The New Silk Road

The World’s Global Islamic Finance News Provider 6th June 2012

RED (All Cap) 850 The New Silk Road

828.94 Economic focus is swinging from west to BRIC countries, as a result of that there is 825 east and as Europe and the US continue also spin off and growth opportunities in to struggle, new investment fl ows and neighboring countries as well. China, India, 798.09 800 trade ties develop. The historic trading they all have to move their goods around route from China to Europe, across south the world in order to be able to trade. So 775 and central Asia and the Middle East, is they have to move some of these through -3.86% once again growing in importance as trade these other countries as well. A lot of these between these regions grows in volume countries are also rich in natural resources 750 W T F S S M T and signifi cance. As these new economic and are energy rich, so what we have going realities take shape across an ancient on is a boom and a lot of potential for Powered by: IdealRatings® road with strong Muslim connections, countries from China all the way to Turkey. Volume 9 Issue 22 how can Islamic fi nance benefi t this new The Middle East is also a criticial component IFN Rapids ...... 2 movement? of the trade that is going on there, and of the fi nancing that’s going on in that part of the Islamic Finance news ...... 5 world.” IFN Reports: Slowly but surely; Afghan Sukuk: A What is the silk route? The old silk road refers to an ancient band aid on a hemorrhage? ...... 13 network of interlinking trade routes that He explains that the new silk route covers a IFN Correspondents: Jordan; Iraq; South connected Asia with the Mediterranean far wider remit than just China, the Middle Africa; Tanzania ...... 15 and European trading centers. At its peak East and Turkey. “The north/south corridor Case study: Banque Saudi Fransi US$750 the route extended over 6,500km, taking its incorporates India, Iran, Azerbaĳ an and million Sukuk ...... 18 name from the lucrative silk trade which Turkey; while the east/west corridor includes the new rail links from China, Features: originated in China and used sea and land Kyrgyzstan and Khazakhstan to Turkey. Islamic banking in the Philippines ...... 19 routes across Asia, Africa and the Middle East to access its key trade markets. With The future of secondary markets in Saudi the arrival of Islamic empires and Arab “The countries that will really benefi t Arabia ...... 20 traders the route fl ourished, building trade the most from this are Kyrghyzstan, Off shore centers: Accommodating Islamic fi nance ties that spanned the globe. Turkmenistan, Khazakhstan, Iran, Turkey, transactions ...... 21 Armenia, Azerbaĳ an, India and Afghanistan. In recent years, these routes have once And if you look at a lot of these countries, again begun to att ract interest as a means they are Islamic countries. So Islamic fi nance Islamic Investor can have a big part to play.” Outperformance amidst adversities ...... 24 to access promising new regional markets. Growth in trade between Asia and the Gulf News ...... 25 continued on page 3 in the form of real estate projects, energy Market Commentary ...... 26 supply, joint ventures and infrastructure A nod to the supporters Fund Focus: Krung Thai Shariah Long-Term investment have revived the old links while Equity Fund ...... 27 new partnerships are also forming. Editor’s Note Fund Data ...... 28 NSR Forum The growth of Islamic fi nance has reached a stage where the industry has Takaful News Abradat Kamalpour, the head of emerging markets and Islamic fi nance at UK law fi rm not only established new, sustainable Risk Management: The missing link? ...... 30 Ashurst, is the CEO and founder of the New markets such as the vibrant Sukuk News ...... 31 Silk Road Forum (NSR Forum), a medium sector; but also a growing number of Feature: and meeting place for participants to discuss auxiliary markets that support the Takaful: Enhancing the UAE’s insurance industry .....32 the possibilities and opportunities of the industry’s further development, such New Silk Road. He explains that: “If you as specialized Shariah compliant legal services and Islamic fi nance education. Forum ...... 34 step back and look at what’s happening in the global economy with the growth of the continued on page 5 Meet the Head: Amer Mohamed Al Jabri, CEO, Al Jazeera Finance ...... 39 Deal Tracker ...... 40 REDmoney Indexes ...... 41 Performance League Tables ...... 43 Events Diary...... 47 Company Index ...... 48 www.islamicfi nancenews.com IFN RAPIDS

Central Bank of the UAE to IDB approves US$260.6 Al Ramz Securities and DEALS extend lending limit deadline? million-worth of fi nancing for Gulfmena Investments Yemen approves US$12.5 projects in member countries partner for research and million IDB fi nancing NEWS and Muslim communities market analysis Emirates still undecided on IDB aims to develop global Crescent Wealth launches ZamZam Bank fails to launch Islamic microfi nance facility Islamic cash management repayment of US$550 million operations Sukuk maturing in June IDB to issue up to US$1 trust IDB collaborates with the Masraf Al Rayan provides billion-worth of Sukuk in June Islamic Society of North this year TAKAFUL fi nancing to Qatar Solar America to off er interest-free Technologies student fi nancing GCC entities turning to the Thirty one insurance Bank Mualamat Indonesia Malaysian Sukuk market in a providers do not meet IDB to allocate US$15 million bid to diversify funding announces indicative yield to Tashkent minimum capital for US$52.55 million Sukuk GCC fi nancial markets requirement, says Bapepam Malaysia’s sovereign Sukuk Mudarabah ministerial committ ee stresses National Insurance hit as foreign investors importance of region’s Indosat plans to sell US$52 Commission to issue decrease holdings of local fi nancial market integration million Sukuk at the end of currency debt guidelines on Takaful in June 2012 GCC Sukuk mart still September this year Hong Leong Bank aims to growing, says National Saudi Aramco and partner Takaful Islami Insurance convert Hong Leong Islamic Commercial Bank eye US$1.4 billion Sukuk to Bank into wholesale bank removes six sponsor-directors part-fi nance joint venture EFG Hermes-QInvest joint from its board Bank Negara Negara venture plan sees a surprising Dana Infra Nasional to issue United Insurance Company launches collateralized turn up to US$2.51 billion-worth of Murabahah distributes 10.9% in surplus Sukuk to fi nance MRT project Alkhair International Islamic funds to Takaful contributors Meezan Bank deploys Bank explores opportunities AREF Energy Holding Syarikat Takaful Malaysia Temenos T24 Islamic banking in China Company approves system will focus on its core markets off er by KFH subsidiary, Al Baraka Banking Group in Malaysia and Indonesia Islamic banks in Bangladesh and World Bank in Islamic Development Enterprises get separate money market Prudential Life Assurance Holding Company, to acquire fi nance development initiative posts US$448 million in its shares Maybank Investment Bank StanChart Private Bank premium income in Q1 aims for 20% growth in group announces imminent launch Great Eastern Takaful eyes Bank Muamalat Indonesia profi t for 2012 considers rights issue of new Islamic products cross-border opportunities following listing on Indonesia Indonesia considers 40% Sharjah Islamic Bank ties Stock Exchange single ownership limit in local up with University Hospital RATINGS banks Sharjah to off er fi nancing for Saudi International medical fees RAM reaffi rms rating Petrochemical Company More room for growth in on Tenaga Nasional’s affi liate signs US$373.17 Pakistan’s Islamic fi nance US$500 million-equivalent million Islamic fi nancing market, says expert Murabahah medium-term agreement with four banks Bangladesh calls for more ISLAMIC notes program Zain Saudi hires four banks IDB aid INVESTOR PEFINDO affi rms rating on to refi nance US$2.5 billion Bank Islam Malaysia The First Investor closes Sha- Bank Muamalat Indonesia maturing Sukuk launches fi xed deposit riah compliant TFI-Hines Bra- Al Kifah Holding raises investment product zil Income Real Estate Fund CI raises fi nancial strength US$159.99 million via Growth of Indonesia’s Shariah Noor Islamic Bank launches rating of Saudi Holland Bank syndicated Murabahah facility compliant banks averaging at two structured wealth RAM reaffi rms ratings on Jafza hires seven banks to 40.2% over the last fi ve years management investment Lafarge Malayan Cement’s arrange new Sukuk Abu Dhabi Islamic Bank products US$110.15 million Islamic Foreign ownership limit in opens fi rst London branch ASEAN trading link to be securities program Malaysian banks to be raised ICD and Aktif Bank sign established soon soon? agreement to boost local Islamic funds should adopt MOVES Gulf International Services private sector socially responsible model, Josef Ackermann steps down signs US$170 million Islamic Maybank eyes exemption say industry experts as CEO of Deutsche Bank fi nancing agreement of Indonesia’s planned bank Barwa Bank off ers three-year, Indonesia and Turkey-linked DIFC Investments receives ownership rules Dinno Indiano appointed as Islamic notes US$1 billion Islamic Masraf Al Rayan announces new president director of BNI syndicated fi nancing to repay plan to acquire Islamic Bank TA Islamic Fund reports Syariah maturing Sukuk of Britain fi rst quarter gross income distribution

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The New Silk Road CLOSING BELL Continued from page 1 Islamic megabank by year-end? Middle East ties Asia could be the region that stands to GLOBAL: Ahmad Mohamed Ali, It comes as no surprise to anyone familiar benefi t most from its strategic location in the president of the IDB, which is with the industry that trade between the between the two trade hubs. spearheading the establishment of a Middle East and Asia has been growing Qatar-based Islamic megabank, has said exponentially. Between 2000 and 2010 Khazakhstan is the obvious focus, with its that the team involved with the set-up of trade between the two regions increased rapidly developing fi nancial status as a re- the bank is targeting to fi nalize its plans by over 700%, according to Farouk gional hub for Islamic fi nance, its lucrative by the end of this year. The megabank Soussa, the chief economist for Citibank oil reserves and its developing trade sta- will issue papers and instruments which in Dubai. Over half the region’s trade is tus. Over the last two decades the country will allow Islamic banks to buy or has become the leading regional recipient now with China, of which the majority disinvest them,” said Ahmad. is energy links. Oil and natural gas from for US investment with over US$16.5 billion from US companies fl owing in. Saudi Arabia, Qatar and Abu Dhabi are Indonesia tackles currency the primary trade ties and in 2010, 55% of Saudi crude exports went to Asia The region has a strong trade history, volatility compared with just 16% to the US and serving as a hub of interlinking trade INDONESIA: The central bank, Bank 4% to Europe. In February 2012 China routes connecting the continents. As Indonesia, is considering introducing imported over 1.4 million barrels of oil economic growth gathers pace, a number new measures to ease volatility in the per day from Saudi Arabia, or around of new initiatives are being promoted to Indonesian rupiah. “In the region, 15% of total production. encourage the development of the central we still suff er from turbulence from Asian region. The US principal deputy the European countries,” noted Edi Kamalpour notes that the opportunities assistant secretary of state for south and Setiadi, an executive director of the lie not only in the physical side, but in central Asia, Geoff rey Pyatt , is quoted Shariah banking at the central bank. The fi nancing this movement, building the as saying that: “For all its progress, authority may also announce its new gas pipelines, and funding the movement central Asia remains one of the least rules on bank ownership by the middle of energy to China and the Asian region. integrated areas of the world.” The US of this month. “It is about fi nancing these deals — state department is therefore developing are there going to be new trade and its own New Silk Road initiative running fi nancing hubs opening up along the through central and south Asia and way? It will play itself out as the silk road based around the economic development develops further.” of post-war Afghanistan. The network hopes to strengthen regional economic integration by liberalizing trade and China-Turkey promoting energy and infrastructure As the countries at either end of the development including new roads, trade corridor, China and Turkey are bridges, energy grids and pipelines. the two most important trade centers for the new silk route. Although there The initiative was offi cially introduced has been friction between them in the in September 2011 at the UN General past, strong links have developed over Assembly by US secretary of state recent years with trade volume in 2011 Hillary Clinton and the foreign minister Scholarships available for the increasing by 24% to US$24.2 billion of Afghanistan, Zalmai Rassoul, as “a CIFP & MIF programmes and expected to reach US$50 billion in means of creating new trade routes INCEIF, The Global University of Islamic Finance, is offering 2015 and US$100 billion in 2020 (targets between Asia and the west, faciliated by scholarships to outstanding candidates to undertake the Chartered set by Chinese premier Wen Jiabao and Islamic Finance Professional (CIFP) programme and Masters in the establishment of modern highways, Islamic Finance (MIF). Turkish prime minister Recep Erdogan rail links and energy pipelines”. Candidates applying for scholarships would have to undertake the in 2010). China is now the third biggest programmes on campus full-time. Selection of candidates will be based on academic excellence, and working experience. trade partner of Turkey, with a number Signifi cant steps have already been taken of signifi cant projects including a new to remove trade barriers in the region. In Both the CIFP and MIF equip students with in-depth knowledge, US$35 billion high-speed rail network analytical tools and strategic perspectives to fast-track their careers September 2011 for example, India and in the growing Islamic finance field, be it as academics, finance connecting the two regions across central Pakistan agreed a pact to normaliz trade practitioners or other related industry professionals. Asia and reaching as far as the UK and relations for the fi rst time in 35 years. Complete application with the relevant supporting documents Spain. There are also talks to revive the must be submitted through our website www.inceif.org for both The TAPI pipeline project is set to bring programmes. pre-WW1 Berlin/Baghdad rail link as well onshore natural gas from Turkmenistan as the old Hejaz rail network connecting across Afghanistan to markets in Pakistan Turkey with the holy cities of Islam. and India, while other projects are being

created to transmit electricity from central For details: Central Asia Asia to Afghanistan, Pakistan and India. Mr Asmawi Asari Tel +603 7651 4037 But it’s not just the Middle East, Turkey Robert Hormats, the US undersecretary Email [email protected] and China that stand to beneﬁ t from the for economic, energy and agricultural KPT/JPS (A8254) 06/12 ® new route. While these are all already aﬀ airs, noted in a recent speech that: KPT/JPS (A8831) 02/13 well-established trade centers, Central continued...

The New Silk Road Continued from page 3

“Construction of new projects would Kamalpour notes that as far as the NSR And, points out Kamalpour: “There create thousands of jobs across the Forum is concerned: “There’s going to is also an opportunity for Shariah entire panorama of Central Asia, and be an Islamic fi nancing working group, compliant funds to invest in projects and unlock private enterprises suppressed because obviously a lot of these countries opportunities along the route. It could by the lack of reliable electricity.” He have big Islamic populations. A lot of off er western banks and big institutions notes that the central Asian region has deals for these countries are done via with Islamic windows new opportunities a lot to off er, particularly Afghanistan. the Middle East, and it’s going to be of for investment. They already have “The US Geological Survey has verifi ed growing importance strategically to these the structuring capability and they that Afghanistan sits on top of at least countries, so we will see increasing levels can off er investors the opportunity to US$1 trillion in mineral wealth – iron, of investment.” invest directly in Shariah compliant copper, gold, rare earth elements, and opportunities. others. Some of these deposits are It is true that Islamic fi nance is a natural already under development, and many fi t for this kind of development, which is “I think it will also work the other way, more will be soon. The Aynak copper based around real economic assets and with Islamic investors from established and Hajigak iron-ore mines could enter infrastructure projects. In addition, many markets going into silk route countries. into production as early as 2016, and of the countries along the new route, That’s already happening to an extent according to World Bank projections they such as Kazakhstan, have expressed an – you have Al Hilal bank going into could each create 90,000 jobs and up to interest in developing the Islamic fi nance Kazakhstan. It’s new territory, but its US$500 million in annual revenue when industry and will be looking to the sector territory of great interest. Some of the developed.” for funding and investment. Turkey’s European investments have not gone Islamic fi nance sector has seen rapid as well as they’d hoped, given the Islamic finance in the new silk growth along with its strengthening Eurocrisis, so this is a diversifi cation trade ties with the Middle East, and opportunity.” route the country recently saw its fi rst Sukuk The economic opportunities are issuance. Afghanistan is also looking The new silk route is the fastest growing undeniable. But what role can Islamic to Islamic fi nance to rescue its trade corridor in the world, and its fi nance play in all this? Yes, the struggling economy following the regional position off ers Islamic fi nance majority of the countries along planned withdrawal of troops in a natural advantage. The opportunity is the new silk route are Muslim. 2014, and its government recently there and ripe for the picking. But this does not necessarily announced the potential for a mean that Islamic fi nance will sovereign Sukuk (see IFN Report Information on the New Silk Route Forum benefi t from these developments ‘Afghan Sukuk: A band aid on a can be found at htt p://www.nsrforum.com. – unless it reaches out and hemorrhage?’ p.13) — LM makes a serious eff ort to get involved. A nod to the supporters

Editor’s Note contribution to the global economy, management in the kingdom. beginning with our cover story on the The growth of Islamic fi nance has exciting developments along the new reached a stage where the industry has Meanwhile, Rafael A Morales of legal silk route from China to Turkey. not only established new, sustainable fi rm SyCip Salazar Hernandez & markets such as the vibrant Sukuk Gatmaitan writes on Islamic banking in sector; but also a growing number One area of the fi nancial industry in the Philippines; while our IFN Reports of auxiliary markets that support the which Islamic fi nance has helped to cover prospects for the expansion of UK industry’s further development, such drive momentum is off shore centers; Islamic banks and Afghanistan’s planned and our issue this week looks at the as specialized Shariah compliant legal debut sovereign Sukuk. services and Islamic fi nance education. links between Islamic fi nance and these growing regional bases in a feature by Our IFN Correspondents report on the Amjad Hussain and Kathleen Bradley of This development of the industry has industry’s developments in Jordan, Iraq helped Islamic fi nance to develop into K&L Gates (Doha). and South Africa; and on Takaful in a valuable alternative to conventional Tanzania. fi nance, doing much to spur economic We also have a contribution by Irfan Butt growth at a time when lending does and Mustafa Kamal of Hogan Lovells, not come as easily it once did. This in association with Al Yaqoub Att orneys Meet the Head talks to Amer Mohamed week, Islamic Finance news looks at & Legal Advisors, who write on the Al Jabri of Al Jazeera Finance; and our how the industry is reaching into future of Saudi Arabia’s secondary Case Study this week highlights Banque new markets and sectors to cement its markets in promoting Islamic liquidity Saudi Fransi’s US$750 million Sukuk.

issuance, while Bank Negara Indonesia is DEALS the trustee agent. Not just countries IDB funds for Yemen Indosat to sell Sukuk YEMEN: The government has approved a fi nancing agreement with the IDB INDONESIA: Local telecommunications IrAq which was signed on the 23rd June 2010. fi rm Indosat is planning to issue a IDR500 billion (US$52 million), seven- LuxemBourg Under the agreement, the IDB will year Sukuk Ijarah at the end of June this contribute US$12.5 million in fi nancing to year, as part of a IDR2.5 trillion (US$269 MoroCco ,, support rural development opportunities million) corporate bond issuance. in the country. ThailanD m m The company will off er the Islamic bonds to investors from the 20th-22nd June. It also IrEland Yet to take off plans to list the Sukuk on the Indonesian UAE: Emirates airline has yet to decide Stock Exchange on the 28th June. AFghanistan on whether to refi nance its AED2.02 billion (US$550 million) Sukuk maturing DBS Vickers Securities Indonesia, SinGapore on the 16th June this year or to repay it Danareksa Sekuritas, HSBC Securities CHina with cash. Indonesia, Mandiri Sekuritas and Standard Chartered Securities Indonesia BahraIn ,,,,, “We are currently considering whether were appointed to manage the sale. to refi nance and [with] what product. DJibouti Cash fl ow is good and we have the Saudi Aramco seeks Islamic ability to repay if we decide [to],” said PaKistan Brian Jeff ery, its senior vice-president of debt financing corporate treasury. SAUDI ARABIA: Saudi Arabian Oil AustraLia ... Company (Saudi Aramco) and US-based Jeff ery also said that the airline will chemical company, The Dow Chemical TurkMenistan only refi nance the maturing Sukuk Company, have reportedly sent requests with another if the price diff erential is to banks for US$12.4 billion in fi nancing GermaNy ..... signifi cant. to fund their joint venture, Sadara CrOatia Chemical Company. Masraf Al Rayan provides JaPan The companies are said to be seeking financing the funds via a US$1.4 billion Sukuk Qatar QATAR: Masraf Al Rayan has signed issuance, US$2.66 billion in bank loans, a fi nancing agreement with local US$6.5 billion from export credit agency FRance polysilicon manufacturer, Qatar Solar fi nancing, US$1.3 billion from Saudi’s Technologies (QST). Public Investment Fund and US$530 IndoneSia .... million from the Saudi Industrial The fi nancing will be used to fund Development Fund. SwiTzerland the construction of QST’s US$1 billion polysilicon manufacturing plant. The banks have until the 23rd July to TUrkey express interest, with the fi nancing MoldoVa .. BMI Sukuk soon expected to be completed by December this year. Saudi Aramco and Dow have INDONESIA: Bank Muamalat KuWait reportedly hired Riyad Bank and The Indonesia (BMI) will issue IDR500 billion Royal Bank of Scotland as fi nancial (US$52.55 million)-worth of 10-year MeXico advisors. Sukuk Mudarabah as the fi rst tranche MalaYsia of its IDR1.5 trillion (US$157.65 million) subordinated Sukuk program. MRT Sukuk confirmed BraZil MALAYSIA: The fi nance ministry has According to Arviyan Arifi n, its president announced that Dana Infra Nasional, the director, the indicative yield for the fi rst company set up to fund the country’s These are some of the countries we tranche is between 9.5-10.5%. infrastructure projects, will issue RM8 have subscribers billion (US$2.51 billion)-worth of The bank began bookbuilding for the government-guaranteed Sukuk to part- Sukuk on the 30th May and will continue fi nance the Klang Valley Mass Rapid Contact us now for a free trial…… through to the 12th June, before off ering Transit (MRT) Project. the papers from the 25-26th June; with Musfaizal Mustafa allotment scheduled for the 27th June. The ministry’s announcement follows Subscriptions Director months of speculation on the size and [email protected] Bahana Securities, Danareksa and Indo issuance date of the Sukuk. Tel: +603 2162 7800 x 24 Premier Securities are underwriting the continued...

© 5 6th June 2012 NEWS continued... The banks involved are Riyad Bank, Malaysia’s bank foreign The fi rst issuance of the Sukuk will National Commercial Bank, Saudi Hollandi Bank and SABB. ownership limit to be raised comprise an Islamic commercial paper soon? and/or Islamic medium-term notes The fi nancing is repayable over two- program and/or a syndicated Islamic MALAYSIA: The government has and-a-half years in semi-annual revolving credit facility up to a combined announced further measures to develop installments. limit of RM8 billion. its fi nancial and capital markets; with Najib Razak, the prime minister, hinting Of the program, the fi rst drawdown is Zain Saudi in Sukuk that the country’s foreign ownership cap expected to be issued by early June this refinancing deal on local banks could be done away with soon. year. The sale of subsequent tranches is SAUDI ARABIA: Mobile not expected to be required until June Telecommunications Company Saudi However, the administration’s 2013. Arabia, bett er known as Zain Saudi, has willingness to reconsider the current reportedly hired four banks to arrange a 30% foreign ownership limit comes with AmInvestment Bank, CIMB Investment fi ve-year, US$2.5 billion fi nancing facility the caveat that there is reciprocity from Bank, Maybank Investment Bank and to refi nance its Sukuk of the same size its regional neighbors. “We’re willing to RHB Investment Bank are joint lead maturing on the 27th July this year. arrangers for the program. look at it… It’s possible that we might increase it in the near future. But it’s The banks are Al Rajhi Bank, Arab also important within ASEAN to have KFH unit gets nod to buy National Bank, Banque Saudi Fransi and reciprocity,” said Najib. AREF Standard Chartered. KUWAIT: AREF Energy Holding With ASEAN markets growing more In January, Zain Saudi received approval Company’s shareholders have approved interdependent, increased linkages to extend the due date of its Sukuk by six an off er by Development Enterprises between the region’s banks could months. Holding Company, a subsidiary of help boost Malaysia’s fi nancial sector; Kuwait Finance House (KFH), to wholly especially as the country further acquire the company’s shares for 13.4 Al Kifah in syndicated deal develops as a global Islamic fi nance hub. Kuwait fi ls (47.72 US cents) per share. SAUDI ARABIA: Al Kifah Holding, a In a report, OSK Research said that the local building and construction materials impending entry of Singapore’s DBS Walid K Al-Hashash, the chairman manufacturer, has raised SAR600 million Bank into Alliance Financial Group of AREF, said that the company’s (US$159.99 million) from a syndicated (DBS is in talks to buy a 14.2% stake in consultant, hired to evaluate its shares Murabahah fi nancing facility to the group) makes a case for potentially and assets, has valued it at 12.6 Kuwait strengthen its balance sheet and facilitate raising Malaysia’s foreign shareholding fi ls (44.88 US cents) a share. its planned expansion. cap based on the principle of reciprocity.

Kuwait Clearance Company will oversee Gulf International Bank (GIB) was the “In return, the Singaporean government the transaction, which is to take place mandated lead arranger, together with could potentially grant the likes of CIMB within 30 days from the 3rd June. National Commercial Bank, Samba [Group] a qualifying full bank operating Financial Group and Banque Saudi license that will signifi cantly relax the BMI studies rights issue Fransi. GIB Capital, the investment arm restrictions on its current number of of GIB, acted as fi nancial advisor to Al permitt ed branches and services locations INDONESIA: Bank Muamalat Indonesia Kifah. from two to 25,” said OSK Research. (BMI) could launch a rights issue following the listing of its shares on the Jafza hires banks for new The call for reciprocity could also Indonesia Stock Exchange, potentially by Sukuk encourage Malaysian banks to venture the end of this year, according to Arviyan outside local shores in a bid to expand Arifi n, its president director. UAE: Jebel Ali Free Zone (Jafza) has their Shariah compliant footprint; hired Abu Dhabi Commercial Bank, Abu leveraging their domestic Islamic fi nance The plan is part of BMI and its fi nancial Dhabi Islamic Bank, Citigroup, Dubai expertise. advisors’ evaluation of options for capital Islamic Bank, Emirates NBD, National raising for the bank. Bank of Abu Dhabi and Standard Nonetheless, Malaysia’s eff orts Chartered to arrange a new Sukuk at liberalization could be quickly SIPCHEM unit in Islamic issuance. stonewalled in markets such as Indonesia, which is currently mulling financing deal The off ering is expected to be worth at over its own bank ownership limits, with SAUDI ARABIA: International least US$500 million. Proceeds will be expectations that shareholders will have Polymers Company, an affi liate of Saudi used to part-fi nance an existing AED7.5 to pare down their stakes in Indonesia’s International Petrochemical Company billion (US$2.04 billion) Sukuk maturing banks. (SIPCHEM), has signed a SAR1.4 billion in November this year. (US$373.17 million) Islamic fi nancing Even so, any upward revision of foreign agreement with four banks to fi nance the Roadshows for the new issuance are set ownership in Malaysia’s banks will only construction of a production plant. to commence on the 5th June in the UAE, be benefi cial for the local industry. continued...

© 6 6th June 2012 NEWS continued... complete its acquisition of AMWAJ Central Bank of the UAE Catering Services and to participate in a followed by Singapore and Hong Kong to extend lending limit th th capital increase for its subsidiary, Gulf on the 7 and 8 June; while Jafza will deadline? also meet investors in London on the 11- Drilling International. 12th June. UAE: The central bank looks to be Funds to repay Sukuk relaxing its stance on the deadline for its new rule on limiting lending to UAE GIS signs into Islamic UAE: DIFC Investments has secured a governments and their entities. financing AED3.67 billion (US$1 billion) Islamic syndicated fi nancing facility to help “We will impose deadlines on banks in QATAR: Gulf International Services repay its US$1.25 billion Sukuk maturing accordance with a bank’s position and (GIS) has signed a QAR619 million on the 13th June. (US$170 million) Islamic fi nancing the extent of its exposure and based on agreement with Arab Petroleum the fi ndings and demands it presents to Dubai Islamic Bank, Emirates NBD, Noor Investments Corporation, Barwa Bank, the central bank, but we will absolutely Islamic Bank and Standard Chartered Qatar International Islamic Bank and not annul or change any of the recent were lead arrangers for the fi nancing, Qatar Islamic Bank. amendments,” Khalil Foulathi, the which is backed by the group’s property chairman of the Central Bank of the UAE, portfolio. The facility will be partly used to is quoted as saying.

Khalil’s comments hint that the central DEAL TRACKER Full Deal Tracker on page 40 bank could be prepared to be more ISSUING DATE ﬂ exible in the timing of its new rules; ISSUER SIZE (US$) CURRENCY ANNOUNCED and come just two weeks aft er the authority said that it would not extend Gulf International Bank RM 1.09 billion 31st May 2012 its September deadline for the rules Danainfra RM 2.49 billion 31st May 2012 announced in April this year; capping bank lending to UAE governments and th General Authority of Civil TBA TBA 24 May 2012 government-linked entities at 100% Aviation of a bank’s capital; and to individual Morocco sovereign TBA TBA 23rd May 2012 borrowers at 25%.

nd Malaysian Airline System RM 780.88 million 22 May 2012 However, the emirates’ banks will likely not be able to meet the timeframe, given their large exposure to UAE government debt. Data shows that government and government-linked lending at Emirates NBD, which owns Islamic units Dubai Bank and Emirates Islamic Bank, amounted to 192% of its capital; while National Bank of Abu Dhabi’s state- linked ﬁ nancing levels stood at 199%. Abu Dhabi Commercial Bank’s lending to government and government-owned companies constituted 108% of its capital.

In addition, the banks are constrained with options to oﬄ oad the debt, with industry players saying that banks will need time to deleverage. Furthermore, it is questionable whether there will be enough demand to take up the ﬁ nancing in the secondary market.

Market watchers also note that securitization of the debt would be a challenge, as the region’s market for securitization has yet to fully develop.

While the central bank is making the right move in reducing banks’ risk to concentrated exposures, providing banks a litt le more time to manage their balance sheets may also be a step in the right direction.

conventional government securities Indonesia considers 40% AFRICA advanced by 1.8% to RM112.1 billion single ownership limit in local (US$34.86 billion) in April.. ZamZam unsuccessful banks ETHIOPIA: ZamZam Bank, which HLIB to switch to wholesale GLOBAL: Bank Indonesia (BI), the hoped to become Ethiopia’s fi rst fully- central bank, offi cially announced MALAYSIA: Yvonne Chia, CEO of Hong fl edged Islamic bank, has announced its on the 31st May that it is looking at Leong Bank (HLB), has announced that failure to launch interest-free banking in limiting single shareholding by fi nancial the bank, which owns Hong Leong the country. institutions in banks to 40% from 99% Islamic Bank (HLIB), is aiming to convert currently; in a rule that will only apply its Islamic business from a consumer to a This follows the September 2011 directive to new investments. Additionally, wholesale bank. from the central bank, the National Bank individuals or families can now only of Ethiopia, barring Islamic banking in own up to 30% in Indonesia’s banks, also The move is part of its eff orts to increase the country. down from 99%. transaction income in Islamic wholesale

and investment banking, treasury and In a shareholder meeting, ZamZam The announcement will allow the likes wealth management. Bank’s board of directors presented three of Malaysia’s CIMB Group, present in options to its shareholders: namely to Indonesia via CIMB Niaga and CIMB Meanwhile, HLB is also keen on inject the bank’s capital into another bank Niaga Syariah; as well as Maybank, raising its 20% stake in China’s Bank and open an Islamic window; to dissolve which owns Bank Internasional of Chengdu, although its ownership the bank and re-disburse its capital; or to Indonesia and Bank Syariah Indonesia, to is currently limited due to existing invest in another sector. maintain their respective 97.9% and 99% regulations, added Chia. ownership in their Indonesian units. The bank’s shareholders have since decided to invest in other ventures. BNM introduces new Seen as a sleeping giant with massive instrument potential for growth in its banking MALAYSIA: The central bank, Bank market, including in the Islamic fi nance AMERICAS Negara Malaysia (BNM), has introduced space, investors have been jostling for a a new Islamic monetary instrument: the place in Indonesia for several years now. Financing for US students collateralized Murabahah. US: The IDB has partnered with the However, plans by new entrants such as Islamic Society of North America to off er The instrument is a Shariah compliant Singapore’s DBS Group, which proposed fi ve scholarships in the form of interest- fi nancing secured by assets allowing the to acquire the entire equity stake in Bank free fi nancing for local Muslim students. fi nancier the right to sell the asset should Danamon, which also operates Bank the client fail to repay the fi nancing. Danamon Syariah, will now be held back The fi nancing is open to individuals who due to the new rule. are currently enrolled in or have been Meezan deploys Temenos T24 accepted to an accredited university or Other foreign interest in Indonesia’s college in the US. PAKISTAN: Meezan Bank has gone banks come from Malaysia’s RHB live with Swiss-based Temenos Group’s Capital, which has been waiting in the Temenos T24 Islamic banking soft ware wings to buy Bank Mestika Dharma, a system. plan that was put on hold due to BI’s ASIA review of the bank ownership rules; New money markets for while another Malaysian bank, Affi n Financing for street lights Bank, also delayed its plan to buy a UZBEKISTAN: The IDB will provide Islamic banks majority stake in Bank Ina Perdana, US$15 million in fi nancing to Tashkent’s BANGLADESH: The country has which it planned to convert into a fully- municipality fund, to be used to launched a separate money market fl edged Islamic bank. modernize street lighting in the country’s for its Islamic banks, the Islamic Inter- capital. bank Fund Market, according to Atiur Nonetheless, Affi n remains keen to Rahman, the governor of the country’s pursue its interest in the Indonesian bank Decrease in Malaysian debt central bank. and is willing to look at its acquisition holdings plan again. The market will provide local Islamic MALAYSIA: Foreign investment in banks with temporary and short-term Although Indonesia has been a hotbed local sovereign Sukuk decreased by 9% liquidity. for foreign investing in recent years, its to RM4.7 billion (US$1.46 billion) in regulator’s new plan may now upset April this year, as holdings of Malaysian Striving for 20% growth the balance for greater international ringgit-denominated bonds by global interest going forward. With its Islamic MALAYSIA: Maybank Investment Bank funds fell to RM185.6 billion (US$58.3 fi nance space also yet to fully develop is targeting at least 20% growth in group billion) from an all-time high of RM191.2 and further participation from more profi t for the fi nancial year ending the billion (US$59.47 billion) in March. experienced Islamic fi nancial institutions 31st December 2012, said Tengku Zafrul facing a cap, it remains to be seen Tengku Abdul Aziz, its CEO. However, according to data from the whether Indonesia’s latest move will central bank, foreign investment in continued... prove to be farsighted, or a folly.

© 8 6th June 2012 NEWS continued... foreign currencies commitments or Masraf Al Rayan announces “It is the investment banking business that obligations, such as payment for plan to acquire Islamic Bank education abroad,” said Norashikin we want to grow here and in the region, of Britain while in the Sukuk and conventional Mohd Kassim, its head of treasury. bond market, this is the fastest growing GLOBAL: In a surprise announcement business for us,” he said. Good growth on the 4th June 2012, Masraf Al Rayan, INDONESIA: Growth of Islamic banks one of just four of Qatar’s Islamic banks, Room for growth in Indonesia has averaged 40.2% over the disclosed that it will acquire 70% of the Islamic Bank of Britain (IBB). PAKISTAN: The country’s fi nance past fi ve years, according to Edy Setiadi, the director of Shariah banking at Bank sector, particularly its Islamic market, Indonesia, the central bank. The bank did not disclose further could grow exponentially with the right details of its acquisition plan, except policy, said Haroon Sharif, the head Total assets of the country’s Shariah that the takeover would be carried out of the economic growth group at the compliant banks increased by 50% to via a capital increase, with the Qatari Pakistan offi ce of the UK’s Department IDR158.8 trillion (US$16.99 billion) as government to acquire the remaining for International Development. at the 31st March 2012, from IDR101.2 30% in IBB. trillion (US$10.67 billion) a year earlier. Haroon believes that the country should The move not only marks the growing focus on three key aspects in order to infl uence of Qatari funds in the do this: namely reforming its macro- global market; but also the increasing business marketing environment so EUROPE participation of Qatari Islamic banks that it will be more capital-intensive; in cross-border merger and acquisition increasing market research on Islamic ADIB opens in London activities. fi nance; and widening Islamic banking’s UK: Abu Dhabi Islamic Bank (ADIB) has reach to the poor. opened its London branch in the district IBB, set up by Qatari shareholders of Knightsbridge. including members of its royal family, More help needed was taken over by Qatar International The bank is looking to serve clients from BANGLADESH: The country has called Islamic Bank (QIIB) in May last year. the UAE who use London as their base for more aid from the IDB in areas QIIB paid around GBP25 million for business and personal transactions. including infrastructure, agriculture, (US$38.49 million) to raise its 80% human resource development and interest in IBB to 91%. access to Islamic fi nancial products ICD in Turkey deal An entry by Masraf Al Rayan into IBB and services; as it seeks to achieve its TURKEY: The Islamic Corporation could prove more benefi cial for the development plans. for the Development of the Private UK bank (given that both banks are Sector (ICD) has signed an agreement retail-focused) then for QIIB, which is In turn, the bank has pledged its future with Aktif Bank to cooperate in areas bett er known for its investment banking support for programs focusing on including the fi nancing of small and business. In return, IBB could prove to be collaborative partnership, capacity medium-sized enterprises and private an important stepping stone for Masraf building, technical assistance, Islamic sector projects and investments. fi nance advisory services and reverse Al Rayan to gain a foothold into the UK and European markets. linkages. It is also looking to provide aid The partnership also aims to encourage for Bangladesh’s energy sector, public- the growth of existing companies An expansion by Masraf Al Rayan private partnership projects, urban and support projects which create could also prove crucial; with industry development and inclusive rural growth. employment by channeling investment to observers noting that the Qatar Central the appropriate areas of business. The IDB has already channeled US$384 Bank’s directive to ban Islamic fi nancial million-worth of fi nancing to Bangladesh, services from conventional banks has completing 58 projects; while also not provided as much a boost to the providing US$11 billion-worth of trade GLOBAL country’s Islamic banks as initially expected. fi nancing to the country for oil imports. Maybank eyes exemption GLOBAL: Maybank, which owns 97% of With the Qatar bank’s plans for IBB still New offering from Bank Islam Bank Internasional Indonesia, hopes that in their early days, only time will tell Malaysia expected new regulations on shareholding how this surprise move will play out. MALAYSIA: Bank Islam Malaysia has limits in Indonesian banks will not apply launched its Dual Currency Investment-i to the Malaysian banking group. off ering, a fi xed deposit product linked to the performance of a pair of foreign “It is our hope that should any currencies. percentage be imposed, that percentage should not apply to the banking group,” FollowFooll us on “The product is expected to appeal said Abdul Wahid Omar, the CEO of to the bank’s existing customers who Maybank, adding that the bank is in are already investing in dual currency discussions with Indonesian authorities structured investments or those with on the proposed rules. continued...

© 9 6th June 2012 NEWS continued... its member countries, said Dr Ahmad EFG Hermes-QInvest joint Meanwhile, he also said that Maybank Mohamed Ali Al-Madani, its president. venture plan sees a surprising has applied for a license to open a turn branch in Laos, in a bid to consolidate Turning to Malaysia GLOBAL: The shareholders of Egypt’s its presence in the ASEAN region. The GLOBAL: More GCC entities are turning EFG Hermes Holding have approved a bank is still awaiting approval from the to the Malaysian Sukuk market in a bid plan for the investment bank to set up relevant authorities. to diversify their fi nancing as US dollar funding becomes scarce in the wake of a joint venture company with Qatar’s IDB approves new financing the Eurozone crisis. QInvest, the investment banking arm of Qatar Islamic Bank. GLOBAL: The IDB has approved Jammaz Abdullah Al-Suhaimi, the US$260.6 million-worth of new fi nancing chairman of Bahrain-based lender Gulf However the proposal, which will see to support development projects in International Bank, which recently has set EFG Hermes and QInvest own 40% and member countries and other Muslim up a ringgit-denominated US$1.11 billion 60% respectively in EFG Hermes Qatar, communities. Sukuk program, noted that tapping the saw a surprising twist when Planet IB, ringgit market was a strategic move to an investment banking fi rm linked to The approvals comprise: US$81 million diversify funding avenues and currencies. Egyptian telecommunications tycoon for a water supply expansion project in Naguib Sawiris, put in an off er to buy Nigeria, US$33.6 million for a thermal Meanwhile Nick Stadtmiller, the head EFG Hermes for EGP13.5 (US$2.24) a power project in Niger and US$16 million of fi xed income at Emirates NBD, said share. for a road project in Lebanon. that: “Malaysian banks are highly liquid, and there is a developed set of other Planet IB’s off er has not derailed the EFG The funding also includes US$118 million institutional buyers in the market.” Hermes Qatar plan, with EFG Hermes for the development of a hospital in Iran to transfer ownership of its brokerage, and US$10 million for Burkina Faso’s research, asset management, investment national primary healthcare project. Strengthening GCC markets and infrastructure fund subsidiaries GLOBAL: Dr Abdulrahman Al-Tuwaĳ ri, to the new entity. The Egypt-based It also granted US$1.36 million under the chairman of the ministerial committ ee bank’s shareholders, which include Abu its Waqf Fund for infrastructural educa- of the fi nancial markets of the GCC, has Dhabi Investment Authority and Dubai tional projects in Muslim communities stressed the importance of the integration Financial Group, have also approved in Ethiopia (US$480,000), the Philippines of the GCC’s capital and fi nancial the transfer of 60% of the seed capital (US$280,000), India (US$200,000), Malawi markets as the council eyes stronger ties held in its asset management business to (US$200,000) and Tanzania (US$200,000). between the region’s markets and the QInvest. unifi cation of regulations and policies IDB in microfinance push related to the markets. Mona Zulfi car, the chairperson of EFG Hermes, said that the bank received two GLOBAL: Dr Ahmad Mohamed Ali A collective fi nancial market in the lett ers from Planet IB dated the 30th May Al Madani, the president of the IDB, GCC will help protect against fi nancial and the 1st June, off ering to acquire EFG said that the bank has commenced setbacks or crisis, said Abdulrahman, Hermes’ shares. discussions with the UK’s Department who is also the chairman of Saudi’s for International Development, the World Capital Market Authority. “The lett ers did not provide any legal Bank and the Center for Charitable commitment or guarantee to EFG Giving and Philanthropy to begin pilot Meanwhile, the GCC ministerial commit- Hermes, nor its shareholders, to conclude projects in various common member tee has also discussed draft laws on the such tender off er. Additionally, no countries and eventually develop a global legal structure of the council’s fi nancial proof to availability of funds has been Islamic microfi nance facility. markets, disclosure regulations and corpo- presented to the company, nor any rate governance of listed companies. information about the identity of the The IDB is also exploring social and investors who will provide the necessary fi nancial inclusion opportunities in Impressive progress funds for the tender off er,” she said, the UK; including the provision of adding that Planet IB should have community-based microfi nance, small and GLOBAL: GCC Sukuk markets have fi led its off er to the Egyptian Financial medium-sized enterprise fi nancing and made impressive progress as an Supervisory Authority. technical assistance programs, he said. alternative source of funding at a time of tight bank credit; and are expected to show continued positive momentum Planet IB seems determined to take over US$1 billion Sukuk from IDB going forward, said Dr Jarmo T EFG Hermes, despite the progress of its GLOBAL: The IDB is planning to raise Kotilaine, the chief economist at National deal with QInvest, in a bid to “keep a between US$500 million-US$1 billion Commercial Bank. fl agship Egyptian multinational intact,” via a Sukuk issuance in June this year to according to Ahmed El Houssieny, CEO fi nance its activities. Default situations also appear to have of Planet IB. In what sounds more like passed, leaving a bett er understanding a political play than anything else, it The bank will also issue regular annual of how to manage them and a talent pool appears that Planet IB will have to put Sukuk tranches ranging from US$500 qualifi ed to handle such tasks; which, its money where its mouth is if it intends million-US$1.5 billion under its medium- in turn, has led to higher effi ciency in to put a stop to the EFG Hermes-QInvest term notes program going forward, due managing risk. deal, which already looks to be all but to rising demand for fi nancing from continued... sealed.

© 10 6th June 2012 NEWS continued... announced a SAR15.7 billion (US$ 4.19 RATINGS “As far as concrete issuance prospects billion), fi ve-year investment plan that for project Sukuk are concerned, we are will draw on fi nancing from conventional Firm foundation increasingly moving from the stage of bank facilities, funds and its recently MALAYSIA: RAM has reaffi rmed its innovation to replication which is much launched Sukuk. ‘AAA’ rating on Tenaga Nasional’s faster and cheaper and should contribute US$500 million-equivalent Murabahah to the positive market momentum,” he The fi rm raised SAR1 billion (US$266.62 medium-term notes program added. million) through its fi rst Sukuk in March this year. Its investment plan covers the (2005/2025). The long-term rating has a expansion of its operations in farming, stable outlook. Crossing to China manufacturing, distribution and logistics GLOBAL: Alkhair International Islamic between 2013-2017. Stability for 1 Warisan Bank, the Malaysian unit of Bahrain’s MALAYSIA: MARC has affi rmed its Bank Alkhair, is looking at opportunities Hospital fees installment ‘AAAIS’(fg) rating on 1 Warisan’s RM170 to expand its business into China. plans from SIB million (US$53.74 million), seven-year Islamic medium-term notes program “We have to look at potential countries UAE: Sharjah Islamic Bank (SIB) has with a stable outlook. which have exposure to non-ringgit partnered with University Hospital currencies. Malaysians also invest Sharjah to off er fi nancing to patients, The rating and outlook are underpinned off shore. There is an opportunity for us allowing them to pay medical fees in by an unconditional and irrevocable to look at a prospect in Shanghai,” said installments. Kafalah Guarantee provided by fi nancial Kamaruddin Taib, its chairman. guarantee insurer, Danajamin Nasional. SIIB under US sanctions Joint initiative for Islamic SYRIA: The US Treasury department has Shaky start finance imposed sanctions on Syria International UAE: S&P has assigned its ‘B’ senior Islamic Bank (SIIB) for allegedly acting GLOBAL: Al Baraka Banking Group unsecured debt ratings to AED7.5 billion as a front for other Syrian fi nancial has tied up with the World Bank under a (US$2.04 billion) Sukuk Musharakah institutions seeking to circumvent their new initiative for Islamic fi nance aimed trust certifi cates, issued by Jebel Ali Free own sanctions. at fostering sustainable development Zone’s special-purpose vehicle, JAFZ of the industry. The cooperation is Sukuk. also targeting the identifi cation and SIIB is accused of acting for the dissemination of sound practices in the Commercial Bank of Syria and providing industry; including those relating to the services to its subsidiary, the Syrian BMI on sturdy standing regulatory and supervisory environment, Lebanese Commercial Bank; both of INDONESIA: PEFINDO has affi rmed institutional infrastructure, corporate which were put under sanctions in its ‘idA +’ rating on Bank Muamalat governance, business practices and August 2011. The treasury also said that Indonesia (BMI) with a stable outlook. market development. SIIB “surreptitiously” facilitated fi nancing worth almost US$150 million on behalf of At the same time, PEFINDO also It also aims to encourage research and the Commercial Bank of Syria. assigned an ‘idA’ rating to BMI’s promote awareness of the appropriate subordinated Sukuk program amounting risk management framework for Islamic Meanwhile, the Qatar Central Bank (QCB) to IDR1.5 trillion (US$157 million). banks. has directed SIIB’s Qatar-based directors to resign from its board following the Thumbs up Islamic offerings from sanctions. “Qatari investors in SIIB will not seek board representation and will SAUDI ARABIA: CI has raised its StanChart remain passive investors,” said QCB. fi nancial strength rating of Saudi GLOBAL: Standard Chartered Private Hollandi Bank to ‘A-’ from ‘BBB+’, Bank is set to launch a suite of Islamic Qatar International Islamic Bank with a stable outlook, supported by fi nancial solutions by the middle of this and other Qatari investors, including improvements in asset quality and month at its booking centers in Dubai, members of the royal family, own a capital adequacy. Geneva, Jersey and London. combined 49% stake in the Syrian lender. SIIB’s board was also chaired by The bank’s long-term foreign currency The Shariah compliant off erings will Dr Yousuf Ahmed Al-Namaa, a QIIB rating was affi rmed at ‘A’ and its short- range from fi duciary deposits, property representative and also a member of the term foreign currency rating at ‘A2’, also fi nancing, equities and discretionary Qatar bank’s board. with a stable outlook. services, mutual funds, Sukuk and third- party structured products. IIB reports profits Stable outlook BAHRAIN: Islamic investment bank MALAYSIA: RAM has reaffi rmed its International Investment Bank (IIB) long- and short-term ratings on Lafarge MIDDLE EAST reported a net income of US$1.7 million Malayan Cement’s RM350 million for the fi rst quarter of this year, against a (US$110.15 million) Islamic securities Sukuk to fund expansion net loss of US$1.3 million in the previous program (2010/2017), at ‘AA2’ and SAUDI ARABIA: Local dairy and corresponding period. ‘P1’,respectively, with a stable outlook on food producer Almarai Company has continued... the long-term rating.

© 11 6th June 2012 NEWS continued... million) in the fi rst quarter of this year. MOVES The bank’s total assets amounted to US$151.4 million, from US$148.5 million Operating income from its asset DEUTSCHE BANK at the end of 2011. management, investment banking and brokerage businesses amounted to GERMANY: Josef Ackermann has KWD2.4 million (US$8.54 million). It stepped down as CEO of Deutsche Bank. IHGS goes into real estate also made a US$21 million principal QATAR: Brokerage fi rm Islamic Holding repayment of its bank debt. He has been replaced by the bank’s co- Group (IHGS)’s board of directors have chiefs Anshu Jain and Juergen Fitschen. approved the establishment of a real estate company, Ajyad Real Estate. The Coming up... BNI SYARIAH new fi rm will have a capital of QAR5 INDONESIA: Islamic Finance news million (US$1.37 million). Volume 9 Issue 23 — 13th June 2012 has learnt that Dinno Indiano has been named as the new president director of DIFC in Oz tie-up Meet the Head BNI Syariah. GLOBAL: Dubai International Financial Ian Lancaster, CEO and chief investment Center (DIFC) has entered into a strategic offi cer, Reliance Asset Management He replaces the previous president partnership with the Australia Gulf director, Rizqullah Thohuri. Features Council to promote and facilitate trade, The means and ends in Islamic fi nance: A investment and other opportunities look into the past, present and future; By between Dubai and Australia. Sherif Ayoub, offi ce of the vice-president — fi nance, Islamic Development Bank Additionally, the agreement will support Group. the promotion of unexplored investment opportunities and conventional and Development challenges in Yemen; By Islamic fi nance investment between Moneer Saif, head of Islamic banking Australia and the GCC. sector, CAC Bank.

Global in the red Update on the Takaful industry in Bahrain; By Shyam Sankar, regional KUWAIT: Global Investment House re- head — Bancassurance, Brokerage and ported a net loss of KWD11 million (US$39 MarCom at Medgulf Allianz Takaful.

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Slowly but surely

Islamic fi nance has been present in the work with the government to develop the He points out that Asia has to date UK for the last 30 years and London industry. mainly focused on providing Islamic has been widely recognized as the fi nance services and products for their leading Islamic fi nance hub of Europe. domestic markets. Numerous companies including those from the Middle East have based their UK Islamic “However, as the domestic market European operations in the UK in a continues to mature we expect to see an bid to grow their Shariah compliant banks are increasingly international off ering. UK business. Islamic banks are interested in Asia and interested in Asia Malaysia due to the established Islamic UK fi rms are also keen to expand to other fi nance industry there. UK Islamic banks regions. In its eff ort to move towards and Malaysia due provide their Asian counterparts with Asia, an MoU between UK Trade & knowledge and experience of UK and Investment (UKTI) and Bank Negara to the established European Islamic fi nance, regulations Malaysia (BNM) was signed in 2009 Islamic finance and fi nancial markets,” he explains. in London with the goal of working together for mutual benefi t, to identify industry there Percy is of the view that BLME’s off ering new opportunities. According to BNM, is further enhanced due to its strong and the MoU will pave the way for the two established links to the GCC. He states countries to strengthen cooperation in that since launching in 2007, BLME has the development of talent and expertise, A cursory view three years aft er the built good relationships with several of business linkages and infrastructure agreement between the two regulators the Malaysian Islamic banks, without support besides facilitating the exchange has not seen any of the UK Islamic elaborating further. of resources in the development of banks sett ing up an offi ce in the country, human capital and promoting mutual however. Currently there are fi ve fully- Despite the positivity and the initially recognition of commons standards fl edged Islamic banks and 17 windows eff ort at the regulatory level, it may of transactions in the Islamic fi nance off ering Islamic products and services take a while before UK Islamic banks industry. in the UK. Even the prominent UK law establish a presence in Asia or Malaysia fi rms which have solid standing in the specifi cally. However, as Malaysia A more recent development is the Middle East are absent from the Asian continues to lead the global Islamic establishment of the UK Islamic Finance market. Humphrey Percy, CEO of the fi nance industry and Asia still a Secretariat (IFS), which is seed funded Bank of London and the Middle East, compelling investment story, the move by UKTI and has the objective to act as off ers an explanation as to the lack of will be inevitable. — RW a ‘one-stop shop’ for the UK sector to presence in Malaysia or Asia in general.

Afghan Sukuk: A band aid on a hemorrhage?

The Afghan government has turned its have been reduced to almost complete eyes towards Islamic banking and is The local dependence on foreign aid aft er over considering the issuance of a sovereign 30 years of political unrest. The country Sukuk in a bid to breathe new life into currency- has received more than US$32 billion in its economy; as western funds are set international aid since the entrance of dwindle following the withdrawal of denominated US-led military forces into the country foreign troops expected at the end of in 2001. 2014. issuance is expected Speaking to Islamic fi nance news, The local currency-denominated to make its debut Zulfi qar Ali Khan, the head of the Islamic issuance is expected to make its debut banking division at DAF, said: “We sometime next year, pending approval sometime next are in the process of structuring Sukuk from authorities. While the government Musharakah and Murabahah for the fi rst has hailed Islamic fi nance as the savior year, pending time.” However, he declined to comment that could help rescue the country’s approval from on the size of the planned issuance, fi nancial industry, how helpful would stating only that: “It won’t be that big. At the planned issuance be in helping authorities this point, we are only testing the market. Afghanistan rebuild its war-torn Upon response from our local market, we economy over the long-term? will issue larger sizes.” planned Sukuk aims to provide the According to Khan Afzal Hadawal, the fi nance ministry with funds to cover Zulfi qar went on to say that the fi rst deputy governor of Da Afghanistan its expenses, while developing the Sukuk would be benefi cal towards Bank (DAF), the central bank, the country’s fi nancial markets which continued...

Continued the redevelopment of the country’s However Dr Thomas Goutt ierre, the address the cott age industry level of economy, with its planned construction director of the Center for Afghanistan borrowing and investments rather than and mining projects, which in turn are Studies at the University of Nebraska at the kinds of investments that people hoped to spur foreign investor interest. Omaha, cautioned that the expectations would put money into. It’s too limiting being pinned on this planned issuance and by having an alternative it will He also said that the Sukuk will either might be deceptive. create uncertainties. Both the Islamic and be issued by the central bank or the conventional [fi nance industry] need to fi nance ministry, with the central bank “The Afghanistan government is create that trust fi rst. likely to manage the planned sale, which off ering an alternative, indigenous will only be off ered domestically. market to the people,” he commented “Having the Sukuk is just a short-term fi x on the Sukuk, noting however that for a long-term illness. Much like putt ing Afghanistan’s overall banking industry a band aid on a hemorrhage,” he noted. “The importance is that Sukuk is more remains underdeveloped. He also acceptable to the local market because believes that while the upside of a Sukuk As one of the poorest countries in Afghanistan is a religious country. would be to help build and restore the world, Afghanistan’s economic There’s a lot of trust and confi dence in confi dence and promote commercial redevelopment is set for a long, diffi cult this because it has no interest [rate] and activity, the issuance will not assist in road ahead. While a Sukuk issuance there are no uncertainties. It will be the development of an economy and may not be suffi cient to spur long-term based on Musharakah and people prefer fi nancial market that off ers a potential growth, its planned sale could, at least, that over conventional,” he added. for the future. “It’s more designed to help provide a short-term boost. — LR

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Updates on the Iraqi Islamic Finance Regulation No. 6 of 2011

IRAQ be experts in banking, fi nancial, and responsible for submitt ing an annual legal operations. report to the bank’s board of directors By Khaled Saqqaf, IFN Correspondent as well as its general assembly of 2. Article 6 further provides that the shareholders. In addition to creating Islamic banks members of the Shariah board shall and providing for the creation of hold an administrative position, 5. The Shariah board may propose Islamic fi nance branches of commercial a senior position, or a member of to the bank’s general assembly of banks, the Islamic Finance Regulation the bank’s board of directors or shareholders as well as its board of No. 6 of 2011 (the Regulation) provides shareholders. directors any ideas or advice it thinks for the formation of a Shariah board for useful for the same to achieve its Islamic banks and Islamic branches of 3. The members of the bank’s Shariah goals in a Shariah compliant manner. commercial banks. board shall stay in position for a period of three years, renewable In addition to the above, Article 6 According to Article 6 of the Regulation, for the same period pending the of the Regulation provides that the the Shariah board shall be responsible for approval of the bank’s general decisions of a bank’s Shariah board is the following tasks: assembly as well as the approval of binding to the executive management the Central Bank of Iraq. of the bank. This is so the same would 1. Create the constituent assembly for ensure that the bank prioritizes the every Islamic bank and then create 4. The Shariah board shall be in charge Shariah compliant decisions of the the Shariah Supervisor Authority. of advising and giving Shariah Shariah board over its own personal The Regulation states that the Shariah compliant opinions in relation to commercial interests. Supervisor Authority shall consist the transactions to be undertaken by of not less than three people and the bank in order to ensure that the Khaled Saqqaf is a partner at Al Tamimi & not more than fi ve people, provided same does not go against the Shariah. Company. He can be contacted at K.Saqqaf@ that more than half of them shall be The Shariah board shall also be tamimi.com. Shariah experts while the rest shall

The adoption of the ICS BANKS financial systems by the Jordanian Military Fund

JORDAN that best serve the client’s needs and and profi t sharing. When it comes to the keeps up with their ever-growing Murabahah module, which according By Khaled Saqqaf, IFN Correspondent requirements. to ICS is the most frequently used form of Islamic fi nance in the world, the The Military Fund has implemented system allows the client to buy assets the ICS BANKS Islamic IT solution, and then sell them to their customers at created by ICS Financial Systems. ICS, a profi t. Among other things, this system founded in London in 1978, is a systems ICS BANKS includes car, house, and real estate integrator and solutions provider that aims to fi nancing, handling the installments focuses on retail banking and fi nance, postponements, as well as retail and healthcare, education and police constantly update corporate features. and security solutions. ICS aims at providing its clients with soft ware that its software and Further, some of the modules, such as the presents the managers with the reliable Mudarabah system, are fully automated reports and information they need for introduce new and capable of handling investments quick decision making. Furthermore, it through a partnership established aims to present the same with soft ware modules that best between the bank and the receiver. that covers the whole business cycle and is fully integrated. serve the The adoption of the ICS fi nancial systems by non-private entities, including the When it comes to the soft ware, clients client’s needs Military Fund, is to be welcomed as can add modules that best serve their a way forward in organizing such purpose. According to ICS: “Each of our An example of this is the addition necessary modules, including Islamic modules is parameterized to quickly of new modules to the system by funding, within public as well as the support a client’s unique workfl ow ICS. This is because ICS BANKS has private sector. and is designed to ‘stand alone’ since recently introduced a number of implementation of any module can be Islamic modules such as Murabahah, Khaled Saqqaf is a partner at Al Tamimi & separately accomplished.” Furthermore, Salam, Tawarruq, Ijarah, Istisnah, Company. He can be contacted at K.Saqqaf@ ICS BANKS aims to constantly update Musharakah, Mudarabah, Qard Hasan tamimi.com. its soft ware and introduce new modules

All set for a sovereign Sukuk?

SOUTH AFRICA proactive supporter of Islamic fi nance, these have not yet been contemplated, said: “This instrument eff ectively off ers or acted upon through the establishment By Amman Muhammad, IFN Correspondent a yield that is comparable to a risk-free of a relevant technical committ ee. government bond. It is hoped that the Similar such discussions have been held South Africa is joining the select band development of this form of fi nancing regarding Egypt and Nigeria. of non-Muslim countries preparing to could encourage new forms of foreign issue a sovereign Sukuk. South African investment beyond traditional western In line with this excitement about South banks are awaiting the all-important funding.” Africa’s pending Sukuk, innovation and decision by the National Treasury on product development are undoubtedly which bank or consortia of banks have The chase for the fi rst benchmark Sukuk the strongest themes in the South been selected to support the delivery issuance — sovereign or corporate — African Islamic banking market. of South Africa’s fi rst Sukuk. The out of Africa clearly is on. It seems that Extension of the product range is critical invitation to banks, issued in December South Africa is in pole position given that for the development of a compelling 2011, invited bids for the service no other potential issuer has published customer proposition. of advising on the structuring and a request for proposal for a Sukuk issuance of a government Islamic bond issuance and invited interested fi nancial Takaful in South Africa was bought in the local and international markets. institutions to submit proposals. Much by the Absa Group to expand the Shortlisted banks were informed in has been said about potential Sukuk offering of its financial services January this year and then presented off erings from African countries such as division and the integration work their approach to the National Treasury. Egypt, Kenya, Nigeria, Senegal, and even following on from this acquisition is Tunisia. well underway. Focus is also being placed on the development of life and In Kenya, the Central Bank of Kenya has capital products in response to strong Much has been been discussing the possibility of issuing Takaful demands following the success said about a Sukuk with local Islamic banks such of Islamic banking. as the First Community Bank. But as far potential Sukuk as guidelines, regulatory issues and the Amman Muhammad is the managing enabling legal framework complete with director at Absa Islamic Banking. He can be offerings from tax neutrality measures are concerned, contacted at [email protected]. African countries such as Egypt, Kenya, Nigeria, Senegal, and even Tunisia

The Sukuk introduction process is in line with the South African National Treasury’s intention to diversify its funding and investor base. Commenting on plans to introduce a sovereign Sukuk Lungisa Fuzile, the treasury director general, said: “There is a great interest in the market and this is the ﬁ rst step towards meeting the growing appetite for government-backed Shariah compliant investment.”

South Africa is not considered a big borrower by global standards. Its public sector ﬁ nancing requirement for 2011- 12 was set at ZAR241.5 billion (US$30 billion), which represents 8% of the country’s GDP. Almost all were raised locally with about US$1-1.5 billion coming from abroad.

Pravin Gordhan, the ﬁ nance minister, a

Takaful in Tanzania: Is there a future?

TANZANIA These external developments as well This hope is supported by the fact internal demands for Takaful products that Muslims in the country constitute By Khalfan Abdallah, IFN Correspondent will be the main motive for Tanzania to almost half of the population of 42 explore this opportunity. million and probably the largest seekers According to the Ernst &Young World and users of insurance products. Takaful report, Takaful opportunities In early January 2012, the Tanzania in core markets suggested a US$12 Insurance Regulatory Authority Tanzania currently has a total of 27 billion industry by the end of 2011 and undertook a study on the viability of insurance companies with total assets are predicted to remain an important feature of Muslim emerging markets for introducing Takaful operations and of TZS355.7 billion (US$220 million) many indigenous and global insurance associated regulatory framework in the in 2010. All of these companies off er players. country. conventional life assurance and general insurance products. The East African region has yet to The fi ndings are expected to be witness robust Takaful providers and completed by the end of May 2012. The insurance market grew by 24% in thus is considered to be one of more gross premiums in 2010. profi table opportunity centers. The The main question asked by practitioners region is comprised of more than 30 and potential customers is whether the This market growth was higher than million Muslims and has no local or country will eventually allow Takaful the growth of the national nominal regional Takaful providers despite the companies to operate in the country GDP and higher than the growth of the strong market potential for Takaful and provide them with a conducive nominal fi nancial intermediation sector products. regulatory framework to conduct the GDP for the year. business successfully. However, new developments suggest Khalfan Abdallah is the head of product that this will not long remain unexplored While this question remains, there is development and Shariah compliance territory for Takaful business in the hope that the study shall gather enough at Amana Bank. He can be contacted at coming decade, following the launch of evidence on the potential of Takaful in [email protected]. Takaful Insurance of Africa in Kenya in Tanzania as well as devising a suitable January 2011. model for the country.

Lead Partners

Executive Partners 12 th - 13th November 2012 Four Seasons Hotel Riyadh at Kingdom Centre

We are delighted to announce the Exclusive Knowledge Partner Multilateral Strategic Partner Takaful & re-Takaful Day Endorser inaugural IFN Saudi Arabia Forum, which will take place in Riyadh on the 12th - 13th November 2012.

This exclusive event in Riyadh will follow our tradition of delivering two, one-day events focusing on the 'Issuer' and Badges & Lanyards Sponsor Partner Lead Media Partner 'Investor' markets within Saudi Arabia; and structured around a series of exclusive regulatory country presentations, Media Partners practitioner-led round-table discussions, non-debatable power presentations, original case studies and sector focused side sessions.

If you have an active interest in Islamic REGISTER ONLINE NOW finance and want to be a part of the exclusive IFN Forum in Saudi Arabia, don’t www.REDmoneyevents.com wait and secure your free seat today; Attendance, while FREE, is by invitation only and open to those who register registrations are NOW open! and have an active interest in this fast growing industry.

Banque Saudi Fransi US$750 million Sukuk

Banque Saudi Fransi (BSF) launched law fi rm Maples & Calder also advised a US$750 million Sukuk on the 15th the issuer. Banque Saudi Fransi Sukuk May, in an off ering that formed part of its recently set up US$2 billion trust In an announcement, Baker & McKenzie certifi cate issuance program. The sale noted that: “This is the fi rst Sukuk to be also marked the fi rst time BSF has issued by a Saudi bank and listed on the tapped the US dollar-denominated London Stock Exchange. [US] dollar- Sukuk market. denominated Islamic bonds are rare and att ract signifi cant demand when they The papers were issued via BSF Sukuk, come in to the market – the pricing and US$750 million the bank’s Cayman Islands-incorporated size of the BSF Sukuk refl ect this.” special purpose vehicle. 15th May 2012 Ian Siddell, a partner and head of the Gulf Pricing banking and fi nance practice at Baker & McKenzie, also said that the issuance’s Issuer BSF Sukuk The Sukuk was launched at a spread of oversubscription shows a demand for 185 basis points (bps) over midswaps, Obligor Banque Saudi Fransi quality corporate credit in the international (BSF) equivalent to profi t rate of 2.95%. The market. “We expect to see a number of Tenor Five years off ering att racted orders worth US$4 banks and corporations following with billion, allowing its fi nal pricing to fall on similar transactions,” he added. Currency US dollars the tighter end of initial guidance of 200 Profi t rate 2.95% bps over midswaps. Shariah compliance Joint lead Citibank, Deutsche According to its base prospectus, the managers Bank and Credit Participating banks and law Sukuk’s structure was approved by Agricole firms BSF’s Shariah committ ee, the Shariah Legal advisors Baker & McKenzie In addition to the lead managers, which supervisory boards of Citi Islamic (for BSF) and Allen & also acted as dealers, the transaction saw Investment Bank and Credit Agricole; Overy (for mandated the involvement of Saudi Fransi Capital and scholar Dr Hussein Hamed Sayed banks) as co-arranger and dealer, while off shore Hassan. — EB Orderbook US$4 billion

Dispute Resolution in Islamic Banking & Finance 14th June 2012, Kuala Lumpur

Understanding the Legal Framework and Procedures in Resolving Disputes Briefi ng Leaders: • Dr Rusni Hassan — Member, Shariah Advisory Council, Bank Negara Malaysia, Assistant Professor, Islamic Law Department, IIUM • Oommen Koshy — Partner, Dispute Resolution Division, Skrine • Nik Sarina Lugman Hashim — Partner, Ghani& Co. • HakimahYaacob — Researcher, International Shariah Research Academy for Islamic Finance • Marwalis Kassim — Partner, Jeff Leong Poon and Wong briefings www.islamicfi nancebriefi ngs.com info@islamicfi nancebriefi ngs.com

Islamic banking in the Philippines

RAFAEL MORALES discusses whether the expansion of Shariah compliant instruments might help in integrating the Filipino Muslim community into the mainstream of Philippine economic life.

Although Islamic banks are expressly authorized to issue “universally accepted the transaction will be subject to gross recognized by the general banking Islamic fi nancial instruments,” which receipts tax and will form part of its gross law, there is currently only one in the conceivably include Sukuk. Deposit-taking income, the net taxable portion of which country: namely, the Al-Amanah Islamic can be undertaken by the bank but on a will be subject to the regular corporate Investment Bank of the Philippines, non-interest basis, considering that Riba is income tax. In this context, Islamic banking which has a legislative charter (Republic prohibited. is on an equal footing with its conventional Act No. 6848) passed in 1990. It is the counterpart. successor-in-interest of the Philippine Shariah Advisory Council Amanah Bank, which was established In addition to its board of directors, the Riba in 1973 “based on the Islamic concept of bank has a Shariah Advisory Council The prohibition against Riba is possible banking, following the non-interest and composed of not more than fi ve members in the Philippines, considering that, partnership principles”. who are Islamic scholars or jurists of under Article 1306 of the Civil Code, comparative law. The council off ers advice parties to a contract are granted The Al-Amanah Islamic Bank’s primary and reviews the application of Shariah autonomy in that they “may establish purpose is “to promote and accelerate principles and rulings to the bank’s such stipulations, clauses, terms and the socio-economic development of transactions. However, the council is not conditions as they may deem convenient, the [Muslim] autonomous region” in directly involved in the operations of provided they are not contrary to law, the Philippines and “to participate in the bank. It is the board of directors that morals, good customs, public order, or agricultural, commercial and industrial conducts the operations of the bank. public policy.” In fact, Article 1956 of ventures based on the Islamic concept of the Civil Code states that “no interest banking”. Operations of Al-Amanah shall be due unless it has been expressly stipulated in writing”. As a practical Islamic Bank matt er and for the avoidance of doubt, In the absence Under its charter, the bank’s “assets, profi ts, all that a bank and its customer must distributions and all contracts, deeds, do is to stipulate that no interest is of a special documents and transactions related to the payable under their contract. It is as well conduct of [its] business” are exempted to underscore, in this regard, that the tax regime for from all taxes under the National Internal freedom in contract-making accorded Revenue Code to the extent of 100% for the to the parties by Article 1306 should Islamic banking fi rst fi ve years of its operations and 75% enable Islamic banking to fl ourish in the for the sixth through the eighth years. In Philippines. and financing view of this time limitation, it is doubtful whether that tax exemption still exists. In transactions, the any case, the exemption benefi ts only the Role of the central bank bank as it does not extend to the bank’s To promote Islamic banking and applicable law is the counterparties. The bank was exempted fi nancing transactions in the Philippines, from customs duties during the fi rst fi ve it is imperative for the Bangko Sentral National Internal years of its operations. However, without ng Pilipinas (BSP), the central bank, to any time limitation, an investor’s profi t issue guidelines for the establishment of Revenue Code from his participation in the bank’s profi t- Islamic banking units within local banks, and-loss sharing scheme is exempt from all consistent with the general banking law’s taxes under the National Internal Revenue recognition of Islamic banks as a distinct Code, except income tax. category of banking institutions. The BSP is the regulator of all banks operating in the The bank is authorized by its charter to, In the absence of a special tax regime for Philippines, but it recognizes the Islamic among others: (a) invest in transactions that Islamic banking and fi nancing transactions, concept of banking. In fact, Section 43 of “will not permit the Haram (forbidden) the applicable law is the National Internal Republic Act No. 6848 mandates the BSP to nor forbid the Halal (permissible);” (b) Revenue Code. Fortunately, under this supervise the operations of the Al-Amanah issue “Muquaradah (non-interest-bearing code, there is no documentary stamp tax Islamic Investment Bank “in accordance bonds),” and (c) “carry out fi nancing and for transfers or conveyances of personal with the universal principle of Shariah.” joint investment operations by way of property other than shares of stock, such This mandate would also apply to other Mudarabah purchasing for others on a as commodities. Accordingly, the initial Islamic banks or banking units that will be cost-plus fi nancing arrangement, and to acquisition and then eventual disposition established in the Philippines. invest funds directly in various projects or by a bank to its customer of a specifi ed through the use of funds whose owners commodity on a cost-plus-profi t basis Rafael A Morales is a managing partner at desire to invest jointly with other resources (such as in Murabahah) will not be subject SyCip Salazar Hernandez & Gatmaitan. He available to the Islamic bank on a joint to that tax. Further, just like in conventional can be contacted at [email protected]. Mudarabah basis.” The bank is also fi nancing, the profi t margin of a bank from

The future of secondary markets in Saudi Arabia

IRFAN BUTT and MUSTAFA KAMAL explore the several steps that could be taken to stimulate the secondary markets and further develop opportunities for Shariah compliant liquidity management in Saudi Arabia.

Ever since the accession of Saudi Arabia recent Sukuk issuances have exceeded The kingdom is already one of the most to the World Trade Organization (WTO) what was on off er. Increasing the volume active members of international Islamic at the end of 2005, the slow winds of of issued Sukuk is critical to the vitality standards sett ing bodies. Perhaps one change have meant an ever increasing of the secondary market – a healthy way towards greater standardization is market expectation that the region’s supply of Sukuk with varied currencies, for the rules, standards and eff orts of biggest economy will be liberalized to risk profi les and maturities is critical to the Islamic Financial Services Board, the include direct foreign investment in encouraging greater participation. International Islamic Financial Markets, its fi nancial markets. With the primary the Islamic Financial Institutions Rating market moving towards direct foreign 2. Issuance of a Sovereign Agency and AAOIFI Shariah standards investment with the new Qualifi ed to be formally adopted in Saudi Arabia Foreign Investors Law expected to take Sukuk – this will also create greater harmony The issuance of groundbreaking Sukuk eff ect at some point in 2012, fi nancial between the powerhouse of the Middle by government entities such as the experts are already beginning to focus East, Saudi Arabia, and the other key General Authority of Civil Aviation on whether the secondary markets will Islamic fi nance economy, Malaysia. was an important milestone for the follow suit. development of Islamic fi nance in the kingdom. This could be followed up 5. Opening the secondary For years many fi nancial analysts have with the issuance of a sovereign Sukuk market to foreigners predicted that Saudi Arabia would which would further assist in price The Saudi secondary Sukuk market eventually overtake the UAE as the benchmarking and boost secondary is currently closed to foreigners. In largest issuer of Sukuk in the region. market trading in the same way that the order for the market to fully realize With a Shariah-based legal system, sky Malaysian government and central bank its potential, the foreign investment high oil prices and liquidity levels that Sukuk issuances have helped turn the regulations should take the next logical the west could only dream of it was only Malaysian Sukuk market into the most step of enabling foreign investors to buy a matt er of time before the pace of change vibrant in the world. and sell Shariah compliant instruments extended into the secondary markets. on the secondary market and for foreign In 2012, the predictions became a reality issuers to be able to list their Shariah and Saudi Arabia now stands as the 3. Product development & compliant instruments on Tadawul. If largest Sukuk issuer in the Middle East diversification of instruments the secondary Sukuk market cannot and globally only second to Malaysia in Secondary market trading must diversify be opened to non-GCC investors the volume of Sukuk issuances. beyond stocks and bonds to cover immediately, perhaps a start can be made trading of Shariah compliant derivatives with GCC issuers listing on Tadawul or For the Saudi Sukuk market to now move and other innovative products GCC persons trading on the secondary forward, several steps could be taken developed under the supervision of Sukuk market. to stimulate the secondary markets and Shariah scholars. This will require the further develop opportunities for Shariah concerted eff ort of industry experts compliant liquidity management in guided by Shariah scholars and active Conclusion Saudi Arabia. encouragement of the regulators. With the imminent opening of the primary market in Saudi Arabia to Tadawul, the Saudi stock exchange, made 4. Greater standardization direct foreign investment, many are of encouraging eff orts to launch an automated the view that it is only a matt er of time On the one hand the standardization before the secondary market follows suit. order-driven secondary market trading debate in Islamic fi nance is oft en a platform in 2009. Secondary trading of debt Although great strides have been made controversial one, but others point to the post accession to the WTO, the challenge instruments no longer have to be executed very rich jurisprudential tradition that through bank treasuries and sett led by remains to fully transition from the prides itself in the fl exibility arising from protectionism of the past in an orderly Tadawul. Qualifi ed investors are now able the multiplicity of opinions expounded to trade in debt instruments directly through manner in line with the aspirations of by Shariah scholars. This must, however, a vibrant contemporary market fully brokers. There are a number of measures that be balanced with the need to develop integrated with the global economy. The should encourage the Saudi Sukuk market: standards for a sophisticated industry. slow winds of change are gathering pace A certain degree of standardization which bodes well for investors of all 1. More issuances will be necessary to increase investor types across the region and beyond. This year has been a brilliant year for confi dence in the secondary Sukuk the Saudi Sukuk market. Sukuk worth market. Standardization covers not Irfan Butt and Mustafa Kamal are senior billions of US dollars have been issued. only documentation for oft -repeated legal advisors at Hogan Lovells in association However, the number of public issuances structures but more importantly, with Al Yaqoub Att orneys & Legal Advisors. is very low compared to the demand standardization of scholarly opinions in They can be contacted at irfan.butt @ – there are only a few Sukuk issuances relation to agreed structures for them hoganlovells.com and Mustafa.kamal@ listed on Tadawul and subscriptions for helps gain legitimacy in Saudi Arabia. hoganlovells.com, respectively.

Offshore centers: Accommodating Islamic finance transactions

AMJAD HUSSAIN and KATHLEEN BRADLEY look at how some off shore fi nancial centers have adapted to att ract the Islamic fi nance industry and accommodate Shariah compliant transactions.

The growth of the Islamic fi nance profi ts) aimed at att racting investors. are based upon the legal framework of industry has been remarkable in the established and tested legal jurisdictions. last decade and, in certain parts of the Clearly a major factor in selecting an OFC These laws are oft en supplemented by world, Islamic fi nance is now the mode is the tax benefi ts that would be achieved additional specifi c laws to clarify any of choice for corporates looking to raise by using a structure which involves that ambiguity so as to provide a greatest funds. OFC. As such, many of the successful amount of clarity to potential investors. OFCs have a network of international tax There are also international rules As with conventional fi nance, borrowers treaties which will provide investors with concerning money laundering which are (or the recipients of funds) look to signifi cant tax savings as well as relief usually adopted by OFCs and these help raise funds in the most effi cient and from other fees and charges that may be provide additional comfort to investors. expedient manner. This involves looking payable onshore to authorities. at structures that, amongst other things, In terms of enforcement of rights, many minimize tax liability, provide ease of Another key feature of OFCs has been of the popular OFCs are former colonies executing business transactions and give the secrecy and anonymity they have of the UK and, as such, their laws are comfort to contracting parties in terms of provided. based upon English common law. Also, enforcing their rights. a number of OFCs still refer to the Privy Council of the House of Lords for fi nal There are a number of off shore fi nancial As the Islamic decisions on areas of law where their centers (OFCs) that have come into own statutes and court decisions are existence over the last 30 years or so. One finance silent. This adds to investor comfort. of the main catalysts behind the growth of OFCs has been the growth in fi nancial industry has In the context of Islamic fi nance, English engineering (especially securitization) to law is seen by many as the law of structure products that facilitate easy and continued to grow choice for many of the core transaction quick fl ow of funds to a global investor documents. and borrower base. exponentially and Therefore, using a structure which OFCs make the headlines, involves an OFC that is based loosely on An OFC is usually characterised as a low- English law makes sense and allows for tax and regulation-light jurisdiction that OFCs have looked advisors and investors to appreciate the provides fi nancial services to individuals wider legal issues for a transaction more and corporate who are non-resident. to see how they readily.

Historically, OFCs were oft en found in can capitalize on All of the above considerations apply as geographical locations that were away much to transactions that comply with from the usual major fi nancial hubs and, this emerging and Shariah law as those that do not. So, what as such, they focused upon providing are the favourite OFCs for the Islamic competitive services which would att ract fast-growing fi nance industry? investors away from the more traditional fi nancial centers. market Islamic finance OFCs? As the Islamic fi nance industry has However, this is not the case now. A However this aspect is not as robust as continued to grow exponentially and number of OFCs have been created it used to be due to the tightening up make the headlines, OFCs have looked alongside on-shore trading hubs to of anti-money laundering regulations, to see how they can capitalize on this encourage foreign investments. Two greater collaboration imposed upon emerging and fast-growing market. Gulf-based examples of this are the OFCs by cross-border bodies such as the Qatar Financial Center and the Dubai Organization of Economic Cooperation Most OFCs claim that they provide the International Financial Center. and Development and the existence of best platform for Shariah compliant Tax Information Exchange Agreements. investors. However, in reality there are a These have been established alongside relatively few OFCs that have succeeded the existing regimes but aim to provide The existence of a light but yet clear in att racting bulk of the Islamic fi nance a regulatory framework that is akin to regulatory framework has continued to business. These include the British the leading global fi nancial centers and be a key consideration that infl uences Virgin Islands (BVI), Cayman Islands, off er incentives (such as no restriction on investors in deciding which OFC to select. Many of the OFCs have laws that foreign ownership and repatriation of continued...

Continued

Bermuda and Labuan (mainly for Asian the Cayman Islands and a view that they investors. These included permitt ing transactions). are a safe and trusted OFC. delivery of offi cial documents through the internet and allowing companies the These OFCs have proven to provide the ability to select wider range of corporate best environment and vehicles that allow objectives. Shariah compliant investors to structure Bermuda is products that are globally accepted and The US$500 million Sukuk issued by are also fl exible enough to accommodate seen as one GE Capital in 2009 was seen as an Islamic principles. Indeed, each of endorsement of the jurisdiction in the these OFCs has taken specifi c steps to of the leading OFCs eyes of many commentators. introduce laws and regulations which are Bermuda has been favoured as a directed towards encouraging the Islamic for Islamic finance jurisdiction by Islamic fund managers fi nance industry to transact business for a number of years. The regulatory there. and has made environment is seen as fl exible and allows for specifi c reference to Shariah Cayman Islands considerable efforts standards into the constitution and The Cayman Islands are seen as the off ering documents. OFC of choice for many Gulf-led Islamic to attract Islamic fi nance transactions. Some of the largest Although Bermuda is not unique in this, Sukuk transactions have been structured finance many commentators have suggested through the Cayman Islands: including that the Bermudan authorities have the US$1.45 billion TDIC Sukuk of 2009 business been more proactive than others in (for which the Government of Abu Dhabi accommodating non-conventional used a Cayman Island SPV) and the British Virgin Islands structures. The Bermuda Monetary AED7.5 billion (US$2.04 billion) JAFZ The BVI Business Companies Act 2004 Authority has issued a number of sukuk of 2007. is seen by many practitioners as a good guidance notes directed at giving further example of a law that has been enacted comfort to the Islamic fi nance industry. More recently, HSBC’s US$5 billion with a view to ensuring the fl exibility Sukuk program was put into place using required to accommodate future The long tested experience of Bermuda a Cayman Islands structure as was the innovation and development of Shariah in insurance and re-insurance fi elds has controversial Goldman Sachs US$2 compliant structures. In particular meant that it has been able to take a key billion Sukuk issuance program. the rules concerning the ability of a role in att racting Takaful and re-Takaful director to act in the best interests of providers targeting the US and European In March 2007 the General Registry of the shareholders (as opposed to just the SPV) markets. Cayman Islands introduced the Arabic are particularly useful in the context of language facility to allow companies to Musharakah-based instruments. Bermuda has commonly been used for receive their incorporation documents the structuring of complicated asset with Arabic language as well as English. In 2008 the Saudi Binladin Group fi nance deals, especially in the aviation This was seen as a move to welcome (through Purple Island Corporation) and shipping sectors. This therefore Middle Eastern investors and make it issued a US$267 million Mudarabah makes it a popular choice of law for clear that the Cayman Islands were keen Sukuk using a BVI SPV. Although the Shariah compliant transactions. to develop further links with the Arabic BVI have not been as popular as Cayman speaking world. Islands or Bermuda for Sukuk issuances, Labuan the mutual funds regulatory framework Another OFC that has grown in The regulatory authorities in Cayman has been popular with Islamic asset prominence in recent years for is the Islands were also quick to address managers and for other Shariah Labuan International Off shore Financial concerns regarding treatment of Islamic compliant transactions. Center (LIOFC), which is based on a fi nance structures by passing legislative small island located off the coast of amendments in 2008 clarifying that, for Bermuda Borneo. example, Sukuk would not fall within the Bermuda is seen as one of the leading remit of the Mutual Funds Law and the OFCs for Islamic fi nance and has made With the lead that Malaysia has taken Banks and Trust Companies Law. considerable eff orts to att ract Islamic in the growth of the Islamic fi nance fi nance business. The Bermuda Monetary industry, it is not surprising that the The Cayman Islands have been popular Authority, which was established in LIOFC has grown in prominence. with Islamic fund managers and Gulf- 1969, has been careful to ensure that based sovereign wealth funds for a the regulatory regime in Bermuda is The Labuan Financial Services Authority number of years. This stems from the suffi ciently accommodating to a number has been active in putt ing into place a popularity of the Cayman Islands in of asset classes and investors, including regulatory environment that is aimed structuring and managing the wealth of Islamic investors. at the att racting the Islamic fi nance a number of high net worth families and industry. In 2004 it signed an MoU individuals from the Gulf. This has meant A number of changes were made to the with the Islamic International Financial that there is a now a level familiarity with corporate laws in 2009 to att ract foreign continued...

Continued 1st - 2nd October 2012 Market in Bahrain to encourage Gulf Kuala Lumpur Convention Centre business. In 2010 it introduced the Issuers Day: Monday, 1st October Labuan Islamic Financial Services and Investors Day: Tuesday, 2nd October Securities Act which, amongst other Takaful & re-Takaful Day: Tuesday, 2nd October things, has strengthened the supervisory role of the Shariah board and allows Following the tremendous success of last year, the 7th IFN Asia Forum will be held in for the board to be referred to for Kuala Lumpur, Malaysia on the 1st-2nd October 2012. The renowned 'Issuers & Investors' dispute resolution. The LIOFC has format will again ensure both the buy-side and sell-side are fully incorporated in this been successful in att racting a number 2-day event. of Islamic banks and Islamic banking With complimentary delegate passes for all issuers, investors, regulators and other windows. In 2010, the total deposits with senior and relevant key practitioners, the IFN Asia Forum 2012 is again set to be the these institutions grew by 63% to US$1.3 industry’s largest and leading annual event; the only event you need to attend if you are billion. involved in Islamic finance in Asia.

Conclusion So, don’t miss out on the IFN Asia Forum 2012 and register today! We look forward to seeing you with the rest of the industry’s finest! It is clear that investors who choose to invest using Shariah compliant instruments share many of the same concerns that conventional investors have. These include ensuring that the structures used provide tax effi ciency, privacy and clarity around the legal and regulatory frameworks; and allow www.REDmoneyevents.com for eff ective enforcement of rights. Attendance, while FREE, is by invitation only and open to those who register Additionally, Islamic investors look at and have an active interest in this fast growing industry. issues around neutrality of treatment of investments (to ensure that they are SPONSORS & PARTNERS not at any disadvantage) and also the fl exibility to structure instruments in a Lead Partners manner consistent with their religious beliefs.

Most OFCs have welcomed the Islamic fi nance industry through tacit approval and issuing guidance to clarify the suitability of their framework for Shariah Executive Partners compliant investors. Some OFCs have taken specifi c steps to encourage and invite Islamic investors to use their services and jurisdiction for investments. However, there does not seem to be any OFC jurisdiction which is head and shoulders ahead of another in terms of its att ractiveness to the Islamic fi nance industry and for that reason Islamic investors will have to look at a number of issues to decide which OFC is most Exclusive Knowledge UK Pavillion Sponsors Takaful & re-Takaful suitable for their specifi c transaction and Partner Day Endorser product.

Disclaimer: The above article is for general information purposes only and should not be relied upon as (or as a substitute to) tailored legal advice. Corporate Gift Sponsor Booth Sponsor Partner Lead Media Partner

Amjad Hussain is a partner and Kathleen Bradley is of counsel at K&L Gates (Doha). They can be contacted at amjad@amaak. co.uk and [email protected] Media Partners respectively.

Outperformance amidst adversity

Cover Story Top 10 Monthly Returns for ALL Islamic Funds In a recent poll on the most important Domicile Performance Measure factors in a retail fund, almost half the Affi n Islamic Equity Malaysia 1.51 votes leaned towards performance. Atlas Pension Islamic - Equity Sub Pakistan 1.44 Whether Islamic or conventional, Dana Islamiah Affi n Malaysia 1.15 investors will always be more att racted AmIslamic Balanced Malaysia 0.97 to funds that provide good returns. Two Emirates Global Sukuk Fund Limited USD Jersey 0.80 other key factors were also identifi ed as Institution Share Class branding and distribution. Atlas Islamic Income Pakistan 0.76 Atlas Pension Islamic - Money Market Sub Pakistan 0.69 According to data provider Eurekahedge, Atlas Pension Islamic - Debt Sub Pakistan 0.68 six of the top 10 funds in terms of monthly AmIslamic Growth Malaysia 0.67 returns for the month of May were Atlas Islamic Stock Pakistan 0.51 domiciled in Pakistan; with four of those Source: Eurekahedge (data as at the 4th June 2012) funds being managed by Atlas Asset Management. The asset management infl ation factored in) over the last 20 years, “The industry, as well as Atlas, is th company, incorporated on the 20 August but instead are choosing traditional asset constantly striving to tap new markets and 2002, manages open-ended and closed-end classes such as the country’s National opportunities and expanding its exposure funds as well voluntary pension funds. Saving Schemes, 10-year government in Islamic funds by consistently att racting bonds and bank deposits that have posted institutional investors. The returns off ered In its monthly report, Atlas stated that very low or even negative real returns. are comparatively higher, simultaneously its Atlas Islamic Stock Fund was the top The report cites insuffi cient att ention catering to the Shariah compliant needs performer in its category for the second to marketing and investor awareness of corporate institutions. Discretionary year running, with a yield-to-date (YTD) of generated by the capital market institutions portfolio management services regarding 26.64% as opposed to its benchmark KMI- as reasons for low level retail interest. Islamic funds are being off ered by various 30 which posted a YTD return of 15.71%. However, regulators and market players fi rms to att ract customers, as well as Atlas Islamic funds have bagged the top are set to commence a nationwide investor several value added services such as text two spots in Eurekahedge’s Top 10 YTD awareness program in the second half of alerts and banking services.” returns table as well as the top spot in the the year. Top 10 annualized returns. Fund managers with Islamic funds globally With the lack of investment products should take a leaf out of Atlas’ book as But the strong performance of these funds available in the market, institutions form despite the adverse economic conditions does not truly refl ect the investment the biggest investors, at least in the case in the country, the fi rm has managed to environment in Pakistan, which may of Atlas. In a response to Islamic Finance maintain a leading position in terms of not be as healthy as it seems. In fact, a news, the asset management company performance of its funds. — RW recent report stated that the country’s confi rms that currently 80% of investments overall investor base in capital markets is in its Islamic funds are from institutional signifi cantly lower than other countries investors. Despite this substantial fi gure , In this issue... within the region, thereby exposing mutual it feels that the exposure by institutional funds to elevated levels of market volatility. investors to these funds industry wide is News ...... 25 still modest. However, the fi rm believes Market Commentary ...... 26 It further stated that a large number of that with the increasing growth of Funds Focus: Krung Thai Shariah Long-Term Equity retail investors were still not participating Islamic fund investment levels, further Fund ...... 27 in investment schemes and asset classes improvement can be expected. Funds Tables ...... 28 that provided real positive returns (with

WE SEE AN EVEN BRIGHTER FUTURE IN ASIA eastspringinvestments.com.my

Islamic fund closed market that will raise the profi le of The notes will be issued by Morgan the region’s securities to the global Stanley Islamic Finance until the 21st BRAZIL: The First Investor (TFI), the investment community. June. However, the off ering may investment banking arm of Qatar’s Barwa be closed earlier if the notes are Bank Group, has announced the closing According to Tajuddin, the trading link oversubscribed. of its TFI-Hines Brazil Income Real Estate will start with Bursa Malaysia and the Fund. Singapore Exchange in June, with the TA Islamic Fund reports Stock Exchange of Thailand joining in The fund, which recently closed its fi rst August. payout seed acquisition with an investment in MALAYSIA: TA Investment Sao Paulo’s World Trade Center, has Socially responsible Islamic Management has reported a gross a target size of US$500 million and is income distribution of 3.5 Malaysia sen expected to achieve a net leveraged funds (1.09 US cent) per unit for its TA Islamic internal rate of return of 10-12.5% for GLOBAL: The Islamic investment Fund, for registered unitholders as of the investors. sector can widen its customer base by 31st May 2012. adopting a socially responsible model The fund is a joint venture between TFI but distribution channels, a sophisticated The fund has achieved constant returns and US-based Hines International Real investor base and incentive schemes since its launch on the 21st April 2001, Estate Holdings. must be strengthened before it can reporting a total gain of 200.45% as at the achieve its full potential, according to 30th April this year. New investment products industry experts. from NIB Expanding reach “The common synergy between the two UAE: Noor Islamic Bank has launched investor classes [Islamic investing and UAE: Al Ramz Securities has entered two structured wealth management socially responsible investing] should into an agreement with Gulfmena investment products which allow clients be exploited,” said Lynett e D’Souza, Investments to cooperate on research and to invest in precious metals, currencies, the head of investment strategies group market analysis. equities, energy and agricultural at NCB Capital. She also noted that by commodities, with 100% capital doing so, greater economies scale can be The partnership will allow Al Ramz to protection. achieved. expand its business across the MENA region. Its Hybrid Pick and Drop Structure Sohail Jaff er, the deputy chief executive product will invest in Shariah compliant of FWU Global Takaful Solutions, equities, precious metals, agricultural Debut offering from Crescent also said that assets in Islamic funds, and energy commodities and the AUSTRALIA: Crescent Wealth is hoping estimated at US$58 billion, can growth Brazilian and Chinese currencies, while to att ract AU$100 million (US$96.86 further by going cross-border. its GCC Volatility Cap product off ers million) to its newly launched Islamic cash GCC market access to a diversifi ed management trust over the next few years. portfolio of underlying stocks. Barwa Bank offers equity- linked notes According to Talal Yassine, its managing director, the trust is expected to att ract ASEAN trading link soon QATAR: Barwa Bank has launched its funds from Australian mosques. The three-year Turkey Indonesia Equity GLOBAL: Tajuddin Atan, CEO of funds will be passed to HSBC Amanah Capital Protected Notes, an investment the Malaysian stock exchange, Bursa Malaysia, which will invest the funds in off ering linked to Indonesia and Turkey’s Malaysia, said that a soon-to-be- Australian-dollar denominated Islamic equity markets. established ASEAN trading link will term deposits. create an integrated ASEAN capital

Legal Documentation and Shariah Issues in Islamic Corporate and Investment Banking 13th – 14th June 2012, Kuala Lumpur Expert Course Directors:

Madzlan Mohd Hussain Zaid Ibrahim & Co

Megat Hizaini Hassan Lee Hishammuddin Allen & Gledhill

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www.miftraining.com info@islamicﬁ nancetraining.com

Market Commentary

Commodities fell broadly in May The Physical Commodity Index (ALL12)* with diversiﬁ ed indices having their Inception 1997. Base 100 worst month since September 2011 - all 1,000 falling about 10%. The FTSE Physical 800 ALL12 600 Industrial Metals Index declined 400 more than 8%. Now a wide range of 200 commodities are negative for the year. 0

Doubts about Europe’s economic 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 and political future weighed on investor conﬁ dence causing a ﬂ ight to *The Physical Commodity Index includes gold, silver, platinum, zinc, nickel, copper, aluminium, wheat, soybeans, corn, palm oil and brent crude oil. government bonds.

In addition to the European malaise, Physical Commodity Metals Index* - 6 Months economic fi gures indicated a sharp contraction of private sector output and 500 declining demand in various global 450 400 economies, including lower growth rates 350 in China. 300 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Crude oil dropped by more than 15% due to this weaker economic data, *The Physical Commodity Metals Index includes zinc, copper and aluminium. easing tensions with Iran and lowering geopolitical risk premiums. Against this to hold high stocks and copper is being trend, wheat temporarily showed an HSBC estimates that industrial production re-exported, to profi t from higher prices in increase of nearly 20% as a result of dry in China shrank for the seventh London. Chinese authorities are expected weather in the US and Russia but fell consecutive month. As a result, Chinese to put forward a new stimulus package back at month-end to fi nish unchanged. warehouse inventories of industrial metals and to continue to ease monetary policies are high whilst prices are trading some to boost growth. Gold continued its downward trend 30% below the highs seen last year. Copper, which started in March, now resting oft en taken as leading indicator for the Merit Commodity Partners. For more around the support level of $1,530 per world economic prospects, fell below information or a daily update, contact info@ ounce. $8,000/t. Warehouses in Shanghai were said mcpag.com or info@ft se.com.

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Krung Thai Shariah Long-Term Equity Fund

Krung Thai Shariah Long-Term Equity Fund (KSLTF)’s objective is to invest medium to long-term mainly in growth or good fundamental companies. The fund will maintain on average at least 65% of net asset value in equity-related securities while the rest will be invested in debt securities, deposits or other fi nancial assets as specifi ed or approved by the offi ce of SEC and qualifi ed in terms of Islamic principles.

What led to this fund being launched? domestic consumption growth and the Fact sheet The lack of availability and options of Shariah change in cost structure. Fund Manager Natt apong Sitt ikul compliant investment funds in Thailand. What are the sectors you have recently Trustee Krung Thai Asset Why has this particular region / asset exited and why? Management class been chosen? We reduced our weighting in the Shariah 1) Werachote Hayeehma There has been increasing interest in petrochemical sector because the ability Advisor(s) 2) Vitaya Visesrut Shariah compliant investment vehicles. to make profi ts of these companies has 3) Prinya Waiyasilp been lower. Benchmark FTSE SET Shariah Index What are the key factors that drive the (Index) fund’s performance? How has this change aff ected your Domicile Thailand Asset allocation and stock selection portfolio of this fund? Inception Date 27th December 2006 The change has contributed to the fund’s Who are your investors? bett er performance compared to the Fund Fund Type Characteristics Open Domestic Muslim and conventional benchmark. th (As of the 15 Fund Size investors. May 2012) What is the rate of return of this fund? THB108 million (US$3.42 million) as of the 30th What specifi c risks does the fund take Current yield-to-date return is around April 2012 into consideration? And why? 10% and since inception the fund has NAV per share Just like any other investment, the fund seen an annual compounded return of THB18.9623 (US$0.60) carries specifi c risks. However, the main 13% per annum. potential risk is the volatility of the stock Minimum / Subsequent Investment market. Since KSLTF is an equity fund, What is the market outlook for this fund? THB500 (US$15.82) the market volatility in diff erent periods Thai economic fundamentals remain Management Fee will have an impact on the returns the strong, but the situation in the European 1.48% p.a. investors receive. Union, especially Greece, still needs to be closely monitored as the extent of the Dividend policy N/A How oft en do you review this fund? damage to the global markets remains KSLTF is constantly monitored closely. unclear. *Performance Summary The fund is also reviewed by an investment committ ee on a weekly How has this fund performed compared 1 Year 7.7% basis. Moreover, the stock universe will to your initial expectations? 3 Years 85.22% be reviewed and approved by Shariah Even though the equity market has been Year to date 15.7% advisor on an annual basis. volatile, the fund has been outperforming its benchmark. Since inception 95.85% What are the sectors you are heavily invested in and why? Has your strategy for this fund changed *Fund portfolio composition Since the second quarter of 2012, the since inception, and if so how? fund has increased its weighting in The fund strategy has not changed and information and communications there is no plan to make changes in the technology (ICT) as it benefi ts from near-term.

*Comparison Graph (Since inception) 21 19 KSLTF 17 AIMC Bencmark 15 Energy 31% 13 11 ICT 24% 9 Commerce 18% 7 Property Development 9% 5 Healthcare 8% Petrochemicals 4% Jul-10 Jul-11 Jul-07 Jan-10 Jan-09 Jan-12 Jan-08 Jun-08 Jun-09 Jun-11 Jun-07 Oct-09 Oct-10 Feb-12 Feb-08 Feb-11 Feb-07 Sep-10 Sep-08 Sep-11 Sep-07 Dec-09 Dec-10 Dec-06 Apr-12 Apr-08 Apr-08 Apr-11 Apr-07 Mar-10 Mar-09 Aug-08 Aug-09 Nov-08 Nov-11 May-10 May-09 Construction Material 4% Source: KTAM as of 30th April 2012 Agribusiness 2%

Eurekahedge Asia Paciﬁ c Islamic Fund Index Index Values

Top 10 Monthly returns for All Islamic Funds Fund Fund Manager Performance Measure Fund Domicile 1 Affi n Islamic Equity Affi n Fund Management 1.51 Malaysia 2 Atlas Pension Islamic — Equity Sub Atlas Asset Management 1.44 Pakistan 3 Dana Islamiah Affi n Affi n Fund Management 1.15 Malaysia 4 AmIslamic Balanced AmInvestment Management 0.97 Malaysia 5 Meezan Tahaff uz Pension — Debt Sub Al Meezan Investment Management 0.81 Pakistan 6 Emirates Global Sukuk USD Institutional Emirates NBD Asset Management 0.80 Jersey Share Class (Acc) 7 Meezan Tahaff uz Pension — Money Market Al Meezan Investment Management 0.78 Pakistan Sub 8 Atlas Islamic Income Atlas Asset Management 0.76 Pakistan 9 Atlas Pension Islamic Money Market Sub Atlas Asset Management 0.69 Pakistan 10 Atlas Pension Islamic — Debt Sub Atlas Asset Management 0.68 Pakistan

Eurekahedge All Islamic Funds -2.49

Based on 29.66% of funds which have reported May 2012 returns as at 5th June 2012

Top 10 Monthly returns for Global Islamic Funds Fund Fund Manager Performance Measure Fund Domicile 1 Jadwa Global Sukuk Jadwa Investment 0.46 Saudi Arabia 2 CIMB Islamic Commodities Structured 2 CIMB-Principal Asset Management 0.37 Malaysia 3 Global Sukuk Plus QIB (UK) 0.30 Luxembourg 4 Jadwa Saudi Riyal Murabahah Jadwa Investment 0.02 Saudi Arabia 5 SWIP Islamic Global Equity — Class A Scott ish Widows Investment Partnership -1.34 UK 6 AmOasis Global Islamic Equity AmInvestment Management -1.81 Malaysia 7 AlManarah Conservative Growth Portfolio The National Commercial Bank -1.86 Saudi Arabia 8 AlManarah Medium Growth Portfolio The National Commercial Bank -3.15 Saudi Arabia 9 AlAhli Healthcare Trading Equity The National Commercial Bank -3.29 Saudi Arabia 10 Reliance Global Shariah Growth — USD I Reliance Asset Management (Malaysia) -3.61 Guernsey Eurekahedge Emerging Markets Islamic Fund Index -4.30 Based on 30.30% of funds which have reported May 2012 returns as at 5th Jun 2012

Comprehensive data from Eurekahedge will now feature the overall top 10 global and regional funds based on a specifi c duration (yield to date, annualized returns, monthly returns), Sharpe ratio as well as delve into specifi c asset classes in the global arena – equity, fi xed income, money market, commodity, global investing (which would focus on funds investing with global mandate instead of a specifi c country or geographical region), fund of funds, real estate as well as the Sortino ratio. Each table covering the duration, region, asset class and ratio will be featured on a fi ve week rotational basis.

Eurekahedge Islamic Fund Fixed Income Index over the last 5 years Eurekahedge Islamic Fund Equity Index over the last 1 year Percentage Percentage

Top 10 Fund of Funds by 3 Month Returns

Fund Fund Manager Performance Measure Fund Domicile 1 Al Yusr Tamoh Multi Asset Saudi Hollandi Bank 8.03 Saudi Arabia

2 Al Rajhi Multi Asset Growth Al Rajhi Bank 5.84 Saudi Arabia

3 Al Yusr Mizan Multi Asset Saudi Hollandi Bank 4.04 Saudi Arabia

4 AlManarah High Growth Portfolio The National Commercial Bank 3.42 Saudi Arabia

5 AlManarah Medium Growth Portfolio The National Commercial Bank 2.48 Saudi Arabia

6 Al Dar Fund of Funds ADAM 2.26 Kuwait

7 Al Rajhi Multi Asset Balanced Al Rajhi Bank 2.17 Saudi Arabia

8 Al-Mubarak Balanced Arab National Bank 1.66 Saudi Arabia

9 AlManarah Conservative Growth Portfolio The National Commercial Bank 1.42 Saudi Arabia

10 Al Yusr Aman Multi Asset Saudi Hollandi Bank 1.25 Saudi Arabia

Eurekahedge Fund Index 3.26

Based on 100.00% of funds which have reported April 2012 returns as at 5th June 2012

Top 5 Real Estate Funds by 3 Month Returns

Fund Fund Manager Performance Measure Fund Domicile 1 Al Qasr GCC Real Estate & Construction Banque Saudi Fransi 21.34 Saudi Arabia Equity Trading 2 Oasis Crescent Global Property Equity Oasis Global Management Company 6.13 Ireland (Ireland) 3 Al Dar Real Estate ADAM 4.58 Kuwait

4 Markaz Real Estate Kuwait Financial Centre 3.77 Kuwait

5 Al-’Aqar KPJ REIT AmMerchant Bank 2.54 Malaysia

Eurekahedge Real Estate Fund Index 4.77 Based on 100.00% of funds which have reported April 2012 returns as at 5th June 2012

Contact Eurekahedge To list your fund or update your fund information: [email protected] For further details on Eurekahedge: [email protected] Tel: +65 6212 0900

Disclaimer Copyright Eurekahedge 2007, All Rights Reserved. You, the user, may freely use the data for internal purposes and may reproduce the index data provided that reference to Eurekahedge is provided in your dissemination and/or reproduction. The information is provided on an “as is” basis and you assume and will bear all risk or associated costs in its use, and neither Islamic Finance news, Eurekahedge nor its aﬃ liates provide any express or implied warranty or representations as to originality, accuracy, completeness, timeliness, non-infringement, merchantability and ﬁ tness for any purpose.

Cover story in some jurisdictions, particularly approach to investment management, concerning the liabilities involved capital adequacy and reserving; due Perhaps the biggest misconception in winding up a Takaful company. A to the need to build up surplus in the in the realm of Takaful and Islamic report by ratings company AM Best long-term, especially for family and life fi nance in general is an almost published earlier this year suggested: businesses, as well as pricing selection complete aversion to risk amongst “Where regulation is deemed to be control. its investors. As an inherent part of weak or unclear, benefi t can be given for business and essentially everyday additional commitments to the Takaful The objectives set by the Shariah boards life, with the right management the fund from shareholders in favor of of the Takaful companies must also be impact of risk could most defi nitely be policyholders, such as the ring-fenced high on the priority list, and these need minimized, and could potentially yield assets which will be made explicit in the to be consistent with key performance more att ractive returns. analysis of a company. indicators based on conventional sound fi nancial and risk management. This The four generic risks for fi nancial includes establishing processes to institutions, both Islamic and address all material risks, concentration conventional, include credit risk, market From a Takaful risks and the limited geographic risk, liquidity risk and operational risk diversity of the current Takaful market. (under which Shariah non-compliance perspective, risk falls for Islamic fi nancial The protracted credit crisis has also institutions). The risks of fi nancing the most prevalent highlighted the need for regulatory with underlying assets in Murabahah, bodies to strengthen their supervisory Salam, Istisnah and Ijarah contracts is form of risk is that roles to ensure that stakeholders in the interchangeable between credit risk and Takaful industry chain are protected and market risk at diff erent stages of the which is linked buff ered from another crisis should it contract. to the regulatory occur. In addition to the four generic risk areas, Standard sett ing bodies such as the IFSB Islamic fi nancial institutions are also environment and AAOIFI have already brought to exposed to Shariah non-compliance risk, light issues with regards to solvency for rate of return risk, displaced commercial Takaful operations, governance and risk risk and equity investment risk. The role of the Shariah board within management; but there is urgent need to the organization and any potential tackle these challenges head-on and as From a Takaful perspective, the most diff erences with regulators on winding quickly as possible in order to allow for prevalent form of risk is that which is up a company is also taken into the sound and stable development of the linked to the regulatory environment. account.” Takaful industry. — NH And due to the fact that the strength of regulations varies signifi cantly A robust regulatory regime is also across jurisdictions, the protection to crucial in the development of a risk policyholders is still relatively muddled. management culture amongst Takaful In this issue... companies, and given the current Although there has been signifi cant constraints, particularly in the form of News ...... 31 improvement in the regulation of limited investments, Takaful companies Feature Takaful companies over the years, there need to develop and demonstrate the Takaful: Enhancing the UAE’s insurance industry .....32 is still a glaring lack of transparency application of an adequate risk-based

For more information, please call 03-2723 9999

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Minimum capital requirement to hold a minimum 2% stake in the “Any merger and acquisition activities not met company as individual directors, will be deliberated at our holding according to Abul Kalam Azad, its company level. Our main focus is to INDONESIA: Bapepam has said that company secretary. grow the business in Malaysia and as many as local 31 insurance providers Indonesia while continuously working have not met the minimum capital The SEC issued a circular on the 22nd hard to gain the top position and increase requirement of IDR70 billion (US$7.36 November 2011 mandating a 30% our market share,” said Mohamed million) or IDR95 billion (US$9.98 shareholding for sponsor-directors, Hassan Kamil, its managing director. million) for Takaful companies. together with 2% as individual directors. Companies were given six months to Higher income growth The regulator has urged the companies to comply with the rule. fulfi ll the requirements to avoid punitive INDONESIA: Prudential Life Assurance action. reported IDR4.3 trillion (US$448 million) Takaful distribution in premium income for the fi rst quarter Takaful guidelines for Nigeria YEMEN: Local insurer United Insurance of 2012, a 38% increase from the same Company has distributed 10.9% of its quarter last year. NIGERIA: Local insurance regulator, Takaful contributions net surplus to its the National Insurance Commission Takaful clients, except for those whose New business premium from its Shariah (NAICOM), will issue its guidelines on claims exceeded their contribution size. business reached IDR245 billion (US$25.5 Takaful in September this year, said Fola million), growing 29%. Daniel, the commissioner for insurance at The surplus in 2009 and 2010 were 5% NAICOM. and 7.9%, respectively. Great Eastern Takaful to cross The guidelines will enable insurance borders companies to off er Takaful services in the Focusing in Malaysia and MALAYSIA: Great Eastern Takaful is country. Indonesia eyeing cross-border opportunities and MALAYSIA: Syarikat Takaful Malaysia will jump at the chance to do so once the Six booted off will focus on its core markets in Malaysia time is right, according to Kamaruddin Taib, its chairman. BANGLADESH: Takaful Islami and Indonesia but does not rule out the Insurance has removed six sponsor- possibility of mergers and acquisitions “We will sett le here locally, and then the directors from its board as they failed in a bid to have a stronger foothold and goal is to be regional — Indonesia, Brunei, to follow the country’s Securities and a bigger market share of the Takaful Singapore — even China,” he said. Exchange Commission (SEC) directive industry.

30th - 31st October 2012 One Bishops Square, London Issuers Day: Monday, 30th October Investors Day: Tuesday, 31st October Takaful & re-Takaful Day: Tuesday, 31st October

Following on the success of the first IFN Europe forum last year, Secure your place today and register now by clicking on the we are proud to announce the 2nd IFN Europe Forum. box below!

Generally recognized as the financial centre of Europe, and certainly the most active Islamic financial centre, London has been chosen as the home of the IFN Europe Forum 2012, which will take place on 30th - 31st October.

Senior industry players are invited to participate as delegates, and will witness the largest and most impressive gathering of industry practitioners ever assembled on European shores. www.REDmoneyevents.com

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Takaful: Enhancing the UAE’s insurance industry

Takaful operators in the UAE must understand the challenges that the UAE Takaful industry faces, and proactively adapt to market needs. MUHAMMAD OWAIS ANSARI explores.

The Takaful and insurance industry in UAE Gross Takaful Contributions the UAE currently comprises 33 national companies and 26 foreign companies. 900 818 800 The UAE is the second largest Takaful CAGR (2005 - 2009): 98% market (by gross Takaful contributions) 700 2010 Growth: 28% 640 across the GCC, with eight Takaful 600 542 operators competing for Takaful 500 business. 400 369 300 The Takaful industry in the UAE has US$ million 200 witnessed strong growth over past years 100 42 65 with a compound annual growth rate of 0 2005 2006 2007 2008 2009 2010 (e) gross Takaful contributions of 98% per annum between 2005-09. Source: EY World Takaful Report 2012

Growth potential billion (US$381.06 million ) by the end of High disposable income levels and low The IA is 2012. market penetration in the UAE provide signiﬁ cant growth opportunities for also in the The UAE regulatory landscape Takaful. It is interesting to note that the The Insurance Authority (IA) has been share of Islamic ﬁ nance in the UAE is process of finalizing quite active in developing the regulatory around 25% (and growing fast), whereas framework around insurance and Takaful the Takaful market share is 15%. regulations covering in the UAE.

This lower level of Takaful share technical provisions, With the Takaful insurance regulations, primarily arises from a lack of customer issued in June 2010, the IA is targeting awareness about Takaful. It is therefore solvency and to have improved governance and imperative that the Takaful operators and standardization within the Takaful distributors play an active role in creating investments industry. awareness and clearing misconceptions about the principles of Takaful. that Takaful is perceived not only as a These Takaful regulations allow for bett er fi nancial proposition but also as a a supreme committ ee for Fatwa and The improved awareness of Takaful product based on ethical principles. This ,Shariah supervision to be established would not only assist in tapping into is analogous to the appeal and growth of whose opinions and directions would the Shariah inclined customers who are socially responsible investments within be binding on all Takaful operators. currently staying away from Takaful the non-Muslim countries. The regulation also promotes corporate but would also contribute to the overall governance through promoting growth in Islamic fi nance. The key opportunity for the Takaful standards aligned with the AAOIFI. industry remains establishing and With 20% of the UAE population being growing eff ective distribution channels. Having recognized the growing role of nationals, and 70% of the expatriate Over the last few years bancassurance bancassurance in the UAE, the IA issued population being Muslims, the growth in has contributed signifi cantly to the a circular in second half of 2011 which Takaful is a bott om-up phenomenon that growth of the Takaful industry, especially defi ned the requirements for marketing is purely demand-driven. In addition, Family Takaful. relationship between banks and Takaful the UAE with its diverse religious and operators/insurers. cultural mix of non-Muslim expatriates It has been a growing distribution can also benefi t from the experience of channel where the productivity and Banks are now prohibited from acting as the Takaful industry in Malaysia where quality of sales are greatly dependent on an insurance agent, broker or consultant the Takaful operators have been quite the training and support provided to the and their activities are limited to only successful in att racting non-Muslim banks distribution staff . marketing Takaful and insurance customers to Takaful. policies. Owing to the growth factors mentioned The key to their success and the appeal above, gross Takaful contributions for for non-Muslims is due to the fact the UAE are forecasted to cross AED1.4 continued...

Continued

The circular is a step in the right solvency, using a risk-based model. has also witnessed positive growth over direction. However moving forward the Additionally the IFSB is also currently past years and is poised to continue IA might strengthen the regulations by working on the standard for risk growing over the coming years. controlling the maximum remuneration management for Takaful undertakings. paid by Takaful operators/insurers to the The key challenges faced by the industry banks (similar to the regulations in Saudi These standards of IFSB, while not are the lack of standardization on key Arabia/Malaysia/Pakistan). compulsory, are adopted by a number Takaful issues and practices and the lack of Takaful operators globally and of awareness of Takaful. Such a move generally contributes could be the much-needed driver for towards Takaful operators/insurers standardizing the practices within the The IA has been supportive with their focusing more on their quality of service Takaful industry. regulatory amendments; and other level and product proposition for the bodies, such as the IFSB, are taking customers than focusing on bank’s Takaful operators are also following initiatives to facilitate the strengthening remuneration only. the Solvency II implementation in of the Takaful industry. Europe and the proposed changes in The IA is also in the process of ﬁ nalizing the International Financial Reporting The onus lies on the Takaful operators regulations covering technical provisions, Standards. It is imperative for Takaful to understand the challenges that the solvency and investments. These operators to understand how these UAE Takaful industry faces and to regulations would improve customer developments would impact the proactively adapt to market needs security and conﬁ dence. Takaful model and what lessons can be and the developments within the local learned by the measures adopted by the and the global Takaful and insurance Global initiatives impacting conventional insurers to prepare for these industry. changes. the Takaful landscape Muhammad Owais Ansari is the chief actuary The Islamic Financial Services Board Moving forward at FWU Global Takaful Solutions. He can be (IFSB) has issued solvency standards contacted at [email protected]. which specify a balance sheet view of The Family Takaful industry in the UAE

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In the short, medium and long-term, Q how can Islamic institutions flush with liquidity address the problem of a lack of Islamic products in which to invest?

Due to the continuing Eurozone happen quickly. One of the opportunities market for longer tenors. Islamic banks A crisis investment conditions that is oft en overlooked is to invest in, do have access to a reasonable Islamic continue to be challenging in both the and lend to, local enterprises. It may not money market platform (which is of mature and emerging markets. Prices for be as glamorous as being able to show a course priced at interest) yet have more Shariah compliant equity have been global reach, but it would benefi t the restricted access to a liquid Sukuk market falling in line with shares more generally, local economy, allow for diversifi cation, (again priced at interest). resulting in a reluctance to invest. and has a strong potential to reduce risks. Although 2012 will be a record year for By its very nature, liquidity needs to Sukuk issuances, yields are low and DR NATALIE SCHOON be invested in a manner that provides barely compensate for the much greater Principal consultant, Formabb strong security for the protection of the capital, along with some parameters for default risk than was the case for the assessing the returns. Debt products period prior to 2008 when there were no The question of fi nding a home for (interbank and bond markets) were defaults. Real estate markets, signifi cant A excess liquidity is one that has been designed for this very purpose, and for long-term investment, also remain doing the rounds for a good number of that is one reason why Islamic banks weak, with much uncertainty over future years now. Over the last fi ve years, great have only considered Islamic versions prices. strides have been made by the market to of these debt products to manage their structure products that are suitable for liquidity. It is clear that this is a short- In these circumstances it is not surprising investment such that I now question sighted solution, because we are still that Islamic fi nancial institutions are whether there is truly a lack of avenues relying on debt and interest at all stages holding on to their liquidity and are to invest. in this scenario. Steps taken to deepen reluctant to invest. Arguably it may this market, to introduce some level be an appropriate time to invest in the I believe that with the advent of Sukuk of transparency, do not take us away emerging markets of Muslim countries, funds, Ijarah funds, trade fi nance from the fact that these are still debt as although these are risky, the risks funds and so on, there are now plenty and interest instruments that we are are no greater than in mature markets. of avenues to choose from. What I transacting and relying on. Following its presidential elections, have found is that risk management Egypt is an obvious destination for techniques and the detailed knowledge In the short-term the industry, due to a Islamic investment. The country has a of how these products operate are still proven lack of vision that we all have young, well-educated population anxious lacking in some areas. It is normally said demonstrated over the years, may well to fi nd employment. Investors who that if a message is not being understood, focus on att empts to reduce transactional get involved in the Egyptian economy it is the problem of the deliverer not costs and improve the liquidity of could be participating in a market with the recipient. I think that the task that money markets (e.g. the introduction exciting prospects while at the same lies ahead for the industry is one of of certifi cates of deposit) and Sukuk time supporting socially worthwhile education, both of the markets and of markets, but that has litt le to no impact endeavors. the products that give access to those on the deeper problem that we still markets. interact in a very signifi cant manner with RODNEY WILSON interest and debt. Emeritus Professor, Durham University, UK MARK WATTS Head of fi xed income, Asset Management What is needed - and the sooner the Group, National Bank of Abu Dhabi industry grasps this, the sooner we can Banks are required to operate look to make positive developments — is A within the confi nes of the local laws an att empt to transform investments and and regulations, and product innovation Islamic institutions that have aspects of the real economy into what is oft en a long and cumbersome process. A liquidity, yet feel there are no is needed by the banks. For certainty In addition, many Islamic banks appear suitable instruments or platforms to of capital, the banks (investors in this to have a tendency to invest in the same invest in, face a peculiar dilemma. case) should look to markets with type of transactions and sectors over and long-term fundamentals and resilience. over again. As long as the banks keep on For conventional banks, the natural home It is unlikely that countries where the placing money with each other using for such liquidity is the fi xed income Islamic banks are located (in meaningful commodity Murabahah or invest in real markets, whether it is the money market estate, product innovation is unlikely to for shorter tenor liquidity, or the bonds continued...

Continued numbers) can deliver these markets in This is ‘stock’, which is not to be As a concrete illustration, the only the medium-term. So we have to look confused with shares in ‘joint stock stand-alone retail Islamic bank in the abroad to markets that can deliver these companies’. Stock consists simply of UK has been ‘deposit rich’ for many instruments. undated credit issued at a discount years, but unable to provide much and redeemable in payment for value customer fi nance, for example house Secondly, investments would need to provided. In fact the origin of the phrase purchase fi nance, due to its low level be separated into three elements — ‘rate of return’ has nothing whatever to of shareholders’ equity. one would be for investors who desire do with a fi xed interest rate and is simply capital protection above all else (i.e. the the variable rate over time at which 2. Islamic fi nancial institutions are banks and Takaful fi rms), one would ‘stock’ may be returned to the issuer unable for religious reasons to invest be for investors who wish to take some against value received. in many assets which are available reasonable amount of risk, and a third to their conventional counterparts. would be for investors wishing to take Interestingly such ‘stock’ is — in eff ect — At its simplest, interest-paying assets more risk. It is not that diffi cult to break now re-emerging in the form of exchange are excluded, but also the equity down an investment into these kinds of traded funds redeemable in payment for of many quoted companies is also tranches. What is key here is that these (in this case) gold bullion. My research excluded, either because they carry investments must be real investments and development has been focused on prohibited businesses or because delivering real returns from real markets, upon such instruments based upon the they earn or pay unacceptable levels not the tranching of credit default swap, use value of productive assets, such as of interest. credit risk, and debt that we have seen energy and land rentals. for too long in the conventional markets. To address the fi rst issue, Islamic banks These create risk and are de-linked from CHRIS COOK and Takaful operators need to increase in the real economy. Managing partner, Wimpole International size, for example by merger. The Islamic banking industry contains too many In short, banks do need to transform banks for its overall size, and regulators from entities that have liabilities For Indonesia, there is a high should encourage mergers. (deposits, capital market issuance etc) A demand for infrastructure project they fund with interest — which means funding and long-term Islamic To address the second issue, Islamic their assets must also deliver interest, just instruments (i.e. Sukuk) are perfect for fi nancial institutions need to become more of it — to entities that truly manage such projects. The issue is to engage the more innovative at structuring investible money and risk of the real economy. legislators and the tax offi ce to create a fi nancial assets which can be issued conducive requirement for infra Sukuk. A by companies regardless of whether Without making this step, Islamic Sukuk law akin to the sovereign Sukuk the issuing companies are owned by banks will continue to have available law would greatly help achieve this. Muslims or by non-Muslims. Provided to them solutions that are spin-off s of they can off er fi nance at att ractive terms, the conventional markets, which will Hanim Hamzah they will fi nd people willing to issue the naturally be based on debt and interest. Partner, Roosdiono & Partners investible assets required. This is a voluntary decision. Any developments along these lines are not MOHAMMED AMIN really developments at all, but further The challenges faced by Islamic Islamic fi nance consultant and former UK steps that take us away from the real A fi nancial institutions are head of Islamic fi nance at PwC solutions our Islamic banks require. fundamentally the same as those faced by conventional fi nancial institutions, SAFDAR ALAM whether they be banks, insurance The economic cycle has not favored CEO, Siyam Capital companies (Takaful operators) or asset A Islamic product development. The managers. All of them need to fi nd discipline is a costly one to fund, oft en This is an interesting question, and investible assets which have the right requiring legal, marketing, and personnel A in the course of my research at the characteristics in terms of yield and risk. costs that are hard for even the largest University College London’s Institute for institutions to champion in a poor Security & Resilience Studies (ISRS), I There are two factors which increase the earnings environment. Once we enter a have come to the conclusion that Islamic challenge for Islamic fi nancial institutions more stable economic growth trajectory fi nance is a contradiction in terms insofar compared with conventional fi nancial and there is a higher degree of fi nancial as it is based upon a dollar monetary institutions: intermediation taking place, institutions system which is backed by debt. may be more willing to put their 1. Islamic fi nancial institutions are carefully craft ed budgets at risk. There is in fact a Shariah compliant oft en smaller than their conventional fi nancing mechanism which pre-dates counterparts. This matt ers for Islamic The Arab Spring itself, however the dawn of the modern banking system banks and Takaful operators, and constructive from a political point of in 1694 when the (then private) Bank means that they have lower equity view in some geographies, has further of England fi rst began to privatize which in turn means that they are caused both issuers and investors to sovereign credit. less able to take on fi nancial risk. continued...

Continued turn inward. The biggest frontier in the Although the Sukuk market is much opportunities if someone holds up to realm of Islamic product development smaller than the conventional bond them an inspiring and att ractive long- is the economic hinterlands of the US, market, by combining Sukuk with term vision and if our industry can give Europe, and East Asia; at least from Islamic money market (commodity them the tools to innovate and progress. a GCC or Southeast Asia perspective. Murabahah) and leasing products Ultimately, the amount of capital chasing (Ijarah) BLME has been able to develop In the long-term, people will look back local opportunities in these core Islamic funds that perform at least as well as at the current era and recognize huge geographies will cause local returns their conventional equivalents — e.g. changes in world fi nance, ones that have to compress, making a case for greater BLME’s US dollar Income Fund , which already occurred and more importantly, international diversifi cation and asset last year was ranked number three out of the big ones yet to come. It is a time allocation policies. more than 800 money market funds by and opportunity for extraordinary Lipper, and now the BLME High Yield structural change. If we give our industry The near-term challenge may be simply Fund which according to a data provider the support it needs for long-term putt ing liquidity to work in routine is one of the best performing Sukuk development, if our leaders can set an products, given the diffi cult economic funds available. example of where that long-term leads, environment at hand. Poor economic the new generation of Islamic fi nanciers prospects in the OECD countries, falling HUMPHREY PERCY will fi nd a way to get there. More than growth in Brazil, China, India, and CEO, Bank of London and The Middle East anything we need leadership. Russia and the weak oil prices are a diffi cult combination for risk managers to JOHN COMRIE look beyond. The short and medium-term Of counsel, Agha & Co A strategy to develop more Islamic DOUGLAS CLARK JOHNSON products cannot be developed without a CEO, Codexa Capital clear vision of what Islamic fi nance Exchange traded funds (ETFs) are should look like in the long-term. Today A an ideal way for Islamic investors that vision is clouded by too many ‘new’ to gain exposure to a wide range of The simplest approach is to break products that are just conventional Shariah compliant products in a A the answer down by asset class: remakes in questionable garb. straightforward transaction. The London Stock Exchange (LSE) has a suite of Equities — there are plenty of Islamic In the long-term, I perceive an Islamic Islamic ETFs, based on indices covering equity funds available, and it is worth fi nancial industry that no longer defi nes the US, Europe, Asia and emerging noting that the Islamic indexes have itself by comparing its products to those market economies. The products give outperformed their conventional of conventional fi nance. It is successful investors access to a diverse selection of equivalents over the last few years as and commercially viable because it is companies and markets, while off ering they do not include conventional banks true to its Shariah precepts and serves the peace of mind that any investment and insurance companies. the needs of its clients: it has a strong does not confl ict with their religious ethical basis with a secure foundation commitments. LSE’s ETFs see the most Property — favored asset class for in real commercial transactions rather trading activity of any exchange in middle eastern investors, both in terms of than artifi cial derivative constructs. It is Europe. They are subject to continuous, direct investments and Shariah compliant therefore also att ractive to both Muslims intraday trading and are supported by property funds ( For example, Bank of and non-Muslims alike. dedicated market makers. The fl exibility London and the Middle East (BLME)’s this creates means they are suited to long Light Industrial Building Fund). Good The short and medium-term strategy or short-term investment. yields are available, though the investor is for the leadership of Islamic fi nance has to be prepared to stay invested for to set an example today, to be a model JONNY BLOSTONE fi ve years, and so forego liquidity. of what the industry could become Press offi cer, London Stock Exchange Group and thus inspire the new generation The criticism of shortage of products can of participants in this industry. Islamic only really be leveled at the fi xed income fi nance today is att racting more and space, and this is therefore an area where more of the best and the brightest. These BLME has focused its asset management new participants will fi nd a way to take product development. advantage of short and medium-term

Next Forum Question:

What industry standardization would assist in promoting Shariah compliant cross- border ﬁ nancing, and why?

If you would like to air your views on the next Forum Question, please email your response of between 50 and 300 words to Christina Morgan, forum editor, at: [email protected] before the 15th June 2012.

Liquidity management: Why is it relevant to Islamic financial institutions?

Contrary to popular belief, since Islamic ﬁ nancial institutions follow the same structure and characteristics as conventional banks’ balance sheets, they are not immune to liquidity risk. ARIFF SULTAN outlines the importance of liquidity management in the Shariah compliant industry.

Liquidity management is a key in value and guaranteeing the value of ’investor bank’ based on Mudarabah component of confi dence in the banking its liabilities. Thus, since Islamic fi nancial principles. The period of investment is system. Customers deposit their money institutions follow the same structure and from overnight to 12 months, while the with the bank and have confi dence characteristics as a commercial bank’s rate of return is based on the rate of gross that when they want to withdraw their balance sheet, they are not immune to profi t before distribution for investments money, the bank will provide them with liquidity risk. The potential mismatch of a year of the investee bank. The profi t- the money. In general terms, liquidity between deposits and investment sharing ratio is negotiable between both refers to broadly to the ability to trade fi nancing exposes Islamic banks to parties. The investor bank, at the time of instruments quickly at prices that are liquidity problems. On the other hand, the negotiation, does not know what the reasonable in light of the underlying if banks maintain too much liquidity return will be, as the actual return will demand/supply conditions through this may in turn hurt their profi tability. be crystallized towards the end of the the depth, breadth and resilience of the Therefore creating the right balance investment period. The principal invested market at the lowest possible execution between the two objectives of safety and is repaid at the end of the period, together cost. profi tability is the crux of the liquidity with a share of the profi t arising from the management issue. use of the fund by the investee bank.

The shortage How did Malaysia address In 1996, BNM introduced the minimum benchmark rate for the MII, i.e. the of liquidity the issues related to liquidity prevailing rate of the government management for Islamic investment issues plus a spread of 0.5%. management tools fi nancial institutions in the The purpose of the benchmark rate is to ensure that only banks with reasonable Malaysian market? rates of return participate in the MII. is cited by survey In Malaysia, the establishment of the fi rst participants as one Islamic Inter-bank Money Market (IIMM) In recent years, Ijarah-based negotiable in 1994 was designed to provide the Islamic money market instruments have of the key challenges Islamic banks with the facility for funding also been developed. Islamic banks can and adjusting portfolios over the short- engage in trading of these instruments to the Islamic term and hence maintaining the funding for liquidity management subject to and liquidity mechanism necessary to observance of the Shariah rules involved finance industry promote stability in the system. More in the relevant modes. importantly the IIMM provides an avenue for Islamic banks to manage liquidity The development of a vibrant, effi cient A perfectly liquid asset is defi ned as one more effi ciently without undermining the and eff ective IIMM requires the creation whose power over goods and services, principles of Shariah. of a broad spectrum of innovative immediately. Cash is liquid: similarly, Islamic fi nancial instruments and the demand deposits, deposits to third The country’s central bank, Bank Negara infrastructure to promote active trading parties over cheque or electronically Malaysia (BNM), issued the guidelines on so as to enhance the breadth and depth and investments are short-term liquid the IIMM in December 1993 to facilitate of the market. Consequently, part of government securities. The importance the proper implementation of the IIMM. BNM’s initiative is to support the Islamic of liquidity transcends the individual The IIMM covers the following aspects: banking and fi nance development in institution, since a liquidity shortfall at (i) inter-bank trading of Islamic fi nancial Malaysia. The commodity Murabahah a single institution may invoke systemic instruments and (ii) Mudarabah interbank program (CMP) was introduced to repercussion causing harm to the whole investments. Islamic banks, commercial facilitate deposit products which are fi nancial stability of a country. Therefore banks, merchant banks, eligible fi nance based on a principle of Tawarruq. It is it is important for banks to have companies and discount houses are designed to be the fi rst commodity-based adequate liquidity potential where they allowed to participate in the IIMM. transaction that utilizes crude palm oil- can obtain suffi cient funds promptly and based contracts as the underlying asset. at a reasonable cost. Mudarabah interbank The CMP transaction with BNM was fi rst auctioned competitively in the IIMM investment th The concern over liquidity management Mudarabah interbank investment on the 14 March 2007 and marked an is also relevant to an Islamic bank that (MII) refers to a mechanism whereby extensive eff ort by the country to become holds illiquid assets while its liabilities a defi cit Islamic ‘investee bank’ can are liquid, and holds assets unpredictable obtain investment from a surplus Islamic continued...

Continued a signifi cant player in Islamic fi nancial Cagamas Mudarabah bonds, Islamic 4. Shariah compliant assets are highly market globally. accepted bills, Islamic negotiable illiquid. Profi table Shariah compliant instruments, Islamic private debt assets such as credit exposures and Liquidity instruments securities, Ar-Rahnu agreement-I and Sukuk are highly illiquid assets (most There are various short-term liquidity Sukuk BNM Ijarah. Sukuk tend to have maturities of instruments in the conventional money more than three years and secondary market, off ering diff erent returns. Even though some of these instruments market trading for Sukuk is not These instruments include treasury are Shariah compatible, others seem active). bills, certifi cates of deposits, repurchase to be controversial. The controversies agreements, banker’s acceptance, surrounding these instruments are mainly To respond to the above challenges, commercial papers and inter-bank due to the overemphasis on the use of the central banks have concentrated their money deposits. Bai al Inah contract in devising most IIMM eff orts in product development for instruments. For example, the government Islamic banks to bett er manage liquidity All these instruments have diff erent investment issue (GII) which was initially surplus: characteristics pertaining to maturity issued by the government of Malaysia periods ranging from over night to one based on the Qard Hasan (benevolent loan) • The Saudi Arabia Monetary Authority year. In a nutshell, the IIMM allows principle, is now released by Bai al Inah has developed an ad-hoc instrument surplus banks to channel funds to defi cit allowing it to be traded in the secondary called Mutajarah, which behaves like banks using various instruments, thereby market via the concept Bay Al Dayn (debt a repurchase agreement (repo). maintaining the funding and liquidity trading). As a result of this, Gulf-based • Sovereign Sukuk issuances will also mechanism necessary to promote Islamic fi nancial institutions have turned contribute to enhancing the overall stability in the system. However, most of away from participating and investing liquidity of the market. these instruments used in the IIMM are in Bai al Inah-based instruments which • Short-term Sukuk programs are being developed where long- essentially interest-based instruments. has resulted in a further reduction of the term instruments are repackaged Therefore, the establishment of a viable availability of products for Gulf-based into short-term monthly maturity Islamic money market with Shariah Islamic fi nancial institutions. compliant instruments has become a certifi cates. necessity for the smooth growth of the Regional observations on industry. In 2011, various Islamic fi nancial the development of liquidity institutions developed the Islamic Initial eff orts to overcome the problem management products interbank benchmark rate (IIBR) which provides a reliable and objective of liquidity management have focused Based on survey results from countries indicator of the average expected on creating short-term and long-term such as Bahrain, Egypt, Hong Kong, return on Shariah compliant short-term debt instruments that are in line with Malaysia, Singapore, Pakistan, the UAE, interbank market funding for the Islamic Shariah principles. This was evident, in the UK and Turkey, it is common for IFIs fi nance industry. some jurisdictions, through the issuance to have an internal liquidity management of diverse Islamic fi nancial instruments framework, with the level of availability of Although benchmark rates based on ranging from short-term to long-term Shariah compliant liquidity management borrowing costs of conventional fi nancial bonds to meet the liquidity and investment instruments ranging from low to high. institutions are used as benchmarks in needs of Islamic banking institutions. The shortage of liquidity management Islamic fi nance transactions, the creation Malaysia seems to be the pioneer country tools has been cited by survey participants of a new rate indicative of the cost of in such initiatives with the establishment of as one of the key challenges to the Islamic Shariah compliant fi nancing is argued the fi rst IIMM in the world. fi nance industry. as being a more accurate refl ection of the industry’s fi nancing costs and a The IIMM was originally introduced as Some of the regional issues relating to fairer refl ection of benchmarking rates a short-term intermediary to provide a this subject are: ready source of short-term investment for Shariah compliant transactions and for use in Islamic fi nancing facilities, outlets and avenue for banks to manage 1. Excess liquidity. This is the current particularly between Islamic banks. their potential asset and liability norm with IFIs contributing to a trade mismatch based on Shariah principles. off between profi tability and liquidity. Through the IIMM, Islamic banks 2. Shortage of Shariah compliant liquid Conclusion participating in the Islamic banking instruments. Despite eff orts by The use of the IIBR will enhance the scheme (IBS) would be able to match central banks authorities to provide a development of products for liquidity funding requirements eff ectively and range of liquid instruments in which management that can be used globally effi ciently. Since its inception, there have IFIs can place their surplus cash, there in order to have global reach and been a number of instruments developed is still a great shortage of Shariah acceptance, which will facilitate cross- and introduced to the market, which compliant liquid instruments. border transactions, thus paving the way suit diverse investors’ requirements 3. Short-term Murabahah comes at a for Islamic fi nancing to be truly global. and needs. These instruments include cost. The cost is versus conventional MII, Wadiah acceptance, government money instruments as it is necessary Ariff Sultan is the regional director (Asia) investment issue, Bank Negara monetary for commodity brokers to be at IdealRatings. He can be contacted at notes-i, sell and buy back agreement, involved. [email protected].

Shariah specialized supervision which is Amer Mohamed Al available at the company is considered one of the most valuable points of Jabri, strength of the Islamic banking industry.

CEO, Al Jazeera This supervision enhances the trust of customers and makes them sure that Finance their dealings are far from suspicion.

The appointment of Amer What are the factors Mohamed Al Jabri as CEO confi rms contributing to the success of the company’s strategy of hiring your company? talented Qatari candidates, and is There are many factors that contribute to aimed at using his experience and the success of the company, such as: knowledge to achieve the expansion plans of the company in the retail 1) The company has a well-established and SME sectors. Shariah supervision panel which ensures the supremacy of the Islamic culture in the company. Could you provide a brief journey of how you arrived 2) Many of the company’s staff have wide-ranging experience of over 15 where you are today? years; and this ensures the passage of I started my career more than 15 years this experience to new employees and ago, and moved from one post to another the creation of a new generation of in Qatar Islamic Bank (QIB) until I well-trained talent at the company. became the assistant general manager of What is your greatest retail and small and medium enterprise achievement to date? What are the obstacles faced banking services. I think that my most outstanding achievement is helping my new and old in running your business That period provided me with colleagues at AJF develop their skills, today? substantial experience and knowledge in and creating a new generation of Islamic Finance businesses need to be more the fi eld of Islamic banking, especially as banking staff which are able to develop independent from the banks in applying QIB was the fi rst Islamic bank to operate the company in the future and maintain the standards and conditions in such in Qatar. the top position in the Qatari banking a way as to safeguard the rights of the market. shareholders. There is a strong relationship between QIB and Al Jazeera Finance Company Which of your products/ In addition, fi nance businesses lack the (AJF) and my move from QIB to AJF was required specialized fi nance technology. appropriate as QIB used to own a high services deliver the best percentage of shares in AJF and it owns results? now almost 30% of the company. AJF has a vast collection of products and Where do you see the Islamic services, and a rich history of 20 years fi nance industry in the next What does your role involve? in the local market; and this makes us fi ve years? My role involves formulating the fully aware of the requirements and The Islamic fi nance industry has been general strategy and development expectations of our esteemed customers. growing rapidly and it will have a big plan to achieve the general objectives share in the market. of the company in order to provide The products and services of the company cover all the sectors of the customers with the highest quality It will also surpass the traditional consumer commodities, real estate, and services, realize good profi ts for banking industry in terms of strength SME fi nance services. the company and shareholders and and size. ensuring the implementation of the The latt er two sectors, real estate and company’s expansion plans. SME fi nance, are among the most Name one thing you would successful products of our company. We work in a highly competitive service like to see change in the sector where clients have wide ranging world of Islamic fi nance. alternatives. What are the strengths of your The one thing I would like to see business? change in the fi eld of Islamic banking Currently, my priorities are to enhance Islamic fi nancial services are easy for the is the soft ware used in implementing the company’s points of strength: the customers to understand. They are clear, and following up the discharge of the most important of which are high quality explicit and do not involve those fi ne customers’ transactions and in keeping customer service and quick delivery of print terms and conditions that put a lot pace with the accelerating development fi nance operations. of future obligations on customers. in this fi eld.

DATE ISSUER SIZE ANNOUNCED IFN Correspondents AFGHANISTAN: Zulfi qar Ali Khan Gulf International Bank RM3.5 billion 31st May 2012 head of Islamic banking division, fi nancial supervision department, Da Afghanistan Bank Danainfra RM8 billion 31st May 2012 AUSTRALIA: Gerhard Bakker director, Madina Village General Authority of Civil Aviation TBA 24th May 2012 BAHRAIN: Dr Hatim El-Tahir director, Islamic Finance Knowledge Centre, Deloitt e & Morocco sovereign TBA 23rd May 2012 Touche BANGLADESH: Md Shamsuzzaman Malaysian Airline System RM2.5 billion 22nd May 2012 executive vice president, Islami Bank Bangladesh BERMUDA: Belaid A Jheengoor Amer Group Holding EGP2.7 billion 14th May 2012 director of asset management, PwC BRUNEI: James Chiew Siew Hua Qatar sovereign TBA 9th May 2012 senior partner, Abrahams Davidson & Co CANADA: Jeff rey S Graham Emirates NBD US$500 million 7th May 2012 partner, Borden Ladner Gervais EGYPT: Dr Walid Hegazy Epmex RM1.35 billion 25th April 2012 managing partner, Hegazy & Associates FRANCE: Antoine Saillon Noor Islamic Bank US$1 billion 19th April 2012 head of Islamic fi nance, Paris Europlace HONG KONG & CHINA: Anthony Chan Encorp RM1.58 billion 18th April 2012 partner, Brandt Chan & Partners in association with SNR Denton Banque Saudi Fransi US$2 billion 18th April 2012 INDIA: Keyur Shah partner, KPMG Islamic Development Bank RM400 million 17th April 2012 INDONESIA: Rizqullah president director, BNI Syariah Indosat IDR2.5 trillion 17th April 2012 IRAN: Majid Pireh Islamic fi nance expert, SEO Johor Corp Group RM3 billion 13th April 2012 IRAQ: Khaled Saqqaf partner and head of Jordan & Iraq offi ces, Al Tamimi & Co Citra Marga IDR1.2 trillion 12th April 2012 IRELAND: Ken Owens Shariah funds assurance partner, PwC Ireland Nakheel AED240 million 11th April 2012 JAPAN: Serdar A. Basara president, Japan Islamic Finance State Bank of Pakistan TBA 2nd April 2012 JORDAN: Khaled Saqqaf partner and head of Jordan & Iraq offi ces, Al Tamimi & Co Saudi Aramco TBA 2nd April 2012 KAZAKHSTAN: Timur Alim area manager, Al Hilal Bank Development Bank of Kazakhstan US$500 million 30th March 2012 KOREA: Yong-Jae Chang partner, Lee & Ko Ethical Asset Management TBA 30th March 2012 KUWAIT: Alex Saleh partner, Al Tamimi & Company National Australia Bank US$500 million 29th March 2012 LEBANON: Joëlle El Gemayel research assistant to the fi rst vice-governor, Banque du Liban Jebel Ali Free Zone AED2.4 billion 21st March 2012 LUXEMBOURG: Marc Theisen th partner, Theisen Law Indonesia sovereign TBA 20 March 2012 MALAYSIA: Nik Norishky Thani th head special projects (Islamic), PNB Yemen sovereign US$232 million 20 March 2012 MALDIVES: Aishath Muneeza head of Islamic fi nance, Capital Market Development Saudi Electricity Company TBA 19th March 2012 Authority MALTA: Reuben Butt igieg Noble Group, Hong Kong RM3 billion 15th March 2012 president, Malta Institute of Management MAURITIUS: Sameer K Tegally Kiler Group US$100 million 12th March 2012 associate, Conyers Dill & Pearman NEW ZEALAND: Dr Mustafa Farouk Dubai Investments US$200 million 12th March 2012 counsel member for Islamic fi nancial institutions, FIANZ OMAN: Anthony Watson Kazakhstan sovereign US$1 million 8th March 2012 senior associate, Al Busaidy Mansoor Jamal & Co PAKISTAN: Bilal Rasul First Community Bank KES2 billion 8th March 2012 director (enforcement), SEC of Pakistan

th PHILIPPINES: Rafael A Morales Pakistan sovereign TBA 7 March 2012 managing partner, SyCip Salazar Hernandez & Gatmaitan th QATAR: Amjad Hussain Syarikat Prasarana Negara RM4 billion 6 March 2012 partner, K&L Gates nd SAUDI ARABIA: Nabil Issa CIMB Singapore SG$100 million 2 March 2012 partner, King & Spalding st SOUTH AFRICA: Amman Muhammad Kingdom Holding TBA 1 March 2012 managing director, Absa Islamic Bank th SINGAPORE: Yeo Wico, Qatar Petroleum TBA 27 February 2012 partner, Allen & Gledhill th SRI LANKA: Roshan Madewala Acwa Power US$800 million 27 February 2012 director/CEO, Research Intelligence Unit rd SWITZERLAND: Khadra Abdullahi South Africa sovereign US$500 million 23 February 2012 associate of investment banking, Faisal Private Bank nd TANZANIA: Khalfan Abdallah Maybank RM7 billion 22 February 2012 head of product development and Sharia compliance, Amana Bank th Oman Arab Bank OMR10 million 20 February 2012 TURKEY: Ali Ceylan partner, Baspinar & Partners th Yemen sovereign TBA 20 February 2012 UAE: Moinuddin Malim CEO, Mashreq Al Islami th Kuwait Finance House, Turkey TBA 18 February 2012 UK: Dr. Natalie Schoon principal consultant, Formabb th Maxis RM2.45 billion 17 February 2012 US: Saeid Hamedanchi CEO, ShariahShares th Egypt sovereign TBA 6 February 2012 YEMEN: Moneer Saif head of Islamic banking, CAC Bank Development Bank of Kazakhstan TBA 6th February 2012 IFN Correspondents are experts in their respective Turkey sovereign TBA 3rd February 2012 ﬁ elds and are selected by Islamic Finance news

th to contribute designated short country reports. For Musteq Hydro RM80 million 24 January 2012 more information about becoming an IFN General Authority for Civil Aviation TBA 24th January 2012 Correspondent please contact sasikala@ redmoneygroup.com

REDmoney Asia ex. Japan 6 Months REDmoney Europe 6 Months

All Cap Large Cap Medium Cap Small Cap All Cap Large Cap Medium Cap Small Cap 1110 950

1018 880

926 810

834 740

742 670

650 600 Dec Jan Feb Mar Apr May June Dec Jan Feb Mar Apr May June

REDmoney GCC 6 Months REDmoney Global 6 Months

All Cap Large Cap Medium Cap Small Cap All Cap Large Cap Medium Cap Small Cap 780 1200

724 1096

668 992

612 888

556 784

500 680 Dec Jan Feb Mar Apr May June Dec Jan Feb Mar Apr May June

REDmoney MENA 6 Months REDmoney US 6 Months

All Cap Large Cap Medium Cap Small Cap All Cap Large Cap Medium Cap Small Cap 750 1670

700 1496

650 1322

600 1148

550 974

500 800 Dec Jan Feb Mar Apr May June Dec Jan Feb Mar Apr May June

SAMI Halal Food Participation (All Cap) 6 months

2000

1825

1650

1475

1300 Nov-2011 Dec-2011 Jan-2012 Feb-2012 Mar-2012 Apr-2012 May-2012 June-2012

REDmoney Global Shariah Index Series (All Cap) 6 Months REDmoney Global Shariah Index Series (Large Cap) 6 Months

REDmoney Asia ex. Japan REDmoney Global REDmoney Asia ex. Japan REDmoney Global REDmoney Europe REDmoney MENA REDmoney Europe REDmoney MENA REDmoney GCC REDmoney US REDmoney GCC REDmoney US 1100 1000

980 890

860 780

740 670

620 560

500 450 Dec Jan Feb Mar Apr May June Dec Jan Feb Mar Apr May June

REDmoney Global Shariah Index Series (Medium Cap) 6 Months REDmoney Global Shariah Index Series (Small Cap) 6 Months

REDmoney Asia ex. Japan REDmoney Global REDmoney Asia ex. Japan REDmoney Global REDmoney Europe REDmoney MENA REDmoney Europe REDmoney MENA REDmoney GCC REDmoney US REDmoney GCC REDmoney US 1700 1450

1460 1260

1220 1070

980 880

740 690

500 500 Dec Jan Feb Mar Apr May June Dec Jan Feb Mar Apr May June

REDmoney Global Shariah

Equities are considered eligible for inclusion Utilities Basis Materials Telecomunication Services 2% 15% into the REDmoney Global Shariah Index 2% Series only if they pass a series of market Consumer Goods Services 15% related guidelines related to minimum market Technology capitalization and liquidity as well as country 14% restrictions. Energy 8% Once the index eligible universe is determined Non-Cyclical the underlying constituents are screened Consumer Goods Services 7% Financials using a set of business and ﬁ nancial Shariah 4% guidelines. Industrials Healthcare 22% 11%

The REDmoney Global Shariah Index Series powered by IdealRatings consists of a rich subset of global listed equities that adhere to clearly deﬁ ned and transparent Shariah guidelines deﬁ ned by Shariyah Review Bureau in Jeddah, Saudi Arabia.

The REDmoney Shariah Indexes provides Islamic investors with an accurate and Shariah-specifi c equity performance benchmark with optimized compliance credibility due to the intensive research conducted to ensure that index constituents do not confl ict with the defi ned Shariah requirements.

IdealRatings™ is the leading provider of Shariah investment decision support tools to investors globally, including asset managers, brokers, index providers, and banks to empower them to develop, manage and monitor Shariah investment products and Shariah compliant funds. IdealRatings is headquartered in San Francisco, California. For more information about IdealRatings visit: www.idealratings.com

For further information regarding REDmoney Indexes contact: REDmoney Global Shariah Index Series Andrew Morgan Managing Director, REDmoney Group

RED Email: [email protected] Tel +603 2162 7800

Most Recent Global Sukuk

Priced Issuer Nationality Instrument Market US$ (mln) Managers 22nd May 2012 DIB Sukuk UAE Sukuk Euro market 500 Deutsche Bank, HSBC, National Bank of Abu public issue Dhabi, Dubai Islamic Bank, Emirates NBD 15th May 2012 BSF Sukuk Saudi Sukuk Euro market 750 Deutsche Bank, Citigroup, Credit Agricole Arabia public issue 10th May 2012 Encorp Systembilt Malaysia Sukuk Domestic market 514 Hong Leong Bank, Kenanga Investment Bank, public issue CIMB Group 1st May 2012 TASNEE Saudi Sukuk Domestic market 533 HSBC Arabia private placement 25th Apr 2012 Dubai DOF Sukuk UAE Sukuk Euro market 1,250 HSBC, National Bank of Abu Dhabi, Dubai public issue Islamic Bank, Citigroup 28th Mar 2012 SABB Saudi Sukuk Domestic market 400 HSBC Arabia private placement 28th Mar 2012 Aman Sukuk Malaysia Sukuk Domestic market 441 Lembaga Tabung Haji, RHB Capital, CIMB public issue Group, AmInvestment Bank, Maybank Investment Bank 27th Mar 2012 Saudi Electricity Saudi Sukuk Euro market 1,750 Deutsche Bank, HSBC Arabia public issue 21st Mar 2012 Cagamas Malaysia Sukuk Domestic market 163 RHB Capital, AmInvestment Bank public issue

12th Mar 2012 DRB-HICOM Malaysia Sukuk Domestic market 123 Maybank, Investment Bank private placement 7th Mar 2012 Almarai Saudi Sukuk Domestic market 267 HSBC Arabia private placement 7th Mar 2012 Tanjung Bin Energy Malaysia Sukuk Domestic market 1,089 HSBC, OCBC, RHB Capital, DRB-HICOM, Issuer private placement CIMB Group, Aﬃ n Investment Bank, Maybank Investment Bank 22nd Feb 2012 DRB-HICOM Malaysia Sukuk Domestic market 232 Maybank Investment Bank private placement

31st Jan 2012 MAF Sukuk UAE Sukuk Wakalah Euro market 400 Standard Chartered Bank, HSBC, Dubai public issue Islamic Bank, Abu Dhabi Islamic Bank

17th Jan 2012 General Authority Saudi Sukuk Domestic market 4,000 HSBC for Civil Aviation Arabia private placement

12th Jan 2012 Tamweel UAE Sukuk Euro market 300 Standard Chartered Bank, Dubai Islamic public issue Bank, Citigroup 11th Jan 2012 FGB Sukuk UAE Sukuk Wakalah Euro market 500 Standard Chartered Bank, HSBC, National public issue Bank of Abu Dhabi, PJSC, Citigroup 11th Jan 2012 Sarawak Energy Malaysia Sukuk Domestic market 796 RHB Capital, Kenanga Investment Bank, public issue AmInvestment Bank 10th Jan 2012 EIB Sukuk UAE Sukuk Euro market 500 Standard Chartered Bank, HSBC, RBS public issue National Bank of Abu Dhabi, Citigroup, Emirates NBD 16th Dec 2011 Projek Lebuhraya Malaysia Sukuk Domestic market 6,155 RHB Capital, CIMB Group, AmInvestment Usahasama private placement Bank, Maybank Investment Bank

Global Sukuk Volume by Month Global Sukuk Volume by Quarter

US$ bn Value (US$ bn) Avg Size (US$ m) US$ m US$ bn Value (US$ bn) Avg Size (US$ m) US$ m 18 600 12 1200 16 500 10 1000 14 400 8 800 12 10 6 600 300 8 4 400 6 200 4 2 200 100 2 0 0 0 0 12345678910111212 34 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2011 2012 2007 2008 2009 2010 2011 2012

Top 30 Issuers of Global Sukuk 12 Months Issuer Nationality Instrument Market US$ (mln) Iss Managers 1 Projek Lebuhraya Malaysia Sukuk Domestic market 9,610 2 RHB Capital, CIMB Group, AmInvestment Usahasama private placement Bank, Maybank Investment Bank 2 General Authority for Civil Saudi Sukuk Domestic market 4,000 1 HSBC Aviation Arabia private placement 3 Pengurusan Air SPV Malaysia Sukuk Domestic market 2,057 2 CIMB Group, Maybank Investment Bank private placement 4 Wakala Global Sukuk Malaysia Sukuk Euro market public 2,000 1 HSBC, CIMB Group, Citigroup, Maybank issue Investment Bank 5 Sarawak Energy Malaysia Sukuk Domestic market 1,783 2 RHB Capital, AmInvestment Bank, public issue Kenanga Investment Bank 6 Saudi Electricity Saudi Sukuk Euro market public 1,750 1 Deutsche Bank, HSBC Arabia issue 7 Manjung Island Energy Malaysia Sukuk Ijarah Domestic market 1,545 1 Lembaga Tabung Haji, CIMB Group public issue 8 Dubai DOF Sukuk UAE Sukuk Euro market public 1,250 1 HSBC, National Bank of Abu Dhabi, Dubai issue Islamic Bank, Citigroup 9 Tanjung Bin Energy Issuer Malaysia Sukuk Domestic market 1,089 1 HSBC, OCBC, RHB Capital, DRB-HICOM, private placement CIMB Group, Aﬃ n Investment Bank, Maybank Investment Bank 10 Perusahaan Penerbit SBSN Indonesia Sukuk Ijarah Euro market public 1,000 1 Standard Chartered Bank, HSBC, Indonesia II issue Citigroup 11 Aman Sukuk Malaysia Sukuk Musharakah Domestic market 812 2 Lembaga Tabung Haji, RHB Capital, CIMB public issue Group, AmInvestment Bank, Maybank Investment Bank 12 ANIH Malaysia Sukuk Domestic market 786 1 CIMB Group, Maybank Investment Bank private placement 13 Kingdom of Bahrain Bahrain Sukuk Euro market public 750 1 Standard Chartered Bank, BNP Paribas, issue Citigroup 13 BSF Sukuk Saudi Sukuk Euro market public 750 1 Deutsche Bank, Citigroup, Credit Agricole Arabia issue 15 Syarikat Prasarana Negara Malaysia Sukuk Ijarah Domestic market 667 1 CIMB Group, Maybank Investment Bank public issue 16 First Gulf Bank UAE Sukuk Wakalah Euro market public 650 1 Standard Chartered Bank, HSBC issue Citigroup 17 DRB-HICOM Malaysia Sukuk Domestic market 561 4 Maybank Investment Bank private placement 18 TASNEE Saudi Sukuk Domestic market 533 1 HSBC Arabia private placement 19 FGB Sukuk UAE Sukuk Wakalah Euro market public 500 1 Standard Chartered Bank, HSBC, National issue Bank of Abu Dhabi, Citigroup 19 EIB Sukuk UAE Sukuk Euro market public 500 1 Standard Chartered Bank, HSBC, RBS, issue National Bank of Abu Dhabi, Citigroup, Emirates 19 DIB Sukuk UAE Sukuk Euro market public 500 1 Deutsche Bank, HSBC, National Bank of issue Abu Dhabi, Dubai Islamic Bank, Emirates NBD 19 Abu Dhabi Commercial UAE Sukuk Euro market public 500 1 Standard Chartered Bank, JPMorgan, Abu Bank issue Dhabi Commercial Bank, Bank of America Merrill Lynch 19 ADIB Sukuk UAE Sukuk Euro market public 500 1 Standard Chartered Bank, Nomura, HSBC, issue National Bank of Abu Dhabi, Abu Dhabi Islamic Bank, Citigroup 24 Saudi International Saudi Sukuk Domestic market 480 1 Deutsche Bank, Riyad Bank Petrochemical Arabia public issue 25 Encorp Systembilt Malaysia Sukuk Domestic market 470 1 Hong Leong Bank, Kenanga Investment public issue Bank, CIMB Group 26 MAF Sukuk UAE Sukuk Wakalah Euro market public 400 1 Standard Chartered Bank, HSBC, Dubai issue Islamic Bank, Abu Dhabi Islamic Bank 27 Saudi British Bank Saudi Sukuk Domestic market 400 1 HSBC Arabia private placement 28 Cagamas Malaysia Sukuk Domestic market 393 3 CIMB Group, Maybank Investment Bank, public issue RHB Capital, AmInvestment Bank 29 Kuveyt Turk Katilim Turkey Sukuk Euro market public 350 1 Standard Chartered Bank, HSBC, KFH, Bankasi issue Abu Dhabi Islamic Bank, Commerzbank Group 30 Telekom Malaysia Malaysia Sukuk Domestic market 345 4 CIMB Group, AmInvestment Bank, public issue Maybank Investment Bank Total 41,071 108

Top Managers of Sukuk 12 Months Sukuk Volume by Currency US$ (billion) 12 Months

Manager US$ (mln) Iss % Malaysian ringgit 22.3 1 HSBC 8,242 17 20.1 US dollar 9.4 2 CIMB Group 7,014 29 17.1

3 Maybank Investment Bank 6,855 32 16.7 Saudi riyal 4.7 4 AmInvestment Bank 4,750 21 11.6 Singapore dollar 0.0 5 RHB Capital 2,869 24 7.0 6 Citigroup 2,254 10 5.5 Sukuk Volume by Issuer Nation US$ (billion) 12 Months 7 Standard Chartered Bank 1,487 10 3.6 8 Deutsche Bank 1,465 4 3.6 Malaysia 24.0 9 Lembaga Tabung Haji 935 3 2.3 Saudi Arabia 5.5 UAE 3.8 10 National Bank of Abu Dhabi 704 5 1.7 Bahrain 1.1 11 Dubai Islamic Bank 613 4 1.5 Indonesia 1.0 12 JPMorgan 425 2 1.0 UK 0.5 13 Kenanga Investment Bank 422 2 1.0 Turkey 0.4 14 OCBC 303 5 0.7

15 DRB-HICOM 286 6 0.7 Global Sukuk Volume by Sector 12 Months 16 Abu Dhabi Islamic Bank 253 3 0.6

17 Hong Leong Bank 252 2 0.6 8% 6% 18 Credit Agricole 250 1 0.6 Construction 28% Government 18 BNP Paribas 250 1 0.6 17% Finance 20 Riyad Bank 240 1 0.6 Utility & Energy 21 Aﬃ n Investment Bank 233 3 0.6 Transportation 20% Other 22 Emirates NBD 183 2 0.5 21% 23 Bank of America Merrill Lynch 125 1 0.3 23 Abu Dhabi Commercial Bank 125 1 0.3 25 KFH 109 2 0.3 Global Sukuk Volume - US$ Analysis

26 Public Bank 98 2 0.2 US$ bn US$ Non-US$

27 RBS 83 1 0.2 18 16 27 Nomura 83 1 0.2 14 29 Commerzbank Group 70 1 0.2 12 10 30 Malaysian Industrial Development 40 1 0.1 8 Finance 6 4 Total 41,071 108 100.0 2 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Top Islamic Finance Related Project Finance Mandated Lead 2007 2008 2009 2010 2011 2012 Arrangers 12 Months

Mandated Lead Arranger US$ (million) No % Top Islamic Finance Related Project Financing Legal Advisors 1 Samba Financial Group 592 4 6.2 Ranking 12 Months 2 Public Investment Fund 463 2 4.9 Legal Advisor US$ (million) No % 3 Arab National Bank 463 2 4.9 1 Allen & Overy 4,198 2 23.9 2 Skadden Arps Slate Meagher & 3,281 1 18.7 4 HSBC Holdings 447 3 4.7 Flom 5 Sumitomo Mitsui Financial Group 404 2 4.2 2 White & Case 3,281 1 18.7 6 Banque Saudi Fransi 386 2 4.1 4 Al-Jadaan & Partners Law Firm 1,200 1 6.8 4 Baker & McKenzie 1,200 1 6.8 7 KfW Bankengruppe 369 2 3.9 4 Cliﬀ ord Chance 1,200 1 6.8 8 Mitsubishi UFJ Financial Group 360 1 3.8 7 Baker Bott s 917 1 5.2 9 Saudi British Bank 324 1 3.4 7 Chadbourne & Parke 917 1 5.2 10 Australia & New Zealand Banking 289 1 3.0 9 Afridi & Angell 267 1 1.5 Group 9 Herbert Smith Gleiss Lutz Stibbe 267 1 1.5 10 Mizuho Financial Group 289 1 3.0 9 Latham & Watkins 267 1 1.5

Top Islamic Finance Related Loans Mandated Lead Arrangers Top Islamic Finance Related Loans Deal List 12 Months Ranking 12 Months Credit Date Borrower Nationality US$ (mln) Mandated Lead Arranger US$ (mln) No % 13th Dec 2011 Barzan Gas Qatar 5,442 1 Samba Capital 924 4 9.4 12th Feb 2012 Mobily Saudi Arabia 2,667 2 SABB 904 3 9.2 nd 2 Banque Saudi Fransi 904 3 9.2 2 Dec 2011 Hajr for Electricity Saudi Arabia 1,981 Production 4 Al-Rajhi Banking & Investment 753 3 7.7 14th Feb 2012 Power & Water Utility for Saudi Arabia 1,200 5 Saudi National Commercial Bank 459 2 4.7 Jubail & Yabbu - Maraﬁ q 6 Saudi Hollandi Bank 444 1 4.5 15th Oct 2011 Maaden Bauxite & Alumina Saudi Arabia 929 6 Riyad Bank 444 1 4.5 15th Sep 2011 Dubai Ports World UAE 850 8 Citigroup 335 7 3.4 18th Jul 2011 Pembinaan BLT Malaysia 822 9 Noor Islamic Bank 324 3 3.3 23rd Jun 2011 Salik One Spc UAE 800 10 Standard Chartered Bank 287 5 2.9 27th Feb 2012 Government of Dubai UAE 675 11 Maybank Investment Bank 279 3 2.8 15th Mar 2012 Turkiye Finans Katilim Turkey 351 12 Barwa Bank 266 2 2.7 Bankasi 13 HSBC 233 3 2.4 14 Arab National Bank 219 1 2.2 Top Islamic Finance Related Loans by Country 12 Months 15 Abu Dhabi Islamic Bank 219 5 2.2 Nationality US$ (mln) No % 16 CIMB Group 216 2 2.2 1 Saudi Arabia 5,377 5 54.7 17 Qatar Islamic Bank 213 1 2.2 2 UAE 1,272 6 12.9 17 Qatar International Islamic Bank 213 1 2.2 3 Malaysia 926 2 9.4 17 Masraf Al Rayan 213 1 2.2 4 Qatar 850 1 8.7 20 Arab Banking 184 3 1.9 5 Turkey 780 4 7.9 21 RHB Capital 164 1 1.7 6 Pakistan 203 4 2.1 7 Indonesia 181 4 1.8 21 Lembaga Tabung Haji 164 1 1.7 8 China 93 1 0.9 21 AmInvestment Bank 164 1 1.7 9 Kuwait 87 1 0.9 24 Deutsche Bank 160 3 1.6 10 Russian Federation 60 1 0.6 25 Emirates NBD 160 3 1.6 26 Bank of America Merrill Lynch 126 3 1.3 Top Islamic Finance Related Loans by Sector 12 Months 27 Bank of China 93 1 0.9 Telecommunications 28 Al Hilal Bank 70 2 0.7 Utility & Energy 29 Bank Al-Jazira 68 1 0.7 29 Alinma Bank 68 1 0.7 Oil & Gas Construction/Building Top Islamic Finance Related Loans Mandated Lead Arrangers 12 Months Finance Bookrunner US$ (mln) No % US$ bln0 124 3 1 Citigroup 354 6 3.6 Global Islamic Loans - Years to Maturity (YTD Comparison) 2 Abu Dhabi Islamic Bank 267 5 2.7 3 Standard Chartered Bank 253 4 2.6 2011 4 HSBC 160 2 1.6 2010 5 Emirates NBD 122 2 1.2 2009 2008 6 Maybank Investment Bank 115 2 1.2 2007 7 Bank of China 93 1 0.9 2006 8 Noor Islamic Bank 88 1 0.9 2005 8 Arab Banking 88 1 0.9 0% 20% 40% 60% 80% 100% 10 National Bank of Kuwait 87 1 0.9 0-3yrs 3-5yrs 5-7yrs 7-10yrs 10+yrs

Are your deals listed here? If you feel that the information within these tables is inaccurate, you may contact the following directly: Mandy Leung (Media Relations) Email: [email protected] Tel: +852 2804 1223

5th — 6th June 2012 29th June — 1st July 2012 1st – 2nd October 2012 The 3rd Annual World Islamic Banking International Conference of Islamic IFN Asia Forum 2012 Conference: Asia Summit Economics and Business Kuala Lumpur Singapore (MEGA Events) Melaka, Malaysia (UiTM (Johor) & (REDmoney events) Universitas Indonesia) 5th — 6 June 2012 10th – 11th October 2012 Oman Islamic Banking and Finance 10th — 11th July 2012 The 2nd Annual International Summit Conference 2012 The 3rd Annual Asia Islamic Banking on Islamic Corporate Finance Oman (OITE) Conference Abu Dhabi (MEGA Events) Kuala Lumpur (Fleming Gulf) 6th — 7th June 2012 14th — 16th October 2012 2012 London Sukuk Summit 10th — 12th July 2012 The International Islamic Finance London (ICG-Events) The International Takaful Summit Conference 2012 London (Afk ar Consulting Ltd) Abu Dhabi (UAE Emerad Group) 7th — 10th June 2012 Moscow Halal Expo 2012 17th July 2012 17th — 18th October 2012 Moscow, Russia (Russia Muft is Council) The 4th Sri Lanka Islamic Banking & The SME Africa 2012 Finance Conference (SLIBFC) Johannesburg, South Africa (Fleming th th 11 — 12 June 2012 Sri Lanka (UTO EduConsult) Gulf) The 3rd Annual World Takaful th Conference: Family Takaful Summit 27 August 2012 30th – 31st October 2012 Kuala Lumpur (MEGA Events) IFN Roadshow Thailand IFN Europe Forum 2012 Bangkok (REDmoney events) London, UK (REDmoney events) 13th June 2012 th World Takaful Conference: Asia Leader 4 September 2012 12th – 13th November 2012 Summit, Kuala Lumpur (MEGA Events) IFN Roadshow Pakistan IFN Saudi Arabia Forum Karachi, Pakistan (REDmoney Events) Riyadh (REDmoney events) 21st June 2012 th IFN Roadshow Japan 6 September 2012 20th — 21st November 2012 Tokyo (REDmoney events) IFN Roadshow Sri Lanka International Islamic Accounting and Colombo, Sri Lanka (REDmoney Events) Finance Conference 2012 th th 27 — 28 June 201 Kuala Lumpur (Accounting Research Institute) The 1st International Forum for Islamic 17th — 18th September 2012 Banks and Financial Institutions 3rd Middle East SME Forum 2012 3rd December 2012 Amman, Jordan (Strategy for Business Abu Dhabi, UAR (Fleming Gulf) IFN Roadshow Brunei Development & CIBAFI) Brunei (REDmoney events)

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1 Warisan 8,11 Danajamin Nasional 11 Merit Commodity Partners 26 AAOIFI 20,30,32 Danareksa 5 National Bank of Abu Dhabi 6,7,34 Absa Group 16 DBS Bank 6 National Bank of Ethiopia 8 Absa Islamic Banking 16 DBS Group 5,8 National Commercial Bank 6, 10 Abu Dhabi Commercial Bank 6,7 DBS Vickers Securities Indonesia 5 National Insurance Commission 31 Abu Dhabi Islamic Bank 6,9 Deutsche Bank 12,18 NCB Capital 25 Aﬃ n Bank 8 Development Enterprises Holding Company 6 Noor Islamic Bank 7,25 Agha & Co 36 DIFC 12,21 Organization of Economic Cooperation and Development 21 Ajyad Real Estate 12 DIFC Investments 7 OSK Research 6 Aktif Bank 9 Dubai Bank 7 PEFINDO 11 Al Baraka Banking Group 11 Dubai Financial Group 10 Philippine Amanah Bank 19 Al Jazeera Finance 39 Dubai Islamic Bank 6,7 Planet IB 10 Al Kifah Holding 6 Durham University 34 Al Rajhi Bank 6 EFG Hermes Holding 10 Privy Council of the House of Lords 21 Al Ramz Securities 25 EFG Hermes Qatar 10 Prudential Life Assurance 31 Al Tamimi & Company 15 Egyptian Financial Supervisory Authority 10 Purple Island Corporation 22 Al Yaqoub Att orneys & Legal Advisors 20 Emirates Airline 5 PwC 35 Al-Amanah Islamic Investment Bank 19 Emirates Islamic Bank 7 Qatar Central Bank 9,11 Alhilal Bank 4 Emirates NBD 6,7,10 Qatar Financial Centre 21 Alkhair International Islamic Bank 11 Ernst &Young 17 Qatar International Islamic Bank 7,9,11 Allen & Overy 18 Eurekahedge 24 Qatar Islamic Bank 7,39 Alliance Financial Group 6 First Community Bank 16 Qatar Solar Technologies 5 Almarai Company 11 Formabb 34 Qinvest 10 AM Best 30 FTSE 26 RAM 11 Amana Bank 17 FWU Global Takaful Solutions 25,33 RHB Capital 8 AmInvestment Bank 6 GE Capital 22 RHB Investment Bank 6 AMWAJ Catering Services 7 General Authority of Civil Aviation 20 Riyad Bank 6 Arab National Bank 6 GIB Capital 6 Roosdiono & Partners 35 Arab Petroleum Investments Corporation 7 Global Investment House 12 S&P 11 AREF Energy Holding Company 6 Goldman Sachs 22 SABB 6 Ashurst 1 Great Eastern Takaful 31 Sadara Chemical Company 5 Atlas Asset Management 24 Gulf Drilling International 7 Samba Financial Group 6 Australia Gulf Council 12 Gulf International Bank 6,10 Saudi Arabian Oil Company 5 Bahana Securities 5 Gulf International Services 7 Saudi Binladin Group 22 Baker & McKenzie 18 Gulfmena Investments 25 Saudi Fransi Capital 18 Bangko Sentral ng Pilipinas 19 Hines International Real Estate Holdings 25 Bank Alkhair 11 Hong Leong Bank 8 Saudi Hollandi Bank 6,11 Bank Danamon 8 Hong Leong Islamic Bank 8 Securities and Exchange Commission 31 Bank Danamon Syariah 8 HSBC 26 Sharjah Islamic Bank 11 Bank Ina Perdana 8 HSBC 22 Singapore Exchange 25 Bank Indonesia 9 HSBC Securities Indonesia 5 Sipchem 6 Bank Internasional Indonesia 8 ICD 9 Standard Chartered 6,7 Bank Islam Malaysia 9 ICS BANK 15 Standard Chartered Private Bank 11 Bank Mestika Dharma 8 ICS Financial Systems 15 Standard Chartered Securities Indonesia 5 Bank Mualamat Indonesia 5,6,11 IDB 5,8,9,10 Stock Exchange of Thailand 25 Bank Negara Indonesia 5 IFSB 20,33 Syarikat Takaful Malaysia 31 Bank Negara Malaysia 8,13,37 Indo Premier Securities 5 SyCip Salazar Hernandez & Gatmaitan 19 Bank of Chengdu 8 Indonesia Stock Exchange 5 Syria International Islamic Bank 11 Bank of London and the Middle East 13,36 Indosat 5 Syrian Lebanese Commercial Bank 11 Bank Syariah Indonesia 8 International Investment Bank 11 TA Investment Management 25 Banque Saudi Fransi 6,18 International Polymers Company 6 Tadawul 20 Bapepam 31 Islamic Bank of Britain 9 Takaful Insurance of Africa 17 Barwa Bank 7,25 Islamic Holding Group 11 Takaful Islami Insurance 31 Bermuda Monetary Authority 22 Islamic International Financial Market 22 Tanzania Insurance Regulatory Authority 17 BNI Syariah 12 Islamic Society of North America 8 Temenos Group 8 Bursa Malaysia 25 Jebel Ali Free Zone 6,11 Tenaga Nasional 11 Capital Market Authority 10 K&L Gates 4,23 The Dow Chemical Company 5 Central Bank of Iraq 15 Krung Thai Asset Management 26 The First Investor 25 Central Bank of Kenya 16 Kuwait Clearance Company 6 The Royal Bank of Scotland 5 Central Bank of the UAE 7 Kuwait Finance House 6 CIMB Group 6,8 Labuan Financial Services Authority 22 UK Islamic Finance Secretariat 13 CIMB Investment Bank 6 Labuan International Oﬀ shore Financial Center 22 UK Trade & Investment 13 CIMB Niaga Syariah 8 Lafarge Malayan Cement 11 United Insurance Company 31 Citi Islamic Investment Bank 18 London Stock Exchange 18,36 University Hospital Sharjah 11 Citibank 3, 6 Mandiri Sekuritas 5 University of Nebraska at Omaha 14 Codexa Capital 36 Maples & Calder 18 Wimpole Internationa 35 Commercial Bank of Syria 11 MARC 11 World Bank 10,11 Credit Agricole 18 Masraf Al Rayan 5,9,10 World Trade Organization 20 Crescent Wealth 25 Maybank 8,9 Zain Saudi 6 Da Afghanistan Bank 13 Maybank Investment Bank 6,8 ZamZam Bank 8 Dana Infra Nasional 5 Meezan Bank 8

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