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(All Cap) Bahrain’s Pakistani Property Company Focus: 1100 liquidity Islamic banks funds: The Shariah compliant 1050 999.78 fund — will it gain liquidity next big Abraham’s River set 1000 2.45% boost Islamic investment options thing for to unleash further 950 975.80 equities as country builds Islamic Islamic ﬁ nance 900 on the infrastructure with investors?...8 growth in the US...12 W T F S S M T

COVER STORY 29th June 2016 (Volume 13 Issue 26) Safe haven switch: Islamic funds ϐlip their ϐlows as global markets stumble

Last week we looked at the potential a safe haven from the geopolitical 7.9% last week while even Wall Street impact of a Brexit on the UK’s instability in their own regions. So was not immune with a 3.6% fall for the Islamic fi nance economy, with most where else can this money go? S&P 500. Brexit does not just aff ect the participants sanguine about the UK — the ripple eff ect is very obviously prospect. Yet in the wake of a surprise Global ripples global. win for the Leave campaign, global The UK and Europe have certainly lost markets have been plunged into their luster for international investors. Islamic impact unexpected turmoil: with uncertainty Sterling is at its lowest level in three So what does this mean for the Islamic sending the UK economy into freefall. decades, the FTSE 100 fell by almost 9% fi nance industry? In terms of domestic What does this mean for Islamic the day after the referendum result and infl uence, the initial reaction is positive. investors — and which regions will Moody’s has already downgraded the In Malaysia, the response has been benefi t from the current volatility? UK’s credit outlook to negative. And largely restricted to optimism around LAUREN MCAUGHTRY learns that it’s not just the UK suff ering. According a strengthening ringgit, while in the as a safe haven, the US is suddenly to S&P, global equity markets lost over Middle East leaders have been quick to looking a lot more appealing… US$2 trillion on the 24th June — the distance themselves. “Due to the limited largest daily loss on record, beating connection between the UAE fi nancial This article is not going to be about the Lehman Brothers’s bankruptcy in system and that of the UK, the channels Brexit. We covered that issue (we hope) 2008 and the Black Monday crash of through which fi nancial institutions in fairly comprehensively last week, and 1987. “We expect considerable foreign the UAE could be aff ected by the state let’s face it — while the UK is a vital exchange volatility, a slowdown in of uncertainty over relations between piece on the global chessboard, it is not inbound foreign direct investment [and] the UK and the EU are limited,” said yet one of the top players in the Islamic a weakening of real estate markets,” the Central Bank of the UAE. Over fi nance game. So why do we keep said the rating agency in its latest note in Saudi Arabia Ahmed al-Kholifey, banging on about its impact on on the 27th June, followed by a shock the governor of the Saudi Arabian Islamic fi nance? Simply put, downgrade of the UK’s ‘AAA’ Monetary Authority, confi rmed that the because billions of Shariah credit rating. Kingdom had, in advance of the vote, compliant dollars are already revised its investment policy invested into the UK and Continental Europe has also regarding assets denominated in the Europe, and these latest experienced extreme turbulence euro and sterling. “It is early to assess events look set to disrupt — both Milan and Madrid the impact of the UK exit from the EU... an unprecedented period saw their biggest stock market but we expect the impact on the banking of economic strength that declines ever at over 12% each, sector to be minimal due to its limited has seen funds pour into the Germany’s DAX was down exposure to those two currencies,” he region from Middle Eastern 6.7% and France’s CAC fell 7.9%. said. and Asian investors seeking Globally, the Nikkei also dropped continued on page 3

Opening doors to PARTNERPARTNER WITHWITH USUS new opportunities

Contact for more information: François-Xavier Chenhalls-Walker Email: [email protected] IFN RAPIDS

Volume 13 Issue 26 year term limit decree for DEALS bank CEOs RATINGS IFN Rapids ...... 2 Indonesia to raise IDR4 Tunisia aims for more Banque Saudi Fransi IFN Reports: trillion (US$301.2 million) sustainable growth, but ratings affi rmed at ‘A+’ via sovereign Sukuk • Bahrain’s liquidity fund — will it boost Islamic reforms will be key, says United Gulf Bank’s ratings auction Moody’s equities on the bourse? • Pakistani Islamic banks revised from stable to RCE Capital establishes Kenyan Islamic fi nancial negative gain liquidity investment options as country builds Sukuk Murabahah program institutions join hands to set RAM assesses rating impact infrastructure with Shariah fi nance • Property of up to RM900 million up Shariah fi nance lobby of NBAD-FGB merger funds: The next big thing for Islamic investors? (US$222.86 million) group Fitch affi rms IDB’s ‘AAA’ State-backed Iranian • Islamic fi nance retail space sees wave of new Allied Bank’s Islamic unit rating with a stable outlook mining company to issue interest on the back of improving fi nancial literacy and International Islamic IRR4 trillion (US$132.63 University Islamabad sign RAM reaffi rms ‘AA1/Stable/ • World nations turn to Islamic arbitration services million)-worth of Sukuk MoU to promote Islamic P1’ ratings on Sabah Credit as Shariah fi nance goes international • DIB’s Musharakah for mining fi nance and banking Corporation’s outstanding development knowledge Sukuk oversubscribed rights issue a boost to its expansion DP World to distribute Neelum Jhelum Dubai Islamic Bank’s plans within the UAE • US commercial real estate th Sukuk profi t on 5 July Hydropower Company rights issue credit positive, market continues to capture Shariah investment for US$1.5 billion trust to issue PKR100 billion says Moody’s certifi cates due 2017 despite slowdown • Sovereign Sukuk: A subdued (US$947.02 million) 10- Moody’s changes outlook year Sukuk; inks fi nancing week • Company Focus: Shariah compliant Sarawak Hidro to issue on UK’s sovereign ratings to RM5.5 billion (US$1.34 agreement with local banks negative from stable Abraham’s River set to unleash further Islamic billion) Sukuk facility; led by National Bank of AEON Credit Service’s fi nance growth in the US ...... 7 expected in July Pakistan Islamic commercial paper th Sarawak Power Generation Faysal Bank opens 76 program maintains ‘P1’ Islamic banking branch IFN Analysis: makes Sukuk payment rating

Sudan: Finding opportunities...... 13 Pakistani Islamic banking Securities and Exchange Adira Dinamika’s IDR500 industry invests PKR155 Commission proposes billion (US$37.05 million) Private equity and venture capital in Islamic billion (US$1.45 billion) in amendment to Modaraba Sukuk Mudarabah rated fi nance ...... 14 government securities in rules including making ‘idAAA(sy)’ appointment of Shariah Case Study: Turkey’s US$1 billion Sukuk: An fi rst quarter of 2016 advisors mandatory Capital Intelligence affi rms exciting comeback ...... 15 Hijrah Pertama to make Saudi Arabia’s ‘AA-’ and periodic distribution for Islamic banking assets ‘A1+’ ratings Column: Class B Sukuk capture 11.4% market share Thinking big ...... 16 of overall Pakistani banking Chellam Plantations industry in the fi rst quarter MOVES Country Correspondents: (Sabah) issues fi rst tranche Dr Jamil El Jaroudi to step Iran; UAE ...... 17 of RM300 million (US$73.2 Indonesia weighs sett ing up down as CEO of Bank million) Danajamin- off shore fi nancial center Nizwa; Khalid Al Kayed guaranteed Sukuk appointed as acting CEO Special Report: Murabahah RHB Banking Group Islamic banking and fi nance opens its doors in Proposed novation for ASSET to build on the potential Suriname to economic empowerment for Latin Konsortium ProHAWK’s of Singapore with key Sukuk Murabahah America and the Caribbean ...... 19 MANAGEMENT leadership appointments Saratoga Investama Sedaya Sector Feature: NBAD Sukuk Income Fund Prime Minister Najib Razak studying possibility of distributes semi-annual reshuffl es cabinet; appoints The phenomenon of Shariah compliant funds ....20 issuing Sukuk 2.57% dividend new fi nance minister Islamic Finance news ...... 22 UBL Funds launches Al- among others Deal Tracker ...... 29 NEWS Ameen Islamic Active Maldivian government REDmoney Shariah Indexes ...... 30 Banque Misr secures Allocation Plan-V names Ahmed Munawwar Eurekahedge Funds Tables ...... 32 US$105 million Murabahah as minister of fi nance and fi nancing from UAE banks TAKAFUL treasury Dealogic League Tables ...... 34 to boost foreign currency National Bank of Fujairah REDmoney Events ...... 38 resources Amana Takaful Life announces IPO worth appoints new board Subscription Contact...... 38 Egyptian court voids nine- LKR75 million (US$502,816) member

Disclaimer: IFN invites leading practitioners and academics to contribute short reports each week. Whilst we have used our best endeavors and eﬀ orts to ensure the accuracy of the contents we do not hold out or represent that the respective opinions are accurate and therefore shall not be held responsible for any inaccuracies. Contents and copyright remain with REDmoney.

Safe haven switch: Islamic funds ﬂ ip their ﬂ ows as global markets stumble Continued from page 1

Uncle Sam Gold standard For Islamic investors, the In fact, this process has already While the future looks bright for consequences are less clear started. “We have seen Islamic fi nance, concerns remain over — but in every game there strategies shifting overnight a global economic slowdown — in are winners and losers. So from clients reorienting their which case no markets will be left who stands to gain from this focus from the UK and Europe unaff ected. Where then will be the global turbulence … to the US,” confi rmed Anup. safest haven for investors? As always, and if investors are “We expect this to continue it is gold that wins in a crisis. running scared from a — not just in the GCC, but disintegrating Europe, globally.” Gold soared to a two-year high where else can they turn to stash their last week following the UK vote. cash? Steady surge The standard safe haven for scared This is not a new trend — US markets investors, the price jumped over 8% have seen a steady infl ux of Islamic to US$1,358 an ounce on the 24th June, funds over the last few years. “Since the Capital its highest since March 2014, while end of the fi nancial crisis, we have seen Google reported a 500% increase annual increases in Shariah compliant that would in searches for the term ‘buy gold’ investment in US real estate, not only in over just four hours following the the number of institutions and groups otherwise be Brexit decision. With a new Shariah sponsoring such investments, but also gold standard already drawn up in the number and size of investments oriented toward the and under consideration by AAOIFI, undertaken by these institutions and Islamic investors could soon be groups,” noted Andy Metcalf, a partner UK and Europe is spoiled for choice. with King & Spalding in New York. likely to be diverted “We expect that the current turmoil in Europe (exacerbated by the Brexit) or investment-grade credit tenants, to the US, which will and in the Middle East will encourage so that investors can replicate a fi xed Middle Eastern investors to invest in income yield. “If you invest in a 10- now be perceived safe havens such as the US.” year US Treasury, you’re going to be gett ing a 1.5% yield that is not infl ation- as an even But it is not just Middle Eastern protected,” pointed out Anup. “If you investors who are fl ocking to American invest in a government-leased asset you greater safe shores. Earlier this year we saw one of might get 5-6% with infl ation protection the fi rst major investments from Asia, plus the ability to leverage above and haven with Malaysia’s Maybank leading a beyond that.” This yield premium that US$219 million Shariah compliant investors achieve by investing in real The obvious answer is of course syndicated construction loan to help estate in comparison to other fi xed America. The US dollar has been one Soho Properties to develop luxury income products is likely to make the of the key benefi ciaries of the recent New York skyscraper 45 Park Place. US real estate sector very desirable for turmoil, seeing a sharp rise as safe “This is one of the most diffi cult times both foreign and domestic capital. haven funds reversed back across the in the post-Lehman construction Atlantic. “The general view today is market,” Sharif El-Gamal, CEO of Soho Yet while real estate is certainly the one of uncertainty,” said Anup Patel, Properties, told the Financial Times in fl avor of the month, with increased the president and chief investment May. “It doesn’t matt er who you are, demand comes increased competition. offi cer at Arch Street Capital Advisors, you cannot get conventional fi nancing in “Markets are strong, and people are a real estate and investment advisory New York.” Islamic fi nancing, in today’s looking out of the core markets, where fi rm focused on the US real estate climate, could be an increasingly viable prices have got very expensive, and market with a specialty in Islamic alternative. exploring secondary markets and value- fi nance. “Capital that would otherwise added opportunities,” said Isam Salah, be oriented toward the UK Expanding options a senior fi nance partner with King and Europe is likely to be & Spalding in New York and the With all this foreign capital head of the fi rm’s Middle East diverted to the US, which relocating to the US, what will now be perceived and Islamic fi nance practice will investors be looking group. “We are beginning to as an even greater safe to buy? Initially, there is haven — simply because it see interest in development likely to be an orientation transactions and we are seeing is too diffi cult to quantify toward high-quality assets the impact associated with investors put money into leased on a long-term basis mezzanine fi nancing as the current uncertainty in to creditworthy the UK and European an alternative to equity tenants, such investment, to get the kind markets at the as the US moment.” government continued on page 4

Safe haven switch: Islamic funds fl ip their fl ows as global markets stumble Continued from page 3 of return they are looking for. There is to develop its regulations for Islamic still a pressure to seek strong returns — fi nance. The UK and Europe have seen Uptick for Islamic funds? sometimes bordering on the unrealistic tens of billions of dollars fl ow from Could Islamic funds benefi t from the — but that forces you to go into the GCC alone in recent years. The US Brexit crisis? The latest fi gures seem secondary markets and look at assets could and should be capturing that to suggest that Shariah compliant that have that potential for turnaround.” opportunity.” funds have weathered the storm bett er than expected. But doubts still exist. “There’s a huge amount of money available that is The Aberdeen Islamic World Equity A lot of th looking for stable assets outside of [the Fund was at its highest on the 24 overseas GCC and especially] Saudi Arabia and June since May 2015. The Arabesque if the pound continues to drop, then SICAV Systematic Fund, domiciled in investors are put the US could be the next destination Luxembourg, saw a rally taking it to for that,” agreed Thom Polson, CEO within a whisker of its highest point off by the prospect of Californian fund manager Falah since February. The BLME Global Capital. “The question is whether there Sukuk Fund has performed equally of an unfriendly are enough products or services or well, with a steady climb since the indeed awareness in general of what is start of the year to reach its highest American available. When transactions happen point since January on the 24th. The here at the moment they tend to be one- iShares MSCI World Islamic Fund, administration, and off s. There is a lot of opportunity in the domiciled in Dublin and tracking US but not enough awareness to take the MSCI World Islamic Index, saw that can make it advantage of that yet.” one of the sharpest spikes: jumping almost 4% from 1,894.75 on the harder to Mohamad Nasir, the general 23rd to 1,977.5 on the 24th, bringing manager of Allied Asset Advisors, is its year-to-date return to 10.31%. raise funds more optimistic. “This could be an Much of this is due to weighting opportunity for the US to fi nally play — the MSCI fund holds 51.73% in Other asset classes are also coming a major role in Islamic fi nance. There US equities and 10.37% in Japanese into play. “We have been seeing is quite some interest from Dubai and equities, for example, both of which over the last few years an increased Kuala Lumpur about growing Islamic have performed well, with the US interest in US investments by Shariah fi nance here, so we could see the US dollar and the yen soaring in the compliant investors,” commented market take the lead. However, we wake of the UK vote. Another factor Amr El-Husseini, CEO of US-based have had no political impetus yet, the is the absence of fi nancial stocks from Lodestone Advisory Group. “This way London did, which may be an Islamic funds — in the UK, fears interest is coming from across multiple impediment.” of up to 100,000 job losses as banks geographies, particularly from the GCC, prepare to move across to Europe in Turkey, and Southeast Asian markets. November rain anticipation of a UK departure have seen a wipeout in fi nancial sector We’ve been talking very actively with Speaking of political impediments, stocks — while in the US, fi nancial clients and we are seeing an interesting could all this optimism change come institutions have also seen shares repositioning of investors who are November? The US elections will plummet due to European exposure. showing an increased appetite toward be the next major political event to new asset classes — for example send shockwaves through the global It looks as if once again, Islamic funds organic and Halal foods; and early markets — with Donald Trump’s have ridden the storm to benefi t from stage innovation-based, research-driven much-maligned rhetoric regarding their religious principles, ethical assets related to healthcare, technology, immigration and foreign policy, what mandate and Shariah compliant asset fi nancial services, and education.” impact could this have on the last safe allocation. haven for Islamic assets should he come A period of transition to power? “There has been an increased interest for global investors focused on the in the last week and we expect to see “The general view is that US. It will be up to the deployers much more on the back of Trump will be pro- of capital to decide whether or Brexit. Traditional Islamic business,” said Anup. not they want to invest in the US investments in the US have “Immigration aside, his given his rhetoric.” been focused on real estate, positions should not but this is changing both have any signifi cant Isam agrees. “I don’t think a in terms of asset class and implications on the real Trump victory will have much investment approach. estate market as a of an impact. People are This could be a great whole, but will puzzled by him, and there opportunity for the create more of a might be a momentary US to seize by starting perception issue continued on page 5

Safe haven switch: Islamic funds fl ip their fl ows as global markets stumble Continued from page 4 hesitation, but I don’t think Trump is looking to inhibit investments from coming into the US,” he confi rmed. Others, on the other hand, are less convinced. “I do think Trump will have an impact on Islamic fi nance in the US,” predicted David Loundy, CEO and chairman of Chicago-based Devon Bank. “A lot of overseas investors are put off by the prospect of an unfriendly American administration, and that can make it harder to raise funds. I think #IFNUS16 there would be global embarrassment if Trump was elected president.”

Interesting times IFN US Forum 11th October 2016 Either way, the future looks as bright New York, US for Islamic fi nance in the US as it looks bleak for the UK and Europe. “There is going to be a lot of change in the US While Islamic finance activities in the US have taken a back seat in recent years, momentum is now building, with in Islamic fi nance, and we are seeing the improving US economy and growing interest from overseas investors seeking solid assets. Deals are being done momentum build,” predicted Loundy. at the larger end of the spectrum and more discussions are being carried out about promoting large Sukuk and “We expect strong performance for the funds transactions. The IFN US Forum will offer delegates access and insight into efforts being taken by industry rest of this year. We expect it to be very players and market makers within the US in developing Islamic financial products and lucrative opportunities for busy, regardless of what happens in domestic and foreign investment into Shariah compliant investments. November,” agreed Isam. Designed to profile the growing number of investment opportunities available to Shariah compliant investors, But there is no knowing which way ranging from innovative real estate deals to agriculture and livestock investments the IFN US Forum will bring the wind may blow, and in the current together key industry players, asset and fund managers and financial intermediaries in the US representing the climate of uncertainty, the outcome retail finance, debt and equity markets. is anyone’s guess. “This uncertainty will open up global opportunities for Islamic fi nance,” predicted Amr. “The UK will start looking for REGISTER FREE NOW more engagement with its global www.REDmoneyevents.com trading partners to compensate for the uncertainty, for example — and while the US will probably be the fi rst place they turn to, they will also start LEAD PARTNER looking to increase trade and FDIs from the Commonwealth, Turkey, China, the GCC and Asia. This will create interesting movements in the Islamic fi nance space.” EXCLUSIVE LEAD LAW FIRM PARTNER LEAD MEDIA PARTNER

Whatever happens, we are living in extraordinary times. It is up to us what W: www.redmoneyevents.com | E: [email protected] | T: 603 2162 7800 ext. 43 | Twitter : #IFNUS16 we make of them.

Bahrain’s liquidity fund — will it boost Islamic equities on the bourse?

Bahrain Bourse is set to receive a capital injection with the latest US$100 million Bahrain Liquidity Fund (BLF) that is meant to enhance the depth of the country’s capital markets and provide bett er liquidity to investors involved with the bourse. DANIAL IDRAKI looks at the situation and how Islamic investors might be able to take full advantage of the new initiative.

“Both Islamic and conventional explained. She added that there is plenty Bahrain All Share Index has declined investors are chasing yield in the of room for improvement since the 8.62% to 1,111.14 points, while the current environment that is full of Bahrain Islamic Index has a liquidity Bahrain Islamic Index also dipped uncertainties and compressed returns,” of just US$300,000 on average since its by 12.74% to 714.08 points. Najla Najla M Al Shirawi, CEO of Securities launch. commented that general sentiment in and Investment Company (SICO), told the capital markets, including Islamic IFN recently, in explaining the current capital markets, is risk-off sentiment, investment landscape in the Kingdom. [The] BLF will whereby there is more liquidity in safer Launched by SICO in collaboration with instruments such as government Sukuk other market participants, the BLF will also participate compared with higher risk instruments act as a market maker by providing such as equities or sub-investment grade two-way quotes on most of the listed corporate Sukuk. stocks with a reasonable spread, to allow in future Islamic investors to actively trade their stocks. equities primary and There are 91 Islamic funds with total Restricted liquidity currently plaguing assets amounting to US$1.3 billion as of the stock market in Bahrain causes secondary offerings March 2016 which dipped slightly from securities to trade at a discount to their US$1.4 billion a year earlier. The overall underlying value and regional peers, and to be traded on [the] assets under management of more than the fund aims to reduce that discount 2,740 mutual funds in the country, over the medium to long term. Bahrain Bourse, meanwhile, stood at approximately US$7 billion. These fi gures were noted during The bourse currently has a market encouraging more the Middle East Asset Management capitalization of US$22 billion with over Forum 2016 in May by Abdul Rahman Al 45 listed companies, out of which 17 Islamic capital- Baker, the executive director of fi nancial comply with Shariah standards. It has institutions supervision at the Central made several initiatives in recent times to raising activities Bank of Bahrain. boost the local Islamic and conventional capital markets, including the to utilize [the] “Certainly, we believe that the liquidity introduction of the Bahrain Islamic Index available for investing in Shariah in September 2015, the introduction Bahrain Bourse as compliant products is far bett er than of rules for REITs and the off ering of the liquidity available for conventional Bahraini government bonds and treasury a platform that has products, specifi cally in the region, due bills. Najla said that part of the funds to the limited number and variety of from the BLF will also be used to invest the sufϔicient depth Shariah compliant investment products. in Shariah compliant equity instruments Investors are essentially looking for listed on the Bahrain bourse. to support products that would give sustainable income over a reasonable investment “The BLF shall endeavor to increase such period with very clear risk mitigation liquidity and free fl oat on the Islamic tools in place,” Najla affi rmed. listed equities, among which there are activities fi ve banking stocks representing around It has been a diffi cult year for Bahrain, as 11% of the total market cap. [The] BLF The timing of the new liquidity fund exemplifi ed by the ratings assigned by will also participate in future Islamic could not have happened at a more Moody’s when it downgraded the equities primary and secondary off erings critical moment for the Kingdom, as it country’s long-term issuer ratings to to be traded on [the] Bahrain Bourse, braces itself for a challenging economic ‘Ba2’ from ‘Ba1’ and assigned a negative encouraging more Islamic capital-raising outlook with lowered energy prices and outlook. Perhaps the BLF will be a activities to utilize [the] Bahrain Bourse a reduction in government spending, turning point to the right direction for as a platform that has the suffi cient in line with the overall cutbacks in the the country’s bourse. depth to support such activities,” Najla wider GCC region. Year to date, the

Pakistani Islamic banks gain liquidity investment options as country builds infrastructure with Shariah ϐinance

Flush with liquidity, the fast-growing sovereign securities, shares and Sukuk Islamic banking fraternity of Pakistan — a 60.6% surge as compared to the has always struggled to fi nd suitable corresponding period in 2015. avenues to park excess liquidity but VINEETA TAN observes that the This upswing — which refl ects the landscape is becoming more fl uid, growing options Islamic banks have to thanks to concerted eff orts by Prime park liquidity — is mainly driven by Minister Nawaz Sharif’s government in the stream of investments into federal creating quality instruments to absorb government securities which swelled by abundant Shariah liquidity from the 67.9% year-on-year to PKR417.6 billion system. (US$3.96 billion) at the end of March 2016. While the exasperated domestic Shariah banking community has for a Pakistani fi nancial market: Syed Iqbal More of such long time been pushed to a corner with Ashraf, the president and CEO of the few Islamic-friendly investment avenues, National Bank of Pakistan, which is the offerings the fi nancial circle has received reprieve: single largest subscriber of the landmark in the fi rst quarter alone, the government debt with a 35% share, believes that the can be expected printed PKR80.4 billion (US$761.58 Sukuk, to be listed on the Pakistan Stock million)-worth of Sukuk Ijarah to meet Exchange, will pave the way for Islamic as Prime Minister the overfl owing demand of Islamic banks and Shariah mutual funds to banking institutions which collectively invest their liquid funds. Nawaz puts in has over PKR200 billion (US$1.89 billion) of excess idle funds, according to some With a ‘AAA’ rating (JCR-VIS) and a place a robust estimates. sovereign guarantee, it does not come as a surprise that investment-hungry infrastructure The government did not stop there. Islamic banks would clamor for a piece of This week, state-owned Water & Power the Sukuk in an environment where project pipeline Development Authority (WAPDA) high-quality assets are scarce; and more raised PKR100 billion (US$947.24 of such off erings can be expected as particularly in the million) through Sukuk — the country’s Prime Minister Nawaz puts in place a largest-ever fund (both conventional robust infrastructure project pipeline China-Pakistan and Islamic) mobilization for a public particularly in the China-Pakistan entity. The private fundraising exercise, Economic Corridor — as part of the Economic conducted to fi nance the 969 MW ambitious ‘One Belt, One Road’ initiative Neelum Jhelum hydropower project, was — expected to be commissioned in 2018. Corridor described as a “milestone” in the history Already approximately US$1.95 billion of of Pakistan by WAPDA Chairman fi nancing involving some of China’s and The numbers are encouraging. Offi cial Muhammad Zubair, who also added Pakistan’s largest banks have been central bank data shows that Pakistani that this issuance will go a long way in raised, part of which is Shariah Islamic banking institutions have facilitating funds for other hydropower compliant, and the multibillion-dollar signifi cantly increased their investments: projects. projects will open the door for Islamic in the fi rst quarter, a total of PKR593.6 banks to participate as the government billion (US$5.62 billion)-worth of Shariah More signifi cantly, the 10-year consciously decides to utilize Shariah banking investments were channeled diminishing Musharakah facility will compliant fi nancing to make its into a variety of asset classes including have great implications to the wider infrastructure plans a reality.

Table 1: Pakistani Islamic banking investments in PKR billion Period Growth (%) March 2015 December 2015 March 2016 Year-on-year Quarter-on-quarter Federal government securities 248.7 307.4 417.6 67.9 35.8 Fully paid-up ordinary shares 5.8 12 12.4 113.8 3.3 Bonds/PTCs/Sukuk 50.2 56.7 50.6 0.8 (10.8) Other investments 64.9 62.5 113 74.1 80.8 Total investments 369.6 438.6 593.6 60.6 35.3 Provisions and deﬁ cit (surplus) (1.5) (6.7) (6.7) 346.7 0 Net investment 368.1 431.9 586.9 59.4 35.9 Source: State Bank of Pakistan

Property funds: The next big thing for Islamic investors?

The uncertainty surrounding the UK more important to the Middle East[ern] are also eligible for inclusion in their exit from Europe has hit, and hit hard. investor,” explained Naomi Heaton, Self Invested Personal Pensions and With property investment up there as CEO of UK-based property investment Individual Savings Accounts, two of the number one asset class for Islamic fi rm London Central Portfolio (LCP). the most popular tax-effi cient savings investors into Britain, LAUREN “They are Shariah compliant, but in vehicles — allowing them to access MCAUGHTRY takes a look at the addition the taxes on direct investments central London investments in a way latest trend likely to hit a sector already are not applicable if you invest through they might not be able to do on a direct under fi re — the growing popularity of a fund structure.” basis, while ensuring they are not property funds. penalized on a tax level. Islamic investors active in the UK While Brexit could have a serious market will soon have to pay capital impact on the UK investment landscape, gains tax, inheritance tax and stamp While Brexit industry insiders are pragmatic that duty, while even off shore companies the consequences for Islamic investors and holdings are soon to come under is expected are unlikely to be too serious (see cover scrutiny. “The UK government doesn’t story, Vol 13 Issue 25: ‘The Big Brexit’). charge tax on property funds which to have an overall Other issues, however, continue to have multiple investors and diverse impinge on the real estate market — ownership,” noted Heaton. “Middle negative effect on which could be on the verge of a sea Eastern investors don’t feel very change in the way overseas investors get comfortable with tax, so that is a major the UK economy and involved. att raction especially given the recent changes in the UK property market.” inward investment, New taxes on UK property, combined with stamp duty changes and a more For those investors buying for the small central rigid regulatory approach, have investment purposes, this approach meant that investments must now be simply makes more fi nancial sense, London segment structured to take account of the new and industry insiders are expecting a landscape. And while direct investment signifi cant shift toward both residential could in fact beneϔit has until now been the favored form of and commercial funds. But this does investment, a new avenue has emerged not just benefi t overseas buyers — it from the that is about to explode onto the Islamic also has an inclusive eff ect for the scene. domestic market. For UK investors upheaval “Property funds are becoming keen to allocate their funds according increasingly popular and specifi cally to their religious principles, these funds And while Brexit is expected to have an overall negative eff ect on the UK economy and inward investment, the small central London segment could in fact benefi t from the upheaval. “Prime Central London real estate is expected to benefi t from a fl ight to quality and the security of blue-chip tangible assets, against a background of highly volatile fi nancial markets,” noted LCP on the 24th June. “It is now likely that property prices in Prime Central London will increase…. LCP have received a stream of enquiries from the early hours of this morning.”

As this market strengthens, funds will play a vital role in its development. “Over the next fi ve years, you will fi nd that funds will become signifi cantly more important,” agreed Heaton. “Everything is shifting toward the funds arena. There are huge new dynamics coming into the property market and for people who have an investment strategy, this is going to be a major new trend.”

Islamic ϐinance retail space sees wave of new interest on the back of improving ϐinancial literacy

Muslims and non-Muslims globally of educating customers about what Arabs and two in fi ve Emiratis hold may not be as aware of Islamic they off er, how they are diff erent and Islamic banking products). fi nancial products as they should be, why they are an appealing alternative. let alone understand their unique value But they have stepped up. Now the This new wave of interest in Islamic proposition, but data from the UAE awareness is much greater, the products fi nance comes amid a cascade of suggests that more Emiratis are buying available are much wider and these enquiries into personal fi nance solutions into the concept of Shariah compliant eff orts are paying off [as] the spikes on in general, demonstrating improving fi nance and are increasingly turning compareit4me indicate.” fi nancial literacy in the Emirate which to Islamic instruments to meet their learned a painful and hard lesson back fi nancing needs. VINEETA TAN takes a Although this upsurge is likely driven by in 2008 during the global fi nancial crisis closer look at the numbers. the eff ective awareness-raising campaigns which impacted many highly-leveraged launched by domestic Islamic banks as individuals. Over the January-March In the fi rst quarter of 2016, the number of well as by the government as part of its 2016 period, enquiries via compareit4me enquiries by UAE residents into Islamic global Islamic economy ambitions, this into mortgages that don’t require salary fi nance facilities surged 240% while rush into the Shariah fi nance space by transfer were up 450%, searches for Shariah compliant mortgage searches retail consumers is also triggered by the ‘free for life’ credit cards hiked up by jumped 380%, according to fi nancial competitive rates off ered by Islamic banks 543% and searches for cash bank and air comparison site compareit4me.com. to grab a larger market share away from miles benefi ts went up 500% and 367% This impressive year-on-year growth is their conventional peers. respectively. a huge leap from fi gures released earlier in January which showed a 53% increase Statistics from global intelligence fi rm “This boost in people taking their in consumers searching for Shariah RFi Group indicate that in the fi rst half of fi nances into their own hands can only be compliant products, particularly personal 2015, 20% of retail banking customers in a good thing,” said Richards, who added fi nancing facilities. Jon Richards, CEO the UAE subscribe to an Islamic banking that this shows that UAE residents are of the UAE comparison site at that time product with both expat Arabs and becoming more confi dent in their ability said: “For a while Islamic banks slipped Emiratis the most likely to utilize Shariah to manage their current fi nances and behind conventional banking in terms fi nancial facilities (one in two expat orchestrate their fi nancial future.

World nations turn to Islamic arbitration services as Shariah ϐinance goes international

Litigation through the courts may be market share needs at the moment,” Prof Trade Law’s Rules for Arbitration. the most popular choice for Islamic Rajoo told IFN, adding that he expects fi nancial commercial disputes; the adoption of the Islamic arbitration When the KLRCA’s i-Rules were however, VINEETA TAN writes services to expand as the Shariah fi nance launched in 2012, industry observers that an increasing number of market market matures. welcomed it as a positive step toward participants are gravitating outside the broadening arbitral options and courts to sett le transaction disputes Very encouraging is that Chinese fortifying Malaysia’s position as an as the internationalization of Shariah President Xi Jinping’s ‘One Belt, One international Islamic fi nance hub, and to fi nance reaches an all-time high. Road’ strategic initiative, which has a large extent, to enhance standardization opened the doors for Shariah compliant across the global Islamic fi nance According to Prof Sundra Rajoo, the project funding opportunities, has industry. director of the Kuala Lumpur Regional also cleared the way for third-party Center for Arbitration (KLRCA), there commercial dispute resolution services. And while one can hope for that, Prof has been a meaningful increase in the Rajoo however highlighted: “It is number of commercial disputes crossing Multiple arbitration centers worldwide, important to remember that [the i-Rules] over to the Islamic arbitration side, including the KLRCA, are now working are a means to an end, and not an end although the level of take-up, while on together to launch a platform to market to a means in the larger picture for the upward trajectory, could still be their services together; Prof Rajoo harmonization in the industry.” improved. confi rms that the proposed alliance will approach the government of China once The i-Rules are currently in the process of “It’s hard to proportionate this things have been formalized. being updated in tandem with the review against dispute resolution cases in the of Malaysia’s Arbitration Act which was conventional fi nancial industry — that Qatari authorities have also shown last revised in 2011. Recommendations to would be similar to comparing apples to interest in possibly utilizing the KLRCA’s the government, which include oranges. But the demand for a Shariah set of Shariah compliant arbitration rules recognizing emergency arbitrators, are compliant dispute resolution avenue is — the world’s fi rst to adopt the United expected to be made this year, confi rms at par with the industry’s growth and Nations Commission on International Prof Rajoo.

DIB’s oversubscribed rights issue a boost to its expansion plans within the UAE

Reassuring its position as one of the Besides strengthening the bank’s capital UAE’s leading fi nancial institutions [This] clearly base, the rights issue will also boost when it comes to Islamic fi nance, its cash liquidity by AED2.2 billion Dubai Islamic Bank (DIB) saw its depicts the (US$598.79 million), based on its share rights issue amounting to AED3.2 premium. DIB’s liquidity has been on billion (US$870.96 million) being tremendous faith the decline since 2013 as a result of its oversubscribed approximately three higher-than-average credit growth, while times, after receiving total subscription that the global its liquid assets declined to 20% of total of nearly AED9 billion (US$2.45 assets as of December 2015, from 35% at billion). DANIAL IDRAKI writes that investor community the end of December 2013, according to the rights issue by the UAE’s largest Moody’s. Islamic bank will increase its share has on the bank’s capital from AED3.95 billion (US$1.08 The extra cash to its balance sheet will billion) to AED4.94 billion (US$1.34 strategic direction push up liquid assets to around 21.3% billion) through the issuance of 988.44 and reverse the decline in liquid assets. million new shares. and long-term Credit growth has also slowed to 5.6% during fi rst quarter of 2016, down from With the rights issue, DIB will now be growth 9.8% a year earlier. “This trend, when able to expand its business through the combined with the higher deposit growth deeper penetration of existing and new aspirations of 12% over the same period, will further wholesale segments as it att empts to gain improve liquidity going forward,” the a larger slice of the market share within rating agency added. the same date,” Moody’s stated. DIB’s the UAE. Dr Adnan Chilwan, group CEO increased capital ratio to such an amount of DIB, commented in a statement that The new shares have a face value of signifi cantly exceeds the 8% regulatory the oversubscription not only came from AED1 (27.22 US cents) per new share and minimum, which includes hybrid the local shareholder base, but also saw a premium of AED2.2 (59.88 US cents) additional Tier 1 Sukuk instruments that substantial take-up from international per share, raising the issue price to constituted around 4.5% of total assets as investors. “[This] clearly depicts AED3.2 (87.1 US cents) per new share. of March 2016. the tremendous faith that the global investor community has on the bank’s strategic direction and long-term growth aspirations,” Dr Adnan affi rmed.

The increased capital will enable DIB to continue its expansion plans while at the same time ensuring that it meets the regulatory requirements under the capital and liquidity guidelines as imposed by the Central Bank of the UAE. “Building on the momentum we have established in the past two and a half years, we will continue to pursue our strategy to achieve sustainable business impetus in the medium term,” Mohammad Ebrahim Al Shaibani, the director-general of the Ruler’s Court of Dubai and Chairman of DIB, said.

In a recent note, Moody’s Investors Service said DIB’s capital increase is credit positive as it replenishes reserves and enhances loss-absorption buﬀ ers of the bank after a period of high growth during 2012-15, and will improve its liquidity after a period of decline. “As a result of this rights issue, we estimate that DIB’s consolidated tangible common equity to risk-weighed-assets ratio will improve to around 12.3% from 9.8% as of March 2016. Concurrently, the new capital will also increase the bank’s reported Tier 1 capital ratio to 18.1% from 15.6% as of

US commercial real estate market continues to capture Shariah investment despite slowdown

The US commercial real estate market slowing down. According to Moody’s GII is not alone. Saudi Arabia’s Islamic may be showing signs of cooling and Real Capital Analytics, prices of investment fi rm Sidra Capital in April down, but this has not deterred Islamic commercial properties in major US cities broke into the US market with a SAR350 investors from jumping into the US have dropped 3% since April while million (US$93.28 million) purchase of property business as global demand for Cushman & Wakefi eld projects the New a South Carolina property to kick-start North American real estate continues to York property market to shrink by as its future US acquisition plans. UK surge. VINEETA TAN reports. much as 30% in 2016. Pacifi c Investment Shariah compliant real estate specialist Management att ributes this slowdown to 90 North in February closed a US$123 Gulf Islamic Investments (GII), based in a stricter regulatory environment and the million acquisition of Saint Gobain’s the UAE, is the latest to join a string of weaker growth of China among others; North American headquarters outside of Shariah-inclined fi nancial institutions in the fi rm expects domestic real estate Philadelphia. capitalizing real estate opportunities in values to slide as much as 5% over the the US. GII recently acquired a Class A next 12 months. More recently, Soho Properties raised Commercial Building in Pennsylvania for US$219 million in Shariah compliant US$48 million using a fi ve-year Shariah Yet, despite the weaker environment, funding from fi nanciers in Malaysia, compliant fi nancing facility. The deal is there are encouraging signs from the Kuwait and Saudi Arabia to fi nance the the fi rm’s fi rst foray in the US market and Islamic investor pool which still sees US construction of its Tribeca condominium certainly not the last as GII intends to real estate as a lucrative asset class. tower in Manhatt an. expand its portfolio to include assets in the European and US markets. Tapping “We have plans to acquire high-quality “This transaction aptly demonstrates the the US market follows its entry into the income-yielding real estate assets in the increased activity in Islamic fi nancings in UK – both of which were executed in the US, the UK, Germany and other parts the US which has emerged over the past span of eight months. of Europe and also to invest selectively year,” commented Baker & McKenzie in att ractive value-added development partner Mona Dajani, who advised the International demand for US real estate opportunities in these regions,” Saudi Arabian fi rm, MASIC, involved in has been on the upward trend; however, confi rmed Pankaj Gupta, the co-founder the Tribeca transaction. the market is already showing signs of and co-CEO of GII.

Sovereign Sukuk: A subdued week

Coming to an end of the fi rst half of titanium pigment from the Kahnouj mine spent on the development of the second the year, the sovereign Sukuk front located in Kerman Province, whereas phase of West Azerbaijan Province’s has been relatively quiet over the IRR700 billion (US$23.21 million) will be Zarshooran gold mine. past week, with no new issuance. DANIAL IDRAKI takes a look at some of the announcements that keep Upcoming sovereign Sukuk Country Amount Expected date the momentum going, no matt er how Oman US$2.5 billion TBA miniscule it may seem. Hong Kong TBA TBA Egypt TBA TBA Indonesia Iran IRR60 trillion 2016 The government of Indonesia is targeting Nigeria TBA TBA to raise IDR4 trillion (US$296.4 million) Jordan JOD175 million TBA via an auction of sovereign Sukuk (SPN-S Pakistan PKR79.1 billion TBA 29122016 and four project-based Sukuk Egypt TBA 2016 Kazakhstan TBA 2016 series) conducted on the 28th June to Kenya TBA 2016 fi nance the 2016 State Budget, according South Africa TBA 2016 to an announcement on the Ministry of Bangladesh TBA TBA Finance’s website. Hong Kong US$500 million to US$1 billion TBA Ningxia Hui Autonomous Region US$1.5 billion TBA Iran Senegal TBA TBA The Iranian Mines and Mining Industries Niger XOF150 billion TBA Luxembourg TBA TBA Development and Renovation Tunisia US$500 million TBA Organization (IMIDRO), a state-owned UAE TBA TBA holding company active in the mining Shandong Province CNY30 billion TBA sector, is planning to issue IRR4 trillion Sindh Province US$200 million TBA (US$132.64 million)-worth of Sukuk Kuwait KWD1 billion 2016 Musharakah. Over IRR3.3 trillion Maldives TBA TBA (US$109.42 million) of the overall fi gure Sri Lanka US$1 billion TBA will be allocated to the production of Germany US$1 billion TBA

Company Focus: Shariah compliant Abraham’s River set to unleash further Islamic ϐinance growth in the US

Although growing at a rapid pace, the provision of religiously compliant of Devon Bank, which also means very the Islamic fi nance industry in the fi nancing in the US, and to provide low overheads,” Loundy noted. US remains relatively small and religiously acceptable income-oriented fragmented compared with other parts investment options. “Throughout the Abraham’s River is based on the dual of the world. However, incremental ‘Great Recession’, we at Devon Bank concepts of Wakalah and Musharakah. changes seem to be taking place, tried various att empts to create Shariah Investors pool their funds under a and the recent Shariah compliance compliant investment products and to Musharakah agreement and invest certifi cation for new kid on the block launch a non-interest-based bank. It was into Shariah compliant transactions as Abraham’s River is welcome news the wrong thing at the wrong time, as we approved and endorsed by the Shariah for the fl edgling industry. DANIAL could not fi nd the investor support we Board of Devon Bank. As part of its IDRAKI brings you the story. needed,” Loundy explained to IFN. investment mandate, no more than 10% of investments may be focused After gaining further experience in outside of the US. The major focus, deposit management for Islamic banks, although not necessarily exclusive, is We will the concept for Abraham’s River was on assets that support the payment of a increase born. Launched a year ago, the fi rm monthly dividend and a stable price for bought its fi rst asset in September 2015, membership units of Abraham’s River. business on the and began operations in January this It currently has four unit classes, which year. “At the end of May, we received include liquid (class L), term (class T), ϔinancing side, add the Fatwa approving the structure, charity (class C) and equity (class E). and in June we paid our sixth monthly investments on the dividends and fi nished our private Aside from receiving the offi cial Fatwa, placement memorandum,” Loundy Abraham’s River is waiting to hear other side of the added. from the Chicago Rabbinical Council on its documentary review. While barely balance sheet in a Currently, Abraham’s River’s assets one year old, Abraham’s River is by are predominantly in the Ijarah no means taking things slow, and sees way we have not structure, with a few shorter-term plenty of opportunities in a country with Murabahah transactions. It has nine 3.3 million Muslims (according to Pew been able to religious institution properties under its Research Center). commercial real estate portfolio, aside so far from retail and industrial properties. The “We are now ready to take the ship out institution also provides a small amount to sea. We will increase business on the of residential property and medical fi nancing side, add investments on the The Chicago-based Abraham’s River was equipment fi nancing. other side of the balance sheet in a way established in 2015 by David Loundy, we have not been able to so far, and the CEO and chairman of Devon Bank, “Abraham’s River functions as an Islamic possibly use the company as a warehouse and describes itself as operating in bank, but not in a way that the US to accumulate assets to generate Sukuk,” accordance with “the requirements regulators would call it a ‘bank’ — no Loundy opined. of the Abrahamic faiths” (Judaism, charter, no branches, no employees — Christianity and Islam). It aims to expand sort of a clownfi sh living in the anemone

Chart 1: Abraham's River’s dividends paid

5% 4.5% * * 4% * * Enterprise yield 3.5% Class L Ann yield 3% Class T/C Ann yield 2.5% * * Class E Ann yield 2% * Benchmark 1.5% + + Loss reserve % 1% + + + 0.5% ++ 0% Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Source: Abraham's River

Sudan: Finding opportunities

In the African continent, Sudan is among the more sophisticated of economies; and in terms of Islamic ﬁ nance, the Republic’s commitment is perhaps unparalleled as it is the only nation to adopt a fully Shariah compliant platform. However, VINEETA TAN writes that the country’s Islamic ﬁ nance ambitions face titanic challenges due to economic volatility and political instability.

Economic overview Banking and ϐinance after Malaysia. It is also one of the Social confl ict and civil war taint There are 34 licensed banks, according to pioneering African players (along with the Sudanese fi nancial and political the Central Bank — which is a founding Gambia) in this space. The country in landscape which has severely dampened member of the IFSB; however, the 2003 established a special committ ee to the resource-rich country’s economic population remains largely unbanked: address the topic of Sukuk and issues potential. The secession of South Sudan fi gures from Islamic Research Training Islamic debts (Ijarah and Musharakah) in 2011 resulted in the loss of about 75% Institute (IRTI) and CIBAFI indicate that four times a year. A total of US$130 of its oil production and the Islamic banking penetration is disproportionate million of Sukuk has been issued since country continues to feel the shocks with the majority of fi nancial activities 2007, according to IRTI and CIBAFI. from the secession and constraints of US (41%) taking place in the capital of sanctions. Khartoum while remaining relatively Takaful dismal in rural areas such as Darfur The Decree of the Minister of Finance Regulatory landscape and Kurdufan (6%). Such uneven No 219 in 1992 required all insurance After unsuccessful att empts to Islamicize distribution has serious implications to operators to convert their operations to its fi nance and banking system in the level of awareness (and subsequently be in compliance with Shariah, in tandem the 1980s, President Omar Al-Bashir development) of Islamic banking among with the country’s banking system. managed to successfully convert Sudan’s the public, which has been identifi ed as fi nancial system to become fully Shariah a major barrier to the development of the There are at least 15 Takaful operators compliant in the early 1990s. The High country’s fi nancial system. in Sudan with fi ve of them off ering Shariah Supervisory Board was created microTakaful products and two in 1992 to monitor the implementation The low banking penetration also reinsurers. Islamic insurance was of reforms and oversee the compliance prompted the Bank of Sudan to create introduced in Sudan by Faisal Islamic of the fi nancial industry as well as serve the Microfi nance Unit in 2007 to push Bank Sudan which in 1978 established as an appeal body for the Republic’s for microfi nancing on a larger scale in the Islamic Insurance Company – the Shariah banks, Central Bank and banking the country in order to increase fi nancial world’s fi rst Takaful operator. Several customers. access. According to the Consultative other banks followed suit including Group to Assist the Poor, 12 Sudanese Al Baraka Bank, Islamic Cooperative Governed by the Central Bank of Sudan banks have introduced dedicated Development Bank and Sudanese Islamic Act 2002, the Act was however amended Islamic microfi nance windows while 10 Bank. in 2006 following the conclusion of stand-alone microfi nance institutions the Comprehensive Peace Agreement have come to market. In 2014, Shariah General Takaful accounts for the majority which ended the civil war involving compliant microcredit extension of contributions and health coverage the southern part of the country and as commanded 4.6% of total banking generates the most demand. a result, the Sudanese banking system fi nancing. was no longer wholly Shariah compliant; Challenges and opportunities instead, it became a dual banking Total banking deposits, according to the The secession of South Sudan has system divided by geographical lines: Central Bank, reached SDG65.42 billion severely impacted Sudan, leaving it to Islamic in the north and conventional (US$10.75 billion) at the end of 2015, wrestle with tough macroeconomic and in the south. The amended Act also building on relatively healthy growth fi scal challenges (as well as political saw the establishment of the Bank of rates. A 2016 report by IRTI and CIBAFI instability). The lack of access to fi nance Southern Sudan (BOSS) as a branch of indicates that for the 2009-14 period, and inadequate infrastructure services as the Central Bank of Sudan (CBOS) to banking assets registered a 16.64% well as incomprehensive taxation policies render conventional banking services compound growth reaching SDG92 and an underdeveloped human capital in Southern Sudan in addition to other billion (US$15.11 billion) while insurance pool weigh heavily on the African nation. tasks. contributions amounted to SDG1.1 billion (US$180.68 million) at the end of 2013. However, the country’s political will and In 2011, following the secession of commitment to Shariah compliant Southern Sudan, BOSS became the In 2015, Bank of Khartoum became the fi nance is commendable and its central bank of the newly independent fi rst Sudanese fi nancial institution to infrastructure investment and plan to state and all topics related to banking operate Shariah compliant wholesale diversify its economy create and lending among others have been banking operations in Bahrain. opportunities for its Islamic fi nancial frozen, and all circulars related to the system to prosper. Public-private dual system have been suspended until Sukuk partnerships and microfi nance have been the amendment of the law of the CBOS In terms of sovereign short-term identifi ed as areas of growth. for the year 2002. Sukuk, Sudan is leading in the world

Private equity and venture capital in Islamic ϐinance

Private equity and venture capital are always welcomed by Shariah-seeking investors due to its equity- based, proﬁ t and loss-sharing nature, as well as the fact that they encourage the ﬁ nancing of the real economy. Transactions in this market segment usually involve start-ups and SMEs, and common structures used are typically based on the principles of Mudarabah, Musharakah and Wakalah. DANIAL IDRAKI takes a look at transactions and developments that have transpired over the last few months.

Private equity opportunities in developed markets APICORP will act as a template for the In Qatar, The First Investor (TFI) had in including the UK, Europe and the US. fi nancing of several other contracts in the March this year expressed its interest pipeline. in investing in Turkey’s real estate, The bank had also invested GBP8 million healthcare, education and food and (US$10.92 million) in a private rented Venture capital beverage industries. TFI, which is Barwa sector development project in the UK’s Malaysia and the IDB are collaborating to Bank’s Shariah compliant investment Manchester City, known as Angel establish the world’s fi rst Islamic venture banking arm, is involved in private Gardens, in February. The 458-apartment capital fund, according to Malaysia’s equity and asset management. It is residential project has a total treasury secretary-general, Dr Mohd expected that TFI could spend more than development value of GBP124 million Irwan Serigar Abdullah. Dr Irwan said US$150 million per deal. (US$169.28 million) and is being funded that treasury offi cials and Malaysia through a combination of equity invested Venture Capital are fi nalizing the US$100 Earlier in January, Iran’s Turquoise by the wholesale Islamic bank and other million deal with the IDB, and an MoU is Partners said that it plans to start a co-investors as well as senior debt. expected to be signed soon. US$200 million private equity fund in The expected income return through the fi rst half of this year with REYL operations starts at 9.1% on stabilized In a bid to support alternative fi nancing Finance (MEA), REYL & Cie’s Dubai income, rising to 10.8% per year after for small enterprises and start-ups, unit, according to a statement sent to three years of stabilized operations and a Otoritas Jasa Keuangan (OJK) had in IFN. The fund will focus on the following targeted internal return rate of over 15% January this year issued a number sectors in Iran: consumer goods, over a fi ve-year investment period. of regulations on venture capital, pharmaceuticals and hospitality that are covering matt ers such as licensing and In August 2015, three of the biggest expected to see signifi cant growth with institutional matt ers, doing business, private equity fi rms in the Gulf, namely the lifting of the country’s economic good corporate governance and direct Abraaj Group, Fajr Capital and Gulf sanctions. supervision by the OJK. Capital, were competing for a controlling stake in Saudi supermarket chain Al Doha-based Islamic investment bank An investor or institution wishing to Raya for Foodstuff Co in a deal worth as QInvest had in February provided a establish an Islamic-based venture much as US$300 million. However, talks fi ve-year US$30 million Murabahah capital company is required to provide for the sale were said to have stalled due mezzanine facility to Crescent Capital a minimum paid-up capital of IDR20 to diff erences over valuation. to acquire Akocak HPP, an operational billion (US$1.48 million) for a limited company and IDR10 billion (US$741,000) 81 MW hydroelectric power plant in While fi rms and industries across the Turkey. The investment was made for either a cooperative or a limited GCC scramble to diversify away from partnership. Venture capital fi rms are through Crescent’s Clean Energy relying on the oil and gas sector, asset Transition Fund (CETF), the fi rst energy- also allowed to develop their fee-based management and investment fi rm income through their services. focused private equity fund in Turkey. Alkhabeer Capital recently launched its fi rst education-focused product in In January, global Islamic investment its private equity investment portfolio. Outlook management fi rm Arcapita announced The Alkhabeer Education Private Equity Demand for real economic activities the US$85 million acquisition of a private Fund I seek to tap into the growing requires a signifi cant amount of portfolio of senior living communities private education sector in Saudi Arabia. fundraising, and this provides both in Colarado in the US — a joint venture entrepreneurs and investors within with MorningStar Senior Living that The Arab Petroleum Investments the Islamic private equity and venture emphasizes the growing appeal of US Corporation (APICORP) extended capital universe a sustainable growth investment opportunities for Shariah a US$10 million Shariah compliant opportunity. compliant private equity investors. fi nancing facility in May to Algeria-based Oil Recovery Services SAL, a service The energy, mining, utilities and Bahrain-based wholesale Islamic bank contracting company which works for chemicals sectors appear to interest many Ibdar in January announced the successful Sonatrach. The transaction was arranged private equity fi rms, whereas venture exit from four Bahraini real estate with 4D Global Energy Advisors, a capital fi rms continue to focus on investments for a total value of US$21.7 Paris-based oil and gas private equity consumer services and information million, and noted a strong pipeline of fi rm and the initial fi nancing provided by technology.

Turkey’s US$1 billion Sukuk: An The Republic of Turkey’s US$1 exciting comeback billion lease certiﬁ cates

After an 18-month hiatus, Turkey fi nancing purposes, which may include returned to the international Sukuk the repayment of debt. The Sukuk is market early this month with engineered based on the Ijarah structure a successful US$1 billion lease as it is the most common structure certifi cate issuance, which saw used globally across transactions and overwhelming demand from a diverse because it was also employed in all the pool of investors amid weak market Republic’s previous issuances. 1st June 2016 conditions. Speaking to Emirates NBD Capital, NURUL ABD HALIM explores Besides marking its comeback to in detail the exciting deal. the US dollar Sukuk market after an 18-month gap, the unique features Issuer Hazine Mustesarligi Varlik The fi ve-year lease certifi cates were of the Ijarah deal also include the Kiralama Anonim Sirketi priced at 290bps over midswaps with government of Turkey’s ability to price Obligor The Republic of Turkey a coupon rate of 4.25%, att racting an the latest off ering with negligible new Size of issue US$1 billion orderbook of approximately four times issue premium — a demonstration of its actual size from 150 accounts. Listed investor confi dence and demand for Mode of issue Public, 144A/Reg S on the London Stock Exchange, the the sovereign paper. This is despite Purpose General fi nancing purpose Sukuk facility, IFN learned, traded prevailing uncertainties in the Turkish which may include at the same level of pricing to that of political landscape, a weak market repayment of debt comparable conventional bonds on the backdrop, the overcrowded primary Tenor Five years fi rst day of opening — a fi rst for Turkey. debt markets and split ratings (the Issuance price 100% certifi cates were assigned investment grade ratings by Moody’s and Fitch Profi t rate 4.25% (fi ve-year midswaps + 290bps) The strong while the sovereign possesses an unsolicited ‘BB+’ rating from S&P). Payment Semi-annual support from Currency US dollars “The Sukuk market remains very Maturity date 8th June 2021 the sovereign in the strategic from the Republic’s point of view as they see it as a tool for investor Lead Emirates NBD Capital, diversifi cation,” commented Emirates manager(s), HSBC, Standard Chartered Sukuk market paves principal Bank NBD Capital on the importance of this advisor(s) and the way for further transaction to the industry. “The strong bookrunner(s) support from the sovereign in the Governing English and Turkish issuances from Sukuk market paves the way for further law issuances from various corporates/banks various corporates/ in the country.” Legal Turkey: Arnold & Porter, advisor(s)/ Paksoy Ortak banks in the counsel Banks: Cliff ord Chance The deal is a stand-alone off ering and and Yegin Ciftci also the sovereign’s fourth issuance in country the international Islamic debt capital Listing Irish Stock Exchange market. According to data by the Underlying 100% tangible assets (real The issuer also witnessed strong Turkish Treasury, Turkey has US$3.75 assets estate) demand for its paper with the Middle billion-worth of international lease Rating Moody’s: ‘Baa3’ East commanding 54% of the Sukuk certifi cates which are outstanding in the Fitch: ‘BBB-‘ pie, followed by Turkey (16%), Europe market. Shariah HSBC, Standard Chartered (11%), the UK (10%), Asia (5%) and the advisor(s) Bank US (4%). Previously, Turkey accessed the Structure Ijarah international Sukuk market in 2014 with “[This paper att racted] among a US$1 billion 10-year 4.49% Ijarah Tradability Tradable the highest-ever Middle Eastern paper, its longest-tenor US dollar Sukuk. Investor Middle East: 54% participation for a Sukuk [facility] from With the latest US dollar off ering, breakdown Turkey: 16% the Republic of Turkey,” said lead Turkey’s US$4.5 billion-worth of 2016 Europe: 11% manager Emirates NBD Capital. eurobond and lease certifi cate issuance UK: 10% Asia: 5% programs amount to US$4 billion. US: 4% Proceeds received from the facility will be used by the Republic for general Face value/ US$200,000 minimum investment

Thinking big

By Kavilash Chawla, a partner at boutique anti-immigrant message Brexit sends is countries, the potential loss of the UK management consulting fi rm Bâton Global very hard to ignore. As organizations regulatory authorities as a partner could and a visiting scholar at Drake University. think about and evaluate their growth be costly. strategies, the implications of Brexit as it In the four weeks since my last column, relates to accessing world-class talent are I am, however, an eternal optimist. there has been an opportunity to ‘think certainly going to weaken the prospects While we all expect signifi cant turmoil big’ about a number of catalytic, world- of London as a hub. and fallout from Brexit over the coming changing events. Let’s start with months (and years), Brexit creates new the most recent: Brexit. What Another casualty is likely opportunities. For other European cities, does Brexit mean for to be the growth and it creates an opportunity to continue Islamic fi nance? expansion of Islamic to establish themselves as the hub of fi nance in western European Islamic fi nance. Luxembourg, While none of us markets like the UK. Switz erland, or perhaps even France, has a crystal ball, The engagement Germany or Belgium could emerge the fi rst casualty is between UK as a hub for the region. While the likely to be London fi nancial market European political climate still needs itself. Since the city regulators and the to be navigated and poses a formidable hosted the World Islamic fi nance barrier, a pivot east from the UK may be Islamic Economic industry has been where Islamic fi nance’s European future Forum a couple of very positive over the lies. years ago, outgoing last decade, and that Prime Minister relationship is often Other than Brexit, this past week David Cameron had held up as an exemplar also saw the arrival of 1,000 Mandela successfully begun to of how regulators Fellows from sub-Saharan Africa to 36 establish London as the hub and industry can work elite universities in the US for a six- and gateway for European together to fi nd solutions week leadership program. Does Brexit Islamic fi nance. Now, it seems that meet the needs of the signal that the move south may be more likely that it was all for naught. local population. As an strategic and prosperous for Islamic Firstly, part of the att ractiveness external observer, it is hard fi nance, at least in the medium term? of London as a hub for Islamic to remain optimistic that fi nance was its access to Europe. the new UK is going to be While it ultimately depends on an While the new operating reality as engaged. This means a organization’s capabilities, capacity and is yet to unfold, it is hard to champion and exemplar for resources, Brexit has certainly forced the imagine that the UK will be able integrating Islamic fi nance need to ‘think big’ about the next few to retain its passporting privileges to into a conventional system has years for Islamic fi nance in Europe, and the European market. A second loss to been lost. As the US and other where the opportunities for growth and the city’s aspirations to be an Islamic markets may look to att ract success are going to be found over the fi nance hub is talent. While home-grown Islamic fi nance, and as Islamic next fi ve to 10 years. For my own part, I talent in the UK will likely continue fi nance looks to expand have been very impressed by the to be strong, the isolationist, further into non-OIC Mandela Fellows!

Islamic treasury bills/notes to be issued IFN Country Correspondents AFGHANISTAN: Dr Alam Khan Hamdard president, Afghanistan Islamic Finance and Consulting Co AUSTRALIA: Dr George Mickhail in the Iranian ϐinancial system until senior lecturer, School of Accounting, Economics and Finance, University of Wollongong, Australia BAHRAIN: Dr Hatim El-Tahir director of Islamic Finance Knowledge Center, Deloitt e & March 2017 Touche BANGLADESH: Md Shamsuzzaman deputy managing director, Islami Bank Bangladesh IRAN Moving on, the government used the BELGIUM: Prof Laurent Marliere, CEO, ISFIN authorized amount for issuing Islamic BERMUDA: Belaid A Jheengoor By Majid Pireh director of asset management, PwC treasury bills which was indicated in the BRAZIL: Fábio Figueira Budget Act and in the previous Iranian partner, Veirano Advogados On the 30th September 2015, the BRUNEI: Dr Aimi Zulhazmi, Islamic fi nance consultant, year (from the 21st March 2015 to the 21st Draznine Advisory fi rst treasury bills after the Islamic CANADA: Jeff rey S Graham March 2016). partner, Borden Ladner Gervais revolution in the Iranian capital market CHINA: Abdullah Han partner, Al-Sadiq Consulting were issued. The face value of each bill EGYPT: Dr Walid Hegazy After that, in the current Iranian year managing partner, Hegazy & Associates was IRR1 million (US$33.16) and on st st (from the 21 March 2016 to the 21 FRANCE: Kader Merbouh the fi rst trading day, each bill had been co-head of the executive master of the Islamic fi nance, Paris- March 2017) according to the country’s Dauphine University discounted at IRR900,500 (US$29.86). HONG KONG: Amirali Bakirali Nasir Budget Act enacted by the Iranian Islamic chairman, The Law Society of Hong Kong working party on The maturity date of the treasury bills Islamic fi nance Consultative Parliament, the government was the 13th March 2016 which meant INDIA: H Jayesh received permission for fundraising by founder partner, Juris Corp that these bills had a maturity period INDONESIA: Farouk A Alwyni issuing over US$5.5 billion-worth of CEO of Alwyni International Capital and the chairman of 5.5 months. The Iranian Farabourse of Centre for Islamic Studies in Finance Economics and Islamic treasury bills/notes. This amount Development Company is the fi nancial market for IRAN: Majid Pireh shows the success of prior activities Islamic fi nance expert, Securities & Exchange Organization trading treasury bills in Iran. On the of Iran in the previous year and for this year, IRAQ: Khaled Saqqaf maturity date, the Iranian government partner and head of Jordan & Iraq offi ces, Al Tamimi & Co the government plans to issue higher fulfi lled its obligations and paid the ITALY: Stefano Padovani, partner and head of Banking & amounts of Islamic treasury bills/notes. Finance, NCTM Studio Legale Associato nominal value to the holders. JAPAN: Kaoru Haraguchi founding att orney, Haraguchi International Law Offi ce JORDAN: Nafi th Al Hersh Nazzal, Islamic banking specialist, Table 1 shows the main characteristics of certifi ed fi nancial and investment advisor Iranian Islamic treasury bills/notes to be KAZAKHSTAN: Timur Rustemov, deputy chairman, association for development of Islamic fi nance There is issued in the current Iranian year (from KENYA: Mona K Doshi st st senior partner, Anjarwalla & Khanna Advocates the 21 March 2016 to the 21 March KOREA: Yong-Jae Chang, partner, Lee & Ko no coupon 2017). KUWAIT: Alex Saleh, partner, Al Tamimi & Co LEBANON: Johnny El Hachem partner – corporate, Bin Shabib & Associates payments for these As is common for treasury notes in LUXEMBOURG: Said Qaceme, senior manager of Advisory & Consulting, Deloitt e Tax & Consulting fi nancial markets, there is no coupon MALAYSIA: Ruslena Ramli head, Islamic fi nance, RAM Rating Services instruments and payments for these instruments and MALDIVES: Aishath Muneeza investors may gain from the diff erent deputy minister, Ministry of Islamic Aff airs, Maldives MALTA: Reuben Butt igieg investors may gain prices on what they pay and what they president, Malta Institute of Management MAURITIUS: Mohammad Akshar Maherally receive when they want to sell. This is on Director (taxation), International Financial Services from the different MOROCCO: Ahmed Tahiri Jouti the basis of a discounting structure. managing consultant, Al Maali Consulting Group NEW ZEALAND: Mohamed Nalar trustee and board member, Awqaf New Zealand prices on what they Nevertheless, the permitt ed amount for NIGERIA: Auwalu Ado; Shariah auditor, Jaiz Bank Islamic treasury notes/bills is due on OMAN: Muhammad Abdullah Dewaya pay and what they the 21st March 2017 and the government Islamic fi nance scholar PAKISTAN: Muhammad Shoaib Ibrahim should realize the available potential managing director & CEO, First Habib Modaraba PHILIPPINES: Rafael A Morales receive when they until then. managing partner, SyCip Salazar Hernandez & Gatmaitan QATAR:Amjad Hussain partner, K&L Gates want to Majid Pireh is the Islamic fi nance senior RUSSIA: Roustam Vakhitov managing partner, International Tax Associates expert at the Securities and Exchange SAUDI ARABIA: Nabil Issa sell partner, King & Spalding Organization of Iran. He can be contacted at SENEGAL: Abdoulaye Mbow [email protected]. Islamic fi nance advisor, Africa Islamic Finance Corporation SOUTH AFRICA: Amman Muhammad CEO, First National Bank-Islamic Finance SINGAPORE: Suhaimi Zainul-Abidin, advisor, 5Pillars SRI LANKA: Imruz Kamil Table 1: Main characteristics of Iranian Islamic treasury bills/notes head of Islamic banking, Richard Pieris Arpico Finance SWITZERLAND: Khadra Abdullahi Name Islamic treasury bills Islamic treasury notes associate, Investment banking, Faisal Private Bank SYRIA: Gabriel Oussi, general manager, Oussi Law Firm Value IRR100 trillion (US$3.32 billion) IRR75 trillion (US$2.49 billion) TANZANIA: Yassir Masoud head, Islamic banking, retail banking, National Bank of Commerce TURKEY: Ali Ceylan Tenor Less than one year One to three years partner, Baspinar & Partners UAE: Rima Mrad Tax treatment Exempted Exempted partner, Bin Shabib & Associates UK: Fara Mohammad director of Islamic fi nance, Foot Anstey Tradable Yes (at the Securities Exchange) Yes (at the Securities Exchange) US: Joshua Brockwell investment communications director, Azzad Asset Management YEMEN: Moneer Saif; head of Islamic banking, CAC Bank Legal base Iran Budget Act ratifi ed by Iranian Iran Budget Act ratifi ed by Iranian IFN Correspondents are experts in their respective fi elds and are selected by Islamic Finance news to contribute designated Islamic Consultative Parliament Islamic Consultative Parliament short country reports. For more information about becoming an IFN Correspondent please contact sasikala.thiagaraja@ Source: Securities and Exchange Organization of Iran redmoneygroup.com

Global collaborations and Shariah IFN Sector Correspondents

CAPITAL MARKETS: compliant hydroponic investments Suhail Ahmad, CEO, Hikmah Capital Corp

UAE DERIVATIVES Suhaimi Zainul - Abidin, treasurer for Gulf-Asia Shariah Compliant Investment Association and advisor to 5Pillars By Rima Mrad GLOBAL ECONOMIC OUTLOOK Tariq Alrifai, expert, Islamic investment products and The UAE Islamic industry is market trends continuing to expand on a steady trajectory. The month of May ended LAW (EUROPE): Ayhan Baltaci, att orney at law, Bereket & Baltaci Law Firm with the 1st China-UAE Conference on Islamic Banking and Finance LAW (MIDDLE EAST) held under the theme ‘Islamic Bishr Shiblaq, head of Dubai oﬃ ce, Arendt & Medernach Banking and Finance: Perspectives, Challenges and Sustainable Impact’. LEASING: Youssef Aboul-Naja, Ijarah specialist, a supranational This conference was organized by banking institution

Hamdan Bin Mohammed Smart MICROFINANCE (ASIA): University’s Dubai Center for Islamic Dr Mahmood Ahmed, executive vice-president and director training, Islami Bank Training and Research Banking and Finance and the Dubai Academy

Islamic Economy Development MICROFINANCE (AFRICA): Mansour Ndiaye, director of microfi nance, Assistance and Center in cooperation with China Consulting for Development Islamic Finance Club and ZhiShang Intercultural Communication. PRIVATE EQUITY & VENTURE CAPITAL: Arshad Ahmed, partner, Elixir Capital A number of other major PROJECT & INFRASTRUCTURE FINANCE announcements were issued this month. Anthony Coleby, head of corporate commercial AAOIFI visited the UAE in early department, Said Al Shahry Law Offi ce (SASLO) June and signed a memorandum of REAL ESTATE Philip Churchill, founder partner, 90 North Real Estate cooperation with the UAE’s Securities Further to this, Ajman Bank raised Partners and Commodities Authority which AED675 million (US$183.72 million) set the framework for cooperation REGULATORY ISSUES through a rights issue which was Intan Syah Ichsan , chief operating offi cer, Samuel Aset between both of these bodies including oversubscribed by 195% and of which Manajemen exchanging expertise, building AED500 million (US$136.09 million) was RETAIL BANKING: capabilities of human resources and raised from the issuance of 500 million Chowdhury Shahed Akbar, offi cer, Southeast Bank, Bangladesh. raising awareness of Shariah compliant new ordinary shares and AED175 fi nancial products and instruments million (US$47.63 million) represented RISK MANAGEMENT: relevant to fi nancial markets. share premium. Following this issuance, Dr Ken Baldwin, CEO, Islamic Financial Analytics the bank increased its share capital to STRUCTURED FINANCE: Also, the UAE’s Ministerial AED162 million (US$44.09 million). John Dewar, partner and head of Islamic fi nance, Milbank, Development Council is preparing an Tweed, Hadley & McCloy international Islamic fi nance framework On another front, international SUKUK as part of its global Islamic economy hydroponic expert Pegasus Agriculture, Anthony Coleby, head of corporate commercial department, Said Al Shahry Law Offi ce (SASLO) ambition, according to the country’s which operates hydroponic farming offi cial news agency, Emirates News facilities based in Dubai, announced that SYNDICATED FINANCE Agency. This is expected to establish they have secured a certifi cate from the Damir Galiev, portfolio manager, AK BARS Bank standards for Shariah compliant Shariah Supervisory Board announcing TAKAFUL & RE-TAKAFUL: fi nancial transactions under a global that its Hydroponic Investment Product Dr Sutan Emir Hidayat, assistant professor and academic regulatory mechanism. is now offi cially Shariah compliant. advisor for Islamic fi nance, University College of Bahrain TAKAFUL & RE-TAKAFUL (AFRICA): With respect to fi nance deals, Dubai Uwaiz Jassat, acting head of Islamic banking, Absa Islamic With respect to new set-ups, Abu Dhabi Banking real estate developer Meydan Group Financial Group and GFH Financial raised AED1 billion (US$272.18 million) Group will establish a new Islamic bank TAKAFUL & RE-TAKAFUL (EUROPE): Ezzedine Ghlamallah, director, Solutions Insurance and in Islamic fi nancing from UAE banks in the Abu Dhabi Global Market with Islamic Finance in France (SAAFI) on a dual-tranche off ering comprising an initial capital of US$100 million. The TRADE FINANCE a AED700 million (US$190.52 million) Abu Dhabi Global Market is the UAE’s Anthony Coleby, head of corporate commercial Sukuk issue and a AED300 million international fi nancial center for local, department, Said Al Shahry Law Offi ce (SASLO) (US$81.65 million) term facility, both regional and international institutions TREASURY PRODUCTS: maturing in 2024. This is reported to Nafi th Al Hersh Nazzal, Islamic banking specialist, and in October 2015 started accepting certifi ed fi nancial and investment advisor be one of the largest Islamic fi nancing applications for registrations. deals in the fi rst half of 2016. The deal is IFN Correspondents are experts in their respective fi elds supposed to support Meydan’s fi nancing and are selected by Islamic Finance news to contribute Rima Mrad is a partner at BSA Ahmad Bin designated short sector reports. For more information objectives, enhance its capital structure, Hezeem & Associates. She can be contacted about becoming an IFN Correspondent, please contact [email protected] diversify its investor base and secure at [email protected]. additional funding for new projects.

Islamic banking and ϐinance opens its doors in Suriname to economic empowerment for Latin America and the Caribbean

Given the recent recession and skyrocketing infl ation, the conversion of Trust Bank in Suriname to a fully- fl edged Islamic bank in line with the demand of its stakeholders that prompted its board members to undertake the necessary steps to achieve this goal by 2017, creates the opportunity for the Suriname economy to strengthen itself. The economy is currently experiencing steep infl ation, declining purchasing power and diminishing SMEs. MAUREEN BADJOERI explores.

SURINAME be off ered a partnership where the investors to explore new and exciting investment risk is shared, technical ventures in Suriname and the region. By Maureen Badjoeri assistance is provided and sector Apart from banking and fi nance, expertise is available for support. This due to the impact of climate change Trust Bank is a small private bank in approach, which is in accordance with on global food reserves, Suriname Suriname, South America’s smallest ICD principles, will allow SMEs to start- can be developed into a food haven. country; established in 1989 with up production of goods and services Limitless opportunities exist in the the vision to foster sustainable with a spin-off in job creation, trade underdeveloped markets such as development and growth and a special and export, adding to GDP growth and fi shery, agriculture, organic food, focus on the low-income segment of strengthening the Suriname currency and natural medicine, aviation and shipping. society. The aim to establish the fi rst economy. Suriname’s membership in the IDB Islamic fi nancial hub in Suriname was Group since 1997, which provides addressed recently during the IDB’s it access to funding, knowledge and 41st Annual Meeting in Indonesia, expertise that so far have not been fully emphasizing the benefi t it could bring Suriname is utilized by the private sector, will now to the economy as well as facilitating strategically pave the way for Trust Bank to exploit foreign direct investments, not only for these available options and resources. Suriname but for the Caribbean and positioned and is a Latin America. Suriname also has a membership with perfect gateway to the Caribbean Community which SMEs are the backbone of most facilitates free trade movement for economies in the world, more so in the Caribbean and people and products; is party to the Suriname and the rest of the Caribbean. ‘Cotonou Agreement’, the partnership Local production of goods and services, the rest of Latin agreement between members of the sector diversifi cation and wealth creation African, Caribbean and Pacifi c Group of among SMEs are crucial to economic America States and the European Union; and is growth without which it will slow down. a member of UNASUR (Union of South American Nations). These agreements The renewed strategy is to contribute to and partnerships are the vehicles to the socioeconomic development of SMEs Trust Bank and the ICD foresee great be accessed for new market entry and which frequently encounter diffi culties economic value in further exploring the development. accessing fi nance. In line with this, Trust partnership, connecting the east and Bank has partnered with the Islamic west together. Suriname is strategically With the renewed strategy that focuses Corporation for the Development of positioned and is a perfect gateway to the on SMEs and the introduction of a new the Private Sector (ICD) to realize this Caribbean and the rest of Latin America business model for Islamic banking and ambition as they commonly share the – an unexplored market for investors fi nance, Trust Bank’s future plans are not main objective of having a developmental from the eastern hemisphere with only to strengthen the bank impact and working toward fi nancial about 600 million people and untapped institutionally but also the whole inclusion. Both parties have signed a resources of natural gas, copper, nickel, fi nancial sector of Suriname by bringing partnership agreement in December iron and granite; a technology industry; benefi ts from collaborations that will 2015 and the permit to proceed with the large-scale manufacturing; and health deepen the fi nancial sector with new conversion of the bank was granted by tourism. Underdeveloped markets fi nancial products and services such as the Central Bank of Suriname in May include fi shery, agriculture, organic food, knowledge transfer and job creations, to 2016. When fully converted, the bank’s natural medicine, aviation, shipping and name a few. name will be Trustbank Amanah. ecotourism. Maureen Badjoeri is CEO of Trust Bank. The partnership will enable the bank With the establishment of the fi rst Islamic She can be contacted at maureen.badjoeri@ to facilitate SMEs not only fi nancially bank and fi nancial hub in Suriname, the trustbanknv.com. but in other aspects as well. SMEs will gateway is now opened to all foreign

The phenomenon of Shariah compliant funds

Much of the focus in recent years in the Islamic fi nance space has been on the explosion in the issuance of Sukuk (or so-called Islamic bonds), the use of Islamic fi nance or tranches in fi nancing large infrastructure projects and the equally notable growth in the retail market. However, another industry has also been quietly and very successfully developing – the phenomenon of the Shariah compliant fund and with it, the creation of a complementary Islamic fund and asset management market. NEALE DOWNES writes.

PRIVATE EQUITY the carried interest or performance fee Shariah board (typically the Shariah is viewed as a Mudarabah agreement (a supervisory board of the fund’s sponsor By Neale A Downes silent partnership where certain parties or anchor investor). Alternatively, a (the Rab Al Maal) provide capital and the fund may hire a Shariah consultant or In many ways, this is not at all other party (the Mudarib) manages and establish its own Shariah supervisory surprising, as Islamic fi nance structures deploys that capital toward an agreed board comprised of various Islamic are, at their heart, far more akin to investment policy or within investment scholars. There are also certain service equity than to debt. Musharakah (joint guidelines and provides expertise in providers with their own Shariah boards venture) and Mudarabah (a limited return for a share of the profi t). Payment which may be engaged on a contractual partnership) – perhaps the purest of the carry or performance is, as is basis to advise a fund. of Islamic fi nance contracts – are usual in the conventional fund sector, arrangements whose very nature is dependent upon the investors fi rst The Shariah consultant or supervisory in the sharing, between the partners achieving a certain rate or return and/ board is required to review and approve therein, of risk and reward or, put or on the returns exceeding a high water the private placement memorandum or another way, of profi ts and losses. mark. other off ering documentation and all other fund documents. Structure While the basic documentation for a Shariah compliant private equity funds Shariah compliant fund is similar to that are normally structured as a limited of a conventional fund – ie analogous partnership which, as explained to a limited partnership agreement – Shariah previously, to all intents, is the same as certain terms, such as the equalization a Mudarabah arrangement. As a general mechanism for investors admitt ed after prohibits rule, Shariah prohibits investments in the fi rst closing and the charging of preference shares, as they go against default or penalty interest on amounts investments in the principle that all investors or due from limited partners which is stakeholders should bear losses equally not contributed (ie using a typical preference shares, or, at the very least, pro rata to the level commitment model), must be adjusted in of their equity participation. Hence, the context of Shariah. as they go against investing in or through a company which issues diff erent participating classes of As a result of their unique operating and the principle that shares is generally not allowed, although investment restrictions, fund managers the use of management shares (for often set up the Shariah compliant all investors or control) is not uncommon. fund as a parallel fund which invests proportionately in portfolio investments stakeholders should One alternative is a closed-ended on substantially the same terms and at bear losses equally unit trust structure, whereby a fund the same time as a separate conventional company issues units to investors fund. While the parallel fund will have or, at the very least, and then delegates management and the same fund manager and investment administration to a third party – usually focus as the conventional fund, such a pro rata to the level the fund sponsor or one of its affi liates. structure allows the fund manager to For example, this contractual structure provide a Shariah compliant investment of their equity is the norm for Middle East-sponsored vehicle to investors without restricting funds domiciled in Bahrain. Shariah the operations of the conventional fund participation compliant private equity funds with and burdening its investors with any international investors are, however, additional costs. typically domiciled in traditional The Shariah consultant or supervisory off shore jurisdictions familiar to such Shariah supervisory board board routinely audits the fund’s international investors. A Shariah compliant fund must appoint activities and produces an annual report a Shariah supervisory board that reviews regarding ongoing Shariah compliance. The fl at, opening or annual management proposed investments and issues Such a review may involve, among other fee is categorized as an agency opinions (Fatwa) as to their compliance things, visiting portfolio companies arrangement (where the fee is a fi xed or otherwise with Shariah. Most private and the examination of documentation amount or a percentage of capital equity funds from the Middle East pertaining to investments. Details of commitments or the net asset value) and simply engage an already existing investments proposed by a fund manager

Continued involving structures or securities not typically donated to a charity – or that the ratio of total conventional debt to previously approved by a Shariah such revenues are applied or reinvested total assets should be less than 33%. consultant or supervisory board are in permissible activities or assets, so Additionally, the ratio of interest income usually presented to the consultant or that any further ensuing revenues are (plus income from any incidental board for review and approval prior to ‘purifi ed’. Haram or unidentifi able activity) to investment. total revenue typically must be less than 5%. The ratio of liquid assets (cash Permissible investment areas Cash held by plus accounts receivable) to total assets In order to qualify as Shariah compliant, should be less than 45%. Finally, any a fund’s investment policy must contain a fund may conventional debt of a portfolio company restrictions that prohibit investment in must be restructured in a Shariah industries or asset classes considered only be invested in compliant manner generally within three to be forbidden or Haram. These years after acquisition. restrictions thus prohibit investment Shariah compliant, in companies active in the following Conclusion industries and activities: short-term As we can see, therefore, the inherent nature of a fund as a partnership (a) conventional fi nancial services investment products, between providers of capital and one or (including conventional banks and more expert and experienced managers insurance companies) such as Islamic of that capital and the requirement that (b) tobacco all such parties should bear the risk and (c) gambling money market enjoy the rewards of their investment on (d) alcohol or pork products an even or proportionate footing fi ts very (e) certain entertainment, such as instruments comfortably into the ethos of Islamic pornography (but often including fi nance. cinemas, music and publications) (eg Sukuk) (f) weapons or military equipment, and The creation of screening services (g) any other immoral or unethical While a Shariah compliant fund may and widely accepted and trusted activities identifi ed by the Shariah engage in leverage through the use of Islamic indices by a number of market consultant or supervisory board. Islamic fi nancing instruments (such participants – perhaps most notably as Murabahah), it may not obtain or Dow Jones – has further facilitated and The application of these investment provide conventional loans or otherwise hastened the growth of this exciting restrictions is subject to diff ering invest in conventional interest-bearing market. interpretations. For instance, some instruments, including convertible debt Shariah scholars argue that an securities. Cash held by a fund may Notwithstanding the continuing era of investment by a fund in a hotel or only be invested in Shariah compliant, low interest rates and infl ation, signs of restaurant that serves alcohol and/ short-term investment products, such as tightening liquidity in the traditional or pork is prohibited, whereas other Islamic money market instruments (eg debt markets would suggest that further scholars argue that if the alcohol sales are Sukuk). opportunities will open up for the less than a certain percentage of the total well-advised and fl eet-footed equity revenue of the hotel or restaurant, the Similarly, a Shariah compliant fund is investor, including those requiring investment by the fund may still qualify subject to restrictions on the amount Shariah compliance. as Shariah compliant. Alternatively, of conventional leverage permitt ed at funds or other investments are often the portfolio company level. This often Neale A Downes is a partner at Watson Farley structured so that any revenues from takes the form of fi nancial parameters & Williams. He can be contacted at ndownes@ any activities considered to be Haram in relation to the debt-to-equity ratios wfw.com. are segregated and not distributed to the and interest income of its investments. Shariah compliant investors – they are The generally accepted standard is that

IFN ONLINE DIRECTORY

Over 6,840 individual companies directly involved in the Islamic ﬁ nance industry

located in Kerman Province, whereas DEALS IRR700 billion (US$23.21 million) will be spent on the development of the second CLOSING BELL Indonesia auctions Sukuk phase of West Azerbaijan Province’s Badlisyah Abdul Ghani joins INDONESIA: The government of Zarshooran gold mine, according to the Indonesia is targeting to raise IDR4 Financial Tribune. Tabung Haji trillion (US$301.2 million) via an auction MALAYSIA: IFN can offi cially of sovereign Sukuk (SPN-S 29122016 confi rm that Badlisyah Abdul Ghani, and four project-based Sukuk series) Hijrah Pertama to make former CEO of CIMB Islamic, will conducted on the 28th June to fi nance Sukuk periodic distribution assume the role of deputy managing the 2016 State Budget, according to MALAYSIA: Hijrah Pertama will be director of Lembaga Tabung Haji on an announcement on the Ministry of making a periodic distribution on the the 1st July. Badlisyah is also slated Finance’s website. 30th June 2016 for its Class B Sukuk to become a board member of Bank with a profi t rate of 4.87% amounting to Islam, pending regulatory approval. RCE Capital sets up Sukuk RM22.52 million (US$5.49 million) under its RM2.92 billion (US$712.49 million) in with Maybank and RHB Investment Murabahah program aggregate nominal value Sukuk Ijarah Bank appointed as the joint lead MALAYSIA: RCE Capital has facility, according to an announcement managers for the off ering. The electricity established a Sukuk Murabahah on Bank Negara Malaysia’s website. generator intends to use the Sukuk program of up to RM900 million proceeds to refi nance its existing debt. (US$222.86 million) in nominal value via Al Dzahab Assets (ADA), according to Pakistan’s Islamic a fi ling with Bursa Malaysia. ADA is a investments on the rise Chellam Plantations ϐloats trust-owned special purpose bankruptcy PAKISTAN: The Islamic banking Sukuk Murabahah remote vehicle incorporated solely for industry in Pakistan invested PKR155 MALAYSIA: Chellam Plantations the Sukuk program and successfully billion (US$1.45 billion) in government (Sabah) has issued the fi rst tranche of its launched its fi rst issuance of RM155.48 securities during the January to March RM300 million (US$73.2 million) 17-year million (US$38.5 million) on the 21st 2016 period, according to the latest Sukuk Murabahah program amounting June. RCE Marketing (RCEM), a wholly- Islamic Banking Bulletin report by the to RM150 million (US$36.6 million), owned subsidiary of RCE Capital, is State Bank of Pakistan. The investments with the balance to be issued at a later the originator of the loan receivables grew 35.89% to reach PKR586.9 billion date, according to a press release. The forming the underlying assets for the (US$5.49 billion) by the end of March, facility, rated ‘AAA(fg)’ by RAM Rating Sukuk program, and has also been compared with PKR431.9 billion (US$4.04 Services, will be used to support the appointed to act as the servicer. The billion) by the end of December 2015. company’s new planting in Kalimantan Sukuk Murabahah program is expected The industry’s assets and deposits were and expansion in Indonesia, refi nance its to increase RCEM’s capital funds for recorded at PKR1.63 trillion (US$15.26 outstanding borrowings and fi nance its future business growth. billion) and PKR1.34 trillion (US$12.54 capital expenditures. The Sukuk program billion) respectively during the quarter is being guaranteed by Danajamin IMIDRO plans Sukuk under review. Nasional, marking its 30th guarantee Musharakah issuance. IRAN: The Iranian Mines and Mining Sarawak Hidro to issue Sukuk Industries Development and Renovation MALAYSIA: Sarawak Hidro, a Ministry Proposed novation for Sukuk Organization (IMIDRO), a state-owned of Finance-owned developer of MALAYSIA: According to an holding company active in the mining Malaysia’s biggest hydropower project, is announcement on Bank Negara sector, is planning to issue IRR4 trillion planning to issue RM5.5 billion (US$1.34 Malaysia’s website, Malaysian Trustees th (US$132.63 million)-worth of Sukuk billion)-worth of Sukuk without a issued a notice on the 17 June to Musharakah of which over IRR3.3 trillion government guarantee in July, confi rmed certifi cate holders of Konsortium (US$109.42 million) of the overall fi gure the issuer to IFN. The Sukuk program ProHAWK’s RM900 million (US$219.6 will be allocated to the production of has been assigned with a preliminary million) Sukuk Murabahah program, titanium pigment from the Kahnouj mine ‘AAA’ rating from RAM Rating Services, informing them of a proposed novation

DEAL TRACKER Full Deal Tracker on page 29 EXPECTED DATE COMPANY'S NAME SIZE STRUCTURE ANNOUNCEMENT DATE July 2016 Sarawak Hidro RM5.5 billion Sukuk 28th June 2016 TBA Iranian Mines and Mining IRR4 trillion Sukuk Musharakah 24th June 2016 Industries Development and Renovation Organization TBA Bank Sulsebar IDR50 billion Sukuk Mudarabah 20th June 2016 TBA Government of Oman US$2.5 billion Sukuk 20th June 2016 Second quarter of Bank Albilad up to SAR2 billion Sukuk 20th June 2016 2016 TBA Tiga Pilar Sejahtera Food IDR1.5 trillion Sukuk 17th June 2016

of the asset management services is for the profi t rate of 6.25% for the total codes VO062342, VO062343, VR062348, agreement from Edgenta Mediserve to amount of US$18.09 million. VS062350, VS062351 and VM070751 were its parent company Edgenta Healthcare due and payable on the 27th June 2016. Management. SPG makes Sukuk payment MALAYSIA: Sarawak Power Generation Saratoga eyes Sukuk issuance DP World to distribute Sukuk (SPG) has made the principal and INDONESIA: Saratoga Investama proϐit profi t payment under its Sukuk Sedaya is studying the possibility UAE: Port operator DP World is expected Musharakah program of up to RM215 of issuing Sukuk as the investment to make a periodic distribution payment million (US$53.24 million), according company looks to add Islamic on the 5th July for its US$1.5 billion trust to an announcement on Bank Negara instruments as an optional source of certifi cates due 2017 for the period of Malaysia’s website. The principal funding besides conventional bonds, the 1st January to the 30th June 2016. redemption of stock code VM070751 and according to Republika.co.id quoting According to a statement, the distribution the semi-annual profi t payment of stock Saratoga’s fi nance director Jerry Ngo.

new blood” where both consecutive and potential growth path. Tunisia has been AFRICA non-consecutive CEO terms would count planning for a sovereign Sukuk worth toward the nine-year limit. The decision approximately TND1 billion (US$452.9 Banque Misr receives to cap CEO terms, however, caused million) for some time, but the issuance Murabahah ϐinancing consternation among bankers who has been delayed multiple times. It was EGYPT: Banque Misr has obtained a described it as an unexpected overreach reported that the government plans to US$105 million Murabahah fi nancing into the private sector’s aff airs. tap the Islamic capital markets under the facility from three undisclosed UAE 2016 State Budget. banks to supplement its foreign currency Tunisia aims for sustainable resources, Reuters quoted the bank’s Firms to launch Islamic chairman, Mohamed Mahmoud Eletreby, growth as saying. Mohamed added that the TUNISIA: Tunisia’s structural reform ϐinance association facility will be paid back in two years. eff ort aims to lift the country’s future KENYA: Islamic fi nancial fi rms have growth potential with the assistance joined hands to set up a team tasked of international institutions, although with preparing the launch of a lobby CBE’s ruling on CEO term limit social and security-related challenges group to push for the development of void weigh on tourism revenues and on Islamic fi nance in the country, reported EGYPT: The Administrative Court in investment activity, Moody’s noted Kenya’s The Star. To be known as the Cairo has rescinded the Central Bank in its report titled ‘Government of Association for Islamic Finance in Kenya, of Egypt (CBE)’s decision to limit the Tunisia — ‘Ba3 Stable’, Annual Credit the proposed entity is expected to be tenure of CEOs of commercial banks to Analysis’. The rating agency added that operational “soon”, and will assist with nine years, Amwal Al Ghad reported. the implementation of the long-delayed the engineering of a legal and regulatory The measure was introduced in March structural reform agenda in the banking, framework for the Shariah fi nance by CBE’s governor, Tarek Amer, in a fi scal and business environment areas industry. bid to modernize the sector and “inject is key to lifting the country’s future

joining their new employer, UIF. The Devon Bank, is a managing member of AMERICAS jury found that the information used was Abraham’s River. a trade secret of Guidance Residential Guidance Residential wins and that the actions of all defendants court battle were “willful and malicious” in the US: Guidance Residential, a provider of misappropriation. Join the most active Islamic Shariah compliant home fi nancing, has finance focused group on won the court case against University US institution certiϐied Islamic Financial Corporation (UIF), Linked-In as well as parent company the Shariah compliant University Bank of Ann Arbor, over US: Abraham’s River, a fi nancial the misappropriation of trade secrets, institution based in Chicago, has received according to a statement. Guidance a Fatwa certifying its Shariah compliance Residential was awarded a judgment and is waiting to hear from the Chicago exceeding US$1 million by the Rabbinical Council on its documentary Washington Superior Court, after a jury review. The fi rm, established in trial found former Guidance Residential 2015, aims to expand the amount of employees, Mohamad Aijaz Hussain, religiously-compliant fi nancing and to Linkedin/ Anwer Mangrio and others to have used provide religiously acceptable income- proprietary information in soliciting oriented investment options. David ISLAMICFINANCENEWS applicants for mortgages shortly after Loundy, the CEO and chairman of

1980 and is seeking feedback from the Ramli. The new organizational structure ASIA public and stakeholders, according will be eff ective on the 1st July 2016. to the Associated Press of Pakistan. Allied Bank and IIUI sign MoU The amendments include making Amended Finance Bill tax PAKISTAN: The Islamic Banking Group the appointment of Shariah advisors of Allied Bank and the International mandatory, making the Shariah reduction Islamic University Islamabad (IIUI) have advisor’s report as part of the annual PAKISTAN: Among a host of changes signed an MoU to promote learning, audited accounts of the Modaraba, brought about by the amended Finance research and development awareness of the prohibition of the use of the word Bill 2016 is a 2% reduction of tax rates Islamic fi nance and banking throughout ‘Modaraba’ or any of its derivatives on income of a listed company that is the country, according to a press release. by any person other than a Modaraba recognized as being Shariah compliant company and the prohibition on deposit- by the State Bank of Pakistan, the NJHPC signs Sukuk agreement raising by a Modaraba. Securities and Exchange Commission PAKISTAN: The Neelum Jhelum of Pakistan and the board; derives Hydropower Company (NJHPC) has SBP releases Islamic banking income from manufacturing only; has entered into a fi nancing agreement with a declared its taxable income for the last consortium of banks led by the National data three consecutive tax years; and issued Bank of Pakistan (NBP) as the mandated PAKISTAN: Pakistani Islamic banking dividends for the last fi ve consecutive lead arranger for the issuance of a PKR100 assets stood at PKR1.63 trillion (US$15.44 tax years, according to the Business billion (US$947.02 million) Sukuk facility, billion) in the fi rst quarter of 2016, Recorder. according to the Business Recorder. The capturing a market share of 11.4%, 10-year Sukuk facility is based on the according to the latest data from the State Indonesian Islamic banks diminishing Musharakah structure, which Bank of Pakistan (SBP). Shariah compliant merger is structured by NBP Aitemaad, and deposits totaled PKR1.34 trillion (US$12.69 billion), a 12.9% market share. INDONESIA: The State-Owned backed by the sovereign guarantee from Enterprises (SOEs) Ministry is now the government of Pakistan. aiming for a merger of two Islamic state- Indonesia to set up OFC owned banks, BNI Syariah and BTN The NBP has a share of PKR35 billion INDONESIA: The Indonesian Syariah, the Jakarta Post reported. The (US$331.46 million) of the PKR100 billion government intends to establish an government had previously included transaction with the remaining PKR65 off shore fi nancial center (OFC) in the Bank Mandiri Syariah and BRI Syariah billion (US$615.57 million) provided by country allowing residents and non- in the merger plan. The SOEs Ministry’s Meezan Bank, United Bank, Habib Bank, residents to set up shell companies deputy for business service, Gatot Askari Bank, Bank Al Habib, BankIslami for off shore investments, according to Trihargo, was quoted as saying that the Pakistan, Dubai Islamic Bank, Faysal Finance Minister Bambang Brodjonegoro ministry aims to complete the Islamic Bank, Bank of Punjab, Bank of Khyber, as reported by the Jakarta Globe. banking consolidation by this year. Allied Bank, Al-Baraka Bank (Pakistan), Bambang, however, added that Soneri Bank, Pak-Brunei Investment the establishment of the tax haven Company and Pak-China Investment is dependent upon a tax amnesty Company. Proceeds from the ‘AAA’- program which seeks to repatriate EUROPE rated, privately-placed Sukuk will be IDR1 quadrillion (US$75 billion) of Turkey’s Islamic banking used to partially fi nance the construction funds owned by Indonesians in OFCs. of a strategically important 969 MW Discussions on the tax amnesty bill sector to grow by 2025 hydel power project located in the with the House of Representatives are TURKEY: According to a recent report districts of Muzaff arabad, Azad Jammu underway and expected to conclude this by S&P on Islamic banking developments and Kashmir. (See IFN Report page 7). week before the 2016 revised state budget in Turkey, the sector is expected to grow is passed. its share in the overall Turkish banking Faysal Bank expands branch sector from its current 5% (US$42.2 RHB undergoes corporate billion) to over 10% in 2025 despite an network expected slowdown of 11% between PAKISTAN: Faysal Bank has launched reorganization 2016 and 2019, as noted by Daily Sabah. eight Islamic banking branches all over MALAYSIA: RHB Banking Group, The annual volume of Sukuk issuances Pakistan in 2016 up until the fi rst week which has an Islamic banking increased by around 20 times from of Ramadan, with the latest launch being subsidiary, has carried out a corporate US$100 million in 2010 to close to US$2 th the 76 such branch to date, as reported reorganization exercise which will see billion by the end of 2015. Government by The News International. RHB Bank become the fi nancial holding support is considered to be a major company of the group in addition to the factor in this regard refl ected by the SECP seeks feedback on establishment of the Group Wholesale government’s decision to increase the rate Banking (GWB) strategic business sector, proposed Modaraba rules of assets and loans in the participation according to a press release. The business banking sector to 15% by the end of 2023. PAKISTAN: In order to promote Islamic pillars under the GWB will comprise S&P also reiterated that the entrance fi nancial services, the Securities and corporate banking, investment banking, of new Islamic banks in the sector, Exchange Commission of Pakistan client coverage, group treasury and such as Ziraat Participation and Vakif (SECP) has proposed amendments to the global markets, asset management and Participation, marks a turning point Modaraba Companies and Modaraba private equity to be led in the interim by for the development process of Islamic (Floatation and Control) Ordinance, Group Managing Director Khairussaleh banking in Turkey.

the global aircraft leasing industry, in According to The Peninsula, QFB was GLOBAL partnership with Dubai-based Novus exclusively involved in the Islamic Aviation Capital (NAC), through the ﬁ nancing part of the transaction whereas QFB invests in aviation indirect acquisition and lease of two 2011 NAC acted as the sole arranger for both industry vintage Boeing 737-900ER single-aisle the ﬁ nancing and leasing elements of the GLOBAL: Shariah compliant Qatar First aircraft to Indonesia’s Lion Air. deal. Bank (QFB) has made an investment in

of providing cash either through the and Dubai California Village under a MIDDLE EAST conventional or Islamic ﬁ nance route. specialized company known as GFH Real Waha Land secures Islamic Production from the facility is expected Estate. The company will have initial to start in early 2019. Alba had initially assets and capital worth US$40 million. ϐinancing package targeted US$3.5 billion, but this was cut The bank also said that it intends to UAE: Waha Land, a wholly-owned back due to lower oil and commodity launch the development of the remaining subsidiary of Waha Capital, has secured a prices. phases of the Harbor Row project ﬁ nancing package worth AED426 million before the end of year 2016 with the (US$115.96 million) from Emirates CBO approves share transfer development value at US$150 million. Islamic for the further development of its OMAN: During its second meeting of ALMARKAZ light industrial real estate the year held on the 20th June, the Central MSM updates Shariah index project, according to a press release. Bank of Oman (CBO) has approved OMAN: Muscat Securities Market

th the application of Alizz Islamic Bank (MSM) has announced new constituents Ithmaar Bank opens 18 to transfer its shares in Tasameem Real of the MSM Shariah Index based on fi rst branch Estates to the United International quarter fi nancials of 2016, according to BAHRAIN: Ithmaar Bank in a press Representation of Companies, according a statement. The new sample, which release has announced the opening to a statement. passed AAOIFI’s rules for compliance of a new full-service branch in the with Islamic investment principles, will Galali neighborhood of Muharraq. Islamic banks to ϐinance be eff ective from the 28th June 2016. The bank now has 18 branches and 48 renewable energy projects ATMs, which gives it the widest branch JORDAN: The Jordan Renewable Energy SEO welcomes rating agencies network of any Islamic bank in the and Energy Effi ciency Fund (JREEEF) IRAN: The Securities and Exchange country and the third-largest of any has entered into agreements with local Organization of Iran (SEO) has given bank in Bahrain. banks — Islamic International Arab the go-ahead for the creation of rating Bank, Bank Etihad, Jordan Ahli Bank, agencies in the Iranian capital market QIB partners with Jaidah Jordan Islamic Bank, Cairo Amman Bank as a fi rst step to acquiring the trust of Equipment and Capital Bank — and the Jordan Loan foreign investors in a bid to increase market transparency, said the SEO’s QATAR: Qatar Islamic Bank (QIB) has Guarantee Corporation (JLGC) for the chairman, Dr Mohammad Fetanat, in entered into a strategic partnership fi nancing of renewable energy projects, conjunction with the commencement with Jaidah Equipment which will see according to the Jordan News Agency, of the 9th fi nancial institution under the the Islamic bank off er its ‘Fleet and Petra. The agreements aim to speed up supervision of the SEO, as reported by Heavy Equipment Financing’ package the implementation of JREEEF-supported the Financial Tribune. to customers of Jaidah Equipment, projects by providing the necessary according to a press release. The funds to individuals and SMEs, mostly in fi nancing package is part of QIB’s industrial and tourism sectors. CBI to issue new reporting Aamaly program, a collection of products standards and services designed specifi cally for The funding, which is 70% guaranteed IRAN: The head of the Monetary and SMEs. by the JLGC, is off ered without interest Banking Research Institute of the Central or commission and the only requirement Bank of Iran (CBI), Ali Divandari, Alba seeks ϐinancing for for borrowers is to repay the actual value announced that new fi nancial reporting of the fi nancing within a maximum of project standards for banks will be released six years for companies or 18 months for soon, and banks in Iran are obliged to BAHRAIN: Aluminium Bahrain (Alba) solar heater fi nancing, Rasmi Hamzeh, an abide by them, according to IRNA. These is considering Sukuk or an international executive director at JREEEF, was quoted procedures are modeled in line with bond issuance along with loans from as saying. the International Financial Reporting banks and export credit agencies to Standards in an eff ort to standardize raise US$3 billion to fi nance its Line 6 GFH to set up GFH Real Estate Iranian banking reporting procedures expansion project, reported Reuters. BAHRAIN: GFH Financial Group and make them comparable with Quoting unnamed sources, the newswire confi rmed in a statement that it will be global reporting standards. This is also said that Alba has approached banks for undertaking the development of its real expected to improve the transparency a US$750 million seven-year loan for the estate portfolio in Bahrain and Dubai of transactions including a clearer project, to be priced within the range of with value exceeding US$300 million disclosure of bank CEOs’ and board 300-350bps over LIBOR, with the option including Harbor Row, Harbor North members’ salaries and benefi ts.

CMA to open debt market to qualifi ed foreign fi nancial institutions The new rules are, however, subject to are allowed to invest in the debt market, investment and legislative limitations foreign investors with the minimum limit for the assets in addition to the limitations set forth in SAUDI ARABIA: The Capital Market under management decreased to the articles of association or bylaws of Authority (CMA) has announced in SAR3.75 billion (US$999.49 million) from the listed companies or any instructions a statement new amendments to the SAR18.75 billion (US$5 billion). The CMA issued by the supervisory or regulatory Rules for Qualifi ed Foreign Financial has also increased the types of fi nancial authorities to which these companies are Institutions Investment in a bid to open institutions to include government funds subject. up its capital market to foreign investors. and university endowments and other According to the suggested amendments, CMA-approved entities.

UBL Funds rolls out new ASSET Islamic fund TAKAFUL PAKISTAN: UBL Fund Managers (UBL Amana Takaful Life MANAGEMENT Funds) has launched the Al-Ameen announces IPO Islamic Active Allocation Plan-V under NBAD Sukuk Income Fund SRI LANKA: Amana Takaful Life, a fully- its Al-Ameen Islamic Financial Planning owned subsidiary of Amana Takaful, has distributes dividend Fund, according to a statement. The received in-principle approval from the UAE: The National Bank of Abu Dhabi latest plan actively allocates investments Colombo Stock Exchange to fl oat an IPO (NBAD)’s NBAD Sukuk Income Fund between Islamic equity and Islamic by way of an off er for sale. The Takaful has distributed a semi-annual dividend income/money market classes, and has operator will off er 50 million ordinary of 2.57% of the fund’s net asset value a term of two years. Yasir Qadri, CEO of voting shares at a price of LKR1.5 (one as at the 9th June, according to a press UBL Funds, commented that the Al- US cent) per share, which represents a release. The fund had earned a dividend Ameen Islamic Active Allocation Plan 10% stake in the company, on the 21st income equivalent to US$716,081.76 series has been well received by investors July, according to a bourse fi ling. Amana which equates to an annualized yield and has a combined initial size of PKR7.6 Takaful will become the fi rst segregated of 5.2% during the period between the billion (US$71.14 million) for the fi rst life insurer in the country to do so 19th November 2015 to the 9th June 2016, four Al-Ameen Islamic Active Allocation following the mandatory segregation of and each unit in the fund will receive a Plans. dividend payout of 12.61 US cents. life and general insurance companies from the 1st February 2015.

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consolidation of the crowded UAE improve the bank’s liquidity after a RATINGS market, which currently has 49 lenders period of decline, according to Moody’s (23 of which are local) serving a in a statement. The rights issue increases BSF ratings afϐirmed at ‘A+’ population of fewer than 10 million. the bank’s share capital to AED4.9 billion SAUDI ARABIA: Capital Intelligence RAM is currently in the process of (US$1.33 billion) from AED3.9 billion has affi rmed Banque Saudi Fransi (BSF)’s conducting the annual rating review on (US$1.06 billion) and boosts DIB’s cash fi nancial strength rating at ‘A+’, its long- the NBAD which it expects to complete liquidity by AED2.2 billion (US$598.8 term foreign currency rating (FCR) at ‘A+’ within the next one to two months. million) based on share premium. and the short-term FCR at ‘A1’, according The NBAD’s senior notes currently to a press release. The strong ratings carry an ‘AAA/Stable’ rating while its UK’s outlook revised to are att ributed to the bank’s strong and subordinated notes are rated ‘AA1/ improving asset quality, resilience in its Stable’. Both represent part of the bank’s negative liquidity profi le, continued improvement RM3 billion (US$742.86 million) Islamic/ UK: Moody’s announced in a statement in operating profi tability, sound capital conventional medium-term note program that it has changed the outlook on the profi le and the ongoing support from (2010/2030). UK’s affi rmed ‘Aa1’ long-term issuer the bank’s principal shareholder. The and debt ratings to negative from stable, support rating remains at ‘2’. Despite the following the country’s vote in favor of deteriorating operating environment, all IDB’s outlook remains stable exiting the European Union which will ratings continue to carry a stable outlook GLOBAL: Fitch has affi rmed the IDB’s herald a prolonged period of uncertainty because of the bank’s overall fi nancial ‘AAA’ long-term issuer default rating for the country. condition. (IDR) with a stable outlook, while the short-term IDR has been affi rmed Concurrently, the outlook on the Bank at ‘F1+’, according to a statement. United Gulf Bank’s ratings of England’s ‘Aa1’ rating has also been Concurrently, the rating agency has also changed to negative from stable with revised affi rmed the trust certifi cates issued by the ‘Aa1/P-1’ ratings affi rmed. The BAHRAIN: Capital Intelligence has the IDB Trust Services at ‘AAA’, with UK’s long-term and short-term foreign affi rmed in a press release the fi nancial the benefi t of a guarantee provided by and local currency bond and deposit strength rating of United Gulf Bank the IDB. The ratings refl ect the IDB’s ceilings, however, remain unchanged at (UGB), which off ers Islamic investment strong capitalization whereas its liquidity ‘Aaa/P-1’. banking services, at ‘BBB’. The long and low concentration risk compare and short-term foreign currency ratings favorably with other regional multilateral (FCRs) have been rated ‘BBB’ and ‘A3’ development banks, Fitch noted. AEON Credit’s Islamic paper respectively. reafϐirmed SCC’s outstanding Sukuk MALAYSIA: AEON Credit Service’s Factors contributing to these ratings Islamic commercial paper program include the bank’s strong ownership reafϐirmed of up to RM1 billion (US$244 million) combined with the demonstrated MALAYSIA: RAM has reaffi rmed has been reaffi rmed at ‘P1’ by RAM, fi nancial and liquidity support from the ‘AA1/Stable/P1’ ratings on Sabah which att ributed the rating to the high its parent, Kuwait Projects Company Credit Corporation (SCC)’s outstanding likelihood of parental support from Holding. UGB’s support rating is Sukuk instruments, according to a AEON Financial Service Co. affi rmed at ‘3’. The fall in oil prices and statement. SCC is wholly owned by challenging equity conditions in Kuwait the state government of Sabah, and Adira Dinamika’s Sukuk rated will continue to impact UGB’s already operates under the purview of the Sabah suppressed and very weak profi tability State Ministry of Finance. The ratings ‘idAAA(sy)’ ratios. Therefore, the outlook for all refl ect the rating agency’s expectation INDONESIA: Pefi ndo has affi rmed the the ratings is revised from stable to of continued support from the state ‘idAAA(sy)’ rating on Adira Dinamika negative. government. Multi Finance’s IDR500 billion (US$37.05 million) Phase I (Series A and B) Sukuk According to RAM, this is clearly Mudarabah, according to a statement. RAM assesses NBAD-FGB demonstrated through the subordination merger rating impact of SCC’s loans from the state government CI afϐirms Saudi Arabia’s UAE: RAM in a statement said that the to its debt securities, the conversion proposed merger between the National of such loans into share capital, the ratings Bank of Abu Dhabi (NBAD) and First reinvestment of dividends and the SAUDI ARABIA: In a press release, Gulf Bank (FGB) will not have any extension of lett ers of support for SCC’s Capital Intelligence (CI) has affi rmed immediate impact on the NBAD’s ‘AAA/ debt securities. Saudi Arabia’s long-term foreign and Stable/P1’ fi nancial institution ratings local currency ratings at ‘AA-’ and its and debt ratings. The rating agency DIB’s rights issue credit short-term foreign and local currency also said that should the proposed ratings at ‘A1+’. The negative outlook merger materialize, the enlarged entity positive on these ratings refl ects the ongoing is expected to remain majority-owned UAE: The AED3.2 billion (US$871 weakness in the Kingdom’s public by the government of Abu Dhabi or its million) rights issue by Dubai Islamic fi nances, as well as CI’s expectation that related parties. Bank (DIB) is credit positive as it the drawdown of external assets under replenishes reserves and enhances loss- the management of the Saudi Arabian According to RAM, this development absorption buff ers of DIB after a period Monetary Agency is likely to persist. is anticipated to encourage the further of high growth during 2012-15 and will

MOVES Bank Nizwa OMAN: Bank Nizwa has announced in a bourse ﬁ ling that the employment contract of its CEO, Dr Jamil El Jaroudi, will end by the 2nd July 2016 and the Islamic bank’s general manager of ﬁ nance, Khalid Al Kayed, has been appointed as acting CEO until further notice.

RHB Banking Group GLOBAL: RHB Banking Group, which also operates RHB Islamic Bank, has announced in a statement several key leadership appointments as it gears itself toward building on the potential of Singapore as a key market. Incumbent managing director and CEO of RHB Investment Bank of Malaysia (RHBIB) Mike Chan will be appointed as CEO of RHB Bank Singapore, while Robert Huray, who is currently the CEO of RHB Securities Singapore, will take the helm at RHBIB as CEO. The head of Asia debt capital markets for RHB Securities Singapore, Kenneth Yeoh Wei Ming, will be taking over from Huray as CEO #IFNPakistan16 of RHB Securities Singapore. The current country head of RHB Bank Singapore, Jason Wong, has decided to pursue other IFN Pakistan Forum opportunities. 26th September 2016 Learning Resource Centre, Government of Maldives The State Bank of Pakistan, Karachi MALDIVES: Ahmed Munawwar has been appointed as the minister The Islamic banking industry in Pakistan has progressed considerably since its introduction to the South Asian of fi nance and treasury of Maldives nation, with its share reaching almost 12% of the overall banking industry in terms of its asset size. The branch following a raft of changes to the cabinet network of Islamic banking is continuously expanding throughout the country at a rapid pace, and the strong made by President Abdulla Yameen demand for Shariah compliant banking products is reflective of the State Bank of Pakistan(SBP)’s goal of having a Abdul Gayoom recently, according to 20% market share by 2020. a statement. Ahmed takes over from Abdulla Jihad who has been sworn in as The SBP and the Securities and Exchange Commission of Pakistan have played key roles in driving the growth of the vice-president of the Maldives. Islamic finance in the country by creating a facilitative environment. As a result, both the regulators’ initiatives over the years have led to the stability and resilience of the Islamic finance industry, making it a worthy consideration to Government of Malaysia the conventional finance and banking activities among investors and banking consumers. MALAYSIA: Prime Minister Najib With its population slowly but surely becoming aware of the competitive depth of Islamic finance, Pakistan remains Razak has reshuffl ed his cabinet with a vital market in the eyes of investors in the growing industry. the announcement of new ministers and deputy ministers: Deputy Finance Minister II Johari Abdul Ghani is now REGISTER FREE NOW Finance Minister II with Othman Aziz www.REDmoneyevents.com and Lee Chee Leong as the new deputy fi nance ministers.

National Bank of Fujairah EXCLUSIVE LEAD PARTNER ACCREDITATION PARTNER UAE: The National Bank of Fujairah (NBF), which oﬀ ers Shariah compliant services, has appointed Ahmed Saeed Al Raqbani to the board of directors LEAD MEDIA PARTNER MEDIA PARTNER during its general assembly meeting, thereby increasing the number of the bank’s board members from eight to nine, according to a statement. W: www.redmoneyevents.com | E: [email protected] | T: 603 2162 7800 ext. 43 | Twitter : #IFNPakistan16

Expected date Company's name Size Structure Announcement Date July 2016 Sarawak Hidro RM5.5 billion Sukuk 28th June 2016 TBA Iranian Mines and Mining IRR4 trillion Sukuk Musharakah 24th June 2016 Industries Development and Renovation Organization TBA Bank Sulsebar IDR50 billion Sukuk Mudarabah 20th June 2016 TBA Government of Oman US$2.5 billion Sukuk 20th June 2016 Second quarter of 2016 Bank Albilad up to SAR2 billion Sukuk 20th June 2016 TBA Tiga Pilar Sejahtera Food IDR1.5 trillion Sukuk 17th June 2016 TBA Islamic Development Bank RM400 million Sukuk 17th June 2016 Jul-16 Public Sector Home Financing RM25 billion Sukuk/Bonds 13th June 2016 Board TBA Almarai Company TBA Sukuk 10th June 2016 By the end of 2017 Ministry of Housing Saudi TBA Sukuk 9th June 2016 Arabia TBA Mahan Air IRR5 trillion Sukuk Ijarah 8th June 2016 TBA Government of Pakistan PKR79.1 billion Sukuk 7th June 2016 TBA The Philippines TBA Sukuk 6th June 2016 Jun-16 Pengurusan Air SPV RM1.4 billion Sukuk 3rd June 2016 TBA Ekovest RM3.64 billion Sukuk Wakalah 2nd June 2016 TBA GFH Financial Group US$150 million Sukuk 2nd June 2016 July 2016 MB Holding Co US$150 million Sukuk 31st May 2016 TBA Government of Sri Lanka US$1 billion Sukuk 27th May 2016 TBA Saudi Aramco TBA Sukuk 26th May 2016 TBA Al-Tajamaout for Touristic JOD45 million Sukuk Ijarah 24th May 2016 Projects Third quarter of 2016 Government of Nigeria TBA Sukuk 23rd May 2016 TBA Societe Generale RM1 billion Sukuk 23rd May 2016 TBA Bank Muamalat Malaysia RM1 billion Sukuk Murabahah 23rd May 2016 TBA Bank Rakyat Malaysia RM5 billion Sukuk Murabahah 20th May 2016 TBA Government of Germany TBA Sukuk 18th May 2016 TBA Aktif Bank TRY100 million Sukuk 9th May 2016 By 2017 Republic of Maldives TBA Sukuk 29th April 2016 Third quarter of 2016 Saudia up to SAR5 billion Sukuk 26th April 2016 By 2017 BRI Syariah TBA Sukuk 21st April 2016 TBA PRAN Foods BDT1 billion Sukuk 11th April 2016 TBA Government of Kuwait KWD2 billion Sukuk 5th April 2016 Fourth quarter of 2016 Bank Syariah Mandiri IDR1 trillion Sukuk 5th April 2016 TBA Qatar International Islamic Bank QAR1 billion Sukuk 31st March 2016 2016-17 Sarana Multigriya Finansial IDR200 billion Sukuk 4th March 2016 TBA Kuveyt Turk TRY1.85 billion Sukuk 1st March 2016 TBA Ziraat Bank (Participation Unit) TRY1.5 billion Sukuk 1st March 2016 TBA Hong Kong TBA Sukuk 1st March 2016 TBA Cahya Mata Sarawak RM1 billion Sukuk Ijarah 22nd February 2016 TBA Saudi Electricity Company US$2.5 billion Sukuk 16th February 2016 2016 Kuwait Finance House TBA Sukuk 1st February 2016 TBA Oman Telecommunications US$130 million Sukuk 28th January 2016 March-April 2016 Government of Qatar TBA Sukuk 26th January 2016 2017 Government of Kenya TBA Sukuk 26th January 2016 TBA Tenaga Nasional US$3 billion Sukuk 8th January 2016 TBA Toprak Mahsulleri Oﬁ si up to TRY600 million Sukuk 7th January 2016

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 2500 1200

2090 1100

1680 1000

1270 900

860 800

450 700 Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun

REDmoney GCC 6 Months REDmoney Global 6 Months

All Cap Large Cap Medium Cap Small Cap All Cap Large Cap Medium Cap Small Cap 1300 2200

1130 1896

960 1592

790 1288

620 984

450 680 Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun

REDmoney MENA 6 Months REDmoney US 6 Months

All Cap Large Cap Medium Cap Small Cap All Cap Large Cap Medium Cap Small Cap 1150 2250

1000 1960

850 1670

700 1380

550 1090

400 800 Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun

SAMI Halal Food Participation (All Cap) 6 months

2250

2110

1970

1830

1690

1550 Jan-2016 Feb-2016 Mar-2016 Apr-2016 May-2016 Jun-2016

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 1400 1250

1210 1080

1020 910

830 740

640 570

450 400 Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun

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 2250 2450

1900 2060

1550 1670

1200 1280

850 890

500 500 Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun

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

Eurekahedge North America Islamic Fund Index

170 160 150 140 130 120 110 100

Index Values 90 80 70 60 50 Jul-09 Jun-05 Oct-06 Feb-04 Sep-02 Dec-14 Dec-99 Apr-12 Aug-13 Mar-08 Nov-10 May-16 May-01

Top 10 Yield-to-Date Returns for ALL Islamic Funds Fund Fund Manager Performance Measure Fund Domicile 1 Deutsche Noor Precious Metals Securities - Class A DWS Noor Islamic Funds 58.90 Ireland 2 AmPrecious Metals AmInvestment Management 42.38 Malaysia 3 NewFunds Shariah Top 40 Index ETF NewFunds 14.91 South Africa 4 Al Meezan Mutual Al Meezan Investment Management 10.72 Pakistan 5 Meezan Islamic Al Meezan Investment Management 10.58 Pakistan 6 Wafa Gestion Cap Al Moucharaka Att ijariWafa Bank 10.36 Morocco 7 Atlas Islamic Stock Atlas Asset Management 8.85 Pakistan 8 Atlas Pension Islamic - Equity Sub Atlas Asset Management 8.50 Pakistan 9 Meezan Tahaff uz Pension - Equity Sub Al Meezan Investment Management 7.90 Pakistan 10 Pak Oman Islamic Asset Allocation Pak Oman Asset Management 7.72 Pakistan Eurekahedge Islamic Fund Index (0.31) Based on 70.05% of funds which have reported May 2016 returns as at the 24th June 2016 Top 10 Sharpe Ratio for ALL Islamic Funds Fund Fund Manager Performance Measure Fund Domicile 1 Public Islamic Money Market Public Mutual 20.13 Malaysia 2 PB Islamic Cash Management Public Mutual 17.60 Malaysia 3 Boubyan KWD Money Market Boubyan Bank 17.29 Cayman Islands 4 PB Islamic Cash Plus Public Mutual 12.05 Malaysia 5 Boubyan USD Liquidity Boubyan Capital Investment Company 11.32 Kuwait 6 Meezan Tahaff uz Pension - Money Market Sub Al Meezan Investment Management 9.94 Pakistan 7 Meezan Tahaff uz Pension - Debt Sub Al Meezan Investment Management 6.42 Pakistan 8 Al Rajhi Commodity Mudarabah - USD Al Rajhi Bank 6.38 Saudi Arabia 9 Atlas Pension Islamic - Debt Sub Atlas Asset Management 6.37 Pakistan 10 FALCOM SAR Murabaha FALCOM Financial Services 5.80 Saudi Arabia Eurekahedge Islamic Fund Index 0.10 Based on 70.05% of funds which have reported May 2016 returns as at the 24th June 2016

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 Fixed Income Index over the last 1 year 130 109 125 120 107 115 105

110 103 105 101 Percentage 100 Percentage 99 95 90 97 85 95 Jul-15 Jul-15 Jan-13 Jun-13 Jan-16 Oct-11 Jun-15 Feb-15 Sep-14 Dec-15 Oct-15 Feb-16 Sep-15 Dec-15 Apr-14 Aug-12 Apr-16 Mar-12 Nov-13 Aug-15 May-16 May-11 Mar-16 Nov-15 May-15 May-16 Top 10 Islamic Fund Fixed Income by 3 Months Returns Fund Fund Manager Performance Measure Fund Domicile 1 MNC Dana Syariah MNC Asset Management 3.50 Indonesia 2 NBAD Sukuk Income NBAD Asset Management Group 2.14 UAE 3 Public Islamic Bond Public Mutual 1.54 Malaysia 4 PB Islamic Bond Public Mutual 1.47 Malaysia 5 Meezan Tahaff uz Pension - Debt Sub Al Meezan Investment Management 1.45 Pakistan 6 Public Islamic Enhanced Bond Public Mutual 1.45 Malaysia 7 Atlas Pension Islamic - Debt Sub Atlas Asset Management 1.29 Pakistan 8 Meezan Islamic Income Al Meezan Investment Management 1.26 Pakistan 9 Manulife Investment As-Saad MAAKL Mutual 1.25 Malaysia 10 Eastspring Investments Dana Wafi Eastspring Investments 1.20 Malaysia Eurekahedge Islamic Fund Index 0.67 Based on 68.97% of funds which have reported May 2016 returns as at the 24th June 2016 Top 10 Sortino Ratio for ALL Islamic Funds Fund Fund Manager Performance Measure Fund Domicile 1 CIMB Islamic Money Market CIMB-Principal Asset Management 59.75 Malaysia 2 Atlas Pension Islamic - Debt Sub Atlas Asset Management 25.55 Pakistan 3 Meezan Tahaff uz Pension - Debt Sub Al Meezan Investment Management 24.79 Pakistan 4 MNC Dana Syariah MNC Asset Management 17.31 Indonesia 5 Public Islamic Income Public Mutual 11.53 Malaysia 6 Public Islamic Select Bond Public Mutual 6.17 Malaysia 7 PB Islamic Bond Public Mutual 5.67 Malaysia 8 Public Islamic Bond Public Mutual 5.67 Malaysia 9 Oasis Crescent Balanced Stable Fund of Funds Oasis Crescent Management Company 4.26 South Africa 10 Atlas Pension Islamic - Money Market Sub Atlas Asset Management 3.30 Pakistan Eurekahedge Islamic Fund Index 0.13 Taking into account funds that have at least 12 months of returns as at the 24th June 2016 Based on 70.05% of funds which have reported May 2016 returns as at 24th June 2016

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 2016, 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.

Most Recent Global Sukuk Priced Issuer Nationality Instrument Market US$ (mln) Managers 2nd Jun 2016 Hazine Mustesarligi Turkey Sukuk Euro market 1,000 Standard Chartered Bank, HSBC, Emirates Varlik Kiralama public issue NBD Anonim Sirketi 2nd Jun 2016 Pengurusan Air SPV Malaysia Sukuk Domestic market 350 CIMB Group, AmInvestment Bank public issue 31st May 2016 Al Hilal Bank UAE Sukuk Euro market 225 National Bank of Abu Dhabi private placement 30th May 2016 GovCo Holdings Malaysia Sukuk Domestic market 306 HSBC, RHB Capital, CIMB Group public issue 24th May 2016 Noor Bank UAE Sukuk Euro market 500 Standard Chartered Bank, First Gulf Bank, public issue Dubai Islamic Bank, Sharjah Islamic Bank, Citigroup, Emirates NBD, Noor Bank 24th May 2016 DP World UAE Sukuk Euro market 1,200 JPMorgan, Deutsche Bank, HSBC, National public issue Bank of Abu Dhabi, First Gulf Bank, Barclays, Dubai Islamic Bank, SG Corporate & Investment Banking, Citigroup, Emirates NBD 23rd May 2016 EI Sukuk UAE Sukuk Euro market 750 Standard Chartered Bank, HSBC, Arab public issue Banking Corporation, Maybank, Dubai Islamic Bank, Emirates NBD, Al Hilal Bank, Noor Bank 17th May 2016 Cagamas Malaysia Sukuk Domestic market 104 CIMB Group public issue 11th May 2016 Ezdan Holding Qatar Sukuk Euro market 500 Mashreqbank, HSBC, Abu Dhabi Islamic Group public issue Bank, Emirates NBD, Barwa Bank 11th May 2016 UEM Sunrise Malaysia Sukuk Domestic market 123 Maybank, CIMB Group public issue 10th May 2016 Boubyan Bank Kuwait Sukuk Euro market 250 Standard Chartered Bank, HSBC, Kuwait public issue Finance House, National Bank of Kuwait, Dubai Islamic Bank, Emirates NBD 28th Apr 2016 Perdana Petroleum Malaysia Sukuk Domestic market 162 UOB public issue 26th Apr 2016 Barwa Bank Qatar Sukuk Euro market 125 National Bank of Abu Dhabi private placement 25th Apr 2016 MEX II Malaysia Sukuk Domestic market 333 CIMB Group public issue 21st Apr 2016 DanaInfra Nasional Malaysia Sukuk Domestic market 1,164 RHB Capital, Maybank, CIMB public issue Group, Hong Leong Financial Group, AmInvestment Bank 20th Apr 2016 Malaysia Sukuk Malaysia Sukuk Euro market 1,500 JPMorgan, HSBC, Maybank, CIMB Group Global public issue 18th Apr 2016 Kuala Lumpur Malaysia Sukuk Domestic market 128 Maybank, CIMB Group Kepong public issue 15th Apr 2016 Sarawak Energy Malaysia Sukuk Domestic market 387 RHB Capital, AmInvestment Bank public issue 6th Apr 2016 Hilal Services Saudi Sukuk Euro market 300 Mizuho, Standard Chartered Bank, HSBC, Arabia public issue Arab Banking, National Bank of Kuwait, First Gulf Bank, Dubai Islamic Bank, SG Corporate & Investment Banking, CIMB Group, Emirates NBD, Warba Bank, Noor Bank 4th Apr 2016 Putrajaya Holdings Malaysia Sukuk Domestic market 137 Maybank, CIMB Group, AmInvestment public issue Bank

Global Sukuk Volume by Month Global Sukuk Volume by Quarter

US$bn US$m US$bn Value (US$bn) Avg Size (US$m) US$m 8 1500 18 600 Value (US$bn) 7 16 Avg Size (US$m) 1250 500 6 14 12 5 1000 400 10 300 4 750 8 3 500 6 200 2 4 100 1 250 2 0 0 0 0 162 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q2Q 3Q 4Q 1Q2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2015 2016 2011 2012 2013 2014 2015 2016

Top 30 Issuers of Global Sukuk 12 Months Issuer Nationality Instrument Market US$ Iss Managers (mln) (%) 1 Perusahaan Penerbit Indonesia Sukuk Euro market 2,500 7.6 Standard Chartered Bank, Deutsche Bank, Dubai Islamic Bank, SBSN Indonesia III public issue CIMB Group, Citigroup 2 Jimah East Power Malaysia Sukuk Domestic market 2,100 6.4 HSBC, Maybank, CIMB Group public issue 3 DanaInfra Nasional Malaysia Sukuk Domestic market 1,891 5.7 HSBC, RHB Capital, Maybank, CIMB Group, AmInvestment public issue Bank, Hong Leong Financial Group 4 IDB Trust Services Saudi Sukuk Euro market 1,836 5.6 Natixis, Standard Chartered Bank, JPMorgan, National Bank of Arabia public issue Kuwait, Gulf International Bank, Natixis, CIMB Group, Emirates NBD 5 Malaysia Sukuk Malaysia Sukuk Euro market 1,500 4.6 JPMorgan, HSBC, Maybank, CIMB Group Global public issue 6 DP World UAE Sukuk Euro market 1,200 3.6 JPMorgan, Deutsche Bank, HSBC, National Bank of Abu Dhabi, public issue First Gulf Bank, Barclays, Dubai Islamic Bank, SG Corporate & Investment Banking, Citigroup, Emirates NBD 7 Prasarana Malaysia Malaysia Sukuk Domestic market 1,192 3.6 RHB Capital, Maybank, Kenanga Investment Bank, CIMB public issue Group, AmInvestment Bank 8 Pengurusan Air SPV Malaysia Sukuk Domestic market 1,111 3.4 Maybank, Bank Islam Malaysia, CIMB Group, RHB Capital, public issue AmInvestment Bank 9 Danga Capital Malaysia Sukuk Domestic market 1,110 3.4 RHB Capital, AmInvestment Bank, Standard Chartered Bank, public issue DBS, CIMB Group 10 Hazine Mustesarligi Turkey Sukuk Euro market 1,000 3.0 Standard Chartered Bank, HSBC, Emirates NBD, HSBC Varlik Kiralama public issue Anonim Sirketi 10 Axiata SPV2 Malaysia Sukuk Euro market 1,000 3.0 Deutsche Bank, CIMB Group, HSBC, Maybank, Bank Mandiri public issue (Persero) 12 Sarawak Energy Malaysia Sukuk Domestic market 774 2.4 RHB Capital, Kenanga Investment Bank, AmInvestment Bank public issue 13 Qatar Islamic Bank Qatar Sukuk Euro market 750 2.3 Standard Chartered Bank, HSBC, Citigroup, QInvest, Barwa public issue Bank, Noor Bank 13 EI Sukuk UAE Sukuk Euro market 750 2.3 Standard Chartered Bank, HSBC, Arab Banking, Maybank, public issue Dubai Islamic Bank, Emirates NBD, Al Hilal Bank, Noor Bank 15 Sultanate of Oman Oman Sukuk Euro market 649 2.0 Bank Muscat public issue 16 Rantau Abang Malaysia Sukuk Domestic market 595 1.8 CIMB Group, AmInvestment Bank, RHB Capital Capital public issue 17 Sime Darby Malaysia Sukuk Domestic market 535 1.6 Maybank public issue 18 Arab National Bank Saudi Sukuk Domestic market 533 1.6 JPMorgan, Deutsche Bank, HSBC, Arab National Bank Arabia public issue 19 Noor Bank UAE Sukuk Euro market 500 1.5 Standard Chartered Bank, First Gulf Bank, Dubai Islamic Bank, public issue Sharjah Islamic Bank, Citigroup, Emirates NBD, Noor Bank 19 Emirate of Sharjah UAE Sukuk Euro market 500 1.5 Bank of Sharjah, HSBC, Barclays, Dubai Islamic Bank, Sharjah public issue Islamic Bank, Commerzbank Group 19 Dubai Islamic Bank UAE Sukuk Euro market 500 1.5 Standard Chartered Bank, HSBC, Arab Banking Corporation, public issue National Bank of Abu Dhabi, Dubai Islamic Bank, Sharjah Islamic Bank, Emirates NBD 19 Arab Petroleum Saudi Sukuk Euro market 500 1.5 Saudi National Commercial Bank, Standard Chartered Bank, Investments Arabia public issue Goldman Sachs, First Gulf Bank, Emirates NBD, Noor Bank 23 Hilal Services Saudi Sukuk Euro market 500 1.5 Standard Chartered Bank, Mizuho, HSBC, Arab Banking Arabia private placement Corporation, National Bank of Kuwait, First Gulf Bank, Dubai Islamic Bank, SG Corporate & Investment Banking, CIMB Group, Emirates NBD, Warba Bank, Noor Bank 24 Majid Al Futt aim UAE Sukuk Euro market 499 1.5 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, Properties public issue Dubai Islamic Bank, Abu Dhabi Islamic Bank 25 Ezdan Holding Qatar Sukuk Euro market 497 1.5 Mashreqbank, HSBC, Abu Dhabi Islamic Bank, Emirates NBD, Group public issue Barwa Bank 26 Cagamas Malaysia Sukuk Domestic market 439 1.3 CIMB Group, Maybank public issue 27 Almarai Saudi Sukuk Domestic market 427 1.3 HSBC, Samba Capital Arabia public issue 28 Kuala Lumpur Malaysia Sukuk Domestic market 417 1.3 Maybank, CIMB Group Kepong public issue 29 Barwa Bank Qatar Sukuk Euro market 375 1.1 National Bank of Abu Dhabi private placement 30 Putrajaya Holdings Malaysia Sukuk Domestic market 374 1.1 Maybank, CIMB Group, AmInvestment Bank public issue Total 32,954 100

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

Manager US$ (mln) Iss % US dollar 16.8 1 CIMB Group 5,099 36 15.5 Malaysian ringgit 13.9 2 Maybank 4,243 29 12.9 3 RHB Capital 3,137 29 9.5 Saudi riyal 1.0 4 HSBC 2,995 21 9.1 Omani rial 0.6 5 Standard Chartered Bank 2,678 19 8.1 6 AmInvestment Bank 1,943 19 5.9 Sukuk Volume by Issuer Nation US$ (billion) 12 Months 7 Emirates NBD 1,440 14 4.4 8 Dubai Islamic Bank 1,195 12 3.6 Malaysia 17.3 9 Deutsche Bank 1,170 5 3.6 UAE 4.3 10 National Bank of Abu Dhabi 956 8 2.9 Saudi Arabia 4.2 11 JPMorgan 843 4 2.6 Indonesia 2.5 Qatar 1.6 12 Citigroup 816 4 2.5 Turkey 1.3 13 Bank Muscat 649 1 2.0 Kuwait 0.8 14 Natixis 551 2 1.7 15 Noor Bank 468 7 1.4 16 Kenanga Investment Bank 390 9 1.2 Global Sukuk Volume by Sector 12 Months 17 Hong Leong Financial Group 312 2 1.0

18 National Bank of Kuwait 311 3 0.9 17% Finance 19 First Gulf Bank 300 4 0.9 Government 6% 40% 20 Barwa Bank 260 3 0.8 Transportation 21 DBS 253 2 0.8 8% Construction/Building Utility & Energy 22 Abu Dhabi Islamic Bank 243 3 0.7 9% Other 23 Sharjah Islamic Bank 226 3 0.7 20% 24 Gulf International Bank 214 1 0.7 25 Samba Capital 213 1 0.7 26 QInvest 204 3 0.6 Global Sukuk Volume - US$ Analysis 27 Barclays 203 2 0.6 US$bn US$m 28 Arab Banking Corporation 180 3 0.6 18 600 16 Non-US$ US$ 29 SG Corporate & Investment Banking 145 2 0.4 500 14 30 UOB 139 1 0.4 12 400 10 300 Total 32,954 114 100 8 6 200 4 100 Top Islamic Finance Related Project Finance Mandated Lead 2 Arrangers 12 Months 0 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q2Q 3Q 4Q 1Q2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q Mandated Lead Arranger US$ (million) No % 2011 2012 2013 2014 2015 2016 1 China Development Bank 821 2 11.9 2 National Commercial Bank 483 3 7.0 3 Banque Saudi Fransi 446 3 6.4 Top Islamic Finance Related Project Financing Legal Advisors Ranking 12 Months 4 Samba Capital & Investment 442 3 6.4 Management Legal Advisor US$ (million) No % 5 HSBC 365 2 5.3 1 Allen & Overy 1,532 1 16.7 6 Aga Khan Fund for Economic 354 2 5.1 1 Latham & Watkins 1,532 1 16.7 Development 3 Adnan Sundra & Low 1,361 1 14.8 7 Export Development Canada 299 2 4.3 3 Zaid Ibrahim & Co 1,361 1 14.8 7 Mitsubishi UFJ Financial Group 299 2 4.3 5 Cliﬀ ord Chance 758 1 8.3 7 Sumitomo Mitsui Financial Group 299 2 4.3 5 White & Case 758 1 8.3 10 Al Rajhi Capital 236 1 3.4 7 Anjarwalla Collins & Haidermota 172 2 1.9 10 Bank Al-Jazira 236 1 3.4 7 Haidermota & Co 172 2 1.9 7 Lincolns Law Chamber 172 2 1.9 10 BNP Paribas 236 1 3.4 7 Linklaters 172 2 1.9 10 NATIXIS 236 1 3.4 7 Mohsin Tayebaly & Co 172 2 1.9 10 Riyad Bank 236 1 3.4 7 Pinsent Masons 172 2 1.9 10 Saudi Investment Bank 236 1 3.4 7 Riaalaw 172 2 1.9

Top Islamic Finance Related Financing Mandated Lead Arrangers Ranking 12 Months Top Islamic Finance Related Financing Deal List 12 Months Mandated Lead Arranger US$ (mln) No % Credit Date Borrower Nationality US$ (mln) 1 Abu Dhabi Islamic Bank 993 9 7.2 15th Apr 2016 Yanbu Aramco Sinopec Saudi Arabia 4,700 2 Mashreqbank 711 8 5.2 Reﬁ ning 3 China Development Bank 621 1 4.5 9th Mar 2016 Dhuruma Electricity Saudi Arabia 1,138 4 Saudi National Commercial Bank 609 5 4.4 15th Jun 2016 PNB Jersey Malaysia 889 5 Noor Bank 600 8 4.4 21st Dec 2015 Engro Powergen Pakistan 851 6 First Gulf Bank 585 9 4.3 28th Jul 2015 GEMS Education UAE 817 th 7 Samba Capital 584 5 4.3 16 Aug 2015 ACWA Power Saudi Arabia 769 International 8 Emirates NBD 517 7 3.8 11th Dec 2015 Cititower Malaysia 751 9 SABB 502 3 3.7 29th Nov 2015 Gulf Marine Services UAE 620 9 Banque Saudi Fransi 502 3 3.7 1st Mar 2016 National Oil & Gas Bahrain 570 11 Dubai Islamic Bank 474 8 3.5 Authority th 12 Abu Dhabi Commercial Bank 437 6 3.2 28 Dec 2015 JBF RAK UAE 500 JBF Bahrain 13 Maybank 338 1 2.5 13 CIMB Group 338 1 2.5 Top Islamic Finance Related Financing by Country 12 Months 15 Al Hilal Bank 307 3 2.2 Nationality US$ (mln) No % 16 HSBC 302 4 2.2 1 UAE 4,561 17 33.2 17 AKFED 292 2 2.1 2 Saudi Arabia 3,000 3 21.9 18 Bank Albilad 292 2 2.1 3 Pakistan 1,613 3 11.8 19 National Bank of Abu Dhabi 251 3 1.8 4 Malaysia 959 2 7.0 5 Qatar 700 2 5.1 20 Kuwait Finance House 248 3 1.8 6 Turkey 645 3 4.7 21 Standard Chartered Bank 247 3 1.8 7 Bahrain 570 1 4.2 22 Arab Banking Corporation 238 4 1.7 8 Jordan 550 2 4.0 23 Riyad Bank 229 1 1.7 9 Egypt 475 3 3.5 23 Al Rajhi Capital 229 1 1.7 10 India 368 1 2.7 25 European Bank for Reconstruction & 170 1 1.2 Development Top Islamic Finance Related Financing by Sector 12 Months 26 Gulf International Bank 165 2 1.2 26 Ahli United Bank 165 2 1.2 Oil & Gas

28 Al Khalij Commercial Bank 163 3 1.2 Utility & Energy 29 OCBC 142 1 1.0 Finance 30 Alinma Bank 122 1 0.9 Real Estate/Property

Top Islamic Finance Related Financing Mandated Lead Arrangers Transportation 12 Months US$ bln0 128 3 4 5 6 7 Bookrunner US$ (mln) No % 1 Mashreqbank 1,550 4 20.2 Global Islamic Financing - Years to Maturity (YTD Comparison) 2 Abu Dhabi Islamic Bank 1,328 5 17.3 3 Noor Bank 586 4 7.6 2015 2014 4 Maybank 338 1 4.4 2013 4 CIMB Group 338 1 4.4 2012 6 Abu Dhabi Commercial Bank 327 1 4.3 2011 2010 7 Arab Banking Corporation 277 4 3.6 2009 8 Saudi National Commercial Bank 267 1 3.5 2008 8 SABB 267 1 3.5 0% 20% 40% 60% 80% 100% 0-3yrs 3-5yrs 5-7yrs 7-10yrs 10+yrs 8 Samba Capital 267 1 3.5

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

11th IFN US Forum New York, US JULY 2016

25th Shariah Non-Compliance Risk Kuala Lumpur, 17th – 18th Africa Islamic Finance Forum Abidjan, Africa Management & Reporting Malaysia

24th Kuwait Forum Kuwait City, AUGUST 2016 Kuwait

16th Islamic Investment Products & Kuala Lumpur, Accounts Malaysia NOVEMBER 2016

7th IFN Iran Forum Tehran, Iran SEPTEMBER 2016

6th Islamic Investment Products & Kuala Lumpur, 28th Saudi Arabia Forum Jeddah, Saudi Accounts Malaysia Arabia

21st IFN Investor Forum Kuala Lumpur, Malaysia MARCH 2017

26th IFN Pakistan Forum Karachi, Pakistan TBA IFN Oman Forum Muscat, Oman

28th IFN Turkey Forum Istanbul, Turkey TBA China OIC Forum TBA

OCTOBER 2016 APRIL 2017

th 9 IFN Project & Infrastructure Dubai, UAE Kuala Lumpur, 10th – 11th IFN Asia Forum Forum Malaysia

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