Impact versus opportunity In this issueislamicfinancenews.com/sites/default/files/newsletters/v8i5.pdfThe past week has been nothing less than eventful. Qatar Central Bank’s surprise

The past week has been nothing less than eventful. Qatar Central Bank’s surprise directive to cease Islamic banking windows by the end of the year has caught industry players off guard. Many are still reeling from the announcement, trying to make sense of the impact on the banking world, both Islamic and conventional, while the central bank keeps mum on the matter.

India too threw a curveball when the Kerala High Court dismissed a petition challenging the setting up of Islamic banks in India, taking the country one step closer to making Shariah banking a reality despite its current law and lack of regulation. Whether or not it does take off remains to be seen. We examine the issues for Qatar and India in our IFN reports.

While industry players in both Qatar and India may well be occupied with assessing the impact and opportunities that lie ahead, Advent Software has been doing the same with regards to the Islamic Financial Reporting Standards (IFRS). In the current scenario, convergence is not yet a reality within the Islamic fi nancial community. While some opt for IFRS and a convergence of standards, some do not permit them, and others implement them with local adaptations, says Advent in its report.

IFRS is in fact issued by the International Accounting Standards Board (IASB). It seems that the IASB and AAOIFI, both standard setting organizations, have entirely different priorities, according to Mohammed Amin, Islamic fi nance consultant and former head of Islamic fi nance at PwC (UK). He suggests in his report that each leverage on the other’s strengths to the extent of partnering and exchanging roles. He even questions the

appropriateness of AAOIFI’s role with regards to accounting standards.

Speaking of roles, the Bermuda Monetary Authority comes to the fore with the potential to be largely instrumental in the growth of Takaful in the offshore jurisdiction, according to law fi rm Conyers Dill & Pearman. Their report considers the various structures available for Takaful and re-Takaful operators in Bermuda, and the various opportunities that lie beneath.

Before opportunities can be explored in Tanzania, the country needs to address the challenges that stand in the way for Islamic fi nance, based on a report by Stanbic Bank Tanzania. The bank gives an overview of the situation in the country, stating that Islamic banking faces two main challenges — lack of capacity and low levels of awareness, before the industry can fi rmly take root in Tanzania.

A growth in the level of awareness for Islamic fi nance will surely bring with it confi dence in exploring and accepting its products as an alternative to conventional funds. At least, that is what Christina Tung, managing director of Mayfair Pacifi c Financial Group looks forward to. Tung, who is featured in Meet the Head this week, heads a fi rm that has been appointed by the government in the Ningxia Hui autonomous region, China to promote Islamic investments.

In Termsheet this week, you will fi nd details of LBS Bina Group’s third issuance of US$6.6 million of its US$44.46 million notes program. LBS is the fi rst issuer to issue Sukuk with the assistance of Malaysia’ fi rst fi nancial guarantee insurer Danajamin.

Vol 8 Issue 5 9th February 2011

T h e W o r l d ’ s G l o b a l I s l a m i c F i n a n c e N e w s P r o v i d e r

In this issue

IFN Rapid ..................................................... 2

Islamic Finance News ................................ 3

Takaful News ............................................... 6

Moves ........................................................... 6

Ratings News .............................................. 7

IFN Reports:Qatar shuts the door on Islamic windows .................................................... 8

Islamic bank in India – Almosta reality ..................................................... 8

Mixed signals in the UAE ....................... 9

Articles:Bermuda: Crossroads for Takaful Opportunities ..........................................10

Which Accounting Standards? .............14

AAOIFI’s Proper Accounting Standards Role ..........................................................16

Meeting Changing Banking Needs in Africa........................................................18

Meet the Head ..........................................19Christina Tung, managing director of Mayfair Pacifi c Financial Group

Termsheet ..................................................20LBS Bina Group US$6.6 million Sukuk

Deal Tracker ..............................................21

Eurekahedge Funds Tables .....................22

REDmoney Indexes ..................................23

S&P Shariah Indexes ...............................24

Dow Jones Shariah Indexes ....................25

Dealogic League Tables ...........................26

Thomson Reuters League Tables ...........29

Events Diary...............................................32

Company Index .........................................33

Subscription Form ....................................33

Impact versus opportunity

Job Search For Islamic Finance ProfessionalsTo find out more about Barakat Jobs, logon to

www.BarakatJobs.com today, and reach your potential.

Page 2© 9th February 2011

www.islamicfi nancenews.comA round-up of all this week’s news IFN RAPID

• Egyptian crisis rings fear for investors and market participants, say fund managers

• Country to launch Islamic banking soon, says governor of Central Bank of Nigeria

• First Community Bank launches Shariah compliant unit trust fund

• Bank Muamalat Indonesia plans to quadruple Shariah debt

• The IDB takes 10% stake in Sri Lanka’s Amana Bank

• Bank Kerjasama Rakyat Malaysia and Mastercard Worldwide launch One Retail Cash Islamic Debit

• QSR Brands increases interest in Al-‘Aqar KPJ REITs to 4.77 million shares

• Kerala High Court approves Shariah compliant Al Baraka Financial Services to start operations as India’s fi rst Islamic bank

• More investments to come from the UAE, says Luxembourg’s minister of fi nance

• National Bank of Kuwait Group announces US$1.07 billion in profi ts for 2010

• National Bank of Abu Dhabi profi t up by 22% in 2010

• Ajman Bank charts US$1.1 million in net profi t for its fi nancial year ending on the 31st December 2010

• Bahrain Financial Exchange launches online trading platform for Murabahah transactions

• Abu Dhabi Islamic Bank launches 97% capital protected BRIC Currency Notes

• Qatar Central Bank orders conventional banks to close their Islamic banking windows

• Saudi Telecom seals deal with Samba Financial Group and HSBC Bahrain to provide US$280 million fi nancing to VIVA Bahrain

• Two Dubai properties of American International Group taken over by consortium of banks

• Syria International Islamic Bank and MasterCard Worldwide launch credit and debit cards

• Jordan Dubai Islamic Bank signs agreement with Visa Jordan to provide Shariah compliant charge cards

• Unicorn Investment Bank cancels plan to buy Dubai Group’s 40% stake in Bank Islam Malaysia

• BMI Bank launches new tag line to reinforce position as customer centric bank

• The Saudi British Bank signs US$533 million in Islamic fi nance deals with Abdul Latif Jameel Group

• National Leasing Holding Company charts a net profi t of US$59 million in 2010

• SHUAA Capital halves losses in 2010 to US$61 million

• Qatar International Islamic Bank plans to issue at least US$500 million Sukuk by mid year

• Gulf Bank returns to profi t in 2010 by posting a net income of US$68.4 million

• Barwa Bank completes acquisitions of The First Investor, First Finance Company and First Leasing Company

TAKAFUL• Mitsui Sumitomo Insurance eyes

35% stake in Malaysian Takaful operator Hong Leong Tokio Marine Takaful

• Amana Takaful (Maldives) applies to be listed on the Maldives Stock Exchange

• Takaful industry may see mergers and acquisitions, says CEO of Takaful Ikhlas

• Department of Shariah affairs and Takaful Brunei Am ink deal to provide Takaful to enforcement offi cers

• Al Khaleej Takaful Insurance and Reinsurance announces US$20 million profi ts for 2010

RATINGS• Fitch assigns individual rating of

‘C/D’ to Dubai Islamic Bank

• MARC affi rms ‘AAAID’ rating on Kwantas SPV’s outstanding US$26 million class ‘A’ Sukuk

• PACRA upgrades Askari Islamic Income Fund’s stablility rating to ‘AA-(F)’ from ‘A+(f)’

• Shariah Quality Rating of ‘AA’ for Jordan Islamic Bank by Islamic International Rating Agency maintains

MOVES• Al Baraka Bank Pakistan appoints

Adnan Ahmed Yousif as chairman of the board of directors

• Al-Amanah Islamic Investment Bank of the Philippines appoints Enrique D Bautista Jr as chairman and CEO

NEWS

Disclaimer: Islamic Finance news invites leading practitioners and academics to contribute short reports each week. Whilst we have used our best endeavors and efforts 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.

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www.islamicfi nancenews.comNEWS

AFRICACrisis stirs concernEGYPT: Average yields for Sukuk have plummeted in the Gulf after seven weeks of turmoil in Egypt.

Investors are being cautious and the turmoil may have long-term effects on Islamic markets in the Middle East if not resolved soon, said Muhammad Asad, chief investment offi cer at Al Meezan Investment Management.

Rohit Chawdhry, portfolio manager at Bahrain Islamic Bank, said market participants fear that the contagion may spread in the Middle East causing an oil price hike which would impact global economic growth.

Shariah banking soonNIGERIA: Islamic banking will soon begin in Nigeria, said Sanusi Lamido Sanusi, governor of the central bank.

Sanusi urged Nigerians to help make the Islamic banking initiative a success as it will help to develop the country’s economy.

New Islamic unit trust fundKENYA: First Community Bank has received approval from the Capital Markets Authority to introduce an Islamic unit trust fund. The fund will make selective investments in equities, government bonds and real estate options that are Shariah compliant.

Nathif Adam, the CEO said the bank sees this move as strengthening its portfolio of Islamic fi nancial services.

He added that many Muslims are unable to buy bonds or stocks because the products are not structured according to Shariah values.

ASIAOptimistic targetINDONESIA: Bank Muamalat Indonesia is planning to quadruple its Shariah compliant debt holdings from IDR500 billion (US$55.4 million) to IDR2 trillion (US$222 million) in 2011, said Hendiarto, its chief fi nancial offi cer.

He added that with a current asset base of IDR20.4 trillion (US$2.27 billion), the bank is targeting asset growth of 50% in 2011 compared to 32% last year.

IDB buys 10% stakeSRI LANKA: The Islamic Development Bank (IDB) has acquired a 10% stake in Amana Bank.

Amana Bank received fi nal approval from the minister of fi nance in January to operate as the fi rst Islamic bank in Sri Lanka.

New Islamic debit cardMALAYSIA: Bank Kerjasama Rakyat Malaysia and Mastercard Worldwide has launched a debit card called One Retail Cash Islamic Debit (Orchid Card) based on the concept of Wakalah and Ujrah.

According to Kamaruzaman Che Mat, its managing director, cardholders will not be required to pay any membership fee. They only need to pay the RM8 (US$2.64) annual fee from the second year onwards.



Stake expansionMALAYSIA: Investment holding fi rm QSR Brands has increased its interest in Al-‘Aqar KPJ REITs to 4.77 million shares, worth RM5.11 million (US$1.68 million) by acquiring an additional 2.82 million units of the hospital REIT.

QSR purchased 2.27 million shares last month and 553, 200 shares on the 21st July 2010.

EUROPEWidening revenue streamsLUXEMBOURG: Luxembourg is eyeing more investments from the UAE, said Luc Frieden, minister of fi nance. He highlighted plans to open an embassy in Abu Dhabi later this year to facilitate regional investments.

In Luxembourg’s various investment funds, AED2.485 billion (US$676 million) come from UAE investors, said Frieden.

He also added that the country is a prime location for Islamic fi nance with 16 Sukuk listed on the Luxembourg Stock Exchange, and a treaty with the UAE to avoid double taxation.

MIDDLE EASTProfi t increaseKUWAIT: National Bank of Kuwait Group has reported profi ts of KWD301.7 million (US$1.075 billion) for last year, an increment of 14% compared to 2009.

Total assets stood at KWD12.9 billion (US$46 billion) and shareholder’s equity at KWD2.1 billion (US$7.4 billion).

The bank recommended a cash dividend of 40 fi ls (14.3 US cents) per share and a 10% bonus share distribution.

Profi ts soarUAE: National Bank of Abu Dhabi has reported a profi t of AED3.68 billion (US$1 billion) for 2010, an increment of 22% compared to AED3.02 billion (US$822.2 million) in the previous year

Total assets grew by 7.4% to AED211.4 billion (US$57.55 million) while deposits increased 6.5% to AED123.1 billion (US$33.51 billion).

e-Tayseer launchedBAHRAIN: Bahrain Financial Exchange (BFX) has started operations with e-Tayseer, an online trading platform for the sale and purchase of underlying assets for Murabahah transactions.

BFX, the fi rst multi asset exchange in the Middle East and North Africa will initially deploy e-Tayseer with its Islamic division Bait Al Bursa and fi ve banks, said Arshad Khan, managing director and CEO.

Arshad said the bourse is targeting by year end to tap 30% of global Murabahah transactions which has a volume of between US$8 billion and US$10 billion daily.

Making progressUAE: Ajman Bank has posted AED4 million (US$1.1 million) in net profi t for its fi nancial year ending the 31st December 2010, an increase from the marginal profi t of AED1.1 million (US$299,474) in 2009.

The bank’s income rose 84% to AED144 million (US$39 million), while customer deposits went up 157% to AED2 billion (US$544.5 million).

New BRIC notesUAE: Abu Dhabi Islamic Bank has launched a 97% capital protected BRIC Currency Notes, which is based on Murabahah principles.

The notes will enable investors to obtain a return of up to 22% at maturity by investing

in the currencies of four BRIC countries — Brazil, Russia, India and China, for two years.

Subscription will be on a fi rst come fi rst served basis and is available until the 3rd March, with a minimum subscription of US$30,000.

Major deal for VIVA BahrainBAHRAIN: Saudi Telecom (STC) has signed an agreement with Samba Financial

continued...

First Islamic bank INDIA: The Kerala High Court has given approval to Shariah compliant Al Baraka Financial Services to start operations as India’s fi rst Islamic bank with Kerala State Industrial Development Corporation as an investor.

The Kerala High Court also dismissed the petitions of Janata Party leader Subramanian Swamy and others fi led against the Kerala state government’s decision to establish the Islamic bank.

(See IFN Report on page 8)

Islamic windows shutdownQATAR: Qatar Central Bank (QCB) announced the termination of Islamic banking services offered by conventional banks, and has given a grace period until the 31st December this year for the banks to close their Islamic windows.

The local conventional banks involved are Qatar National Bank, Commercial Bank of Qatar, Doha Bank and International Bank of Qatar.

The order gives no direction on whether banks can apply for separate Islamic banking licences and suggests a lack of transparency in the country, say bankers.

John Sfakianakis, chief economist at Banque Saudi Francais, said that the vague directive creates an unlevel playing fi eld for investors and those observing the Qatar economy.

On the other hand, Doha Bank does not expect a major fi nancial impact as approximately 89% of the bank’s books are conventional, said Raghavan Seetharaman, its group CEO.

Mohd Daud Bakar, CEO of Amanie Business Solutions said QCB’s decision is in accordance with Malaysia’s development model for its Islamic banking sector, and is a positive step in terms of competition for Islamic banking.

The local conventional banks as well as HSBC Amanah are currently in talks with the central bank for a workable solution.




Group and HSBC Bahrain to provide a seven-year US$280 million Islamic fi nancing facility for STC’s wholly owned subsidiary, mobile telecommunications operator VIVA Bahrain.

The facility consists of US$100 million from HSBC and US$180 million from Samba Financial Group.

“STC is keen to expand its international operations,” said Ameen Al-Shiddi, its vice president of fi nance.

New MastercardsSYRIA: Syria International Islamic Bank in collaboration with MasterCard Worldwide has launched four credit and debit card programs.

They are MasterCard Al Mas Platinum and MasterCard Zhahab Gold credit cards; MasterCard Fiddhah and MasterCard Zomorod debit cards.

Islamic Visa cardsJORDAN: Jordan Dubai Islamic Bank has signed an agreement with Visa Jordan to provide Shariah compliant charge cards to the bank’s customers.

The card has a JOD15,000 (US$21,156) charge limit.

Unicorn scraps plan BAHRAIN: Bahrain based Unicorn Investment Bank has cancelled its plan to buy the 40% stake in Bank Islam Malaysia currently

owned by Dubai Group, said Ikbal Daredia, acting chief executive of Unicorn.

Unicorn has also effectively repaid a three-year US$125 million Murabahah facility involving more than 20 banks, settling Unicorn’s long-term debt, said Ikbal.

Rebranding programBAHRAIN: BMI Bank has launched its new tag line ‘Better, Together’ to strengthen its position as a customer centric bank.

The bank also plans to soon embark on a rebranding exercise.

US$533 million in fi nancingSAUDI ARABIA: The Saudi British Bank has signed Islamic fi nance agreements worth SAR2 billion (US$533 million) with Abdul Latif Jameel Group.

The agreements include three securitization deals for the benefi t of the group’s installment wing, United Installment Sales, and a stock fi nance Murabahah agreement.

Profi ts riseQATAR: National Leasing Holding Company (NLHC) has posted a net profi t of QAR179.83 million (US$59 million) for 2010, from QAR90.21 million (US$29.7 million) in the previous year.

Total assets rose 13% to QAR2.03 million (US$669 million), while total revenue increased 113% to QAR458 million (US$151 million).

Mixed performanceUAE: SHUAA Capital halved its losses in 2010 to AED223.6 million (US$61 million), from AED529.8 million (US$144 million) in 2009.

In the same period, the bank’s income decreased by 29.7% to AED188.4 million (US$51 million), while total assets lowered 32.5% to AED1.92 billion (US$522 million), and total liabilities slid 61% to AED704 million (US$191.7 million).

QIIB Sukuk to come QATAR: Qatar International Islamic Bank (QIIB) is planning to issue a benchmark-sized Sukuk of at least US$500 million by the middle of this year.

No banks have yet been mandated on the deal.

Swinging back to profi tKUWAIT: Gulf Bank has returned to profi t in 2010 by posting a net income of KWD19.1 million (US$68.4 million), compared to a loss of KWD28.1 million (US$100.3 million) in 2009.

Ali Abdul Rahman Al Rashaid Al Bader, its chairman attributed the performance to recovery in Kuwait’s economy, increase in public infrastructure projects, new business strategy, growth in credit facilities and expansion in banking services.

Takeover fi nalizedQATAR: Barwa Bank has completed the acquisitions of The First Investor, First Finance Company and First Leasing Company.

The bank has also announced the distribution of share certifi cates for Barwa Bank to shareholders, to replace those of the three entities.

continued...

Double takeoversUAE: Two Dubai properties of American International Group (AIG) have been taken over by a consortium of banks after a breach of valuation covenant.

The properties were acquired by AIG under an Ijarah agreement from the consortium comprising of Noor Islamic Bank, National Bank of Abu Dhabi, Abu Dhabi’s First Gulf Bank, United Arab Bank and United Bank.

The outstanding amount for the facility is AED430 million (US$117 million).


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www.islamicfi nancenews.comTAKAFUL NEWS

ASIAAttractive Islamic InsuranceJAPAN: Mitsui Sumitomo Insurance, a unit of Japan’s property-casualty insurance fi rm MS&AD is eyeing a 35% stake in Malaysian Takaful operator Hong Leong Tokio Marine Takaful (HLTMT), which is currently owned by Japanese insurer Tokio Marine & Nichido.

Tokio Marine & Nichido, a unit of Tokio Marine Holdings, recently expressed a desire to divest of its stake in HLTMT and sell it back to Hong Leong Financial Group, before the Group sells it on to Mitsui Sumitomo.

Signifi cant applicationMALDIVES: Amana Takaful (Maldives), a subsidiary of Sri Lanka’s Amana Takaful Insurance, has applied to be listed on the Maldives Stock Exchange.

According to the bourse, the local Takaful operator is the fi rst foreign owned Shariah compliant company which has applied for the listing.

Takaful consolidationMALAYSIA: The Malaysian Takaful industry may see a wave of mergers and acquisitions following the implementation of proposed risk based capital framework, said Syed Moheeb Syed Kamarulzaman, president and CEO of Takaful Ikhlas.

He highlighted that under the framework, the required capital will change signifi cantly.

According to industry players, the proposed framework may be implemented this year and could lead to consolidation among Takaful operators to meet the capital requirements.

Takaful for Shariah offi cersBRUNEI: The department of Shariah affairs and Takaful Brunei Am have signed an agreement to provide a one-year personal accident cluster Takaful scheme coverage to the department’s enforcement offi cers.

The scheme will provide coverage in the event of death and permanent disablement, due to accident or illness occurring within 12 months.

MIDDLE EASTSteady progressQATAR: Al Khaleej Takaful Insurance and Reinsurance has reported a profi t of QAR72.84 million (US$20.04 million) for 2010, a rise of 7% from 2009. The company has proposed a cash dividend of 30%.

Total investments and other income had a 58% growth of QAR117.4 million (US$32.29 million) compared to 2009. Total expenses stood at QAR30.87 million (US$8.49 million).

The shareholders’ defi cit was QAR610,000 (US$170,000) from Takaful operations compared with a QAR33.31 million (US$ 9.17 million) surplus last year.

Total assets stood at QAR976.54 million (US$268.65 million).

AL BARAKA BANK PAKISTANPAKISTAN: Adnan Ahmed Yousif has been elected chairman of the board of directors of Al Baraka Bank Pakistan.

He is also the president and CEO of Al Baraka Banking Group.

AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILIPPINESPHILIPPINES: Al-Amanah Islamic Investment Bank of the Philippines has appointed Enrique D Bautista Jr as its new chairman and CEO.

He replaces Armando O Samia who has rejoined the marketing department of state-owned Development Bank of the Philippines.

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www.islamicfi nancenews.comRATINGS NEWS

ASIAStrong backing

UAE: Fitch Ratings has assigned Dubai Islamic Bank a long-term foreign currency issuer default

rating (IDR) of ‘A’ with a stable outlook, short-term IDR of ‘F1’, individual rating of ‘C/D’ and support rating fl oor of ‘A’. The support rating has been affi rmed at ‘1’.

The long- and short-term ratings are based on the support from the UAE government. The individual rating refl ects the strong franchise, earning power and satisfactory liquidity position of the bank.

Sturdy fi nancial supportMALAYSIA: Malaysian Rating Corporation (MARC) has affi rmed its ‘AAAID’

rating on Kwantas SPV’s outstanding RM80 million (US$26 million) class ‘A’ Sukuk with a stable outlook.

The move is based on the satisfactory net operating income from the company’s securitized plantation estates.

The estates’ consolidated net operating income of RM49.9 million (US$16 million) for 2010 was 78% higher than MARC’s assessed sustainable revenue of RM28 million (US$9.2 million).

Moving up PAKISTAN: The Pakistan Credit Rating Agency (PACRA) has upgraded the stability rating of Askari Islamic Income Fund to ‘AA-(F)’ from ‘A+(f)’.

The move is based on Askari Investment Management’s capacity to manage the fund’s returns.

MIDDLE EASTDominant power

JORDAN: Islamic International Rating Agency has maintained the Shariah Quality Rating of ‘AA’ for

Jordan Islamic Bank.

According to the agency, the rating is supported by the bank’s highly qualifi ed Shariah supervisory board and a vibrant Shariah audit department.

3rd - 5th October, Kuala Lumpur


www.islamicfi nancenews.comIFN REPORTS

Qatar shuts the door on Islamic windows

Qatar Central Bank (QCB), in a surprise move issued a circular last week ordering conventional banks in the country to shut down their Islamic window operations by the 31st December 2011. This move came without warning or market player consultation. Nor has the central bank given any indication that the conventional banks involved will be allowed to apply for separate Islamic banking licences to circumvent a loss of revenue stream.

The circular affects seven conventional banks including Qatar National Bank (QNB), Commercial Bank of Qatar, Doha Bank, International Bank of Qatar, HSBC, al khaliji Bank and AhliBank. Some are now lobbying for a workable solution with QCB.

“This is likely to have a signifi cant impact on the Islamic fi nance industry in Qatar as it will effectively reduce the number of Islamic fi nancial service providers by over half within 10 months,” said Amjad Hussain, partner at Doha based law fi rm Eversheds.

Speculation has it that the seven conventional banks may be asked to sell off their Islamic assets to their fully fl edged Islamic competitors, which are Qatar Islamic Bank, Qatar International Islamic Bank, Masraf Al Rayan and Barwa Bank.

If so, the current four Islamic banks stand to benefi t from enhanced revenue streams from Shariah sensitive customers who will be seeking alternative channels to place their money. With this possibility and a potential widening of customer base, shares of Islamic banks have soared in recent days, with Masraf Al Rayan’s up 10% and Qatar Islamic Bank’s rising to 9.4%.

Qatar’s Islamic banking sector began with the opening of Qatar Islamic Bank in 1983. It was not until 2005 when QCB allowed conventional banks to open Islamic windows, a move that has since attracted almost 100,000 customers.

To date, the Islamic banking sector has grown to four Islamic banks and seven Islamic windows, and has achieved an overall market share of 20% of the banking industry.

Alternatively, it would be faster and easier for the conventional banks to set up subsidiaries in the form of separate Islamic banks, if allowed, rather than fully converting into an Islamic institution. It would also allow the conventional banks to retain their Shariah sensitive customers.

Another motivation for QCB’s decision may be the possible mixing of conventional and Islamic funds, which poses a threat to the Shariah compliance of Islamic banking windows. Amjad believes that the preferred method of operation for a regulator is to have clarity, with one set of rules for Islamic banks and another for conventional banks.

“However, the concern that the Islamic fi nance industry has is the lack of proper industry and stakeholder-wide consultation as well as the timescale in which the changes are coming into force. This may deter foreign investors at a time when Qatar needs to bring them in the most,” said Amjad.

Bankers have voiced that the decision has brought about confusion, highlighting a lack of transparency and an unlevel playing fi eld for investors and players following the Qatari economy. The real effect that this decision carries for banks is still vague, with analysts projecting

QNB as the most severely impacted if it is forced to exit Islamic banking. Doha Bank does not expect a major fi nancial impact as its Islamic window operations account for only 11% of the total asset book. The fi nancial markets and investors have shown a more intense reaction to the news with QNB’s shares plummeting by 4.8% following the news.

How QCB plans to deal with existing long term Shariah compliant fi nancing by conventional banks is still unclear. “These changes, if they are to have an immediate impact, may constitute a material change in law under existing facilities and this may, depending upon terms, lead to the acceleration of re-payment obligations,” added Amjad.

Ashar Nazim, executive director and MENA head of Islamic fi nancial services group at Ernst & Young, believes that many more central banks may take their cue from Qatar. If central banks start tightening the screws on Shariah governance and auditing, Islamic banks may have an advantage over conventional banks in maintaining stricter control over Shariah compliance, said Ashar.

Islamic bank in India – Almost a reality

Last week, the Kerala High Court dismissed a petition objecting to the creation of an Islamic fi nancial institution, bringing India much closer to the reality of developing Islamic banking within its shores. While this has given Al Baraka Financial Services (Al Baraka) the approval it needs to start operations as the country’s fi rst Islamic bank, the high court did however caution that the bank was to work in accordance with the fi nancial laws of the country.

The ruling by the Kerala High Court may give constitutional validity to an Islamic bank in India, but the hurdle of the lack of regulatory framework and law still stands, at least as far as the Reserve Bank of India (RBI) is concerned. The stand that the RBI has thus far taken is that Shariah banking is not possible given the present regulation.

“With this court ruling, the government may consider giving some relaxation for Shariah compliant banks. Things will start moving, but it will still take time,” said Ali M Shervani, director at investment advisory fi rm Miftah Advisory India.

Al Baraka was set up with an authorized capital of INR10 billion (US$220 million) with the aim of starting up an Islamic bank in 2009, an initiative from Dr TM Thomas Isaac, state minister for fi nance and the non-resident Indian community.

The initial proposal also contains the appointment of an advisory body, comprising Islamic scholars to ensure Shariah compliance of the fi nancial entity. Once formed, the Kerala State Industrial Development Corporation is to hold an 11% stake in Al Baraka.

The interest in the proposed institution has been strong. Shri Elamaram Kareem, state minister for industries highlighted that immediately after the plan was drawn up, a large corporation with interest in multiple domains sought 74% stake in it. Doha Bank also expressed a desire to pick up a 46% equity.

Ali emphasizes the fact that a cautious approach needs to be taken with regards to Islamic banking in India, and “it would be of crucial importance to see which players take the lead in developing this industry”.

continued...


www.islamicfi nancenews.comIFN REPORTS

He further added that a need is there for major fi nancial institutions like HSBC and Standard Chartered with vast experience in Islamic fi nance globally to step into the Indian market, to capitalize on their expertise, establish infrastructure and Islamic product lines.

This victory of sorts follows from a year long battle with the courts, in which the fi nal verdict by the Kerala High Court was to dismiss a petition fi led in January 2010 by Subramanian Swamy, former law minister and Janata Party chief, and RV Babu, head of Hindu Aikyavedi, claiming that the state government’s participation in the creation of an Islamic bank violates the principle of secularism in the Indian constitution.

The decision marks another positive sign for the world’s largest Muslim minority of 160 million. Recent efforts which have exposed the Indian market to Shariah compliant fi nance and investment options include the successful launch of the BSE TASIS Shariah 50 Index by the Bombay Stock Exchange and Taqwaa Advisory and Shariah Investment Solutions.

The launch of an Islamic bank will assist the economy and have wide reaching economic impact for Kerala as well as the country. According to the Centre for Development Studies, INR250 billion (US$5.5 billion) to INR280 billion (US$6.17 billion) is remitted by Keralans into the state.

The major chunk of the remittance is invested in real estate and gold. The introduction of Islamic banking in Kerala can contribute to channeling these funds to more productive use.

Mixed signals in the UAE

The UAE economy is expected to grow by more than 3% in 2011, a slight increase from the estimated 2.3% in 2010, as the banking

sector grapples with fi nancial diffi culties this year. Economic progress is positive based on rising oil prices and the fi nalization of Dubai World’s US$25 billion restructuring plan in September last year. But contrasting signals are being sent from the real estate business, with two major developments last week. In a strong move from the UAE banks, two commercial properties in the UAE have been taken over from the real estate arm of insurance giant American International Group (AIG). The strong action came after AIG’s refusal to pay more to cover its creditors’ risk. The properties have been on the seller’s market since early 2009 without much success. This was a part of AIG’s plan to dispose of assets in order to raise funds for the repayment of the US government’s rescue fund.

The move came about when AIG violated a valuation covenant in an Islamic leasing agreement (Ijarah).The properties had been acquired under Ijarah in 2008 via a consortium of banks including Noor Islamic Bank, National Bank of Abu Dhabi, First Gulf Bank, United Arab Bank and United Bank. The outstanding amount of the Ijarah facility is understood to be AED430 million (US$117 million).

The second development includes property giant Dubai World narrowly avoiding default on US$3.52 billion debt, and its overseas arm Istithmar World recently breaching a loan to value ratio covenant on debt against the Adelphi building in London worth US$427 million. The asset revaluation last month put the loan to value ratio at 89.48% in breach of contractual limit of 80%.

According to a statement from Indus Holding, the vehicle that issued the notes for the Adelphi debt, US$341 million is still outstanding against the property. All surplus rent on the property is now being used to pay off the debt, which is due to mature later this year. This default may well lead to the sale of the building.

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Particular focus on that market with international participationStandard format ensuring everyone knows exactlywhat to expect from each eventPlenary sessions – no sales pitchesShort one-day events – senior individuals don’thave the time to attend lengthier eventsTargeting between 125 and 250 for each eventCooperation and participation from local regulatorsPractitioner led, with some Shariah scholarsproviding the perfect mixConclusions will be delivered at the end of each eventIssuers and investors will be in attendance– not just the intermediaries


www.islamicfi nancenews.comCOUNTRY REPORT

Bermuda is positioned to play a key role in the swiftly growing Takaful industry. It has a sophisticated legal system rooted in English law and its success as an insurance centre is largely attributable to its effective regulatory system, overseen by the Bermuda Monetary Authority (BMA).

Cooperative interaction between the industry and the BMA has resulted in a regulatory framework that is innovative, responsive and transparent. This regime, combined with a deep pool of insurance expertise, allows Bermuda to keep pace with global developments in the marketplace. By tapping into Bermuda’s resources, Takaful and re-Takaful operators should be able to leverage access to capital as well as systems, products and expertise.

Bermuda insurance regulationAny company carrying on insurance or reinsurance business “in or from within Bermuda” must be registered (such as licensed) by the BMA, and this requirement would apply equally to a Takaful or re-Takaful operator (reinsurers are regulated in the same way as direct insurers). Insurance business is divided into general, long term and special business, and the appropriate class and applicable regulatory

requirements for any Takaful or re-Takaful provider would depend upon its proposed activities.

To refl ect the breadth and diversity of the market, there exists a multi-class licensing system for general business, ranging from pure captives (such as single parent captives writing risks of parent and affi liates only) to very large commercial insurers writing excess liability or property catastrophe business (subject to the strictest regulations on capital, solvency and liquidity).

This allows for a graduated approach for solvency and liquidity margins and reporting standards depending on the amount of unrelated risk. Bermuda law also provides for the licensing of special purpose insurers (essentially a ‘disposable’ or single transaction company), which benefi t from less stringent regulation and a faster track to registration.

Bermuda insurers are allowed considerable fl exibility in their investment policies. While statutory capital and assets tests must be met, there are no restrictions on the proportions in which different categories of qualifying assets may be acquired and held. This could be

Bermuda: Crossroads for Takaful OpportunitiesBy Claire McConway and Kerri Lefebvre

SHAREHOLDER(S)

TAKAFULOPERATOR

Capital Profits

Mudarabah/Wakalah agreement

Wakalah fee for underwriting activities(based on % of contributions)

Interest free loan (returned out of future years’ surplus)

Mudarabah profit share for investment activities

Net surplus paid to participantsunder bye-laws as devidend or

policy rebate

Contributions(less Wakalah fee)

Capital &Contributions

CAPTIVEMANAGEMENT

EXPENSESAND

GENERALOVERHEADS

REINSURANCE PREMIUMS/RE-TAKAFUL CONTRIBUTIONS & CLAIMS

CLAIMS

RESERVES

SHARIAH COMPLIANTINVESTMENT

SURPLUS

TAKAFUL FUNDS

BERMUDA CAPTIVE INSURANCE COMPANY

PARTICIPANTS (INSURED)(SHAREHOLDERS/MEMBERS)

Figure 1: Joint venture between captive and third party operator (based on Wakalah-Mudarabah hybrid model)

continued...



Bermuda: Crossroads for Takaful Opportunities (continued)

advantageous for Takaful operators, which by defi nition have more restrictive investment policies than conventional insurers.

It also should be noted that certain categories of assets which do not automatically qualify as “relevant assets” for general business (such as unquoted equities and real estate) may on successful application to the BMA by the insurer be designated as relevant. This provides considerable scope for focus on Shariah compliant asset classes.

Dividends may be declared and paid by Bermuda insurance companies provided that relevant liquidity and solvency margins are met and the solvency requirements under Bermuda company law are satisfi ed. As a consequence, Bermuda companies enjoy greater freedom to declare dividends than their counterparts in many other jurisdictions.

Bermuda structures for Takaful operationsAs with conventional insurance, Takaful participants vary from corporations to individuals. There is no “one size fi ts all” approach, but it is likely that elements of traditional captive and third party insurance arrangements may facilitate Takaful arrangements.

CaptivesCaptives are privately owned insurance companies, and range from single member captives to group or association captives, which have more than one owner, and from pure captives (which insure only risks emanating from their parent and affi liates) to captives which also underwrite a limited amount of third party risk.

Conventional captive management is typically outsourced by all but the largest of businesses, and specialist Takaful captive management services could also be sub-contracted where necessary. With the exception of single member captives (which would lack the necessary element of mutuality), captives are well suited to Takaful arrangements.

The majority of captives in Bermuda are set up as companies limited by shares, although a small number of multi-owner captives are set up as mutuals (often cited as the conventional counterpoint to Takaful).

These are companies without share capital authorized to carry on insurance or reinsurance business on the mutual principle, meaning that their members, who are exposed to some contingency, contribute premiums on the basis that if the contemplated contingency befalls any member he will receive a compensatory payment.

Since the solidarity principle is already built into the structure, it is easy to see how the mutual concept aligns to Takaful. Commonly used in Bermuda for groups of ship owners or professional fi rms, a mutual structure could be used by any group of persons sharing similar exposure.

In general, captives are best suited to operations with a relatively small number of participants, as the operation cannot exist until the founders have come together and pooled their contributions. The use of captives in Takaful business is therefore likely to attract smaller groups of participants with access to signifi cant capital reserves.

Bermuda law allows captives to be capitalized through equity, debt or contributed surplus, which in the case of a Shariah compliant captive, would need to be structured subject to the usual Shariah considerations.

To the extent that further capital is necessary and is unavailable from the owner-participants, a Shariah compliant captive would need to access capital by way of a Qard through a Takaful operator or through some form of Islamic fi nancing arrangement.

In this regard, an independent conventional insurer could potentially enter into a joint venture with a Shariah compliant captive. The relevant joint venture agreement could provide for remuneration in respect of the management, licensing, underwriting and investment activities to be carried on.

The parties also could agree on the establishment of a Qard facility or some other form of Shariah compliant capital, provided that any issues of corporate benefi t that may arise in this regard are addressed.

While there are a number of possibilities for such a structure, the chart in Figure 1 shows how a captive might work in such a joint venture. In the example given, the captive remains the owner of the Takaful fund which is managed on its behalf by an operator on the basis of Wakalah/Mudarabah.

Third party arrangementsA conventional non-captive insurer is not owned by the policyholder(s), and underwrites mainly or exclusively the risks of third parties. While conventional non-captive insurance contracts typically contravene Shariah principles, what such arrangements have in common with most commercial Takaful schemes is the lack of an ownership interest by the policyholders in the insurance company or operator.

In both cases, the policyholder (or Takaful participant) pays money to an unrelated insurance company (or Takaful operator), and in return, is entitled to make a claim for his loss should the covered risk materialize. In the case of Takaful, Shariah compliance typically is achieved through the relevant contractual arrangements and appropriate provisions in the operator’s constitutional documents.

It should be possible to set up third party re-Takaful arrangements in Bermuda along the lines of what is done in other jurisdictions that have embraced Takaful. The Takaful operator might be an established (re)insurer in Bermuda, or a newly licensed overseas (re)insurer or re-Takaful operator.

In a joint venture situation, the operator might be the vehicle for a partnership between an established conventional (re)insurer with access to capital resources, and an overseas re-Takaful operator with

continued...

“Dividends may be declared and paid by Bermuda insurance companies provided that relevant liquidity and solvency margins are met and the solvency requirements under Bermuda company law are satisfi ed”




the requisite technical expertise. Such partnerships with established conventional (re)insurers are often cited as a potential solution to the thorny issue of capitalization.

In order to conform to the requirements of Takaful, the operator would not be entitled to all of the profi ts from the operation, but neither would it bear all the risk. Under the Wakalah/Mudarabah hybrid model, the operator would be entitled to its Wakalah underwriting fees and/or its Mudarabah profi t share, and against the possible need for draw down under the Qard facility, the right to recover any advances out of future years’ profi ts.

The diagram in Figure 2 shows how such a model might work in Bermuda. This has been structured so that the company which holds the Takaful fund is incorporated as a subsidiary of the operator, but this might not be necessary depending on the circumstances (such as if the operator is already established and licensed in Bermuda).

Bermuda law allows for a variety of arrangements that might be considered in connection with the re-Takaful fund. For example, it might be held on a ring fenced basis that is purely contractual, through a trust or in a segregated accounts company. Care would need to be taken to ensure the arrangement remains Shariah compliant even on a dissolution or winding up of the operator, since surplus in the re-Takaful fund must not revert to the operator or any liquidator of the operator (other than to settle amounts to which the operator is contractually entitled).

Additional structuring optionsThe Segregated Accounts Companies Act 2000 (SAC Act) sets out rules governing the operation of segregated accounts. While separate accounts to manage risk may be created contractually, SACs are an increasingly popular option for insurers who need to differentiate between categories of risk and accordingly register under the SAC Act.

Figure 2: Third party arrangement (based on Wakalah-Mudarabah hybrid model)

Capital Profits

Wakalah fee for underwritingactivities (based on % ofcontributions)

Interestfree loan (returned out of future years’ surplus)

Mudarabah profitshare forinvestmentactivities

Net surplus paid to participantsunder Mudarabah agreement

Contributions(less Wakalah fee)

Contributions

SHAREHOLDER(S)

TAKAFUL OPERATOR

CAPTIVEMANAGEMENT

EXPENSESAND

GENERALOVERHEADS

REINSURANCEPREMIUMS/RE-TAKAFUL

CONTRIBUTIONS

CLAIMS

RESERVES

SHARIAH COMPLIANT INVESTMENTS

TAKAFUL FUNDS

BERMUDA INSURANCECOMPANY

PARTICIPANTS (INSURED)

SURPLUS

Contributions madeon terms of “policy”(Mudarabah/Wakalahagreement)

continued...




Given that the Takaful fund must be kept entirely separate from the funds belonging to the operator and there can be no cross contamination of assets and liabilities, a SAC could be a useful Takaful structuring tool. A SAC could be used wholly for Takaful business, or by a conventional (re)insurer who wishes to operate a Takaful or re-Takaful window without having to incorporate and license a new entity.

Since Takaful operators receive fee income which will by defi nition be Shariah compliant, operators may wish to diversify by offering Shariah compliant securities, which would give them the option of accessing the Islamic capital markets. Such instruments could play a part in an increasingly diversifi ed Islamic capital market. The potential to operate SACs may be advantageous in this regard.

In addition, while we do not consider that Bermuda’s existing legal and regulatory framework would pose any substantive obstacles to Takaful, it is worth noting that it is possible to petition the Bermuda Parliament for private bespoke legislation to give enhanced fl exibility, and a number of Bermuda reinsurers and fi nancial institutions are governed by private act.

Additional issues arisingShariah complianceThe requirement to ensure compliance with Islamic principles arises in every Takaful structure. While contractual and constitutional documents will be subject to any secular laws which may apply (by choice or by operation of law), they also must conform to Shariah. The BMA is of course a secular regulator.

Even in Islamic countries the regulator typically does not determine whether an arrangement accords with Shariah. Rather, this requirement is devolved to a Shariah board established by the Takaful operator. The regulator requires the operator to provide evidence that the board has been established and has signed off on the arrangement. It is to be expected that the BMA would impose a similar requirement.

EnforcementAs a self governing overseas territory of the UK, Bermuda’s legal system is based upon that of the UK, and decisions of the English and other Commonwealth courts are highly persuasive. The Supreme Court of Bermuda is the fi rst instance court in Bermuda, exercising unlimited jurisdiction. An appeal lies as of right to the Court of Appeal for Bermuda and thereafter, in more limited circumstances, to the Privy Council.

The question arises as to how the Bermuda courts might deal with disputes involving Takaful contractual arrangements, a point highlighted by the recent English High Court ruling on an appeal from

summary judgment in The Investment Dar Company (TID) versus BLOM Development Bank [2009].

A lesson learned from the TID case applicable to Takaful operations is that one should not rely solely on the approval of a Shariah board to establish compliance. While obviously not unique to Takaful or Islamic fi nance matters, it is key to ensure that the transaction is within the objects of the relevant company and conforms to other provisions in its constitutional documents, although additional steps should be taken, including requiring parties to waive any defence of non-compliance and/or to obtain independent Shariah advice.

It should be noted that substantive contracts involved in setting up and operating a Takaful arrangement involving a Bermuda entity (in-cluding the Wakalah and/or Mudarabah contracts and the Qard loan facility) generally need not be governed by Bermuda law, other than in relation to matters such as capacity, which are of necessity governed by local law.

The Bermuda courts generally recognize the validity of foreign choice of law provisions and submission to the jurisdiction of overseas courts and tribunals. To the extent that judicial resolution of disputes may be inappropriate, the parties could provide for arbitration. It stands to reason that only tribunals with Takaful expertise should hear cases involving potential default in Takaful arrangements based on Shariah principles.

The way forwardDespite the growth predictions for Takaful, it has suffered during the downturn alongside the rest of the global insurance industry. Nonetheless, projections suggest that Takaful is set to remain the fastest growing area of insurance in the world, including in Western countries.

As a jurisdiction with a potentially advantageous legal and regulatory framework, an established captive insurance and reinsurance market and an interest in opening up to Islamic capital markets, Bermuda provides a unique opportunity for the re-Takaful industry — and vice versa.

The authors gratefully acknowledge the kind assistance of Peter Hodgins, partner at Clyde & Co, Dubai in reviewing the article. This article is not intended to be a substitute for legal advice or a legal opinion. It deals in broad terms only and is intended to merely provide a brief overview and give general information.

Claire McConwayAssociateConyers Dill & PearmanEmail: [email protected] Prior to joining Conyers, Claire spent fi ve years in the London offi ce of US fi rm King & Spalding where she advised on the corporate aspects of Shariah compliant fi nance transactions and investment structures.

Kerri LefebvreDirectorConyers Dill & PearmanEmail: [email protected] has advised issuers and underwriters in connection with IPOs and follow on offerings of debt and equity listed on the NYSE, the Nasdaq, the LSE and other exchanges.

“A lesson learned from the TID case applicable to Takaful operations is that one should not rely solely on the approval of a Shariah board to establish compliance”


www.islamicfi nancenews.comSECTOR REPORT

The wake up call of the fi nancial crisis has made the need for global accounting and fi nancial reporting standards more pertinent than ever before, as investor and regulator demands for transparency, disclosure and demonstrating best practices increase. As a consequence of globalization and the growing role of Islamic fi nance within the wider fi nancial services industry, players within the Islamic fi nance arena have been active parties in the undertaking to reinforce and homogenize accounting and reporting standards.

Many countries and institutions did not wait for the crisis to start developing common accounting and reporting standards. As early as 1997 the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) was created with this aim. It currently has over 200 members across 46 countries adhering to its guidelines.

Similarly, the International Accounting Standards Board (IASB) has been working towards global convergence of accounting standards for over ten years, proposing the now widely applied International Financial Reporting Standards (IFRS). Since 2008, at the initiative of China, Japan and Korea, the Asian-Oceanian Standard-setters Group (OSG) has been taking part in the IFRS debate, representing the viewpoints of the region on the evolution of those standards. In particular, this group has been closely looking at technical fi nancial reporting issues relating to Islamic fi nance.

As a matter of fact, there is much to gain in using common standards in fi nancial accounting and reporting for both Islamic and conventional fi nance, in terms of increased transparency and comparability of the reporting for regulators and investors worldwide. Moreover, IFRS’s standards are principles based rather than legal based, which makes them applicable to Islamic fi nance, provided that concerned states issue the appropriate complementary guidelines and obligations.

Indeed, while Islamic and conventional fi nance are distinct systems which work differently, in terms of accounting and reporting, the principles are the same, with an aim at accounting for transactions and values.

All states should have a set of standards to ensure the quality and transparency of reporting, and international convergence of these standards can only contribute to greater comparability, and therefore better information, providing for local exceptions and specifi cities.

These specifi cities, however, are still the object of much discussion, and may prove to be a challenge to fi t within the existing framework provided by IFRS to date. Some conventional accounting principles are not necessarily applicable to Islamic fi nancial transactions, nor would they require additional disclosure and explanation.

In addition, for conventional and Islamic fi nancial institutions alike, the adoption of IFRS affects more than just accounting policies and fi nancial reporting. Many aspects of an organization’s business could be affected. The adoption of IFRS may have a transformational impact on fi nancial reporting systems, internal controls, taxes, treasury and cash management with an extended impact on employees, processes, and systems.

Therefore, institutions wishing to implement IFRS or to produce reporting under both IFRS and their national standards may require changes to their operational and technology environments. In many cases, the requirements for IFRS are less specifi c than local standards such as US-GAAP and as such, in many cases treatment under these local standards will work for IFRS.

However, some differences will require different accounting treatment or reporting and therefore have an impact on how fi rms operate and account for their investment activity.

High level considerations include:1. Pricing

Firms that are currently valuing investments using only one type of price under their current standards will need to accommodate additional prices for valuing their assets under IFRS. Depending on how fi rms gather prices and value their investments, this may represent a technology change, as many fi rms are using technology to automate the process of price collection and position valuation.

2. Trade versus settle date representationFirms moving to IFRS who want to report initial recognition of positions as of settle date will need to ensure they are capturing settlement date information. Firms that are tracking positions only based on trade date may not be capturing settle date information today.

3. Transaction costsUnder some accounting standards, transaction costs can be recognized as part of an investment’s cost basis. As such, fi rms may not be tracking these separately from investment cost. Under IFRS, transaction costs may need to be expensed. Firms that are not currently differentiating transaction costs from the investment cost will need to identify transaction costs so that different treatments may be applied.

More specifi cally, IFRS reporting has specifi c requirements that organizations will need to cater for, such as:

1. Statement of cash fl owsThis statement is required for IFRS, and even for fi rms that currently provide it under their local standards, the potential exists for classifi cation differences. In both cases, fi rms will need to capture cash activity with enough detail to generate the statement of cash fl ows and classify appropriately on statements.

2. Classifi cation of investor ownership IFRS requires that investor capital be split between share capital, premium, and surplus. Firms that were not previously tracking different types of ownership may need to do so to report accurately.

Which Accounting Standards? By Kaushiq Kodithodika

continued...

“IFRS’s standards are principles based rather than legal based, which makes them applicable to Islamic fi nance”



Which Accounting Standards? (continued)

3. Recognition of unrealized and realized price and currency gainsUnder some standards such as US-GAAP, fi rms must distinguish between realized and unrealized gains and price and foreign exchange gains. IFRS does not require this. This is an example where a local standard can be more specifi c, and while this may not change current operations for a fi rm adopting IFRS, it may require technology to report both ways without manual effort to combine gains for IFRS.

4. Functional currencyUnder a number of local standards, it is possible for a fund to have different functional currencies. IFRS, on the other hand, does not allow for this. In order to meet IFRS requirements, fi rms therefore need to ensure that additional foreign exchange rates to and from additional functional currencies are captured and must have the ability to restate in multiple currencies.

5. Segment reportingIFRS requires separate sub-reporting for business unit or geographic segments. If they are not already doing this, fi rms will need to start tracking and associating all investment activities to the appropriate segments.

6. Risk reportingIFRS requires disclosures related to the nature and extent of risk exposure of investments. The types of risk that must be reported include liquidity risk, market risk, and currency risk.

Institutions wishing or obliged to cater to IFRS standards, either in addition to local standards or in replacement of these, will therefore not only be faced with the specifi cities of exceptions for Islamic fi nance and the additional rules that may be applied by their national regulator, but will also have to consider whether their current frameworks and systems can carry the strain of these new requirements.

Firstly, the system must allow fi rms to capture any additional data needed to ensure proper treatment and reporting of accounting results.

Secondly, the system must be fl exible enough to apply different sets of accounting rules to the same underlying data sets. And thirdly, the system must be able to present the results in ways that are compliant with both standards without ongoing manual intervention.

In spite of these challenges, IFRS is being applied today in more than 100 countries where its use is either required or permitted. The

major breakthrough occurred in 2002 when the European Union (EU) required all European-listed companies to adopt IFRS by 2005. Since then, several countries outside the EU have followed and IFRS has gained acceptance as a set of global standards specifi cally among multinational organizations.

However, convergence is not yet a reality within the Islamic fi nancial community, with a number of players opting for IFRS and a convergence of standards, some not permitting them, and others implementing them with local adaptations.

For example, IFRS are required for all listed companies in countries like the UAE or Egypt and permitted in Brunei and Yemen, but are not permitted in Indonesia, Iran or Pakistan. Libyan stock market regulations require the use of IFRS for all listed companies and the Libyan Banking Law requires the use of IFRS for all commercial banks, however, it would seem that they have yet to put IFRS in practice.

The Philippines are adopting IFRS as Philippines Financial Reporting Standards (PFRS), after various modifi cations were made. Malaysia has announced a plan to ‘bring Malaysian GAAP into full convergence with IFRS effective the 1st January 2012’.

Therefore, while the debate is still seemingly rife on global accounting standards for Islamic fi nance, the need for such standards has been widely acknowledged. The fi nancial crisis underlined the multiple connections and dependencies of conventional and Islamic fi nancial centres and helped build the momentum of a convergence towards internationally accepted and recognized standards, as a basis for higher quality reporting, transparency and comparability.

Used in conjunction with national standards which will cater to specifi c local practices, these widely recognized standards will in turn reinforce investor confi dence and favour international investments and economic growth.

Kaushiq KodithodikaRegional sales director, MENAAdvent SoftwareEmail: [email protected] Kaushiq Kodithodika has been working in the MENA region for 15 years, collaborating closely with a variety of Islamic fi nancial institutions. In his current position at Advent, his role is to identify clients’ needs and to have an ongoing dialogue with key players in the market and regulatory evolutions which impact clients’ businesses.

“The adoption of IFRS may have a transformational impact on fi nancial reporting systems, internal controls, taxes, treasury and cash management with an extended impact on employees, processes, and systems”

“Therefore, while the debate is still seemingly rife on global accounting standards for Islamic fi nance, the need for such standards has been widely acknowledged”



When most of the world accounts under IFRS, what should be AAOIFI’s role with regard to accounting standards?

At Islamic fi nance events, participants often ask whether Islamic fi nancial institutions should account under International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Boar d (IASB) or under the Financial Accounting Standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). While this question is common, a more fundamental question is “What is the proper role of AAOIFI with regard to accounting standards?”

AAOIFI was established after an agreement signed by various Islamic fi nancial institutions on the 26th February 1990 and was registered in Bahrain as an international autonomous non-profi t making corporate body on the 27th March 1991.

At that time, local country accounting standards were not well established in the Middle East and a need was clearly felt for the establishment of accounting standards for Islamic fi nancial institutions that would be harmonized across countries.

AAOIFI has also established a Shariah board which is highly respected, and is probably the leading global setter of Islamic fi nance Shariah standards. However the organization’s name clearly indicates that it regards its main focus as being accounting and auditing standards setting.

AAOIFI’s limited geographical reachThe 2010 edition of AAOIFI’s “Accounting, Auditing and Governance Standards for Islamic Financial Institutions” shows that AAOIFI’s Accounting and Auditing Standards Board is heavily dominated by the Middle East. The 15 members (ignoring the secretary general) come from only the following countries — Kuwait (1), Bahrain (5), Saudi Arabia (2), Lebanon (1), UAE (2), Jordan (1) and Qatar (1) with only Malaysia (2) from outside the Middle East.

A review of AAOIFI’s membership list published in the same volume shows that it has many member Islamic fi nancial institutions drawn from outside the Middle East. For example, both Kenyan Islamic banks (First Community Bank and Gulf African Bank) are members, and so are two (European Islamic Investment Bank and Gatehouse Bank) of the fi ve Islamic banks established in the UK. However it is striking that the other three UK Islamic banks do not feel any need to join AAOIFI.

Unlike the situation in 1990, by 2011 IFRS have become almost universally accepted in Europe, Asia, Oceania, Africa, Latin America and the Caribbean.

The only signifi cant country that still clings to its domestic accounting standards is the US, but the US accounting standards setter,

the Financial Accounting Standards Board (FASB) has signed a memorandum of understanding with the IASB with the purpose of converging FASB standards and IFRS. The goal of convergence is that well before the end of this decade US companies should account under IFRS.

Islamic fi nancial institutions are required to use the system of accounting standards which is mandated by the fi nancial services regulator of the country in which they are based.

Accordingly, Islamic fi nancial institutions based in the US must use FASB accounting standards, while almost everywhere else they account under IFRS, although limited time and the variable quality of English language information disclosure makes exhaustive verifi cation of this impractical.

However it is practical to review the position in the countries closest to AAOIFI’s base, namely the countries of the Gulf Cooperation Council (GCC). A review of published accounts for 2009 shows the following:

Country Islamic fi nancial institutions reviewed

Accounting standards used

Kuwait Kuwait Finance House IFRS

Bahrain Al Salam Bank-Bahrain AAOIFI

Qatar Qatar Islamic Bank AAOIFI

Saudi Arabia Al Rajhi Banking and Investment Corporation

IFRS

UAE (Dubai) Dubai Islamic Bank IFRS

UAE (Abu Dhabi) Abu Dhabi Islamic Bank IFRS

The writer understands that Oman does not have any Islamic banks (none are members of AAOIFI) although some websites list certain entities as offering Islamic fi nancial services. The accounts of one Omani bank, Oman Arab Bank SAOC, were reviewed. It accounts under IFRS although there is no indication from the accounts that it is an Islamic Financial Institution.

Accordingly, even within the GCC, AAOIFI accounting standards are used by only two countries, Bahrain, the country where AAOIFI is established, and its neighbor Qatar. All other GCC countries use IFRS. While both Bahrain are important countries for Islamic fi nance, they only represent a small minority of the global Islamic fi nancial services industry.

The purpose of accountingBefore drawing any conclusions from the almost universal non-use of AAOIFI’s accounting standards, it is helpful to consider the purpose of accounting. Both standard setting organizations have set out their views.

AAOIFI’s “Statement of Financial Accounting No. 1: Objectives of Financial Accounting for Islamic Banks and Financial Institutions” was published in 1993. The introduction to that statement says: “Financial accounting in Islam should be focused on the fair reporting of the entity’s fi nancial position and results of its operations, in a manner that would reveal what is halal (permissible) and haram (forbidden).

Section 6/2 of the standard sets out the objectives of fi nancial reports in six paragraphs of which the fi rst is “6/2(a) Information about the

AAOIFI’s Proper Accounting Standards RoleBy Mohammed Amin

continued...

“The two standard setting organizations have entirely different priorities”



AAOIFI’s Proper Accounting Standards Role (continued)

Islamic bank’s compliance with the Islamic Shariah and its objectives and to establish such compliance; and information establishing the separation of prohibited earnings and expenditures, if any, which occurred, and of the manner in which these were disposed of.”

In 2001 the IASB adopted its “Framework for the Preparation and Presentation of Financial Statements.” Paragraph 12 states: “The objective of fi nancial statements is to provide information about the fi nancial position, performance and changes in fi nancial position of an entity that is useful to a wide range of users in making economic decisions.”

These quotations demonstrate that the two standard setting organizations have entirely different priorities.

In the writer’s opinion, a key criterion for accounting is comparability; two organizations that carry out transactions which have identical economic effects should account for the transactions in the same way. Comparability breaks down when AAOIFI requires transactions to be accounted for differently from IFRS standards.

One simple example is leasing in cases where the asset is to be transferred to the lessee by a gift, Ijarah Muntahia Bittamleek, covered in AAOIFI’s FAS No 8 paragraph 2/2(a). AAOIFI requires the leased asset to be held on the lessor’s balance sheet and depreciated.

IFRS would clearly regard such a transaction as a fi nance lease, removing the asset from the lessor’s balance sheet and instead accounting only for a fi nance lease receivable.

What should AAOIFI be doing with regard to accounting?It is pointless for AAOIFI to continue to issue accounting standards in competition with the IASB, when those standards are going to be ignored outside a few countries.

This represents a waste of limited resources, and also reduces the comparability of Islamic fi nancial institutions’ accounts since AAOIFI accounts are not directly comparable with IFRS accounts.

AAOIFI’s accounting resources would be more usefully directed to collaborating with the IASB. The following goals come to mind immediately, although as the collaboration developed other goals would also most likely emerge:

1. Islamic banks accounting under IFRS will of course show the same numbers in their fi nancial statements and balance sheets as would conventional banks undertaking identical transactions. However Islamic investors need additional

information which is not mandated by IFRS, for example the amount on which they should pay zakat in respect of their shares. In most cases Islamic fi nancial institutions accounting under IFRS are likely to provide this information voluntarily; for example in its 2009 accounts the UK’s European Islamic Investment Bank provided a fi gure computed using AAOIFI’s standards. It would be desirable to have IFRS mandate a standard method of calculation for IFRS accounting entities that wished to make such a disclosure.

2. Muslims represent a growing proportion of the investor base of conventional non-fi nancial companies that account under IFRS. It would be desirable for such companies to give a voluntary disclosure in their accounting notes regarding the amount of their dividends that arise from sources that are regarded as impure by Shariah scholars, computed in a standardized way.

To conclude, while it may appear radical for AAOIFI to cease issuing accounting standards, this would enable it to become globally relevant by partnering with the IASB.

Mohammed AminIslamic fi nance consultantEmail: [email protected] Mohammed Amin MA FCA AMCT CTA (Fellow) was previously UK head of Islamic fi nance at PricewaterhouseCoopers.

“While it may appear radical for AAOIFI to cease issuing accounting standards, this would enable it to become globally relevant by partnering with the IASB”

MODERN FINANCIAL TECHNIQUESFOR ISLAMIC BANKING & FINANCE

www.IslamicFinanceTraining.com

KUALA LUMPUR11th – 13th April

8th - 10th MayCAIRO

14th - 16th JuneDUBAI

20th - 22th June

LAGOS


www.islamicfi nancenews.comMARKET REPORT

Banking in Africa is becoming increasingly customer driven, with banks moving to tailor their products and services to meet the needs of people who have specifi c banking requirements. Nowhere is this truer than in Tanzania where Stanbic Bank, a subsidiary of the Standard Bank Group, has been proactively structuring new offerings to adhere to Islamic religious teachings.

In order to respond to the call for appropriate banking products from its Muslim community, Stanbic Bank Tanzania has conducted wide ranging research and cooperated with Islamic religious authorities, says Bashir Awale, the bank’s managing director. According to Awale, each new service and product developed involves an intensive process that begins within the bank where a committee meets regularly with Islamic scholars who are authorities in the interpretation of Shariah law as it applies to fi nancial services. “Shariah law governs the way in which Muslims follow their faith, conduct their lives and utilize their day-to-day fi nancial products, so the provision of banking facilities to the Muslim community must strictly conform to this system.”

At the base of the Shariah law is a requirement that is totally opposite to the way that Western banking has been conducted for hundreds of years. At the foundation was the establishment of a Shariah council, which oversees all operational issues regarding product delivery. This ensures the Shariah compliance of all products and services offered. The next step was to ensure that the most common banking products were developed fi rst. Accordingly, Stanbic examined those products primarily needed on an everyday basis, and so introduced transactional accounts to the Muslim community in Tanzania.

The fi rst product to be delivered was a ‘TransactPlus’, the fi rst transactional and cheque account in Tanzania that totally meets Shariah requirements. With its emphasis on convenience this product offers features such as internet banking, debit cards and the ability to access prepaid cellular phone services.

During the course of the new fi nancial year, Stanbic Bank will focus on developing and introducing a number of additional new products that will meet the diversifi ed needs of the Muslim community, whether they are customers interested only in transactional products or those conducting international businesses that trade across Tanzanian borders.

Although Islamic fi nance is progressively being integrated into the international fi nancial system, there is still a need for supervisory authorities and policy makers in emerging markets to become more involved in the process. Fazal Saib, the director of Shariah and specialized banking at Standard Bank Africa argues that a substantial investment of time will be needed to negotiate and develop an international Islamic fi nancial system.

“Policy makers are aware of the issues and the requirements of this signifi cant sector of the market. However, this has to be translated into action so that the gap separating policy and practical implementation is removed,” says Fazal. “As can be expected, dealing with fi nancial matters that are totally intertwined with a religious belief system requires that all aspects of policy are carefully evaluated before decisions can be implemented. We have a cordial relationship

with the Bank of Tanzania which has demonstrated a careful, yet accommodating and pragmatic approach to our suggestions regarding Shariah banking,” said Fazal.

What is happening in Tanzania is true for the entire African continent. There is an increasing understanding that the Muslim community represents a major growing market. Yet there is still a lot of work to be done in this segment, however, there is no doubt that Islamic banking is enjoying the attention of African authorities on a widespread basis.

The central pillar of effective banking is effective risk management. Taking a conventional banking system and building in specialized products and services that take Islamic beliefs into account does not alter this approach. ”The risks are no different from any fi nancial institution that is dealing with public money. The rules of central banks still apply to the Islamic customer.”

With all the attention and potential market growth, Islamic banking is faced with two challenges that are holding back its rise in the market place. First, is the absence of capacity building of Islamic bank institutions. Second, is the lack of awareness of Islamic banking products among targeted population.

Stanbic Bank believes that it must take the time to consult and work together with the authorities to launch appropriate products. These products will eventually be popularized through marketing to become integrated within the Muslim community. “We have seen that many universities and tertiary institutions are now offering courses in Islamic banking. As this trend of educating people about Islamic banking continues, further benefi ts will be derived from the promotion and spread of information via awareness campaigns. Undoubtedly, this process will involve religious institutions and the fi nancial industry.”

At its most basic, there is no doubt that Tanzania as a country will gain economically from a growing Islamic banking sector. As more products become available, so will banking become more popular among the country’s citizen. This will result in previously unbanked people partici-pating in mainstream fi nancial activities. Governments will therefore get a better perspective on how their economies are performing. “On the commercial side, there is no doubt that competition for Muslim customers and market share will increase. This can only be good for all concerned. We are determined, though, that Standard Bank will be amongst the leaders as this new, exciting sector develops,” concludes Fazal.

For the Standard Bank Group, Tanzania presents the beginning of its investment into Shariah banking on the African continent. By taking lessons learned from Tanzania, Standard Bank will soon be in a position to expand this offering to other markets.

Stanbic Bank TanzaniaEmail: [email protected] Bank, also trading as Stanbic Bank, is part of one of Africa’s leading fi nancial services groups, the Standard Bank Group, which is based in South Africa and listed on the Johannesburg Securities Exchange.

Meeting Changing Banking Needs in AfricaBy Stanbic Bank Tanzania


www.islamicfi nancenews.comMEET THE HEAD

Could you provide a brief journey of how you arrived where you are today?

During Mayfair Pacifi c Financial Group’s visits to the Middle East starting from 2006, we noticed the growth potential of Islamic fi nance. In 2008, we launched the fi rst ever Mayfair Islamic Greater China SP (MIGC) which provides alternate Shariah compliant investment opportunities in the Greater China region, covering China, Taiwan and Hong Kong. We continue to speak and participate in different Islamic fi nance forums worldwide.

What does your role involve?My role involves company management including strategic planning, marketing and fund management.

What is your greatest achievement to date?The launch of the MIGC in 2008.

Which of your products / services deliver the best results?

MIGC continues to outperform the Islamic benchmark, provide quality investment opportunities in Greater China, and help to improve risk adjusted return on our clients’ portfolios.

What are the strengths of your business?Our business strives to offer clients total investment solutions via full discretionary investment management services covering investments in all major asset classes in both developed and emerging markets; and for both conventional and Shariah compliant investments. We are a one-stop platform. Not only do we manage in-house products, we also collaborate with strategic partners and offer investment management services to third party funds.

What are the factors contributing to the success of your company?

With strong support of the Hong Kong government promoting Hong Kong as an Islamic fi nancial centre, we have taken the lead in launching the fi rst Islamic Greater China equity fund. Government representatives are aware and fully supportive of our role as one of the leading Islamic fi nance players in Hong Kong. Our professional management team comprises of seasoned professionals who command proven track records and a wide range of

industry knowledge and experience. We focus not only on conventional investments but also Islamic products.

Also, leveraging on the long-established Greater China network, we have further extended our footprint through our affi liates, strategic partners and distribution networks to the Gulf Cooperation Council, the UK, Japan, and ASEAN countries. This provides us with the best platform to explore cross border investment opportunities.

What are the obstacles faced in running your business today?

After the 2008/09 fi nancial crisis, overall investment sentiment weakened and local investment regulations have become more stringent. This has further discouraged investors’ appetites on both Islamic and conventional funds, and other investment vehicles.

Typical investors view Islamic funds as religious funds which cater only for Islamic investors. To overcome this, Mayfair Pacifi c participates in different forums explaining the principles and benefi ts of Islamic investments as an alternative to conventional funds; and emphasize that Islamic funds are suitable to all investors, regardless of religious background. There is still room for the Hong Kong government to bring in better Islamic guidelines and impose tax incentives to attract more Islamic industry players, Islamic banks and fi nancial institutions, Islamic legal professionals, Islamic investment expertise and Islamic investors from overseas.

Where do you see the Islamic fi nance industry in, say, the next fi ve years or so?

There continues to be a huge potential growth for Islamic fi nance in Asia. For example, Ningxia Islamic Bank opened in North West China in 2009 and the Economic and Technological Cooperation Offi ce of the People’s Government of Ningxia Hui Autonomous Region has recently appointed Mayfair Pacifi c as their chief representative to promote their Islamic investments. With further awareness of the Islamic world, we expect more countries to become more confi dent in exploring and accepting Islamic products as an alternative to conventional funds.

We also foresee a growing pool of talent and expertise in Islamic fi nancial development. The Hong Kong University School of Professional and Continuing Education and the Chinese University of Hong Kong have been providing Islamic fi nance courses to professionals, and related topics are also covered in some MBA courses, not to mention other professional bodies.

Name one thing you would like to see change in the world of Islamic fi nance.

We would like to see more innovative and dynamic Islamic investment products be introduced to the market. If the implementation of a well defi ned global fi nancial architecture for Islamic fi nance in each respective country can be expedited, we will see a broader and faster development of Islamic fi nance which will encourage more cross border transactions and build up investors’ confi dence on the Islamic fi nance industry globally.

Islamic Finance news talks to leading players in the industry

Name:

Position:

Company:

Based:

Nationality:

Christina Tung

Managing director

Mayfair Pacifi c Financial Group

Hong Kong

Chinese


www.islamicfi nancenews.comTERMSHEET

SUMMARY OF TERMS & CONDITIONS

LBS Bina Islamic Commercial Papers/Islamic Medium Term Notes Program

(ICP/IMTN Program)

Issuance of RM20 million(US$6.6 million) of the RM135 million (US$44.46 million) ICP/IMTN Program

(Third Issuance)

17th January 2011

Obligor/Issuer LBS Bina Group

Tenor 2.5 years

Return 4.05%

Payment Semi annually

Maturity date 17th July 2013

Main lead manager MIMB Investment Bank

Legal advisor Soo Thien Ming & Nashrah

Trustee Equity Trust (Malaysia)

Governing law Malaysia

Purpose of issuance Primarily for fi nancing several residential develop-ment projects in Malaysia.

Principal activities Property development and investment holdings

Rating ‘AAA(fg)’ by Malaysian Rating Corporation

Shariah Advisor The Shariah committee of EONCAP Islamic Bank

Structure Sukuk Mudarabah

Tradability Tradability

The Q&A was conducted with Lim Hock San, managing director of LBS Bina Group:

1. Why did you use this particular Islamic structure? We wanted the Islamic structure to mirror closely our business operation. In summary, the issuer, LBS Bina Group, acts as the

entrepreneur and uses its skills and experience as a property developer for the investors (such as the Sukuk holders) where the Sukuk holders are the capital providers.

In addition, the large liquidity pool in the Malaysian Islamic capital market allows LBS to diversify its sources of funding while lowering the cost of fi nancing as compared to conventional fi nancing.

The Sukuk’s rating is enhanced by the involvement of Danajamin Nasional in the fi nancing structure which ultimately benefi ts the investors who could enjoy the yield with peace of mind.

2. What will this capital be used for? The funds raised will mainly be utilized for LBS’s residential development projects in Puchong, Selangor; Cameron Highlands, Pahang

and Batu Pahat, Johor.

3. What were the challenges faced and how were they resolved? The main challenge for us was the packaging of the whole transaction as we were the fi rst issuer to issue a Sukuk with Danajamin’s

assistance. The challenge was resolved by having a committed in-house team working closely with Danajamin and our external advisors.

4. Geographically speaking, where did the investors come from? The entire Sukuk issuance is arranged by the lead arranger, MIMB Investment Bank and the investors were mainly from Malaysia.

5. Was this deal rated? Yes. The Sukuk program fetched an ‘AAA(fg)’ rating, the highest rating accorded to securities by the Malaysian Rating Corporation.


www.islamicfi nancenews.comDEAL TRACKER

Mr Daud Abdullah (David Vicary)Global Leader

Global Islamic Finance Group, Deloitte

Prof Dr Mohd Masum BillahGroup Executive ChairmanMiddle Eastern Business

World Group of Companies

Dr Humayon DarChief Executive Offi cer

BMB Islamic

Mr Badlisyah Abdul GhaniChief Executive Offi cer

CIMB Islamic

Ms Baljeet Kaur GrewalManaging Director/Vice Chairman

Head, Global ResearchKFH Research Limited

Mr Sohail JafferPartner

International Business Development FWU International

Dr Monzer Kahf Consultant/Trainer/Lecturer

Private Practice

Mr Mohamed Ridza AbdullahManaging Partner

Mohamed Ridza & Co

Prof Bala ShanmugamDirector of Banking & Finance

Taylors University Malaysia

Mr Muhammad Nejatullah SiddiqiAuthor, Scholar, Speaker, Trainer

Mr Rushdi SiddiquiHead of Islamic Finance

Thomson Reuters

Mr Dawood TaylorRegional Senior Executive-Middle East

Prudential PLC

Mr Abdulkader ThomasPresident & CEO

SHAPE – Financial Corp

Mr Paul WoutersPartner

Bener Law

Prof Rodney WilsonDirector of Postgraduate Studies

Durham University

Mr Sohail ZubairiChief Executive Offi cer

Dar Al Sharia Legal & Financial Consultancy

Islamic Finance newsAdvisory Board:

Another Islamic Finance news exclusive

ISSUER SIZE INSTRUMENT

Qatar International Islamic Bank

US$500 million Sukuk

Malaysian government TBA Sovereign Sukuk

Dana Gas US$1 billion Sukuk

Amana Takaful LKR750 million Sukuk

Bizim Securities, Turkey TRL100 million Sukuk

Antara Steel Mills RM300 million Sukuk

Brazil TBA Sukuk

General Authority of Civil Aviation, Saudi Arabia

SAR15 billion Sukuk

Kazakhstan TBA Sukuk

Albaraka Turk Katilim Bankasi TBA Sukuk

Franklin Templeton TBA Sukuk

Gulf Investment Corporation RM3.5 billion Sukuk

CIMB Islamic TBA Sukuk

France TBA Sukuk

Bank Negara Malaysia TBA Sukuk

Nakheel TBA Sukuk

General Electric TBA Sukuk

Kenchana Petroleum Malaysia

RM350 million Sukuk

Senegal Ministry of Finance TBA Sovereign Sukuk

Palestine Monetary Authority US$50 million Sukuk

Credit Agricole US$3 billion Sukuk

Saudi International Petrochemical Company

SAR1.5 billion Sukuk

UK Islamic Finance Secretariat

TBA Sterling denominated Sukuk

Sabah Credit Corporation RM1 billion Sukuk

Dubai Department of Finance US$1.5 billion Sukuk

International Islamic Liquidity Management

TBA Sukuk

National Commercial Bank, Saudi Arabia

TBA Sukuk

KPJ Healthcare Malaysia RM500 million Sukuk

Karachi Stock Exchange TBA Sukuk

Islamic Bank of Thailand THB5 billion Sukuk

Al Barakah Bank Egypt TBA Sukuk

Islamic Development Bank US$500 million Sukuk

For more details and the full list of deals visit www.islamicfi nancenews.com

Keeping you abreast of the world’s upcoming Shariah compliant deals


www.islamicfi nancenews.comISLAMIC FUNDS TABLES

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

Contact EurekahedgeTo list your fund or update your fund information: [email protected]

For further details on Eurekahedge: [email protected] Tel: +65 6212 0900

Sharpe ratio for ALL funds (as of the 9th February 2011)

FUND FUND MANAGER PERFORMANCE MEASURE FUND DOMICILE

1 Atlas Pension Islamic - Debt Sub Atlas Asset Management 5.28 Pakistan

2 SR International Trade Finance - (Al Sunbula) Samba 3.70 Saudi Arabia

3 Al Rajhi Commodity Mudarabah - USD Al Rajhi Bank 3.48 Saudi Arabia

4 USD International Trade Finance - (Al Sunbula) Samba 3.20 Saudi Arabia

5 Al Rajhi Commodity Mudarabah - SAR Al Rajhi Bank 2.42 Saudi Arabia

6 BNI Dana Syariah BNI Securities 1.52 Indonesia

7 Am-Namaa' Asia-Pacifi c Equity Growth AmInvestment Management 1.42 Malaysia

8 Atlas Pension Islamic - Money Market Sub Atlas Asset Management 1.21 Pakistan

9 Namaa' Asia-Pacifi c Equity Growth AmInvestment Services 0.97 Malaysia

10 Mega Dana Obligasi Syariah Mega Capital Indonesia 0.81 Indonesia

* Eurekahedge Islamic Fund Index 0.08

Top 10 Islamic Funds by Key Performance Statistics

YTD returns for ALL funds (as of the 9th February 2011)

FUND FUND MANAGER PERFORMANCE MEASURE FUND DOMICILE

1 AmOasis Global Islamic Equity AmInvestment Management 4.09 Malaysia

2 CIMB Islamic Equity Aggressive CIMB-Principal Asset Management 3.79 Malaysia

3 Atlas Pension Islamic - Equity Sub Atlas Asset Management 3.54 Pakistan

4 UBS Islamic - Global Equities (USD) UBS Islamic Fund Management Company 3.44 Luxembourg

5 CIMB Islamic DALI Equity Theme CIMB-Principal Asset Management 2.47 Malaysia

6 AmIslamic Growth AmInvestment Management 2.31 Malaysia

7 AmIslamic Balanced AmInvestment Management 2.22 Malaysia

8 AmIttikal AmInvestment Management 2.07 Malaysia

9 CIMB Islamic Small Cap CIMB-Principal Asset Management 1.97 Malaysia

10 CIMB Islamic DALI Equity Growth CIMB-Principal Asset Management 1.93 Malaysia

* Eurekahedge Islamic Fund Index -0.48

Inde

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70

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100

110

120

130

140

150

Dec-99

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Feb-01

Sep-01

Apr-02

Nov-02

Jun-03

Jan-04

Aug-04

Mar-05

Oct-05

May-06

Dec-06

Jul-07

Feb-08

Sep-08

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Jun-10

Jan-11


www.islamicfi nancenews.comDATARED

REDmoney GLOBAL SHARIAH INDEX SERIES (All Cap) 6 Months REDmoney GLOBAL SHARIAH INDEX SERIES (Large Cap) 6 Months

INDEX Last (US$) MTD (%) 3 Months (%) 6 Months (%) YTD (%) 1 Year (%) 2 Years (%)

REDmoney US All Cap 980.78 1.92 8.56 18.30 -1.59 9.15 34.43

REDmoney MENA All Cap 622.69 2.18 0.41 6.64 0.98 8.24 39.38

REDmoney GCC All Cap 623.56 2.76 2.22 8.85 -0.99 12.76 38.69

REDmoney Europe All Cap 807.07 0.85 3.43 16.83 1.18 15.55 45.75

REDmoney Global All Cap 896.51 1.45 5.24 17.65 1.13 21.80 58.06

REDmoney Asia ex. Japan All Cap 893.45 0.94 0.78 16.40 -2.92 28.61 99.50

REDmoney GLOBAL SHARIAH INDEX SERIES (Medium Cap) 6 Months REDmoney GLOBAL SHARIAH INDEX SERIES (Small Cap) 6 Months

IdealRatingsRED

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

[email protected]

+603 2162 7800

INDEX Last (US$) MTD (%) 3 Months (%) 6 Months (%) YTD (%) 1 Year (%) 2 Years (%)

REDmoney US Large Cap 933.49 1.68 7.78 17.17 3.80 14.89 33.36

REDmoney Europe Large Cap 783.05 0.96 2.65 15.27 1.07 12.59 38.25

REDmoney Global Large Cap 848.53 1.42 5.24 16.40 1.33 18.20 46.73

REDmoney MENA Large Cap 606.21 2.49 1.25 8.63 -2.54 15.58 42.37

REDmoney GCC Large Cap 620.88 3.04 3.76 11.69 -1.75 20.28 48.68

REDmoney Asia ex. Japan Large Cap 816.14 1.06 0.50 14.45 -2.21 24.70 78.25

REDmoney Asia ex. Japan Medium CapREDmoney Europe Medium CapREDmoney GCC Medium Cap

REDmoney Global Medium CapREDmoney MENA Medium CapREDmoney US Medium Cap

500

700

900

1100

1300

2/111/1112/1011/1010/109/108/107/10

REDmoney Asia ex. Japan Small CapREDmoney Europe Small CapREDmoney GCC Small Cap

REDmoney Global Small CapREDmoney MENA Small CapREDmoney US Small Cap

500

700

900

1100

1300

2/111/1112/1011/1010/109/108/107/10

REDmoney Asia ex. Japan All CapREDmoney Europe All CapREDmoney GCC All Cap

REDmoney Global All CapREDmoney MENA All CapREDmoney US All Cap

500

600

700

800

900

1000

2/111/1112/1011/1010/109/108/107/10

REDmoney Asia ex. Japan Large CapREDmoney Europe Large CapREDmoney GCC Large Cap

REDmoney Global Large CapREDmoney MENA Large CapREDmoney US Large Cap

450

550

650

750

850

950

2/111/1112/1011/1010/109/108/107/10


www.islamicfi nancenews.com

SHARIAH INDEXES

The S&P Shariah Indices. Creating opportunity for Islamic investors.To learn more, contact [email protected].

S&P Shariah Indices Price Index Levels

100

220

340

460

580

700

820

940

1060

1180

1300

7/2/11 Oct-10 Sep-10 Aug-10Nov-10Dec-10Jan-11

S&P 500 ShariahS&P Europe 350 Shariah S&P Japan 500 Shariah

0

120

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480

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960

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S&P Global Property ShariahS&P Global Infrastructure Shariah


Index Code Index Name 7/2/11 Jan-10 Dec-10 Nov-10 Oct-10 Sep-10 Aug-10

SPSHX S&P 500 Shariah 1169.203 1143.662 1116.185 1055.305 1055.737 1012.387 927.814

SPSHEU S&P Europe 350 Shariah 1317.848 1296.598 1284.601 1179.078 1243.62 1200.681 1082.714

SPSHJU S&P Japan 500 Shariah 1127.61 1104.465 1104.726 1032.02 1015.125 997.313 939.684


SPSHAS S&P Pan Asia Shariah 1181.961 1170.956 1162.323 1075.868 1077.471 1055.516 956.455

SPSHG S&P GCC Composite Shariah 751.836 728.593 753.965 721.171 720.021 711.722 675.181

SPSHPA S&P Pan Arab Shariah 125.876 122.54 127.698 122.361 122.657 121.1 115.09

SPSHBR S&P BRIC Shariah 1390.14 1356.222 1338.497 1249.391 1266.724 1213.917 1093.125


SPSHGU S&P Global Property Shariah 749.478 743.73 746.209 719.266 747.598 737.706 672.74

SPSHIF S&P Global Infrastructure Shariah 90.921 89.978 91.68 87.253 88.875 86.53 80.314

100

220

340

460

580

700

820

940

1060

1180

1300

S&P Pan Asia ShariahS&P GCC CompositeS&P Pan Arab ShariahS&P BRIC Shariah



www.islamicfi nancenews.comSHARIAH INDEXES

Tariq al-Rifai DirectorIslamic Market IndexesTel: +971 4374 [email protected]

Anthony YeungRegional Director Hong Kong, China, Taiwan, Korea, Japan, Australia & New ZealandTel: +852 2831 2580 [email protected]

Ariff SultanBusiness Development DirectorMalaysia, Singapore, Indonesia, India, Thailand, Pakistan, Sri Lanka & BangladeshTel: +65 6415 4262 [email protected]

For more information, please visit www.djislamicmarkets.com or contact

INDEX 1 Week 2 Week 3 Week 1 Month 3 Month 6 Month 1 Year YTD

DJIM World 2.33 2.24 1.81 3.5 6.31 18.53 23.94 3.36

DJIM US 2.49 2.61 2.36 4.22 8.9 20.27 23.73 5.09

DJIM Titans 100 1.97 1.72 2.19 3.89 5.79 16.41 16.89 4.25

DJIM Asia/Pacifi c Titans 25 1.57 1.56 0.59 1.99 5.65 17.48 25.16 1.33

DJIM Europe 2.13 1.9 2.39 5.15 3.53 16.38 19.81 3.65

PERFORMANCE OF DJ INDEXES

Data as of the 7th February 2011

DESCRIPTIVE STATISTICS Market Capitalization (US$ billion) Component Weight (%)

INDEXComponent

numberFull

Float adjusted

Mean Median Largest Smallest Large Small

DJIM World 2471 17985.19 14165.04 5.73 1.16 423.22 0.008457 2.9878 0.00006

DJIM US 581 7608.31 7161.44 12.33 3.44 423.22 0.187261 5.9097 0.002615

DJIM Titans 100 100 7521.87 6714.94 67.15 44.59 423.22 14.327113 6.3027 0.213362

DJIM Asia/Pacifi c Titans 25 25 1181.12 787.73 31.51 27.17 82.36 14.327113 10.4553 1.818794

DJIM Europe 263 3400.68 2730.17 10.38 2.53 145.6 0.281695 5.3329 0.010318

DJIM GCC 114 209.28 88.66 0.78 0.32 9.88 0.029181 11.1439 0.032913

DJIM MENA 163 387.26 113.75 0.7 0.18 15.39 0.008457 13.5263 0.007435

DJIM ASEAN 232 471.19 187.93 0.81 0.16 17.08 0.003257 9.0883 0.001733

*all performance is cumulative, based on price return and US$

PRIC

E R

ETU

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1 Week 2 Week 3 Week 1 Month 3 Month 6 Month 1 Year YTD

��


www.islamicfi nancenews.comISLAMIC LEAGUE TABLES

TOP 30 ISSUERS OF ISLAMIC BONDS 12 Months

Issuer Nationality Instrument Market Amt US$ Iss % Managers

1 Saudi Electricity Saudi Arabia Sukuk Domestic market public issue

1,866,000,000 1 10.6 HSBC, Samba Capital

2 Danga Capital Malaysia Sukuk Musharakah Domestic market public issue; Foreign market private placement

1,700,000,000 2 9.6 Standard Chartered, HSBC, OCBC, RHB Capital, CIMB, DBS

3 Cagamas Malaysia Sukuk Domestic market private placement

1,393,000,000 10 7.9 AmInvestment Bank, Maybank Investment Bank, RBS, RHB Capital, Al-Rajhi Banking & Investment, HSBC, Standard Chartered, CIMB

4 Celcom Transmission (M) Malaysia Sukuk Domestic market public issue

1,329,000,000 1 7.5 CIMB, Maybank Investment Bank

5 Senai Desaru Expressway Malaysia Sukuk Domestic market public issue

1,275,000,000 2 7.2 Maybank Investment Bank Bhd

6 1Malaysia Sukuk Global Malaysia Sukuk Ijarah Euro market public issue

1,250,000,000 1 7.1 HSBC, Barclays Capital, CIMB

7 Pengurusan Air SPV Malaysia Sukuk Murabahah Domestic market private placement

884,000,000 1 5.0 HSBC, CIMB

8 Malaysia Airports Capital Malaysia Sukuk Ijarah Domestic market public issue

792,000,000 2 4.5 CIMB, Citigroup

9 Qatar Islamic Bank Qatar Sukuk Ijarah Euro market public issue

750,000,000 1 4.2 HSBC, Credit Suisse, QInvest

9 Abu Dhabi Islamic Bank UAE Sukuk Musharakah Euro market public issue

750,000,000 1 4.2 Standard Chartered, HSBC, Barclays Capital

11 Islamic Development Bank Saudi Arabia Sukuk Euro market public issue

500,000,000 1 2.8 Standard Chartered, HSBC, CIMB, Citigroup

11 Emaar Properties UAE Sukuk Euro market public issue

500,000,000 1 2.8 Standard Chartered, HSBC, RBS

13 Dar Al-Arkan International Sukuk

Saudi Arabia Sukuk Foreign market public issue

446,000,000 1 2.5 HSBC, Maybank Investment, RBS

14 Government of Ras Al Khaimah

UAE Legal issuer: RAK capital Euro market public issue

393,000,000 1 2.2 RBS, Citigroup

15 National Bank of Abu Dhabi UAE Sukuk Murabahah Foreign market public issue

312,000,000 2 1.8 HSBC, Maybank Investment Bank

16 Projek Lebuhraya Utara Selatan (PLUS)

Malaysia Sukuk Musharakah Domestic market private placement

301,000,000 1 1.7 CIMB

17 Konsortium Lebuhraya Utara-Timur (KL)

Malaysia Sukuk Musharakah Domestic market public issue

280,000,000 13 1.6 CIMB

18 Padiberas Nasional Malaysia Sukuk Musharakah Domestic market public issue

240,000,000 2 1.4 Standard Chartered, Bank Muamalat Malaysia

19 Khazanah Nasional Malaysia Sukuk Musharakah Domestic market private placement

228,000,000 1 1.3 Standard Chartered, CIMB

20 Trans Thai-Malaysia Sukuk Malaysia Sukuk Musharakah Domestic market private placement

195,000,000 1 1.1 HSBC, CIMB

21 AmIslamic Bank Malaysia Sukuk Musharakah Domestic market public issue

177,000,000 1 1.0 AmInvestment Bank

22 Maju Expressway Malaysia Sukuk Musharakah Domestic market public issue

168,000,000 1 1.0 CIMB

23 Pelabuhan Tanjung Pelepas Malaysia Issued under issuer's MYR1

Domestic market public issue

167,000,000 1 1.0 RHB Capital, Maybank Investment Bank

24 Putrajaya Holdings Malaysia Sukuk Musharakah Domestic market public issue

161,000,000 1 0.9 CIMB, AmInvestment Bank, Maybank Investment Bank

25 Malaysia Debt Ventures Malaysia Sukuk Murabahah Domestic market public issue

158,000,000 1 0.9 Lembaga Tabung Haji, RHB Capital, CIMB Group"

26 Bank Pembangunan Malaysia

Malaysia Sukuk Murabahah Domestic market public issue

153,000,000 1 0.9 HSBC, CIMB

27 Naim Cendera Holdings Malaysia Sukuk Domestic market public issue

148,000,000 3 0.8 CIMB

28 Boustead Holdings Malaysia Sukuk Domestic market private placement

133,000,000 1 0.8 OCBC, Public Bank, Affi n Investment Bank

29 Nomura Sukuk Japan Sukuk Ijarah Euro market public issue

100,000,000 1 0.6 (Persero) Danareksa, Bahana Securities, Bank MandiriTrimegah Securities

29 Kuveyt Turk Katilim Bankasi Kuwait Sukuk Murabahah Euro market public issue

100,000,000 1 0.6 KFH, Citigroup

Total 17,694,000,000 94 100



GLOBAL ISLAMIC BOND VOLUME BY QUARTER

20 MOST RECENT GLOBAL ISLAMIC BONDS

Priced Issuer Nationality Instrument Market Value US$ Managers

27th Jan 2011 Emaar Properties UAE Sukuk Murabahah Euro market public issue 500,000,000 Standard Chartered, HSBC, RBS

25th Jan 2011 Pengurusan Air SPV Malaysia Sukuk Murabahah Domestic market private placement 884,000,000 HSBC, CIMB

10th Jan 2011 Padiberas Nasional Malaysia Sukuk Murabahah Domestic market public issue 114,000,000 Standard Chartered, Bank Muamalat Malaysia

29th Dec 2010 Senai Desaru Expressway Malaysia Sukuk Murabahah Domestic market public issue 1,192,000,000 Maybank Investment Bank

14th Dec 2010 National Bank of Abu Dhabi UAE Sukuk Murabahah Foreign market public issue 159,000,000 HSBC, RBS, Maybank Investment Bank

10th Dec 2010 Cagamas Malaysia Sukuk Murabahah Domestic market private placement 287,000,000 HSBC, CIMB

8th Dec 2010 Government of Ras Al Khaimah

UAE Sukuk Murabahah Euro market public issue 400,000,000 RBS, Citigroup

3rd Dec 2010 Malaysia Airports Capital Malaysia Sukuk Murabahah Domestic market public issue 476,000,000 CIMB, Citigroup

29th Nov 2010 Boustead Holdings Malaysia Sukuk Domestic market private placement 133,000,000 OCBC, Public Bank, Affi n Investment Bank

5th Nov 2010 Trans Thai-Malaysia Sukuk Malaysia Sukuk Musharakah Domestic market private placement 195,000,000 HSBC, CIMB

28th Oct 2010 Abu Dhabi Islamic Bank UAE Sukuk Euro market public issue 750,000,000 Standard Chartered, HSBC, Barclays Capital

20th Oct 2010 Islamic Development Bank Saudi Arabia Sukuk Euro market public issue 500,000,000 Standard Chartered Bank, HSBC, CIMB, Citigroup

20th Oct 2010 Cagamas Malaysia Sukuk Domestic market private placement 161,000,000 AmInvestment Bank

30th Sep 2010 Qatar Islamic Bank Qatar Sukuk Euro market public issue 750,000,000 HSBC, Credit Suisse, QInvest

21st Sep 2010 Putrajaya Holdings Sdn Malaysia Sukuk Musharakah Domestic market public issue 161,000,000 CIMB, AmInvestment Bank, Maybank Investment Bank

15th Sep 2010 AmIslamic Bank Malaysia Sukuk Mush0 arakah Domestic market public issue 177,000,000 AmInvestment Bank

30th Aug 2010 Pelabuhan Tanjung Pelepas Malaysia Sukuk Domestic market public issue 167,000,000 RHB Capital, Maybank Investment Bank

20th Aug 2010 Malaysia Airports Capital Malaysia Sukuk Murabahah Domestic market public issue 316,000,000 CIMB, Citigroup

18th Aug 2010 Celcom Transmission (M) Malaysia Issued off MYR4. Domestic market public issue 1,329,000,000 CIMB, Maybank Investment Bank

18th Aug 2010 Padiberas Nasional Malaysia Sukuk Murabahah Domestic market public issue 127,000,000 Standard Chartered, Bank Muamalat Malaysia

GLOBAL ISLAMIC BOND VOLUME BY MONTH



TOP 30 MANAGERS OF ISLAMIC BONDS 12 Months

Manager Amt US$ Iss %

1 CIMB Group 4,242,000,000 47 24.0

2 HSBC 3,172,000,000 15 17.9

3 Maybank Investment Bank 2,479,000,000 22 14.0

4 AmInvestment Bank 1,014,000,000 12 5.7

5 Samba Capital 933,000,000 1 5.3

6 Standard Chartered Bank 929,000,000 10 5.3

7 Citigroup 767,000,000 5 4.3

8 Barclays Capital 667,000,000 2 3.8

9 OCBC 530,000,000 3 3.0

10 RBS 522,000,000 4 3.0

11 RHB Capital 380,000,000 5 2.2

12 DBS 363,000,000 1 2.1

13 QInvest 250,000,000 1 1.4

13 Credit Suisse 250,000,000 1 1.4

15 Bank Muamalat Malaysia 168,000,000 3 1.0

16 KFH 150,000,000 2 0.9

17 Unicorn Investment Bank 149,000,000 1 0.8

17 Goldman Sachs 149,000,000 1 0.8

17 Deutsche Bank 149,000,000 1 0.8

20 Al-Rajhi Banking & Investment 122,000,000 2 0.7

21 Lembaga Tabung Haji 59,000,000 2 0.3

22 Public Bank 44,000,000 1 0.3

22 Affi n Investment Bank 44,000,000 1 0.3

24 Kenanga Investment Bank 33,000,000 1 0.2

25 Mitsubishi UFJ Financial Group 25,000,000 3 0.1

26 Malaysian Industrial Development Finance 19,000,000 4 0.1

27 Trimegah Securities 18,000,000 1 0.1

27 Bank Mandiri 18,000,000 1 0.1

27 (Persero) Danareksa 18,000,000 1 0.1

30 EON Bank 12,000,000 1 0.1

Total 17,694,000,000 94 100

GLOBAL ISLAMIC BOND VOLUME - US$ ANALYSIS

ISLAMIC BOND VOLUME BY CURRENCY US$ (BILLION)

ISLAMIC BOND VOLUME BY ISSUER NATION US$ (BILLION) - 12 Months

GLOBAL ISLAMIC BOND VOLUME BY SECTOR - 12 Months

GLOBAL ISLAMIC LOANS - YEARS TO MATURITY (YTD Comparison)

Government

Finance

Utility & Energy

Telecommunication

Construction/Building

Other

12%

8%

27%

16%

23%

14%

9.8

4.8

1.9

1.2

0.1

US dollar

Malaysian ringgit

Saudi riyal

Singapore dollar

Indonesian rupiah

2.8

11.8

2.0

0.8

0.1

Malaysia

Saudi Arabia

UAE

Qatar

Japan


www.islamicfi nancenews.comLEAGUE TABLES

SUKUK MANAGERS FEB 2010 – FEB 2011

ManagerManager Commitment

(in US$)Issues

Market Share %

1 Malaysia (Government) 26,492,513,700 114 60.6

2 CIMB 5,518,571,179 92 12.6

3 Malayan Banking 2,953,262,711 119 6.8

4 HSBC Banking Group 1,246,193,984 26 2.8

5 AMMB Holdings 968,320,316 60 2.2

6 RHB Banking Group 907,779,785 26 2.1

7 Malaysian Industrial Development Finance

829,839,205 190 1.9

8 Barclays Bank 566,666,667 2 1.3

9 Standard Chartered Bank 535,206,154 9 1.2

10 Cagamas 414,455,098 19 0.9

11 Bukhary Capital 405,562,190 6 0.9

12 Citigroup 356,170,953 4 0.8

13 Kuwait Finance House 200,000,000 2 0.5

14 Indonesia (Government) 196,881,427 6 0.5

15 EON Capital 184,529,977 62 0.4

16 Affi n Holdings 180,976,790 16 0.4

17 RBS 159,113,250 2 0.4

18= Unicorn Investment Bank 150,000,000 1 0.3

18= Deutsche Bank 150,000,000 1 0.3

18= Goldman Sachs & Company 150,000,000 1 0.3

18= Nomura 150,000,000 1 0.3

SUKUK MANAGERS NOV 2010 - FEB 2011

ManagerManager Commitment

(in US$)Issues

Market Share %


2 Malayan Banking 1,944,215,674 53 16.1

3 CIMB 950,228,787 15 7.9

4 Bukhary Capital 228,571,700 2 1.9

5= HSBC Banking Group 166,666,667 1 1.4

5= Standard Chartered Bank 166,666,667 1 1.4

7 Malaysian Industrial Development Finance

160,115,223 48 1.3

8 RHB Banking Group 153,193,125 8 1.3

9= Citigroup 133,333,333 1 1.1

9= Samba Financial Group 133,333,333 1 1.1

11 RBS 81,606,000 1 0.7

12 AMMB Holdings 71,645,438 14 0.6

13 EON Capital 50,132,376 16 0.4

14 OSK Holdings 21,997,319 3 0.2

15 OCBC Bank 16,162,900 2 0.1

16 Affi n Holdings 14,693,895 2 0.1

17 United Overseas Bank 14,668,565 4 0.1

18 Public Bank 11,228,130 3 0.1

19 Hong Leong Financial Group 11,153,240 2 0.1

20= Andalan Artha Advisindo Sekuritas 5,503,600 1 0.0

20= Trimegah Securities 5,503,600 1 0.0

SUKUK ISSUERS FEB 2010 – FEB 2011

IssuerIssuer Commitment

(in US$)Issues

Market Share %

1 BNM Sukuk 22,216,868,700 89 46.0


3 Perusahaan Penerbit SBSN Indonesia 2,281,221,728 7 4.7

4 Senai-Desaru Expressway 1,821,445,920 42 3.8

5 Bank Indonesia 1,442,454,982 22 3.0

6 Cagamas 1,430,304,230 20 3.0

7 Celcom Transmission (M) 1,342,937,400 4 2.8

8 Pengurusan Air SPV 1,118,250,840 3 2.3

9 Pakistan, Islamic Republic of (Government)

1,038,784,845 2 2.1

10= ADIB Sukuk 750,000,000 1 1.6

10= Qatar Islamic Bank 750,000,000 1 1.6

12 Danga Capital 621,408,000 1 1.3

13 ESSO Malaysia 589,955,760 14 1.2

14= Emaar Sukuk 500,000,000 1 1.0

14= IDB Trust Services 500,000,000 1 1.0

16 Dar Al-Arkan International Sukuk 450,000,000 1 0.9

17 RAK Capital 400,000,000 1 0.8

18 Khazanah Nasional 367,252,800 1 0.8

19 Padiberas Nasional 364,357,251 4 0.8

20 Malaysia Airports Capital 319,747,000 1 0.7

SUKUK ISSUERS NOV 2010 - FEB 2011

IssuerIssuer Commitment

(in US$)Issues

Market Share %

1 BNM Sukuk 7,966,469,100 26 57.0

2 Senai-Desaru Expressway 1,821,445,920 42 12.1

3 Pakistan, Islamic Republic of (Government)

1,038,784,845 2 6.9

4 Pengurusan Air SPV 684,822,300 1 5.0

5 Emaar Sukuk 500,000,000 1 4.5

6 RAK Capital 400,000,000 1 2.6

7 Bank Indonesia 364,446,819 3 2.4

8 Padiberas Nasional 235,428,851 7 1.7

9 Malaysia (Government) 224,087,300 3 1.6

10 National Bank of Abu Dhabi 163,212,000 1 1.1

11 ESSO Malaysia 145,029,850 4 1.0

12 BMA International Sukuk 143,214,600 5 0.9

13 MM Vitaoils 43,601,756 15 0.3

14 Goodway Integrated Industries 38,717,915 9 0.3

15 Citydev Nahdah 38,272,350 1 0.3

16 Sunrise 32,653,100 1 0.2

17 Perbadanan Kemajuan Negeri Selangor

26,264,980 4 0.2

18 Serrisa Sinar 22,559,550 4 0.1

19 Horizon Hills Development 22,456,260 3 0.1

20 Prinsiptek Corp 21,997,319 3 0.1

(12 months) (3 months)

(12 months) (3 months)

Islamic Sukuk league tables refl ect Shariah compliant bonds showing evidence of ownership of assets or their earnings. These results include (but are not limited to) the following securities/assets: Sukuk Salam, Sukuk Mudarabah, Sukuk Ijarah, Sukuk Murabahah, Sukuk Istisna and Sukuk Musharakah.

For more information please contact:

Aimee Webster Telephone: +1-646-223-6816 Email: [email protected]

ALL DATA AS OF THE 7th FEBRUARY 2011



ISLAMIC LOANS RAISED FEB 2010 – FEB 2011

Borrower Country Islamic Loan Amount (US$)

1Power & Water Utility Co for Jubail & Yanbu

Saudi Arabia 2,283,000,000

2Qatari Diar Real Estate Invest-ment

Qatar 1,500,000,000

3Saudi Aramco Total Refi ning & Petrochemical

Saudi Arabia 1,429,000,000

4Arabian Centres Saudi Arabia 1,099,879,984

5Riyadh Independent Power Plant Saudi Arabia 616,049,284

6 Emirates Steel Industries UAE 367,001,999

7Majid Al Futtaim Group UAE 310,109,178

8Qatari Diar Real Estate Invest-ment

Qatar 300,000,000

9 Asya Katilim Bankasi Turkey 253,944,570

10 Albaraka Turk Katilim Bankasi Turkey 250,000,000

11 Ras Al Khaiman Ceramics UAE 225,000,000

12 GMMOS Group UAE 185,000,000

13 Gulf Finance House Bahrain 100,000,000

14 Emirates Trading Agency UAE 100,000,000

15 Gulf Finance House Bahrain 100,000,000

(12 Months) (12 Months)

(12 Months)


LOAN MANDATED LEAD ARRANGERS FEB 2010 – FEB 2011

Lender Pro Rata (US$) Full Credit (US$) Deals Market Share %

1 HSBC 1,394,583,333 5,737,000,000 5 15.3

2 Alinma Bank 1,350,573,846 2,792,101,042 3 14.8

3 Standard Char-tered Bank

954,981,523 2,188,944,570 4 10.5

4= Credit Agricole CIB 675,997,446 4,064,828,226 3 7.4

4= Samba Financial 675,997,446 4,064,828,226 3 7.4

6 National Com-mercial Bank

631,193,862 3,975,221,058 3 6.9

7 Arab Bank 544,583,333 3,937,000,000 3 6.0

8 Saudi Hollandi Bank

499,583,333 3,712,000,000 2 5.5

9 Abu Dhabi Islamic Bank

493,610,177 677,111,177 2 5.4

10 WestLB 345,000,000 525,000,000 4 3.8

11 Al Hilal Bank 183,500,999 367,001,999 1 2.0

12= Arab Banking 167,981,523 503,944,570 2 1.8

12= Noor Islamic Bank 167,981,523 503,944,570 2 1.8

14= Al Rajhi Banking & Investment

119,083,333 1,429,000,000 1 1.3

14= Saudi Investment Bank

119,083,333 1,429,000,000 1 1.3

14= Bank Al-Jazira 119,083,333 1,429,000,000 1 1.3

14= Islamic Develop-ment Bank

119,083,333 1,429,000,000 1 1.3

14= Riyad Bank 119,083,333 1,429,000,000 1 1.3

19= Royal Bank of Scotland

100,000,000 300,000,000 1 1.1

19= Masraf Al Rayan 100,000,000 300,000,000 1 1.1

21= BNP Paribas 45,000,000 225,000,000 1 0.5

21= Gulf International Bank

45,000,000 225,000,000 1 0.5

23= Abu Dhabi Com-mercial Bank

37,000,000 185,000,000 1 0.4

23= Development Bank of Singapore

37,000,000 185,000,000 1 0.4

23= Deutsche Bank 37,000,000 185,000,000 1 0.4

23= Mubadala GE Capital

37,000,000 185,000,000 1 0.4

LOAN BOOKRUNNERS FEB 2010 – FEB 2011

LenderPro Rata

(US$)Full Credit

(US$) DealsMarket

Share %

1 Alinma Bank 1,099,879,984 1,099,879,984 1 51.9

2 WestLB 375,000,000 525,000,000 4 17.7

3Abu Dhabi Islamic Bank

310,109,178 310,109,178 1 14.6

4= Deutsche Bank 92,500,000 185,000,000 1 4.4

4=Standard Chartered Bank

92,500,000 185,000,000 1 4.4

6= HSBC 75,000,000 225,000,000 1 3.5

6= BNP Paribas 75,000,000 225,000,000 1 3.5

(12 Months)(12 Months)



SUKUK BY COUNTRY FEB 2010 – FEB 2011

Country Volume Issued Volume Outstanding

Malaysia 39,576,413,628 23,986,073,931

Indonesia 3,819,953,285 3,000,000,000

Eurobond 3,000,000,000 2,741,945,122

Pakistan 1,038,784,845 1,038,784,845

US 575,000,000 575,000,000

Bahrain 254,641,280 196,255,500

Singapore 74,243,950 74,243,950

Saudi Arabia - -

Cayman Islands - -

UAE - -

Jersey - -

LOANS BY COUNTRY FEB 2010 – FEB 2011

Country Volume (US$) Market Share (%)

Saudi Arabia 5,427,929,268 59.5

Qatar 1,800,000,000 19.7

UAE 1,187,111,177 13.0

Turkey 503,944,570 5.5

Bahrain 200,000,000 2.2

SUKUK BY INDUSTRY FEB 2010 – FEB 2011

Industry Volume Issued Volume Outstanding

Other fi nancial 31,691,510,925 17,845,350,870

Sovereign 7,008,557,527 5,869,825,964

Agency 2,780,620,738 2,719,134,288

Manufacturing 1,907,839,165 1,168,737,098

Telephone 1,342,937,400 1,342,937,400

Banks 1,256,424,450 1,256,424,450

Energy company 652,977,170 113,346,580

Transportation 599,717,140 433,434,245

Consumer goods 394,337,751 394,337,751

Electric power 372,633,000 216,991,000

Service Company 331,481,722 251,783,702

Gas Distribution - -

LOANS BY INDUSTRY FEB 2010 – FEB 2011

Industry Volume (US$) Market Share(%)

Construction 2,608,000,000 28.6

Real estate 1,800,000,000 19.7

Oil and gas 1,614,000,000 17.7

Retail and supermarkets 1,099,879,984 12.1

Financial services 703,944,570 7.7

Utilities 616,049,284 6.8

General manufacturing 367,001,999 4.0

Services 310,109,178 3.4

GLOBAL ISLAMIC VOLUME SUKUK/LOANS (US$ IN MILLIONS)

For more information please contact: Aimee WebsterTelephone: +1-646-223-6816 Email: [email protected]




1Q - '07 2Q - '07 4Q - '07 1Q - '083Q - '07 2Q - '08 3Q - '08 1Q - '09 2Q - '09 3Q - '09 TD 4Q - '09 TD 1Q - '10 TD 2Q - '10 TD 3Q - '10 TD 4Q - '10 TD 1Q - '11 TD4Q - '08

Sukuk

Loan

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000


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EVENTS DIARY

DATE EVENT VENUE ORGANIZER

February

21st – 22nd 8th Annual Middle East Trade & Export Finance Conference

Dubai Exporta Group

21st – 23rd 10th Anniversary Islamic Finance Summit London Euromoney

24th IFN Awards Kuala Lumpur REDmoney events

28th IFN Awards Dubai REDmoney events

March

7th – 10th Middle East Investment Summit Dubai Terrapinn Middle East

8th – 9th Hedge Funds World Middle East 2011 Dubai Terrapinn Middle East

12th Islamic Finance: Making it Real(Featuring an in-depth Sharia panel discussion)

Dubai Globe Law and Business

22nd IFN Roadshow Indonesia Jakarta REDmoney events

24th IFN Roadshow Singapore Singapore REDmoney events

28th – 29th World Islamic Finance Conference — Fleming Gulf Conferences

29th – 31st The First International Islamic Banks Conferencein Qatar

Qatar Echo Media WLL

April

7th IFN Roadshow Hong Kong Hong Kong REDmoney events

10th – 11st 6th Annual World Takaful Conference (WTC 2011) Dubai MEGA Events

12th Islamic Finance: Making it Real London Globe Law and Business

27th IFN Roadshow Thailand Bangkok REDmoney events

29th – 31st The First International Islamic Banks Conferencein Qatar

Qatar Echo Media WLL

May

12th IFN Roadshow Australia Melbourne REDmoney events

June

20th – 21st IFN Europe Forum London REDmoney events

July

19th IFN Roadshow Pakistan Karachi REDmoney events

21st IFN Roadshow India Mumbai REDmoney events

October

24th IFN Roadshow New York New York REDmoney events

November

1st IFN Roadshow Turkey Istanbul REDmoney events

3rd IFN Roadshow Egypt Cairo REDmoney events

14th IFN Roadshow Japan Tokyo REDmoney events

17th IFN Roadshow Korea Seoul REDmoney events

22nd IFN Roadshow Brunei Brunei REDmoney events

NE-IFN0/05

AAOIFI 14, 16, 17Abdul Latif Jameel Group 5Abu Dhabi Islamic Bank 4, 16Advent Software 15Ajman Bank 4Al Baraka Bank Pakistan 6Al Baraka Financial Services 3, 8Al Khaleej Takaful Insurance and Reinsurance 6Al Meezan Investment Management 3Al Rajhi Banking and Investment Corporation 16Al Salam Bank-Bahrain 16Al-Amanah Islamic Investment Bank of the Philippines 6Amana Bank 3Amana Takaful (Maldives) 6Amana Takaful Insurance 6Amanie Business Solutions 4American International Group 5, 9Asian-Oceanian Standard-setters Group (OSG) 14Askari Investment Management 7Askari Investment Management 7Bahrain Financial Exchange 4Bahrain Islamic Bank 3Bank Kerjasama Rakyat Malaysia 3Bank Muamalat Indonesia 3Bank of Tanzania 18Banque Saudi Francais 4Barwa Bank 5, 8Bermuda Monetary Authority 10, 11BLOM Development Bank 13BMI Bank 5Bombay Stock Exchange 8Capital Markets Authority 3Central Bank of Nigeria 3Chinese University of Hong Kong 19Commercial Bank of Qatar 4Conyers Dill & Pearman 13Danajamin Nasional 20

Doha Bank 4Dubai Islamic Bank 7, 16Dubai World 9EONCAP Islamic Bank 20Equity Trust (Malaysia) 20Ernst & Young 8Eversheds 8First Community Bank 3First Finance Company 5First Gulf Bank 5, 9First Leasing Company 5Fitch 7Gulf Bank 5Hong Leong Financial Group 6Hong Leong Tokio Marine Takaful 6HSBC 8HSBC Amanah 3HSBC Bahrain 5International Accounting Standards Board 14, 17International Bank of Qatar 4International Financial Reporting Standards 16Islamic Development Bank 3Islamic International Rating Agency 7Istithmar World 9Jordan Dubai Islamic Bank 5Jordan Islamic Bank 7Kerala State Industrial Development Corporation 3, 8Kuwait Finance House 16Kwantas SPV 7LBS Bina Group 20Luxembourg Stock Exchange 4Maldives Stock Exchange 6MARC 7, 20Masraf Al Rayan 8MasterCard Worldwide 3, 5Mayfair Pacifi c Financial Group 19Miftah Advisory India 8MIMB Investment Bank 20

Mitsui Sumitomo Insurance 6National Bank of Abu Dhabi 4, 5, 9 National Bank of Kuwait Group 4National Leasing Holding Company 5Ningxia Islamic Bank 19Noor Islamic Bank 5Pakistan Credit Rating Agency 7Qatar Central Bank 4, 8Qatar International Islamic Bank 5, 8Qatar Islamic Bank 8, 16Qatar National Bank 4, 8QSR Brands 3Reserve Bank of India 8Samba Financial Group 4, 5Saudi Telecom 4SHUAA Capital 5Soo Thien Ming & Nashrah 20Stanbic Bank 18Stanbic Bank Tanzania 18Standard Bank Africa 18Standard Bank Group 18Syria International Islamic Bank 5Takaful Brunei Am 6Takaful Ikhlas 6Taqwaa Advisory and Shariah Investment Solutions 8The First Investor 5The Investment Dar 4, 13The Pakistan Credit Rating Agency 7The Saudi British Bank 5Tokio Marine & Nichido 6Unicorn Investment Bank 5United Arab Bank 5, 9United Bank 5, 9United Installment Sales 5VIVA Bahrain 5

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Impact versus opportunity In this issueislamicfinancenews.com/sites/default/files/newsletters/v8i5.pdfThe past week has been nothing less than eventful. Qatar Central Bank’s surprise