English: economic transaction
Alternate spelling: Mu'amalah, Mu'amalat, Muamalah

Definition: The lease of land or fruit trees for money, or for a share of the crop.

Brunei Darussalam – Islamic finance, a legacy for a sustainable future

Brunei Darussalam is widely known for the sovereignty of the monarchy and the in-depth practices of Islamic principles and teachings. The Sultanate incorporates Islam in its people’s daily lives which is apparent from various angles, such as the food industry, hospitality industry, as well as the financial services industry. SHUKRI AHMAD writes.

Islamic finance was offered as early as 1991 and has a sizeable share of today’s banking and insurance sector. This exponential growth of the market share of Islamic financial institutions is a prime example of the importance placed on the application of Islamic values in the Bruneian way of life.

As of 2016, the total deposits held by Islamic deposit-taking institutions (Chart 1) made up 61% of the total assets while total gross Takaful contributions (Chart 2) totaled BND152.5 million (US$106.38 million) (51% market share) in 2016 compared with BND50 million (US$34.88 million) (27% of total gross premiums) in 2006.

Current landscape
In addition to the impressive growth, the development of Islamic finance in Brunei also received a boost in terms of rankings. According to the Islamic Corporation for the Development of the Private Sector-Thomson Reuters Islamic Finance Development Report 2016, Brunei ranked 14th out of 124 nations in the Global Islamic Finance Development Indicator, which comprises five indicators: quantitative development (QD), knowledge, governance, corporate social responsibility and awareness.

Brunei also ranked ninth in the Research Knowledge sub-indicator and in the Funds and Activities Corporate Social Responsibility sub-indicators.

In terms of governance, Brunei ranked 10th in Shariah governance, placing it as one of the top-ranked countries in the third-tier in regulations. This is a reflection of Brunei’s performance against regional counterparts in terms of QD where there has been a significant increase in the profitability of its Islamic financial institutions.

Brunei’s drive toward achieving sustainable growth in the development of Islamic finance in the country remains potent. In 2006, the country announced the maiden offering of the Brunei government Sukuk Ijarah program (Chart 3). Since then, the issuances have been at a steady momentum. On the 10th anniversary, the total issuance was BND1.17 billion (US$816.12 million) compared to its initial offering of BND570 million (US$397.6 million).

On the capital market front, as at the end of 2016, there are 10 capital market services licensees, of which one company conducts a fully-fledged Islamic investment business dealing in securities and another conducts a fully-fledged Islamic investment business dealing in fund management services.

Additionally, there are 13 collective investment schemes (CIS) registered for distribution in Brunei, comprising four public conventional funds, seven public Islamic funds and two private Islamic CIS. Based on Chart 4, as at end of 2016, 33.5% of the total size of the CIS is Islamic.

With these rapid developments, great importance is placed on preserving the purity of Islamic
financial products and the operations of all licensed Islamic financial institutions. This is governed and administered through a thorough two-tier Shariah governance framework, comprising a Shariah Financial Supervisory Board (SFSB) at the national level and a Shariah Advisory Board (SAB) at the industry level. Both the SFSB and SAB are made up of renowned and prominent Islamic scholars with diverse experience and backgrounds including Shariah, legal, economics and finance.

Recognizing this importance, Brunei shares the same challenges as its fellow counterparts in building a solid succession plan for its Islamic finance experts and Shariah scholars. The call to grow a new generation of young experts and scholars to succeed the seniors has been well received by the authorities.

Among the initiatives toward developing a new generation of experts include the Fiqh Muamalat Professional Program (FMPP) by the Center for Islamic Banking, Finance and Management, the training arm of Autoriti Monetari Brunei Darussalam (AMBD). The FMPP has attracted participation from both Muslims and non-Muslims alike and has produced 26 junior Islamic scholars.

Furthermore, higher education institutions, such as Universiti Brunei Darussalam and Universiti Islam Sultan Sharif Ali, offer courses up to the PhD level in Islamic finance. As of 2016, Brunei is ranked 8th out of 53 nations that offer Islamic finance education.

On the international front, in undertaking its commitment to develop Islamic finance, Brunei  is aligned to its developed counterparts by being members of renowned Islamic international organizations like the IFSB and International Islamic Financial Market.

The fruits of today are the seeds of yesterday
Brunei acknowledges that in order to achieve a sustainable future for Islamic
finance, the infrastructure built today must be strong and able to weather any headwinds.

Among the building blocks laid out in that direction are the establishment of an Islamic deposit protection scheme administered by the Brunei Darussalam Deposit Protection Corporation and a central securities depository that supports secondary market trading of Sukuk while the authorities are also working toward a stock exchange that would list Shariah compliant securities.

The Financial Sector Blueprint (2016-25) that was recently released by AMBD serves to complement these infrastructures by setting out the future directions of Islamic finance development toward realizing the goal of becoming one of the renowned Islamic finance hubs. These future directions include the development of a Shariah compliant capital market and a Shariah market index as well as building Brunei’s competitive edge in the fund
management industry.

Moreover, Brunei continues to calibrate itself toward achieving meaningful development milestones in Islamic finance. The Muktamar Kewangan Islam Brunei (MKIB) and Brunei Islamic Investment Summit (BIIS) to be held in August 2017 are aimed at positioning Brunei on the international platform and contributing toward the ongoing development initiatives. Both the MKIB and BIIS will house globally renowned Islamic finance scholars to share their experiences and knowledge.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of Autoriti Monetari Brunei Darussalam.

Shukri Ahmad is the principal Shariah advisor at Autoriti Monetari Brunei Darussalam. He can be contacted at

Fintech and Shariah governance

Financial technology (fintech) is a new way of applying technology within the financial industry in a more responsive and efficient manner. The widespread adoption of fintech in the finance industry covers a wide range of activities including financing, payments, operational risk management, data security and monetization, and customer interface. 

The emergence of fintech and its widespread application in various financial services has triggered the following concerns: Are there issues of Shariah compliance in fintech application? How can fintech be regulated continuously to ensure Shariah compliance (and consistency of legal opinions), especially when the technology keeps changing coupled with the challenges in the current application of Islamic financial structures and contracts?

In order to address these concerns, it is important to note that, in general, Shariah principle with regards to a business transaction (Muamalat) is govern by the notion that every transaction is permissible (Ibādah), except when there is a clear text which prohibits it. The permissible principle provides flexibility in innovation and new practices in business and financial transactions. All innovations in Muamalat, are considered as permissible and welcomed. In this regard, innovations in fintech become impermissible only if there is clear evidence that they are in conflict (against) the basic rules of the Shariah

Therefore, fintech application and practices, as in traditional Islamic finance, should follow the principles of the Shariah by avoiding the prohibited elements in the transactions such as interest (Riba), gambling (Maysir), uncertainty (Gharar), harms (Darar), cheating (Tadlis), etc. It must be transparent with no hidden cost, irresponsible or unethical financing.

Likewise, the practice of transactions in fintech application should follow the rules of contract (Aqd) used in the transaction by observing the pillars (Rukn) and conditions (Shart) in the contract. In addition, fintech application should aim at achieving the objectives of the Shariah (Maqāsid Al Shariah), namely to realize the benefits (Maslahah) and to avoid the harms and difficulties (Mafsadah and Mashaqqah). 

Nevertheless, the existing Shariah governance framework does not address fintech and how to supervise its Shariah compliance. Moving forward, the issue of Shariah compliance in fintech operations and practices should be taken into consideration by the regulators or authorities so that Muslim consumers are not sceptical and have confidence in the services provided. 

Therefore, the regulatory framework in addressing consumer protection and market conduct issues as well as the technological impact on the orderly functioning of financial markets that promotes Maşlahah to the general public as desired by the Shariah must be there. A firm that operates within the framework must also commit to observing reasonable standards of service, transparency to customers, appropriate funding and reporting requirements.

A proper Shariah governance framework would also ensure the operations of fintech are in total compliance with the Shariah to minimize Shariah non-compliance risk to firms who utilize fintech and reduce dispute and conflict. 

Prof Dr Mohamad Akram Laldin is the executive director of the International Shariah Research Academy for Islamic Finance. He can be contacted at

A new paradigm for Shariah governance in Bahrain

Bahrain is introducing major changes to the Shariah governance framework for Islamic wholesale and retail banks in the country. This is the first comprehensive overhaul of the Shariah governance framework in place for Islamic banks in a decade. The Central Bank of Bahrain (CBB) has released a Shariah governance module for market consultation which is expected to be finalized for implementation in the first quarter of 2017. SOHAIB UMAR explores. 

Regulators all over the world have been tightening compliance rules and regulations since the global financial crisis of 2008, and Bahrain is no exception. Since Shariah compliance is at the core of Islamic financial institutions, it was imperative that the CBB took the necessary steps to ensure a higher level of Shariah compliance at Islamic banks in Bahrain. It has done so by introducing a detailed Shariah governance module. The main objectives of the module are:

  • To provide a structure and a system to govern all the business activities of an Islamic bank in order to ensure Shariah compliance at all times and at all levels, and
  • To enable the Islamic banks to be perceived as Shariah compliant by the stakeholders including the general public.

The module would apply to Islamic wholesale and retail banks in Bahrain but not to Islamic windows of conventional banks (which may be addressed at a later stage).

The module requires Islamic banks to adopt a Shariah governance structure commensurate and proportionate with the size, complexity and nature of their business. Such a structure must consist, at a minimum, of the following components:

The module introduces detailed regulations for each component. We shall discuss the key points for two major components – the Shariah supervisory board and independent external Shariah compliance audit.

Shariah supervisory board
The module discusses the SSB requirements in detail, given the importance of the SSB in ensuring Shariah compliance in an institution. All Islamic banks must have a SSB consisting of at least three scholars specialized in Fiqh Muamalat, and whose members must be approved by the shareholders in their annual general meeting upon the recommendation of the board of directors. SSBs’ rulings are binding on the respective banks. 
A SSB charter must be drawn which contains the roles and responsibilities of the SSB, their working protocol, etc. The module provides guidance on issues such as independence, handling confidential information, conflict of interest situations, continuous professional development of SSB members and their annual assessment. It also lays out the eligibility criteria in terms of qualifications and experience for SSB members.

The SSB is to be supported by the Shariah officer/Shariah advisor who will implement its Fatwa on a day-to-day basis and also act as the secretary to the SSB. To ensure the independence of the Shariah officer, the module proposes that the SSB approve its appointment and dismissal.

Independent external Shariah compliance audit (IESCA)
One of the common criticisms of Islamic banks is that their claim of Shariah compliance is not independently verified. The endorsement of the SSB serves the purpose only partially due to the perception that by receiving remuneration from the institution whose Shariah compliance is to be checked, the SSB’s independent position is somewhat compromised.

Bahrain has decided to join a growing list of markets where the regulator has mandated an independent external third-party audit of Shariah compliance-related controls in order to check whether Shariah compliance is embedded in the day-to-day functioning of the bank. For this purpose, the bank may engage their external auditor or any other independent audit firm as approved by the CBB to perform an IESCA and present its report to the SSB as well as the board of directors. 

It is worth noting that an IESCA is not meant to second-guess the SSB’s decisions; it is only meant to give an opinion on whether appropriate Shariah-related controls exist and are functioning. The IESCA must test on a sample basis the transaction level controls, product specific controls and other relevant controls. An IESCA report must be guided by International Standards on Assurance Engagements 3000. A template for an IESCA report and other guidance on this important issue are included as an appendix to the module.

The module also proposes some interesting disclosure requirements. These include:

  • Publication of the SSB report as part of the annual report
  • Disclosure of the SSB’s rulings of standard products along with their jurisprudential evidence
  • Disclosure of the aggregate remuneration paid to SSB members during the year, and
  • Disclosure of the nature and amount of prohibited earnings (if any) realized and prohibited expenses paid by the Islamic bank during the year and the means of their disposal.

In summary, Bahrain is taking a quantum leap when it comes to Shariah governance. It will take incrementally more time, effort and money for Islamic banks to ensure Shariah compliance under the new framework. However, it should be viewed as necessary to lay a solid foundation for long-term growth and prosperity of the industry. 

Sohaib Umar is the advisor of Islamic financial services development at the Central Bank of Bahrain. He can be contacted at  

IFN Best Banks Poll 2016 – the results are in!

GLOBAL: Votes were cast, vetted and counted, and IFN is pleased to announce the winners of the illustrious IFN Best Banks Poll 2016! Selected by peers, the IFN Best Banks Poll received over 26,000 votes – one of the best responses ever – from industry players worldwide to recognize Islamic financial institutions which have impressed, outperformed and inspired the Islamic finance community during what was a tumultuous and difficult 12 months for the global markets. 

In a year of many unexpected turns – politically and economically – we saw many industry captains maintaining their dominance in their respective jurisdictions and sectors, demonstrating the resilience and agility of Islamic financial players in navigating choppy waters; but at the same time, we also saw new names coming to the fore, displacing mainstays and disrupting the status quo in an increasingly competitive and ever-evolving landscape.

As expected, Malaysian and Middle Eastern banks dominated the league, with Dubai Islamic Bank taking home the most coveted title, Best Overall Islamic Bank, for the second consecutive year. CIMB Islamic is another big winner this year bagging multiple awards. Nine sector categories and 28 country categories were contested and IFN recognizes both winners and runners-up in each category.

Best Islamic banks by sectors

  • Best Overall Islamic Bank – Dubai Islamic Bank
  • Best Central Bank in Promoting Islamic Finance – Bank Negara Malaysia
  • Best Islamic Leasing Provider – Islamic Finance House
  • Best Islamic Private Bank – Abu Dhabi Islamic Bank
  • Best Islamic Retail Bank – Dubai Islamic Bank
  • Most Innovative Islamic Bank – Dubai Islamic Bank
  • Best Islamic Trustee/Custodian – CIMB Islamic Trustee
  • Best Islamic Bank for Treasury Management – Meezan Bank
  • Best Private Equity House – CIMB Islamic

Best Islamic banks by country

  • Best Islamic Bank in Australia – Muslim Community Co-Operative Australia
  • Best Islamic Bank in Bahrain – Bahrain Islamic Bank
  • Best Islamic Bank in Bangladesh – Islami Bank Bangladesh
  • Best Islamic Bank in Brunei – Bank Islam Brunei Darussalam
  • Best Islamic Bank in Egypt – Albaraka Bank (Egypt)
  • Best Islamic Bank in Indonesia – Bank Muamalat Indonesia
  • Best Islamic Bank in  Iran – Bank Mellat
  • Best Japanese Islamic Bank – Bank of Tokyo Mitsubishi UFJ
  • Best Islamic Bank in Jordan – Jordan Islamic Bank
  • Best Islamic Bank in Kenya – Gulf African Bank
  • Best Islamic Bank in Kuwait – Kuwait Finance House
  • Best Islamic Bank in Lebanon – Arab Finance House
  • Best Islamic Bank in Malaysia – CIMB Islamic Bank
  • Best Islamic Bank in Oman – Bank Muscat
  • Best Islamic Bank in Pakistan – Meezan Bank
  • Best Islamic Bank in Palestine – Palestine Islamic Bank
  • Best Islamic Bank in Qatar – Qatar Islamic Bank
  • Best Islamic Bank in Saudi Arabia – Al Rajhi Bank
  • Best Islamic Bank in South Africa – Albaraka Bank
  • Best Islamic Bank in Sri Lanka – Amana Bank
  • Best Islamic Bank in Sudan – Albaraka Bank Sudan
  • Best Islamic Bank in Syria – Syrian International Islamic Bank
  • Best Islamic Bank in Thailand – Islamic Bank of Thailand
  • Best Islamic Bank in Turkey – Albaraka Turk Katilim Bankasi
  • Best Islamic Bank in the UAE – Dubai Islamic Bank
  • Best Islamic Bank in the UK – Bank of London & The Middle East
  • Best Islamic Bank in the US – University Islamic Financial
  • Best Islamic Bank in Yemen – Islamic Bank of Yemen

Congratulations to all winners! For a comprehensive list of winners, read this week’s cover story: ‘IFN Best Banks Poll 2016: Islamic finance giants return to claim glory alongside fresh faces’.

Results of the IFN Deals of the Year Awards 2016 will be announced next Wednesday, the 11th January.

IFN Best Banks Poll 2016: Islamic finance giants return to claim glory alongside fresh faces

The global Islamic finance industry has spoken! With over 26,000 votes this year, the results for the illustrious IFN Best Banks Poll 2016 are finally in — and it is clear from the outcome that Islamic financial institutions worldwide are soldiering on amid a very trying year with many shocking and surprising turns politically and economically; at the same time, we saw the emergence of new winners, proving that innovation, determination and strategic thinking are still the names of the game. VINEETA TAN takes us through the victors of the distinguished IFN Best Banks Awards as honored by their peers.

Despite massive turbulence in the global economic landscape which significantly impacted the performance of global Islamic financial players worldwide, this year saw one of the best responses ever for the IFN Best Banks Poll with 26,507 votes from individuals all over the world cast. Preserving the quality and independence of the IFN Awards, this year’s screening process was ramped up employing greater due diligence and a stricter and more robust screening process.

In a year with many unprecedented and unexpected developments, from the UK deciding to leave the EU to the election of Trump as the president of the US, in the backdrop of stubbornly low oil prices and sluggish global economic growth, many Islamic finance stalwarts have demonstrated great resilience in maintaining their grip on being number one amid stiffer competition as we welcome many familiar faces back to the league of winners. Yet concurrently, we also open our arms to greet many new names that have turned the tables and shaken the status quo of the industry with their stunning victories.

Central bank champions
Proving that a change in leadership did not and would not affect its solid performance nor dilute its strong commitment to Islamic finance, Bank Negara Malaysia (BNM) this year emerged triumphant in a very tight race as the Best Central Bank for Promoting Islamic Finance, displacing last year’s winner, the State Bank of Pakistan, to second place.

Caught in the regional wave of volatility which sent the Malaysian currency plunging to record-low levels, BNM held its head up high and wasted no time mobilizing measures to bolster the financial community and nation’s economy. The departure of Dr Zeti Akhtar Aziz, one of the most respected central bankers of the world widely credited as an international champion of Islamic finance, in April may have caused some concerns over the future of Malaysia’s Shariah finance industry, but those doubts were soon silenced as her successor Muhammad Ibrahim, another strong advocate of Islamic finance, is proving his worth. Inheriting a strong legacy, BNM in 2016 made fintech a top priority in driving the Islamic and conventional finance industry forward: it launched the Investment Account Platform — the world’s first Shariah compliant bank-mediated fintech platform and set up a fintech sandbox to catalyze the development of fintech. The central bank also focused on building international and regional partnerships, signing bilateral MoUs with another solid Islamic finance player, Indonesia and also Thailand.

The SBP came in as a runner-up for the central bank category, but only by a very small margin. Introducing a slew of supportive measures for the Islamic banking industry including establishing four Islamic finance subcommittees to increase the sector’s reach and allowing Islamic banking branches of conventional banks to set up a separate Pakistan Real-Time Interbank Settlement Mechanism in a bid to optimize the efficiency of the financial services of the banking system, the Pakistani central bank is unwavering in its dedication to increase the market share of Islamic banks — the SBP is indeed deserving to be one of the top central banks in the world in promoting Islamic finance.

Sector stalwarts
The strong support of these central banks are yielding positive results as Malaysian and Pakistani Islamic banks dominate the table of sector winners this year. Malaysian heavyweight CIMB Islamic bagged multiple awards including Best Private Equity House for the second consecutive year and beating Qatar First Bank to the top by a comfortable margin. CIMB Islamic Bank was the runner-up for the categories of Best Islamic Retail Bank (first time being recognized in this global category) and Best Islamic Bank for Treasury Management. CIMB Islamic also once again was voted as the Best Islamic Bank in Malaysia, demonstrating it strength both in the local and international markets. CIMB Islamic Trustees proved that it is the undisputed Best Islamic Trustee/Custodian of the year, winning it three times in a row; Malaysia’s AmanahRaya Trustees came in second.

In terms of treasury management, this year the industry voted Asian institutions to the top, changing last year’s GCC-focused dynamics. Pakistan’s Meezan Bank took home the crown as the Best Islamic Bank for Treasury Management by a large margin; together with runner-up CIMB Islamic, they both ousted Middle Eastern giants Abu Dhabi Islamic Bank (ADIB) and Al Rajhi Bank from the league. Voted as the Best Islamic Retail Bank in 2015, Meezan Bank also tied with ADIB as the runner-up for Most Innovative Islamic Bank; after coming in second in 2015, Dubai Islamic Bank (DIB) was crowned champion in this innovation category. DIB, with its customer-centric approach, also flexed its muscles running ahead of CIMB Islamic to clinch the title of Best Islamic Retail Bank.

The year 2016 has witnessed massive shake-ups across multiple sectors with new names to the fore: Islamic Finance House, based in the UAE, was voted as the Best Islamic Leasing Provider, a strong win in its IFN Best Banks Poll debut; while Sri Lanka’s Al-Falaah, the Islamic Business Unit of LOLC Finance, moved up the ranks from third place in 2015 to second place in 2016. It has indeed been a good year for Al-Falaah which has also been recognized as the second Best Islamic Bank in Sri Lanka.

Winning gold in the Best Islamic Private Bank category for the second consecutive year, ADIB continues to wow its customers by enhancing its offerings by expanding its product suite and upgrading its IT infrastructure. From third place, Maybank Islamic climbed the ladder this year grabbing second place in this category. 

Country leaders 
Leading Islamic banks continue to hold their ground in the domestic landscape but 2016 has also unveiled surprising new winners, a sign of rising healthy competition.

In the Middle East, several countries saw the return of 2015’s victors asserting their dominance with their expansive network, innovative products and excellent customer service. These nations include Bahrain (Winner: Bahrain Islamic Bank; Runner-up: Al Baraka Islamic Bank), Oman (Winner: Meethaq Islamic Banking by Bank Muscat; Runner-up: Bank Nizwa), Saudi Arabia (Winner: Al Rajhi Bank; Runner-up: Arab National Bank), Qatar (Winner: Qatar Islamic Bank; Runner-up: Qatar International Islamic Bank), the UAE (Winner: DIB; Runner-up: ADIB), Palestine (Winner: Palestine Islamic Bank; Runner-up: Arab Islamic Bank), Syria (Winner: Syrian International Islamic Bank; Runner-up: Albaraka Bank Syria) and Yemen (Winner: Islamic Bank of Yemen; Runner-up: Saba Islamic Bank).

The status quo was nonetheless disrupted in other Gulf markets. In Kuwait, Al Rajhi Bank Kuwait for the first time made it to the top-two list — grabbing second place in the Best Islamic Bank in Kuwait category; but huge applause goes to winner Kuwait Finance House which, for the 12th year running (since the IFN Best Banks Poll was launched in 2005!), has been selected as Kuwait’s most premier Shariah bank by IFN readers worldwide. A record-breaking and outstanding achievement! Moving on to Lebanon: despite its national economy suffering from crises within and beyond its borders, Arab Finance House managed to pip former champion Al Baraka Lebanon to the post to win Best Islamic Bank in Lebanon. Bank Mellat is living up to its name as the ‘Bank of the Nation’ as it wins Best Islamic Bank in Iran, outstripping 2013 winner Bank Melli Iran by over 50% in votes. The Best Islamic Bank in Jordan award once again goes to Jordan Islamic Bank which won by a comfortable margin over Islamic International Arab Bank which saw itself move up the polls from third place in the previous year.

Flying off to Asia, we saw household names like Bank Muamalat Indonesia (Runner-up: Maybank Syariah) winning the Best Islamic Bank in Indonesia award again; Bank Islam Brunei Darussalam in a landslide victory maintains its position as the Best Islamic Bank in Brunei (Runner-up: Maybank); in an extremely tight race — possibly the tightest we’ve ever seen! — CIMB Islamic managed to outdo Maybank Islamic (only by a hair’s breadth) to win Best Islamic Bank in Malaysia. Bank of Tokyo Mitsubishi UFJ takes home the title of Best Japanese Islamic Bank (Runner-up: Sumitomo-Mitsui Banking Corporation); and in Thailand, despite the great challenges faced by the Islamic Bank of Thailand in grabbing market share and turning profits, voters seem to be optimistic of the state-owned bank’s major overhaul and debt restructuring strategy, as they again voted it as the Best Islamic Bank in Thailand (Runner-up: CIMB). 

The South Asian region is characterized by repeated winnings — an encouraging trend testifying to the strength and dominance of these major players. Unsurprisingly, mammoth Islami Bank Bangladesh won again, for the 9th time, the Best Islamic Bank in Bangladesh award, far ahead of runner-up ICB Islamic Bank. In Pakistan, the country’s largest Islamic bank, Meezan, deservingly bagged the Best Islamic Bank in Pakistan award for the 10th time (Runner-up: Al Baraka Pakistan); while Amana Bank is awarded Best Islamic Bank in Sri Lanka for the sixth time (Runner-ups: Muslim Commercial Bank — MCB Islamic Banking Division and LOLC Finance’s Al-Falaah).

Moving farther afield, there’s been a flip in standings as Muslim Community Co-Operative Australia overtakes Amanah Islamic Finance Australia as the Best Islamic Bank in Australia. Similarly in Turkey, Al Baraka Turk Katilim Bankasi, 2015’s runner-up, displaced Turkiye Finans Katilim Bankasi, which settled for second spot this year, to become the Best Islamic Bank in Turkey.

In any institution, a transition in power may present itself as a hiccup in operations; likewise 2016 was a year of major management changes for the Bank of London & The Middle East; however, the Islamic bank’s strong fundamentals and clear strategy continue to steer the bank to be honored as the Best Islamic Bank in the UK, a position it has been holding since 2009. Masraf Al Rayan again emerged as the runner-up.
The Best Islamic Bank in the US goes to Michigan-based University Islamic Financial (UIF). Delivering impressive results in 2016, UIF set a new record originating over US$200 million of financings in the third quarter and passed the US$1 billion of financings threshold since inception. This year, IFN welcomes runner-up Guidance Residential to the list of top US Islamic banks for the first time, which beat mainstays Lariba and Devon Bank in the polls.

Zooming into Africa, the Albaraka brand continues to exert its presence in all corners of the world: Al Baraka Bank Sudan adds yet another trophy (fifth) to its collection this year as Best Islamic Bank in Sudan (Runner-up Arab Sudanese Bank appears on the list for the first time); the Egyptian arm of Albaraka wins Best Islamic Bank in Egypt again (Runner-up: Faisal Islamic Bank of Egypt) and Albaraka also steals the show in South Africa with yet another consecutive win (Runner-up: FNB Islamic Finance). In Kenya, Gulf African Bank leapfrogged from third place to first as Best Islamic Bank in Kenya (Runner-up: First Community Bank).

Best of the best
And finally, saving the best for last, in one fell swoop, this bank again proves its worth, even more so during a year flooded with uncertainty and economic headwind as it goes on to win multiple awards across different categories, illustrating its enviable strength as an issuer, investor and retail player. The IFN’s 2016 Best Overall Islamic Bank award goes to Dubai Islamic Bank yet again! Winning the title for the second consecutive year, DIB’s 2016 IFN Awards stable also includes Best Retail Islamic Bank, Most Innovative Islamic Bank and Best Islamic Bank in the UAE. An extremely well-deserved win and IFN extends its heartiest congratulations to this global Islamic finance pioneer! Congratulations are also in order for runner-up CIMB Islamic Bank and second runner-up Abu Dhabi Islamic Bank for this coveted accolade. 

It is indeed a privilege to honor all the winners of the IFN Best Bank Poll 2016, which have showcased great fortitude, creativity and strength the past tumultuous 12 months with each leaving an indelible mark on the global Islamic finance and banking landscape — we thank and commend you for your excellent service and performance and are proud to recognize your contributions.

Best Islamic Bank by Sector

Best Overall Islamic Bank

1st: Dubai Islamic Bank* 2nd: CIMB Islamic Bank; 3rd: Abu Dhabi Islamic Bank

Best Central Bank in Promoting Islamic Finance

1st: Bank Negara Malaysia 2nd: State Bank of Pakistan

Best Islamic Leasing Provider

1st: Islamic Finance House 2nd: Al-Falaah, Islamic Business Unit of LOLC Finance

Best Islamic Private Bank

1st: Abu Dhabi Islamic Bank* 2nd: Maybank Islamic

Best Islamic Retail Bank

1st: Dubai Islamic Bank 2nd: CIMB Islamic Bank

Most Innovative Islamic Bank

1st: Dubai Islamic Bank 2nd: Abu Dhabi Islamic Bank & Meezan Bank

Best Islamic Trustee/Custodian

1st: CIMB Islamic Trustee* 2nd: AmanahRaya Trustees

Best Islamic Bank for Treasury Management

1st: Meezan Bank 2nd: CIMB Islamic Bank

Best Private Equity House

1st: CIMB Islamic* 2nd: Qatar First Bank*

Note: Red, Bold: winner; * Repeat winner

Indonesia: Growing dominance of government Sukuk

Similar to the year of 2015, the growth of the Islamic banking industry in Indonesia is still continuing on a decelerating trend. In 2014, the Islamic banking industry grew 12.4%. The growth then dipped in 2015 to 8.8%. 

As at August 2016, it recorded a 3.1% growth. It is, of course, a tentative growth figure for 2016 but it at least indicates persistent slow growth experienced by the Indonesian Islamic banking industry. The same also applies to the Islamic rural bank industry that has so far recorded slower growth compared with 2015 although it still recorded higher growth compared to its Islamic bank counterpart.

However, comparatively speaking, it is important to note that there has been a small increase in the market share of the Islamic banking industry to 4.95% in August 2016 from 4.71% in August 2015, meaning that the growth of Islamic banking is still faster than conventional banking.

Contrary to the growth of the Islamic banking industry, the year 2016 saw the acceleration in the growth of government Sukuk issuance. Sovereign Sukuk issuance up to August 2016 (from December 2015) reached 45.05%. It maintained a fast growth momentum and is most likely to surpass the full year growth of 2015 which was at 54.23%. Government Sukuk issuance has now become the most dominant player in the Indonesian Islamic finance industry.

The Islamic insurance industry is another component of the Islamic finance industry that has also shown encouraging growth in 2016 (as at August 2016) although its asset size is still small compared to Islamic banking. The Islamic life insurance industry and general (and reinsurance) industry recorded growth of 22.9% and 22.2% respectively.

Corporate Sukuk have still not made any major progress so far. The same can be said for the Islamic mutual fund industry. It even recorded negative growth as at August 2016 although it has yet to be seen how it will perform until the end of 2016.

Apart from the aforementioned industry perspectives, a general slowdown in the global economy also contributed to some extent to the slower economic growth in the country, which in turn, also affected the growth of the Islamic banking industry.

Review of 2016
Despite the fact that the growth of the Islamic banking industry is still comparatively faster than conventional banking, the growth is historically reaching a record low. Two major Islamic banks, Bank Syariah Mandiri (BSM) and Bank Muamalat Indonesia (BMI), whose assets accounted for 43% of total Islamic banking assets in 2015, have entered their slowest growth periods since 2014. BMI even experienced negative growth in 2015, experiencing a 7.4% decline in assets to IDR57.8 billion (US$4.28 million) in 2015 from IDR62.4 billion (US$4.62 million) in 2014. Worse still for BMI, by August 2016, its total assets went down further to IDR52.6 billion (US$3.89 million).

In fact, the market share of BSM and BMI have declined over time; in 2010, their market shares were 33.3% and 22% respectively and by 2015, their market shares declined to 23.7% and 19.3% respectively. While these two largest Islamic banks experienced declining market shares, second-tier Islamic banks such as Bank Negara Indonesia Syariah (BNIS), Bank Rakyat Indonesia Syariah (BRIS) and Permata Syariah (the Islamic window of Permata Bank) increased their market shares.

BRIS, BNIS, and Permata Syariah increased their market shares to 8.2%, 7.8% and 5.1% respectively in 2015 from 7%, 6.5% and 2.3% in 2010. It is most likely that this trend will continue by the end of 2016.

While the Islamic banking industry is facing a slowdown, Islamic government securities are continuing their upward trend. In fact, according to data from the Ministry of Finance, as at the 6th October 2016, total issuance of government global Sukuk is the largest in the world amounting to US$10.15 billion, followed by the Emirate of Dubai (US$7.07 billion), Malaysia (US$6.85 billion) and Turkey (US$4.86 billion).

In 2016, the Indonesian government issued two global Sukuk facilities with two different tenors and pricings. The first one has an issuance size of US$750 million with a five-year tenor and a 3.4% pricing while the other issue of US$1.75 billion had a 10-year tenor and a 4.55% pricing. The government also issued its first savings Sukuk facility intended for local retail investors in 2016, mobilizing around almost US$200 million in local currency. This saving Sukuk facility offered a 6.9% return under the Wakalah structure with the minimum order at around US$150.

On the corporate side, the progress has not been like its sovereign counterpart. Up to the end of July 2016, there was only a 7.8% increase in issuances compared with 2015. However, it is expected that more Sukuk can be issued by the end of 2016. In fact, in November 2016, BRIS issued its first Sukuk Mudarabah in the amount of around IDR1 trillion (US$74 million). 

The other segment of the Islamic finance industry that recorded a significant increase in 2016 is Islamic life insurance. Considering that the market penetration of the insurance industry as a whole is still low, Islamic life insurance has the potential to grow further. According to the Indonesian Islamic Insurance Association, only 9.4% of the Indonesian population know that there are Islamic life insurance products.

Although it is still small in absolute value, similar progress can also be seen in the general insurance and reinsurance segment where it recorded growth of 22.2% up until August 2016, surpassing the full year growth of 13.9% in 2015. Unfortunately, Islamic mutual funds experienced an almost 10% decline in terms of the net asset value up until July 2016.

Preview of 2017
Government Sukuk have continued the trend to be a dominant player in the Indonesian Islamic finance industry and this is expected to continue in 2017. It is most likely that government Sukuk will also play a more important role in the global Sukuk market, especially considering the fact that the government has looked into Sukuk more and more to plug its budget deficit and finance many infrastructure projects.

The challenge for Indonesia is now more on how to make other components of Islamic finance such as Islamic banking, corporate Sukuk, Islamic insurance and Islamic mutual funds more competitive and grow further. 

Although the intention is actually there by the authorities to support the growth of Islamic finance as a whole (see IFN Annual Guide 2016), it seems that there is a lack of understanding on what actions to take to really stimulate the growth.

Officials in Indonesia’s OJK claimed that it has created a comprehensive infrastructure to support the growth of Islamic finance by issuing many regulations. However, it is high time to discuss whether those regulations are simplifying the businesses or complicating them. The issue here is not about how many regulations are issued, but how effective they are in stimulating the development of Islamic finance.

Like any other business, the Islamic finance industry needs a less bureaucratic environment to grow. Government Sukuk, taking advantage of its sovereign status, may not have as much bureaucratic barriers than those faced by its private counterparts. 

Apart from bureaucratic issues, the government may need to encourage its state-owned enterprises to place more of their funding into Islamic banks and/or Islamic mutual funds. Alternatively, they may also be encouraged to issue more Sukuk instead of conventional bonds.

Last but not the least, fiscal incentives is the area that has not been touched by the government to promote the growth of Islamic banking and corporate Sukuk. As an infant industry in the country, giving fiscal incentives to Islamic finance is to put it on a more level playing field with its conventional counterpart.

Table 1: Selected figures from the Indonesian Islamic finance industry (IDR trillion)








Assets of Islamic commercial banks and Islamic windows







Assets of Islamic rural banks







Sovereign Sukuk issuance (cumulative)







Corporate Sukuk issuance (cumulative)







Islamic mutual funds (net asset value)







Assets of Islamic life insurance







Assets of Islamic general insurance and reinsurance







Sources: Alwyni (2016), Financial Services Authority (OJK), Ministry of Finance, and calculated further.

Notes: *As at August 2016; **As at the 6th October 2016; ***As at July 2016; ^includes all government Islamic securities issuances; US$1 = IDR13,640 (22nd October 2015).

Notwithstanding the aforementioned issues, Indonesia needs to consider Islamic finance as a way to attract more funds into the country in view of the current global political climate, especially in the US and Europe which are not perceived to be very friendly with Muslim countries and further exacerbated by the election of Donald Trump as the US president-elect and the growing influence of ‘far right’ politics in Europe.

However, it is imperative for the country to create a more business-friendly environment with less bureaucracy, fewer unnecessary regulations and better rules of law. All of these factors are critical to attract capital, including Shariah compliant capital.

Farouk Abdullah Alwyni is the chairman of the Center for Islamic Studies in Finance, Economics, and Development and CEO of Alwyni International Capital. He can be contacted at

Structuring Islamic demand deposit products in Malaysia — fundamental issues

The most basic service a bank can provide to members of the public is to act as a depository for their money. This is the essence of commercial banking. The public generally holds its deposits with banks in the form of accounts. The most basic accounts are the savings account and the current account. Both these are considered demand deposit accounts, because they are payable on demand, either by withdrawal or by the customer instructing the bank to make payment to a third party. The relationship between the customer and the bank, in the conventional sense, in relation to the demand deposit accounts, is fundamentally that of creditor and debtor. SYED ALWI MOHAMED SULTAN explains more in this article. 

In Malaysia, under the previous Islamic Banking Act 1983, Islamic banks used to offer demand deposit accounts through two Shariah contracts, the Mudarabah and Wadiah Yad Dhamanah. However, with the coming into effect of the Islamic Financial Services Act in 2013 and Shariah policy documents for specific Shariah contracts issued by Bank Negara Malaysia (BNM), Mudarabah has already been phased out from being offered as a deposit product while Wadiah Yad Dhamanah will be phased out by July 2018 to be converted into Qard as stipulated in the Qard policy document (dated the 3rd August 2016).

Salient features of the Qard policy document (issued by BNM)
Qard is a contract of lending or financing involving money. It is a contractual relationship between a borrower and a lender. Under the Qard policy and as per Fiqh rules, a lender is not allowed to accrue any contractual benefits when giving a financing to the borrower. The financing shall unconditionally be repaid in full at par value.

However, there have been instances where the lender would resort to clever multi-layered financial structures where in substance, such benefits will continue to accrue to the lender, yet comply with the direct textual prohibitions of such regulations. One such example is combining a sale contract with a financing contract, where the borrower would be required to enter into a sale contract as part of obtaining the financing. This is known as Bai Wa Salaf. This is prohibited under Shariah principles.

This may occur, either by accident or by design, in an Islamic banking product offering. For instance, if the Islamic bank induces depositors to place money with the bank (under a Qard or financing contract) and promises to provide the depositors profit under a separate commodity Murabahah contract, this will trigger the Bai Wa Salaf prohibition, as enumerated under Clause 14.1(a) of the Qard policy document.

Apart from the prohibition regarding accruing benefits from a financing under a Qard contract, another common practice that is now banned is the pre-agreed periodic rebate on the installment of a deferred selling price which is linked to the Qard contract. Take, for example, a mortgage facility that is popularly known as the FlexiHome product.

Essentially, this type of product allows customers who have taken up a financing facility (ie sale-based financing) the ability to prepay the facility as an advanced payment yet make such prepaid funds available for redraw such as withdrawing funds from the advance payment pool of funds (technically this advance payment has features of a Qard contract). 

This prepayment will be applied directly toward reducing the principal outstanding amount, thus offering rebates on the daily profit accrual of the financing. While this structure facilitates the acceleration of debt settlement, it is now clearly disallowed as stipulated under Clause 14.1(b) of the Qard policy document.

Another common practice by Islamic banks is to offer certain incentives and benefits to customers who open a current and savings account (CASA) with the Islamic bank. Some benefits may be in the form of gifts, prizes, reward points and even waivers from MEPS charges for using the ATMs of other banks. These benefits will no longer be allowed for customers who open a CASA based on Wadiah (or Qard) as stipulated under Clause 14.1(c) that restricts “any form of incentives based on a binding promise”.

Clause 14.1(c) also impacts the practice of banks in offering affluent or premier banking services to customers who maintain a minimum deposit balance with the bank. Such exclusive benefits, if offered to Qard or Wadiah-based deposit accountholders, will not be allowed under this standard.

Another common product offering that will find a limited shelf life is the Islamic credit card using Qard and Ujrah concepts. Effectively, under this credit card, the credit utilization is based on Qard, while the bank charges fees on the basis of Ujrah. Under Clause 15.3 of the Qard standard, such practices will no longer be allowed.

Tawarruq as the alternative solution to CASA
As a result of the aforementioned disruptive issues posed by the Qard policy, the optimal solution for Islamic banks is to consider structuring CASA products based on the concept of Tawarruq. The Shariah policy document for Tawarruq (Tawarruq Standard) was issued by BNM on the 17th November 2015 and came into effect on the 1st July 2016. Technically, the Tawarruq Standard covers all products that utilize the contract of Tawarruq including deposits, financing, trade finance and derivatives.

Even though Tawarruq is available as an alternative solution to designing CASA deposit products, there are specific fundamental challenges that need to be taken into consideration as shown next.

Customer-bank relationship in deposit products
The relationship between the customer and the bank, in the conventional sense, in relation to demand deposit products, is fundamentally that of creditor and debtor. This enables the bank to treat the money deposited with them as their own. Banks are thus obliged only to return an equivalent amount upon demand.

However, under the Tawarruq contract, the relationship between the customer and the Islamic finance institution is that of a seller and purchaser, ie the customer becomes the seller of certain Shariah compliant commodities while the Islamic finance institution acts as the purchaser. 

The bank only receives the money, purportedly the deposit funds, by way of on-selling the commodities to a third party on a spot basis subsequent to purchasing the commodities from the customer. As a result, the entire deposit transaction is structured through a set of sale and purchase contracts.

On one hand, the transaction costs due to the involvement of Shariah compliant commodities, make the product structure inefficient from a cost perspective. 

On the other hand, in structuring this deposit product, proper attention needs to be paid to the legal documentation to ensure that the rights, obligations, interests and benefits of the respective parties are elucidated as per the Shariah contracts utilized and not blindly adopting terms that relate to the conventional form of a creditor and debtor.

Is the deposit truly on demand?
To that effect, the obligation of the Islamic finance institution to return the depositors’ money is established under a sale contract with a deferred payment obligation. However, the Islamic finance institution is not under any obligation to return the money to the depositors on demand. Instead, the customer may request for the funds on demand at a date earlier than the deferred maturity date of the original sale contract, but this will be construed as an acceleration of the repayment of the deferred selling price, which is a break from the contracted terms. So technically, the customer has to break the agreed terms in order to fulfil a fundamental requirement of the deposit account – money at demand.

Right to grant rebate (Ibra)
The next issue concerns the calculation and payment of profits. To be clear, the use of Tawarruq under a fixed term or fixed deposit product is easy to execute because the amount of the deposit and the tenor are fixed, which enables the computation of the selling price and the profit with certainty.

However, in a savings accounts (and in some instances, current accounts that pay profits), the computation of the profit is a challenge because by nature these demand deposits will have inflows and outflows which are quite random without a fixed tenor. To address this issue, typically Islamic finance institutions will resort to designing the Tawarruq-based CASA with a synthetic tenor, say one year or five years and a ceiling profit rate to facilitate the computation of the selling price. 

Subsequent to that, the effective rate and actual profit will be calculated by taking into consideration the actual amounts and actual number of days that the deposit remains in the account. The difference between the profit computed using the ceiling rate and the actual profit shall be granted as a rebate. However, under Shariah rules, rebate (Ibra) shall only be granted at the discretion of the creditor or the seller. In a Tawarruq-based CASA, that right resides with the customer!

From the view of the Islamic finance institution, handing the decision on a rebate in the hands of the customer will not sit well with the Islamic finance institution’s risk committee. The reason for this is because the Islamic finance institution may end up paying the ceiling profit computed at the synthetic tenor, if the customer refuses to grant such a rebate. 

Clause 20.2 of the Tawarruq Standard mentions that “a rebate clause shall be incorporated in a sale and purchase contract when it is imposed by the relevant authority”. But to the knowledge of the author, there isn’t any regulatory authority imposing depositors to grant rebate to Islamic finance institutions under a sale and purchase contract. This may need to be scrutinized properly in the legal documentation offering Tawarruq-based CASA products.

CASA Tawarruq – a game changer
The observations here are not exhaustive as there are other issues that will also require diligent inspection in designing Tawarruq-based CASA products. This simply demonstrates that diligent structuring expertise is needed in order to ensure that the interests of the Islamic finance institution and the expectations of customers are properly managed. 

Yet, the Tawarruq-based CASA will possibly be a game changer in the Islamic banking industry. As such, getting the design right by balancing between commercial viability and regulatory compliance is of paramount importance in order to compete effectively in the present banking landscape.

The views expressed here are entirely the author’s own.

Syed Alwi Mohamed Sultan is the executive vice-president at Bank Muamalat Malaysia. He was formerly the managing director of Islamic Banking Asia at BNP Paribas. He can be contacted at

MARC affirms Bank Muamalat Malaysia

MALAYSIA: MARC has affirmed the ‘A/MARC-1’ financial institution ratings (FI) on Bank Muamalat Malaysia and concurrently affirmed the ‘AIS’ rating on the Islamic senior note program (senior Sukuk) of up to RM2 billion (US$449.79 million) with a stable outlook, according to a statement. The affirmed FI rating is driven by Bank Muamalat’s relatively modest asset size and weaker asset quality metrics as well as moderate financial performance and constraints posed by its funding profile.



China and Hong Kong: OBOR to fuel Islamic finance developments

China has always been an interesting Islamic finance proposition due to the sheer size of its economy and Muslim population as well as impressive economic growth rates; and with its ambitious ‘One Belt, One Road’ (OBOR) initiative in place, the future for Shariah finance shines brighter than ever. VINEETA TAN provides a 12-month overview of Islamic finance developments in China.

Regulatory environment
There has yet to be a dedicated legal framework for Islamic banking and finance in China; Hong Kong, however, in 2014 amended its tax framework to accommodate the issuance of Sukuk: the Loans (Amendment) Bill 2014 followed the introduction of the Inland Revenue and Stamp Duty Legislation (Alternative Bond Schemes) (Amendment) Ordinance 2013 on the 10th July 2013, with both pieces of legislation together providing a taxation framework for Sukuk, comparable to that provided by Hong Kong for conventional bonds. In 2015, Qatar International Islamic Bank entered into an MoU with Chinese brokerage Southwest Securities through which the Islamic bank will leverage on to develop a Shariah finance framework for China.

Prior to this, there was a proposal to study what needs to be changed legislation-wise to facilitate Islamic finance development in China after the country became a member of the IFSB in 2009. However, there has been little subsequent movement from the government of the People’s Republic of China (PRC) to start on any necessary amendments. In 2013, China’s State Council approved Ningxia as an economic experimental zone for inland development, which has been considered a tacit approval to the introduction of Islamic finance in the zone.

Hong Kong has positioned itself as a formidable and serious Sukuk issuer by following up with another US$1 billion five-year Wakalah paper in 2015 after its debut Ijarah issuance in 2014, and announced in its Budget 2016 its intentions to issue another Sukuk facility. Mainland China is also catching up: over the past one year, local corporates and state-backed firms have been mobilizing to tap the Sukuk market: Sichuan Development Holdings (SDH) is expected to price a US$300 million three-year Sukuk by the end of 2016 (See IFN Report Vol 13 Issue 45: ‘New developments for China’s long-awaited entry into the world of Sukuk). SDH’s is one of several other Chinese entities which have expressed an interest in offering Sukuk including HNA Group, as well as TEB Technology in partnership with SAG Holdings. The latter two planned to raise CNY100 billion (US$14.52 billion) for the controversial elevated bus project in China, with an initial issuance of CNY12 billion (US$1.74 billion) (See IFN Report Vol 13 Issue 21: Exclusive — ‘China explodes into Islamic finance scene with government-backed green deal’).

President Xi Jinping’s OBOR initiative is a catalyst for Islamic finance developments as it opens a slew of financing opportunities for infrastructure stretching across key Islamic finance centers along the Middle East, Africa, Asia and Europe. In fact, several infrastructure projects under OBOR are already financed in a Shariah compliant manner: for example, the development of the Thar Block II coal mine in Pakistan is being financed by a dual-currency multijurisdictional part-Islamic financing package.

New entrants
The immense potential OBOR brings coupled with the increasingly attractive Muslim wealth has led Chinese financial institutions to also expand their offerings to cater to Shariah-conscious investors. In May 2016, Fullgoal Asset Management (Hong Kong) partnered with Dubai-based Mawarid Finance to launch an Islamic fund underpinned by Chinese equities while Chinese Business Hub, an outfit assisting Chinese companies to build a presence in the UAE, in August secured a Shariah compliance certification for one of its investment products.

In terms of banking: there have been multiple attempts by foreign players to establish Islamic banks in China including Malaysia’s Affin Bank, RHB Capital (RHB Banking Group) as well as Bank Muamalat Malaysia. While these initiatives have not materialized, in September 2015, an Islamic bank — the Xining Rural Commercial Bank — was launched in Xining, the capital of northwestern China’s Qinghai province, according to state-run Xinhua News Agency. The new bank joins the Islamic banking unit (established in 2009) of Bank of Ningxia in providing Shariah compliant financial products.

International partnerships
Both China and Muslim-majority countries as well as Islamic finance organizations are laying the foundation for stronger bilateral banking and financing relationships. Particularly interesting is China’s ties with Iran. Maintaining steady ties even when Iran was still under sanctions, Chinese banks are now looking at setting up shop in the world’s largest fully-fledged Shariah compliant banking and finance market (See IFN Report Vol 13 Issue 45: ‘China leveraging on Iranian ties to gain Islamic finance edge’).

The Islamic Corporation for the Development of the Private Sector (ICD) has also been actively engaging Chinese entities to explore Islamic finance opportunities: the ICD in May 2015 entered into a collaborative agreement with ICBC Financial Leasing, the leasing arm of the Industrial and Commercial Bank of China, to jointly develop Islamic capabilities and opportunities and assist economic evolution across ICD member countries. The ICD followed up with an MoU with China International Contractors Association.

The IDB is also in talks with China’s Asian Infrastructure Investment Bank (AIIB) to explore the potential of utilizing Shariah compliant financing facilities to fund Asia’s infrastructure needs. The AIIB also plans to make use of Hong Kong as a bond-issuing platform due to the island state’s sound financial system and experience in developing Sukuk.

IFN weekly market roundup: 12th – 18th November 2016

In this week’s IFN review, we saw the tepid sovereign Sukuk space offset by a healthy dose of corporate issuances; the global Islamic asset management industry is seeing a robust pipeline of new funds; Abu Dhabi is considering further consolidation in the banking sector; while the Indonesian national Shariah finance committee is about to take shape.

Malaysia has raised RM3 billion (US$678.53 million) via a government investment issue (GII) Murabahah facility while the Bruneian government issued its 138th series of short-term Sukuk Ijarah worth BN$100 million (US$70.08 million).

The International Islamic Liquidity Management Corporation reissued its US$840 million three-month tenor Sukuk facility, while TRIplc Medical of Malaysia plans to issue a senior Sukuk Murabahah facility of up to RM639 million (US$146.28 million) in nominal value. BRI Syariah’s IDR1 trillion (US$73.5 million) subordinated Sukuk Mudarabah instrument, which was listed on the Indonesian exchange on the 17th November, received over IDR2 trillion (US$148.8 million) in subscriptions, reported. The IDB is planning to hold investor roadshows for its US dollar Sukuk sale, according to Reuters, which also reported that Etihad Airways is expected to launch an approximately US$1 billion private-placement Sukuk this week.

GCC: Eskan Bank will debut its and also the Kingdom of Bahrain’s first Islamic retail REIT, the Eskan Bank Realty Income Trust, next week, while Ibdar Bank has teamed up with Barak Fund Management to offer the Barak Ibdar Shariah Trade Fund. 

GLOBAL: The UAE’s Gulf Islamic Investment has raised US$145 million in funds for California-based technology firm Apttus. Azimut Group and Malaysia’s Maybank Asset Management Group have joined forces to jointly manage Azimut’s Global Sukuk Fund, which will be rebranded as Azimut MAMG Global Sukuk

EUROPE: The UK’s London Central Portfolio will soon launch a new property fund, the London Central Apartments IV, which will include a Shariah compliant option.

The mergers of Abu Dhabi Islamic Bank with Al Hilal Bank and that of Abu Dhabi Commercial Bank with Union National Bank are on the cards in the Abu Dhabi banking sector, according to Bloomberg; however, this plan will only be considered after the completion of the National Bank of Abu Dhabi-First Gulf Bank merger by March 2017.

Over in the financing market, Ajman Bank secured an AED850 million (US$231.36 million) syndicated Islamic financing facility from local and regional banks; GFH Capital of Bahrain made an investment in the form of a Shariah compliant convertible Murabahah facility in the AMA Group; Saudi Arabia’s Riyad Bank renewed an Islamic facilities agreement worth SAR276.05 million (US$73.51 million) for Abdullah AM Al Khodari Sons Co; Malaysia’s Bank Muamalat extended RM265 million (US$61.09 million)-worth of Muamalat financing facilities to Sabah Land Development Board; and according to the Business Recorder, Pakistan’s Modaraba players are setting up an Islamic Financing Facility Center at Rawalpindi to extend affordable financing to buyers of motorcycles. 

The IDB, via its trade finance arm, is supporting the Senegalese groundnut sector via a US$75 million syndicated Murabahah financing facility. The Islamic bank will also be providing a financial backing to Turkey for the latter to develop its high-speed rail projects, according to Anadolu Agency. 

The president of Indonesia, Jokowi Widodo, has signed a presidential decree on the National Shariah Finance Committee, according to, which also added that the government is now focusing on the establishment of a national Shariah board. 

The Iran Mercantile Exchange and the Real Estate Agents Union have agreed to create a real estate index with futures and options to be offered on the index after securing the Shariah compliance stamp, according to the Persian daily Hamshahri.

GFH Financial Group has appointed Hammad Younas, former CEO of EY (Bahrain) in corporate finance, as the head of investment management; Pieter Burger de Witt joined Bank Sohar of Oman as CFO and assistant general manager; and Aberdeen Asset Management, which launched its office at the Abu Dhabi Global Market, named Andrew Paul as the senior executive officer and Lucy Draper as the senior business development manager for the Middle East region.


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