English: Islamic jurisprudence
Alternate spelling: Sharia, Shari'a, Shari'ah, Syariah, Syaria, Syari'ah, Syari'a

Definition: Islamic cannon law derived from three sources: the Quran, the Hadith and the Sunnah

A “Shariah compliant” product meets the requirements of Islamic law.

A “Shariah board” is the committee of Islamic scholars available to an Islamic financial institution for guidance and supervision in the development of Shariah compliant products.

A “Shariah advisor is an independent Islamic trained scholar that advises Islamic institutions on the compliance of the products and services with the Islamic law.

IFN Weekly Market Roundup: 18th February – 24th February 2017

The week brought in promising head starts and prospective outlooks as the end of the second month of 2017 draws closer. In a span of seven days, we witnessed Hong Kong dominating the sovereign Sukuk space; Malaysia taking up the corporate sector; more banks looking to a future in compliant products and services; regulators and authorities collaborating to increase global Islamic finance standards; and industrial moves and strategical reshuffles mostly from banks and insurance companies.

The government of Hong Kong extended its Sukuk curve with a US$1 billion 10-year tenor Reg S Sukuk facility; its previous two issuances were for five years. The paper, priced at 3.13%, was almost twice oversubscribed, with orders worth US$1.72 billion 
Saudi Arabia called for proposals from banks for its potential US dollar Sukuk, according to Reuters quoting unnamed sources. Citibank, HSBC and JPMorgan will be acting as the global coordinators. Bank of China, BNP Paribas, Deutsche Bank, Goldman Sachs, Morgan Stanley, MUFG and NCB Capital are reported to be involved.

Oman mandated Alizz Islamic, Citibank, Dubai Islamic Bank, Gulf International Bank, HSBC, JPMorgan and Standard Chartered to manage a Sukuk sale worth approximately US$1.5 billion to US$2 billion, as reported by Global Capital.

The corporate issuance space was dominated by Malaysia throughout the week. YTL Power International proposed a RM2.5 billion (US$561.04 million) Sukuk Murabahah facility to fund the equity contribution of a 1,320 MW coal-fired power plant in Indonesia and a 470 MW oil shale power plant in Jordan. 

IFN learned that the Malaysian Ministry of Finance is evaluating a Sukuk plan by Malaysia Debt Ventures (MDV). SapuraKencana Petroleum announced the signing of seven-year multicurrency financing facilities approximately worth US$1.5 billion with a range of Malaysian, regional and international banks, involving an issuance of approximately RM3.6 billion (US$806.78 million) of unrated Sukuk

Tanjung Bin Energy Issuer  passed a resolution to refinance a junior term financing facility during an extraordinary general meeting with Sukukholders of a Sukuk Murabahah program of up to RM4.5 billion (US$1.01 billion).

In the Gulf, Qatar Islamic Bank obtained approval from its ordinary general assembly to raise the limit of its perpetual additional Tier 1 Sukuk from QAR5 billion (US$1.37 billion) to QAR7.5 billion (US$2.06 billion), which also approved a recommendation to distribute a 47.5% cash dividend. 

Turkey’s Eximbank announced its plans to develop a credit rating system and Sukuk among others by the end of 2017, according to Anadolu Agency.

In its latest report, the IMF called for the Islamic banking industry to establish a policy framework and environment that promote financial stability. The global foundation also encouraged increased efforts to diversify the sovereign Sukuk markets.

The World Bank Group and the IDB announced the publication of a global report on Islamic finance subtitled ‘A Catalyst for Shared Prosperity?’ The report discusses trends in Islamic finance, identifies major obstacles in the industry and recommends policy interventions to boost the market. 

In Africa, The Popular Credit of Algeria Bank is planning to venture into Shariah compliant financing from 2018 onwards, according to its CEO as reported by local media.

In the Middle East, Warba Bank announced its plan to raise the allocated amount of the acquisition of financing portfolios from Al-Mulla International Financing from KWD30 million (US$97.99 million) to KWD50 million (US$163.32 million). Alizz Islamic has launched new Shariah compliant commercial financing products for salaried customers. Saudi-based Middle East Paper Company reached an agreement with Saudi British Bank to renew its Islamic credit facilities, according to a bourse filing. 

In Asia, Bank of Maldives Islamic established its first home construction and real estate financing facility, according to Dr Aishath Muneeza, IFN Correspondent and the chairperson of the Maldives Center for Islamic Finance. Pakistan’s Securities and Exchange Commission approved the prospectuses of two new Modarabas: Habib Metro and Orient Rental.

Norton Rose Fulbright and Chadbourne & Parke confirmed that both firms will be merging in the second quarter of 2017. The firm will adopt Norton Rose Fulbright’s name after the merger.

The Dubai Financial Services Authority has inked an agreement with the European Securities and Markets Authority as an effort to share information and increase partnership in Dubai International Financial Center-based central counterparties’ compliance with the European Market Infrastructure Regulation’s conditions. 

Borse Dubai, the parent company of Dubai Financial Market, and NASDAQ signed a technology deal to boost the infrastructure of Dubai’s stock exchanges. Under the agreement, NASDAQ would be providing a new INET-powered, multi-asset trading technology engine called NASDAQ Matching Engine; a cash equities clearing module called NASDAQ Packaged Clearing; and enabling an in-memory-vetting model on the central securities depository solution under the new NASDAQ Financial Framework architecture. 

Audit regulators under the ASEAN Audit Regulators Group (AARG) comprising Malaysia’s Audit Oversight Board, Indonesia’s Finance Professions Supervisory Center, Singapore’s Accounting and Corporate Regulatory Authority and Thailand’s Securities and Exchange Commission; and the four largest audit firms in the region comprising Deloitte Touche Tohmatsu, EY, KPMG and PwC, agreed to work toward achieving a reduction of at least 25% in the number of listed companies’ audits with inspection findings. AARG also announced that the World Bank’s Center for Financial Reporting Reform is collaborating with experts from the East Asia Pacific region of the bank’s Global Governance Practice to secure funding and provide technical assistance to enhance audit oversight in the member nations. 

KBW Investments launched Crestmount Capital which focuses its funding on Shariah compliant investments. The company also announced that Crestmount Fund I, its premier Shariah compliant real estate investment fund, achieved the full subscription of AED267 million (US$72.68 million).

QInvest exited from the St Edmund’s Terrace LP Fund, a Shariah compliant London residential real estate fund.  

Zurich Takaful Malaysia launched Takaful SeniorGold, a Family Takaful plan, offering coverage to senior citizens. 

Bahrain Kuwait Insurance Company (BKIC) is set to purchase Bahrain Islamic Bank’s entire stake in Takaful International Co.

Qatar Islamic Bank has appointed new board members and elected Sheikh Jassim Hamad Jassim Jaber Al Thani as the bank’s chairman and Abdullatif Abdulla Al Mahmoud as the vice-chairman; Bank Nizwa has elected acting CEO Khalid Al Kayed as its CEO; SHUAA Capital has appointed Hisham Al Rayes to replace Hamad Al Sagar who resigned from the board of directors; Dr Ghassan Abdulrahman has resigned from the board of Malath Cooperative Insurance and Reinsurance Company; Fitch Group has appointed Ian Linnell as the president of Fitch Ratings; and Slaughter and May, elected Dan Schaffer as its new partner in the firm’s Pensions and Employment Group.

RAM rates Maybank Islamic’s program

MALAYSIA: RAM has assigned ‘AAA/Stable/P1’ ratings to Maybank Islamic’s proposed RM10 billion (US$2.24 billion) Islamic commercial paper/medium-term note program, according to a statement. The proceeds will be used for Shariah compliant funding purposes, and the rating agency has also reaffirmed the bank’s ‘AAA/Stable/P1’ financial institution ratings as well as the ‘AA1/Stable’ rating on its RM10 billion subordinated Sukuk Murabahah program (2014/2034).


Kuala Lumpur welcomes Islamic finance elites to honor industry’s finest

MALAYSIA: Kuala Lumpur hosted 270 Islamic finance leaders from across Asia, the Middle East and Europe last evening as the industry gathered at the prestigious annual Islamic Finance news Awards ceremony to honor and celebrate the exceptional achievements and contributions of market players in 2016, a year characterized by volatility and turbulence.

Differentiated by its independence, breadth and rigorous selection process, the IFN Awards are recognized worldwide as the leading accolade for the global Islamic finance industry. A total of 25 awards were handed out to winners of the IFN Deals of the Year (DOTY), IFN Best Banks, IFN Service Providers and IFN Law Awards from the Asian region.

Despite 2016 being a challenging year for the Islamic financial markets which were impacted by erratic movements in the wider financial markets, weaker global growth and major geopolitical shakeups, there were several vibrant bright spots in the Shariah finance space. Andrew Morgan, the managing director and publisher of the REDmoney Group, the parent company of IFN, says: “This showcases yet again the resilience of this market and the unwavering commitment of Islamic finance participants to develop the sector – all promising to ensure the growth and sustainability of the industry.”

The industry’s perseverance and agility in navigating a tough landscape is captured in the series of IFN Awards which continues to grow from strength to strength. The IFN DOTY welcomed an unprecedented number of environmental and social impact transactions showcasing for the first time that Islamic finance players and their customers are demonstrating a more clear and systematic focus on doing well for the planet and for the people; the IFN Best Banks Poll received one of the best responses ever with over 26,000 votes from around the world; the IFN Law Awards received a record number of nominations from firms across 13 hotly-contested categories, with a diverse range of submissions reflecting complexity, breadth and visibility of the work undertaken by the legal fraternity; and the IFN Service Providers Poll, now in its 11th year, once again received an exceptional response, highlighting the importance of these players to the ongoing functionality of the Islamic finance industry.

Some of the biggest victors last night include CIMB Group which took home six awards; Maybank Group which bagged four awards; Meezan Bank with three awards; ZUL RAFIQUE & Partners also winning three; and Bank of Tokyo Mitsubishi UFJ with two awards. For a complete list of winners, please click here.

The night was graced by industry stalwarts including Abu Hassan Alshari Yahaya, the assistant governor of Bank Negara Malaysia; Irfan Siddique, the president and CEO of Meezan Bank; Zainal Izlan, the managing director of development and Islamic markets of the Securities Commission of Malaysia; Raja Teh Maimunah, CEO of AmInvestment Bank; Norzilah Mohammed, the president and CEO of EXIM Bank; Shazmeer Mokhtar, the deputy director of Malaysia International Islamic Financial Center; Adissadikin Ali, the managing director and CEO of RHB Islamic; Badlisyah Abdul Ghani, the deputy CEO of Lembaga Tabung Haji; Mohamad Safri Shahul Hamid, the senior managing director and deputy CEO of CIMB Islamic; and Fad’l Mohamed, the deputy CEO of Maybank Investment.

Held in Kuala Lumpur and Dubai every year, the next IFN Awards Dinner will be held at the Ritz Carlton DIFC in Dubai on the 28th February 2017 to recognize winners from the Middle East and the African region.

CPA to launch Islamic financing from 2018

ALGERIA: The Popular Credit of Algeria Bank (CPA) is planning to launch Shariah compliant financing from 2018 onwards, CEO Omar Boudieb was quoted by the Algeria Press Service as saying. The bank is currently evaluating the commercial prospects as well as studying regulatory requirements of offering Shariah products.


Malaysia Building Society

MALAYSIA: Malaysia Building Society (MBSB), which plans to convert into a fully-fledged Shariah compliant financial institution, reported a profit after tax of RM201.41 million (US$45.14 million) for the 12 months ended the 31st December 2016, a 21.8% decline year-on-year from the RM257.59 million (US$57.73 million) recorded in the previous year, according to a press release. This was on the back of improved revenues which were up 7.37% year-on-year to RM3.27 billion (US$732.82 million) during the period.

Riyad REIT

SAUDI ARABIA: Riyad REIT, a Shariah compliant investment fund, has gained a net profit of SAR9.89 million (US$2.64 million) for 2016. According to a bourse filing, the fund recorded an earning of SAR200 (US$53.31) per share for 2016, an increase from a loss of SAR60 (US$16) for 2015. Gross profit increased 716.15% from SAR2.63 million (US$700,980) in 2015 to SAR21.48 million (US$5.73 million) in 2016.

Islamic microfinance continues to make headway globally

Islamic microfinance continues making headway and has been a topic at the World Economic Forum. In a panel session in Davos, Switzerland on the 19th January 2017 titled ‘Unconventional Solutions: The Role of Faith’, global leaders brainstormed different approaches to Islamic social finance. Discussants in the session argued that a new approach is needed to shift the challenge of financial exclusion in the developing world and that there is growing recognition that Islamic financial instruments can also overcome problems such as overindebtedness and the lack of transparent pricing that the conventional microfinance industry is grappling with. 

This follows the realization at the ‘Midi de la Microfinance’ event with investment bankers in Luxembourg, which is both a European hub for Islamic finance and microfinance, that there is a market gap, both on the supply and demand sides for more inclusive finance. In the event organized by ADA and supported by the Luxembourg Directorate for Development Cooperation and Humanitarian Affairs, experts including Triodos Bank explored how Shariah compliant financing differs from conventional microfinance and what is required to make the still relatively young sector investment-ready. The discussion explored different Islamic consumer finance products as well as the necessary investment infrastructure, with microfinance rating agencies still struggling to push Shariah compliant microfinance institutions through their assessment mold, leaving potential investors without the necessary assurances.

But it’s not all in the name, and some feel-good news this time comes from the US, with a new interest-free enterprise financing scheme. In the state of New Jersey, small businesses are still struggling to recover from the economic downturn. In response, the local government in Union County, New Jersey is partnering with UCEDC, a nonprofit economic development corporation, to offer women business owners in Union County access to 0% working capital financing. The no-interest loans of up to US$25,000 are made possible by grants from Investors Bank and the Tory Burch Foundation Capital program. This is an interesting example of the universal power of the ethical value proposition that underpins Islamic finance and microfinance – banks and financial institutions must serve society. “Working capital is the lifeblood of small businesses and unfortunately, women-owned businesses often come up short,” said UCEDC President Maureen Tinen in a press statement. “With the elimination of all interest payments on this loan, we’re hoping that more women entrepreneurs will now have the cash they need to grow their business.” 

Dr Mohammed Kroessin is the head of Islamic microfinance at Islamic Relief Worldwide. He can be contacted at

New era for Shariah governance of Islamic banks in Kuwait

A unique feature of Islamic banks is their adherence to the principles of Shariah in all their banking activities. Thus, to reassure stakeholders and customers, Islamic banks globally have established corporate governance structures and frameworks to ensure that all transactions are in strict compliance with Shariah principles. The primary governance mechanism used to ensure compliance with Shariah principles in Islamic banks is the Shariah supervisory board. Shariah supervisory boards typically operate within the bank itself to ensure the bank’s conformity. 

In Kuwait, every Islamic bank has a Shariah supervisory board pursuant to the Central Bank of Kuwait (CBK)’s instructions titled ‘Rules and Conditions for the Appointment and Responsibilities of the Shariah Supervisory Board in Islamic Banks’ issued in June 2003 and which complement the instructions titled ‘Rules and Standards of Corporate Governance in Kuwaiti Banks’ issued in 2012. It has long been debated whether the CBK should be doing more to bolster the Shariah governance framework of Islamic banks in Kuwait considering the fast-paced changes and innovation taking place in Islamic banking products as banks compete to increase their market share amid stiff competition.

On the 16th December 2016, the CBK’s board of directors passed a resolution to issue new instructions called ‘Shariah Supervisory Governance for Kuwaiti Islamic Banks’. The new instructions are consistent with the CBK’s ambitions to broaden its scope and oversight of the Islamic banking sector in Kuwait in response to the substantive growth it has recorded over the past decade, and more importantly, the growth it is projected to realize over the next decade as it overtakes conventional banking in market share for the very first time.

The new instructions provide a comprehensive framework, clearly outlining the duties and responsibilities of the Shariah supervisory board including Shariah audits, and Kuwaiti banks would be granted a grace period of one year to fulfill the requirements as the instructions will be effective the 1st January 2018. The provision attracting the most attention in the new CBK Shariah supervisory governance instructions relates to external Shariah audits of Islamic banks’ activities. For the very first time since the establishment of the first Shariah compliant financial institution in Kuwait in 1977, the CBK will require all Islamic banks to appoint an external, independent Shariah auditing firm to audit their activities. Kuwaiti Islamic banks have traditionally used their in-house Shariah supervisory board to police the compliance and conformity of their business activities to Shariah principles, but this self-policing has frequently been criticized for exposing banks to conflicts of interest.

The existence of a proper framework of Shariah governance is not a luxury but a matter of dire necessity. The enforcement of these regulations will lead to a more transparent and credible operating environment for Kuwaiti Islamic banks which should uplift the confidence of the Islamic banking industry in Kuwait and ensure its long-term prosperity.

Thuwaini Al Thuwaini is the acting chief investment banking officer of Warba Bank. He can be contacted at

Islamic megabank underway?

QATAR: Three Qatari banks deciding to merge could give the region the Islamic ‘megabank’ the industry has for years tried to create to no avail, and increase the prospects for larger Islamic syndicated deals and project finance to boost the US$2 trillion Shariah finance sector.

Masraf Al Rayan (MAR), Barwa Bank and International Bank of Qatar (IBQ) are currently performing due diligence on a possible tripartite merger which would result in the largest Islamic bank in Qatar with assets of QAR173 billion (US$47.47 billion), displacing incumbent Qatar Islamic Bank, and propel the merged entity as the largest bank in the State after Qatar National Bank (QNB). This potential shakeup is viewed positively by analysts as it would relieve the pressures on asset yields and profitability as well as mitigate risks.

“The merged entity between MAR, Barwa and IBQ would help to rebalance the Qatari banking sector,” explains Nitish Bhojnagarwala, an assistant vice-president at Moody’s. “Currently in Qatar, 18 banks serve a population of only 2.6 million, and QNB – the largest bank in the GCC – dominates with a market share of more than 40% of domestic assets.” Depending on the strategy of the new entity, which may diverge from the current direction of each individual participating bank, the amalgamation is likely to give it the economies of scale to better compete and add to the country’s efforts to raise public awareness of Shariah compliant finance.

If executed, the consolidation would also give the Qatari entity an edge in regional Islamic banking standings: overtaking the likes of QIB and Abu Dhabi Islamic Bank to become the GCC’s fourth-largest Shariah bank by assets. This could help the new entity to win larger mandates previously out of reach for the respective individual banks.

What is also interesting is the diverse business profiles of MAR, Barwa and IBQ which would work in the favor of both the merged entity in helping it build a stronger business proposition, and consumers as they would benefit from a wider range of products and expertise under one roof. 

Masraf Al Rayan has a strong relationship with the Qatari government, with loans to the government and public sector entities representing around 50% of its financing book. Barwa has a solid consumer and corporate business and IBQ is a niche player in private banking,” noted Bhojnagarwala.

AIB unveils new products for commercial financing

OMAN: Alizz Islamic Bank (AIB) has announced new Shariah compliant commercial financing products for customers with a minimum monthly wage of OMR500 (US$1,293.93) for government and semi-government employees and OMR750 (US$1,940.89) for those working in the private sector, according to a press release. The products are based on Murabahah, Ijarah and forward Ijarah.



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