Volume12.Issue34

What gender gap?

Islamic finance is an ever-evolving animal, and I hope that like us, many of its practitioners enjoy confounding the expectations, assumptions and prejudices of those who do not yet understand its advantages, open-mindedness and innovative attitude. This week, we focus on one of the most positive aspects of the industry's recent development, with a cover story on the exceptional advances in gender equality and the new initiatives that are bringing women into the fold on both sides of the fence: as employment programs and client innovations encourage female involvement at every level.

Our IFN reports look at opportunities in Germany and Russia while our IFN Correspondents cover Saudi Arabia, risk management, syndicated finance, leasing and capital markets. Our special reports explore Islamic ETFs while our features come from Morgan Lewis on Russia and our in-house analysis brings you the latest on Djibouti and aviation and marine financing.

September is nearly upon us and the summer is all but over. As the third quarter gets into full swing we hope that as always, you have a productive week and a positive result in all that you do.

 

The importance of being equal: How women are winning in Islamic finance

Last month, the Women in Islamic & Ethical Finance Forum (WIEFF) was launched, marking the latest in a line of encouraging activity to support female involvement in Islamic finance at both the practitioner and customer level. LAUREN MCAUGHTRY looks at the role women can play in the industry, and how this is being supported across the financial landscape through multiple channels, platforms and inspirational initiatives.

An influential opportunity
Women are becoming an increasingly powerful force, both in terms of industry talent and client targets. In the GCC for example, women’s net worth could grow up to 15% to US$258 billion by 2023 (according to estimates from the Kuwait Financial Center) — and yet the gender gap still exists.

While initiatives exist to encourage female clients, Islamic banks have done much less to attract female talent through their doors. This is especially true in the Middle East, where a combination of cultural, economic and corporate influences has left the region some way behind several of its peers in promoting the inclusion of women in the Islamic finance workforce. Yet with the proportion of working women in the GCC jumping to 38% last year (according to the World Bank), the opportunities are more exciting than ever.

“We as humans need role models. Someone we can follow. Someone whom we can look up to. Someone we can aspire to. There are many female role models in the industry. Having platforms where we can highlight their contributions and achievements is extremely important. Not particularly because they are women. However, because they are smart, talented, gifted. They achieved their position because of their knowledge and hard work. Inspirational role models are also vehicles to change,” said Samina Akram, the managing director at Samak Consultants, a former Merrill Lynch banker and founder of the Women in Islamic & Ethical Finance Forum, speaking to IFN.

A leading figure in the area is Malaysia, which has multiple female CEOs including Fozia Amanulla, CEO of Alliance Islamic Bank, and Raja Teh Maimunah Raja Abdul Aziz, CEO of Hong Leong Islamic Bank. Three of the 11-member central bank Shariah Advisory Board are women, while Dr Zeti Akhtar Aziz has been governor of the Malaysian central bank since 2000. “Much work needs to be done on closing the gender gap,” commented Harris Irfan, the managing director of the European Islamic Investment Bank, speaking on the WIEFF. “While Malaysia is impressively progressive in this regard, many other countries are lagging. Women have virtually zero representation at board level in Islamic banks and very little at senior management. Unless this issue is addressed, the culture of Islamic finance will be little different to the culture of conventional finance.”

Abayomi Alawode, the head of Islamic finance at the World Bank Group, is equally supportive. “Islamic finance is a growth area for the World Bank Group’s Finance and Markets Global Practice and we are keen to enhance our focus on how Islamic finance can benefit women in our client countries, especially in terms of improved access to financial services,” he said. “We are also interested in fostering links between the Islamic and ethical finance industries and will be working with WIEFF to explore opportunities for collaboration in these areas.”

A room of one’s own
The WIEFF is one of the first platforms set up to promote the inclusion of women in Islamic finance, but its ambitions go beyond simply organizing seminars and connecting women — with the eventual hope of becoming an active think tank for the industry. “Over the years I have come to realize that there are many hidden stereotypes and prejudices we all have. When we challenge those stereotypes not through aggressive or hostile means, but just by being good at what we do, we soon begin to break down those barriers and the very people who stood in our way will begin to respect us and will become our greatest supporters,” said Samina. “My personal struggle in the industry made me realize the obstacles women face and what we need to overcome them. This is where the Women in Islamic Finance idea came from, the journey had been a slow, frustrating one. However, it was time to help other ladies and to ensure their path into the industry would be much easier and smoother than mine.”

With over 5,500 members, the Forum officially launched on the 30th July this year to an international audience, supported by leading organizations including IFN, KPMG, the British Bankers Association, UK Trade & Investment and The Chartered Institute for Securities and Investment. The event featured a keynote speech from world-renowned scholar Sheikh Nizam Yaquby, who noted the important role of women and emphasized Lady Khadija tul Kubra’s contributions to business, trade and Islamic finance.

This involvement, emphasized Samina, was of particular value. “Lady Khadija tul Kubra was the beloved wife of the Prophet Mohammad. She was an extremely successful and powerful businesswoman… It was extremely humbling and inspiring to hear Sheikh Nizam’s talk on what a great role model Lady Khadija was and how some of the transactions we use in modern day Islamic finance can be traced back to her. When we highlight such incredible, inspiring role models to the world, this is how we will change attitudes and this is our ultimate goal. Gandhi said: 'In a gentle way we can shake the world'. Change is never aggressive or forceful - it’s always gentle, with its own timing.”

Industry encouragement
The situation has not always been as encouraging, however, and many women in the industry have struggled with feelings of isolation. “Over the past few years we are beginning to see more and more women playing an increasingly important role in the development of the industry,” confirmed Samina. “When I first entered the sector we would hardly see women at industry conferences. However, now we see more women visible at events and speaking on stage as major contributors bringing about key innovation and industry development”.

A lack of communication and collaboration was a significant contributor to the problem — with many large international banks suffering from their own size and failing to successfully market or promote its Islamic finance initiatives. Samina got into the area through diversity platforms including the South Asian Network at Merrill Lynch, but noted that in many investment banks, many employees may not be aware of the opportunities. “Recognizing the business opportunity for Shariah compliant investments in my day-to-day job, I organized an introductory lunch time seminar on Islamic finance, taking advantage of the South Asian Networks internal reach within the organization [Merrill Lynch]. We marketed the event throughout the firm including overseas offices. Over 200 employees attended the event in London and many colleagues listened in from abroad. This event had a huge impact in the company and I somehow became the face of Merrill’s  Islamic finance business.  When working in such a big organization it’s difficult to even sometimes know they have expertise in niche markets. Here we can see a diversity forum highlight an important business opportunity.”

And now, organizations are slowly starting to recognize the importance of encouraging women to enter the industry. A pioneer in this area is Abu Dhabi Islamic Bank (ADIB), which this year launched its Tamkeen Women in Leadership Program to prepare and develop a new generation of leaders. “The Women in Leadership Program will strengthen your abilities to manage people, multiple roles that you fulfill in the workplace, community and is uniquely tailored to equip you to transition into more challenging leadership roles,” it tells its participants.

The first banking women leadership program in the GCC and the first Women in Banking Forum in the GCC and MENA region, the program focuses on personal development (‘the character factor’) as well as team leadership, management development, banking fundamentals, executive coaching and business projects.

The first wave of the 12-month project runs from May 2015-16 and includes 40 participants in four groups, with participants restricted to UAE female nationals with a minimum of four years’ experience at ADIB. “We wanted to make sure the ladies at the bank are given a career path with training so that if they have been forgotten or looked over, then they are now in the spotlight,” CEO Tirad Mahmoud commented on the program.

Client collaboration
However, few other institutions have followed in ADIB’s footsteps to institute specific programs to encourage female involvement — and this could start to look short-sighted, given the increasing focus on women as a customer segment. “We are seeing a lot of initiatives to get female customers in, as well as on the employment side, and the two are driving each other,” commented Ashruff Jamal, Global Islamic Finance leader at PwC Middle East. “More women working in Islamic finance could certainly attract more female customers, and that is where the synergy lies: you cannot look at the two in isolation.”

According to a recent report from PwC surveying banking customers in the GCC: “One of the key differentiating factors for Islamic banks has been their embrace of services designed exclusively for women. Although this has developed as a result of cultural and religious factors, it can be extremely beneficial to Islamic banks.”

Women are more loyal customers than men, with the survey finding that 35% of women would not consider changing their bank accounts, compared to 25% of male respondents. More women than men visit bank branches, yet the majority of female respondents also said their preference was online banking, suggesting that a digital platform could be a significant factor in attracting new clients.

“Islamic banks could do well to focus more attention on understanding what women customers want and how to better serve them,” highlighted Ashruff, one of the authors of the recent report. “The assumption that women are best served via female-only branches could soon become outdated and a better model could be developed around a robust digital strategy. A compelling digital offering could be a far more significant factor in attracting new female customers than a much costlier effort to develop a network of women-only branches. Bricks and mortar investment to segregate branches will increasingly lose value as women use more services online.”

However, banks will have to ensure that this digital platform offers women what they want — and that will be much easier if they can utilize the experience of their female employees. “The research suggests that rather than a single online offering for both genders, men will be more receptive to a product that saves time and effort, while women want a platform that is easy to use and offers security in an emergency,” noted PwC.

Yet there is still a significant opportunity to attract more customers. Women are far less active clients than men, and use every banking channel less than their male counterparts. Only 40% of women use internet banking at least once a week, for example, compared to 60% of men — and 8% of women do not have their own independent bank accounts.

Banks in the region are recognizing this and going to ever-greater lengths to capture market share. Dubai Islamic Bank has had a dedicated female segment called Johara since 2000, and currently operates seven exclusive female-only branches, which CEO Adnan Chilwan calls “very profitable”. ADIB also has a dedicated female segment called Dana, with over 130,000 customers, women’s only branches, dedicated female areas in regular branches and female relationship managers to manage their banking relationships. In October last year, Oman’s Bank Nizwa launched a female banking service in response to a significant increase in the percentage of working women — which increased to 29% in Oman in 2013.

Some initiatives might seem more extreme than others. This year, Al Hilal Bank launched Laha, a perfumed credit card that lets off a scent from an absorbent pad in the corner and comes with a free bottle of perfume. “Today’s modern woman wants to send out a strong message about her individuality and her capacity to become a productive member of society while staying true to her heritage,” said Mariam Yousef Ahli, the bank’s head of corporate communications, to The National.

Yet despite its encouraging initiatives, the bank continues to have limited female representation at a senior level, with Mariam the only woman on the 13-member management board despite a recent reshuffle last month.

“We are beginning to see more women coming in, but they need to come in more at the senior management levels,” said Ashruff. So what is getting in the way? “I think there is a perception issue. It is not that the banks don’t want to employ women, but women may think that Islamic finance is not for them,” he suggested. “I don’t think there is any actual bias, but the barriers need to come down. More communication from the Islamic institutions to encourage and welcome female practitioners would be useful.”

Areas of opportunity
It can sometimes seem as if institutions are simply paying lip service to the concept of gender equality, but for women in the Islamic finance industry these initiatives represent a very real benefit that they should take advantage of — particularly as the market is so niche. “Islamic finance is a very niche area and much work still needs to be done, especially in areas such as human capital development,” pointed out Samina. “The industry suffers hugely from lack of credible headhunters.  I’ve been fortunate to have had the opportunities to travel, network and speak at industry conferences. However, not everyone has this level of visibility. As an industry still in its infancy stages, we can’t afford to lose talent. Over the years, we have been losing much talent to conventional finance. Not out of choice, but because industry specialists didn’t know how to find work in the Islamic finance industry. We are hoping our forum will serve as an important platform to retain and develop existing talent.”

Females also represent a huge entrepreneurial pool, which is currently not being supported to the extent it could be. “The participation of women in the GCC Islamic finance sector is improving. More and more women are entering the sector. When it comes to job functions, the banks have no issues in hiring women at the admin, secretarial, investor relations, public relations, recruitment and HR. However, we see very few women at the managing director or CEO level of Islamic banks,” highlighted Samina. “More generally, women in the GCC are increasingly taking up senior roles in business. For example within the family run business space, daughters are being encouraged to sit on company boards or take up executive roles. More women in the GCC are also pursuing the entrepreneurial route choosing to run their own very successful firms.  However, banks and financial institutions fail to recognize their needs. They must do more to offer Islamic financial solutions to this growing female segment who desperately welcome the idea of investing in Shariah compliant/ethical financial products.”

Everyone has different talents, and women can approach business in a very different way to their male counterparts. Whether by attracting female clients or by offering new skills; whether by bringing new talent to the table or developing the existing opportunities, women have a very real contribution to bring to the Islamic finance industry.

It is enormously encouraging to see the steps that are being taken across the global landscape to encourage this — but there is still a long way to go, and much work to be done. Collaboration, communication and education are the essence of success — and we hope to see more initiatives such as WIEFF and Tamkeen emerging as the industry embraces the importance of equality.

AFC makes initial foray into Islamic finance

Africa Finance Corporation (AFC), the second-highest investment grade-rated multilateral financial institution in Africa which is tasked to drive private infrastructure investments in the region, has made its debut foray into the Islamic finance space with a US$50 million facility secured from the IDB. VINEETA TAN reports.

The agreement is a result of six years of discussions which began with an MoU between AFC and the IDB’s Islamic Corporation for the Development of the Private Sector to explore potential collaboration and build cooperation. Equipped with a ‘A3/P2’ credit rating reaffirmation by Moody’s and years of track record in various project financing including a transport infrastructure initiative connecting South Africa’s industrial heartland to the nearest water port in Mozambique, AFC finally won the IDB financing which marks a milestone in AFC’s development strategy and a testament to the increasing utilization of Shariah compliant facilities to meet growing Islamic finance demand in the region.

“As AFC’s first Islamic finance loan, this agreement represents an important step for the corporation,” affirmed Andrew Alii, the president and CEO of AFC. “The Islamic finance sector is responding to high demand and rapidly expanding, with a large number of Islamic finance institutions establishing operations here as a result of Africa’s significant Muslim population. There is enormous growth potential within this industry.”

The US$50 million 15-year line of financing will be channeled toward developing projects (particularly infrastructural and agricultural endeavors) within IDB member countries, several of which are also AFC member states, in line with both the organizations’ goal of unlocking regional economic growth potential.

Equally significant, the African institution also views this venture as an important avenue to establish a vital bridge connecting African and Middle Eastern entities in the near future and hopes that this would lead to enhanced collaboration.

Sovereign Sukuk: Liquidity management papers

Slightly on the uptick this week, the sovereign Sukuk market witnessed three issuances made from three different countries: Turkey, Indonesia and Bahrain. Mainly regular issuances for liquidity management purposes, the Sukuk issued all ranged between US$100-500 million. As usual, NABILAH ANNUAR keeps up with the latest developments in the sovereign arena.

The Turkish treasury on the 19th August issued a lira-denominated Sukuk worth TRY1.6 billion (US$555.21 million) through a direct sale method. Maturing on the 16th August 2017, the Sukuk was issued to diversify borrowing instruments, broaden investor base and increase domestic savings.

This was followed by Indonesia’s issuance, which was made by the Ministry of Finance on the 25th August 2015. The government auctioned its sovereign Shariah securities project-based Sukuk series PBS006 (reopening), PBS008 (reopening) and PBS009 (reopening), and Islamic treasury bills series SPN-S 05022016 at an indicative target of IDR2.5 trillion (US$179.25 million).

Having made its announcement on the 24th August 2015, the Central Bank of Bahrain sold its monthly issue Sukuk Al-Salam Islamic securities worth BHD43 million (US$113.02 million). Carrying a maturity of 91 days, the Sukuk was oversubscribed by 155% and is due to mature on the 25th November 2015. The expected return on the issue, which begins on the 26th August 2015 is 1.35% compared to 1.2% for the previous issue on the 22nd July 2015.

Upcoming sovereign Sukuk

Country

Amount

Expected date

Ivory Coast

XOF300 billion

Fourth quarter of 2015

Sindh Province

US$200 million

TBA

Oman

US$1 billion

2015

Kazakhstan

TBA

2016

Turkey

US$1.1 billion

TBA

Bangladesh

TBA

TBA

Hong Kong

US$500 million to US$1 billion

TBA

Ningxia Hui Autonomous Region

US$1.5 billion

TBA

Kenya

TBA

2016

South Africa

TBA

2016

Senegal

TBA

TBA

Niger

XOF150 billion

TBA

Tunisia

US$500 million

2015

Jordan

JOD400 million

2015

UAE

TBA

2015

Luxembourg

TBA

TBA

Indonesia’s decision to ramp up infrastructure investments in 2016 opens doors for Sukuk

With its currency in a rut and capital account adversely affected due to slowing global and domestic economic growth, Indonesia has drafted a budget designed to boost 2016 macroeconomic figures by increasing infrastructure spending and slashing subsidies while capping fiscal deficit at 2.1% of GDP. VINEETA TAN explores how this creates an avenue for Islamic finance.

Premised upon assumptions of 5.5% GDP growth and 4.7% inflation (modest and realistic projections), the world’s largest Muslim nation’s 2016 draft budget is viewed as credit positive and its strong focus on infrastructure investment opens huge opportunities for Sukuk to meet this financing gap. For 2015 alone, the government set a target to raise IDR79 trillion (US$5.66 billion) via Sukuk to finance the state budget deficit and reduce its reliance on external market funding – a prudent strategy given increasing international capital volatility.

However, while the proposed fiscal measures are viewed in optimistic light, analysts have noted challenges for the government to implement the plan. “Although we see some downside risk to the growth forecast, the greater risk to budget outcomes stems from the government’s own administrative capacity constraints, which have resulted in lower-than-expected infrastructure spending this year, and a smaller-than-expected increase in tax collections,” opined Moody’s Investors Service.

Such difficulties in executing the proposed state budget is predicated upon the government’s performance thus far this year which has yet to see it achieving its 2015 fiscal goal of driving up infrastructure investment using subsidy savings despite being well in the third quarter of the year. “Lower-than-forecast infrastructure spending has led to smaller-than-expected growth in the first half of the year. Rather than accelerating, as the government had forecasted at the beginning of the year, GDP growth slipped to 4.7% in the first half of 2015 from 5% in 2014,” explained Moody’s.

The Indonesian government intends to shore up infrastructure spending to IDR313.5 trillion (US$22.48 billion) next year from IDR290.3 trillion (US$20.81 billion) this year and moderate subsidy spending by 5.1% to IDR201.4 trillion (US$14.44 billion) which would include pulling back electricity subsidies by 31.6% and offsetting it with an increase in allocation for oil and gas and non-energy subsidies.

“The 2016 budget continues the policy direction set in the 2015 budget of keeping fiscal deficits low, but shifting spending to capital investment to generate growth, while lowering subsidy spending so that market price signals, rather than government intervention, determine domestic demand,” said Moody’s.

Omani Islamic banking growth on the uptrend — deposit base quadrupled

Six years since the introduction of Islamic banking in Oman, the latest adopter of Shariah finance in the GCC has managed to quadruple its Islamic banking deposit base and grow its assets to OMR1.8 billion (US$4.66 billion), commanding 6.3% of the total banking market share. These developments are, as VINEETA TAN writes, a clear demonstration of strong demand and positive growth momentum for Shariah compliant financial products in line with industry expectations of a double-digit market share for Islamic banking entities in the next few years.

Adopting the best practices of older industry players — an advantage gained by the Sultanate due to its late entry to the Islamic banking and finance scene — Oman was able to implement effective strategies to spread awareness and spur demand while its Islamic banking community continuously engineer suitable products to meet the needs of its customer base. This is evident in the performance of Islamic banking entities during the first six months of the year which saw the two fully-fledged Shariah banks and six Islamic windows double their extension of credit to OMR1.4 billion (US$3.62 billion) from OMR700 million (US$1.81 billion) a year ago and attracted OMR1.2 billion (US$3.1 billion) in deposits from customers — a surge from OMR300 million (US$776.06 million) outstanding as at the end of June 2014.

Central bank data shows that the growth rate experienced by Islamic banks outstrips their conventional peers, although it must be noted that the figures for Shariah entities stem from a lower base. In the first half of 2015, conventional commercial banks realized an 8.9% expansion in credit disbursement to OMR17.8 billion (US$46.05 billion) while total assets were up 11.2% to OMR27.4 billion (US$70.88 billion). 

These positive six-month data comes at a time of significant stress to the Sultanate’s macroeconomic indicators due to headwinds at a domestic and global level. In the first quarter, Oman’s GDP at current prices sank 14.2% against an appreciation of 2.7% in the corresponding period in 2014 while the annual inflation rate measured by movement in the average CPI for the Sultanate hovered at 0.24% in the January-June 2015 period. 

Rated ‘A1’ by Moody’s, the investment grade rating, however, is pinned with a negative outlook premised upon uncertainty involving the effectiveness of government measures with regards to a multi-year period of soft oil prices. In the first three months of the year, the petroleum sector plunged 36.8% while the non-petroleum sector was up 4.1%. Nonetheless, Moody’s in its rating reaffirmation earlier this year believes that Oman’s intrinsic economic and fiscal strengths buoyed by solid government asset buffers would not be significantly undermined over 2015/16 in its base case oil price scenario.

Russian opportunities

Islamic finance continues to gain momentum in Russia, with interest gathering despite limited action so far at a federal level. LAUREN MCAUGHTRY looks at the latest developments in a country struggling with economic challenges, global sanctions, industrial contraction and a plummeting GDP.

In the second quarter of this year, Russia’s economy contracted by 4.6% compared to the same period in 2014 — the biggest decline since 2009 and a sign of the country’s first real recession since the financial crisis. Exacerbated by low oil prices and economic sanctions, the contracting economy has seen real income fall for the first time in Putin’s presidency, along with declines in retail sales, industrial output and currency value and with foreign investment slowing to a trickle. So where can the country look for financial support? Islamic finance has long been promoted as a solution, but its implementation would require substantial changes to Russian federal law. Is the country finally at a point where this is a viable option?

It was recently reported by the TASS news agency that a parliamentary task force has been created with the aim of implementing Islamic banking in Russia and updating the banking laws to accommodate the alternative system — led by Dmitry Savelyev, the deputy chairman of the State Duma Committee on Financial Markets. Could this be the tipping point the country needs to propel it into full participation? 

With a Muslim population of around 15% of the population and around two million more Muslim workers and immigrants, the opportunities could be substantial. In addition, the western sanctions are making Islamic institutions an attractive target for Russian entities desperately seeking financing. “The Muslim countries have not taken part in the attempts to isolate our country on the international stage, and the latest developments in the world economy have shown that Islamic banks can withstand various global crises and complement the global financial system,” said Rustam Minnikhanov, the president of Tatarstan, at the KazanSummit Economic Forum in June this year. Tatarstan has been a major driver of Islamic finance activity in the region, including some of the first Murabahah deals in 2014 and 2015 from AK BARS Bank

Minnikhanov has emphasized that while Islamic finance may not be able to completely substitute western credit, it has the potential to provide an important additional channel and alternative financial instruments for Russian firms. “There are still problems with taxation and the lack of qualified personnel, but with the help of our colleagues in the Russian government, we will be able to make this process more dynamic,” he commented. 

So far, attempts to incorporate Islamic banking at a federal level have been unsuccessful, and earlier this year the finance ministry reportedly rejected a draft law to open the way for alternative financial solutions including Islamic finance. However, activity is once more picking up and as momentum grows, increasing numbers of supporters are jumping on board — sometimes from surprising angles. Last month, the Tatarstan president signed a cooperation agreement with state-owned Sberbank, Russia’s largest lender, to develop Islamic banking in the region: while earlier this year local insurance firm Alliance also began selling a Shariah compliant option called Halal Invest. And in perhaps one of the strongest displays of support for the industry, the Russian Orthodox Church in June also confirmed its involvement in promoting Islamic finance: and is currently working with parliament to develop a system of non-interest-based banking. 

The road may be long and the obstacles high, but Russia continues on its journey. 

Proposed Hollywood-backed venture leaning toward Takaful insurance

Paramount Studios recently made London-based Shariah compliant Cobalt Underwriting its preferred insurer for its upcoming entertainment resort in Kent. VINEETA TAN writes how this is indicative of the rising demand for Shariah compliant products in the Western world as Islamic investors from the Arab Gulf channel investments into major developments in the UK and Europe. 

“There are an increasing number of major projects that have been announced this year in London, the UK and Europe which are backed by Middle Eastern and Islamic investors,” confirmed Richard Bishop, CEO of Shariah compliant managing general agent Cobalt Underwriting based in London, which was recently engaged as the insurer of preference for the UK’s first Nationally Significant Infrastructure Project in Kent.

The project — the proposed London Paramount Entertainment Resort worth GBP3 billion (US$4.7 billion) and backed by Hollywood giant Paramount Studios — was awarded the Nationally Significant Infrastructure Project status due to the grand scale of the undertaking which is expected to greatly bolster the Kent economy by means of investments and job creation which will transform the Swanscombe peninsula. Positioned to rival Euro Disney as a major family attraction, the venture — whose initial stages are largely funded by Middle Eastern wealth — is anticipated to create some 27,000 jobs.

With the possibility of Islamic investors financing the entire project, these investors are keen to proceed with the venture in a Shariah compliant manner including with regards to insurance and this has opened up opportunities for the country’s Takaful segment. “We feel sure that the demand for Shariah compliant options when it comes to insurance will continue to grow and we are working with leading underwriters both inside and outside of Lloyd’s and the London market to provide the capacity to meet these demands,” shared Bishop, who also cautiously explained that: “Cobalt will have the opportunity to provide the Shariah compliant options for clients to consider and will always be asked to at least provide terms on each risk. We will, however, need to be competitive.”

Bishop revealed that the first insurance covers are already in place and contracts for property owners’ liability as well as environmental impairment liability have been issued. 

Work on the London Paramount Entertainment Resort is expected to commence in two years’ time in time for its opening in 2020. The resort builds on the other GBP17 billion (US$26.64 billion) investment opportunities highlighted by the UK Trade & Investment specifically for Shariah investors.

Company Focus: Raouda Finance

Ivory Coast has long been an African investment darling to the international community and its capital, Abidjan, is regarded as one of the most sophisticated economic capitals in West Africa where commercial banks outnumber microfinance institutions — an uncommon phenomenon in the West African Economic and Monetary Union where microcredit providers generally dominate the financial landscape in terms of branch network. And while the environment is challenging, this has not deterred Raouda Finance from pioneering the Islamic microfinance sector in the Republic. Speaking to the young organization, VINEETA TAN provides an exclusive insight into Ivory Coast’s sole Shariah microfinancier. 

Licensed in June 2014, Raouda Finance opened its doors in January this year and has since then received phenomenal demand and interest from both the public and conventional microfinancing peers attracted by its ethical proposition.

“The essential mission of Raouda Finance is to be a regional leader in the alternative financial system and in socially responsible investment, that is to say provide the best ethical finance. This partnership [is synergistic] with all the components of Ivorian society,” shared Stephanie Awa Bamba, the manager of Raouda, with IFN.

And the socially responsible tenets of its service resonate well with the population, both Muslims and non-Muslims with non-Muslims representing 40% of the institution’s clientele. In the eight months since its opening, Raouda has extended over CFA221.26 million (US$380,702)-worth of financing through 166 facilities to approximately 3,000 individuals. 

Another driving force for the positive take-up is government support. Bamba explained that promoting microentrepreneurship has been on the government’s agenda as a means to reduce unemployment and this elevates Raouda’s and other microfinanciers’ position as a critical bridge to those wishing to enter the realm of microentrepreneurship. Especially important is the wide access of microcreditors to areas beyond the bank-clustered city of Abidjan, reaching out to the underserved rural population.

Microfinance institutions in Ivory Coast generally adopt a cooperative model and Raouda is no exception. Apart from granting financing, the firm also offers long-term savings products.

“The strategic objectives are to create opportunities for broad social layers, to contribute to the efforts of production and transformation of the poor by living forces of society through the implementation of microcarriers based on the use of financial tools based on the principle of sharing profits and losses, and factors of production available in each environment,” said Bamba.

Like many pioneers, Raouda too is ambitious and enthusiastic about what the future holds, and is especially eager to be part of a movement that is likely to democratize access to financing while contributing to nation-building – and judging by the responses thus far, the Shariah microfinancier may well be on its way toward that.

Germany: A worthy contender with Sukuk on the cards

Over the last year, Germany has undoubtedly upped its game positioning itself as a permanent industry player in the Islamic finance space. In the span of only one year, the country managed to enhance its Islamic retail and wholesale banking side along with a potential corporate Sukuk in the pipeline. What now appears to be a burgeoning market that is ripe for the picking, NABILAH ANNUAR provides a comprehensive update of the latest advancements in Germany’s flourishing Islamic finance market.

One of the main highlights of the year is the debut of the country’s first Islamic bank. KT Bank, a wholly-owned subsidiary of Kuveyt Turk, which is in turn wholly owned by Kuwait Finance House began to procure its license from German financial regulator, Bafin, to operate in Germany earlier in March this year. Offering Shariah compliant deposit and credit finance facilities, it launched its operations in Frankfurt later in July and subsequently opened new branches in Mannheim and Berlin, with a view to expand to Dusseldorf, Hamburg and Munich. 

Being the first Islamic bank to be established in continental Europe, Ugurlu Soylu, the chief representative of the bank exclusively revealed to IFN in June that it expects to issue a EUR100 million (US$113.02 million) Sukuk within its first two years of operation, indicating the bank’s confidence of its growth in the country. Testament to the success of the opening of its first Islamic bank in Germany, Kuveyt Turk (according to local reports) most recently announced that it is considering penetrating the Dutch market if its expansion stabilizes.

On the wholesale banking side, pbb Deutsche Pfandbriefbank, a conventional real estate and public investment finance specialist in July provided Saudi Arabia’s SEDCO Capital with a EUR76 million (US$87.35 million) Shariah compliant medium-term refinancing facility for a mixed-use portfolio comprising of eight assets with 75% located in Berlin. The transaction is said to be part of a growing trend of Shariah compliant real estate deals taking place in the country which is seeing significant interest from Middle Eastern investors who are increasingly asking for Shariah-friendly products. 

SEDCO Capital has three investment funds with exposure to the German real estate market: it has two funds invested in a diversified portfolio of properties and another fund (the Euro Commercial Property I) which holds six income-generating buildings in Germany fully leased to Deutsche Telekom.

German players have also tapped the Islamic microfinance market. In November last year, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), the government’s international development agency, instituted a series of German-fund studies and pilot projects to study, develop and implement Islamic microfinance in developing countries. 

GIZ has collaborated with Washington-based Consultative Group to Assist the Poor on a study of Islamic finance products to find a way to reduce costs and is also working on a study to explore demand factors and plans to sponsor a study to compare Islamic finance regulations. Such niche initiatives evidently demonstrate the country’s serious interest in developing its Islamic finance capabilities, enabling them to penetrate each aspect of the Shariah compliant industry.

It should not be forgotten that the nation also has the FWU Group, a reputable European insurance provider which also offers Takaful products. Apart from providing global Takaful solutions, the company has tapped the Sukuk market twice: in 2012 and 2013. Its most recent Sukuk offering in 2013 incorporated an innovative structure in which the bonds were backed by Takaful contracts (see IFN Report Vol 10 Issue 44: ‘FWU Group Sukuk: The first to be backed by Takaful contracts’). However, this was not the country’s first Sukuk issuance. More than a decade ago, the German state of Saxony-Anhalt tapped the Sukuk market, raising EUR100 million in 2004.

With approximately four to five million Muslims holding an estimated wealth of EUR18-25 billion (US$20.69-28.73 billion) (according to market figures), industry experts find that the second and third generation of Muslims in the country are very attractive to bankers, both conventional and Islamic. They are born in Germany, better educated, and have higher income levels than the first generation. The country’s economic growth experienced a slight improvement in the second quarter on rising exports. Together with Germany’s current economic climate and an encouraging track record in Islamic finance, there is very little doubt that the German market would make it as a worthy competitor in global Islamic markets.

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