Boubyan Bank planning sukuk issuance in 2016

Boubyan Bank, an Islamic bank in Kuwait, has recorded a profit growth of 23% in Q116, amounting to net profits of KD 9.1 million.

Adel Abdul Wahab Al-Majed, the Bank’s Vice Chairman and CEO, said that this growth was achieved despite a highly competitive environment. Al-Majed also stated that the bank will issue sukuk this year to enhance the capital base through CET1 instruments as per Basel III instructions on a mudarabah basis.

posted from Bloggeroid

Kuwait Finance House launches Al Rabeh salary account

Kuwait Finance House (KFH) has launched the Al-Rabeh salary account, which offers clients the opportunity to win two 2016 Range Rovers and 3 kg of gold every quarter. Al-Rabeh is also an investment savings account that gives clients annual dividends.

The account is offered for clients wishing to transfer their salaries and manage their personal accounts with the ability to save and invest. Al-Rabeh account is available for individuals in KD, and it requires salary transfers to enter the draw. KFH invests 100% of the sum available in the account according to mudarabah principles, where profits are calculated according to the minimum monthly balance invested.

Interested?

Clients can open this account at any of KFH 64 branches around Kuwait. The draws are held in January, April, July, and October, provided that three rounds of salaries have been deposited in the three months prior to the draw, and a minimum monthly balance of KD50 by the end of each month is maintained. Every additional KD 50 in the account entitles clients to additional chances in the draw.

KFH Bahrain launches Wealth Management Department

KFH-Bahrain’s Wealth Management Department has been officially launched. 

Abdul Razak Jawahery, Executive Manager at KFH-Bahrain; Head of Wealth Management commented, “Upon the successful soft launch of the Wealth Management department, we were able to evaluate and identify a good appetite towards our products and offerings which enabled us to accelerate our strategies for those clients who were sitting on significant capital value within their own business models.”

Jawahery explained that the department can invest in large institutional strategies. "Our clients benefit from various depositor accounts having a number of privileges and features from international murabahah and mudarabah. As their personalised investment command centre, we provide a number of investment products in both discretionary and non-discretionary methods for equities and sukuk. For investments in real estate there are a number of opportunities in the Kingdom of Bahrain and the UK to select from, and, as part of our expansion plans, the department is developing key strategies to launch commodities and real estate opportunities in other geographic areas.”

Interested?

The Wealth Management Department at KFH-Bahrain offers a range of Islamic wealth management products and services. Contact the team at 77 000 500 in Bahrain.

BSN converts two products from mudarabah to wadi'ah

Bank Simpanan Nasional (BSN) has announced that effective 1 September 2015, the following BSN Islamic Deposit products based on the mudarabah type of contract will be converted to the wadi’ah type of contract instead:

No.	Product Name
1.	BSN GIRO-i Account including Kelab Penabung Muda (KPM) dan Skim Galakan Simpanan Pelajar (SGSP)
2.	GIRO-i eSaver

Customers are deemed to have consented to the conversion unless BSN is notified otherwise, and are not charged for the conversion. According to the bank, account numbers remain unchanged, and customers can operate their accounts as usual, with deposits still guaranteed by the Government of Malaysia.

Under the wadi'ah contract, some of the features and benefits of the products have changed. More information regarding the new features and benefits can be viewed online, shared through the 1300 88 1900 hotline or by visiting any BSN branch.

Go for ijarah sukuk and have respected shari'ah scholars certify them: IMF working paper

The type of sukuk and the choice of shari'ah scholar could affect interest in a sukuk issue.

In Do the Type of Sukuk and Choice of Shari'a Scholar Matter?, a working paper* from the International Monetary Fund (IMF) released in August 2014, authors Christophe Godlewski, Rima Turk, and Laurent Weill study a sample of 131 sukuk from eight countries from 2006 to 2013 and find both criteria do indeed matter.

Some observations from the analysis include: 

• The average coupon is above 4%, maturity is 8 years, and the average amount issued is US$1,270 million with a large standard deviation. 
• An average of three scholars certify an issuer’s sukuk. 
• On average, half of the team of scholars is from the same country as the issuer. 
• A typical scholar certifies on average 24 sukuk per year, or almost 75 issues over three years. 
• Issuing firms have issued on average more than 11 bond issues.

According to the working paper, ijarah (اجارۃ) sukuk "exert a positive influence on the stock price of the issuing firm". The authors suggest that ijarah structures may benefit the most from the expansion of sukuk markets because of the better investor reaction to them compared to other structures. 

The authors observe that sukuk in the musharakah and mudarabah formats, which are partnership contracts in which the financier and entrepreneur share profits based on pre-agreed ratios but also the losses that are proportional to their contributions (financial or physical) to the partnership, are not as popular. "Ijarah is a debt-based instrument that is not based on profit and loss sharing principles; hence, it does not suffer from the possibility of attracting borrowers of poor financial condition as would a musharakah instrument," the authors suggested.

A similar positive impact was observed with sukuk that had been certified by prominent shari’ah scholars from the same country as the sukuk issuer. In more than half of the sample, at least one scholar is from the same country as the issuer, the authors observed. 

"Our finding provides some evidence that high compensation for reputable shari’ah scholars certifying sukuk may be justified on the grounds of better valuation of issuing firms," the authors said.

*Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. The views do not necessarily represent the views of the IMF or IMF policies.

Al Baraka Banking Group working with World Bank to study musharakah, mudarabah

Al Baraka Banking Group has collaborated with the World Bank to begin a research partnership to benefit the global Islamic banking industry. The partnership's first initiative, part of a planned series of research projects, will be a study examining the risk-management challenges facing Islamic banks, with a particular focus on musharakah and mudarabah under the profit-and-loss-sharing system. Preliminary findings are expected to be available in the first quarter of 2015.

"We are committed to serving the sector by addressing several pressing issues that the industry is facing today. The research collaboration with the World Bank is yet another step in this direction," said Al Baraka's Group President and Chief Executive Adnan Ahmed Yousif. 

Abayomi Alawode, Head of Islamic Finance at the World Bank, said that the priority is to create an environment where the profit-and-loss system can flourish. "After a series of discussions with Al Baraka's Executive Management and Research Team, we recognise that the industry must address concerns that the majority of Islamic banking assets are debt-based and that the proportion of equity-based investments (such as musharakah and mudarabah) does not form a significant portion of the Islamic investments portfolio. The enabling support system to mitigate these inherent risks and challenges is either limited or nonexistent. As a result, equity-based investments remain under-represented in the Islamic banking industry," he said.

Adnan Ahmed Yousif added, "Being the first of its kind, the research project will not only collect data from a number of countries where musharakah and mudarabah are being used in banking transactions, but the project will also examine what enabling legal and regulatory environment would be needed to support the adequate risk management of musharakah and mudarabah."

Alawode remarked, "We look forward to our collaboration with Islamic financial institutions, such as Al Baraka, drawing on their front-line experience in the use of Islamic financial products. Their insights will contribute to producing a study that will encourage innovation and contribute to the sustainable growth of the industry. The Islamic banking and financial industry has reached a level where further growth is possible, if it develops new tools and innovative products that address those core issues."

The Al Baraka Banking Group is a Bahrain joint stock company licensed as an Islamic wholesale bank by the Central Bank of Bahrain, and is listed on the Bahrain Bourse and the Nasdaq Dubai stock exchanges. The Group has a geographical presence in fifteen countries: Jordan, Tunisia, Sudan, Turkey, Bahrain, Egypt, Algeria, Pakistan, South Africa, Lebanon, Syria, Indonesia, Libya, Iraq and Saudi Arabia.

Al Baraka is recognised as a pioneer in the Islamic banking sector for its thinktank, the Al Baraka Annual Islamic Banking Symposium (The Nadwa). The Nadwa is the only platform of its kind that annually provides the industry with resolutions and fatwas which form the basis of new products, standards and policies. 

*Click here for Investopedia definitions of musharakah and here for Bank Negara Malaysia's discussion on mudarabah.