L-R: Richard Thomas; Faizal Eledath; Juergen Walker; Ijlal Alvi; Ahmed Fahour
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The latest products and services in the Islamic banking sector
FRENCH CONNECTION
Gatehouse Bank is the first Islamic financial institution to join Paris Europlace, the organisation that is promoting Paris as a leading international financial centre.
Gatehouse Bank CEO Richard Thomas explained his bank’s Gallic move. “Islamic finance has a bright future in France with its large Muslim population and trade links to many Islamic economies. We hope to play an active role in the development of Shariah-compliant finance.” Through its membership of Paris Europlace, Gatehouse Bank will take part in international financial forums and benefit from Europlace’s network.
Gatehouse has concluded the first cross-border murabahah transaction with CIMB Islamic using Bursa Malaysia’s Bursa Suq Al-Sila’ Shariah-compliant commodity trading platform. This platform was intended for domestic use and has been expanded for international trade, facilitating commodity–based Islamic financing under the principles of murabahah, tawarruq and musawamah.
GREEN LIGHT
Dubai Bank has become more green and transparent at the flick of a switch. The IT solutions company Inatech has implemented an online interface for raising and submitting expenses. The uae bank has moved the human resource management system from Windows to a Linux platform and upgraded from Oracle E-Business Suite Release 11i to Oracle E-Business Suite Release 12.
The software automation helps provide a more robust architecture and reduces paper transactions. The Dubai Bank CIO Faizal Eledath said: “We are now much closer to achieving an efficient and secure system, speeding up processes and removing human errors.”
NEW LEASE OF LIFE
To inject new life into Dubai’s finances, $6.5 billion of conventional and Islamic bonds are being issued by Dubai’s department of finance. The department hopes to raise $2.5 billion in sukuk. Dubai Islamic Bank, Mitsubishi UFJ, Standard Chartered and UBS Investment Bank are lead arrangers.
Sukuk are also being used in Abu Dhabi. The Tourism Development and Investment Co (TDIC) is going to issue a $1 billion sukuk with HSBC Amanah as lead manager. The agency is financing the Saadiyat Island project, which will host the world’s largest single concentration of cultural institutions.
TEMPLATE FOR SWAPS
The International Swaps and Derivatives Association (ISDA) and the International Islamic Financial Market (IIFM) are developing a template for privately negotiated Shariah-compliant derivative transactions.
Swaps are not well regarded by Shariah scholars because they are seen to cause volatility and involve no real economic transactions. IIFM CEO Mr Ijlal Alvi said: “Proper controls will be put in to ensure that the contract is used only for real transactions.”
The contract, to be known as tahawwut or hedging, will create a standard legal framework for over the counter derivatives in the Islamic market. It is claimed that the risk management tool, while promoting standardisation, will reduce both the time and entry costs for the contracts.
LIFE IN THE FAST LANE
Mercedes-Benz plans to be the first automaker to have its own Shariah-compliant finance and leasing company in the UAE. Daimler’s financial division has created a joint venture with importers of Mercedes-Benz cars in Abu Dhabi and Dubai to offer funding for new and used vehicles.
The UAE is Daimler’s primary Middle Eastern market, with sales of 7,800 cars and 3,100 commercial vehicles last year. Daimler’s target is to reach a medium-term contract volume of $440m. Juergen Walker, Daimler Financial Services’ CEO, says: “Once we have successfully established our business here, in the mid-term we will decide about offering financial services in other Middle Eastern markets as well."
INVESTORS BACK GFH
A new phase in the development of Gulf Finance House (GFH) has begun with $300m commitment subscription offers. gfh aims to raise fresh capital from its rights issue to face the global economic downturn.
In the meantime, GFH has been reorganised into two principal businesses: GFH Real Estate & Infrastructure and GFH Banking. CEO Ahmed Fahour, said: “At every stage in this critical process we’ve made it a priority to inform our shareholders. The exciting level of commitment subscription offers we’ve received are a reflection of the faith they are placing in our refined approach.”
IN THE CRYSTAL BALL
Islamic finance may be threatened by a shortage in qualified manpower, low returns on Shariah-compliant investments and lack of innovation, reports the Islamic Finance Perceptions survey. Participants included chairmen, CEOs and directors in the sector.
Respondents cite East Asia and Malaysia as the greatest contributors to the development of Islamic finance. However, their forecast is that the Middle East will take more of a leading role, followed by Europe and South Asia.
The survey conducted by the Sri Lankan consultancy Research Intelligence Unit reports a number of challenges must be confronted when countries open their doors to Islamic finance.
Half of the participants say the support from regulatory authorities is fundamental, and 20% expressed concern about sufficient grass roots demand. The majority of the participants consider that Shariah-compliant microfinance can play a “significant” or “great” role in reducing poverty in developing countries and help to promote the wider acceptance of the whole Islamic finance sector.
TAX CHANGE SPARKS ACTION
Five Indonesian banks plan to launch separate Shariah units next year. Bank Central Asia acquired Bank UIB last year and is planning to convert the lender into a Shariah bank.
Bank Negara Indonesia, Bank Panin, Bank Victoria and Bank Jabar Banten will set up Islamic banking departments and later make them dedicated Islamic banks. Indonesia has five Shariah banks and 24 commercial banks with Islamic finance units. As double taxation had made Islamic transactions more expensive than conventional finance, the revision of value-added tax law in Indonesia is expected to encourage more banks to set up Islamic banking subsidiaries.
