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T h e Wo r l d s G l o b a l I s l a m i c F i n a n c e N e w s P r ov i d e r

7th November 2012

RED (All Cap)
The increasing sophistication of
925 Sukuk
Alongside the record growth and Islamic versus economic
exceptional investor demand of the This evolution can be broadly separated
870.08 booming Sukuk market lies a parallel into two categories. Nick Stadtmiller, the
875 story: the ongoing development and head of fixed income research at Emirates
increasing complexity of Sukuk NBD, explains that: When you refer to a
850 structures. Yet is this a blessing or a complicated structure, there are two things
W T F S S M T curse for the industry are we moving you could mean. One is the structuring
Powered by: IdealRatings
in the right direction, or is our appetite of the cash flows is it a Murabahah, a
for sophistication hampering the true Wakalah, an Ijarah the Islamic side. The
Volume 9 Issue 44
course of Shariah compliant instruments? other is the actual economic aspect of the
IFN Rapids .........................................................2 This week we explore the innovations transaction: in other words, what are the
Islamic Finance news .........................................6 taking place at the cutting edge of the risks and what are the pay-os.
IFN Reports: A possible catalyst; Dana Gas fails Sukuk sector, and what this means for the
to repay debt on time reaches standstill with industry. Issuer advantage
creditors; US$1.73 billion Sukuk to buy planes for Islamic structures for Sukuk remain the
ailing national carrier Malaysia Airline System.....10 Sukuk is undeniably the most popular fundamental building blocks, but the
IFN Correspondents: Indonesia .........................12
investment instrument in the Islamic industry is seeing a growing number of
capital market, bringing a unique value innovative transactions that develop and
Insider: Al Hilal Bank strengthens investment
proposition to both investors and issuers expand these structures in order to create
banking capabilities....................................................13
and promoting a diverse and flexible means new transactions based on the needs of
Case study: of harnessing the liquidity and strength of the company. As demand continues to far
TH Plantations US$65.23 million Sukuk the industry. For investors, Sukuk oer the outpace supply, issuers are able to leverage
Murabahah .........................................................14 advantage of portfolio diversification in this in order to create structures that meet
Features: the form of new asset classes, while issuers their own specific requirements.
Australia a new Islamic finance hub? ............15 benefit from increased liquidity along
Examining Malaysias Shariah governance with compliant and accessible fundraising Anzal Mohammed, a partner and the head
frameworks provisions on Shariah advisors .....16 through tapping into the growing demand of the Sukuk practice at Allen & Overy
for Shariah compliant investment products. continued on page 3
Islamic finance: A growth strategy model .........19

According to Bank Negara Malaysia in its

Islamic Investor recent report on the Development of the Considering the complexities
The REIT investment.........................................21 Financial Sector: The strength of Sukuk
Market Commentary ......................................22 lies in its distinct structure. The flexibility Editors Note
Funds Focus: Amana Developing Fund ..........23 of Sukuk structures is a key factor that
As the favorite method of Shariah
has led to its growing acceptance. Over
Funds Data .......................................................24 compliant fundraising, Sukuk has
the years, Sukuk structures have evolved
shown increased levels of complexity
from debt-based structures which are
Takaful News this past year, in tandem with the record
premised on cost-plus sale agreements
Government includes Takaful in 2013 budget ..26
number and value of issuances in 2012.
(Murabahah), to lease-based (Ijarah), profit-
This week, our cover story explores
sharing (Musharakah) and manufacturing
the increasing sophistication of Sukuk;
Forum................................................................27 contracts-based (Istisnah) Sukuk, as well as
and whether the structures growing
Meet the Head: Sufyan Maysara Yassin, head hybrid structures based on combinations
maturity will prove to be a boon or a
of Shariah contracts that appeal to a wider
of Shariah audit and compliance, BankMuscat - bane to the Islamic finance industry.
Meethaq Islamic Banking .............................. 30
range of investors. continued on page 5
Deal Tracker .....................................................31
REDmoney Indexes ........................................32
Performance League Tables...........................34
Events Diary.....................................................38
Company Index ...............................................39
Subscription Form ...........................................39


DEALS Sri Lanka's Amana Bank

targets expansion in rural
KFH Research and World
Bank sign MoU to facilitate RATINGS
Abu Dhabi Islamic Bank areas global Islamic financing RAM lifts developing Rating
holds investor meeting for growth Watch on Cerah Samas
Indian Center for Islamic
proposed Sukuk Finance questions the need Turkey sovereign Sukuk US$124.35 million IMTN
TH Plantations issues first for Islamic banking law boosts standing Fitch assigns expected rating
tranche of US$327.1 million on upcoming governments
IFSBs draft standards in line Al Madina Financial
Sukuk US$3 billion global Sukuk
with Basel III & Investment Services
Indonesia looks to issue Company and Amanie
Accounting Research
global Sukuk Advisors sign MoU on
Institute of Malaysia's
Islamic investment
Universiti Teknologi
Dialog Axiata plans US$366
MARA develops Islamic Standard Chartered Saadiq
million Sukuk sale Etiqa Takaful appoints
corporate social responsibility oers financing for local SMEs
Ahmad Rizlan Azman as new
Tunisia's 2013 draft federal framework
QIIB announces higher CEO
budget to be financed through
Al Baraka Bank (Pakistan) to profits in the third quarter of Emirates NBD Asset
oer more products 2012 Management appoints David
Almarai Company to issue Shariah compliant funds part Tadhamon International Marshall as new senior
second tranche of US$513.17 of Private Retirement Scheme Islamic Bank oers gold executive ocer
million Sukuk program portfolio savings accounts University of East London
Arcapita awaits approval for Takaful protection for paddy Alizz Islamic Bank initial appoints Dr Gaar Khalid
US$100 million bankruptcy farmers could be extended public oering raises as new director of Islamic
financing to other farming activities, US$119.3 million finance center
says ministry of agriculture of Central Bank of the UAE
Oman's draft rules exclude
Malaysia appoints Khalifa Mohammed
commodity Murabahah and
NEWS National Bank of Abu Dhabi Tawarruq al-Kindi as chairman
enters South Korea
Takaful Insurance of Africa Dubai Islamic Bank
calls for more Takaful Faisal Private Bank to convert announces US$232.44 million
incentives from authorities into family oce in nine-month profit

Accounting and Reporting for

Shariah Compliant Derivatives
25th 27th November 2012, Dubai
Key Highlights:

Applying IFRS Denitions to Shariah

Compliant Derivatives

Applying IFRS Recognition Principles to

Shariah Compliant Derivatives

Applying AAOIFI Standards to Shariah

Compliant Derivatives

Accounting Issues for Embedded

Derivatives & Other Products

Prospective Derivative Guidance under IFRS


Disclaimer: Islamic Finance news invites leading practitioners and academics to contribute short reports each week. Whilst
we have used our best endeavors and eorts to ensure the accuracy of the contents we do not hold out or represent that the
respective opinions are accurate and therefore shall not be held responsible for any inaccuracies. Contents and copyright
remain with REDmoney.

2 7th November 2012


The increasing sophistication of Sukuk

Continued from page 1
Dana Gas formally
in Dubai, comments that: Given the a more conventional Murabahah-
dierent type of issuers that are accessing Tawarruq structure.The airtime structure
acknowledges payment
the Sukuk market, we are seeing the was first introduced by Mobily in failure
development of innovative structures 2007, and allowed the operator to sell UAE: Dana Gas, which on the 31st
such as the use of airtime (Etisalat and minutes of airtime to investors and October became the first UAE-based
Axiata) and the combination of structures use the revenues generated as the corporate entity unable to repay its
(the same issuers and the likes of Majid basis for the Sukuk, in the absence US$920 million Sukuk, has formally
Al Futtaim Properties who used self- of tangible assets. The success of the acknowledged its failure to do so
use assets as part of an Ijarah-based structure led to its subsequent use by through an announcement to the London
structure). Mobilys principal shareholder, Emirates Stock Exchange, where the debt is listed.
Telecommunications Corporation It has also asked investors of the Sukuk
(Etisalat), for its own Sukuk program in
New combinations 2010.
to decide on their course of action: which
Anzal also notes that: As 100% tangible includes liquidating the Sukuk, claiming
asset-based structures are dicult the assets backing it or agreeing to
for corporate and financial institution One step further restructure the facility.
issuers in particular, we have seen The 2012 facility took the structure a step
combined Mudarabah and Murabahah- further by introducing multiple term Islamic Bank of Thailand to
tranches, which according to Nethercott:
based structures becoming the norm for
Granted greater flexibility to Mobily sell Sukuk in 2013
subordinated Sukuk issuance by banks in
Saudi Arabia. We will continue to see this and more closely aligned the terms of THAILAND: The Islamic Bank of
development as well as further project the financing with its corporate needs. Thailand is planning to sell up to THB5
Sukuk transactions coming to market The facility was supplemented by two million (US$162,015)-worth of local
following the very successful issuance Murabahah-Tawarruq facilities: one currency-denominated Sukuk, followed
last year as part of the Jubail project providing a revolving working capital by a US dollar-denominated US$250
facility while the other replicated the million Sukuk oering, in the first
financing in Saudi Arabia.
same commercial terms as the airtime quarter of 2013, according to Dheerasak
facility. Nethercott notes that: Whilst the Suwannayos, its managing director and
Intangible assets introduction of multiple tranches initially president.
Craig Nethercott, a partner at Latham led to some complex drafting issues (and
& Watkins, explains that: Traditionally,
the most common Islamic financing
interesting discussions with the Shariah
MBSB grows Takaful business
boards of the financiers), the structure
structures require the use of an will now no doubt serve as a template for MALAYSIA: Malaysia Building Society
underlying tangible asset as the basis other companies seeking to raise multi- (MBSB) aims to boost income from its
of the financing which has restricted tranche Islamic finance. bancaTakaful business to RM30 million
the ability of some companies to access (US$9.8 million) by the end of 2013,
the increasingly liquid Islamic markets This turned out to be the case, with backed by its collaboration with AIA
(specifically in the context of the Sukuk Malaysian operator Axiata launching AFG Takaful. MBSB also reported an
capital markets). a US$1.5 billion multi-currency Sukuk increase of 9% in net profit to RM263
program in September 2012 based on million (US$85.85 million) for the third
However, this is now changing and one airtime minutes. quarter ended the 30th September 2012,
of the most exciting features of the new while its revenue grew by 44% to RM1.3
sophistication in Sukuk structures is the
growing use of intangible assets as the
Saudi sophistication billion (US$424.37 million).
The popularity and success of the airtime
underlying basis.
structure clearly shows that the use of Morocco to set up national
intangible assets as a basis for Islamic Zakat fund
Airtime innovation finance is growing more popular, as
Prime examples of this are the recent MOROCCO: The country is in the midst of
well as demonstrating the growing
Sukuk issuances from mobile operators, setting up a national Zakat fund which will
sophistication of the Sukuk market in
based on airtime assets. In March 2012 be used to fund social welfare, according
Saudi Arabia and the wider Middle East.
Saudi Arabian mobile to Mohamed Najib Boulif, its minister of
service provider In February 2012 the Saudi Arabian general aairs and governance.
Etihad Etisalat General Authority of Civil Aviation
Company (Mobily), issued its debut SAR15 billion (US$4 Listing Shariah compliant
completed a billion) Sukuk, based on a sale of its stocks
SAR10 billion rights to charge and collect fees from
(US$2.7 billion) PHILIPPINES: The Philippine Stock
airlines. In November 2011 the Saudi
refinancing using Exchange is drawing up a list of local
International Petrochemical Company
an innovative (Sipchem) issued a SAR1.8 billion Shariah compliant companies to attract
airtime facility (US$480 million) Sukuk using its right more investors interested in Islamic
structure investing, according to Hans Brinker
along with Makasiar Sicat, its CEO and president.

3 7th November 2012


The increasing sophistication of Sukuk

Continued from page 3

to receive distributions and other Another recent example is the US$500 Stadtmiller explains
payments from its subsidiaries as the million First Gulf Bank (FGB) Sukuk in that: A Tier 1
underlying revenue-generating assets January 2012, which comprised a hybrid capital issue has
for the Sukuk. Wakalah and Mudarabah structure. economic features
that are similar to
Sipchem structure Perpetual popularity fixed income from the
The innovation in the Sipchem Hybrid Sukuk are garnering increasing investors perspective,
deal lies in its asset basis. A Sukuk attention and perpetual bonds are one of but the issuer can record
normally requires that the issuer has the most attractive new forms; brought them as equity on
unencumbered tangible assets available, into the spotlight by the Malaysia their balance sheet.
Airlines (MAS) RM2.5 billion (US$816 The transaction has
which in the case of Sipchem was a
million) perpetual junior Sukuk program. been compared to
problem as the firm was a holding
Launched in June 2012, the first tranche the preferred shares hybrid Tier 1 deals
company with relatively few assets of its
of RM1 billion (US$326.4 million) was done by US banks, as because the notes
own and encumbrances at the operating
fully subscribed by Malaysian retirement will be accounted for as equity instead
level. The challenge was therefore to
fund Kumpulan Wang Persaraan of liability, they will not be required
broaden the asset base of the holding
(KWAP) with MAS claiming to have by Basel III to include loss-absorption
company to accommodate a Shariah
received firm commitments for the rest of provisions. The ADIB Sukuk is designed
compliant structure based on real assets.
the program. to comply with the Basel committees
criteria for additional Tier 1 capital
The Sipchem deal therefore involved an
Unlike normal bonds, perpetual bonds in anticipation of possible Basel III
innovative Mudarabah Sukuk structure implementation in the UAE, yet despite
centered around the intangible rights do not have a redemption date; and the
holders receive a coupon only when the its hybrid nature will be based on a very
between a holding company and its simple Mudarabah structure. This is
subsidiaries. This made the right of the company issues dividends, rather than
receiving a periodic fixed coupon. The very straightforward, said another
holding company to receive distributions banker. The most challenging part of the
and payments from its subsidiaries the perpetual Sukuk has the advantage of
being recognized as equity capital under structuring was converging Islamic rules
key underlying revenue-generating with Basel rules.
asset of the Sukuk basically stripping Malaysian accounting standards, while
out equity and using it as a asset still giving a long-term funding rate of
basis for a Mudarabah structure. At
6.9%. It therefore provides equity at a Sabanas convertible first
relatively lower cost of capital compared Over in Singapore, the country is
the launch of the deal Dipti Thakar, a
to common equity, whilst oering an making its own contribution towards
counsel at Latham & Watkins in Dubai,
attractive yield to investors. Rafe Haneef, pushing back the boundaries with
commented that: This Sipchem Sukuk
CEO of HSBC Amanah Malaysia, noted the issuance in October of the first
structure further reflects the increasing
at the launch of the transaction that the convertible Sukuk since 2009, Sabana
sophistication of the available products in
hybrid Sukuk was an attractive option for REITs SGD80 million (US$65.3 million)
the Saudi Arabian market. This product
companies which have reached a certain 4.5% convertible Sukuk due in 2017. The
is a great addition to the toolkit available
debt-to-equity ratio level. It is just structure was specifically tailored to the
to corporate treasurers in the market.
emerging as a concept and hopfully you REITs needs; combining the concepts
will see the market trend move towards of Murabahah, Ijarah and Wakalah to
Sophistication through that. It will gain popularity here among allow the Sukuk to acquire property
simplicity companies which do not want to dilute assets which then formed the basis for
Along with the growing use of intangible their shareholding and at the same time the underlying revenue-generation for
assets and new structures lies another are constrained by debt levels. the Sukukholders.
trend: the development of hybrid
structures using simple Islamic building Tier 1 trend Gregory Man, a senior associate with
blocks in order to create instruments that This new trend towards equity-style Sukuk Cliord Chance representing Morgan
suit the specific needs of issuers. is growing increasingly popular as issuers Stanley as sole lead manager and
figure out how to structure their Sukuk bookrunner, explained that: We needed
Stadtmiller explains that: Essentially to meet their balance sheet requirements. to execute the transaction in two stages
a standard Sukuk is just an Islamic Most recently, Abu Dhabi Islamic Bank because Sabana REIT required the
bond and the simple structure has a (ADIB) announced the launch of an funding from this issue to acquire the
coupon payment with a profit rate and innovative new Shariah compliant hybrid real estate asset that would ultimately
repayments until the end. But you can Tier 1 non-call perpetual notes issue, underlie the Sukuk. We entered into
make Islamic structures with other which is expected to be benchmark sized at a Murabahah transaction to provide
features. For example the Dana Gas around US$500 million and will be the first Sabana with its acquisition funding,
Sukuk; which has a structure which international perpetual Sukuk. The key and then the asset was injected into the
combines standard bond-like features feature of the Reg S deal is its simplicity, structure so that the transaction going
such as fixed payments and repayment of however, with one banker commenting forward was part-Murabahah and
principle with an option to convert into that: It was specifically designed to avoid Ijarah.
shares. being over-engineered. continued...

4 7th November 2012


The increasing sophistication of Sukuk

Continued from page 4

The deal represents one of the most be approved by some Shariah boards conservative, with little appetite for
sophisticated Sukuk structures ever seen and not by others, and that limits innovation and a preference for short-
on the market, with Man commenting the potential investor base, explains term vanilla Sukuk of five years or less.
that the most dicult aspect was in Stadtmiller. So having a more complex So while issuers may be excited about
creating the complex structural flexibility structure means getting more Shariah the new opportunities oered by more
for convertibility features that investors boards in the region on board with the complex Sukuk structures, there is no
required. However, the team that worked idea and getting them comfortable with guarantee that the market will respond.
on the transaction have high hopes the underlying structure as Shariah
for the future with the Sabana REIT compliant. Stadtmiller explains that: As institutions
structure acting as a template for new that are dedicated to using Islamic
issuances. Matt Fairclough, a partner A key example of this was the Goldman finance grow, inevitably they will want
at Cliord Chance, commented on the Sachs deal, which proposed a structure to try dierent structures. But in terms
launch that: Islamic finance is becoming that used commodity contracts which of what can actually be done in the
more sophisticated and we have seen the had the potential to be traded away from marketplace, I would say that one of the
development of both hybrid Sukuk as par on the Irish exchange. This led to major limiting factors is investor appetite.
well as more sophisticated convertible vehement controversy between Shariah Particularly in the Middle East, people
Sukuk such as this. We will continue to scholars as to the Shariah compliance have historically been very content with
see these sorts of developments as the of the deal and eventually halted the plain vanilla Sukuk, with a fixed coupon
Islamic finance industry continues to process entirely. and secure return. So the challenge
grow. is to engage with the Islamic investor
As the transactions get more complex in community and see whether they are
Compliance complaints terms of Islamic structure it does open up prepared to take new risks with slightly
However, a vital issue holding back the possibility of dierent opinions, and more complex products.
the complexity of Sukuk transactions is it will take more time and more eort to
the lack of standardization regarding get a more complex structure that a wide Perhaps this should stand as a warning
Shariah compliance. While in Malaysia range of parties will agree to, warns for the industry. Innovation is vital, but
the market benefits from a single Shariah Stadtmiller. not for its own sake. Sophistication of
board which decides whether a structure Sukuk should develop in the cause of
is permissible, in the Middle East there Investor concern advancement and improvement; oering
is no common board which can cause Market players have also expressed real benefits to investors and enhancing
considerable problems. They have to concern at whether Islamic investors rather than impeding compliance with
get more stakeholders on board; and will buy into the new hybrid structures. Shariah which is of course the highest
sometimes a complex structure will Sukukholders are traditionally goal of all. LM

Considering the complexities

Editors Note issues underpinning Islamic finance This week, our issue also covers
transactions. developments in Indonesia by our
As the favorite method of Shariah
IFN Correspondent there; while our
compliant fundraising, Sukuk has
A further issue that remains mired in IFN Reports look at Islamic finance in
shown increased levels of complexity
controversy in the Islamic finance space South Africa and an impending US$1.73
this past year, in tandem with the
includes the role of Shariah advisors; billion Sukuk issuance from Malaysia to
record number and value of issuances
and this week, Sherin Kunhibava of help national carrier Malaysian Airline
in 2012. This week, our cover story
Wisdom Management Consultancy System build its fleet of aircraft. Insider
explores the increasing sophistication
contributes a feature on the role, talks to Lim Say Cheong, the executive
of Sukuk; and whether the structures
responsibilities and independence of vice-president of investment banking at
growing maturity will prove to be a
the Shariah Advisory Board under Al Hilal Bank.
boon or a bane to the Islamic finance
Malaysias Shariah governance
framework. Meet the Head profiles Sufyan Maysara
Yassin, the head of Shariah audit and
Despite the strides seen in Sukuk
Notwithstanding our industrys existing compliance at BankMuscats Islamic
structuring however, some aspects
shortcomings, bright spots remain, window, Meethaq Islamic Banking;
of the industry lag behind in their
providing a myriad of opportunities and our Case Study highlights TH
development, such as those discussed
for the industrys further growth; as Plantations US$65.23 million Sukuk
in a feature by Umer Majid, the head of
discussed by Nigel Denison of the Bank Murabahah.
Islamic finance at UK Shariah advisory
of London and The Middle East in his
firm Halal Investments, which considers
contribution on Australias potential as
the options for improving legal
a new hub for Islamic finance.

5 7th November 2012


DEALS Arcapita awaits approval for

The finance ministrys debt management
oce has so far raised IDR47.5 trillion
(US$4.94 billion) from Sukuk issuances,
US$100 million bankruptcy
ADIB looking to issue Sukuk but is still short of its target of IDR57 financing
UAE: Abu Dhabi Islamic Bank (ADIB) trillion (US$5.93 billion) to finance the GLOBAL: Embattled Shariah compliant
held its first investor meeting on the 2012 state budget deficit. To meet the investment bank Arcapita is awaiting
30th October to discuss a possible Sukuk target, we plan to raise the remaining approval from the US Bankruptcy Court
issuance to boost the banks capital. funds from foreign currency global to secure a US$100 million bankruptcy
Sukuk by the end of this year, added financing from Fortress Investment
HSBC Holdings, Morgan Stanley, Dahlan. Group as it tries to protect its assets and
National Bank of Abu Dhabi and avoid a creditor-led restructuring.
Standard Chartered Bank have been Dialog Axiata plans Sukuk
mandated by the bank to arrange In an announcement to the court, where
roadshows for the proposed benchmark- SRI LANKA: Dialog Axiata, a subsidiary
Arcapita filed for bankruptcy protection
sized, Tier 1 perpetual dollar- of Malaysian telecommunications firm
on the 19th March 2012, the bank said
denominated Sukuk. Axiata Group, has announced a plan to
that while the financing is less than a
issue LKR51 billion (US$366 million)-
package it first sought from investment
worth of Sukuk with a tenor of 15 years.
TH Plantations first Sukuk advisor Silver Point Capital, the facility
from Fortress can be increased to
tranche deployed Funds raised from the issuance, which
US$150 million, the amount it originally
MALAYSIA: TH Plantations, a remains subject to regulatory approval,
requested from Silver Point.
subsidiary of national pilgrim fund will be used to refinance existing debt
manager Lembaga Tabung Haji, and finance capital expenditure and
Arcapita also said that the financing from
specializing in palm oil plantations, working capital.
Fortress is on substantially better terms
launched the first tranche of its RM1 than those oered by any other potential
billion (US$327.1 million) Sukuk Sukuk for state budget lender, with lower fees and permission
program, worth RM200 million (US$65.42 TUNISIA: The government will utilize for the Bahrain-based bank to seek
million), on the 30th October. Sukuk to finance the federal budget 2013 refinancing.
of around TND1 million (US$631,592),
The Sukuk, which will mature on the 29th according to Slim Besbes, the countrys A hearing is scheduled for the 5th
October 2027, holds a profit rate of 6.6% acting finance minister. November for the US Bankruptcy Court
per year and is payable semi-annually. to rule on whether Arcapita will be
Almarais second tranche allowed to pay Fortress the commitment
Global Sukuk to meet funding fees required to unlock the financing.
deficit SAUDI ARABIA: Local dairy food The bank is also continuing to evaluate
INDONESIA: Indonesias domestic producer Almarai Company will issue whether its bankruptcy plan will only
Sukuk, issued on the 30th October via the second tranche of its SAR2.3 billion include financing from Fortress or an
government auction, was more than five (US$513.17 million) Sukuk program investment from a third party. Arcapita
times oversubscribed, attracting over within the next few months, subject to must file its plan by the 14th December
IDR2.65 trillion (US$275.18 million) and market conditions. and receive approval for it by the
exceeding the initial issuance target of first quarter of next year to avoid a
IDR500 billion (US$52 million). In an announcement to the Saudi restructuring led by its creditors, who are
stock exchange, Almarai said that the already waiting in the wings with their
Dahlan Siamat, the director of Islamic second tranche will be sold via a private own plans for the Bahraini bank. Those
finance policy at the ministry of finance placement to investors in the kingdom. creditors include three hedge funds
Indonesia, revealed in a statement that which own or manage US$195 million of
the government is not looking to issue Almarai raised SAR1 billion (US$266.6 the US$1.1 billion owed by Arcapita.
any more domestic Sukuk in the next million) from its first tranche of the
month as it has met its domestic Sukuk program in a sale in March this year. Arcapitas case is the first bankruptcy
target for 2012. filing of a Shariah compliant financial
institution. At the time it filed for
DEAL TRACKER Full Deal Tracker on page 31 bankruptcy, the bank had assets worth
US$7 billion.
Dialog Axiata Sri Lanka LKR 366 million 2nd November 2012
Are you a member
Malaysia sovereign RM 1.73 billion 6th November 2012
Almarai Company SAR 513.57 million 6th November 2012
Sumberdaya Sewatama IDR 1.04 million 24th October 2012
MNRB Holding RM 48.95 million 16th October 2012
of our Linked-In group?
Banque Saudi Fransi SAR 666.6 million 15th October 2012

6 7th November 2012


AFRICA IFSBs draft standards in line

LKR178 million (US$1.37 million) and
total assets of LKR18 billion (US$138.06
million) for the period ended the with Basel III
Calling for support 30th September 2012, is also targeting GLOBAL: The Islamic Financial Services
KENYA: Takaful Insurance of Africa unbanked individuals and the countrys Board (IFSB) has released new draft
(TIA) has urged the government and small and medium-sized enterprise guidelines on capital adequacy for
the Insurance Regulatory Authority sector for its expansion plans. Islamic banks and risk management for
(IRA) to oer incentives supporting the Takaful companies.
development of Takaful in the country. Questioning RBI Its capital adequacy guidelines are in
Hassan Bashir, CEO of TIA, noted that INDIA: H Abdul Raqeeb, the general alignment with the upcoming Basel III
tough licensing requirements by the IRA secretary of the Indian Center for Islamic requirements, allowing Islamic banks to
and the high cost of running Takaful Finance, has questioned the countrys issue Sukuk against their assets in order
operations has contributed to the lack central bank, the Reserve Bank of India to meet minimum regulatory capital
of distribution of Islamic insurance (RBI)s, decision not to allow the practice requirements. The minimum maturity of
products in the country. of Islamic banking in the country under the Sukuk is recommended at five years
the current Banking Regulation Act. and should not have step-up features
to encourage the issuers to redeem the

ASIA Dr D Subbarao, the governor of RBI,

said on the 30th October 2012 that the
government needs to first introduce

Capitalizing on rural areas a law specifically for Islamic banking

The guidelines also include Islamic
windows and the application of capital
SRI LANKA: Amana Bank plans to before it is practiced in the country. requirements, and also how Islamic
expand its business in rural areas by profit-rate swaps should be calculated.
adding five new branches this year and However, Abdul Raqeeb noted that However, it is ultimately up to each
nine more branches in 2013 to bring its Islamic banking can be accommodated countrys regulators to incorporate the
total network to 28, according to Faizal through an executive order from the guidelines.
Salieh, its CEO. government, therefore bypassing the
need for the establishment of a new and Its draft on the risk management of
The bank, which reported a profit of separate Islamic banking law. Takaful companies outlines the risks
faced by Takaful operators; along with
best practices to manage risks, to create a
level playing field with the conventional
insurance industry. However, the
standard does not prescribe specific
quantitative standards, which the IFSB
says is for practical reasons due to
the dierences in environment where
the Takaful undertakings operate, as
well as dierences in their operational

The IFSB said: Following the

approach taken by the IFSBs Articles
of Agreement, this document sets out
minimum standards to be applied to
the Takaful industry, in parallel with
perspectives set out by the International
Association of Insurance Supervisors,
in order to bring the Takaful industry to
the desired level of eective supervision
and regulation, on a par with the
conventional insurance industry, subject
always to the constraints imposed by
Shariah principles.

So far as features of risk management

that are in common with conventional
insurance are concerned, users of this
Standard should have regard to the
standards issued by the management,
for the direction and guidance of Takaful
operators, as well as insurance/ Takaful

7 7th November 2012


Framework for Islamic CSR However, the decision to do so will Turkey sovereign Sukuk
depend on the success of the scheme for
MALAYSIA: The Accounting Research
paddy farmers.
boosts standing
Institute (ARI) of Universiti Teknologi GLOBAL: Turkeys debut international
MARA (UiTM) is developing an Islamic sovereign Sukuk, worth US$1.5 billion,

corporate social responsibility (i-CSR) which was issued on the 18th September
general practice framework for Islamic this year, has propelled the country
financial institutions.
NBAD in South Korean foray to second place in the primary Sukuk
market for the month of September, after
Associate professor Dr Faizah Darus said GLOBAL: National Bank of Abu Dhabi Malaysia. A report by KFH-Research
that the implementation of the i-CSR (NBAD), which has a Shariah compliant revealed: By country of domicile,
framework will require the endorsement window, will see its first venture into Malaysia topped the primary Sukuk
of the Malaysian central bank. South Korea via a cooperation with the market with total issuances of US$10
administrative organization of South billion or 85.3% of market share in
Al Baraka to grow in Pakistan Koreas capital, the Seoul Metropolitan September 2012. This was followed by
Government. Turkey at US$1.5 billion or 12.8% market
PAKISTAN: Al Baraka Bank (Pakistan)
will open more branches and launch share, and Bahrain at US$99.9 million or
This is to help facilitate the Seoul 0.9% market share.
new products as part of its expansion International Financial Centers
plan in the country, according to Adnan development into a regional financial
Ahmed Yousif, the chairman of Al Ringgit-denominated paper accounted
hub. for RM9.8 billion (US$3.2 billion) or
Baraka Islamic Bank and the president
and chief executive of Al Baraka 8.93% of total Sukuk issued, followed
Banking Group. Faisal Private Bank to by US-dollar denominated paper. Total
transform volume of Sukuk issued in the first nine
months of this year has reached US$103
PRS to launch offering GLOBAL: Swiss-based Faisal Private billion; of which US$11.6 billion was
MALAYSIA: The Private Retirement Bank, which is owned by Bahrains issued in the month of September. This
Scheme (PRS), a voluntary retirement Ithmaar Bank, will be converted into a was a 135% increase compared to the
saving scheme structured by private family oce managing the capital of a corresponding period in 2011.
sector fund managers, expects to launch single family, announced Ithmaar on the
24 funds by mid-November; some of 1st November 2012. According to the report, Murabahah is
which will be Shariah compliant. The currently the favored mode of Sukuk
funds are currently pending approval Ithmaar did not disclose the family issuance, representing 61.4% of global
from Securities Commission Malaysia. involved in the deal. The move will also Sukuk issued, followed by Ijarah at
enable the parent bank to focus on its US$2.1 billion, or 18.3%, and Musharakah
The approved providers are core retail and commercial business, with at US$1.7 billion, or 14.5% of total
AmInvestment Management, American both banks having struggled following issuances.
International Assurance, CIMB-Principal the 2008 financial crisis.
Asset Management, Hwang Investment The Turkey Sukuk, which matures in
Management, ING Funds, Manulife Facilitating global Islamic 2018 and has a yield of 2.8%, received
Unit Trust, Public Mutual and RHB financing growth book orders of up to US$8 billion; or five
Investment Management. times oversubscribed. However, some
GLOBAL: KFH Research, a subsidiary
have argued that the 58% uptake by
of Kuwait Finance House, has signed
Farming Takaful a memorandum of understanding
Middle East investors will not bode well
for the Sukuk in the secondary markets
MALAYSIA: Noh Omar, the minister of (MoU) with the World Bank aimed at
as it is too heavily concentrated on a
agriculture and agro-based industry, has developing the Islamic finance industry.
single region. It was reported that the
said that a government-backed Takaful
sovereign Sukuk dropped to US$98 cents
protection scheme for paddy farmers The MoU will enable both parties to
on the dollar in the secondary market
might be extended to other farming exchange expertise and professional
after its issuance, and has remained
sectors in the country.
continued... below par since then.

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8 7th November 2012


continued... Alizz Islamic bank IPO RATINGS

views regarding the industry, said Fahad oversubscribed
Al-Mukhaizeem, the chairman of KFH
OMAN: The IPO of Omans first Islamic Outlook improves
Research. MALAYSIA: RAM has lifted its
bank, Alizz Bank, which was launched
in September, is reported to have raised developing Rating Watch on Cerah
Al Madina in Islamic RO46 million (US$119.3 million) after Samas RM380 million (US$US$124.35
investment MoU closing on the 21st October. Although the million) Islamic medium-term notes
issue manager has yet to announce the (IMTN) and rearmed its long-term
GLOBAL: Omans Al Madina Financial rating on the papers at AA3, with a
ocial subscription figure, the issue is
& Investment Services Company and stable outlook.
said to have been oversubscribed by 1.15
Malaysia-based Amanie Advisors have
times; with a major portion subscribed by
signed a memorandum of understanding
(MoU) to work together in the area of
retail investors. Strong expectations
Islamic investments. INDONESIA: Fitch has assigned an
Liquidity management could expected BBB-(EXP) rating on the
suffer Indonesian governments upcoming 10-

MIDDLE EAST OMAN: The countrys draft rules

for Islamic banking have excluded
year US$3 billion global Sukuk.

Financing for Bahrains SMEs commodity Murabahah and Tawarruq,

BAHRAIN: Standard Chartered Saadiq is
now oering Shariah compliant financing
spurring Islamic finance players to
question the ability for eective liquidity
Are you reading
to the kingdoms small and medium-
sized enterprises sector, according to
management in the market. us on your
Sultan Ali Haider, a Dubai-based general
manager for consumer Islamic banking.
DIB announces results iPad /
UAE: Dubai Islamic Bank (DIB)
He added that the bank is also
announced an increase in its net profit to iPhone?
AED854 million (US$232.44 million) for
developing its businesses in the UAE.
the nine months to the 30th September
2012, in comparison to a profit of AED850
QIIB reports growth million (US$231.35 million) in the same
QATAR: Qatar International Islamic period of 2011.
Bank (QIIB) announced a net profit of
QAR53 million (US$14.56 million) for the Total assets rose 3.5% to AED93.7 billion
third quarter of 2012, 5.4% higher than a (US$25.5 billion) from the end of last MOVES
year earlier. year.
Etiqa Takaful
Total assets rose to QAR24.5 million MALAYSIA: Etiqa Takaful has appointed
(US$6.73 million) from QAR22.2 million
(US$6.1 million) at the end of 2011, as its Coming up... Ahmad Rizlan Azman as its new CEO.

financing portfolio increased to QAR12.6 He was previously the chief sales ocer
million (US$3.46 million) from QAR10.6 Volume 9 Issue 45 14th November 2012 of Maybank Asset Management.
million (US$2.91 million).
Meet the Head
Khalfan Abdallah Salim, head of product Emirates NBD Asset
Bank offers gold account development and Shariah compliance, Management
YEMEN: Tadhamon International Amana Bank, Tanzania UAE: Emirates NBD Asset Management
Islamic Bank has signed an agreement has named David Marshall as its new
with Dubai-based Gold Arab Emirate, Features senior executive ocer. Prior to his
an online gold and silver trading firm, The awakening of the IBF dragon; By appointment, he was the head of product
which will allow the banks customers to Amirullah Haji Abdullah, advisor of and distribution at the firm.
hold gold instead of cash in their savings Islamic banking & finance at Nova
accounts. Training and Education Institute, Hong
Kong. University of East London
UK: The University of East London has
Microfinance: A challenge that Islamic appointed Dr Gaar Khalid as the new
finance can meet; By Mohammad director of its Islamic finance center.
Abdullah Dewaya, head of Shariah audit
and compliance, Dhofar Bank Oman. Central Bank of the UAE
UAE: The Central Bank of the UAE has
Islamic microfinance in Tanzania; By
appointed Khalifa Mohammed al-Kindi
Khalfan Abdallah, head of product
as its new chairman, replacing Khalil
development and Shariah compliance at
Foulathi, whose four-year term expired
Amana Bank Tanzania.
in July this year.

9 7th November 2012


A possible catalyst
Last month, South Africas quasi- compliant, but thus obviously have a far Our key challenges as investors are to
sovereign body Trans-Caledon Tunnel narrower universe than the conventional obtain a suitable spread of Sukuk input
Authority announced that it was fund universe. portfolios as required by Regulation 28
considering the issuance of Sukuk to (of the Pension Funds Act) and to also
fund two large infrastructure projects Mogammad Saliegh Salaam, an close the yield gap between Sukuk and
worth about ZAR26 billion (US$3.06 investment manager at Old Mutual bonds. Ultimately we would also like
billion). The announcement comes in Investment Group, said in a report that to see the development of a secondary
the wake of the federal governments the Islamic investment community needs tradable market for domestic Sukuk.
own revelation that it was to issue a lot more products from the various
its first sovereign Sukuk, slated for investment banks. They need to provide Last year, regulators amended Regulation
March 2013. The authority stated the us a lot more Shariah compliant products 28 a provision that allows employees of
sovereign issuance would be gauged or avenues in which to deploy our a company to choose the types of assets
as a benchmark on whether it would cash. That is probably by far the biggest a retirement annuity, preservation fund
proceed towards the Islamic route. challenge. or pension/provident fund may invest
in, and what maximum percentage of the
South Africa is one of the oldest Islamic There is also the issue of Shariah portfolio may be invested in specific asset
markets in the continent, with fully- compliance. According to Saliegh, the classes. Termed as member level choice,
fledged Islamic bank Al Baraka Bank first products of these investment banks may only Shariah compliant balanced funds
opening its doors in 1989. This paved not necessarily satisfy the other parties have been approved to be oered to
the way for other conventional financial Shariah boards. We need to make sure these investors. There are currently three
institutions such as First National Bank, that all the products satisfy our Shariah asset management companies oering
HBZ Bank and Absa Bank eventually boards. such funds: namely Oasis, Old Mutual
incorporating Islamic windows alongside and Kagiso.
their conventional practices. When contacted by Islamic Finance
news, Abdulazeez Davids, the head of With Sukuk the most popular product
However, as in so many other Islamic research and portfolio manager at Kagiso in the Islamic finance industry at the
finance jurisdictions, South Africa faces a Asset Management, explained that he moment, this is the perfect timing for
common challenge in the lack of Islamic welcomed the state authoritys decision quasi-sovereign and corporate bodies
investment tools. South African fund to consider a Sukuk issuance as Islamic to raise capital via the Islamic route and
managers compromise by investing bonds were sorely needed to enable perhaps provide South Africa with much-
in local money market instruments better pricing, greater diversity and needed exposure to the industry. RW
and equities that are deemed Shariah healthy competition amongst issuers.

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With a focus on delivering the best for our clients, our results speak for themselves.

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The Edge-Lipper Malaysia Fund Awards 2012,
5 years Best Mixed Asset MYR Flexible Category
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Morningstar Fund Awards Malaysia 2012,
Islamic MYR Allocation Category


10 7th November 2012


Dana Gas fails to repay debt on time reaches standstill with

Speculation on Dana Gas failure to of any action by investors of its US$920 The main contributing factor to Dana
repay US$920 million outstanding on its million Sukuk to put a claim on the firms Gas credit woes, market watchers
US$1 billion Sukuk has materialized. Egyptian assets as they seek repayment believe, is its heavy concentration on
The company has reached a standstill for the Sukuk. Egypt which in the past year has had
which is eective for up to six months a less than stable economic and political
with its creditors, including BlackRock, The company, which has now become environment. The companys Egyptian
Ashmore Group and Spinnaker Capital. the first UAE-based company unable assets, investment bank Exotix estimates,
In a press release to investors, the to pay its Sukuk upon maturity, also are currently worth US$800 million; and
company announced that it was in commented that its discussions with the the company is said to be owed millions
discussions with the Sukukholders, and ad hoc committee of its Sukukholders are of dollars by the Egyptian government
believes that a consensual solution continuing to progress constructively. for past production.
in the best interest of all stakeholders
would be reached. The company, which has grown to In a press statement issued in January
become the largest regional private sector this year by Dana Gas with reference
However it is not all doom and gloom natural gas company in the Middle East, to the status of its convertible Sukuk,
as analysts at investment bank Beltone saw its shares drop by 8.9% leading up the company said: With regard to
Financial believe that any chances of to the announcement of the standstill. its convertible Sukuk which are not
the Sukuk maturity being deferred for Earlier in the month, Dana Gas stocks due until the 31st October 2012, the
three to four years will be a positive fell by 2.4% after seeing an 11% boost in company has been proactive in taking the
development for the group. In a September; and at one point being the initiative to mandate advisors including
statement the bank said: We notice most traded stock by volume. an international financial advisor and
the increased risk post the latest news will update the market with its plans
that has just come out on the Sukuk. In an earlier interview with Islamic in good time and due course. Dana
Assuming the worst case scenario of a finance news, a Dubai-based lawyer Gas over the last four years has timely
default, and Dana Gas giving up on its revealed that the implications of a and consistently paid on or before the
Egyptian assets, would yield us a fair potential Dana Gas default could be due date the Sukuk profit amount and
value of AED0.35 (US$0.09) per share, or detrimental to the UAE Sukuk market will continue to do so pursuant with
a 22% downside from the current share and the Middle East Islamic finance its obligations. Dana Gas maintains
price of AED0.45 (US$0.12) per share. industry; as well as the UAE credit strong positive relationships with its
Any chances of the Sukuk maturity credibility. He said: We are looking host governments, and is progressing
getting deferred by about three to four at an upward trend throughout, so the constructive discussions with the
years would mean positive news for impact of something like this, in which Egyptian government covering the
the group, both in terms of near-term Dana Gas might default, is very negative delayed payments due from government
liquidity as well as valuation. to the trend. Also when Nakheel was owned entities owing to the unrest in
not able to make its repayment in 2009, that country over the past year. NH
Meanwhile Dana Gas has issued a it negatively impacted the entire Dubai
statement claiming that it is unaware economy.

US$1.73 billion Sukuk to buy planes for ailing national carrier

Malaysia Airline System
The sale of a RM5.3 billion (US$1.73 ministry of finance. Funds raised from taken up by local pension fund,
billion) Sukuk to fund the purchase the transaction will be used to buy eight Kumpulan Wang Persaraan. The second
of aircraft which will be leased to new aircraft which MAS will lease from tranche was also privately placed, but
ailing national carrier Malaysia Airline the SPV. MAS has not disclosed the investor of the
System (MAS) is expected to come to papers.
market soon. Islamic Finance news understands that
CIMB Islamic and Maybank Investment MAS has said that the third phase of its
The Sukuk represents the second phase Bank (Maybank IB) are the joint lead funding plan, comprising commercial
of the carriers funding plan, unveiled managers for the Sukuk sale. funding for aircraft capital expenditure,
in May this year, which includes a is expected to be implemented after the
landmark perpetual Sukuk sold in two MASs perpetual Sukuk deal was solely completion of the first two phases. The
tranches in June and September as well managed by Maybank IB. commercial funding will likely comprise
as plans for a commercial loan. operating leases, finance leases and
The first-of-its-kind deal was issued commercial debt. LR
The new Sukuk will reportedly be in tranches of RM1 billion (US$326.44
sold by special purpose vehicle (SPV) million) and RM500 million (US$163.22
Turus Pesawat, which is owned by the million). The first issuance was fully

11 7th November 2012


Islamic trade finance: Potential for Indonesia?

INDONESIA been increasing over time, to 12.22% income still comes from the financing
and 17.16% in 2009 from 8.3% and 13.9% margin. Fee-based income from
By Farouk Abdullah Alwyni,
in 2000, respectively. However, despite transactional banking activities such
IFN Correspondent
Indonesias trade potential, the Islamic as trade finance and remittance is still
banking industry in general has not negligible.
The 2nd Annual Indonesia Trade &
really benefited from this. Only a few
Commodity Finance Conference Islamic banks and windows have oered Secondly, most of the Islamic banks
was recently held in Jakarta on the trade finance services to their clients. and/or UUS still do not have foreign
16th October 2012. One of the topics exchange licenses that will enable them
discussed was assessing increased Out of the 11 fully-fledged Islamic to perform trade finance transactions,
appetite for Islamic finance within banks, there are only four banks that especially cross- border trade finance.
trade. have foreign exchange licenses and Thirdly, oering trade finance business
only two that are already oering the will need good support systems such
Representatives of the International service. These are Bank Syariah Mandiri as an international banking network,
Islamic Trade Finance Corporation (BSM) and Bank Muamalat Indonesia proper contracts, IT systems and
(ITFC), Maybank Islamic, Bank (BMI). Despite already having a foreign qualified human resources to perform the
Muamalat Indonesia and myself exchange license for more than 10 years necessary tasks.
participated in the above panel and being the oldest Shariah bank in
moderated by Paul Wouters, a member the country (established in 1991), BMI Despite the above facts, considering the
of the advisory board of Islamic Finance only started to develop its trade finance large Indonesian trade values, it is indeed
news. The panel discussed issues relating activities in 2009/10. Similarly, out of a great opportunity for Islamic banking
to Islamic trade finance in general and the 26 Shariah windows (Unit Usaha industry (both local and global) to tap
the specific potential for the Islamic trade Syariah [UUS]), there are only seven into the Indonesian trade finance market.
finance in Indonesia. whose parent companies have foreign In fact, by its nature, trade finance is
exchange licenses. Of these seven UUS, one financing activity that is really in
Indonesia is one of major trading there are only three already oering the line with Islamic finance technique.
countries among OIC member countries service. These are Bank Permata Syariah, Furthermore, to be more competitive
and IDB member countries. Indonesias Bank Danamon Syariah and CIMB Niaga and move to the next level of banking,
exports and imports to and from the Syariah. Islamic banks need to diversify their
world in 2011 reached US$203.5 billion sources of income more toward fee-based
and US$177.4 billion respectively. This There are a number of reasons why income by entering transactional banking
puts Indonesia in fourth place for both the Islamic banking industry has not activities, and trade finance is a major
export and import values among the IDB really benefited from the trade finance part of this.
member countries. business potential. Firstly, the Islamic
banking industry in Indonesia is still Farouk A Alwyni is CEO of Alwyni
Similarly, Indonesia is also a major relatively an infant industry. The focus International Capital (AIC) and the chairman
exporter and importer to and from OIC of business activities are still in the of the Center for Islamic Studies in Finance
member countries. In fact, Indonesias areas of traditional banking activities Economics and Development (CISFED). He
intra-OIC exports and imports have such financing and funding. Most of the can be reached at falwyni@alwyni.com.

Islamic Treasury Management & Derivatives

18th 20th November 2012, DOHA
www.islamicfinancetraining.com | enquiry@redmoneytraining.com

12 7th November 2012


Al Hilal Bank strengthens investment banking capabilities

At just a little over four years old, Sukuk is expected to continue growing This year, the bank participated in a
Abu Dhabi-based Al Hilal Bank has in 2013, with more from the GCC, such as US$200 million financing for Tpra,
spent the past year strengthening its from Qatar, Saudi Arabia and the UAE, Turkeys sole oil refiner. Ahli United
investment banking proposition as it to fund infrastructure. Bank, Barwa Bank, Commercial Bank of
seeks to capitalize on the increasing Qatar, Doha Bank, Dubai Islamic Bank,
number of Sukuk transactions in the The bank will look at Sukuk origination First Gulf Bank, Qatar Islamic Bank
Middle East. in earnest next year and more and QInvest were also involved in the
aggressively pitch for business as financing. Were slowly starting to put
In an exclusive interview with Islamic it builds on the momentum it has our foot out in the international arena
Finance news, Lim Say Cheong, the developed this year. were very bullish on Turkey, noted Lim.
executive vice-president of the banks According to Dealogic data, Al
investment banking group, said that in Hilal managed six Islamic financing
addition to its concerted eort to win
Sukuk mandates for this year and next,
Al Hilal will transactions worth US$224 million in the
12 months to the 6th November 2012.
the bank also has plans to grow its fund
oerings, while keeping a keen eye on
look at Sukuk The growth in the Middle East Sukuk
business opportunities outside of the
origination in market has also increasingly attracted
Al Hilals eye for the expansion of

Sukuk has been in the limelight this last

earnest next its business activities. Lim cautioned
however that the bank will first focus on
year, with most of the funding completed year its business in the MENA region before
in the Middle East done through Sukuk; expanding its presence outside the
and with low pricing, issuers have had region, although it will consider other
a good time issuing Sukuk. Al Hilal has Additionally, Islamic financing has opportunities which may arise; including
spent a lot of eort in the last eight to nine become increasingly important in the setting up a presence in Asia. Currently,
months pitching for Sukuk mandates, Middle East, as European banks lower the bank is also present in Kazakhstan,
said Lim, adding that the bank is always their credit exposure as the ongoing crisis after launching its business there in 2010.
talking to potential issuers. in Europe causes them to draw back Meanwhile, apart from its financing
from the market. Lim however warned business, the bank also launched its
He also noted that Sukuk has emerged that the Eurozone crisis still poses the Global Sukuk Fund in March this
as a crucial alternative for governments biggest danger for the credit markets year. As at the end of September, the
and corporates to move away from next year, with even expectations of fund has more than doubled in size to
direct financing, with expectations Sukuk issuances for 2013 to hinge on US$40 million from US$16 million at its
that the Islamic bond market will gain developments in Europe. inception.
further momentum next year, especially
as issuers look to raise fresh capital to Nonetheless, the bank expects to play According to Lim, the bank is now
replace older borrowings. a more active role in the Sukuk market in the midst of putting something
in 2013; despite its investment banking together in terms of a new fund
On his expectations for the Sukuk market business hitherto being dominated by oering, which may be a real estate
next year and Al Hilals role in arranging direct financing transactions rather than fund or a balanced fund. EB
Islamic bond issuances, Lim noted that: Sukuk deals.

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13 7th November 2012


TH Plantations US$65.23 million Sukuk

TH Plantations, a unit of pilgrims fund to fully repay its existing commodity
manager Lembaga Tabung Haji (TH), Murabahah term financing-i facilities TH Plantations US$326.16 million
issued a RM200 million (US$65.23 and to finance its capital expenditure Sukuk Murabahah program
million) Sukuk on the 30th October requirements.
2012, pursuant to its Sukuk Murabahah
US$65.23 million
program of up to RM1 billion The company is engaged in oil
(US$326.16 million). palm plantations in Malaysia. It is
also involved in oil palm plantation
The 15-year notes represent the first operations in Indonesia via its subsidiary,
tranche of its program. THP Agro Management, which also
manages teak and rubber plantations in

Proceeds from
the Malaysian state of Sabah.

Pricing and placement

the issuance The oering, which bears a coupon of
30th October 2012

will be used to 6.6% payable semi-annually in arrears,

was privately placed to its majority Issuer and TH Plantations
fully repay its shareholder, TH. TH Plantations also said
that its program did not require approval
Issuance RM200 million (US$65.23
existing commodity from Securities Commission Malaysia
as all issuances from the facility will be
15 years
Murabahah term issued to TH, with the notes to be non-
tradable and non-transferable.
Coupon rate /

financing-i facilities Payment Semi-annual

Existing debt
and to finance its
Currency Ringgit
The company also has an existing RM200 Maturity date 29th October 2027

capital expenditure million Bai Murabahah medium-term

notes program of up to 10 years first
Lead arrangers
RHB Investment Bank and
Hong Leong Islamic Bank

requirements issued in 2009. It has fully drawn down

the program after issuing RM50 million
Hong Leong Investment
(US$16.3 million)-worth of notes from Malaysia
Governing law
that program in March this year, in three
Utilization of proceeds tranches each with six-year maturities. Structure /

Proceeds from the issuance will be used EB

Shariah Audit and Compliance

for Islamic Banking

1st 2nd November 2012, Kuala Lumpur

Key Highlights:


14 7th November 2012


Australia a new Islamic finance hub?

Australias political stability, sizable domestic economy, supportive infrastructure and developed financial system
adds to its chance of becoming a hub for Islamic finance in the region. NIGEL DENISON discusses.

Islamic finance has a long history. initial target client base. The last credit creation and encourage sound risk-
However, it has only developed on a census indicated that there were just management procedures.
global scale over the last 30 years. In over 475,000 Australian Muslims,
that relatively short space of time the equalling approximately 1.7% of the These ethical principles will prove as at-
industry has grown rapidly and the total population. At first glance this tractive to the Australian market as they
global market now exceeds US$1 trillion. may appear small when compared to have in the UK. Ethical and responsible
other countries such as the UK which investment is well-established in Australia
Many will find it surprising that has a Muslim population in excess of 2.5 and according to the Responsible Invest-
Australia was one of the first developed million. However it is a solid base from ment Association Australasia (RIAA) has
countries to establish Islamic finance. which to expand and it is also important in many areas outperformed the conven-
Shariah compliant cooperatives have to examine the wider potential market. tional market. A 2011 RIAA report states
been oering personal and small At the Bank of London and The Middle that core responsible investment rose 8%
business financial services such as East (BLME) we have found that all faiths between 2010 and 2011 from AU$18.12
mortgages from the 1990s. Since then and cultures are attracted to Islamic billion (US$18.7 billion) to AU$19.55 bil-
growth has been modest; however we finance with the majority of our clients lion (US$20.24 billion). Islamic financial
expect the pace of development to pick being non-Muslim. institutions are well positioned to play a
up exponentially in the coming years, part in this market.
with the Australian Islamic finance Attraction to Islamic finance
industry diversifying and expanding So if clients are not choosing to use These markets will be the key drivers of
away from its traditional base of small Islamic finance purely on religious growth for Islamic finance in Australia.
cooperative oerings into larger financial grounds what is the attraction? From In addition, Australias proximity to and
organizations and asset managers. BLMEs experience, one of the primary growing relationships with Asia will
be an important factor. For example
motivating factors is financial. Clients are
the demand for commodities from
Many looking for competitive returns from their
investments and competitive financing
developing counties such as China
and India continues to increase and of
people feel costs when they wish to borrow. It is vital
that an Islamic bank or asset manager
Australias top 10 trading partners, eight
are in the Asia Pacific region. Malaysia
disillusioned with oers a comparable service, both in terms
of product and performance, to their
has a free trade agreement with Australia
which provides a strong link to a country
and disenfranchised conventional counterparts in order to
compete in the financial market place.
that has an established Islamic finance

by the large
market. Indeed according to Standard
BLME has found that by providing Chartered Bank, Malaysia issued 62%
returns that meet or exceed those of
conventional banks
of all Sukuk between 2007-11. Indonesia
conventional providers we have become has the largest Muslim population in the
an alternative option for any client seeking
and are turning to an investment or financing.
world but currently only 5% of the total
banking assets are Shariah compliant

ethical The strong similarities between Shariah

(CityUK, 2011 Islamic Finance Report).

and ethical principles are also attracting

providers clients. Many people feel disillusioned Future for Australia in Islamic
with and disenfranchised by the large finance
This is already starting to happen with conventional banks and are turning Many of the key Asian economies have
the first Australian Islamic fund launched to ethical providers. Islamic financial shown substantial and sustained growth
in 2009. This fund was quickly followed institutions seek to generate a fair and in recent years and investors are looking
by other Islamic funds including the equitable return from transactions and for Islamic investment opportunities that
first fully Shariah compliant cash funds that are backed by real assets. balance their need for an attractive return
management fund and the first Islamic In addition they are prohibited from with a low appetite for risk. Australia is
international equity fund, launched by investing in conventional banking and tapping into this market with companies
Crescent Wealth in 2012. We expect to insurance, weapons manufacturing, such as Crescent Wealth partnering with
see a similar growth trajectory to that of pork-related products, alcohol, experienced providers such as BLME to
the UK which now has over 25 financial pornography and gambling. Many of oer investors access to the Sukuk and
institutions oering Shariah compliant these prohibitions and the principles of Islamic equity markets via competitive
services and products. fairness, integrity and transparency are and ethical funds.
shared with the ethical finance sector.
Muslim population Shariah compliant organizations also Nigel Denison is the head of asset
employ methods of financing that avoid management and treasury at BLME. He can
Australia has a small but wealthy
speculation, short-selling and excessive be contacted at Nigel.Denison@Blme.com.
Muslim population that is the natural

15 7th November 2012


Examining Malaysias Shariah governance

frameworks provisions on Shariah advisors
SHERIN KUNHIBAVA assesses the role, responsibilities and independence of the Shariah Advisory Board under
Malaysias Shariah governance framework.

Ensuring Shariah governance is critical Academys 19th session and decision Further, according to Appendix 2 of the
for the forward progress of Islamic No. 177 regarding the role of Shariah SGF the Shariah advisory member cannot
banking. It is critical not only to ensure supervision in regulating the operations be an employee of the IFI or any of its
confidence of investors and the public of Islamic banks its importance, related companies for the current or the
in the authenticity of the conduct and stipulations and the way it operates. last financial year. This again would be in
practise of Islamic banking, but also to According to the OIC Fiqh Academy the line with the OIC Fiqh Academys 177th
minimize fiduciary and reputational risks Shariah board must be independent, and decision that a Shariah advisory member
to Islamic financial institutions (IFIs). in order to achieve that, the following cannot be the employee of the IFI.
issues must be considered:
The central bank of Malaysia, Bank However under Principle 2.4 of the SGF,
Negara Malaysia (BNM), developed the The appointment and removal of the board of directors are encouraged
Shariah governance framework (SGF) Shariah board members and the to appoint at least one member of the
eective the 1st January 2011 for IFIs with determination of their compensation Shariah advisory board as a member
the primary objective of enhancing the should be done by a public body. of the board of directors. According
role of the board of directors, the Shariah The authentication of the to Principle 2.4: The presence of a
advisory board and the management in aforementioned items will then be director with sound Shariah knowledge
relation to Shariah matters: Including done by a central Shariah authority or would foster greater understanding and
enhancing relevant key organs having its representative. appreciation amongst the board members
the responsibility to execute the Shariah The members shall not be an on the decisions made by the Shariah
compliance and research functions aimed executive director in the Islamic Committee. This provision is in direct
at the attainment of a Shariah based financial institution or an employee contradiction to the OIC Fiqh Academys
operating environment. of the Islamic financial institution 177th decision.
or engaged in jobs that are contrary
A Shariah advisory board is defined by to the role of the Islamic financial It is opined that the Shariah advisorys
the AAOIFI as an independent body institution. independence might be compromised if
of specialized jurists in Fiqh Mualamat a Shariah advisory board member sits
(Islamic jurisprudence). However, the Based on the above, the provisions in the on the board of directors. Further, what
Shariah supervisory board may include SGF that relate to the Shariah advisory would be the duty of the Shariah advisor:
a member other than those specialized board are discussed under the following would he/she owe a fiduciary duty to the
in Fiqh Muamalat, but who should be an headings: company as directors do?
expert in the field of Islamic financial insti-
tutions and with the knowledge of Fiqh Appointment It is opined that there would be a
Mualamat. The Shariah supervisory board According to Appendix 2 of the SGF blurring of lines of responsibility, roles
is entrusted with the duty of directing, the board of directors shall, upon and duties if a Shariah advisor sits on the
reviewing and supervising the activities recommendation of its nomination board of directors.
of the Islamic financial institution in order committee, nominate the appointment
to ensure that they are in compliance with of the members of the Shariah advisory A better option would be for a Shariah
Islamic Shariah rules and principles. The board. The appointment and the advisor to be invited in certain special
Fatwas and rulings of the Shariah supervi- reappointment of a Shariah advisory occasions to the board meetings in the
sory board shall be binding on the Islamic board member is subject to the prior event there are Shariah matters that are
financial institution. written approval of the central bank and discussed. The Shariah advisor should
the Shariah Advisory Council. The SGF not be a permanent member of the board
Key words can be noted from the further provides that in this application of directors: this is to ensure a clear
above definition: the Shariah advisory the central bank may impose necessary separation of responsibility, role and
board should be independent, they conditions it deems fit in addition to the duty between the board of directors and
are specialists in Fiqh Muamalat and/ requirements in the SGF. the Shariah advisory board.
or IFIs and Fiqh Muamalat, and their
duties include directing, reviewing, and Comparing this to the requirement of Also each Shariah advisor is only allowed
supervising IFIs on whom their Fatwas the OIC Fiqh Academys 177th decision to sit on one Shariah Board in the same
are binding. How the SGF ensures it would seem that since appointment of industry (SGF Appendix 2). This means
these functions and roles of the Shariah Shariah advisory board members must that each Shariah board member can only
advisory members will be assessed below. be approved by the central bank and the sit on the Shariah board of one Islamic
Shariah Advisory Council, this provision bank and at the same time can sit on
How a Shariah advisory body remains on ensuring independence of the Shariah the Shariah advisory board of a Takaful
independent is found in the OIC Fiqh advisory board seems to be satisfied. continued...

16 7th November 2012



company and the Shariah advisory board

of a non-banking institution. It is opined Sample Shariah advisory board report:
that such a provision prevents incidences In our opinion:
of conflict of interest, preserves secrecy 1. The contracts, transactions and dealings entered into by the ABC Islamic Financial
and confidentiality and allows for more Institution during the year ended XX/XX/XXXX that we have reviewed are in
compliance with the Shariah principles;
new talent to enter the market.
2. The allocation of profit and charging of losses relating to investment accounts conform
to the basis that had been approved by us in accordance with Shariah principles;
However at the same time there may be (where appropriate, the opinion paragraph shall also include the following matters:)
some very experienced Shariah advisors 3. All earnings that have been realised from sources or by means prohibited by the
who will be restricted from serving more Shariah principles have been considered for disposal to charitable causes; and
than one Islamic bank and thus may 4. The calculation of zakat is in compliance with Shariah principles.
deprive the market of excellent expertise.
We, the members of the Shariah Committee of ABC Islamic Financial Institution, do hereby
confirm that the operations of the ABC Islamic Financial Institution for the year ended XX/XX/
There may also be minimum interaction XXXX have been conducted in conformity with the Shariah principles.
between experienced and inexperienced
Shariah advisors, since Shariah members public body. If remuneration is decided The Shariah advisors are under the
are to sit on only one Islamic banks by the board of directors on advice of the SGF are further required to provide
Shariah advisory board. Thus while one Remuneration Committee, would this written Shariah opinions or decisions.
may see this as a provision to ensure thwart the independence of the Shariah In discharging its duties, the Shariah
proper governance it does have its advisory member? It would seem so. Committee is expected to disclose
fallbacks as well. sucient information in the IFIs annual
There could also be instances where financial report on the state of Shariah
Duration of the appointment of members remuneration of the Shariah advisory compliance in the IFI (Principle 2.9). An
for the Shariah advisory boards is usually member is not standardized, some paid example of the report that must be signed
for a term of two years and this can be higher than others. There should be by each Shariah advisory board member
renewed by recommendation of the greater transparency of the amount of is found in Appendix 3 of the SGF. Part of
Islamic bank and upon approval of the remuneration and other perks if any, the sample of the Shariah advisory board
central bank and the Shariah Advisory Shariah advisors are entitled too. This is report is shown in the box above.
Council. to ensure that shareholders of the IFIs are
aware of the costs to the IFI. The words highlighted above are to add
It used to be a necessity that the emphasis on the burden or responsibility
Shariah advisory board consists of a Qualification of Shariah advisors. Shariah advisors are
minimum of three members, now with The majority of the Shariah members no longer mere advice-giving religious
the SGF (principle 2.3) a minimum of should at least be qualified in the field scholars, they must now ensure that the
five members is necessary of which of Islamic Jurisprudence or Islamic transactions and dealings entered into
the majority must have a Shariah transactions/commercial law (Fiqh by the IFI are in compliance with Shariah
background. The minimum number of Muamalat), however the minority of principles, they are required to attest that
committee members has been increased Shariah members may comprise of the operations of the IFI is in accordance
due to the greater number of individuals experts from other relevant backgrounds to Shariah principles and that all the
in the industry who have the necessary such as finance and law (SGF, Appendix earnings of an IFI are Halal.
expertise. The larger number of 2). This enables advisors to be from
Shariah advisory members also allows diverse backgrounds. It is opined Prima facie this appears to be a heavy
a greater number of those who have that those with financial and legal burden on these religious scholars. They
diverse backgrounds such as in finance, background are necessary to help the owe a high level of duty to ensure Shariah
economics and law to be a Shariah Shariah advisory board to make the best compliance. What occurs if they are
Advisory member. possible informed decision. This would negligent? What if a deal is found to be
be in line with the definition of the non-Shariah compliant, can the IFI now
Remuneration Shariah advisory board of the AAOIFI. sue the Shariah advisory member based
According to principle 2.6 of the SGF, on the report? Can shareholders sue the
remuneration of the Shariah advisory Duties, Responsibilities & Reporting Shariah advisory members? It would seem
members is determined by the board of The responsibilities of the Shariah that from the SGF according to Principle
directors as advised by its remuneration advisory board according to the SGF 2 of the SGF, the Shariah advisory board
committee. The SGF further states that include advising the board of directors is responsible and accountable for all its
such remuneration shall reflect, and be on Shariah matters on the banks business decisions, views and opinions related to
commensurate with, the accountability, operations to ensure that they comply Shariah matters. While this accountability
duties and responsibilities of the Shariah with Shariah principles at all times, to seems burdensome it is opined that
advisory board. endorse the Shariah compliance manuals, Shariah advisors will now take more care
to endorse and validate relevant in arriving at their decisions, Fatwa (legal
This provision is contrary to the documents, and to ensure proper records opinions/rulings) and carrying out their
requirement of the OIC Fiqh Academys for easy reference. This would be in other duties.
177th decision, which states that line with the definition of the Shariah
compensation must be determined by a advisory board of the AAOIFI. continued...

17 7th November 2012



The inaugural
The only issue is whether the Shariah
advisors themselves are aware of this
Islamic Finance news Forum
higher status of responsibility? On to be held in Saudi Arabia
this point reference should be made to
Principle 2.3 of the SGF which provides
that the board of directors must ensure 12th - 13th November 2012
that the Shariah advisory members are Four Seasons Hotel Riyadh at Kingdom Centre
aware of their fiduciary responsibilities
in discharging their duties. Confirmed Speakers

Referral of a question to the National

Abdulmohsen A. Al-Fares
Shariah Advisory Council
Achraf Cherkaoui
The Islamic Banking Act 1983 provides Dr Ali Al Amari
that an Islamic bank may seek the advice 
of the Shariah Advisory Council on Abdulkader Thomas

Shariah matters relating to its banking Ayham Al Yousef 
business, and the Islamic bank shall Benjamin Newland 
comply with the advice of the Shariah Bernardo Vizcaino 

Advisory Council (s.13A Islamic Bank
Bilal Kahlon
Act 1983).  
Emad Al Monayea
Like the Islamic Banking Act 1983 the 

Banking and Financial Institutions Act Faisal Qadri

1989 provides that Islamic banking Habib Motani
scheme banks may also refer a question Harj Rai
Dr. Henri Chaoul 
to the Shariah Advisory Council Humphrey Percy
and shall comply with directions on Imran Iqbal

Islamic banking business and Islamic Jawad Ali

financial business issued by BNM in  
consultation with the Shariah Advisory John Sandwick  
Council (s.124(3) Banking and Financial 
Kamal Mian

Institutions Act 1989).
Lawrence Oliver
Lilian Le Falher
It should be noted that by s.58 of the  

Central Bank Act of Malaysia 2009, Mansoor Durrani

where there is conflict in the ruling given Dr Mashhour Mourad
by a Shariah body or committee and the Mian Muhammad Nazir

Shariah Advisory Council, the ruling Mohammad Kamran Wajid
Mohamed Donia 
given by the Shariah Advisory Council
Mohammed Jalaluddin
will prevail. This is to ensure that there Monem Salam
is certainty of decisions by all IFIs in Muhammad Farhan

relation to Shariah matters in Malaysia. Nabil Issa 
Neil Miller
Much thought and eort has been made Raed G. Al-Barakati 
in providing provisions on Shariah 
governance through the SGF on the Rizwan Kanji 
Shariah advisory board. Many of the Salman Akbar  
provisions have clarified the role and Salman Al-Sudairi
functions of a Shariah advisory board Dr Salman Syed Ali  
member and the dynamics of reporting Sundra Rajoo  
to the board of directors. However it is Talal K. Althefery
opined that a Shariah advisory member   
should not be a permanent member of Tariq Al-Rifai 
the board and remuneration of Shariah Tobias Frenz
advisors should be disclosed and thus Walid Sarieddine 

become more transparent.
Yasser Dahlawi

Dr Sherin Kunhibava is a consultant at

Wisdom Management Consultancy. She can www.REDmoneyevents.com
be contacted at drsherin@wisdommc.com.

18 7th November 2012


Islamic finance: A growth strategy model

Islamic finance is much more vulnerable than its conventional counterpart as its processes are less ecient and
the legal underpinning of Islamic transactions is not yet robust. UMER MAJID questions what can be done to
improve this.

The future survival of Islamic finance conventional counterparts, underpinned home finance product which could be
will depend on a forward-thinking by profit maximization. very simply designed to avoid negative
organizations capacity to generate equity but instead which Islamic
new ideas and eectively deliver Vulnerability of Islamic finance organisations have simply used
competitive, credible alternatives to to replicate the conventional mortgage
targeted customers. A company which finance? structured products.
seeks to outperform its rivals will In reality prevalent Islamic finance
only be able to achieve this by firmly is much more vulnerable than its It should be noted that Islamic finance
establishing a relationship that they can conventional counterpart as its processes at this stage is still prohibition-driven
preserve by delivering genuine value to are much more inecient and the legal finance. The two fundamental elements
each customer the ultimate barometer underpinnings of Islamic transactions are its drivers Riba and Gharar, and
to measure success with. are not yet robust and do not navigate notably almost all Islamic finance
towards any Shariah standards. products almost always compromise
Especially in the case of disputes, there with either along the way. The two
Before these still remains uncertainty as to whether
the court ruling is based on Shariah or
prohibitions that can explain distinctions
between contracts deeming them valid or
pressing civil law. invalid are simply stated by the famous
scholar Ibn Taymiyya.
issues can hope to The rulings that have taken place in
English courts for example have not This is why Shariah is the only safeguard
be solved, Islamic sought to rule according to Shariah
as they do not profess to or have the
able to provide a realistic safety net to
regulate the activities of the providers
finance needs to expertise to deliver a Shariah solution. of Islamic finance. Realistically without
the political will to build the institutional
decide if it really Furthermore there is also uncertainty on
how insolvency and default should be
framework vital to deliver Islamic finance
it is hard to see the long-term survival of
wants to become handled; the dierent interpretations of
Shariah rulings across the jurisdictions;
the Islamic financial experiment.

Islamic a lack of standard documentation which

in turn contributes to the high cost of
The challenge facing leadership within
Islamic-based organizations and more
transactions and financing; and the importantly at governmental level is to
pressing issue of liquidity management combine economic success with moral
Some observers in my view correctly in Islamic finance, which make it success without compromising the
argue that current capitalistic practices just as vulnerable as its conventional Islamic value system which is to abide by
are prevalent in the would-be Islamic counterpart. the Shariah.
political and economic framework
Before these pressing issues can hope
which are predicated and adopted
to be solved, Islamic finance needs Vision
from a morally impoverished societal Collectively the Islamic finance network
framework which values profit to decide if it really wants to become
Islamic. The growth of Islamic finance should therefore seek to implement this
maximization above everything else. Ann strategy or seek to create this desired
Pettifor, a director of policy research in over the last decade was largely fuelled
by conventional banking organizations situation. Let us now look at the ways
macroeconomics (PRIME) and a fellow organizations should move forward to
of the New Economics Foundation in funnelling cheap credit (this is also
explains why Islamic financial products implement such a vision. Any vision is
London, comments: Let us make no obsolete without implementation.
bones about it. This financial crisis is a are inextricably linked to Libor) into
major spiritual crisis. these so-called Islamic banks.
It must be noted that the argument
Current Islamic financial practice to that Islamic finance needs to adhere to
Critically this is where true Islamic or intertwine in to the existing global
finance can help deliver financial say the least has only delivered a great
disservice to the hopes and aspirations financial framework makes little sense, as
solutions by following a sound and the existing system is totally at odds with
robust theoretical model that does not of millions of Muslims and non-Muslims
alike who really would like to see a real the values of the Shariah.
undermine the spirit of the Shariah,
which is the only basis upon which a alternative financial solution to meet
their everyday needs. Organizations have very limited powers
sound and robust Islamic financial model in terms of delivering the fundamental
is deliverable. Most Islamic financial institutional framework which would
institutions are modelled upon and run For example, let us look at a typical
in very much the same way as their would-be diminishing Musharakah continued...

19 7th November 2012



allow us to deliver a robust Islamic humanity. Today we live in a world

finance strategy model. Governments Organizations where most of the vast resources and

have very
need to step in to establish a structure wealth are controlled by 3% of its
to work with institutions who want to population, in a demand-led world

limited powers in
deliver Islamic finance by delivering the fuelled by technological advances like the
following: internet, Facebook and mobile phones.

1. A legal framework treaty, which terms of delivering We have seen how peoples desire for
must collectively allow all member
countries to ensure that any the fundamental justice and fairness has mobilized masses
like the gallant youth, the drivers of
organization under its juristic control
must be governed by and abide under institutional the Arab spring, who have been able to
remove greedy and tyrannical dictators.
strict Shariah safeguards. Perhaps
the establishment of some kind of framework which Increasingly large financial institutions
Shariah court which should set the
precedent for all bodies to adhere to. would allow us to and autocratic regimes that are seen
to preserve the interest of the few are

2. Educating people with sound

deliver a robust becoming enemies of the public. If
tyrannical rule can be replaced then
knowledge of the Shariah and
proactively encouraging the
Islamic finance these institutional activities will no
doubt equally one day pay the price for
development of new ideas to find
solutions to meet customer needs.
strategy compromising the Islamic value system.

3. Development of financial institutions

model Umer Majid is the head of Islamic finance at
Halal Investments, a Shariah advisory firm in
which adopt a benevolent approach the UK. He can be contacted at umermajid@
to humanity aligned to the needs of The paradigm shift I often hear people hotmail.com.
their potential customers contrary to talk about has to be a moral shift to
the conventional banker mindset. protect each and every member of

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20 7th November 2012

Islamic Investor eastspringinvestments.com.my

Vol 9 Issue 44

The REIT investment

Cover Story Chart 1: Performance of Emirates REIT
Real estate investment trusts (REITs), US$110 AED 600m
like their cousin the exchange-traded US$108.50 US$108.20
US$107.89 US$107.81
Net Asset Value per share
fund, have been regarded as one of the AED 500m
US$108 US$107.27 US$107.00
lesser known alternative investment US$106.55 US$107.33
AED 400m

Portfolio Size
products in the Islamic finance industry. US$106 Dividend: US$2.55
US$105.27 US$105.91
AED 300m
Globally, Malaysia pioneered the market US$104
after becoming the first country to AED 200m
introduce formal guidelines specifically US$102
US$102.02 AED 100m
for Islamic REITs in November 2005 that US$101.16

were designed to complement guidelines 00.00 US$100.82

US$100 AED 0
Ju A S O N D J F M A M J J A S O
for the conventional REIT. l 2 ug ep 2 ct 2 ov ec an 2 eb 2 ar pr ay un 2 ul 2 ug ep 2 ct 2
01 20 01 01 20 01 01 01 20 201 20 01 01 20 01 01
1 11 1 1 11 1 2 2 12 2 12 2 2 12 2 2
This saw the birth of the worlds first
Islamic REIT Al Aqar KPJ REIT
managed and administered by Damansara billion (US$812.48 million), with its latest Bank oces, in which DIB took 15-year
REIT managers, as well as the Al- acquisition valued at SG$61 million upward-only leases on rents that have a
Hadharah Boustead REIT the worlds (US$49.03 million). projected 10% yield. Targeting primarily
first plantation Islamic REIT, launched in professional investors, Emirates REIT
January 2007. In December 2008 the Axis According to data provider Eurekahedge, Management stated that it would
REIT, once a conventional REIT, was re- apart from the Emirates REIT, the four subsequently diversify its portfolio to
classified to become the first Islamic oce/ other Islamic REITs have provided include residential and oce buildings,
industrial REIT in the world. double digit returns to investors. As at warehouses and car parks.
the 31st October, Al-Aqar KPJ REIT and
Malaysias dominance in the Islamic REIT Al-Hadharah Boustead REIT provided This came to pass on the 3rd July when
market is part of the countrys bid to a yield-to-date return of 26.09% and Dubai Properties, a subsidiary of Dubai
position itself as an international Islamic 27.92% respectively while the two oce/ Properties Group, became a shareholder
hub by oering a full spectrum of products industrial REITs Sabana REIT and Axis of the REIT after it contributed to the
catering to every need of the investor. REIT boasted above 30% for their trusts 374,000 square feet of prime
respective one-year returns. Although commercial and retail property located in
Despite being a pioneer in this asset class, not comparable to the returns of its Dubai Internet City.
Malaysias oerings have been overtaken peers, Emirates REIT is already showing
by Singapore-listed Sabana REIT, which positive signs that it may soon join their Going forward, Islamic REITs have a
became the worlds largest listed Shariah ranks. As can be seen from Chart 1, bright future as a less volatile alternative
compliant REIT in 2010. Gross revenue the net asset value of the REIT stood at to equities, making it the right time for
stood at SG$20.3 million (US$16.58 US$108.20 per share as at 30th September both retail and institutional investors to
million) representing a 16.7% year-on- while its portfolio size surged to AED592 venture into this asset class. RW
year increase while its distributable million (US$161.17 million)
income rose to SG$15 million (US$12.25
In this issue...
million) in the third quarter of 2012, Emirates REIT is the product of
making it the seventh consecutive Dubai Islamic Bank (DIB) and Eiel Market commentary ..........................................22
quarter the REIT has exceed its forecasts. Management, making it the UAEs first
Fund Focus: Amana Developing Fund ...............23
Sabana REIT currently holds a portfolio Shariah compliant REIT. It was initially
comprising 21 industrial properties in seeded with a AED200 million (US$54.45 Fund Tables .........................................................24
Singapore valued at more than SG$1 million) portfolio of seven Dubai Islamic


21 7th November 2012


Market commentary
FTSE Physical Commodity Industrial Metals Index (FTSE PIMI)*
risen to 940,000 mt, the highest level since
September 2010. According to Aurubis,
1,000 Inception 1997, Base 100 the largest copper producer in Europe,
800 the intended launch of copper ETFs by
JP Morgan and Blackrock (still to be
approved by US regulators) may cause
400 the two institutions to buy 180,000 t of
200 copper for physical deposit.
Apart from that we have seen a weak
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
energy sector with WTI- and Brent-
FTSE PIMI prices falling by 7% and 3% to US$85.5
and US$108.5 per barrel respectively -
*The Physical Commodity Industry Metals Index includes zinc, nickel, cooper and aluminium. The
thereby pushing the spread between the
Index series is Shariah compliant.
two contracts again to record highs of
US$24/barrel. The prevailing price levels
Agriculture / Corn 6 months indicate lower geopolitical risk premiums
and sucient stock levels in the short
and medium-term.
800 After the sharp price increases during
the summer months in the course
600 of the worst US drought in 50 years,
grains are going through a period of
400 price consolidation with slight negative
May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 tendencies as the late harvest turned out
to be better than initially expected. Eighty
In this issue we focus on the recent though the latest quantitative easing percent of the US corn and soya harvests
activity in the agriculture sector. programs are suering a diminishing are already brought in and due to the
marginal utility. lack of storage facilities farmers sell their
Diminishing economic growth rates crop directly from the fields - thereby
mixed with a disappointing earnings Base and precious metals were putting pressure on futures markets.
season and revised profit outlooks put particularly hard hit with nickel, zinc and However, with price increases of 30%
pressure on financial markets in October. lead losing more than 10%. The sector on average this year, the agricultural
On the credit side we have seen some is confronted with declining growth complex remains top ranked for 2012.
strength in the US housing sector, as rates in emerging markets, diminishing
well as better than expected consumer global demand and to a certain degree Merit Commodity Partners. For more
sentiment data. All in all, it seems as with overcapacity and high stock levels. information or a daily update, contact info@
Aluminium stocks in Shanghai have mcpag.com or info@ftse.com


22 7th November 2012


Amana Developing Fund

The primary objective of the Developing World Fund is long-term capital growth.

What led to this fund being launched? we know have proven desirable in the Fact sheet
In 2009, we believed there were developed world and are likely to be Fund Manager Nicholas Kaiser, portfolio
significant growth opportunities just as desirable as incomes rise in the manager;
overseas. We also felt this type of fund developing world. Scott Klimo, deputy
further helped diversify the Amana Fund portfolio manager
family. Who are your investors (profile)? Trustee The Amana Mutual Funds
Retail (Muslim and non-Muslim) and Trust is overseen by a
What are the key factors that drive the institutional from the US. Board of Trustees:
funds performance?
Benchmark MSCI Emerging Markets
The first factor is our Shariah-based What specific risks does the fund take (Index) Index
screening process. Companies with into consideration? And why?
Apart from the traditional portfolio, Domicile US
excessive debt or that engage in
prohibited activities are not eligible factor and stock specific risks, a Inception Date 28th September 2009
for purchase by the fund. Secondly we developing world fund presents unique Fund Fund Type
are highly disciplined in the price we risk challenges relative to our US-centric Characteristics Open
will pay for a stock. Third, we have growth and income funds. Currency (as of the 30th
Fund Size
very low turnover; less than 10% of the movements or commodity price swings September 2012)
US$19.97 million
funds holdings annually. This keeps can have a larger impact on developing
trading costs to a minimum but more nations. With a developing world fund NAV per share
importantly allows us to avoid the one must be cognizant of political risks, US$10.44
pitfalls of behavioralism that often cause while most OECD countries dont have Minimum / Subsequent
investors to buy when enthusiasm and coups or revolutions. Of course, such Investment
prices are at their highest yet value at its events often present excellent buying US$250 / US$25
lowest and vice versa. opportunities.
*Fund portfolio
This is especially important in market How often do you review this fund?
downturns as simple math tells us that a We review the fund daily as the nature of
portfolio declining in value by 50% needs the investments means theres that much
to rise 100% to reclaim its original value. more to know, understand and interpret.
Our portfolios consistently outperform Its not enough to know what the Federal
in down markets, while capturing the Reserve is doing. We need to know
majority of the gain in rising markets. whats happening at the Bank of China
We are able to hold stocks for long or possible outcomes of the elections in
periods because of the extensive research Malaysia.
we conduct on portfolio candidates,
seeking companies with identifiable What is the market outlook for this
and sustainable positions of superiority fund? Foreign Equities 64.79%
in their industries, high quality While we prefer positive market Cash 35.21%
management teams and an opportunity environments, tactical market calls are
to substantially grow their earnings. not a significant contributor to fund
performance. Our goal is to select the *Industry allocation
As a developing world fund we best possible companies in all market
often have opportunities to invest in environments and with our multi-year
companies replicating business models average holding period for investments,
that have succeeded in the developed tactical portfolio adjustments are not a
world or providing goods and services part of our toolkit.

*Comparison Graph


$10,991 Consumer Non-durable 14.2%

10,000 $10.498 Cyclical 12.2%
Health 11.5%
Amana Developing World Fund Utilities 9.9%
MSCI Emerging Market Index Energy 7.1%
Transportation 5.7%
5,000 Technology 4.2%
Sep 09 Sep 10 Sep 11 Sep 12
Cash & Equivalents 35.2%

23 7th November 2012


Eurekahedge North America Islamic Fund Index




Index Values


















Top 10 Annualized Returns for ALL Funds since Inception
Fund Fund Manager Performance Measure Fund Domicile
1 Atlas Pension Islamic - Equity Sub Atlas Asset Management 19.96 Pakistan
2 Public Islamic Select Enterprises Public Mutual 16.43 Malaysia
3 Reliance Global Shariah Growth - USD I Reliance Asset Management 14.27 Guernsey
4 Public Islamic Opportunites Public Mutual 12.92 Malaysia
5 Public Islamic Dividend Public Mutual 12.11 Malaysia
6 Meezan Tahauz Pension - Equity Sub Al Meezan Investment Management 12.02 Pakistan
7 Public Islamic Equity Public Mutual 11.54 Malaysia
8 Am-Namaa' Asia-Pacific Equity Growth AmInvestment Management 11.35 Malaysia
9 Atlas Islamic Stock Atlas Asset Management 10.63 Pakistan
10 Amana Growth Saturna Capital 9.77 United States
Eurekahedge Islamic Fund Index 3.78

Based on 28.57% of funds which have reported October 2012 returns as at 6th November 2012

Top 10 Annualized Standard Deviation for ALL Funds since Inception

Fund Fund Manager Performance Measure Fund Domicile
1 Public Islamic Money Market Public Mutual 0.14 Malaysia
2 PB Islamic Cash Management Public Mutual 0.15 Malaysia
3 CIMB Islamic Money Market CIMB-Principal Asset Management 0.19 Malaysia
4 CIMB Islamic Deposit CIMB-Principal Asset Management 0.22 Malaysia
5 PB Islamic Cash Plus Public Mutual 0.24 Malaysia
6 Emirates Islamic Money Market Limited Institutional Emirates NBD Asset Management 0.26 Jersey
Share Class I USD
7 Watani USD Money Market National Bank of Kuwait 0.35 Cayman Islands
8 Watani KD Money Market National Bank of Kuwait 0.55 Cayman Islands
9 Meezan Tahauz Pension - Money Market Sub Al Meezan Investment Management 0.72 Pakistan
10 Public Islamic Income Public Mutual 1.20 Malaysia
Eurekahedge Islamic Fund Index 12.14

Taking into account funds that have at least 12 months of returns as at 30th October 2012

Comprehensive data from Eurekahedge will now feature the overall top 10 global and regional funds based on a specific duration (yield to date, annualized returns,
monthly returns), Sharpe ratio as well as delve into specific asset classes in the global arena equity, fixed income, money market, commodity, global investing (which
would focus on funds investing with global mandate instead of a specific country or geographical region), fund of funds, real estate as well as the Sortino ratio. Each table
covering the duration, region, asset class and ratio will be featured on a five week rotational basis.

24 7th November 2012


Eurekahedge Islamic Fund Equity Index over the last 5 years Eurekahedge Islamic Fund Equity Index over the last 1 year
105.000 113.000


95.000 108.000




70.000 93.000

60.000 88.000




















Top 10 Islamic Equity Funds by 3 Months Returns

Fund Fund Manager Performance Measure Fund Domicile
1 Meezan Tahauz Pension - Equity Sub Al Meezan Investment Management 9.73 Pakistan
2 NBAD UAE Islamic (Al Nae'em) National Bank of Abu Dhabi 9.42 UAE
3 Atlas Pension Islamic - Equity Sub Atlas Asset Management 9.31 Pakistan
4 Atlas Islamic Stock Atlas Asset Management 9.29 Pakistan
5 Meezan Islamic Al Meezan Investment Management 8.82 Pakistan
6 Al Meezan Mutual Al Meezan Investment Management 8.78 Pakistan
7 Am-Namaa' Asia-Pacific Equity Growth AmInvestment Management 6.13 Malaysia
8 Public China Ittikal Public Mutual 5.02 Malaysia
9 Emirates MENA Opportunities EIS Asset Management 3.40 Jersey
10 JPM Islamic Global Dynamic Equity (USD) A (acc) J.P. Morgan International Bank 3.13 Luxembourg
Eurekahedge Islamic Fund Index 2.49

Based on 26.54% of funds which have reported October 2012 returns as at 6th November 2012

Top 10 Islamic Globally Investing Funds by 3 Months Returns

Fund Fund Manager Performance Measure Fund Domicile
1 DWS Noor Precious Metals Securities - Class A DWS Noor Islamic Funds 15.87 Ireland
2 AmPrecious Metals AmInvestment Management 10.40 Malaysia
3 CIMB Islamic Greater China Equity CIMB-Principal Asset Management 5.01 Malaysia
4 JPM Islamic Global Dynamic Equity (USD) A (acc) J.P. Morgan International Bank 3.13 Luxembourg
5 Reliance Global Shariah Growth - USD I Reliance Asset Management 1.96 Guernsey
6 Emirates Islamic Global Balanced EIS Asset Management 1.93 Channel Islands
7 Global Sukuk Plus QIB (UK) 1.54 Luxembourg
8 BLME Umbrella Fund Sicav - SIF - USD Income - Class B Bank of London and The Middle East 0.77 Luxembourg
9 CIMB Islamic Commodities Structured 2 CIMB-Principal Asset Management 0.59 Malaysia
10 Watani KD Money Market National Bank of Kuwait 0.16 Cayman Islands
Eurekahedge Islamic Fund Index 2.99
Based on 21.67% of funds which have reported October 2012 returns as at 6 November 2012

Contact Eurekahedge
To list your fund or update your fund information: islamicfunds@eurekahedge.com
For further details on Eurekahedge: information@eurekahedge.com Tel: +65 6212 0900

Copyright Eurekahedge 2007, All Rights Reserved. You, the user, may freely use the data for internal purposes and may reproduce the index data provided that
reference to Eurekahedge is provided in your dissemination and/or reproduction. The information is provided on an as is basis and you assume and will bear all
risk or associated costs in its use, and neither Islamic Finance news, Eurekahedge nor its aliates provide any express or implied warranty or representations as to
originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for any purpose.

25 7th November 2012

Takaful Brought to you by

7th November 2012

Government includes Takaful in 2013 budget

Cover story to maximize land utilization due to
The Malaysian government will be The challenges the conversion of land for other uses:
particularly in the industrial, residential
introducing a Shariah compliant
and urban sectors.
protection scheme for paddy farmers

next year, as mentioned in the 2013
Prior to the budget announcement,
budget. The government has allocated
Malaysian Takaful operators had called
RM50 million (US$16.32 million) to the
program, which is expected to benefit agricultural sector for the government to include tax rebates
for Takaful premiums, similar to the ones
172,000 farmers.
currently include aorded for the Employees Provident
Fund and conventional life insurance.
Should the scheme successfully kick o,
the government will consider expanding a lack of crop However, there was no progress reported
on the issue.
the Takaful cover to other farming
activities, including vegetable and cash diversification, The 2013 budget also included a
crop farming and livestock breeding.
The Takaful Padi Protection Scheme will
shortage of skilled statistical summary of the Malaysian
Takaful industry, with Takaful assets
include coverage for paddy farms of 10
hectares or less.
farm labor, the accounting for 9% of total insurance
assets at RM18.3 billion (US$5.97 billion)
The average size of a paddy farm in
need for more as at December 2011; net contributions

amounting to RM2.6 billion (US$848.67
Malaysia, which is usually run by
million) as at July 2012; and new Family
smallholders, is 1.06 hectares. Wetland rice
machinery and a
Takaful contributions recorded at RM2
constitutes 85% of the total rice area in the
billion (US$652.81 million) in July 2012.
country with the remaining 15% made up
of upland rice, based on recent statistics. need to maximize Market penetration for Family Takaful
According to the Malaysia Agricultural
Research Development Institute
land stood at 13% in July 2012; while gross
direct contributions for General Takaful
(MARDI), the demand for rice in both
the international and domestic Malaysian
utilization grew to RM1 billion (US$326.4 million) in
July 2012, charting a 14.2% growth over
the private sector in Malaysias food and the same period last year. NH
market has increased from 1.8 million
tonnes in 1995 to 2.3 million tonnes agriculture production industry, with
in 2010, due to the countrys growing total private investments and agriculture
population. in the 1990s only reaching RM9.5 billion
(US$3.1 billion), compared to RM84
The government is also confident of the billion (US$27.4 billion) invested in
prospects of increased domestic rice manufacturing.
production to cater to domestic demand,
due to an undersupply in international The challenges facing Malaysias
markets. agricultural sector currently include a
lack of crop diversification, shortage of
MARDI also believes that there is a skilled farm labor, the need for more
growing need for more involvement from sophisticated machinery and a need

For more information, please call 03-2723 9999


26 7th November 2012


Sukuk are evolving from asset-backed

to asset-based structures. How will this
impact the way defaults are managed?
A Much will depend on the wording Musharakah. If the process of issuance of or not. Consequently, the issuer feels
of the investment contracts. With Sukuk on the above lines is followed in comfort while issuing asset-based
asset-based Sukuk defaults are less likely its true spirit and Islamic banks moves to security, because he is not worried about
as the originator and the investor share in the next level by having industry experts/ the generation of revenues from the
the market risk. In contrast with asset- specialists on board as part of their asset, subject finance, rather he can pay
backed Sukuk, the originator takes on investment banking and corporate teams, profits to the security holders from any
the entire market risk, the risk to the it would reduce the chances of default for other source of revenues. This became
investors being that the originator the industry and in the long run provide the main factor behind the popularity for
defaults. a better handle to Islamic banks for the issuance of asset-based securities and
handling default scenarios. this is why sale and lease back Ijarah
The practice may however deviate and sale and purchase back diminishing
from the theory, as is all too often We have recently seen significant activity Musharakah structures were practiced,
the case in Islamic finance. The legal in the Pakistani Sukuk market where especially for the government
wording of the contracts may seek to Islamic banks like Meezan Bank are now guaranteed/ sovereign Sukuk, to either
protect the investors from market risk, focusing on business enterprise-based provide liquidity to the government or to
even when the Sukuk are asset-based. Sukuk structures based on Musharakah finance budget deficit.
This however is undesirable from a where the bank and customers are
Shariah perspective, and from a finance sharing on the gross profits/loss of the On the other hand, the corporate
perspective only serves to increase the underlying business and this trend is Sukuk issuers felt comfort, providing
possibility of defaults. Defaults are expected to grow as more and more assets to make sale and lease back
seldom well managed, and moving to customers are now finding it easy to do Ijarah and sale and purchase back
asset-based Sukuk will not make much Musharakah transactions with Islamic diminishing Musharakah structures
dierence. banks. Shariah compliant when either they
needed liquidity for their businesses or
RODNEY WILSON AHMED ALI SIDDIQUI to convert their conventional loans into
Emeritus professor, Durham University UK Executive vice-president & head, product Shariah compliant financing.
development & Shariah compliance, Meezan
Bank Issuance of asset-based securities

A The Islamic banking industry has provided room for the growth of Islamic
shown a high level of flexibility finance in the infancy stage, where
over the last few decades and is
responding to the needs of its user by
A Sukuk have never really been asset
backed structures 95% have
the motive was to introduce Islamic
finance as parallel to conventional loans.
continuous innovation and is coming up always been asset-based with the same However, since this infancy stage has
with novel ideas in terms of new product credit risk as unsecured debt. passed, asset-backed securities should
structures. replace the issuance of asset-based
Similarly, the recent focus of moving Senior credit ocer, asset-backed and Sukuk
toward asset-based Sukuk structure is finance, Moodys Middle East The issuance of asset-backed securities
a very positive and healthy transition can provide the following distinguished
for the industry as it will enhance the advantages:
credibility of Islamic banking and would
provide a mechanism where the Islamic
A The asset-backed security makes
sure that the revenue earned from a) The central governments will have
banks and businesses (as partners) would the asset subject to finance, are to make strategic planning before
be focusing on the profits generated distributed among security holders, as receiving finance to make sure that
through the productive process involving against asset-based security, which does assets subject to finance must produce
actual trade and business transactions. not make sure such revenue distribution, revenues, by themselves;
rather the issuer can pay profits to the b) The Shariah principle of economic
This shift of focus on the underlying security holders from the revenues of any purpose/materiality will be served
business and viewing assets as other asset. which is unfortunately lacking in
investment to generate return and not most of the issues of asset based
only as a collateral will definitely result Accordingly, asset-based security securities;
in better credit decision making and holders receive profits from the issuer, c) There will be control over deficit
Islamic banks active involvement and irrespective of whether the profits financing and obviously will help
monitoring of the business enterprise and are paid out of the revenue streams control inflation;
would increase the transaction based on generated by the asset subject to finance

27 7th November 2012



d) Funds will be utilized to finance new structures, and ensure that there is no Supervisory Board to sign o the Sukuk
capital development expenditure of secondary market for such Sukuk that as Shariah compliant. If the original
the Central government which will have already been issued. Failure to owner becomes insolvent, its creditors
yield the prosperity of the general do so may result in a debt crisis that can seize the asset. Conversely the SPV
public. has the potential to bring down every does not have sucient ownership of
stakeholder in the industry. There is a lot the asset to sell it in the case of failure
Based on the above advantages, it is hoped at stake for Malaysia. Currently, Kuala by the original owner to honor its
that Islamic finance can rapidly achieve its Lumpur is attracting a lot of interest in its contractual commitments under the
true objective, in near future, as soon as the Islamic finance industry. In the event of Sukuk arrangements, such as paying rent
asset-backed securities are issued instead a crisis, popularity will diminish. If one for use of the asset.
of issuance of asset based securities. takes for example Bahrain: once a central
player in Islamic finance; today it is a For many years the ratings agencies
MUJEEB BEIG struggling financial center. warned that most Sukuk being issued by
Senior vice president & head of product GCC companies should be regarded as
development & research, MCB Islamic Asset-based Sukuk are all but only being asset-based (using the above
Banking Group conventional bonds in their economic definitions) for several reasons, including
eects. In the event of default, investors insuciently developed insolvency laws
may end up losing significantly and will and local restrictions on ownership of

A While supporters of Islamic finance

have reasons to be joyous over the
not have any recourse to an underlying
asset. Sukuk defaults have just started.
land by foreign persons. Investors largely
ignored these warnings until the recent
impressive growth of Sukuk, especially For instance, there are problems on the Gulf financial crisis.
in Malaysia, caution must be exercised horizon for those who invested in Dana
when advising investors and issuers on Sukuk, which was a nearly US$1 billion Investors in asset-based Sukuk (using
matters related to Sukuk. The current Sukuk maturing on the 31st October the above definitions) have much less
trend in Sukuk structuring is towards 2012, but with the obligor out of cash security than investors in asset-backed
debt-based structures, which render most hindering paybacks to the investors. It Sukuk. They need to satisfy themselves
of the Sukuk issued similar to will take one large default to happen in that they are being paid a return
conventional bonds in their risk-return Kuala Lumpur before investors will start commensurate with the additional risks
profile. This is a significant concern given going elsewhere. We definitely will not that they are taking on.
the increasing share of Sukuk in the total like to see all the eort, time and money
assets under management of institutions invested in Islamic banking and finance MOHAMMED AMIN
oering Islamic financial services (at in Malaysia to be at stake. Hence, this is a Islamic finance consultant and former UK
present assets under Sukuk are estimated precautionary note on the use of asset- head of Islamic finance at PwC
to be about one fifth of the total global based Sukuk at the expense of asset-
Islamic financial assets of US$1.35 backed Sukuk.
trillion, according to the Global Islamic
Finance Report 2012). PROFESSOR HUMAYON DAR A The pure structuring of the Sukuk
(asset-based/asset-backed) should
Chairman, president & CEO, Edbiz have no impact at all on how the Islamic
An over-emphasis on asset-based Consulting creditors behave (lenient and
Sukuk structures means corporates and magnanimous through restructuring and
sovereigns borrowing from the Islamic grace - firstly amicable by all means),
capital markets will increase their
indebtedness, thus magnifying the use A Clarity about the terminology is
since Shariah makes no distinction in this
of leverage in their capital structures.
This will not only endanger operational I understand asset-backed to mean that Should the conventional creditors decide
sustainability of the borrowing the underlying asset has fully transferred not to abide by the Islamic prescriptions
corporates but will also contribute to to the ownership of the Sukuk structure. as can be expected since they will
the instability of the Islamic financial Consequently insolvency of the original look greedy to the available assets and
system as a whole. Governments owner which has sponsored the Sukuks only have eyes for the pure monetary
borrowing through debt-based Sukuk creation does not imperil the asset. aspect of the situation then probably
structures like commodity Murabahah Furthermore failure by the sponsor to conventional debtor protection schemes
are draining the Islamic capital markets perform its contractual obligations will will come in play and failure thereof real
of the liquidity required for real private mean that the special purpose vehicle default will be declared. Fast unwinding/
sector investments. This will result in (SPV) used to issue the Sukuk can sell enforcement will be the case. It is
governments using Islamic structures to the asset and distribute the funds to the obvious that this will be at the cost of all
finance their budget deficits. Sukuk investors. parties directly involved and indirectly of
the community at large.
As Malaysia is at the forefront of Sukuk I understand asset-based to mean
issuance, it is absolutely imperative for that the underlying asset is not fully It becomes more and more clear that
the government (Securities Commission transferred to the Sukuk issuing SPV. same as structuring issues, dispute
Malaysia) to actively discourage Instead the SPV merely has some legal settlement for Islamic financial
commodity Murabahah in Sukuk rights sucient to enable the Shariah

28 7th November 2012



instruments should be dealt with in an regards the criteria that should be strictly of the underlying assets. However, this
Islamic environment. Or at least that complied with in order to ensure that a new type of structuring does not, in itself,
legal engineering by convinced and Sukuk issuance is a genuine Shariah ensure Shariah compliance for those new
dedicated practitioners for these cases compliant issuance. In a nutshell, the issuances. Indeed, one should still check
should be stepped up one notch. AAOIFI made it clear that Sukukholders whether the Sukukholders are actually
must be the true legal owners of the granted ownership rights in the under-
PAUL WOUTERS underlying assets. This will ensure that, lying assets and therefore will recover
Senior foreign counsel, Azmi & Associates in case of default of the Sukuk issuer, the eective management rights over the
law oce (Kuala Lumpur-Malaysia Sukukholders can directly manage the underlying assets in case of default of the
and Singapore); Lawyer, Antwerp Bar underlying assets themselves. SPV. If this latter criterion is not complied
Association (Belgium); CEO, Senturiyon with, the new issuances will have the
Global However, it is debatable whether the new same drawbacks as the former Sukuk is-
Sukuk issuances strictly comply with the suances in case of default by the SPV. This
above rule. In practice, this rule has led to means that the classification of Sukuk as

A The distinction between asset-

backed and asset-based Sukuk has
the ownership in the underlying assets be-
ing passed by way of a true sale from the
asset-backed or asset-based is, in itself,
emerged following the first defaults originator of the Sukuk to an ad hoc SPV
under Sukuk that arose in 2009 and the that will issue the Sukuk and act as trustee SUFIAN BATAINEH
earlier position taken by the AAOIFI as for the Sukuk holders for the management Managing director, Dananeer

Next Forum Question:

With the delay in the issuance of its planned Sukuk, is the IILM in jeopardy of losing
its relevance to the industry and what other avenues can be explored to help boost the
industrys liquidity?
If you would like to air your views on the next Forum Question, please email your response of between 50 and 300 words to Christina Morgan,
forum editor, at: Christina.Morgan@REDmoneygroup.com before the 16th November 2012.

29 7th November 2012


Sufyan Maysara What are the strengths of your

Yassin, Delivering genuine and uncontaminated
Shariah compliant products and services
head of Shariah that meet the demands of the market by
our financial institution; achieving the
audit and vision of the shareholders to be a Shariah
compliant business provider; as well as
compliance, the desire of the depositors in gaining
legitimate and lawful returns.
BankMuscat -
What are the factors
Meethaq Islamic contributing to the success of
Banking your company?
Major factors contributing to success
are well-versed business professionals,
Sufyan Maysara Yassin is a certified strong presence of the Shariah
Shariah advisor and auditor in supervisory board and eective and
ecient Shariah audit and compliance
Islamic banking and finance and
has a postgraduate diploma in
Islamic Banking & Insurance from
the Institute of Islamic Banking and
What are the obstacles faced
Insurance, London. Sharjah Islamic Bank from the scratch
in running your business
can be mentioned here. Contributing today?
Could you provide a brief to spreading an appropriate Shariah A lack of in-depth understanding of
governance attitude within the bank Shariah compliant products, transaction
journey of how you arrived atmospheres as well. sequences, documentation and process
where you are today? flows by the sta due to the deficiency
I joined Sharjah Islamic Bank (formerly I have now joined [Meethaq, the Islamic of the Islamic banking training and
National Bank of Sharjah) for a short window of] BankMuscat. Islamic learning. Also a general dearth of
period before the banks conversion into banking has recently been introduced experienced manpower in the Islamic
Islamic banking. I was assigned to assist in Oman and I am looking forward to banking industry.
the Shariah supervisory board during the accomplishing better achievements with
banks holistic transformation process. my associates and to humbly contribute Where do you see the Islamic
My mission then entailed me to work in inaugurating Shariah compliant
closely with the Shariah supervisory banking in Oman.
finance industry in the next
board members of the bank, thus five years?
exposing myself to the industry overall Islamic finance has firmly positioned
and the challenges therein.
Which of your products/ itself in Muslim countries and even
services deliver the best moved further to tap the markets in
What does your role involve? results? western countries. The constant double
Ensuring Shariah compliance and As Shariah audit and compliance is digit growth shall carry on, in spite of the
consistency of the banks transactions, a control function area, its one of the recent global economic challenges.
operations, investments, contracts, legal success factors needed by Islamic
documentation and all activities with financial institutions to achieve their Name one thing you would
the Shariah provisions and principles; as best results, both in business targets as
well as the authentication of the business
like to see change in the
well as ensuring implementation of the
Shariah supervisory boards resolutions from a Shariah perspective. The ultimate world of Islamic finance.
and pronouncements. Also, facilitating results of the Islamic institution to a I would like to see eective orientation
and streamlining the banks operations significant extent depend on the eective and broader application to microfinance
and procedures through adopting and innovative Shariah solutions that are products by Islamic banks and tangible
simple and distinctive Shariah compliant extended by the Islamic division. participation by the Islamic financial
practices. institutions in developing this sector.
In terms of business, product
development relies on the quality of our Noticeably, the main income for many
What is your greatest services. Regarding the operation, on Islamic financial institutions comes from
achievement to date? the other hand, of the back oce and applying secured products. I would also
The greatest achievement is yet to come. other supporting functions, their job like to see participatory-based banking
Yet achievement cant be achieved betterment and smoothness to a large and financing for micro-entrepreneurs
without a dedicated team. Playing a extent relies on our eective solution and develop into a real practice by the Islamic
leading role in setting up the Shariah process flows that comply with Shariah financial institutions.
Audit and Compliance Division in standards.

30 7th November 2012


ANNOUNCED IFN Correspondents
AFGHANISTAN: Zulfiqar Ali Khan
Dialog Axiata Sri Lanka LKR51 billion 2nd November 2012 head of Islamic banking division, financial supervision
department, Da Afghanistan Bank
Malaysia sovereign US$1.73 billion 6th November 2012 AUSTRALIA: Gerhard Bakker
director, Madina Village
Almarai Company US$513.57 million 6th November 2012 BAHRAIN: Dr Hatim El-Tahir
director, Islamic Finance Knowledge Centre, Deloitte &
Sumberdaya Sewatama IDR1 trillion 24th October 2012
BANGLADESH: Md Shamsuzzaman
executive vice president, Islami Bank Bangladesh
MNRB Holding RM150 million 16th October 2012
BERMUDA: Belaid A Jheengoor
director of asset management, PwC
Banque Saudi Fransi SAR2.5 billion 15th October 2012
BRUNEI: James Chiew Siew Hua
senior partner, Abrahams Davidson & Co
Edaran SWM RM1 billion 5th October 2012
CANADA: Jerey S Graham
partner, Borden Ladner Gervais
International Islamic Liquidity US$200 to 500 million 4th October 2012
Management Corporation CZECH REPUBLIC: JUDr Ivana Hrdlickova,
judge, Judiciary, Appelate Court Pardubice
Turkish Airlines TBA th
4 October 2012 EGYPT: Dr Walid Hegazy
managing partner, Hegazy & Associates
Danainfra Nasional RM1.5 billion 4th October 2012 FRANCE: Kader Merbouh
co head of the Executive Master of the Islamic Finance,
Paris-Dauphine University
Weststar Capital RM900 million 4th October 2012 HONG KONG & CHINA: Anthony Chan
partner, Brandt Chan & Partners in association with SNR
Dubai Electricity and Water Authority AED4.5 billion 3rd October 2012 Denton
INDIA: Keyur Shah
Tunisia sovereign TBA 30th September 2012 partner, KPMG
INDONESIA: Farouk A Alwyni
Bank Asya TRY150 million 25th September 2012 chairman, Center for Islamic Studies in Finance,
Economics, and Development
Qatar Islamic Bank US$1.5 billion 16th September 2012 IRAN: Majid Pireh
Islamic finance expert, SEO
Bolton RM380 million 6th September 2012 IRAQ: Khaled Saqqaf
partner and head of Jordan & Iraq oces, Al Tamimi & Co
HSBC Amanah RM3 billion 4th September 2012 IRELAND: Ken Owens
Shariah funds assurance partner, PwC Ireland
Sime Darby US$1.5 billion 3rd September 2012 JAPAN: Serdar A. Basara
president, Japan Islamic Finance
Malako Corporation RM1.8 billion 17th August 2012 JORDAN: Khaled Saqqaf
partner and head of Jordan & Iraq oces, Al Tamimi & Co
Putrajaya Holdings RM3 billion 13th August 2012 KOREA: Yong-Jae Chang
partner, Lee & Ko
Indonesia sovereign US$1 billion 10th August 2012 KUWAIT: Alex Saleh
partner, Al Tamimi & Company
Indonesia sovereign US$750 million 10th August 2012 LUXEMBOURG: Marc Theisen
partner, Theisen Law
Tanjung Bin Power RM4.5 billion 7th August 2012 MALAYSIA: Nik Norishky Thani
head special projects (Islamic), PNB
Kuala Lumpur Kepong RM1 billion 1st August 2012 MALDIVES: Aishath Muneeza
head of Islamic finance, Capital Market Development
Kimanis Power RM1.16 billion 16th July 2012
MALTA: Reuben Buttigieg
president, Malta Institute of Management
Syarikat Prasarana Negara RM4 billion 12th July 2012
MAURITIUS: Sameer K Tegally
associate, Conyers Dill & Pearman
Trkiye Finans Katilim Bankasi US$300 million 9th July 2012
NEW ZEALAND: Dr Mustafa Farouk
counsel member for Islamic financial institutions, FIANZ
Sudan sovereign US$758 million 5th July 2012
NIGERIA: Hajara Adeola
managing director, Lotus Capital Limited
South Africa sovereign TBA 4th July 2012
OMAN: Anthony Watson
senior associate, Al Busaidy Mansoor Jamal & Co
Indonesia sovereign IDR500 billion 3rd July 2012
PAKISTAN: Bilal Rasul
director (enforcement), SEC of Pakistan
National Treasury South Africa US$500 - 700 million 3rd July 2012
PHILIPPINES: Rafael A Morales
managing partner, SyCip Salazar Hernandez & Gatmaitan
Qatar sovereign US$4 billion 2nd July 2012
QATAR: Amjad Hussain
partner, K&L Gates
Indosat IDR300 billion 20th June 2012
partner, King & Spalding
Sadara SAR1.4 billion 13th June 2012
SENEGAL: Abdoulaye Mbow
Islamic finance advisor, Africa Islamic Finance
UEM Group RM2.2 billion 13th June 2012 Corporation
SOUTH AFRICA: Amman Muhammad
General Authority of Civil Aviation TBA 24th May 2012 managing director, Absa Islamic Bank
Morocco sovereign TBA 23rd May 2012 partner, Allen & Gledhill
SRI LANKA: Roshan Madewala
Amer Group Holding EGP2.7 billion 14th May 2012 director/CEO, Research Intelligence Unit
SWITZERLAND: Khadra Abdullahi
Emirates NBD US$500 million 7th May 2012 associate of investment banking, Faisal Private Bank
TANZANIA: Khalfan Abdallah
Epmex RM1.35 billion 25th April 2012 head of product development and Sharia compliance,
Amana Bank
Noor Islamic Bank US$1 billion 19th April 2012 TURKEY: Ali Ceylan
partner, Baspinar & Partners
Encorp RM1.58 billion 18th April 2012 UAE: Moinuddin Malim
CEO, Mashreq Al Islami
Johor Corp Group RM3 billion 13th April 2012 UK: Siraj Ibrahim
associate, Credit Agricole CIB
Citra Marga IDR1.2 trillion 12th April 2012 US: Saeid Hamedanchi
CEO, ShariahShares
Nakheel AED240 million 11th April 2012 YEMEN: Moneer Saif
head of Islamic banking, CAC Bank
Development Bank of Kazakhstan US$500 million 30th March 2012 IFN Correspondents are experts in their respective
fields and are selected by Islamic Finance news to
Ethical Asset Management TBA 30th March 2012 contribute designated short country reports. For more
information about becoming an IFN Correspondent
please contact sasikala@redmoneygroup.com
National Australia Bank US$500 million 29th March 2012

31 7th November 2012


REDmoney Asia ex. Japan 6 Months REDmoney Europe 6 Months

All Cap Large Cap Medium Cap Small Cap All Cap Large Cap Medium Cap Small Cap
1110 1000

1018 920

926 840

834 760

742 680

650 600
Jan Feb Mar Apr May June July Aug Sept Oct Nov Jan Feb Mar Apr May June July Aug Sept Oct Nov

REDmoney GCC 6 Months REDmoney Global 6 Months

All Cap Large Cap Medium Cap Small Cap All Cap Large Cap Medium Cap Small Cap
850 1300

780 1176

710 1052

640 928

570 804

500 680
Jan Feb Mar Apr May June July Aug Sept Oct Nov Jan Feb Mar Apr May June July Aug Sept Oct Nov

REDmoney MENA 6 Months REDmoney US 6 Months

All Cap Large Cap Medium Cap Small Cap All Cap Large Cap Medium Cap Small Cap
850 1700

780 1520

710 1340

640 1160

570 980

500 800
Jan Feb Mar Apr May June July Aug Sept Oct Nov Jan Feb Mar Apr May June July Aug Sept Oct Nov

SAMI Halal Food Participation (All Cap) 6 months





Jan-2012 Feb-2012 Mar-2012 Apr-2012 May-2012 June-2012 July-2012 Aug-2012 Sept-2012 Oct-2012 Nov-2012

32 7th November 2012


REDmoney Global Shariah Index Series (All Cap) 6 Months REDmoney Global Shariah Index Series (Large Cap) 6 Months
REDmoney Asia ex. Japan REDmoney Global REDmoney Asia ex. Japan REDmoney Global
REDmoney Europe REDmoney MENA REDmoney Europe REDmoney MENA
REDmoney GCC REDmoney US REDmoney GCC REDmoney US
1100 1000

980 890

860 780

740 670

620 560

500 450
Jan Feb Mar Apr May June July Aug Sept Oct Nov Jan Feb Mar Apr May June July Aug Sept Oct Nov

REDmoney Global Shariah Index Series (Medium Cap) 6 Months REDmoney Global Shariah Index Series (Small Cap) 6 Months
REDmoney Asia ex. Japan REDmoney Global REDmoney Asia ex. Japan REDmoney Global
REDmoney Europe REDmoney MENA REDmoney Europe REDmoney MENA
REDmoney GCC REDmoney US REDmoney GCC REDmoney US
1700 1450

1460 1260

1220 1070

980 880

740 690

500 500
Jan Feb Mar Apr May June July Aug Sept Oct Nov Jan Feb Mar Apr May June July Aug Sept Oct Nov

REDmoney Global Shariah

Equities are considered eligible for inclusion Utilities Basis Materials
Telecomunication Services 2% 15%
into the REDmoney Global Shariah Index 2%
Series only if they pass a series of market Consumer Goods Services
related guidelines related to minimum market Technology
capitalization and liquidity as well as country 14%
Once the index eligible universe is determined Non-Cyclical
Consumer Goods Services
the underlying constituents are screened 7% Financials
using a set of business and financial Shariah 4%
guidelines. Industrials Healthcare
22% 11%

The REDmoney Global Shariah Index Series powered by IdealRatings consists of a rich subset of global listed equities that adhere to clearly
defined and transparent Shariah guidelines defined by Shariyah Review Bureau in Jeddah, Saudi Arabia.

The REDmoney Shariah Indexes provides Islamic investors with an accurate and Shariah-specific equity performance benchmark with optimized
compliance credibility due to the intensive research conducted to ensure that index constituents do not conflict with the defined Shariah

IdealRatings is the leading provider of Shariah investment decision support tools to investors globally, including asset managers, brokers, index
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Andrew Morgan
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RED Email: Andrew.Morgan@REDmoneygroup.com
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33 7th November 2012


Most Recent Global Sukuk

Priced Issuer Nationality Instrument Market US$ (mln) Managers

22nd Oct 2012 Putrajaya Holdings Malaysia Sukuk Domestic market 262 CIMB Group, AmInvestment Bank,
private placement Maybank Investment Bank
11th Oct 2012 Qatar International Qatar Sukuk Euro market 700 Standard Chartered Bank, HSBC, Qatar
Islamic Bank public issue National Bank
4th Oct 2012 Edaran SWM Malaysia Sukuk Domestic market 245 Hong Leong Bank, CIMB Group
public issue
3rd Oct 2012 Qatar Islamic Bank Qatar Sukuk Euro market 750 Standard Chartered Bank, Deutsche Bank,
public issue HSBC, QInvest
1st Oct 2012 Khazanah Nasional Malaysia Sukuk Domestic market 651 CIMB Group, AmInvestment Bank
Musharakah private placement
20th Sep 2012 Republic of Turkey Turkey Sukuk Euro market 1,500 HSBC, Kuwait Finance House, Citigroup
public issue
20th Sep 2012 MISC Malaysia Sukuk Domestic market 163 HSBC, CIMB Group, AmInvestment Bank
public issue
20th Sep 2012 HSBC Amanah United Sukuk Domestic market 163 HSBC, AmInvestment Bank, Hong Leong
Malaysia Kingdom public issue Islamic Bank, Maybank Investment Bank
18th Sep 2012 Malaysian Airline Malaysia Sukuk Domestic market 165 Maybank Investment Bank
System private placement
7th Sep 2012 National Higher Malaysia Sukuk Domestic market 321 CIMB Group, Maybank Investment Bank
Education Fund public issue
3rd Sep 2012 Cagamas Malaysia Sukuk Domestic market 160 RHB Capital
public issue
29th Aug 2012 Malako Malaysia Sukuk Domestic market 577 Maybank Investment Bank
Corporation private placement
28th Aug 2012 Syarikat Prasarana Malaysia Sukuk Domestic market 644 RHB Capital, Kenanga Investment Bank,
Negara Murabahah public issue CIMB Group
15th Aug 2012 Tanjung Bin Power Malaysia Sukuk Domestic market 1,346 CIMB Group, Maybank Investment Bank
private placement
14th Aug 2012 Celcom Transmission Malaysia Sukuk Domestic market 1,605 HSBC, CIMB Group, Maybank Investment
(M) Murabahah public issue Bank
10th Aug 2012 Khazanah Nasional Malaysia Sukuk Domestic market 806 Kenanga Investment Bank, DRB-HICOM,
Musharakah private placement CIMB Group, AmInvestment Bank
9th Aug 2012 Kuala Lumpur Malaysia Sukuk Ijarah Domestic market 322 CIMB Group, Maybank Investment Bank
Kepong public issue
1st Aug 2012 SME Bank Malaysia Sukuk Domestic market 159 Kuwait Finance House, AmInvestment Bank,
public issue Maybank Investment Bank
19th Jul 2012 Kimanis Power Malaysia Sukuk Domestic market 272 HSBC, CIMB Group
public issue
17th Jul 2012 Aman Sukuk Malaysia Sukuk Domestic market 260 Lembaga Tabung Haji, RHB Capital, CIMB
public issue Group, AmInvestment Bank, Maybank
Investment Bank

Global Sukuk Volume by Month Global Sukuk Volume by Quarter

US$bn US$m US$bn US$m

12 1200 18 600
Value (US$bn) Avg Size (US$m) 16 Value (US$bn) Avg Size (US$m)
10 1000 500
8 800 12 400
6 600 300
4 400 6 200
2 200 100
0 0 0 0
1 2 3 4 5 6 7 8 9 10 1112 1 2 3 4 5 6 7 8 9 10 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2011 2012 2007 2008 2009 2010 2011 2012

34 7th November 2012


Top 30 Issuers of Global Sukuk 12 Months

Issuer Nationality Instrument Market US$ (mln) Iss Managers

1 Projek Lebuhraya Malaysia Sukuk Domestic market 9,610 18.3 RHB Capital, CIMB Group, AmInvestment Bank, Maybank
Usahasama private placement Investment Bank
2 State of Qatar Qatar Sukuk Euro market 4,000 7.6 Standard Chartered Bank, Deutsche Bank, HSBC, QInvest,
public issue Barwa Bank
3 General Authority Saudi Sukuk Domestic market 4,000 7.6 HSBC
for Civil Aviation Arabia private placement
4 Saudi Electricity Saudi Sukuk Euro market 1,750 3.3 Deutsche Bank, HSBC
Company Arabia public issue
5 Celcom Malaysia Sukuk Domestic market 1,590 3.0 HSBC, CIMB Group, Maybank Investment Bank
Transmission (M) Murabahah public issue
6 Republic of Turkey Turkey Sukuk Euro market 1,500 2.9 HSBC, Kuwait Finance House, Citigroup
public issue
7 Tanjung Bin Power Malaysia Sukuk Domestic market 1,298 2.5 CIMB Group, Maybank Investment Bank
private placement
8 Dubai DOF Sukuk UAE Sukuk Euro market 1,250 2.4 HSBC, National Bank of Abu Dhabi, Dubai Islamic Bank,
public issue Citigroup
9 National Higher Malaysia Sukuk Domestic market 1,110 2.1 CIMB Group, Maybank Investment Bank
Education Fund public issue
10 Tanjung Bin Energy Malaysia Sukuk Domestic market 1,089 2.1 HSBC, OCBC, RHB Capital, DRB-HICOM, CIMB Group,
Issuer Tawaruq private placement An Investment Bank, Maybank Investment Bank
11 Perusahaan Penerbit Indonesia Sukuk Ijarah Euro market 1,000 1.9 Standard Chartered Bank, HSBC, Citigroup
SBSN Indonesia II public issue
11 EIB Sukuk UAE Sukuk Euro market 1,000 1.9 Standard Chartered Bank, HSBC, RBS, National Bank of
public issue Abu Dhabi, Citigroup, Emirates NBD, Dubai Islamic Bank,
Credit Agricole
13 Johor Corporation Malaysia Sukuk Domestic market 939 1.8 CIMB Group, An Investment Bank, AmInvestment Bank,
public issue Maybank Investment Bank
14 Malaysia Malaysia Sukuk Domestic market 817 1.6 Maybank Investment Bank
Murabahah public issue
15 Maxis Malaysia Sukuk Domestic market 805 1.5 CIMB Group, Maybank Investment Bank
Musharakah public issue
16 IDB Trust Services Saudi Sukuk Euro market 800 1.5 Saudi National Commercial Bank, Standard Chartered
Arabia public issue Bank, BNP Paribas, HSBC, CIMB Group
17 Sarawak Energy Malaysia Sukuk Domestic market 796 1.5 RHB Capital, Kenanga Investment Bank, AmInvestment
public issue Bank
18 ANIH Malaysia Sukuk Domestic market 786 1.5 CIMB Group, Maybank Investment Bank
private placement
19 DanaInfra Nasional Malaysia Sukuk Domestic market 752 1.4 Lembaga Tabung Haji, RHB Capital, CIMB Group,
public issue AmInvestment Bank, Maybank Investment Bank
20 Qatar Islamic Bank Qatar Sukuk Euro market 750 1.4 Standard Chartered Bank, Deutsche Bank, HSBC, QInvest
public issue
20 Kingdom of Bahrain Bahrain Sukuk Euro market 750 1.4 Standard Chartered Bank, BNP Paribas, Citigroup
public issue
20 BSF Sukuk Saudi Sukuk Euro market 750 1.4 Deutsche Bank, Citigroup, Credit Agricole
Arabia public issue
23 Qatar International Qatar Sukuk Euro market 700 1.3 Standard Chartered Bank, HSBC, Qatar National Bank
Islamic Bank public issue
24 Aman Sukuk Malaysia Sukuk Domestic market 700 1.3 Lembaga Tabung Haji, RHB Capital, CIMB Group,
public issue AmInvestment Bank, Maybank Investment Bank
25 Khazanah Nasional Malaysia Sukuk Domestic market 652 1.2 Kenanga Investment Bank, DRB-HICOM, CIMB Group,
private placement AmInvestment Bank
26 Jafz Sukuk UAE Sukuk Euro market 650 1.2 Standard Chartered Bank, Abu Dhabi Commercial Bank,
public issue National Bank of Abu Dhabi, Dubai Islamic Bank, Abu
Dhabi Islamic Bank, Citigroup, Emirates NBD
27 Syarikat Prasarana Malaysia Sukuk Domestic market 644 1.2 RHB Capital, Kenanga Investment Bank, CIMB Group
Negara Murabahah public issue
28 Malako Malaysia Sukuk Domestic market 577 1.1 Maybank Investment Bank
Corporation private placement
29 DRB-HICOM Malaysia Sukuk Domestic market 561 1.1 Maybank Investment Bank
private placement
30 TASNEE Saudi Sukuk Domestic market 533 1.0 HSBC
Arabia private placement

Total 52,542 100

35 7th November 2012


Top Managers of Sukuk 12 Months Sukuk Volume by Currency US$ (billion) 12 Months

Manager US$ (mln) Iss %

Malaysian ringgit 28.6
1 HSBC 10,296 28 19.6
US dollar 18.4
2 Maybank Investment Bank 9,056 41 17.2
3 CIMB Group 8,213 36 15.6 Saudi riyal 5.5

4 AmInvestment Bank 4,539 25 8.6 Singapore dollar 0.0

5 RHB Capital 3,193 34 6.1
6 Standard Chartered Bank 3,047 19 5.8
Sukuk Volume by Issuer Nation US$ (billion) 12 Months
7 Deutsche Bank 2,213 5 4.2
Malaysia 27.5
8 Citigroup 2,130 10 4.1
Saudi Arabia 8.8
9 QInvest 988 2 1.9
UAE 6.3
10 Dubai Islamic Bank 868 7 1.7 Qatar 5.5
11 Barwa Bank 863 2 1.6 Turkey 1.5
12 National Bank of Abu Dhabi 797 6 1.5 Indonesia 1.2

13 Kenanga Investment Bank 666 4 1.3 Bahrain 1.1

14 Kuwait Finance House 608 4 1.2

15 An Investment Bank 468 4 0.9 Global Sukuk Volume by Sector 12 Months

16 Emirates NBD 439 5 0.8

17 JPMorgan 425 2 0.8 12%
5% 28% Government
18 BNP Paribas 410 2 0.8 Construction / Building
19 Hong Leong Bank 374 3 0.7 13% Finance
Utility & Energy
20 DRB-HICOM 353 9 0.7
21 Credit Agricole 350 2 0.7 Other
20% 22%
22 Abu Dhabi Islamic Bank 339 4 0.6
23 Lembaga Tabung Haji 290 3 0.6
24 Qatar National Bank 233 1 0.4
Global Sukuk Volume - US$ Analysis
25 OCBC 219 4 0.4
26 Abu Dhabi Commercial Bank 218 2 0.4 US$bn US$m
18 600
27 Saudi National Commercial Bank 160 1 0.3 16 Non-US$ US$
28 Riyad Bank 153 2 0.3 12 400
29 Bank of America Merrill Lynch 125 1 0.2 300
6 200
30 RBS 99 2 0.2 4
Total 52,542 132 100.0 0 0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
Top Islamic Finance Related Project Finance Mandated Lead 2007 2008 2009 2010 2011 2012
Arrangers 12 Months

Mandated Lead Arranger US$ (million) No % Top Islamic Finance Related Project Financing Legal Advisors
Ranking 12 Months
1 Public Investment Fund 873 3 8.5
Legal Advisor US$ (million) No %
2 SABB 873 3 8.5
1 Allen & Overy 4,198 2 25.9
3 Arab National Bank 722 2 7.0
2 White & Case 3,579 2 22.1
4 Samba Financial Group 614 3 6.0 3 Skadden Arps Slate Meagher & Flom 3,281 1 20.2
5 Banque Saudi Fransi 475 2 4.6 4 Baker Botts 917 1 5.7

6 Sumitomo Mitsui Financial Group 404 2 3.9 4 Chadbourne & Parke 917 1 5.7
6 Linklaters 684 2 4.2
7 HSBC Holdings 385 2 3.7
7 Baker & McKenzie 417 2 2.6
8 KfW Bankengruppe 369 2 3.6
8 Al-Jadaan & Partners Law Firm 386 1 2.4
9 Mitsubishi UFJ Financial Group 360 1 3.5 8 Cliord Chance 386 1 2.4
10 Standard Chartered 317 3 3.1 8 Saudilegal 386 1 2.4

36 7th November 2012


Top Islamic Finance Related Loans Mandated Lead Arrangers

Top Islamic Finance Related Loans Deal List 12 Months
Ranking 12 Months
Mandated Lead Arranger US$ (mln) No % Credit Date Borrower Nationality US$ (mln)
1 SABB 1,684 6 8.3 th
13 Dec 2011 Barzan Gas Qatar 5,442
2 Banque Saudi Fransi 1,232 5 6.1 th
12 Feb 2012 Mobily Saudi Arabia 2,667
3 Samba Capital 1,093 5 5.4
25th Jul 2012 Zain Saudi Saudi Arabia 2,600
4 Al-Rajhi Banking & Investment 1,007 4 5.0 th
11 Jun 2012 DanaInfra Nasional Malaysia 2,525
5 Saudi National Commercial Bank 991 5 4.9
2nd Dec 2011 Hajr for Electricity Saudi Arabia 1,981
6 Maybank Investment Bank 983 6 4.8 Production
7 Arab National Bank 906 3 4.5 4th Jul 2012 Dubai Duty Free UAE 1,749
8 AmInvestment Bank 868 4 4.3 th
14 Feb 2012 Power & Water Utility for Saudi Arabia 1,200
9 CIMB Group 842 3 4.2 Jubail & Yanbu
10 RHB Capital 794 2 3.9 13th Jun 2012 Jebel Ali Free Zone UAE 1,198
11 Standard Chartered Bank 636 9 3.1
30th Jun 2012 TIBAH Saudi Arabia 1,193
12 Emirates NBD 621 6 3.1
25 Jun 2012 Bawabat Al Shamal Real Qatar 1,154
13 HSBC 584 6 2.9 Estate Company
14 Noor Islamic Bank 566 7 2.8
15 Saudi Hollandi Bank 538 2 2.7 Top Islamic Finance Related Loans by Country 12 Months

15 Riyad Bank 538 2 2.7 Nationality US$ (mln) No %

17 Abu Dhabi Islamic Bank 495 8 2.4 1 Saudi Arabia 9,291 7 45.7
2 Malaysia 3,851 6 19.0
18 Dubai Islamic Bank 487 3 2.4
3 UAE 3,461 8 17.0
19 Citigroup 460 5 2.3
4 Qatar 1,317 2 6.5
20 Barwa Bank 378 3 1.9 5 Turkey 1,256 5 6.2
21 Standard Bank 289 1 1.4 6 Sri Lanka 350 2 1.7
21 National Bank of Kuwait 289 1 1.4 7 Pakistan 233 6 1.2
21 Gulf Bank 289 1 1.4 8 Singapore 207 1 1.0
9 Indonesia 183 4 0.9
21 DBS 289 1 1.4
10 Brunei Darussalam 170 1 0.8
21 Credit Agricole 289 1 1.4
26 Mashreqbank 226 4 1.1 Top Islamic Finance Related Loans by Sector 12 Months
27 Al Hilal Bank 224 6 1.1
28 Qatar Islamic Bank 223 2 1.1
29 Qatar International Islamic Bank 213 1 1.1
29 Masraf Al Rayan 213 1 1.1 Finance

Utility & Energy

Top Islamic Finance Related Loans Mandated Lead Arrangers
12 Months Transportation
US$ bln 0 1 2 3 4 5 6
Bookrunner US$ (mln) No %
1 Credit Agricole 867 1 11.4
Global Islamic Loans - Years to Maturity (YTD Comparison)
1 Banque Saudi Fransi 867 1 11.4
1 Al-Rajhi Banking & Investment 867 1 11.4 2012
4 QInvest 517 2 6.8 2011
5 HSBC 500 4 6.6
6 Abu Dhabi Islamic Bank 470 5 6.2
7 Emirates NBD 408 4 5.4
8 Standard Chartered Bank 399 6 5.3 2006
9 Citigroup 390 4 5.1 0% 20% 40% 60% 80% 100%
0-3yrs 3-5yrs 5-7yrs 7-10yrs 10+yrs
10 Noor Islamic Bank 330 3 4.3

Are your deals listed here?

If you feel that the information within these tables is inaccurate, you may contact
the following directly: Mandy Leung (Media Relations)
Email: mandy.leung@dealogic.com Tel: +852 2804 1223

37 7th November 2012


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38 7th November 2012


AAOIFI 16,17 Dealogic 13 Maybank Investment Bank 11

Absa Bank 10 Dialog Axiata 6 Maybank Islamic 12
Abu Dhabi Islamic Bank 4,6 Doha Bank 13
MCB Islamic Banking Group 28
Ahli United Bank 13 Dubai Islamic Bank 9,13,21
Meezan Bank 27
AIA AFG Takaful 3 Dubai Properties 21
Al Baraka Bank 10 Durham University UK 27 Mobily 3
Al Baraka Bank (Pakistan) 8 Edbiz Consulting 28 Moodys Middle East 27
Al Baraka Banking Group 8 Eiel Management 21 Morgan Stanley 4,6
Al Baraka Islamic Bank 8 Emirates NBD 1
Al Hilal Bank 13 Emirates NBD Asset Management 9
Al Madina Financial & Investment Services Company 9 Emirates REIT 21 National Bank of Abu Dhabi 6,8
AlAqar KPJ REIT 21 Etiqa Takaful 9 National Bank of Sharjah 30
Al-Hadharah Boustead REIT 21 Etisalat 3 New Economics Foundation (London)
Alizz Islamic Bank 9 Eurekehedge 21
OIC 12,16
Allen & Overy 1 Exotix 11
Old Mutual Investment Group 10
Almarai Company 6 Faisal Private Bank 8
Alwyni International Capital 12 First Gulf Bank 4,13 Philippine Stock Exchange 3
Amana Bank 7 First National Bank 10 Public Mutual 8
Amanie Advisors 9 Fitch 9 PwC 28
American International Assurance 8 Fortress Investment Group 6
Qatar International Islamic Bank 9
AmInvestment Management 8 GACA 3
Qatar Islamic Bank 13
Antwerp Bar Association 29 Gold Arab Emirate 9
Arcapita 6 Goldman Sachs 5 QInvest 13
ARI 8 Halal Investments 20 RAM 9
Ashmore Group 11 HBZ Bank 10 Reserve Bank of India 7
Axiata 3 Hong Leong Investment Bank 14
Responsible Investment Association Australasia 15
Axiata Group 6 Hong Leong Islamic Bank 14
Axis Reit 21 HSBC Amanah Malaysia 4 RHB Investment Bank 14
Azmi & Associates28 29 HSBC Holdings 6 RHB Investment Management 8
Bank Danamon Syariah 12 Hwang Investment Management 8 Sabana REIT 21
Bank Muamalat Indonesia 12 IDB 12
Saudi International Petrochemical Company 3,4
Bank Muscat 30 IFSB 7
Securities Commission Malaysia 8
Bank Negara Malaysia 1,16 Indian Center for Islamic Finance 7
Bank of China 23 ING Funds 8 Seoul Metropolitan Government 8
Bank of London and The Middle East 15 Institute of Islamic Banking and Insurance 30 Sharjah Islamic Bank 30
Bank Permata Syariah 12 Insurance Regulatory Authority (Kenya) 7 Silver Point Capital 6
Bank Syariah Mandiri 12 Islamic Bank of Thailand 3
Spinnaker Capital 11
Barwa Bank 13 ITFC 12
Standard Chartered Bank 6,15
BlackRock 11,22 Ithmaar Bank 8
Central Bank of the UAE 9 JP Morgan 22 Standard Chartered Saadiq 9
Centurion Global 29 Kagiso Asset Management 10 Tadhamon International Islamic Bank 9
Cerah Sama 9 KFH Research 8,9 Takaful Insurance of Africa 7
CIMB Islamic 11 Kumpulan Wang Persaraan 4,11
TH Plantations 6,14
CIMB Niaga Syariah 12 Kuwait Finance House 8
CIMB-Principal Asset Management 8 Latham & Watkins 3,4 Trans-Caledon Tunnel Authority 10
CISFED 12 Lembaga Tabung Haji 6,14 Tpra 13
Cliord Chance 4,5 London Stock Exchange 3 Turus Pesawat 11
Commercial Bank of Qatar 13 Majid Al Futtaim Properties 3
Universiti Teknologi MARA 8
Crescent Wealth 15 Malaysia Airline System 4,11
University of East London 9
Damansara REIT Managers 21 Malaysia Building Society 3
Dana Gas 3,4,11 Manulife Unit Trust 8 Wisdom Management Consultancy 18
Dananeer 29 MARDI 26 World Bank 8

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