Issue 34

www.theislamicglobe.com

october 5, 2011

atings agency standard & Poors yesterday issued a report on the state of the global takaful industry. In the report, An analysis of Shariah compliant cooperative and Takaful insurers in the Middle East focused primarily on financial strength, the agency commends the growth of the global Takaful sector and the fact that in key markets it is competing strongly with the conventional insurance industry, and in many ways winning the battle for hearts, minds and premiums from Muslims and non-Muslims alike. However, S&P does frame this praise with the caveat that in some key markets notably Saudi Arabia and Malaysia which have national policies to promote Islamic finance that the Takaful industry has been taking on the conventional insurance sector with a lot of backing. The report also says that this trend is likely to emerge in other countries, especially in the Gulf, where Qatar recently forced conventional banks with Islamic windows to shut their Shariah compliant business, and: in the UAE and Kuwait, [where] all the insurance licenses issued in recent years have been Takaful

Ethics into insurance

ones. It is not known whether there were any requests for new, conventional insurance licenses but the result has been to leave only a limited number of traditional companies to continue to operate in those countries The growth of Takaful in the MENA region, S&P claims, has been a direct result of the role of bancassurance, where retail banks (both conventional and Islamic ones) have been bolting on insurance covers to their bank accounts and some finance products. In the MENA region especially the GCC many banks dont know the religious or ethical persuasion of their customers, so S&P argues, and whereas offering Takaful insurance cover to a non-Muslim is not a bad thing, and sometimes Takaful offers a better deal to policyholders than conventional insurance; offering conventional insurance to a Muslim is a blunder, as this amounts to enticing him to become involved in a number of Haram activities. So, the banks in the GCC region have been erring on the side of caution, and selecting Takaful providers rather than conventional insurers for their bancassurance products. The report calls into question the sustainability and stability of the Takaful industrys business model, which can sometimes be seen as encouraging excessive premium expansion alongside exposure to religiously acceptable, but potentially volatile or illiquid investment assets notably shares and real estate Two of the specific risks in the Takaful industry as interpreted by S&P in the report were the industrys fee structure and firms exposure to volatile and illiquid assets, where decision making was made on a religious basis, as opposed to a financial and risk management basis. David Anthony, credit analyst for S&P, told The Islamic Globe: Beyond the need to make adjustments to the accounts, we have general concerns regarding the Takaful model. For instance, the Wakala fee is levied as a fixed percentage of gross premiums written, and this raises the possibility of moral hazard. A Takaful operator could be encouraged to maximize the income of shareholders by increasing the amount of premium and therefore risk being written. The accounting difficulty, S&P explains, arises from the contracts that Takaful firms use to transfer income and levy charges. In the first instance, the Takaful firm can only transfer income to shareholders through a Wakala contract, whereas it can only charge fees for asset management through a Mudarabah contract. In some domiciles, there are strict regulations dealing with the profit-sharing of the Takaful operator, such as in Saudi Arabia, where there is a statutory 90:10 profit share relationship between shareholders and policy holders. In other domains there is no statutory mandate, such as in Iran where Takaful operates on a loose mutuality agreement. The lack of global standards has caused problems, as some Continued on p3

Kuwait Finance House in tie-up with Grosvenor

LoNDoN-based property fund manager, Grosvenor Fund Management has entered into a joint venture with Kuwaits biggest Islamic bank, Kuwait Finance House, to invest 380m ($585m) in US healthcare properties. The Islamic Globe reported back in July that KFH had re-entered the US market through a $450m JV with UDR Incorporated, a real estate investment trust. The KFH-UDR JV has so far made a $43m acquisition of an apartment building in Silver Spring, Maryland. This second North America-focused JV with the US arm of a UK fund manager shows that KFH intends to increase its footprint in the US market, possibly hoping to take advantage of economic uncertainty and a real estate apocalypse to pick up some undervalued bargains. Grosvenor Fund Management will oversee all investment activities, including sourcing, underwriting, structuring, financing, closing, asset managing, and exiting the partnerships investments, all of which be Shariah compliant. other KFH JVs include one with Canada Pension Plan Investment Board to invest in Londons West End office market over the next two years and the acquisition of a portfolio of four retail properties in Sweden and two shopping centers in France. KFH did not respond to requests for comment and Grosvenor was not available for comment by the time the newspaper went to press. Grosvenor has 3.8bn ($6.0bn) of assets under management in its real estate portfolios.

INSIDE

P3 TURKEY AND MALAYSIAS ENTENTE CORDIALE P5 LETTER FROM AMERICA: IFCS BROKEN PIPELINE P6 EDITORIAL: WHATS WRONG WITH SIMPLE? P8 NEWS ANALYSIS: SUKUK SALAD DAYS P10 ABOUBAKARS FRUITY ORANGE JELLY

The Islamic Globe

october 5, 2011 3
Continued from front page

rom east to west everyone wants a slice of Turkey. Last week at the same time the country was hosting a UK business delegation led by business secretary Vince Cable, malaysias Islamic finance big guns were in Ankara and Istanbul setting out on the new silk route in Islamic finance. The Islamic finance onslaught comes after much diplomatic handshaking at the highest level earlier this year when both countries announced the lifting of travel visas and the two prime ministers agreed that a free trade agreement should be signed by the end of 2011. Malaysia wants to export its Islamic finance expertise and experience, while at the same time opening up its own markets to investment from emerging players like Turkey. Right now the Malaysia-Turkey dtente looks like a win-win situation. Speaking in Turkey, Bank Negara Malaysias deputy governor, Muhammad Ibrahim laid out a roadmap with five waypoints to building closer economic, social and strategic ties between Turkey and Malaysia. One battering ram the Malaysians are deploying to get into Turkeys markets is Islamic finance and its hoped that this cross-pollination will enhance the already $1.35bn worth of bilateral trade the two countries do.

A slice of turkey
On trend: Industry descends on Turkey

Ethics into insurance

scholars view traditional conventional insurance as Shariah compliant because of the inherent risk-sharing nature of its business, whereas other scholars rule that a Takaful firm is only Shariah compliant if it allocates 100% of its profits to policyholders. In different domains this interpretation varies from firm to firm and S&P calls on AAOIFI and the IFSB to collaborate to make one global accountancy standard and policy on profit sharing. The report argues that where there is uncertainty the temptation is there to inflate Wakala fees, which in the spirit of Takaful are there to cover the firms operational costs, to generate profits for shareholders, in effect getting the policyholders to pay the shareholders. Firms also hold back surpluses as a hedge against insolvency, but sometimes these surplus funds become very large and technically should be redistributed to policyholders. The opaque nature of a Takaful firms book-keeping, juggling between Wakala, Mudarabah and surplus funds, means that the management can often arbitrarily transfer funds to shareholders. This S&P believes is not just inappropriate conduct but could have a detrimental effect to the firms underwriting. In addition, the profit taking is often written off as an operating expense, which it is not and gives Takaful firms, at an analytical and ratings level, an unfair advantage over conventional insurers. The compounding of these issues led Anthony to the conclusion that the Takaful industry needs to apply sound corporate governance. He said: While the need to be Shariah compliant may encourage overexposure to religiously acceptable, but potentially volatile or illiquid assets, most of these issues can be addressed or even eliminated by applying sound corporate governance, backed up by effective enterprise risk management, predictable regulation, transparent accounting, and an efficient internal audit function. Ultimately, therefore, it will be more the principles of managers and management and less the structure of operations that brings ethics into insurance. JF

Some of the tools he outlined were cross-border Sukuk issuances, the development of collaborative Islamic fund management products, and Malaysian investment in innovation, and research in Turkey. Abdullah Gl, Turkeys moderate Islamic president, has been dithering on a muchflouted issue of sovereign Sukuk and Turkeys four participation banks, the majority of which are GCC-owned, account for only 5% of the fiercely-secular countrys banking assets. The worlds most comprehensive and tested [Sukuk] infrastructure, said Ibrahim, could be used by Turkey to raise funds for large infrastructure projects such as the building of the Bosphorus shipping canal, while the depth of Islamic funds in Malaysia

should interest the Turkish banks as Malaysia offers diversification opportunities with high prospects for the development and distribution of Shariah compliant funds across borders. On other fronts ISRA was offered up as a Shariah research collaborator while INCEIF was put forward as a training and education partner. Some Malaysian Islamic banking industry players have said that this is the beginning of Malaysia exporting its national and institutional Islamic finance experience, with one saying that the Malaysian model is not just about the domestic Malaysian market any more, and the industry collectively has enough expertise and experience to help develop the needs of new and untapped emerging markets. EAA

Regulators seek to grow Modaraba sector

The Pakistan SeC and registrar of modarabas have come together to try and boost the fortunes of the industry. The two institutions approached the trade body that represents the modaraba sector, the modaraba Association of Pakistan, to ask how the regulators can fine tune the rules that govern the industry so that it can reach out to new customers and enterprises. Javed hussain, registrar of modarabas, told The Islamic Globe: The consultative process is aimed at involving all the stakeholders. The views of the participants will be taken Association, explained to this newspaper that much of the discussion revolved around enhancing the training and certification of the internal financial and Shariah auditors within the modarabas, he said: the participants agreed to enhance the size and image of the sector through innovation, mutual cooperation and professional competence. As previously reported in The Islamic Globe [Issue 32] the modaraba sector, which primarily operates providing Ijarah-based plant leases to the Sme sector in Pakistan, is one of the fastest growing sectors in finance in the country.

into account for extending the full support for accelerating growth of the sector. Basheer Chowdry [above], chairman of the modaraba

The Islamic Globe

october 5, 2011 5

LETTER FROM AMERICA

he global financial crisis has led to much soul searching in the financial services industry about the systemic risks of large financial institutions. Canada was not entirely immune to the effects of the slump, but its banks held up much better than banks in the US and Europe, so it is not surprising that a public-private partnership to promote applied research on issues relating to financial risk management would come out of that country. What is surprising, given the small size of the Islamic finance industry in Canada is that this institution, the Global Risk Institute (GRI), which was incorporated at the beginning of 2011 would look to turn its sights on the Islamic finance industry. However, that is just what the GRI is considering, according to Donald Hathaway, the GRIs presumptive president and CEo, who is yet to be elected by the board of the institution. While the deliberations are just starting, Hathaway shared his personal views with The Islamic Globe, on leading the charge to put Islamic finance on the agenda. Islamic finance is a strategic issue and will be on the agenda for the new

Juggling the risks

BLAKE

GOUD

blake@eaglemontmedia.com

Tipping the balance: Canada steps up to the global stage and focuses on risk management board as soon as it is formed, Several of these institutions commented Hathaway. operate internationally, Many Islamic financial including in markets where institutions both in the Islamic finance is prevalent. west and in the GCC have Hathaway indicated that the focused on real estate, and focus would be on research to given the financial straits that illuminate discussion and policy. many prominent institutions The focus on risk management experienced, a focus on risk is starting with the country management is sorely needed. whose risk management and includes the Big Five banks, If the GRI includes Islamic prudential regulation seems life insurance companies, asset finance on its agenda, the focus to have worked the best, so would be on Canada at the start; managers and the three largest hopefully their example will not pension funds in Canada. the membership of the GRI be pushed to the side.

If the GRI includes Islamic finance on its agenda, the focus would be on Canada at the start

IB part of new global financial order IFCs broken

DR. ahmad mohamed ali al-madani, president of the islamic Development Bank group, recently addressed the World Leaders Forum at Columbia University and said islamic banking does not need to be adopted as a whole, but that elements of islamic banking be considered when creating the new international financial order. his comments followed an introduction by Jeffrey sachs [pictured right], director of the earth institute, at the school who wryly commented that: i say with mild envy, but mostly admiration, that the [iDB] is a aaa-rated organization, something we can no longer say about the United states treasury.

pipeline

BACK in May of this year, a spokesperson for the International Finance Corporation told The Islamic Globe that the IFC was hoping to issue a Sukuk every couple of years. Their last Sukuk was issued in 2009 and they were building a portfolio of assets to back the Sukuk. However, when contacted recently, a spokesperson for the IFC said they did not expect a Sukuk issue any time soon.

6 october 5, 2011

The Islamic Globe

the globe says

editorial@eaglemontmedia.com

Learning from the euros mistakes

oNCE upon a time, long, long ago there was exciting talk of the Common Market, a club of the rich countries of Europe. The dream was to have a common currency and the removal of trade barriers between European countries. Many years later it all came to pass and much of Europe became lumbered with the euro. What the architects of the dream could not have foreseen was that the European Union (son of Common Market) would welcome basket case countries into the eurozone and that when one of them went bust the entire zone would suffer from contagion. Many years later the wise men of the Islamic finance world contemplated a similar scheme in the form of a Common Islamic Dinar while equally wise men contemplated a Gulf Common Currency. It seems that the wise men had learned nothing from past mistakes and were condemned to repeat them. And thats the end of the story.

the Puzzler
Answers to The Puzzler will be available from october 10 at www.theislamicglobe.com. Please send an email to the puzzler@ eaglemontmedia.com for a chance to win a copy of Case Studies in Islamic Banking & Finance by Brian Kettell
Across 1 Give out (4) 3 Goods that fall under Riba ruling [IF] (6) 6 Waiving Islamic doctrine in case of human welfare [IF] (8) 9 Ruling on uncertain event [If] (7)

11 Deposit guarantee [IF] (5) 13 Arabian sailing vessels (5) 16 Type of video file format (3) 17 Tribal leader (5) 18 Option to cancel a contract [IF] (6)

Down 2 Contract to sell an asset in the future yet to be created [IF] (7) 4 A Divine Ruling [IF] (5) 5 Welfare Loan [IF] (4,5) 6 Swedish furniture shop (4) 7 Operatic song (4) 8 One leg on either side (10) 10 Nearest galaxy (5,3) 12 A lawful object for trade [IF] (5) 14 CoE Priest (5) 15 The science of Shariah [IF] (4)

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ho is islamic finance designed for? Looking at the type of product the bankers are developing it does not seem that the industry By John Foster is for the average ali or Farouk on the muslim street. Instead it seems that the industry is focused on the product side on a tiny sliver of a small segment of the Muslim population, the high net worth individual or ultra high net worth individual. And of course the elusive and secretive family office and institutional investor. on the lending side as well its hard to find competitive and serious products that loan money to individuals, or finance the entrepreneurs that run small- to medium-sized businesses. Instead the industry seems to want to deliver Sukuk for multinational oil companies, or real estate firms who want to erect fanciful, overpriced glorified business parks and luxury flats. By and large the industry is not lending money to the factory owner in Delhi who wants to buy or lease some industrial equipment or the community leader who wants to build some basic, but affordable houses in Yemen. Instead the Islamic finance industry giants are, much like a flurry of lemmings stampeding towards oblivion, trying to create a Shariahwrapped private wealth management and investment banking model based on the system that is collapsing in the US and Europe. It has been this way for years, but monumental collapses like Unicorn Investment Bank or Gulf Finance House, to name a few, have taught the industry nothing, and there seems to be little change in business models, personnel or product development. There is scant democratization in Islamic finance, nor universality nor altruism. But only a fool would think that a business like Islamic banking is there for the purposes of philanthropy. However, that doesnt mean that news of the development of an Islamic hedge fund should be greeted with a standing ovation. Who is this product for? The term Islamic hedge fund is in itself an oxymoron and although the one in question is technically a tracker within an Islamic wrapper, when it first launched in a pre-credit crunch 2007 it did not attract a great deal of interest. The bank behind it now hopes that it will meet with a much more favorable reaction in the middle of a global recession. However, with a minimum investment of $25k, the vast majority of the banks regular customers will not have enough money to invest in this fund. Islamic hedge funds are not new. The Dubai government sunk $200m in a suite of alternative asset management products in 2009 and since then things have been very quiet on that front. other Islamic hedge funds have been lost without a trace, but product manufacturers are still trying to come up with the Golden Islamic Hedge Fund Egg for their UNHWI clients as well as more exotic real estate products and more private equity. All these products are aimed for a very narrow segment of the market and personally I dont think thats where the action is. Africa is a very new market for Islamic finance the same as southern Asia. Its in places like this where Islamic finance has captured the imagination of the masses and there is a reason for that. Its because the banks and financial institutions there have lowered their sights from the mega-wealthy to average mortal and whose business model is based on lots of small fees on small accounts, as opposed to a few big fees from a few big accounts. Surely Islamic banking is about simplicity and sustainability and what drew me to the sector was that it was refreshing, purported to be based on ethics and was trying to solve problems in a simple, moral and transparent way. Simplicity defined. So more power to the Pakistani Modarabas and savings schemes of Sudan, because this is where the future is not in trying to compete with discredited Swiss Banks and Wall Street titans, as that is just a lose-lose scenario.

Whats wrong with simple? W

8 october 5, 2011

The Islamic Globe

he sukuk market, once the darling of the islamic finance industry, has been the subject of revival predictions for the past two years: predictions that have largely proved incorrect and ill-founded. But it looks as if Sukuk might be once again about to have their day in the sun as the Gulf uses the bond-type instruments to deal with enormous piles of debt and expansion opportunities. Taqa, the Abu Dhabi National Energy Company, has set up a $1.1bn medium-term note program denominated in Malaysian ringgit of RM3.5bn to appeal to Malaysian investors as a means of diversifying its funding sources. According to a statement filed by Taqa on the ADX: once appropriate regulatory approval is received, the program will allow Taqa to issue quickly if and when the market conditions are optimal. Malaysian investors have shown remarkable loyalty to

Sukuk Salad Days

NEWS ANALYSIS

By Paul McNamara

Islamic finance instruments denominated in their own currency and this has not gone unnoticed in the Gulf. Dubai home finance company Tamweel is said to be looking at a $300 to $500m Sukuk in Q4 this year according to its acting CEo Varun Sood, speaking on the sidelines of Cityscape a Dubai property expo. The issue could be denominated in US dollars or Malaysian ringgit. Home finance companies have tried funding their business through issuing Sukuk in the past with mixed results. There is a high risk involved in securing short-term funding through Sukuk with a tenor of five to seven years and then lending for the purchase of residential units, typically with a tenor of 25 years. The mismatch in the tenors of

assets and liabilities can have disastrous results. Also in the UAE, Nakheel has been using Sukuk for some years and the company is still in the process of issuing Sukuk as a form of part-payment to trade creditors. Readers of The Islamic Globe will already have heard all about the mooted Sukuk from KSAs oil industry in the form of a $1bn (SAR3.75bn) issue from Saudi Aramco and the French petrochem group Total. It seems the issuer has now set an initial pricing guideline for the issue, which will be at six-month Saudi interbank offered rate (Saibor) plus 95 to 105 basis points. The issuer will be an SPV called the Saudi Aramco Total Refining and Petrochemical Co (SAToRP) and proceeds will be issued to finance the Jubail refinery project. Deutsche Securities Saudi Arabia, Samba Capital and Saudi Fransi Capital are joint lead managers and joint bookrunners for the issue. Meanwhile over in Doha,

Qatar International Islamic Bank has indicated that it is planning to issue a significantly sized Sukuk. Although the bank has been coy about the precise size of the issue, it is likely to be several hundred million dollars. Local player QNB Capital, the investment banking wing of Qatar National Bank, Standard Chartered and HSBC have been mandated as lead managers for the issue, which is expected to be issued later this year or early 2012. Last time the Sukuk industry saw this level of activity it was subject to a series of bombshells in the form of widely misconstrued remarks from Taqi Usmani on the Shariah compliance of certain types of Sukuk, the credit crisis in general and The Investment Dars stoush with Blom Bank over whether a transaction should have been entered into in the first place on the grounds of Shariah permissibility. Another such bombshell could easily derail the speeding Sukuk train setting the clock back to 2007 once again.

Taqa in 3.5bn Ringgit issue

TAQA, Abu Dhabis National Energy Company is set to issue RM3.4bn ($1.1bn) in Sukuk as the utility company seeks to diversify its financing base, according to news agencies. This will be the first Ringgit issue by the UAE company and follows what will become a well-worn path to the east after National Bank of Abu Dhabi sold two bonds of RM1bn ($200m) last year. A lot more MENA money will be finding its way into Malaysia and its environs in the aftermath of the Arab Spring, and it is expected that many GCC companies will now look to diversify their funding away from dollar and dollar-linked currencies as global economic uncertainty and questions over the strength of the US economy continues. Tamweel of Dubai is also expected to raise money from the Malaysian markets. Taqa has AED72.3bn ($19.7bn) in outstanding debt, including an AED5.51bn ($1.5bn) loan maturing next year, according to Bloomberg.

A RECENT Asia Pacific HR Trends report released by professional services company Towers Watson reveals that Shariah advisory jobs are the most difficult to recruit and retain within the Malaysian Islamic banking and finance sector. TWs Malaysia global data services manager, Sambhav Rakyan [right] told The Islamic Globe: We hear from our clients that it is always hard to get experienced and skilled talent with IF knowledge. Issue 32 this paper reported on the disproportionate availability of IF jobs to the growing number of IF graduates and the following week questioned AAoIFIs deputy secretary general Khairul Nizam who

Recruits are hard to find and retain

claimed there was a shortage of qualified people coming into the industry. To these concerns Rakyan feels there is greater demand for more experienced professionals, adding about the Malaysian sector: There are plenty of jobs for new

graduates within the IF sector. People are shifting more rapidly from one company to another due to demand for talent in this sector. The study of 74 financial institutions included 12 local and six foreign IFIs operating in Malaysia. It threw up an interesting highlight with regards to IF sector salaries and compensation where conventional FIs are opting for more fixed pay and less short-term incentives to discourage bankers from taking unnecessary risks for shortterm gains. Local Malaysian IFIs are paying higher base salaries compared to their foreign counterparts, although according to Rakyan, the gap is diminishing.

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10 october 5, 2011

The Islamic Globe

Hot spot: Tanzania is enjoying a boom in new products

Dear Diary!

once again I find myself a contorted heap of conflicting emotions. on the one hand I am Thrilled To Bits that I am leaving for America in the morning where the bank is going to try to do an Islamic Private Equity Transaction. But on the other hand I am Deeply Peeved because my Brand New Green Watch which I had been so proud of has stopped working! Can you believe it? I thought these watches were supposed to be robust and almost unbreakable. I had read that James Bond uses them as knuckle-dusters! But it seems I was wrong. What happened was this: I had decided that I would make a Fruity orange Jelly and bring it into the office to share with the people who were not lucky enough to have gone on the Sukuk Roadshow. Anyway, my mind was not on the task at hand when I was making the Fruity orange Jelly and somehow my watch slipped off my wrist and into the Jelly Bowl. It stayed there overnight while I Waited For The Jelly To Set and when I found it in the morning I laughed my light musical laugh because I know how sturdy and manly these watches are. Imagine my horror to find some of the orangey tasty delight UNDER the glass of the watch and that the watch was no longer ticking! I think even Mary Poppins could have been forgiven a murmur of disquiet at such a shocking turn of events. For the rest of the day I was in the Slough of Despond. My mother suggested that I send the watch back to the manufacturers and complain. So I sent it off with a Terse Note in the form of a Stiff Letter. I used the word liaise a total of four times in the letter to let them know that They Were Not Dealing With A Fool. I await satisfaction. That was when my mind turned to my upcoming visit to America! I know that I will not sleep tonight with excitement and I have been reading up on everything to do with America. I thought that there was a cruel irony in one of the facts about America that I discovered: instead of saying Jam Americans say Jelly! I dont normally believe in conspiracy theories but this was just a little too close to home to be comfortable. They also have a blind spot when it comes to Aluminium (which they call Aluminum) and Toffee (which they call Taffy). And they tell each other that things are Copasetic. Its like a whole new language. The Private Equity Trip to America will be the same MEIB Posse that went on the Roadshow: just the hard-bitten road warriors of Chairman, CEo, General Manager and me. I like to think of us as The Three Musketeers except of course there are four of us and we dont all have moustaches. Well, we do actually although General Managers is Quite Small and Quite Grey and I think we are meant to pretend we cannot see it.
Follow Aboubakar on Facebook where he shares other additional insights into his unique life and style (http://www. facebook.com/pages/Aboubakar/120536218039526).

anzania seems to be shaping up to become the next islamic finance hotspot in east africa with a bevy of new retail products slated to come out in the next few months. The Islamic Globe has learned that Kenya Commercial Bank, which also recently started operations in Uganda [see Issue 15], is about to launch a retail banking product in Tanzania. With First National Bank of South Africa and National Bank of Commerce of Kenya also setting up Shariah compliant operations in Tanzania, the choice of products for the retail Islamic finance customer is set to boom. KCB will be offering a simple interest-free current account which, according to the banks MD, Joram Kiarie, will: operate as a checking account for both personal and business customers. The account will offer all the features of regular conventional accounts

KCB rolls out retail account in Tanzania

including checkbook, ATM access and a prepaid Visa card. Some 50% of the population in Tanzania is Muslim, and as such it is a ripe market for the regions Islamic banking giants. Closer economic cooperation between the states of the East Africa Community (Burundi, Kenya, Rwanda, Tanzania, and Uganda) has allowed banking groups that operate in the regions largest economy, Kenya, to expand across the borders and quickly set up operations in the country. However, up until now Tanzanias banking regulations have not made provision for Islamic banking. Regulatory change has been driven by the banking industry in consultation with the National Muslim Council of Tanzania, of which the latter has stipulated the establishment of an independent Amana Banking Advisory Board to oversee products and the appointment of Shariah compliance officers. FK

AMIslamic issues first tranche of RM2bn Sukuk

MALAYSIAS AmIslamic Bank has issued the first tranche of its proposed RM2bn ($627m) subordinated Sukuk program. The notes will be issued under a Musharakah contract. Each tranche will have a tenor of between five and 15 years from date of issue, with a top-end yield of 4.4%.

The first tranche of RM600m ($188m) will be used for the banks working capital, including the refinancing of its existing RM400m ($125m) subordinated Sukuk issued in 2006. The Sukuk program has been given a long-term rating of A1 by Malaysianbased RAM Rating Services.

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Takaful News
Great Eastern Goals
GreaT eastern Takaful of Malaysia has set its sights on achieving great things from its newest product, i-Great amal. i-Great amal is Great easterns first Takaful term plan and the company is hoping for rM25m ($7.8m) to rM30m ($9.4m) in total weighted contributions by the end of next year. Mohamad Salihuddin ahmad, Ceo of Great eastern Takaful said the company hoped to sign between 30,000 and 50,000 policyholders to i-Great amal by the end of next year. ahmad told the media: i-Great amal also provides an opportunity for ibadah Qrban where the company will perform the ibadah on behalf of the policyholders after 10 years of contributionsUpon reaching maturity at the age of 70 years, the company will top up rM2,000 ($623) to the policyholders accounts if performing Hajj or Umrah is not yet utilized. He also indicated that Great eastern planned to launch more products this year with an education focus: We have two products in the pipeline for launch next year. They are expected to be trend-setting in the Takaful industry. airobi-based Takaful insurance of africa has underwritten business worth slightly over $1m in the last four months since it started operations in Kenya. For Kenya, $1m is high when compared to the premia of conventional insurance companies, and indicates that there is a healthy appetite for Takaful in Kenya. Underwriting commercial and private motor vehicle insurance has emerged as our number one business but generally all our general insurance business categories are doing well, TIAs CEO Hassan Bashir [pictured] told The Islamic Globe. TIA is the only fully-fledged Takaful insurer in east Africa, with four branches in Kenya. Bashir said that the company was engaged in talks with

TIAs figures proves Takaful appetite

the insurance regulators in Tanzania and in Uganda to enable it set up branches in these two countries, as well as helping the regulators with the reform of their national insurance laws to place Takaful on a level footing with conventional insurance. TIAs strong growth since launch can also be explained

by the fact it is the only game in town, with no other fullyfledged Takaful insurance firms yet operating in Kenya. Hassan explained that TIAs entry to other East Africa Community states where there is little else in the way of Takaful cover will hopefully see TIA entrenched as the regions dominant Takaful provider. SB

Qatar First in Abu Dhabi alliance

QATAr First Investment Bank, a Doha-based Islamic investment firm has been awarded an allocation of 10% of the UAEs National Takaful Companys IPO, according to news agencies. The Abu Dhabi-based Takaful company, also known as Watania, closed its IPO in May [see Issue 12] selling 55% of its share capital. Of this 13.33% was reserved for UAE-only investors, with 45% remaining in the hands of Watanias founding partners, Abu Dhabi National Islamic Finance (part of National Bank of Abu Dhabi), Abu Dhabi National Insurance Company, Abu Dhabi National Energy Company and Aldar Properties. It was suggested that Qatar First acquired 10.3% of the company through the IPO and a seat on the board. Watania will list on the Abu Dhabi bourse ADX.