UK SOUTH AFRICA QATAR - Islamic Finance News

In this issue

Islamic Capital Markets Briefs ................ 1

Islamic Ratings Briefs ................................ 9

IFN Reports ................................................11

Encore Calls for More Variety in Europe ........................................................13

Islamic Finance in Europe .......................15

Islamic Financial Services in Italy ..........18

Shariah Compliant Securitizations in the GCC ..................................................20

IMF on Islamic Banks: Build Skyscrapers, Not the Titanic ...........................................22

Emerging Markets Buck the Trend ........23

Meet the Head ..........................................24M A Majeed, The Institute of Islamic Banking & Finance

Termsheet ..................................................25SACOFA and Sarawak Gateway’s Sukuk Istisna

Takaful News Briefs..................................26

Takaful Report ..........................................27Takaful Products in Trinidad and Tobago

Moves .........................................................28

Deal Tracker ..............................................29

Islamic Funds Tables ................................30

Dow Jones Islamic Indexes .....................31

Malaysian Sukuk Update .........................32

Islamic League Tables .............................33

Events Diary...............................................36

Subscriptions Form ..................................37

Country Index ............................................37

Company Index .........................................37

Vol. 5, Issue 10 14th March 2008

T h e W o 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 o v i d e r

UKPositive vibe from budget announcementsAlthough no fi nality has been reached on the issuance of the UK sovereign Sukuk, the British government through the 2008 Budget Report gave assurance that it will continue to study the feasibility of the issuance.

In the report, Chancellor of the Exchequer Alistair Darling points out it will be premature for the government to make an announcement on the outcome of the feasibility study, especially given the range of issues being considered.

An update of the work program, including a response to the recently closed public consultation, will be provided in the summer.

Darling also announced measures to further support Islamic fi nance in the UK. The government aims to provide relief from stamp

duty land tax (SDLT) for alternative fi nance investment bonds.

It will also amend legislation to treat these instruments as loan capital for stamp duty and stamp duty reserve tax purposes, and modify legislation that will allow corporation and income tax rules on these instruments to be amended in the future, should that prove necessary.

The proposals received the thumbs up from those within the Islamic fi nance industry.

They say the announcement will further escalate London’s aspiration to be a global hub for Islamic fi nance

(Also see IFN Reports on page 12)

SOUTH AFRICANewGold, Absa Capital’s fi rst Shariah ETFSouth African investment bank Absa Capital’s NewGold exchange-traded fund (ETF) has been certifi ed Shariah compliant, a fi rst for a South African ETF.

“Demand for Shariah investments is escalating in South Africa,” says Vladimir Nedeljkovic, head of ETFs and index products at Absa Capital. “There is an estimated ZAR1.8 billion (US$231 million) of annual investible assets held by Muslim investors and this represents a signifi cant niche target market. There is defi nitely an opportunity for

more Shariah instruments to come to market including structured products.”

NewGold ETF is the largest in South Africa with ZAR6.4 billion (US$820 million) assets under management, which have increased more than four times since the beginning of 2007.

Absa also plans to launch an ETF tracking the FTSE/JSE Shariah All-Share Index, but no agreement has been reached as yet. Absa Capital is an affi liate of UK investment bank, Barclays Capital.

QATARJapan banks focus on Islamic funds Japanese banks have been focusing on Islamic funds, recognizing the country can play the role of a gateway internationally in a regional market from Asia to strengthen

inter-regional linkages between Asia and the Gulf, said Tadashi Maeda, director-general of Japan’s energy and natural resources fi nance department.

www.islamicfi nancenews.comNEWS BRIEFS

14th March 2008©

TAIWANMega International gets regulator’s OKTaiwan’s Financial Supervisory Commission has approved Mega International Commercial Bank’s application to set up a representative offi ce in Abu Dhabi and a branch in Macau.

The bank, a unit of Mega Financial Holding, will be the fi rst Taiwanese bank to operate in the UAE, the commission said. After the establishment of the Abu Dhabi offi ce, Mega International will close its representative offi ce in Bahrain, the commission said without providing a time frame.

Formerly known as International Commercial Bank of China, the bank assumed its current name after merging with Chiao Tung Bank in 2006.

UAEShuaa set to start Saudi operationsDubai-based Shuaa Capital has won fi nal approval to begin operations in Saudi Arabia to set up a SAR150 million (US$40 million) brokerage fi rm. The investment bank will own 60% in Shuaa Capital Saudi Arabia, based in Riyadh, it said.

“Our Saudi Arabian operations, together with our regional presence across the GCC and Arab world, will expand our ability to offer clients advanced fi nancial services, both locally and internationally,” CEO Iyad Duwaiji said.

Omar Al Jaroudi will head up the Saudi unit, which will offer brokerage, asset management and investment banking services.

BAHRAINSeychelles license for BMIBahrain-based BankMuscat International (BMI) has received a license from the Central Bank of Seychelles to set up an offshore banking venture.

BMI will manage BMI Offshore Bank, a joint venture with locally incorporated Nouvobanq, the largest bank in Seychelles.

BMI Offshore Bank will engage in offshore banking and private banking services and provide access to trust and investment services. The new venture is expected to be operational by the third quarter.

QATARQNB investment armQatar National Bank (QNB) has reached an advanced stage in obtaining the necessary approvals to establish QNB Capital, which will have a capital of US$150 million. It will be set up at the Qatar Financial Centre.

The bank is fi nalizing all related work with regard to the legal and structural form of the company. QNB Capital will provide investment banking services, advisory and structured fi nance and direct investments. These will be independent of regular commercial activities.

QATARUNB to set up Qatar branchUnion National Bank has received approval from the Qatar Financial Centre Regulatory Authority to set up a branch in the Qatar Financial Centre (QFC).

The branch’s permitted activities would include accepting deposits and providing and arranging of credit facilities within the QFC to wholesale customers.

UNB is the fi rst bank from the UAE to achieve this status.

UAEShariah banking software launchedInfosys Technologies has launched the latest version of its Financial Universal Banking Solution banking software, which includes a component for Islamic banking. The Indian software company said that version 10 of its system will meet Shariah requirements concerning the payment of interest.

MALAYSIAWestports Sukuk oversubscribedWestports Malaysia’s initial issuance of RM445 million (US$139 million) of the RM800 million (US$250.32 million) Sukuk Musharakah medium-term notes (MTN) program has been oversubscribed by an average of 6.3 times based on the original size of RM345 million (US$107.94 million), said OSK Holdings (OSK).

Due to overwhelming demand, the book building process and scheduled to close on the 4th March was completed on the 29th

February.

OSK said the proceeds would be used to refi nance Westports’ existing bank borrowings, fi nance the construction of a new container terminal and acquisition of machineries and equipment.

MALAYSIAA leg up for Islamic fi nance The rising oil price will give Islamic fi nance a leg up to grow beyond 20% this year, thus promoting liquidity and funds from countries in the Middle East. There will also be a slight impact on the subprime market.

With technology and international standards together with greater awareness and knowledge, Islamic fi nance could be further expanded to create more products acceptable internationally. Once the global standardization has been achieved, Islamic fi nance will take a larger share of the market, said Majid Dawood, CEO of Yasaar, an independent global Shariah consultancy.

At present, Asian Islamic fi nancial services are highly concentrated in Malaysia with focus on banking assets, Sukuk issuance, asset management and Takaful assets. Malaysia accounts for 76% of the banking assets in Asian Islamic fi nancial services, 95.5% of Sukuk issuance in Asia and 83% of Takaful assets in Asia.

(Also see IFN Reports on page 11)


© 14th March 2008

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UAEDIB, MAG ink home loan dealDubai Islamic Bank (DIB) has agreed to provide Shariah compliant home loans for about AED2 billion (US$544.7 million) worth of properties developed by MAG Group Property Development (MAG).

Under the deal, DIB will offer fi nance to buyers of properties in three of MAG’s current projects in prominent developments in Dubai: MAG 226 in Jumeirah Village; MAG 228B in phase three of International City; and MAG 218 at Dubai Marina.

UKHalal fi nance growing in popularityIslamic compliant fi nance products are not just popular with Muslims, but also people of other religious faiths, observed Junaid Bhatti, Islamic fi nance expert and director of Ballencrieff House.

“There are three main factors driving the growth of Shariah compliant fi nance in the European markets — Muslim customers, non-Muslims looking for ethical fi nance and fi nally, the governments themselves,” he explained.

With over 50,000 UK Islamic fi nance customers and a worldwide industry growth rate of between 15% and 20%, the products are growing in popularity, Junaid said.

QATARQatar Islamic to sell shares from TuesdayQatar Islamic Bank, will sell 17.9 million shares to existing shareholders at QAR70 (US$19.25) apiece as part of a plan to boost capital by 10%.

The shares will be on offer from the 18th March to 31st, the Doha-based bank said.

Qatar Islamic is also studying expansion into Egypt and Turkey as well as Indonesia and Brunei through its Asian Finance Bank unit. Qatar Islamic owns 70% of Kuala Lumpur- based Asian Finance.

KUWAITNBK unveils Thahabi Ijarah IVNational Bank of Kuwait (NBK) has launched its Thahabi Ijara Fund IV to meet the needs of its Thahabi customers for low-risk investments that generate a consistent monthly income, said NBK’s assistant gen-eral manager, consumer banking group, Abdullah Al Najran Al Tuwaijri.

“Thahabi Ijara Fund IV represents the continuation of NBK’s strategy to provide its valued clients with best-in-class investment products, and follows in the footsteps of NBK’s previous and successful Ijarah fund launches,” he said.

The three-week offer period commenced on the 9th March. The minimum expected income for the Thahabi Ijara IV Fund will be fi xed after the end of the investment period.

BAHRAINPorta Reef-BIsB fi nancing dealInvestors with intention to seek market residential units can now access competitive fi nancing options through a new partnership between Porta Reef and Bahrain Islamic Bank (BIsB). Porta Reef is a US$90 million project being undertaken by Abu Dhabi Investment House.

The agreement states that BIsB will offer fi nancing packages to buyers who wish to purchase one of the 150 residential units on sale at the Porta Reef development.

The partnership is the fi rst such agreement between Porta Reef and a fi nancial provider, and is intended to increase accessibility for Porta Reef’s niche target market.

BAHRAINSukuk market set to cross US$100 billion The global market for Sukuk more than doubled last year to exceed US$60 billion, and is on track to top the symbolic US$100 billion mark in the next few years, concluded Standard & Poor’s (S&P) in its latest report.

“We expect Sukuk growth to remain on the same impressive trajectory, fueled by huge investment and fi nancing needs, notably in countries of the Gulf and Asia,” said S&P credit analyst, Mohamed Damak.

He added Sukuk is set to continue providing issuers with non-bank alternatives to longer-term funding and their growth has been slowed in the past six months by unfavorable credit market conditions.

To date, S&P rates 22 Sukuk, the bulk of which are Ijarah or Musharakah and carry credit enhancements.


14th March 2008©

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QATARCentral Bank sells certifi cates of depositQatar Central Bank has completed its fi rst auction of certifi cates of deposit (CDs) as part of Qatar’s attempts to soak up excess liquidity and help tackle infl ation.

The country has the highest infl ation in the region, at 13.74% in the last quarter of 2007. The central bank sold QAR1 billion (US$275 million) worth of 91-day CDs at a coupon rate of 3%.

BAHRAINBankers probe fi nance issuesAbout 60 senior bankers from Bahrain, the GCC, Malaysia and Indonesia took part in a two-day seminar on corporate governance issues in Islamic fi nance, co-organized by the Islamic Financial Services Board (IFSB), the World Bank corporate governance departments and the Global Corporate Governance Forum. The event was hosted by the Central Bank of Bahrain.

“IFSB has drafted a series of principles on Islamic fi nance and this event was designed to raise awareness of these issues,” said Eugene Spiro, global corporate governance forum senior projects offi cer.

UAEDIB announces 40% cash dividend Shareholders of Dubai Islamic Bank (DIB) have approved distribution of 40% cash dividend and 15% bonus at their annual general meeting. The bank’s fi nancial results for the year ended the 31st December 2007 were approved at the meeting.

In 2007, DIB reported AED2.5 billion (US$680 million) in net profi t, an increase of 60% compared to AED1.56 billion (US$420 million) in 2006. In addition, the assembly reviewed the Director’s Report and Annual Report of the Fatwa and Shariah Supervisory Board.

UAEDIC denies Citi requested fundsDubai International Capital (DIC) has denied the rumor that Citigroup had approached it for funds.

“We have not been privy to any non-public information about the company, neither has Citi approached DIC for a capital raise,” DIC said in a statement. This followed DIC CEO Sami Al-Ansari’s comment that it would take a lot more money to rescue Citigroup, which since November has raised about US$30 billion of capital from Abu Dhabi, Kuwait and Saudi Arabia’s Prince Alwaleed.

QATARQNB Al Islami’s Vehicle Lease productQatar National Bank Al Islami (QNB Al Islami) has launched its Vehicle Lease (Ijarah Al Markabat). This product will allow the bank to fi nance both new and used vehicles at competitive profi t rates.

Under the scheme, QNB Al Islamic will fi rst buy the vehicle then lease it out to the client, who will buy or obtain the vehicle at the end of the lease period.

QNB Al Islami also utilizes this formula to fi nance constructive projects. Last year, the bank developed the “lease ending in ownership”, which allows customers to have their various construction projects fi nanced with competitive prices.


© 14th March 2008

MALAYSIAKFH and unit win Islamic fi nance awardsKuwait Finance House (KFH) and its subsidiary Kuwait Finance House Malaysia (KFHM) bagged awards for “Best Overall Islamic Bank”, “Most Innovative Islamic Bank” and “Best Islamic Bank in Kuwait” at the 2007 Islamic Finance news Awards ceremony held last Thursday.

Meanwhile, CIMB Islamic Bank CEO Badlisyah Abdul Ghani picked up the award for “Best Individual Islamic Banker”, a recognition given to outstanding individuals in the banking sector.

Khazanah Nasional won for “Cross-Border Deal of the Year” and “Equity Deal of the Year” following its Cherating Capital exchangeable Sukuk transaction.

Bank Negara Malaysia was named the “Best Central Bank in Promoting Islamic Finance” while Malayan Banking was recognized for “Malaysian Deal of the Year”.

UAESleeping giant awakensIslamic real estate fi nancing has been likened to a sleeping giant about to awaken with international multi-billion dollar deals set to make new records this year, according to leading fi nance industry watchers.

The burgeoning economies of the Gulf Cooperation Council (GCC) along with Asia-Pacifi c are the driving forces, said Irina Awote, director of the Real Estate Finance and Investment Conference, which is scheduled to take place in May.

Moody’s Investors Service noted that one of the main areas of growth is expected to be Islamic real estate investment trusts, or REITs, aided by the tremendous concentration of high net worth individuals and family businesses with a collective wealth in the GCC alone estimated to be over US$1.3 trillion.

BAHRAINBahrain Bay land parcels taken upBahrain Bay, the US$2.5 billion landmark waterfront community located in the heart of Manama, has sold 60% of its land parcels to international and regional developers and investors.

The development has attracted investments from leading local and regional fi rms such as Al Baraka Group, the Bahrain-based Global Islamic Bank, as well as Salhia Real Estate, the leading Kuwaiti property developer.

In addition, Guidance Financial Group, the international Shariah compliant fi nancial services group, recently committed to developing a Shariah-based boutique hotel within Bahrain Bay.

DENMARKBanks to comply with Shariah Three local banks in the Jutland region of Denmark have agreed to offer mortgage loans that comply with Islamic laws, it was reported Wednesday. To meet the requirements, the Danish banks have created what resembles a leasing agreement for Muslims in the area.

The three banks — Sparekassen Farsø, Sparekassen Vendsyssel and Sparekassen Hobro — with cooperation of a fourth (Den Jyske Sparekasse) created a company to handle the new Amanah Kredit mortgages.

Niels Mogaard, director of Amanah, said the arrangements were already in use, especially in the city of Aalborg.


14th March 2008©

UAEA&O adviser to US$1.2 billion MudarabahAllen & Overy (A&O) advised Emirates Islamic Bank and Emirates Bank International on a US$1.2 billion dual currency Mudarabah facility for Limitless, a landmark transaction signifying confi dence in the region’s real estate sector, said A&O senior associate, Shehzaad Sacranie.

She said the syndicate proves there is a continued appetite for investment in the real estate sector and a growing interest in Shariah compliant fi nancings.

The proceeds of this transaction will be used to fund landmark real estate projects being developed by Limitless in Russia, Saudi Arabia, India, Jordan, Vietnam and Malaysia and in the UAE.

UAEAmlak to fund growth through SukukAmlak plans to raise AED6 billion (US$1.63 billion) in Sukuk and loans this year to fi nance growth, said CEO Arif Al Harmi.

“We are looking at raising AED6 billion through various schemes this year. We will be tapping different markets and investors. We are looking at medium- to long-term funding,” explained Arif, adding that Amlak is seeking a banking license from the UAE Central Bank in order to access customer deposits.

“We are moving ahead with our plans, whether we get the banking license or not. Our plans will not be affected by with this.”

BAHRAINFinancing facility arranged for SBGGulf International Bank, Arab Bank, Calyon Credit Agricole CIB and Emirates Bank International have made an arrangement of a SAR3.2 billion (US$854.4 million) Islamic contracting facility for the Saudi Binladin Group (SBG). The four banks acted as lead arrangers.

The transaction, which comprises a Murabahah facility, letters of credit facility and guarantee issuing facilities, will be used by the Saudi borrower to fi nance the construction of a housing project for the King Abdullah University of Science & Technology.

KUWAIT KFH seeks Morocco, Algeria propertiesKuwait Finance House (KFH) is increasing its investments in real estate and wants to acquire properties in Morocco and Algeria, said KFH managing director, Bader Al-Mukhaizeem.

KFH recently won a license this month to start Sukuk Company, a venture for trading Islamic bonds.

MIDDLE EASTComplementary new business modelsThe pure commercial-banking model in Islamic banking in the GCC is being complemented by developed forms of more specialized Shariah compliant fi nancial intermediation, said Moody’s in a report.

Maturing operating environments and imperfect risk positioning tend to weigh on Islamic banks’ risk profi les and ultimately on their stand-alone credit ratings, the report said.

The commercial-banking business model, dominated by both the corporate and retail business lines, is now being enhanced by the emergence of two new activities.

While Shariah compliant investment banking has grown as a successful way to manage alternative Islamic asset classes, specialized fi nancial institutions focusing on mortgage, housing and consumer banking have been providing fi nancing solutions to households facing unprecedented needs, said Anouar Hassoune, a Moody’s analyst who wrote the report.

QATARQIB profi ts soarQatar Islamic Bank (QIB) has recorded full-year profi ts of QAR1.25 billion (US$3.45 million) in 2007, compared to QAR1 billion (US$2.84 million) in 2006, indicating a year-on-year growth of 25.2%. The bank’s board of directors has recommended the distribution of cash dividend of 20%, or QAR2 (US$0.55) per share and 50% bonus shares.

It has also recommended a further capital increase via a rights issue amounting to 20% to be fl oated in two stages during 2008 and 2009 (10% at each stage) to strengthen QIB’s fi nancial position to meet the requirements of its expansion and execution of its strategic plans.

During this fi nancial year the depositors’ share of the profi ts reached QAR343 million (US$94.31 million), an increase of 33% over the previous year, and QIB’s total assets reached QAR21.3 billion (US$5.86 billion) as compared to QAR14.9 billion (US$4.1 billion) in 2006, recording an increase of QAR6.4 billion (US$1.76 billion) at a growth rate of 43%.

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© 14th March 2008

PAKISTANUBL Fund investing overseasUBL Fund Managers, Pakistan’s leading asset management company in the private sector, has ventured abroad to capitalize on global investment potential globally.

United Composite Islamic Fund, a balanced Shariah compliant fund that gave a calendar year return of 18% to its investors in 2007, will be the fi rst UBL fund to offer exposure in overseas markets. A portion of the fund’s assets has been invested in regional Shariah compliant equity funds that are being managed by globally recognized investment managers.

OMANBourse expecting three IPOsThe Muscat Securities Market (MSM) expects three companies — one of them an industrial fi rm — to sell shares in initial public offerings this year and list them on the region’s best-performing bourse, said chairman Abdullah bin Salim al Salmi on Tuesday.

Oman’s benchmark is up more than 16% this year, making it the best performer in the Gulf Arab region. It surged almost 62% last year.

BAHRAINABC closes Murabahah dealABC Islamic Bank has closed the senior phase of a US$100 million three-year syndicated revolving Murabahah fi nancing facility for a Kuwaiti real estate services company. This is the debut syndication for Munshaat Real Estate Projects Company and the funds will be used to fi nance development of prime properties in the Holy Haram area in Makkah and Madinah in Saudi Arabia.

Athman Investment Company, Kuwait, is the fi nancial adviser for Munshaat, a Shariah compliant company.

Prior to general syndication, BNP Paribas, Emirates Bank International, and Saudi British Bank joined the facility as mandated lead arrangers at the senior stage.

UAEGulf Bank profi t up 23%Gulf Bank reported a record net profi t of US$477.8 million for 2007. This marked an increase of 23% over the previous year’s results, with earnings per share rising nearly 23% to 44.7 US cents.

Total assets increased by more than 25%, surpassing US$18.5 billion for the fi rst time.

JORDAN/SYRIAJordan Islamic Bank setting up in SyriaJordan Islamic Bank will open a branch in Syria, said vice-chairman and general manager Musa Shihadeh. Speaking on the sidelines of a conference on Islamic banking in Syria, Musa underlined the importance of Jordanian-Syrian cooperation in the banking sector, in particular.

Jordan has 23 banks, two of which are Islamic banks. Islamic banks account for around 15% of the banking business in the kingdom.

Commercial Bank of Kuwait (CBK) is seeking to buy 70% of Yemen Gulf Bank. CEO of CBK Jamal al-Mutawa said the head of the Yemeni bank had approved a US$30 million investment to be made jointly by CBK and the World Bank’s commercial lending arm.

The deal would increase Yemen Gulf Bank’s capital to US$30.19 million.

CBK seeks 70% stakeKUWAIT

80327 IceBreaker IFN[E2]8.ai 2/15/08 9:01:15 PM


14th March 2008©

UAENational Bonds sales grew 109%The sales of Dubai-based National Bonds Corporation, which takes care of the UAE’s Shariah compliant national savings scheme, grew 109% to AED180 million (US$49 million) last month from AED86 million (US$23.42 million) a year ago, according to a company statement.

It said sales in February represented a 29% growth from AED140 million (US$38.13 million), a development which CEO Mohammad Qasim Al Ali said indicates that a “savings culture” is becoming popular in the UAE.

Last year, the company disbursed an annual profi t of 6.03% to investors.

UKBLME latest to join FLA divisionThe Finance and Leasing Association (FLA) announced that the Bank of London and The Middle East (BLME) has become the latest business to join its asset fi nance division, making the fi rst Islamic bank to become a full member of the association.

“We are pleased to be a full member of the FLA, which for many years has provided a strong platform for UK leasing businesses. Our membership is testimonial to the increasing demand for Islamic fi nancial products in the UK as well as our commitment to providing innovative lease fi nancing solutions in the UK. We look forward to a long lasting working relationship,” said Humphrey Percy, CEO of BLME.

BAHRAINIIB’s net income up by 56% Bahrain-based International Investment Bank’s (IIB) net income rose US$21.1 million last year, up 56.3% from the US$13.5 million recorded in 2006. Chairman Saeed Abdul Jalil Mohammad Al Fahim said the numbers refl ect the continued growth of IIB’s business and its ability to effectively develop and offer a diverse range of attractive investment opportunities.

Total income increased by 39.4% to US$34.3 million from US$24.6 million, mainly from investment banking fees that increased by 33.3% to US$22.8 million from US$17.1 million in 2006, generated from the structuring, underwriting and the placement of new investments.

SAUDI ARABIAMMG to launch IPO in MaySaudi Arabian contractor Mohammed al-Mojil Group (MMG) will stage an initial public offering (IPO) of 30% of its shares in May. The IPO, held over nine days, will open on the 3rd May.

A portion of the shares will be set aside for institutional investors. MMG specializes in onshore and offshore oil and gas and petrochemicals projects in the kingdom.

HSBC Saudi Arabia has been appointed fi nancial adviser and lead manager for the IPO.

UAEChallenges for Gulf’s private banksMargin pressures, eroding prices and rapid product commoditization are some challenges faced by foreign players looking to enter the Gulf’s increasingly competitive private banking industry, according to global management consultant Boston Consulting Group (BCG).

In its report on global wealth management and private banking, BCG said global wealth grew by 7.5% in 2006 to US$97.9 trillion and it expects assets under management to continue their steady rise.

Foreign players face additional challenges, such as growing competition from Islamic banks, In terms of assets, Islamic banking represents 15% to 20% of local retail banking markets in the GCC.

Many conventional banks in the region are converting to Islamic banks, and some global players have established Islamic windows to meet increased demand from the public and private sectors. Islamic banks are more profi table than conventional banks because their funding costs are generally lower as a result of government subsidies, the report said.

QATARQNB sets up fi nance companyQatar National Bank (QNB) is setting up an Islamic fi nancial services company with Kuwaiti partners. Qatar’s largest lender by market value will own 30% of Kuwaiti-Qatari Company for Ijara Investment, amounting to KWD24 million (US$88 million).

The new fi rm will offer Islamic fi nance services across the Gulf Arab region.

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MALAYSIANo immediate impact from KLK bondsRAM Ratings has stated that Kuala Lumpur Kepong’s (KLK) proposed US$300 million nominal value fi ve-year Unsecured Guaranteed Exchangeable Bonds via KLK Capital Resources have no immediate impact on the AA2/P1 ratings of the group’s existing RM500 million (US$157.86 million) Sukuk Ijarah Commercial Paper/Medium-Term Notes Programme (2007/2011).

RAM Ratings believes that the group’s fi nancial profi le would still be within levels that commensurate with its AA2/P1 ratings and that the issuer of the proposed Exchangeable Bonds will have the option of increasing the issued amount by another US$100 million in the event of an over-allotment.

MALAYSIAAA-IS for Stratavest Sukuk MARC has assigned the rating of AA-IS to independent power producer Stratavest’s RM120 million (US$37.68 million) nominal value Sukuk Ijarah. Proceeds from the issuance of the Sukuk Ijarah will be utilized largely to fi nance the purchase and/or early redemption of Stratavest’s outstanding Al-Bai’ Bithaman Ajil (ABBA) bonds and to fi nance advances of RM31.3 million (US$9.83 million) to Stratavest’s shareholder, Eden.

The outlook on the rating is stable.

MALAYSIAAAA for IBK debt facilityRAM Ratings has assigned an AAA rating to Industrial Bank of Korea’s (IBK) proposed RM3 billion (US$9.42 million) Multi-Currency Conventional and/or Islamic Medium-Term Notes program, with a stable outlook.

The rating is anchored by IBK’s strategic role as a specialized policy bank that has been entrusted to provide impetus to the growth and development of small and medium-sized enterprises.

MALAYSIANPE notes on rating watchRAM Ratings has placed the respective AA3 and A1(s) ratings of New Pantai Expressway’s (NPE) RM490 million (US$153.8 million) Senior Bai’ Bithaman Ajil Notes (2003/2013) and RM250 million (US$78.47 million) Junior Bai’ Bithaman Ajil Notes (2003/2016) on rating watch, with a negative outlook.

The rating watch is triggered by the longer-than-expected completion of a refi nancing exercise, which had been intended to fully repay the Senior and Junior Notes by the 31st December 2007.

MALAYSIAMARC maintains Emas Kiara IndustriesMARC continues to maintain its AID/MARC-2ID ratings on Emas Kiara Industries’ (EKI) RM80 million (US$24.97 million) Partially Underwritten Murabahah Notes Issuance Facility/ Islamic Medium-Term Notes Issuance Facility (MUNIF/IMTN) on MARCWatch Developing where they were placed since the 10th December 2007.

The rating action follows slower-than-anticipated progress on EKI’s acquisition of a 51% stake in Carimin. EKI has extended the timeline for submission to the authorities in respect of the proposed acquisition for a further three months that commenced on the 26th February.

EKI is conducting due diligence for the proposed acquisition.

QATARSovereign credit ratings affi rmedStandard & Poor’s (S&P) has affi rmed its ‘AA-/A-1+’ sovereign credit ratings on Qatar as the result of its strong fi scal surpluses, substantial external liquidity, healthy economic prospects and high per capita income. The outlook is stable.

“The ratings remain constrained, however, primarily by the geopolitical risks facing sovereigns in the Gulf region, and capacity and institutional constraints which are higher than for other AA-rated sovereigns,” said S&P credit analyst, Luc Marchand.

MALAYSIAMARC reaffi rms Sapura EnergyMARC has reaffi rmed the long-term rating of Sapura Energy’s (SE) RM140 million (US$43.71 million) Al Bai’ Bithaman Ajil Islamic Debt Securities (BaIDS) at AID, with a stable outlook.

The reaffi rmed rating refl ects SE’s moderate business profi le as an oil and gas service provider with sustained operating track record evidenced by its ability to renew/obtain new contracts from its major customers.

Although revenue has been on an overall uptrend since 2003, SE’s fi nancial metrics have been somewhat tempered by fl uctuating profi tability and tight cash fl ow position as a result of stiff competition from other players with a larger asset base.

MALAYSIASACOFA’s Sukuk Istisna reaffi rmedMARC has reaffi rmed the ratings of SACOFA and its special purpose subsidiary, Sarawak Gateway’s RM160 million (US$50.51 million) Sukuk Istisna and RM240 million (US$50.51 million) Sukuk Ijarah at AAAIS.

The negative outlook on the ratings has been maintained.

(Also see Termsheet on page 25)

UAEDIB’s Sukuk trust certs assigned AStandard & Poor’s has assigned its A preliminary rating to Dubai Islamic Bank’s (DIB) US dollar fl oating-rate Sukuk trust certifi cates due 2012.

The transaction involves a special-purpose company incorporated in accordance with the laws of the Cayman Islands, DIB Sukuk, issuing rated ‘Musharakah sharikat melk’ Sukuk trust certifi cates. The proceeds of the Sukuk will be ultimately used for general funding purposes of DIB, which will sell a given percentage of a pool of assets to the issuer.

www.islamicfi nancenews.comRATINGS NEWS

14th March 2008©

MALAYSIAMoody’s, Fitch maintain ratingCredit rating agencies Fitch and Moody’s on Monday maintained their sovereign ratings on Malaysia even as investors offl oaded local stocks and currency because of heightened uncertainty after the recent elections.

Investors are worried about a possible shift in government policy amid speculation that Prime Minister Abdullah Ahmad Badawi could be pressured to resign. But Fitch and Moody’s said Malaysia’s economy was still on a sound footing.

The government’s improving fi scal position supported Malaysia’s rating, said Franklin Poon, a director with Fitch. Fitch has an A- long term foreign currency rating with a positive outlook and an A+ long-term local currency rating with a stable outlook.

Moody’s has a long-term foreign and local currency bond rating of A3 with a stable outlook for Malaysia. Standard & Poor’s had earlier said there was no change to Malaysia’s sovereign rating, and has ‘A-/A-2’ foreign currency and ‘A+/A-1’ local currency ratings on the country.

MALAYSIAKrisAssets bonds reaffi rmedRAM Ratings has reaffi rmed the AAA(bg) rating of KrisAssets Holdings’ (KrisAssets) RM200 million (US$63.37 million) nominal value Bank-Guaranteed Bonds (BG Bonds), with a stable outlook. The rating mirrors the credit strength of the guarantor bank, i.e. Public Bank, the general bank ratings of which were reaffi rmed by RAM Ratings at AAA/P1, with a stable outlook, in May 2007. The bank guarantee from Public Bank enhances the credit profi le of the BG Bonds beyond KrisAssets’ stand-alone credit risk.

KrisAssets is a subsidiary and property-investment arm of IGB Corporation with two subsidiaries, i.e. Mid Valley City and Mid Valley Capital. Mid Valley City owns and operates Mid Valley Megamall.

THIS TIME LAST YEAR• First National Bank of Bostwana became the fi rst

conventional bank in Botswana to introduce an Islamic banking unit.

• Bank Negara Malaysia governor Dr Zeti Akhtar Aziz called for Islamic fi nancial institutions to expand their reach to untapped markets.

• The General Council for Islamic Banks and Financial Institutions proposed the set-up of a mega Islamic bank to fund large projects in Muslim countries.

• The Sharjah Electricity and Water Authority closed its nine-year Sukuk Ijarah at US$350 million. The Sukuk was lead arranged and underwritten by ABC Islamic Bank, Gulf International Bank, Kuwait Finance House and the Sharjah Islamic Bank.

• The Dubai Financial Services Authority signed a cooperation agreement with the New Zealand Securities Commission.

• Project fi nancing for the 288 meter Bishopsgate Tower — London’s tallest building — was sold at £200 million (US$391.4 million) to Islamic investment fi rm Arab Investment.

• The International Islamic Trade Finance Corporation commenced business with a start-up capital of US$3 billion.

• The Sharaf Group, along with Protea Hospitality Corporation of South Africa, launched Sharaf Protea Hotels Middle East to manage Shariah compliant hotels and furnished apartments.

• OCBC Bank’s Islamic banking income increased by 16% to RM52 million (US$14.8 million) as at the 31st December 2006.

• Dubai Islamic Bank’s Islamic home fi nance facility attracted applications worth PKR5.5 billion (US$90.6 million).

MALAYSIATenaga Nasional reaffi rmedMARC has reaffi rmed Tenaga Nasional’s (TN) issuer rating of AA+ and rated the utility’s Islamic debt facilities for its RM2 billion (US$6.31 million) Al-Bai’ Bithaman Ajil Bonds AA+ID and RM1.5 billion (US$4.73 million) Murabahah Commercial Papers and Murabahah Medium-Term Notes MARC-1ID/AA+ID.

The rating fi rm rated TN’s RM1 billion (US$3.16 million) Al-Bai Bithaman Ajil Notes Issuance Facility AA+ID.

The developing outlook on the ratings refl ects uncertainty as to the timing and magnitude of a potential revision on gas prices, given the increased likelihood of a near-term gas price revision, and the credit implications of an upward revision in prices on TN’s fi nancial profi le.

MALAYSIARating watch on SDE liftedRAM Ratings has lifted the Rating Watch (with a negative outlook) on Senai-Desaru Expressway (SDE) while simultaneously reaffi rming the AA3 rating of the company’s RM1.46 billion (US$462.55 million) nominal value Bai Bithaman Ajil Islamic Debt Securities (2005/2024).

Nonetheless, the outlook on the rating remains negative.

www.islamicfi nancenews.comIFN REPORTS

© 14th March 2008

Islamic fi nance can only catch up with its conventional partner once the industry has a standardized Shariah compliant fi nancial rules that cuts across the globe, said Majeed Dawood, CEO of Yasaar, an independent Islamic fi nance consultancy.

He said coupled with current technology and standard of innovations, Islamic fi nance will be able to capture a larger share of the market in no time. Dawood added that the scholars are already working toward achieving core standardization.

“When we have a standard rule, a product can be introduced all over the world with only minor amendments to accommodate each country’s jurisdiction and tax laws,” Majeed told reporters after speaking at the luncheon briefi ng on Islamic fi nance in Asia organized by index provider FTSE Group.

Majeed, however, could not set a timeframe on when the industry can expect such standardization due to mounting challenges posed by the different interpretations of the scholars representing Islam’s four different sects.

“It’s going to take time. Institutions like AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) and IFSB (Islamic Finance Services Board) are already in place to close the gaps. These two (organizations) are already creating a level playing fi eld across the board.

“I must stress that we are referring to a 40-year-old industry as compared to a 700-year-old one (conventional fi nance). We will get there… of course, it will not take us 600 years but the standardization will come.”

Majeed also expressed confi dence that the Islamic fi nance market will grow much higher than the 20% projected by most analysts. “With the high liquidity and escalating oil prices, the industry can easily surpass the 20% growth expectation.”

“There was a slight setback last year with the announcement that 85% of the GCC Sukuk was non-Shariah compliant. We saw a lot of people pulling back on their Sukuk products.

“But now that scholars have settled that issue, we should expect more Sukuk to be introduced in the second quarter. That would further boost the industry up a few notches.”

In his presentation at the luncheon, Majid said Asia was experiencing a boom in Islamic fi nancial services at a growth rate in excess of 20% per annum.

At present, Asian fi nancial services are highly concentrated in Malaysia with focus on banking assets, Sukuk issuance, asset management and Takaful.

He added that in the Malaysian market, wholesale Islamic fi nancial services under the corporate loans segment had grown 14.1 times compared with 2.9 times for the conventional banking system while trade fi nance expanded 32.5 times against 5.3 times and corporate fi xed deposit grew 17 times compared with 2.3 times.

By Arfa’eza A Aziz

Standardization the way to goASIA/GLOBAL

In Malaysia’s equity market, about 85% of the stocks listed on the Exchange are Shariah compliant. So, when Malaysian stocks plunged 9.5% last Monday following the dismal performance of the Barisan Nasional (BN, or National Front) government in last week’s general elections, players in the Islamic fi nance industry were wary of the future.

Although stocks rebounded the next day, some observers believe the development will leave a lingering effect on the near-term outlook for the market.

However, CIMB Islamic Bank CEO Badlisyah Abdul Ghani said the dip — Malaysia’s lowest in seven years — was an expected reaction to the elections, which saw the BN lose control of fi ve states (out of 13) to the opposition coalition, Barisan Alternatif.

“The stocks picked up today (11th March). It’s a typical reaction due to the current development in Malaysia’s political scenario. I believe the election results showed the level of maturity that Malaysia has achieved,” said Badlisyah, when Islamic Finance news spoke with him at the Islamic Funds Asia meet in Kuala Lumpur on Tuesday.

He stressed that there was no reason to believe that the political stability and strength of the Malaysian government has been greatly affected.

“The levels of confi dence are still intact. We must remember that the federal government is being ruled by the BN, which won 140 (parliament) seats; only eight seats short of the two-thirds majority. It does not face any risk in running the country. From the business point of view, that’s comforting,” he said.

As to whether foreign investments would be affected, Badlisyah said such fear should not exist. “Like I said earlier, the federal government is the government that will take charge of the major economic policies.”

Concurring with Badlisyah was Bank Islam’s senior economist, Azrul Azwar. “The results showed that democracy is alive in Malaysia. Foreign investors who place democratic principles very highly will be keener to come to Malaysia.”

Azrul believed that the market reaction would not have been so negative if not for the current global fi nancial uncertainty due to the subprime woes. He pointed out that most Asian markets sank on Monday, with Tokyo’s market falling to a 2½-year low.

He said investors should view the situation positively. “It’s a great time to buy now that the price is low.”

Despite these brave statements, international markets continue to be wary. On Wednesday, Standard & Poor’s Equity Research reduced its weighting on Malaysia to underweight from marketweight, citing higher risk to earnings outlooks following the election results.

Lorraine Tan, vice-president of S&P Equity Research, Asia, said that the infrastructure sector is likely to be hurt. She believed a number of the special economic zone projects that the federal government favors may be put on hold.

Market dip has no lingering effectMALAYSIA

www.islamicfi nancenews.comIFN REPORTS

14th March 2008©

“Boring”, “subdued” and “a damp squib”. Those were some of the reactions by the British press and commentators to the UK 2008 Budget Report presented by Alistair Darling, Chancellor of the Exchequer, on Wednesday.

Indeed, free press thrives in the UK. But more importantly, the budget is assurance that the Islamic fi nance industry will continue to thrive in the country hailed as Europe’s gateway to Islamic fi nance.

Darling took the UK government a step closer to issuing its fi rst sovereign Sukuk, stating that the government will continue to examine the feasibility of such an issuance and, in the Finance Bill 2008, take legal powers to facilitate any future sovereign issuance, as well as provide a full response to the recently closed public consultation on Sukuk issuance in the summer.

It is obvious that the government refused to take the bait reeled by opposition parties, the Conservatives and the Liberal Democrats who have deliberately sought to play up the so-called religious and tax implications of the issuance of a UK sovereign Sukuk.

Darling’s announcement relating to Islamic fi nance includes proposals to:

• legislate, following consultation, in the Finance Bill 2009 to provide relief from stamp duty land tax (SDLT) for Sukuk (referred to as alternative fi nance investment bonds);

• amend the law to classify Sukuk as tax-exempt loan capital for stamp duty and stamp duty reserve tax (SDRT);

• adjust legislation to allow existing corporation tax and income tax rules on Islamic fi nance arrangements (referred to as alternative fi nance arrangements) to be amended by regulation and work with the UK banking regulator (the Financial Services Authority) and stakeholders to clarify the regulatory treatment of Sukuk.

One of the industry players who hailed the announcements was John Challoner, tax partner at law fi rm Norton Rose. “For the last few years, HMRC (Her Majesty’s Revenue and Customs) has been receptive to representations made for the tax treatment of Islamic fi nance to be no more onerous than conventional fi nance. Last year saw legislation which permits UK companies to issue Sukuk.

“The legislation, however, did not extend to removing the SDLT charges which would make Sukuk uneconomic where the assets underlying the bonds are UK land and buildings. It has now been announced that, subject to consultation, the legislation will be amended to remove these charges,” said Challoner.

His colleague, senior associate Davide Barzilai, added that the tax aspects, coupled with the restated intention to issue a Government Sukuk, will give the UK an Islamic fi nance initiative.

Meanwhile, Islamic fi nance consultant Junaid Bhatti welcomed the government’s continued support for halal fi nance.

“Promoting ethical fi nancial conduct is at the core of Islamic principles. The chancellor is working to create a level playing fi eld for British Muslims who want to run their fi nancial affairs in accordance with their

religious ethics,” said the director of Ballencrieff House, an Islamic fi nance consultancy.

“Right now, the capitalist economies are suffering severe liquidity shortages due to the global credit crunch. These economic problems are a result of irresponsible lending and the gambling of customers’ money by non-ethical fi nancial institutions. Islamic fi nance is the perfect antidote to this because it forces banks to act more responsibly and with greater transparency.

“It does this by shifting a greater amount of risk away from customers and back to the banks, and through an insistence that all transactions must be supported by tangible assets.”

Although Darling fell short of setting a date for an inaugural sovereign Sukuk, Junaid believes the budget lays the foundations for the UK government to issue a sovereign Sukuk (Islamic bond) within the next year.

“Several measures have been announced for this historic project. The main changes will be the introduction of changes to the stamp duty regulations to ensure that Sukuk will be given the same tax treatment as conventional bonds,” he said.

Junaid thinks the report is also a boon to foreign investments in the UK. “Offi cial support for Islamic fi nance, through the issuance of Sukuk by a western government, will send a powerful signal to Muslims in the UK and abroad… The move will also encourage more Muslims from the oil-rich Middle East to invest more of their funds in one of the UK’s four (recently-authorized) Islamic banks.”

The UK is home to some two million Muslims and its Islamic banks have more than 30,000 customers across the country. Since 2003, the Islamic mortgage market has grown to over GBP500 million (US$1.01 billion) — an increase of about 50% in the last year alone.

In Budget 2006, the government announced its commitment to work with the fi nancial sector to establish a high-level group, with senior representatives from across the fi nancial sector, to develop and support a new strategy to promote London as the leading international fi nancial center. The Islamic Finance Experts Group was established as a result.

Budget 2007 introduced new measures for Sukuk, enabling them to be issued, held and traded in the same way as corporate bonds. This is expected to increase primary issuance in the UK, and there is also a growing secondary Sukuk market in London.

HMRC issued guidance alongside Budget 2007 on the treatment of Musharakah, a common structure used for Islamic mortgages; and Takaful products, to provide more clarity and encourage growth in these markets.

On the 6th April 2007, the FSA introduced new protections in the housing market for consumers wanting to buy their homes in a way that complies with Shariah law through a home purchase plan.

By Arfa’eza A Aziz

New Darling of Islamic fi nanceUK

www.islamicfi nancenews.comINTERVIEW

© 14th March 2008

At the recent Islamic Funds Asia meet (which ended on Wednesday) in Kuala Lumpur, John A Sandwick boldly told the audience why he’ll be voting for Barack Obama, US Senator for Illinois who’s gunning to become the fi rst black leader of the Free World.

“We need to put some wisdom in the White House,” quipped the managing director of Geneva-based Encore Management.

As frank as he is in expressing his political inclination, Sandwick adopts the same attitude when he gives talks on Islamic fi nance. Speaking to Islamic Finance news on the industry’s development in Europe, the well-known expert in Islamic assets management did not mince his words. Sandwick said Swiss banks will suffer “swift and brutal” consequences if they don’t establish a legitimate base for Islamic assets management in the country.

He also expressed concerns over the limited Islamic fi nancial and investment products in the continent, adding that too much focus is being given on private equity, which is often just “venture capital in disguise”. While private equity is good for any economy, but there are limits, he stressed.

In the interview, he also spoke on the challenges that Europe faces in building its Islamic funds and investment market. Below are his takes on the industry.

The UK is shaping up to be the Islamic fi nance capital for Europe. What are the main reasons for that? What does it have that other European countries don’t?Clearly, the most important element of successful Islamic fi nancing of any kind is a legal and regulatory framework that accepts that not all distributions of cash are subject to withholding taxes. The UK has made substantial progress in recognizing that a lot of Islamic investing is not equity investing in the conventional western sense according to tax regulators, and permitted distributions without withholding tax. This alone is the biggest single step any European or in fact any government can make to support Islamic banking and fi nance.

The tax authorities in countries like France, Germany and Switzerland have been slow to acknowledge there are alternative treatments of cash distributions, capital structures and the like when it comes to Islamic investing. We believe this will ultimately change, especially as the stakes get higher. Remember, the oil exporting states of the GCC have about US$38 trillion in total revenue during the next 20 years, of which Morgan Stanley estimates only 10% can be deployed into domestic economy investments. Where will the 90% go? They will go to international capital markets and direct investing.

As Islamic investing becomes increasingly common among sovereign wealth funds within the GCC, you will see an automatic adjustment by European — and indeed many non-European — governments to Islamic structures and tax treatment.

What do other countries need to do to catch up with the UK? How long will it take to see them on par?Some governments will take a long time to adjust. France, in particular, has a very dedicated commitment to the secular treatment of all government affairs. They might ask: Why should tax treatment of Islamic investing be any different from conventional investing?

In fact, I think that each government in Europe has already looked into these issues, and is already considering how and when to implement policies to support and encourage Islamic investments and fi nance.

Why have other countries been slow to allow full-fl edged Islamic banks and fi nancial institutions as opposed to the UK, which now has allowed four full-fl edged Islamic banks?I wouldn’t criticize their slow behavior, I would encourage their more rapid absorption of the new technologies and policies required to encourage Islamic banking. You know that governments everywhere take slow, measured steps on all banking regulatory matters, and Islamic banking is no exception to this rule.

London is leading the pack simply because it has: (a) a long tradition of fi nancial market innovation; and (b) much deeper ties to the international communities that host most of today’s Islamic banking professionals, meaning Dubai, Bahrain, Kuala Lumpur and other locals.

Switzerland holds potential in tapping the growing investors’ base from the Middle East. Do you think it is doing enough to take Islamic fi nance to a higher level? What needs to be done there?In general, there appears to be an overwhelming paralysis in Switzerland to the Islamic asset management industry. Not a single Swiss bank, or foreign bank in Switzerland, seems to be making any solid, concerted approach to Islamic wealth management. This is strange as there is (a) a gigantic pool of perhaps US$200 billion in Muslim-owned funds in the Swiss banking system, and (b) nearly every Swiss bank has opened for business in Dubai, Manama and/or Doha. What is the cause of this paralysis?

It could be that after the demise of Bank Noriba (sponsored by UBS), there seems to be fear or reputation risk in the event of another failure. Further, I myself have actually heard senior Swiss bankers say they think Islamic banking is a fad, eventually to disappear after the industry’s fi rst major scandal.

I have heard other Swiss banking leaders say they don’t understand or they fear the heterogeneous nature of fatwa (religious edict) and fear issuing a product with one fatwa that won’t be accepted by the majority of their clients.

In my opinion, the Swiss must get moving now to establish a legitimate base of Islamic assets management before it is too late. Can you imagine what will happen if Singapore, Dubai or any other proposed center of Islamic assets management begins to eat into the Swiss market share in the Gulf states and Saudi Arabia? The consequences could be swift and brutal if the Swiss banks don’t respond, and that could be very soon.

Encore Calls for More Variety in EuropeBy Arfa’eza A Aziz

continued...

www.islamicfi nancenews.comINTERVIEW

14th March 2008©

Encore Calls for More Variety in Europe (continued...)

What are the other major challenges does Europe face in developing the Islamic fi nance market? How can these challenges be overcome?Wholesale Islamic banking, meaning corporate fi nance, treasury, capital markets and similar services, are the easiest parts of the Islamic banking package to absorb because here, the regulatory involvement is relatively easy and limited.

Retail banking is the most diffi cult as it involves massive regulatory interference, just as retail banking requires everywhere. I think right now, most European governments are taking a ‘wait-and-see’ approach toward retail Islamic banking, observing the experience of the UK fi rst before they make any formal entries into this area.

What has been Europe’s best achievement in Islamic fi nance so far? I applaud the establishment of so many Islamic investment houses in London. It will stimulate even further growth in the industry throughout Europe. Unfortunately, there are far too many Islamic private equity ventures in London; often, they are really only venture capital disguised as and with the more conservative name of private equity. And, while so many businesses were established, we still see very few actual products or announcements from the majority of them.

It is hard to say they have achieved much more other than physical presence, of course part of which is a more diffi cult regulatory environment outside of the UK. I’ll hold my opinion for the time being on the word ‘achievement’ and wait for something more concrete before I bestow that honor.

East Asia and the US have expressed interest in setting up a global Islamic fi nance hub. What plus points does Europe have over the other non-Muslim majority jurisdictions?You are interviewing me as I am here in Kuala Lumpur attending Islamic Funds Asia, where yesterday (the 10th March) I was teaching a master class on Islamic assets management to eager and very professional Malaysian and Singapore bankers.

Without a doubt, East Asia is very far ahead in the legitimatization of the Islamic banking industry, and I mean that on a worldwide basis. The industry here is very professional and they are both serving client needs and making money. In fact, Europe and the US simply have to emulate the success of Islamic banking in countries like Malaysia to achieve the same results. Europe, of course, is home to many devout Muslims, not all of whom are skeptics or cynical about Islamic banking. Given meaningful alternatives that match conventional banking in all respects, this will cause the vast majority of European and American Muslims to choose this alternative.

There is a dearth of Islamic fi nance experts even in Malaysia and the Middle East, which are considered leaders of the industry. Do you think the shortage of such experts is one of the main reasons

Europe’s Islamic fi nance development is slow? If so, how do you think the problem can be overcome?Yes, I got a smile with that last question. I speak at Islamic banking conferences all over the world and am often surprised to hear the length of service an individual has in the industry. Many of them proudly proclaim they have been ‘Islamic bankers’ for six or 12 months! But, that’s really not a barrier. Good banking is good banking, regardless of one’s faith, and in fact, other than learning the basics of Islamic banking, any good banker can become an expert Islamic banker in short order. It is in fact only a matter of time before Islamic banking is fully legitimized worldwide. I don’t see a single element of Islamic banking that would prevent this. Its adaptability to all commercial and regulatory environments is very high.

Do you think Islamic wealth management in Europe can ever catch up with its conventional partner?Yes, of course, in the long term, it can and it will. Even in Germany, we are seeing some pension funds looking at offering their Muslim employees an Islamic retirement fund alternative. But the biggest complaint is the huge lack of products. As mentioned above, the Islamic banking units of so many Arab and European banking entities are falling all over themselves to create more private equity, which is often just venture capital in disguise.

Of course, private equity is good for any economy, but there are limits. Someone somewhere must create, manage and distribute world-class Islamic mutual funds of all kinds. The gigantic empty space in terms of Islamic products is what fi rst needs to be fi lled. Only then can Islamic wealth management become a serious alternative to conventional asset management. We at Encore are working on that right now, with a soon-to-be established Bahrain-based fully dedicated Islamic mutual funds company.

How do you view Islamic fi nance in Europe in the next fi ve years? What are the changes you want to see?My predictive powers are poor, as are everyone else’s. I can’t tell you exactly where we will be in Europe, but I can tell you that we at Encore are trying to become a catalyst for change. Europe needs Islamic banking. Europe needs Islamic assets management. Of that, there is no doubt.

Translating that need into a reality is the diffi cult part. When will the French central bank, for example, permit what will perhaps be the most successful Islamic retail banking enterprise in all of Europe? It’s hard to say. Eventually they will, as eventually all European banking and regulatory bodies will absorb and adapt their own versions of an Islamic banking environment.

Unlike the opinion of one Swiss banker, as I stated earlier, the Islamic banking industry is not going to disappear with the fi rst scandal or meltdown. It is here to stay.

Next Forum Question

In your view, what is hampering the growth of Islamic fi nance in the west?

If you would like to air your views on the next Islamic Finance Forum Question, please email your response of between 50 and 300 words to Christina Morgan, Forum Editor, at: [email protected] before Wednesday, 19th March 2008.

www.islamicfi nancenews.comCOUNTRY REPORT

© 14th March 2008

Islam all too often resonates negatively in Europe, with much non-Muslim public opinion uncomfortable with Islamic culture and values. Secular and Christian opinion is at best suspicious of Shariah law, and indeed often antagonistic.

The notion of wanting to apply Shariah principles to banking and fi nance is treated with skepticism, if not outright hostility, especially as there is no concept of Christian or Jewish banking, even if there are some parallels between Shariah fi nancial principles and the teaching of the Old Testament.

Yet, Islamic fi nance is thriving in Europe, and many major European banks perceive it as a profi table opportunity to generate new business rather than as a threat to existing business. Although Islam is sometimes viewed as prescriptive and concerned with restricting choice, Islamic fi nance is about widening choice, and in particular about providing alternatives to interest-based fi nance. The aim is to develop fi nancial products that are seen as ethical and within the realm of socially responsible investment.

Much of the focus is on Shariah compliant asset management, with a section on liquidity management without the use of conventional instruments such as treasury bills, and an extensive discussion of the structuring of Islamic Sukuk securities.

In the banking fi eld, the development of Islamic retail banking in Europe is reviewed, with a further section devoted to Shariah compliant wealth management and private banking. Prospects for Islamic investment banking are also considered as well as the European experience of Shariah compliant fund management.

Finally, future prospects for Islamic banking and fi nance in Europe are assessed, notably the provision of Shariah compliant services for continental European Muslims, and the possible implications of Turkey’s accession to the European Union (EU) will be examined, although there the fortunes of Islamic fi nance have been rather mixed.

The Islamic fi nancial activities of major European banks will become apparent from the discussion, as will the Islamic fi nance operations of some of the Arab banks with subsidiaries and branches in Europe.

The achievements of the European-based, exclusively-Islamic banks will also be reviewed, notably those of Islamic Bank of Britain (IBB) and the European Islamic Investment Bank (EIIB).

Islamic fi nance has become a key dimension of the relationship between Arab banks and their European counterparties. While the Arab banks imported most of their conventional fi nancial products from Europe in the past, now European banks are importing Shariah compliant products from the Arab world, not only for their overseas Arab clients, but more signifi cantly for the growing Muslim population of Europe. Thanks to the emergence of Islamic banking, knowledge transfers in fi nance have become a two-way process rather than simply a one-sided affair. European banks have as much to learn from the Arab world as the latter have from Europe as interdependence replaces dependence.

Role of Islamic fi nance in Euro-Arab banking relationsThe increasing spread of Shariah compliant fi nance, and the dynamism of the economies where it is important, is making the Euro-Arab fi nancial relationship more a partnership of equals in the 21st century. In contrast to much of the 19th and 20th centuries, the Arab economies underperformed those of Europe, and one explanation for this underperformance was the development of a fi nancial system in the region based on riba that was never fully accepted, given its inherent confl ict with Islamic values. Fortunately now pious Muslims have a real choice, as Shariah compliant products have been developed over the last three decades to serve most of their fi nancial needs, and these products are at least as effi cient as their conventional counterparts.

The UK has been the gateway for Islamic fi nance to enter Europe, partly refl ecting the role of London as the leading international fi nancial center, but also as a consequence of the exposure of leading British banks to the Arab and wider Islamic world and their knowledge of these markets. It was the Arab joint-venture banks that fi rst brought Islamic fi nance to London in the early 1980s as Islamic banks in the Gulf found that re-depositing on a Murabahah basis could be an effective tool for liquidity management, with the mark-ups generated from trading activity on the London Metal Exchange.

Islamic Finance in EuropeBy Prof Rodney Wilson

continued...

“The UK has been the gateway for Islamic fi nance to enter Europe, partly refl ecting the role of London as the leading international fi nancial center, but also as a consequence of the exposure of leading British banks to the Arab and wider Islamic world and their knowledge of these markets”


14th March 2008©

Islamic Finance in Europe (continued...)

The UK has also hosted the fi rst Islamic retail bank in Europe, the IBB which started operations in September 2004, and the EIIB, which opened for business in 2006. The leading conventional banks have also become involved in serving the local retail market for Islamic fi nancial services, notably HSBC and Lloyds TSB, both of which provide Islamic deposit facilities and housing fi nance using Shariah compliant structures.

It is of course internationally that European banks have made the greatest contribution to Islamic fi nance with Barclays Capital partnering Dubai Islamic Bank (DIB) for the world’s largest Sukuk issuances; Standard Chartered making a notable contribution to Islamic fi nance through its networks in the Gulf, Pakistan and Malaysia; Deutsche Bank in pioneering capital protected funds in the Gulf, and UBS in developing Shariah compliant wealth management services to name just some examples. The operations of these major European banks will be also reviewed here.

Early Islamic trade fi nance operationsIt was the involvement of European banks in the Gulf that fi rst resulted in them encountering demands for Islamic fi nance. These date back over 80 years, as it was in the 1920s that the Eastern Bank, the predecessor of StanChart, was informed by the ruler of Bahrain that the bank’s proposed branch on the island would only be allowed if it avoided all interest-based transactions. At the same time, the National Handelsbank of the Netherlands, the predecessor of ABN Amro, was allowed to establish itself in Jeddah to provide money-changing services for pilgrims from Dutch Indonesia, the condition being that it avoided all interest-based transactions.

For the next 50 years, most of the European banks involved in the Muslim world carried out their business using interest, as indeed did their local counterparts, within fi nancial systems where governments believed religion had no role to play. By the late 1970s, however, the perceptions of European bankers were starting to change, largely as a result of the emergence of Islamic banks in the Gulf, with DIB the fi rst to be established in 1974, followed by Kuwait Finance House (KFH) in 1977, and the Bahrain Islamic Banks in 1978.

All these banks were extensively involved in Shariah compliant trade fi nance, especially of imports from Europe, using a structure known as Murabahah, whereby an Islamic bank would purchase an imported good on behalf of a client, and then resell the good to the importer for deferred payments covering the costs of the purchase plus a mark-up representing the bank’s profi t. As the bank was involved in a real trading transaction which involved ownership risks, this justifi ed its profi t, unlike interest on a conventional loan where there was only the credit risk of default.

As the payments by the Islamic banks would be made to the European exporter’s bank, those bankers involved started to learn about Islamic fi nance. In a conventional trading transaction usually the exporter’s bank would demand a letter of credit from an importer’s bank that would guarantee the payment.

With Murabahah, however, as it is an Islamic bank, and not the import distributor or agent who is making the payment, letters of credit are arguably unnecessary, as well-regulated banks are less likely to default than individual corporate clients. This potentially lowered the

costs of trade fi nancing, but European banks acting on behalf of their exporting clients were only prepared to wave the requirement for their Shariah compliant counterparties to provide letters of credit if they were satisfi ed that these Islamic banks could meet their payments obligations. To be confi dent in the timely payment of receivables, European banks needed to fi nd out more about Islamic banking and understand how Islamic fi nancing techniques worked.

Although Islamic banking and fi nancial services have been offered from Europe for almost three decades in many respects, the industry is still in its infancy. Much of the business activity has been focused on Shariah compliant institutions from the Gulf and high net worth Muslim investors, but this has resulted in activity being somewhat cyclical and linked to oil market developments.

The impact on Europe’s resident Muslim population has been marginal, and mostly confi ned to the UK, even though France and Germany have much larger Muslim populations, with that of France exceeding fi ve million. The Gulf and wider Muslim world is likely to continue to generate substantial Islamic fi nance business for London as an international fi nancial center and Europe’s leading investment banks and asset managers, but the longer-term prospects are more likely to be shaped by developments within Europe and further EU enlargements.

Prospects for Islamic fi nance in EuropeThere are two major issues, the fi rst being whether retail Islamic banking services can be provided for continental Europe’s Muslim population and if this is desirable. Second, there is the issue of EU enlargement to encompass countries and regions with long established Muslim populations in the Balkans, and Turkey, the most populous state in Europe, with over 72 million Muslims.

Although the EU functions as a single market, banking and fi nancial regulation is devolved to member states. In the UK, the Financial Services Authority has played a pro-active role with respect to Islamic banking and fi nance and been broadly supportive, but that has not been the position elsewhere in Europe, where central banks and other regulatory authorities have shown little interest.

There is also a negative perception of Shariah, especially among right-wing and nationalist politicians, which potentially inhibits the spread of Islamic banking and fi nance. What is not always appreciated is that Shariah compliance in fi nance is a choice, and not about the imposition of Shariah on those, including Muslims, who want to lead secular lives and manage their fi nancial affairs in a conventional manner.

continued...

“There is also a negative perception of Shariah, especially among right-wing and nationalist politicians, which potentially inhibits the spread of Islamic banking and fi nance”


© 14th March 2008

Islamic Finance in Europe (continued...)

Some critics assert that Islamic fi nance is simply another facet of segregation and places Muslim banking in a ghetto, but those who rebut this argument point out, as shown earlier, that many leading European banks are now heavily involved in Islamic fi nance. There is certainly potential to develop more Shariah compliant savings and fi nancing products for Europe’s Muslim community, as well as distribute Takaful insurance which remains in its infancy in Europe, despite the involvement of fi rms such as Allianz and Prudential in the Takaful industry in the Gulf. At present, the worldwide value of Takaful premiums amounts to US$1.7 billion, but less than 1% of this is spent in Europe.

The greatest potential for Islamic fi nance in Europe is undoubtedly in Turkey, where Islamic banking has been established since the 1980s although it remains on the fringes of the fi nancial system, accounting for less than 5% of deposits. Opinions on its merits are politicized as already indicated.

Turkey currently has six special fi nance houses, as Islamic banks in the country are designated, most being under joint Gulf and Turkish ownership. The largest Shariah compliant bank, Ihlas Finance House, collapsed during the fi nancial crisis of 2001-02, but depositors were compensated through Central Bank and the Ministry of Finance, which helped maintain public confi dence in the special fi nance houses.

The leading institutions are Kuveyt Türk Participation Bank, which was established in 1989, and is majority-owned by KFH and the Kuwait Social Security Fund, and Bank Asya, which is under majority Turkish ownership, and dates from 1996. Kuveyt Türk has a network of 79 branches while Bank Asya has 111 branches spread throughout the country, but with the largest number in Istanbul and Ankara. Both banks receive most of their deposits through profi t-sharing Mudarabah accounts, and Kuveyt Türk, like its Kuwait parent, is heavily involved in leasing fi nance using an Ijarah structure.

Turkey has the greatest potential for expansion of banking in Europe, including Islamic banking, as the fastest-growing economy, with GDP growth averaging 7.5% over 2004-06. Although this slowed to 5.7% in 2007, growth is expected to accelerate to 6.2% for 2008. Turkey, of course, starts from a low base, given its per capita GDP of under US$8,000, but it has attracted foreign direct investment of almost US$10 billion annually since 2005 and remittances, mainly from Turks working in the EU, average almost US$1 billion annually.

Turkey can serve as a bridge between the EU and the wider Muslim world and in the longer term, it is likely that Istanbul, and not London, will become Europe’s leading center for Islamic banking and fi nance.

In this issue

News Briefs

Capital Markets .......................................... 1Control infl ation, please

more inside...

Ratings ......................................................... 8TAQA outperforms more inside...

Malaysia: Turning the Vision into Reality................................................... 9

Interview ....................................................12John Doyle, UOB Asset Management

Ijarah Financing in Malaysia ...................14

Case Study – Dar Al-ArkanSukuk Ijarah ..............................................15

Mudarabah as a Fuel to Growth ............ 17

Key Trends in Islamic Funds, Part 2 .......18

Meet the Head ..........................................20Michael J. Zamorski, DFSA

Termsheet ..................................................21Alam Maritim Resources Sukuk Ijarah and Murabahah

Takaful News .............................................22AXA for Qatar Petroleum

more inside...Takaful Interview ......................................23Haji Syed Moheeb Syed Kamarulzaman, Takaful Ikhlas

Takaful Report ..........................................26Takaful Rating Methodology and Review Summary, Part 2

Moves ........................................................ 29

Deal Tracker NEW ........................................30

Eurekahedge .............................................31

Dowjones Islamic Indexes .......................32

Bondweb ....................................................33

Dealogic – League Tables .......................34

Events Diary...............................................37

Subscriptions Form ..................................38

Country Index ............................................38

Company Index .........................................38

Vol. 4, Issue 32 10th August 2007

T h e W o 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 o v i d e r

MALAYSIACagamas hits big timeAll-round success for Cagamas MBS (CMBS) yesterday as its residential mortgage-backed securities of RM2.41 billion (US$694.72 million) nominal value attracted a book size of RM9.10 billion (US$2.6 billion) from a diverse group of domestic and offshore investors, giving an over-subscription rate of close to four times.

Approximately 51.9% of the bids came from institutional investors, with the remaining

coming from government agencies (22.6%), asset management companies (13.9%), insurance companies (11%) and corporates (0.6%) (see Islamic Finance news, Vol. 4, issue 31, page 1 for more details).

Despite market jitters in the US sub-prime debt market, investor confi dence in the domestic asset-backed securities market was seen from both local and foreign fi xed income investors.

SINGAPORETrust withdrawnArcapita Bank has withdrawn the proposed S$300 million (US$198.29 million) IPO of Ar-capita Unit Trust in Singapore. The strength-ening of private markets for wind and water assets has caused a widening of the valua-tion gap between private and public markets, thus disrupting public market expectations.

Arcapita thus believe that divesting assets via a listing would be sub-optimal at present.

The IPO had already been registered with the Monetary Authority of Singapore, and was slated to be the fi rst Shariah compliant busi-ness to list in the country.

MAURITIUSGetting down to businessThe Mauritian ministry of fi nance has passed the 2007/2008 bill on tax measures, which encompasses Islamic banking services.

Rama Sithanen, the country’s minister of fi nance, elucidated: “Mauritius has a great opportunity to diversify its fi nancial sectors and provide foreigners with new services

in the fi elds of wealth management and investment. Existing and new banks will be able to provide such services.”

Rama added that Shariah compliant institutions are now able to carry out activities under the existing regulations and legal framework for conventional banks.

GLOBALAll-time Sukuk highAccording to latest reports, the global Sukuk market is valued at US$24.5 billion as at the end of June 2007. This marks a 75% growth over last year.

The Malaysian Sukuk market experienced a

growth rate of 71.4%, while the international markets have expanded by 83.3% over the last year. Sovereign Sukuk issues also grew by 521% to US$4.4 billion, with Malaysian ringgit-denominated Sukuk accounting for 70% of the market.

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Professor Rodney Wilson is director of Islamic fi nance studies at Durham University, the UK. He has contributed to numerous professional publications on

topics such as Sukuk, asset management, retail banking and Takaful. Wilson is also a facilitator for Islamic fi nance courses in Bahrain, Dubai, Kuala Lumpur, Kuwait, London and Singapore.


14th March 2008©

The history of Islam in Italy started when Sicily and some Italian regions were part of the Muslim Umma between 828 and 1300. From that time, and through the country’s unifi cation in 1861, Islam was almost entirely absent.

In the 1970s, the fi rst trickle of North African immigrants began arriving: They were mostly of Berber and Arab origin and came mainly from Morocco. In more recent years, they have been followed by people from Albania, Egypt, Tunisia, Senegal, Somalia, Pakistan and other Islamic countries.

Immigrants and their status in Italy became politically visible only in the early 1990s with the adoption of the fi rst of four laws legalizing immigrant status. As such, the melting pot phenomenon that has characterized the major western societies for the last 50 years is a new experience in Italian public opinion.

Italy’s situation also differs from that of other major European countries in the sense that it has developed industrially without much dependence on foreign workers. Therefore, the new immigrants have sometimes been perceived as connected to structural problems in Italian society or as a competing force with local labor.

Present situationAccording to the latest Italian offi cial statistics, Muslims make up about 32% of the 3.7 million foreigners living in Italy as at January 2007. To these 1.2 million Muslim legal residents, another 100,000 to 150,000 unoffi cial Muslim immigrants should be added. The number of foreign Muslims who have been granted Italian nationality is estimated at 50,000, while Italian Muslims (converts of full Italian ancestry who previously belonged to the Catholic faith or had no religion) are estimated to be 10,000. Therefore, the number of Muslims living in Italy is currently around 1.4 million.

Today, Muslims represent around 2.3% of Italy’s population, a percentage much lower than that of other major European Union countries, and still slightly lower than that recorded in Italy between the middle of the ninth century and the end of the 13th century. While in medieval times the Muslim population was almost totally concentrated in insular (Sicily, Sardinia) and southern (Calabria, Puglia) Italy, it is now more evenly distributed, with almost 55% of Muslims living in the north of Italy, 25% in the center and 20% in the south.

The relatively small size and young age of the local Muslim community means that Islam has yet to make a signifi cant impact on public life, but there are signs that this is changing.

For example, while Islam is not yet formally recognized by the state, despite being the second-largest faith after Catholicism, Rome houses the biggest mosque in Europe. This post-modern building, designed almost 25 years ago, displays an impressive unity of oriental and occidental architecture.

Italian regulation of Islamic fi nancial servicesThe modern Italian banking system has witnessed, since the country’s unifi cation, the promulgation of banking laws that met the specifi c regulatory needs of the different periods of its industrialization

process. The last major reform of the entire credit and fi nancial market took place between 1985 and 1993, and resulted in a model that follows the rules of both public and business laws and that requires an interdisciplinary approach to individual issues.

The last issue to which the banking system has been confronted is the emergence of new models of credit brokerage based on principles that are religious in nature and that fi nd their source in the Quran. This issue has resulted in a lively — and still open — debate on the compatibility of Islamic activities with the current Italian banking regulatory system.

The debate focuses on the resolution of important interpretative issues on the legal classifi cation of the Islamic activities; and it also aims to determine whether the current regulatory structure can embrace the Islamic model of banking activity or whether, in light of any pronounced incompatibility, it becomes necessary to identify other norms that actually permit the legal regulation of the Islamic model.

The issue of the difference in the level of risk that the depositor assumes in the Islamic versus the Italian system and the fact that the Islamic banks do not collect interest when providing fi nancing has been addressed with particular care.

The issue of the so-called “EU (European Union) passporting” — where an institution authorized in a EU country may offer products throughout the EU without the need to have separate authorization in each member country — and the second EU directive on banking (646/1989) with its two fundamental principles of mutual recognition and prudential vigilance has also had a signifi cant bearing on the de-bate. The proposed solutions can be found in La Banca Islamica e la Disciplina Bancaria Europea (The Islamic Bank and the European Banking Legislation), G Gimigliano/G Rotondo (ed. by), Giuffré Editori, Milano (2006).

Events in 2007Last year saw an array of events and publications that have fostered awareness of the Islamic fi nancial services (IFS) industry and helped build up the momentum. In January, the Fondazione Housing Sociale — set up by the Fondazione Cariplo, one of the largest banking

Islamic Financial Services in ItalyBy Alberto Brugnoni

continued...

“The issue of the difference in the level of risk that the depositor assumes in the Islamic versus the Italian system and the fact that the Islamic banks do not collect interest when providing fi nancing has been addressed with particular care”


© 14th March 2008

Islamic Financial Services in Italy (continued...)

foundations in the world — commissioned to ASSAIF a study on the structuring of Shariah compliant home fi nance products for the Italian Muslim community.

In early May, the city of Padova and Banca Popolare Etica organized a widely attended conference on Islamic fi nance. At the end of May, the well-known Università Cattolica of Milan held a seminar on Islamic fi nance attended by several students of the prestigious university. In July, the European Business Ethics Network (EBEN) hosted in Bergamo a two-day seminar on “Finance & Society in Ethical Perspective” where, inter alia, different aspects of Islamic equity fi nance were discussed.

In October, the Italian Banking Association (ABI) and the Union of Arab Banks (UAB) signed in Rome a memorandum of understanding that, in due time, shall lead to the establishment of the fi rst Islamic bank in Italy. ABI, the Islamic Development Bank and UBAE had previously organized a major event in Rome on “Banks and Islamic Finance”. At the end of October, Welcomebank/Etnica published “Stili Migranti”, a thorough study where the “Islam marketing” issue in Italy is widely analyzed. November saw the presentation of Banche e immigrati: credito, fi nanza islamica e rimesse by N Borracchini that focused on Islamic fi nance and money transfers. In December, M Mauri, a researcher at ASSAIF, put the fi nal touches to Islamic Banking in Italy. This work, shortly to be published by Il Mulino, will be the reference book for the IFS in Italy.

FeaturesThe fi rst Murabahah deal ever transacted in Italy has been concluded in the historical city of Pavia. It featured the acquisition of an industrial building by a special purpose vehicle and its disposal to a local Muslim association for its use as a cultural center. It will soon be followed by an Ijarah wa iqtina transaction. This single shot deal required several months of legal and fi scal work, performed by ASSAIF members, to put together a transaction that could satisfy both the Shariah requirements and the Italian civil code.

In the end, the Murabahah, which had been privately funded, went through with the full satisfaction of the Ministry of Finance and local Shariah scholars. It must be noted, though, that the double stamp issue, common to many EU countries, made this transaction pricey.

Home fi nance is a particularly promising market for the IFS industry. Last year, 20% of the real estate transactions, equivalent to €17.5 billion (US$26 million), registered an immigrant as a buyer. Very detailed market studies that analyze regions, cities, trends, fl ows and the buying power of different groups of immigrants are available. Cassa di Risparmio di Fabriano e Cupramontana, a regional bank in Central Italy, proposes a mortgage for the Muslim immigrants that is “Quranic compliant”.

There is a viable local market for Islamic fi nancial products in Italy. Given its size, a number of research institutes, banks and legal partnerships are looking

at IFS with keen interest. Important initiatives are expected this year in areas such as fi nancial inclusion and religious diversifi cation, consumer fi nance, home fi nance, pensions and investments.

Although not part of the Islamic world, Italy plays a key role in the Euro-Arab dialogue and is taking the initiative in shaping a new EU Mediterranean policy. Italy is also relevant to Middle Eastern investors for its industrial heritage and real estate, whether they are adhering to Shariah principles or not.

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Islamic Finance continues to surge ahead withwhat looks like inexorable growth, breaking newrecords for issuance every year. While it is still asmall area relative to capital markets as a whole,few doubt its vast potential.

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www.islamicfi nancenews.comSECTOR REPORT

14th March 2008©

Last year, a number of milestones were achieved in the securitization market in the Gulf Cooperation Council region (GCC), including the successful completion of the fi rst true sale residential “mortgage” backed securitization (by the Shariah compliant mortgage lender Tamweel).

As a result of these developments involving new assets in new jurisdictions, several legal and Shariah issues have been successfully resolved, paving the way for continued expansion of this market in the region. The following article summarizes some of the key issues raised in structuring Shariah compliant securitizations in the GCC.

The evolving legal landscape in the GCC is at the heart of a number of legal issues, which arise when structuring asset-backed products in the region. Although GCC countries in general do not have legislation that expressly regulates and/or permits securitizations, most of these jurisdictions recently enacted laws enabling the establishment of Shariah compliant true sale securitization structures that satisfy rating agency criteria (e.g. insolvency and property laws in the UAE, and Sukuk legislation in Kuwait).

Legal regimes in the GCCIn addition, a patchwork of different legal regimes may apply to a particular transaction, which adds complex layers to the legal analysis. For example, Dubai-based assets are subject to UAE federal law, Dubai emirate law and, in some instances, the laws of a particular free zone. In most instances, new regulations and the interplay between various

layers of regulation have yet to be tested and, as such, require more detailed legal analysis of the likely impact of certain scenarios on the structure and, in order to accommodate rating agency criteria, may require additional structural features to compensate for certain uncertainties.

There are also some instances in which current legislation in the GCC does not accommodate aspects of conventional securitization structures and, as such, GCC-based securitization structures must account for the certain factors. For example, the laws in most GCC countries have Napoleonic roots and, therefore, do not recognize the English common law concept of a trust. GCC countries also tend to impose legal restrictions on foreign ownership of certain assets (e.g. real estate, shares).

In order to accommodate these aspects of GCC legislation, a two-tiered special purpose vehicle (SPV) securitization structure can be used, whereby the originator transfers title in the relevant assets to a GCC-based SPV, which then transfers its rights and obligations as owner of the assets to an SPV established in a jurisdiction that recognizes trusts.

The new proposals for exempt companies in the Dubai International Financial Centre will assist in this regard. The trust is declared over the rights and obligations transferred to the second SPV, which then issues notes or Sukuk to investors.

Shariah Compliant Securitizations in the GCCBy Sahar Kianfar

Tamweel(as Originator)

ABN Amro(as AED Account Bank

and PDC Manager)

Spot Banks

Morgan Stanley(as Exchange Rate

Counterparty) Deutsche Trustee

(as Trustee and Security Trustee)

Standard Chartered (as AED Liquidity Facility Provider

and US$ Liquidity Facility Provider)

Escrow Bank(Bank with minimum rating)

Tamweel (as Servicer) Ensec Services (as Standby Servicer)Dubai Islamic Bank (as second

Standby Servicer)

Deutsche Bank London Branch (as Principal Paying Agent, Reference Agent, Cash Manager, US$ Account

Bank and Escrow Agent)

Tamweel Properties (1)

Tamweel ResidentialABS CI (1)

Investors

ReserveFund

Dubai

US$

US$

US$

US$ Purchase Price

Sale of properties and leases(including right to rental payments)

TPL Acquisition Agreement

Issuer Acquisition Agreement andTPL Declaration of Trust: sale of certain of the assets acquiredfrom the Originator and beneficialinterest in the Properties

US$

US$PurchasePrice

Notes

DIFC

US$ Liquidity Facility

Cayman Islands

AED

AED

AEDLiquidityFacility

continued...

Case study: Tamweel

www.islamicfi nancenews.comSECTOR REPORT

© 14th March 2008

Shariah Compliant Securitizations in the GCC (continued...)

Additional complexities are introduced into structuring securitizations in the GCC as a proportion of these transactions will have to be structured so as to comply with Shariah (e.g. if required by an originator or where investors are located in the GCC). Because Shariah compliant structures invariably require fi nancing of assets, securitizations provide an ideal platform for compliant transactions.

Relevant Shariah requirements which impact securitization structures include prohibitions on interest-paying instruments or receivables (e.g. notes, GIC accounts and Istisna), restrictions on the inclusion of insurance-, guarantee- and hedging-like arrangements; limitations on tranching of debt; and restrictions on the nature of transferable assets (e.g. haram assets and debts cannot be transferred). In addition, the parties will have to determine who takes responsibility for monitoring the Shariah compliance for the life of a transaction.

In addition to legal and Shariah specifi c issues which arise in GCC-based securitizations, there are a number of additional factors relevant for securitizations in any emerging market, including potential transparency issues for non-local investors, relatively limited data on historical asset performance and consequently onerous due diligence investigations, currency convertibility issues and increased costs associated with regimes for the registration of title to and creating security over certain asset classes which have not been designed to accommodate structured fi nancings.

In July 2007, the fi rst true sale transaction in the UAE and the GCC region as a whole was completed with the US$210 million issuance of notes backed by Shariah compliant home fi nancing products originated by Tamweel, the Dubai-based Islamic-compliant home fi nance provider. (See chart on previous page)

Under the transaction, Tamweel sold a portfolio of Shariah compliant residential leases (leases) to Tamweel Properties (1) (TPL, a DIFC company). Under this true sale, TPL became the legal owner of the leases and held all the rights and obligations arising under the leases (e.g. rental payments).

Immediately after acquiring legal title to the leases, TPL declared a trust in favor of Tamweel Residential ABS CI (1) Ltd (a Cayman Islands entity; the issuer) over such leases and assigned certain of its related rights to the issuer (e.g., rental payments).

The issuer applied a portion of the proceeds of the issuance of the notes toward the consideration for such transfer by TPL (which used the proceeds to purchase the leases from Tamweel). The rental payments due under the leases served as the principal source of payments due under the notes. Tamweel continued to service the leases pursuant to a servicing agreement.

Growing, growing marketAs a Shariah compliant institution, Tamweel requited a range of innovations and adjustments in order to securitize the leases (rather than conventional mortgage loans) originated in accordance with local law and practice, including thousands of existing and future post-dated lease payment checks and rent-control regulations.

TPL took on continuing obligations as lessor under the leases, which required detailed and tailored servicing procedures to accommodate this. In addition, the transaction tested for the fi rst time a recently introduced property law in Dubai, creating a variety of legal and logistical hurdles. As the leases were UAE dirham-denominated and the notes were US dollar-denominated, currency swap arrangements appropriate for a Shariah compliant institution were also introduced.

Structuring conventional and Shariah compliant securitizations in the GCC poses particular diffi culties and multi-tranched notes achieved an Aa2 from Moody’s and AA from Fitch, which is the highest ratings for any outstanding securities issued in the UAE.

Highly rated transactions like the Tamweel securitization mark signifi cant milestones in the development of the securitization market in the GCC and are likely to pave the way for similar transactions.

As GCC governments begin to enact securitization-enabling legislation, Shariah scholars continue to support the development of true-sale asset-backed products and rating agencies grow increasingly comfortable with structures designed to accommodate particular features of securitizing assets in the GCC, the market for Shariah compliant securitizations will continue to develop and grow.

Sahar Kianfar, an associ-ate in Allen & Overy’s Lon-don offi ce, is a member

of the fi rm’s securitization and Islamic fi nance groups. She can be contacted via email at [email protected]. A&O regularly advises clients with an interest and active participation in Islamic fi nance transactions, across the spectrum of the banking, capital markets and leasing industries.

“As GCC governments begin to enact securitization-enabling legislation, Shariah scholars continue to support the development of true-sale asset-backed products and rating agencies grow increasingly comfortable with structures designed to accommodate particular features of securitizing assets in the GCC”

www.islamicfi nancenews.comMARKET REPORT

14th March 2008©

Bankers try to make profi ts. For their clients as well as for themselves. Such is the mantra of fi nancial institutions; and for that matter, is usual for all kinds of business.

Despite the unparalleled growth of Islamic banks, the question of whether they will be able to withstand future economic upheaval continues to be debated. After seeing how the bubble burst for conventional fi nance following the US subprime crisis, it pays to evaluate the situation.

Some organizations try to address the question from a statistical perspective on fi nancial stability, governance, sustainability, risk management etc. Although such reports are sometimes deemed impractical as they fail to address daily problems and experiences, they can provide insights that we may have overlooked as we tackle our day-to-day activities.

Recently, the International Monetary Fund (IMF) issued a working paper entitled “Islamic Banks and Financial Stability: An Empirical Analysis”. It tries to determine whether Islamic banks are more or less stable than their conventional counterparts, and uses the “z-score” as a benchmark.

The z-score is a popular tool used to measure a bank’s soundness. It is considered an objective measure because it focuses on the risk of insolvency, i.e. the risk that a bank (whether commercial, Islamic or other) will run out of capital and reserves. From the sample provided, basic data analysis indicates that Islamic banks may be more stable than commercial banks.

Large Islamic banks (which own more than US$1 billion worth of assets) have, on average, higher loan-to-asset ratios compared to large commercial banks. This may be due to the fact that Islamic banking prohibits investments involving non-lending operations such as regular bonds or T-bills in Islamic banking.

Large Islamic banks have higher cost-to-income ratios than commercial banks of the same asset worth, and this is in line with the literature on effi ciency. Here, the Islamic banks in the sample are, on average, bigger than commercial banks.

Comparison of average z-scores

Source: IMF Working Paper — Monetary and Capital Markets Department: “Islamic Banks and Financial Stability: An Empirical Analysis”, by Martin Čihák and Heiko Hesse, IMF, January 2008

The survey shows that:

(i) small Islamic banks tend to be fi nancially stronger than small commercial banks;

(ii) large commercial banks tend to be fi nancially stronger than large Islamic banks; and

(iii) small Islamic banks tend to be fi nancially stronger than large Islamic banks.

The result suggests that it is signifi cantly more complex for Islamic banks to adjust their credit risk monitoring system as they become bigger.

Due to the limitations on standardization in credit risk management, monitoring the various profi t-loss arrangements becomes more complex as the scale of the banking operation grows. Because of the larger scale, better governance is needed to avoid adverse selection and moral hazard. Another possibility is that small banks concentrate on low-risk investments and fee income, while large banks do more profi t-loss sharing (PLS) business.

While mergers of small Islamic banks should be encouraged from an effi ciency viewpoint, the paper suggests that to reap these effi ciency benefi ts, attention needs to be paid to prudential risks, which — other things being equal — tend to play a greater role for larger Islamic banks.

A bigger market penetration of Islamic banks in a country’s fi nancial system does not appear to have played a signifi cant part in the outcome of the results.

However, we believe that the fi ndings in this paper should be viewed as preliminary. This is because it uses only one benchmark and lacks complete coverage of the database. On top of that, it relied on unconsolidated statements and focused its research only on full-fl edged Islamic banks. The Islamic “windows” or Islamic branches operated by some commercial banks were largely ignored.

Data limitations also prevented the authors from fully taking into account all aspects of Islamic fi nancial contracts, for example, by distinguishing differences between PLS and other investments. And precisely those aspects could have partly infl uenced the results.

The report is reassuring because in a way, it praised small-sized Islamic banks (with assets worth below US$1 billion). Although larger banks will not fi nd the revelations alarming, they must not ignore the implicit warning it carries. As we build our Islamic mega banks, we should be reminded that they should be solid like a skyscraper and not the Titanic, which can be easily sunk by an iceberg. Simple pooling of money can sometimes mean multiplying risk, not stability.

IMF on Islamic Banks: Build Skyscrapers, Not the TitanicBy Paul Wouters

Paul Wouters is a consultant to Bener Law Offi ce in Istanbul, Turkey. He can be contacted via email at [email protected]

BENERIstanbul – Turkey

www.islamicfi nancenews.comMARKET REPORT

© 14th March 2008

Will 2008 be another bullish year for the emerging markets? It is too early to say, but the performance of the Dow Jones Islamic Markets (DJIM) Index family refl ects the continuation of last year’s positive trend in the BRIC (Brazil, Russia, Indonesia and China) countries, Southeast Asia and the Middle East.

In the last quarter of 2007, these regions demonstrated a remarkable resistance to the downtrend among western markets stemming from the subprime mortgage crisis.

One reason these markets are bucking the trend is that investing based on Islamic law, or the Shariah, grows 15% to 20% annually. Most of this growth occurs where markets are doing better.

However, Islamic banking is not a Middle or Far Eastern phenomenon. It already is global and worthy of being examined in its own right. Especially in times when conventional (interest-charging) banks are under pressure, Islamic indices tell you whether investing in Shariah compliant fi rms can pay off. Islamic banks don’t charge interest and their business is based on risk-sharing models.

“Islamic banking contributes to the diversifi cation of the global fi nancial system,” Joe Ackermann, CEO of Deutsche Bank AG, said last month at the Middle Eastern CEO conference of the International Institute of Finance (IIF) in Dubai.

Kuwait still leadsThe DJIM February performance table is diversifi ed as well, led by the DJIM Taiwan Index with a plus of 12.49%, the DJIM Thailand (+10.49%) and the Indonesian Shariah compliant DJ index (up 9.77%).

It is interesting to note that the DJIM Indonesia outperforms the conventional Dow Jones Indonesia Index by 3.86% — the biggest advance of a DJIM Index to its mainstream counterpart. Kuwait still leads the year-to-date league with the oil-rich state’s DJIM Kuwait Index gaining 7.9% since the 31st December 2007.

The northern gulf state currently enjoys a strong comeback on the international investor’s scene after Parliament approved a massive tax-rate cut for foreign companies at the end of 2007. Overall, the second month of the year was a turnaround period for many indices. While in January only three out of 23 DJIM stock indices generated a positive rate of return, this ratio reversed in February.

More interesting is the fact that the established markets have not been attractive for Islamic investors. The DJIM Europe Titans 25 Index advanced insignifi cantly in February (+2.36%). The DJIM US Titans 50 Index, comprising the 50 fi rms with the biggest market capitalization, operating in a halal manner lost 0.05%, and the DJIM Japan Index 1.17% last month.

Both indices have retreated by 8.5% and 7.16%, respectively, since the beginning of the year. Its conventional counterparts fell into negative territory as well. Only the DJIM Philippines Index performed worse (off 3.96%).

The DJ Citigroup Sukuk Index, which encompasses non-interest bearing, US-dollar denominated Islamic bonds, known as Sukuk, with

investment grade remained almost unchanged with a return of 0.23% as at the 25th February. It is said that due to the credit crisis, banks delayed the issuance of Sukuk, which are one of the most innovative halal investment instruments.

The global volume of Sukuk is expected to top US$100 billion until 2009. When Deutsche’s Ackermann opened the bank’s subsidiary in Riyadh in May 2006, he set a high target: His institute aims to become the leading issuer of Islamic bonds.

The Dubai International Financial Exchange (DIFX), which is currently merging with the American Nasdaq, has already become the biggest exchange for listed Sukuk, with a total volume of US$13.39 billion.

Source of diversifi cationRegarding the sectors, the DJIM Basic Materials Index continued to be the top performer last month with an advance of 8.64%, and the DJIM Oil and Gas regaining ground with a 7.99% increase. And while the fi nancials are still suffering all over the world as a result of the credit crunch, stock exchange-listed Islamic banks and insurers gained 4.69% in February.

Investors focusing on fi rms compliant with principles of the Quran shy away from technologies (off 0.55%), consumer services (down 1.38%) and telecommunications (4.2% lower).

“Even if oil prices dip because of a US recession, we believe that vast infrastructure projects in the Gulf region would mitigate losses in the carbon sector,” said Ackermann, who hailed Islamic banking as a source of diversifi cation and a stabilizing force in global capital markets.

Non-banks are prohibited from earning money through alcohol, casinos, pork products, weapons or tobacco products. The DJIM index family, created in 1999, gives the growing halal fund industry a tool to not only put a Muslim’s faith into fi nance, but also can build a diversifi ed fund family in terms of a country or sector focus.

For example, the asset management company of Deutsche Bank, DWS Investments, uses the DJIM Global Index as a benchmark for its Islamic funds family. In Dubai, DWS funds can be purchased at all branches of Dubai Islamic Bank. This allows Muslims and non-Muslims to invest in a non-interest, non-conventional and an ethical style.

Emerging Markets Buck the TrendBy Gérard Al-Fil

Gérard Al-Fil is a correspondent for Swiss fi nancial website moneycab.com, Swiss banking magazine Schweizer Bank and

for the German weekly Euro am Sonntag. He reports extensively from the UAE, Kuwait, Bahrain, Qatar, Oman, Iran and Turkey.

“Overall, the second month of the year was a turnaround period for many indices”

www.islamicfi nancenews.comMEET THE HEAD

14th March 2008©

Islamic Finance news talks to leading players in the industry

Could you provide a brief journey of how you arrived where you are today?

I worked with a leading Indian commercial bank for 16 years and decided to change tack and worked with an Indian Islamic fi nancial institution as its general manager for just as long. I was selected as general manager of Faisal Islamic Bank of Kibris Ltd, North Cyprus.

During this long span of my association with the world of Islamic banking and fi nance, I enjoyed a few rare privileges. I was invited by the Central Bank of The Islamic Republic of Iran to study the country’s banking system.

Academically, I have pursued with great enthusiasm the subject of Islamic banking and fi nance since its early days. In the process, I attended the orientation program at The Islamic Foundation, Markfi eld in Leicester, the UK. I was invited to the silver jubilee of Islamic Development Bank in Jeddah, Saudi Arabia, where I had met leading fi nancial and Shariah experts.

While traversing this journey, I was able to assess the emergence of this fi eld on the global stage, the probable dearth of manpower, skilled human resources and the ever-growing demand for educated and trained professionals in Islamic banking and fi nance. This motivated me to establish the institute in 1996 as an equal-opportunity education and training center of excellence.

What does your role involve?I play a multi-faceted role of faculty, guide, practitioner, consultant and evaluator. The institute offers a postgraduate diploma in Islamic banking and fi nance through distance learning.

The course is designed, updated and revised under my supervision by an academic council assisted by the faculty team. I interact with various institutions and universities to create awareness on the subject.

What is your greatest achievement to date?When the institute was started more than a decade ago in this non-Muslim country, it was thought that the idea was misplaced but today, its geographic reach from Trinidad in the West Indies to Hong Kong and enrolment of a number of non-Muslim professionals, even from premier business schools, is an achievement, apart from publication of my interviews on the subject in leading dailies and journals.

Which of your products/services deliver the best results?

The web-based program’s success is attributed to the performance of students and their ability to become absorbed in the Islamic fi nancial sector demonstrates the success of our effort. The course is offered under distance learning, knowledge resource and fl exible learning convenience programs at affordable cost and with convenient mode of learning from anywhere, which contributes major strength to our business.

What are the strengths of your business?Overwhelming response and interest in learning the subject received from IT professionals, fi nancial management experts, postgraduates and individuals from other fi elds.

What are the factors contributing to the success of your company?

A maiden venture, pioneering effort implemented with dedication and commitment. Coverage by the media, both electronic and print, of the institute’s profi le and relevance of the subject in today’s fi nancial environment.

What are the obstacles faced in running your business today?

Major constraints are lack of awareness of the subject in most non-Muslim countries where the concept is misunderstood and misinterpreted. Lack of qualifi ed professional trainers to educate and train an upcoming generation of young Islamic bankers. Absence of a global accrediting, affi liating or recognizing body of professionals. There is a need for a central supervisory organization to regulate and guide education and training in the fi eld of Islamic banking and fi nance.

Where do you see the Islamic fi nance industry, maybe in the next fi ve years?

Islamic fi nance is developing as a fast-emerging phenomenon and at the current growth rate, it will succeed in occupying a prominent position in the global fi nancial world by attracting more than US$5 trillion worth of business. Business-wise, it will provide a viable alternative to conventional fi nance in all areas of operation.

Name one thing you would like to see change in the world of Islamic fi nance?

Innovation and evolution of marketable products.

Name:

Position:

Company:

Based:

Age:

Nationality:

M A Majeed

Dean

The Institute of Islamic Banking & Finance

Hyderabad, India

59

Indian

The Institute of Islamic Banking and Finance is India’s maiden attempt at institutionalizing education at all levels in Islamic economics, banking and fi nance. IIBF is a registered non-profi t, equal opportunity, professional, educational research and training institution that is independent, non-affi liated to any university nor accredited to retain complete

academic autonomy and intellectual independence regarding course content, methodology and orientation.

www.islamicfi nancenews.comTERMSHEET

© 14th March 2008

INSTRUMENT RM160 million (US$50 million) Redeemable Secured Serial Sukuk Istisna

ISSUER SACOFA

OBLIGOR —

PRINCIPAL ACTIVITIES The principal activity of Sacofa is to carry on the trade or business of a telecommunications infrastructure and services company including all its related businesses. It has the exclusive rights in developing, owning and managing telecommunication towers and structures (towers) in the State of Sarawak. SACOFA targets to construct 128 new telco towers in 2008 as compared to 76 towers and 119 towers in 2007 and 2006, respectively.

BOARD OF DIRECTORS Ahmad Tarmizi SulaimanTeo Tien Hiong @ Teo Thin PeeIr Abang Jemat Abang BujangSamat JunaiGhazali Ismail Azwan Khan Osman KhanSudarsono OsmanThien Joon Hiong (alternate director to Teo Tien Hiong @ Teo Thin Pee)Mohamed Adlan Ahmad Tajudin Mohammad Farid bin Mohamed Yunus (alternate director to Azwan Khan bin Osman Khan)

ISSUE SIZE RM160 million

DATE OF ISSUE 18th November 2005

MATURITY (TENURE) Four to nine years

COUPON Fixed profi t rates per annum calculated in the nominal value of each tranche

PAYMENT SCHEDULE Payable semi-annually in arrears

AUTHORIZED SHARECAPITAL

RM500 million (US$156 million)

IDENTIFIED ASSETS Telecommunication towers to be constructed in accordance with the specifi cations/descriptions of the construction contracts and have a fair value of approximately RM160 million

LEAD ARRANGER CIMB Investment Bank

LISTING/ LAW Sukuk Istisna will not be listed on Bursa Malaysia Securities or any other stock exchange

FINANCIAL ADVISER Newfi elds Advisors

TRUSTEE AmanahRaya

SHARIAH ADVISER CIMB Shariah Committee

METHOD OF ISSUE Bought deal basis

PURPOSE OF ISSUE To part-fi nance the construction of new telecommunication towers as well as the purchase of existing telecommunication towers; repayment of existing shareholders’ loans and to fi nance the issuer’s working capital requirements

INITIAL RATINGS AAA IS

SACOFA and Sarawak Gateway’sSukuk Istisna

For more termsheets, visit www.islamicfinancenews.com

www.islamicfi nancenews.com

14th March 2008©

UAEThird annual World Takaful ConferenceDubai International Financial Centre (DIFC) will again host the third annual World Takaful Conference from the 14th to 15th April. This year’s conference carries the theme, “Expanding the International Market for Islamic Insurance: Product Innovation and New Growth Opportunities”.

With estimates of the industry growing to US$7.4 billion in global annual contributions by 2015, the conference is the ideal platform to educate the market about Takaful as awareness is still low in the Middle East, said Parvaiz Siddiq, Salama general manager.

The total premiums written by Takaful insurers are expected to reach 90% of the world’s insurance market share by 2010.

KUWAITAl-Ahleia posts US$60 million profi tAl-Ahleia Insurance reported earning a profi t of KWD16.32 million (US$60.27 million) for the year ended the 31st December 2007 with earnings per share (EPS) valued at 117.88 Kuwaiti fi ls. The net profi t includes unrealized total revenue worth KWD1.94 million (US$7.17 million) and outstanding expenses amounting to KWD476,701 (US$1.76 million).

UAEAl Buhaira and Uniqa in Takaful ventureAustria-based Uniqa Group and the UAE’s Al Buhaira National Insurance are to set up Takaful Al Emarat Insurance with a paid-up capital of AED150 million (US$40.84 million). The Shariah compliant health and life insurance outfi t will be located in Dubai.

Uniqa will hold a 15% stake in the company while Al Buhaira will own 20%. Other prominent founders will hold 10%. The other 55% of the share capital will be offered for subscription on the 23rd March.

Takaful Al Emarat will initially offer its products within the UAE. However, expansion of the business to the GCC, MENA and other Islamic countries is being considered.

PAKISTANCoverage for APIF participantsPak-Qatar Family Takaful (PQFTL) has partnered Atlas Asset Management (AAM) to provide Takaful coverage to participants of the Atlas Pension Islamic Fund (APIF).

Under the agreement, PQFTL is to provide the participants with the Takaful cover of 100 times of their monthly investment in the fund up to a maximum of PKR4 million (US$63,948). This applies in the event of accidental death, permanent partial disability or permanent total disability due to an accident.

UAEFGB, Takaful cover home fi nanceFirst Gulf Bank (FBG) and Abu Dhabi National Takaful (Takaful) have signed a strategic alliance agreement to provide Takaful cover to home fi nance customers of the bank.

Under the scope of the agreement, FGB customers will be able to avail themselves of Shariah compliant life insurance when fi nancing their home purchase through the bank.

The life insurance premium will be a single amount paid at the beginning of the tenor in full or can be paid in easy installments for a tenor of the customer’s choice. This is a pioneer venture in a series of initiatives that FGB and Takaful will provide to the bank’s customers.

SAUDI ARABIASaudi Re launchedA new insurance company Saudi Reinsurance Company (Saudi Re) was launched in Riyadh. Saudi Re has a SAR11 billion (US$3 billion) capital divided into 100 million shares.

It will benefi t from the new regulations, which have liberalized the market and opened it to regional and international players.

GERMANYAnother record for Hannover ReHannover Re’s fi nancial year 2007 surpassed its profi t targets and recorded the highest group net income in the company’s history, announced CEO Wilhelm Zeller.

He said the operating profi t — which does not include the profi t of around EUR22 million (US$34.21 million) booked by the Praetorian Financial Group — surged by 14.6% to EUR940 million (US$1.46 billion). Group net income surged by 42.6% to EUR733.7 million (US$1.14 billion). Earnings per share climbed from EUR4.27 (US$6.64) to EUR6.08 (US$9.46).

The gross written premium of the Hannover Re Group contracted as expected by 11.1% to EUR8.3 billion (US$13 billion). This was attributable to the sale of Praetorian and the associated withdrawal from US specialty business. The vigorous growth generated in life and health reinsurance failed to offset these infl uencing factors. The return on equity stood at 23.5%.

PAKISTANPak-Qatar and UBL Fund seal agreementUBL Fund Managers and Pak-Qatar Family Takaful sealed an agreement on Thursday that will provide all investors of UBL Funds Islamic Investment Plans with Shariah compliant accidental and medical Takaful coverage.

www.islamicfi nancenews.comTAKAFUL REPORT

© 14th March 2008

Takaful Products in Trinidad and Tobago

In 1999, the fi rst Takaful provider in Trinidad and Tobago, Takaaful T & T Friendly Society (TTTFS or the Society) was incorporated under the country’s Friendly Societies Act. It aimed to promote the general welfare of the Muslim population by offering a range of fi nancial products that would encourage growth, development, improvement and expansion through mutuality, voluntarism, savings and investments.

These included what are termed “primary offerings”, the three main instruments being a Funeral Benefi t Scheme, an investment fund and the establishment of a general co-operative Waqf .“Spin-off” products include a Hajj fund, which facilitates the performance of the Hajj by encouraging thrift, savings and investment.

“Secondary offerings” include Qurbani services, i.e. sale of sheep, slaughter and distribution at the time of Eid ul Adha; sale of various items such as printed mugs and T-shirts, dates (during the month of Ramadan) and equipment rental (multimedia projector with laptop).

Steady growth in benefi t schemeAmong the three main products, the Funeral Benefi t Scheme — a mutual aid scheme — has shown a steady pattern of growth since its inception in 1999. Members contribute to a common pool with the purpose of sharing and/or alleviating each other’s burdens when a loved one dies. Contributions are invested and the contributions plus the income derived, less management fees, claims and reserves, go back to the participants of the scheme as rebates.

An annual contribution of TT$120 (US$19), provides members with cover for themselves and three dependants and a benefi t of TT$2,500 (US$396). In 2007, 300 participants contributed TT$30,000 (US$4,746), the value of claims was TT$16,354 (US$2,587) and members received a rebate of 33%. Several mosque-based organizations have enlisted their Zakah recipients on this scheme.

InvestmentThe Investment Fund is open to all members who can afford an initial minimum investment of TT$100 (US$15.82, and any amount thereafter) and who are required to give three months’ written notice for withdrawals.

Investments are carried out by an elected board of management in accordance with the Friendly Societies Act and Islamic Shariah. The year 2007 saw some TT$8 million (US$1.26 million) invested in real

estate, the Trinidad and Tobago stock market, shares in the Muslim Credit Union Cooperative Society (the oldest local Muslim fi nancial organization), joint venture transactions with members, equipment rental and trading. The average dividend over the last fi ve years (2003-07) was 13.36%.

WaqfTTTFS aims at using the Islamic institution of Waqf as a platform for charitable, welfare and development programs. Both members and non-members contribute cash or in kind for the benefi t of the entire community.

Charity through Waqf is not seen simply as a means of transferring wealth to the poor and needy but serves as a sustainable mechanism for development, individually and otherwise. Contributors are not entitled to any monetary benefi t; nor can they take back their contributions.

Instead, the benefi ts that accrue include a means to the Hereafter; a mechanism for expressing gratitude to the Creator; a method for self-purifi cation; sustainable benefi ts to the poor and needy, and last but not least, nurturing futuristic thinking.

The profi ts generated by this fund are disbursed for charitable and welfare purposes and in the past two years, TTTFS has been able to make disbursements from its Cooperative Waqf Fund to four Muslim institutions in the country, i.e. two homes for the aged, one children’s home and a shelter for battered/abused women. At the end of 2007, the net assets of the Waqf Fund was approximately TT$400,000 (US$63,286).

In addition to the Society’s annual general meeting, social and educational activities and sporting events include an annual dinner, an annual football competition in which Jamaats across the country take part, while lectures and seminars are arranged so that a larger audience is exposed to various types of Islamic fi nancial intermediation.

The Society maintains a website (www.takaafultt.org), publishes a newsletter and conducts orientation seminars at mosques as part of its education and marketing drive. Last year, it sponsored a weekly cable-TV program hosted by Imtiaz Ali, manager of TTTFS. Imtiaz has since been appointed to the Advisory Friendly Societies Council (State Board) by the Minister of Labour, Small & Micro Enterprise Development in the Government of Trinidad & Tobago.

Since 2005, the Society has continued its membership in the prestigious International Co-operative and Mutual Insurance Federation (ICMIF). At present, TTTFS has a membership of 854 and assets of TT$10 million (US$1.58 million).

By Yvonne Teelucksingh

Yvonne Teelucksingh is a consultant at Takaaful T & T Friendly Society. She can be contacted via email at [email protected]

“Among the three main products, the Funeral Benefi t Scheme — a mutual aid scheme — has shown a steady pattern of growth since its inception in 1999”

www.islamicfi nancenews.comMOVES

14th March 2008©

AL RAYAN INVESTMENT — UAE

Asad Zafar is the new CEO of Al Rayan Investment, a wholly owned subsidiary and investment banking division of Masraf Al Rayan.

Asad has extensive Islamic banking experience. Prior to this, he was managing director of Dubai-based HSBC Amanah.

BANK DANAMON — Indonesia

Bank Danamon has appointed Anton Gunawan as chief economist and head of treasury team research. He will be involved in the setting up of an economics and market research team to support Danamon’s treasury, capital market and fi nancial institutions operations.

Meanwhile, Helmi Arman, an economist at Bahana Securities, will join Danamon in April.

TAYLOR WESSING — London

Taylor Wessing LLP in London has appointed Kazi Rahman as an associate within the fi nance group, with a particular interest in Islamic fi nance.

Formerly with Norton Rose, Kazi has worked with Middle East banks on Islamic fi nance transactions.

HBG HOLDING — UAE

HBG Holdings (HBG), a Dubai-based investment fi rm specializing in private equity and real estate investments in the Middle East and South Asia, has appointed Richard Stockdale as senior vice-president and chief fi nancial offi cer.

Stockdale will be responsible for structuring and closing private equity transactions as well as evaluate plans for launching a niche corporate fi nance advisory arm. Prior to the appointment, he was CEO of Lloyds TSB Bank Group’s wholly owned offshoring subsidiary in India.

BURSA MALAYSIA — Malaysia

Bursa Malaysia has appointed Prof Dr Aznan Hasan as its Shariah adviser. Aznan will provide Shariah advisory services on matters relating to strategic product development and innovation in the Islamic capital market. He will also work closely with the relevant industry players and authorities to position and profi le the Exchange within the global Islamic capital market.

Aznan is well-versed with and experienced in the Islamic fi nance industry. He is currently an assistant professor at the Ahmad Ibrahim Kulliyyah of Laws of the International Islamic University Malaysia.

STANDARD BANK — Europe/Middle East

Mark Taylor has been promoted to head of compliance for Europe and the Middle East by Standard Bank. He will be responsible for managing compliance issues across continental Europe, the UAE as well as the offshore group.

DUBAI ISLAMIC BANK — UAE

Dubai Islamic Bank has appointed Mohammad Ebrahim Al Shaibani as chairman of its board of directors. He replaces Dr Mohammad Khalfan bin Kharbash, who is stepping down following the conclusion of the three-year tenure of the current board.

Shaikh Khalid bin Zayed bin Saqr Al Nahyan, chairman of Tamweel, has been named vice-chairman.

MAKAN CAPITAL GROUP — UAE

Real estate private equity group and investment banking fi rm Makan Capital Group has appointed Samer Wahbeh as director of the Property Development Fund and acting chief fi nancial offi cer at Makan Capital Group (MCG).

Samer has extensive knowledge of the airline, transportation, real estate and fi nancial services sectors, and has worked closely with investment banks and corporate investors while based in Abu Dhabi.He was chief fi nancial offi cer at SinoGulf Investments and a senior manager at PricewaterhouseCoopers.

DLA PIPER — Middle East

DLA Piper has hired Peter Monk as regional corporate head in the Middle East. Monk was with Australian fi rm Minter Ellison, where he spent 18 years — 12 as a partner — working across the fi rm’s Australian and Asian offi ces.

At DLA Piper, Monk will build the corporate team across the region. Currently, the fi rm has an offi ce in Dubai and plans to launch in Abu Dhabi, Qatar and Oman as soon as it receives the relevant licenses. He specializes in domestic and cross-border mergers and acquisitions, private equity transactions and joint ventures.

HSBC — Qatar

Aamir Jawaid, a banker with 10 years’ experience in banking in the Middle East, will take up the role of director of project fi nance from the 15th March.

Aamir has been with HSBC since 2006. Apart from senior roles in investment banking, focusing on fi nancial advisory and fi nancing, he has extensive experience in the oil and gas, petrochemicals, telecoms, transportation and infrastructure sectors. Prior to joining the banking industry, Aamir worked in the petrochemicals industry.

BAHRAIN ISLAMIC BANK — Bahrain

Mohammed Ebrahim Mohamed is now CEO of Bahrain Islamic Bank (BIsB). He joined BIsB in April 2007.

Mohammed has held several key management, executive and senior positions in various local and international banks and fi nancial companies in Bahrain and abroad such as CrediMax, Bank of Bahrain and Kuwait, Saudi National Commercial Bank and Chase Manhattan Bank.

RHB — Malaysia

RHB Banking Group, the fourth-largest lender in Malaysia, has appointed Renzo Viegas as head of retail banking.

Viegas, who previously headed various aspects of banking operations in India, Singapore, Guam (US) and Asia-Pacifi c, was chief operating offi cer and chief fi nancial offi cer of Citibank Malaysia prior to his appointment.

BANK PERTANIAN – Malaysia

Bank Pertaninan Malaysia has appointed Mohamed Salleh Bajuri its chairman. His career in fi nance sector spans over 30 years. He is a chartered accountant by training.

Mohamed Sallleh started his career path as an auditor with Marwick & Co. He then served at Mayban Finance and Malayan Banking before he moved to stock broking fi rm JB securities as managing director.

www.islamicfi nancenews.comDEAL TRACKER

© 14th March 2008

Islamic Finance newsAdvisory Board:

Mr Daud Abdullah (David Vicary)Chief Operating Offi cer

Asian Finance Bank

Dr Mohd Daud BakarChief Executive Offi cer

International Institute of Islamic Finance

Prof Dr Mohd Masum BillahGroup Executive ChairmanMiddle Eastern Business

World Group of Companies

Dr Humayon DarChief Executive Offi cer

BMB Islamic

Mr Badlisyah Abdul GhaniChief Executive Offi cer

CIMB Islamic

Ms Baljeet Kaur GrewalGroup Chief EconomistHead, Global ResearchKFH Research Limited

Mr Sohail JafferPartner

International Business Development FWU International

Dr Monzer Kahf Consultant/Trainer/Lecturer

Private Practice

Mr Mohammed Ridza AbdullahManaging Partner

Mohamed Ridza & Co

Prof Bala ShanmugamDirector of Banking & Finance Monash University Malaysia

Mr Muhammad Nejatullah SiddiqiAuthor, Scholar, Speaker, Trainer

Mr Rushdi SiddiquiGlobal Director

Dow Jones Islamic Indexes

Mr Dawood TaylorHead of Takaful Taawuni Division

Bank Aljazira

Mr Abdulkader ThomasPresident & CEO

SHAPE – Financial Corp

Mr Paul WoutersPartnerBener

Prof Rodney WilsonDirector of Postgraduate Studies

Durham University

Mr Sohail ZubairiVice President & Head Shariah

Coordination Dubai Islamic Bank

Another Islamic Finance news exclusive

ISSUER SIZE (million) INSTRUMENT

Pakistan Government TBA TBA

Pakistan International Airlines

US$1,086,609,140 Ijarah

Pak Elektron US$1,997,443,272 Diminishing Musharakah

Pace Pakistan US$31,959,092 Diminishing Musharakah

Westports US$251.15 Musharakah MTN

Adhi Karya US$10.95 Mudarabah

Al Aqar KPJ REIT US$73.77 Ijarah; CP/MTN

Al Noor Sugar Mills US$7.99 Diminishing Musharakah

BHCB US$1,881,600,350 Islamic/Conventional CP/MTN

FACB Industries US$25.11 Murabahah; CP/MTN

FACB Industries US$32.96 BBA

Glomac US$18.83 Murabahah MTN

Haisan US$62.79 Ijarah

Hong Leong Industries US$156.97 Musharakah CP/MTN

IJM Corp US$251.15 TBA

Indonesia Comnets Plus US$10.95 Murabahah

Javedan Cement US$15.98 Diminishing Musharakah

Kwantas US$20.41 Murabahah; CP/MTN

Lahore Suncity US$250 Musharakah

Liberty Power US$191.75 Diminishing Musharakah

Megan Media Holdings US$100.47 6 Series Bonds

Moccis Trading US$119.31 Murabahah

Naim Cendera US$156.99 Musharakah CP/MTN

National Industrial Parks US$31.96 Ijarah

Orient Petroleum US$31.96 Diminishing Musharakah

Pendidikan Industri US$47.1 BBA

For more details and the full list of deals visit

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Deal trackerKeeping you abreast of the world’s upcoming Shariah compliant deals

www.islamicfi nancenews.comFUNDS PAGE

14th March 2008©

80

90

100

110

120

130

140

150

Sep-04

Dec-04

Mar-05

Jun-0

5

Sep-05

Dec-05

Mar-06

Jun-0

6

Sep-06

Dec-06

Mar-07

Jun-0

7

Sep-07

Dec-07

Monthly returns for Emerging Markets funds (as of 12th March 2008)

FUND MANAGEMENT COMPANY Performance Measure FUND DOMICILE

1 Al Rajhi Local Shares Fund Al Rajhi Banking & Investment Corporation 22.12 Saudi Arabia

2 Amanah Saudi Industrial Fund Saudi British Bank 21.06 Saudi Arabia

3Al Qasr GCC Real Estate & Construction Equity Trading Fund

Banque Saudi Fransi 20.68 Saudi Arabia

4 Bakheet Saudi Trading Equity Fund Bakheet Investment Group 20.46 Saudi Arabia

5 Jadwa Saudi Equity Fund Jadwa Investment 20.41 Saudi Arabia

6 Riyad Equity Fund 2 Riyad Bank 20.06 Saudi Arabia

7 Saudi Equity Fund (Al Raed) Samba 19.49 Saudi Arabia

8 AlAhli Saudi Trading Equity Fund National Commercial Bank 18.50 Saudi Arabia

9 Jadwa GCC Equity Fund Jadwa Investment 18.13 Saudi Arabia

10 AlAhli GCC Trading Equity Fund National Commercial Bank 17.90 Saudi Arabia

Eurekahedge Emerging Markets Islamic Fund Index* 3.48

DisclaimerCopyright 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 affi liates provide any express or implied warranty or representations as to originality, accuracy, completeness, timeliness, non-infringement, merchantability and fi tness for any purpose.

Contact EurekahedgeTo list your fund or update your fund information: [email protected]

For further details on Eurekahedge: [email protected] Tel: +65 6212 0900

Eurekahedge Asia Pacifi c Islamic Fund Index

Monthly returns for Developed Markets funds (as of 12th March 2008)

FUND MANAGEMENT COMPANY Performance Measure FUND DOMICILE

1 Al Rajhi European Equity Fund Al Rajhi Banking & Investment Corporation 79.05 Saudi Arabia

2Islamic Al Yusr Certifi cate on the ABN Amro US Opportunities Fund A

ABN Amro 3.03 Not disclosed

3Islamic Al Yusr Certifi cate on the ABN Amro European High Dividend Equity Fund A

ABN Amro 1.50 Not disclosed

4 AlAhli Islamic Europe Equitybuilder Certifi cates National Commercial Bank 1.06 Germany

5 AlAhli Islamic US Equitybuilder Certifi cates National Commercial Bank 0.90 Germany

6 Al Madar US Index Fund Almadar Finance & Investment 0.83 Bahrain

7 AlAhli US Trading Equity Fund National Commercial Bank 0.71 Saudi Arabia

8 Solidarity European Real Estate Fund Solidarity Funds Company 0.55 Bahrain

9 Islamic Certifi cate on European Real Estate Altiplano ABN Amro 0.51 Not disclosed

10 Dow Jones Islamic Fund Allied Asset Advisors 0.27 US

Eurekahedge Developed Markets Islamic Fund Index* 3.05

Ind

ex V

alu

es

www.islamicfi nancenews.comMARKET INDEXES

© 14th March 2008

DESCRIPTIVE STATISTICS Market Capitalization (US$ billions) Component Weight (%)

IndexComponent

numberFull

Float adjusted

Mean Median Largest Smallest Largest Smallest

DJIM World 2628 19211.78 15639.77 5.95 1.26 469.71 0.01 3 0

DJIM Asia/Pacifi c 1116 3759.83 2481.81 2.22 0.5 115.09 0.01 4.64 0

DJIM Europe 386 5158.91 3905.38 10.12 2.68 208.74 0.21 5.34 0.01

DJIM US 748 8503.77 8017.12 10.72 2.6 469.71 0.14 5.86 0

DJIM Titans 100 100 8065.69 7245.33 72.45 47.15 445.29 11.47 6.15 0.16

DJIM Asia/Pacifi c Titans 25 25 1187.54 794.16 31.77 23.89 82.34 11.47 10.37 1.44

Mean, median, largest, smallest and component weights are based on fl oat adjusted market capitalization, not full market capitalization.

Anthony YeungRegional Director

[email protected]: +852 2831 2580

Learn more about the Dow Jones Islamic Market Indexes

Data as of the 12th March 2008

INDEX PRICE RETURN (%)

1 Week 2 Week 3 Week 1 Month 3 Month 6 Month 1 Year YTD

DJIM World -1.57 -4.04 -0.66 -0.36 -5.84 -8.10 6.43 -8.28

DJIM Asia/Pacifi c -1.40 -5.50 -0.13 2.77 -4.98 -10.86 1.98 -8.96

DJIM Europe -0.65 -3.38 1.74 1.79 -4.85 -6.36 9.28 -7.93

DJIM US -2.09 -4.12 -2.54 -3.07 -8.37 -9.97 2.91 -9.56

PERFORMANCE OF DJ INDEXES

INDEX PRICE RETURN (%)


DJIM Titans 100 -1.31 -3.80 -0.95 -1.33 -8.17 -9.80 5.56 -9.87

DJIM Asia/Pacifi c Titans 25 -1.74 -5.98 -1.41 0.83 -3.93 -9.96 6.04 -7.63

PERFORMANCE OF DJ TITANS INDEXES

PRIC

E R

ETU

RN

(%)


DJIM World DJIM Asia/Pacif ic DJIM Europe DJIM US

PRIC

E R

ETU

RN

(%)

1 Week 2 Week 3 Week 1 Month 3 Month 6 Month 1 Year YTD-15

-10

-5

0

5

10

15

-12

-10

-8

-6

-4

-2

0

2

4

6

8


DJIM Titans 100 DJIM Asia/Pacif ic Titans 25

www.islamicfi nancenews.comMALAYSIAN SUKUK UPDATE

14th March 2008©

RINGGIT ISLAMIC DEBT MARKET: WEEKLY SNAPSHOT AS AT 12th MARCH 2008MOST ACTIVE BONDS TRADED BETWEEN 6th MARCH and 12th MARCH 2008

Stock Name Last Traded Price Last Traded YieldTotal Volume Traded

Last 7% w-o-w Price

ChangeLast Week Closing

Price

BNMNI B4 (68D - 91D) 3.33 335.2

BNMN-IDB 73/2007 91D 27.03.2008 3.4 273.8

BNMN-IDB 18/2008 182D 11.09.2008 3.4 260

BNMNI B7 (172D - 211D) 3.37 200

BNMNI B9 (262D - 311D) 3.33 200

CAGAMAS IMTN 3.830% 13.03.2009 100.16 3.67 165 -0.01 100.17

PROFIT- BASED GII 3/2007 14.09.2012 100 3.58 160 0.18 99.82

BNMN-IDB 2/2008 90D 10.04.2008 99.73 3.41 102

PROFIT-BASED GII 1/2007 15.03.2010 100.11 3.51 100 0 100.11

KHAZANAH 0% 08.12.2016 70.07 4.11 90 0.13 69.98

BNMN-IDB 16/2008 182D 04.09.2008 98.38 3.36 80

BNMN-IDB 34/2007 273D 20.03.2008 99.92 3.48 65

RANTAU IMTN 0% 14.08.2013-MTN 2 103.67 4.15 61.4 0 103.67

BNMN-IDB 17/2008 273D 11.12.2008 3.38 60

WESTPORTS IMTN 0% 07.03.2013 (TRANCHE- 3) 100.54 4.42 55

Outstanding Bond by Issuer Class as at 12th March 2008 (RM’000) Bond Traded Amount by Issuer Class as at 12th March 2008 (RM’000)

Corporate111,079 (55%)

Government30,000 (15%)

Financial4,056 (2%)

BNM21,000 (10%)

Corporate Guaranteed2,442 (1%)

ABS6,887 (3%)

Quasi-Govt24,900 (12%) Government

290 (11%)

Corporate Guaranteed14 (1%)

Disclaimer: Information on this page is intended solely for the purpose of providing general information on the Ringgit Bond market and is not intended for trading purposes. None of the information constitutes a solicitation, offer, opinion, or recommendation by Bondweb Malaysia Sdn Bhd (“Bondweb”) to buy or sell any security, or to provide legal, tax, accounting, or investment advice or services regarding the profi tability or suitability of any security or investment. Investors are advised to consult their professional investment advisors before making any investment decision. Materials provided on this page are provided on an “as is” basis, and while care has been taken to ensure the accuracy and reliability of the information provided in this page, Bondweb provides no warranties or representations of any kind, either express or implied, including, but not limited to, warranties of title or implied warranties of fi tness for a particular purpose, accuracy, correctness, non-infringement, timeliness, completeness, or that the information is always up-to-date.

5 YR YTM Historical Chart (week closing, last 3 months)YTM Curves as at 12th March 2007

ABS27 (1%)

Quasi-Govt273 (10%)

BNM 1,485 (56%)

Corporate 504 (19%)

Financial50 (2%)

www.islamicfi nancenews.comLEAGUE TABLES

© 14th March 2008

For all enquires regarding the above information, please contact: Catherine Chu Email: [email protected] Phone: +852 2804 1223; Fax: +852 2529 4377

TOP ISSUERS OF ISLAMIC BONDS MARCH 2007 – MARCH 2008

Issuer or Group Nationality Instrument Amt US$ m Iss. % Manager

1 Binariang GSM Malaysia Sukuk Musharakah 4,509 9 12.7CIMB, RHB Investment, Aseambankers, ABN Amro, AmInvestment , OCBC Bank (Malaysia)

2 Malaysia Malaysia Sukuk 2,863 3 8.0 Malaysian Government bond

3 Saudi Basic Industries Saudi Arabia Sukuk Istithmar 2,133 1 6.0 HSBC Saudi Arabia, Riyad Bank

4 JAFZ Sukuk UAE Sukuk Musharakah 2,043 1 5.7Barclays Capital, Deutsche Bank (London), Dubai Islamic Bank, Lehman Brothers International (Europe)

5Dar Al-Arkan International Sukuk

Saudi Arabia Sukuk Ijarah 2,000 2 5.6

ABC Islamic Bank, Arab National Bank, Deutsche Bank, Dubai Islamic Bank, Gulf International Bank, Kuwait Finance House, Unicorn Investment

6 Nucleus Avenue (M) Malaysia Sukuk Musharakah MTN 1,994 9 5.6 CIMB

7 DP World Sukuk UAE Sukuk Mudarabah 1,496 1 4.2Barclays Capital, Citigroup Global Markets, Deutsche Bank, Lehman Brothers

8 Saudi Electricity UAE Sukuk 1,333 1 3.7 HSBC Saudi Arabia

9 Dubai Sukuk Center UAE Sukuk Mudarabah 1,248 1 3.5Deutsche Bank (London), Goldman Sachs International

10Projek Lebuhraya Utara Selatan

Malaysia Sukuk Musharakah 1,067 10 3.0 CIMB

11 Dana Gas Sukuk UAE Sukuk Mudarabah 1,000 1 2.8 JP Morgan

12 Cherating Capital Malaysia Exchangeable Sukuk 850 1 2.4Deutsche Bank (Malaysia), JP Morgan, CIMB

13 Hijrah Pertama Malaysia Sukuk Ijarah 847 2 2.4 Citigroup, CIMB

14 Nakheel Development 2 UAE Sukuk Ijarah 750 2 2.1 JP Morgan

15 DIB Sukuk UAE Sukuk Musharakah 750 1 2.1Barclays Capital, Citigroup Global Markets, Standard Chartered

16 Golden Belt 1 Sukuk Saudi Arabia Sukuk Manafaa 650 1 1.8 BNP Paribas

17 Cagamas MBS Malaysia

Sukuk Musharakah Islamic Residential Mortgage Backed Securities

620 7 1.7Standard Chartered, National Bank of Pakistan

18 Cagamas MalaysiaBithaman Ajil Islamic Securities/Mudarabah MTN

568 6 1.6 Cagamas, Aseambankers, HSBC, CIMB

19 Khazanah Nasional Malaysia Exchangeable Sukuk 550 1 1.5 CIMB, Deutsche Bank, UBS

20 Silterra Capital Malaysia Sukuk Ijarah 530 1 1.5 CIMB, HSBC, Citibank

Total 35,589 329 100.0


14th March 2008©

ARE YOUR DEALS LISTED HERE?

Catherine ChuEmail: [email protected]

Telephone: +852 2804 1223

If you feel that the information within these tables is inaccurate, youmay contact the following directly:

TOP ISSUERS OF ISLAMIC BONDS DECEMBER 2007 – MARCH 2008

Issuer or Group Nationality Instrument Amt US$ m Iss. % Manager

1 Binariang GSM Malaysia Sukuk Musharakah 4,509 9 55.7

CIMB, RHB Investment, Aseambankers, ABN Amro, AmInvestment, OCBC Bank (Malaysia)

2 Projek Lebuhraya Utara Selatan Malaysia Sukuk Musharakah 1,067 10 13.2 CIMB

3 Khazanah Nasional Malaysia Exchangeable Sukuk 550 1 6.8 CIMB, Deutsche Bank, UBS

4 Central Bank of Bahrain Bahrain Ijarah Sukuk 350 1 4.3 Calyon

5 Menara ABS Malaysia Sukuk Ijarah 307 8 3.8 Citibank

6 Tamweel UAE Convertible Sukuk 300 1 3.7 Barclays Capital

7 Manfaat Tetap Malaysia Sukuk Mudarabah 230 1 2.8 Affi n Investment

8 Westports Malaysia Malaysia Musharakah MTN 140 3 1.7 OSK Investment

9 DRIR Management Malaysia Sukuk Ijarah 102 9 1.3United Overseas Bank (Malaysia), HwangDBS Investment

10 Al-Aqar Capital Malaysia Sukuk Ijarah 73 3 0.9 AmInvestment

11 Syarikat Bekalan Air Selangor MalaysiaBai Bithaman Ajil Islamic Bond

71 4 0.9 HSBC, CIMB, Bank Islam Malaysia

12 Tradewinds Plantation Capital Malaysia Sukuk Ijarah 63 8 0.8 OCBC Bank (Malaysia)

13 Alam Maritim Resources Malaysia Sukuk Ijarah 61 4 0.7 Aseambankers, Standard Chartered

14 Gamuda MalaysiaSukuk Musharakah and Sukuk Murabahah

55 1 0.7 AmInvestment, CIMB

15 Pendidikan Industri YS MalaysiaAl-Bai Bithaman Ajil Islamic Bond

46 11 0.6 Affi n Investment

16 Kohat Cement Pakistan Sukuk 41 1 0.5Standard Chartered, National Bank of Pakistan

17 Pace Pakistan Pakistan Musharakah Islamic bond 32 1 0.4BankIslami Pakistan, Pak-Brunei Investment

18 KNM Capital MalaysiaMurabahah and Mudarabah MTN

28 2 0.3 Aseambankers

19 Sunway City Malaysia Murabahah MTN 26 2 0.3 HSBC

20 Mukah Power Generation MalaysiaMudarabah and Istisna Islamic Bond

25 4 0.3 RHB Islamic Bank

Total 8,120 96 100.0


© 14th March 2008

For all enquires regarding the above information, please contact:

Catherine Chu

Email: [email protected]: +852 2804 1223; Fax: +852 2529 4377

ISLAMIC BONDS BY CURRENCY DECEMBER 2007 – MARCH 2008

Amt US$ m Iss. %

Malaysian ringgit 6,829 91 84.3

US dollar 1,200 3 14.8

Pakistan rupee 73 2 0.9

Total 8,102 96 100.0

ISLAMIC BONDS BY CURRENCY MARCH 2007 – MARCH 2008

Amt US$ m Iss. %

Malaysian ringgit 16,885 280 47.4

US dollar 12,414 25 34.9

Saudi Arabian riyal 3,466 2 9.7

Emirati dirham 2,043 1 5.7

Total 35,589 329 100.0

ISLAMIC BONDS MARCH 2006 – MARCH 2008

Manager or Group Amt US$ m Iss. %

1 CIMB 6,001 75 16.9

2 HSBC 3,835 37 10.8

3 Malaysian Government bond 2,863 3 8.0

4 Deutsche Bank 2,230 21 6.3

5 JP Morgan 2,033 4 5.7

6 Citigroup 1,975 14 5.5

7 Barclays Capital 1,560 5 4.4

8 AmInvestment 1,410 61 4.0

9 Aseambankers 1,295 36 3.6

10 Standard Chartered 1,203 32 3.4

11 Dubai Islamic Bank 1,165 7 3.3

12 Riyad Bank 1,066 1 3.0

13 RHB Investment 926 68 2.6

14 BNP Paribas 845 3 2.4

15 Lehman Brothers 810 2 2.3

16 Oversea-Chinese Banking 683 16 1.9

17 Goldman Sachs 624 1 1.8

18 ABN Amro 620 8 1.7

19 Kuwait Finance House 390 9 1.1

20 Calyon 350 1 1.0

Total 35,589 329 100.0

ISLAMIC BONDS BY COUNTRY MARCH 2007 – MARCH 2008

Amt US$ m Iss. %

Malaysia 18,585 283 52.2

UAE 8,482 14 23.8

Saudi Arabia 6,116 5 17.2

Kuwait 775 3 2.2

Pakistan 667 17 1.9

Bahrain 550 2 1.5

Total 35,589 329 100.0

ISLAMIC BONDS DECEMBER 2007 – MARCH 2008

Manager or Group Amt US$ m Iss. %

1 CIMB 2,712 24 33.5

2 AmInvestment 723 13 8.9

3 Oversea-Chinese Banking 683 16 8.4

4 Aseambankers 681 15 8.4

5 RHB Investment 661 20 8.2

6 ABN Amro 620 8 7.6

7 Calyon 350 1 4.3

8 Citigroup 307 8 3.8

9 Barclays Capital 300 1 3.7

10 Affi n Investment 276 12 3.4

11 Deutsche Bank 183 1 2.3

12 UBS 183 1 2.3

13 OSK Asia Securities 140 3 1.7

14 HWANGDBS Investment 51 9 0.6

15 United Overseas Bank 51 9 0.6

16 Standard Chartered 51 5 0.6

17 HSBC 50 6 0.6

18 Bank Islam Malaysia 24 4 0.3

19 National Bank of Pakistan 20 1 0.3

20 BankIslami Pakistan 16 1 0.2

Total 8,102 96 100.0

ISLAMIC BONDS BY COUNTRY DECEMBER 2007 – MARCH 2008

Amt US$ m Iss. %

Malaysia 7,379 92 91.1

Bahrain 350 1 4.3

UAE 300 1 3.7

Total 8,102 96 100.0

www.islamicfi nancenews.comEVENTS DIARY

14th March 2008©

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ABC Islamic Bank 7Absa Capital 1Abu Dhabi Investment House 3Abu Dhabi National Takaful 28Al Baraka Group 5Al Buhaira National Insurance 28Al-Ahleia Insurance 28Allen & Overy 6Amanah 5Amlak 6Arab Bank 6Asian Finance Bank 3Athman Investment Company 7Bahana Securities 28Bahrain Islamic Bank 3, 28Ballencrieff House 3Bank Danamon 28Bank Negara Malaysia 5Bank of Bahrain and Kuwait 28Bank of London and The Middle East 8Bank Pertanian 28BankMuscat International 2BNP Paribas 7Boston Consulting Group 8Bursa Malaysia 28Calyon Credit Agricole CIB 6Carimin 9Central Bank of Bahrain 4Central Bank of Seychelles 2

Chase Manhattan Bank 28Chiao Tung Bank 2CIMB Islamic Bank 5Citigroup 4Commercial Bank of Kuwait 7CrediMax 28DLA Piper 28Dubai International Capital 4Dubai International Financial Centre 28Dubai Islamic Bank 9, 28Eden 9Emas Kiara Industries 9Emirates Bank International 6, 7Finance and Leasing Association 8Financial Supervisory Commission 2First Gulf Bank 28Fitch 10Guidance Financial Group 5Gulf Bank 7Gulf International Bank 6Hannover Re Group 28HBG Holdings 28HSBC 28IGB Corporation 10Industrial Bank of Korea 9Infosys Technologies 2Investment Bank 8Islamic Financial Services Board 4Jordan Islamic Bank 7

Khazanah Nasional 5KrisAssets Holdings 10Kuala Lumpur Kepong 9Kuwait Finance House 5, 6Limitless 6Lloyds TSB 28MAG Group Property Development 3Makan Capital Group 28Malayan Banking 5MARC 9, 10Marwick & Co. 28Masraf Al Rayan 28Mayban Finance 28Mega International 2Minter Ellison 28Mohammed al-Mojil Group 8Moody’s 6, 10Muscat Securities Market 7National Bank of Kuwait 3National Bonds Corporation 8New Pantai Expressway 9Norton Rose 28Nouvobanq 2OSK Holdings 2Pak-Qatar Family Takaful 28Porta Reef 3PricewaterhouseCoopers 28Public Bank 10Qatar Central Bank 4

Qatar Financial Regulatory Authority 2Qatar Islamic Bank 3, 6Qatar National Bank 2, 8RAM Ratings 9, 10RHB Banking Group 28SACOFA 9Salam 28Salhia Real estate 5Sapura Energy 9Sarawak Gateway 9Saudi Binladin Group 6Saudi British Bank 7Saudi National Commercial Bank 28Saudi Reinsurance Company 28Senai-Desaru Expressway 10Shuaa Capital 2Sparekassen Farsø 5Sparekassen Hobro 5Sparekassen Vendyssel 5Standard & Poor’s 9, 28Stratavest 9Taylor Wessing 28Tenaga Nasional 10UAE Central Bank 6UBL Fund Managers 7Union National Bank 2Uniqa Group 28Westports Malaysia 2World Bank 4

NE-IFN05/10

Company Index

Company Page Company Page Company Page Company Page

Country Index

Bahrain IIB’s net income up by 56% 8 ABC closes Murabahah deal 7 Financing facility arranged for SBG 6 Bahrain Bay land parcels taken up 5 Bankers probe fi nance issues 4 Porta Reef-BIsB fi nancing deal 3 Sukuk market set to cross US$100 billion 3 Seychelles license for BMI 2Denmark Banks to comply with Shariah 5Germany Another record for Hannover Re 28Jordan/Syria Jordan Islamic Bank setting up in Syria 7Kuwait Al-Ahleia posts US$60 million profi t 28 CBK seeks 70% stake 7 KFH seeks Morocco, Algeria properties 6 NBK unveils Thahabi Ijarah IV 3Malaysia AA-IS for Stratavest Sukuk 9 NPE notes on rating watch 9 SACOFA’s Sukuk Istisna reaffi rmed 9 AAA for IBK debt facility 9 No immediate impact from KLK bonds 9 MARC maintains Emas Kiara Industries 9 MARC reaffi rms Sapura Energy 9

Malaysia Tenaga Nasional reaffi rmed 10 KrisAssets bonds reaffi rmed 10 Moody’s, Fitch maintain rating 10 Rating watch on SDE lifted 10 KFH and unit win Islamic fi nance awards 5 Westports Sukuk oversubscribed 2 A leg up for Islamic fi nance 2Middle East Complementary new business models 6Oman Bourse expecting three IPOs 7Pakistan Coverage for APIF participants 28 UBL Fund investing overseas 7Qatar QNB sets up fi nance company 8 Sovereign credit ratings affi rmed 9 QIB profi ts soar 6 Japan banks focus on Islamic funds 1 QNB Al Islami’s Vehicle Lease product 4 Central Bank sells certifi cates of deposits 4 Qatar Islamic to sell shares from Tuesday 3 QNB investment 2 UNB to set up Qatar branch 2Saudi Arabia Saudi re launched 28 MMG to launch IPO in May 8

South Africa NewGold, Absa Capital’s fi rst Shariah ETF 1Taiwan Mega International gets regulator’s OK 2UAE Third annual World Takaful Conference 28 FGB,Takaful cover home fi nance 28 Al Buhaira and Uniqa in Takaful venture 28 Challenge for Gulf’s private banks 8 National Bonds sales grew 109% 8 DIB’s Sukuk trust certs assigned A 9 Gulf Bank profi t up 23% 7 A&O adviser to US$1.2 billion Mudarabah 6 Amlak to fund growth through Sukuk 6 Sleeping giant awakens 5 DIC denies Citi requested funds 4 DIB announces 40% cash dividend 4 DIB, MAG ink home loan deal 3 Shuaa set to start Saudi operations 2 Shariah banking software launched 2UK BLME latest to join FLA division 8 Positive vibes from budget announcements 1 Halal fi nance growing popularity 3

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