#96 - March 2016 by CPI Financial

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ISSUE 96

T H E A U T H O R I TAT I V E V O I C E O F I S L A M I C F I N A N C E ISSUE 96 ENSURING SUSTAINABLE GROWTH Islamic finance in Pakistan looks to continue its upward trajectory

ENSURING SUSTAINABLE GROWTH Islamic finance in Pakistan looks to continue its upward trajectory

A CPI Financial Publication

PLUS:

page 3-4 contents96.indd 1

TECH:

Bringing Islamic finance to the cloud

SUKUK:

2016â&#x20AC;&#x2122;s expected issuance

TAKAFUL:

Bolstered by sovereign issuance

13/04/2016 10:10

bleed guide.indd 1

18/02/2016 14:07

CONTENTS

ISSUE 96

REGULAR SECTIONS

EDITOR'S LETTER

Greetings all,

elcome to our latest issue of Islamic Business & Finance. In the working world, there’s one pathway to success that we hold most dear. There’s many different ways to get to the top, of course, but there’s nothing that ignites our imaginations and tugs at our heartstrings like those that start near the bottom of an organisation, and through hard work, impress all those around them before finally ending up chief executive officer. In my search through Pakistan for our country focus section, I had the honor of speaking to someone who followed just such a path—Muhammad Shaoib Ibrahim, CEO of First Habib Modaraba. Our conversation can be found on page 20. And towards the back, you’re in for a treat. Most of you are of course familiar of Bilal from early Islamic history, the slave who became an integral part of the faith in its earliest days. Barajoun Enteratainment, a Dubai-based company, has produced a 3D animated film telling Bilal’s story. Read our conversation with the director of the film on page 46. Until next time,

William Mullally

OPINION

WHERE DO YOU SEE GROWTH?

THOUGHT LEADERSHIP

10 THE PATH FORWARD

Abdulla Mohammed Al Awar, CEO of DIEDC

SUKUK

14 $55-65 BILLION GLOBAL SUKUK ISSUANCE EXPECTED IN 2016

TAKAFUL

44 HUGE RISE IN GCC

SOVEREIGN ISSUANCE TO SUPPORT TAKAFUL STABILITY

DIARY AND MARKET WATCH

6 7

DATES FOR YOUR DIARY MARKET WATCH

Log on to www.islamicbusinessandfinance.com for news, polls, events, analysis, blogs, features, commentary and more.

www.islamicbusinessandfinance.com

page 3-4 contents96.indd 3

ISSUE 96 | Islamic Business & Finance

21/04/2016 11:24

CONTENTS

CHAIRMAN

ISSUE 96

SALEH AL AKRABI CHIEF EXECUTIVE OFFICER

MANAGING EDITOR

ROBIN AMLÔT robin@cpifinancial.net Tel: +971 4 391 3723

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EDITORS

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COUNTRY FOCUS: PAKISTAN

HALAL BUSINESS

16 ENSURING SUSTAINABLE

34 NOOR VITAMINS

GROWTH

LEGAL FOCUS

20 FIRST HABIB MODARABA

38 A NEW DAY FOR ISLAMIC FINANCE IN IRAN

SPECIAL FEATURE

24 MALAYSIA LAUNCHES

ISLAMIC INVESTMENT

INVESTMENT ACCOUNT PLATFORM

40 SHARI’AH-COMPLIANT EQUITY: CHALLENGES AND OPPORTUNITIES

26 NOOR TAKAFUL ISLAMIC TECH

THE INSIDE STORY

30 PATH SOLUTIONS

46 DUBAI BUSINESS BRINGS

ISLAMIC STORY OF BILAL TO LIFE

Get the next issue of Islamic Business & Finance before it is published. Full details at www.islamicbusinessandfinance.com ISSUE 96 Dubai Technology

and Media Free

Zone Authority

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CPI FINANCIAL FZ LLC P.O. Box 502491, Dubai Media City, Dubai, UAE Fax: +971 4 390 9756

R I TAT THE AUTHO

ISSUE 94

ISSUE 95

ISSUE 96

upward trajectory

looks to continue its

INSPIRED

upward trajectory

TO INNOVATE

page 3-4 contents96.indd 4

PLUS:

TECH:

Bringing Islamic cloud finance to the

SUKUK:

2016’s expected issuance

AWARDS:

The Islamic Business & Finance Awards Asia

SUKUK:

Cote D’Ivoire’s first launch

A CPI Financial Publication

Islamic Business & Finance | ISSUE 96

BIG MOVES CEO Fadi Al Faqih on BOK’s expansion plans in the region and beyond

A CPI Financial Publication

BANK OF KHARTOUM’S

Emirates Islamic CEO Jamal Bin Ghalaita

PLUS:

bleed guide.indd 1

BANK OF KHARTOUM’S BIG MOVES CEO Fadi Al Fiqih on bok’s expansion plans in the region and beyond

in Pakistan GROWTH Islamic finance

n looks to continue its Islamic finance in Pakista

INSPIRED TO INNOVATE Emirates Islamic CEO Jamal Bin Ghalaita

G ENSURINBL A E SUSTAINTH GROW

ENSURING SUSTAINABLE

PRINTED BY United Printing & Publishing – Abu Dhabi, UAE

@IBFMag on Twitter for stories as they're being told

ISSUE 94

T H E A U T H O R I TAT I V E V O I C E O F I S L A M I C F I N A N C E

www.cpifinancial.net Registered at the Dubai Media City

Dubai Technology and Media Free Zone Authority

ISSUE 95

FINANCE OF ISLAMIC IVE VOICE

TAKAFUL:

The road forward

23/02/2016 09:19

PLUS:

bleed guide.indd 1

AWARDS:

The Islamic Business & Finance Awards 2015

SUKUK: Malaysia in 2016

TAKAFUL:

DEWA’s employee initiative

19/11/2015 10:22

TAKAFUL:

Bolstered by sovereign issuance

12/04/2016 17:56

bleed guide.indd

www.islamicbusinessandfinance.com

21/04/2016 11:24

51253

300441

bleed guide.indd 1

13/04/2016 11:28

DATES FOR YOUR DIARY

03-04 May 2016

02-04 Aug 2016

(Eugene Sergeev SHUTTERSTOCK)

CIBAFI GLOBAL FORUM

(saiko3p/SHUTTERSTOCK)

WORLD ISLAMIC ECONOMIC FORUM

Themed under the concept â&#x20AC;&#x153;rethinking values for sustainable growthâ&#x20AC;&#x2122;, the Forum, which will be held under the patronage of the Central Bank of Bahrain, will discuss some of the most pressing priorities currently facing the Islamic financial industry in sustaining growth and the stability of the financial markets. Venue: Four Seasons Hotel, Bahrain www.Cibafi.org

Now in its 12th edition, WIEF this year will follow the theme "Decentralising Growth, Empowering Future Business", focusing on topics which include infrastructure investments, Islamic finance, SME financing, innovative technology, and more. Venue: Jakarta Convention Centre, Indonesia www.wief.org

11-12 May 2016

05-07 Dec 2016

(Dr Ajay Kumar Singh/SHUTTERSTOCK)

(Martin Mecnarowski/SHUTTERSTOCK)

SUB-SAHARAN AFRICA ISLAMIC FINANCE CONVENTION

Arranged by Ethico Live, the Sub-Saharan Africa Islamic Finance Convention aims to create a strong platform for the growth of the industry that will not only help to establish Uganda as an investment destination but also attract the support and enable the development of the broader Sub-Saharan market, according to its sponsors. Venue: Kampala Serena Hotel, Uganda www.ethicolive.com

Islamic Business & Finance | ISSUE 96

page 6 Diary96.indd 6

WIBC 2016

Now reaching its 23rd year, the World Islamic Banking Conference (WIBC) continues to be a key date on the yearly map for Islamic financial professionals worldwide, bringing together those from across the Islamic economy to discuss the most important issues of the day as well as making landmark agreements and announcements. It will be run in strategic partnership with the Central Bank of Bahrain. Venue: Gulf Hotel, Bahrain www.WIBC2016.com

www.islamicbusinessandfinance.com

13/04/2016 09:37

MARKET WATCH

OUTSTANDING SUKUK MAP OUTSTANDING SUKUK MAP

THE SIZE OF THE OUTSTANDING SUKUK MARKET GLOBALLY AS OF 30 MARCH 2016 The size of the outstanding Sukuk market globally as of 30 Mar 2016

SOURCE: Zawya Islamic

OPEN SUKUK IN APRIL 2016 STATUS

ISSUER NAME

SUKUK NAME

SUKUK STRUCTURE

COUNTRY

CURRENCY

SUBSC. DATE

ISSUE SIZE ($M)

MARGIN

TENOR

ARRANGER/ADVISOR

Announced

Cahya Mata Sarawak Bhd

Cahya Mata Sarawak Sukuk Ijarah Program

Ijarah

Malaysia

MYR

Announced

Ministere des Finances - Tunisie

Tunisia Sukuk

Unknown

Tunisia

TND

20-Oct-16

497.934

Announced

DSI Perpetual Sukuk Limited

Drake & Scull International Sukuk II

ModarabahMurabaha

UAE

USD

10-Jul-16

150

Standard Chartered Bank

Announced

Bank AlBilad

Bank Albilad Sukuk

Unknown

Saudi Arabia

SAR

16-Jun-16

266.645

Announced

Government of Nigeria

Nigeria Sovereign Sukuk

Unknown

Nigeria

NGN

12-May-16

Announced

Boubyan Bank K.S.C.P.

Boubyan Bank Sukuk

Unknown

Kuwait

USD

14-Apr-16

250

Announced

The Grand Duchy of Luxembourg

Luxembourg Sukuk

Unknown

Luxembourg

EUR

31-Mar-16

Announced

Dubai Islamic Bank PJSC

Dubai Islamic Bank Sukuk 2016

Unknown

UAE

USD

22-Mar-16

750

Announced

Sime Darby Berhad

Sime Darby Perpetual Sukuk

Wakala

Malaysia

MYR

17-Mar-16

Maybank Investment Bank Berhad

Announced

Perdana Petroleum Bhd

Perdana Petroleum Sukuk

Unknown

Malaysia

MYR

17-Mar-16

160.237

5 Years

Announced

Mohebi Logistics

Mohebi Logistics Sukuk

IjarahIstisnaa

UAE

AED

25-Feb-16

108.903

Rumoured

Kuwait Petroleum Corporation KSC

Kuwait Petroleum Corporation Sukuk

Unknown

Kuwait

KWD

19-Feb-16

Announced

Kuwait Finance House K.S.C.

Kuwait Finance House Sukuk

Unknown

Kuwait

17-Feb-16

Announced

Hilal Services Limited

Hilal Services IMTN Program

Unknown

Saudi Arabia

SAR

16-Feb-16

Standard Chartered Bank

SOURCE: Zawya Islamic

www.islamicbusinessandfinance.com

page 7 Market Watch96.indd 7

ISSUE 96 | Islamic Business & Finance

13/04/2016 09:38

OPINION

Where do you see growth? W

here do you see the most growth for Islamic finance? The answer may surprise you. Fortynine per cent chose Levant in our polland North Africa as leading the growth path for Islamic finance. Twenty-six per cent of you believe that the GCC will see the most growth for Islamic finance. Though many have noted the current challenges facing the GCC in terms of growth, namely the price of oil and the widereaching effects that has in the region, there is still room for optimism in terms of Islamic finance. Boston Consulting Group recently found that Islamic banks in the GCC continued their growth path in 2015, while some speculated otherwise. Nearly 10 per cent believe that South East Asia to be the driver for Islamic finance’s growth. This is surprising, when leaders in South East Asia, such as Malaysia, continue to innovate, push forward new initiative and regulation, and issue Sukuk at a rate that outpaces the rest of the world. According to Fitch Ratings, Malaysia issued half of all Sukuk worldwide in 2015.

Furthermore, RAM Ratings has stated that they expect financing growth in Malaysia to decelerate to 12 per cent, but still ahead of the overall industry’s six per cent. Four per cent believe that Sub Saharan Africa will lead the way for Islamic finance. Eight per cent believe that Europe and the USA will lead Islamic finance’s growth. As always, one per cent of you chose “other.” So why so much growth expected in the Levant and North Africa? For one, there’s a lot of room for growth in those markets. Governments across North Africa are making increasing measures to improve and open the landscape for Islamic finance, recognising the many benefits that the region could reap as a result. By the time you read this, the Central Bank of Egypt will have hosted a seminar with the IFSB on potential Sukuk issuance, as it shows further interest in getting more involved. There are clear signs that a lot of growth for Islamic finance in North Africa is ahead.

Islamic Business & Finance | ISSUE 96

page 8 Opinion96.indd 8

William Mullally

Editor

www.islamicbusinessandfinance.com

18/04/2016 12:34

Our vision your future

Providing trusted Islamic financing solutions that are innovative and customer centric for consumers and businesses alike.

Terms and conditions apply

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800 ASEEL (27335) | www.aseelfinance.ae

19/10/2015 20:24

OPINION

The path forward AFTER YEARS OF MILESTONES, ISLAMIC FINANCE IN DUBAI AND BEYOND STILL HAS WORK TO DO, WRITES ABDULLA MOHAMMED AL AWAR, CEO OF DIEDC

Dubai continues to make strides on its path to become the centre of the Islamic economy.

Islamic Business & Finance | ISSUE 96

page 10-12 Opinion96.indd 10

www.islamicbusinessandfinance.com

13/04/2016 09:40

OPINION

ast fall, Dubai concluded the second Global Islamic Economy Summit focusing on the importance of Islamic finance in the UAE’s journey to achieving social and economic development. We have been emphatic in our call for the inclusion of Islamic finance in key economic sectors in order to unlock the full potential of the Islamic economy ecosystem. We, along with other major cities in the world, have witnessed an exponential growth of the industry especially with the rise of Sukuk as one of the

main financial instruments that can make a difference in the investment sector. Dubai has made a giant step in this regard, by outpacing top global financial centres and becoming the world's largest centre for Sukuk. The positive momentum in the Islamic finance market, helped achieved growth of up to $1.8 billion in 2014 and expected to reach $3.2 trillion by 2020. The Islamic Economy Indicator we launched prior to last fall’s Summit revealed the UAE’s ranking as one of the healthiest Islamic economy environments,

taking the number one spot in the Arab world and coming in second globally.

A TURNING POINT What was the watershed moment for Islamic finance? I think it is the moment of realisation that the world needs a new shift in the way business is done. The repercussions of the financial crisis have affected major economies globally and it was about time for the world to finally admit that ethical and social responsible investments are the best and only alternative

(Anna Omelchenko/SHUTTERSTOCK)

cont. overleaf

www.islamicbusinessandfinance.com

page 10-12 Opinion96.indd 11

ISSUE 96 | Islamic Business & Finance

18/04/2016 12:40

OPINION

cont. from pg 11

to sustain economic growth and overcome the challenges of poverty, unemployment, and inequality in the distribution of wealth and high risks investments. Islamic finance assets are expected to reach $3.2 trillion in 2020, which represents a great opportunity to innovate new instruments and channels that can boost national economies across the globe through wise and responsible investments such as manufacturing and sustainable energy. SME is another field of potential growth requiring capital flow to help young entrepreneurs engage in the drive for economic development. The change we’ve been witnessing in the past few years is mainly cultural. If we are to change any trend or behaviour, we need to instill a new culture. I think Dubai has succeeded in doing that by developing a comprehensive strategy that communicates best the need for a more resilient economic system that achieves sustainability.

FUTURE CHALLENGES But there is still much that needs to be addressed. Since the establishment of DIEDC we have been stressing on the need to achieve harmonisation of global standards to enable The Islamic economy to evolve and prosper. The Halal sector is growing at a fast pace while this challenge is still to be addressed. In an effort to standardise Halal certification in the country, Dubai has achieved a great milestone with the new Halal National Mark developed by ESMA. Nevertheless, greater efforts are required globally with regard to a consensus on what is Shari’ah-compliant and

growth is increasingly covering the non-Muslim countries. Around 80 per cent of the Halal food industry, for instance, is in the hands of non-Muslims for what matters to the Muslim buyers is not the religion of the manufacturer but the quality and efficacy of the product.

THE PATH FORWARD

what is not. Another area of improvement is innovation, be it in Islamic finance to create new financial tools supporting the various sectors, or in each component of the Halal industry itself that encompasses fashion and arts, digital e-commerce and family friendly tourism. All these require creative approaches and financial support to achieve growth and present a viable opportunity for the next generation of investors across the world. Training and increased knowledge in the Halal sector manufacturing is also a mandate. The Halal sector is integral to the growth of Islamic economy. The Muslim population, expected to reach 2.2 billion in 2030, is a core market for Halal products and services but the scope of the Halal

Islamic Business & Finance | ISSUE 96

page 10-12 Opinion96.indd 12

Abdulla Mohammed Al Awar, CEO of DIEDC

I believe the latest summit held in Dubai will be a stepping stone towards developing solutions to the major challenges stated above. In the knowledge space, Dubai’s new portal “Salaam” is the world’s first and only online platform for all Islamic economy-related industry intelligence, news, information, and data needed by industry-related professionals to advance their businesses and fuel their innovations. On the other hand, increased efforts are being made by Islamic banks to train and empower skills and talents in the Islamic banking and finance space. As for the harmonisation of standards, we hope to see progress in our efforts to achieve this objective as Dubai reinforces its position as the global Islamic economy.

About Dubai Islamic Economy Development Centre Dubai Islamic Economy Development Centre (DIEDC) was established in December 2013 to transform Dubai into the ‘Capital of Islamic Economy’, as envisioned by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, VicePresident and Prime Minister of the UAE and Ruler of Dubai. His Highness Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai, supervises the efforts of the DIEDC and its Board to bolster Dubai’s bid to become a global hub for the Islamic economy, encompassing a wide array of sectors through harnessing the projected $6.7 trillion Islamic economy market.

www.islamicbusinessandfinance.com

18/04/2016 12:40

Faisal Islamic Bank (Sudan) Best Corporate Bank in Africa 2015

w w w.fib sudan.com

bleed guide.indd 1

13/04/2016 11:27

SUKUK

$55-65 billion global Sukuk issuance expected in 2016

(g0d4ather/SHUTTERSTOCK)

AM Ratings expects global Sukuk issuance to remain fairly resilient at around $55 to $65 billion in 2016, despite a declining global market sentiment, particularly in Malaysia as a result of a weaker ringgit. Given the precipitous drop in crude oil prices that have adversely affected the core Sukuk markets of Malaysia and the Gulf Cooperation Council (GCC), RAM’s projection takes into account these countries’ government expenditure cuts and potential delays in infrastructure spending, it said in a statement. The issuance of Sukuk in 2015 reached $66.4 billion, said RAM. “While Malaysia and the GCC will remain the leaders in global Sukuk issuance, supported by the funding requirements of the corporate and quasi-government sectors, we envisage Indonesia in 2016 to still have the economic momentum to play a more significant role in tapping the global Sukuk market to fund its Government budget,” observes Ruslena Ramli, Head of Islamic Finance at RAM. Historically, more than 90 per cent of global Sukuk issuance has originated from Malaysia, the GCC and Indonesia. Another positive trend is the growing number of sovereign Sukuk issues in 2014 and 2015, which are expected to spill over

into 2016 and increase the number of countries that are keen on expanding their domestic Sukuk markets. RAM also stated that it has analysed the Sukuk markets of the GCC member countries, and found that the widening deficits of nations that are more dependent on oil exports could prompt the issuance of sovereign Sukuk. R e g u l at o r y b o d i e s , t h e Accounting and Auditing O r g a n i s at i o n f o r I s l a m i c Financial Institutions (AAOIFI), the Islamic Financial Services Board (IFSB), the International Islamic Financial Market (IIFM), the Islamic Development Bank Group (IDB) and Malaysia

Islamic Business & Finance | ISSUE 96

page 14 Sukuk-96.indd 14

International Islamic Financial Centre (MIFC) are collectively putting in efforts to build a stronger foundation for Islamic finance. RAM acknowledges their commitment to promote Islamic finance as part of the mainstream global financial system, it said in a statement. As a result of these initiatives, issues involving Shari’ah interpretation, the standardisation of documentation and tax treatment are progressively being looked into to bolster the cost-effectiveness of issuing Sukuk and to lay the foundation for the next stage of development for the global Sukuk market, said RAM.

Sukuk could reach 2015’s issuance, but RAM Ratings expects issuance slightly lower.

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13/04/2016 09:40

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COUNTRY FOCUS PAKISTAN

Ensuring sustainable growth VIRTUALLY NON-EXISTENT IN 2001, ISLAMIC BANKING IS NOW 10 PER CENT OF ALL BANKING IN PAKISTAN. THE STATE BANK OF PAKISTAN IS CURRENTLY IN THE MIDST OF A STRATEGIC PLAN TO MAKE SURE THAT GROWTH CONTINUES

Islamic Business & Finance | ISSUE 96

page 16-19 Country Focus-Pakistan_96.indd 16

www.islamicbusinessandfinance.com

13/04/2016 09:42

COUNTRY FOCUS PAKISTAN

(naihei/SHUTTERSTOCK)

Pakistan is rich in both beautiful landscapes and tremendous potential in its financial industries.

slamic finance in Pakistan has come a long way. Though the country is officially an Islamic republic, the current path for Islamic finance in Pakistan did not begin until 2001, when the country re-launched Islamic banking. Today, much progress has been made. In the last 15 years, Islamic banking has reached 10 per cent of the industry, according to the State Bank of Pakistan (SBP), Pakistan’s central bank, with 19 Islamic banking institutions as of 2014. According to Saleem Ullah, then-director of Islamic finance for SBP at the time of the publication of the Strategic Plan Islamic Banking Industry of Pakistan 2014–2018, “Pakistan has been growing at a very health cumulative annual growth rate of 53 per cent since 2003 (27 per cent since 2008) and maintaining the growth momentum despite the increasing base. The branch network is also growing 15-20 per cent annually; the existence of about 1,200 branches is likely to grow to 2,000 branches during next five years. The industry has also made significant progress on developing Shari’ah permissible products for meeting the varying needs of the real economy. The sustained growth momentum over the last 10 years provides strong evidence of growing acceptability of Islamic banking as a viable and competitive to conventional banking.” This, coupled with troubles that conventional finance has faced in recent years, have helped bring forth Islamic finance more prominently, according to Yaseen Anwar, Governor of the SBP.

“The stability and resilience exhibited in the wake of financial crisis by Islamic financial industry has led to its wider recognition as a viable and competitive component of the financial system. The innate strengths of the Islamic financial system of being based on productive economic activity and devoid of excessive leverage and imprudent risk taking have been key drivers of its significantly improved acceptability and increasing share in the global financial system. But with all those positive figures and sentiment amongst those in the industry, Islamic finance in Pakistan still has a long way to go, according to Ullah. “While the achievements made by the industry during last decade are commendable and give optimism about continuation of growth momentum, the industry is still in the evolutionary phase and need collaborative efforts by all stakeholders, particularly the regulator and practitioners, to take it to the next level of growth and development.” The public, too, needs to grow not only their participation in the Islamic economy and Islamic banking in particular, but also their general awareness. “Despite strong growth momentum the industry perception is still not very positive largely due to limited awareness and similarities between conventional and Islamic banking products,” said Anwar. In terms of law and regulations, much needs to be bolstered as well, according to Ullah. “The legal and regulatory framework and taxation environment though improved over the years still need significant changes to

enable Islamic banking to achieve its real potential and contribute in development of a sound, stable and inclusive financial system.” According to Governor Anwar, it is the financial crisis as well that highlighted the need for the aforementioned regulatory updates.“This post financial crisis era is challenging at the same time, due to the low confidence of customers in the prevailing financial system along with the slowdown in global economic growth. The second round impact of the financial crisis on Islamic financial institutions has also indicated that the inbuilt shields of the Islamic financial system need to be complemented with a robust regulatory framework, enhanced transparency and adequate buffers for ensuring its sustainable growth.” Furthermore, much work needs to be done to reach the ideals that Shari’ah suggests for a workable financial framework. “The product offerings are overwhelmingly debt-based, which though meet the minimum Shari’ah requirements however don’t meet the Shari'ah objectives of risk and reward sharing and equitable and broad based distribution of economic gains,” said Ullah. According to the SBP, this is what led to the launch of the central bank’s strategic plan.“Keeping in view the existing growth potential, SBP in collaboration with stakeholders has developed the Strategic Plan Islamic Banking Industry of Pakistan for the period 20142018. The Strategic Plan focuses on critical issues and includes necessary initiatives for improving cont. overleaf

www.islamicbusinessandfinance.com

page 16-19 Country Focus-Pakistan_96.indd 17

ISSUE 96 | Islamic Business & Finance

18/04/2016 15:25

COUNTRY FOCUS PAKISTAN

cont. from pg 17

public acceptance and promoting Islamic banking as a distinct and viable system for meeting the financial services need of the public in general and business community in particular.” According to Governor Anwar, it was launched in order to ensure that Islamic finance in Pakistan does not stall. “To sustain and further boost the growth momentum, significant changes in the architecture of the industry are needed. The SBP thus took the initiative to develop the strategic plan for the industry for next five years, which sets the future direction of the industry and gives a consensus strategy to take the industry to the next phase of growth and development.” All of the aforementioned problems should be addressed, and market share is hoped to increase by 50 per cent. “The plan has an extensive focus on improving public perception of Islamic banking industry as a distinct and viable system capable of catering to diversified financial needs of various segments of the society. It envisages intensifying the awareness creation efforts, strengthening consultation mechanism with stakeholders, removing confusions and inconsistencies in legal, regulatory and taxation environment, deepening and broadening of product offerings by Islamic banks, doubling the outreach of Islamic banking institutions during next five years and increasing the market share to 15 per cent of the banking system,” said Anwar. According to Ullah, unification and harmonisation are also a top priority. “The plan also gives significant emphasis on Shariah standardisation and harmonisation across the industry, which among

ASSETS SIZE AND $ CHANGE (USD '000)

Bank Islami Pakistan Limited* Askari Bank Limited Bank AL Habib Limited Bank Alfalah Limited Habib Bank Limited

Asset

REVENUE, NP SIZES (USD '000)

Bank Islami Pakistan Limited*

39,487 3,121 168,073 39,956

Askari Bank Limited 223,574

64,054

Bank AL Habib Limited 292,348 Bank Alfalah Limited

56,137 906,672

Habib Bank Limited

316,666

Rev 2014

NP 2014

Source: CPI Financial *Shari'ah-compliant

others is also critically important for improving the industry perception as a distinct, competitive and Shari’ah permissible financial system,” said Ullah. SMEs are also a major focal point for the SBP on this front. “Recent economic crisis once again has signified the importance of SMEs in reducing unemployment and sustaining growth. SBP will provide support to Islamic banking institutions in terms of enabling regulations, facilitating

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Asset

research to develop products for this sector and encourage the industry to make use of its market expertise to explore the huge potential of this sector. There also exists an anecdotal argument that entrepreneurs in SME sector are more inclined towards Islamic banking products due to their religious sensitivity. Having enabling regulatory environment and the limited availability of banking services for this sector, the strategic plan envisages that

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ASSETS SIZE YOY CHANGE (USD '000)

Habib Bank Limited Bank Alfalah Limited

Bank AL Habib Limited

Asset

Askari Bank Limited Bank Islami Pakistan Limited* Asset

REVENUE, NP SIZES (USD '000)

Habib Bank Limited Bank AL Habib Limited Bank Alfalah Limited Askari Bank Limited Bank Islami Pakistan Limited*

Source: CPI Financial *Shari'ah-compliant

the Islamic banking industry will allocate and finance at least five per cent of the deposits or 10 per cent of financing whichever is higher for SMEs,” said the SBP. Microfinance, too, will see developmental attention. “Islamic microfinance has great potential to provide support to the poor by providing financial services at their doorstep,” said the SBP. “The asset based nature of Islamic modes of financing safeguard customers against

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misutilisation of financing and thus over indebtedness. The regulatory environment for developing Islamic microfinance in Pakistan is quite conducive as detailed guidelines for Islamic microfinance industry including detailed licencing criteria are already available. Going forward, support will be provided to the Islamic microfinance industry for capacity building, coordination and collaboration among various stakeholders, focused

research and pilot projects to develop this sector.” The unbanked in the nation, many of whom remain that way for religious regions, are also part of the strategy for SBP, for which microfinance will play a part. “A large untapped market [more than 80 per cent of population is excluded from the financial sector]; while a significant per centage of faith sensitive voluntary exclusion signifies huge potential demand for Islamic banking in the country. The SBP and the industry will therefore collaborate to expand its network to areas/regions/sectors where there is no or limited availability of financial services particularly the rural agricultural areas, SMEs, low cost housing and microfinance,” said SBP. According to Governor Anwar, he is optimistic that the plan will work in creating a more sustainable growth path for Islamic finance in Pakistan. “The development of this consensus plan gives me optimism about sustenance of the strong growth momentum and the improvement in public perception about Islamic finance. The SBP will keep on demonstrating its ownership and resolve for developing the industry on sound footing through enabling legal and regulatory regime and partnering with the industry for addressing perception and taxation issues. I am confident that all stakeholders will collaborate and cooperate for successful implementation of this strategic plan and five years down the road we will have a more vibrant and stronger Islamic banking industry with significantly improved perception about its utility and contribution towards development of a fair and equitable economic system,” said.

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Furthering ‘a rich tradition’

MUHAMMAD SOHAIB IBRAHIM, CEO AND MANAGING DIRECTOR, FIRST HABIB MODARABA, WORKED HIS WAY THROUGH THE RANKS TO BECOME THE CEO OF A PIONEER IN THE NBFI MODARABAH SECTOR, WHICH CONTINUES TO LEAD THE PACK

ell me briefly about your institution.

First Habib Modaraba (FHM) is operating in Pakistan’s financial market as a non-bank Islamic financial institution as one of the pioneers in Mudaraba sector. The concept of Mudaraba as a Shari’ah-compliant mode of business evolved and introduced as an institutional framework in Pakistan as far back as in 1980 with proper legislation, regulatory and monitoring structure and operating guidelines. The basic aim of FHM was to make a contribution towards the transformation of our mercantile as well as financial systems and dealings in line with principles elaborated in Shari’ah. FHM is a pioneer in the Mudaraba and non-banking Islamic financial sectors, and has played a very vital role for promotion of Islamic finance in Pakistan’s Islamic financial market. FHM started its business operations in 1985 as the first full-fledged Islamic financial service

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provider within the banking and non-banking sector. Last year FHM completed 30 years of successful business operation and growth over the years on sound footing with a commitment of adding value to all our stakeholders, particularly certificate holders and investors. FHM always remains the best performing Mudaraba within the Mudaraba sector. The management of FHM is full of rich tradition. Business operations of FHM have always been backed by valuable expertise in the field of fund management. FHM is committed to both sustainable business practises and its responsibilities as a corporate citizen. It is believed that our responsibility is primarily about conducting our business in transparent and ethical ways that not only enhance value for all stakeholders but also give support to events that enhance the wellbeing of the community.

This monument in Islamabad symbolises Pakistan’s commitment to progress, something First Habib Modaraba embodies.

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The main components of success of FHM are excellent teamwork across all levels of the organisation. Due to the hard and dedicated work of all staff members, FHM became the premiere Mudaraba institution within the Mudaraba sector.

What is First Habib Modaraba’s current strategy? The corporate strategy of FHM is derived from our vision and mission statements and its primary objective is to create long term and sustainable development. The key elements of corporate strategy have been to effectively employ available resources, develop business segments and maximise business opportunities backed by innovative technology solutions while managing and mitigating related risks. Our present strategy is at three levels: corporate, business and operation. From time to time we review our strategies of various segments falling in under above broad categories and refresh them as per requirements of business development and operational efficiency. The efficacy of FHM’s business strategy and prudent risk management policies have always supported the management to maintain outstanding assets quality while ensuring sustainability of performance despite the increasingly competitive operating environment in Pakistan’s financial market. At FHM we have the legacy of making the finest mechanism of penetrating a good corporate environment and mitigate the potential risk and threats within our operations. The control index matrixes at FHM primarily demonstrate through quality human resource induction, better infrastructure, and well-defined policies and processes of operations. The management has their clear views on internal control without isolating other important areas such as the economic and legal environment.

What are your thoughts on Islamic finance in Pakistan? On the backdrop of impressive growth globally, Islamic finance is expanding sensibly across the country in an impressive manner. With a large Muslim population, Pakistan remains at the forefront in promoting Islamic finance. The country has a strategic geographical location coupled with rich source of minerals and a large

and highly productive agricultural region, which makes the country a marketplace with ample business opportunities for trade and finance. The Islamic banking industry in Pakistan has progressed considerably and its share has increased from scratch in 2002 to nearly 12 per cent of the overall banking industry in terms of assets of overall size of conventional banks. The branch network has also reached to around 1800 at the country level and is expected to reach higher by the end of 2016. The growth in Islamic banking assets was higher compared to growth in overall banking industry assets. The stability and resilience of the Islamic financial industry had attracted wider acceptability of this system as a viable alternative to the conventional financial system. The outlook of the Islamic finance industry is very positive with bright prospects. Regulators are playing their due role for the growth and promotion of the Islamic finance industry within the country. Pakistan is the world’s second-most populous Muslim nation and has great potential for the expansion of Islamic finance which is largely untapped. The major challenge is to educate the masses and widening the outreach to improve visibility and accessibility of Islamic products so as to bring the financially excluded segment under the net. Although the industry has shown rapid growth, there are still areas which require concerted and proactive efforts to further develop and nurture this industry.

What are the challenges of running a non-banking Islamic financial institution in Pakistan? The supply of human resources is the biggest challenge facing our industry right now. Like any other industry the development of Islamic finance critically hinges upon quality of its human resources. As a result, developing a high quality and competent human resources is critical for addressing the challenges faced by the industry. In this regard, a number of initiatives have been taken by the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP) to build the industry’s HR capacity through collaboration with reputed national and international institutions for organising targeted seminars, lectures, training programmes and workshops. Recently, SBP with collaboration with Institute of Business Administration (IBA) cont. overleaf

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cont. from pg 21

inaugurated the Centre for Excellence in Islamic Finance (CEIF). The objectives of the Centre are to provide qualified human resources to the industry and play a pivotal role in developing a shared understanding of Islamic finance principles among the participants. The other challenges facing us include low presence of branch networks at a country level, lack of product development and innovations, shortages of fund raising products such as deposits, and competing with banks that can deliver Ijarah financing at a low cost and with a large network. Furthermore, it’s hard to create the scale that compares to larger Islamic banks due to our small size.

How are you working to overcome those challenges? Besides our aforementioned corporate strategy, we have also overcome various challenges through enhancements of market outreaches, by tapping new business segments for building quality portfolio, and by providing quality and state of art services/ facilitates to our customers. We are also continuously improving operational processes for quality delivery, strengthening our risk management and internal controls for effective and efficient operations, and investing in information technology on a regular basis. Under the current challenging economic environment we remain vigilant to the changing market dynamics. We are also in a good position to further strengthen the existing growth momentum by focusing on enhancing market outreach and adding good customers within the existing portfolio by offering value-added products and services.

How has the institution performed in the last few years? During our three decades of operations, FHM had undergone various ups and downs and successfully countered several economic and business challenges. Ever-changing requirements of businesses, product innovation and development were effectively managed and delivered to the entire satisfaction of all stakeholders with steady growth on sound footing. Our sound balance sheet and the market positions of our businesses have placed us well to deliver sustainable profit growth and continuous return to our investors since inception. Our clientfocused approach and capital-efficient strategy

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paired with our time-tested risk assessment and mitigation policies enabled us to remain on our path of sustainable growth. Blending our business strategies with a strong corporate culture has nurtured our good governance and social responsibility. Over the past 30 years, FHM has become the sound, strong and leading Mudaraba institution within the Mudaraba sector. We believe that we always at the intersection of opportunity and entrepreneurship. With this spirit that is demonstrated in our ability to explore welldiversified business opportunities for long term and sustainable growth within our venture. We continuously refresh our business process and practises to align them in accordance with our core business objectives for wider and robust business performances. FHM has always stood by our pledge and fullfilled our commitment and given satisfactory financial results with better return to our certificate holders. The team of FHM has demonstrated business and operational strength which is reflected both in business volume and profitability despite a highly competitive business environment within the Islamic financial sector. Consistency in distribution of dividends among the certificate holders, along with increases in certificate holders’ equity, has made FHM a sound and well-performing Mudaraba within the sector. By the grace of God, FHM has maintained its history of continuous payment of dividend to its certificate holders for the last 30 years with an average pay out of around 17.75 per cent. Within the last 16 years the average payment of dividend is around 20.65 per cent. FHM has also added substantial value to the certificates of Mudaraba through strong reserve building which has not only strengthened certificate holders’ equity but also enhanced their certificate value.

Tell me about your own personal story in Islamic finance. I started my career with FHM in a junior position. At that time, the Mudaraba concept was initially started in Pakistan’s financial market as a nonbanking Islamic financial institution. During my tenure, I have worked in almost each and every department of the company and gained extensive experience in banking and finance, particularly in Islamic finance, both in support and core functions of the institution.

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After reaching middle management positions I seriously became emotionally invested in awareness building and the promotion of Islamic finance. In order to enhance and further develop my professional skills, I did an MBA in banking and finance from Institute of Business Administration (IBA) and also completed a two year course on Islamic banking and finance from the Centre of Islamic Economics, which was operating by renowned Shari’ah Scholar Shaikh Muhammad Taqi Usmani. This course greatly increased my knowledge and confidence in Islamic finance. In 2007, the Board of Directors assigned me responsibility of Chief Executive Officer (CEO) of FHM from my previous post of Chief Operating Officer (COO). At present, FHM is well-positioned in the Islamic financial market with highest equity base, assets size and strong profitability within the entire Mudaraba sector of Pakistan. Extensive work experience with non-banking Islamic financial institutions makes me the senior-most person with such long experience in the Mudaraba sector in Pakistan. This experience has given me insight into the financial and technical aspects of the non-banking Islamic financial activities. During this period, I have seen various up and downs in Pakistan’s financial market and also witnessed the emergence of Islamic banking within the country. As I stated earlier, I had worked almost in all departments and this experience gave me tremendous support to handle the affairs of FHM in an efficient manner as a CEO of the company. However, I must say that responsibility of as ‘captain’ of the ship is massive and needs more consciousness and responsiveness. At present my concentration is on the progress of FHM through the innovation and development of Islamic financial products. I always remain keen on promotion and enhancement regarding the outreach of Islamic finance within Pakistan. Various research papers have been presented by me on the Mudaraba model and other Islamic financials products at different international forums in Malaysia, Singapore, Hong Kong and South Africa. I was also named Executive Member of

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NBFI & Modaraba Association of Pakistan. Last year I had the portfolio of Chairman of said association.

What is your personal leadership philosophy?

Muhammad Sohaib Ibrahim, CEO and Managing Director, First Habib Modaraba

My leadership philosophy has been shaped through various aspects and approaches. First is the belief and knowledge of myself. I am firm believer that until you know yourself you are not able to meet your fullest potential as a leader. I believe that philosophy is an integrated and comprehensive view of life and a system of principles for guidance. The most critical step to becoming an effective leader is to determine and understand one’s core values. Many of my values are a result of my progress and progress of institution where I work as CEO. In my career I drive through with hard work, high moral convictions, strong ethical codes and values. I have faced many challenges that made pursuing my goal quite tough but with full determination and strong will and with the blessing of God, I successfully managed and accomplished my set target. My personal values include a strong family commitment, carefulness, honesty and integrity. In my professional career and as the head of the institution, I carry the high respect of my colleagues and am always supportive of them. I am always responsive to them and keep open communication and always encourage healthy discussion for the betterment of the institution. This approach has made FHM a strong and sound financial institution. The main component of success of FHM is excellent team work across all levels of the organisation. The future, as I see it, will be very different from the past and I do recognise that a constantly changing business environment requires more concentrated efforts with very effective leadership. Survival belongs to those who challenge the status quo and keep adapting to the required changes of businesses. My present clarity of thought remains, and I am determined to succeed in my future as well to aid the future of my organisation. I always wish for prosperity and a better future for my institution, my colleagues and family members. I also need to stay ahead of the curve in order to remain progressive, vibrant and growing.

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SPECIAL FEATURE

MALAYSIA LAUNCHES

INVESTMENT ACCOUNT PLATFORM THE GOVERNOR OF BANK NEGARA MALAYSIA ANNOUNCED THE LAUNCH OF A NEW FINTECH PLATFORM WITH MYRIAD BENEFITS FOR BUSINESSES AND ISLAMIC BANKS ALIKE

n late February, six Islamic banking institutions launched the first bankintermediated fintech platform, according to the Malaysia International Islamic Finance Centre (MIFC). The platform’s official name is the Investment Account Platform (IAP). According to the MIFC, IAP is a strategic initiative of the Islamic finance industry to operationalise investment account, a new product offering by Islamic banking institutions. The platform was developed by a consortium of six Islamic banking institutions namely, Affin Islamic, Bank Islam, Bank Muamalat, Maybank Islamic, Bank Rakyat and Bank Simpanan Nasional, and a wholly-owned subsidiary of Raeed Holdings Sdn Bhd (Raeed). IAP was launched by Tan Sri Dr. Zeti Akhtar Aziz, Governor of Bank Negara Malaysia. “This platform is more than just a new and innovative medium for Shari’ah-compliant investments and fund raising initiatives.

It signifies a fundamental shift towards providing solutions that addresses the prevailing gap in the current risk-transfer financial regime to one that now allows for financial institutions to include a wider range of investment intermediation activities that emphasises risksharing and thus facilitate a stronger linkage of finance and the real economy,” said Zeti in her speech. “Islamic finance in Malaysia has journeyed through different phases of development and has now evolved into a complete Islamic financial ecosystem that operates alongside the conventional financial system. Underpinning its growth has been the infrastructure and institutional development, product development that is reinforced by increased competition, and supported by a robust Shari’ah, legal and regulatory framework. Its development has also been strongly anchored by the investment in human capital development,” continued Zeti.

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The Governor also boasted on Islamic finance’s market share in the country. “The industry has now not only achieved a market share beyond the target of 20 per cent by the year 2010 as was envisioned in the Financial Sector Masterplan, but it has also met the increasing and differentiated demands of the economy through the range of financial product offerings in Islamic banking, Takaful and Islamic capital market segments,” said Zeti. In his speech, Datuk Zamani Abdul Ghani, Chairman of Raeed described the launch as an important milestone within the industry in broadening the role of Islamic banking institutions as an investment intermediary. Similar to many fintech platforms such as crowd funding and peer-to-peer lending platforms, IAP facilitates direct investment by investors into viable ventures of their choice. However, a key differentiating factor of IAP is the roles undertaken by Islamic banking institutions, said a statement from the MIFC.

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(kijangmas/SHUTTERSTOCK)

SPECIAL FEATURE

Tan Sri Dr. Zeti Akhtar Aziz, Governor of Bank Negara Malaysia

According to Encik Mohamed Izam Mohamed Yusof, Chief Executive Officer of Raeed, IAP increases trust, which is valuable in boosting investors’ confidence and enhancing financing opportunities for entrepreneurs. “Through IAP, we plan to create a conducive marketplace to match investors ranging from low to high risk appetites, and entrepreneurs with various funding needs.” Governor Zeti further elucidated the benefits of the platform. “The value proposition and benefits of the IAP are multifold. It has the potential to spur the generation of new economic strengths through the promotion of entrepreneurship and job creation while also promoting greater financial inclusion and thus enhanced prospects for balanced growth. The IAP enables investors to directly finance a broad range of economic activity of their choice, therefore diversifying their investment portfolio with exposures to various types of projects and industries that yield potential returns that are based on the performance of the underlying chosen ventures.” Halal businesses, too, stand to benefit.

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“For businesses, the IAP provides a new source of funding for activities, with more competitive financing terms in a range of financing structures. Ventures and entities of varying types, size and industries, including SMEs, listed firms and multinational companies can raise funds on this platform. Given its greater visibility, the IAP will also provide access to a broader range of individuals and institutional investors,” continued Zeti. And of course, the Islamic banks themselves will find much to like. “For Islamic banks, the IAP creates a differentiated product that presents a new source of income and funding profile. There is also the potential for institutions with specific mandates including Government a g e n c i e s t o s t r at e g i c a l l y collaborate with the IAP and Islamic banks to form publicprivate partnerships to facilitate the efficient channelling of grants or funding and to facilitate financing opportunities for identified strategic ventures,” said Zeti. Zeti also stressed the need for banks to follow best practices in terms of its due diligence, governance and reporting. “This

would ensure that the IAP is always a trusted medium of investment that is transparent and competitive in providing a seamless experience for investors,” said Zeti. For other banks that are interested in participating, Zeti once again stressed the importance of collaboration and diversification, noting and welcoming that other banks, too, might look to participate. “This platform will have the potential to create a more extensive network of sponsoring banks to meet the more diversified demands of investors and ventures. This would further enhance the potential for the value proposition of the IAP as a Shari’ah-compliant investment vehicle and a fund raising avenue that would bring benefits to the economy.” The MIFC backed up this encouragement from Governor Zeti, stating itself that, “more Islamic banking institutions are expected to join the platform moving forward.” Concluding its statement, the MIFC also stressed the benefits of increased collaboration between the public and private sectors.“IAP will also be positioned as a new medium to facilitate more publicprivate partnerships in financing strategic ventures within specific industries. Through collaborations with IAP, government agencies can efficiently identify viable ventures to channel their grants into, and create opportunities for the private sector to partially fund these ventures. This can increase the number of beneficiaries for these grants therefore optimising the government’s revenue in spurring productive economic growth.” More information can be found on the platform at www. iaplatform.com.

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SPECIAL FEATURE

REACHING TAKAFUL'S POTENTIAL WITH TAKAFULâ&#x20AC;&#x2122;S HUGE POTENTIAL IN THE UAE, NOOR TAKAFUL IS TAKING A MULTIPRONGED APPROACH TO THE MARKET, ACCORDING TO RAJESH SETHI, CEO, NOOR TAKAFUL

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SPECIAL FEATURE

ell me about Noor Takaful Family and Noor Takaful General. What do each cover?

Noor Takaful Family and Noor Takaful General are sister companies, which were established in early 2009 to provide a broad range of Islamic insurance— Takaful. This includes general and customised Takaful products and services to individuals, families and corporates in the UAE market. We were among the first entities to have abided by the Federal Law No 6 of 2007, which requires life and non-life insurance businesses to be separate legal entities. Both Noor Takaful entities are subsidiaries of Noor Investment Group (NIG), which is predominantly owned by governmental organisations, members of the Dubai and Abu Dhabi ruling families and prominent UAE businessmen. Within Noor Takaful Family we currently offer products for individuals such as tailor-made savings, life protection, medical and group products for corporate clients such as group life, group medical and more. Within Noor Takaful General we offer a comprehensive range of products for individuals including Motor, Home and Travel and products for corporate clients which include Fleet motor, Marine, Fire, Engineering and Property.

What are the range of products you offer? At Noor Takaful, we recognise that the health and well-being of every employee goes hand in hand with the success of a business. Our large range of solutions are tailored to ensure that an individual’s or business’ interests are protected. In recognition of UAE’s vast expatriate population and travel needs, our protection covers clients from diverse nationalities, home countries and occupations. As an example, subject to meeting compliance requirements, Noor Takaful can offer protection to Africa-based or India-based clients who travel frequently and need cost-effective protection. With the national focus on developing UAE’s trading status, Noor Takaful’s general Takaful products like SME Package, Contractors All Risks, Workmen’s Compensation etc. are popular in the SME segment, where our trained professionals explain the risk mitigation features of our products to protect clients from unforeseen events. In the group medical space, one of our more prominent products is called ‘Mediwork’, which

is a group medical plan for labourers. The plan is designed to address the needs of any labourers employed within an organisation from both social and humanitarian perspectives. The benefits include repatriation, medical expenses and disabilities, while the plan includes in-patient hospitalisation, out-patient treatment, diagnostic tests, and much more. As an example, Noor Takaful has enabled its Dubai Trade customers to have access to an Islamic insurer product portfolio. A wide choice of marine and cargo Takaful solutions are available through Dubai Trade’s online Tradeshield platform, which enables Noor Takaful to provide safe online insurance with instant quotes to customers. Our aspirations go beyond simply offering marine cargo cover—we want to be the provider of choice for all employee benefits, property and transportation coverage needs.

Where do you see the most opportunity for Takaful in this market? We feel that the Takaful industry has tremendous potential in the UAE. Today, the UAE continues to attract a growing segment of Muslim and non-Muslims Takaful customers and a number of affluent customers looking for more ethical alternatives. In the wake of regulatory changes that are taking place, new opportunities to demonstrate customer value are opening up, such as prudent risk management measures, mandatory medical insurance and better customer service and response times. Also, as customers become more sophisticated and respond to continuous improvements in the customer experience and ease of understanding product features, we see rising levels of customer acceptance in life insurance and general insurance. Besides this, based on the recently issued financial regulations, ethical investment as a part of the concept of Takaful will differentiate Takaful from traditional insurance. There are definite guidelines as to where money (be it in the form of corporate equity or in terms of policyholders funds) can be held which are strictly approved by Noor Takaful’s Shari’ah board.

What challenges are you currently facing? The challenges we face are consistent with the challenges facing all companies in the insurance cont. overleaf

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SPECIAL FEATURE cont. from pg 27

and Takaful landscape. Our challenges include the lack of customer awareness of the risks in their financial plans for the future for themselves and their businesses, the lack of standardised and easyto-compare product features, lack of appropriate pricing in conjunction with standardised terms and also the availability of appropriate human resources.

How optimistic are you about Takaful in this market? What is distinctive about this market? We are pleased to be a part of UAE’s Takaful industry, which is the second largest Takaful market in GCC. The segment is well backed by many government initiatives, such as the esteemed leadership’s vision to transform Dubai as the capital of the Islamic economy. While it is a competitive industry, there are a number of opportunities in the region with the development of Dubai as a global trade hub and its rising connections around the world. Takaful includes ethical aspects which make it distinctive from other options. We believe that more customers in the region would opt for Takaful protection, if the distinctions like transparency, risk sharing, corporate governance

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and ethical practices which are naturally built into the Takaful concept were appropriately explained to them. For example, in line with Shari’ah principles, in Takaful, the customer stands to get back some contributions paid depending on the position of the Takaful fund. This is a huge differentiator—as in conventional insurance, once the policy matures, the insured typically gets only some investment portion if the policy is an investment-linked product. The optimism in the global Takaful arena has also trickled down to the GCC region, with the UAE and Saudi Arabia as its key markets due to low penetration rates.

Noor Takaful Family, one of the companies that is a part of Noor Takaful, takes care of families in the UAE.

What are the main accomplishments that Noor Takaful has made in the recent past? Noor Takaful has grown through building partnerships and an emphasis on technology and customer service excellence. We market our products in partnership with a number of banks such as Noor Bank, Dubai Islamic Bank, and Abu Dhabi Islamic Bank, just to name a few affinity partners, brokers and also through our direct sales force. We count some of the largest banks among our partners. Our clients include individual customers and companies.

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SPECIAL FEATURE

By focusing on customer centric products and quick, responsive services, we ensure customer satisfaction, and increasing support from our partners.

as being named the “Best Takaful Company in the UAE” at the International Takaful Summit in 2014.

What distinguishes Noor Takaful from its competition in the Takaful space?

We are in the B2B and B2C space, which includes government, semi-government entities, corporates, SMEs and individual customers. Our customers choose us for our commitment to customer centricity coupled with strong backing of our parent group.

In the crowded Takaful space, Noor Takaful has distinguished itself by continuously enhancing its technology and improving processes, to enhance customer experience. Noor Takaful is delighted to be a certified ISO 9000:2008 company. We have stayed close to our values which have been based on customer-centricity, innovation, determination integrity and responsibility. We believe that our long term sustainability will not depend on price, but on proven trustworthiness and positive customer experience over a period of time

And what distinguishes Noor Takaful from conventional insurers? We are a Shari’ah-compliant company, which strongly appeals not only to customers looking for a Takaful solution, but also other customers seeking fair treatment and ethical processes and values. In general, Takaful is assessed and handled differently from conventional insurance. The Takaful concept is based on the spirit of cooperation between customers. The contributions paid by participants are pooled together and will be used to pay for claims and a Takaful operator is appointed to manage the scheme. We maintain full transparency with our customers, in disclosing all terms and conditions as well as pricing—this is a requirement of Shari’ah principles in which all terms are agreed between the company and the customer. Takaful offers two key distinctions to conventional insurance business—first that there is complete independency of policyholders money within the organisation which obviously translates to enhanced security, and second, that policyholders may be rewarded with returns for good years of account. This latter aspect is key to defining the financial value of Takaful. Whilst also matching the conventional offering for service and price, it should provide a compelling case to discerning customers. Since our inception we have also been recognised by Emirates Post as a “Key Strategic Partner” for the delivery of high-standard excellence, as well

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Tell me about your clientele. Who are they, and why do they choose your service?

What clientele are you looking to pursue in the future? At Noor Takaful Family, we are focused on growth in both the individual segment and corporate segment, while at Noor Takaful General, we are focused mainly on the corporate sector— predominantly the SME segment (marine, engineering, property and casualty, etc.), which remains the mainstay of the nation’s economy.

We are a Shari’ah-compliant company, which strongly appeals not only to customers looking for a Takaful solution, but also other customers seeking fair treatment and ethical processes and values. What other plans do you have for the future? Our mission is based on three key pillars; customer experience, training our professionals, and prudent risk management. We have seen that although there is great potential here in the UAE when it comes to Takaful, these pillars are key to penetrate the market—as the lack of quality customer experience and below par risk management has hindered Takaful companies in making significant gains. While the industry faces stiff competition from larger and well established conventional players, the broadening of distribution channels beyond banks and brokers will accelerate the growth for Takaful. We believe our strategy will lay a successful foundation for comprehensively meeting the needs of our customers and ensuring that the Noor Takaful brand stands for customer service standards that exceed every international benchmark.

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ISLAMIC TECH

Bringing Islamic finance to the cloud A CHAT ON INNOVATIVE IT SOLUTIONS FOR ISLAMIC BANKING WITH ABDO CHALHOUB, EXECUTIVE VICE PRESIDENT ICT PROFESSIONAL SERVICES AT PATH SOLUTIONS

All businesses are going to be affected by cloud technology in the near future, and Islamic financial institutions are no different.

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ISLAMIC TECH

ath Solutions being the leading provider of IT solutions for the Islamic banking industry, certainly you are the first to catch any new trend in Islamic banking technologies. First, would you please brief us how Path Solutions is able to cope with the rapid changes in information and communication technology internally, while developing your products? As you said, being the leading provider of IT solutions puts a huge responsibility on us to stay up-to-date with any new trend or new technology in the market especially that in the ICT field the only thing constant is change. Actually, we have no choice; if we are not able to keep track with new trends, our leadership in this industry will be easily lost. Our skilled ICT professionals are our main pillar helping us to remain in the leadership. Each team member in his/her own specialty keeps a close eye on any new technology release or trend, and he/she does it through extensive tests to ensure that we can make full use of any new technology or trend. Our subject matter experts cover a variety of ICT infrastructure, ranging from security to network, cloud, social media, database, systems, and others.

(pogonici/SHUTTERSTOCK)

How do you see the adoption of new technologies in Islamic banking?

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There are so many interesting things that have developed lately in the ICT field. From smart phones to smart houses and smart cars, smaller, lower power consumption, more powerful wearables technologies, etc. IT is getting into every single detail of our lives. Data is growing exponentially; businesses need to use or extract useful knowledge from this huge data to be competitive in todayâ&#x20AC;&#x2122;s financial environment. No one can ignore what is going on around us in the field of technology advancement. Even conservative banking in general, and Islamic banking in specific, cannot be an exception.

Taking for example the hot topics these days, how do you see the adoption of cloud services in Islamic banking? The variety of services that are available nowadays in the cloud are pushing all businesses to look seriously into the use of cloud services.

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ISLAMIC TECH

So, the feedback that used to be received from some old ICT schools or business professionals as “too expensive”, “risky”, “might not be reliable”, cannot be used anymore to ignore cloud services. At the same time, one cannot ignore other limitations or constraints, especially in the banking and Islamic finance sector. From our side, our products are already deployed on the cloud. However, looking at it from the client perspective, there are concerns and perceptions that need to be taken into consideration, and they are related to the use of cloud services: Ü Compliance: Local regulations imposed by some central banks limiting the location of the data center within the country itself Ü Security of information: Businesses are reluctant to put themselves totally dependent on a crossborder cloud service provider, without having concrete contingency plans Ü Operation: One of the main advantages of having cloud services is relieving businesses from worrying about hardware, systems, databases and infrastructure systems’ maintenance and administration, making them focusing solely on what they know best—the business side. But on the other hand, are the changes or upgrades of the infrastructure systems, offered through the cloud, running smooth and trouble-free? Can businesses find themselves one day running their mission-critical application on an upgraded version of an operating system, database or other infrastructure system without going through the traditional/ conventional change control procedure?

With all this in mind, how and where do you see the adoption of cloud services in the Islamic banking sector? While the listed concerns may imply that the banking sector may go slow to use public cloud services in core banking, the adoption of cloud services may go much faster in external facing applications for business operations or processes that do not directly involve sensitive data pertaining to customers. While keeping the core or internal applications on-premises or using a hosted private cloud.

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Abdo Chalhoub, Executive Vice President ICT Professional Services at Path Solutions

Other use of hybrid deployment can be using the cloud services for test and development environments (where there is no sensitive or personally identifiable information PII). We are also seeing cloud service providers building their cloud services datacenters within the country itself, which will also encourage some reluctant businesses to get into the cloud faster. Another factor that will speed up the adoption of cloud services is that, with the increased cybersecurity risks, the availability of qualified/ specialised ICT personnel taking care of the enterprise infrastructure is vital. But the problem is that, it will be difficult for small to medium businesses to attract and to retain highly qualified professionals in security, systems, database, networking, communication, etc.It is difficult to retain them because the ICT environment will become for those professionals not challenging enough, shortly after the initial implementation. Routine work will push them to look for more challenging opportunities somewhere else. The cloud is offering a reliable infrastructure with all its related maintenance activities at a reasonable cost. The very short (fast) provisioning cycle, compared to the traditional hardware purchase, shipment delivery, installation cycle, is also another advantage in favor of the cloud usage. So, the provisioning cycle in the cloud services is a matter of days, while it will take months to get on-premises the hardware ordered, delivered and installed.

Other than cloud services, what do you perceive as a new trend that can affect ICT? Of course the explosive use of social media is a major factor driving businesses to make use of it to grow their businesses. Also, with the proliferation of technology devices, the internet of things and big data are other hot topics these days.

www.islamicbusinessandfinance.com

21/04/2016 11:20

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15/12/2015 15:47

HALAL BUSINESS

Halal vitamins for every consumer THE AMERICAN-BASED NOOR VITAMINS HAS FOUND A LOYAL CUSTOMER BASE BOTH MUSLIM AND NON-MUSLIM ALIKE, ACCORDING TO MOHAMMED ISSA, PRESIDENT, NOOR PHARMACEUTICALS

hat was the original inspiration for Noor Vitamins?

The three founders were originally practicing doctors and pharmacists and repeatedly received questions from patients on Halal alternatives that were just as scientifically reputable to their vitamins/supplements. We could never find a brand that we can stand behind as healthcare professionals. I was personally practicing less medicine at the time and had started leading large brands for pharmaceutical companies. The group decided to leverage our scientific and business background to start Noor Pharmaceuticals to meet the need in the market to bring Halal and scientifically formulated products to market that are competitive with the major brands.

How did you begin? What work did you do behind the scenes to make this happen? We worked to raise capital, build our manufacturing capabilities, start formulating products and obtain certifications required (both Halal and FDA GMP certifications for the facilities). We put together comprehensive plans both from a business and scientific perspectives and worked on preparation for about two years prior to launch to make sure we did it right.

Tell me more about the range of products you produce. Right now we offer more than 13 products. We started with basic multivitamins that were made for adults and children. Now weâ&#x20AC;&#x2122;ve expanded to offer the basic multivitamins and include specialty products such as childrenâ&#x20AC;&#x2122;s gummies, prenatal

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HALAL BUSINESS

40 per cent of our customers are non-Muslims. They are attracted to our naturally sourced ingredients, reputable manufacturing and scientifically complete formulas.

Noorflex, made to improve mobility and stability.

vitamins, adult vitamins to support immunity and energy, and joint support. Many of these new products are proprietary in nature (formulas trademarked to Noor and no one else can replicate it). Please visit www.noorvitamins.com products page to get more details on the current product line. We’re planning on introducing at least four more new products this year alone.

How have you altered your product based on the feedback you have gotten from users? Our products have evolved to be made with all natural ingredients, free of artificial colors and preservatives. We are allergen free and nonGMO. We’ve done this to continue to provide our Muslim consumers the best possible products and to make sure our line is not only competitive but even better than the leading brands so they don’t feel like they have to settle for inferior products just to live a Halal lifestyle. We pride ourselves on putting our products side by side with any brand on the market and ensuring we have a more complete formulas with the best possible sources ingredients.

Is it difficult to keep products Halal in the US? We have a process to make sure every ingredient we use is Halal and to make sure our facilities are exceeding the standards of most if not all Halal-certifying agencies worldwide.

What has been your marketing strategy for Noor Vitamins? Create the best possible vitamins/supplements using the highest quality ingredients in the most

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stringent manufacturing process and educate the consumer on the importance of Halal and naturally sourced ingredients. We make our products available online and in pharmacies worldwide when possible.

Have you tried to reach non-Muslim consumers as well? Forty per cent of our customers are non-Muslims. They are attracted to our naturally sourced ingredients, reputable manufacturing and scientifically complete formulas.

What are your plans for the future? We will continue to make the best possible products. This will include launching new products and making our products available in more countries worldwide. We’re also working on developing brands in related business that leverage our expertise in sourcing and producing the highest quality healthcare brands.

How do you run Noor Vitamins as a Halal business? We have a Shari’ah business advisor to make sure everything from contracts, sales/marketing process, financial instruments used, Zakat and even employment guidelines are all Shari’ah-compliant.

What is it like running a Halal business in a country that is not primarily Muslim? In my opinion, Halal business is good business. It is one that minimises risk, focuses on community and holds all we do for our customers and employees to the highest standards.

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HALAL BUSINESS cont. from pg 35

This simply holds ourselves to a bar that is better for our business and the Baraka that comes from it is worth all of the challenges of running a Muslim business in a non-Muslim environment.

What else would you like to see improved in the Islamic economy? What other areas do you feel are under-serviced? A network of Muslim business that can leverage each other’s strengths and synergise their efforts would be great to see. There are many ways businesses can build off of each other and help provide customers a broader value proposition. We don’t do that as much as we should in our Islamic economy. Rather than thinking about how ‘can we copy’ something that is working ‘think how can I build on it’.

What advice do you have for those who want to start their own business to join the growing Islamic economy?

Prenatal vitamins for expectant mothers.

Focus on quality and be the best offering in your sector, not just Halal. If you strive to be the best possible product, Halal or not, you’ll find yourself exceeding the expectations of your Halal customers and competing in an even broader market. Don’t just depend on Halal customers buying from you because you’re Muslim, work to have them buy from you because you’re the best possible product in your sector.

In my opinion, Halal business is good business. It is one that minimises risk, focuses on community and holds all we do for our customers and employees to the highest standards. Children's vitamins for many uses.

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18/04/2016 14:36

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13/04/2016 11:25

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Join us at this Global Forum and be part of the most important

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LEGAL FOCUS

A new day for Islamic finance in Iran

WITH SANCTIONS EASED, SHARI’AH-COMPLIANT BANKS STAND TO BENEFIT HUGELY, WRITES AZADEH MESKARIAN, SOLICITOR AT ZAIWALLA & CO.

ran is one of the pioneers of Islamic finance and their history of Islamic finance goes back to 1983. Following the Islamic revolution, Iran passed regulation forcing its entire banking system to rebuild into an Islamic one. More than 30 years on, the Iranian banking industry remains completely regulated by

Shari’ah and is by far the world’s largest centre of Islamic banking. An often-ignored area within Islamic finance is the establishment of an inclusive national interest-free banking system in Iran. The core of Islamic finance around the world is associated with the ban on the payment of certain types of

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interest. Somehow in this case Iranian banks still effectively use interest-based transactions and retain the accounting standards of conventional banking.

Islamic finance in Iran will benefit from inward investment.

THE SHADOW OF SANCTIONS The international community became concerned that Iran

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LEGAL FOCUS

The lifting of sanctions has not only enhanced Iran’s economy but has also provided an opportunity for Shari’ahcompliant investment with diversification opportunities. was allegedly pursuing the establishment of a nuclear w e a p o n r e s u r f a c e d . Th e s e suspicions continued into the mid-1990s, when President Bill Clinton’s government imposed sanctions on foreign firms believed to be allowing a nucleararms programme. In the early 2000s, indications of work on uranium enrichment renewed international concerns, spurring several rounds of sanctions from the UN, European Union, and US Government. These international sanctions have sought to block Iran’s access to nuclear-related materials and put an economic restriction on the Iranian government to compel it to end its uranium-enrichment program. Over the last few years Iran’s economy was weakened by the imposition of sanctions by the US and EU, amongst other countries, on its financial, banking and energy sectors. It will take time for Iran to recover from the knock-on effects of these sanctions, which led to a dramatic the fall of the Iranian rial and unexpectedly high inflation. Poor exchange rates seriously affected the lives of local Iranians, foreign companies and individuals with an interest in investing in the country. Foreign investors were left with the choice of either closing down or significantly reducing their activities. Unmistakably these prohibitions made it impossible for Iranian banks and their foreign subsidiaries to carry out

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transactions with the rest of the world whilst European banks with representatives operating there, again, had to close up or reduce their activities.

POST-SANCTIONS GROWTH FOR ISLAMIC FINANCE The lifting of sanctions has not only enhanced Iran’s economy but has also provided an opportunity for Shari’ahcompliant investment with diversification opportunities. There is a particular demand that Iran’s growing economy accommodates investment that will bolster its strength beyond dependence on oil. For Iran—one of the largest players in the Islamic finance industry contributing to around 40 per cent of global Islamic banking assets—the

lifting of sanctions has only helped boost Islamic finance. The lifting of sanctions have also restored Iran’s access to the global financial markets. Under this scenario, Iran’s GDP growth would hover around six per cent annually in fiscals 2017 and 2018 according to market estimates, compared with less than one per cent in 2015. Iran’s Islamic banking assets are $482 billion, according to Dubai Government data from 2014. That’s more than in Saudi Arabia, Malaysia and the United Arab Emirates combined. Islamic finance in Iran can benefit from the sheer volume of the post-sanction investments and such projects are reportedly high. This will in turn support the market growth and create growth opportunities for the banking system in Iran.

ABOUT ZAIWALLA & CO SOLICITORS Zaiwalla and Co. Solicitors is an international law firm based in Chancery Lane, City of London, with expertise in sanctions, arbitration, litigation and mediation. The firm acts for both domestic and overseas clients including corporations and state entities, as well as individuals. Their practice areas cover both contentious and non-contentious law, including domestic and international litigation, international commercial arbitration, shipping, banking, project finance, energy, company commercial and immigration. Founded in 1982 by Mr Sarosh Zaiwalla, the first Asian individual to establish a law firm in the City of London, Zaiwalla and Co. Solicitors has been involved in over 1,200 international litigations and arbitrations in the fields of Energy, Maritime and Construction. Previous clients of the firm range from the President of India, the Government of the People’s Republic of China (PRC) and the Iranian Government to the Bachchan and Gandhi families in India. Zaiwalla & Co. Solicitors benefits from the expertise of a strong international team, including specialists in the laws of Russia & CIS, China, India, Middle East and Iran.

ISSUE 96 | Islamic Business & Finance

18/04/2016 14:37

ISLAMIC INVESTMENT

(hin255/SHUTTERSTOCK)

Shariâ&#x20AC;&#x2122;ah-compliant equity: challenges and opportunities

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18/04/2016 14:43

ISLAMIC INVESTMENT

AT FRANKLIN TEMPLETON INVESTMENTS, ASSET MANAGERS WITH EXPERTISE IN SHARI’AH-COMPLIANT STRATEGIES ARE LOCATED IN THE KEY ISLAMIC FINANCE CENTRES OF SINGAPORE, HONG KONG, THE UNITED ARAB EMIRATES AND MALAYSIA.

By ALAN CHUA, Global Equities Portfolio Manager, Franklin Templeton Investments

Finding an acceptable investment is just one step in selecting the right investment for future growth.

e all have different reasons to invest our hard-earned money. It might be for a short-term goal like the purchase of a car or house, or a long-term one such as funding our children’s education or ensuring a more comfortable retirement. Investing can take on a religious significance, too. For a growing Muslim audience, investments must not only be able to achieve their goals, but also be compliant with the Islamic law. At Franklin Templeton Investments, asset managers with expertise in Shari’ah-compliant strategies are located in the key Islamic finance centres of Singapore, Hong Kong, the United Arab Emirates and Malaysia. Alan Chua, EVP and Portfolio Manager with Templeton Global Equity Group based in Singapore, talks about the unique aspects of managing a Shari’ahcompliant equity portfolio and why profits and principles don’t have to be mutually exclusive. The principles of Shari’ah investing dictate that to be considered acceptable, companies must pass a certain set of criteria. Among them, the balance sheet

structure should contain neither too many liquid assets nor debt, and the company should not engage in Haram, (forbidden) industries such as alcohol, tobacco, gambling as well as specific foods considered nonHalal, or unpure. Advisers who are considered experts in Islamic law are integral to the investment selection and review process. Our portfolios are independently reviewed and endorsed by the Amanie International Shari’ah Supervisory Board, highly regarded for its extensive Shari’ah and technical expertise. The Amanie Scholars provide initial approval on investment objectives and strategy, as well as ongoing supervisory and monitoring services to ensure continuous adherence to internationally accepted Shari’ah principles and standards. Implementation of these standards can be subjective at times, as it is subject to the interpretation by different Shari’ah Boards, which is a challenge to us as portfolio managers. That can lead to a lack of homogenisation of approach and can confuse potential investors.

THE DETAILS For example, generally, a company that holds too many

liquid assets may have Shari’ah restriction on eligibility. So one would think to eliminate the company. However, this is not always straightforward. It can depend upon the Shari’ah screening methodology applied by the fund adviser in the review process in which one calculates the company’s financial ratio. If a company classifies a large portion of its liquid assets as long-term assets, certain Shari’ah benchmarks will not include it as part of their liquid asset calculations. In addition, some benchmarks will use market capitalisation as the denominator while others will use total assets—both of which could provide different results. Using market capitalisation as the denominator is particularly difficult for value investors (like us) because as a stock gets cheaper and hence provides more longterm value, it could suddenly become ineligible as the market capitalisation falls relative to the liquid assets or debt. Stocks that were compliant at one time but then later deemed non-compliant must be disposed of, but once again it’s all about details. For example, the frequency at which the company pays its dividends (once a year, semi-annually or cont. overleaf

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ISLAMIC INVESTMENT

cont. from pg 41

Alan Chua, Global Equities Portfolio Manager, Franklin Templeton Investments

annually) could make a difference to eligibility. Depending on the Shari’ah screening methodology, a company that accumulates large amounts of cash throughout the year before paying it out in the form of dividends runs the risk of becoming non-compliant. Once it pays the dividend, it may become compliant and hence an eligible investment once again. The grace period given to dispose a stock (once it becomes non-compliant) is also different from one benchmark or adviser to another. In the dividend example, if the grace period to sell non-compliant stocks is short you may be forced to sell it before it pays the dividend but conversely if your grace period is long, the stock could remain compliant by paying the dividend and reducing cash on the balance sheet. Such are the challenges of Shari’ah investing! But despite the constraints, we are able to find plenty of potential opportunities. In managing our Shari’ah portfolios, we leverage the same investment team and research process in place in the Templeton Global Equity Group at large. So the Muslim investor is essentially getting a subset of our broader portfolio, but one which is compatible with specific Shari’ah principles. Our team overall is finding potential opportunities in the healthcare, energy, and telecommunications sectors. European financials represent a sector our Shari’ah portfolios can’t invest in, but we’ve been finding a lot of value over the past year there in our other portfolios. By country, Malaysia represents one of the biggest markets right now for Shari’ah investing, and is growing because of its advanced national pension scheme.

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There is a mandatory monthly contribution into the national pension fund that grows with population and income levels. Other big centres include some of the Gulf cities in the Middle East like Dubai and Abu Dhabi. I think the natural interest in Shari’ah investing is likely to be confined to Muslim nations, but it would not be surprising to find other countries also interested in offering an Islamic investment vehicle as there is a large and growing Muslim diaspora globally. So our potential investment opportunities could likewise continue to expand, and we think it’s an exciting time to be an investor in this growing space.

The principles of Shari’ah investing dictate that to be considered acceptable, companies must pass a certain set of criteria.

www.islamicbusinessandfinance.com

18/04/2016 14:43

The region’s most transparent awards

The BME100, a list of the region’s top-performing banks, is not only a benchmark in bank performance, but the judging process is unequivocally transparent. Each bank is ranked according to its financial performance relative to other regional banks, there are no grey areas. Every bank’s financial data is carefully scrutinised by our in-house analytics team and each bank is ranked in our BME100 list according to that financial data. Our analysts use the Data Envelopment Analysis (DEA) method for analysing the efficiency of the banks in the BME 100. The analytical framework of our BME100 reports is based on secondary data drawn from the annual reports of the major financial institutions and Islamic windows around the MENA region. In our analysis we measure the performance of the whole banking sector of the countries against each other and compare the best banks of each country against each other. Where annual reports are not publically available on the institution’s website for the year in question, the institution is not included in the analysis.

bleed guide.indd 1

Results are collated in the currency in which they are originally published and are then converted into US dollars and normalised before the institutional rankings are calculated. The currency conversions are carried out using the prevailing exchange rate at the end of each year and as published by the relevant Central Bank. The institutions are ranked according to both the absolute size of and the dollar value increase in size of the following: ÜAssets ÜLiabilities ÜIncome ÜNet profit The rankings obtained within these areas are then combined to create an overall ranking.

CHECK OUT OUR LATEST BME100 HERE:

http://www.cpifinancial.net/flipbooks/SUPPLEMENTS/ 2015/BME1002015/

18/02/2016 14:24

TAKAFUL

Huge rise in GCC sovereign issuance to support Takaful stability

(JOAT/SHUTTERSTOCK)

SUKUK AND BONDS COULD AID THE INDUSTRY, ACCORDING TO BLAKE GOUD, CHIEF RESEARCH OFFICER OF MIDDLE EAST GLOBAL ADVISORS

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TAKAFUL

Bond and Sukuk issuance from GCC sovereigns is expected to rise.

ne of the major challenges facing the GCC Takaful market— excess allocation to real estate due to limited alternatives – may see an avenue for relief in the next few years. The region, home to two of the three leading markets globally (Saudi Arabia and the United Arab Emirates), will see $58 billion in bond and Sukuk issuance in 2016 and $385 to $390 billion through 2020 according to Kuwait Finance Centre Markaz. The stability of all insurance companies (including those operating Takaful funds) has been put at risk by high allocations to equities and real estate. The high allocation to these asset classes can be beneficial while times are good but leave the solvency of insurers and Takaful operators more at risk when the economy slows. The excess allocation towards real estate (something which is common among insurers as well as Takaful operators) has been exasperated by the shortage of Shari’ah-compliant fixed income. Going forward, the next few years may be challenging for the GCC and its Takaful companies if energy prices stay low because the low penetration rate of insurance and Takaful has led to an extremely competitive market. When Finance Forward surveyed insurance professionals

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Blake Goud

in the region about the major challenges facing insurers, the top response (and the only one with more than 50 per cent of responses) was pricing pressure driven by the over-competitive market. With competitive pressures putting pressure specifically on underwriting margins, the investment side of the Takaful business will be crucial for ensuring the long-term success for Takaful operators. Many of them are relatively well capitalised and thus helping improve their resiliency of their investment allocations by including more of the (upcoming) sovereign Sukuk. A unique challenge facing Takaful, even compared to conventional insurers with similar asset allocation problems, is the dearth of Shari’ah-compliant fixed income, and particularly a shortage of sovereign Sukuk. Th i s s h o r t a g e m a k e s i t challenging to implement the new rules being proposed or phased in that put a cap on

real estate and equity exposure. The new caps generally also limit foreign exposure making domestic, sovereign Sukuk a highly desirable asset for Takaful operators. The benefit from rising sovereign issuance is that it will have a chance of reaching such a volume that meets both banks’ (particularly Islamic banks which are highly liquid) need for high quality liquid assets and Takaful operators need for domestic, Shari’ahcompliant fixed income. A pipeline of around $60 billion per year for the next five years will support banks and Takaful operators’ ability to manage their balance sheets and, thus, support growth.

The article was published on Finance Forward and authored by Blake Goud, Chief Research Officer of Middle East Global Advisors. The piece reflects some of the key themes of the 11th annual World Takaful Conference which happened in Dubai on April 11-12. WTC is the world’s pre-eminent platform for the global Islamic insurance industry with past partners including the Dubai International Financial Centre: www.wtc16.com The originally published article can be found here: http:// meglobaladvisors.com/hugerise-in-gcc-sovereign-issuanceto-support-Takaful-stability/

ISSUE 96 | Islamic Business & Finance

18/04/2016 15:22

THE INSIDE STORY

Bringing the story of Bilal to the world BILAL IBN RABAH IS A LEGENDARY FIGURE FOR MUSLIMS ALL OVER THE WORLD. NOW, DUBAI-BASED BARAJOUN ENTERTAINMENT HAS TURNED HIS STORY INTO ITS FIRST FILM AIMED AT BRINGING ITS MESSAGE TO AUDIENCES OLD AND NEW

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13/04/2016 09:51

THE INSIDE STORY

A scene from Barjoun Entertainment’s Bilal, telling the story of the Islamic historical figure.

n the history of Islam, not many stories are as beloved as that of Bilal ibn Rabah, who was born a slave before being freed and becoming one of the closest companions of the founders of Islam. Now Dubai-based Barajoun, which has worked on some of the most prominent animated features globally, has produced its first feature, aimed at bringing this Islamic figure to the world. Bilal, the film Barajoun produced, tells the thousand-year old story of a young boy and his sister, abducted into slavery in a faraway land. Bilal dreams of becoming a great warrior and eventually finds the courage to raise his voice and bring about the change he seeks. Bilal was entirely produced at Barajoun’s studios in Dubai across three years. The film is considered the most ambitious animation project to have come from the region to date. The script was developed by multi-award-winning authors Alex Kronemer and Michael Wolfe, working alongside a team of 360 animation and CGI talents from around the world whose credits include 300, Shrek and Lord of the Rings. The film aimed to stay as true as possible to the authenticity of the time, bringing to life a story which took place 1,400 years ago. Over 5,000 hours were spent on the research and design of the costumes which are influenced by ancient Arabia and Africa, whilst more than 90 location scenes were used to capture the grandeur of the landscapes. Islamic Business & Finance sat down with the Co-Director, Khurram H. Alavi, about the process behind bringing this beloved Islamic figure to life, aimed at bringing their product to the world.

How did you take to the idea of the film? We have grown up with this story. The story of Bilal is the story of how Mecca was liberated

back in the day. There were a lot of barbaric people, and then came a movement that wiped everything clean, and Bilal was a part of that. It was so inspiring to see someone actually present a rough draft of a script of this person’s story that you have grown up with, to get the opportunity design characters in this world, and to make a movie that is aimed to speak to the whole world. That was the intention. We wanted to make a movie that speaks to the whole world, not just one region, or one nation.

How did you go about refocusing the story to make it more accessible to people that didn’t grow up with the story of Bilal? That’s why we picked an animated feature genre. When you see movies made in other religions, actual actors are cast into those roles, and you can’t help but judge those actors, and audiences won’t accept them as those figures. With animation, it’s the difference between shooting with a camera and drawing with a pencil. We love characters from our history, but people won’t accept an actor playing him. That’s why we went for an animated movie where we could design the characters and people would look at them and not judge them and just accept the story. When you get to designing these characters, you want to see how you can stylise these characters, and you have age groups that like simplified characters, whereas young adults want more mature animation. We were facing this dilemma—which age group to target? Then we ultimately decided to target a broader age group who would look at this and be interested in it. That’s how we led our design process—we made humanoid characters who are not so realistic but exist in a world itself that is realistic—a bridge between realism and cont. overleaf

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THE INSIDE STORY cont. from pg 47

surrealism. It’s a very fine balance. We did a lot of exercises showing it to viewers, getting their feedback on how we design their faces, how to make their skin look real, and how to design the hair styles.

How do you get people to accept animated characters as historical figures of Islam? You can’t replicate the human face. It doesn’t work when you try to replicate it. But when you see a Disney movie or a cartoon, you relate to the characters, even though they don’t look like you. We had to find the happy medium. It took us two years to explore the styles for the characters, saying this is what we want and this is what’s going to appeal to a wider audience, then we finally went to the animation part. I was inspired by DreamWorks’ Prince of Egypt, which I felt embodied the spirit of the story. You don’t end up judging who Moses was, because the film doesn’t explicitly say who Moses was. But we didn’t copy anything directly. We came

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up with something original—I can’t compare them to anything else that is out there.

Bilal shows off his heroic side.

Did you plan from day one to have this Arabic story in English? There was originally some speculation that we would have it be more authentic and go for Arabic, but since the story is for the whole world, English was the natural choice. It speaks volumes to so many people, and it’s a bridge between cultures. It was our first solo project at Barajoun Entertainment, and as a result, we didn’t have a Hollywood budget. Ayman Jamal, the founder of Barajoun Entertainment and the co-director for the film, was amazing with how he managed his resources. We decided to design the characters first because they are historical characters. They have descriptions in traditional writings that have come down from generation to generation, and we followed those descriptions. We don’t have photographic evidence, obviously, but there is a

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THE INSIDE STORY

As far as I know, no. We wanted this to be seen by the world. I’m not against picking regional actors, but I want actors who have international experience. With animation, you want actors who are good with voice over acting, and in this region I’m not sure how much they’ve actually done. Jacob Latimore, who played teenage Bilal, has a great singing background, which means he could match that aspect of the character well. With Ian McShane, he would start reading the lines and get them on the first try.

to show these people who follow the religion and show their personalities, rather than talk about the religion explicitly. Prophet Mohammed was there historically at the time, but he is such a big personality, you can’t have him as a supporting character. So instead, we had him as something that we couldn’t see, and that thus made him more important. Islam was a movement for freedom. These were terrible times for the people there, and then came Islam which promoted freedom. We tried to stay away from characters who would distract from Bilal himself, as we are trying to tell his story. We didn’t want the movie to be just about religion, we wanted it to be about the characters. We just wanted to focus on Bilal’s story, and as a result, we didn’t define the movement. People that know the history will get it. We decided to make it more interesting than showing the call to prayer itself—we cut it right before he was about to begin. We’ll put it in the deleted scenes!

How did you incorporate the religious aspect into the story?

What do you want people to take away from this film?

Religion is a character. When you think of story, it’s not background music. In many movies you would hear the call to prayer in the atmosphere, and that’s atmospheric. When you think of the call for prayer, it’s quite spiritual and quite conceptual, much like Islam itself. But when you are telling the story of Bilal, who was sold into slavery, came to Mecca and fought for his freedom, bringing a strong element like Islam into play would extend the duration of the film. We considered this very carefully. We wanted

We want the film to spark some imagination. There’s a lot of wrong-headed negativity in the world towards Islam and towards our region. We are the same people, and we want to show that we have people in our history who followed this religion and are good, normal people, like we are. We want people to start thinking about who this guy is, to spark their interest in the history of the region. We aren’t trying to directly preach to the audience. We want to instead spread information. This film is about universal themes like rising

lot that describes them. For instance, Hamza is known as ‘the lion’, and so I decided we should make his face resemble a lion. Umayya, the main villain, we designed after a snake. It’s so much easier to enhance features, and we then went back and said, which actor can fit? Ian McShane was the perfect villain to cast to fit Umayya, and he was wonderful to work with.

Was there any push to have actors from this region appear in a film set in Mecca?

(L-R) Bilal and his antagonist.

cont. on pg 50

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ISSUE 96 | Islamic Business & Finance

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THE INSIDE STORY cont. from pg 49

A touching family moment.

against oppression, and demanding freedom. We want people to know that they shouldn’t sit around expecting someone to free them—stand up, and use your voice! We want people to think of historical figures that have inspired so many generations. It’s a good time to stand up and show the whole world that Islam has wonderful figures like this, that helps prevent unnecessary prejudice.

What are more of the morals that you are trying to get across to the viewer? The opening scene, when a young kid is taken away into slavery, you see how slavery happens all throughout history. It’s a very simple story—seeing people resist a bigger oppressive force. And at the end, one thing to consider is that in this time and age, you have so many disasters happening, so much oppression, and so much killing. In the end, the one who suffers the most is the child. You see this everywhere—oppressors killing innocent people, with children crying. Our movie starts with a kid, and that kid grows up. When you watch this movie, you see a kid grow up, use his voice, and come out a hero. It makes you question

Islamic Business & Finance | ISSUE 96

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There’s a lot of wrong-headed negativity in the world towards Islam and towards our region. We are the same people, and we want to show that we have people in our history who followed this religion and are good, normal people, like we are. a lot of things. The hero doesn’t kill his enemy. There is strength, but there is forgiveness. It’s a message for peace. We wanted to show that no one is a villain by birth—it’s many characters by many motivations. It’s the same thing, and that’s what we are promoting here. Use your voice for right, and fight against injustice. It’s something that we are trying to show in this movie. We want to spread the good and heroic things in life. I hope that it is well received.

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