TOP PERFORMERS The institutions and individuals making the difference in Shari ah-compliant financing

Transcription

1 ISSUE 2016 TOP PERFORMERS The institutions and individuals making the difference in Shari ah-compliant financing Dubai Technology and Media Free Zone Authority

2 Every award we win makes you, our customers, shareholders and the nation a winner. So while we take pride in our winning tally for 2015, we look forward to an even better year ahead Best Retail Bank Africa Islamic Business & Finance Awards 2015 Best SME Bank - Africa - Islamic Business & Finance Awards 2015 Best Islamic Bank - East Africa- Islamic Business & Finance Awards 2015 Best Islamic Bank - Africa- Islamic Business & Finance Awards 2015 Best Microfinance Bank East Africa Banker Africa Best Customer Service East Africa Banker Africa Best Islamic Retail Bank East Africa Banker Africa Best Islamic Retail Bank Sudan - Global Banking & Finance 2015 Best Islamic Microfinance Bank Sudan - Global Banking & Finance 2015 Best Islamic Retail Bank Africa International Finance Magazine 2015 Critics Choice Best Islamic Retail Bank 2015 Sudan Islamic Retail Banking Awards 2015 by Cambridge Analytica IF. Call Mubasher: /

3 Dubai Technology and Media Free Zone Authority CONTENTS 1 EDITOR S LETTER Both Islamic banks and conventional banks have taken a hit in profits during the last financial year due to the global economic slowdown and continuing depressed oil prices. Despite this, those in the Islamic banking sector are still hopeful for dynamic growth. Because Islamic finance is starting from a lower penetration rate than conventional banking, there are far more market segments for it to conquer, and far more countries for it to get a foothold in. Bashar Al Natoor, Global Head of Islamic Finance, Fitch Ratings says that in Africa alone, Islamic finance is already present in more than 20 African countries, with Sudan having a fully-fledged 100 per cent Islamic financial system. However, the size of the Islamic finance industry in Africa is still small in relation to the industry as a whole. Fitch estimates around $1 billion of Sukuk total issuance from the whole of Africa in 2016 compared to $21.74 billion in 1H16 across the Gulf Cooperation Council, Malaysia, Indonesia, Turkey, Singapore and Pakistan, said Al Natoor. Islamic finance is also seen as a safer option than conventional and this is encouraging more and more people to look into investing in a Shari ah -compliant way. Many Islamic banking institutions are also diversifying their product offerings to give their clients more options when looking to invest, take out a loan, or get a credit card. TOP PERFORMERS The institutions and individuals making the difference in Shari ah-compliant financing 6 Top 100 Shari ah-compliant institutions 8 Top Shari ah-compliant institutions by assets 9 Top Shari ah-compliant institutions by change in assets 10 Top Shari ah-compliant institutions by liabilities 11 Top Shari ah-compliant institutions by change in liabilities 12 Top Shari ah-compliant institutions by income 13 Top Shari ah-compliant institutions by change in income 14 Top Shari ah-compliant institutions by net profits 15 Top Shari ah-compliant institutions by change in net profits Georgina Enzer Managing Editor 16 Top numbers overview 18 Islamic Business & Finance Awards A look back at the Islamic Business & Finance Awards

4 CONTENTS 2 32 Published by Chairman SALEH AL AKRABI Chief Executive Officer ROBIN AMLÔT robin@cpifinancial.net Managing Editor GEORGINA ENZER georgina@cpifinancial.net IN-DEPTH 22 Faisal Islamic Bank exceeds customer expectations 24 Alizz Islamic Bank; bringing Shari ah-compliant finance to Oman 26 National Bonds invests in Islamic finance 28 ICD helps unlock Islamic finance s potential 32 Legal focus: looking to the future of Islamic finance OPINIONS 36 State of the global Sukuk market Islamic finance s myriad challenges and opportunities 44 Islamic finance 2017: another difficult year 46 Methodology Editor WILLIAM MULLALLY william@cpifinancial.net Tel: Online Editor MATT AMLÔT matt@cpifinancial.net Tel: Online Content Manager SIYA PAINAYIL siya@cpifinancial.net Tel: Data Analyst NADINE ABOUZEID nadine@cpifinancial.net Tel: Sales Director JON DESPRES jon@cpifinancial.net Tel: Sales Director OMER HUSSAIN omer@cpifinancial.net Tel: Business Development Manager NAPOLEON ESTAMPADOR napoleon@cpifinancial.net Tel: Chief Designer BUENAVENTURA R. JALUAG, JR. jun@cpifinancial.net Tel: Senior Designer FLORANTE MAGSAKAY florante@cpifinancial.net Tel: Contract Publishing Manager VINOD THANGCOOR vinod@cpifinancial.net Tel: Finance Director SHAIS MEMON, ACCA, CMA shais.memon@cpifinancial.net Tel: Administration & Subscriptions enquiries@cpifinancial.net Tel: Tel: Registered at the Dubai Media City. Head Office P.O. Box , Dubai, UAE Fax: Printed by UNITED PRINTING & PUBLISHING Abu Dhabi, UAE 2016 CPI Financial. All rights reserved. No part of this publication may be reproduced or used in any form of advertising without prior permission in writing from the editor. 4

5 23 rd Annual Strategic Partner 5, 6 & 7 December 2016, ART Rotana Hotel, Amwaj Islands, Kingdom of Bahrain Economic Uncertainties: Vigilance & Growth Dr. Ahmed Abdulkarim Alkholifey Governor Saudi Arabian Monetary Agency His Excellency Alexander P. Torshin State Secretary - Deputy Governor Central Bank of Russia H.E. Rasheed Mohammed Al Maraj Governor Central Bank of Bahrain WIBC2016.COM Global Islamic Banking Partner Ethical Banking Partner Accreditation Partner Platinum Partners Gold Partners Silver Partners GALA Dinner Host Knowledge Partner Conference Luncheon Host Day 2 Polling Partner Regional Banking Partners Islamic Finance Islamic Banking Services Associate Technology Partner Associate Partners Powering Islamic Financial Markets Associate Partners Delegate Bag Partner Delegate Badge Partner Notepad Partner WIBC is a brand of To participate in this prestigious event please partnerships@meglobaladvisors.com

6 THE AUTHORITATIVE VOICE OF ISLAMIC FINANCE 100 TOP 100 SHARI AH-COMPLIANT INSTITUTIONS: Final Rank 2015 Entity Name Country Name 1 Dubai Islamic Bank United Arab Emirates 2 Abu Dhabi Islamic Bank United Arab Emirates 3 Al Rajhi Bank Saudi Arabia 4 Alinma Bank Saudi Arabia 5 Qatar Islamic Bank Qatar 6 Emirates Islamic United Arab Emirates 7 National Bank of Pakistan (Islamic Banking) Pakistan 8 Masraf Al Rayan Qatar 9 Boubyan Bank Kuwait 10 Sharjah Islamic Bank United Arab Emirates 11 Bank AlBilad Saudi Arabia 12 PT Bank Syariah Mandiri Indonesia 13 Noor Bank United Arab Emirates 14 Meezan Bank Limited Pakistan 15 Barwa Bank Qatar 16 Kuwait International Bank Kuwait 17 Ajman Bank United Arab Emirates 18 Qatar International Islamic Bank Qatar 19 Ahli United Bank - Kuwait Kuwait 20 The City Bank Ltd (Islamic) Bangladesh 21 Al Hilal Bank United Arab Emirates 22 Jordan Islamic Bank Jordan 23 Bank AlJazira Saudi Arabia 24 Islami Bank Bangladesh (IBBL) Bangladesh 25 BUPA Arabia for Cooperative Insurance Saudi Arabia 26 Parsian Bank Iran 27 Bank of Khartoum Sudan 28 First Security Islamic Bank Bangladesh 29 Kuwait Finance House - Bahrain Bahrain 30 Soneri Bank Limited (Islamic Bank Limited) Pakistan 31 Bank of Industry & Mine Iran 32 Social Islamic Bank (SIBL) Bangladesh 33 Al-Arafah Islami Bank Bangladesh 34 Warba Bank Kuwait 35 Al Rayan Bank United Kingdom 36 Export Import Bank of Bangladesh Bangladesh 37 Kuwait Finance House Kuwait 38 Sepah Bank Iran 39 Khaleeji Commercial Bank Bahrain 40 Bahrain Islamic Bank Bahrain 41 Ithmaar Bank Bahrain 42 Shahjalal Islamic Bank Bangladesh 43 Premier Bank Ltd (Islamic) Bangladesh 44 Al Baraka Islamic Bank Bahrain 45 Bank Islam Brunei Darussalam Berhad (BIBD) Brunei 46 OCBC Al-Amin Bank Berhad Malaysia 47 Bank Islami Pakistan Limited Pakistan 48 Bank Nizwa Oman 49 Bank AlKhair Bahrain 6

7 THE AUTHORITATIVE VOICE OF ISLAMIC FINANCE Mashreq Al-Islami Finance Company United Arab Emirates 51 RHB Islamic Bank Berhad Malaysia 52 Malath Cooperative Insurance & Reinsurance Saudi Arabia 53 Alafco Aviation Lease and Finance Company Kuwait 54 Palestine Islamic Bank Palestine 55 CIMB Group Holdings (Islamic Banking) Malaysia 56 ABC Islamic Bank Bahrain 57 Maybank Islamic Berhad Malaysia 58 Jordan Dubai Islamic Bank Jordan 59 Alliance Islamic Bank Berhad Malaysia 60 Bank Rakyat (Bank Kerjasama Rakyat Malaysia Berhad) Malaysia 61 alizz islamic bank Oman 62 Al Salam Bank - Bahrain Bahrain 63 Gulf African Bank Kenya 64 BIMB Holdings Malaysia 65 Qatar Islamic Insurance Company Qatar 66 PT Bank Panin Syariah Indonesia 67 Public Islamic Bank Berhad Malaysia 68 PT Bank Syariah Bukopin (BSB) Indonesia 69 Amana Bank Limited Sri Lanka 70 Takaful Emarat United Arab Emirates 71 PT Bank Mega Syariah Indonesia Indonesia 72 HSBC Amanah Malaysia Berhad Malaysia 73 Affin Islamic Bank Berhad Malaysia 74 Hong Leong Islamic Bank Berhad Malaysia 75 Seera Investment Bank Bahrain 76 Etiqa Takaful Berhad Malaysia 77 Agrobank Islamic Banking Malaysia 78 Bank Muamalat Malaysia Berhad Malaysia 79 Venture Capital Bank Bahrain 80 Standard Chartered Saadiq Berhad Malaysia 81 Takaful Ikhlas Sdn Berhad Malaysia 82 First Insurance Jordan 83 Sun Life Malaysia Takaful Berhad (formerly CIMB Av) Malaysia 84 First Habib Bank Modaraba Pakistan 85 The Islamic Insurance Company Jordan 86 A Ayan Real Estate Company Kuwait 87 KAF Investment Bank Berhad (Islamic Banking) Malaysia 88 Takaful International Bahrain 89 ACR Retakaful Berhad (formerly ACR Re Takaful SEA) Malaysia 90 ACR Retakaful MEA Bahrain 91 Liquidity Management Centre Bahrain 92 Bank of London and the Middle East United Kingdom 93 Investors Bank Bahrain 94 First Finance Company Jordan Jordan 95 Amana Takaful Sri Lanka 96 Burj Bank Pakistan 97 Global Banking Corporation Bahrain 98 ICB Islamic Bank (formerly the Oriental Bank) Bangladesh 99 MCCA Ltd Australia 100 Gulf North Africa Holding Company Kuwait 7

8 THE AUTHORITATIVE VOICE OF ISLAMIC FINANCE 100 TOP 50 SHARI AH-COMPLIANT INSTITUTIONS BY ASSETS: Asset Rank Entity Name Country Name Asset ( 000 USD) 1 CIMB Group Holdings (Islamic Banking) Malaysia 107,543,603 2 Al Rajhi Bank Saudi Arabia 84,165,239 3 Kuwait Finance House Kuwait 54,462,577 4 Dubai Islamic Bank United Arab Emirates 40,816,203 5 Maybank Islamic Berhad Malaysia 36,428,810 6 Qatar Islamic Bank Qatar 34,898,490 7 Abu Dhabi Islamic Bank United Arab Emirates 32,233,536 8 Alinma Bank Saudi Arabia 23,659,875 9 Masraf Al Rayan Qatar 22,809, Bank Rakyat (Bank Kerjasama Rakyat Malaysia Berhad) Malaysia 21,527, Sepah Bank Iran 20,446, Parsian Bank Iran 19,726, Bank AlJazira Saudi Arabia 16,870, National Bank of Pakistan (Islamic Banking) Pakistan 16,356, Emirates Islamic United Arab Emirates 14,486, Bank AlBilad Saudi Arabia 13,658, BIMB Holdings Malaysia 13,365, Ahli United Bank - Kuwait Kuwait 12,866, Barwa Bank Qatar 12,418, Al Hilal Bank United Arab Emirates 11,733, Standard Chartered Saadiq Berhad Malaysia 11,443, Qatar International Islamic Bank Qatar 11,137, Noor Bank United Arab Emirates 10,745, Public Islamic Bank Berhad Malaysia 10,637, Boubyan Bank Kuwait 10,324, RHB Islamic Bank Berhad Malaysia 10,269, Islami Bank Bangladesh (IBBL) Bangladesh 9,245, Ithmaar Bank Bahrain 8,138, Sharjah Islamic Bank United Arab Emirates 8,136, Bank of Industry & Mine Iran 7,851, PT Bank Syariah Mandiri Indonesia 6,992, Kuwait International Bank Kuwait 5,898, Hong Leong Islamic Bank Berhad Malaysia 5,424, Jordan Islamic Bank Jordan 5,358, Bank Islam Brunei Darussalam Berhad (BIBD) Brunei 5,297, Bank Muamalat Malaysia Berhad Malaysia 5,227, Meezan Bank Limited Pakistan 5,081, HSBC Amanah Malaysia Berhad Malaysia 4,503, Al Salam Bank - Bahrain Bahrain 4,405, Ajman Bank United Arab Emirates 3,899, Kuwait Finance House - Bahrain Bahrain 3,857, OCBC Al-Amin Bank Berhad Malaysia 3,404, Export Import Bank of Bangladesh Bangladesh 3,377, First Security Islami Bank Bangladesh 3,268, Affin Islamic Bank Berhad Malaysia 3,118, Etiqa Takaful Berhad Malaysia 3,051, Al-Arafah Islami Bank Bangladesh 2,918, Agrobank Islamic Banking Malaysia 2,864, The City Bank Ltd (Islamic) Bangladesh 2,728, Bahrain Islamic Bank Bahrain 2,596,670 8

9 THE AUTHORITATIVE VOICE OF ISLAMIC FINANCE 100 Asset Change Rank TOP 50 SHARI AH-COMPLIANT INSTITUTIONS BY CHANGE IN ASSETS: Entity Name Country Name Asset Change ( 000 USD) 1 Qatar Islamic Bank Qatar 8,495,615 2 Dubai Islamic Bank United Arab Emirates 7,082,408 3 Parsian Bank Iran 3,106,604 4 Noor Bank United Arab Emirates 2,845,885 5 Emirates Islamic United Arab Emirates 2,801,623 6 Al Rajhi Bank Saudi Arabia 2,108,825 7 Alinma Bank Saudi Arabia 2,096,712 8 Barwa Bank Qatar 1,924,203 9 Abu Dhabi Islamic Bank United Arab Emirates 1,762, PT Bank Syariah Mandiri Indonesia 1,636, Bank AlBilad Saudi Arabia 1,597, Boubyan Bank Kuwait 1,280, Sharjah Islamic Bank United Arab Emirates 1,053, National Bank of Pakistan (Islamic Banking) Pakistan 986, Islami Bank Bangladesh (IBBL) Bangladesh 886, Ajman Bank United Arab Emirates 841, Masraf Al Rayan Qatar 805, Meezan Bank Limited Pakistan 743, Bank Islami Pakistan Limited Pakistan 652, First Security Islamic Bank Bangladesh 640, Qatar International Islamic Bank Qatar 588, Ahli United Bank - Kuwait Kuwait 581, Warba Bank Kuwait 526, Al Hilal Bank United Arab Emirates 490, Al Rayan Bank United Kingdom 476, The City Bank Ltd (Islamic) Bangladesh 459, Export Import Bank of Bangladesh Bangladesh 390, BUPA Arabia for Cooperative Insurance Saudi Arabia 379, alizz islamic bank Oman 346, Jordan Islamic Bank Jordan 344, Social Islami Bank (SIBL) Bangladesh 322, Soneri Bank Limited (Islamic Bank Limited) Pakistan 306, Ithmaar Bank Bahrain 277, Bahrain Islamic Bank Bahrain 268, Premier Bank Ltd (Islamic) Bangladesh 242, Bank Nizwa Oman 241, Kuwait International Bank Kuwait 220, Al-Arafah Islami Bank Bangladesh 218, PT Bank Panin Syariah Indonesia 212, Bank of Khartoum Sudan 188, Jordan Dubai Islamic Bank Jordan 172, PT Bank Syariah Bukopin (BSB) Indonesia 166, Khaleeji Commercial Bank Bahrain 152, Shahjalal Islami Bank Bangladesh 137, Mashreq Al-Islami Finance Company United Arab Emirates 110, Palestine Islamic Bank Palestine 79, Amana Bank Limited Sri Lanka 66, Alafco Aviation Lease and Finance Company Kuwait 64, Takaful Emarat United Arab Emirates 56, Alliance Islamic Bank Berhad Malaysia 27,834 9

10 THE AUTHORITATIVE VOICE OF ISLAMIC FINANCE 100 TOP 50 SHARI AH-COMPLIANT INSTITUTIONS BY LIABILITY: Liability Rank Entity Name Country Name Liability ( 000 USD) 1 CIMB Group Holdings (Islamic Banking) Malaysia 97,703,755 2 Al Rajhi Bank Saudi Arabia 71,728,158 3 Kuwait Finance House Kuwait 47,688,845 4 Dubai Islamic Bank United Arab Emirates 34,609,660 5 Maybank Islamic Berhad Malaysia 34,502,764 6 Abu Dhabi Islamic Bank United Arab Emirates 28,128,640 7 Alinma Bank Saudi Arabia 18,765,965 8 Parsian Bank Iran 18,733,834 9 Bank Rakyat (Bank Kerjasama Rakyat Malaysia Berhad) Malaysia 18,260, Sepah Bank Iran 17,795, Bank AlJazira Saudi Arabia 14,893, National Bank of Pakistan (Islamic Banking) Pakistan 14,716, Emirates Islamic United Arab Emirates 13,099, BIMB Holdings Malaysia 12,504, Bank AlBilad Saudi Arabia 11,940, Ahli United Bank - Kuwait Kuwait 11,677, Standard Chartered Saadiq Berhad Malaysia 10,459, Al Hilal Bank United Arab Emirates 10,247, Public Islamic Bank Berhad Malaysia 9,947, Noor Bank United Arab Emirates 9,789, RHB Islamic Bank Berhad Malaysia 9,687, Boubyan Bank Kuwait 9,267, Qatar Islamic Bank Qatar 8,922, Islami Bank Bangladesh (IBBL) Bangladesh 8,643, Bank of Industry & Mine Iran 6,917, Sharjah Islamic Bank United Arab Emirates 6,855, Masraf Al Rayan Qatar 5,832, Ithmaar Bank Bahrain 5,347, Kuwait International Bank Kuwait 5,082, Hong Leong Islamic Bank Berhad Malaysia 5,039, Meezan Bank Limited Pakistan 4,830, Bank Muamalat Malaysia Berhad Malaysia 4,795, Bank Islam Brunei Darussalam Berhad (BIBD) Brunei 4,340, HSBC Amanah Malaysia Berhad Malaysia 4,165, Qatar International Islamic Bank Qatar 4,102, Barwa Bank Qatar 4,027, Ajman Bank United Arab Emirates 3,564, Al Salam Bank - Bahrain Bahrain 3,389, OCBC Al-Amin Bank Berhad Malaysia 3,174, First Security Islamic Bank Bangladesh 3,141, Export Import Bank of Bangladesh Bangladesh 3,057, Affin Islamic Bank Berhad Malaysia 2,895, Etiqa Takaful Berhad Malaysia 2,694, Al-Arafah Islamic Bank Bangladesh 2,635, The City Bank Ltd (Islamic) Bangladesh 2,415, Agrobank Islamic Banking Malaysia 2,285, Warba Bank Kuwait 2,253, Soneri Bank Limited (Islamic Bank Limited) Pakistan 2,246, Social Islami Bank (SIBL) Bangladesh 2,128, KAF Investment Bank Berhad (Islamic Banking) Malaysia 2,019,532 10

11 THE AUTHORITATIVE VOICE OF ISLAMIC FINANCE 100 Liability change Rank TOP 50 SHARI AH-COMPLIANT INSTITUTIONS BY CHANGE IN LIABILITY: Entity Name Country Name Liability Change ( 000 USD) 1 Dubai Islamic Bank United Arab Emirates 5,697,128 2 Parsian Bank Iran 3,162,073 3 Masraf Al Rayan Qatar 2,897,537 4 Noor Bank United Arab Emirates 2,780,704 5 Emirates Islamic United Arab Emirates 2,640,294 6 Alinma Bank Saudi Arabia 1,986,598 7 Bank AlBilad Saudi Arabia 1,450,563 8 Abu Dhabi Islamic Bank United Arab Emirates 1,384,696 9 Boubyan Bank Kuwait 1,251, National Bank of Pakistan (Islamic Banking) Pakistan 1,157, Sharjah Islamic Bank United Arab Emirates 1,022, Islamic Bank Bangladesh (IBBL) Bangladesh 881, Barwa Bank Qatar 856, Al Rajhi Bank Saudi Arabia 844, Ajman Bank United Arab Emirates 806, Meezan Bank Limited Pakistan 728, Qatar International Islamic Bank Qatar 639, First Security Islamic Bank Bangladesh 624, Bank Islami Pakistan Limited Pakistan 613, Qatar Islamic Bank Qatar 556, Ahli United Bank - Kuwait Kuwait 551, Warba Bank Kuwait 535, Al Hilal Bank United Arab Emirates 521, Al Rayan Bank United Kingdom 469, The City Bank Ltd (Islamic) Bangladesh 432, Export Import Bank of Bangladesh Bangladesh 365, alizz islamic bank Oman 316, Social Islami Bank (SIBL) Bangladesh 313, Soneri Bank Limited (Islamic Bank Limited) Pakistan 301, PT Bank Syariah Mandiri Indonesia 289, Ithmaar Bank Bahrain 232, Premier Bank Ltd (Islamic) Bangladesh 227, Kuwait International Bank Kuwait 226, BUPA Arabia for Cooperative Insurance Saudi Arabia 215, Bank Nizwa Oman 172, Al-Arafah Islamic Bank Bangladesh 168, Jordan Islamic Bank Jordan 147, Shahjalal Islamic Bank Bangladesh 131, Mashreq Al-Islami Finance Company United Arab Emirates 92, Amana Bank Limited Sri Lanka 64, Al Baraka Islamic Bank Bahrain 58, Bahrain Islamic Bank Bahrain 58, Alliance Islamic Bank Berhad Malaysia 53, Khaleeji Commercial Bank Bahrain 51, Takaful Emarat United Arab Emirates 39, Inovest Bahrain 38, First Energy Bank Bahrain 36, Kuwait Finance House - Bahrain Bahrain 32, Bank of Khartoum Sudan 28, Bank AlKhair Bahrain 22,691 11

12 THE AUTHORITATIVE VOICE OF ISLAMIC FINANCE 100 TOP 50 SHARI AH-COMPLIANT INSTITUTIONS BY INCOME: Income Rank Entity Name Country Name Income ( 000 USD) 1 Al Rajhi Bank Saudi Arabia 3,665,540 2 CIMB Group Holdings (Islamic Banking) Malaysia 3,609,340 3 Kuwait Finance House Kuwait 2,440,504 4 Dubai Islamic Bank United Arab Emirates 1,766,810 5 Abu Dhabi Islamic Bank United Arab Emirates 1,565,964 6 Qatar Islamic Bank Qatar 1,524,328 7 Masraf Al Rayan Qatar 916,701 8 Bank Rakyat (Bank Kerjasama Rakyat Malaysia Berhad) Malaysia 818,566 9 Sepah Bank Iran 818, Alinma Bank Saudi Arabia 816, Bank AlJazira Saudi Arabia 779, National Bank of Pakistan (Islamic Banking) Pakistan 759, Emirates Islamic United Arab Emirates 748, PT Bank Syariah Mandiri Indonesia 687, Maybank Islamic Berhad Malaysia 672, Etiqa Takaful Berhad Malaysia 623, Bank AlBilad Saudi Arabia 611, Bank of Industry & Mine Iran 570, Al Hilal Bank United Arab Emirates 543, Barwa Bank Qatar 521, BIMB Holdings Malaysia 510, Malath Cooperative Insurance & Reinsurance Saudi Arabia 478, Qatar International Islamic Bank Qatar 436, BUPA Arabia for Cooperative Insurance Saudi Arabia 414, Noor Bank United Arab Emirates 380, Ahli United Bank - Kuwait Kuwait 365, Sharjah Islamic Bank United Arab Emirates 363, Islami Bank Bangladesh (IBBL) Bangladesh 357, Parsian Bank Iran 342, Boubyan Bank Kuwait 301, Ithmaar Bank Bahrain 268, Kuwait International Bank Kuwait 266, Kuwait Finance House - Bahrain Bahrain 263, Bank Islam Brunei Darussalam Berhad (BIBD) Brunei 228, Meezan Bank Limited Pakistan 217, Alafco Aviation Lease and Finance Company Kuwait 211, Jordan Islamic Bank Jordan 189, Takaful Ikhlas Sdn Berhad Malaysia 188, Public Islamic Bank Berhad Malaysia 177, Standard Chartered Saadiq Berhad Malaysia 169, The City Bank Ltd (Islamic) Bangladesh 166, Al Salam Bank - Bahrain Bahrain 156, Export Import Bank of Bangladesh Bangladesh 139, Agrobank Islamic Banking Malaysia 136, Bank of Khartoum Sudan 135, RHB Islamic Bank Berhad Malaysia 134, Sun Life Malaysia Takaful Berhad (formerly CIMB Av Malaysia 127, Al-Arafah Islamic Bank Bangladesh 127, Bank Muamalat Malaysia Berhad Malaysia 121, PT Bank Mega Syariah Indonesia Indonesia 115,778 12

13 THE AUTHORITATIVE VOICE OF ISLAMIC FINANCE 100 Income change Rank TOP 50 SHARI AH-COMPLIANT INSTITUTIONS BY CHANGE IN INCOME: Entity Name Country Name Income Change ( 000 USD) 1 Qatar Islamic Bank Qatar 526,231 2 Dubai Islamic Bank United Arab Emirates 287,842 3 Malath Cooperative Insurance & Reinsurance Saudi Arabia 188,429 4 Bank AlJazira Saudi Arabia 185,211 5 PT Bank Syariah Mandiri Indonesia 166,851 6 BUPA Arabia for Cooperative Insurance Saudi Arabia 154,071 7 Abu Dhabi Islamic Bank United Arab Emirates 146,966 8 Emirates Islamic United Arab Emirates 134,139 9 Alinma Bank Saudi Arabia 118, Noor Bank United Arab Emirates 104, Kuwait Finance House - Bahrain Bahrain 92, National Bank of Pakistan (Islamic Banking) Pakistan 86, Masraf Al Rayan Qatar 71, Kuwait International Bank Kuwait 67, Sepah Bank Iran 54, Bank AlBilad Saudi Arabia 52, Bank of Industry & Mine Iran 51, Sharjah Islamic Bank United Arab Emirates 48, Meezan Bank Limited Pakistan 42, Ithmaar Bank Bahrain 40, PT Bank Mega Syariah Indonesia Indonesia 38, Seera Investment Bank Bahrain 36, Boubyan Bank Kuwait 33, Al Salam Bank - Bahrain Bahrain 32, The City Bank Ltd (Islamic) Bangladesh 28, Bank Islam Brunei Darussalam Berhad (BIBD) Brunei 28, Jordan Islamic Bank Jordan 26, Bank of Khartoum Sudan 24, Al Rajhi Bank Saudi Arabia 21, Ahli United Bank - Kuwait Kuwait 19, Qatar International Islamic Bank Qatar 19, Social Islamic Bank (SIBL) Bangladesh 18, Ajman Bank United Arab Emirates 17, Bank AlKhair Bahrain 16, Khaleeji Commercial Bank Bahrain 15, First Security Islamic Bank Bangladesh 14, ACR Retakaful Berhad (formerly ACR Re Takaful SEA) Malaysia 13, ACR Retakaful MEA Bahrain 13, Warba Bank Kuwait 13, Al Rayan Bank United Kingdom 13, Bank Nizwa Oman 11, Soneri Bank Limited (Islamic Bank Limited) Pakistan 11, alizz islamic bank Oman 10, PT Bank Panin Syariah Indonesia 9, Takaful Emarat United Arab Emirates 9, OCBC Al-Amin Bank Berhad Malaysia 8, Al Baraka Islamic Bank Bahrain 8, Takaful International Bahrain 8, PT Bank Syariah Bukopin (BSB) Indonesia 7, Bank Islami Pakistan Limited Pakistan 7,619 13

14 THE AUTHORITATIVE VOICE OF ISLAMIC FINANCE 100 TOP 50 SHARI AH-COMPLIANT INSTITUTIONS BY NET PROFIT: Net Profit Rank Entity Name Country Name Net Profit ( 000 USD) 1 Al Rajhi Bank Saudi Arabia 1,901,353 2 Dubai Islamic Bank United Arab Emirates 1,045,408 3 CIMB Group Holdings (Islamic Banking) Malaysia 674,731 4 Kuwait Finance House Kuwait 625,375 5 Qatar Islamic Bank Qatar 557,786 6 Masraf Al Rayan Qatar 556,631 7 Abu Dhabi Islamic Bank United Arab Emirates 526,628 8 Bank Rakyat (Bank Kerjasama Rakyat Malaysia Berhad Malaysia 425,005 9 Alinma Bank Saudi Arabia 391, Bank AlJazira Saudi Arabia 343, Maybank Islamic Berhad Malaysia 282, Qatar International Islamic Bank Qatar 215, Bank AlBilad Saudi Arabia 210, Barwa Bank Qatar 200, National Bank of Pakistan (Islamic Banking) Pakistan 191, Emirates Islamic United Arab Emirates 174, Noor Bank United Arab Emirates 152, BIMB Holdings Malaysia 142, Ahli United Bank - Kuwait Kuwait 141, Boubyan Bank Kuwait 115, Sharjah Islamic Bank United Arab Emirates 111, Public Islamic Bank Berhad Malaysia 79, Bank Islam Brunei Darussalam Berhad (BIBD) Brunei 75, Jordan Islamic Bank Jordan 68, Bank of Industry & Mine Iran 67, RHB Islamic Bank Berhad Malaysia 59, Bank of Khartoum Sudan 59, Kuwait International Bank Kuwait 52, Alafco Aviation Lease and Finance Company Kuwait 52, Meezan Bank Limited Pakistan 47, Hong Leong Islamic Bank Berhad Malaysia 46, The City Bank Ltd (Islamic) Bangladesh 45, Islami Bank Bangladesh (IBBL) Bangladesh 40, Parsian Bank Iran 34, Ajman Bank United Arab Emirates 33, Etiqa Takaful Berhad Malaysia 33, OCBC Al-Amin Bank Berhad Malaysia 32, Al-Arafah Islami Bank Bangladesh 31, Bahrain Islamic Bank Bahrain 29, PT Bank Syariah Mandiri Indonesia 28, Al Hilal Bank United Arab Emirates 28, Kuwait Finance House - Bahrain Bahrain 28, HSBC Amanah Malaysia Berhad Malaysia 28, Al Salam Bank - Bahrain Bahrain 28, Agrobank Islamic Banking Malaysia 27, Export Import Bank of Bangladesh Bangladesh 26, Social Islami Bank (SIBL) Bangladesh 26, Sun Life Malaysia Takaful Berhad (formerly CIMB Av) Malaysia 24, Qatar Islamic Insurance Company Qatar 22, Khaleeji Commercial Bank Bahrain 21,332 14

15 THE AUTHORITATIVE VOICE OF ISLAMIC FINANCE 100 Net Profit Change Rank TOP 50 SHARI AH-COMPLIANT INSTITUTIONS BY CHANGE IN NET PROFIT: Entity Name Country Name Net Profit Change ( 000 USD) 1 Dubai Islamic Bank United Arab Emirates 281,970 2 Bank AlJazira Saudi Arabia 190,574 3 Qatar Islamic Bank Qatar 99,393 4 Kuwait Finance House Kuwait 78,671 5 Al Rajhi Bank Saudi Arabia 78,374 6 Emirates Islamic United Arab Emirates 75,286 7 Seera Investment Bank Bahrain 61,692 8 Alinma Bank Saudi Arabia 54,812 9 Abu Dhabi Islamic Bank United Arab Emirates 49, National Bank of Pakistan (Islamic Banking) Pakistan 32, PT Bank Syariah Mandiri Indonesia 32, Bank of Industry & Mine Iran 27, The City Bank Ltd (Islamic) Bangladesh 23, Boubyan Bank Kuwait 18, Bank of Khartoum Sudan 17, Kuwait Finance House - Bahrain Bahrain 14, Bank AlKhair Bahrain 14, Ajman Bank United Arab Emirates 13, Al Rayan Bank United Kingdom 13, OCBC Al-Amin Bank Berhad Malaysia 11, Khaleeji Commercial Bank Bahrain 11, BUPA Arabia for Cooperative Insurance Saudi Arabia 10, Sharjah Islamic Bank United Arab Emirates 8, Shahjalal Islamic Bank Bangladesh 7, Bank Nizwa Oman 6, Al Hilal Bank United Arab Emirates 6, Kuwait International Bank Kuwait 6, Soneri Bank Limited (Islamic Bank Limited) Pakistan 5, Bahrain Islamic Bank Bahrain 5, Jordan Islamic Bank Jordan 5, Mashreq Al-Islami Finance Company United Arab Emirates 4, ABC Islamic Bank Bahrain 4, Barwa Bank Qatar 4, Al Baraka Islamic Bank Bahrain 3, Malath Cooperative Insurance & Reinsurance Saudi Arabia 3, Investors Bank Bahrain 3, Warba Bank Kuwait 2, Gulf African Bank Kenya 2, Meezan Bank Limited Pakistan 2, Palestine Islamic Bank Palestine 2, Masraf Al Rayan Qatar 2, Qatar Islamic Insurance Company Qatar 2, Global Banking Corporation Bahrain 2, PT Bank Syariah Bukopin (BSB) Indonesia 2, First Security Islamic Bank Bangladesh 1, Jordan Dubai Islamic Bank Jordan 1, ICB Islamic Bank (formerly the Oriental Bank) Bangladesh 1, Amana Bank Limited Sri Lanka 1, Al-Arafah Islami Bank Bangladesh 1, Social Islami Bank (SIBL) Bangladesh 1,329 15

16 FINANCE OVERVIEW Leaders in Islamic Finance Overview Total Assets $834,000,000,000 Countries Covered in the Sample Total Liability $668,000,000,000 Total Revenue $34,000,000,000 Total Net Profit $10,000,000,000 Australia (0.01%) Bahrain (14.55%) Bangladesh (9.09%) Brunei (0.91%) Indonesia (3.64%) Iran (2.73%) Jordan (5.45%) Kenya (0.91%) Kuwait (8.18%) Malaysia (18.18%) Oman (1.82%) Pakistan (6.36%) Palestine (0.91%) Qatar (5.45%) Saudi Arabia (6.36%) Sri Lanka (1.82%) Sudan (1.82%) 0 Unit (9.09%) Assets Liability Revenue Net Profit Unit (1.82%) 16 IB&F LiTF pages indd 16 30/10/ :15

17 FINANCE OVERVIEW Change in Each Criteria % The over-all percentage measured change for each of the used criteria: Assets 1.70% Liability 0.62% Income -0.87% Net Profit 2.61% The Best Bank Dubai Islamic Bank ASSETS $40,816, % REVENUE $1,766, % LIABILITIES $34,609, % NET PROFIT $1,045, % Source: Eikon - Thomson Reuters and RAM Ratings 17 IB&F LiTF pages indd 17 30/10/ :15

18 AWARDS Islamic Business & Finance announces its Awards nominees Voting is open on our website ( until 10 November CPI Financial and Islamic Business & Finance have finalised the shortlist for the 11th Annual Islamic Business & Finance Awards, and voting has begun. All those shortlisted have been notified of their nomination. Voting for the esteemed Awards will run from the 13 of October to 10 November. The Islamic Business & Finance Awards are a showcase of industry excellence for the Islamic banking and finance sectors in the world. The great and the good of the industry are brought together at the Islamic Business & Finance Awards, with more than 300 senior figures from the world s leading financial institutions gathering to witness the winners in the widely contested categories. Held on the 23rd November 2016, the Islamic Business & Finance Awards are well established as the defining awards programme in the world and this year celebrates its 11th year of acknowledging the best industry achievements that the world has to offer. With very high profile attendees, the Islamic Business & Finance Awards are truly the social occasion of the year for the Islamic finance professionals, where they come together for a fun and glamorous evening of competition and celebration. The Islamic Business & Finance Awards are recognised by senior banking and finance industry professionals globally through a voting system online saw over 39,000 votes cast on www. cpifinancial.net during the one month period. Be sure to cast your vote on to honour excellence from around the industry. 18

19 AWARDS ISLAMIC BUSINESS & FINANCE AWARDS 2016 CATEGORIES BY COUNTRY: Best Retail, Corporate & Commercial banks in: Levant Qatar KSA Bahrain UAE Oman Kuwait Malaysia Indonesia Bangladesh Iran Turkey Jordan Sudan Egypt Pakistan BY REGION - MIDDLE EAST: Best Retail Bank Best Corporate Bank Best Commercial Bank Best Investment Bank Best Takaful Operator Best Sukuk Arranger Best Finance Company Best SME Finance Company Best Consumer Finance Company Best Islamic Window Best Wealth Management Best Corporate Advisory BY REGION - ASIA: Best Retail Bank Best Commercial Bank Best Takaful Operator Best Sukuk Arranger Best Corporate Bank Best Investment Bank Best Asset Manager BY REGION - AFRICA: Best Retail Bank Best Commercial Bank Best Corporate Bank Best SME Bank INTERNATIONAL AWARDS: Best Training Institution Best Consultancy Service Best Shari ah Advisory Board Best Sukuk Deal Best Wealth Management Service Best Investment Fund Best Equity Research Best Savings Product Best Institutional Investor Service Best Real Estate Finance 19

20 AWARDS A look back at the Islamic Business & Finance Awards 2015 Around 200 Islamic bankers and financiers from across the globe congregated in December 2015 to celebrate Excellence through innovation at the gala dinner and Awards ceremony at the Emirates Towers Hotel, Dubai. Here s a look at some of the highlights BANKER OF THE YEAR Jamal Saeed Bin Ghalaita, Chief Executive Officer, Emirates Islamic BEST ISLAMIC BANK Dubai Islamic Bank (left to right) Saleh Al Akrabi, Chairman, CPI Financial; Adnan Chilwan, CEO, Dubai Islamic Bank; Georgina Enzer, Managing Editor, CPI Financial Jamal Saeed Bin Ghalaita, Chief Executive Officer of Emirates Islamic, won the esteemed Banker of the Year Award. He is a veteran banker with over 25 years of banking experience across multiple leadership domains. Dubai Islamic bank emerged triumphant at the Awards 2015, winning Best Islamic Bank in addition to eight other accolades. 20

21 AWARDS MULTIPLE WINNERS IN 2015 Dubai Islamic Bank Best Islamic Bank Best Commercial Bank (ME) Best Corporate Bank (ME) Best Retail Bank (ME) Best Sukuk Arranger Best Sukuk Deal aafaq Islamic Bank Best Customer Excellence Best Finance Company (ME) Best SME Finance Company (ME) Bank of Khartoum Best Islamic Bank (Africa) Best Islamic Bank (East Africa) Best Retail Bank (Africa) Best SME Bank (Africa) (left to right) Saleh Al Akrabi, Chairman, CPI Financial; Adnan Chilwan, CEO, Dubai Islamic Bank; Georgina Enzer, Managing Editor, CPI Financial (left to right) Mujtaba Naseem, Chief Executive Officer & Deputy Chief Executive Officer, aafaq; Saleh Al Akrabi, Chairman, CPI Financial; Georgina Enzer, Managing Editor, CPI Financial (left to right) Saleh Al Akrabi, Chairman, CPI Financial; Faisal Abass M. Fadl, Deputy Chief Executive Officer, BOK; Georgina Enzer, Managing Editor, CPI Financial Emirates Islamic Best Commercial Bank (UAE) Best Retail Bank (UAE) Best Wealth Management (ME) Al Baraka Islamic Bank Best Retail Bank (Bahrain) Best Corporate Bank (Bahrain) Best Commercial Bank (Bahrain) CIMB Islamic Best Corporate Bank (Asia) Best Sukuk Arranger (Asia) Most Socially Resposible Bank (Asia) (left to right) Saleh Al Akrabi, Chairman, CPI Financial; Jamal Bin Ghalaita, CEO, Emirates Islamic; Georgina Enzer, Managing Editor, CPI Financial (left to right) Saleh Al Akrabi, Chairman, CPI Financial; Mohamed Isa Al Mutaweh, Chief Executive Officer and Board Director of Al Baraka Islamic Bank; Georgina Enzer, Managing Editor, CPI Financial (left to right) Saleh Al Akrabi, Chairman, CPI Financial; Badlisyah Abdul Ghani, Executive Director and Chief Executive Officer of CIMB Islamic bank Berhad; Georgina Enzer, Managing Editor, CPI Financial 21

22 INTERVIEW Faisal Islamic Bank exceeds customer expectations Faisal Islamic Bank General Manager El-Bagir Ahmed Al-Nori looks to the future of the Bank s contribution to the Islamic finance sector in Sudan Through your many experiences with Faisal Islamic Bank, what have you learned about the Sudanese market? What do the Sudanese people want in a bank? I believe that Sudan has a huge amount of potential for the banking sector. The banking sector in the country forms the fundamental source of finance for the national economy, and is viewed as the cornerstone of the financial system in Sudan. As of 2016, 37 commercial banks are active in the country offering banking services and products to different sectors. Commercial banks finance national projects that are concerned with the economic and social development of the economy on one hand, and financing the private sector to boost its investments on the other. Tell me about the current landscape for Islamic banking in Sudan. What are the challenges you face? Sudan is among the few economies in Africa, in which a whole Islamic banking system is in place. The Islamic banking system has a long history in Sudan, as it goes back to 1978, when Faisal Islamic Bank (FIBS) was established as Sudan s first Islamic bank. With a fully Shari ah-compliant banking and financial system in place, Sudan is considered one of the most resource-rich countries in Africa. The most significant challenge that Sudanese banking sector faces is how Sudanese commercial banks contribute to the economic and social development of Sudan How are you working to address those challenges? We have established the Al Faisal Cultural Center as part of the Bank s corporate social responsibility programme, with the intention of contributing further to the cultural field in Sudan and as a platform to create knowledge and share it. I can say that Al Faisal Cultural Center has attained and exceeded its objectives and the goals that it was founded for. How is the landscape for businesses in Sudan? With its geographic positioning for trade and opportunities in agriculture and mining, the Sudanese economy does hold El-Bagir Ahmed Al-Nori potential for those willing to take on good business opportunities. The country holds good potential for investment in its agricultural and mining sectors, especially in terms of gold. Sudan has large areas of cultivatable land, and its agricultural sector employs roughly 80 per cent of the workforce. In addition to the capital Khartoum, Sudan has a number of other important business centres, such as Al Qadarif, which is well known for being the hub for sesame trade globally, also Port Sudan, located on the Red Sea, is strategically positioned for business and trade as it is currently the only sea port in Sudan. Tell me about your corporate banking offerings. What differentiates them from the competition? FIBS uses the slogan, We are the 22

23 INTERVIEW pioneers ; FIBS was established in 1978 as the first commercial Islamic bank in Sudan. Since then, the bank has occupied a senior position among the banks operating in Sudan. There are many features that distinguish FIBS from the other banks in the continent. First of all, FIBS strongly supports community development programmes in line with its strategic vision, as the bank management is committed to coordinate with different business societies. Accordingly, the bank developed a special administration to offer optimal corporate banking services, as well as business consultation to our customers. How do you merge Shari ahcompliant principles with business needs to produce effective corporate banking products? Sudan s banking sector is working under Islamic banking laws and regulations. The innovative approach applied by FIBS assures that all the bank operations and investments are entirely consistent with the Shari ah principles; this approach was applied by establishing the world s first Shari ah Supervisory Board, for the purpose of granting Shari ah advice and to ensure that the bank products, services and activities are compatible with Islamic law. Also, FIBS created the first Islamic insurance company in the world in Thus, we would proudly say that FIBS developed the first integrated Islamic banking system in the world. In many ways, Sudan is at the forefront of Islamic banking on the African continent. How has this leadership impacted Faisal Islamic Bank? FIBS is the pioneer of Islamic banking industry in the continent, consequently, we always strive to keep up with changes and meet the challenges in the banking industry to maintain our leadership position in the banking market. As a result of the bank achievements and its advancement in terms of applying modern technology and management excellence systems, FIBS has been granted a number of awards both locally and internationally. We have obtained the class of best corporate bank in Africa for the last two years. In which sectors of your services (trade finance, agri finance, etc.) have you seen the quickest growth in demand over the past few years? Do you see this shifting in the future? The fastest growth rate in demand over the last few years in FIBS finance activities, besides corporate banking, was in microfinance and the social development sector. The bank has unique experience in this field, in line with its policy and its beliefs in the importance of corporate social responsibility that the bank is committed to. This growing rate reflects the bank s effective contribution to society and creating small projects for the benefit of the community. Tell me about the initiatives that you ve started with Bangor University to help with education to develop human capital and aid the young people of Sudan? The quality of employees and their development through training and education are major factors in determining long-term success and growth of the bank. Based on this vision, FIBS established a variety of partnerships internally and globally with the intention of developing its human resource capabilities and competencies, which will eventually improve the capacity of their productivity and boost their skills. One of these partnerships was the collaboration between FIBS and Bangor University in the United Kingdom which occupies a high rank among global universities, particularly in graduate and undergraduate programmes in Islamic Finance, Business, and Economics. Since 2008 Faisal Islamic Bank of Sudan annually sends a number of the staff to study master s degree in banking, economic studies, and business administration. So far, more than 80 of the bank s employees have studied at Bangor University. We are now planning to send our staff to get more practical training in developed countries. Are you working on any international partnerships? Faisal Islamic Bank (Sudan) has a strong relationships with many foreign banks and financial institutions in a form of correspondence relationships. What plans do you have for the future of FIB? Our plans for the near future include enhancing the financial capabilities of the bank to increase its paidup capital, and the continuous improvement of bank performance. This performance improvement is in terms of the bank s commitment to provide a broad range of integrated banking solutions particularly at the corporate level to meet growing customers needs. This is reflected in our unique banking products and services which are designed to exceed our customers expectations, particularly our present and our potential corporate customers. 23

24 INTERVIEW Alizz Islamic Bank: bringing Shari ah-compliant finance to Oman Salaam Al Shaksi, CEO, Alizz Islamic Bank discusses the improvement in Islamic finance in Oman and the bank s rapid growth Conscious of the challenges ahead, the Bank has successfully established products, systems, policies and procedures complementing the best in the international banking arena. Alizz Islamic Bank has increased its net operating income by 210 per cent in the last financial year. What are the key challenges facing Islamic finance in 2017, and how are you working to overcome those challenges? One of the biggest challenges that Islamic banks are facing in Oman is having to compete with Islamic windows that represent and leverage the balance sheets and distribution network of much larger and well established conventional banks. Another problem that is faced by Islamic banks is the challenge of Shari ah-compliant products that provide liquidity to our clients due to regulatory restriction. Customers want us to provide more facilities such as liquidity support, shortterm products and transfer of personal loans from conventional banks to Islamic ones. However we continue to engage the CBO and the Higher Shari ah Supervisory Board on this issue. This will help bolster the local economy as well as increase competitiveness, which in turn will improve the banking system and deliver the best and latest products to customers. I believe the Islamic banking sector will witness 24

25 INTERVIEW significant growth within the next year and attract more customers. Finally the challenge of costs incurred in attracting and training qualified employees is there, considering that the Islamic banking industry is still new in the Sultanate. However, the Central Bank of Oman and the College of Banking and Financial Studies (CBFS) have been taking great efforts to train Omanis to work in this sector. What have been your key contributions to the Islamic finance sector? The Bank established itself as a fully-fledged Islamic Bank in the Sultanate wherein Islamic banking was licenced for the first time. In this short time Alizz Islamic bank has been able to do many firsts, from offering the first Islamic credit card, to having the first Islamic Prize savings account, the Bank has successfully established products, systems, policies and procedures complementing the best in the international banking arena. This has resulted in an increase in business volumes. Alizz Islamic Bank was also the first bank in the country to launch an interactive teller machine. This machine has the ability to assist customers in carrying out the majority of their branch transactions without actually visiting the branch. The Bushra Prize Savings Account is one of the recent Salaam Al Shaksi achievements of our Bank. This is the first Shari ah compliant prize savings account in the Sultanate. The account was launched in line with the Bank s plan to deliver innovative and excellent products that guarantee a different customer experience in line with Shari ah principles. What have been the key accomplishments your institution has made this year? Alizz Islamic Bank achieved its strategic targets in terms of growth, cost and profitability. The gross financing portfolio grew 185 per cent in 2015, reaching About Alizz Islamic Bank SAOG Alizz Islamic Bank is one of the first specialised Islamic banks in The Sultanate of Oman. With an aim to offer customers an enriching banking experience designed for today s modern world, the bank has focused its investments on human capital and crosscutting technology to ensure the delivery of exceptional and responsive customer service. Our transparent Shari ah-compliant processes and innovative products and solutions cater to the diverse needs of both corporate and retail customers. OMR million while customer deposits increased exponentially to OMR million from OMR 15.3 million at the end of This exceptional growth has resulted in a 210 per cent increase in net operating income to reach OMR 5.99 million for the year 2015, improved considerably from OMR 1.93 million for the year We aspire to accomplish exceptional achievements over the next few months. We focus on offering different products that have been carefully selected in line with our we will make progress slowly but surely policy. What are the key Islamic investment opportunities in your market? The Government is actively supporting the Islamic investments with the Sukuk Ijarah it had issued in October 2015 and are now planning another Sukuk by the end of Additionally two more Sukuk were issued recently by Al Madina Investment and MB Holding. We are always advising our corporate customers to issue Sukuk. As a leader in the Islamic finance space, what advice do you have for your peers? My advice to my peers in Islamic finance space is clear, let us be prepared to face any challenges thrown at Islamic banks from the market. We should raise the level of awareness of Islamic banking and its products. Also we should be ready to compete with conventional banks on products and services and more importantly customer experience. TO JOIN THE CONVERSATION: Visit: Fan: Facebook.com/alizzislamicbank Follow Instagram: alizz_islamic 25

26 INTERVIEW National Bonds invests in Islamic finance Mohammed Qasim Al Ali, CEO, National Bonds Corporation believes the future of Islamic banking is bright Mohammed Qasim Al Ali, CEO, National Bonds Corporation What challenges will the Islamic financial sector face in 2017, and how will you work to overcome them? Islamic finance today plays a significant role in the UAE s financial ecosystem. However, each period has its own challenges. Given the geopolitical and economic trends currently sweeping the region, we can outline some important challenges that we expect Islamic finance to face in Firstly the liquidity crunch that forces Islamic institutions to either increase profit rates on deposits or issue Sukuks, some of which are perpetual in nature. This will certainly increase their cost of funds. Simultaneously this will also raise the cost of financing for corporate and retail customers. Secondly, volatility and liquidity issues at listed equity markets across the region will contribute to lack of liquidity in the markets. Thirdly there is pressure on capital to meet Basel III and other regulatory requirements. Islamic banks need to enhance corporate governance and attract and retain qualified human resources and develop human resource competencies to lead and rejuvenate the banking and 26

27 INTERVIEW financial services sectors with new ideas and products. We need to understand that the challenge is not merely the lack of personnel, but also ensuring the readiness of the existing resources to take on different specialisations aligned with the culture and direction of Islamic finance. Islamic banks also need to catch up with the rapid digital revolution to offer best in class service to their clients. How have you contributed to the growth of the Islamic financial sector? Our main contribution has been introducing and developing retail Mudharaba Sukuk as a key instrument of Islamic finance. Prior to the establishment of National Bonds Corporation, Sukuk were not commonly used in the market as a tool for funding and saving at the same time. In addition, through our Sukuk-based savings products, we have helped highlight the importance of the personal wealth of citizens and expatriates to the Islamic financial sector. Personal wealth is a great resource that can be leveraged as capital to fund development with Islamic financial instruments. Another significant contribution has been our effort to transform a culture of consumption into a culture of saving. As you know, it is not easy to build a sound financial sector in an atmosphere that fuels consumerism. It s also important to stress that 97 per cent of our investment portfolio is being invested in the UAE economy compared with other funds that invest mainly abroad. What are your most important achievements for this year? This year has marked our entry into the Takaful sector through the Sanadi plan, which combines saving and Takaful insurance in one product. We have also used our participation in Cityscape to communicate with clients and introduce them to the company s investment strategy, which focuses exclusively on ventures built on real assets and Shari ah compliance in terms of sale, purchase, and payment plans. The results of the Financial Health Check and Savings Index for this year indicated higher public awareness about the importance of savings and financial stability for families and individuals. We believe this is also an important achievement because it shows an overall improvement in the nation s financial literacy. What initiatives do you plan to launch in 2017? We are always examining market changes and clients needs, as well as the results of the Savings Index and Financial Health Check. Using this intelligence, we design future products and services that would respond to developments in a way that, on the one hand, benefits clients and cultivates their financial behaviour, and, on the other hand, contributes to the national economy and helps achieve social stability. One tool that will enable us to achieve such objectives is the NBC Digital 2020 strategy which will take National Bonds to the next level. What are the opportunities for Islamic investment in the UAE market? The opportunities are diverse and promising. There is a strong trend of developing non-oil industries, focusing on the manufacturing of food products, clothes and textiles, and fast-moving consumer goods (FMCG). Another prominent trend is restructuring the national economy to transform it into a knowledge economy, especially in fields such as commerce, services, and industrial production that relies on modern technology. Nowadays, the government is implementing policies, and instituting more stringent rules and regulations in order to direct these trends towards economic sustainability and social development. These factors combined expand the possibilities for Islamic investors and enable them to become active and effective partners in the present and future of the UAE economy. As leaders in the Islamic financial sector, what advice would you offer to professionals in this field? It is an opinion and insight on the Islamic financial sector rather than advice: I hope we can broaden our view of Islamic finance to incorporate its role in all industries. In the process, we should pay particular attention to social ownership enterprises, such as small businesses and startups established by young people, especially enterprises with joint ownership, owned and managed by a higher-than-usual number of people. We should also realise how necessary it is for people to participate in catering to their own needs within their economic system and to use Islamic finance to achieve this goal. After all, it is production that defines the identity of an economy, not consumption. In conclusion, I invite everyone to build on past experience, especially that of the financial sector in the world economy. This way, we can avoid repeating mistakes that led to the recent economic crisis, such as lack of work ethics and laws regulating markets, or over lending without guarantees, encouraging consumption that is disproportionate to one s actual income. 27

28 INTERVIEW ICD helps unlock Islamic finance s potential Khaled Al-Aboodi, CEO & General Manager of the Islamic Corporation for the Development of the Private Sector (ICD) looks at the future of Islamic finance as we move into 2017 What are the key challenges facing Islamic finance in 2017, and how are you working to overcome those challenges? Currently, the global Islamic finance industry faces several multi-dimensional challenges in its bid to unlock its huge potential and compete with the conventional financial sector. These include challenges on the regulatory front, such as regulatory inconsistency, as well as the shortage of qualified human capital. Meanwhile, the low penetration levels of Islamic finance outside of its traditional markets can be attributed to the lack of public awareness regarding Islamic finance products and services and the perception that Islamic finance is for Muslims only. When consumers lack knowledge about Islamic finance products and services, Islamic finance institutions often need to work harder than their conventional counterparts to educate people. Industry stakeholders, including Islamic financial institutions and regulators, are well aware of the ongoing challenges and of the need to address them. At ICD, we continuously strive to do what we can to change the status quo. Khaled Al-Aboodi, CEO & General Manager of ICD For example, ICD has launched the Islamic Financial Institutions (IFI) programme, offering a wide range of advisory services including: converting conventional banks into Islamic banks; setting up Islamic windows or Islamic branches within conventional banks; assisting Islamic banks in raising funds; and assisting governments in establishing or enhancing existing Islamic financial systems, in addition to providing various capacity building advisory services and programmes. Since its launch, the IFI programme has successfully rendered a large number of advisory services to renowned financial institutions in ICD member countries and has succeeded in expanding Islamic finance s role as a facilitator of inclusive growth. 28

29 INTERVIEW As we all know, there is an urgent need for Islamic financetailored programmes which are able to produce highly competent and motivated professionals with required knowledge of conventional banking and finance, as well as knowledge of Shari ah. As a means of addressing this shortfall, the ICD established the Islamic Finance Talent Development programme (IFTDP) in 2011 to develop superior talents and best practice for the industry. Other programmes include the Corporate MBA programme in collaboration with IE Business School, Harvard University and UC Berkeley, as well as the ICD-IE Masters in Islamic Finance and Leadership (MIFL). We also often conduct skills workshops and training programmes on a regular basis. More recently, the ICD recognises that the Islamic finance industry requires effective holistic measures to focus on efforts to facilitate and ensure inclusive financial sector development. In collaboration with Thomson Reuters, the annual ICD-Thomson Reuters Islamic Finance Development Indicator (IFDI) Report, now in its third consecutive year, assesses the current states of the overall health of the Islamic finance industry and measures growth potential across 108 countries. The indicator is the leading global reference for Islamic finance development for all users including policymakers and regulators, investors and finance institutions, Shari ah scholars, and research and training departments interested in Islamic finance. What have been your key contributions to the Islamic finance sector? Since its inception in 1999, ICD, the private sector arm of the Islamic Development Bank (IDB) the world s largest Shari ah compliant multilateral institution focuses on supporting its 57-member country development by stimulating the private sector in various ways. Our mandate is similar to other multilateral institutions with the proviso that all of our operations must be strictly Shari ah compliant. Apart from providing critical capital, we also impart knowledge, help manage risks and catalyse the required participation of others Apart from providing critical capital, we also impart knowledge, help manage risks and catalyse the required participation of others in order to achieve development goals. Khaled Al-Aboodi, CEO & General Manager of ICD in order to achieve development goals. Through our numerous projects, we support the type of entrepreneurial initiatives that help developing countries attain sustainable economic growth. For example, amidst the different challenges faced by SMEs in its member countries, ICD initiated the SME programme which provides a comprehensive range of Shari ah-compliant financial products and services with customised approach for each member country. Through this programme, ICD works with member-country governments to promote SMEs via targeted measures, aimed at making markets work efficiently and at providing incentives for the private sector to assume an active role in SME finance. In addition to providing lines of credit to local banks in its member countries for onward financing of SMEs, ICD, as part of its overall strategy, has been actively involved in the set-up of Shari ah-compliant leasing and investment companies as well as Islamic banks to act as its channels to reach a greater multitude of beneficiaries. Some achievements include launching Ijarah companies in Malaysia in partnership with Pelaburan Mara Berhad, and in Palestine in partnership with the Palestine Investment Fund (PIF) and Palestine Islamic Bank (PIB). ICD was also involved in numerous financing deals in member countries such as in Kazakhstan, Tajikistan, Egypt, Morocco, and Indonesia, spanning across various economic sectors. Additionally, ICD accompanied its business accomplishments with the robust development of its support functions, including the signing of agreements and Memorandums of Understanding (MOUs) with member countries governments and institutions in support of private sector development and to enhance collaborations on Islamic finance. What have been the key accomplishments ICD has made this year? Following its five-year Sukuk programme with ICD, in August 2016, Ivory Coast issued its second sovereign Sukuk valued at XOF 150 billion. Meanwhile, in July 2016, Togo successfully issued its first Sukuk on the West African cont. overleaf 29

30 INTERVIEW cont. from pg 29 Economic and Monetary Union (WAEMU) market, valued at CFA 150 billion with a 10-year maturityalso lead-arranged by ICD. This paves the way for other Western African countries to consider Sukuk as an alternative financing tool. To date, only South Africa, Senegal, Ivory Coast and now Togo have issued Sukuk in the region. Additionally, this year we made the bold move of venturing outside of our traditional markets. In March 2016, we organised a landmark China-OIC Forum in Beijing, which was an excellent platform to showcase what Islamic finance has to offer to the world s second largest economy and how the OIC bloc, the fourth-largest economic bloc in the world, can stand to provide real opportunities to China. Indeed, the event marks what we hope to be an exciting foray into China. Positively, at the side lines of the forum, ICD effectively signed two important MoUs with our new Chinese partners one with China-Africa Development Fun (CADFund), a Beijing-based private equity firm, to boost investment and growth in selected African countries, and another with CNBM International Engineering Co. (CNBM-IE) to launch a global public-privatepartnership (PPP) scheme for social infrastructure projects in ICD member countries. In December 2015 ICD inked a cooperation agreement with Suriname s Trust Bank to offer advisory support and technical assistance during all stages of Trust Bank s integration process into Islamic finance. This will make Trust Bank the first fully-fledged Shari ah compliant bank in not only Suriname but the whole of Caribbean and South America. It was reported recently that the Central Bank of Suriname has finally granted a licence to Trust Bank, which plans to be in operation by the first quarter of What key initiatives do you have planned for 2017? ICD has set a 10-Year Strategic Road-Map, supported by four- Pillar Strategy that consist in Developing Islamic Finance Channels, Investing in High-Impact Sectors, Improving the Enabling Environment and mobilising Resources. In 2017, ICD will keep doing what it started two years ago to keep achieving the strategy objectives. ICD aim to establish and support Islamic financial channels in the member countries and provide advisory services to convert conventional banks into Islamic ones, set up new Islamic banks and develop an enabling environment in at least 10 countries. In addition, in terms of investment and financing, ICD is planning to provide finance to at least one direct investment project in each member country, but also allocate approximately 60 per cent of new approvals to high impact sectors such as infrastructure, agriculture and healthcare. Last and not least, ICD plan to mobilise about $6 billion from the market through issuing Sukuk and loan market financing over the next 10 years and set up at least 20 SMEs, private equity and income funds to mobilise resources. This is to name few and give a holistic view of the 10-Year Strategic Road-Map. What are the key Islamic investment opportunities in your market? The most glaring opportunity would be in infrastructure development. When developing countries focus on upgrading their infrastructure, economies and people s lives will inherently transform for the better. Indeed, infrastructure development is a top developmental priority in regions such as Africa, particularly in two critical areas: power and transport. Evidence has proved that without both of these sectors being properly developed, any further investment into secondary infrastructure (such as education, health and housing) will struggle to materialise. To this end, Islamic finance can be the catalyst in mobilising funding into infrastructure development. The burden of infrastructure financing projects can shift away from banks towards the Sukuk market, for example. Globally, Sukuk has emerged as a competent alternative to conventional debt financing for large infrastructure and energy projects. This is so because Islamic finance requires a clear link with real economic activity and transactions have to relate to a tangible, identifiable asset, as in the case of infrastructure financing. As a leader in the Islamic finance space, what advice do you have for your peers? Embrace and draw on the economic value that Islamic finance has to offer especially given the more challenging environment. More importantly, maintain focus on the continuous development of products and services that manifests the value propositions of Islamic finance which promotes sustainable growth and benefits the society instead of only focusing on wealth creation. 30

31 11 th Islamic Business & Finance Awards 2016 Excellence through innovation Rewarding pioneers in Islamic finance 23 rd November 2016 The Godolphin Ballroom, Emirates Towers Hotel, Dubai 7pm cocktail reception followed by dinner and the awards ceremony SUPPORTED BY: For sponsorship and nominations opportunities please contact: Nap Estampador, Business Development Manager Tel: or nap@cpifinancial.net For other information please contact CPI Financial s events team Tel: or events@cpifinancial.net

32 ISLAMIC FUNDS Looking to the future of Islamic finance: some personal opinions Michael J.T. McMillen looks at where Islamic finance is now, and where it is heading When considering Islamic finance since the 2007 global financial crisis, there is some bad news and some good news. Let us start with the gloomier perspective, if only because it forms the basis upon which a more encouraging orientation is emerging. The aftermath of that crisis has been as apparent in Islamic finance as in the larger interestbased economy (call it the conventional economy). That is true despite Islamic banking s evasion of the initial immediate damage resulting from the collapse of subprime mortgage and related conventional instruments. Islamic banking suffered notably in the second (illiquidity) phase of that crisis due to, among other things, an overconcentration in illiquid assets, such as real estate investments. Private Shari'ahcompliant investment activity slowed abruptly, and is only now showing indications of sustained redevelopment (in a repeating pattern: real estate investment). Sukuk issuances continued, albeit at a moderated pace, and with an increased emphasis on debt-based structures (Sukuk al-murabahah) and other less transparent structures (Sukuk al-wakalah). Despite publicly available statistics that avouch an increase in corporate issuances, Sukuk remain predominantly a sovereign phenomenon. Sukuk statistics have become less transparent. They report three categories of issuers: sovereign; quasi-sovereign; and corporate. Probing the transactional documentation reveals that the ultimate credit in all three categories is, overwhelmingly, sovereign. Probabilistically, the number of private sector corporate issuances approaches zero. So, what is the good news? The good news relates to both the macro and micro vantages. Here I select a few examples (from many). My assessment is decidedly anecdotal. Four developments at the macro level and two from the micro level seem particularly encouraging. At the macro level (without discussing exceptions), the following seem to be occurring: First, increasing recognition within the conventional finance community of the legitimacy, and sustainability, of Islamic finance. Second, increasing recognition within the Islamic finance community that cooperation with the conventional community and conventional practice is both appropriate and acceptable. Third, an increased focus on the objectives (Maqasid, broadly defined) of Islamic finance and how the practice of Islamic finance might be nudged in the direction of greater sensitivity to those objectives. Fourth, increasing willingness to objectively consider some oft-repeated, rather dogmatic, assertions that have guided the development of Islamic finance. At the micro level, I perceive an increased focus on some fundamental legal reforms that (I believe) are critical to the expansion 32

33 ISLAMIC FUNDS of Islamic finance beyond its current, rather confined, ambit to become widely accepted and globally influential, both in competition and in symbiotic harmony with conventional modalities. Though not further addressed in this note, I cite two laudatory trends. First are efforts of the European Bank for Reconstruction and Development, UNCITRAL, The World Bank and the International Finance Corporation, among others, to develop collateral security regimes that are responsive to Shariʿah precepts. Second are the efforts of the Islamic Financial Services Board (IFSB) and The World Bank to explore bankruptcyinsolvency and resolution regimes that take cognizance of Shari'ah principles. Hopefully, these efforts will be pursued to fruition with input and assistance from the Islamic finance industry. MACRO: LEGITIMACY OF ISLAMIC FINANCE As to perceptions of the legitimacy and sustainability of Islamic finance, market participants in jurisdictions such as North America and Europe, when requested to structure a transaction as Shari'ah-compliant, no longer ask what that means or whether it is possible, and they no longer fret about reputational risks of consummating Shari'ahcompliant transactions. Instead, they inquire as to how they obtain expert assistance to accomplish the structuring and the transaction. That is a sea change. A few examples are representative. I recently undertook representation of a special servicer for a United States commercial mortgage-backed securitization (CMBS). It entailed conversion of an interest-based financing to an Ijarah-based financing, with the financings and the properties to remain within the CMBS. Despite a lack of experience with any Shari'ahcompliant structure by all but one transactional participant, there was never a question as to whether this should be undertaken or an effort to avoid the transaction. The focus was on how to consummate the transaction. As another example, I have consulted with numerous central banks regarding how to implement Islamic banking and/ or issue sovereign Sukuk within existing (interest-based) legal frameworks. The result has been targeted Islamic banking bills that are now being considered by national legislatures and at least one imminent Sukuk issuance. Another example is a contemplated Sukuk issuance by a large Western national oil company: their first foray into Islamic finance. Again, there has been no fretting about reputational risk, legitimacy, appropriateness or similar considerations: the focus has been on the potential market opportunity. MACRO: COOPERATION OF ISLAMIC AND CONVENTIONAL FINANCE I have also observed an increased realisation within the Islamic finance community that Islamic synergistic cooperation with conventional finance is appropriate and desirable. From the mid-1990s until recently, my impression has been that Islamic finance (particularly banking) desired to develop apart and distinct from conventional equivalents. Some of that desire derived from a retail market orientation (despite acceptance of Islamic window concepts). Diverse factors have shifted the focus toward cooperation. A renewed focus on the objectives of Islamic finance has included consideration of the provision of fundamental social services. That means an increased focus on physical and social infrastructure development (including water, transportation, communications, education, healthcare, sanitation, electricity, industries that employ and must be supplied (presenting opportunities for small and medium-sized entities), social infrastructure and many other activities). This coincided with a global infrastructure crisis, certainly in the poorest economies, but also in advanced economies. Infrastructure needs, however measured, are acute and daunting, especially for the bottom two-thirds of the socioeconomic pyramid. Infrastructure projects are massive: too large for the Islamic finance industry alone. Cooperation is mandatory, because of size, experience, and the need for risk diversification. Concurrently, lessons have been taken from the experience of the Islamic finance industry with product development. Most refined products are developed at the commercial (rather than retail) level, if only because of the magnitude of development costs. The process entails resolution of the same issues as have been faced, and resolved, by conventional markets (for example, tax, accounting, collateral security, and bankruptcy issues). The Islamic finance industry has looked to, and worked with, conventional finance to develop and implement these solutions. This is not product mimicry; this is a process of resolving identical or similar issues efficiently. This cooperation has been beneficial to both Islamic and conventional finance. Islamic finance has avoided many of the high frontend development costs by coattailing on conventional solutions cont. overleaf 33

34 ISLAMIC FUNDS cont. from pg 33 (appropriately adapted for Shari'ah considerations). Each of the Islamic and conventional participants has acquired a deeper understanding of the other which, in the case of the conventional participants, has led to greater acceptance of the legitimacy and stability of Islamic finance, as referenced in the preceding section. MACRO: OBJECTIVES (MAQASID) AND ISLAMIC FINANCE Astute observers have long criticised (some as gentle inducement; some by pillory) the Islamic finance industry for not internalising in practice a greater emphasis on social justice and social welfare objectives. Scholars are often criticised for focusing on formalistic aspects of Shari'ah compliance. Some of this criticism is quite fair, and some not. That judgement usually has little regard for the state of development particularly in broader historical terms of the concepts that comprise Shari'ah compliance at a given point in time. Post crisis, Islamic finance and other societal institutions have undertaken a process of assessment and reevaluation. Concepts of relevance include sustainable development goals (SDGs), social responsibility, social welfare, socially responsible investing (SRI), climate change, the global environment, social inclusion, social and physical infrastructure, sexual equality, and many others. The World Bank has promoted made its SDG principles and related projects and its recent joint high-level seminar with the IFSB emphasised the harmonies between Islamic finance principles and fundamental SDG objectives. The Islamic finance industry and the Shari'ah scholars have done much to address Riba considerations in a contextspecific manner that has facilitated current and future industry growth in harmony with conventional finance and markets. Shari'ah scholars define their responsibilities in commercial transactions by reference to institution-specific consulting agreements. In this context, the scope of work is defined by the retaining institution. Few formulations include objectives that transcend formalistic adherence to Shariʿah principles. I know of none that include social welfare reform within the scope of work. In advising development and standard setting institutions, on the other hand, these scholars define their roles more broadly and are more assertive in encouraging consideration of a more comprehensive range of Maqasid considerations. We, as an industry, have gotten what we requested. It is the obligation of every industry participant to request more sensitivity to social justice and welfare considerations. This is not the sole responsibility of Shari'ah scholars. When a consensus supports social justice and welfare considerations, they will become integral to Shariʿah compliance determinations. The difficult parts are inculcating knowledge, awareness and a willingness to make the requisite sacrifices. There are efforts in these directions, including the Khazanah Nasional education Sukuk and the International Finance Facility for Immunisation Sukuk. These types of issuances lead the way, but they are only the seeds of a beginning. MACRO: OBJECTIVE RECONSIDERATION OF MANTRIC ASSERTIONS The Islamic finance industry also seems more willing to objectively re-evaluate (or initially evaluate) some of the assertions that have become dogma, or at least mantra, and have shaped formative developments. I present only one example, which I believe to be indicative. Since the inception of my involvement in Islamic finance in 1996, the mantra has been that the industry needs more standardisation. The most prominent proponents of standardisation have been large banks and financial institutions, international standard setting institutions, multi-lateral institutions, and certain (and many) economists. Acknowledging the desirability, and even the necessity, of standardisation in select areas (certain retail products, for example), I retain my reticence and belief that standardisation should come only slowly, after considerable deliberation, and selectively. I reject the notion that standardisation of Shari ah principles, which embody religious determinations, is acceptable in the pursuit of market efficiency. Interpretive variation is accepted, honoured, and the source of a rich intellectual history. standardisation certainly does minimise certain (short-term) transaction costs, stabilise external market relationships, serve the needs of hierarchical and internally segmented organisational structures, and render efficiency unto resolution of agency issues. But at what cost and to whose detriment and whose benefit? Is short-term economic efficiency the appropriate criterion? standardisation is appropriate when the relative risk positions of and risk allocations among the parties are universally agreed and fairly allocated. It is supported by 34

35 ISLAMIC FUNDS the low probability of invocation of, and disputes regarding, most contractual terms and the low stakes of contractual dissonance or dispute (at the individual contract level). Premature standardisation results in adoption of the position of the most powerful participants, to the detriment of the weak, the poor, and those at a bargaining disadvantage. A benefit of developing products in the commercial realms is the greater equality of bargaining positions, which inclines to more even-handed risk allocations and risk-resolution mechanisms. Hopefully the product can then be transported to retail and other realms in which bargaining capabilities are not as evenly distributed. The growing literature on secular adhesion (non-negotiable) contracts and boilerplate provisions is illuminating. Adhesion contracts are ubiquitous in our daily lives. Examples include the click contracts that you encounter every day in using software or web sites. Dare to not agree and you will be without your word processor, spread sheet or account. Other examples include your parking stub, your football or opera ticket, and your airline ticket. If you do not agree to the terms, you cannot park or retrieve your car, watch the event, or fly. A problem with many adhesion contracts, in case you have not recently read your software contract or the terms of your airline ticket (possibly only available online, and after reading relevant incorporated international treaties), is that they are often a tad one-sided and even unfair. With high probability, I aver that they do not favour the consumer, the poor or the weak. The oftheard argument ( trust me, we would never enforce those terms ) is cold comfort indeed. The issue is best illustrated by consumer contracts. However, sovereign bond issuers and corporate borrowers submitting to contract forms dictated by debt market associations, for example, face similar issues. I have also observed a markedly increased realisation within the Islamic finance community that Islamic finance should and must cooperate synergistically with conventional finance and an increased willingness to find ways to cooperate. As a consequence of contract theory, judges encounter difficulties in considering challenges to these contracts, rare though challenges may be in jurisdictions that do not recognise class action suits and do not allow lawyer s contingency fees. If the judge determines that the contract is in fact unfair, a dilemma exists. You agreed to it by clicking Agree or by watching the game or opera or taking the flight. And we all agree with freedom of contract. What to do to serve justice? Judges resort to equity principles or implied contractual terms or seek out enforcement exceptions. That may serve justice in the individual case, but it also has the unintended effect of undermining the rule of law concept that is embodied in freedom of contract principles. That is not an ideal outcome from any long-term societal vantage. I suggest that it is time that we challenge and objectively evaluate some of these fundamental assertions. And I suggest that we do so from many different perspectives, including those embodied in the fundamental principles of the Shari'ah and in a manner that is not limited to short-term transaction cost efficiency analysis. CONCLUSION This note has provided a few anecdotal examples in four areas. I believe that these are accurate perceptions of emerging trends. However, I labour under no illusions as to how difficult it will be to sustain these trends. I encourage you to assess my perceptions and evaluate your commitment to the principles, ideas, and processes described here (and others). If and to the extent that you subscribe to the concepts underlying the types of trends discussed in this note, I urge you to make a public commitment and assist in the practical effectuation of the underlying principles. The financial downturn presented the opportunity for evaluation. This period of recovery provides the opportunity for realisation. Michael J.T. McMillen, Partner and Global Head of Islamic Finance of the international law firm of Curtis, Mallet-Prevost, Colt & Mosle LLP, and Adjunct Professor teaching Islamic finance at the University of Pennsylvania Law School and The Wharton School. Opinions and assessments expressed in this note are those of the author and not of any institution with which the author is associated. Copyright 2016, Michael J.T. McMillen; all rights reserved. 35

36 RATINGS State of the global Sukuk market 2016 Ruslena Ramli, RAM Rating Services Berhad, looks at pushing the envelope with responsible investing The global slowdown and depressed oil prices, which are expected to hover around $40 $45 per barrel in the foreseeable future, have affected the performance of key Sukuk markets such as Malaysia, the Gulf Cooperation Council (GCC) countries and Indonesia, which have historically accounted for 80 per cent to 90 per cent of Sukuk issuance. Despite the lacklustre conditions, there have been interesting developments within the domestic market of each jurisdiction, which have compensated somewhat for the slower Sukuk issuance. Malaysia Malaysia s Sukuk market has remained resilient despite generally less upbeat sentiment. As at end-august 2016, Shari ahcompliant securities accounted for 52 per cent (equivalent to $22.4 billion or MYR90.0 billion) of the market s $42.9 billion (or MYR171.7 billion) of government, quasi-government and corporate debt issues. Quasi-government and corporate debt securities still dominated the Sukuk scene, with funding largely channelled towards infrastructure projects. Thanks to steady issuance from the private sector, RAM Ratings is optimistic that the local-currency (LCY) Sukuk market will be able to meet the targeted $25.0 Figure 1: Composition of global Sukuk issuance by country (as at end-august 2016) 2016 Review GCC USD11.5 billion UAE (USD4.9b) Saudi Arabia (USD3.5b) Qatar (USD1.6b) Bahrain (USD0.7b) Oman (USD0.5b) Kuwait (USD0.3b) OTHERS USD8.6 billion Turkey (USD3.7b) Pakistan (USD2.8b) Bangladesh (USD0.96) Tunisia (USD0.5b) Senegal (USD0.3b) Brunei (USD0.2b) Others (USD0.2b) Figure 2: Issuance of conventional bonds and Sukuk by Malaysian quasigovernment entities and corporates (January 2013 August 2016) Sukuk Conventional 58% 59% 51% 61% 42% 41% 49% 39% INDONESIA USD8.6 billion USD51.1 billion % of Islamic portion to total corporate (including quasi-government) issuance USD9.3 billion MALAYSIA USD22.4 billion Aug-2016 USD17.7 billion USD17.5 billion USD16.3 billion USD14.9 billion USD12.6 billion USD12.0 billion USD15.9 billion Source: Bond Pricing Agency Malaysia (BPAM), Eikon - Thomson Reuters and RAM Ratings 36

37 RATINGS billion $30.0 billion (equivalent to MYR billion MYR billion) of issuance this year. Following the debut of the year s largest Sukuk-Sarawak Hidro Sdn Bhd s MYR5.54 billion Sukuk Murabahah on 11 August we expect infrastructure-related issuance to remain resilient in Malaysia s dominance in the global Sukuk market is anchored by its unique value proposition, underscored by an ecosystem that has been progressively developing into an international centre for Islamic finance. To fuel this growth, the regulators are promoting the linkage between Islamic finance and responsible investing (e.g. the announcement of the sustainable and responsible investment (SRI) Sukuk guidelines in August 2014). In May 2016, RAM Ratings a pioneer in the local Sukuk market that has rated many firsts in Sukuk structures over the last 25 years became one of the first six global credit rating agencies to sign on to the United Nations-supported Principles of Responsible Investment s Statement on Environment, Social and Governance (ESG) in Credit Ratings. Given the importance of institutional credit ratings to the global debt capital markets, this marks RAM Ratings contribution to the development of a more sustainable global financial system and its efforts on the better alignment of its business processes with ESG. Indonesia Indonesia, the world s most populous Muslim nation, unveiled its 10-year Islamic finance masterplan in August 2016, which envisages sovereign Sukuk issuance to increase to 50 per cent Figure 3: Indonesia s Sukuk and conventional bond issuance (January 2013 August 2016) USD8.6 billion USD8.2 USD5.4 billion billion USD5.3 billion Source: Eikon - Thomson Reuters and RAM Ratings In the GCC, Sukuk issuances have been on a declining trend since 2013 exacerbated by feeble oil prices and the resultant slowdown in these countries economic growth. Ruslena Ramli, RAM Rating Services Berhad of its total debt issuance over the next decade, from around 13 per cent last year. Indonesia s domestic Sukuk market is dominated by the government; the pace of issuance has been steadily rising since Despite the government s concerted efforts to increase private sector participation, response has been lukewarm pending regulatory and tax reforms, which continue to plague the industry. As at end-august 2016, Indonesia s LCY bond market recorded a total issuance value of $35.90 billion; conventional bonds made up the bulk of this (76 per cent). Nevertheless, the USD32.8 billion USD35.4 billion USD31.3 billion USD27.3 billion 14% 13% 21% 24% 86% 87% 79% 76% Sukuk Conventional Aug-2016 % of conventional bonds to total bond issuance market share of Sukuk has been gradually expanding in the last three years, from 14 per cent to 24 per cent. Of the total Sukuk issuance, sovereign debt took the lion s share of 98 per cent while the corporate sector contributed the rest. Historically, infrastructure development has been mainly undertaken by the public sector. Under the 2016 budget, the government had allocated $24.2 billion (or IDR trillion) for infrastructure expenditure. Taking into account the 10-year Islamic finance master plan, sovereign Sukuk issuance is likely to continue taking centre stage, accounting for an increasingly larger portion of the government s funding budget. GCC In the GCC, Sukuk issuances have been on a declining trend since 2013 exacerbated by feeble oil prices and the resultant slowdown in these countries economic growth. RAM Ratings initial expectation that the sovereigns in the GCC would turn to the Sukuk market to cover their budget deficits has, unfortunately, not materialised. The complexities cont. overleaf 37

38 RATINGS cont. from pg 37 related to Sukuk issuance and the longer time to market, are among the factors that may have influenced the decision to take the conventional route. As at end- June 2016, debt issuances in the GCC amounted to $33.8 billion, of which Sukuk represented 24 per cent (equivalent to $8.0 billion) of this amount. Nonetheless, the GCC reported steady issuance by the private sector, with Saudi Arabia taking the lead with a 46 per cent share (or $3.2 billion), followed by the United Arab Emirates (UAE, 43 per cent or $2.9 billion), Qatar (seven per cent or $0.5 billion), and Kuwait (four per cent or $0.25 billion). Issuance from the quasi-government and corporate sectors constituted 81 per cent of the GCC s total Sukuk issuance as at end-june Given the global spotlight on SRI, the United Nations Development Programme (UNDP) and the Islamic Development Bank Group (IDBG) signed a memorandum of understanding (MoU) in May 2016, to strengthen collaboration between these two leading developmental institutions vis-àvis supporting the implementation and achievement of sustainable development goals (SDGs).This agreement seeks to expand UNDP-IDBG cooperation beyond the Middle East to Africa, Central and South Asia, and South-east Asia and the Pacific. The UNDP-IDBG partnership will focus on scaling up ongoing initiatives and exploring new opportunities to collaborate and effect the realisation of the SDGs, in areas that include the following: 1) Project development and implementation in shared priority areas and comparative advantages. Figure 4: GCC s Sukuk and conventional bond issuance (January 2013 June 2016) Source: Eikon-Thomson Reuters, Bloomberg, Kamco Research and RAM Ratings Note: The figures for 1H 2016 reflect major hard currency bonds/sukuk (above $100 million issue amount and maturity of 1-year or more) issued by GCC entities which include both fixed & floating rate issuances. Figure 5: Share of quasi-government and corporate Sukuk in the GCC (as at end-june 2016) USD3.2 billion Saudi Arabia USD26.3 billion USD23.3 billion USD18.0 billion USD8.0 billion Source: Eikon - Thomson Reuters and RAM Ratings USD24.0 USD24.0 billion billion USD58.0 billion USD25.8 billion 52% 49% 24% 24% 48% 51% 76% 76% Sukuk Conventional Jun-2016 USD2.9 billion USD0.5 billion USD0.25 billion UAE Qatar Kuwait 2) Development of privatesector partnerships. 3) Strategy development/sdg alignment. 4) Promoting systematic institutional cooperation. Core Sukuk markets such as Malaysia, Indonesia and the GCC will continue accounting for 80 per cent to 90 per cent of total Sukuk issuance. We do not expect this contribution mix to change significantly going into Private sector Sukuk issuance, particularly in Malaysia and the GCC, will remain the foundation in regard to setting the performance benchmark for future growth. Malaysia s economic pumppriming through infrastructureled projects has been a boon to the Sukuk market, and is likely to remain a key catalyst. On the other hand, the GCC s Sukuk market is an avenue for Islamic financial institutions seeking to fund their regulatory capital, and corporate players looking at business-related expansion. The stabilisation of oil prices and the ensuing improvement in market sentiment are envisaged to support Sukuk issuance from the GCC, albeit at a more subdued pace compared to the previous year s performance. Taking into account the UNDP- IDBG-led initiatives, Sukuk which has successfully been used as a financing medium to fund largescale infrastructure projects could be deployed for the SDGs. For developing countries, infrastructure gaps are estimated to range around $1.0 trillion $1.5 trillion annually. On a global level, investment in infrastructure is projected to reach about $100 trillion over the next two decades. The potential utilisation of Sukuk to fund these infrastructure projects bodes well in cementing its position as a competitive product amid the mainstream financial market. 38

39 THE AUTHORITATIVE VOICE OF ISLAMIC FINANCE Essential reading for an expanding industry - Islamic Business & Finance is the world s most thought-provoking monthly magazine dedicated to the development of Islamic finance globally. Islamic Business & Finance is a controlled circulation publication. You may apply to subscribe via our website or by ing subscriptions@cpifinancial.net CPI Financial FZ LLC PO Box Al Shatha Tower, Office 1209 Dubai Media City, Dubai, U.A.E. Tel: +971 (0) Fax: +971 (0)

40 CAPITAL MARKETS Islamic finance s myriad challenges and opportunities Looking forward, the story for Islamic finance is diverse, with many different global factors affecting each of Islamic finance s core markets, says Bashar Al Natoor, Head of Islamic Finance, Fitch Ratings How do you expect 2016 to look for Sukuk? I do not think that the fundamentals will change much in We might see more Sukuk issuance coming from both sovereigns and corporates. The capital market in the GCC for example is not deep and developed enough, whether it s a Sukuk or a bond, to accommodate the actual environment. Corporates have been relying on easy bank financing, whereas now liquidity is becoming more precious. The alternatives, namely, capital markets including Sukuk, are thus underdeveloped. If you re operating in a country where you have a significant Islamic finance market, many corporates that wish to tap capital markets will go for the option of Sukuk, not to exclude Islamic banks from their issuance. But the capital market development is not a Sukuk-specific issue. I would say the complexity and less standardisation of Sukuk adds Bashar Al Natoor, Head of Islamic Finance, Fitch Ratings 40

41 CAPITAL MARKETS to the Sukuk issues, but there is a fundamental issue, which is a lack of developed capital markets, both conventional and Islamic, in the markets in which Islamic finance operates. We have seen initiatives to develop it, and so we might see more regulations in Kuwait and other countries developing their capital markets to allow for Sukuk and bonds issuance and more activity to push corporates to do that rather than relying on financing. On top of that, we are seeing actual sovereigns have a specific dedicated strategy towards Sukuk and Islamic finance, such as in Malaysia where there are specific objectives with regards to Islamic finance levels, as well as Turkey, which is trying to have Islamic finance be a greater part of its financial system. Many sovereigns globally have their own challenges, but there are many countries that are prioritising Islamic finance. The story is very diverse. What else might affect Sukuk issuance in 2017? There are a lot of uncertainties that are contributing to issuance, not only in the region but in emerging markets in general. If you look at uncertainties about growth, oil prices, interest rates and geopolitical issues in Islamic financial markets, as well as external uncertainties such as Brexit, also affect Islamic finance and Sukuk issuance. Oil prices are putting pressure on the reserves of sovereigns, which is affecting the liquidity of banks, driving the corporates to look for other alternatives for financing, such as Sukuk. It is a linked chain. Ultimately, oil prices should help push more towards Islamic finance. Do you believe Brexit might weaken the UK s position as a leader in the Sukuk space? The UK s position in Islamic finance is driven by three main factors; The London Stock Exchange s role as a key global venue for Sukuk issuance (nearly $46 billion raised through 64 Sukuk issuers); London s position as a global financial hub where many Islamic banks access international markets; and the importance of Many sovereigns globally have their own challenges, but there are many countries that are prioritising Islamic finance. The story is very diverse. Bashar Al Natoor, Head of Islamic Finance, Fitch Ratings UK-based legal services due to the use of English law for the majority of international Sukuk issuance. London s advantage over other financial-services markets developing Islamic finance remains secure for the foreseeable future. That said, the playing field may now widen over time for Islamic finance. One interesting possibility is Luxembourg. Luxembourg, like the UK, has a Sukuk-friendly legal framework in place. Additionally, Luxembourg has Shari ah-compliant investor funds that places them at more of an advantage compared to other hubs looking to carve out their Islamic finance footprint. Luxembourg could in time equip their banking system to handle Sukuk legal frameworks. However, English law is likely to remain prevalent in Islamic finance. Importantly, most Sukuk-active countries are English speaking, thus strengthening the UK already formidable advantage. Are you optimistic for the growth of Islamic finance in general? We identify five key pillars for Islamic finance Islamic banking, Takaful, Sukuk, Islamic corporates and fund managers. We re looking at a more diversified Islamic finance industry where you cannot have one branch and label everything together. You need to dig deeper and see the actual fundamentals and the countries within that, specifically the ones that are active, and see how each is operating in each environment. The Islamic finance industry will continue to show growth. Growth of Islamic banks will still supersede the conventional ones. We had a quiet third quarter 2016, but in the first half we were 11 per cent up, and we expect the Sukuk market to be active again towards the end of the year. In the GCC, the Takaful industry is challenged but is mainly driven by regulation that makes insurance compulsory. Compulsory insurance in many markets in which Islamic finance operates is helping the insurance industry, but as Takaful awareness matures, that should have a positive impact on that industry as well. In terms of corporates that are operating under Shari ah will continue to be fragmented as they will face their own issues. Each sector, such as real estate or Halal food, will be affected by the issues specific to those sectors. Fund managers, too, will be affected by what is happening in the market. 41

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44 CAPITAL MARKETS Islamic finance 2017: another difficult year Dr. Mohamed Damak, Global Head of Islamic Finance, S&P Global Ratings Dr. Mohamed Damak, Global Head of Islamic Finance, S&P Global Ratings, says that the Islamic finance industry s growth is being limited by global economy factors, in particular the low oil price. While we estimate the Islamic finance industry s total assets will reach $2.1 trillion at the end of 2016, major factors continue to shape the sector and impact its growth. So what s limiting the expansion of the industry and where is the silver lining in what is predicted to be a difficult 2017? Islamic finance remains concentrated primarily in oilexporting countries, with the Gulf Cooperation Council countries, plus Malaysia and Iran, accounting for more than 80 per cent of the industry s assets. Unsurprisingly, the significant drop in the oil price, combined with the ensuing reduction of economic growth and governments spending cuts, have impacted the industry s growth prospects for For example, deposits from governments and their related entities account for between 20 and 40 per cent of the deposit base of GCC banks, and this inflow of money depends heavily on oil prices. The decline in liquidity has therefore increased the cost of funding for banks while conversely, the drop in economic growth exposed the most vulnerable borrowers, primarily subcontractors and small and midsize enterprises, leading to higher default rates and provisioning needs. As a result of these factors, Islamic banks asset growth decreased to around seven per cent in 2015 from 12 per cent in We believe this slowdown will persist for the remainder of 2016 and into 2017 with growth stabilising at around five per cent. Overall, we believe that not only will banks asset growth decline, but profitability will also drop, prompting some banks to take a closer look at their efficiency and potentially trigger mergers or acquisitions. The trend started in June 2016, with the announced mega-merger between First Gulf Bank and National Bank of Abu Dhabi to create one of the largest financial institutions in the region. In addition, the Sukuk market has not played a countercyclical role as an alternative source for governments to close their funding gaps and maintain spending levels with conventional debt issuance filling this void. While this is partly related to the currently low prevailing interest rates, we believe the length and 44

45 CAPITAL MARKETS complexity of the Sukuk issuance process still deters some issuers from tapping the market. The market is slowly realising that the process of issuing Sukuk can be laborious and can take much more time than the process for issuing a conventional bond. The only exception is Malaysia, where the process for Sukuk issuance is as efficient as for conventional bonds according to our understanding. Finally, despite its small size and tremendous opportunities to grow, the Takaful sector has remained a marginal player. In 2015, the combined gross premium income of Islamic insurers in the region exceeded $10 billion (based on available data from listed companies), which compares to roughly $9 billion of premium income generated by conventional insurers for the year in the GCC. More than 85 per cent of the region s Islamic insurance premiums were written in Saudi Arabia, which has the largest Shari ahcompliant market in the region. There is half a dozen explicitly Takaful insurers and 28 Islamic cooperative companies operating in Saudi Arabia. In our view, the Takaful sector is underperforming, especially in UAE, because it lacks the advantages of conventional insurers, which are often larger and benefit from better economies of scale. They have more-established distribution mechanisms and so their revenue generation is less dependent on intermediaries. They have also a broad array of assets where their excess cash can be deployed. Looking ahead, despite some significant challenges, there are opportunities that could put the industry back on track for strong growth and continued globalisation. First, stakeholders are getting more serious and aggressive about standardisation. Some players are working on standard legal structures to be used by sovereign issuers to shorten and ease the process of Sukuk issuance. In our opinion, if this is achieved, Islamic finance will not only return to its strong growth trajectory, but will see an increase in innovation. More integration could lead to an increase in Islamic finance activity across the board, creating a ripple effect throughout the industry. Dr. Mohamed Damak There is also a natural connection between the principles of Islamic finance and some of the United Nation s sustainable development goals. In September 2015, the UN General Assembly adopted its 2030 agenda for sustainable development, comprising 17 sustainable development goals (SDGs) and 169 measurable targets centred on five pillars: people, planet, prosperity, peace, and partnership. The UN has stressed that striving for sustainable development will require a revitalised global partnership between all stakeholders. Islamic finance could play a role - a modest one at the very least - in meeting some of the SDGs, particularly those that are in line with the core principles of Islamic finance. Both want to achieve more responsible, equitable, and real-economy-oriented financing. Finally, the Islamic finance industry would benefit from more consolidation and integration transforming the sector into a truly globalised sector. New and existing players could benefit from the experience in other markets, for example, some Sukuk issuers could look to the experience in Malaysia. Another example could be found in cross-border acquisitions, which might help the industry unite its Shari ah interpretation. We have already seen this with several acquisitions of Gulf banks in Turkey, for example. More integration could lead to an increase in Islamic finance activity across the board, creating a ripple effect throughout the industry. For example, more Sukuk issuance could help Takaful operators to invest less in risky real estate and equities, banks to manage their liquidity, and funds to have some fixed income revenue and allocate other funds to more profit-and-loss sharing instruments. Banks could start to offer Takaful products more systematically if the relevant regulation were in place. Progress would be aided if regulators acted to create a more supportive regulatory environment, while scholars, MLIs, and lawyers worked together to achieve standardisation. This could even trickle down to universities, who could provide the necessary training and knowledge to create the needed new generation of Islamic finance professionals. Finally, all the sectors that form the Islamic economy could work together to achieve more integration. Overall, united and more integrated, the industry will grow stronger. 45

46 METHODOLOGY Data analysis Explaining our methodology Wh ile this publication highlights only the top 100 institutions, the full analysis covers a total of 119 banks from 19 countries around the globe that are 100 per cent Shari ah-compliant. Five countries (Bahrain, Malaysia, Kuwait, Pakistan, and UAE) accounted for 62 per cent of all Islamic financial institutions. Total assets of all the Islamic banks in 2015 stood at $834 billion, increasing by $13 billion from The biggest gainer was Qatar Islamic Bank, which grew its assets by $8.5 billion, and the bank that made the largest loss was Sepah Bank in Iran, whose assets decreased by around $275 Million. The total liabilities of all banks in 2015 stood at $668 billion, increasing by $4 billion from The highest growth was seen by Dubai Islamic Bank, which increased its liabilities by $5.7 billion (around 20 per cent from 2014), followed by Parsian Bank in Iran at $3.2 billion (20.31 per cent from 2014). In terms of income growth, Qatar Islamic Bank (UAE) topped the list with an increase of $526 million, followed by Dubai Islamic Bank with $287 million increase (19.46 per cent from 2014). The total income of all banks is $34 billion in 2015, decreasing by an amount of $299 million. In terms of net profit growth, Dubai Islamic Bank (UAE) also topped the list with an increase of $282 million (almost 36.9 per cent up from 2014), followed by Bank AlJazira with an increase of $190 million in Total net profit of all banks was $10.3 billion in 2015, increasing by $263 million (2.6 per cent from 2014). Country Islamic Institutions Bahrain 22 Malaysia 21 Kuwait 11 Pakistan 10 United Arab Emirates 10 Bangladesh 9 Qatar 6 Saudi Arabia 6 Jordan 5 Indonesia 4 Iran 3 Oman 2 Sri Lanka 2 United Kingdom 2 Australia 1 Brunei 1 India 1 Kenya 1 Palestine 1 Sudan 1 46

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48 3% UP TO EXPECTED PROFIT P.A Licensed and regulated by Central Bank of UAE SMS "wealth" to 4248