Malaysian and Indonesian pension funds, which have a combined $192 billion of assets, say plans to increase holdings of Islamic bonds are being hampered by a shortage of investment-grade sukuk.
Kuala Lumpur-based Employees Provident Fund and Kumpulan Wang Persaraan (Diperbadankan), Malaysia’s two biggest pension managers, and PT Jaminan Sosial Tenaga Kerja (JAMSOS), Indonesia’s largest retirement fund, say they want more Shariah-compliant debt in order to diversify portfolios that must hold investment- grade securities.
Islamic finance has proven to be more resilient amid financial crises, but experts believe that more can still be done to manage risks.
Despite Islamic banks’ high liquidity, namely; in the form of cash, the industry still lacks the necessary depth to manage risks effectively, commented Jaseem Ahmad, the secretary general of the Islamic Financial Services Board.
Qatar's plan to list government bonds on the country's bourse for the first time may motivate companies in the world's fastest-growing economy to sell bonds locally as Europe's debt crisis prompts its banks to lend less.
The central bank of Qatar said yesterday it would list treasury bills on the Qatar Exchange tomorrow "as a first step toward starting a secondary market." Listings of bonds and sukuk, or Islamic notes, would follow, the central bank said.
Islamic financial institutions operating in the gulf region are keen to tap into the long term corporate financing opportunities, including project finance that exist in the market, bankers told a gathering of Islamic finance experts and corporate treasurers in Abu Dhabi yesterday.
The International Summit on Islamic Corporate Finance (ICFS 2011), which opened yesterday at the Le Royal Meridien in Abu Dhabi, saw leading Islamic bankers and corporate borrowers engage in innovative discussions that focused on boosting deal flow in the Islamic corporate finance space.
The Association of Islamic Banking Malaysia (AIBIM) and Indonesian Syariah Banking Association (ASBISINDO) need to set up an industry task force on joint development of cross-border Islamic liquidity management products suitable for both Malaysia and Indonesia.
In a joint statement today, the associations said this was decided at one of the specialised workshops held in conjunction with the Joint High Level Conference in Islamic Finance, organised by Bank Negara Malaysia and Bank Indonesia in Jakarta last week.
The UAE central bank will launch on Thursday a repurchase facility for Islamic certificates of deposits to provide a new liquidity tool for the banks, a document showed on Wednesday.
Lack of liquidity management tools is seen as one of the key challenges to the emerging Islamic finance industry, which has close to $1 trillion worth of assets globally. The religion's ban on interest rules out most interbank tools.
Islamic banks needed to manage the risks in the financial system ahead of any possible crisis or downturn, business advisory firm PricewaterhouseCoopers (PwC) warned at the weekend.
Mohammad Faiz Azmi, global leader of PwC’s Islamic finance team, said: "Risk management is an issue which cannot be ignored by any financial institution, but Islamic banks in particular need to establish risk management credibility as they aspire to move into the mainstream of the financial system."
long-touted Islamic megabank has received approval from Bahrain and a preliminary green light from Malaysia to begin operations, an organiser said. Saudi Arabia's Sheikh Saleh Kamel — who is founder and chairman of Bahrain-based Islamic bank Al Baraka and spearheaded the megabank initiative — said the venture is still in discussions with Qatar to obtain a licence.
Governors and representatives from 12 central banks and two multilateral organisations signed on Monday the articles of agreement for the establishment of the International Islamic Liquidity Management Corporation (IILM). The signing ceremony was the highlight at the opening ceremony of the Global Islamic Finance Forum.
As a global initiative aimed at assisting institutions offering Islamic financial services in addressing their liquidity management in an efficient and effective manner, the IILM would facilitate greater investment flows for the Islamic financial services industry.
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