Islamic Finance Council UK says Britain has failed to deliver on a government commitment to boost the sector.
The British Islamic finance market is facing a slew of challenges and is being held back by weak consumer awareness, according to one of the country’s top experts.
The $19 billion market is also suffering from a lapsed government commitment and a lack of regulation, said Omar Shaikh, an advisory board member for the Islamic Finance Council UK (IFCUK) in London.
Islamic financing in Saudi Arabia will reach around 80 percent of system-wide loans in the next 12-18 months according to a report from Moody’s.
That compares to 78 percent of loans in the Kingdom in 2019 and 70 percent in 2013, the credit ratings agency said in a report on Tuesday.
Moody’s anticipates a shift to more Shariah-compliant finance over the next 12-18 months as corporates and households increasingly use Islamic products, even as low oil prices and the coronavirus crisis cause economic challenges.
The $2.5 trillion global Islamic finance industry is on course to return to slow growth in 2021 after recovering from Covid-imposed lockdowns and subsequent recessions in core Islamic finance countries, S&P Global Ratings said.
"The significant slowdown of core Islamic finance economies in 2020, because of measures implemented by various governments to contain the Covid-19 pandemic, and the expected mild recovery in 2021, explain our expectations," Mohamed Damak, analyst at S&P, said in a report released on Wednesday.
The world’s first actively managed sharia-compliant exchange traded fund will start trading In London on Wednesday, opening up a new avenue of growth in Europe’s fast-expanding $1.1tn ETF market.
The new fund will aim to achieve capital growth over the medium to long term investing in companies with high returns on capital and low leverage, while ensuring that its holdings are ethical, asset backed and subject to good governance.
Algeria said on Sunday it had given the go-ahead to a plan aimed at offering Islamic finance services, as it seeks new funding sources to cope with financial problems caused by a fall in energy revenues.
OPEC member Algeria has been affected by the drop in global crude oil prices, mainly after the coronavirus outbreak. This has forced the government to cut spending and delay some investment projects planned for 2020.
Algeria’s Supreme Islamic Council said the National Bank of Algeria (BNA) had become the first state bank to obtain a sharia compliance certificate from the Sharia Board for issuing Fatwas for the Islamic Finance Industry, which is in charge of Islamic finance.
The Islamic Research and Training Institute (IRTI) has launched the Islamic Social Finance Report (ISFR) 2020 which focuses on the potential of Islamic social finance tools in reducing poverty levels and achieving other Sustainable Development Goals in the Maghreb. The report reveals that the Islamic social finance sector, comprising of zakah, awqaf (Islamic endowments), and Islamic microfinance, has huge potential that remains largely untapped in the region.
The new report is a result of IRTI’s multi-year flagship initiative to address the knowledge and information gap pertaining to the zakah, awqaf and other not-for-profit sectors in Member Countries of the Islamic Development Bank (IsDB). It covers the Islamic social finance sector in five north-west African countries, namely Algeria, Libya, Mauritania, Morocco, and Tunisia.
Fitch Ratings says that the recent volatility in key Islamic finance markets caused by the coronavirus pandemic, oil price fall and cuts in central banks repo rates highlights the need to use effective sharia-compliant derivatives as hedging tools (tahawwut). However, derivatives markets remain underdeveloped in most countries where Islamic finance is prevalent. Moreover, issues with the sharia compliance of derivatives and the lack of standardisation and harmonisation across jurisdictions of available hedging instruments are constraining the expansion of Islamic derivatives market.
Shariah-compliant banking and takaful products see an increasing appetite in the local market, although conventional players still dominate Qatar’s banking and insurance sectors, Oxford Business Group has said in a report.
Islamic financial services (IFS) are playing an increasingly important role in Qatar’s economy, and the sector is poised for growth as the gas-rich country continues to invest in infrastructure and the expansion of its energy sector.
In 2019 the country’s first bank merger, between Barwa Bank and conventional lender International Bank of Qatar, created a new Shariah-compliant entity with a 6% market share.
The Nigerian government, through the Debt Management Office, has commenced the third tranche sale of US$390mn seven-year Islamic Sukuk bond offe, an Islamic financial bond.
It will close on 2 June 2020.
Offered in a unit sales of US$2.61 per unit subject to a minimum of US$26.14 and in multiple of US$2.61 thereafter, the seven-year Sukuk with a rental rate of 11.2 per cent per annum has a half yearly payment and full payment on the day of maturity.
The Islamic finance industry needs to work out a revenue generation aspect for a long-term socially-driven Waqf sukuk, experts have urged.
This was the consensus view in the first Islamic Finance Virtual Forum on ‘Covid-19 Economic Implications, Islamic Finance and the Way Forward’ organised by Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI).
The half-day virtual forum was organised in collaboration with Islamic Research and Training Institute, College of Banking and Financial Studies and Minhaj University.