S&P Global Ratings said that the publication of a new auditing standard for Sharia compliance is a step forward for the Islamic finance industry.
“We consider that the recent publication of auditing standard No. 6 by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) will reinforce governance and enhance market discipline,” said S&P Global Ratings’ Head of Islamic Finance, Mohamed Damak.
“The key aspects of market discipline, in this context, are greater consistency in adhering to Sharia principles and a culture of rapid remedial action by non-compliant institutions.”
The adoption by the United Arab Emirates of certain sharia-compliance standards has slowed the issuance of Islamic bonds from the Gulf, adding to a chronic supply-demand imbalance, market sources said.
Dubai, one of the UAE’s seven emirates, has long aimed to establish itself as a major global centre for issuance of sukuk, or Islamic bonds, that constitute the backbone of the $2.2 trillion global Islamic finance industry. UAE investors are also key players in the global sukuk market.
But compliance standards adopted by UAE central bank body the Higher Sharia Authority, and confusion around them, are preventing local banks from buying some sukuk, prompting investors to request clearer rules as the UAE’s flow of new issuance ebbs, market sources said.
With a supportive fiscal and regulatory framework backed by the Government and Bank of England, Islamic Finance has continued to grow across a range of Shariah-compliant investment products, from savings accounts to pension schemes, from investment funds to bonds.
Shariah-compliant investing meets criteria such as not paying or receiving interest, a restriction on investing in industries such gambling, alcohol and tobacco, and the sharing of profit and risks between the financial institution and consumer. Islamic finance strategies are accessible to all, providing a tool for investors to diversify their portfolios, and can bring an ethical lens to investment.
Oman's Islamic banking sector growth is likely to continue apace in 2021-2022 following strong momentum in 2020 despite the pandemic and lower oil prices, Fitch Ratings says. Islamic financing in Oman grew by 9.5% in 2020, compared with the conventional banks' loan growth of 2.1%. This was driven by demand for Islamic products, support from conventional banks offering Islamic products through their Islamic windows, and regulations supportive of Islamic finance.
The market share of Islamic banking and Islamic windows increased to 14.3% at end-2020 (end-2019: 13.6%), with total assets of OMR5.1 billion (USD13.5 billion). This is high considering that Oman was the last Gulf Cooperation Council (GCC) country to introduce Islamic banking in 2013. In contrast, Islamic banking has been present in Indonesia and Turkey for more than two decades but market shares there are below 8%.
Malaysia’s takaful industry is likely to continue its steady growth in 2021 amid government initiatives and a supportive Islamic finance ecosystem, further propped up strong economic growth, which Fitch Ratings forecasts at 6.7% in 2021, increased digitalisation, higher awareness and a low life-insurance penetration rate.
Malaysia’s vibrant Islamic finance ecosystem includes Islamic banks, sharia-compliant corporates, Islamic fund managers and halal industries that seek takaful products. Bancasssurance is one of the main distribution channels of takaful products. Takaful demand also arises from sukuk issuance, which makes up more than 60% of outstanding domestic issues and is often linked to projects and insuring the underlying assets. Takaful firms can also invest their liquidity in diverse sukuk and other Islamic options
The government of the United Kingdom plans to issue its second sovereign sukuk during the first half of 2021, according to a UK Treasury spokesperson.
“Further announcements, including on the precise timing and size of issuance, will be communicated in due course,” the spokesperson said in an email on Wednesday (March 3). The spokesperson declined to comment on potential arrangers involved in the upcoming issuance.
The United Kingdom has a new digital platform that aims to build the waqf ecosystem and help achieve the country’s first £1 billion Islamic endowment fund.
Waqfinity is a commercial entity and wholly-owned subsidiary of One Endowment Trust (OET), a UK-based charitable foundation that launched last year and aims to become a £1 billion waqf fund by combining commercial and social investments.
The platform is an important part of actualising the OET target operating model, according to Sultan Choudhury, chairperson of Waqfinity and executive chairperson of OET.
Tunisia plans to issue its first Sukuk by July 2021. According to Finance Minister Ali Kooli, this Islamic financing facility will make it possible to mobilize up to TND300 million ($111 million).
The program is part of the State's financing strategy for the 2021 budget. It aims to offer more attractive financing alternatives to Tunisia which is already facing an economic crisis marked by a high level of debt, reaching 90% of GDP
There is a place for Shariah-compliant peer-to-peer lending opportunities in the UK market, according to global consultancy firm Capco.
In a series of white papers released over the past year, Capco has explored the viability of P2P lending within an Islamic finance framework.
The firm concluded that Shariah-compliant P2P lending is possible in the UK market, as long as all loans are secured against assets.
A $270 million company to develop Saudi Arabia’s holy sites has been launched.
Kidana will be headquartered in Mina and is the first closed joint-stock company owned by the Royal Commission for Makkah Al-Mukarramah and the Holy Sites (RCMC), the Saudi Press Agency reported. The company has an authorized capital of SR1 billion ($270 million).
Kidana is aiming for long-term sustainability when reconstructing and renovating the holy sites.