Reforms to takaful regulations across the Arabian Gulf are helping to improve the creditworthiness of companies in the loss-making industry, according to the ratings agency Standard & Poor’s.
Legal changes will cause short- term pain to the region’s Islamic insurers – but the rewards will be “better capital management, liquidity, internal controls, and corporate governance”, S&P said.
The upside for sovereign sukuk issuance in GCC countries is limited in 2015, according to Standard & Poor's (S&P) Ratings Services.
Although S&P expects lower oil prices to lead to fiscal deficits in some countries in the GCC, most governments' net asset positions will likely remain strong enough to enable their financing.
Islamic banking operations in Oman have grown to account for over 4 percent of the country's total banking assets in the past two years and could double that ratio by 2018, a study by Thomson Reuters found.
The sultanate introduced Islamic finance at the end of 2012, becoming the last country in the six-nation Gulf Cooperation Council to do so.
Relatively low level of Takaful (Islamic insurance) penetration in theGulf Cooperation Council (GCC) is hurting the industry in these markets while favouring the growth prospects of other markets like Malaysia, according to global rating agency Standard & Poor's.
Even though the GCC is the largest takaful market, the industry has not truly flourished in any of the six GCC states, even if we treat the Saudi market as wholly takaful.
The takaful industry in the Gulf Cooperation Council (GCC) countries will maintain its growth path in the next five years, but competition, operational issues and lack of qualified talent continue to pose challenges, experts told Gulf News on Monday.
Takaful, an Islamic alternative to conventional insurance, has been growing at a double-digit rate and global premiums are forecast to expand from $4 billion (Dh14.7 billion) in 2007 to $20 billion in 2017. As of 2010, takaful premiums accounted for nearly half (43 per cent) of the GCC region’s composite premiums, compared to 31 per cent nearly a decade ago, or in 2005.
Volumes of sukuk sales are likely to outperform conventional bond issuance in the GCC in the first quarter as record low yields and new rules raise their attraction for companies as a fundraising tool, says Standard & Poor’s
Across the longer term, Dubai’s bid to create an Islamic finance centre will help to further underpin demand for Islamic bonds.
“We expect sukuk issuance in volume terms to remain above conventional bond issuance in the first quarter,” said Karim Nassif, a credit analyst in Dubai at S&P, the credit rating agency.
Muscat Securities Market (MSM) introduced the sample of its Sharia-compliant index. It issued a circular stating that the new sample will be effective from September 15th.
The Sharia index contains 32 joint stock company listed on MSM whose activities and financial conduct comply with the requirements of the Sharia depending on the standards of the Accounting and Auditing Organization for Islamic financial institutions (AAOIFI).
The top ten GCC banks are among the fastest growing globally, led by QNB Group. They are likely to remain well insulated from the current turmoil in emerging markets (EM) as their growth momentum is underpinned by strong economic fundamentals in the region: High revenue from hydrocarbon exports; positive net foreign asset positions; strong support for the banking system; and large government spending on infrastructure.
Islamic bond sales in the Arabian Gulf are on course for the slowest third quarter since 2010 as borrowers delay issuing sukuk after costs rose.
The 1bn-riyal ($267mn) sale of Jeddah-based construction company Saudi Binladin Group is the only issue in the Gulf Cooperation Council this quarter, compared with five sales totalling $5.27bn in the same period last year, according to data compiled by Bloomberg. The average yield on Shariah-compliant debt from the GCC has risen 95 basis points in 2013 to 3.87% on August 16.
Depressed initial public offering (IPO) activity in the Gulf Cooperation Council (GCC) continued into the second quarter (Q2) of 2013 with three new listings raising a total of only $ 48 million. This compared to two IPOs in Q1, 2013 raising an aggregate of $ 337 million, representing an 86 percent decrease in total value raised.
The average offering value dropped 94 percent this quarter compared to the same quarter last year where four IPOs were witnessed raising a total of $ 1.1 billion. The total value raised in Q2, 2012 was the result of a stronger performance in the Saudi market, where out of the total four IPOs, three were Saudi-based. While the value of offerings significantly dropped this quarter, the number of offerings remained relatively stable at 3 IPOs.