Jordan: Building Islamic banking
Jordan is moving to further open its financial sector to sharia-compliant lenders, having unveiled plans to change regulations and legislation that will strengthen the regulatory environment for the Islamic component of the banking industry. At present, Islamic banks have a relatively low profile in Jordan's finance sector, though this is in the process of changing. The country's older Islamic banks have assets representing some 11% of the total asset holdings of the banking system and 12.5 per cent of all bank deposits and credit facilities, accounting to around 15 per cent of credit extended by Jordan's financial institutions, according to Central Bank of Jordan (CBJ) data. While these figures are expected to expand with the recent entrance of two new lenders into the segment - the Jordan Dubai Islamic Bank, which began its operations in Jordan in January 2010, and Saudi Arabia's Al Rajhi Bank, expected to start operating in the next two months - it will take more than issuing new licenses to help the Islamic finance sector blossom, officials say. Currently, Islamic banks and authorities have to contend with difficulties in developing the sharia-compliant finance model in Jordan, according to Khulud Saqqaf, the deputy governor of the CBJ. In early March Saqqaf told delegates attending a seminar held at Sweimeh on the Dead Sea that among the biggest challenges faced by Islamic banks operating in Jordan are the absence of a secondary market for Islamic financial instruments and the lack of lender of last resort facilities. She added that there is a shortage of qualified and trained personnel skilled in the workings of Islamic banks. (Source: OBG)
Saudi bourse ETF move unlikely to lure investors
Saudi Arabia's plan to launch exchange-traded funds (ETFs) may lure more investors to the biggest Arab bourse but major funds are won't commit large sums without better regulation or the right to buy individual stocks. The world's top oil exporter has said it wants to launch ETFs run by local brokerages tracking Saudi shares, debt or commodities to attract more foreign investors. Analysts say ETFs for Saudi shares, to be traded on exchanges much like stocks, could come as early as in April, the latest move by the biggest Arab economy to gradually open up its stock market for foreigners after allowing indirect ownership via swap agreements in 2008. While state firms in neighboring Dubai are busy sorting out massive debt problems, Saudi Arabia is rolling out investments worth US$400 billion after high oil prices filled state coffers. Global banks and fund mangers have set up shop in the capital Riyadh and are exploring ways to tap opportunities on the best performing Gulf bourse last year and so far in 2010. Yet investments remain small as many outsiders want the right to directly buy and fully own individual shares. Foreign buyers of shares via swaps were US$792 million, or 2.3 per cent of total market capitalization, from March until February, according to Saudi investment bank Jadwa Investment. Under the swap agreements foreign investors can buy Saudi shares through licensed Saudi brokerages, who technically own the stock but transfer the returns to the foreign investor.
Egypt: Non-traditional offerings
With the Arab world's largest population and a high level of poverty, Egypt is an ideal candidate for the expansion non-traditional banking products, including mobile banking and microloans. The government is now setting the legal groundwork needed to increase the banking options available to its low-income citizens. Since its international debut six years ago, mobile banking has gained a foothold in African countries with large unbanked populations. In January the Egyptian central bank announced it was in the final stages of authorizing legislation to regulate the mobile banking sector. At present only 10 per cent of Egyptians have a formal bank account, due in part to the lack of branches in rural areas. In addition, there are 14 million people living under the poverty line who traditionally considered un-bankable by commercial financial institutions. Online banking has also yet to catch one due to low Internet penetration (16 per cent). The mobile market, on the other hand, is surging, with an estimated 55 million registered accounts in the country. "Unlike Westerners, whose mobile usage is limited to necessities, Egyptians use mobile phones excessively," Ayman Sabry, business development manager at Middle East Network Solutions, told local press. In 2001 Arab Bank started offering simple mobile banking services, allowing customers to check account balances from their phones. Since then, a number of other players have joined the market, offering more sophisticated products such as money transfers. As the current system of keeping track of and paying bills at payment points is slow and bureaucratic, there is real potential for mobile bill payments to proliferate. Indeed, a study by Ipsos Marketing Research showed that 84 per cent of respondents would to prefer to hire someone else to pay their bills. As the majority of Egyptian transactions are cash-based, one barrier for mobile banking to overcome is distrust of technology, but this is set to change. "There has been huge development in the field of securing information exchange via mobile phones, namely the introduction of new encryption systems that are impossible to hack," said Sabry. (Source: OBG)
GFH to open in Syria and Indiar
Gulf Finance House (GFH), an Islamic investment company based in Bahrain, is pushing ahead with plans to start an Islamic bank in Syria and will soon begin construction on a major development near Mumbai. The moves mark a surprising turnaround for the company, which was recently forced to restructure debts after it ran out of money and could not secure refinancing from banks on US$400 million (AED1.46bn) of loans. Paying down debt and reforming GFH’s business model have been central to an aggressive restructuring strategy under Ted Pretty, the chief executive. The new commercial bank, to be called Syria Finance House, was announced with capital of 15 billion Syrian pounds (AED1.19bn). The bank is to be 60 per cent financed by GFH and its co-investors, while 10 per cent of it is to be owned by Syrian investors and 30 per cent listed on the country’s stock market. The bank is now awaiting final approval from Syria’s central bank. “Islamic commercial and investment banking in Syria promises great potential for growth with a significant demand for Islamic financial services and low penetration,” Mr. Pretty said. “The Syrian market enjoys excess liquidity, with deposits amounting to 41 per cent of GDP last year, which could be utilized in developing the country in line with the Syrian government’s plans ambitions for socioeconomic growth and prosperity.” GFH announced the start of work on the infrastructure for its Mumbai Economic Development Zone project, launched in 2007 and covering 647 hectares located 65km from the country’s financial centre. The project is to include a large energy city project, along with zones for telecommunications, software development and entertainment.
Jordan: Exchange rate boost
Investors on the Amman Stock Exchange (ASE) will be hoping that the projected growth in the Jordanian economy and a long sought after increase in liquidity will see the bourse reverse its downward slide of recent months. The ASE has had something of a rollercoaster ride over the past year and a half, sharing the experience of many exchanges in the region and indeed around the world. In June 2008 the ASE index broke through the 5000-point barrier, before tumbling to just over half that by late November. Subsequently, the market has worked toward the 3000-point mark, with the index presently moving around the 2500-2470 range. Between them, the 272 companies listed on the ASE have a total market capitalization of US$31.5 billion, representing 147.4 per cent of gross GDP, well down on the 226 per cent at the end of 2008. At least in part, the weak performance of the past year or so has been a result of some of the foreign investors pulling out of the exchange. The ASE has traditionally had a high foreign ownership, with the level having risen from 38.5 per cent in 2001 to just under half. As of the end of 2009 foreign investors held 48.9 per cent of the total market value of shares in companies listed on the exchange, with investors from Arab countries holding 33.4 per cent while non-Arab investors accounted for the remaining 15.5 per cent. Non-Jordanian ownership is spread across the economy, representing 51.9 per cent in the financial sector, 32.3 per cent in services and 53.1 per cent in industry. Though strongly represented on the ASE, overseas shareholders staged a small retreat in 2009, with the net value of non-Jordanian investment decreasing by US$5.4 million, compared to the US$440 million increase posted in 2008. Overall, the value of shares bought by overseas investors last year totaled US$3 billion, representing 22.1 per cent of the trading value for the year, while foreign-owned shares worth US$3.04 billion were sold. This downward trend has continued into the New Year, with the total value of shares bought by non-Jordanian investors in January being US$119 million, while shares sold by overseas traders amounted to US$144 million in value. The US$25 million decrease for the first month of the year compared to the US$7.1 million increase in January 2009. Another issue that has impacted the Jordanian economy, and thus activity on the ASE, is a lack of liquidity. According to a report released by the Central Bank Jordan (CBJ) at the end of January, money supply growth almost halved to 9 per cent last year, compared to a record 17 per cent in 2008. Domestic bank credit fell by 1.5 per cent in 2009, the first decline in more than a decade, as local lenders became increasingly cautious. Though 2009 figures may have been below expectations, the ASE has continued to prepare for a brighter future. Having launched its new high-speed electronic trading system in March last year, Jalil Tarif, the CEO of the exchange, recently announced the ASE was working to create new financial instruments to further diversify and increase the market depth for investors while simultaneously expanding the investment base. (Source: OBG)
Amlak, Tamweel restructuring plan in final stages
Sultan Bin Saeed Al Mansouri, the UAE's Minister of Economy has said that the restructuring plan for Amlak Finance and Tamweel is in its final stages. The plan includes the merger of the two firms and establishing an Islamic bank that will receive the financial support of the government, the daily said. A ministerial committee in charge of the restructuring process had allocated AED2 billion (US$544.5m), equally divided between the UAE government and the Dubai government, to support the financial solvency of the two companies.
Trade Bank of Iraq implements real-time banking system
TBI is the first bank in Iraq to have implemented this automated banking system, facilitating TBI transactions across the country and enabling customers of any TBI branch to access real-time information about their account. Prior to the implementation of Misys Equation, each branch used stand-alone offline systems; daily transactions taking place at branches were consolidated at the end of the day for the generation of consolidated financial positions. With Misys Equation, a central database is maintained where customers of any TBI branch can access their accounts; updates of financial information take place in real-time as soon as the transaction is committed. Hussein Al-Uzri, Chairman of TBI said, “Equation has automated and streamlined TBI’s business processes and will be the gateway to mobile and internet banking for the bank. This automation reduces manual intervention and human errors, resulting in accurate information and smooth processing of transactions. TBI presently has nine branches throughout the country, set to increase by another five this year, and it is our priority that we provide our customers with first class service.”
Banks to carry out brokerage activities on local Qatar bourse
In a major move, Qatar has decided to once again allow listed banks to carry out brokerage activities on the local bourse. The Minister of Economy and Finance, H E Yousef Hussain Kamal, who is also the chairman of Qatar Financial Markets Authority (QFMA), said in a statement that the Qatari banks keen to carry out brokerage activities on Qatar Exchange (QE) could approach the QFMA for licensing. Qatari banks were earlier permitted to carry out brokerage activities on the local bourse but were discontinued later, but financial market regulators have decided to permit them to resume brokerage activities.
E&Y to stay in Saudi after losing one license
Accounting firm Ernst & Young (E&Y) said it would respect Saudi Arabia's decision to revoke a license but would continue to seek business opportunities in the biggest Arab economy and top oil exporter. The Saudi capital market authority (CMA) said it would revoke an Ernst & Young advisory and transaction-arranging license granted in 2006, for a number of undisclosed violations. In response, Ernst & Young said: "We fully respect the CMA decision... The circumstances leading to that decision are not related to standards of quality of client service."
UAE's NBAD to raise up to US$1bn with new bond
National Bank of Abu Dhabi, the UAE's second biggest bank by assets, will tap markets to raise up to US$1 billion, an executive at the bank said. The executive, who asked not to be named, said: "The bank is looking to raise anything between US$500 million to US$1 billion, depending on the response, the road shows are underway." Bank of America Merrill Lynch, HSBC, Royal Bank of Scotland, Barclays Capital and National Bank of Abu Dhabi are mandated banks.