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Kuwait's IIG Defaults on $152.5m Sukuk

Kuwait's International Investment Group (IIG) encountered its second sukuk default this year. The investment firm said in April it had appointed an international consultant, which it did not name, to review its business after it defaulted on a $3.35 million payment for a $200 million Islamic bond.
July 26, 2010
Kuwait City, Kuwait

IIG said on Monday its payment on the Islamic bond, or sukuk, had been scheduled for July 12.

The company said KPMG would carry out an independent review of its business and make an assessment of its financial position. IIG said it has also received the central bank's approval for its 2009 financial statements.

"IIG will then be able to assess its positions and restructuring options with assistance from its professional advisors," the company said.


First Philippines Sukuk Planned by Al-Amanah

Sukuk is coming to the poorest region of the Philippines at the behest of Al-Amanah Islamic Bank. Eight of Al-Amanah’s nine branches are based on the southern island of Mindanao, a poor region, and the base of the al Qaeda-linked Abu Sayyaf and some members of the communist New People’s Army, according to a U.S. government watch list for international terror organizations. “There is currently no regulatory framework for Islamic banking,” said Bangko Sentral ng Pilipinas Governor Tetangco. “What we have is the charter of Al-Amanah Bank.”

July 26, 2010
Mindanao, Philippines

The Philippines’ state-owned Al- Amanah Islamic Bank may sell the nation’s first Shariah- compliant bonds to finance development in Muslim Mindanao, the poorest region and base of Abu Sayyaf separatist militants.

“There’s a lot of money in the market for sukuk that we can tap,” Al-Amanah President Armando Samia, whose bank is the only one in the Philippines with a mandate to sell Islamic notes, said in an interview yesterday. “We’re still in the very exploratory stage. Getting the first one out is difficult.”

A lack of regulations governing issuance makes it difficult to sell securities in the Philippines that comply with the religion’s laws banning payment of interest, according to Samia. The Autonomous Region of Muslim Mindanao had per capita gross domestic product that’s about 23 percent of the national average.

BNP Paribas Investment Partners, which manages the equivalent of $700 billion globally, said investors will be interested in the bonds. Global sales of debt that conform to Shariah law fell 29 percent to $6.65 billion this year, according to data compiled by Bloomberg.


High Islamic Banking Fees Irk Customers in S. Africa

“Islamic banks such as Albaraka Bank (South Africa) and the Islamic banking windows of FNB, ABSA, Nedbank and Standard Bank have come under heavy criticism from Muslim customers from following the greed culture of conventional banking and in some cases actually charging higher fees and service charges than their conventional counterparts.”


Arab News
July 19, 2010
Cape Town, South Africa

For the ANC government, who refused to go to the International Monetary Fund (IMF) for financial loans on the grounds of revolutionary ideology when Nelson Mandela became the first black president of the new South Africa in the early 1990s, it is the ultimate irony that successive administrations have failed to rein in the banks who even charge people to deposit and withdraw cash from their current accounts. Investec, for instance will charge customers 11 rands for withdrawing every 1,000 rands. Banks have a litany of fees and service charges, and some so-called free banking services are either highly conditional or peripheral - charges which many customers take for granted as free in the UK and European Union. For instance, First National Bank (FNB's) Islamic check account must have a minimum of 3,500 rands before qualifying for free banking.

With both retail and business customers complaining bitterly about the ever-rising fees and customers, the government of President Jacob Zuma has started to put pressure on the banks to lower their charges and fees. ANC stalwarts such as Seddick Isaacs, who spent 13 years on Robben Island with Nelson Mandela and the other ANC hierarchy as a fellow "prisoner of apartheid" and who taught President Zuma, a fellow inmate, regret what they call the emergence of a "corporatocracy" in South Africa.


Sukuk Action Failures Send Indonesia Overseas

Failures of ten rupiah sukuk auctions have motivated Indonesia’s finance ministry to reach out to overseas investors. “We may use a different approach of a book-building process if we can’t sell Islamic notes in the next auction,” Dahlan Siamat, director for Islamic financing at the ministry, said. “The auctions failed because investors asked for higher yields above our benchmark because the market isn’t liquid.”

July 9, 2010
Kuala Lumpur, Malaysia

The failures of 10 rupiah sukuk auctions this year are prompting Indonesia’s finance ministry to revive demand for its Islamic debt by tapping international investors and possibly changing its sales practices.

The world’s most-populous Muslim nation raised 4.9 trillion rupiah ($540 million) from notes that comply with Islam’s ban on interest in 2010, down 40 percent from a year earlier, according to the finance ministry’s Debt Management Office. The next auction on July 13 is seeking 1 trillion rupiah. Malaysia, the biggest market, has generated 15 billion ringgit ($4.7 billion) from five sukuk sales, government data show.

Indonesia may negotiate rates with potential investors in so-called book-building rather than in a single auction, Dahlan Siamat, director for Islamic financing at the ministry, said yesterday in a phone interview from Jakarta. Domestic investors are demanding higher returns from Islamic bonds because they aren’t actively traded, according to PT Bank Danamon Indonesia and PT Bank Syariah Mandiri in Jakarta.


Nomura Sells Sukuk to Support Shariah Ambition

Japan’s largest brokerage firm, Nomura Holdings Inc., has jumped aboard the Shariah Finance bandwagon by selling sukuk in Malaysia. The Ijarah sukuk will allow Nomura to “diversify its funding sources and tap the large and growing Islamic finance market for the first time,” Takumi Shibata, chief operating officer of Nomura Holdings, said in the statement.

Bloomberg Businessweek
July 6, 2010
Kuala Lumpur, Malaysia

Nomura Holdings Inc. plans the first sale of dollar-denominated Islamic bonds in Malaysia by a Japanese company, supporting its expansion in an industry with $1 trillion of assets.

Japan’s largest brokerage will sell $100 million of Ijarah sukuk that will mature in 2012, Nomura said in a statement in Kuala Lumpur today. The securities will be priced to yield 160 basis points more than the London interbank offered rate, said Jamelah Jamaluddin, chief executive officer of Kuwait Finance (Malaysia) Bhd., the sale arranger.

The notes complying with Shariah’s ban on interest will allow Muslim investors to diversify, according to CIMB-Principal Islamic Asset Management Bhd. and Amundi Islamic Malaysia Sdn. Nomura set up a fund unit in Malaysia last year to offer services to Muslim investors worldwide. Nomura won a stock broking license in the Southeast Asian country in 2009 and has banking operations in Qatar, Bahrain, Dubai and Saudi Arabia.

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