Vol 8 Issue 10 16th March 2011
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Better safe than sorry
Being caught off guard is not anyone’s
cup of tea. Despite much contingency
planning, nothing could prepare Japan for
the devastation that wreaked the island
nation last week. Hence, while paying much
attention to detail should cover most ground
in any crisis management plan, one can never
be too sure.
In the same vein, the reports we bring you
this week show that proponents in the Islamic
finance industry, while enthusiastic about
industry growth and expansion prospects,
remain cautious in their approach.
Luxembourg is now recognized as one of the
leading European centers for Islamic finance,
a European leader in Sukuk listings and ranks
first as a domicile for Shariah compliant
investment funds. Accolades which were
not incidental, but the result of meticulous
planning by Luxembourg’s task force set
up in 2008, to identify obstacles to the
development of Islamic finance and suggest
ways to promote its growth.
A report by the Association of the Luxembourg
Fund Industry gives a comprehensive
rundown of the numerous factors already laid
out to facilitate Islamic financial products. The
Luxembourg perspective on bancatakaful and
its benefits, brought to us in a report by FWU
Group, outlines not only the prospects but
also various reasons why a certain overriding
hesitancy towards the adoption of Takaful
exists.
This guarded disposition is in fact evident
throughout Europe, though most notably in
France. A report by two doctoral candidates
from Ecole Nationale Supérieure conclude
that Islamic finance is welcome in Europe in
so far as it is contained in the financial mar-
ket in order to reap petrodollars and remains
discreet in doing so. Any trace of religiosity is
quite abhorred and needs to be dealt with del-
icately. In the final analysis, the private sector
is not against the idea of Islamic finance as
long as ‘image risk’ remains at a minimum.
Indonesia too comes under scrutiny. The good
news is that industry players are well aware
of the current inhibitions, listing unwelcom-
ing laws and regulations by the government,
a lack of clear industry standards, no proper
guidelines on Islamic securities, the disap-
pointing performance of Sukuk, unresolved
tax issues and low public awareness. In fact,
in the recent US$824 million government of
Indonesia / Perusahaan Penerbit SBSN Indo-
nesia Sukuk, featured in our Termsheet, saw
selling agents personally carrying out market-
ing activities to garner investors in almost all
major cities in the country.
The central bank, Bank Indonesia deserves
a special mention – its efforts are outlined
in a report by BNI Syariah – and its director
of Islamic banking Mulya Siregar takes the
spotlight in our Meet the Head.
Law firm Azmi & Associates’ report gives the
view on Islamic private equity and venture
capital as having more basis on risk and
profit and loss sharing than typical Islamic
financial transactions. University of Reading’s
Professor Dr Volker Nienhaus infers in
his report that in replicating conventional
products, the underlying contracts of Islamic
finance adds to individual and systemic risk,
on top of commercial risks already present
in conventional finance. Our IFN reports
this week cover the US’ and Turkey’s love-
hate relationship with Islamic finance, and
updates on Dubai World, Ithmaar Bank and
RAM Rating Services.
In this issue
IFN Rapid ..................................................... 2
Islamic Finance News ................................ 3
Takaful News ............................................... 8
Ratings News .............................................. 9
Moves ......................................................... 10
IFN Reports:
Islamic banking pays off but still
challenging .............................................11
Turkey’s participation market ............11
RAM has US$653 million of foreign
issuer ratings in the pipeline ............. 12
Islamic finance in the US – A love-hate
affair .......................................................12
Dubai’s road to recovery.......................12
Articles:
A Continental European View ................13
The Development of Islamic Finance in
Luxembourg ............................................15
International Bancatakaful Opportunities:
Luxembourg Perspective........................ 17
Islamic Private Equity and Venture
Capital......................................................19
The Islamic Finance Industry
in Indonesia............................................. 21
Islamic Economics and Financial Sector
Reforms ..................................................23
Forum .........................................................25
Meet the Head ..........................................26
Mulya Effendi Siregar, director of Islamic
banking, Bank Indonesia
Termsheet .................................................. 27
Indonesia Retail Sukuk US$824 million
Deal Tracker ..............................................28
Eurekahedge Funds Tables .....................29
REDmoney Indexes ..................................30
S&P Shariah Indexes ............................... 31
Dow Jones Shariah Indexes ....................32
Dealogic League Tables...........................33
Thomson Reuters League Tables ...........36
Events Diary...............................................39
Company Index .........................................40
Subscription Form ....................................40
A round-up of all this week’s news
•
•NEWS
• Pharez Nigeria slams Islamic banking
as inauspicious
• Indonesia succeeds in meeting
US$114 million Sukuk target
• Malaysian local banks may invite
foreign partners for Islamic
megabank licenses
• Emery Oleochemicals Group plans to
raise US$158.3 million via Sukuk
• Malaysia’s Academic Medical Centre
considers Sukuk to raise up to
US$494 million
• Islamic Bank of Thailand to provide
US$16.5 million financing to Muslim
garment industry
• BRI Syariah targets US$1 billion in
financing this year
• Bio-XCell finalizes US$82.2 million
Commodity Murabahah facility
• Indonesia’s Islamic banks to
contribute in government’s target of
expanding assets by 55%
• Philippines in talks with the IDB
on deploying Al-Amanah Islamic
Investment Bank
• Syarikat Prasarana Negara to issue
US$1.65 billion Sukuk in 2012
• CIMB Syariah to contribute 5%
of CIMB Niaga’s total assets in
Indonesia
• OCBC Al-Amin to chart high double
digit growth for current financial year
• Axis REIT Managers to list US$988
million REIT by end of June
• National Spot Exchange plans to
launch Islamic products in India
• Kazakhstan to attract up to US$10
billion in Islamic finance in seven
years
• Bank of London and The Middle East
charts pre-tax profit of US$8.1 million
in 2010
• Kuveyt Türk Participation Bank to
issue benchmark Sukuk by year-end
• AssetCo rejects a takeover by
Arcapita
• HSBC Amanah and HSBC Securities
Services unveil Shariah compliant
global securities services
Disclaimer: Islamic Finance news invites leading practitioners and academics to contribute short reports each week. Whilst we have used our best endeavors and
efforts to ensure the accuracy of the contents we do not hold out or represent that the respective opinions are accurate and therefore shall not be held responsible
for any inaccuracies. Contents and copyright remain with REDmoney.
© Page 2
www.islamicfinancenews.com
• Islamic finance industry must
innovate products, says CEO of
Amanie Business Solutions
• Sovereign bodies contribute to 77%
of global Sukuk issuances, says
Baitak Research
• Unicorn Investment Bank charts
US$229.5 million net loss in 2010
• Investment Corporation of Dubai
acquires National Bonds Corporation
• Dubai SME inks deal with Dubai
International Financial Centre for
SMEs
• Sukuk can solve local companies’
debt in Kuwait , says Liquidity
Management House
• Emirates Islamic Bank offers
financing to SMEs
• Dubai World to ink final agreement
with creditors
• Arqaam Capital to help Indonesian
banks find Gulf investors
• Islamic financing faces difficulty in
winning acceptance
• Kuwait International Bank provides
US$90 million financing for mall
expansion
• Emirates NBD expects to increase
net profit by 45.3% this year
• National Bank of Abu Dhabi charts
22% hike in net profit to US$1 billion
• Ithmaar Bank’s net loss of US$150.1
million in 2010
• Kuwait International Bank’s net profit
increased 303% in 2010
• Nakheel offers investors refunds for
Palm Jebel Ali project
• Investment Corporation of Dubai
seeks US$4 billion refinancing
• First Gulf Bank to issue Sukuk in
2011
• Al Fardan Exchange inks deal with
Abu Dhabi Islamic Bank to provide
monthly payment facilities
• Masraf Al Rayan seeks shareholders’
consent to issue US$1 billion Islamic
euro notes
• Low yields will encourage Abu Dhabi
to issue sovereign Sukuk
• Bank AlJazira is planning to issue a
Saudi riyal-denominated Sukuk
IFN RAPID
• Dubai Islamic Bank’s net profit fell to
US$219 million in 2010
• Al Ahli Bank of Kuwait records 36%
hike in net profit to US$191 million
• Qatar Islamic Bank plans to acquire
25% stake in Bank Asya
TAKAFUL
• Indonesia’s Takaful assets increases
by 47.6% in 2010
• Amana Takaful announces rights
issue to facilitate expansion strategy
• Labuan Financial Services Authority
allows Takaful operators to select
dual offices
• Takaful Indonesia seeks to
reach US$12.5 million through
bancassurance system
• Neova Sigorta plans to penetrate into
Central Asia and Eastern Europe
• Takaful growth in Southeast Asia is
weaker than expected
• Qatar General Insurance &
Reinsurance Company charts net
profit of US$33 million in 2010
RATINGS
• MARC withdraws ratings assigned
to Mulpha International’s US$24.6
million Murabahah notes
• AM Best Europe puts Arab Union
Reinsurance Company under review
• Fitch downgrades Arab Banking
Corporation’s long-term issuer
default rating
• S&P affirms and withdraws long- and
short-term counterparty credit ratings
of Dubai Islamic Bank
MOVES
• Mufti Munib ur Rehman appointed
religious board member at
the Securities and Exchange
Commission of Pakistan
• Dr Zeti Akhtar Aziz’s contract as
governor of Bank Negara Malaysia to
be extended
• Legal firm Hogan Lovells appoints
Robert Fugard and Simon Gwynne
as partners for asset finance
department
16th March 2011

AFRICA
Islamic banking insensitive
NIGERIA: The introduction of Islamic banking
by the Central Bank of Nigeria (CBN) is
inauspicious and insensitive because
legislation for the industry has not been
completed, said Eghes Eyieyien, CEO of
consulting firm Pharez Nigera.
Eyieyien said the move brings serious
implications for the Nigerian banking
industry and the economy which warrant
that the CBN immediately revisit the issue
and withdraw the framework accordingly. He
also said the central bank should develop
the industry and enact laws which are not
religion specific.
However, he added that Nigeria could create
its own system of non-interest banking based
on the principle of profit and loss sharing
without requiring Shariah compliance.
Nigeria is in the process of revamping its
banking laws to provide for Islamic banking
and the central bank has proposed a plan to
establish the CBN Shariah Council.
ASIA
Sukuk target accomplished
INDONESIA: The finance ministry has
succeeded in meeting the IDR1 trillion
(US$114 million) target via a Sukuk auction
this week, said Dahlan Siamat, director of
Islamic finance.
Proceeds from the Sukuk will be used to
cover a state budget deficit.
Two routes to Islamic
megabank licences
MALAYSIA: Local banks can invite foreign
partners for an Islamic megabank license
and allow them to hold up to 70% equity in
the megabank, said Mohd Razif Abdul Kadir,
deputy governor of Bank Negara Malaysia
(BNM), the central bank.
“The megabank can be from two sources,
either through a new license or by
transforming a domestic license into a
megabank license,” said Mohd Razif.
BNM had been expected to convert two
conditional megabank licenses it awarded to
unnamed parties last year into full licenses
© Page 3
www.islamicfinancenews.com
but this has yet to materialize.
The central bank is not in a hurry to issue
the two licenses, as Malaysia currently
has 17 Islamic banks, while the US$1
billion minimum capital requirement for
the megabank could be a challenge for
prospective investors due to the current
market environment, said Mohd Razif.
He added that although there are two groups
keen on the licenses, they are still looking for
more partners.
Financing via Sukuk
MALAYSIA: Emery Oleochemicals Group
is planning to raise up to RM480 million
(US$158.3 million) via Sukuk to finance
the company’s three-year expansion plans,
according to Kongkrapan Intarajang, its CEO.
Emery Oleochemicals is a 50-50 joint
venture between Thailand-based PTT
Chemical International and Sime Darby
Plantation.
Sukuk for medical school
MALAYSIA: The Academic Medical Centre
(AMC) is planning to issue a Sukuk to raise
between RM1.2 billion (US$395.5 million)
and RM1.5 billion (US$494.4 million) over
the next three years, said Dr Mohan Swami,
its chairman.
The funds will be used to finance the
establishment of Perdana University
Graduate School and adjoining facilities,
which is being set up via a tie-up with Johns
Hopkins Medicine International and the
Royal College of Surgeons in Ireland.
Swami said AMC is in talks with several
local and foreign investment banks to
issue a Sukuk or for a bridging loan. The
banks include CIMB, RHB Bank, Malaysian
Industrial Development Finance, a bank in
Singapore and one in Bahrain.
Encouraging employment
THAILAND: The Islamic Bank of Thailand is
planning to provide financing worth THB500
million (US$16.5 million) to the Muslim
garment industry to stimulate employment in
the country’s five southern provinces.
The financing is part of a five-year Muslim
clothing and garment industry development
project designed to improve living standards
in the provinces.
NEWS
Retail sector focus
INDONESIA: BRI Syariah is targeting to
increase financing to IDR9 trillion (US$1
billion) this year from IDR5.5 trillion (US$627
million) in 2010.
Ari Purwandono, the bank’s business
director said retail sector financing, including
home financing and Hajj funds, will account
for 75% of its target.
Opting for Islamic financing
MALAYSIA: Biotechnology developer Bio-
XCell is finalizing a RM250 million (US$82.2
million) Commodity Murabahah facility with
a local bank to develop a park at Iskandar
Malaysia, in the state of Johor.
The park will be developed over a span of
six years, providing facilities to firms in the
biotechnology industry.
Farming asset expansion
INDONESIA: Islamic banks will contribute to
the government’s target of expanding assets
by 55% this year, by offering services to
palm oil, cocoa and corn growers, said Bank
Indonesia, the central bank.
By focusing on the rural areas, Islamic
banks will reduce farmers’ dependence on
illegal money lenders, known for their violent
collection practices, according to Bogor
Agricultural University.
Bank Muamalat Indonesia is seeking to
boost financing tenfold outside cities this
year after opening 30 new branches in 2010.
BCA Syariah is looking to add 15 outlets
aimed at small businesses this year.
Islamic financiers accounted for 1.8% of the
INR91 trillion (US$10.4 billion) in financing
to the farming industry in 2010, according to
the central bank.
Dialogue with the IDB
PHILIPPINES: The Filipino government is in
talks with the Islamic Development Bank
(IDB) on ways to effectively deploy Al-Amanah
Islamic Investment Bank, the country’s only
Islamic bank.
Cesar Purisima, the finance secretary, is
pushing for Islamic microfinance in the
Muslim majority state of Mindanao as a tool
for poverty alleviation and social cohesion.
16th March 2011

Infrastructure financing
MALAYSIA: Public transport operator
Syarikat Prasarana Negara is planning to
issue a RM5 billion (US$1.65 billion) Sukuk
in 2012 to finance a RM7 billion (US$2.3
billion) light rail transit extension project.
Zulkifli Mohd Yusoff, group director of project
development, said the company earlier
raised RM2 billion (US$658 million) through
Sukuk for this project.
Vital contributor
INDONESIA: CIMB Niaga is expecting
subsidiary CIMB Syariah to contribute to
5% of its total assets, said Arwin Rasyid,
president director of CIMB Niaga.
Arwin is optimistic that this target can
be achieved as CIMB Niaga has adopted
the world banking strategy where Islamic
banking is offered with conventional
products, and not separately.
Through this strategy, although CIMB Syariah
only has 33 branches, its Islamic products
are available in all CIMB Niaga’s branches,
he added.
Further expansion
MALAYSIA: OCBC Bank Malaysia is targeting
between 10% and 15% bottom and top line
growth for the financial year ending the 31st
December 2011, to be driven by the Islamic
banking, business, and consumer segments.
Jeffrey Chew, director and CEO said the bank
expects high double digit growth in Islamic
banking this year, and is planning to increase
the traction of Islamic subsidiary OCBC Al-
Amin in the areas of personal financing,
mortgages and wealth management.
OCBC Al-Amin registered a 10% growth in
revenue to RM158 million (US$51.7 million)
for the previous financial year.
The bank also plans to open five OCBC
Al-Amin branches and four conventional
branches this year, with a forecast
expenditure of at least RM100 million
(US$32.8 million) to upgrade its banking and
information technology system, open new
branches and revamp existing ones.
World’s largest REIT
MALAYSIA: Axis-REIT Managers is planning
to list the world’s largest Shariah real estate
© Page 4
www.islamicfinancenews.com
investment trust valued at over RM3 billion
(US$988 million) to meet the demand for
new Islamic finance products.
The REIT is expected to be listed in the
second quarter of this year and will manage
33 properties located in three Asian
countries including Australia and Hong Kong.
Reports list the investment banking arm of
CIMB Group as the principal advisor for the
initial public offering and the involvement of
Standard Chartered Bank.
Axis-REIT Managers have yet to confirm the
plans.
Leong Kit May, chief financial officer of Axis-
REIT declined to comment further when
contacted by Islamic Finance news.
New Shariah products
INDIA: National Spot Exchange, based in
Mumbai, is planning to market Islamic
investment products in two weeks.
Huge demand from Muslim investors
including Waqf boards, mosques, high net
worth individuals and Shariah compliant
products traders, is set to increase volume
by 15% to 20%, said Anjani Sinha, CEO and
managing director.
Additionally, SBI Mutual Fund and UTI Asset
Management are looking to launch similar
products in the coming months.
Major role for Islamic finance
KAZAKHSTAN: Kazakhstan plans to
attract up to US$10 billion in Islamic
finance in the next five to seven years,
said Arken Arystanov, chairman of the
state-administered body that oversees the
Regional Financial Center of Almaty.
Kazakhstan will also revisit a plan this year
to issue a debut sovereign Sukuk worth
US$500 million, and is currently drafting new
financial regulations to allow for the issuance
before the year end, said Berik Sholpankulov,
deputy finance minister.
EUROPE
Returns to profit
UK: Bank of London and The Middle East
has posted a pre-tax profit of GBP5 million
(US$8.1 million) in 2010, as compared to
NEWS
a GBP18.9 million (US$30.5 million) loss
in 2009, through a recovery strategy and
prudent financial investments.
Total operating income increased 34% to
GBP40.4 million (US$65 million) spurred by
revenue growth in the markets and corporate
banking divisions with a robust performance
from investment in the US Dollar Income
Fund.
Net fee income rose 112% to GBP974,693
(US$1.6 billion). However, total assets
dropped to GBP712 million (US$1.15
billion).
Another Sukuk soon
TURKEY: Kuveyt Türk Participation
Bank, a subsidiary of Kuwait Finance
House, will issue a US$500 million
benchmark Sukuk by year-end, following
the success of the country’s first Sukuk
issuance, according to Mohammad Al-
Omar, its chairman.
(See IFN Report on page 11)
Takeover offer rejected
UK: Fire and rescue services provider
AssetCo has rejected a takeover offer by
Islamic investment firm Arcapita, in spite of
support for the proposal by John Shannon,
AssetCo’s CEO and largest shareholder.
According to AssetCo, the independent
directors considered the approach to be
opportunistic and against the interests of
shareholders as the indicated price range
included a lower offer than the current
market price.
GLOBAL
Islamic securities services
GLOBAL: HSBC Amanah and HSBC Securities
Services have launched the HSBC Amanah
Securities Services, a Shariah compliant
global securities services for Islamic fund
managers.
Innovation needed
GLOBAL: Dr Mohd Daud Bakar, president
and CEO of Amanie Business Solutions has
called on the Islamic finance industry to
continued...
16th March 2011

continued...
develop new asset classes, including Shariah
compliant access to private equity, and real
estate products that have the ability to invest
in multiple global markets in one fund.
He also said the industry should roll-out
investment fund platforms, improve on
its Shariah screening methodologies, and
develop innovative Sukuk structures.
US$6 billion Sukuk issuances
GLOBAL: Sukuk worth US$6 billion were
issued last month, where 77% were issued
by sovereign bodies, according to Baitak
Research, a subsidiary of Kuwait Finance
House.
MIDDLE EAST
First net loss
BAHRAIN: Unicorn Investment Bank has
recorded an annual net loss for the first time,
of US$229.5 million for 2010, as compared
to a profit of US$2.2 million in 2009.
Total income reached US$2.3 million, down
from US$96.5 million in 2009 due to the
lack of financial transactions, as a result
of the kingdom’s challenging financial
environment.
Investment and other provisions hit US$53.9
million, while fair value write-downs reached
US$118.6 million, due to a drop in the
earnings multiples used for valuation within
the private equity industry.
Full acquisition
UAE: The Investment Corporation of Dubai
(ICD) has fully acquired National Bonds
Corporation (NBC) following the purchase of
a 50% stake in the Islamic savings scheme
company.
The ICD has also appointed Khalifa Al
Daboos NBC’s chairman and named Saif
Sulaiman Mohamed Al Yarabi, Abdulla Saeed
Majed Belyoahah, Ali Rashid Humaid Al
Mazroei and Ghulam Moinuddin Malim as
the company’s new board members.
Promoting growth
UAE: Dubai SME has signed an MoU with the
Dubai International Financial Centre (DIFC) to
© Page 5
www.islamicfinancenews.com
promote small and medium sized enterprises
(SMEs) in the UAE.
Abdul Basit Al Janahi, CEO of Dubai
SME said the agreement will provide
an incentive package for SMEs, give
them access to the DIFC and develop
partnerships for growth.
Needs legislation
KUWAIT: Sukuk can play a major role in
solving local companies’ debt crisis but
the lack of legislation has hindered the
issuance of the Islamic debt papers, said
Abdulnaser Al Subaih, chairman of Liquidity
Management House.
SPEAKER & PANELISTS:
Farouk Soussa, Citi Group
Chief Economist, UAE
Dr. Said A. Al-Shaikh
National Commercial Bank
Chief Economist, KSA
Christophe Mariot, BNP Paribas
Regional Head ECEP, Bahrain
Richard Palmer, Mubadala
Development Company
Advisor Structured Finance
& Capital Markets
Bill Appleby, Citi
Head of Infrastructure and Energy
Finance, EMEA, UK
Frank Beckers, Deutsche Bank
Managing Director, UAE
Ghazali Inam, Arab Bank
Global Head Corporate Finance
Bahrain
Ray Maurer, QNB Capital
Managing Director, Qatar
Enrico Grino, QNB, Assistant
General Manager, Head of Structured
& Project Finance, Qatar
Peter Goodall, Crédit Agricole
Corporate and Investment Bank
Head of PF EMEA, France
Shamshad Akhtar, The World
Bank, Regional Vice President
Middle East and North Africa, US
WHO SHOULD ATTEND?:
This event will be bring together the key decision makers stimulating the
project finance market from the following verticals:
Project sponsors and developers, Ministries & Regulatory Bodies, International
and local financiers, Commercial & Investment Banks, Islamic Banks, Lawyers
& Consultants, Asset & Fund Management Companies, Insurance Companies,
Contractors & Project Management Company, Executives from Power
generation & transmission, Oil & Gas, Transport, Desalination, Water supply
and Waste water management, ECA & Multilateral agencies, Rating Agencies.
Email: lucia.kasanicka@fleminggulf.com, T: +9181-0580-5411
Media Partners:
NEWS
He said the absence of Sukuk laws in Kuwait
also limits the options of companies who
have held back from selling their debt and
assets due to low prices or a lack of buyers.
However, he added that Kuwait has
the suitable environment and financial
resources for Sukuk issuances and noted the
government’s current efforts to introduce a
law for Sukuk.
Financing for SMEs
UAE: Emirates Islamic Bank is planning to
offer financing to small and medium sized
enterprises (SMEs) in the next three months,
continued...
VISIT OUR WEBSITE: www.fleminggulf.com
7th Annual Middle East
Project Finance Forum 2011
16th - 17th May 2011, Doha, Qatar.
REASONS TO ATTEND:
Thomas C. Barrett, European Benefit from landmark case studies of leading
Investment Bank, Director - New
Products & Special Transactions
regional projects on the challenges of funding
and structuring projects in a dynamic
Department Directorate for Lending
Operations in Europe Luxembourg
environment
Rajesh Ramanathan, APICORP Vice
President – GCC Business Group Project
Understand the upcoming developments that
will shape the regional Project Finance industry
& Trade Finance Department KSA Benchmark your financing strategies against
Rajit Nanda projects par excellence from across the region
ACWA Power Projects, CFO, UAE Discuss your ideas and concerns with industry
James Finucane, Emirates Steel
Project Manager, UAE
thought leaders and experts from around the
world
Jean-Marc Mangiavellano
Evaluate the potential for alternative sources
Natixis Dubai, Regional Head Project
Finance, UAE
of finance, Public Private Partnerships &
Islamic Finance
Dr. Manar M. Al-Moneef
Saudi Arabian General Investment And much more…
Authority, Director General Health
Care & Life Sciences Sector, KSA
Alexandra Boleslawski, Crédit KEY TOPICS:
Agricole Corporate and
Investment Bank, Managing Growth of Project Finance in
Director, Global Head of Power
the State of Qatar – Pursuing the
Structured Finance, France
Laughlan Waterston Qatar National Vision 2030 through
SMBC Europe Limited, Head of
Infrastructure & PPP, UK
Sustainable Development
Jean-Francois Croft, Export
Structuring & Funding Projects
– Perspectives from Borrowers and
Development Canada, Chief
Representative, Middle-East,UAE Lenders
Stefano Terranova, International
Power Plc, Head of Project Finance
Public Private Partnerships (PPP) –
Middle East and Africa Benefiting from the combined expertise
of the Government
& Private sectors
Funding Projects through Islamic
Finance
– Ensuring Sharia compliance in business
Social Infrastructure – Growing role
of Project Finance in the Health &
Education sectors
16th March 2011

continued...
according to Faisal Aqil, general manager of
retail banking.
Faisal added that the financing products will
include asset based financing and working
capital finance.
Final deal soon
UAE: Dubai World has secured 100%
support from its creditors and will sign
the final agreement with them this week
on its US$25 billion debt restructuring,
said Sheikh Ahmed Saeed Al Maktoum,
chairman of Dubai’s supreme fiscal
committee and Dubai World.
Sheikh Ahmed added that Dubai World
is not facing any pressure in selling its
assets this year to pay off creditors, as it
has a period of eight years to do so.
(See IFN Report on page 12)
Optimistic growth
UAE: Emirates NBD is expecting this year’s
net profit to increase 45.3% from AED3.4
billion (US$926 million) in 2010 when the
bank’s results took a hit from major debt
restructurings in the UAE, according to Rick
Pudner, its CEO.
Pudner added that the bank will also step
up its plans in Abu Dhabi and is considering
securitizing additional parts of its retail
financing portfolio to raise medium-term
funding this year.
Contact subs@islamicfinancenews.com or call +603 2162 7800
© Page 6
www.islamicfinancenews.com
Helping Indonesian banks
UAE: Dubai based investment bank Arqaam
Capital is open to helping Indonesian
financiers locate investors in the Gulf region
after advising on the sale of a stake in Bank
Kesawan to Qatar National Bank.
According to Tamer Nazih Makary, executive
director of Arqaam, there is active interest
from four to five conventional banks and two
to three Islamic banks in Indonesia which
are looking to sell stakes to help raise money
for growth.
He added that Arqaam will also look for
buyers from Japan, South Korea and India as
they are looking to invest in Indonesia.
Time to win acceptance
QATAR: Islamic financing is struggling to win
acceptance among borrowers in Qatar, due to
the common sentiment that it is costlier than
the conventional, according to Emad Mansour,
CEO of Qatar First Investment Bank.
Emad said the higher cost was due to
the limited number of Shariah financing
providers and it being a niche market.
Financing for mall
KUWAIT: Kuwait International Bank has
signed an agreement with Mabanee
Company to provide a five-year KWD25
million (US$90 million) financing to fund the
expansion of The Avenues Mall.
The expansion will cover an area of 100,000
meters square, offering more parking
spaces.
NEWS
Profits up
UAE: National Bank of Abu Dhabi’s net profit
for 2010 increased by 22% to AED3.68
billion (US$1 billion).
Total assets climbed 7.4% to AED211.4
billion (US$57 billion), while deposits
increased 6.5% to reach AED123.1 billion
(US$33 billion).
Less impairment provisions
BAHRAIN: Ithmaar Bank posted a
smaller net loss of US$150.1 million
in 2010 compared to a net loss of
US$247.4 million last year.
The bank, which reported its first
year results as an Islamic retail
and commercial bank said full year
impairment provisions fell to US$197.4
million last year from US$206.9 million
in 2009.
(See IFN Report on page 11)
Huge leap in profits
KUWAIT: Kuwait International Bank’s net
profit increased 303% to KWD16.75 million
(US$60 million) in 2010, as compared to a
net loss of KWD8.2 million (US$30 million)
in 2009, according to Sheikh Mohammed
Jarrah Al-Sabah, its chairman.
Return on assets stood at 1.5%, while return
on shareholder’s rights was 9% in 2010, as
compared to a 5% loss in 2009.
continued...
16th March 2011

continued...
Customer deposits reached KWD925 million
(US$3.3 billion), while assets touched
KWD1.14 billion (US$4.1 billion).
Still restructuring
UAE: Nakheel has confirmed it is
offering refunds to investors for its
stalled Palm Jebel Ali development
and buyers have been given the option
of swapping their funds for available
inventory or receiving a refund.
In January, Ali Rashid Lootah, chairman
of Nakheel said the developer will issue
a US$1.63 billion Sukuk in the first
quarter. Nakheel has to restructure debt
worth US$10.9 billion after being hit by
the Dubai real estate crash.
(See IFN Report on page 12)
Debt refinancing
UAE: Investment Corporation of Dubai has
requested banks to submit proposals on a
new US$4 billion, five-year refinancing.
The financing will be used to settle existing
debt including a US$6 billion loan, split
between US$3.75 billion conventional and
US$2.25 billion Islamic.
The conventional creditors are Barclays
Bank, Citigroup, HSBC, JP Morgan and The
Royal Bank of Scotland, and the Islamic
ones are Dubai Bank, Dubai Islamic Bank,
Noor Islamic Bank and Standard Chartered
Bank.
Payment facilities provider
UAE: Al Fardan Exchange has signed an
agreement with Abu Dhabi Islamic Bank to
provide monthly payment facilities to the
bank’s covered cardholders.
Under the deal, cardholders will be able to
settle their payments at any of Al Fardan
Exchange branches in the UAE.
Approval sought
QATAR: Masraf Al Rayan will seek
shareholders’ approval to issue US$1 billion
Islamic euro medium-term notes during its
annual general meeting on the 28th March.
© Page 7
www.islamicfinancenews.com
The Sukuk will be issued after obtaining the
financial authorities’ approval and the bank’s
share capital is fully paid.
Encouraged to issue Sukuk
UAE: Low yields are expected to encourage
the Abu Dhabi government to issue sovereign
Sukuk rather than conventional bonds, as
it will be a cheaper alternative for them,
according to Mark Watts, head of fixed
income at National Bank of Abu Dhabi.
Sukuk funding
SAUDI ARABIA: Bank AlJazira is planning to
issue a riyal-denominated Sukuk to boost
capital and finance expansion.
The bank did not reveal the size and date
of the issuance, but said it will be issued
based on the market situation and after
meeting with investors in Jeddah, Riyadh and
Dammam.
HSBC and JPMorgan Chase & Co are the
arrangers for this Sukuk.
Sukuk in 2011
UAE: First Gulf Bank is planning to issue a
Sukuk this year, according to Andre Sayegh,
its CEO.
Profit slips
UAE: Dubai Islamic Bank posted a net profit
of AED806 million (US$219 million) in 2010,
as compared to AED2.1 billion (US$572
million) in 2009.
Provisions stood at AED864 million (US$235
million). However, assets grew 7% to
AED90.1 billion (US$25 billion).
Good progress
KUWAIT: Al Ahli Bank of Kuwait’s net profit
increased by 36% to KWD53.2 million
(US$191 million) in 2010.
Return on assets stood at 1.8%, while return
on equity reached 13.3%.
Eyeing new territory
QATAR: Qatar Islamic Bank is planning to buy
a 25% stake in Turkey based Bank Asya from
six major shareholders.
NEWS
We’re Growing
Islamic Finance news is seeking
experienced industry practitioners to
come and join its growing team.
Do you have the ambition, drive and gall
to join the world of media?
Editorial
• Excellent written and spoken
English
• Extensive experience in writing
and commenting on financial
markets / international business
• Ability to conduct senior level
interviews
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developing new ideas
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staff motivational skills
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efficiently and to work under
strict deadlines
Business Development
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English
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player - a ‘go-getter’
• Ability to develop and manage
new projects
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Do you have what it takes? Would you
like to work with a young, enthusiastic
and very professional team?
If the answer is YES then submit your
curriculum vitae to Andrew Morgan,
Managing Director and Publisher at
Andrew.Morgan@REDmoneyGroup.com
or call on +603 2162 7801 now.
16th March 2011
 TAKAFUL NEWS
www.islamicfinancenews.com

ASIA Labuan International Business Financial

High growth for Takaful
INDONESIA: Indonesia’s Takaful assets
increased by 47.6% to IDR4.5 trillion
(US$512 million) in 2010, while premiums
for Takaful rose 35.7% to IDR3.2
trillion (US$361 million), according Isa
Rachmatarwata, head of insurance bureau
at the Indonesia Capital Market and
Financial Institution Supervisory Agency.
Isa added Takaful made up 2% of the total
IDR224.9 trillion (US$25 billion) insurance
assets in the country.
Rights issue announced
SRI LANKA: Amana Takaful has announced a
rights issue on a 1:1 basis at LKR1.50 (1.36
US cents) a share, subject to shareholders’
approval at the extraordinary general
meeting scheduled for the 18th March 2011.
The rights issue will see Amana Takaful’s
core capital rise to LKR1.25 billion (US$11.3
million), which will facilitate its expansion
strategy and consolidate its position to meet
changes in regulations on risk based capital
and splitting of life and general business.
More choice now
MALAYSIA: The Labuan Financial Services
Authority (Labuan FSA), the regulator of
Center (Labuan IBFC), has given the freedom
to insurance and Takaful operators for dual
management and operations offices across
Malaysia.
The move is aimed at attracting more foreign
insurance and Takaful firms to choose
Labuan IBFC as their regional operations
base. It is also an expansion of Labuan FSA’s
initiative introduced in May 2009 to allow
holding firms to establish their offices in
Kuala Lumpur.
High sales target
INDONESIA: Takaful Indonesia is targeting
IDR110 billion (US$12.5 million) in sales
through the bancassurance system from its
branches in the country, according to Ahmad
Sehu Ibrahim, its vice president.
EUROPE
New markets for Neova
TURKEY: Insurance firm Neova Sigorta, which
also offers Takaful services, is planning to
expand into Central Asia and Eastern Europe
once it has strenghtened its position in
Turkey, said Özgür Bülent Koç, its CEO.
Turkapital, an investment holding company
established by Kuwait Finance House Group,
holds 53% of Neova, while Kuveyt Türk
Participation Bank owns 7%.
GLOBAL
Slow Takaful growth
GLOBAL: Growth in Southeast Asia’s Takaful
sector has not been as strong as expected
with many consumers opting for regular
policies, said Simon Machell, chief executive
of Aviva (Asia).
He said the huge growth that Aviva expected
a few years ago has not materialized.
Aviva sells Takaful in Malaysia, where it
has a joint venture with CIMB Group, and
in Indonesia, where it holds a 60% stake in
Asuransi Winterthur Life Indonesia.
MIDDLE EAST
Profit slips
QATAR: Qatar General Insurance &
Reinsurance Company posted a net profit of
QAR119.4 million (US$33 million) in 2010
compared to QAR136.2 million (US$37
million) in 2009.
Takaful gross written premiums increased
to QAR78 million (US$21 million) compared
with QAR54 million (US$14.7 million) in
2009, while total assets for general Takaful
rose 49% to QAR105.7 million (US$29
million).

17th - 19th October, Kuala Lumpur

Secure Your FREE Seat.
REGISTER NOW!
Entering its 6th year, the IFN 2011 Issuers & Investors Asia Forum, is recognized as the
industry’s leading and largest annual event

Delegate numbers increase each year, as the industry develops and this event grows in
stature. 1,811 attended in 2010 and we’re expecting an equally impressive audience
in 2010

Each day will include Key Note presentations and round table discussions

Our unique format of almost entirely round table discussions ensure unbiased and
educational debate

www.ifnforums.com

© Page 8 16th March 2011


AFRICA
Financially strong
EYGPT: Standard & Poor’s
Ratings Services (S&P)
has affirmed its ratings on
Commercial International
Bank, National Bank of Egypt and National
Société Générale Bank.
S&P has affirmed its ‘BB/B’ long- and
short-term counterparty credit ratings on
Commercial International Bank and National
Bank of Egypt.
The outlook on both banks is negative. The
ratings on both banks were removed from
CreditWatch, and placed with negative
implications.
S&P has also affirmed the unsolicited ‘BBpi’
(public information) rating on National
Société Générale Bank.
The rating actions are based on all the
banks’ strong financial profiles.
ASIA
Grade withdrawn
MALAYSIA: Malaysian
Rating Corporation (MARC)
has withdrawn the ‘MARC-
1ID(bg’)/’AA-ID(bg)’ ratings
assigned to Mulpha
International’s RM75 million (US$24.6
million) bank guaranteed Murabahah notes
issuance facility, following the cancellation of
the program.
With the cancellation, MARC’s rating
coverage on Mulpha is now limited to
RM25 million (US$8.2 million) Murabahah
commercial papers/medium term notes
facility, which carries the ratings of ‘MARC-
1ID’/’AID’/stable.
MIDDLE EAST
Concerns on sustainability
SYRIA: AM Best Europe has
placed under review with
negative implications the
financial strength ratings of
‘B’ (Fair) and issuer credit
rating of “bb+” of Arab Union
Reinsurance Company (AURe).
© Page 9
RATINGS NEWS
www.islamicfinancenews.com
The ratings service said the action reflects
the impact of the Middle East’s recent
Mixed ratings
political unrest on AURe’s operations and UAE: Standard & Poor’s Ratings
concerns regarding the sustainability of Services has affirmed and
AURe’s business profile. withdrawn ‘BBB-’/ ‘A-3’ long-
and short-term counterparty
The Libyan government also owns 50% of credit ratings on Dubai Islamic
the company and has representation on its Bank. The outlook was negative.
board which makes its viability uncertain, in
addition to AURe’s exposure to Libya through The ratings and outlook are based on the
its branch operations. economic environment in Dubai, which will
continue to negatively affect the bank’s
financial profile.
AM Best said the under review status would
be resolved upon further clarity on the
political situation and its impact on AURe.
Disappointing performance
BAHRAIN: Fitch Ratings has
downgraded Arab Banking
Corporation’s (ABC) long-term
issuer default rating (IDR) to ‘BB’
from ‘BBB-’. The outlook is stable.
The move is based on the downgrade of
Libya’s long-term IDR to ‘BB’ from ‘BBB’, as
the Central Bank of Libya is ABC’s majority
shareholder.
Temporary removal
UAE: Fitch Ratings will
withdraw the ratings of Dubai
Electricity and Water Authority
(DEWA) in the next two weeks,
citing a lack of information for
the assesment of Dubai.
I = INDEPENDENT
DEWA’s current ratings are long-term issuer
default rating (IDR) at ‘BBB-’, short-term IDR F = FACTUAL
at ‘F3’, senior unsecured rating at ‘BBB-’ and
an AED3.2 billion (US$871 million) Sukuk N = NEUTRAL
rated at ‘BBB-’.
Poor showing
IRAN: Capital Intelligence
(CI) has affirmed Bank
Tejarat’s long-term and DON’T YOU
short-term foreign currency
ratings at ‘BB-’ and ‘B’ respectively with a THINK YOU
stable outlook.
SHOULD BE
CI has also affirmed the support rating
at 3, due to government support, while
SUBSCRIBING?
the financial strength rating of ‘B+’ is also
affirmed, based on poor asset quality, weak
capital adequacy and difficult operating
For more information, visit
environment.
www.islamicfinancenews.com
16th March 2011
Section Sponsor

MOVES
www.islamicfinancenews.com

SECURITIES AND EXCHANGE
COMMISSION OF PAKISTAN
PAKISTAN: The government has appointed
Mufti Munib ur Rehman as a member of
the religious board for Islamic financial
institutions at the Securities and Exchange
Commission of Pakistan.
department in London, effective on the 1st
May.
Fugard is currently head of asset finance and
co-head of transport and logistics sector. He
focuses on aviation, shipping and Islamic
finance.
Gwynne specializes in structured financing
involving aircraft, cable and telecoms
equipment and rolling stock.
ABU DHABI COMMERCIAL
BANK
UAE: Mufaddal Khumri, head of Islamic
banking division at Abu Dhabi Commercial
Bank is leaving on the 17th March to help
National Bank of Ras Al-Khaimah establish
an Islamic branch.

BANK NEGARA MALAYSIA

MALAYSIA: The government is expected
to extend Dr Zeti Akhtar Aziz’s contract as
governor of the central bank, Bank Negara
Malaysia, following the expiry of her tenure
on the 1st May.
Too many pieces in the puzzle?
HSBC BANK MIDDLE EAST
GLOBAL: HSBC Bank Middle East has
appointed Abdulfattah Sharaf and Abdul
Hakeem Mostafawi as board directors.

Presently Abdulfattah is the CEO of HSBC in

HOGAN LOVELLS
UK: Legal firm Hogan Lovells has appointed
Robert Fugard and Simon Gwynne from
Linklaters as partners for its asset finance
the UAE, and Mostafawi is the HSBC CEO in
Qatar. Let IFN put it together for you…
SUBSCRIBE TO IFN TODAY
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Standard format ensuring everyone knows exactly what to expect from

each event

Plenary sessions – no sales pitches

Short one-day events – senior individuals don’t have the time to attend
lengthier events

Targeting between 125 and 250 for each event

Cooperation and participation from local regulators

Practitioner led, with some Shariah scholars providing the perfect mix

Conclusions will be delivered at the end of each event

Issuers and investors will be in attendance – not just the intermediaries

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© Page 10 16th March 2011


www.islamicfinancenews.com
Islamic banking pays off but still challenging
Bahrain’s Ithmaar Bank, which recently reported its first full set of
financials as an Islamic retail and commercial bank, has improved its
results but still faces challenging market conditions.
The bank completed its conversion into an Islamic bank from a
conventional investment bank in April last year by fully integrating its
Islamic subsidiary, Shamil Bank. The change was done to lower its risk
profile following losses from the Middle East real estate crisis. Ithmaar
also appointed Mohammed Bucheerei as its new CEO to guide the
bank’s transformation.
A year on, Ithmaar’s moves seem to be paying off. In 2010, it reduced
its net loss to US$150.1 million from US$247.4 million in the previous
year as net provisions for impairment decreased to US$197.4 million
from US$206.9 million in 2009. In a statement accompanying its
results, Prince Amr Mohammed Al Faisal, chairman of Ithmaar said a
significant portion of the impairment provisions were for its investment
portfolios. The bank also posted a turnaround in net income to US$51.4
million in 2010 compared to a net loss of US$44 million a year earlier.
With significant exposure to real estate losses in 2009, the bank has
since set about repairing its balance sheet. Although it received a
lukewarm response to its US$200 million rights issue in March last
year, it did raise US$103 million and now has US$654 million in total
equity. In 2009, it had seen 23% of its capital wiped out from 2008’s
balance of US$924 million. Ithmaar also increased its total assets last
year, to US$6.7 billion from US$6.1 billion in 2009.
Despite its improved financial position, Ithmaar remains confronted
with difficult credit and business conditions. However, Ithmaar is not
alone. Other conventional and Islamic banks in Bahrain also had a
tough time following the recent financial crisis. Among them were
Bahrain Islamic Bank, whose net loss widened to US$105.3 million in
2010 from US$51.5 million in 2009, while Al Salam Bank saw its net
profit halve to US$19.4 million over the same period. Al Salam also
booked US$4 million in impairment provisions in 2010 compared to
none in 2009.
In its latest report on the outlook for Bahrain’s banking system,
Moody’s Investors Service (Moody’s) maintained its negative view of
the sector due to continued weakness in Bahraini and regional real
estate and its impact on the rest of the economy. Moody’s negative
outlook for this sector assumes further deterioration in some aspects
of Bahraini banks’ franchises and risk profiles. The rating agency’s
primary focus will be on possible further increases in non-performing
loans with banks’ significant construction and real estate exposures
being an area of particular concern.
In its 2011 outlook for the GCC and Middle East banks, Fitch Ratings
(Fitch) also voiced its concern over Bahraini banks’ exposure to the
real estate and construction sectors. It believes however overall non-
performing loans have peaked and impairment charges are likely to
remain stable or decline this year. Fitch reported that this would have
a positive impact on banks’ profitability.
In addition to the difficult business environment, Bahrain like some of
its regional neighbors is experiencing unrest from protestors demand-
ing political, social and economic reforms. Moody’s has placed Bah-
rain’s sovereign ratings under review for possible downgrade, while
Fitch and Standard & Poor’s Rating Services have both lowered its
ratings on the country.
© Page 11
IFN REPORTS
Turkey’s participation market
Turkey has stayed on the borderline of the mainstream Islamic capital
market for some time. It entered the Sukuk market in August 2010
with Kuveyt Turk Participation Bank’s issuance of a three-year Sukuk
worth US$100 million.
The Turkish Sukuk market is poised to develop, following the national
assembly’s recent approval of the Finance Bill 2011 which contains
tax neutrality measures for Sukuk Ijarah. The announcement was
immediately followed by Kuwait Finance House’s plans to issue a
US$500 million Sukuk by the year end via its Turkish unit.
Industry players have a positive outlook for the Sukuk market. Cenk
Karacaoglu, vice president of financial institutions at Bank Asya
expects major Sukuk issuances probably before the end of 2011. In
response to Islamic Finance news, Karacaoglu said he believes Sukuk
structures based on Ijarah and Murabahah receivables would be
popular in the Turkish capital markets.
Sovereign Sukuk, however, would depend on whether the current
regime stays after elections in June this year. If they do, a sovereign
Sukuk issuance may come as early as the end of 2011 or the first
quarter of next year, said Karacaoglu.
The Shariah compliant banking sector in Turkey accounted for 4%
of total banking assets in 2010. The potential for growth is huge for
the four existing participation banks in Turkey. According to Fahrettin
Yahsi, chairman of the Participation Banks Association of Turkey, asset
growth of the participation banks is expected to be approximately 55%
in 2010.
This huge potential of participation banks is a major market for Sukuk.
As Karacaoglu highlighted, the market for Sukuk exists mainly among
participation banks and other local investors.
However, even with the huge potential, industry players are still taking
a cautious approach as more clarification on laws governing Sukuk are
needed, especially on taxation measures in Turkey.
RAM has US$653 million of foreign issuer
ratings in the pipeline
RAM Rating Services (RAM) could rate more than RM2 billion (US$653
million) worth of foreign bond issuances in Malaysia this year with
most of the programs likely to be Sukuk, said Chong Kwee Siong, its
deputy CEO.
Chong declined to give details of the debt papers to be rated but said
historically each foreign issuance in Malaysia has an average size of at
least RM1 billion (US$327 million).
However, he said the number of foreign issuances in Malaysia this year
and whether they would be foreign-currency or ringgit-denominated,
would depend on credit conditions.
RAM recently rated Gulf Investment Corporation’s RM3.5 billion
(US$1.2 billion) Sukuk, giving it a long-term rating of ‘AAA’. The
issuance was the first by a GCC issuer in Malaysia.
continued...
16th March 2011

www.islamicfinancenews.com
Meanwhile, Chong said although it is not easy to project the value of
local Sukuk issuances in Malaysia this year, the market is expected
to make up at least 50% of corporate bond issuances, which RAM
forecasts to be worth between RM55 billion (US$18 billion) and RM60
billion (US$19.6 billion).
“In the past, Sukuk issuances have also exceeded conventional
issuances,” he added.
Chong said the growth of Malaysia’s Sukuk market is driven by
government support via the Malaysia International Islamic Financial
Centre and increasing global demand for Sukuk.
Malaysia’s Sukuk market has seen an increasing demand from foreign
issuers, especially from the Middle East. Last year, in Malaysia the
National Bank of Abu Dhabi issued a US$160 million Sukuk and Dubai
has also proposed a sale of up to US$1.5 billion Sukuk this year.
Islamic finance in the US – A love-hate affair
Last week we saw two contrasting announcements from the US,
summarizing the seesaw development and love-hate relationship
between Islamic finance and the US legal system.
Recently, Atlanta based Shariah compliant fund manager MWM
Ventures launched a technology fund to invest in early stage technology
companies. In opposing news, the South Dakota state legislature said
it is in the process of adopting several new bills that seek to limit
the applicability of Shariah law by its courts in connection with valid
financial transactions.
The news from South Dakota has raised a few concerns and is a legal
setback which comes at a time when experts had actually started
building hope for the development of Islamic finance, following the
Michigan ruling in January this year.
The Michigan District Court had dismissed a case filed in March 2009
against the US government, alleging insurance group AIG’s Shariah
compliant business promoted religious doctrine. Then last month,
Kevin Parker, state senator from Brooklyn, introduced a bill to create
an alternative Sukuk market in New York to attract a new class of
international investors.
According to a legal expert in Washington, there is a marked difference
between the US states on the matter of promoting Islamic financial
products. Former speaker of the House of Representatives, Newt
Gingrich has been busy calling for a federal law to ensure Shariah laws
and Islamic finance, are not recognized by any US court. The states of
Oklahoma, Arizona and South Carolina have pursued bills to the same
effect.
It is no wonder that the US market has stayed on the periphery of the
global Islamic finance boom. With a Muslim population of 7 million
people growing at 6% annually, financial institutions in the country
have been flirting with the idea of Islamic finance, but this has not
led to a major upswing in the industry. Although Muslims represent
a small population segment, the high growth rate forms a lucrative,
untapped segment in the US. Currently, there is a large gap between
supply and demand of Islamic financial products. Furthermore, the
exploitation of the growth potential in the country has been stunted
owing to these varying regulatory and legal challenges.
© Page 12
IFN REPORTS
However, the very future of Islamic finance in the US is highly dependent
on the development of its regulatory environment. As Kavilash Chawla,
a US based senior Islamic finance expert and practitioner highlighted
to Islamic Finance news, “The regulatory environment in the US needs
to continue to progress and develop significantly in order to become
more conducive to Islamic finance.”
Despite this, Chawla feels that given the fallout of the global financial
crisis, and regulatory changes in the US, the current momentum
towards creating an enabling regulatory environment in the US for
Islamic finance is “minimal, at best”. He also added that for the
sustained future of Islamic finance, the industry itself needs to develop
a more robust value proposition and more dynamic products specific
to US investors.
Dubai’s road to recovery
While Dubai may well be on the recovery path, with the UAE economy
expected to post a growth of 3.6% in 2010, and claims from Dubai’s
ruler, Sheikh Mohammed Rashid Al Maktoum that the emirate has
recovered from the global economic crisis, caution still prevails.
Sheikh Ahmed Saeed Al Maktoum, chairman of Dubai’s supreme fiscal
committee and Dubai World, conveyed positive news last week. He
announced that Dubai World will sign the final deal for its US$25 billion
debt restructuring deal with its creditors this week. Dubai sent the
world’s financial industry reeling when the conglomerate announced
in November 2009 that it sought a delay in repaying its debt, mainly
linked to its property unit Nakheel.
Nakheel, the real estate arm of Dubai World, has also been battling
with its financial situation and last week announced the offer of
refunds to investors for its stalled Palm Jebel Ali development
project. The offer gives buyers the option of swapping their funds for
available inventory or receiving a refund. The announcement follows
plans for a US$1.63 billion Sukuk issuance by Nakheel in the first
quarter of 2011, as announced in January by its chairman, Ali Rashid
Lootah.
The Sukuk is part of Nakheel’s own plans to restructure its US$10.5
billion debt. Under Nakheel’s restructuring plan, trade creditors were
offered 40% what they owed in cash and the remaining 60% through a
Sukuk with a 10% return. So far Nakheel has garnered an agreement
from 95% of its creditors, the remaining 5% of whom are expected to
agree by the end of March.
Meanwhile, Drydocks World (DDW), the ship repair unit of Dubai World
in Singapore announced that it expects to finalize its restructuring of
US$2.2 billion debt by the 30th April. Confusion recently arose over
legal suits against DDW for non-payment of bills. Dubai World recently
denied that it is being sued in Singapore, stating that it resolved
payment issues with suppliers there in February.
With these recent developments, Dubai World and its subsidiaries are
finally emerging out of the financial turmoil. This rings positive for the
emirate with bankers upbeat about the situation. Peter Sands, global
group CEO of Standard Chartered Bank said economic prospects for
Dubai and the UAE have improved significantly.
16th March 2011

www.islamicfinancenews.com
A Continental European View
By Bochra Kammarti and Anne-Sophie Gintzburger
The UK has been extensively covered in its leading role in Islamic
finance in Europe, and to observe a different approach to
implementing Islamic financial services locally, the emerging pattern
of Islamic finance in select continental European countries, France
and Germany is valuable.
Both illustrate similarities to the British development of Islamic finance
locally, and offer an insight into the emergence of Islamic finance
in Europe in a unique local manner, quite different to the sector
emergence in Britain. The core focus will be France which seems to
follow a rather perplexing development pattern closely echoing its
political and cultural specificities.
In this respect, it is interesting to note that in August 2010 France
followed similar steps to the UK eight years ago. The UK abolished
double stamp duty for Islamic mortgages in 2003. The state of Victoria,
Australia did so seven years ago in 2004. France, through its recent
set of fiscal instructions on Ijarah, Istisnah and Murabahah indicates
that there are tangible steps to provide tax incentives, or at least no
penalties, to transactions based on these Islamic contracts.
Based on the dynamics of the Islamic finance sector in the UK, plausible
developmental stages for Europe indicate that the emergence of the
sector in each country begins with the setting up of international non-
European Islamic banks from Southeast Asia and the Middle East.
Clearly this is not the chronological case in France or Germany.
But in the UK, this was closely followed by the development of
Islamic windows or subsidiaries by conventional banks of UK origin in
overseas markets, essentially in the Middle East and Southeast Asia,
which sought to services to customers sensitive to Shariah compliant
finance.
In Europe, these conventional financial institutions, which include
European conventional banks in addition to the pioneering British
banks, are currently Islamic finance players in the financial markets
in London, and in the Islamic funds market in Luxembourg. The final
developmental stage of the emergence of Islamic finance as duly
noted in the UK is the establishment of European fully fledged Islamic
financial institutions, of local Islamic banks, a step which seems to be
followed by Germany but not by France.
According to the British Financial Services Authority (FSA), there are
records of Shariah compliant transactions in the London financial
market dating back to the 1980s. In the UK, Islamic retail banking
offers date back to the 1990s through Middle Eastern and Southeast
Asian banks. Conventional financial institutions of British origin,
including Citigroup, Barclays Bank, Standard Chartered Bank, HSBC
and Lloyds TSB, have Islamic financial products offered since the end
of the 1980s.
Most remarkably in 2004, the FSA authorized the first British fully
fledged retail Islamic bank, the Islamic Bank of Britain (IBB). This was
closely followed by two fully fledged Islamic investment banks, the
European Islamic Investment Bank of Britain in 2006, and the Bank of
London and the Middle East in 2007.
© Page 13
COUNTRY REPORT
Germany is another European country where Islamic finance is
maturing fast given the prevailing European context. In 2004, the
first EUR100 million (US$138.28 million) European Sukuk was issued
by Saxony-Anhalt. Major German banks, such as Deutsche Bank,
Dresdner Bank and West-LB, Commerzbank, offer Islamic financial
services through regional offices in the Middle East, Southeast Asia
and London.
Since 2010, the German financial authority, Bundesanstalt für
Finanzdienstleistungaufsicht (BaFin), is allowing Kuveyt Türk Bank
(KTB), to set up office in Germany. KTB is opening in 2011 in
Mannheim. The Meridio AG Bank set up the Global Islamic Meridio Multi
Asset Fund, domiciled in Luxembourg. Various European monetary
authorities have publicized welcoming Islamic finance locally.
Since the highly publicized 2007 address by France’s minister of the
economy, Christine Lagarde, suggesting that France address and
welcome the opportunities offered by Islamic finance — Kuwait Finance
House, IBB and Qatar Islamic Bank have yet to hear back positively on
their application to set up French regional offices since 2008.
Major French conventional banks like Société Générale, BNP Paribas
and Crédit Agricole, offer Islamic financial products outside of France.
Lasting from 2008 to 2009 in Reunion Island, an Islamic fund was
set up by Société Générale through its subsidiary Banque Française
Commerciale Océan Indien.
In 2009, Crédit Agricole Asset Management (CAAM) set up CAAM
Islamic in 2009, and its first Islamic fund domiciled in Luxembourg,
Amundi Islamic, was set up in August 2010 following the merger of
Société Générale Asset Management and CAAM.
France’s August 2010 fiscal instructions for the Islamic commercial
contracts Murabahah, Ijarah and Istisnah indicate a will for these to
now be at par with other modes of financing regarding tax issues.
In mid-2010, the BRED, a subsidiary of Banque Populaire et des
Caisses d’Epargne (BPCE) offered a first Islamic home financing
product underpinned by the Murabahah contract. One more fiscal
instruction was issued, facilitating the issuance of Sukuk.
Additionally, key events organized by France to promote it as a
key location for Islamic finance include a recent event at Dubai
International Financial Centre, in Dubai in December 2010. The Paris
Europlace event, ‘The Dubai-Paris Partnership: Facing a Multi-polar
World’ featured key French private sector actors and institutional
players, and sought to present Islamic finance opportunities in France
to Middle Eastern investors. This indicates a clear will by France to
reap the benefits of Islamic finance.
A recent development gives rise to numerous questions, namely as to
how France is looking at developing Islamic finance. The Ministère du
Logement (French ministry for housing), has authorized since January
2011 that clients have access to interest-free loans, closely equivalent
to a Qard contract, for home financing. This could possibly indicate
that Islamic products in France have little chance to emerge at the
continued...
16th March 2011

www.islamicfinancenews.com
A Continental European View (continued)
retail banking level in the manner observed in the GCC and Malaysia
(Musharakah Mutanaqisah, and such), and in particular for house
financing which was the area in which local Muslims were most vocal.
Following this move, it is reasonable to note that if Islamic finance
emerges in France in a more tangible manner, the most likely area
is through French conventional banks through interest free loans.
They have Islamic finance expertise and experience developed
through regional offices offering Islamic financial services expertise in
metropolitan France.
French conventional banks are all too aware of local cultural and
political sensitivities and are in a position to successfully navigate
within the context.
The most visible stumbling blocks to the development of Islamic
finance in France are linked to a fear of Islam and to socio-cultural and
political laicism. The law prohibiting wearing the burqa in France since
September 2010 is a clear example of this.
It seems likely that in France, Islamic finance will be developed through
conventional financial institutions, and in a covert manner due to
‘image risk’, a risk local to France only, in associating their name to
the word ‘Islamic’ on the French market. As doing so for these very
banks is clearly not an issue outside the French market.
This indicates, just as the interest-free loan by the French ministry for
housing, that it is likely that France will look at following the footsteps
of Turkey in naming this mode of financing ‘participative finance’, or
the footsteps of Morocco which authorized Islamic products under the
label of ‘ethical finance’.
France is probably not going to use the label ‘Islamic’ which would
make local bankers, and potentially customers, cringe due to the
© Page 14
COUNTRY REPORT
sensitive local context.
Islamic finance is today a reality for European markets. However,
regional and sectarian inequalities subsist and are linked to the
secular social and cultural European background, as well as a fear of
Islam, and in particular of the term ‘Islam’.
Spain as well as Italy have both expressed interest for Islamic finance.
It seems reasonable to express the view that Islamic finance is
welcome in Europe as far as it is contained in the financial market
in order to reap petrodollars and that it remains discreet in doing so.
In fact, major European conventional banks offer Islamic financial
services overseas, in London and through Islamic funds in Luxembourg.
This means that the private sector is not against the idea as long as
‘image risk’ remains minor.
The exceptional experience of the UK seems to be followed by other
European countries. That could indicate that despite challenges,
Islamic finance will develop in a way that leads to a parallel
development of both conventional and Islamic markets in Europe, and
in particular in the Anglo Saxon part of Europe, as has happened in
parts of Southeast Asia and the GCC.
Anne-Sophie Gintzburger
Email: asgintzburger@gmail.com
Anne-Sophie is a doctoral candidate at the ENS (Ecole Nationale
Supérieure).
Bochra Kammarti
Email: bochra.kammarti@gmail.com
Bochra Kammarti is a doctoral candidate at the EHESS (Ecole des
hautes études en sciences socials) and the ENS.
16th March 2011

www.islamicfinancenews.com
The Development of Islamic Finance in Luxembourg
By Pierre Oberlé
Luxembourg is now recognized as one of the leading European
centers for Islamic finance. The country ranks first in Europe as a
domicile for Shariah compliant investment funds, with 40 in all, and
its stock exchange is a European leader in Sukuk listings, totaling 16.
How has Luxembourg gone about positioning itself in Islamic finance?
What are the main activities that have emerged here?
Pioneers
Islamic finance first appeared in Luxembourg in 1978 with the arrival
of Islamic Banking System International Holding, the first Islamic
finance institution in a western country.
Five years later, the first Shariah compliant insurance company in
Europe was established in Luxembourg, and in 2002 Luxembourg
was the first European stock exchange to list a Sukuk. But while these
first Islamic finance activities date back three decades, the pace has
picked up sharply in the past few years, reflecting the commitment
of both the authorities and stakeholders in the financial sector to
developing these activities in Luxembourg.
The turning point
In 2008, the government set up a task force to identify obstacles
to the development of Islamic finance and suggest ways to promote
its growth. This led to the research into assets eligible for Shariah
compliant UCITS funds, the development of best practice guidelines
for financial services in this area and a review of the tax treatment
of Shariah compliant vehicles, all conducted by a dedicated working
group within Association of the Luxembourg Fund Industry (ALFI), the
representative body of the fund industry.
The working group reported back favorably, noting that Luxembourg
was able to offer a range of vehicles addressing the specific needs
of both investors and promoters interested in Shariah compliant
investment with a limited need for specific additional legislation. A
number of initiatives followed:
1.Tax circulars
Luxembourg tax law is based on an economic approach that can
accommodate Islamic investments well. In January 2010, the
Luxembourg tax administration published Circular LG-A no 55
on Islamic finance, addressing the Luxembourg tax treatment of
Murabahah contracts and Sukuk transactions. In June 2010, a circular
followed on the tax treatment of Murabahah and Ijarah contracts.
2. Education
A workforce with specialized skills is needed to attract Islamic finance
business, and over the past two years both the Institut de Formation
Bancaire Luxembourg (IFBL) — the banking industry’s training arm
— and the Luxembourg School of Finance have launched training
programs in this area. Private sector institutions have also introduced
training initiatives.
3. Communication
Having an adequate regulatory framework for Islamic finance business
is one thing; but people must know about it. Representative bodies in
the financial sector — among them ALFI and Luxembourg for Finance
© Page 15
COUNTRY REPORT
— have thus increased their presence in key countries by taking part in
major industry events and organizing regular trade missions.
Last month, a mission led by the Crown Prince of Luxembourg and the
minister of finance visited Abu Dhabi, Riyadh and Beirut. This autumn,
a mission will travel to Kuala Lumpur.
The role of the central bank
The Central Bank of Luxembourg (BCL) has also become very active in
Islamic finance. In 2009, it was the first central bank in the European
Union to join the IFSB (Islamic Financial Services Board), and in
October 2010, it was a founding member of the IILM (International
Islamic Liquidity Management Corporation).
Set up with 10 other central banks and two multilateral organizations,
the IILM’s aim is to enhance the liquidity management of Islamic
finance institutions and foster cross border investment flows. BCL is
the only European central bank to have joined the initiative, and BCL’s
governor Yves Mersch was appointed deputy chairperson for the first
year.
This year, the IFSB is organizing its 8th Summit from the 10th May until
13th May 2011 in Luxembourg, hosted by BCL.
These are just some of the initiatives the authorities have taken to
strengthen Luxembourg’s position in the field of Islamic finance. The
private sector is also active, and most financial industry stakeholders
(auditors, law firms and custodian banks) have now set up dedicated
Islamic finance teams.
Two activities that have emerged in this area are the listing of Sukuk
and Shariah compliant investment funds.
Sukuk and Shariah compliant funds
In 2002, the Luxembourg Stock Exchange was the first in Europe to
enter the Sukuk market. Sixteen have now been listed, with issuers
from Malaysia, Pakistan, Saudi Arabia, the UAE and other countries.
Shariah compliant investment funds is another growth area and a
natural development given Luxembourg’s strengths in conventional
investment funds — over the past 20 years, the Grand Duchy has
become Europe’s most popular domicile for UCITS funds and the
leading centre for global fund distribution.
UCITS (Undertakings for Collective Investment in Transferable
Securities) are funds introduced in 1985 through a European directive.
Originally a retail product, they are now widely sold to the public as
well as corporate and institutional investors. While domiciled in one
European country, a Europe “distribution passport” makes it easy to
sell them to investors from all other EU countries.
Over the years, UCITS has become a strong global brand and funds are
now well accepted in many non-European jurisdictions. Luxembourg
domiciled investment structures are distributed in more than 65
countries around the globe, with a particular focus on Europe, Asia,
Latin America and the Middle East.
continued...
16th March 2011
 COUNTRY REPORT
www.islamicfinancenews.com

The Development of Islamic Finance in Luxembourg (continued)

A number of Shariah compliant funds have adopted the UCITS selected and the investor base targeted, most Shariah compliant funds
structure, which is well suited to the principles underlying Islamic launched in Luxembourg are structured either as UCITS or as SIF.
finance: since UCITS funds are primarily for retail investors, the main
concern is safety, and funds have rigorous investment policies that The list of fund promoters that have launched Shariah compliant
accommodate the prohibition of gharar (uncertainty). vehicles in Luxembourg shows that big international names in
conventional investment funds were quick to climb aboard. In most
UCITS funds are especially well adapted to Shariah compliant fund pro- cases, they already had a traditional range domiciled in Luxembourg
moters looking to target retail or institutional investors around the world. and simply added on a Shariah compliant fund.

In parallel, Luxembourg has developed a strong track record in More recently, smaller players from the Middle East have also started
alternative investment products and bespoke investment structures to set up funds in Luxembourg. They usually already operate funds
such as hedge funds and funds of hedge funds, private equity vehicles in their home countries for domestic investors, but have difficulties
and real estate funds. These can be set up under a variety of legal selling these in other countries. For them, Luxembourg’s international
forms and are subject to rules set out in Part II of the 2002 Law on reach has definite appeal. This is a new trend, but is set to intensify
undertakings for collective investment and in the Law of the 13th in the coming months with a number of projects now in the pipeline.
February 2007 relating to specialized investment funds (SIF).
In conclusion, Islamic finance in Luxembourg is still in its early
The introduction of SIFs three years ago paved the way for a new days. But with a regulatory and tax framework in place and a strong
generation of alternative investment funds targeting an international, commitment from both the authorities and the private sector to
qualified investor base. More than 1,000 SIF funds have already been develop these activities, there will certainly be more developments in
launched since this option was created. the near future.

Such strong growth confirms that the SIF framework is well adapted Pierre Oberlé
to the needs of sophisticated investors seeking closer supervision Business development manager
combined with flexibility in terms of structure, investment policies and Association of the Luxembourg Fund Industry (ALFI)
techniques. This structure is often used for Shariah compliant real Email: Pierre.OBERLE@ALFI.LU
estate and private equity funds. Pierre Oberlé takes care of Islamic finance at ALFI and is the coordina-
tor of the ALFI Islamic finance working group. He contributes to the
While the choice of regime will depend upon the investment strategy development of Luxembourg as a place for Shariah compliant funds.

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Vol 8 Issue 7 23rd February 2011

x 50 online issues
Revolution brings renewal In this issue

IFN Rapid ..................................................... 2

The tectonic plates have shifted, albeit
metaphorically. Nations in the Middle East
and North Africa are caught up in a whirlwind
of revolution moving across the region, and
the world waits to witness the full impact of
the political crisis. If the domino theory has
its way, the global economy will bear the
brunt of this catastrophe even before it has
completely healed from the wounds of the
However distasteful, this might be a good
moment to pay heed to the adage that
behind every crisis lies great opportunity.
At least that is how NBD-Abu Dhabi Islamic
Bank (Egypt) chooses to look at things in its
report. The bank asserts that the best time
in post revolution Egypt, particularly in the
light of the political will that comes with a
new regime.
Not far from the political unrest lies Syria
which has made incremental steps to
However, there are many opportunities
for improvement in Syria as put forward
in a report by The Scandinavia University,
including injecting new blood into Islamic
Islamic Bank. And in Oman, while not explicit
in its laws for facilitating Islamic banking
of law precludes the need for separate
BankMuscat’s report.
Ever intertwined with the fate of the
Middle East economies is the US, where
opportunities for Shariah syndicated
institutions expand their knowledge and
opportunities to originate and participate in
One strategic approach which may help the
US market is to concentrate on the high net
worth individual market as suggested by
ADCB Meethaq. Their report proposes that
the HNW market be given top priority, so
focus is kept on best of breed Islamic banking
offerings. This will in turn ensure that quality
service is the key strategy for growth.
In our IFN reports, Uganda, Nigeria and
Ethiopia are steadily harnessing the potential
Islamic Finance News ................................ 3
Takaful News ............................................... 7
Moves ........................................................... 7
Ratings News .............................................. 8 HANDBOOK
IFN Reports:
Islamic megabank fails to retain
interest ..................................................... 9
South Korean Sukuk in limbo .............. 9
Thailand Sukuk market opens up ..... 10
New African entrants in Islamic
banking ................................................... 10
Global Sukuk sales may top 2007
record .....................................................11
Articles:
Islamic Finance and the Legal Framework
in Oman ...................................................12
............14
Syndication of Islamic Finance in the US
Financial Market ..................................... 16
Islamic Finance Features In Syria..........18
Islamic Finance in the New Egypt .........20
Islamic Finance: Opportunities for Growth
and Innovation ........................................ 22
Meet the Head ..........................................25
Najmul Hassan, CEO of Gulf African Bank
Termsheet ..................................................26
Senai Desaru Expressway US$1.83 billion Sukuk
Deal Tracker .............................................. 27

While not immune to the recent political
protests, both Yemen and Oman stand in good
are concerned. Although the development
Yemen has been a governmental priority for
a while, the country now needs an Islamic
says a report by Tadhamon International
Sukuk are detailed; Korea is on the verge of
a make or break decision on allowing Islamic
much touted megabank is considered.
In Meet the Head, we feature Najmul Hassan,
CEO of Gulf African Bank, one of the banks
poised to enter the Ugandan market this
year, and Senai Desaru Expressway’s Islamic
medium term notes is detailed in our
Termsheet.
Eurekahedge Funds Tables .....................28
REDmoney Indexes ..................................29
S&P Shariah Indexes ...............................30
Dow Jones Shariah Indexes .................... 31
Dealogic League Tables...........................32
Thomson Reuters League Tables ...........35 Featuring
Events Diary...............................................38
Company Index .........................................39
Subscription Form ....................................39

All of the above for only US$995 per year

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© Page 16 16th March 2011


www.islamicfinancenews.com
International Bancatakaful Opportunities: Luxembourg
Perspective
By Sohail Jaffer
A growing number of banks are embracing the potential of
Shariah compliant insurance (Takaful) by establishing partnerships
with Islamic insurance companies. Indeed, Takaful has gained
momentum in the MENA region and Southeast Asia. Furthermore,
there is a potential for an accelerated expansion of Takaful products
and services in a number of secular or Muslim minority countries.
The industry has witnessed a gradual development of the distribution
of Islamic insurance via the bank channel (bancatakaful). Sales
of Takaful products through this channel have multiplied between
insurers and banks, enhanced by the commitment of many countries
to issue guidelines to allow for banks to transact bancassurance/
bancatakaful business.
Legislation is also often adapted as regards to cross ownership
of banks and insurance companies as well as holding company
structures. The share of this distribution channel as a proportion of
the total has strongly increased to almost double in the last few years
like in Indonesia (doubled between 2005 and 2008) until reaching
in some countries like Malaysia more than half of the market share
or in Tunisia where “the regulator reported in 2009 that 40% of life
insurance sales were produced by this method” and in Morocco where
“more than 60% of new life and capitalization business is sold by
bancassurance”.
This competitive distribution channel has had a considerable impact in
the life insurance market as it enables easier access for the consumer
to such life cycle products. It also represents a win-win model for
banks and insurance companies: banks have access to customized
protection and savings products, sales training by experienced
professionals and it allows them to widen their range of products and
services for the relevant consumer segments, hence contributing to an
increase in their fee based income.
On the other hand, insurance providers benefit from the reputation
of well established banks thus gaining a wider visibility. Mirroring this
increasing trend in the Takaful insurance segment is the successful
partnerships and joint ventures established between global insurance
brands and major banks such as HSBC and Allianz Takaful, Standard
Chartered Bank and Prudential, Maybank and Etiqa, CIMB and Aviva.
The Islamic insurance industry is estimated to be growing at an annual
rate of 20% compared with a growth rate of below 10% for conventional
insurance. Nevertheless, the Ernst & Young Takaful report of 2010
revealed that global contributions grew by 29% in 2008, reaching
US$5.3 billion.
The same report projected the growth of Takaful by end 2010 to
US$8.9 billion and current unofficial figures note that the 2010
contributions exceeded the forecast. The alternative insurance model
seems thus benefiting of an increasing interest from mass affluent
and retail consumer segments globally.
In secular countries, however, the adoption of Takaful has been a much
slower burn. Even if we have recently seen a number of encouraging
© Page 17
COUNTRY REPORT
initiatives in Europe (namely the UK, France, Luxembourg and
Germany), such as an increasing number of events on Islamic finance
organized in European countries as well as several governments
launching working groups focused on Shariah compliant finance and
amending the legal framework to comply with Shariah principles;
there remains a certain hesitancy to further develop and promote this
alternative insurance industry.
The reasons explaining this hesitancy may range from conventional
regulatory regimes to a lack of local Shariah compliant investment
opportunities, a shortage of Shariah scholars, a dearth of staff with
adequate knowledge and practical experience of Takaful and limited
number of suitable distribution outlets.
Within the Eurozone, attention has focused on the opportunities for
Islamic financial services and a country that has shown its willingness
to integrate Shariah compliant finance into its wide array of expertise.
Luxembourg is indeed very well positioned to develop this industry
within Europe and beyond.
The Grand Duchy is a vibrant market in retail investment funds, hedge
funds, real estate companies, private equity and venture capital
vehicles as well as structured products. Luxembourg investment
vehicles are appealing for many institutional investors including
sovereign wealth funds.
The specific legal framework of the country enabled the creation of
regulated investment vehicles such as venture capital investment
company (SICAR), Specialized Investment Fund (SIF) and family wealth
management company (SPF). These legal structures are tailor made
for institutional and high net worth investors.
Due to the European passport, Luxembourg has been able to position
itself as the world hub for global distribution of retail funds with 75%
of all cross border funds being domiciled in Luxembourg. Practically,
Luxembourg domiciled investment funds compliant with the UCITS
directive can be easily marketed across EU and are widely accepted
around the world.
Furthermore, Luxembourg is already familiar with Islamic finance.
Currently 38 Shariah compliant funds are domiciled in the country and
a new tax circular is now covering the tax treatment of the Murabahah
contracts and Sukuk transaction. Indeed, the Luxembourg Stock
Exchange was the first European stock exchange to enter the Islamic
bonds market. The country started listing Sukuk in 2002 and now has
some 16 Islamic bonds with a global value estimated at EUR5.5 billion
(US$7.6 billion).
Additionally, the Banque Centrale du Luxembourg is the first non-
Islamic entity to become a member of the Malaysian based Islamic
Financial Services Board and the government takes part in ALFI’s
Working Group for Islamic Finance.
Besides the offering of Sukuk, the Grand Duchy’s financial place is a
continued...
16th March 2011
 COUNTRY REPORT
www.islamicfinancenews.com

International Bancatakaful Opportunities: Luxembourg Perspective (continued)

leading cross border provider of insurance; offering the necessary
infrastructure and service platform to welcome Takaful operators
or to enable conventional insurers to sell Takaful to their customers
via Islamic windows or subsidiaries. Luxembourg’s insurance market
counts 97 insurance companies and represented EUR12 billion
(US$16.7 billion) premiums in 2008. Eighty nine percent of the life
sector’s activities were generated by cross border sales.
The country attracts indeed many international insurance brands
and most of them offer Takaful products in targeted markets such as
Malaysia and the GCC. A major favorable factor for Takaful to flourish
in Luxembourg is the unit-linked life insurance.
Shariah compliant insurance products are similar to unit-linked
products: Takaful allows customers to combine protection cover
with return on Shariah compliant investments, notably in unit-linked
policies tied to dedicated funds, an instrument that is increasingly
used in wealth management. The specificity of those investments is
the ethical aspect.
channel and cross border access to Shariah compliant investments;
this industry is poised for growth.
Sohail Jaffer
Partner, head of international business development
FWU International
E-mail: s.jaffer@fwugroup.com
Sohail Jaffer is a partner and head of international business
development for “white label” bancassurance and investment
services within the FWU Group. Jaffer has successfully originated,
negotiated and won several major bank distribution deals in the
GCC region, Pakistan and Malaysia. He has written extensively on
alternative investments and has edited several publications on hedge
funds, multi-manager strategies as well as six books in the Islamic
finance range including retail banking, asset management, Takaful,
wealth management, investment banking and Sukuk.

Takaful companies cannot invest in funds from the alcohol industry as Opportunity…or Threat?
well as tobacco, weapons and gambling. This ethical and alternative
system is close to the socially responsible investment, thus it appeals
to both Muslim as well as non-Muslim customers. Shariah compliant
funds thus seem to have emerged as a viable alternative to the
conventional range of investments.

In addition, Luxembourg is contributing to the globalization of Islamic

insurance thanks to its flexible legislation, political and social stability,
financial competencies and its international platform as well as
multicultural environment.

Luxembourg is the second largest investment fund centre in the world

after the US, with almost approximately EUR2 trillion (US$2.7 trillion) “By far the most significant event of finance during the
of assets under management (AUM) in Luxembourg incorporated
past decade…”
funds in 2010. This privileged position enabled the country to emerge
as a leading center for the fast growing Shariah compliant investment
OR
market segment as well as a leading distribution center for Europe
and the US.
“Financial weapons of mass destruction”
Moreover, the investment funds industry can offer access to many
distribution channels to permit Islamic investment funds to expand
cross border into Europe, MENA and Asia. Funds supermarkets thus
play an important role to enhance distribution as they are adequate How do Islamic Finance and the Development of
infrastructures for the global connectivity in Islamic finance and as Derivative Instruments Fit Together?
they reduce the high information search costs. In Luxembourg, there
are three categories of funds platforms: What are the Key Shariah Issues?

1. Luxembourg Financial Group’s platforms including Answers here:

Luxembourg Alternatives UCITS Platform – LAUP – and
Luxembourg Financial Group InvAG TGV;
2. Bank’s platforms such as Deutsche Bank’s Luxembourg based
Islamic Treasury Management & Derivatives
funds platform Al Miyar; 22nd – 24th May, DUBAI
3. Asset managers’ platforms such as Internaxx Fund 20th – 22nd July, KUALA LUMPUR
Supermarket.

Globalization of Takaful as a viable alternative to conventional

insurance is clearly on its way with the foundations being laid in Asia, www.islamicfinancetraining.com
Africa, Europe and North America for further growth in the market. info@islamicfinancetraining.com
Benefiting from the competitive distribution edge of the bancatakaful

© Page 18 16th March 2011


www.islamicfinancenews.com
Islamic Private Equity and Venture Capital
By Ahmad Lutfi Abdull Mutalip
In Islam, money is not a commodity and cannot be traded for profits.
It is just a medium of exchange and it stores value. Money therefore
must be invested in projects and ventures for the generation of
activities for the benefit of mankind and in the process, for profit.
This is precisely why Islamic finance praises and encourages the appli-
cation of finance in the financing of real economic activities. The returns
should be earned by active involvement and participation in the busi-
ness risks of investment and not the returns on lending or financing.
Islamic banks would apply the same criteria in evaluating projects to
invest in, namely the entrepreneur’s ability and the profit potential of
the project. This is the reason why Murabahah (cost plus financing) as
an Islamic transaction is considered less risky compared to Mudarabah
(profit sharing) and Musharakah (partnership). A true form of Islamic
financing or investment structure should have that element of sharing
of profit and loss.
“A true form of Islamic financing
or investment structure should
have that element of sharing of
profit and loss”
Common Shariah based structures for Islamic private
equity/venture capital
1. Mudarabah (profit sharing)
Mudarabah is one of the typical forms of Islamic private equity/venture
capital (Islamic PE/VC). It is basically a contract made between two
parties to finance a business venture. The parties are a Rab al maal
(investor) who solely provides the capital and Mudarib (entrepreneur)
who solely manages the project.
This is akin to a conventional PE/VC, where there exists a relationship
between the capital provider and the entrepreneur. If the venture is
profitable, the profit will be distributed based on a pre-agreed ratio. In
the event of a business loss, it should be borne solely by the capital
provider, to the extent of the capital contribution while the entrepreneur
will lose his time and effort.
The key to a Mudarabah structure is the fact that the entrepreneur
cannot be placed at risk to bear losses, unless proven negligent.
2. Musharakah
Musharakah is a partnership between two parties or more to finance
a business venture whereby all parties contribute capital either in the
form of cash or in kind. Profits are shared at a pre-agreed ratio while
in the event of a loss, the loss shall be shared on the basis of capital
contribution.
3. Wakalah
Wakalah is basically a contract where a party (principal) authorizes the
other party or parties (agent) to act on his behalf, based on the agreed
terms and conditions. Pursuant to the Wakalah contract, it confers the
© Page 19
SECTOR REPORT
power and rights to the agent to act on behalf of the principal as long
as the principal is alive.
Fundamental requirements for an Islamic PE/VC fund
There are two fundamental requirements for the establishment of an
Islamic PE/VC fund, namely:
1. The appointment of a Shariah advisor to provide continuous
guidance in ensuring that the investment contract and the
instrument structure are in compliance with the Shariah at
all times; and
2. The core activities of the investee companies must be Shariah
compliant. Effectively, this means that the underlying assets
and investments of the fund must be permissible.
Non permitted Shariah activities include:
(i) financial services based on interest (riba);
(ii) gaming/gambling (maysir);
(iii) conventional insurance;
(iv) manufacture or sale of non-halal products or related
products;
(v) entertainment activities that are non-permissible according
to Shariah;
(vi) manufacture of sale of tobacco based products or related
products;
(vii) stockbroking or share trading in Shariah non-compliant
securities; and
(viii) hotels and resorts with non-Shariah compliant activities.
Best practices
There are some best practices which are highly encouraged to be
adopted by Islamic PE/VC fund companies, inter alia:
1. The Shariah advisor shall act with due care, skill and diligence:
(a) to ensure that all aspects of the Islamic venture capital such
as portfolio management, trade practices and operational
matters comply with Shariah;
(b) to provide Shariah expertise and guidance on matters relating
to documentation, structuring and investment principles;
(c) to review and scrutinize compliance report prepared by Shariah
compliance officer or any investment transaction report; and
(d) to provide a written opinion and periodic report.
2. Annual written disclosure and declaration
The Shariah advisor is expected, on an annual basis, to disclose and
declare to the board of directors of the Islamic PE/VC fund company
that the Islamic PE/VC fund company is managed according to Shariah
principles.
3. Portfolio management
The Shariah advisor is also expected to endorse any investment
decision and to ensure that the activities of the investee companies
remain Shariah compliant right to the point of full divestment.
Source: Guidelines and best practices on Islamic venture capital
issued by the Securities Commission of Malaysia.
continued...
16th March 2011

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Islamic Private Equity and Venture Capital (continued)
Specific considerations in Islamic VC/PE fund companies
1. Structure
The documentation, financing and investment structure must
be Shariah compliant in that:
(a) funds belonging to the Islamic PE/VC fund company must
be invested in a structure which is Shariah compliant.
Activities of the Islamic PE/VC fund company are based on
tangible assets and are not speculative in nature (gharar).
(b) the constitution of the Islamic PE/VC fund company
stipulates a prohibition on non-Shariah compliant activities.
(c) the activities of the directors and officers of the Islamic PE/
VC fund company must be acceptable in nature and that their
activities are conducted in a Shariah compliant manner.
“The creation of appropriate
business structure or investment
structure to make the Islamic
PE/VC products better
understood and accepted
by market players is another
important criterion to enable the
rapid growth of the industry”
2. Underlying Assets
The underlying assets and investments of the fund must be
Shariah compliant. The Islamic PE/VC fund company funds
must not invest in non-Shariah compliant counters or securities.
The assets must also be of good quality and the risk and reward
associated with such investment have been fully appraised.
3. Islamic VC/PE fund documentation
Legal documentation for the setting up of an Islamic PE/VC
fund company and fund management company shall take into
account the earlier points, inter alia, the appointment and
powers of the Shariah advisor, the provision stipulating that
the fund be invested in line with criteria as specified by the
Shariah advisor, the provision specifying that the fund can only
enter into transactions which are in compliance with Shariah
principles and the provision for continuous audit to determine
whether the assets are Shariah compliant.
4. Profits of fund
There must be an express provision and understanding
between the parties involved that any profit of the Islamic PE/
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© Page 20
SECTOR REPORT
VC fund company shall be based on returns from investment
of the fund, with no guaranteed profit return and there should
also be a provision for reinvestment of profits into the Islamic
PE/VC fund company.
Challenges faced by Islamic PE and VC
As the market and market players are more familiar with the banking
industry, plus the fact that typical Islamic financing transactions lead
to the creation of indebtedness (for instance sale and purchase, sale
and lease back) compared to Islamic PE/VC the basis is profit and loss
sharing and the sharing of risks, emphasis has been given towards the
banking industry.
Until the market and market players are familiar with and are willing
to venture into risk sharing, Islamic PE/VC will only be applicable to
certain target groups like start up companies.
The establishment of legal and regulatory framework, or the appropriate
guidelines to regulate the Islamic PE/VC industry are equally important
to enable the industry to gain momentum in a particular jurisdiction
and lend certainty on issues arising out of Musharakah, Mudarabah
or Wakalah contracts.
The governments also need to play their role in supporting and backing
the Islamic PE/VC industry in terms of incentives, tax exemptions, and
such, to enable the industry to make way into the mainstream economy.
The creation of appropriate business structure or investment structure
to make the Islamic PE/VC products better understood and accepted
by market players is another important criterion to enable the rapid
growth of the industry.
Shortage of well trained and high caliber individuals, advisors and
management teams with expertise in investment strategies, legal
documentation and who at the same time understand and appreciate
the Shariah requirements are also real challenges to the Islamic PE/
VC industry.
Another challenge worth noting is for market players in the Islamic
PE/VC industry to innovate and develop new investment structures
given the changing investment climate and circumstances without
compromising the requirement of the Shariah.
Ahmad Lutfi Abdull Mutalip
Partner, global financial services and Islamic banking
Azmi & Associates
Email: alam@azmilaw.com
Ahmad Lutfi Abdull Mutalip’s expertise ranges from Islamic banking
and Islamic private debt securities, Islamic product development,
mergers and acquisitions to Islamic venture capital and private equity.
Secure Your FREE Seat
www.ifnforum.com
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The Islamic Finance Industry in Indonesia
By Rizqullah
A comprehensive definition of Islamic banking and finance described
by the State Bank of Pakistan goes as follows: “Islamic banking has
been defined as banking in consonance with the ethos and value
system of Islam and governed, in addition to the conventional good
governance and risk management rules, by the principles laid down
by Islamic Shariah.”
Islamic finance in more general terms is expected not to only avoid
interest based transactions, but to also avoid unethical practices,
and to participate actively in achieving the goals and objectives of an
Islamic society.
The emergence in Indonesia
With the regulation Act No 7/1992 elaborated in government decree
No 72/1992 concerning bank applying share base principle, the
Indonesian government has implicitly permitted Shariah banking
operation. The Act No 10/1998 was then issued as an amendment.
Bank Muamalat was established in 1999 as the country’s first Islamic
bank. The industry grew by 85% in 2004 which triggered many
conventional banks to open a Shariah window.
An overview
Indonesia is considered as the largest Muslim country in the world;
85% of its 240 million population is Muslim. This fact poses great
opportunity for massive growth. In the past five years, Indonesia
experienced an encouraging average annual growth of 60% for the
industry. In 2005, Indonesian Shariah banking recorded a profit of
US$23.8 million; a 47% increase from the previous year.
Through its central bank; Bank Indonesia (BI), the Indonesian
government has initiated efforts to stimulate further growth. Various
support schemes have commenced, legal support and law enforcement
proposed and implemented, and policies issued. Flexibility in various
commercial regulations and business conditions has been offered
to foreign investors on stimulating the industry’s growth. However,
despite various encouragement and official support, the country’s
Shariah banking industry remains in its infancy.
Although the industry’s outlook is promising in general, the accomplish-
ments of the Indonesian Shariah banking industry still trails behind its
neighbor Malaysia. In 2005, Malaysia recorded US$272 million in profit,
and by the end of 2006, Malaysia seized a 12% market share of its total
national banking assets. By the end of 2006, Indonesia only seized a
1.4% market share of its total national banking assets. Furthermore,
the industry showed rather slow growth by the end of 2009, seizing only
2.8% market share of its total national banking assets.
From the retail side, in 2009, the total number of nationwide Shariah
banking accounts in Indonesia totals only 4.5 million. To compare,
the total number of nationwide conventional banking accounts is
estimated to be 100 million. This shows Shariah banking accounts
hold a humble market share of less than 5%.
Shariah banking development
The Shariah banking industry in Indonesia has recorded an
encouraging growth rate since its first introduction in 1993. According
© Page 21
FOCUS
to BI, total Islamic banking assets grew by 35 times; from IDR1.79
trillion (US$204 million) in 2000 to IDR66.089 trillion (US$7.5 billion)
at the end of 2009.
BI also reported that, in the past eight years, the industry’s average
annual growth has been recorded at a rate of 53.32%. Between
periods of 2008-2009, the industry’s assets grew by an average rate
of 33.4% per year. This is well above a growth rate of 15% — 20%
per year achieved by the Southeast Asian region’s Shariah banking
industry within the same period.
Furthermore, in 2008 to 2009 there was a positive indication in the
growth of the Shariah banking industry’s financing provision; average
annual growth of 22.8% was recorded. In its funds mobilization from
public side, 37.7% average annual growth was achieved.
Over the past five years, financing to deposit ratio (FDR) of the industry
reached 90%, implying that the industry has been actively supporting
the real sector’s growth. From the profitability side, Shariah banking
recorded a high growth rate between the periods of 2008-2009 with
its return on equity of 25.22% per year.
The Indonesian Shariah banking industry has experienced an
aggressive expansion process, nationwide. Its total network has
reached 1,140 offices and 1,802 Shariah services are now made
available in 32 provinces. The operation is supported by a wider
network of ‘joint ATM’ stands and various sophisticated technology
which enables internet and banking mobile features.
Challenges
Despite the encouraging growth figures in the early years of Shariah
banking in Indonesia, the industry is facing challenges which might
have slowed down this growth.
According to BI, total assets of Shariah banks as of January 2010 were
only around 2% of the total nationwide bank assets of IDR2.502 trillion
(US$275.2 billion). BI claims that the industry seems to be struggling
on meeting its target of growth, which is 5% share of the total assets.
Investors previously predicted a potential explosive growth in Indonesia
based on the fact of a vast untapped banking potential and a large
Muslims population. It was then expected that Southeast Asia’s
largest economy would soon be the next huge growth market for the
US$1 trillion industry.
Apparently, investors would have to be satisfied to settle with a slower
rate of gains. This slow growth is assumed to be the result of the
implementation of several unwelcoming laws and regulations by the
government, also a lack of clear industry standards, for example, no
proper guidelines on Islamic securities for instance.
The combined elements of a general upbeat economic outlook,
high domestic interest rate, and the country’s firming currency
have also appealed many foreign investors to the country’s assets.
Unfortunately, Indonesia is facing disappointments in the case of
Sukuk. Several Sukuk sales and government issuances have shown
continued...
16th March 2011

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The Islamic Finance Industry in Indonesia (continued)
discouraging results. Mohamad Safri Shahul Hamid, the deputy chief
executive at Malaysia’s MIDF Amanah Investment Bank, believes that
the regulators need to be more aggressive and active in opening up
the market, initiating discussions and encouraging the introduction of
various new products, especially retail and Sukuk.
Tax issues were also considered as one major hurdle of the industry’s
growth. The double taxation system applied in several Shariah
transactions subjected the customers to pay additional tax. Although
the government has recently revised its tax regulation, the new
regulation is viewed as ‘not retroactive’; and banks are still involved in
a dispute with the directorate general of taxation.
Public awareness is one of serious issues holding back its growth. The
need to educate Indonesian Muslims on Shariah finance is considered
crucial. The other challenge to overcome is the characteristic of
the Indonesian Muslim, which is less inclined to adhere to Islamic
principles in many aspects including finance. Many analysts in
Indonesia agree that although 80% to 85% of Indonesia’s population
is Muslim, a significant portion of them practice a more moderate form
of Islam compared to Malaysia.
The World Bank argues that the industry’s growth is impeded by
the lack of regulation instruments to supervise and regulate the
industry, which is also lacking in appropriate framework, and low
public awareness and limited market coverage. From the operational
side, the industry’s growth seems to be held back by inefficiencies of
institutional structures to support efficient operations, incapability to
comply with international financial standards, and harsh competition
from conventional banks.
BI support
The government through BI as the regulator is expected to facilitate the
structures on various issues related to the Shariah banking industry,
before the industry could be expected to leap for growth in the future.
Only with the right support from regulators level, a more impressive
growth can be achieved.
To strengthen the Shariah banking network, BI issued in 2009 the
regulation on the conversion of conventional banks to Shariah banks;
Regulation No 11/15/PBI/2009. The regulation came into force
on the 29th April 2009, with the aim to stimulate the conversion of
conventional banks to Shariah banks.
The regulators’ role in supporting the industry’s growth is vital.
Mulya Siregar, then deputy director of BI, in his speech at a seminar
on Islamic Banking in 2009 claims that, without the full support
of government regulations, the growth would only be around 43%,
while with the support, it could grow by a maximum of 81% for asset
ownership.
Prospects for growth
The Shariah banking market is predicted to grow at a compound
annual growth rate (CAGR) of around 52% from 2008 to 2010.
The reasons behind this are the large Muslim population, current
conditions of a relatively low penetration of Shariah banking, and the
improvements in regulatory framework. As an effort to support the
industry’s development, BI issued a blueprint aimed at strengthening
the industry by 2015.
© Page 22
FOCUS
BI’s grand strategy to boost the industry’s growth will be focusing
on three major actions; increasing the efficiency of Islamic banking,
integrating Islamic banking into the Islamic financial industry, and
conforming to global Islamic banking products.
BI believes that a recent revival of the Islamic religion in the country,
supported with by its grand strategy, will popularize various Shariah
banking products; eventually resulting in concrete growth in the future.
Based on the rising popularity of Shariah banking within the country,
BI predicts an increase in demand for Shariah financing, which will
offer a CAGR growth of more than 51% from 2008 to 2010.
Despite various challenges faced, the industry’s growth potential in
the country has apparently attracted foreign banks. HSBC launched its
Shariah window called HSBC Amanah, which is now operating in the
country. Only recently, Malaysia entered the market in 2010 with CIMB
Niaga Syariah. It is also predicted that in the near future there will be
more foreign banks from Malaysia and Bahrain entering the market by
establishing its Shariah branches in Indonesia. This fact implies there
is a massive potential market for growth within the country.
Drs Rizqullah, MBA
President director
Bank BNI Syariah
Email: rizqullah57@yahoo.com
Rizqullah has been involved in Islamic banking and economic
activities since 2002. He was involved in several Islamic economic
and banking organizations and is lecturing on Islamic economic and
finance at several postgraduate programs with Trisakti University and
Universitas Islam Negeri Jakarta.
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Islamic Economics and Financial Sector Reforms
By Professor Dr Volker Nienhaus
The idea of a Muslim state on the territory of British India took shape
in the 1930s and became reality in 1947. The search and quarrel for a
distinct “Islamic” economic order started in the 1940s and continued
even after the adoption of the constitution of the “Islamic Republic of
Pakistan” in 1956, since the institutions of the new state were rather
secular. Proponents of an Islamic order presented a concept that was
considered to be a “third way” between materialistic capitalism and
anti-religious communism.
The concept of an Islamic economic order (in some variations by
different authors) was comprehensive and covered areas such as
consumer behaviour, public finance, money and banking, social
solidarity and Zakat and such.
Islamic economists wanted to give guidance for a systems reform, and
the literature was more prescriptive than analytic. Models often had a
utopian character, because they assumed the general adherence to
high moral standards and altruistic and social welfare oriented values.
In a world populated by ‘ideal Muslims’, honesty and trust prevail while
principal agent or moral hazard problems do not exist.
In such a world, a financial system based on profit and loss sharing
(PLS) could function smoothly and ensure a fair distribution of risks
and rewards as well as overall financial stability. For those who were
searching for an alternative economic system – to be neither capitalist
nor socialist but Islamic — the so-called “two-tier Mudarabah” model
was the core of a genuine Islamic financial order.
The basic model was later refined and formalized, but one crucial
question was hardly ever addressed, namely how to get from the status
quo to the ideal new world. Obviously most Muslims did not behave
as assumed and secular ideas had taken root in Muslim societies.
Islamic economics did not provide a theory of system transformation.
Most Islamic economists left this problem to the state, and they
insisted that an Islamic economic order should be implemented in its
totality and not only for specific sectors such as finance.
Against this background it is understandable that, on the one hand,
Islamic economists had familiarized themselves with the activities of
Islamic banks — established in the Arab world since the late 1970s —
only lately and with a lot of scepticism.
On the other hand, the practitioners of Islamic banking did not care
much about the models of Islamic economists and made (for many
good reasons) extensive use of non-PLS modes of financing. The
conceptual reference group for Islamic bankers were not Islamic
economists but experts in Islamic law (Shariah scholars) who had to
ensure the Shariah compliance of products and procedures. Only few
Shariah scholars had strong links to Islamic economists (or even were
economists themselves).
In a slightly oversimplification one may say —
• that Islamic economists had argued in favour of a fundamentally
different financial system (with different techniques and
products and in support of entrepreneurial activities outside
established circles),
© Page 23
MARKET REPORT
• while Islamic bankers (or their shareholders) had no intention
to change the fundamentals of the financial system; they
made only efforts to change the underlying contracts to create
Shariah compliant functional equivalents for existing products
of the established business community.
Islamic economists did not challenge the legal permissibility of the
widely applied non-PLS modes of financing, but they pointed out that a
change of the legal form does not change the economic substance of
the system — it does not bring forth a more just financial system, and
it does not broaden the entrepreneurial base to open new avenues for
socio-economic development.
In spite of this critical attitude of Islamic economists, CEOs of Islamic
banks as well as politicians and central bankers persistently refer to
two of their propositions, namely —
• that Islamic banking links finance to the productive real
economy and
• Islamic finance is based on the principle of risk sharing.
One does not have to dig deep to find out that both propositions are
claims rather than factual descriptions of Islamic finance today.
• To start with, in a fractional reserve system credit creation and
leverage are always possible — and that implies the existence
of financial claims without an asset backing, such as a direct
link to the real economy.
• Next, by far the largest portion of Islamic banks’ financing
is based on contracts with fixed costs/returns (Murabahah,
Ijarah) and factually very limited if any risk for the bank, while
financing based on partnership contracts (Musharakah,
Mudarabah) is the very rare exception.
• Then, investment in bubble prone markets with speculative
price movements (such as real estate in the past or
commodities at present) does link finance to real assets — but
not to productive activities in the real economy.
• Further, the combination of trade related contracts with
unilateral promises (Waad) led to recent ‘innovations’ —
approved as Shariah compliant by leading scholars that
replicate complex conventional products used by conventional
financial institutions for speculative deals within the financial
sector (such as short selling of stocks or swaps of currencies
or returns).
• Finally, in the ‘deposit business’ Mudarabah based investment
accounts are conceptually exposed to a risk, but Islamic banks
have created a ‘deposit illusion’ because they treat them like
deposits: If actual investment returns fall short of expectations,
banks use investment risk and profit equalization reserves,
reduce their profit share, or transfer shareholders’ funds to
ensure that the advertised ‘anticipated’ rates of return can be
paid out.
continued...
16th March 2011

www.islamicfinancenews.com
Islamic Economics and Financial Sector Reforms (continued)
The Islamic finance industry seemingly moves more towards
conventional finance than towards the ideal of Islamic economists.
By this, the Islamic sector replicates many of those products and
techniques that are suspected to have caused or at least amplified
the recent financial crisis. In addition to the commercial risks of
conventional finance, the specific underlying contracts of Islamic
finance add a further individual and systemic risk dimension.
Before the recent crisis, the readiness to think about fundamental
financial sector reforms was absent. But now, in academia and media
as well as in politics and the business community, the search for
and debate on systemic alternatives has reached an unprecedented
intensity. The economic core of the PLS models of Islamic economics —
financing only the productive real economy and sharing risks between
financiers and entrepreneurs can serve as a guide for a systemic
reform, at least for the Islamic finance industry.
• Suppose investment account holders realize and accept that
they are no depositors but investors, that is, the nominal value
of their funds is not guaranteed.
• Once the deposit illusion is gone, investment account holders
will become risk sensitive and concerned about the use of
their funds.
• For the modest returns they have received in the past — roughly
equivalent to interest on conventional savings accounts or
term deposits, they will hardly be ready to accept high risks.
Leverage boosted returns on equity only, not investment
account returns.
• Most probably investment account holders want to learn about
the risk profile of their investment and to make informed
choices, what universal banking cannot provide.
But financial holding companies which have wide ranges of separate
mutual funds with different investment strategies and risk profiles
(from very secure investments in sovereign Sukuk with low returns
over diversified portfolios of corporate and project financings to
venture capital funds with high risks and chances for high returns)
could meet the demand of the risk aware savers.
• Instead of ‘depositing’ money with a bank, savers will then
purchase certificates of investment funds that are traded on
an exchange.
• The trading ensures the liquidity of the certificates, but it
does not guarantee a nominal value (which depends on the
performance of the underlying portfolio).
• In contrast to opaque banking practices, the saver will know
in advance where his money is invested (in bubble prone
markets, speculative commodity transactions, the short selling
of stocks, sovereign Sukuk, manufacturing enterprises, and
such), and he has knowingly accepted the associated risk.
For conventional finance, a replacement of bank deposits by mutual
funds looks revolutionary, but for Islamic banking it would be not much
more than the consistent application of the concept of Mudarabah
based investment accounts and the adherence to Islamic finance
principles.
© Page 24
MARKET REPORT
• Banks would be reduced to so-called “narrow banks”: They
accept and guarantee deposits only for transactional purposes
and keep funds received from the public in cash or highly liquid
central bank papers (= 100% reserve). There is a long tradition
of “100% money” reform proposals in conventional economics
(from Irving Fisher in the 1930s to “narrow banking” or “limited
purpose banking” concepts today), and Islamic economists
had also taken up these ideas in the past (but more under the
perspective of monetary policy than banking system reform).
• Given the rather low returns for investment accounts, savers
would not suffer a financial loss but gain transparency and
the freedom to choose. This would greatly enhance the
effectiveness of market discipline in the financial industry.
• Regulators may like such a system because it eliminates
stability threats from liquidity squeezes and bank runs (due
to over leveraging, maturity mismatches and write-offs on
assets). Such problems will simply vanish because transaction
deposits are backed by 100% reserves and investment
certificates do not carry a guaranteed nominal value.
• Shareholders of financial institutions who earned – at least in
‘good times’ – profits much above the productivity growth of
the real economy, may not like the new system at first sight.
But once they realize that the high profits were mainly due to
highly leveraged and risky financial transactions and originate
from a zero-sum game over time (unless the state bails out
failing banks and transforms the game into a positive sum for
the financial actors and negative-sum for the public), Muslim
shareholders may wonder how all this could be Shariah
compliant in substance.
• Even if disappointed shareholders would withdraw capital
from the financial sector, this would not be a serious reform
obstacle because narrow banks and mutual funds can be run
with minimal capital. They do not need equity as a risk buffer
in order to meet depositors’ claims.
Islamic economics persistently reminded the Islamic finance industry
of core principles which were well received and often quoted in public
but not implemented in practice.
A reform of the Islamic financial sector in line with core principles
of Islamic economics seems feasible and beneficial, and the socio-
economic impact could be tremendous. This makes it worthwhile to
start an intensive debate on narrow banking in Islamic finance.
Professor Dr Volker Nienhaus
Visiting professor
ICMA Centre, Henley Business School, University of Reading
Email: vwn@gmx.net
Professor Dr Volker Nienhaus is also a visiting scholar at the University
of Malaya under the Securities Commission Islamic Capital Market
program and member of the Governing Council of the International
Centre for Education in Islamic Finance in Kuala Lumpur. He has
published numerous articles, essays and books on Islamic economics
and finance since the 1980s.
16th March 2011
 FORUM
www.islamicfinancenews.com

At a time where the European economies are still in distress, with the Eurozone’s GDP projected
at less than 1% for 2011, how can Islamic finance be an alternative source for revival?

The outlook for the European economies has improved in recent months and the European Commission is now
predicting growth in the Eurozone of 1.6% for 2011. Germany is the best performer with solid export growth driving
the economy forward by 2.4%, while the projection for France is 1.7%. The major weakness is in the smaller peripheral
Eurozone members, notably Greece, Ireland and Portugal.

Although the overall growth figure of 1.6% looks modest in comparison to China and India, as it is from a much higher base and seems
sustainable. The major threat to growth is higher oil prices as a result of the popular uprisings in the Middle East.

As Islamic finance plays a very limited role in Europe, and most of the activity is in the UK which is not a Eurozone member, it is unlikely to
provide much of an alternative to conventional finance. European banks continue to be risk averse which has a small negative effect on growth,
but investors from the Middle East may also now be more risk averse about investment in Europe, especially with the freezing of assets of the
Gadaffi, Mubarak and Ben Ali families.

More significantly, the assets of the Libyan sovereign wealth fund have also been blocked. Of course these asset holdings were not specifically
Shariah compliant, but given the uncertainties in the Middle East, and particularly in Bahrain, which is an important centre for Islamic finance,
investments in Europe are more likely to be liquidated than increased.

PROFESSOR RODNEY WILSON: Director of postgraduate studies, Durham University

There are two ways for Islamic finance to help revive the economy of Europe. Firstly, governments should look to do more sovereign
Sukuk. This could be especially easy in Germany as they have experience with Saxony-Anholdt. Second is to pass laws that would
allow for the opening of Islamic banks that cater to the European Muslim population. This Muslim population in Europe is said to
be around 7%, and are mostly likely “unbanked”.

MONEM A SALAM: Director of Islamic investing and deputy portfolio manager, Saturna Capital

Poor economic growth discourages financial intermediation, whether conventional or Islamic in nature. So
to suggest that Islamic finance can help “cure” economic malaise could be misleading. In practice, regional
governments need to support business and consumer confidence so that the economic momentum begins
to churn at an incrementally higher rate. This may be difficult because of the size of the European market,
along with the global backdrop.

Where Islamic banks can play a meaningful role is to use the current downturn as a forum in which to raise awareness and education about their
competencies. This effort need not be a zero-sum game with the conventional institutions. Rather, Islamic banks can use the vacuum created
by this environment to build a franchise for their products and services, many of which are misunderstood by the marketplace. Especially at the
wholesale level, firms may be looking for financing options in ways that they have not explored in the past.

We argue that one of the constraints on Islamic finance in general is the absence of a large hinterland. We see an opportunity in Europe
for Shariah compliant institutions to be more forthright in their strategic planning, taking advantage of the current lull to develop new client
segments.

DOUGLAS CLARK JOHNSON: CEO, Codexa Capital

Next Forum Question

Pakistan as the world’s second largest Muslim population has lagged in development of an Islamic banking hub.
What may have been the reasons and what should the country do?
If you would like to air your views on the next Islamic Finance Forum Question, please email your response of between 50 and 300
words to Christina Morgan, Forum Editor, at: Christina.Morgan@REDmoneygroup.com before Monday, 28th March 2011.

© Page 25 16th March 2011


www.islamicfinancenews.com
Islamic Finance news talks to leading players in the industry
Name: Mulya Effendi Siregar
Position: Director, Directorate of
Islamic Banking
Company: Bank Indonesia (Central
bank of Indonesia)
Based: Jakarta
Age: 54
Nationality: Indonesian
Could you provide a brief journey of how you arrived
where you are today?
I began my career with the Shariah banking research and regulation
team of Bank Indonesia in April 1999 as a vice manager. The team
was established with the Banking Act No 10/1998 which states that it
is possible for a bank to operate based on Shariah principles. From a
small team of 10 people, it then became the Shariah banking bureau
in 2001. In 2002, I became the bureau’s head of Shariah research
development and regulation team. Later in 2003, the bureau became
the Sharia Banking Directorate. In 2006, the board of governors
appointed me as the directorate’s head of Shariah banking research,
development and regulation bureau. I have been the director of the
directorate since June 2010.
What does your role involve?
The directorate of Islamic banking is the banking regulator for the
industry. This directorate also supports the monetary management
directorate in preparing regulations for the Islamic money market. I am
involved in developing the blueprint for the Islamic banking industry
2002 – 2015. With the government’s cooperation and other related
parties, we help build the Islamic capital market, Islamic multifinance
and non-banking Islamic financial institutions.
What is your greatest achievement to date?
From two Shariah banks and one Islamic window, we now have 11
Islamic banks, 23 Islamic banking windows and 150 Islamic rural
banks, with asset growth of 38% per year in the last five years. Shariah
banks have performed well with 96.4% financing to deposit ratio and
only 3.9% non-performing financing in the last five years. Further,
the Islamic Banking Act and Sukuk Act of 2008 strengthen the legal
operations of the Islamic banking industry and foster the development
of the Sukuk market. Indonesia has some advantages such as the
world’s biggest Muslim population, Islamic banking operations with
no application of debatable Islamic contracts; and support from the
government, Islamic scholars and public.
Which of your products / services deliver the best
results?
Our products are in the form of banking regulation and supervision.
We have issued various banking regulations such as risk management
in Islamic banks, product developments, capital adequacy ratio, as
well as including reference to the standards of the IFSB and AAOIFI.
© Page 26
MEET THE HEAD
Further, we have created the blueprint for the development of Islamic
banking industry (2002-2015). Such programs have shown positive
results.
What are the strengths of your business?
The high growth of the country’s Islamic banking industry is based
on the robust performance of Shariah banks, contributing to
the development of the economy through financing SMEs which
dominates 95% of Islamic bank’s financing. Islamic banks mostly
finance the business, trading and construction sectors. The growth of
Islamic banks’ branches, the office channeling program which allows
customers to deposit money in any conventional bank and, various
Islamic products have illustrated the strength of this industry.
What are the factors contributing to the success of
your company?
The central bank particularly the directorate of Shariah banking works
with the National Sharia Board, Indonesian Accountant Association,
government, parliament, market players, academic and all related
parties to develop the Islamic banking industry. The stability of the
Indonesian economy also allows the industry to grow.
What are the obstacles faced in running your
business today?
The market share of the Islamic banking industry (3.3%) is still very
small compared to conventional. The industry also faces obstacles
such as — limited human resources, limitation in the Islamic financial
market instruments, lack of Islamic banks and government funds.
However, such obstacles are being mitigated through the active
involvement of the banking regulator, market players, academic and
Islamic scholars.
Where do you see the Islamic finance industry in, say,
the next five years or so?
In the next five years, the industry would have exceeded 5% market
share. We have planned to achieve a double digit market share in 2015
to 2020. With the current performance of the Islamic banking industry,
such a market share would correlate with bigger contribution of the
industry to the economy. Moreover, the growing Islamic capital market
especially the Sukuk market will play a significant role. Currently, the
volume of the Indonesian government Sukuk since 2008 is INR44.4
trillion (US$4.44 billion) out of US$134 billion globally and there will
be more issuances in the next five years.
Name one thing you would like to see change in the
world of Islamic finance.
We realize that Islamic finance is developed based on Shariah legality
and tries to mimic conventional finance with certain modification to
comply with Shariah principles. I hope Shariah finance develops based
on Shariah economic substance that may harmonize the financial and
real sectors. Shariah finance should introduce products to support real
sector development and create services and products which have a
multiplier effect on the economy. In other words, Islamic finance should
not contribute to the bubble economy. This requires a paradigm shift
based on Shariah economic substance. I realize that it is not easy as
customers are not ready. Therefore, we should do it step by step
16th March 2011
 TERMSHEET
www.islamicfinancenews.com

SUMMARY OF TERMS & CONDITIONS

Obligor/Issuer Government of Indonesia / Perusahaan Penerbit

SBSN Indonesia
Indonesia Retail Sukuk Tenor Three years
Return Fixed coupon 8.15% per annum
Payment Monthly
Maturity date 23rd February 2014
IDR7.3 trillion Selling agent Bank Mandiri (Persero), Bank Internasional
Indonesia, Bank Syariah Mandiri, Bank Rakyat
(US$824 million)
Indonesia (Persero), Bank CIMB Niaga, HSBC, Bank
Negara Indonesia (Persero), Citibank, Standard
Chartered Bank, Bank Permata, Bank OCBC NISP,
Andalan Artha Advisindo Sekuritas, Mega Capital
Indonesia, Bahana Securities, Danareksa Sekuritas,
Trimegah Securities, Sucorinvest Central Gani,
Reliance Securities, Ciptadana Securities, Kresna
Graha Sekurindo
Legal advisors AZP Legal Consultants
Trustee Perusahaan Penerbit SBSN Indonesia
Governing law Indonesian
Shariah advisor National Shariah Board — Indonesia
23rd February 2011 Structure Ijarah sale and lease back
Tradability Tradable

The Q&A was conducted with the directorate of Islamic financing, ministry of finance Indonesia:

1. Why did you use this particular Islamic structure? What other structures were considered?
We used this structure because it is well accepted by investors and gives fixed returns periodically. It is already approved by the National
Shariah Board (Sharia Approval number: B-036/DSN-MUI/I/2011 on the 31st January 2011). Ijarah sale and lease back were used in
the previous domestic retail Sukuk issuance (SR-001 and SR-002 series).

2. What will this capital be used for?

Based on Indonesia Sukuk Law No 19 / 2008, the sovereign Sukuk is issued for the purpose of financing the state budget (general
budget financing).

3. What were the challenges faced and how were they resolved?
The most challenging thing was the distribution of investors which were still concentrated in Jakarta and western Indonesia. The
Indonesian government and selling agents worked together to smooth the distribution of investors through socialization, pre-marketing
and marketing which were carried out in almost all major cities in the country. As a result of the SR-003 issuance, the government and
selling agents will be more focused on socialization and marketing efforts in the central and eastern regions of Indonesia. We are also
currently looking for other methods to increase the participation of investors in both regions.

4. Geographically speaking, where did the investors come from?

No Region Volume (%) Investor (%)
1 DKI Jakarta 55.40 41.17
2 Western Indonesia except DKI Jakarta 40.33 52.32
3 Central Indonesia 2.97 4.62
4 Eastern Indonesia 1.30 1.89
Total 100 100

5. Was this deal rated? If not, explain why.

No. The deal was unrated as this is a government bond.

© Page 27 16th March 2011

 DEAL TRACKER
www.islamicfinancenews.com

Islamic Finance news

Advisory Board:
Keeping you abreast of the world’s upcoming Shariah compliant deals
Mr Daud Abdullah (David Vicary)
Another Islamic Finance news exclusive Global Leader
Global Islamic Finance Group, Deloitte
ISSUER SIZE INSTRUMENT
Prof Dr Mohd Masum Billah
Al Jazira Bank Saudi Arabia TBA Sukuk
Group Executive Chairman
Masrayan Al Rayan US$1 billion Sukuk Middle Eastern Business
World Group of Companies
First Gulf Bank TBA Sukuk
Kazakhstan US$500 million Sovereign Sukuk Dr Humayon Dar
Prasarana Negara Malaysia RM5 billion Sukuk Chief Executive Officer
BMB Islamic
Bio-Xcell Malaysia RM250 million Sukuk
Academic Medical Center RM1.5 billion Sukuk Mr Badlisyah Abdul Ghani
Malaysia Chief Executive Officer
CIMB Islamic
Kuwait Finance House-Turkey US$500 million Sukuk
Ministry of oil, Iran EUR2 billion Sukuk Ms Baljeet Kaur Grewal
Qatar International Islamic TBA Sukuk Managing Director/Vice Chairman
Bank Head, Global Research
KFH Research Limited
Engro Corporation, Pakistan PKR3 billion Sukuk
Mr Sohail Jaffer
Aldar Properties AED3.5 billion Sukuk Partner
Gatehouse Bank GBP60 million Sukuk International Business Development
FWU International
Islamic Bank of Thailand US$250 million Sukuk
First Invetsment Company KWD92 million Sukuk Dr Monzer Kahf
Consultant/Trainer/Lecturer
Central Bank of Yemen US$500 million Sukuk Private Practice
Qatar International Islamic US$500 million Sukuk
Bank Mr Mohamed Ridza Abdullah
Managing Partner
Dana Gas US$1 billion Sukuk Mohamed Ridza & Co
Amana Takaful LKR750 million Sukuk
Bizim Securities, Turkey TRL100 million Sukuk Prof Bala Shanmugam
Director of Banking & Finance
Antara Steel Mills RM300 million Sukuk Taylors University Malaysia

Brazil TBA Sukuk Mr Muhammad Nejatullah Siddiqi

Author, Scholar, Speaker, Trainer
General Authority of Civil SAR15 billion Sukuk
Aviation, Saudi Arabia Mr Rushdi Siddiqui
Head of Islamic Finance
Kazakhstan TBA Sukuk Thomson Reuters
Albaraka Turk Katilim Bankasi TBA Sukuk
Mr Dawood Taylor
Franklin Templeton TBA Sukuk
Regional Senior Executive-Middle East
Gulf Investment Corporation RM3.5 billion Sukuk Prudential PLC
CIMB Islamic TBA Sukuk Mr Abdulkader Thomas
President & CEO
France TBA Sukuk
SHAPE – Financial Corp
Bank Negara Malaysia TBA Sukuk
Mr Paul Wouters
Nakheel TBA Sukuk Partner
Bener Law
General Electric TBA Sukuk
Kenchana Petroleum RM350 million Sukuk Prof Rodney Wilson
Malaysia Director of Postgraduate Studies
Durham University
Senegal Ministry of Finance TBA Sovereign Sukuk
Mr Sohail Zubairi
Chief Executive Officer
For more details and the full list of deals visit Dar Al Sharia Legal & Financial
www.islamicfinancenews.com Consultancy

© Page 28 16th March 2011

 ISLAMIC FUNDS TABLES
www.islamicfinancenews.com

Top 10 Islamic Funds by Key Performance Statistics

150

140

130

120
Index Values

110

100

90

80

70
Dec-99
Feb-00
Apr-00
Jun-00
Aug-00
Oct-00
Dec-00
Feb-01
Apr-01
Jun-01
Aug-01
Oct-01
Dec-01
Feb-02
Apr-02
Jun-02
Aug-02
Oct-02
Dec-02
Feb-03
Apr-03
Jun-03
Aug-03
Oct-03
Dec-03
Feb-04
Apr-04
Jun-04
Aug-04
Oct-04
Dec-04
Feb-05
Apr-05
Jun-05
Aug-05
Oct-05
Dec-05
Feb-06
Apr-06
Jun-06
Aug-06
Oct-06
Dec-06
Feb-07
Apr-07
Jun-07
Aug-07
Oct-07
Dec-07
Feb-08
Apr-08
Jun-08
Aug-08
Oct-08
Dec-08
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Dec-09
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
YTD returns for ALL funds (as of the 15th March 2011)
FUND FUND MANAGER PERFORMANCE MEASURE FUND DOMICILE
1 BIMB BIMB UNIT Trust Management 18.59 Malaysia
2 ETFS Physical Silver ETFS Metal Securities 9.25 Jersey
3 ASBI Dana Al-Falah BIMB UNIT Trust Management 7.11 Malaysia
4 Al Madar US Index Fund Almadar Finance & Investment 7.01 Kuwait

5 iShares MSCI USA Islamic Barclays Global Investors Ireland 6.35 Germany
6 Al Rajhi European Equity Al Rajhi Bank 6.34 Saudi Arabia
7 iShares MSCI World Islamic Barclays Global Investors Ireland 5.45 Germany
8 ASBI Dana Al-Munsif BIMB UNIT Trust Management 5.44 Malaysia
9 Reliance Global Shariah Growth - USD I Reliance Asset Management (Malaysia) 5.34 Guernsey
10 Al Rajhi International Small Capitalisation Merrill Lynch Investment Managers 5.17 Saudi Arabia
* Eurekahedge Islamic Fund Index -1.37

Sharpe ratio for ALL funds (as of the 15th March 2011)
FUND FUND MANAGER PERFORMANCE MEASURE FUND DOMICILE
1 Meezan Tahaffuz Pension Fund - Money Market Sub Fund Al Meezan Investment Management 8.90 Pakistan

2 Atlas Pension Islamic Fund - Debt Sub Fund Atlas Asset Management 5.08 Pakistan

3 Meezan Tahaffuz Pension Fund - Debt Sub Fund Al Meezan Investment Management 4.19 Pakistan

4 Al Rajhi Commodity Mudarabah Fund - USD Al Rajhi Bank 3.45 Saudi Arabia

5 Commodity Trading Fund - SAR Riyad Bank 3.34 Saudi Arabia

6 Reliance Global Shariah Growth Fund - USD I Reliance Asset Management (Malaysia) 3.32 Guernsey

7 Public Islamic Money Market Fund Public Mutual 2.95 Malaysia

8 AlAhli Saudi Riyal Trade Fund The National Commercial Bank 2.59 Saudi Arabia

9 AlAhli International Trade Fund The National Commercial Bank 2.58 Saudi Arabia

10 Al Rajhi Commodity Mudarabah Fund - SAR Al Rajhi Bank 2.38 Saudi Arabia
* Eurekahedge Islamic Fund Index 0.07

Contact Eurekahedge
To list your fund or update your fund information: islamicfunds@eurekahedge.com
For further details on Eurekahedge: information@eurekahedge.com
Tel: +65 6212 0900

Disclaimer
Copyright Eurekahedge 2007, All Rights Reserved. You, the user, may freely use the data for internal purposes and may reproduce the index data provided that reference to Eurekahedge is provided in your
dissemination and/or reproduction. The information is provided on an “as is” basis and you assume and will bear all risk or associated costs in its use, and neither Islamic Finance news, Eurekahedge nor its
affiliates provide any express or implied warranty or representations as to originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for any purpose.

© Page 29 16th March 2011

 RED DATA
www.islamicfinancenews.com

REDmoney GLOBAL SHARIAH INDEX SERIES (All Cap) 6 Months REDmoney GLOBAL SHARIAH INDEX SERIES (Large Cap) 6 Months

REDmoney Asia ex. Japan All Cap REDmoney Global All Cap REDmoney Asia ex. Japan Large Cap REDmoney Global Large Cap
REDmoney Europe All Cap REDmoney MENA All Cap REDmoney Europe Large Cap REDmoney MENA Large Cap
REDmoney GCC All Cap REDmoney US All Cap REDmoney GCC Large Cap REDmoney US Large Cap
1000 950

900 850

800 750

700 650

600 550

500 450
8/10 9/10 10/10 11/10 12/10 1/11 2/11 3/11 8/10 9/10 10/10 11/10 12/10 1/11 2/11 3/11

REDmoney GLOBAL SHARIAH INDEX SERIES (Medium Cap) 6 Months REDmoney GLOBAL SHARIAH INDEX SERIES (Small Cap) 6 Months

REDmoney Asia ex. Japan Medium Cap REDmoney Global Medium Cap REDmoney Asia ex. Japan Small Cap REDmoney Global Small Cap
REDmoney Europe Medium Cap REDmoney MENA Medium Cap REDmoney Europe Small Cap REDmoney MENA Small Cap
REDmoney GCC Medium Cap REDmoney US Medium Cap REDmoney GCC Small Cap REDmoney US Small Cap
1300 1300

1100 1100

900 900

700 700

500 500
8/10 9/10 10/10 11/10 12/10 1/11 2/11 3/11 8/10 9/10 10/10 11/10 12/10 1/11 2/11 3/11

INDEX Last (US$) MTD (%) 3 Months (%) 6 Months (%) YTD (%) 1 Year (%) 2 Years (%)
REDmoney US Large Cap 916.18 -2.36 10.39 25.04 1.87 8.10 51.95
REDmoney Europe Large Cap 771.88 -3.36 11.90 20.70 -0.36 4.46 57.00
REDmoney Global Large Cap 835.32 -2.28 9.28 21.85 -0.24 10.10 63.61
REDmoney MENA Large Cap 590.47 5.22 -5.54 4.36 -5.07 8.76 53.28
REDmoney GCC Large Cap 601.26 5.69 -4.62 6.47 -4.86 12.00 64.03
REDmoney Asia ex. Japan Large Cap 800.74 -0.47 2.22 14.65 -4.05 15.57 87.79

INDEX Last (US$) MTD (%) 3 Months (%) 6 Months (%) YTD (%) 1 Year (%) 2 Years (%)
REDmoney US All Cap 967.98 -2.23 11.14 27.42 2.48 10.26 60.08
REDmoney MENA All Cap 602.04 4.04 -5.04 2.77 -4.86 4.32 44.48
REDmoney GCC All Cap 598.84 4.69 -4.64 3.82 -4.92 6.55 52.82
REDmoney Europe All Cap 797.60 -3.07 12.27 22.21 -0.00 7.21 64.90
REDmoney Global All Cap 887.38 -1.96 9.00 22.84 0.10 13.02 75.13
REDmoney Asia ex. Japan All Cap 899.00 -0.12 2.86 16.44 -2.32 19.79 107.16

REDmoney Global Shariah Index Series For further information regarding REDmoney Indexes contact:
Andrew Morgan Managing Director, REDmoney Group

RED IdealRatings Andrew.Morgan@REDmoneyGroup.com

+603 2162 7800

© Page 30 16th March 2011

 SHARIAH INDEXES
www.islamicfinancenews.com

S&P Shariah Indices Price Index Levels

1300
1180
1060
940
820
700
580 S&P 500 Shariah
S&P Europe 350 Shariah
460 S&P Japan 500 Shariah
340
220
100
14/3/11 Feb-11 Jan-11 Dec-10 Nov-10 Oct-10 Sep-10

Index Code Index Name 14-Mar-11 Feb-11 Jan-11 Dec-10 Nov-10 Oct-10 Sep-10
SPSHX S&P 500 Shariah 1145.042 1175.593 1143.662 1116.185 1055.305 1055.737 1012.387
SPSHEU S&P Europe 350 Shariah 1280.145 1332.904 1296.598 1284.601 1179.078 1243.62 1200.681
SPSHJU S&P Japan 500 Shariah 954.061 1129.41 1104.465 1104.726 1032.02 1015.125 997.313

1300
1180
1060
940
820
700
580 S&P Pan Asia Shariah
S&P GCC Composite
460
S&P Pan Arab Shariah
340 S&P BRIC Shariah
220
100
14/3/11 Feb-11 Jan-11 Dec-10 Nov-10 Oct-10 Sep-10

Index Code Index Name 14-Mar-11 Feb-11 Jan-11 Dec-10 Nov-10 Oct-10 Sep-10
SPSHAS S&P Pan Asia Shariah 1148.27 1133.3 1170.956 1162.323 1075.868 1077.471 1055.516
SPSHG S&P GCC Composite Shariah 708.436 685.834 728.593 753.965 721.171 720.021 711.722
SPSHPA S&P Pan Arab Shariah 119.567 116.293 122.54 127.698 122.361 122.657 121.1
SPSHBR S&P BRIC Shariah 1409.164 1390.791 1356.222 1338.497 1249.391 1266.724 1213.917
1200
1080
960
840
720
600
480
S&P Global Property Shariah
360
S&P Global Infrastructure Shariah
240
120
0
14/3/11 Feb-11 Jan-11 Dec-10 Nov-10 Oct-10 Sep-10

Index Code Index Name 14-Mar-11 Feb-11 Jan-11 Dec-10 Nov-10 Oct-10 Sep-10
SPSHGU S&P Global Property Shariah 717.396 715.72 743.73 746.209 719.266 747.598 737.706
SPSHIF S&P Global Infrastructure Shariah 88.872 89.602 89.978 91.68 87.253 88.875 86.53

The S&P Shariah Indices.

Creating opportunity for Islamic investors.
To learn more, contact index_services@standardandpoors.com.

© Page 31 16th March 2011

 SHARIAH INDEXES
www.islamicfinancenews.com

Data as of the 14th March 2011

PERFORMANCE OF DJ INDEXES

DJIM World DJIM US DJIM Titans 100 DJIM Asia/Pacific Titans 25 DJIM Europe
20

15
PRICE RETURN (%)

10

-5

-10
1 Week 2 Week 3 Week 1 Month 3 Month 6 Month 1 Year YTD

INDEX 1 Week 2 Week 3 Week 1 Month 3 Month 6 Month 1 Year YTD

DJIM World -2.78 -2.99 -3.47 -2.63 2.18 14.57 12.03 0.72

DJIM US -1.58 -2.53 -3.75 -2.84 4.19 18.02 13.25 2.98

DJIM Titans 100 -2.51 -3.2 -3.6 -2.84 2.08 12.91 7.09 1.02

DJIM Asia/Pacific Titans 25 -3.64 -2.94 -4.54 -3.76 -2.3 10.23 10.99 -4.3

DJIM Europe -4.11 -4.04 -2.86 -2.78 1.08 11.63 7.14 0.55

*all performance is cumulative, based on price return and US$

DESCRIPTIVE STATISTICS Market Capitalization (US$ billion) Component Weight (%)

Component Float
INDEX Full Mean Median Largest Smallest Large Small
number adjusted

DJIM World 2464 17546.8 13789.66 5.6 1.1 415.41 0.007829 3.0124 0.000057

DJIM US 579 7437.58 7008.45 12.1 3.4 415.41 0.123095 5.9272 0.001756

DJIM Titans 100 100 7295.69 6506.8 65.07 44.75 415.41 13.371868 6.3842 0.205506

DJIM Asia/Pacific Titans 25 25 1130.45 744 29.76 26.38 75.12 13.371868 10.0975 1.797297

DJIM Europe 261 3308.03 2644.62 10.13 2.52 139.48 0.285326 5.2739 0.010789

DJIM GCC 114 195.41 83.06 0.73 0.28 9.24 0.024749 11.1266 0.029795

DJIM MENA 163 367.92 108.65 0.67 0.16 14.62 0.007829 13.455 0.007205

DJIM ASEAN 232 465.1 184.58 0.8 0.15 16.29 0.00232 8.8274 0.001257

For more information, please visit www.djislamicmarkets.com or contact

Anthony Yeung Ariff Sultan Tariq al-Rifai

Regional Director
Hong Kong, China, Taiwan, Korea,
Japan, Australia & New Zealand
Tel: +852 2831 2580
Anthony.yeung@dowjones.com
Business Development Director Director
Malaysia, Singapore, Indonesia, India, Islamic Market Indexes
Thailand, Pakistan, Sri Lanka & Bangladesh Tel: +971 4374 8045
Tel: +65 6415 4262 tariq.alrifai@dowjones.com
ariff.sultan@dowjones.com

© Page 32 16th March 2011

 ISLAMIC LEAGUE TABLES
www.islamicfinancenews.com
TOP 30 ISSUERS OF ISLAMIC BONDS 12 Months

Issuer Nationality Instrument Market Amt US$ Iss % Managers

1 Saudi Electricity Company Saudi Arabia Sukuk Domestic market 1,866,000,000 1 10.2 HSBC, Samba Capital
public issue
2 Danga Capital Malaysia Sukuk Musyarakah Domestic market 1,700,000,000 2 9.3 Standard Chartered, HSBC, OCBC, RHB
public issue; Foreign Capital, CIMB Group, DBS
market private
placement

3 Cagamas Malaysia Sukuk Domestic market 1,430,000,000 10 7.8 AmInvestment Bank, RBS, RHB
private placement; Capital, Al-Rajhi Banking & Investment,
Domestic market HSBC, CIMB Group, Maybank
public issue Investment Bank, Standard Chartered
Bank
4 Celcom Transmission (M) Malaysia Sukuk Domestic market 1,329,000,000 1 7.2 CIMB Group, Maybank Investment
public issue Bank
5 Senai Desaru Expressway Malaysia Sukuk Domestic market 1,275,000,000 2 7.0 Maybank Investment Bank
public issue
6 1Malaysia Sukuk Global Malaysia Sukuk Ijarah Euro market public 1,250,000,000 1 6.8 HSBC, Barclays Capital, CIMB Group
issue
7 GOVCO Holdings Malaysia Sukuk Murabahah Domestic market 985,000,000 1 5.4 HSBC, RHB Capital, CIMB Group
private placement
8 Pengurusan Air SPV Malaysia Sukuk Murabahah Domestic market 884,000,000 1 4.8 HSBC, CIMB Group
private placement
9 Malaysia Airports Capital Malaysia Sukuk Ijarah Domestic market 792,000,000 2 4.3 CIMB Group, Citigroup
public issue
10 Qatar Islamic Bank Qatar Sukuk Ijarah Euro market public 750,000,000 1 4.1 HSBC, Credit Suisse, QInvest
Sukuk Murabahah issue
10 Abu Dhabi Islamic Bank UAE Sukuk Musharakah Euro market public 750,000,000 1 4.1 Standard Chartered Bank, HSBC,
issue Barclays Capital
12 Islamic Development Bank Saudi Arabia Sukuk Euro market public 500,000,000 1 2.7 Standard Chartered Bank, HSBC, CIMB
issue Group, Citigroup
12 Emaar Sukuk UAE Sukuk Euro market public 500,000,000 1 2.7 Standard Chartered, HSBC, RBS
issue
14 Government of Ras Al UAE Legal issuer: RAK capital Euro market public 393,000,000 1 2.1 RBS, Citigroup
Khaimah issue
15 Pembinaan BLT Malaysia Sukuk Domestic market 360,000,000 1 2.0 Lembaga Tabung Haji, RHB Capital,
private placement CIMB Group, AmInvestment Bank, May-
bank Investment Bank
16 National Bank of Abu Dhabi UAE Sukuk Murabahah Foreign market 312,000,000 2 1.7 HSBC, Maybank Investment Bank, RBS
public issue
17 Projek Lebuhraya Utara Malaysia Sukuk Musharakah Domestic market 301,000,000 1 1.6 CIMB Group
Selatan private placement
18 Konsortium Lebuhraya Malaysia Sukuk Musharakah Domestic market 280,000,000 13 1.5 CIMB Group
Utara-Timur (KL) public issue
19 Padiberas Nasional Malaysia Sukuk Musharakah Domestic market 240,000,000 2 1.3 Standard Chartered, Bank Muamalat
public issue Malaysia
20 Trans Thai-Malaysia Sukuk Malaysia Sukuk Musharakah Domestic market 195,000,000 1 1.1 HSBC, CIMB Group
private placement
21 AmIslamic Bank Malaysia Sukuk Musharakah Domestic market 177,000,000 1 1.0 AmInvestment Bank
public issue
22 Maju Expressway Malaysia Sukuk Musharakah Domestic market 168,000,000 1 0.9 CIMB Group
public issue
23 Pelabuhan Tanjung Pelepas Malaysia Issued under issuer's Domestic market 167,000,000 1 0.9 RHB Capital, Maybank Investment
MYR1. public issue Bank
24 Putrajaya Holdings Malaysia Sukuk Musharakah Domestic market 161,000,000 1 0.9 CIMB Group, AmInvestment Bank, May-
public issue bank Investment Bank
25 Malaysia Debt Ventures Malaysia Sukuk Murabahah Domestic market 158,000,000 1 0.9 Lembaga Tabung Haji, RHB Capital,
public issue CIMB Group
26 Bank Pembangunan Malaysia Sukuk Murabahah Domestic market 153,000,000 1 0.8 HSBC, CIMB Group
Malaysia public issue
27 Boustead Holdings Malaysia Sukuk Domestic market 133,000,000 1 0.7 OCBC, Public Bank, Affin Investment
private placement Bank
28 Nomura Sukuk Japan Sukuk Ijarah Euro market public 100,000,000 1 0.6 KFH
issue
28 Kuveyt Turk Katilim Bankasi Kuwait Sukuk Murabahah Euro market public 100,000,000 1 0.6 KFH, Citigroup
issue
30 Gamuda Malaysia Sukuk Musharakah Domestic market 97,000,000 1 0.5 CIMB Group, AmInvestment Bank
Sukuk Murabahah private placement
Total 18,341,000,000 92 100

© Page 33 16th March 2011

 ISLAMIC LEAGUE TABLES
www.islamicfinancenews.com

20 MOST RECENT GLOBAL ISLAMIC BONDS

Priced Issuer Nationality Instrument Market Value US$ Managers

23rd Feb 2011 Cagamas Malaysia Sukuk Murabahah Domestic market public issue 132,000,000 CIMB Group, AmInvestment
Bank
8th Feb 2011 GOVCO Holdings Malaysia Sukuk Murabahah Domestic market private placement 985,000,000 HSBC, RHB Capital, CIMB
Group
2nd Feb 2011 Pembinaan BLT Malaysia Sukuk Domestic market private placement 360,000,000 Lembaga Tabung Haji,
RHB Capital, CIMB Group,
AmInvestment Bank,
Maybank Investment Bank
27th Jan 2011 Emaar Sukuk UAE Sukuk Euro market public issue 500,000,000 Standard Chartere, HSBC,
RBS
25th Jan 2011 Pengurusan Air SPV Malaysia Sukuk Murabahah Domestic market private placement 884,000,000 HSBC, CIMB Group

10th Jan 2011 Padiberas Nasional Malaysia Sukuk Murabahah Domestic market public issue 114,000,000 Standard Chartered, Bank
Muamalat Malaysia
29th Dec 2010 Senai Desaru Expressway Malaysia Sukuk Domestic market public issue 1,192,000,000 Maybank Investment Bank

14th Dec 2010 National Bank of Abu Dhabi UAE Sukuk Murabahah Foreign market public issue 159,000,000 HSBC, RBS, Maybank
Investment Bank
10th Dec 2010 Cagamas Malaysia Sukuk Murabahah Domestic market public issue 287,000,000 HSBC, CIMB Group

8th Dec 2010 Government of Ras Al UAE Sukuk Euro market public issue 400,000,000 RBS, Citigroup
Khaimah
3rd Dec 2010 Malaysia Airports Capital Malaysia Sukuk Murabahah Domestic market public issue 476,000,000 CIMB Group, Citigroup

29th Nov 2010 Boustead Holdings Malaysia Sukuk Domestic market private placement 133,000,000 OCBC, Public Bank, Affin
Investment Bank
5th Nov 2010 Trans Thai-Malaysia Sukuk Malaysia Sukuk Musharakah Domestic market private placement 195,000,000 HSBC, CIMB Group

28th Oct 2010 Abu Dhabi Islamic Bank UAE Sukuk Musharakah Euro market public issue 750,000,000 Standard Chartered Bank,
HSBC, Barclays Capital
20th Oct 2010 Islamic Development Bank Saudi Arabia Sukuk Euro market public issue 500,000,000 Standard Chartered, HSBC
CIMB Group, Citigroup
20th Oct 2010 Cagamas Malaysia Sukuk Murabahah Domestic market public issue 161,000,000 AmInvestment Bank

30th Sep 2010 Qatar Islamic Bank Qatar Sukuk Ijarah Euro market public issue 750,000,000 HSBC, Credit Suisse, QInvest
Sukuk Murabahah
21st Sep 2010 Putrajaya Holdings Malaysia Sukuk Musharakah Domestic market public issue 161,000,000 CIMB Group, AmInvestment
Bank, Maybank Investment
Bank
15th Sep 2010 AmIslamic Bank Malaysia Sukuk Musharakah Domestic market public issue 177,000,000 AmInvestment Bank
30th Aug 2010 Pelabuhan Tanjung Pelepas Malaysia Sukuk Domestic market public issue 167,000,000 RHB Capital, Maybank
Investment Bank

GLOBAL ISLAMIC BOND VOLUME BY MONTH GLOBAL ISLAMIC BOND VOLUME BY QUARTER

© Page 34 16th March 2011

 ISLAMIC LEAGUE TABLES
www.islamicfinancenews.com

TOP 30 MANAGERS OF ISLAMIC BONDS 12 Months ISLAMIC BOND VOLUME BY CURRENCY US$ (BILLION)

Manager Amt US$ Iss %

Malaysian ringgit 10.9
1 CIMB Group 4,529,000,000 48 24.7

2 HSBC 3,501,000,000 16 19.1 US dollar 4.3

3 Maybank Investment Bank 2,517,000,000 23 13.7

Saudi riyal 1.9
4 AmInvestment Bank 1,102,000,000 12 6.0

5 Samba Capital 933,000,000 1 5.1 Singapore dollar 1.2

6 Standard Chartered Bank 808,000,000 8 4.4

Indonesian rupiah 0.1
7 RHB Capital 781,000,000 7 4.3

8 Citigroup 767,000,000 5 4.2

9 Barclays Capital 667,000,000 2 3.6 ISLAMIC BOND VOLUME BY ISSUER NATION US$ (BILLION) - 12 Months
10 OCBC 530,000,000 3 2.9

11 RBS 522,000,000 4 2.9

Malaysia 12.9
12 DBS 363,000,000 1 2.0

13 QInvest 250,000,000 1 1.4 Saudi Arabia 2.4

13 Credit Suisse 250,000,000 1 1.4

UAE 2.0
15 Bank Muamalat Malaysia 168,000,000 3 0.9

16 KFH 150,000,000 2 0.8 Qatar 0.8

17 Lembaga Tabung Haji 131,000,000 3 0.7

Japan 0.1
18 Al-Rajhi Banking & Investment 122,000,000 2 0.7

19 Public Bank 44,000,000 1 0.2

19 Affin Investment Bank 44,000,000 1 0.2 GLOBAL ISLAMIC BOND VOLUME BY SECTOR - 12 Months
21 Kenanga Investment Bank 33,000,000 1 0.2

22 Mitsubishi UFJ Financial Group 25,000,000 3 0.1

13%
23 Malaysian Industrial Development Finance 19,000,000 4 0.1
32%
24 Trimegah Securities 18,000,000 1 0.1 Government
7%
24 Bank Mandiri (Persero) 18,000,000 1 0.1 Finance
Utility & Energy
24 (Persero) Danareksa 18,000,000 1 0.1 Telecommunication
12%
Construction/Building
27 EON Bank 12,000,000 1 0.1
Other
28 Indo Premier Securities 11,000,000 1 0.1 21%
15%
29 OSK 9,000,000 2 0.1
Total 18,341,000,000 92 100

GLOBAL ISLAMIC BOND VOLUME - US$ ANALYSIS GLOBAL ISLAMIC LOANS - YEARS TO MATURITY (YTD Comparison)

© Page 35 16th March 2011

 LEAGUE TABLES
www.islamicfinancenews.com
ALL DATA AS OF THE 14th MARCH 2011
SUKUK MANAGERS (12 months) MAR 2010 – MAR 2011 SUKUK MANAGERS (3 months) DEC 2010 - MAR 2011
Manager Commitment Market Manager Commitment Market
Manager Issues Manager Issues
(in US$) Share % (in US$) Share %
1 Malaysia (Government) 27,718,000,350 118 59.7 1 Malaysia (Government) 6,507,125,850 25 49.9

2 CIMB 6,569,967,118 97 14.1 2 Malayan Banking 1,986,846,785 54 15.2

3 Malayan Banking 2,931,882,058 117 6.3 3 CIMB 1,243,991,470 16 9.5

4 HSBC Banking Group 978,399,795 7 7.5
4 HSBC Banking Group 1,973,156,368 27 4.2
5 RHB Banking Group 408,816,685 8 3.1
5 RHB Banking Group 1,146,544,735 27 2.5
6 Bukhary Capital 228,571,700 2 1.8
6 AMMB Holdings 984,233,866 61 2.1
7 Standard Chartered Bank 208,308,245 2 1.6
Malaysian Industrial Development
7 859,508,378 194 1.9
Finance 8 Citigroup 174,974,912 2 1.3
8 Barclays Bank 566,666,667 2 1.2 9 Malaysian Industrial Development 167,891,330 44 1.3
Finance
9 Standard Chartered Bank 510,255,375 7 1.1
10 Indonesia (Government) 166,566,315 4 1.3
10 Bukhary Capital 405,562,190 6 0.9
11 Samba Financial Group 133,333,333 1 1.0
11 Cagamas 377,521,973 15 0.8
12 AMMB Holdings 126,399,921 18 1.0
12 Citigroup 349,974,912 4 0.8
13 RBS 81,606,000 1 0.6
13 Kuwait Finance House 200,000,000 2 0.4
14 OCBC Bank 61,084,239 4 0.5
14 Affin Holdings 183,016,625 16 0.4 15 OSK Holdings 53,449,681 5 0.4
15 EON Capital 179,715,957 57 0.4 16= Andalan Artha Advisindo Sekuritas 47,145,179 2 0.4
16 Indonesia (Government) 172,097,265 6 0.4 16= Trimegah Securities 47,145,179 2 0.4
17 OSK Holdings 162,614,404 19 0.4 16= Bank Permata 41,641,579 1 0.3
18 RBS 159,113,250 2 0.3 16= Ciptadana Sekuritas 41,641,579 1 0.3
19 Nomura 150,000,000 1 0.3 16= Danareksa Sekuritas 41,641,579 1 0.3
20 Samba Financial Group 133,333,333 1 0.3 16= Kresna Graha Sekurindo 41,641,579 1 0.3

SUKUK ISSUERS (12 months) MAR 2010 – MAR 2011 SUKUK ISSUERS (3 months) DEC 2010 - MAR 2011

Issuer Commitment Market Issuer Commitment Market

Issuer Issues Issuer Issues
(in US$) Share % (in US$) Share %
1 BNM Sukuk 23,531,564,250 96 46.0 1 BNM Sukuk 6,963,971,650 25 45.3
2 Malaysia (Government) 4,438,108,800 21 8.7 2 Senai-Desaru Expressway 1,821,445,920 42 11.8

3 Perusahaan Penerbit SBSN Indonesia 2,019,555,790 8 4.0 3 Pakistan, Islamic Republic of 988,910,951 2 6.4
(Government)
4 Pengurusan Air SPV 2,002,481,940 6 3.9
4 Govco Holdings 983,928,000 2 6.4
5 Senai-Desaru Expressway 1,821,445,920 42 3.6
5 Perusahaan Penerbit SBSN Indonesia 963,662,475 3 6.3
6 Pakistan, Islamic Republic of 1,594,481,152 3 3.1
(Government) 6 Pengurusan Air SPV 884,231,100 3 5.8

7 Celcom Transmission (M) 1,342,937,400 4 2.6 7 Emaar Sukuk 500,000,000 1 3.3

8 RAK Capital 400,000,000 1 2.6
8 Cagamas 1,282,571,730 16 2.5
9 Aman Sukuk 360,773,600 6 2.3
9 Bank Indonesia 1,124,686,644 19 2.2
10 Govco Holdings 983,928,000 2 1.9 10 Padiberas Nasional 235,428,851 3 1.5

11= ADIB Sukuk 750,000,000 1 1.5 11 Bank Indonesia 215,448,960 3 1.4

11= Qatar Islamic Bank 750,000,000 1 1.5 12 BMA International Sukuk 175,040,840 6 1.1

13 Danga Capital 621,408,000 1 1.2 13 National Bank of Abu Dhabi 163,212,000 1 1.1

14= IDB Trust Services 500,000,000 1 1.0 14 ESSO Malaysia 64,449,600 2 0.4
15 KNM Capital 64,094,745 6 0.4
14= Emaar Sukuk 500,000,000 1 1.0
16 Perbadanan Kemajuan Negeri 59,235,680 3 0.4
16 ESSO Malaysia 499,608,060 13 1.0
Selangor
17 RAK Capital 400,000,000 1 0.8
17 Goodway Integrated Industries 39,277,485 9 0.3
18 Khazanah Nasional 367,252,800 1 0.7
18 Hubline 36,069,155 3 0.2
19 Padiberas Nasional 364,357,251 4 0.7 19 TSH Sukuk Ijarah 32,827,450 2 0.2
20 Aman Sukuk 360,773,600 6 0.7 20 Toyota Capital Malaysia 32,797,600 1 0.2

Islamic Sukuk league tables reflect Shariah compliant bonds showing evidence of ownership of assets or their earnings. These results include
(but are not limited to) the following securities/assets: Sukuk Salam, Sukuk Mudarabah, Sukuk Ijarah, Sukuk Murabahah, Sukuk Istisna and
Sukuk Musharakah.

For more information please contact:

Aimee Webster Telephone: +1-646-223-6816 Email: aimee.webster@thomsonreuters.com

© Page 36 16th March 2011

 LEAGUE TABLES
www.islamicfinancenews.com
ALL DATA AS OF THE 14th MARCH 2011

LOAN MANDATED LEAD ARRANGERS (12 Months) MAR 2010 – MAR 2011 LOAN BOOKRUNNERS (12(12 Months)
Months) MAR 2010 – MAR 2011
(12 Months)

Market Pro Rata Full Credit Market

Lender Pro Rata (US$) Full Credit (US$) Deals Lender
Share % (US$) (US$) Deals Share %

1 Alinma Bank 1,350,573,846 2,792,101,042 3 18.3

1 Alinma Bank 1,099,879,984 1,099,879,984 1 51.1
2= Credit Agricole 675,997,446 4,064,828,226 3 9.1

2= Samba 675,997,446 4,064,828,226 3 9.1 Abu Dhabi Islamic

2 378,177,137 378,177,137 2 17.6
Bank

4 HSBC 644,583,333 4,237,000,000 4 8.7

3 WestLB 325,000,000 475,000,000 4 15.1
5 National 631,193,862 3,975,221,058 3 8.5
Commercial Bank
4= Deutsche Bank 92,500,000 185,000,000 1 4.3
6 Abu Dhabi Islamic 561,678,136 745,179,136 3 7.6
Bank

7 Arab Bank 544,583,333 3,937,000,000 3 7.4 Standard Chartered

4= 92,500,000 185,000,000 1 4.3
Bank

8 Saudi Hollandi 499,583,333 3,712,000,000 2 6.8

Bank 6= HSBC 75,000,000 225,000,000 1 3.5
9 WestLB 295,000,000 475,000,000 4 4.0

6= BNP Paribas 75,000,000 225,000,000 1 3.5

10 Al Hilal Bank 183,500,999 367,001,999 1 2.5

11 Standard 120,333,333 435,000,000 2 1.6

8 Citigroup 13,000,000 13,000,000 1 0.6
Chartered Bank

12= Bank Al-Jazira 119,083,333 1,429,000,000 1 1.6

ISLAMIC LOANS RAISED (12 Months) MAR 2010 – MAR 2011

12= Riyad Bank 119,083,333 1,429,000,000 1 1.6

Borrower Country Islamic Loan Amount (US$)

12= Islamic Develop- 119,083,333 1,429,000,000 1 1.6
ment Bank
1 Marafiq Saudi Arabia 2,283,000,000
12= Al Rajhi Banking 119,083,333 1,429,000,000 1 1.6
2 Jubail 2 Refinery Saudi Arabia 1,429,000,000
12= Saudi Investment 119,083,333 1,429,000,000 1 1.6
Bank 3 Arabian Centres Saudi Arabia 1,099,879,984

17= Masraf Al Rayan 100,000,000 300,000,000 1 1.4

4 Riyadh IPP Saudi Arabia 616,049,284

17= Royal Bank of 100,000,000 300,000,000 1 1.4

Scotland 5 Emirates Steel Industries UAE 367,001,999

19= Arab Banking 83,333,333 250,000,000 1 1.1

6 Majid Al Futtaim UAE 310,109,178

19= Noor Islamic Bank 83,333,333 250,000,000 1 1.1 7 Qatari Diar Real Estate Qatar 300,000,000

8 Albaraka Turk Katilim Bankasi Turkey 250,000,000

21= BNP Paribas 45,000,000 225,000,000 1 0.6
9 Ras Al Khaiman Ceramics UAE 225,000,000
21= Gulf International 45,000,000 225,000,000 1 0.6
Bank 10 GMMOS UAE 185,000,000

23= Deutsche Bank 37,000,000 185,000,000 1 0.5

11 Emirates Trading Agency UAE 100,000,000

23= Mubadala GE 37,000,000 185,000,000 1 0.5

Capital 12 Gulf Finance House Bahrain 100,000,000

23= Development 37,000,000 185,000,000 1 0.5

Bank of Singapore 13 National Factory for Plastic UAE 68,067,959

23= Abu Dhabi 37,000,000 185,000,000 1 0.5

14 Bukhatir Investment UAE 50,000,000
Commercial Bank

27 Citigroup 13,000,000 13,000,000 1 0.2 15 Adopen Plastik Turkey 13,000,000

© Page 37 16th March 2011

 LEAGUE TABLES
www.islamicfinancenews.com
ALL DATA AS OF THE 14th MARCH 2011

SUKUK BY COUNTRY (12 Months) MAR 2010 – MAR 2011 LOANS BY COUNTRY (12 Months) MAR 2010 – MAR 2011

Country Volume Issued Volume Outstanding Country Volume (US$) Market Share (%)

Malaysia 42,766,923,872 23,840,227,537

Saudi Arabia 5,427,929,268 73.4
Indonesia 3,240,519,009 2,489,343,144
Eurobond 3,000,000,000 3,000,000,000
Pakistan 1,594,481,152 1,594,481,152 UAE 1,305,179,136 17.6

Bahrain 312,985,720 254,599,940

US 125,000,000 125,000,000 Qatar 300,000,000 4.1
Singapore 74,243,950 74,243,950
Saudi Arabia - -
Turkey 263,000,000 3.6
Cayman Islands - -
UAE - -
Bahrain 100,000,000 1.4
Jersey - -

SUKUK BY INDUSTRY (12 Months) MAR 2010 – MAR 2011 LOANS BY INDUSTRY (12 Months) MAR 2010 – MAR 2011

Industry Volume Issued Volume Outstanding Industry Volume (US$) Market Share(%)

Other financial 34,760,882,509 17,521,857,415 Construction 2,608,000,000 35.3

Sovereign 7,157,276,596 6,374,923,831
Oil & Gas 1,614,000,000 21.8
Agency 2,522,379,000 2,458,978,790
Manufacturing 1,863,904,845 1,109,803,441 Retail & Supermarkets 1,099,879,984 14.9

Telephone 1,342,937,400 1,342,937,400 Utilities 616,049,284 8.3

Banks 1,256,424,450 1,256,424,450
Financial Services 400,000,000 5.4
Transportation 594,228,000 447,280,530
Energy company 562,930,120 32,446,560 General Manufacturing 367,001,999 5.0

Electric power 372,633,000 216,991,000

Services 310,109,178 4.2
Consumer goods 364,357,251 364,357,251
Real Estate 300,000,000 4.1
Service company 316,200,532 251,895,055
Gas distribution - - Chemicals, Plastics & Rubber 81,067,959 1.1

GLOBAL ISLAMIC VOLUME SUKUK/LOANS (US$ IN MILLIONS)

18,000

16,000
Sukuk
14,000 Loan
12,000

10,000

8,000

6,000

4,000

2,000

0
1Q - '07 2Q - '07 3Q - '07 4Q - '07 1Q - '08 2Q - '08 3Q - '08 4Q - '08 1Q - '09 2Q - '09 3Q - '09 TD 4Q - '09 TD 1Q - '10 TD 2Q - '10 TD 3Q - '10 TD 4Q - '10 TD 1Q - '11 TD

For more information please contact: Aimee Webster

Telephone: +1-646-223-6816
Email: aimee.webster@thomsonreuters.com

© Page 38 16th March 2011

 EVENTS DIARY
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Company Index
Company Page Company Page Company Page
AAOIFI 26 Citibank 7 Mega Capital Indonesia 27
Abu Dhabi Commercial Bank 10 Citigroup 13 Meridio AG Bank 13
Academic Medical Centre 3 Codexa Capital 25 MIDF Amanah Investment Bank 22
AIG 12 Commercial International Bank 9 Moody’s 11
Al Ahli Bank of Kuwait 7 Commerzbank 13 Mulpha International 9
Al Fardan Exchange 7 Credit Agricole Asset Management 13 MWM Ventures 12
Al Salam Bank 11 Danareksa Sekuritas 27 Nakheel 7, 12
Al-Amanah Islamic Investment Bank 3 Deutsche Bank 13 National Bank of Abu Dhabi 6, 7, 12
Allianz Takaful 17 Dresdner Bank 13 National Bank of Egypt 7
AM Best Europe 9 Drydocks World 12 National Bonds Corporation 5
Amana Takaful 8 Dubai Bank 7 National Société Générale Bank 9
Amanie Business Solutions 4 Dubai Electricity and Water Authority 9 National Spot Exchange 4
Andalan Artha Advisindo Sekuritas 27 Dubai International Financial Centre 5, 13 Neova Sigorta 8
Arab Banking Corporation 9 Dubai Islamic Bank 7, 9 Noor Islamic Bank 7
Arab Union Reinsurance Company 9 Dubai SME 5 OCBC Al-Amin 4
Arcapita 4 Dubai World 6, 12 OCBC Bank Malaysia 4
Arqaam Capita l 6 Durham University 25 Palm Jebel Ali 7, 12
AssetCo 4 Emery Oleochemicals Group 3 Participation Banks Association of Turkey 11
Association of the Luxembourg Fund Industry 15, 16 Emirates Islamic Bank 5 Perdana University Graduate School 3
Asuransi Winterthur Life Indonesia 8 Emirates NBD 6 Pharez Nigera 3
Aviva 8, 17 Ernst & Young 17 Prudential 17
Axis-REIT Managers 4 First Gulf Bank 7 PTT Chemical International 3
Azmi & Associates 20 Fitch 9, 11 Qatar First Investment Bank 6
AZP Legal Consultants 27 FWU International 18 Qatar General Insurance & Reinsurance Company
Bahana Securities 27 Gulf Investment Corporation 11 8
Baitak Research 5 Hogan Lovells 10, Qatar Islamic Bank 7, 13
Bank AlJazira 7 HSBC 7, 13, 16, 22 Qatar National Bank 6
Bank Asya 7, 11 HSBC Amanah 4, 22 RAM 11
Bank BNI Syariah 22 HSBC Bank Middle East 10 Regional Financial Center of Almaty 4
Bank Indonesia 3, 21, 22, 25 HSBC Securities Services 4 Reliance Securities 27
Bank Internasional Indonesia 27 Indonesia Capital Market and Financial Institution RHB Bank 3
Bank Kesawan 6 Supervisory Agency 8 Royal College of Surgeons 3
Bank Mandiri 27 Indonesian Accountant Association 26 S&P 9
Bank Muamalat Indonesia 3, 21 Institut de Formation Bancaire Luxembourg 15 Saturna Capital 25
Bank Negara Indonesia 27 Investment Corporation of Dubai 5,7 Saxony-Anhalt 13
Bank Negara Malaysia 3, 10 Islamic Development Bank 3 SBI Mutual Fund 4
Bank OCBC NISP 27 Islamic Financial Services Board 15, 17, 26 Securities and Exchange Commission of Pakistan 10
Bank of London and The Middle East 4 Ithmaar Bank 6, 11 Securities Commission of Malaysia 19
Bank Permata 27 Johns Hopkins International 3 Shamil Bank 11
Bank Rakyat Indonesia 27 JP Morgan 7 Sime Darby Plantation 3
Bank Syariah Mandiri 27 JPMorgan Chase & Co 7 Société Générale 13
Bank Tejarat 9 Kresna Graha Sekurindo 27 Standard Chartered Bank 4, 7, 12,13
Banque Française Commerciale Océan Indien 13 Kuveyt Türk Participation Bank 4, 8 State Bank of Pakistan 21
Barclays Bank 7 Kuwait Finance House 5, 11, 13 Sucorinvest Central Gani 27
Bio-XCell 3 Kuwait Finance House Group 8 Syarikat Prasarana Negara 4
Bogor Agriculture University 3 Kuwait International Bank 6 Takaful Indonesia 8
BRI Syariah 3 Labuan Financial Services Authority 8 The Avenues Mall 6
Bundesanstalt für Finanzdienstleistungaufsicht 13 Labuan International Business Financial Center 8 The Islamic Bank of Britain 13
CAAM Islamic 13 Liquidity Management House 5 The Islamic Bank of Thailand 3
Capital Intelligence 9 Lloyds 13 The Royal Bank of Scotland 7
Central Bank of Libya 9 Luxembourg Financial Group 18 The World Bank 22
Central Bank of Luxembourg 15, 17 Luxembourg for Finance 15 Trimegah Securities 27
Central Bank of Nigeria 3 Luxembourg School of Finance 15 Turkapital 8
CIMB 3, 17 Luxembourg Stock Exchange 17 Unicorn Investment Bank 7
CIMB Group 4, 8 Mabanee Company 6 University of Reading 24
CIMB Niaga 4, 22 Malaysian Industrial Development Finance 3 UTI Asset Management 4
CIMB Syariah 4 MARC 9 West-LB 13
Ciptadana Securities 27 Masraf Al Rayan 7

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