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Unicorn ready for Malaysia: Bahrain-based Unicorn Investment Bank received the nod on the 11th December 2007 to convert its Kuala Lumpur office into a full-fledged Islamic bank. Vaseehar Hassan, CEO of the unit, was appointed to head up operations.
BNM opens up to foreign lawyers?: Bank Negara Malaysia (BNM) proposed the opening up of the country’s legal market to foreign law firms, specifically in the area of Islamic finance, come 2009.
“Bank Negara is looking at inviting three to five foreign firms to apply for licenses to operate here (Malaysia),” said Ahmad Lutfi Abdull Mutalip, a partner at Azmi & Associates. “There may be more firms as we’ve already had some foreign firms expressing interest.”
BNM was said to be preparing a draft legislation in line with its proposal, pushing for the amendment of Malaysia’s Legal Profession Act to permit the entry of foreign firms.
The bank would also set up a committee to review all applications made. The committee would comprise seven members, made up of representatives from the attorney-general’s office, BNM and the Malaysian Bar Council.
AFB soon in Jakarta: Asian Finance Bank was granted a license by Bank Indonesia to open its representative office in the republic’s capital of Jakarta. The Malaysian-based bank was the first to be given such a license and aimed to be the prime Islamic financing link between the Gulf states and Indonesia.
CEO Faisal Al Showaikh cited Indonesia’s large Muslim population as the main driver behind its Indonesian presence. AFB Indonesia would initially target government and semi-government projects, and subsequently move into corporate and retail banking. “A lot of projects — infrastructure, agriculture — will come onstream in the next five years. We want to be ahead of the curve,” Faisal affirmed.
Citi to lead underwriting business: Citi CEO Usman Ahmed remained confident of the bank maintaining its position as lead underwriter for Islamic finance deals. He attributed this to the group’s global distribution platform and structuring abilities.
“We have the ability to leverage on our extensive distribution platform for the marketing of Islamic transactions to investors. Citi currently is the largest global fixed income institutional underwriter stretching from the US, Europe, the Middle East and Asia. By leveraging on our global platform and expertise, we are able to give issuers the best structuring solutions and the most efficient execution of their transactions,” Usman elucidated.
Citi was the top underwriter for Sukuk and loans, at approximately 13% market share, covering 15 deals totaling close to US$4.5 billion. For Islamic loans alone, the bank had a higher market share of 19%, with 10 deals in hand with volume of about US$4 billion.
Indian firms keen to diversify funding: Indian investors were keen to raise funds in Malaysia as the country has vast experience in the market, with control of a significant share in the global Sukuk market.
Bank Negara Malaysia assistant governor Muhammad Ibrahim said the country, which currently accounted for 60% to 70% of the global Sukuk market, was well known not only in the Islamic bond market but also in the Islamic banking and financial system.
“A few corporations have expressed interest to raise Sukuk in Malaysia. They want to diversify their sources of funding and investor base for their funds and wish to be based in Kuala Lumpur,” he told reporters on the sidelines of a seminar in India in January.
On concerns that London was fast becoming another Islamic financial hub for Sukuk issuance, Ibrahim said: “It is an emerging sector. It is like banking finance... still developing, so there’re a lot of areas for participation.”
KFHM rolls out more realty: Kuwait Finance House Malaysia (KFHM) entered into an agreement to provide Corner Side Realty (CSRSB) a Mudarabah financing facility amounting to RM74.7 million (US$22.16 million).
Under the agreement, CSRSB was to enter into an underwriting arrangement with the developer, BU Developments, to underwrite the sale of 30 units of bungalow properties on freehold land in Batu Uban, Pulau Pinang. The units were part of Parcel 1B of the development on a 28-acre freehold gated residential project known as The Sanctuary.
Affin Bank gearing up for M&As: Affin Bank, the smallest anchor bank in Malaysia, planned to roll out mergers and acquisitions in the country and abroad, having obtained board approval to proceed. This, however, would be conducted within the bank’s financial capabilities, which stood at RM500 million (US$148.87 million) at the holding level. It can raise capital of about RM1.3 billion (US$387.06 million) at the bank level.
The bank had also sold a 15% stake to the Bank of East Asia at US$148.87 million, in a move to boost its Islamic finance business in China.
In the last five years, the bank had been repaired organically and not through the injection of new money. It had sent bold messages to debtors that the bank meant business and was achieving a good recovery rate for non-performing loans.
RHB Islamic to up home financing: RHB Islamic Bank expected to increase its home financing by the end of 2009 by another RM1 billion (US$295.75 million) via its product, Equity Home Financing-i.
“We stand at RM1.8 billion (US$532.36 million) right now and hope to increase another RM1 billion (US$295.75 million), which will make it RM2.8 billion (US$828.11 million),” said managing director Jamelah Jamaluddin.
The product is based on the concept of diminishing partnership, where the customer and the bank enter into a co-ownership agreement to acquire and own the asset with the view to progressively reduce the ownership of one partner (the bank) until the other Musharakah partner finally holds the full ownership of the asset.
Micro-credit gaining momentum: Amanah Ikthiar Malaysia (AIM), a body that gives out small loans to the impoverished to start businesses, was set to become a micro-credit institution in 2009, said deputy prime minister Najib Tun Razak.
Najib also suggested that AIM help the poor to participate in development projects under the various economic corridors proposed by the government. “The micro-credit financing scheme is an important strategy as 99.2% of the companies in Malaysia are small and medium-sized enterprises and of that, 80% are financed by banks.”
SunInfra awaiting approval: Sunway Infrastructure (SunInfra) revealed plans to complete the refinancing/restructuring of its Islamic bonds by 1Q2008. Bondholders of the Bai Bithaman Ajil Islamic debt securities (BaIDS) had accepted the proposal from Affin Investment Bank to restructure/refinance the existing BaIDS, which were issued by Sistem Lingkaran-Lebuhraya Kajang (SILK), a subsidiary of SunInfra.
TAKAFUL
Malaysia as Aviva’s springboard: Aviva, the UK’s No 1 life insurer and the world’s fifth-largest insurance group, planned to use Malaysia as the center of its Takaful business worldwide and as a springboard to enter new markets.
In July 2008, Aviva paid RM500 million (US$150.75 million) for a 49% stake in CIMB Group’s subsidiaries, Commerce Takaful and Commerce Life Assurance. It resulted in Aviva holding its first Takaful unit — CIMB Aviva Takaful — along with a life unit, CIMB Aviva Assurance.
“I think that (turning Malaysia into the group’s global center for Takaful business) is a real ambition for us,” said Aviva’s CEO Andrew Moss. Since CIMB Aviva Takaful would be the group’s only dedicated Takaful unit, Moss added, it could take three years to build expertise and opportunities not only in Malaysia but also in other parts of the group itself. He noted that even if Takaful business constituted 2% to 3% of Aviva’s business in five years, it would be huge since the group’s sales had grown 26% to RM190.82 million (US$57.53 million) in the nine months ended September 2007.
Another two suitors for Takaful Malaysia: Takaful Malaysia, which had received approval from Bank Negara Malaysia to resume talks with two Middle Eastern parties on the sale of its stake, was also approached by two multinational corporations from Europe.
Group managing director Hassan Kamil affirmed that the two Middle Eastern companies concerned, Abu Dhabi-Kuwait-Malaysia Strategic Investment Corp and Islamic Arab Insurance (SALAMA), had submitted their proposals.
“We are still open to other interested parties. In fact, two MNCs are also interested to talk to us through our merchant banks,” he said, adding that Takaful Malaysia expected to conclude the deal before end-December.
On its Indonesian operations, Hassan said, the Takaful operator planned to form a partnership with an Indonesian Shariah bank and an announcement would be made by the end of the month.
Its Indonesia business, operated through Syarikat Takaful Indonesia, recorded higher net profit of RM2.4 million (US$717,853) for financial year ended the 30th June 2007.
Conference on fraud prevention: ISM Insurance Services Malaysia (ISM) and the Malaysian Chapter of the Association of Certified Fraud Examiners co-hosted the inaugural “Insurance & Takaful Fraud Conference — Identifying and Preventing Fraud”on the 14th and 15th January.
The conference attracted more than 150 senior executives from the insurance and Takaful sectors and had two prominent keynote speakers — Dr Basel Hindawi and Megat Najmudin Megat Khas.
Hindawi is president of the International Association of Insurance Fraud Agencies while Megat Najmudin is president of the Malaysian Institute of Corporate Governance.
A number of experts in fraud investigation, forensics, law, insurance and Takaful delivered papers and conducted workshops in various areas of internal and external fraud against insurance and Takaful companies, ISM said.
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