Islamic finance sector becoming increasingly sophisticated

Points of Essence:

• Moody’s report revealed that Islamic finance has grown to the level of diversification, sophistication and innovation triggered by the mushrooming of Islamic financial institutions and abundance of liquidity in the market.
  
• Business has diversified beyond geographical lines and products has evolved rapidly and become more sophisticated.

By Staff Writer

The Islamic finance sector is increasingly witnessing diversification, sophistication and innovation, thanks to new entrants, the launch of new products and abundant liquidity in the market, a new report has revealed.

“We have seen a mushrooming of new Islamic financial institutions (IFIs), and there are several reasons for this,” said Anouar Hassoune, a Moody’s Vice-President Senior Credit Officer in Global Banking report.

“The consolidation is not on the agenda of Islamic financiers at this stage: Microenomomic theory says that a growing and profitable market provides enough space for a sizeable number of newcomers,” said Hassoune. The report also emphasises the expectation that the expansion of the Islamic financial industry will lead to further diversification. Benefits are expected to be extracted from increasing sophistication and further innovation, but also from growing operating and geographic diversification.

Pakistan plans to issue first local currency Islamic bond next month

Points of Essence:

• Pakistan will issue rupee-dominated Islamic bond for its domestic market consumption in September.
• The issuance will be handled by Standard Chartered Bank and Dubai Islamic Bank which would be less than Rs 20 billion than what the market had expected.
• The Islamic bond will further stimulate the growth of the Islamic finance industry which shared 3.2% of the total banking system in Pakistan and only accounted for Rs 135 billion of assets.

Published: August 15, 2008, 23:58

Kuala Lumpur: Pakistan will issue its first local currency Sharia-compliant bond in September, a government official said yesterday, as the Muslim nation seeks to build its fledging Islamic finance industry.

Ashfaque Hassan Khan, special secretary at the Finance Ministry, said the issue size had not been determined although it would be “substantially less” than the Rs20 billion ($269.5 million) some bankers had earlier expected.

“We have already completed all the paperwork and we hope to be in the market sometime in Sep-tember,” Khan told Reuters by telephone. “This is the first time we will be going to the market with a rupee-denominated local sukuk.”