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ABN Amro plans retail Islamic services

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Points of Essence:

  • ABN Amro Bank plans to launch retail Islamic banking services in the Middle East by the 2nd Q of 2009
  • It has issued issued 32 Shariah-compliant products and sold $2 billions (Dh7.3bn) in Shariah-compliant funds since the beginning of 2007
  • It plans to introduce between 5-10 new products every month and expects to launch at least 30 new Islamic products during the 2nd Q of 2008
  • It has structured products which have different themes such as the water, real estate, shipping, renewable energy, climate changes and commodities that suit different investment trends and risk appetite among high net worth individuals in the region

23 June 2008
ABN Amro Bank is planning to launch retail Islamic banking services in the Middle East region by the second quarter of 2009 to meet the increasing demand for Islamic products in the region, according to a senior executive.

Sudhanshu Garg, director of equity derivatives at the bank, said that ABN Amro would launch retail Islamic products within nine to 12 months after finalising preparations for Islamic services in the region.

He added that the bank achieved great progress in its Islamic structured solutions during the past 18 months as it issued 32 Shariah-compliant products.

“We sold $2 billions (Dh7.3bn) in Shariah-compliant funds since starting Islamic banking facilities from the beginning of 2007. This progress put ABN Amro among the top four banks in the Middle East region offering Shariah-compliant equity derivatives and structured solutions,” he said.

Garg told Emirates Business that GCC investors bought around 80 per cent of the total sales in the Middle East. He added that the bank plans to accelerate the introduction of Islamic products during the next stage due to the increasing demand.
“We plan to introduce between five and 10 new products every month. We expect to launch at least 30 new Islamic products during the second half of 2008. We work similar to wholesale style as we carry out research studies about the need in the Middle East markets and then we create structured products that suit different investment trends and risk appetite among high net worth individuals in the region. We sell these Islamic products through Islamic banks, investment companies and fund managers in the region. Our products succeeded because they are based on the needs of the market,” he said.

These products have different themes such as the water, real estate, shipping, renewable energy, climate changes and commodities. Also the products depend on sub-sectors in global equity markets, based on macro-economic analyses. For example, the water theme depends on the supply and demand of water around the globe and prospects of growth in this area.

“We invest in water supply companies in several markets which give growth for our investments even during the decline stages in the markets,” he said.

Garg said that the structured products also depended on geographies such as Asian and Central African markets, where Middle Eastern investors cannot access these markets.
“We offer them the ability to invest in such markets. Our Central African fund achieved 40 per cent growth during the first nine months of 2007. With this deep research in the market, we can offer varied products to our clients. Also the Dubai International Financial Centre is becoming essential for the growth in our business because we see companies in the DIFC as potential clients and distributors for our Islamic products. Also we have relations with international banks who are opening up offices in the centre and this will ease cooperation with them as we will be working from the same region.”

He added that the increasing Islamic deposits and the wealth generated in the Middle East region showed great potential growth for Islamic banking services.

“Expectations are high that the Islamic banking sectors will grow by 30 per cent annually and ABN Amro expects its Shariah-complaint products to grow at least at the same pace,” he said.

By Mohamad Al Kady

Source: http://www.zawya.com/story.cfm/sidZAWYA20080623040957

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Written by Suapi Shaffaii

June 24, 2008 at 7:10 am

First Islamic equity product launched in UK

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Points of Essence:

  • Arab Banking Corporation (ABC) launched “al-buraq” – the first retail Shariah-compliant capital-protected equity product in UK
  • A savings product which has a minimum subscription of just £500 and is a Shariah-compliant alternative to a conventional guaranteed equity bond
  • Offered in partnership with the Bank of Ireland which has a long history of providing guaranteed equity bonds to UK consumers.

23 June 2008

LONDON: The London-based ABC International Bank’s Islamic Asset Management (IAM) entity, both of which are subsidiaries of the Bahrain-based consortium bank, Arab Banking Corporation (ABC), has launched the first retail Shariah-compliant capital-protected equity product in the UK under its ‘Alburaq’ brand.

The savings product, which has a minimum subscription of just £500 and is a Shariah-compliant alternative to a conventional guaranteed equity bond, adds to an increasing number of retail Islamic financial offerings in the UK market, which now includes mortgages, Takaful (insurance), pensions, current and deposit accounts and even escrow accounts for money transfers. Other Shariah-compliant retail products in the process of being launched include ISAs (investment savings accounts) and child trust accounts.

The product was structured by ABC International Bank and is offered in partnership with the Bank of Ireland, which has a long history of providing guaranteed equity bonds to UK consumers. ABC GroupABC Group is one of the largest banks in the Arab world with assets totaling around $32.7 billion at the end of December 2007. The group announced net profits of $125 million for the year 2007.

The government of Prime Minister Gordon Brown has been very supportive of developing the Islamic finance sector under the Labor Party’s social and financial inclusion policies. At the same time, it is the stated policy of the UK to develop London into an international hub for Islamic finance, investment and trade. Only yesterday at the Jeddah oil summit, Brown reiterated that oil producers in the GCC states should divert some of their record liquidity surpluses to investment in the developed countries in renewable energy initiatives and other sectors. These funds could be channeled through sovereign wealth funds; through conventional or Islamic capital flows. Bahrain-based Arcapita BankArcapita Bank, for instance, was one of the first Islamic financial institutions to invest in alternative energy in the UK in a wind farm project developed by Innogy.

The UK Treasury and Financial Services Authority (FSA), however, are only too aware that the Islamic finance industry in the UK needs to improve customer access to and awareness of Islamic retail financial products. UK Economic Secretary and City Minister Kitty Ussher, who is effectively in charge of Islamic finance at the treasury, at a meeting of the Islamic Finance Experts Group (IFEG) at the treasury earlier this year, stressed that “the UK is at the forefront of developments in Islamic finance and London continues to seize new opportunities. We have made tremendous inroads in the wholesale markets…But there is also an important domestic market, which we want to be accessible and open.

“There are nearly two million Muslims living in the UK and, thanks in part to legislative changes introduced by this government, the Islamic mortgage market is now worth over £500 million. Going forward, the government and industry want to continue to do all it can to see the retail market flourish and ensure that everyone – regardless of faith – has equal access to competitive financial products,” he said.

ABC International Bank claims that the Alburaq savings plan provides a new way for those wishing to invest in accordance with their faith and provides savers easy exposure to potentially unlimited returns linked to shares in major companies, all with the added comfort of capital protection and Shariah compliance.

According to Keith Leach, head of Alburaq at ABC International Bank, said, “Alburaq is very excited to be the first to bring a Shariah compliant capital protected product to the retail market in the UK. Over the past few years the UK has seen an increase in the availability of Islamic home finance products, but there remains very few options for Muslims wishing to save money in accordance with their religious beliefs. This new account is also an easy way for Muslim savers to gain exposure to the equity markets, in a secure way. While it is considered permissible within Islam for Muslims to own shares, there are restrictions on the type of companies that are considered allowable. The companies must not be over-reliant on debt nor must they be engaged in activities that conflict with the principles of Shariah. Many of these principles will be similar to those required by ethical investors.”

Savers will be able to deposit funds with the Bank of Ireland for five years in an account structured under the Wakala contract. At maturity, savers will receive their initial capital back together with 100 percent of any gain in the performance of a basket of 20 shares in global companies selected from the Dow Jones Islamic Market (DJIM) Titans 100 Index.

Des Crowley, chief executive of the Bank of Ireland UK Financial Services, is confident that “this is a highly innovative product, which is the first of its kind and directly addresses the saving needs of the Muslim community. We have been working with Alburaq for four years providing Islamic Home Finance and (this product) should be seen as the next stage in our development of Shariah compliant products.”

The Alburaq fixed-term savings product offer closes on Sept. 5 2008 and investors will have their funds tied up for five years. The maximum opening deposit is £1 million and the promoters stress that there is no cap on the returns; in other words customer’s enjoy 100 percent of the calculated return.

Capital protected funds are not new in the market. Several institutions – such as HSBC, the National Commercial Bank, Al-Rajhi Bank, Deutsche Bank and others – have launched Shariah-compliant capital protected funds in the Middle East.

While this product is new in the UK, Islamic equity funds per se are not, although they have had a very mixed record. Al-Madina Equity Fund, the Al-Safa Equity Fund and the Parsoli Global Equity Fund, which were launched at different times over the last decade or so, have all dismally failed. The first two were closed soon after they were launched. The latter has failed to make any impact. The reasons are manifold – the wrong promoters, wholly inadequate marketing strategies and resources, and perhaps the wrong timing.

By Mushtak Parker

Written by Suapi Shaffaii

June 24, 2008 at 3:34 am