More Islamic finance firms in Kuwait than conventional ones

Points of Essence:

• The latest report data released by the Central Bank of Kuwait showed 3 significant developments:
  

1. There are 48 Sharia-compliant finance companies and 45 conventional companies in Kuwait;
2. The volume of assets managed by Islamic companies still much lesser than of conventional companies as it stood at $39.8 billion at the end of July 2008 compared to $29.7 billion held by the IFIs;
3. There was a noticeable growth in assets of Islamic investment companies since January this year by 18.7 % compared to the 14 % growth rate registered by conventional companies during the same period.

Dubai, Sep 25 (IANS) There are more Islamic finance-compliant investment companies in Kuwait than conventional institutions, new figures have revealed.Analysis of data released by the Central Bank of Kuwait showed that there are 48 Sharia-compliant finance companies and 45 conventional companies in that Gulf city-state, the official Kuwait News Agency (KUNA) reported.

However, the volume of assets managed by Islamic companies still remained less than that run by conventional companies.

Robust Economic Landscape In GCC & Asia Driving Growth In Islamic Finance

Points of Essence:

• Kuwait Finance House predicted an immense potential for further growth in the Islamic Finance industry with the robust economic landscape indicator in the GCC or Gulf Cooperation Council countries and Asia.
• The industry is estimated to reach US$4 trillion by 2020 while the global takaful market is estimated to reach US$7.5 billion by 2015 from US$2.5 billion in 2007.
• However, there are challenges to the industry:

1. Narrowing of product diversification at institutional level;
2. The absence of accounting standards pertinent to Islamic banking and finance caused uncertainties in revenue realisation, disclosures of accounting information, accounting bases, valuation, revenue and expense matching;
3. Need for a greater communication and cooperation between governments, regulators and multilateral organisations;
4. The subprime crisis in US which is also another risk management issue in Islamic finance.

August 11, 2008 20:41 PM
KUALA LUMPUR, Aug 11 (Bernama) — The robust economic landscape in the GCC or Gulf Cooperation Council countries and Asia is indicating an immense potential for further growth in the Islamic Finance industry, says Senior Analyst, Global Research of Kuwait Finance House, Arsad Thinoon.

He said the rising wealth and strengthening demand for Syariah-compliant investments will also drive Islamic finance growth.

“Government-linked/top-tier companies in the Middle East and emerging Asia (financial, real estate, oil and gas and transport services) are looking for funds on the back of massive infrastructure and construction projects in the region,” Thinoon said during the MIF2008 Issuers & Investors Forum here Monday.

This growth is expected to be strengthened further by improvements in the Islamic finance industry architecture, development of government-backed Islamic financial centres as well as greater awareness and global technological development.

The Islamic financial services is estimated to reach US$4 trillion by 2020 while the global takaful market is estimated to reach US$7.5 billion by 2015 from US$2.5 billion in 2007.

However, there remain challenges in the industry.

According to Thinoon, product diversification even at large Islamic financial institutions remain narrow.

The absence of standards pertinent to Islamic banking and finance has also resulted in uncertainties in accounting principles involving revenue realisation, disclosures of accounting information, accounting bases, valuation, revenue and expense matching, he said.

“There needs to be greater communication and cooperation between governments, regulators and multilateral organisations,” Thinoon said.

The subprime crisis in US is also another risk mangement issue in Islamic finance.

According to managing director of BinaFikir, Mohammed Rashdan Yusof, the subprime issue in US is due to excessive leverage and the structuring of bonds not according to cashflow resources.

Mohammed Rashdan was speaking at the forum entitled, “Learning from the Markets: Risk Management Issues and Islamic Finance”.

Another speaker, Mohamed Ridza, managing partner of Mohamed Ridza & Co. said that amid the subprime crisis – now a major concern among investors – some countries have been aggressive in adopting regulations that meet investors needs in addressing risk issues.

Within the Asian region, Singapore is one country that has been aggressive in its guidelines and regulations in meeting investors’ needs, Mohamed Ridza said.

Source: BERNAMA

Global Investment House looks to enter Malaysia in 4th quarter

Points of Essence:

• Kuwait’s Global Investment House planned to start a financial services firm to deal in investment banking, asset management and brokerage in Malaysia this year.
• The group will also expand to Saudi Arabia and Qatar soon.

Published: Monday, 11 August, 2008, 01:38 AM Doha Time

KUWAIT: Kuwait’s Global Investment House has said it wants to start a financial services firm in Malaysia this year as part of an expansion plan that also includes new forays in the booming Gulf region.
Kuwait’s biggest investment bank by market value is in talks with a partner in Malaysia to set up the firm in the fourth quarter, chief financial officer Sunny Bhatia told Reuters, declining to identify the partner or give details.

“It will be investment banking, asset management and brokerage,” he said in a recent interview, declining to be more specific.

Gulf Arab companies, awash with cash after riding a regional economic boom spurred by high oil prices, are moving into Asia to diversify their revenue streams.

Kuwait Finance House, the Gulf region’s second-biggest Islamic bank by market value, operates in Malaysia and Australia, while Global has various funds investing in Asia, including Chinese and Indian real estate.
Bhatia said Global was on track to set up an investment bank next year in the United Arab Emirates with local investment firm Al-Qudra Holding Co after it receives regulatory approval.

Global aims to get the approval by the end of the year so it can “focus on the real business” next year, he said.

Banks across the world’s top oil-exporting region have been expanding abroad as competition in home markets intensifies.

Global wants to start a brokerage business in Saudi Arabia “soon” and move into Qatar next year, making the oil-producing region the main focus of its expansion strategy, Bhatia said.

Global, whose second-quarter net profit soared 96%, aims to double investment banking fee income this year from 7.7mn dinars in 2007, he said.

In the first six months, investment banking fee income reached 11.5mn dinars.
“Investment banking is an area of focus for us and will remain so,” Bhatia said, adding that Global expected an “excellent” profit in 2008. The investment bank posted net profit of 91.4mn dinars last year.

“We are on track for growth…We are optimistic,” he said, declining to give a profit forecast for this year.
Global which offers advisory services and buys into firms, raised $1.15bn this year by selling global depositary receipts (GDRs) in London.

Assets were roughly flat at $9.4bn at the end of the first half but should rise after a recent string of share placements, he said. Global raised $600mn with partners to start a Saudi real estate firm.

In June, it also raised $500mn for a private equity fund listed in London to finance expansion in the Middle East.

Source: Reuters