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US Islamic investment platform Wahed rolls out Sharia-compliant ESG-themed fund

US-based Islamic investment platform Wahed has rolled out a new Sharia-compliant ESG themed exchange traded fund (ETF).


The Wahed Dow Jones Islamic World ETF (Ticker: UMMA) began trading last Friday on the Nasdaq stock exchange. 

The actively managed fund will benchmark to the Dow Jones Islamic Market International Titans 100 Index, a data-driven index owned and maintained by S&P Dow Jones Indices. The fund is designed to measure the stock performance of the largest global companies – excluding the US – that adhere to Sharia compliance guidelines. 

The new ETF utilises RepRisk, an environmental, social and governance (ESG) data science provider combining machine learning and human intelligence to assess ESG risks. UMMA has an expense ratio of 0.65%

“We’re using RepRisk for daily filtering, screening, and analysis of controversies related to companies within the fund,” said Samim Abedi, chief investment officer at Wahed. “Such analysis includes a range of issues such as economic crime and corruption, fraud, illegal commercial practices, human rights issues, labour disputes, workplace safety, catastrophic accidents and environmental disasters.”

This latest ETF follows Wahed’s first ETF, the Wahed FTSE USA Shariah ETF (Ticker: HLAL), a strictly US equity focused fund which it launched on the Nasdaq in 2019. Wahed says its new ETF would be the first Sharia compliant ESG-focused/theme ETF on Nasdaq.

It joins the growing activity of providers of combining Sharia compliant and ESG principles. Most recently, in November, Saturna Capital, a US-based investment manager partnered with London-based ETF platform HANetf to launch the Saturna Al-Kawthar Global Focused Equity UCITS ETF. The London Stock Exchange, Borsa Italiana and Germany’s XETRA listed actively managed ETF consists of Sharia compliant stocks with positive ESG characteristics, primarily targeting European investors.

Wahed’s ETFs also joins a growing number of Islamic ETFs in the market which include SP Funds, S&P Global REIT Shariah and, depending on the broker access, BlackRock's iShares Islamic ETFs.

The rationale of establishing this new ETF came down to two main reasons, Wahed's Abedi noted.

“Firstly, as we look to provide long-term capital appreciation to investors, we wanted to provide better diversification through international exposure,” he said. “As part of our investment thesis, we see the possibility of international and emerging markets playing catch-up to the US market over the next few years, so we believe it’s an ideal time to add this global exposure.” 

“Secondly, we’re seeing the line between ethical, socially responsible and ESG funds continue to blur,” he said. “Investors are increasingly looking for more personalised investing options that better fit their individual beliefs. By bringing these values-based investment principles together, we believe we’re addressing a clear gap in the market for an international Sharia-compliant fund managed through an ESG investing lens.”

To ensure flows and liquidity, the ETF is listed on the Nasdaq, which will allow American investors to have access to investing in both ETFs through their brokerage or using the Wahed Invest app or platform, Abedi said.

“UMMA is equity-focused, and many of the top holdings are large-cap and well-known companies, so we’re highly liquid,” he said. “Additionally, we have dedicated liquidity providers looking to ensure the fund trades on a relatively tight bid-ask spread, closely tracking the net asset value of the underlying constituents.”

Blake Goud, CEO of the RFI Foundation, a think-tank which seeks to converge various forms of responsible finance including ESG, impact investing and Islamic finance, said it is encouraging to see more funds that combine Sharia compliance and ESG screening. 

“On the ESG front, RFI's research has shown that different ways of using ESG data can interact with Sharia screens in different ways,” he said. “And so, as with all ESG funds but particularly for funds that combine ESG and Sharia screening, it's important to have transparency around ESG policies, both for their screening and active stewardship practices.”

Aside from the ETF, Abedi said that Wahed is working on new products for 2022 across different geographies.

“Wahed has products in the pipeline and will provide more details as we near live dates across various markets,” he said. “For the US market, we’ll be launching an updated version of our app in the coming months, which will bring additional functionality and products.” 

© SalaamGateway.com 2021 All Rights Reserved

Islamic Finance
Analysis: Indonesia’s ruling on haram crypto raises eyebrows

Indonesia’s MUI has deemed ‘using’ cryptocurrency to be haram, but the ruling does not chime with Islamic scholars and regulators around the world.


In early November, Indonesia's National Ulema Council (MUI), the country's top Muslim clerical body, ruled that "using" cryptocurrency is haram (not permissible), due to its "uncertainty" and "potential for wagering and harm".

The 11 November ruling, which was not accompanied by any public clarification of MUI's position on what constitutes "using" cryptocurrency, sent ripples through the Islamic world and reignited discussions about the role of the rapidly expanding digital assets sector in Sharia-compliant finance.

Whether or not cryptocurrency, which is essentially a means of currency exchange via digital payments platforms using blockchain technology, can be Sharia-compliant, or halal, has been the focus of much religious, professional and academic Islamic debate since cryptocurrencies first emerged with the launch of Bitcoin in 2009.

In the past 18 months, the volatility of Bitcoin in particular and reports of cryptocurrencies being used by criminal organisations to launder stolen or illegally earned money, commit fraud and demand ransoms in software hacks, have heightened fears that using cryptocurrency may be contrary to Islamic teachings.

In December 2020, the Kuala Lumpur, Malaysia-based Islamic Financial Services Board (IFSB), an international standard-setting body for the Islamic financial services industry, said in a note on investor protection in capital markets (IFSB-24), that the Sharia debate about the permissiveness of cryptocurrency should be focused on digital tokens that are treated as currency, with no inherent value of their own.

By contrast, digital tokens treated as securities, conveying an interest in the assets or earnings of a business, or asset-backed or utility tokens, which are tethered to some underlying asset or service of value, have not attracted the same controversy.

The IFSB has not yet stated a definitive position on cryptocurrency, preferring to host, and relay perspectives from, regular programmes and events for the Islamic finance industry, where the role of cryptocurrencies and other fintech products in Islamic finance are discussed.

Dr Gapur Oziev, Associate Professor in the Department of Economics at the Kulliyyah of Economics and Management Sciences, part of the International Islamic University of Malaysia, said the main concerns about cryptocurrency relate to how such currencies may enrich users at the expense of others, rather than their fundamental nature as digital forms of money.

"There is no single valid argument from the text of Sharia to prohibit cryptocurrency as such, because the nature of the money, or currency, can be absolutely anything – gold, silver, paper, cow-hide, plastic etcetera,” he said, noting that its permissibility depends on a certain government or “a large group of sound people use it without causing harm to anyone."

Harm, in an Islamic finance context, is generally taken to mean deception, corruption or money laundering, but Dr Oziev said concerns about crypto could be broader. While using cryptocurrencies to pay for assets is not reprehensible from a Sharia perspective, he said, activities such as trading currency, crypto-mining and swapping cryptocurrencies maybe unacceptable.

From an academic perspective, Dr Oziev suggested it might be possible for cryptocurrencies to be accepted as Sharia-compliant, if they are recognised and integrated into the central banking systems of Islamic countries, removing their ambiguity, drastic volatility and susceptibility to speculation.

However, others experts see no contradiction between Sharia law and cryptocurrency and are fervently in favour of all cryptocurrency use cases within the Islamic finance system.

Cypto: more halal than other forms of cash?

Fait Muedini, the Frances Shera Fessler Associate Professor and Director of International Studies at Butler University in Indianapolis, USA, argues that cryptocurrencies like Bitcoin are not only halal, but are much more halal than other forms of money.

"I disagree with the statement MUI made [about cryptocurrency in November], and believe that their concerns do not address all of the positive benefits that Bitcoin offers within an Islamic financial context," he said.

In Professor Muedini's view, cryptocurrency is compatible with Sharia law because, unlike traditional fiat (government-issued currency that may not be backed by a commodity such as gold), the supply of Bitcoin and many other digital currencies is fixed, thereby eliminating potential for gharar (deception) and inflation.

"In addition, unlike fiat and precious metal coins, digital currencies cannot be altered, forged, or manipulated," he noted, adding that the peer-to-peer (P2P) nature of cryptocurrency transactions removes the need for banking institutions to handle the assets, eliminating risks associated with giving a third-party control of the money.

Other approaches to crypto

The MUI's ruling was striking because it was the most explicit stance taken against cryptocurrency by a major Islamic authority to date. Other Islamic finance authorities have generally taken a measured but tolerant approach to cryptocurrency, approving its use for certain purposes.

For example, in 2019, the Central Bank of Bahrain (CBB) issued its "final rules" on crypto-asset

services and crypto-asset exchanges, permitting their use by bringing crypto-related activities within its regulatory perimeter.

In July 2021, the Central Bank of the United Arab Emirates (CBUAE) announced plans to introduce a central bank digital currency (CBDC), as part of its 2023-2026 strategy to promote digital transformation in UAE's financial services sector and make cross-border payments faster, cheaper and more secure through a network of multiple Central Bank Digital Currencies (mCBDCs).

Prior to this, in December 2020, the CBUAE collaborated on a venture with the Saudi Arabian Monetary Authority (SAMA) known as ‘Project Aber’, a joint digital currency and distributed ledger proof of concept project also aimed at facilitating smoother cross-border payments between central banks.

In November 2021, Dr Yasir Qadhi, Dean of Academic Affairs of the Houston, Texas-based Al Maghrib Institute and part of a panel of experts of the independent organisation, the Assembly of Muslim Jurists of America (AMJA), broadcast a YouTube video Q&A on Bitcoin, where he expressed the view that cryptocurrency is not haram.

The ambiguity around cryptocurrency's Sharia status has not deterred issuers of digital tokens from targeting the Islamic finance market.

In January 2021, Bahrain-headquartered CoinMENA launched what it describes as a Sharia-compliant digital assets exchange that is licensed and regulated by the CBB. Users of CoinMENA can buy, sell, store, and receive major cryptocurrencies such as Bitcoin, Ethereum and Ripple, as well as deposit and withdraw funds in their local currency.

In March, Switzerland-based Caizcoin launched what it claims is the first fully Sharia-compliant cryptocurrency. Like other cryptocurrencies such as Bitcoin, Caizcoin is built on a decentralised blockchain, however it is the design of the blockchain that its developers say will ensure Cazcoin is halal.

For example, the system's e-wallet for holding the tokens will be kept separate from "haram activities", such as businesses dealing in mortgages, weapons, tobacco, alcohol or pork, or lending with interest, and Caizcoin can only be invested in "halal activities", such as government bonds, stocks, property and transferring funds, or being used to make Zakat payments to charities.

According to Islamic scholars Mufti Faraz Adam, Shaikh Muhammad Ahmad and Mufti Irshad Ahmad, part of the scholarly network of the Shariyah Review Bureau, a Sharia advisory service for the financial sector based in Jeddah, Dubai and Bahrain and with clients across the world, there is no agreed Islamic law perspective on crypto-assets.

"Since the crypto-boom in 2016/2017, we have continuously researched internally and engaged with various scholars, practitioners and regulators on this topic. We are of the view that a general view cannot be taken as a Fatwa [a formal ruling or interpretation on a point of Islamic law], because of the various nuances and possibilities with crypto-assets," they explained in a joint statement sent to Salaam Gateway.

They said that the term "cryptocurrency" is used to refer to a vast array of digital assets with different uses and functionalities. They also dispute that the potential for speculation is an innate feature of crypto-assets, arguing that Sharia concerns with crypto-assets arise when the contract used, and the underlying asset, are not Sharia-compliant.

"An investor in a Sharia-compliant transaction is speculating and taking a view on the market. Speculation […] exists everywhere, and it is only an issue when the tools used to speculate and the reference point of speculation are problematic," they said.

"We promote the idea of evaluating in light of Sharia principles each crypto-asset and checking on the project underpinning the crypto-asset, the utility of the token, the tokenomics, the financials, the staking process and governance," they added.

However, every Islamic finance authority may take its own view on how to treat cryptocurrency.

A case by case approach

In the view of the scholars of the Bahrain-based Shariya Review Bureau, an advisory institution, each Islamic finance authority is likely to take its own approach to the use of cryptocurrency in its respective jurisdiction. This advisory institution is licensed and regulated by the Central Bank of Bahrain.

"Each authority is a sovereign and independent, and we hope that each regulator will have sufficient expertise and insight, as well as the due process to form an informed response and framework to deal with crypto-assets," they said, adding that moves are underway to formally adopt Sharia-compliant crypto assets.

"This is already happening with different scholars and platforms coming with interesting concepts that show genuine use cases and implementations of blockchain and crypto-assets. Regional crypto-operators (…) are regulated and have Sharia supervisory boards in place to ensure Sharia-compliance with periodical Sharia audits in place."


© SalaamGateway.com 2021 All Rights Reserved

Islamic Finance
Canada’s Manulife adds Islamic funds to meet growing demand in North American market 

Manulife, a Toronto-based insurance and financial services firm with around $826 billion of assets under management, has added two Sharia-compliant funds to its portfolio to meet growing demand from Canadian Muslim investors.

Manulife Canada Retirement launched the Manulife SP Funds S&P 500 Shariah Industry Exclusions ETF (exchange traded fund) Fund and the Manulife SP Funds Dow Jones Sukuk ETF Fund to its iWatch platform.

SP Funds are part of ShariaPortfolio, a US-based boutique asset management firm specialising in socially responsible and halal investing. The firm also has a presence in Canada.

A key driver behind Manulife’s addition of these Islamic funds is Canada’s sizable and growing Muslim population. Muslims make up around 3.2% (or over one million people) of the nation’s population, according to a 2017 study by Statistics Canada. This is expected to grow to somewhere between 5.6% to 7.2% by 2036.

“With over a million Canadians identifying as Muslim, there have been a limited amount of professionally managed investment options that align with Shariah law,” said a Manulife spokesperson. “This has forced many Muslim plan members to potentially accept alternate solutions that can have implications to their overall retirement savings.”

The SP Funds S&P 500 Shariah Industry Exclusions ETF (SPUS) is an existing instrument which aims to track the performance–before fees and expenses–of the S&P 500 Sharia Industry Exclusions Index, co-developed by S&P Dow Jones Indices and by SP Funds. The SP Funds Dow Jones Sukuk ETF (SPSK) aims to track the performance–before fees and expenses–of the Dow Jones Sukuk Total Return (ex Reinvestment) Index.

The instruments are available to both Manulife’s savings sponsors and members in Canada. Sponsors can choose to add them as an investment option under their group savings plans. Sponsors are defined as an entity, often an employer, that sponsors group savings plan. The plan is also available to members, which are defined as individuals that opt into the group savings plans.

“Manulife is now offering two segregated funds that have been certified as Shariah-compliant with broad equity and fixed income exposure to meet the needs of Muslim Canadian group plan members and other group plan members interested in halal investments,” said the Manulife spokesperson.

The Islamic Finance Advisory Board (IFB), a Canada-based Sharia advisory board which provides advice and guidance, certified the funds as Sharia compliant and will audit them annually. “All Sharia EFTs work under the same Sharia guidelines but are slightly different from each other in terms of their objectives,” said Tahmyna Qazi, Liaison at Islamic Finance Advisory Board. “[For example], the two Manulife EFTs have the following objectives:  SPUS is a fund that invests only in US Equity with the objective of having a variable income, and SPSK invests globally to have a fixed income.”

The Manulife spokesperson said that whilst they can’t anticipate the flow of these segregated funds, they wanted to provide two funds so plan members can properly diversify portfolios.

“Manulife will follow the demand of the product through continued consultation of our plan sponsors and members,” said the spokesperson.

Adding to growing Canadian asset universe

Manulife’s addition of these new Islamic funds to its portfolio comes amid growing activity in the Islamic asset universe offering in Canada. 

Earlier this year, Toronto-based Wealthsimple launched Canada’s first ever listed halal ETF (Wealthsimple Shariah World Equity Index ETF) which aims to replicate the Dow Jones Islamic Market Developed Markets Quality and Low Volatility Index

Wealthsimple’s Islamic ETF joins a growing number of ETFs in the market including Wahed Invest’s FTSE Shariah ETF, SP Funds S&P Global REIT Shariah ETF and depending on the broker access to BlackRock’s suite of iShares Islamic ETFs.

Mohamad Sawwaf, co-founder & CEO of Manzil, a digital platform that offers Sharia compliant financing and investment solutions, welcomed Manulife’s inclusion of these funds.

“It's definitely a good move as it allows Canadian Muslims to access Sharia compliant ETFs for their group plans while not having their funds sit in cash with no return,” he said. “This will also allow SP ETFs to grow their assets under management much more rapidly due to the increased distribution.”

Naushad Virji, CEO of ShariaPortfolio said it can be challenging to enter a new market. “It’s important to show people that this is a viable solution to their needs,” he said. “Even though our USA affiliate has around 20 years of experience, we have only been in Canada for about two years. We are already seeing a greater degree of interest in our services.”

He said SP Funds are working with other major asset managers including Franklin Templeton in the USA which is using one of their ETFs in their multi-asset mutual fund. “We are in talks with several banks around the world in structuring similar products for their institutions. In addition, we have many asset managers around the world using our ETFs for both Muslim clients and also clients looking for investments with minimal leverage. A number of robo-advisors have also included our funds in their offerings.”

More products needed

Whilst Manulife’s funds inclusion has been welcomed, market participants have called for more products to serve consumer needs.

“The market needs to expand its Sharia compliant product offerings especially in the financing space: cars, equipment leasing, commercial real estate etc,” said Sawwaf. “This is still a major gap along with Shariah compliant bank accounts (i.e., deposit and day to day transaction).”

Qazi said that there is a strong halal retail market and also an evolving halal investment products market in Canada, all due to the grassroots demands of the local Muslim communities.

“The challenges we see Muslims facing is mainly a shortage of halal mortgage products in the country as opposed to demand for such products,” said Qazi. “However, due to the active involvement of the Canadian Muslim consumers, the market is evolving more than some other western countries.”

© SalaamGateway.com 2021 All Rights Reserved

Islamic Finance
UK Islamic banks set to receive a boost as Bank of England opens alternative liquidity facility

The UK’s Islamic banks are set to receive a welcomed boost as the Bank of England opened its Alternative Liquidity Facility this week and accepted deposits from participating banks for the first time.


LONDON: The much-awaited Alternative Liquidity Facility (ALF) is structured as a wakalah or fund-based facility and will enable participating banks to deposit funds. Participants’ deposits are backed by a fund of high-quality Sharia compliant securities (sukuk). The return from these instruments (minus hedging and operating costs) will be paid to depositors in lieu of interest.

The Bank of England (BoE), the country’s central bank, said that the fund purchased sukuk issued by the Islamic Development Bank (IsDB) in the first instance. The IsDB is a Sharia-compliant multilateral development bank and carries a triple AAA credit rating.

“This [the ALF opening] is a significant and positive advancement that further underlines UK government policy and support for Sharia compliant banking and financial services,” said Stella Cox, managing director of DDCAP Group.

Levelling the playing field

Like conventional banks, Islamic banks are subject to strict regulatory requirements. This includes holding a buffer of high-quality liquid assets (HQLA) to meet obligations as they fall due. Conventional banks are able to hold deposits at the central bank to help meet their buffer requirements but Islamic banks have been unable to do so before, because deposits were interest bearing.

As a result, British Islamic banks have faced challenges in managing their liquidity because the BoE’s existing facility is interest-based and there were no Sharia compliant liquidity facilities. Similarly, Islamic banks were also unable to invest in Gilts (UK government bonds) or interesting-bearing reserves accounts at the central bank.

At the same time, Islamic lenders had to fund their activities or products in expensive or inefficient ways, like holding large amounts of non-interest bearing cash or limiting their short-term deposits.

“There has been a shortage of UK-based liquidity management tools in British pound sterling (GBP) denomination,” said Omar Shaikh, a member of the UK Islamic Finance Council’s (UKIFC) advisory board. “To date efforts have been facilitated through interbank deposits, but normally this is the function of a central bank. Such facilities allow banks to manage their capital requirements and get some minimal return (in the current interest rate environment) on their liquidity.”

In a speech last year, Andrew Hauser, Executive Director for Markets at the BoE, highlighted that the ALF was an important step in providing a level playing field, and enabling greater flexibility in meeting regulatory requirements under Basel III prudential rules.

Good things come to those who wait

Last December, the BoE said that it was preparing to launch the ALF and planned to open it during the first quarter of this year.

The ALF has been in the pipeline for a while. In 2015, the central bank conducted a feasibility study of establishing a standalone non-interest-based facility. It followed up in 2016, with a public consultation, and then in 2017, when it sought to fine tune its approach.

“It has been a long time in development, there were challenges to be resolved to enable its implementation, but the BoE has been unwavering in its commitment to deliver the ALF throughout that extended period and it has achieved an industry first in becoming the first Western central bank to create such a facility,” said Cox.

Shaikh said that the fact the BoE has done this is beneficial to UK Islamic banks as they have an additional tool through which they can manage liquidity more effectively.

“It also demonstrates the UK's ongoing commitment to the Islamic banking sector,” he said. “This particular tool was promised some time ago and it has eventually come through, which is welcomed.”

The opening of the ALF follows the UK’s second sovereign sukuk which took place earlier this year. HM Treasury sold a five-year £500 million ($663 m) sukuk in March. The UK sold its maiden sovereign sukuk in 2014, which consisted of a £200 million ($265 m) issuance.


© SalaamGateway.com 2021 All Rights Reserved

Islamic Finance
Russia’s largest lender sees bigger role for Islamic finance as it rolls out first halal ETF

Russia’s largest lender sees a bigger role for Islamic finance in its 2022 strategy after launching the country’s first ever halal exchange traded fund (ETF) last month in a bid to fill the gap for Islamic financial products.


State-owned Sberbank via Sber Asset Management rolled out Russia’s first ever Sharia compliant ETF called Halal Investments towards the end of November.

“The ETF is based on the MOEX Shariah Total Return Index designed by Moscow Exchange (MOEX) together with Sberbank,” said Behnam Gurbanzada, chief Islamic finance officer at Sberinvest Middle East. “The index is composed of the 15 most heavily traded stocks of Russian companies on MOEX. Our main idea was to create a Sharia compliant ETF for the local market.”

The passively managed ETF is available for both Russian and international clients, said Gurbanzada, adding that investors can purchase even one share in the Halal Investments ETF.

“The recommended investment term is three years,” he said. “The liquidity of the products is high. Investments in the assets are denominated in roubles. Next year the ETF will be also be available in US dollars.”

He highlighted that the ETF will be screened monthly and audited quarterly by the Sharia Supervisory Board, adding that non-halal funds will go to charity.

“We observe a demand for Sharia compliant products in the market,” Gurbanzada said. “Furthermore, clients are focusing more and more on investment products rather than on deposits. This fund is primarily designed for people seeking to invest and adhere to Sharia. The ETF’s financial attractiveness is not inferior to other conventional investment instruments.”

Sber’s halal ETF comes shortly after the introduction of two new Islamic indices that it helped to create with MOEX.

In October, the bourse launched the MOEX Shariah Index and MOEX Shariah Total Return Index. The indices enable investors to invest in halal instruments.

Gurbanzada said there were administrative and educational challenges in developing their new ETF.

“It was a completely new product for the Russian market and for Sber as well,” he said. “Our team was very excited to learn about ethical requirements for investment products. Based on the experience achieved during the work we found out some new investment ideas applicable to Islamic financing.”

As part of new investment ideas, Sber’s Islamic finance team is working in two areas. The first is the adoption of existing products to Sharia required standards. The second is structuring new products.

“At the present time we are focused on corporate financing,” he said. “Bank accounts for corporate clients, financing, investment products for individuals, operational leasing etc.”

Underserved market

Russia’s Muslim population ranges between 10% to 15% of the country’s 144 million, according to various estimates.

One Moscow-based banking analyst, who asked for anonymity, said local experts in Islamic finance point out the lack of information about the genuineness of Sharia compliance in the fund.

“I doubt that the investor community in Russia cares much about Islamic instruments,” he said. “Whether this ETF will be of interest to non-Russian residents, I’m not too sure.”

But a practitioner familiar with the Russian Islamic finance market disagreed, saying it was a positive development.

“This ETF is positive because Muslim consumers or those seeking Sharia compliant investments in Russia have little to no choice,” he said.

Despite a sizeable Muslim population, and a gap for Islamic financial products, there are few players in the market. Market participants point to some of the legal and regulatory challenges.

“There is still no law on Islamic finance and subsequently the tax treatment, and in particular VAT [valued added tax], makes Sharia-compliant products uncompetitive,” said the practitioner, who also requested anonymity.

Sber Islamic finance strategy

Sberbank’s Islamic finance efforts will be underpinned by Sberinvest Middle East, Sber’s subsidiary in the Abu Dhabi Global Market (ADGM).

The subsidiary has been operational since June 2021, when it received its final authorization from the Financial Services Regulatory Authority (FSRA) of ADGM, noted Gurbanzada.

Sber’s foray into the Middle East follows a lengthy application process. In October 2020, Salaam Gateway reported that the Russian lender was working on the process.

In September 2020, the state-owned lender signed a strategic agreement with Mubadala, Abu Dhabi’s sovereign investment company. The agreement covered cooperation in several areas including Islamic finance.

“Our strategy is to create accesses for all clients,” said Gurbanzada. “To establish a secured bridge between Russia and the MENA. The bridge which will be based on partnerships.”

To meet their clients’ needs and demands, Sber’s Islamic finance team are working on Sharia-compliant asset management products.

“We are considering several investment products for local and international clients together with Sberinvest Middle East,” he said.


© SalaamGateway.com 2021 All Rights Reserved

Islamic Finance
Hejaz sees great potential in Australian Islamic financial services

Study shows nearly four in 10 Australian Muslims are stashing cash at home due to the lack of Islamic financial products in the market.


A survey has highlighted that 36% of Australian Muslims are choosing to retain “significant” cash savings at home because of the lack of Sharia-compliant finance products available in the market. 

The study, which was commissioned by Hejaz Financial Services, a Melbourne-based, non-bank financial institution that offers Sharia-compliant services, consisted of digital questionnaires of 400 Muslim Australian in October 2021 surveying their financial habits and attitudes. The findings highlight the growing demand for Islamic financial products in Australia.

“This study highlights that whilst Muslim Australians are becoming more aware about the principles of Islamic finance, they still lack access to products and information,” said Muzzammil Dhedhy, chief operating officer at Hejaz.

“Traditionally, Australian Muslims were migrants, however the second or third generation are highly educated, speak English and have good jobs and income,” he explained. “They are demanding products like wealth management and property financing that are aligned with their faith and values.”

Filling the gap

To fill this growing demand, Dhedhy said that Hejaz is working on new products.

“We working on various instruments including three new Islamic exchange traded funds (ETFs).” Hejaz plans to launch the Hejaz Managed Funds which are presently unlisted and are in discussions with trustees and fund administrators to establish the new listed ETFs. 

These ETFs will consist of a global equities fund that will track the MSCI Islamic Index. The second ETF will be a property/REIT (real estate investment trust) and the third ETF will consist of an income/credit/mortgage fund. 

“These ETFs will be listed on the Australian stock exchange and be available to both domestic and international investors,” said Dhedy. Hejaz plans to launch these new ETFs by the end of the first quarter of 2022 or in early in the second quarter.

Beyond ETFs, Hejaz is also working on other ancillary services including a robo-advisory.

Robo advisors are digital platforms that provide automated and algorithm based financial investments with little to no human supervision. They do this by collecting information from users about their financial circumstances and investment goals. 

Takaful (Islamic insurance) is also on the cards, but that will require its own legal process. “Takaful services require an insurance licence, this is a medium-to-longer term goal for us,” he said.

Hejaz continues to focus on getting its banking licence application. In June, Salaam Gateway reported that Hejaz initiated discussions with the regulator, the Australian Prudential Regulation Authority, as well as the Australian Securities & Investments Commission. 

Dhedhy said that talks are progressing and hopes that Hejaz will receive its restricted licence within the next 12 months. After a two-year period, they hope to obtain a full banking licence and become a fully-fledged Islamic bank within three years.

“We have an excellent relationship with Australian financial regulators, who are willing to support us in developing more customer-centric products,” he said. 

Others in the race

Muslims make around 2.6% of Australia’s 26 million population, according to the 2016 census. This is expected to increase to nearly 3% during the next census which took place this year.

Despite the growing Muslim population, and demand for Sharia compliant products, there are no fully-fledged Islamic banks in Australia. However, that is set to change. Islamic Bank Australia (IBA), is hoping to become the country’s first Shariah-compliant retail lender and is in the process of obtaining its own banking licence.

Among the other more established Islamic players are Crescent Wealth and MCCA as well as non-bank financial institutions like Amanah and Islamic Co-operative Finance Australia.

Adding to this, conventional banks like National Australia Bank (NAB) offer some Sharia compliant services. Most recently, NAB launched the country’s first Sharia structure for construction financing earlier this year.

One Australian banking practitioner said that the current Islamic product offerings are adequate given the poor uptake.  “If a major Aussie bank offered a product with the same service offering then that would improve uptake dramatically, '' he said. “Most Islamic players are tiny.”

Dhedhy said that Muslims are frustrated with current limited offerings. 

“A lot of educated and wealthier Muslims are looking for good quality products,” he said. “Among products we want to create are specific savings products for things like home deposits, weddings, college funds, and hajj.”

He also added that Islamic products don't have to be expensive when compared to the conventional. 

“Muslim customers should only expect to pay a few basis points more than conventional products, otherwise they’re not competitive enough,” he said. “Moreover, 5% of our customer base are non-Muslim, because we are offering competitive products that align with the moral values of modern Australians.”

© SalaamGateway.com 2021 All Rights Reserved

Islamic Finance
Malaysia’s Islamic banks need not fear digital challengers — as long as they embrace financial inclusion

The pandemic has forced Islamic banks to change how they look at Malaysia’s growing unbankable population.


KUALA LUMPUR: The head of one of Malaysia’s main Islamic banks insists he has no fear of a new wave of digital banks that will open in the country next year.

Arsalaan Ahmed, chief executive of Al-Rajhi bank, is himself gearing up to unveil the institution’s new suite of digital services at a time when Malaysia’s central bank will issue five licences for challenger banks.

Nevertheless, he is urging other Islamic institutions to beware of the intentions of these digital banks, which will be only too willing to deviate from their social remit and face them on their own turf.

“I don’t think for one second that the digital banks are only going to stick to financial inclusion. I’m sure their application will say that, but I’m certain their business case won’t,” Ahmed said.

Early in 2022, Bank Negara Malaysia, the central bank, will name the recipients of the new digital banking licences, which are set to transform the country’s traditionalist financial landscape. At least one of the winners is expected to be an Islamic bank.

The successful banks, chosen from 29 applicants, will be expected to contribute towards greater financial inclusion by offering products and services to address market gaps in the financially underserved and excluded segments.

“Whose market share do you think they are going to take? It will be the largest banks in the country. For the likes of [Saudi Arabia’s] Al-Rajhi bank, which is a behemoth on the globe but still modest in Malaysia, I’m not worried about these new digital banks,” said Ahmed at the recent Islamic Fintech Dialogue, an online conference in Kuala Lumpur.

Bank Islam, one of Malaysia’s Islamic banking giants, appears to have foreseen this and is preparing to tackle the newcomers head on. By tailoring its business to attract a legion of financially excluded customers, it is preparing to squarely face off against the socially inclusive challenger banks.

Financial inclusion is becoming an important strategy for Malaysian banks, not least because of the wholesale changes to society brought about by the pandemic that have seen more people denied access to the banking market.

Before the first lockdowns in 2020, one in four Malaysians were already self-employed or part of the gig economy according to the World Bank.

“Over the last two years, this number is expected to have risen substantially,” said Mohd Muazzam Mohamed, Bank Islam’s chief executive. “Since banks continue to use traditional means of gathering data to examine loan applications, those people will be considered to be excluded from banking. We need to prepare a roadmap for these unbankables so that they become bankable.”

To this end, Bank Islam has set up a financial inclusion division and recently launched several microfinance products for micro-entrepreneurs and low wage-earners that use instruments such as zakat, waqf and sadaqah in combination with traditional banking products.

Mohd Muazzam predicts that more institutions will follow by finding new ways to assess risk when providing loans, in place of the traditional rating model, which assumes the applicant will have a credit history.

“One of the key things we are trying to do is understand the persona of the unbankable people. We are developing products and services to address their needs and to evaluate the credit-worthiness of this group,” he said.

The current model focuses on the ability to pay, he said, whereas a new one that Bank Islam is working on will look at different data-points that touch on the willingness to pay. These may include metrics such as financial behaviour, cashflow data and even psychometric assessment.

“Soon enough, this new approach to credit assessment will be part of the mainstream financial system,” Mohd Muazzam added.


© SalaamGateway.com 2021 All Rights Reserved

Islamic Finance
Indonesia's Bank Muamalat to increase equity with rights issue

JAKARTA–Indonesian Islamic bank Muamalat will increase equity through a pre-emptive rights issue of 39.81 billion new c-series shares next month, with an indicative price 30 rupiah per share, in the hopes of raising 1.19 trillion rupiah ($83.9 million) from investors. In addition to this, the lender will also issue 2 trillion rupiah ($140.5 million) sub debt (sukuk), Hayun Aji, its corporate secretary, told Salaam Gateway.

The fund will be allocated to strengthen its capital structure. Bank Muamalat is weighed down with bad assets as non performing financing soared to an unhealthy level of around 5 percent in the last three years. Its NPF soared to 4.64% in the third quarter of 2019 from 2.5% in the third quarter of 2018, and it soared to 5.69% in the third quarter of 2020 and 4.94% in the third quarter of 2021. 

“After this right issue, our focus is on changing the business model from the majority corporate segment into the retail segment. In the past, our financing went mostly (65%) to corporates and it turned out that it led to surging NPF. We should focus on Indonesian Muslims, which comprise a huge market,” Aji said. 

Bank Muamalat attempted to issue new shares five times in the last three years, but it always failed to attract investor’s trust due to its bad financial performance. In March, Vice President Maaruf Amin asked Chairman of Sharia Economy Society Erick Thohir, who is also Minister of State Owned Enterprises, to bail out Bank Muamalat. And in September, a master restructuring agreement was signed between Indonesia's Haj Fund Management Agency BPKH, national asset management company and the bank. 

The agreement rules out strengthening Muamalat capital and asset structure. Later in November, Muamalat existing shareholders such as Boubyan Bank, Atwill Holdings Limited, National Bank of Kuwait, IDF Investment Foundation and BMF Holdings Limited donated their shares to BPKH. It is now owned by BPKH as the majority shareholder with 78.45% of total shares and IsDB with 10% of shares with the remainder held by public investors. 

Bank Muamalat Indonesia was established in November 1991, founded by ​​the Indonesian Ulema Council (MUI), the Indonesian Muslim Intellectuals Association (ICMI) and Muslim entrepreneurs. 

© SalaamGateway.com 2021 All Rights Reserved


Islamic Finance
Oman's Sohar International seeks to initiate merger talks with Bank Nizwa

Published 23 Nov,2021 via Muscat Daily - Sohar International Bank has expressed its intention to initiate merger discussions with Bank Nizwa. The bank on Tuesday sent a letter of intent to the board of directors of Bank Nizwa for a merger between the two entities.

“The board of directors of Sohar International Bank would like to announce that on Tuesday it has sent a letter of intent to the board of Bank Nizwa proposing a merger of the two banks,” Ahmed al Musalmi, chief executive officer of Sohar International Bank said in a disclosure to the Muscat Stock Exchange.

Musalmi said the Sohar International Bank’s board will keep the market updated with any progress on this matter, which will be subject to necessary boards, shareholders and regulatory approvals and the applicable laws of the sultanate.

Mergers between the banks are quite rare in Oman. Last year Alizz Islamic Bank was merged with Oman Arab Bank’s Islamic banking window, and before this erstwhile Oman International Bank was merged with HSBC Oman in 2012.

Bank Nizwa is the leading and fastest-growing Islamic bank in Oman. The bank’s total assets grew by 22 per cent to RO1.385bn as of September 30, 2021 from RO1.139bn a year ago.

Bank Nizwa’s gross financing portfolio grew by 19 per cent year-on-year to reach at RO1.130bn in September 2021, while its total customer deposits reached RO1.074bn recording a growth of 18 per cent compared to the same period of last year.

On the other hand, Sohar International Bank’s total assets increased by 9.3 per cent to RO4.023bn as of September 2021 compared to RO3.681bn a year ago.

The bank’s net loans and advances increased by 3.4 per cent to RO2.550bn in September 2021 against RO2.467bn a year ago.

Sohar International Bank’s customer deposits, however, decreased by 5.1 per cent to RO2.229bn in September this year compared to the same period a year ago.

© Apex Press and Publishing

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