Here's a roundup of key developments across the Islamic finance ecosystem during the first two weeks of September

Editor's note: There is a visible demand for Islamic finance and banking. Keep to 'cash in' on the riding wave, non-Muslim majority countries across the world are gladly obliging. Russia has intitiated Islamic banking, while the Bank of Uganda has issued its first Islamic banking licence. Philippines is also taking active strides to promote Islamic banking and financing activities, signalling a strong global run for the sector. 

COMPANY NEWS

Singapore

Islamic Coin announces landmark MoU with CoinDesk Indices
At TOKEN2049 in Singapore, Islamic Coin announced an MoU with CoinDesk Indices (CDI) to explore a strategic partnership focused on developing innovative index strategies.

The partnership aims to tap into growing interest in crypto and inclusive finance. Key highlights include licensing CDI indices for various financial products, creating new Shariah-compliant indices, and providing API access to selected digital assets for HAQQ's internal use. (Zawya)

INVESTMENT

UAE

Alkhair Capital launches $100m Islamic healthcare fund in Dubai
Alkhair Capital Dubai, a provider of Shariah-compliant investment solutions, has introduced the Alkhair Capital Healthcare Sector Fund.

The open-ended liquidity fund will focus on healthcare enterprises leveraging cutting-edge artificial intelligence (AI) technology to enhance healthcare services.

Alkhair Capital has partnered with Klaim Technologies, a fintech firm specializing in AI-powered insurance claims assessment, to employ proactive investment management strategies for the fund. (Khaleej Times)

REGULATORY

Uganda

Bank of Uganda issues first Islamic banking licence
The Bank of Uganda has issued its inaugural Islamic banking license to Salaam Bank Uganda, a subsidiary of a Djibouti-based bank.

The license was presented at the central bank's offices by Deputy Governor Michael Atingi-Ego. This development comes after the Ugandan parliament passed legislation in June to authorize Islamic banking, with President Yoweri Museveni signing it into law in August. (Central Banking)

Russia

Russia introduces Islamic banking
In an effort to explore the viability of the Islamic finance model, President Vladimir Putin has signed a law introducing Islamic banking in four Muslim-majority republics in Russia.

The four regions, which include Chechnya, Dagestan, Tatarstan, and Bashkortostan, launched the Islamic banking system on September 1 as part of a two-year pilot program. (Al Arabiya News)

Pakistan

SECP issues Shariah compliance certificate to fintech fifirm
The Securities and Exchange Commission of Pakistan (SECP) has issued a Shariah compliance certificate to Qist Bazaar (Private) Limited, a licensed non-banking finance company (NBFC), offering buy-now-pay-later (BNPL) services.

The certificate, granted under Shariah Governance Regulations, is based on the principle of Musawamah, incorporating a profit margin in the commodity's sale price. (Business Recorder)

TRADE DEVELOPMENTS

Philippines / Saudi Arabia

Philippine Central Bank promotes Islamic finance, invites Saudi investors
The Bangko Sentral ng Pilipinas (BSP), the Philippines' central bank, has been actively promoting Islamic banking and finance initiatives in the country.

Recently, the monetary board granted its first Islamic banking unit license to a traditional bank, opening opportunities for foreign and private banks to enter the market. This was previously limited to the state-owned Al-Amanah Islamic Investment Bank of the Philippines. (Arab News)

Azerbaijan

ITFC considers Islamic finance deals uptick in Azerbaijan
The International Islamic Trade Finance Corporation (ITFC) is considering opportunities to expand Islamic finance deals in Azerbaijan.

ITFC's CEO, Hani Salem Sonbol, expressed optimism about introducing Islamic financial tools in collaboration with Rabita Bank and encouraged the transformation of existing banks or the creation of specialized units for Islamic banking in the region. (Trend News Agency)

ESG DEVELOPMENTS

UAE

Abu Dhabi Islamic Bank launches electric vehicle finance program
Abu Dhabi Islamic Bank (ADIB) has introduced its electric vehicle finance program. 

The initiative aligns with ADIB's sustainability commitment and the UAE's net-zero economy objectives. The program offers competitive financing with a rate of 1.79%, one of the industry's lowest for new electric vehicles. (Zawya)

Malaysia Digital Economy Corporation, a government agency tasked with leading the country's digital economy, will emphasize on three key domains within its Islamic Digital Economy (IDE) focus. 

The three domains include Islamic finance, halal and lifestyle. 

Syed Ibrahim Syed Noh, the agency's chairman said that it has been strategically designed to pave the way for a thriving ecosystem, Bernama reported.

The country's Islamic economy has been pivotal in its economy development, with MDEC identifying the Islamic digital economy as a promoted sector under its national Malaysia digital initiative.

Malaysia's Islamic finance assets stood at $3.6 trillion in 2021, and are forecast to reach to $4.9 trillion by 2025, a recent MDEC report revealed. Meanwhile, spending on halal food was recorded at $1.27 trillion in 2021, and is expected to grow to $1.67 trillion in 2025. Consumer spend on lifestyle sectors, such as travel, cosmetics and modest fashion, also totaled $467 billion, and is set to soar to $657 billion by 2025. 

MDEC is committed to nurturing IDE companies by offering a comprehensive ecosystem of mentorship, funding, business matching and market access, Noh added. 

"We are weaving a tapestry that fosters collaboration and effective partnerships between supply, demand, and enablers," he said, at the IDE Industry Conference 2023, earlier this week. 

"MDEC also serves as a bridge between traditional Islamic industries and the digital realm, by working close with halal certification bodies, Islamic financial institutions, and other stakeholders to integrate technology into their processes, thereby enhancing efficiency, transparency and compliance," Noh added. 

The Securities & Exchange Commission of Pakistan (SECP) has greenlit an initiative aimed at standardizing the Shariah structure for the issuance of sukuk, a form of Islamic financial instrument.

The decision, approved by the Shariah Advisory Committee (SAC) of the SECP, brings clarity and consistency to the sukuk landscape. 

The standardized framework, centered around the concept of Musharakah (Shirkat ul Aqd), encompasses a suite of comprehensive draft agreements, encompassing sukuk issuance and subscription, issue agency agreements, and Musharakah arrangements. It also aims to simplify the process of seeking approval for the issuance of Shariah-compliant securities, adhering to the Shariah Governance Regulations of 2018.

Fueling interest in sukuk Issuance

Companies are increasingly expressing interest in utilizing sukuk as a means to address their short-term working capital needs and fund their financial requirements. The framework introduces a level of clarity and predictability, allowing companies to navigate the sukuk issuance process efficiently. 

London-based Islamic fintech startup Mnaara has concluded a pre-seed funding round, raising $500,000 from investors spanning the UK, the US, the Middle East, and Singapore.

Mnaara.com aims to empower Shariah-conscious investors by providing access to global private funds, while ensuring compliance with Islamic finance principles.

The platform employs advanced technology to break down barriers and grant individual investors entry to private funds that were traditionally limited to institutional players. Through Shariah-screening guidelines supervised by expert advisers, Mnaara ensures that all investment opportunities are fully compliant with Islamic finance standards.

The platform's commitment to democratizing access to the previously exclusive private markets is set to launch to eligible investors worldwide before the close of 2023.

By mitigating non-ethical activities and avoiding interest-based income, Mnaara empowers investors to diversify their portfolios within a Shariah-compliant framework.

Takaful insurers operating across the Gulf Cooperation Council (GCC) are primed to continue a favorable growth path in 2023, underpinned by higher insurance prices and demand, a new report by S&P Global Ratings, has suggested.

However, the adoption of the International Financial Reporting Standard 17 (IFRS 17) does require Takaful insurers to update their internal processes and IT systems, which could translate into extra costs, time constraints, and operational challenges. This may potentially stress smaller, under-resourced players, the 'IFRS 17 Adoption Will Test GCC Islamic Insurers' report, has revealed.

Islamic insurers in Saudi Arabia, the largest Arab economy, and those operating out of other GCC countries adopted the aforementioned reporting standard from January 1, this year. Remaining insurers are likely to follow suit on the same date next year.

“Although we anticipate the adoption [of IFRS 17] will improve detailed published financials as companies enhance their data and processes, many insurers that have already implemented the new standard have experienced reporting delays and other setbacks," the S&P report read.

"In Saudi Arabia and the UAE, regulators extended reporting timelines in the first quarter to provide insurers, auditors, and other industry participants more time to complete the first financial returns under the new standard. Across the GCC region, we still see substantial differences in insurers' level of preparedness for IFRS 17. Many smaller and midsize Islamic insurers yet to implement will likely encounter difficulties given the lack of resources. This is because IFRS 17 requires internal process and IT system updates, resulting in additional costs and time constraints,” the S&P report read.

The GCC’s Takaful sector has ventured on a stable growth trajectory over the past five years, not least in 2022, when the overall gross written premium/contribution (GWP/C) among listed companies rose by about 23%.

The same year, Saudi Arabia recorded premium growth of almost 27%, despite a nearly 5% dip in GWP/C across other GCC countries over the same period. Some smaller Takaful markets, such as Qatar, stood to gain more as opposed to other Islamic markets in the region.

​Saudi National Bank, the largest Saudi bank in terms of assets, achieved a 10% increase in its net income in the first half of 2023.

The lender's net profit climbed to 10.037 billion Saudi riyals, from 9.90 billion Saudi riyals achieved during the corresponding period last year. 

The basic earnings per share for the current period amounted to 1.62 Saudi riyals per share, compared to 1.49 Saudi riyals per share in the same period of last year, according to a statement published on the Tadawul stock exchange. 

In the second quarter of 2023, the bank's net income increased by 9% to reach 5.016 billion Saudi riyals, compared to 4.589 billion Saudi riyals in the same quarter last year.

Growth in net income attributable to equity holders for Q2 2023 was driven by higher operating income along with lower operating expenses, including net impairment charge for expected credit losses, the bank said in its statement. 

Total operating income increased by 2% to 8.5 billion Saudi riyals, driven by an increase in fees from banking services, foreign exchange income, and investment income.

UAE-based Abu Dhabi Islamic Bank recorded a year-on-year net profit growth of 61% to total 2.3 billion dirhams in the first half of 2023.

The Abu-Dhabi-headquartered lender posted a 50% surge in revenue for the first half, rising to 4.3 billion dirhams, from 2.8 billion dirhams recorded during a year-earlier period, on account of 'excellent income diversification mix and strong growth across all business segments and products', the bank said in a statement.

Funded income grew by 75% to 2.9 billion dirhams compared to 1.7 billion dirhams in the corresponding period last year, driven by higher volumes and better margins.

Non-funded income also rose 14% to reach 1.3 billion dirhams in H1 2023 versus 1.2 billion dirhams from a year-earlier period, driven by 15% growth in fees and commissions.

Total assets increased 28% to total 182 billion dirhams, driven by 18% growth in gross financing and 22% growth in investments, the lender added.

Customer deposits rose 31% to reach 150 billion dirhams versus 115 billion dirhams in H1 2022, driven mainly by 14% growth in current and savings accounts (CASA), now comprising 66% of total deposits. 

“We have benefited from strong deposit inflows and grew our market share by attracting approximately 96,000 new customers to ADIB in the first half of 2023 emphasising the strength of our brand,” said chairman Jawaan Awaidah Al Khaili.