IFN can confirm that Al Baraka Bank has issued South Africa’s first Tier 2 capital Sukuk, a landmark offering that also has the rare distinction of being a retail paper. More details about the Sukuk in this week’s roundup which highlights the top stories from the last seven days including Bahrain’s new crowdfunding rules, the UK flexing its Islamic financial muscles and new reforms in Iran.
Al Baraka taps retail market for Tier 2 capital
Durban-based Al Baraka Bank became the first financial institution to raise Tier 2 capital through Sukuk in South Africa. A total of 94 retail and institutional investors subscribed to the ZAR200 million (US$14.43 million) offering.
“Initially, it was gradual to gain traction because this type of investment structure was new to the South African Islamic market; we are most gratified to have achieved the target by raising these funds from the retail market. The Sukuk enable us to grow our advances book by both creating direct cash flow from its proceeds and also allowing us to leverage its capital effect as required by regulation,” shared Abdullah Ameed, Al Baraka South Africa’s financial director.
The UK flexes Islamic financial muscles
It’s a strong week for the UK with players and the regulator making a loud statement about their commitment to the Islamic finance industry.
Despite uncertainties surrounding Brexit negotiations, the western hub for Islamic finance is still attracting investments from the Gulf. A consortium of institutional and ultra-high-net-worth investors has secured GBP350 million (US$447.6 million)-worth of Shariah compliant financing to develop London’s Regent’s Crescent, a deal that is one of the largest Islamic financing transactions in the UK in recent years.
Out of GBP350 million, GBP250 million (US$319.71 million) was provided by a syndicate of five banks from the Gulf and the UK while an additional GBP100 million (US$127.89 million) was structured as mezzanine capital funded by multiple parties domiciled in the Middle East and the US.
The real estate market remains a darling for Islamic investors and this interest moves beyond bank financing. To meet investor demand for funding diversification, Rosette Merchant Bank has set up a dedicated Sukuk unit to advise and structure Islamic capital solutions for local authorities and housing associations.
Bankers aside, Islamic financial intermediaries are also actively pursuing new opportunities. London-based DDCAP Group has partnered with financial markets data and infrastructure provider Refinitiv to offer financial institutions a fully integrated treasury trading workflow for Islamic transactions, which could translate to significant trade execution and operational efficiencies.
But the UK’s Islamic finance prowess extends beyond its shores. Ireland this week revamped its Islamic finance tax guidance and included a new chapter on Sukuk. The move by the Irish tax authority could provide potential issuers with much-needed clarity to use Ireland to originate Sukuk.
Iran overhauls banking system
The Supreme Council of Economic Coordination has approved a long-awaited reform plan of Iran’s banking system, Financial Tribune reported. The banking reform plan tackles problems with banks’ balance sheets and addresses the establishment of legal and regulatory platforms as well as management structures.
OJK expands Waqf program
With the development of Waqf a national priority, the Financial Services Authority of Indonesia (OJK) bolstered its Islamic endowment initiative by establishing Almuna Berkah Mandiri, a micro Waqf bank cluster program, aiming to empower the batik industry for residents around the Al Munawwir Islamic Boarding School Krapyak Bantul, Yogyakarta. Forty batik workers have been officially confirmed to receive funding via the program, while around 600 batik workers are in the process of being identified as potential customers of the program. This follows the government Sukuk Waqf launch and expansion of its micro Waqf bank network to Northern Sumatra.
Algerian bank to offer Islamic products
Following the approval of Islamic banking regulations, Banque de l’Agriculture et du Developpement Rural’s CEO Boualem Djebbar reportedly said the bank will soon launch Islamic deposit and financing solutions. The North African country has been proactive in spurring its fledgling Islamic finance sector. This month, the Algerian bourse also confirmed that it is working on Sukuk regulations.
CBB revises crowdfunding rules
A strong proponent of Islamic fintech, the Central Bank of Bahrain (CBB) has expanded the scope of the services covered under the existing rules on crowdfunding. The revisions made to the existing crowdfunding rules include, among others, a reduction in the minimum capital given the nature of the risk profile of the crowdfunding platform operator; removing the prohibition on business-to-business lending or investing through platforms; raising the limits for lending; the removal of certain restrictive conditions for lending/investing; and a consumer protection mechanism whereby the lender or investor has the right to withdraw the commitment made within 48 hours from the time he/she makes a commitment to lend or invest.