Islamic fund eyes private buyouts

Islamic fund eyes private buyouts

 

Global Investment House, Millennium Capital and Dubai Islamic Bank have received approval from the Central Bank of Bahrain for a US $500 million Islamic buyout fund.

The fund will provide investors access to Shariah compliant private equity investments, which the partners see as a largely untapped asset class across the region.

As seed investors, Global, DIB and Millennium Capital will be contributing 13% of the fund’s capital. Global will be the investment manager to the Fund, while Millennium Capital will act as investment advisor.

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Tagged: Islamic Banking, Islamic Finance, Islamic Funds

Saudi Arabian bank to launch Shariah-compliant Africa mutual fund

Saudi Arabian bank to launch Shariah-compliant Africa mutual fund

The chairman of Jadwa Investment, Prince Faisal Bin Salman, hosted South African Ambassador John Davies and a number of businessmen at an “Investor Forum” for launching the new Jadwa Africa Equity Freestyle Fund. The fund is the first Shariah-compliant Africa fund offered by any institution in the region.

The offering of the Africa Fund places Jadwa in a leading position in the investment banking industry.

Remarkably, Jadwa has launched as many as 13 investment funds since June last year.

The comprehensive range of funds offered by Jadwa ranked it at No. 6 among the Saudi banks in terms of the assets under management, which exceeded SR5 billion.

“Jadwa, since its establishment in the first quarter of 2007, has made great achievements and Jadwa Africa Equity Freestyle Fund, the first of its kind, is a new milestone in its achievements,” Ahmed Al-Khateeb, managing director and CEO of Jadwa Investment, said in his welcome speech.

“Jadwa has set itself as a leader in Shariah-compliant investments in the world through its high quality services and superior investment solutions,” he added.

The ambassador was pleased with foresight and wisdom of Jadwa Investment in seeing the brighter side of African countries and with the introduction of the Jadwa Africa Equity Freestyle Fund.

“Last year, five out of top 10 fastest growing economies of the world were from Africa, which itself proves a lot. I believe that this fund will lead to more exciting opportunities for investors who are always seeking to enhance their returns,” he said.

The highlight of the event was an impressive presentation titled “The African Sun is Rising” by Dr. Michael Power, chief strategist at Investec Asset Management, highlighting how Africa’s relative value in the world is rising.

Dr. Power said that since 2000 the real GDP of Africa had been growing at an average rate of 5.8 percent compared to the world real GDP growth of four percent.

He presented compelling evidence that, contrary to its perception in the market, the reality of Africa today is vastly superior due to its ever improving political framework and reduced incidence of conflict.

In response to a question, Dr. Power mentioned that historically for the last two to three years markets have averaged returns of around 35 percent per annum, which is exceptional.

However, he would be very disappointed if the fund could not return an average of 20 percent per annum over the next five years.

In addition, Dr. Power drew investors’ attention to the important fact that a number of African markets have provided some of the world’s strongest returns over the past three years, despite being perceived as historically too risky.

“Africa is connecting well with the world to benefit from globalization and that the African markets are deepening and choices are widening for investors,” he said. “If we believe in China, and it is expected to be the world’s largest economy by 2030, then it is not without reason that Africa is now China’s fastest growing investment destination,” he added.

“This event was aimed at improving awareness among investors and simplify the investment mystery of the African Black Box,” Fadi Tabbara, Jadwa’s head of asset management and chief investment officer, said summing up the discussion.

“Jadwa will continue to offer unique products just as we have offered the first multimanager Shariah-compliant funds, the first Global Sukuk Fund, and we are now exploring Africa and much more to come,” he added.

Tagged: Islamic Finance, Islamic Banking, Islamic mutual fund, Sukuk

Islamic banks join in the race for Africa

Islamic banks join in the race for Africa

CHINA is not the only financial powerhouse with its hungry eye on Africa. Flush with oil wealth, the Gulf states, too, are spying profitable opportunities among the hundreds of millions of Muslims who live just a hop across the Red Sea. Africa’s economies are growing fast, thanks in large part to the commodities boom. Although many people on the continent do not have a bank account, the banking systems in some countries are growing increasingly sophisticated. Bankers from the Gulf hope that the middle class, particularly in the Muslim north, will turn to Islamic finance, and that firms will raise money through Islamic bonds, known as sukuk. Moody’s, a credit-rating agency, reckons that although Islamic finance was worth a puny $18 billion at the end of last year, its potential is close to $235 billion—about half what it estimates as the GDP of Africa’s Muslim population.

So far, forays from the Gulf into Africa have been limited to a few countries. Sudan—where only sharia-compliant finance is allowed in the north—dominates, holding over half of Africa’s Islamic-banking assets. A number of Gulf banks, familiar with the country’s language and oil resources, have joined forces with Sudanese investors to open Islamic banks. Last year the first sukuk from Africa was issued by a Sudanese cement firm. Reportedly, the government also tapped the market in January—selling bonds to Gulf investors to sidestep American economic sanctions over the massacres in Darfur.

But Sudan’s banking industry remains embryonic and few African countries combine the strong desire to promote Islamic banking with heavy demand from Muslim customers. “Islamic banking is a luxury product,” admits Anouar Hassoune of Moody’s: it tends to do better in places with established banking systems, such as South Africa and Kenya. South Africa’s only Islamic bank, Albaraka, was set up in 1989. Last year the Kenyan authorities licensed two Islamic banks, Gulf African Bank and First Community Bank, both backed by Gulf investment.

Western banks are also dipping their toes in. In Kenya Barclays was the first to offer an Islamic bank account appropriately named La Riba, meaning “no interest”. South Africa’s ABSA opened an Islamic banking division in 2006. It offers phone, internet and branch banking. Its head, Ahmed Moola, says the division was profitable last year, though he declines to discuss numbers.

Some of the keenest African custom for Islamic products is in countries where Muslims are a small minority; it provides a way of affirming their cultural heritage. Hamza Farooqi, who heads South Africa’s CII Holdings, a diversified business group, has gradually been moving his own and his company’s finances from conventional banks to ABSA’s Islamic division. It has asked ABSA to help finance the first “dry” five-star hotel in Cape Town.

Islamic finance in Africa is a niche market, and probably will remain so. Islamic scholars are few and far between; few countries’ laws are suitable for Islamic banking; the margins tend to be thinner than in the conventional Western model. Some countries, such as Nigeria, with almost 70m Muslims and a booming banking sector, should be fertile ground. The authorities’ hands are full, however, sorting out its existing banks.

One of the most promising areas of growth may be in project finance and bonds. The continent’s vast need for infrastructure is matched only by the shortage of investment funds: Gulf investors could help bridge the gap. Project finance is well suited for Islamic financial instruments, which need to be backed by physical assets. Gulf Finance House, an Islamic investment bank based in Bahrain, signed a $1.4 billion deal in Morocco to fund two tourism projects in 2006. Senegal is said to be contemplating issuing a sovereign sukuk. It could be a 21st-century version of “the scramble for Africa”. But this time the Gulf is moving in alongside China.

Al Salam Bank eyes expansion

Al Salam Bank eyes expansion

Al Salam Bank is looking for further expansion at a time when Islamic banking is booming, it was announced yesterday.

Speaking at the Algeria Economic Forum, the bank’s managing director Hussain Mohammed Al Meeza said it was estimated that Islamic banks’ total assets were hovering around $450 billion and expected to increase to $1 trillion by 2010.

“The golden age of Islamic banking and high patronage they enjoy encouraged us to launch the Salam Bank Group which continues to witness rapid growth and prosperity day by day,” he said.

“We started with Salam Bank of Sudan, then with Salam Bank of Bahrain and now with Salam Bank of Algeria. We will soon open more in other Arab countries.

“All financial institutions’ reports point to significant growth of assets and liabilities of Islamic banks in all Islamic countries, except Iran,” he said.

“Islamic banks are growing at higher rates than other banks and this is helping in creating a conducive climate in the banking sector.”

He said profit margins being achieved by Islamic banks and financial institutions are better than those being achieved by their traditional counterparts in many Arab countries.

“There are about 270 Islamic banking and financial institutions in various parts of the world, including 34 in Bahrain, which is the main hub of these banking institutions in the Middle East region,” he said.

Sudan raises funds in first Islamic bond sale

Sudan raises funds in first Islamic bond sale

Sudan is raising as much as 100 million euros ($147 million) from the sale of Islamic bonds in the African nation’s first issue of the securities.

The so-called sukuk mature in 2010, Bahrain’s Manama-based central bank said in its monthly capital-market review, sent by e-mail today. Sudan has set-up the Sudan Salam Sukuk Co., a special-purpose vehicle in Bahrain, for the sale of the bonds, according to the review.

Middle East borrowers have largely sidestepped the turmoil in global credit markets triggered by the collapse of the U.S. subprime home-loan market, raising $17.9 billion of Islamic securities in 2007, 75 percent more than the previous year. Global Islamic sales jumped 70 percent last year to a record $30.8 billion, according to data compiled by Bloomberg.

“An Islamic-compliant issue, backed by oil in some way, would appeal to an emerging Middle-Eastern investor base,’’ said Stuart Culverhouse, chief economist at Exotix Ltd., a London broker of developing-nation debt. “Any issue would likely have been placed among a tight grouping of investors.’’

Sudan is looking to investors in the Gulf to raise funds after U.S. President George W. Bush imposed economic sanctions in May in an attempt to force President Omer al-Bashir’s government to stop what the U.S. has described as genocide in Darfur. A 4 1/2-year civil war in the country has forced more than 2 million people to flee their homes, according to the United Nations. As many as 250,000 people have died.

INCREASED OIL OUTPUT

Sudan was the third-biggest oil producer in sub-Saharan Africa last year, after Nigeria and Angola. The country may increase output to an average 565,000 barrels a day this year, the International Monetary Fund said Oct. 11, 13 percent more than in 2007.

Bahrain’s Liquidity Management Centre BSC and the Riyadh, Saudi Arabia-based Arab Investment Co., the bond-sale arrangers, declined to comment on whether the transaction had been completed. The central bank report didn’t give any timing for the issue.

The funds raised will be used by Sudan to “enhance oil production and meet oil-related operating costs,’’ the review said. The debt will be “backed by a commodity, in this case oil,’’ said Ali Salman Thamer, the central bank’s director of capital markets supervision.

Sudan’s central bank and the finance ministry guaranteed the securities. No one answered the phone when Bloomberg called the switchboard number of the Central Bank of Sudan headquarters in Khartoum today.

INVESTMENT BAN

Bush signed legislation on Dec. 31 to let local governments bar the investment of state assets in companies with ties to Sudan. Twenty-two states, among them California and New York, passed laws to require or allow pension funds to divest from companies, such as PetroChina Co., that have business ties to Sudan.

Ahmed Abbas, Chief Executive Officer of Liquidity Management, and Suleiman Walhad, Arab Investment’s senior manager for Islamic banking, declined to comment when contacted in Bahrain today.

Sudan’s economy may expand about 11 percent for the third straight year, the International Monetary Fund said in an October report. The IMF estimated that the economy grew 11.8 percent in 2006. Gulf investors have started banks and real estate projects in Sudan, facing Saudi Arabia across the Red Sea, in expectation of the African nation’s economic resurgence.

INTEREST BAN

Berber Cement Co., a Sudan-based maker of building materials, raised $130 million from seven-year Islamic bonds in November. Liquidity Management helped in the sale.

Islamic law bans the payment and receipt of interest, prohibits investment in businesses such as gambling and alcohol, and stresses profit-sharing.

State-backed Qatari Diar Real Estate Investment Co. in 2006 said it bought a plot near Sudan’s presidential palace in Khartoum to build a five-star hotel, villas, apartments and offices. Last year, Global Investment House KSCC, Kuwait’s biggest investment bank, also said it bought a Sudanese financial-services company to benefit from the nation’s “considerable potential growth.’’

Sudan doesn’t have a credit rating at Moody’s Investors Service or Standard & Poor’s.