continued... - Islamic Finance News

Note from the editor 

www.islamicfi nancenews.com 

Islamic Finance news Guide 2008 

Unlike its conventional counterpart, Islamic fi nance had a successful year in 2007. The sum of Islamic assets was said to have 

reached US$900 billion, marking a 20% growth from the previous year. The global Sukuk market recorded a new high with a market 

value of US$51.5 billion — a 90% growth from 2006, which saw only a total of US$27.2 billion issuance of the Islamic bond. 

The year also witnessed several landmark deals, including the US$2.53 billion exchangeable Sukuk issued by ALDAR Properties 

PJSC, the largest exchangeable deal to date. 

It was also a year of signifi cant innovation as we saw new structures from Red Sea Gateway, the Egyptian Fertilizer Company 

acquisition and Tamweel. But what stood out was Mobily’s US$2.85 billion project fi nancing, which proved that innovation need not 

be complicated thus paving the way for funding other high-technology and communications deals in the future. 

The UK also set a precedent by issuing the world’s fi rst Shariah compliant exchange-traded funds (ETFs), beating Malaysia which 

holds a series of “fi rsts” in the Shariah compliant fi nance industry. 

With such exciting developments, can Islamic fi nance get any better? Looking at the numbers and the developments throughout the 

year, one can only answer in the affi rmative. 

Demand for Islamic investments rises from an estimated 1.3 billion Muslims worldwide and Islamic assets are set to hit US$1 

trillion by 2010. Day by day, Islamic banking grows more popular and banks churn out product after product to feed the insatiable 

hunger. 

There is little doubt that new precedents will be set in the Sukuk sector and it is said that the issuance of global Sukuk is likely to 

double to US$100 billion this year due to higher take-up of Shariah compliant fi nancial products among Middle East investors. 

All eyes will also be on Indonesia, Pakistan and the UK as these three countries have been identifi ed as the next big growth market 

for Islamic bonds. 

The race for a share of the lucrative pie is set to get even hotter this year as more non-Muslim countries enter the realm of Islamic 

fi nance. Hong Kong, which holds the gateway to China’s booming economy, has made major decisions in relation to its capital 

market and is poised to set waves in the industry. 

It has, been smooth sailing for the industry and it’s not too much to say that it has yet to face its biggest challenges which are 

expected to crop up more often this year as the market continues to grow. 

One of the industry’s biggest challenges is the serious lack of Shariah experts who play an important role in the industry. It is 

worrying that only a handful are qualifi ed to sit on the Islamic review boards at the world’s top banks and fi nancial institutions. The 

issue must be addressed quickly as it raises concerns over the ability of Shariah supervisory boards to provide enough of a rigorous 

challenge and oversight. 

In this third edition of the Islamic Finance news Guide, we have painstakingly compiled the industry’s most comprehensive and 

authoritative review of 2007 and preview of 2008. Featured within are 25 exclusively authored industry, sector and market reports 

and the full results of the Islamic Finance news Deals of the Year and Poll for 2007. Like its previous editions, the Guide also features 

a full review of stories from last year, the industry’s largest Arabic structured fi nance terminology glossary and much, much more. 

We would like to thank Professor Rodney Wilson, who kindly wrote the introductory industry overview for the third year running, and 

all other contributors for making time amid their busy schedules to share their insights. 

Last but not least, heartfelt thanks to our readers for your continued support. Till next year! 

Kind regards, 

Arfa’eza A Aziz 

Editor 

Page 1

CONTENTS 


INTRODUCTION 

Developments in Global Islamic Financial Markets in 2007 and Prospects for 2008 9 

By Prof Rodney Wilson, Durham University, UK 

ISLAMIC CAPITAL MARKETS 

Bringing Industry Participants onto a Single Platform 17 

By Dr Azmir Agel, IIFM 

LMC’s Role in the Primary and Secondary Islamic Capital Market 20 

By Liquidity Management Centre 

SECTOR REPORTS 

Malaysian Islamic Finance Landscape 27 

By Baljeet Kaur Grewal, KFH Malaysia 

Investing in Islamic Structured Products 33 

By Neil D Miller, Dean Naumowicz and Aziza Atta, Norton Rose 

Islamic Finance — The Offshore Connection 37 

By Tahir Jawed, Maples and Calder 

Profi t Rate Swap — Breaking New Frontiers 40 

By Kareem Hussaini, The Islamic Bank of Asia 

Macro Trends in Equipment Leasing 45 

By James A Cracco, First Leasing Bank 

Challenges of Regulating Shariah Compliant Securities and Investments: The GCC Example 47 

By Andrew Henderson, Clifford Chance 

S&P Foresees Mounting Demand for Islamic Products 50 

By Emmanuel Volland, Standard & Poor’s 

Risk Management in Islamic Banking: Key Issues 55 

By Dr Sunil Kumar, IRIS intergrated risk management AG 

Kuwait - Bahrain - Lebanon - United Kingdom - Malaysia 

Page 2 

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CONTENTS 


Globalization of the Islamic Banking Industry 59 

By Dourria Mehyo, Path Solutions 

2007 Global Takaful Review: Evolving Trends, Opportunities and Challenges 63 

By Sohail Jaffer, FWU Group 

MIDDLE EAST 

Bahrain 69 

Why Sukuk Pioneer Still the Preferred Venue; By Jane Dellar, Bahrain Financial Services Development 

Jordan 71 

Islamic Leasing in Jordan; By Raed Rafi Al-Ali, Bank of Jordan 

Lebanon 74 

Sky’s the Limit for Islamic Banking in Lebanon; By Badih S Khatib, Arab Finance House 

Syria 76 

The Syrian ‘Experiment’ on Islamic Banking; By Louay Habbal 

UAE 79 

Islamic Banking in the United Arab Emirates; By Dr Taha El Tayeb Ahmed, Badr Al Islami 

EUROPE 

Italy 82 

Islamic Financial Services in Italy; By Alberto Brugnoni, ASSAIF 

Turkey 84 

Marking the Next Phase: Innovation; By Paul Wouters, Bener Law 

AFRICA 

Africa 88 

Challenges for Islamic Banking in Africa; By Ahmed Moola, Absa Islamic Banking 

INDIAN SUBCONTINENT 

India 90 

Scope of Islamic Investments in India; By Taher Badshah, Kotak Mahindra Offshore Funds 

Sri Lanka 94 

Interest Picking Up in Sri Lanka’s Islamic Market; By Faizal Salieh, Amana Investments 

Page 4 

www.islamicfi nancenews.com

��

CONTENTS 


SOUTHEAST ASIA 

Brunei 97 

Developments in the Islamic Banking and Capital Market in Brunei 

Darussalam; By Mohamad Daud Ismail, Daud Ismail & Co 

Indonesia 100 

Accelerating Islamic Banking Growth in Indonesia; 

By Ali Sakti and Nasirwan IIyas 

AWARDS 

Full Report 107 

Deals of the Year 2007 Report & Poll 2007 Report 

NEWS BRIEFS 

January - December 120 

TAKAFUL NEWS BRIEFS 

January - December 147 

GLOSSARY 

Exclusively sponsored by Standard & Poors 

LEAGUE TABLES 

Page 6 

154 

Islamic League Tables 160 

By Dealogic 

Islamic Funds Tables 164 

By Eurekahedge 

EVENTS ROUNDUP 

168 


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Developments in Global Islamic Financial Markets 

in 2007 and Prospects for 2008 

By Professor Rodney Wilson 

The aim of this review is to examine trends in the 

markets for Islamic securities, usually designated 

as Sukuk, and Shariah compliant equities and 

equity funds, the performance of which can be 

measured against benchmarks such as the Dow 

Jones Islamic Indices. In contrast to 2006, when 

Shariah compliant equities underperformed, 

partly refl ecting the slump in share prices in Gulf 

markets, 2007 has been an excellent year for both 

direct equity investors and those placing their 

money in Shariah compliant mutual funds. 

For investors in Sukuk, fortunes have been more mixed, as 

although 2007 witnessed record issuance, the overall market 

could not escape the effects of the subprime crisis which 

affected all types of bonds and notes, including those that 

were Shariah compliant. Prospects for Shariah compliant 

equities look even more promising for the year ahead, with 

Gulf markets fairly valued. 

Medium- and longer-term prospects for Sukuk are also 

favorable especially once the true extent of subprime 

provisions becomes apparent and structured products are 

more accurately priced, refl ecting market fundamentals 

rather than dubious mathematical calculations. 

Impact of subprime crisis 

The subprime home lending crisis inevitably had an impact 

on the Sukuk market, especially in the Gulf where most of 

the Sukuk are US dollar-denominated and local currencies, 

with the exception of the Kuwaiti dinar, remain pegged to the 

dollar. There is little possibility of default with Sukuk in the Gulf 

as issuers can easily meet their payment obligations, given 

the record oil prices that approached US$100 per barrel by 

November 2007. Rather, the problem was with major fi nancial 

institutions reluctant to lend to each other through inter-bank 

markets, global bond markets that became suddenly less 

active from August with new issuance slowing down and much 

less secondary trading. 

Had it not been for the global credit crunch, 2007 would have 

been a superb year for Sukuk issuance with signifi cant trading 

activity in Gulf markets, notably through the Dubai Financial 

Market and the Dubai International Financial Exchange. By 

August, Gulf borrowers had raised over US$13.2 billion in 

Sukuk issuance compared to US$9 billion during the whole 

of 2006, easily overtaking the value of issuance in Kuala 

Lumpur for the fi rst time. 

A further US$10 billion of issuance was planned by Gulf 

corporate issuers but after August, it was either necessary 

to postpone new Sukuk placements or accept much higher 

fi nancing costs. While in June 2007 Ijarah Sukuk, the most 

popular issuance, were being offered at 65 basis points 

(bps) over the London Inter-Bank Offered Rate (LIBOR) for US 

dollars, by August, rates had risen to 125bps over LIBOR. 

This rise of 60bps had implications for existing as well as new 

Sukuk issuance, as with Ijarah Sukuk the rate of return varies, 

usually in line with movements in LIBOR. As the US Federal 

Reserve cut rates, the relative difference in returns between 

new and existing Sukuk increased as the 60bps had to be 

added to a lower number. 

The credit crunch meant the gap widened between LIBOR, 

and hence Ijarah Sukuk rates, and Fed rates. If there had 

been an active market in Sukuk in the Gulf, prices of existing 

Sukuk would undoubtedly have fallen. However, most of 

Sukuk trading occurs in the Kuala Lumpur market rather 

than the Gulf, but in Malaysia the issuance is largely ringgit 

denominated, and the value of the ringgit is determined by a 

trade weighted basket which has appreciated against the US 

dollar, hence Sukuk pricing in Malaysia is less affected by Fed 

interest rate decisions. 

Widening participation in Sukuk issuance 

The probability is that Sukuk spreads will remain higher in 

2008, although the costs to the issuers will be offset by 

declines in LIBOR, and indeed SIBOR and KIBOR, the Saudi 

and Kuwaiti offered rates respectively. There has been some 

reluctance to cut interest rates in Saudi Arabia because of 

infl ationary pressures, but cuts in the coming months are 

likely, which should encourage Sukuk issuance. 

At present, Malaysia and the UAE continue to account for over 

75% of global Sukuk issuance, but this dominance is likely to 

be reduced in 2008 as corporations in Saudi Arabia and other 

Gulf Cooperation Council (GCC) states see the advantages 

of securitized fi nancing. Saudi Arabia already accounted for 

almost 20% of global issuance in 2007. 

The opening of offi ces by leading international investment 

banks in Riyadh partly refl ects prospects for Sukuk issuance, 

continued... 

Page 9


Page 10 

Developments in Global Islamic Financial Markets in 2007 and 

Prospects for 2008 (continued...) 

as one of the factors that attracted Deutsche Bank, JPMorgan 

Chase and BNP Paribas to come has been the potentially 

attractive fees from Sukuk arrangement. 

At present, HSBC Amanah and CIMB Islamic of Malaysia 

are the dominant managers, but Deutsche Bank arranged 

18 Sukuk in 2007, and JPMorgan Chase and BNP Paribas 

— which arranged two and three respectively — are keen to 

catch up. Standard Chartered is also a lead arranger, given its 

worldwide network that includes Malaysia and South Asia, but 

expect more Sukuk arrangements out of its offi ce in the Dubai 

International Financial Center. 

Proposed sterling sovereign Sukuk 

A landmark development was the publication in November 

2007 of the consultative document on sterling Sukuk 

issuance by Her Majesty’s Treasury in the UK. London has 

been the leading western center for Islamic banking since the 

early 1980s, but there are no Shariah compliant transactions 

in its debt markets. 

Yet London’s position as the leading European market for 

corporate bonds and fl oating rate notes demonstrates that 

there is the expertise to develop new variants catering 

specifi cally for the requirements of Islamic fi nancial 

institutions. The consultative document seeks opinions on 

whether Ijarah Sukuk based on rental contracts would be 

the most appropriate form of Sukuk for the proposed UK 

government issuance and what would be the legal rights for 

the government as issuer, the Sukuk investors and the special 

purpose vehicle established to administer the Sukuk. 

The proposed Sukuk by HM Treasury is likely to be priced at 

below LIBOR and in line with the pricing of other UK government 

debt. As the UK government can easily raise fi nance at highly 

competitive rates given its creditworthiness, it is not prepared 

to pay a premium to Sukuk investors that would ultimately be 

disadvantageous to British taxpayers. The purpose is not to 

attract funding from Islamic fi nancial institutions in the Gulf, 

although they are welcome to bid for the Sukuk, but rather 

to provide a Shariah compliant alternative for those fi nancial 

institutions that already hold UK government debt. 

Major international banks involved in Islamic fi nance, for 

example, may welcome the opportunity to acquire high-quality 

marketable Shariah compliant assets as counterparts to their 

Wakalah, Qard Hasan and Mudarabah deposit liabilities. This 

includes sterling liabilities, as both Islamic and conventional 

banks in the UK are offering Shariah compliant current, 

savings and investment accounts, including time and advance 

notice deposits. 


At present, covering liquidity requirements is problematic 

and has a high opportunity cost if assets are held in cash 

or in Murabahah inter-bank deposits that incur relatively high 

structuring charges for very low returns. 

The main motivation behind the UK government’s interest 

in sovereign Sukuk is that such issuances will serve as a 

pricing benchmark and facilitate the city of London emerging 

as a major international center for corporate Sukuk, indeed 

perhaps even the leading center. In addition to the investment 

banking expertise in bond and note issuance in London, the 

city has many advantages over other potentially competing 

centers, notably the long-term historical links with the Muslim 

world, a legal system based on common law that can ensure 

the enforceability of Shariah compliant contracts and the 

presence of fi nancial institutions and businesses from all 

major Muslim countries. 

“The main motivation behind 

the UK government’s interest 

in sovereign Sukuk is that such 

issuances will serve as a pricing 

benchmark and facilitate 

the city of London emerging as 

a major international center for 

corporate Sukuk” 

A further advantage is the strength of sterling, as Gulf 

investors seek alternatives to the US dollar, the UK pound and 

the euro being the obvious choices given their convertibility, 

the extremely competitive spreads on foreign exchange 

transactions and the choice of hedging opportunities. Sterling 

may be less attractive from the issuers’ perspective, however, 

given its strength, but this applies to an even greater extent to 

the euro, and the likely lower pricing of sterling-denominated 

corporate Sukuk should largely compensate for the risk to 

dollar-dependent issuers of sterling appreciation. Of course, 

if the other GCC countries follow Kuwait’s lead in May 2007 

and move to a currency basket, expectations concerning 

sterling appreciation against the US dollar will become less of 

a concern for issuers. 

The timing of any Sukuk issuance by the UK government 

remains unclear, as there are legal and tax issues regarding 

the underlying asset that could be used that may require 

legislation. Selecting which Shariah scholars to approve the 

continued...

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Sukuk is also a complex and potentially contentious issue 

that is not addressed in the consultation paper. 

Should the scholars be British citizens or UK residents, 

and should they all belong to the same school of Islamic 

jurisprudence? What should be their qualifi cations and 

experience, and is it more important that they have credibility 

in the Gulf rather than the confi dence of Britain’s very 

heterogeneous Muslim community? 

“Shariah compliant investors do 

best when conventional banks 

underperform the market and do 

worst when shares in conventional 

banks outperform the markets” 

It is unlikely that any issuance could come before the second 

half of 2008, but supporters should not be disheartened as 

the plans have momentum, and it is better to take the time to 

ensure the issuance is a success rather than act with undue 

haste and jeopardize what could become a rolling program 

with regular issuances. 

Shariah compliant equity investment 

As already indicated, 2007 has been an excellent year for 

Shariah compliant equity investors with the Dow Jones Islamic 

Market (DJIM) Indexes outperforming their conventional 

counterparts. The DJIM World index rose by over 16% during 

the year, as did the DJIM Asia Pacifi c Index. 

The DJIM Europe index rise exceeded 20%, the highest by 

geographical segment, partly refl ecting the appreciation of 

the euro, while the rise in the DJIM US index was lower at 

12%, refl ecting the converse US dollar weakness. The DJIM index 

rose by over 16%, but disaggregated gains by sector were 

lower, with technology stock rising by 12% and smaller capitalized 

companies also by 12%, less than the previous year. 

It was fortunate that Shariah compliant equity investments 

exclude shares in conventional banks, as in 2007 these 

performed poorly; and, in many cases, suffered signifi cant 

capital losses due to the fallout from the subprime mortgage 

crisis and their holdings of collateralized debt obligations 

(CDO) that became virtually worthless. 

As CDOs are not Shariah compliant and not asset backed, this 

is one of the many reasons Islamic investors cannot invest 

in conventional banks. Empirical studies show that Shariah 

compliant investors do best when conventional banks 


underperform the market, as in 2007, and do worst when 

shares in conventional banks outperform the markets, as in 

2006 and possibly again in 2008 depending on the speed of 

recovery by the banks from the subprime mortgage crisis. 

Trends and prospects for GCC equity markets 

There was an increased tendency for Shariah compliant 

investors from the Gulf to keep their funds in their home 

markets in the aftermath of 9/11 and the burst of the tech 

bubble as well as the collapse of WorldCom and Enron, to 

which many Shariah compliant investors were exposed. Apart 

from these negativities, there were also positive factors 

encouraging investment in local markets, notably the stock 

market boom in the Gulf following the post-2002 oil price 

hikes. 

The stock market crash of 2006, with the Saudi Arabian 

market losing 60% of its value, caused many equity investors 

to think again and review their asset allocation strategies. 

Consequently, there was renewed interest in international 

equity investment, with global equity funds and regional funds 

experiencing a revival of interest. 

However, developments in 2007 highlighted the need for 

Gulf investors to take a more balanced view of their Shariah 

compliant equity portfolios. Following the crash of 2006, Gulf 

equities were more fairly priced, with realistic price-to-earnings 

ratios. The Saudi Arabian market rose 25% during 2007, with 

the Kuwait market, the second largest in the region, rising 

by over 36%. Although well below the early 2006 peaks, this 

represented a credible advance. 

Furthermore, greater portfolio diversifi cation is now possible 

in the Saudi Arabian market, with two new initial public 

offerings (IPOs) per month and the total value of IPOs in 2007 

exceeding US$4 billion. In the UAE, the value of IPOs was also 

signifi cant, exceeding US$1.6 billion in 2007. 

Prospects for 2008 are promising as leading Gulf industrial 

companies have been performing well, with profi ts of Saudi 

Basic Industries Corporation (SABIC) rising by over 42%, 

partly refl ecting high petrochemical prices with increased 

demand from Asia, and partly buoyed by substantial revenue 

contributions from its overseas subsidiaries in Europe and 

elsewhere. 

The profi t outlook for real estate development companies 

such as Emaar and Nakheel from Dubai is more uncertain 

and will depend on the demand and supply balance in the 

regional market for commercial and residential property. The 


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Page 14 



retail sector is expected to hold up well in 2008, partly due 

to oil revenues continuing to trickle down to Gulf consumers, 

but also with demand in countries such as Malaysia, helped 

by increasing tourist arrivals. 

Conventional bank shares are of course excluded from Shariah 

compliant asset portfolios, but investors can expect shares in 

Islamic banks to appreciate signifi cantly in 2008, with Al Rajhi 

Bank and Boubyan Bank of Kuwait likely to do well. If Islamic 

Bank of Britain starts to make profi ts, this will also be good 

news for Shariah compliant investors in London’s Alternative 

Investment Market (AIM). 

Islamic managed funds 

Both open- and closed-ended Shariah compliant managed 

funds expanded signifi cantly in 2007 with over 320 funds 

available by the end of the year. Half of these were equity 

funds, the second-largest category being real estate 

funds, an asset class much favored by Shariah compliant 

investors. 

Leasing funds, usually closed-ended, continued to attract 

interest from institutions and high net worth investors, while 

commodity funds, usually Murabahah-based, continued to 

appeal to retail investors seeking permissible alternatives to 

savings and treasury bank accounts paying interest. 

The major new development during the year was the launch 

of Islamic Sukuk funds in the Gulf, with offerings from the 

Kuwait Financial Center (Markaz) as well as Falcom Financial 

Services and Jadwa Investment of Riyadh. Hitherto the only 

Sukuk funds available to retail investors were in Malaysia, 

with RHB Bank the market leader. 

The launch of Sukuk funds was not previously possible 

beyond Malaysia because of the shortage of these securities, 

but with this now rectifi ed, Sukuk funds are likely to become 

as popular among Shariah compliant investors as corporate 

bond funds are for conventional investors. 

The establishment of Jadwa Investments was perhaps 

the most signifi cant recent institutional development in 

fund management. It was granted a license by the Capital 

Markets Authority of Saudi Arabia in August 2006, and 

2007 was its fi rst full year of operation. The employees own 

a major portion of its stocks, and therefore have a direct 

interest in the company’s success. The initial paid-up capital 

was SAR500 million (US$133.5 million), and its founding 

partners included Prince Faisal bin Salman bin Abdulaziz, 

chairman of the board, and Abdulrahman Saleh Al Rajhi and 

Abdullatif Kanoo, the latter bringing a Bahrain connection. 


Jadwa acquired ExxonMobil’s 30% stake in the Saudi Aramco 

Lubricating Oil Refi ning Company in November 2007, its most 

signifi cant investment. Jadwa has been able to attract highquality 

staff, not least Brad Borland, who in June 2007 was 

appointed its chief economist and head of research, having 

worked for Samba, the former Saudi American Bank. 

Jadwa formed a partnership with Russell Investment Group in 

May to develop Shariah compliant funds and attract successful 

fund managers. Its funds to date include Saudi Equity, GCC 

Equity, Arab Market Equity and a Murabahah Fund, in addition 

to the Global Sukuk Fund. 

“The launch of Sukuk funds was 

not previously possible beyond 

Malaysia because of the shortage 

of these securities” 

In December 2007, it extended its portfolio of funds further 

with the launch of the Jadwa World Equity Fund and the 

Jadwa Emerging Market Fund. These launches make Jadwa 

a serious competitor to the National Commercial Bank with 

its Al Ahli family of mutual funds and Al Rajhi Bank, the two 

leading fund providers in the Saudi Arabian market. Both the 

Jadwa World Equity Fund and the Jadwa Emerging Market 

Fund are multi manager funds, the fi rst to be offered in the 

kingdom. Saudi investors have now a greater choice than ever 

of Shariah compliant funds, and in such a competitive market, 

should be able to gain good returns with very reasonable 

management fees. 

Egypt as a destination for Shariah compliant 

funds 

Shariah compliant investors are increasingly interested in 

GCC and wider Middle Eastern markets as the offerings from 

Jadwa Investments illustrate. In the longer term, markets such 

as Egypt look interesting, as although most of the funds there 

are conventional, there are now fi ve Shariah compliant funds, 

including two from Hermes Fund Management of Cairo, one 

from Banque Misr and two from Faisal Islamic Bank, one of 

which is managed by Hermes. 

With a population of over 75 million and economic growth 

approaching 7% annually, the Egyptian economy has been 

performing much better in recent years, with encouraging 

prospects for the future despite some concerns over infl ation. 



Page 16 



Egyptian equity prices fared badly in 2006 but the recovery 

was much faster than in GCC markets, with the share prices 

of Orascom Construction and the Orascom Hotels Company 

doubling in value in 2007, although the rebound in Orascom 

Telecom and Mobinil was more modest. 

“Shariah compliant capital market 

products are more successful, as 

virtually all of the debt issuance 

in the GCC and Malaysia is in the 

form of Sukuk, and most managed 

funds are Shariah compliant” 

Price-to-earnings ratios for some of the Orascom companies 

are starting to look stretched, but overall, there is still much 

value stock for fund managers to pick in 2008, virtually all of 

which is Shariah compliant. 

Challenges for Takaful operators and Shariah 

compliant investment companies 

Islamic banks in markets where conventional and Islamic 

banks co-exist appear to be unable to achieve more than 

a share of 10% to 20% of total bank deposits. In sharp 

contrast, Shariah compliant capital market products are 

more successful, as virtually all of the debt issuance in 

the GCC and Malaysia is in the form of Sukuk, and most 

managed funds are Shariah compliant. There are good 

reasons for being optimistic about Sukuk, not least as 

Takaful becomes more popular in the largely under-insured 

Islamic world. 

Conventional insurance companies are the largest holders 

of corporate bonds and as Takaful operations extend, a 

major part of their assets are likely to be held in Sukuk given 

the risks in excessive equity exposure. Providers of general 

Takaful can cover their claims liabilities by holding Salam 

Sukuk, while for family Takaful operators whose clients have 

long time horizons, Ijarah, Murabahah and Istisna Sukuk are 

more appropriate given their maturities. 

In June 2007, Bank AlJazira reached agreement with 

Prudential to establish a joint Takaful venture to serve 

the potentially vast market in Saudi Arabia, for insurance. 

An application for regulatory approval has already been 

submitted to the Capital Markets Authority, and it is hoped 

operations can begin by June 2008. The new venture, 

Tadawul Takaful, will be a listed company on the Saudi 


Arabian stock market, with Prudential as its largest single 

shareholder. 

Given the success of the IPO by the National Company for 

Co-operative Insurance three years ago in Saudi Arabia, 

prospects for Tadawul Takaful are encouraging. Other 

international insurance companies interested in Takaful 

include Allianz, which distributes its products from Bahrain, 

and reinsurance companies such as Hanover Re and Munich 

Re, both of which are increasingly active in the Gulf. 

Shariah compliant investment companies such as Investment 

Dar and the International Investor of Kuwait are likely to be 

more in the news in 2008 as they spread their activities. 

Investment Dar profi ts rose to KWD91 million (US$350 

million) for the fi rst half of 2007, and are likely to jump to 

KWD200 million (US$730 million) for the whole year, almost 

double the 2006 level. 

Investment Dar has established a banking subsidiary in 

Bahrain. Its real ambitions are qualitative, however, rather 

than merely quantitative, and have real signifi cance for the 

future of Islamic fi nance. It is seeking to defi ne more clearly 

what is meant by Islamic “values” in fi nance and communicate 

this to investors and potential clients. Specifi cally, Islamic 

fi nance is often perceived as an industry that revolves 

around prohibitions, most crucially the prohibitions of riba 

and gharar. 

Although these prohibitions are fundamental to the industry, 

expect to see more emphasis on positive values, not least 

the concepts of partnership and participation long stressed 

by Shariah scholars including members of the Investment Dar 

Shariah Board. It is chaired by Sheikh Ahmed Bazie Al-Yassen, 

with Dr Issam Khalaf Al-Inzi as their youngest scholar. 

One area in which these values can be applied is private equity 

and venture capital fi nance, where Musharakah provides 

an ideal structure with considerable potential for further 

innovation. Such innovations are already being explored by 

academics, including the writer of this review. It may be too 

soon to see their widespread application in 2008, but in the 

longer term, their signifi cance will undoubtedly grow, with 

the potential to transform much of the corporate sector in 

Muslim countries into a truly Islamic economic system and 

Shariah compliant fi nance as the means, rather than simply 

an end in itself. 

Professor Rodney Wilson is the 

director of Islamic fi nance studies at 

Durham University, UK



Bringing Industry Participants onto a 

Single Platform 

By Dr Azmir Agel 

Following the completion of its reorganization 

in 2006, International Islamic Financial Market 

(IIFM) embarked on a revised and well-focused 

business strategy while keeping its mandated 

objective of establishment, development, selfregulation 

and promotion of Islamic capital and 

money markets intact. 

The major change in IIFM’s approach is that the 

development projects are now market-driven and it brings 

industry participants, mainly fi nancial institutions (FIs), on 

a common platform through the creation of global working 

groups. More specifi cally, IIFM is now expending its efforts 

on assisting the industry in establishing and endorsing 

minimum documentation standards for money market and 

capital market products through the development of master 

agreements. 

“IIFM has a unique and 

advantageous international 

organizational set-up which 

will be a major factor in the 

implementation and adaptation 

of IIFM Islamic market uniformity 

efforts, standardized documents, 

products and common practices” 

In terms of board composition, the major change is 

that besides seven founding and permanent members 

representing mainly the central banks and regulatory 

bodies of Bahrain, Malaysia, Indonesia, Pakistan, Sudan, 

Brunei and the Islamic Development Bank (IDB), the IIFM 

board of directors also consists of nine major FIs from 

fi ve jurisdictions. IIFM has a unique and advantageous 

international organizational set-up which will be a major 

factor in the implementation and adaptation of IIFM Islamic 

market uniformity efforts, standardized documents, products 

and common practices. 

FIs are expected to be the main benefi ciary of IIFM projects 

as standardization of specifi c and well-identifi ed areas, 

whether document or product, will signifi cantly reduce 

costs and time as well as provide greater transparency, 

robustness and acceptability across the globe, leading to 

more opportunities for facilitating growth. 

In order to have wider Shariah acceptability, the IIFM board, 

with the support of the Central Bank of Bahrain (CBB), has 

fi nalized Shariah approval arrangement with the IDB. As per 

the arrangement, IIFM will submit its completed projects 

to the IDB Shariah board for fi nal approval. Since IDB is 

a neutral body and its Shariah board consists of seven 

prominent Shariah scholars from diversifi ed backgrounds, 

it is envisaged that IIFM’s uniformity projects will have wider 

acceptability and usage. 

Moreover, during the project initiation and development 

phase, IIFM will use the services of a number of prominent 

Shariah scholars who have agreed to assist IIFM together 

with IIFM’s in-house Shariah head, whose main role is 

to coordinate Shariah workfl ow and provide input when 

needed. 

IIFM project-specifi c working group model provides the ideal 

opportunity to FIs to work on a common platform where they 

can share their views, experiences and expertise and, work 

together on a global basis towards the creation of a unifi ed 

document, product, best practices, and so on, for the wider 

industry, thereby creating a robust and transparent Islamic 

fi nancial services industry (IFSI). 

In terms of project implementation, IIFM is fi nalizing the 

following key initiatives: 

1. IIFM/ISDA Master Agreement (framework document on 

Ta-Ahut/Hedging) 

IIFM is working on the fi rst phase i.e. the creation of a 

framework document mainly covering Islamic hedging. 

It is expected, if requested by industry participants, that 

the second phase would be the product development 

itself. 

2. IIFM Master Agreement for Treasury Placement 

The Master Agreement for Treasury Placement will 

provide a standardized benchmark document for the 

industry as currently there are more than 20 different 

documents being used by the institutions. Absence of 

a unifi ed document results in increased cost, raises 

the issues of robustness and transparency, as well as 

diverse Shariah acceptance. 


Page 17


Bringing Industry Participants onto a Single Platform (continued...) 

3. IIFM/ICMA Shariah Compliant Repurchase (repo) 

This project is aimed at resolving the non-availability 

of a viable Islamic money market instrument and will 

also provide an effi cient liquidity management tool to 

the industry. Moreover, this tool will assist in fostering 

the secondary market on Sukuk. 

In addition, there are several other projects under 

consideration such as the Islamic instrument database, 

Sukuk primary market recommendation and guidelines 

IIFM’s medium-term objective is to provide benchmark/ 

standardized documents and best practices and database 

of Islamic capital market instruments. 

“There are several other 

projects under consideration 

such as the Islamic instrument 

database, Sukuk primary market 

recommendation and guidelines 

IIFM’s medium-term objective is to 

provide benchmark/standardized 

documents and best practices and 

database of Islamic capital market 

instruments” 

However, without the active support and involvement by the 

fi nancial sector, especially Islamic banks and conventional 

banks with Islamic windows, it will be a challenge for IIFM 

to achieve its objectives which are aimed at making the 

IFSI a robust fi nancial system where IFIs will be the main 

benefi ciary. 

Dr Azmir Agel is head of capital market and support services at 

IIFM. He can be contacted via email at azmir.agel@iifm.net. 

Page 18 


147564-KLIFF277x190_C3_3-12.ai 5/12/07 11:29:06 AM


Page 20 

LMC’s Role in the Primary and Secondary 

Islamic Capital Market 

By Liquidity Management Centre 

Liquidity Management Centre (LMC/the bank), an 

Islamic investment bank regulated by the Central 

Bank of Bahrain (CBB, formerly the Bahrain 

Monetary Agency), was incorporated in July 2002 

with the aim of providing optimal Islamic fi nancing 

and investment solutions contributing to the growth 

of the Islamic capital market. 

Today, LMC plays an active role in the primary and secondary 

Islamic fi nancing market delivering innovative, adaptable and 

tradable Islamic Shariah compliant short- and medium-term 

fi nancial instruments to Islamic fi nancial institutions in order 

to invest their surplus funds. LMC’s experience and knowledge 

of the Islamic capital market enables it to also provide Islamic 

advisory services, including (but not limited to) the areas of 

structured fi nance, project fi nance and corporate fi nance. 

With an authorized capital of US$200 million and a paid-up 

capital of US$51 million, LMC proudly shares a close working 

relationship with its shareholders — all renowned in the 

Islamic fi nancial market for their contribution to the industry, 

and all hold equal shares in LMC: Bahrain Islamic Bank BSC 

(Kingdom of Bahrain), Dubai Islamic Bank PJSC (UAE), Islamic 

Development Bank (Saudi Arabia) and Kuwait Finance House 

KSC (Kuwait). Moreover, LMC is keenly seeking the opportunity 

to further increase its capital this year. 

LMC boasts signifi cant achievements in a span of six years 

with a sound track record, acknowledged by industry leaders 

around the world. Led by a highly experienced and qualifi ed 

management team comprising CEO Ahmed Abbas and 

chief operating offi cer Khalid Bucheeri, and supported by a 

professional technical and placement team, LMC has achieved 

a high level of transactional and product diversity. The bank 

has proven to be a leading arranger of Sukuk (Islamic bonds), 

having issued a number of innovative Sukuk with adaptable 

and recognized structures that have been refl ected in other 

Sukuk issued in the region. 

The bank’s focus has not only been on bringing long-term 

fi nancing opportunities to market but also on developing 

short-term Shariah compliant investment opportunities. It 

pioneered the structure of its short-term Sukuk program, a 

tradable low-risk liquidity management product that gives 

investors the opportunity to invest in short-term Sukuk having 

monthly tenors that are secured by a diverse portfolio of 

asset backed corporate and sovereign Sukuk instruments 


arranged and administered by LMC. The program is the fi rst 

such repackaged Sukuk product to be offered in the Islamic 

banking market. Currently, the program stands at a total size 

of US$300 million and further sustained growth is anticipated 

throughout 2008. 

“LMC’s experience and knowledge 

of the Islamic capital market 

enables it to also provide Islamic 

advisory services, including (but not 

limited to) the areas of structured 

fi nance, project fi nance and 

corporate fi nance” 

With the ultimate long-term vision of contributing towards 

the development of a standardized framework for Islamic 

investment banking, LMC not only benefi ts from its own 

Shariah supervisory board but also enjoys the support of its 

prominent shareholders, board of directors and that of the 

CBB. 

LMC primary market arrangement activities 

LMC has had a creditable track record of primary market 

Sukuk issuances since mid-2003. The diversifi ed array of 

Sukuk arranged is summarized below: 

1. BAHRAIN — Bahrain Monetary Agency Ijarah Sukuk 

US$250 million issued in June 2003 

• LMC’s fi rst Sukuk, and the fact that it was a 

sovereign issuance was testimony to the CBB’s 

belief in LMC’s capabilities. 

• The Sukuk structure was an Ijarah Sukuk over 

designated government buildings. 

2. UAE — EMAAR Sukuk US$65 million issued in June 

2004 

• This was the fi rst corporate real estate Sukuk 

issued in the UAE and a landmark transaction for 

LMC, given the market standing of EMAAR. 

• The Sukuk structure was essentially an Ijarah 

Sukuk over designated buildings. 

• The issue was domestically listed in Bahrain. 



LMC’s Role in the Primary and Secondary Islamic Capital Market 

(continued...) 

3. BAHRAIN — FIRSAN Sukuk €76 million (US$111.78 

million) issued in October 2004 

• This Sukuk was issued for Arcapita and was a 

prestigious Sukuk for LMC, given the market 

standing of the obligor. 

• The issue was oversubscribed by €26 million 

(US$38.5 million). 

• The Sukuk proceeds were used for general 

corporate funding purposes. As a consequence, 

the Sukuk structure was one that was backed by 

an investment Murabahah. 

4. BAHRAIN — Durrat Khaleej Al Bahrain US$152.5 million 

issued in January 2005 

• The fi rst project fi nance type Islamic Sukuk (Istisna 

Ijarah). 

• This was the fi rst large-scale property development 

to involve Sukuk in Bahrain. 

• New concept of advance lease rentals in the Sukuk 

mechanism. 

5. KUWAIT — The Commercial Real Estate Company Ijarah 

Sukuk US$100 million issued in May 2005 

• Issue fully underwritten in 10 days. 

• First rated corporate Sukuk in the Middle East 

(rated “A-” by Capital Intelligence) and fi rst Sukuk 

issued out of Kuwait. 

6. BAHRAIN — Bahrain Financial Harbour Al Marfa’a Al Mali 

Sukuk US$134 million issued in July 2005 

• One of the premier commercial developments in 

Bahrain, given the project’s aim of maintaining a 

state-of-the-art fi nancial hub in Bahrain. 

• Structure based on Istisna into Ijarah. 

• Reputed as one of the best documented and 

fi nancially engineered Sukuk to be launched in the 

international market. 

7. UAE — Bukhatir Investments Limited Sukuk US$50 

million issued in May 2006 

• First investment agency structure (Sukuk Al- 

Wakalah Bel-Istithmar) to be issued in the 

international Sukuk market. 

• Jointly arranged with Emirates Islamic Bank (EIB). 

8. KUWAIT — Lagoon City Sukuk US$200 million issued in 

December 2006 

• This was LMC’s fi rst international Sukuk issue 

settled through the international market clearing 

system. 

• The Sukuk was a reducing fi ve-year Musharakah 

Page 22 


callable at the end of the second year by the obligor, 

supported by a guarantee from parent company, Al 

Ahlia Investment Company KSC. 

• The Sukuk has been rated “BBB+” by Capital 

Intelligence. 

9. UAE — Thani Investments Limited Sukuk US$100 million 

issued in November 2007 

• Musharakah Sukuk — one of the fi rst Sukuk issued 

for privately owned businesses in the GCC. 

• Jointly arranged with EIB. 

10. UAE — Berber Investment Agency Sukuk US$130 million 

issued in September 2007 

• This was the first Musharakah structure based 

on Al-Wakalah Bel-Istithmar contract between 

the investment agent Berber Cement Company, 

acting through its agent, National Cement 

Company PSC, Dubai, UAE (the wakeel) and 

the Sukuk holders acting through their agent 

Berber Sukuk Company BSC — Bahrain (the 

issuer). 

• This Sukuk was promoted and fully supported 

by a guarantee from Berber’s Gulf Cooperation 

Counties (GCC)-based shareholders. 

• Co-arranged with EIB. 

11. SUDAN — Sudan Salam Sukuk €68 million (US$100 

million) issued in November 2007 

• This Sukuk was jointly arranged with The Arab 

Investment Company. 

• This was the fi rst Salam transaction issued by LMC 

and the fi rst transaction issued in Sudan by LMC 

for the Sudanese Ministry of Finance and National 

Economy. 

• The Sukuk was guaranteed by the Central Bank 

of Sudan and supported by the offshore sales of 

crude oil. 

Secondary market development activities 

LMC has actively facilitated, and continues to facilitate, the 

further development of the secondary market in tradable 

Islamic instruments such as Sukuk. LMC’s primary role is in 

acting as a facilitator or medium through which buyers and 

sellers of Sukuk can execute trades. 

LMC’s secondary market initiatives include: 

• A Sukuk “Bid/Offer Registration Service” — a 

complimentary service launched on LMC’s public 

website (www.lmcbahrain.com/bid-offer-table.asp). 


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• The issuance of a global Sukuk table (www.lmcbahrain. 

com/Global-table.asp). 

• Publication of executed secondary market Sukuk trades 

commencing from the second half of 2005 (www. 

lmcbahrain.com/trade.asp). 

• Establishment of LMC pages on Bloomberg (codes 

“LMCS” and “Sukuk”). These pages have been jointly 

developed by LMC’s senior management in cooperation 

with Bloomberg. The joint intention is to provide 

subscribing investors with access to static Sukuk data 

and industry standard modeling functionalities for a 

range of Sukuk. 

Through both its primary market fi nancing activities and 

market contacts, LMC is strategically positioned to coordinate 

and execute secondary market transactions in Sukuk. Given 

the increasing depth of the primary market, LMC has found 

that the appetite for secondary market buying and selling 

services is ever increasing. 

“Our approach centers on 

structuring attractive transactions 

in partnership with both our clients 

and placement agents” 

Business services and products offered 

Short-term investment services 

LMC’s conducts extensive Sukuk asset sourcing and repacking 

as part of the offering, placement and administration of its 

short-term Sukuk program. 

Structured fi nance services 

LMC’s structured fi nance services provide an end-to-end 

solution tailored to meet the needs of our clients in the 

international marketplace. Services offered include the 

following: 

• Finance raising: LMC has extensive experience in the 

structuring, issuance, marketing and post-issuance 

administration of tradable Islamic capital markets 

instruments such as Sukuk. Our approach centers on 

structuring attractive transactions in partnership with 

both our clients and placement agents. As such, our 

activities to date are playing a key role in the continued 

growth of both publicly quoted and unquoted businesses 

in the GCC. We are in the process of extending the 

geographical reach of these services to other more 

established fi nancial markets in order to increase our 

product diversity. 

Page 24 


• The types of roles we play in our fi nance raising business 

are: 

Arranger: This is one of our most frequently played 

roles, given our strategic market positioning. The 

role of arranging a Sukuk may be undertaken by 

LMC in its sole capacity, though in some instances, 

we share this title with our transactional partners. 

As part of this role, LMC will coordinate the process 

of listing and rating the instrument if required. 

Structuring adviser and documentation agent: 

These roles are central to the establishment of 

a Sukuk or fi nance raising structure. LMC will 

structure an appropriate Shariah compliant 

instrument and then prepare all related 

transaction documentation. The level and extent 

of documentation required will vary from one 

structure to another. 

Placement agent: LMC is frequently involved as 

the sole placement agent on Sukuk it arranges 

though placement cooperation arrangements 

are also entertained where required by a given 

transaction. On occasion, we may also act as a 

third party placement agent on a select number 

of Shariah compliant instruments issued by other 

fi nancial institutions. 

Issue manager and/or trustee: Given our primary 

issuance experience and process streamlining, we 

are well positioned to play the role of issue manager 

throughout the tenor of any given Sukuk. This role 

largely entails the performance of monitoring and 

management tasks for the Sukuk as well as the 

key task of ensuring timely reporting/payment to 

Sukuk investors. All activities undertaken by LMC 

acting in such capacity are intended to ensure the 

preservation and protection of the best interests of 

the Sukuk holders. 

• Private equity raising: Though established in more 

recent times, our private equity services have benefi ted 

from the extensive knowledge gained in our capital 

markets-based fi nancing activities. In this capacity, LMC 

conducts and coordinates the modeling of transactions 

jointly with the client, assists him in identifying and 

resolving any prospective legal and corporate issues 

arising from the equity offering, prepares all offering 

documentation and presentation materials, directs 





Page 26 

all placement-related activities and conducts the 

offering process. Throughout, LMC is solely focused on 

ensuring the successful completion of the equity raising 

transaction. 

“LMC possesses the necessary 

market expertise to effi ciently 

structure, document, place and 

administer Shariah compliant 

investment funds.” 

The types of roles we play in our private equity services 

business are materially similar to those outlined under 

“Finance raising”. 

Fund issuance and administration services 

LMC possesses the necessary market expertise to effi ciently 

structure, document, place and administer Shariah compliant 

investment funds. Our investment fund-based services benefi t 

from the extensive knowledge gained in our capital marketsbased 

fi nancing and private equity activities. 

In this capacity, LMC conducts and coordinates the modeling 

of the prospective fund in conjunction with the client, assists 

the client in identifying and resolving any prospective legal and 

corporate issues arising from the equity offering, prepares all 

offering documentation and presentation materials, directs 

all placement-related activities and conducts the offering 

process. 

Strategic advisory services 

These services revolve around the provision of analysis and 

advice to our clients in relation to their business development 

activities. Our principal objective in the provision of such 

services is to develop and evaluate strategic plans which 

meet our clients’ needs for business growth or reorganization 

or whether equity, fi nancing-based. 

Additionally, as part of such strategic transactional advice, 

LMC actively focuses on ensuring that its clients optimize 

their capital structures with a view to facilitating access to new 

and effi cient sources of equity and other forms of Islamically 

compliant transactions. 

The future is bright for LMC. Backed by its strong operating 

performance, LMC looks forward to entering a high-growth 

phase. 


With its plans to increase capital in 2008, LMC envisages itself 

to be fully equipped to harness further activities and expand 

its service offering to include a range of investment banking 

solutions such as debt capital markets, asset management, 

equity capital market and private equity in compliance with 

Islamic Shariah principles, thereby developing within the 

regulatory requirements of the CBB and the Islamic fi nancial 

market development. 

PO Box 11567 Manama, 

Kingdom of Bahrain 

Tel: (973) 17-541666 

Dir: (973) 17-541590 

Fax: (973) 17-541124 

www.lmcbahrain.com



Malaysian Islamic Finance Landscape 

By Baljeet Kaur Grewal 

The Islamic fi nancial system represents an 

integral component of the capital market, offering 

alternative funding/investment options for both 

capital seekers and providers, while concurrently 

playing an important complementary role to the 

Islamic banking and Takaful industry. 

In Malaysia, the widening and deepening of the Islamic 

fi nancial market have resulted in three strategic pillars 

of growth: banking, Takaful and the capital market. The 

Malaysian Islamic capital market has complemented the 

conventional market by providing a range of value-added 

fi nancial instruments, and has effectively mobilized and 

channeled funds to fuel economic growth. 

A glance at the performance of the Malaysian Islamic 

banking sector confi rms its increasing popularity in and 

importance to the domestic fi nancial landscape in recent 

years. As at end-June 2007, assets of Islamic banking 

system grew 8.5% year-on-year (y-o-y) to RM143.7 billion 

(US$43.6 billion; 2006: RM133 billion [US$40 billion]), 

accounting for 12.1% of total banking system assets. 

Robust growth in the Islamic banking assets was driven 

mainly by the expansion in Islamic fi nancing activities of 

3.8% y-o-y to RM81.5 billion (US$25 billion; 2006: RM78.5 

billion [US$23.8 billion]), which contributed to 13.3% of total 

banking system fi nancing. Concurrently, deposits mobilized 

by the Islamic banking system continued to grow at 8.4% y-o-y 

to RM107.5 billion (US$32.65 billion; 2006: RM99.2 billion 

[US$30.13 billion]) to account for 12.2% to total banking 

system deposits. 

By 2010, Malaysia’s Islamic banking assets are expected to 

account for 20% of the country’s total banking sector assets. 

Increasing demand for Islamic instruments 

With regard to the capital market, the Islamic bond 

market accounts for a large proportion of the private debt 

securities (PDS) market in Malaysia. In the last nine years, 

the composition of Islamic fi xed rate securities has grown 

unabated and increased in signifi cance. 

Demand for domestic Islamic debt instruments, which 

accounted for only 7% of total bonds raised in 1999, grew 

to 25% in 2000 and subsequently to 56% in 2007, primarily 

due to investor awareness of alternative funding sources, i.e. 

Islamic instruments and the increased number of Islamic 

funds launched over the years. 

Currently, more than 36% of outstanding domestic bonds 

are Shariah compliant, especially the larger issues, and this 

proportion continues to grow. 

The result is that Malaysia’s Islamic fi nancial landscape 

has advanced in terms of diversity of instruments and its 

modernity. It also boasts a dual banking model, whereby a 

developing Islamic fi nancial system exists parallel to the 

conventional banking system. 

To chart the growth of Islamic fi xed income securities, 

total Islamic PDS (IPDS) issued since 1991 (matured and 

outstanding) amounted to RM188.9 billion (US$57.36 billion) 

at 413 issues as at end-2007. In terms of total number of 

IPDS issued, infrastructure/utilities and property/real estate 

sectors dominate at 52.9% and 16.7% respectively, given the 

large-scale nature of these projects. 

“The Malaysian Islamic capital 

market has complemented the 

conventional market by providing 

a range of value-added fi nancial 

instruments, and has effectively 

mobilized and channeled funds to 

fuel economic growth” 

For 2007, total new corporate bond issuances stood at 

RM42.6 billion (US$12.9 billion), an increase of 42.4% from 

RM29.9 billion (US$9 billion) in 2006. IPDS accounted for 

RM23.7 billion (US$7.2 billion), or 56% of new issuances, 

while conventional PDS stood at RM18.9 billion (US$5.74 

billion), or 44% of new issuances. Issuers from infrastructure 

and utilities dominated the primary market at 27%, followed 

by fi nancial services (18.6%) and asset backed securities 

(15.7%). 

Some notable bond deals were Nucleus Avenue RM7.9 billion 

(US$2.4 billion) (IPDS, power), Cagamas MBS RM4.52 billion 

(US$1.37 billion) (both PDS and IPDS, residential mortgage 

backed securities), MTD Infraperdana RM600 million 

(US$182.2 million) (IPDS, toll road), Hijrah RM2.92 billion 

(US$886.7 million) (IPDS, telecommunications) and MISC 

RM700 million (US$212.6 million) (IPDS, shipping). 


Page 27


Page 28 

Malaysian Islamic Finance Landscape (continued...) 

Infrastructure main benefi ciary 

The Malaysian bond market is expected to continue its 

aggressive stance in 2008, with an estimated RM35 billion 

to RM40 billion (US$10.63 billion to US$12.15 billion) worth 

of new debt to be issued, of which 70% of the bonds are 

expected to be Shariah compliant. A large proportion will be 

channeled to fi nance infrastructure projects, given that 2008 

is the third year of the Ninth Malaysia Plan (9MP). 

Project fi nancing via the Islamic route has gained impetus 

since the late 1990s. Notable projects in the past include 

Putra–Star LRT (RM1 billion [US$303.7 million] Istisna 

fi nancing), Putrajaya Holdings (RM2.2 billion [US$668.18 

million] Sukuk), SAJ Holdings water project (RM680 million 

[(US$206.5 million)] Sukuk), toll road operators as well as 

other infrastructure and utilities players. 

Chart 1: Malaysia’s Islamic Banking Growth Trend (Assets, Deposits and Financing) 

RM bln 

Chart 2: Malaysia’s Corporate Bond Market Issuance Trend (1990-2008F) 

RM mln 

140 

120 

100 

80 

60 

40 

20 

0 

45000 

40000 

35000 

30000 

25000 

20000 

15000 

10000 

5000 

0 

1990 

Source: BNM/DOS, KFH 

1991 

1992 

1993 

1994 

1995 

1996 

1997 

1998 


The thrust of the 9MP will continue to drive demand for 

Islamic project fi nance structures specifi cally in the areas of 

infrastructure fi nancing for water/power projects, education, 

healthcare and roads. 

Meanwhile, on the global Sukuk front, new Sukuk issuances 

stood at approximately US$27.8 billion in 2007, up 53.7% 

y-o-y, bringing the total amount of global Sukuk outstanding to 

US$85 billion (including local currency denominated Islamic 

bonds). 

Notable variety of new Sukuk issues include Saudi 

Electricity Co SAR5 billion (US$1.3 billion, Saudi’s biggest 

power producer); Nakheel Development US$4.27 billion 

(UAE property/real estate developer); Jebel Ali Free Zone 

AED7.5 billion (US$1.99 billion, business park operator); 


1983 1993 1995 2000 2001 2002 2003 2004 2005 2006 1H07 

Assets Deposits Financing 

1999 

2000 

2001 

2002 

Islamic Conventional Total 

2003 

2004 

2005 

2006 

2007F 

2008F


Page 30 

Malaysian Islamic Finance Landscape (continued...) 

Ras Al-Khaimah Investment Authority US$435 million (UAE 

investment authority) and Nucleus Avenue RM7.9 billion 

(US$2.4 billion, Malaysian power producer). 

By country, the UAE topped the issuer chart at 43% of total 

global Sukuk issued, followed by Malaysia (30%), Saudi 

Arabia (18%) and Bahrain (5%). For 2008, we expect new 

Sukuk issuances to trend higher to between US$40 billion 

and US$45 billion (US$12.15 billion to US$13.67 billion), 

dominated by huge infrastructure/utilities, property/real 

estate, and oil, gas and petrochemicals fi nancing in Malaysia 

and GCC countries. 

Bigger investor base, lower pricing 

So, why are Sukuk increasingly popular? The advantages 

fundamentally lie in the structure of Islamic fi nance itself. 

Sukuk provides an avenue for Islamic investors to invest in 

Shariah compliant investments, thus guaranteeing access to 

a larger investor base. It also provides potential lower pricing 

to issuers via the wider investor pool from the participation of 

large Islamic investors. 

Structures employed have also evolved from the traditional 

Musharakah to include more project-specifi c transactional 

structures like Ijarah Sukuk, Istisna or a combination of the 

above. 

“Sukuk provides an avenue 

for Islamic investors to invest 

in Shariah compliant investments, 

thus guaranteeing access 

to a larger investor base” 

Nevertheless, like all fi nancial mechanisms that are in the 

emerging stages of development, the Islamic industry poses 

some overreaching challenges. One of the main challenges 

is to ensure the sustainability of the Islamic fi nance industry 

and in accessing a large pool of long-term investors. 

Both can be overcome by maintaining a competitive domestic 

Islamic capital market via continuous product development 

and innovation. The ability to structure a marketable deal (in 

terms of instrument type and pricing) will ensure access to a 

wide distribution pool of funds, both regionally and globally. 

Some of the Islamic market innovations in recent years include 

the gradual shift from traditional products (Musharakah and 

Ijarah) to Istisna- and Salam-based products, short-term oil 


and commodity linked products, equity/debt hybrids as well 

as internationalizing distribution lines. Continuous research 

and development in the areas of product development can 

also enhance growth in Islamic equity funds, cultivate liquidity 

management of assets as well as create Shariah-based equity 

benchmarks. 

This year will see Malaysia’s GDP grow by 5.7% respectively, 

with key sectoral drivers being the infrastructure/construction 

industry, services sub-sectors, oil and gas, and plantations. 

As such, the fundraising activities will also boast Shariah 

compliant structures that support activities in these key 

areas. 

The Malaysian bond market has shown exemplary growth 

with the onset of Islamic debt, thus contributing towards 

the resilience of the overall international financial 

architecture. 

Chart 3: Global Local Currency & Dollar Sukuk Issued by Country 

(2007) 

Saudi 

18% 

Kuwait 

3% 

Pakistan 

0% 

Bahrain 

5% 

Qatar 

1% 

Malaysia 

30% 

UAE 

43% 

Source: Bloomberg, Zawya, Failaka International, BNM/FAST, RAM, 

MARC, KFH 

Baljeet Kaur Grewal is 

group chief economist and 

head, global research at 

Kuwait Finance House (KFH) Research Limited. 

The information herein has been obtained from sources 

believed to be reliable but cannot be guaranteed. The views 

or opinions expressed are subject to change at any time. 

Neither the information nor any opinion expressed is to be 

construed as a solicitation for the purchase or sale of any 

securities. KFH disclaims liability in this respect.



Investing in Islamic Structured Products 

By Neil D Miller, Dean Naumowicz and Aziza Atta 

Islamic structured products are fi nancial 

instruments that create cash fl ow or delivery 

obligations linked to the performance of a defi ned 

underlying benchmark that is compliant with the 

principles of Shariah (such as equity markets, 

indices and commodities). For example, a Dow 

Jones Islamic Market (DJIM) index-linked note has 

a return linked to the performance of the DJIM 

index. The greater the return of the DJIM during 

the tenure of the note, the better the return on 

the DJIM index-linked note. An Islamic structured 

product can be structured as a security, a bilateral 

contract or even a deposit. 

“Investors who are committed to 

investing in a Shariah compliant 

structure should be willing to 

accept that receipt of any income 

and the eventual return of their 

capital invested are contingent on 

the performance of the relevant 

underlying assets” 

As the products and their applications vary, we shall use the 

generic term “Islamic structured products”. The techniques 

involved are often at the cutting edge of the product 

development world and while, in each case, we and our 

clients have worked with renowned scholars to seek Shariah 

approval for the specifi c product concerned, there can be no 

guarantee that future developments or changing attitudes will 

not require further adaptations of the techniques involved. For 

now, we would argue that there is no such thing as a standard 

Islamic structured product. 

A common feature and benefi t of many Islamic structured 

products is the protection of some or all of the capital invested 

by the investor. A capital protected product provides for the 

protection of a portion (sometimes even up to 100%) of the 

invested capital usually by way of a purchase undertaking 

(Wad). Many clients have used a Wad structure to link an 

investment or deposit with the performance of fi nancial 

markets with little or no capital risk for an investor. With 

respect to some structures, there is currently a great deal of 

scholarly discomfort regarding the fi xed price repurchase of an 

issuer’s assets by an originator (in the context of Mudarabah, 

Musharakah and Wakalah; not for Ijarah). The purpose of 

the purchase undertakings is to ensure that an investor can 

recoup its capital investment on the occurrence of certain 

events such as insolvency, early redemption or on maturity. 

Sheikh Muhammad Taqi Usmani, one of the most eminent 

scholars in the Islamic fi nance industry and chairman of the 

Shariah Council of the Accounting and Auditing Organization 

for Islamic Financial Institutions, recently wrote a paper 

discussing the issue of purchase undertakings. His main 

point of contention with regard to purchase undertakings 

is that they move away from the concept of profi t and risk 

sharing, which is a critical feature of more traditional Islamic 

fi nance instruments. 

Investors who are committed to investing in a Shariah 

compliant structure should be willing to accept that receipt of 

any income and the eventual return of their capital invested 

are contingent on the performance of the relevant underlying 

assets. The existence of a purchase undertaking arguably 

eliminates the risk-sharing aspect of such structures since 

the return of capital can be guaranteed which could, in 

effect, decouple the performance of the structure from the 

performance of the underlying assets. 

Islamic structured products in practice 

The Islamic fi nance team at Norton Rose has been involved 

in a number of transactions relating to Islamic structured 

product transactions. For instance, we advised UBS on the 

initial multi-million US dollar issue of its Shariah compliant 

commodity-linked investment certifi cate. This is thought to 

have been the fi rst Shariah compliant product that was linked 

to commodities. 

In addition, the ability to trade this product was a real 

innovation in the Islamic fi nance industry. The linkage to 

commodities is a natural one, given the requirement under 

Shariah law for investments to be linked to a tangible asset. 

Norton Rose has also been leading the way in the development 

of structured Shariah compliant wealth and asset management 

products. There has historically been a shortage of such 

instruments because of the diffi culties in ensuring that they 

are suffi ciently linked to the underlying asset class. 

We recently advised Citigroup on the creation of a suite of 

Shariah compliant hedging products. Established Shariah 


Page 33


Page 34 

Investing in Islamic Structured Products (continued...) 

techniques have been utilized and rearranged in a novel 

security-based structure that enables the client to offer a 

comprehensive range of hedging instruments. In particular, 

fi xed to fl oating; fl oating to fi xed and currency swap 

transactions can all now be offered. The product has been 

utilized in a number of transactions for clients in Middle East 

jurisdictions. Several institutions have been trying to solve the 

hedging problems in Islamic fi nance over the last three years 

or so and of course, the IIFM/ISDA initiative continues. 

In the meantime, we have worked with clients to devise 

several different hedging solutions. The structures utilized in 

the development of the suite of products for Citigroup have 

been innovative. 

As mentioned in the fi rst paragraph, Islamic structured 

products can be fi nancial instruments in which an underlying 

structure is created to facilitate the required cash fl ows 

and deliveries. Shariah compliant swap transactions are 

a good example of such a fi nancial instrument in practice. 

While conventional swap transactions may be used to 

hedge certain risks or to speculate on changes in a market, 

Shariah compliant swaps are only used to effect prudential 

risk mitigation. 

The manner in which a transaction is structured depends on 

the cash fl ows and deliveries required by counterparties. In 

any event, the stream of cash fl ows involved in Shariah compliant 

swaps will be created through the use of fully funded 

transactions (unlike conventional transactions, which often 

calculate cash fl ows using notional principal amounts). For example, 

where a fi xed profi t leg is being exchanged for a fl oat- 

Arbun (downpayment) hedging product 

Vendor 


ing profi t leg, the underlying transactions may involve a term 

Murabahah to create the cash fl ows under the fi xed profi t leg 

and a revolving series of Murabahah to create the cash fl ows 

under the fl oating profi t leg. To reduce counterparty payment 

risk, installment payouts under the fi xed profi t leg of the swap 

are set off against the maturity payments of each revolving 

Murabahah under the fl oating profi t leg of the swap. 

Market participants are trying to develop a common approach 

to the structure and documentation of such transactions. In the 

current market, the exact manner in which such transactions 

are structured and documented varies considerably, 

depending on the precise commercial terms involved and the 

way in which an institution reduces counterparty credit risk. 

Uncertainty (gharar) is a vitiating factor in Islamic contracts. Any 

products that provide greater certainty by removing the peril 

of gharar for the transacting parties are therefore desirable 

under Shariah. There is a growing view that transactions and 

products that have the effect of prudential risk mitigation are 

acceptable, as opposed to transactions entered into for purely 

speculative reasons. The work of several Islamic economists 

supports this contention. The range of this type of product 

has expanded recently, and there appears to be a willingness 

to explore areas that have not necessarily been universally 

accepted. 

Arbun (downpayment) is an example of a product that is not 

generally accepted by all of the four main schools of Islamic 

jurisprudence but which has nonetheless been deployed. 

Arbun provides clients with structured, documented products 

Maturity date 

Sale proceeds less target price 

Arrangement terminated 

Assets Arbun payment 

Financier Client 

net sale proceeds 

Maturity date 

Sale proceeds greater than target price 



Page 36 

Investing in Islamic Structured Products (continued...) 

that hedge against future price fl uctuations in commodities 

and equities. Under an Arbun arrangement, the following 

happens: 

1 The client contracts to buy assets from a fi nancier for an 

agreed price (the target price) for delivery on an agreed 

date; 

2 The client makes a partial payment (for example, 10%) 

of the purchase price immediately by way of deposit; 

3 The client is entitled not to complete the purchase of 

the assets, but if he decides not to do so, he forfeits the 

deposit; 

4 If, on the maturity date, the target price is higher than 

the market price, the assets are purchased by the client 

and resold by the fi nancier as agent of the client. The 

sale proceeds are distributed to the client net of the 

outstanding purchase price; and 

5 If, on the maturity date, the target price is lower than 

the market price, the contract can be terminated and 

the client forfeits the deposit (in all probability having 

acquired the assets elsewhere for a lesser sum). 

“Islamic structured products can be 

an attractive addition to a client’s 

portfolio and for the time being, 

there is the fl exibility to tailor an 

investment structure to meet the 

specifi c fi nancial objectives of the 

investor” 

Exchange-traded funds (ETFs) 

Norton Rose has also acted for Barclays Global Investors, 

which launched three Shariah compliant ETFs on the London 

Stock Exchange in December 2007 as sub-funds of the 

European Exchange Traded Fund Company plc (the fund). The 

three products — iShares MSCI World Islamic, iShares MSCI 

Emerging Markets Islamic and iShares MSCI USA Islamic — 

provide exposure to emerging and international markets and 

US shares. 

Each product aims to provide investors with a total return, 

taking into account both capital and income returns, which 

refl ects the return of the MSCI World Islamic Index, MSCI 

Emerging Markets Islamic Index or the MSCI USA Islamic 

index (the indices). 

In order to achieve the investment objective, the fund will 

invest, in a manner consistent with Shariah, in a portfolio 

of securities that consists of the component securities of 

the indices. The Shariah panel appointed is responsible for 


ensuring that the operation of the sub-funds is in compliance 

with Shariah. The investments of the fund will be listed or 

traded on regulated markets. 

The securities included in the sub-funds are deemed to be 

compliant with Shariah by a board appointed by MSCI, which 

will review them on a quarterly basis to contemplate changes 

as a result of market changes or other events (e.g. delisting, 

bankruptcy or corporate actions). The portfolios will focus 

more on basic materials and technology and will avoid alcohol, 

media and armaments etc. 

The fund will undertake the required changes to its 

investments in line with the Benchmark Index. The ETFs 

will be distributed through brokers and private client banks 

globally with particular growth expected in the Middle East 

and Asia-Pacifi c. 

Conclusion 

Islamic structured products can be an attractive addition to a 

client’s portfolio and for the time being, there is the fl exibility 

to tailor an investment structure to meet the specifi c fi nancial 

objectives of the investor. Interest in these products has been 

growing exponentially in recent years, possibly because they 

offer several benefi ts. These generally include tax-effi cient 

access to fully taxable investments, favorable returns and 

reduced risk. 

However, Islamic structured products continue to be a topic of 

discussion and speculation among Islamic investors, scholars 

and practitioners. Market developments such as the ongoing 

crisis in the conventional credit markets have encouraged 

those involved to show more interest in the development of 

innovative and alternative fi nancial products that will give 

investors a good return while managing risk. 

There is no doubt that there will be some disagreement as 

to the level of compliance of some of the structures with 

Islamic principles, but the reality is that most stakeholders in 

the industry realise that in order for the industry to develop, 

structures will need to be devised and improved upon as the 

scope of Islamic jurisprudence (fi qh al muamalat) is applied 

to a wider range of investment products. 

Neil D Miller is partner 

and global head of 

Islamic fi nance, Dean 

Naumowicz is partner, derivatives and structured products 

while Aziza Atta is an associate with the Islamic fi nance 

group at Norton Rose. References are available on request 

from the writers.



Islamic Finance — The Offshore Connection 

By Tahir Jawed 

As Islamic fi nance has grown over recent years into 

a substantial fi nancial industry in itself, some of the 

unexpected benefi ciaries have been the offshore 

centers dotted around the world. Often the home 

of hedge funds, securitizations and holding companies, 

offshore fi nancial centers such as the Cayman 

Islands and Jersey now provide a convenient domicile 

for popular Islamic fi nance structures. 

Prior to the boom, most Middle East and Asian jurisdictions 

already had strong links with certain offshore centers; for 

example, Malaysia favored Labuan while the GCC preferred 

Bahrain and certain Caribbean centers. Historically, the 

offshore centers were used to organize investments and 

structure personal wealth. When practitioners, particularly 

lawyers, were presented with the challenges of structuring 

Shariah compliant transactions, most were already familiar 

with the uses of the offshore jurisdictions and utilized the 

effi ciency of these centers to structure the new wave of 

Islamic fi nance products. 

In return, the offshore centers have kept a keen eye on the 

Islamic fi nance market and have been quick to market their 

value in structuring complex fi nancial structures, removing 

many of the concerns regarding tax, regulation and cost when 

compared to using onshore structures. 

Sukuk transactions 

Sukuk are typically structured as trust instruments under 

English law. A company or “issuer” will issue Sukuk, or trust 

Corporate services provider 

(Provides directors and 

administrative services for issuer) 

certifi cates, and invest the proceeds in assets. The issuer of 

the Sukuk will then hold the assets on trust for the benefi t of 

the Sukuk holders, using the income from the assets to make 

payments to the Sukuk holders. 

The wider Sukuk structure can be more complex with a few 

more players involved. Typically, the entity looking to raise 

funds, often referred to as the “obligor”, will establish a 

company to act as issuer of the Sukuk. The obligor will then, 

for example, either sell or lease its assets to the issuer, which 

will purchase the assets or lease them using the proceeds 

from the issue of the Sukuk. 

The issuer will then make periodic payments back to the 

Sukuk holders from proceeds generated by the assets, 

often by leasing them back to the obligor. At the end of the 

transaction, the issuer will sell the assets back to the obligor 

and use the proceeds to redeem the Sukuk. There are several 

variations to this structure, with the issuer leasing, buying or 

entering into a joint venture to buy and manage the assets 

from the obligor but the cashfl ows generally follow the same 

pattern. 

Those in the offshore industry will consider this structure 

similar to a securitization structure. All of the benefi ts that 

attracted the securitization industry to establish bond issuers 

in offshore jurisdictions would apply to the Sukuk issuer 

also. 

The Cayman Islands, in particular, were quick to market their 

services for Sukuk structures as a domicile for the issuer with 


Share trustee 

(Holds issuer’s shares on trust for 

charity) 

Sells assets 

Sukuk subscription 

Purchase price 

Issuer money 

Obligor Lease assets 

Periodic payments 

(Incorporated in the 

Cayman Islands) 

Periodic payments 

generated by assets Investors 

Page 37


Page 38 

Islamic Finance — The Offshore Connection (continued...) 

considerable success. Initially, the opportunity was simply for 

the Cayman Islands law fi rms to establish a Cayman Islands 

company to act as issuer (sometimes referred to as a special 

purpose vehicle, or SPV). The issuer would typically be a 

subsidiary of the obligor managed by the obligor. 

However, this is now seen as too synthetic as effectively the 

obligor was selling assets to itself (or at least a wholly owned 

subsidiary). Most Shariah scholars now require some distance 

between the obligor and the issuer. This again created a 

great opportunity for offshore service providers to establish 

and manage the Sukuk issuers for the duration of a Sukuk 

transaction. 

The typical structure of an offshore Sukuk issuer is a limited 

liability company, with its shares held by a trust company on 

trust for charitable purposes. This is an offshore invention to 

avoid any diffi culty from potential benefi ciaries as the trust 

will not specify which charity is to benefi t until the end of the 

transaction to avoid interference from the charities. 

A corporate services provider (usually the same trust company) 

will then provide the company with a registered offi ce and 

directors to maintain the company, obviously for a fee. 

The services from the corporate services provider may also 

extend to preparing accounts, arranging audit or provision 

of a secretary. The result is a legal entity that is completely 

independent of the obligor and able to deal with the obligor 

at arm’s length. 

Funds 

The other growth area for offshore jurisdictions resulting 

from the increase in Islamic fi nance has been the Shariah 

compliant fund. The offshore centers, especially the Cayman 

Islands, have long been the favored domicile for investments 

funds. It is estimated that 70% of the world’s hedge funds are 

domiciled in the Cayman Islands. Again, it is the certainty and 

effi ciency these jurisdictions can provide that attract funds 

to be domiciled there. The same benefi ts apply to Shariah 

compliant funds. 

Funds have developed into a major industry for the offshore 

jurisdictions, from lawyers forming the funds to fund 

administrators to administer the funds, custodians to hold 

assets and accountants to prepare accounts and audit 

funds. 

Although not all of these services have to be provided offshore, 

the “one-stop shop” offered by any law fi rm and service 

provider is often favored by asset managers who are keen to 

get their fund up and running as quickly as possible. 


Shariah compliant funds have presented some challenges for 

traditional fund structures but these have now generally been 

resolved. Shariah compliant private equity funds are typically 

structured as partnerships, giving investors fl exibility with 

investments and a Shariah board often acts as an adviser to 

approve investments as Shariah compliant. These structures 

are easily accommodated within the existing fund structures 

available in offshore jurisdictions which have provided a fast 

and effi cient home for Shariah compliant funds. 

“The offshore centers, 

especially the Cayman Islands, 

have long been the favored 

domicile for investments funds. It is 

estimated that 70% of the world’s 

hedge funds are domiciled in the 

Cayman Islands.” 

Conclusion 

The offshore industry was quick to recognize the opportunities 

presented by Islamic fi nance and has been quick to capitalize 

on them. 

The Cayman Islands in particular was established as the 

jurisdiction of choice for Sukuk issuers and private equity 

funds. It recently introduced legislation allowing companies to 

register with Arabic names as an indication of its acceptance 

of Islamic fi nance and transactions from the Middle East. 

Offshore law fi rms and service providers have also opened 

offi ces in the Middle East for the fi rst time as an indication 

of their commitment to the region and Islamic fi nance. The 

potential for Islamic fi nance is well documented, but it would 

seem that the opportunities for the offshore centers are just 

as good. 

Tahir Jawed is managing 

partner of Maples and 

Calder. He can be contacted 

via email at tahir.jawed@maplesandcalder.com


Page 40 

Profi t Rate Swap — Breaking New Frontiers 

By Kareem Hussaini, CFA 

In Islamic fi nance, derivative instruments have long 

been frowned upon. Nevertheless, over the past 

few years, new derivative structures approved by 

Shariah scholars have come onto the market. One 

such instrument that is in demand is the profi t rate 

swap. The recently introduced product may well 

see the fastest growth, refl ecting on the success of 

its conventional sibling in terms of market share, 

the interest rate swap. 

The Islamic Bank of Asia has developed a novel Shariah 

compliant structure that is more effi cient and easier to 

manage. In this article, we examine the new structure and 

the benefi ts it offers over the current existing structure. We 

begin with an analysis of the global swap market, followed 

by a discussion of the Shariah compliant structures used to 

create this instrument, and an evaluation of risk and pricing 

considerations. 

Structure of global swap markets 

The global swap market is made up of market makers 

that are predominantly commercial banks and investment 

banking fi rms. They make the markets in swaps, quoting 

bid-and-offer rates, thereby offering to take either side of a 

swap transaction. The counterparties to swaps are generally 

end users or other banks. The end users are usually 

corporations with risk management problems that can be 

mitigated by engaging in a swap. Upon taking a position 

in an interest rate swap, the dealer generally offsets or 

lays off the risk by making transactions in other markets 

or engaging in an opposite transaction with another party; 

that transaction could be a simple futures contract or an 

over-the-counter transaction with another dealer. 

In the Shariah compliant fi nancial world, this is not as 

simple; to manage risk, the available transactions are 

limited. The Shariah compliant derivative world is at a 

relatively early stage and requires special documentation 

and counterparty arrangements, so only a handful of 

dealers can actually make a market in Shariah compliant 

profi t rate swaps. Neither the range of solutions nor the 

depth of liquidity of the market has come close to the 

“conventional” market. 

Structural analytics 

Profi t rate swap is a risk management instrument that 

promises to deliver the same risk management profi le as 

an interest rate swap, but in a Shariah compliant manner. 


Let us start with a simple analysis of an interest rate swap 

and then compare it with a Shariah compliant profi t rate 

swap structure. 

In an interest rate swap, two parties agree to exchange 

periodic interest payments. The dollar amount of the interest 

payments exchanged is based on some predetermined 

dollar principal, which is called the notional principal or 

the notional amount. The dollar amount each counterparty 

pays to the other is the agreed-upon “periodic interest rate” 

multiplied by the notional principal. 

The dollars exchanged between the parties are interest 

payments and not notional principal. In the most common 

type of swap, one party agrees to pay the other party fi xed 

interest payments at designated dates for the life of the 

contract. This party is referred to as the fi xed-rate payer. 

The fi xed rate that the fi xed rate payer must make is called 

the swap rate. The other party, which agrees to make the 

interest rate payments that fl oat with some reference rate 

is referred to as the fi xed rate receiver. 

The reference rates that have been used for the fl oating rate 

in an interest rate swap are those on various money market 

instruments: treasury bills, the London interbank offered 

rate (LIBOR), commercial paper, bankers’ acceptances, 

certifi cates of deposit, the federal funds rate and the prime 

rate. The most common is the LIBOR. 

Figure 1: Interest rate swap 

Party X 

Fixed rate 

payer 

Swap summary 

Fixed rate payer: : Party X 

Fixed rate receiver: Party Y 

Fixed rate: 

6% (US$1.5 million) 

Reference rate: Libor 

Swapping frequency: Every six months 

Swap tenor: 

Five years 

National principal: US$50 million 

US$1.5 million 

6 months Libor 

Party Y 

Fixed rate 

receiver 

To illustrate an interest rate swap, suppose that for the next 

fi ve years, party X agrees to pay party Y 6% per year (the 

swap rate), while Y agrees to pay X six-month LIBOR (the 

reference rate). X is the fi xed rate payer while Y is the fi xed 

rate receiver. Assume that the notional principal is US$50 

million and that payments are exchanged every six months 

for the next fi ve years. This means that every six months, X 

(the fi xed rate payer) will pay Y US$1.5 million. The amount 

that Y (the fi xed rate receiver) will pay X will be six months’ 

LIBOR on US$50 million. 




Profi t Rate Swap — Breaking New Frontiers (continued...) 

Now, in a profi t rate swap, the same payoffs should be 

achieved as in the interest rate swap i.e. while constructing 

a profi t rate swap, the ultimate objective to be achieved is 

to enable swapping of one set of dollar amount with another 

set of dollar amount with reference to some reference rate of 

return and predetermined principal. 

The current popular Shariah compliant method commonly 

used to achieve this payoff is the execution of two opposite 

Murabahah contracts between X and Y. While one Murabahah 

transaction achieves the fi xed rate payment element, the other 

achieves the fl oating rate element. However, the structure that 

is currently employed by majority of the market makers in the 

Islamic fi nance world is quite cumbersome and burdensome. 

We will see why as we proceed. 

The Islamic Bank of Asia has developed a new and novel 

Shariah compliant structure to achieve a payoff similar to 

its conventional sibling, the interest rate swap but in a more 

effi cient manner. 

Figure 2. 

Time line [Exercise dates] 

Party X 

Fixed rate 

payer 

Unilateral undertaking to 

purchase @ profit of 

[Libor − Exercise rate] 

Party Y 

Party Y 

Fixed rate 

receiver 

Unilateral undertaking to 

purchase @ profit of 

[Exercise rate − Libor] 

Party X 

Party X Master Murabahah agreement 

Party Y 

• Shariah compliant structure 

In this Shariah compliant structure, X is the fi xed rate payer 

and consequently, Y is the fi xed rate receiver. Unilateral 

undertakings are issued by each counterparty to the other to 

effect swap positions. 

Unilateral Undertaking A: X issues a unilateral undertaking 

to Y to purchase commodity X (Shariah compliant) from Y on 

spot Murabahah basis on certain specifi ed dates (exercise 

dates) in the future. The profi t rate at which such Murabahah 

will be entered into will be defi ned in the unilateral undertaking 

by reference to a formula and reference rate: [Libor 

– Fixed Rate]. 

Unilateral Undertaking B: Y also issues a unilateral undertaking 

to X to purchase commodity Y (again Shariah compliant) 

from X on spot Murabahah basis on certain specifi ed dates 

(exercise dates) in the future. As above, the profi t rate at 

which the Murabahah under this undertaking will be executed 

will also be defi ned in the unilateral undertaking by reference 

to a formula and reference rate: [Fixed Rate – Libor]. 

Figure 2, depicts the engagement of the Shariah compliant 

profi t rate swap. The exercise dates are the agreed-upon 

dates between the two counterparties to exchange the dollar 

amounts. The two undertakings are independent of each 

other, implying that the functioning and execution of one is 

not dependent on the other. 

To align the two undertakings and to achieve the desired 

payoff the terms and conditions of each undertaking will be 

exact mirror image of the other with respect to all the terms 

and conditions. Therefore, the exercise dates and the principal 

for executing the Murabahah trade will be the same for both 

the above transactions. However, the following parameters 

will be different: 

• The commodities: each undertaking will be for a 

different commodity; and 

• The profi t margin formulae: these are different but 

opposite. 

The undertakings will be supported by a Master Murabahah 

Agreement which will defi ne the terms and conditions of 

the Murabahah transactions to be executed under the 

undertakings. 

• Execution 

Let’s fast forward to an exercise date. Once the swap is 

engaged and market conditions change, the market value 

becomes positive for one party and negative for the other. 

This is due to the way the formulae for the Murabahah 

profi t calculations are constructed under each undertaking. 

Because the formulae calculating the profi ts are structured 

in opposite directions, at any given point in time, only one of 

the undertakings will be ‘in the money’ while the other will 

be “out of money”. This is an important point to note. While 

the undertakings are independent and on any given exercise 

date, both undertakings can be exercised, it is the formulae 

that ensure that only one undertaking is worth exercising. 

Let us assume that the reference rate, i.e. ‘Libor’ on an exercise 

date is 5%. The fi xed rate remains the same at 6%. With these 


Page 41


Page 42 


assumptions in place, only one undertaking should be in the 

money. In our example, the Murabahah to be executed under 

Undertaking A will have a profi t rate of Libor – Fixed Rate: 5%– 

6% = -1%. Undertaking A is “out of money”. Consequently, the 

Murabahah to be executed under undertaking B will be “in 

the money” having a profi t rate of 1% (6% – 5%). 

Figure 3 below depicts the execution of the Murabahah trade 

resulting from undertaking B being in the money on the 

exercise date. 

Figure 3. 

Commodity Y 

Commodity Y 

Party X Party Y 

“Principal + Profit” 

Purchase 

price 

Table 1 below calculates the dollar netting and pay off received 

by X and paid by Y. 

Table 1: Position of the two counterparties on exercise 

date 

Party X Cash fl ow (US$ mil) Profi t = [Fixed 

Buy commodity Y from 

broker 

Sell commodity Y to Y 50+0.50 

SPOT COMMODITY MURABAHAH UNDER 

UNILATERAL UNDERTAKING ‘B’ 

Infl ow Outfl ow 

-50 

Rate – Libor] 

= 6%-5% = 

1% 

Net Position 50+0.50 -50 = 0.50 

Party Y 

Buy commodity Y from X -(50+0.50) 

Sell commodity Y to 

broker 

50 

Commodity Y 

Broker A Broker B 

Purchase 

price 

Net position 50 -(50+0.50) = -0.50 

Therefore, in this structure, we achieve the desired result of 

swapping one set of dollar amount with another set of dollar 

amount with reference to some reference rate of return and 

predetermined principal. Further, it has also achieved the 


netting of payments. We will later see how this netting process 

mitigates credit risk. 

Critical analysis of the new structure 

Both the interest rate swap and the Shariah compliant 

profi t rate swap are representative of a plain vanilla swap. 

Plain vanilla swap is probably the most common derivative 

transaction in the global fi nancial system. 

Table 2 gives a comparative of interest rate swap against other 

derivative instruments on notional amounts outstanding, gross 

market values. A plain vanilla swap is simply the swap in which 

one party pays a fi xed rate and the other pays a fl oating rate, 

with both payments in the same currency and both sets of 

payments are on the same notional amount. 

In the regular conventional interest rate swap, because we 

are paying in the same currency, there is no need to exchange 

notional principal at the beginning and end of an interest rate 

swap. In addition, the interest payments can be — and nearly 

always are — netted, which greatly reduces the credit risk. 

The new profi t rate swap structure (developed by The Islamic 

Bank of Asia) achieves just this. It is one of the strongest points 

of this structure. The formulae are constructed in a manner 

that ensures netting of amounts. Therefore, any amount owed 

by one party to the other is only after the netting; this greatly 

reduces the credit risk faced by the counterparties. This is 

also a reason the structure is superior to the two-parallel 

Murabahah profi t rate swap structure commonly used in 

the market. In that structure, profi t payments under the two 

opposite and parallel Murabahah trades has to be made, 

thus exposing each party to the credit and settlement risk of 

the other party. 

Another advantage the new profi t rate swap structure has 

over the two-parallel Murabahah profi t rate swap structure is 

the ease in engaging in the swap, the effi cient monitoring and 

management of the swap. Engaging in the swap requires only 

the issuance of a unilateral undertaking by each counterparty 

at the inception of the swap. Thereafter, only the reference 

rate needs to be monitored. 

Depending on a reference rate on an exercise date, only one 

Murabahah contract needs to be executed on spot basis. This 

cuts the monitoring and execution work by half, compared to 

the two-parallel Murabahah profi t rate swap structure. The new 

structure is also cost-effi cient because the brokerage cost is 

incurred only on the execution of one Murabahah trade rather 

than on two trades under the two-parallel Murabahah profi t 

rate swap structure. Moreover, if the reference rate and the 





Table 2: OTC Derivatives comparison — Notional amounts outstanding and gross market value US$ bil 

June-04 Dec-04 June-05 Dec-05 June-06 Dec-06 June-07 

Interest rate swaps 

Notional amount outstanding 127,570 150,631 163,749 169,106 207,042 229,241 271,853 

Gross market value 

Currency swaps 

3,562 4,903 6,077 4,778 4,831 4,157 5,315 

Notional amount outstanding 7,033 8,223 8,236 8,504 9,669 10,767 12,291 

Gross Market Value 

Equity Linked Swaps 

442 745 549 453 533 599 617 

Notional Amount Outstanding 691 756 1,086 1,177 1,430 1,767 2,599 


FX Options 

63 76 88 112 147 166 240 

Notional Amount Outstanding 6,038 6,115 7,045 6,987 9,027 9,602 11,804 


Interest Rate Options 

116 158 129 138 166 196 235 



Equity Linked Options 

360 492 592 597 579 631 700 



Source: Bank for International Settlements 

231 422 294 470 523 686 876 

swap rate are the same on an exercise date, no Murabahah 

contract needs to be executed at all. 

Some issues 

Certain issues need to be resolved in a profi t rate swap 

irrespective of the structure. The fi rst is the valuation and sale 

issue. Let us return to an interest rate swap and contrast it 

with profi t rate swap to analyze the issue. 

The value of an interest rate swap will fl uctuate with market 

interest rates. To see how, let’s return to our example. Suppose 

that interest rates change immediately after X and Y enter 

into the swap. Assume the current market demanded that in 

any fi ve-year swap, the fi xed rate payer must pay 7% in order 

to receive six months’ LIBOR. If X (the fi xed rate payer) wants 

to sell its position to A, then A will benefi t by having to pay 

only 6% (the original swap rate agree upon) rather than 7% 

(the current swap rate) to receive 6 month LIBOR. X will want 

compensation for this benefi t. Therefore, X has gained a value 

on its position in the swap arrangement. 

In a Shariah compliant profi t rate swap, the issue arises on 

saleability. While an interest rate swap can be easily valued and 

sold to another interested party as described above, a profi t 

rate swap cannot be sold because of the inherent philosophy 

underlying Shariah. Under Shariah, a debt cannot be sold 

except at par value. Furthermore, future sale transactions 

cannot be bought and sold before the commencement and 

consumption of such transactions. This is an issue that 

product developers of the Islamic fi nance world are trying 

hard to resolve. 

Unlike in an interest rate swap, where all future exchanges of 

interest payments are already the obligations/rights of either 

counterparty and therefore can be valued using valuation 

models, under a PRS, no recognition can be given to the 

expected future Murabahah transactions and, therefore, 

valuation cannot be performed. This means X or Y can only 

transfer its future obligations under the PRS to another 

interested party without any compensation or recognition to 

the changes in the market rates of return or interest rates. 

Documentation: Standardizing documentation still remains 

an issue for the profi t rate swap market. Unlike an interest 

rate swap whose documentation has been developed over 

many years and has now reached a stage of standardization, 

the documentation representing Shariah compliant derivative 

instruments (including the profi t rate swap) has a long way to 

go and currently is solely dependent on proprietary networks 

and negotiations of the dealers. 

Credit risk and swaps 

We now analyze the credit risk dynamics in a profi t rate or 

interest rate swap. We then examine the swap rate and what 

it represents. 


Page 43


Page 44 


Once the swap is engaged and market conditions change, 

the market value becomes positive for one party and 

negative for the other. The party holding the positive value 

thus assumes credit risk. The counterparty could declare 

bankruptcy, leaving the party holding the positive value 

swap with a claim that is subject to the legal process of 

bankruptcy. 

In most swap arrangements, netting is legally recognized, so 

the claim has a value based on the net amount. This credit 

mitigation feature is achieved by the new profi t rate swap 

structure developed by The Islamic Bank of Asia, which is in 

contrast to the higher credit risk inherent in the 2 parallel 

Murabahah profi t rate swap structure. This is a signifi cant 

milestone in the product development of Shariah compliant 

profi t rate swap. 

However, as we move into the life of the swap, the market 

value to a given party can change from positive to negative 

or vice-versa. Hence the party not facing the credit risk at a 

given moment is not entirely free of risk because the swap 

value could turn positive for it later. 

Further, the credit risk in a swap varies during its life. A profi t 

rate swap or an interest rate swap has no fi nal principal 

payments. The credit risk is therefore greater in the middle 

of the life of a swap. This occurs because near the end of 

the life of the swap, not many payments remain, so there is 

not much money at risk, and at the beginning of the life of 

the swap, the credit risk is usually low because the parties 

would probably not engage in the swap if a great deal of 

credit risk were already present at the start. 

Swap rate and credit quality — Incongruent 

The parties that engage in swaps are generally of good credit 

quality but the fear of default is still a signifi cant concern. 


Yet surprisingly, the rate that all parties pay on swaps is the 

same, regardless of their credit quality. In a plain-vanilla 

swap, the fi xed rate is determined by reference to the term 

structure for the underlying rate. Therefore, if a party wanted 

to engage in a swap to pay LIBOR and receive a fi xed rate, it 

would get the fi xed rate based on the LIBOR term structure, 

regardless of its credit quality or that of the counterparty. 

Implicit in the fi xed rate is the spread between LIBOR and 

the default free rate. Swap rates are quoted in the market 

with respect to a spread over the equivalent default free 

rate. This differential is called the ‘swap spread’. That the 

swap spread is not a measure of credit risk on a given swap 

but rather a refl ection of the general level of credit risk in the 

global economy. Whenever a recession approaches or credit 

concerns arise, this spread widens. This can be seen in the 

screen shot below obtained from Bloomberg service. With 

the sub-prime crises affecting globally, the swap spread 

spiked during the month of July 2007. 

Conclusion — Value Proposition 

The premise and promise of a profi t rate swap is to be the 

Shariah compliant sibling of the interest rate swap. It is then 

a derivative instrument and its value can be ascertained by 

using the same math and statistical models that are used 

to value an interest rate swap. Certain structural issues still 

remain and continue to test the minds of product developers. 

Islamic fi nance has broken, and will continue to break, new 

frontiers. 

Kareem Hussaini 

is vice-president at 

The Islamic Bank 

of Asia Limited. He 

can be contacted via email at kareem@islamicbankasia.com 

5 year semi annual US$ swap spread Source: Bloomberg



Macro Trends in Equipment Leasing 

By James A Cracco 

In 2006, the worldwide equipment leasing market 

grew to a robust US$634 million. In fact, year in and 

year out, leasing is responsible for one-fi fth of the 

world’s total expenditures on capital equipment. 

With an average annual growth rate of 8.4% per 

year over the last fi ve years, equipment leasing 

continues to look forward to a bright future. 

That said, equipment leasing today looks very different from 

what it was fi ve years ago and, like any other capital formation 

product, continues to adjust to ever-changing market 

conditions. While the core of equipment leasing continues to 

be the fi nance lease (Ijarah wa iqtina) and operating lease 

(Ijarah), the forces that shape those products are always on 

the move. 

A look at some of those trends may give us some insight 

into the worldwide equipment leasing market as well as the 

direction it may take. 

Growth of Islamic leasing 

Unfortunately, there are not any reliable consolidated 

statistics on Shariah compliant equipment leasing. We do, 

however, have the numbers on the annual value of equipment 

leasing for the top 50 markets in the world. In 2003, the total 

equipment leasing transactions for Islamic countries stood 

at US$2.9 billion. Four years later, fi ve Islamic countries 

appeared on the list of top 50 markets (Turkey, Morocco, 

Kazakhstan, Saudi Arabia and Egypt) while the dollar value 

rose to US$7.4 billion — a growth rate of 26% per year. 

While the absolute numbers are smaller, the equipment 

leasing growth rate of the Islamic world is consistent with 

— and in fact, outpaces — the growth rates of 15% to 20% for 

the general Islamic fi nance market. Perhaps just as telling is 

the number of companies and banks being set up, at least in 

the Middle East and North Africa, that mention “leasing” as a 

projected offering. 

The Islamic countries are clearly making progress at 

overcoming some of the structural problems inherent in 

launching a viable equipment leasing industry. Among these 

hurdles are: 

• Lack of lessee awareness 

• Lack of trained personnel 

• Lack of credit information and/or reluctance to share 

credit information 

• Lack of equipment expertise across a broad spectrum of 

assets 

• Willingness to serve the small and medium-sized enterprises 

(SME) marketplace 

• Conducive regulatory and legal environments 

While the above can be a daunting list, many marketplaces 

in the region are well on their way to developing a vibrant 

equipment leasing industry; most others recognize that 

there is now an alternative capital formation tool that offers 

signifi cant advantages to spending one’s own cash or using 

traditional bank debt. 

Regulatory environment becoming more 

burdensome 

While it is dangerous to make the sweeping generalization 

that all lessors in all countries are becoming more regulated, 

it is certainly diffi cult to fi nd someone who is an exception to 

the rule. One need only look at the money and time that many 

organizations are investing in to comply with Basel II. Beyond 

international standards, there is the large body of countryspecifi 

c leasing regulation and/or legislation. Of course, there 

are the age-old complaints and allegations that a specifi c 

body of regulations is “inappropriate”, “rigid”, “ambiguous” or 

even “inadequate”. 

As one looks around the world, there are several regulatory 

philosophies and models. There is no doubt that the most 

dynamic and innovative leasing industries have matured in 

those countries where the regulators have differentiated 

between: 

(a) those entities who, directly or indirectly, fund their leasing 

operations with deposit accounts, public money, or 

so-called “unsophisticated investor” money; and 

(b) those organizations who use private “sophisticated investor” 

money. 

In other words, if the regulatory philosophy is one that protects 

unsophisticated investor funds but allows — even encourages 

— independent leasing companies and manufacturers’ 

captive leasing operations (sophisticated investor funds) 

to operate in a relatively unfettered environment, then that 

country stands to gain a powerful engine for economic and 

capital development. 

The leasing industry in the Czech Republic, for example, has 

witnessed remarkable growth over the past 15 years. Today, 

the republic is the 25 th -largest market in the world at nearly 

US$5 billion in transaction value. The Czech Republic is also 

the home of a strong independent equipment leasing industry 

which is not heavily regulated. 


Page 45


Page 46 

Macro Trends in Equipment Leasing (continued...) 

Lessors, on their part, need to conduct their business in a 

manner so as not to attract the regulators’ attention. Some 

observers are increasingly concerned with the growing tendency 

in many markets for leasing companies to mix consumer 

leasing (typically automobiles) and equipment leasing. 

Consumer leasing and business-to-business leasing are two 

different markets that merit different levels and methods of 

disclosure. The regulatory environment for consumer leasing 

needs to obviously be more stringent. The danger that lessors 

run by mixing the two is that regulations growing (probably 

justifi ably) out of a consumer movement or backlash are 

applied indiscriminately to both marketplaces, thus making 

equipment leasing slower and more expensive. 

The tendency is generally to regulate more, rather than less. 

Even within that context, both regulators and lessors can 

serve their constituencies well by differentiating among the 

various sectors of the leasing marketplace and regulating/ 

acting accordingly. 

Growing role for operating leases 

As lessees become more sophisticated from both a leasing 

and asset utilization point of view, they will continue to look for 

products that are more sophisticated than the simple fi nance 

lease/installment sale. The more mature leasing markets 

naturally have a greater propensity toward full-service leases, 

facility management lease contracts (typically offered by 

manufacturers), capped or collared purchase options, and 

operating leases. Full-service leases bundle other services 

such as maintenance, insurance or disposable supplies with 

the equipment into a single payment lease. 

The operating lease is a well-developed product that is easily 

understood. The lessor, of course, depends on residual 

realization at the end of the term of the lease to achieve his 

profi t requirements. The lessee receives a much lower rental 

payment by only paying for a specifi c number of years’ use and, 

at the same time, achieves “off balance sheet treatment,” i.e., 

the subject asset of the lease does not appear on the lessee’s 

balance sheet and is not depreciated. 

Little wonder that a lessee might fi nd a four-year corporate jet 

lease attractive when the operating lease monthly payment 

is 20% of what the payment would be in a fi nance lease/ 

installment sale. The underlying rational of the operating 

lease is that the lessee will return the asset at the end of the 

lease. However, operating leases are often structured with 

a lease renewal or purchase option, generally at fair market 

value. That said, operating leases are often complemented 

by a variety of end-of-term options including risk sharing on 

disposal of the asset and remarketing agreements. 


Just as “lessee willingness” is important in the operating 

lease equation, “lessor expertise” is equally important. The 

evidence is clear that the most effective operating lease 

lessors are usually independent leasing companies and 

vendor leasing companies. Traditional banks typically are not 

the best source of operating leases simply because they do 

not invest the product research resources, and therefore do 

not develop the risk tolerance to assume aggressive residual 

positions. 

The US leasing market offers an interesting look into the 

correlation between traditional bank leasing and operating 

leases. The US represents about one-third of the worldwide 

equipment leasing market (US$220 billion) and, while not 

a template for the rest of the global market, it does not 

seem accidental that over the past fi ve years, US operating 

leases declined while traditional banks doubled their market 

share from 25% to 50%. Several observers believe that the 

trend is beginning to reverse and that operating leases will 

increase now that traditional banks appear to be in a cycle of 

withdrawing from the equipment leasing market. 

Whatever the status of the mature leasing markets, the new 

or developing leasing markets are really in the early stages 

of creating and utilizing the benefi ts of the operating lease. 

The users of assets as diverse as construction equipment, 

corporate jets and offi ce furniture are learning what the 

operators of commercial airplanes and ships have known for 

some time: It is not important who owns the asset; it is who 

uses the asset that counts. 

Conclusion 

The above is certainly not an exhaustive list of the major 

trends currently having an impact on the equipment leasing 

industry. Many pages could be written on the topic of the 

impact of probable accounting changes alone. Other trends 

include the changing (or the need to change) the laws in 

many jurisdictions in order to better protect lessor rights 

and accelerate the asset recovery process. There is also, for 

example, the intriguing questions comparing “traditional” 

leasing with Shariah compliant leasing: Is the purest form 

of Ijarah and the full-service lease the very same instrument 

— will both markets end up in the same place? 

These various trends represent change and, in some cases, 

challenges. More importantly, they are evidence of a healthy 

equipment leasing industry moving forward that increasingly 

works to the mutual benefi t of both lessor and lessee. 

James A Cracco is CEO of First Leasing Bank. He can be 

contacted at +973 1756 3433.



Challenges of Regulating Shariah Compliant 

Securities and Investments: The GCC Example 

By Andrew Henderson 

The Middle East is not immune to fi nancial 

services and securities market regulation. In 

some GCC countries, regulators have developed 

special regimes for regulating Islamic fi nancial 

services providers; in others, even where Shariah is 

recognized as a body of law separate from general 

law, those institutions offering Shariah compliant 

securities and investments will be subject only to 

a general regulatory regime. 

In considering the regulation of securities and investments, 

the somewhat broad distinction can be drawn between 

primary market activity — the offering of securities for the 

fi rst time — and secondary market activity — the trading of 

securities and investments. 

Primary and secondary 

In the context of primary market activity, regulators have 

two primary concerns: regulation of the person offering and 

trading in securities, and regulation of the offering and sale 

process. 

Regulators generally address the fi rst concern by imposing 

licensing requirements on offerors, certain types of offerees 

and their agents and advisers — such as investment bankers, 

broker-dealers and fund managers; they address the second 

by imposing registration and/or disclosure requirements for 

the documents governing the offer and sale. 

In the context of secondary market activity, regulators are 

also concerned with industry participants — such as brokerdealers, 

fund managers and investment advisers — and the 

manner in which these participants carry on and safeguard 

their businesses; regulators address the fi rst concern by 

imposing licensing requirements; they address the second by 

imposing conduct of business and prudential requirements. 

In both cases, underpinning the various requirements are the 

interests that regulators have in safeguarding the integrity of 

the securities markets and fi nancial systems, generally, and 

in protecting investors. 

Islamic fi nancial services providers in the Middle East 

— and, indeed, elsewhere — have not been immune to the 

regulatory requirements. In the area of primary market 

activity, those marketing, arranging, advising on and dealing 

in Islamic securities such as Sukuk have found themselves 

subject both to licensing requirements and the requirements 

governing the offering process. 

In the area of secondary market activity, those originating 

and offering Islamic investment products (such as 

Mudarabah) and managing or advising on Islamic compliant 

investments (such as Shariah compliant mutual funds) have 

found themselves subject to licensing, conduct of business 

and prudential requirements. 

Regulation under general regulatory regimes 

Many parts of the GCC have undergone recent regulatory 

changes — most notably, Saudi Arabia, the UAE and Bahrain 

— and seen the creation of new regulatory regimes — the 

Dubai International Financial Center (DIFC) and Qatar 

Financial Center (QFC). Others — most notably, the UAE and 

Qatar — are looking at signifi cant regulatory reform. Some 

jurisdictions, discussed later, have adopted special regimes 

for governing Islamic fi nancial services providers. 

The majority, however, regulate those fi rms offering Islamic 

fi nancial services in much the same way as those offering 

conventional (i.e. non-Islamic) fi nancial services; when it 

comes to how the Islamic securities are offered, the rules 

governing the process for such offerings, even in those 

jurisdictions with special licensing regimes, are in effect the 

same. (For example, the rules governing the listing of Islamic 

bonds issued by the Securities and Commodities Authority 

of the UAE are near identical to those governing the listing of 

conventional bonds, save for use of the word “profi t” instead 

of “interest”). 

Therefore, a fi rm looking to carry on a business in Shariah 

compliant securities and investments in a GCC country 

will, as a matter of law, require a license or authorization 

from that country’s securities and investments regulator. 

Generally, the scope or type of business, both in respect to 

the particular activities the company wishes to conduct (e.g. 

broking and dealing, asset management) and the securities 

or investments it seeks to offer (e.g. equities, mutual funds, 

commodity derivatives), will determine the type of license or 

authorization for which the fi rm needs to apply. 

For example, in Saudi Arabia, the Capital Market Authority 

(CMA) specifi es fi ve categories for which it may grant a 

license: dealing, arranging, managing, advising and custody. 


Page 47


Page 48 

Challenges of Regulating Shariah Compliant Securities and 

Investments: The GCC Example (continued...) 

It identifi es the following securities and investments: shares 

(which include Sukuk), debt instruments, certifi cates, 

warrants, units in investment funds, options, futures, 

contracts for differences and rights in any of these. 

Therefore, a Saudi fi rm wanting to manage Shariah 

compliant investment funds would need to apply to carry on 

all of the activities but, subject to the investment strategy 

and composition of the fund, it would not need to apply to 

carry on the activities with respect to all the securities and 

investments identifi ed by the CMA. 

In principle, the type of license or authorization held by 

a fi rm will determine the scope and extent of the rules or 

regulations, with which it has to comply, and the levels of 

regulatory capital that the fi rm will need to hold. In general, 

regulators or other governmental authorities will impose 

rules and regulations governing subjects, such as the 

manner in which a regulated fi rm must organize and manage 

its business, market and sell its products, treat its clients 

and their investments. 

Regulation under special Islamic fi nance 

regimes 

Some of the newly created or recently reformed jurisdictions 

— the DIFC, Bahrain and the QFC — have adopted special 

regulatory regimes with similar provisions to govern or 

supplement the general regulatory regime. 

Take the DIFC as an example: Islamic fi nancial institutions 

(IFIs) are regulated under a special law — the Law Regulating 

Islamic Financial Business (LRIFB) — which essentially 

consists of rules set by the Dubai Financial Services Authority 

(DFSA). The LRIFB supplements the general laws in the DIFC 

governing the regulation of fi nancial services and markets. 

The LRIFB prohibits any fi rm from holding itself out as 

conducting “Islamic fi nancial business” unless so authorized 

by the DFSA to carry on fi nancial services activities and the 

authorized fi rm’s license is endorsed to permit it to conduct 

Islamic fi nance business either as an “Islamic fi nance 

institution” or by operating an “Islamic window”. The LRIFB 

defi nes Islamic fi nancial business as the carrying on of one 

or more fi nancial services in accordance with Shariah and 

an IFI as an authorized fi rm or authorized exchange whose 

entire business operations are conducted in accordance 

with Shariah. It states that an authorized fi rm or authorized 

exchange, other than an IFI, operates an Islamic window if 

it conducts Islamic fi nancial business as part of its overall 

business operations. 


The LRIFB sets out a single substantive requirement for the 

conduct of Islamic fi nancial business: an authorized fi rm 

which has an endorsed license authorizing it to conduct 

Islamic fi nancial business must appoint a Shariah board. 

“The LRIFB defi nes Islamic 

fi nancial business as the carrying 

on of one or more fi nancial services 

in accordance with Shariah and 

an IFI as an authorized fi rm or 

authorized exchange whose entire 

business operations are conducted 

in accordance with Shariah” 

The DFSA amplifi es these requirements by setting out 

rules: 

(a) governing the appointment of the Shariah board, 

including the requirement to have at least three 

members who are competent and independent of the 

fi rm’s management; 

(b) for demonstrating the process for appointing and 

retaining members of the Shariah board, including the 

process for considering the suitability of the board; 

(c) governing the effectiveness of the Shariah board, 

including the requirement to ensure that the board 

is independent of, and not subject to, any confl ict of 

interest with respect to the fi rm; and 

(d) governing the manner in which the Shariah board 

operates, including the requirement for reviews in 

accordance with relevant AAOIFI (Accounting and 

Auditing Organization for Islamic Financial Institutions) 

governance standards. 

With respect to rules governing the effectiveness of the 

Shariah board, the following requirements on a DFSA 

authorized fi rm’s employees are noteworthy: 

(a) to provide such assistance as the board reasonably 

requires to discharge its duties; 

(b) to give the board right of access at all reasonable times 

to relevant records and information; 

(c) not to interfere with the board’s ability to discharge its 

duties; and 

(d) not to provide false or misleading information to the 

board. 




Challenges of Regulating Shariah Compliant Securities and 

Investments: The GCC Example (continued...) 

In a similar way to the LRIFB, the rules set out a single 

requirement with respect to the marketing and promotion 

of Shariah compliant products or services: Before a fi rm 

communicates any marketing material to a person, it must 

ensure that, in addition to the information generally required 

by the DFSA for inclusion in any marketing material, the DFSA 

requires that the marketing material state which Shariah 

board has reviewed the products or services to which the 

material relates. 

Form, not substance? 

Where GCC regulators have chosen not to regulate those 

offering Shariah compliant securities and investments 

separately, they have avoided any suggestion that they would 

take it upon themselves to police Shariah compliance, i.e. 

determine whether a security or investment described by a 

fi rm as being Shariah compliant is indeed Shariah compliant. 

“By requiring a fi rm to establish a 

Shariah board, the DFSA sets the 

basic requirements for how Shariah 

compliance is to be achieved rather 

than what is Shariah compliant” 

However, even under specialist regimes, regulators have 

sought to avoid issues of substance. For example, as discussed 

above, in the DIFC the focus of the DFSA’s regulation of Islamic 

fi nance is the process for determining Shariah compliance 

rather than the outcome of such a determination. 

By requiring a fi rm to establish a Shariah board, the DFSA 

sets the basic requirements for how Shariah compliance is to 

be achieved rather than what is Shariah compliant. Similarly, 

with respect to the marketing and promotion disclosure 

requirement, the DFSA does not require a fi rm to state its 

opinion that a product or service is Shariah compliant (the 

fi rm may, of course, do so). The DFSA does, however, require 

the fi rm to state, as a matter of fact, the identity of the Shariah 

board that has reviewed the product or service. 

This distinction is important: Under its rules, the DFSA’s 

case that a fi rm had misrepresented a product or service as 

Shariah compliant would rest on the fi rm’s failure to inform 

or misrepresentation to investors about the relevant Shariah 

board and, by necessary implication, the process for ensuring 

and assessing Shariah compliance — questions of fact; the 

case would not rest on an allegation that the product or 

service was not, in fact, Shariah compliant despite the fi rm 

holding the product or service out as being Shariah compliant 

— a question of opinion. 

Again, the approach taken by the DFSA prevents it from 

having to make substantive determinations: Provided a fi rm 

has subjected a product or service to the scrutiny of its own 

Shariah board — or indeed any Shariah board which conforms 

with the DFSA’s requirements — and disclosed that board’s 

credentials to investors, the fi rm’s behavior should not run 

foul of the DFSA’s Islamic fi nance regime. 

It remains to be seen whether the approach in the GCC to 

the regulation of those offering Shariah compliant securities 

and investments, with its focus on form (not substance) and 

systems (not outcomes), will remain. Such an approach helps 

satisfy the principle of proportionality, which holds that the 

means of regulating should be reasonably related to and 

be no greater than is necessary to achieve the purpose of 

regulation; this principle informs or ought to inform a sensible 

system of regulation. 

Requiring fi rms to put themselves in the best possible position 

to decide whether a security or investment is Shariah compliant 

and requiring the same to disclose this process to investors 

is a reasonable means of achieving investor protection 

and maintaining confi dence in the markets. Moreover, the 

alternative would involve a cost to regulators, likely to be 

borne by the industry in the form of increased licensing fees 

passed on to investors, as regulators were required to put in 

place the necessary legal framework for reviewing Shariah 

compliance and recruit and retain the necessary expertise to 

give effect to that framework. 

Nevertheless, with the proliferation of Shariah compliant 

products comes the increased risk of harm to investors, which 

would be likely to demand a regulatory response. The hope 

is that an effective regulatory response to any wrongdoing 

in the context of a Shariah compliant security would be 

possible within the existing framework. However, if it is not, 

the pressure on regulators in the GCC and elsewhere to put in 

place a system of second-guessing Shariah scholars could be 

become diffi cult to resist. 

Andrew Henderson is 

a senior associate at 

Clifford Chance LLP in 

Dubai, the UAE. He can 

be contacted via email at andrew.henderson@cliffordchance.com 

Page 49


Page 50 

S&P Foresees Mounting Demand for 

Islamic Products 

By Emmanuel Volland 

Islamic fi nance will continue to expand beyond its 

historical boundaries in 2008, with the total value 

of Sukuk outstanding worldwide set to eclipse the 

US$100 billion barrier by mid-year. 

The growth of Islamic fi nance continued to be impressive 

in 2007, making it one of the most dynamic sectors in 

international fi nance. This translated into strong activity for 

Standard & Poor’s Ratings Services, with new Islamic banks 

and Sukuk being rated for the fi rst time, including Albaraka 

Banking Group, one of the oldest players in this industry, and 

the US$1.5 billion Sukuk issued by Dubai-based port operator 

DP World Ltd, which was rated ‘A+’ in June 2007. Overall, S&P 

now rates more than 20 Sukuk accounting for a total of about 

US$13 billion in issuance. 

“A key challenge for the industry 

is to continue progress toward 

acceptance by the international 

fi nancial community” 

S&P believes the outlook for Islamic fi nance remains bright, 

with mounting demand around the world for Shariah compliant 

fi nancial products and services fueling the industry’s buoyant 

expansion. More and more customers are choosing to 

invest in a broader range of Islamic fi nancial instruments 

available through long-established Islamic banks in the Gulf 

Cooperation Council (GCC) states and Muslim Asia, while 

increasing interest in Muslim and non-Muslim countries alike 

is contributing to the development of Islamic fi nance outside 

historical boundaries. 

S&P estimates that Shariah compliant assets worldwide total 

close to US$500 billion and have been growing at more than 

10% per year over the past decade, placing Islamic fi nance in 

a global asset class on its own. In comparison, Islamic assets 

stood at about US$150 billion in the mid-1990s. Market 

shares of Islamic banks are currently 12% in Malaysia and 17% 

in the Gulf countries. Retail banking services and issuance of 

Islamic notes, or Sukuk, have been and will continue to be 

frontrunners in the global Islamic fi nance boom. 

However, a key challenge for the industry is to continue 

progress toward acceptance by the international fi nancial 

community. Different schools of thought, heterogeneous 


historical legacies, various degrees of fl exibility and even 

some intellectual competition have meant a uniform, coherent 

and harmonized Shariah compliant fi nancial code has yet to 

emerge. 

Interest from previously reluctant parties 

Support provided by the governments of the Gulf countries 

and certain Muslim states such as Malaysia has fostered 

positive views of Islamic fi nance by regulators and supervisory 

agencies across the Muslim world. Regions with predominantly 

Muslim populations that were previously reluctant to open 

their borders to Islamic banks, particularly North Africa, are 

now showing some interest. Tunisia has made a signifi cant 

advance, having authorized in February 2007 the launching 

of an “international Islamic institution” on its territory, in 

partnership with the Islamic Development Bank. The objective 

of this institution, through its Islamic fi nancing activities, is to 

boost business between the Arab countries of the Maghreb 

and the Mashreq. 

In March 2007, Morocco’s central bank, Bank Al-Maghrib, 

authorized Moroccan banks to offer some Islamic 

banking services for the fi rst time in the country’s history. 

This authorization is limited to three products: Ijarah, 

Murabahah and Musharakah. We believe that the fi nancing 

of infrastructure, tourism and real estate projects will 

increasingly constitute an indirect point of entry for Islamic 

institutions into the markets of North Africa. 

Outside the Muslim world, the global Islamic fi nancial industry 

stands to benefi t from the UK’s development as an attractive 

marketplace for Shariah compliant fi nancing and investment 

instruments. European banks are setting their sights on an 

increasingly broad activity base in Islamic fi nance, establishing 

operations in wholesale banking by recycling funds fl owing out 

of the Gulf into Shariah compliant asset classes in Europe. 

These classes comprise assets in the real estate, industrial, 

infrastructure and tourism sectors, in mature, effi cient, 

transparent and diversifi ed western economies. 

Shariah compliant investment banks are also emerging, mainly 

in the Gulf. These banks have no retail customers and fi nance 

themselves chiefl y through the wholesale markets. Banks such 

as Arcapita Bank, Gulf Finance House and Unicorn Investment 

Bank, all based in Bahrain, are the best representatives of 

this new generation of fi nancial intermediaries, capturing the 

capital that institutions and wealthy families are seeking to 




S&P Foresees Mounting Demand for Islamic Products (continued...) 

invest and recycling it in high-yielding industrial, real estate and 

infrastructure projects. They enjoy lofty returns on activities 

that have long been reserved for conventional players. Capital 

investment, infrastructure project intermediation and direct 

real estate investment (usually through leveraged buyouts) 

are now part of Islamic fi nance. 

However, the product range offered by most Islamic banks 

remains narrow. In most credit portfolio allocations, Ijarah 

and Murabahah dominate, accompanied to a lesser degree 

by Istisna, exclusively for corporate borrowers, and more 

especially larger ones. In light of the profi ts generated in the 

highly lucrative retail segment, both in the Gulf and in Muslim 

Asia, incentives to develop riskier fi nancial offerings with 

hefty appetites for capital — either through partnerships such 

as Mudarabah or Musharakah — remain minimal. 

Global Sukuk issuance is set to top the symbolic US$100 

billion mark in the very near term. Sukuk are now a mainstay 

in asset allocation in Malaysia and the Gulf countries. The 

non-Muslim world is also homing in on Sukuk, with issuers 

(including sovereigns) aiming to tap into surplus liquidity 

fl owing from the Gulf region. Hand in hand with widening 

interest in Sukuk and Islamic securities in general, London 

has recently joined the list of major fi nancial hubs to handle 

Islamic transactions, becoming the main non-Muslim 

competitor of “natural” Islamic markets in Dubai, Kuala 

Lumpur and Bahrain. 

Narrow primary market 

As is the case in wholesale banking, London has the capacity 

to become a serious contender for Shariah compliant fi nancial 

fl ows that seek recycling in Europe while competition heats up 

among the world’s fi nancial centers to attract Islamic issuers 

and investors. While expanding, the Sukuk market remains 

a buy-and-hold asset class. Although the primary market 

has been quite active over the past two years, as a whole it 

remains narrow, and still constitutes a niche segment even by 

regional standards. 

The secondary market for Sukuk is virtually nonexistent. A 

signifi cant demand for investment, highly correlated with the 

prevailing liquidity in the Gulf region, is chasing a still-limited 

supply of Shariah compliant vehicles, all the more so as some 

inconsistencies remain in the interpretation of what is and 

isn’t lawful as far as Sukuk are concerned. 


Islamic issues and issuers rated by Standard & Poor’s (30th November, 2007) 

Issue credit ratings 

Originator Date of rating Issue amount (US$ mil) Long-term foreign currency rating 

Central Bank of Bahrain Sukuk Various 1,094 A 

DIB Sukuk 15th February, 2007 750 A 

DP World Sukuk (Obligor: DP World) 27th June, 2007 1,500 A+ 

Dubai Sukuk Center (Guarantor: DIFC Investment) 25th May, 2007 1,250 A+ 

East Cameron Gas Sukuk 31st July, 2006 166 CCC+ 

EIB Sukuk Company Program (Guarantor: Emirates Bank 

International) 

15th May, 2007 1,000 A 

GFH Sukuk (Obligor: Gulf Finance House) 26th June, 2007 1,000 BBB- 

Gold Sukuk dmcc (Guarantor: Dubai Multi Commodities Center 

Authority) 

11th April, 2005 200 A 

Golden Belt 1 BSC 18th April, 2007 650 BBB+ 

Islamic Development Bank 20th May, 2005 1,000 AAA 

Ithmaar Sukuk (Guarantor: Shamil Bank of Bahrain) 20th June, 2007 TBD* BBB- 

JAFZ Sukuk 8th November, 2007 AED7.5 billion A+ 

Loehmann’s Capital (Guarantor: Loehmann’s Holdings) 22nd September, 2004 110 CCC+ 

Malaysia Global Sukuk 10th June, 2002 600 A- 

MBB Sukuk 11th April, 2007 300 BBB+ 

Pakistan International Sukuk 23rd December, 2004 600 B+ 

Qatar Global Sukuk 10th September, 2003 700 AA- 

Sarawak Corporate Sukuk 30th November, 2004 350 A- 

Sharjah Islamic Bank Sukuk 12th September, 2006 255 BBB 

Solidarity Trust Services (Guarantor: Islamic Development Bank) 11th August, 2003 400 AAA 

Stichting Sachsen-Anhalt Trust 9th July, 2004 130 AA- 

Tabreed 06 Financing 15th June, 2006 200 BBB- 

TOTAL 14,297 

Page 51



Islamic banks in the Gulf have demonstrated, and should 

continue to show, strong profi tability so long as oil revenues 

pour into their economies, maintaining economic momentum 

through a powerful multiplier effect. The Gulf banks rated 

by S&P (Islamic and conventional) continued to post strong 

fi nancial performance in 2007. The ratio of RoA (Return on 

Assets) for these banks reached about 3.0%, compared with 

3.2% in 2006. Cumulated core earnings continued to grow 

during the same period, although at a slower pace — about 

10% compared with more than 20% in 2006. 

Islamic issues and issuers rated by Standard & Poor’s (30th November, 2007) 

Issuer credit ratings 

Issuer Date of rating Country 

Long-term foreign 

currency rating 

Albaraka Banking 

Group 

21st March, 2007 Bahrain BBB- 

Al Rajhi Bank 5th October, 2005 Saudi Arabia A 

Arcapita Bank 16th November, 2006 Bahrain BBB 

BEST Reinsurance 2nd September, 1997 Tunisia BBB 

Dubai Islamic 

Bank 

18th October, 2006 UAE A 

Gulf Finance 

House 

7th Islamic 

August, 2006 Bahrain BBB- 

Development 

Bank 

19th December, 2002 Saudi Arabia AAA 

Kuwait Finance 

House 

24th August, 2004 Kuwait A- 

Salama/Islamic 

Arab Insurance 

24th May, 2007 UAE BBB+ 

Shamil Bank of 

Bahrain 

6th November, 2006 Bahrain BBB- 

Sharjah Islamic 

Bank 

6th September, 2006 UAE BBB 

Takaful Re 31st October, 2006 UAE BBB 

*TBD — to be determined. 

This slowdown stems not only from the slump in stock marketrelated 

gains, but also from a decline in net interest margins 

as a direct result of increasing competition. Islamic banks in 

the Gulf are at least as profi table as their conventional peers, 

putting them among the most profi table across the globe. It 

is important, however, that the Islamic banking industry does 

not become complacent or rest on its laurels. 

Islamic banks still have a long journey ahead to build stronger 

recognition, longer track records and greater scale. Some 

critical issues need to be tackled, among which small size 

and high concentration (including geographic) are some of 

the most important. Islamic banks, even the largest ones, 

remain small by international standards, and their portfolios 

continue to focus on a limited number of asset classes and 

segments. We expect geographic diversifi cation to continue to 

progress in 2008. 

For the fi rst time in the industry’s history, several Islamic 

banks headquartered in the Gulf have set up business 

Page 52 


operations in Malaysia, while making clear that on their radar 

are Indonesia and China — large and deep markets only a 

short hop away from their Malaysian platform. New horizons 

are also emerging for Islamic fi nance within the Arab universe: 

Lebanon, Syria, Egypt, Turkey and North Africa have been 

identifi ed as potential engines for unlocking franchise value. 

“Although ‘historical’ leaders such 

as Al Rajhi Bank, Kuwait Finance 

House, Albaraka Banking Group 

and Dubai Islamic Bank still have 

bright prospects within their own 

marketplaces, new entrants are 

looming” 

Beyond the natural borders of the Muslim world, the advanced 

markets of both Europe and North America promise niche 

segments in which Islamic fi nance can profi tably gain 

momentum, as shown by the fi nancial community’s bullish 

welcoming of the Islamic Bank of Britain and the European 

Islamic Investment Bank. This is internationalization, but not 

yet globalization, for which some challenges remain. 

Like their conventional peers, the current market position of 

existing Islamic banks is subject to signifi cant competitive 

pressure. Although “historical” leaders such as Al Rajhi 

Bank, Kuwait Finance House, Albaraka Banking Group and 

Dubai Islamic Bank still have bright prospects within their 

own marketplaces, new entrants are looming. As already 

mentioned, Shariah compliant investment banks are shaking 

the old rules of Islamic fi nance with more aggressive business 

models. In addition, new heavyweight contenders are making 

their debut, pushed by the proactive ambitions of Gulf 

entrepreneurs and governments: Al Rayyan Bank, Al Masref, 

Boubyan Bank and Bank Albilad are examples of institutions 

that will increasingly add pressure to the industry. 

Stability ratings tailored for PSIAs 

Islamic fi nance has many qualities that could lend 

some institutions to securitization as a means of raising 

funds. Shariah compliant fi nance tools must have assetdriven 

returns, for example, which is a notable feature of 

securitization. Although Sukuk are based on assets and 

usually issued via a special purpose vehicle, they should 

not be confused with a true sale securitization. That said, 

theoretically one could issue a Sukuk out of a securitization. 

Numerous asset-based Sukuk have been issued recently. 





In particular, there have been several Musharakah Sukuk, 

such as the US$225 million Sukuk issued by Sharjah Islamic 

Bank in November 2006; or the US$750 million Sukuk 

issued by Dubai Islamic Bank in March 2007. 

However, the ratings on these Sukuk have been based on 

full and senior unsecured guarantees provided by rated 

entities (the originator). This means that the rating is weak 

linked to the supporting counterparty and not the underlying 

pool of assets as in a true sale securitization. The lack of 

conventional hedging should encourage investment bankers 

and fi nancial engineers to come up with new and innovative 

tools to structure these products. S&P believes that some 

progress will be made in this fi eld in the near term, to allow 

securitization for Islamic institutions to develop. 

In 2007, S&P introduced a new product (so-called “stability 

ratings”) tailored to Islamic banks offering profi t-sharing 

investment accounts (PSIAs). As the latter are loss-absorbing, 

our classic credit ratings are not applicable to this class of 

instrument, and therefore they require a different rating 

approach. 

S&P created a new class of stability ratings which are 

applicable to PSIAs, and which could provide depositors, 

banks and investors with a useful opinion on these 

instruments. S&P’s stability ratings for PSIAs are specifi cally 

designed to opine on the prospective relative stability of 

cash fl ow distributable to PSIA holders. 

S&P, the world’s leading index provider, also responded 

to the needs of Muslim investors with the launch of new 

equity indexes that track the stocks of Shariah compliant 

companies. Last November, S&P and the Tokyo Stock 

Exchange announced the launch of a new Japan equity 

index to meet demand from Islamic investors for access to 

Japanese large-cap companies. All S&P Shariah indices are 

screened by Ratings Intelligence Partners, a Kuwait-based 

consulting company specializing in the Islamic investment 

market. Its researchers interface directly with a dedicated 

Shariah supervisory board. 

Emmanuel Volland is a 

credit analyst with S&P. He 

can be contacted via email 

at emmanuel_volland@ 

standardandpoors.com 

*In recognition of its strong commitment to supporting the 

development of deep, effi cient and transparent Islamic 

capital markets globally, Standard & Poor’s was voted Best 

Islamic Rating Agency for the fi rst time in 2007 by readers 

of Islamic Finance news. 

Islamic Finance news, the global Islamic finance news provider, will 

host a series of one-day forums in the world’s developing markets 

for Shariah finance in 2008. This unique roadshow will bear 

witness to the development of the Islamic financing phenomenon in 

markets which are yet to show their true potential. 

Singapore 2 nd April 2008 

Grand Copthorne Waterfront 

Brunei 16 th April 2008 

The Rizqun International 

Hong Kong 30 th April 2008 

Conrad Hong Kong 

Jakarta 7 th May 2008 

Hotel Mulia Senayan 

Karachi 21 st May 2008 

Karachi Sheraton Hotel 

Cairo 3 rd June 2008 

Conrad Cairo 

London 8 th October 2008 

Hilton on Park Lane 

New York 15 th October 2008 

Le Parker Meridien 

Istanbul 28 th October 2008 

Conrad Istanbul 

Key topics 

• The size of the Islamic finance industry today and potential 

growth 

• Attracting Islamic capital: Structuring funds and investment 

products 

• The Islamic capital markets’ progress in each featured 

country and their future role 

• Key principles of structuring Islamic financial products and 

future innovations 

• Sukuk, Islamic bonds and securitization: Structures and uses 

• Islamic wealth management and private banking 

THERE IS NO FEE TO ATTEND 

Register online today 

http://www.IslamicFinanceEvents.com/ifnforum2008 

Page 53

Vol. 5, Issue 4 1 st February 2008 

The World’s Global Islamic Finance News Provider 

In this issue 

HONG KONG 

Islamic Capital Markets Briefs ................ 1 

Tsang woos Arabs to Fragrant Harbor 

Islamic Ratings Briefs ..............................12 

In an effort to develop a market for Islamic should capitalize on their fi scal freedom. In 

fi nance, Hong Kong’s chief executive Donald Kuwait, he signed a letter of intent for the IFN Reports ................................................13 

Tsang went on a three-nation tour to Kuwait, development of bilateral trade relations 

Hong Kong Forging Ahead with 

the UAE and Saudi Arabia. Accompanied during the two countries. 

New Venture ..............................................15 

by a high-level business delegation, 

Tsang created deep impressions with In Saudi, he announced that all Saudi Will Hong Kong Stand Up to 

his persuasive words and determination citizens would have the opportunity to the Competition? ...................................... 17 

to explore business ties with the three receive a one-month free visa to Hong Kong 

Malaysian Tax Incentives for Islamic 

countries. 

to encourage locals and businessmen to Finance — Trends and Issues ..................19 

visit the Asian business hub. 

In Abu Dhabi, Tsang praised UAE’s sovereign 

The UK Approach to Taxation of 

Islamic Finance .........................................21 

wealth funds and said that the two countries (Also see IFN Reports on page 14) 

Fitch on Rating it Right ............................23 

ASIA 

Meet the Head ..........................................26 

Zulkifl i Ishak, Prudential Fund Management 

Lawyers want standardized regulation 

Members of the International Bar Association’s focused on the latest developments of Islamic Term Sheet ................................................27 

who attended the recent “Islamic Finance fi nance in the Middle East. In highlighting the Hajj Terminal Financing 

in the Middle East” conference were nearly issue, Husam Hourani, who is partner and 

unanimous about the need to apply some level head of the banking and fi nance department 

of consistency in Islamic fi nance laws across the at Al Tamimi & Company, said: “There is an 

GCC countries in order to establish regionally- urgent need to deepen our understanding 

accepted regulatory standards. 

and awareness of Islamic fi nance and 

ensure that sound regulatory frameworks 

The conference, which was attended by 70 are implemented on the ground for effi cient 

banking professionals and legal experts, fi nancial intermediation.” 

QATAR/UK 

Qataris own 80% of London Bridge Quarter 

A consortium of Qatari investors has designed by the award-winning international 

acquired 80% of the building of the London architect, Renzo Piano. 

Bridge Quarter, which includes the famous 

“Shard of Glass” new London Bridge Tower. The consortium members will each hold 

The four Qatari institutions — QInvest, Sellar 20% in the newly formed London Bridge 

Property Group, Qatar National Bank, Qatari Quarter Holdings Ltd. Sellar Properties of 

Islamic Bank and Barwa — are to undertake London will retain the remaining 20% of the 

the £2 billion (US$4 billion) development deal. 

Takaful News Briefs..................................28 

Takaful Report ..........................................29 

Different Models of Takaful in the Global Market 

Moves .........................................................32 

Deal Tracker ..............................................33 

Islamic Funds Tables ................................34 

Dow Jones Islamic Indexes .....................35 

Malaysian Sukuk Update .........................36 

Islamic League Tables .............................37 

Events Diary...............................................40 

Subscriptions Form .................................. 41 

Country Index ............................................ 41 

Company Index ......................................... 41 

Guides & 

YES! I would like to subscribe to 

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A Product



Risk Management in Islamic Banking: Key Issues 

By Dr Sunil Kumar 

Islamic banking has made rapid progress in 

the last two decades. What started as a social 

activity in Egypt in the form of Mitghamr Savings 

Association in the early 1960s became a 

movement in the 1990s. The setting up of Dubai 

Islamic Bank and Islamic Development Bank 

during the 1970s, the Islamic Research and 

Training Institute in 1981, and the Accounting 

and Auditing Organization for Islamic Financial 

Institutions in 1990 were landmarks in the 

development of Islamic banking. 

Currently, over 250 Islamic fi nancial institutions (IFIs), 

including banking and non-banking, offer Islamic banking 

products. The range of products now offered is remarkable 

and shows the increasing depth of the market. From simple 

Murabahah to structured products, the market has evolved 

and is showing a sign of seriousness and early maturity. 

Major types of products in modern banking can be offered 

through Islamic banking (Figure 1). 

IFIs are now able to offer products across all the asset 

classes and cover a wide range of lending products. The 

growth is not limited to only Islamic countries or countries 

where Muslims form the majority of the population. Several 

conventional banks, including the large ones, are offering 

Islamic banking services through an Islamic window. Bahrain, 

Malaysia, Kuwait, Pakistan, Sudan and Iran have the largest 

concentration of Islamic banks. Countries such as the UK, 

the US, France, Australia, Luxembourg and Germany are 

also having some presence of Islamic banking. 

A healthy sign of growth is the coexistence of conventional 

banking and Islamic banking in these countries, indicating 

that Islamic banking need not be an alternative mode 

of fi nancing but can be a complement to conventional 

banking. With the prohIslamic bankingition of rIslamic 

bankinga and gharar, insistence on zakat and avoidance 

of haram activities, the fundamental principle of equitable 

distrIslamic bankingution remains at the core of Islamic 

banking and, hence, has found special appeal among non- 

Islamic intellects. 

Since Islamic banking is based on real assets and not 

fi nancial assets, it can be more stable and safe. Due to 

its reliance on profi t and loss sharing, Islamic banking 

promotes better fi nancial allocation and wider distrIslamic 

bankingution of risks. 

Figure 1: Major Islamic contracts and their usage 


Page 55


Page 56 

Risk Management in Islamic Banking: Key Issues (continued...) 

However, this growth could not remain untouched by the 

complexity and issues related to risk management. Risks exist 

in all forms of banking and Islamic banking is no different and 

is not shielded from the risks. The prohIslamic bankingition of 

rIslamic bankinga, as a basic tenet of Islamic banking, does 

not make it completely safe from interest-rate risk. Islamic 

banking cannot, and does not, operate in an isolated world of 

banking. It has strong linkages with conventional banking and 

operates in complete harmony with it. 

As a systemic partner of the banking system as a whole, 

Islamic banking is affected by the risks faced by conventional 

banks. Risks in Islamic banking are distrIslamic bankinguted 

in a different way as compared to conventional banking. Since 

Islamic banking is based on contracts such as Murabahah, 

Musharakah, Mudharabah, Istisna, Ijarah and Salam, the 

risks are also woven around the combination of factors in the 

contracts. The timeline in the contracts relating to events, 

which are related to either cash fl ows or change of liabilities, 

affects the risks. 

Trends and developments 

In the early 1980s, conventional banking risk management 

techniques were applied to Islamic banking as there were no 

specifi c standards for risk management for Islamic banking. 

The original Basel 8% norm of capital adequacy was applied 

to Islamic banks also. When Basel II was released, Islamic 

banks attempted to fi nd ways of managing the risks specifi c 

to Islamic banking. It was realized that the provisions in Basel 

I, and later on, Basel II, were insuffi cient for handling risks 

in Islamic banking. Pillar I of Basel II failed to answer the 

complexities of the Islamic contracts. However, Pillars II and 

Pillar are fundamentally applicable to Islamic banking also. 

Due to the gaps in existing risk management standards, 

the Islamic Financial Services Board (IFSB) attempted to 

systematize the risk management framework for Islamic 

banking. It released the risk framework for IFIs in 2005. 

The role of IFSB is commendable since it brings the risk 

management discussion to the core of risk recognition. IFSB 

stresses the need to recognize the risks at the point of origin. 

It also recognizes that the risks are dynamic and change 

during the lifetime of the contracts. 

On the technology front, tools and solutions for Islamic banking 

have also evolved over the last decade. While several core 

banking solutions specifi c to the industry are widely available, 

risk management solutions are not. The solutions available 

also address silo risks and do not integrate all fi nancial risks. 

Conventionally, risk factors were single and not so complicated 

and interwoven. As the complexities in the market increased, 


risks became correlated with each other. For example, change 

in the market prices of the indices (market risk) affected the 

credit rating of the counterparties, affecting their liquidity 

positions (liquidity risk), which fi nally affected the risk of 

default or changed repayment conditions for the bank (credit 

risk). Thus, different risks started interacting with each other, 

making it mandatory to look for solutions that offer truly 

integrated fi nancial analysis and not just silo solutions. The 

risks in Islamic banking are even more complex and need 

integrated risk analysis. 

Challenges and solutions 

Islamic banking’s present success still poses some serious 

challenges on the internal and external fronts (Figure below). 

Figure 2: Major challenges for Islamic banking 

On the internal front, and due to recent rapid developments, 

there is a shortage of qualifi ed manpower for Islamic banking. 

Business development, risk management, compliance and 

so on are some of the areas where Islamic banking has 

signifi cant gaps in terms of qualifi ed manpower. More training 

programs, user seminars, conferences and study groups can 

solve the problem to a certain extent. 

Risk identifi cation is more complicated in Islamic banking 

because the relationship between contract parties changes 

as the contract enters into a new phase. The risk should be 

identifi ed carefully and should be based on the timeline in 

the contract. 

Risk measurement is similar to conventional banking. The 

mitigation techniques are sometimes unique in Islamic banking 

due to the absence of standard insurance and other mitigation 

methods. Shariah compliant risk mitigation techniques 

can solve the problem to a certain extent. The most critical 

issue in Islamic banking is liquidity risk management. Due to 

the diffi culties related to intra-bank money market and other 

money market instruments, coupled with heightened risks of 

defaults, liquidity management is one of the most important 

factors in Islamic banking. 





Added to this most central banks do not have special 

provisions for providing overnight credit for liquidity 

management to Islamic banks. Specifi c funds for managing 

the liquidity requirements, special reserves, improving the 

short-term money market for Islamic banking are some of the 

urgently needed measures to answer the liquidity issue. Lack 

of accounting standards is another challenge. Recording of 

income and expenses at different values by different Islamic 

banks render their reports non-comparable. 

Quick adoption of available Islamic accounting standards 

can resolve the problem of accounting. Limited availability 

of Shariah compliant technological solutions also poses a 

special challenge. 

Effective use of technology and solutions is sometimes 

diffi cult due to the high cost involved, since most of the IFIs 

are small. Sharing of resources and careful outsourcing can 

be used to overcome the problem of IT. Due to insistence on 

transparency, solutions and systems in Islamic banking need 

to be more capable in terms of reporting. 

On the external front, the acceptability of Islamic banking 

should cross religious borders and cater to all faiths. Islamic 

banking should grow beyond religious justifi cations and 

provide better fi nancial sense, thus becoming accessIslamic 

bankingle to a larger audience. 

“Islamic banking should grow 

beyond religious justifi cations and 

provide better fi nancial sense, thus 

becoming accessible to a larger 

audience” 

Within the Muslim community, the product must meet the 

religious test and should appeal in the right way. Legislations 

relating to Islamic banking are inadequate and often vague. 

The Single Risk Analysis Platform 

for Conventional and Islamic Banking 

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Page 57


Page 58 


In countries where Islamic banking is permitted along with 

conventional banking there is more confusion due to the 

absence of specifi c provisions. For example, there is confusion 

regarding the capital certainty of deposit in several countries, 

especially in the UK. 

“Risk management in Islamic 

banking is more complex and 

needs broad analytical capabilities. 

There is a defi nitive need for fully 

integrated analysis solutions rather 

than silo solutions, because risks 

in IB are woven together and hence 

are not suitable for analysis by silo 

solutions.” 

However, efforts are being made to create specifi c provisions 

and clauses to support Islamic banking. Tax reforms are 

needed in order to answer the issues related to double 

taxation, especially while dealing with sale and purchase 

transactions as originating in a typical Murabahah contract. 

Another issue of concern is ambiguity related to unresolved 

fi qhi issues. Deferred payment for sale transactions, liabilities 

of partners related to third parties, the treatment of residual 

value of asset in Ijarah, sale of debt assets and the treatment 

of derivatives remain unclear, causing serious hurdles in the 

process of consolidation and progress of Islamic banking. 

Opportunities and growth 

Risk management practices in Islamic banking are developing 

rapidly. This will require core banking applications, risk 

management solutions, rating and scoring models. With the 

increasing complexities of the Islamic banking products and 

more stress on transparency, there is a growing need for better 

data for which a robust core banking system is a necessity. 

As discussed, risk management in Islamic banking is more 

complex and needs broad analytical capabilities. There is a 

defi nitive need for fully integrated analysis solutions rather 

than silo solutions, because risks in Islamic banking are 

woven together and hence are not suitable for analysis by 

silo solutions. The true picture of risks can only be created by 

solutions offering unifi ed enterprise-wide risk views. 

On the other hand, rating needs dedicated and organized 

efforts and should result in some standardization. There are 


some efforts to set up Islamic rating services; for example, 

the Islamic International Rating Agency, with shows some 

success but still has a long way to go. And last but not least, 

Islamic banking comes close to universal banking — a general 

trend that has been accelerating since the repeal of the Glass- 

Steagall Act in the US. 

Concluding remarks 

Islamic banking is now a force to reckon with. It blends well 

with conventional banking and is rapidly gaining ground. 

It has crossed the boundaries of religion and faith and is 

now fi nding support among non-Muslim customers and 

countries. However, the rapid growth has been unplanned 

and uncontrolled, and hence has left several open issues. 

Qualifi ed manpower, core banking systems, integrated risk 

management systems, Shariah issues and compliance are 

some of the important issues faced by Islamic banking today. 

Most critical among them is risk management. Risk in Islamic 

banking is more complex and diffi cult to measure and manage. 

Islamic banking requires a fully integrated risk management 

solution since most of the risks are correlated. 

Dr Sunil Kumar is head of risk management, 

Middle East, for IRIS integrated risk management 

ag in Dubai, the UAE. He can be contacted via 

email at sunil.kumar@irisunifi ed.com



Globalization of the Islamic Banking Industry 

By Dourria Mehyo 

Islamic fi nance is the fastest-growing sector in the 

global fi nance industry. More than 350 Islamic 

banks and fi nancial institutions are operating 

in over 50 countries, with total assets that top 

US$400 billion. 

The industry’s promising benefi ts and returns have caught the 

attention of conventional banks that might have otherwise 

never considered offering such products, and the services are 

well accepted by Muslims and non-Muslims alike because of 

its “ethical banking” concept. 

As recent developments show, the industry is on the road 

to increasing globalization of the fi nancial services sector. 

Future expectations are for continued high growth and great 

potential across the globe. For the next few years, Islamic 

banking is projected to grow by at least 20% per year. 

As in any industry, and since Islamic banking operations 

are based on the same Shariah principles (despite minor 

differences in specifi c areas) regardless of the bank’s 

geographic location, the IT system to support such growth 

and globalization should also conform with the basics and 

specifi cs of the industry with enough fl exibility to cater for 

country-specifi c areas. 

The globalization of an industry naturally leads to the need for 

the related IT system to cover the operations of the industry, 

regardless of location, and thus to globalization of the related 

IT supporting system. 

In this article, we examine the impact of globalization on 

Islamic banking and the need for a sustainable IT system. 

Beginnings 

Islamic banking, in the exact sense of the term, started in 

1963 in the Egyptian town of Mit Ghamr in the form of a 

savings bank based on profi t sharing. By 1967, nine such 

banks were operating in the country, functioning as savinginvestment 

institutions. 

Subsequently, in 1971, The Nasir Social Bank was declared 

an interest-free commercial bank and was the fi rst Islamic 

commercial bank. The fi rst Islamic bank outside Egypt, The 

Islamic Development Bank (IDB), was established in 1974 in 

the United Arab Emirates (UAE). 

The bank was established primarily as an inter-governmental 

bank with the purpose of providing funds for development 

projects in member countries. All of these banks invested 

mostly by engaging in trade and industry, directly or 

in partnership with others, and shared the profi ts with 

depositors. They neither charged nor paid interest. The idea 

of Islamic banking was welcomed by the Muslim population, 

who wanted to put their money in institutions that were not 

based on riba or interest. 

By 2005, according to the International Monetary Fund (IMF) 

yearly report, over 300 Islamic fi nancial institutions were 

operating worldwide, with estimated total assets of US$250 

billion and an annual growth rate of 15%. Citibank, HSBC, 

BNP Paribas, Barclays and UBS had begun offering Islamic 

fi nancing products. 

“After leading conventional banks 

such as Citibank and HSBC started 

offering Islamic fi nancing products 

on a basic level, their rivals 

followed suit” 

The IMF report attributed the continued growth in the Islamic 

banking industry to three factors: increasing demand from 

a large number of Muslims (including Muslim immigrants 

to western countries), the growing oil wealth in jurisdictions 

such as Dubai and other countries of the UAE, and the 

attractiveness of Shariah compliant fi nancial services to non- 

Muslim investors seeking “ethical” investments and banking 

practices. 

The Euromoney Islamic Finance Review for 2007/08 stated 

that the estimated Islamic fi nancial market size was US$700 

billion to US$750 billion, with an annual growth rate of 15%. 

It has been reported that the Islamic banking industry is 

growing at 20% per year and will reach a level with total assets 

exceeding US$1 trillion by 2016. 

After leading conventional banks such as Citibank and HSBC 

started offering Islamic fi nancing products on a basic level, 

other leading conventional banks followed suit. Recently, 

the burgeoning international footprint of Islamic fi nance has 

become more apparent. Countries all over Europe, North 

America and in new parts of Asia have also witnessed the 

setting up of Islamic banking operations. 

These operations are offered either through Islamic windows 

created at existing banks or through newly established ones; 


Page 59


Page 60 

Globalization of the Islamic Banking Industry (continued...) 

both reap the benefi ts from local investments and deposits, 

and cross-border capital fl ows. The regulatory bodies in these 

countries have also set up enabling regulatory environments 

that have set the industry on the path to major globalization. 

The following two examples affi rm global acceptance of 

Islamic banking products among customers in new regions. 

In the Islamic Bank of Britain, for instance, “one in fi ve 

applicants for some of our products is non-Muslim”; says its 

director of sales (source: This is Money UK website, August 

2006). In 2004, when HSBC Group began offering Islamic 

equivalent mortgages (more like leases), surprisingly more 

than half of the customers were non-Muslim. According 

to bank offi cials, what drew these customers was the 

“competitive pricing” compared with traditional interestbased 

fi nancing. 

“The fi rst essential characteristic in 

the software is that it must be built 

on Shariah principles and have 

embedded the related information 

capturing features” 

Aside from the facts stated above, the key areas of growth 

with respect to geographic distribution of new Islamic banks in 

2007 include the UK, with at least fi ve new investment banks 

offering mostly Islamic investment and treasury banking 

services; France, where a license has been applied for the 

fi rst Islamic commercial bank; and fi nally, Germany is listed 

as a potential base for new Islamic banks. 

Other new geographic areas are Africa (where two Islamic 

commercial banks started operations in Kenya), Syria (two 

Islamic commercial banks have opened) and Sri Lanka. 

Amanah Finance (a subsidiary of HSBC) is operating in 

countries such as Malaysia, Saudi Arabia and the UK, offering 

personal products (such as private banking, home fi nance, 

personal fi nance, vehicle fi nance, investments and Islamic 

insurance or Takaful); and business products (trade services, 

working capital fi nance and assets fi nance). 

ABN Amro, operating in Pakistan, offers consumer fi nancing 

products in Pakistan, and is mulling consumer, corporate and 

institutional products in Malaysia. Citi Islamic has branches 

in South Korea, Turkey, Egypt, Mexico, South Africa, Pakistan, 

India and Bangladesh and offers term Islamic investment 

products and an open-ended global equity fund, among 

others. 


GCC-based banks have also begun venturing into European 

countries. One example is Ahli United Bank, a Bahrain-based 

Islamic commercial bank. Its services are also available in 

Qatar and the UK. New emerging markets include the UK, 

France, Sudan and Kenya. 

With respect to North America, until the development of 

a full Islamic bank per se, some “alternative products 

and services” currently offered by a limited number of 

companies and finance houses are home, auto and 

business financing; car and equipment leasing; interestfree 

deposits and mutual funds management. Equity 

indices were created by Dow Jones for investors keen to 

invest according to Shariah principles. Meanwhile, Canada 

is looking into the licensing of its first Islamic investment 

bank. 

Efforts to go global must be supported by the concomitant 

IT back-up. As such, the globalization of Islamic financial 

services leads to challenges including the need for 

specialized technology that meets Islamic banking rules 

and regulations; these are the industry’s distinguishing 

aspects that must be applied and followed regardless of 

geographic location since the underlying rules of Islamic 

banking are the same everywhere. 

In addition, the supporting technology should also be 

flexible and innovative enough to meet the country’s 

specific needs (such as tax issues). 

Industry requirements from an IT system 

The regulations and rules on which Islamic fi nance is based 

and which govern its operations are signifi cantly different 

from those for conventional fi nance. The absence of interest 

is the most important differentiating aspect; this makes the 

structuring of Islamic fi nancial products a complex task. 

As a result, Islamic banks need to rely on effi cient IT systems 

in order to handle their signifi cant transaction nature and 

volumes, and to make available necessary information for 

the bank’s management on an accurate and timely basis. 

This can only be achieved through advanced IT solutions that 

allow streamlining procedures, consolidating operations and 

effi cient processing of transactions. 

The fi rst essential characteristic in the software is that it must 

be built on Shariah principles and have embedded the related 

information capturing features. The captured information 

must fully cater to the type of Islamic product; for instance, to 

fully cover recording of a commodity Murabahah transaction, 

the data must relate to the details of the bought and sold 





products, and cover details related to the suppliers and down 

payments. 

For Islamic banks to operate effi ciently, the system must 

facilitate the set-up and ease of tracking the restricted and 

unrestricted investment accounts of clients across the system 

and getting the information on a timely basis. 

Since Islamic banking is based on shared profi ts and risks, 

the operations, simply put, cover pooling of clients’ funds and 

then distributing the profi ts based on revenues generated 

from this pool, and after applying certain criteria that are 

pertinent to Islamic banking. In light of these transactions, 

the software must support proper recording and tracking and 

management of the pools of funds. Each pool must be easily 

tracked and computations must be made on an effi cient timely 

basis and be able to produce reports detailing the results of 

the computations. 

As such, the system must also support the complex profi t 

computation method for the unrestricted investment 

accounts and distribution of the computed profi ts to 

each account holder. The system must allow the tracking 

of the fi nancing transactions, the contributors in these 

transactions, and computations of profi t to be received from 

funded (or partnership parties) and computation of the profi t 

shares to be distributed to the contributors based on each 

client’s invested amount. This is important for the restricted 

investment account holders. 

Since Islamic banks are to abide by Accounting and Auditing 

Organization for Islamic Financial Institutions (AAOIFI) 

standards, the system must produce the standard accounting 

entries and booking methods of the transactions and bank 

profi ts and investments according to those standards. 

Legal documents and confi rmations are an essential part of 

Islamic banking. As such, the IT solution to be utilized must 

allow printing of the details pertaining to Islamic banking 

and fi nancing transactions, the related confi rmation and the 

related legal documents and contracts. Each type of Islamic 

fi nancing product has its own legal document, and the system 

must be able to support it. This applies to all transactions 

of the bank (with depositors of restricted and unrestricted 

investments) and with the funded counterparties. 

The possibility of being able to keep a copy of the signed 

contracts as scanned document or another medium in the 

system would also be an important feature. The logging of 

dates and times of a transaction is also an essential factor, 

as is being able to keep the signed contracts in their related 

transaction record, particularly since the Shariah audit will 

be looking at those details. 

In the era of banking operations where customer service 

management concepts are becoming more and more 

essential for competitive advantage, “customer centricity” 

is extremely important. Banks need to know, from a single 

screen or at the click of the mouse, the total balance and 

number of transactions done by a client. This is important for 

customer service, sales management, risk management and 

exposure analysis. The IT software to be utilized should be 

fully customer-centric in order to give a bank the competitive 

advantage in obtaining such information on an accurate and 

timely basis. 

“The logging of dates and times of 

a transaction is also an essential 

factor, as is being able to keep the 

signed contracts in their related 

transaction record, particularly 

since the Shariah audit will be 

looking at those details” 

Needless to say, the technological software must also have 

a powerful reporting tool that allows ease of access to 

data and development of all types of reports for the bank’s 

management and central bank reporting. The system must 

also easily integrate with other applications for data mining 

and in order for the bank to obtain its needed reports to 

support its operations. 

The software must also allow the bank to comply with Basel II 

requirements and compute what is needed for such compliance 

on timely manner. The software must also allow the Islamic bank 

to properly record and monitor its market, credit and operational 

risk. 

IT challenges resulting from the industry’s 

globalization 

In addition to industry-specifi c requirements, globalization 

raises the need for the supporting IT technology to be 

fl exible enough to cater for the distinguishing aspects of 

a geographical area or specifi c country such that it will 

guarantee quick time-to-market and return on investment for 

the bank with very effi cient preparation and strong basis of 

operation that is using the software. The following paragraphs 

present examples of the major areas of consideration. 

While most, if not all, GCC countries do not have income 

tax and value-added tax (VAT), these are a given in some 


Page 61


Page 62 


other geographic areas such as Europe. On the other hand, 

GCC countries do have the zakat requirement that must be 

paid. The IT solution to support the global Islamic banking 

industry must be able to cater for both areas (taxes, nontax 

and zakat) in a timely manner as well as facilitate the 

automation and related computations and accounting 

related reporting. 

“The globalization of Islamic 

fi nancial services with its 

opportunities and challenges 

naturally lead to potential returns 

in innovation and specialized 

technology” 

At some point, a bank operating on a global level (such as 

having operations in both the UK and Kuwait) will need to 

develop consolidated fi nancial statements for its global 

operations; a task that is expected to be made effi ciently 

using the IT system in force. 

While the basic operations of Islamic fi nancing products 

are the same across all banks, banks operating in a certain 

geographic area may have different policies and procedures 

(that have been approved by the Shariah boards) than their 

counterparts elsewhere. 

Policies with respect to profi t structures and repayment terms 

are examples. With the globalization of the industry, more 

sophisticated Shariah compliant products may be set up 

(hybrid/mixed products). This presents another challenge for 

the IT system supporting the industry’s globalization drive. 

In addition, regulatory reporting requirements differ between 

countries in the same geographical area, and the channel 

is bigger when the IT system is utilized across continents; 

the system should facilitate the extraction of the regulatory 

reporting requirements. The system should have open 

architecture that allows interfacing with local central banks 

or regulatory institutions where required and applicable. An 

example is the real-time gross settlements systems available 

in KSA (SADAD) and RENTAS (in Malaysia). 

And last but not least, with the globalization of the Islamic 

banking industry, and since new countries will be working 

on new areas of operations, IT related companies may be 

required to engage Islamic banking experts with enough 

exposure to the industry’s specifi c operations, in addition to 

technical staff. The globalization of Islamic fi nancial services 


with its opportunities and challenges naturally lead to 

potential returns in innovation and specialized technology. 

Conclusion 

With the current rise of Islamic fi nancial services worldwide 

and the returns these are generating for banks and clients, 

Islamic banking has proven it is not a negligible or merely 

a temporary phenomenon. Such institutions are here to 

stay and the Islamic banking services are set to expand 

more geographically. Even if one does not subscribe to 

the prohibition of interest, one may fi nd in Islamic banking 

innovative ideas that would add more variety to the existing 

fi nancial network. 

With the openness and willingness of regulators across 

the globe to address and understand such markets, the 

willingness of fi nancial institutions to enter the market, 

the efforts of regulators at industry level, and the existing 

and growing demand, there is signifi cant potential for the 

globalization trend we are witnessing. Naturally, this should 

be coupled with IT innovations and globalization of the related 

software services. 

Dourria Mehyo is assistant vice-president, 

business consulting at Path Solutions. She 

can be contacted via email at Dmehyo@ 

lb.path-solutions.com



2007 Global Takaful Review: Evolving Trends, 

Opportunities and Challenges 

By Sohail Jaffer 

The renaissance in socially responsible investing 

and demand for Shariah compliant solutions 

has spurred the double-digit growth of the global 

demand for Takaful, or insurance based on 

principles of mutual assistance. The fi rst Takaful 

company was established in 1979. Now, there are 

over 250 globally. 

According to the Standard & Poor’s April 2007 report on 

Takaful, “the GCC Takaful market is currently growing at 

40% per year and the opportunities for increased uptake of 

Takaful in the GCC markets are positive. The GCC insurance 

market has a potential size of US$20 billion (currently US$6 

billion). Within the GCC insurance sector, the Takaful market 

has the potential to reach US$4 billion at the current level of 

development (currently US$170 million)”. 

Based on a 2007 Oliver Wyman report, “in terms of headline 

revenue potential, reasonable assumptions about likely 

penetration among Muslims, and adjustments for non-Muslim 

potential, suggest that there is worldwide Takaful premium 

potential of at least US$20 billion annually, compared to 

today’s fi gures of US$4 billion at most”. Wyman’s analysis 

suggests that up to 20% of Takaful revenues could emanate 

from non-Muslim customers. 

More recent analysis published by Fitch Ratings put the 

total global Takaful contributions at US$2.6 billion in 2006, 

which the agency described as “very small compared with the 

world’s insurance sector as a whole”. However, Fitch added 

that Takaful’s “infl uence and importance extend well beyond 

its current size, and there is substantial potential for growth 

both in Muslim communities in the Middle East and Asia as 

well as in more mature OECD (Organisation for Economic 

Cooperation and Development) markets like the UK, France 

and Germany, which have signifi cant Muslim minorities”. 

The nascent Takaful industry needs to gain critical mass, to 

provide an innovative array of products and superior quality 

customer services, to build worldwide brand recognition and 

to exceed performance standards set by the conventional 

insurance industry. 

Product innovation and distribution 

The Takaful product family spans general, life, health and 

pensions business. The two main business models used in the 

Takaful industry are Mudarabah and Wakalah. The Wakalah 

model is more prevalent. Under this model, the Takaful operator 

acts as an agent (Wakeel) for the participants and manages 

the Takaful/reTakaful fund in return for a defi ned fee. 

“Acceptance of Shariah compliant 

savings, education, marriage 

and retirement plans is gradually 

increasing among the affl uent” 

Due to the ethical guidelines underpinning Shariah compliant 

fi nancial services, the increasing transparency of customer 

terms and conditions, pricing structure, regular compliance 

monitoring by the relevant Shariah boards and supervisory 

regulators and adequate disclosure of information and 

transparency to policyholders, such offerings have tended to 

attract both Muslim and non-Muslim customers. 

Acceptance of Shariah compliant savings, education, 

marriage and retirement plans is gradually increasing among 

the affl uent, but signifi cant investment in customer education 

and training of fi nancial planners and investment advisers 

is still necessary. A successful distribution model needs to 

develop a thorough understanding of the customer’s needs, 

offer product and process innovation, eliminate fl aws in 

product terms and cost structures, and enhance customer 

service delivery. 

Advent of bancassurance 

In light of the exponential growth of Islamic retail banking and 

fi nance, several enterprising banks have sought to diversify 

their business by including bancassurance in their product 

offerings. Hence, Islamic savings, education, marriage and 

retirement plans that combine investments with protection 

benefi ts are starting to become attractive. The average 

maturity of such capital accumulation plans is between 15 

and 20 years and the customer retention period in performing 

programs is much longer than direct investments in mutual 

funds. 

Product customization for the different bank channels (retail, 

mass affl uent, private banking), customer referrals and gaining 

brand loyalty are critical success factors. Banks are keen to 

work with strategic product partners who offer bespoke family 

Takaful investment-linked plans, the opportunity to “white 

label” such a plan and have open investment architecture. 


Page 63


2007 Global Takaful Review: Evolving Trends, Opportunities and 

Challenges (continued...) 

Clearly, the ability to tailor suitably diversifi ed risk reward 

investment portfolios, select top quartile performing funds 

from major international brands and control defi ned portfolio 

risk levels are powerful drivers for the retail value proposition. 

Furthermore, product certifi cation by an independent Shariah 

board of experts and ongoing compliance monitoring with 

high ethical standards have had a favorable impact on 

transparency, disclosure of different terms and conditions, 

charges and frequency of reporting. 

The bank distribution partners generally prefer a “white label” 

family Takaful linked investment plan due to the following 

reasons: 

• Customers are more comfortable with a bank’s “own 

brand” equity; 

• Banks can blend both their own Shariah compliant 

mutual funds with quality third-party funds; 

• All customer assets of the family Takaful-linked 

investment business are in the bank’s custody and it 

also gains the corporate bank account of the Takaful 

company supplying the product; 

• Banks have access to the web-based point of sale and 

online administration system without having to integrate 

new systems or build new interfaces; 

• Due to the life cycle of the product, banks enhance 

individual customer relationship and retention rate. 

The distribution of Takaful life and savings products 

through bank channels is relatively new. According to 

the abovementioned S&P report, “contributions from 

bancassurance constitute slightly more than 20% of all 

Takaful contributions in the more established Malaysian 

Takaful market. In comparison, this distribution channel 

remains under-utilized in the GCC, and generally 

contributes only a small amount to the overall contributions 

generated”. 

Recently, several UAE banks including Abu Dhabi Commercial 

Bank, National Bank of Dubai and ABN Amro introduced 

a Shariah compliant Takaful and savings scheme in joint 

arrangement with Dubai Islamic Insurance and Reinsurance 

Company (Aman) and FWU Group. The sales process through 

the branch banking network has been facilitated by the advent 

of web-based point of sale and online administration systems 

offered by entrepreneurial groups such as FWU Group in 

Germany. 

These “white label” Takaful and savings plans offer investmentoriented 

life Takaful products to their mass affl uent customers. 

In addition to the benefi ts of customer convenience, the “white 

label” advantage of using own brand equity, transparency of 

Page 64 


product terms and conditions, open investment architecture 

and effi cient online processing have all proved attractive to 

major bank distribution partners. 

Major markets include Malaysia and Indonesia, the Kingdom 

of Saudi Arabia and other GCC countries, Pakistan and Iran. 

Europe and the US also offer considerable untapped potential 

for the Takaful industry. 

Takaful surge in the Middle East 

Currently, the insurance penetration and per-capita density 

in the GCC states are low. However, the GCC will see a 

dramatic increase in insurance in general and Takaful in 

particular over the coming years. 

A report by the Salama Islamic Arab Insurance Company 

states: “The Saudi market within the GCC has attracted several 

new market entrants, and liberalization of foreign ownership 

in the UAE and other markets in the insurance sector 

will further accelerate growth. Among the GCC states, Saudi 

Arabia is expected to generate close to US$900 million in 

premiums, followed by the UAE (US$480 million) and Egypt 

(US$467 million).” Growth is spurred by the introduction of 

“compulsory health insurance for expatriates from 2006 

and motor third-party liability in Saudi Arabia” and “compulsory 

health insurance for foreigners” in the UAE. 

“Liberalization of foreign ownership 

in the UAE and other markets in 

the insurance sector will further 

accelerate growth” 

Saudi Arabia in particular will see an increase: the Jeddah 

Chamber of Commerce believes the insurance market will 

triple from SAR8 billion (US$2.13 billion) to SAR24 billion 

(US$6.4 billion) within the next decade. Insurance currently 

contributes 0.7% of GDP; this is expected to reach 3.7% in 

fi ve years. 

The Council of Ministers in Saudi Arabia has licensed several 

new insurance companies. Most of these are joint ventures 

with foreign insurance companies. For example, Al Ahli 

Takaful which was recently licensed to undertake insurance 

business in Saudi Arabia is a joint venture insurance company. 

Institutional shareholders include the National Commercial 

Bank, International Finance Corporation, FWU Group and 






VHV, a general insurer in Germany; the balance is held by the 

public by way of an initial public offering. 

Recent strategic alliances include Prudential UK and Bank 

AlJazira. The memorandum of understanding signed by the 

two parties allows Prudential to take a signifi cant equity stake, 

thereby becoming the largest individual shareholder in a new 

venture that will acquire the market-leading Takaful Ta’awuni 

life insurance business of Bank AlJazira. The new Takaful 

Ta’awuni life insurance operation will be listed on the Saudi 

Arabian stock exchange (the Tadawul). Prudential will also 

take an equity stake in Bank AlJazira’s new fund management 

business, subject to regulatory approvals. 

“The growth of Takaful has also 

been aided by Shariah compliant 

home fi nance solutions” 

In Kuwait, annual insurance premiums are growing by 12% 

to 15%, equivalent to KWD150 million (US$519 million), 

aided by the increase in local development projects. Dr Ali Al- 

Bahr, director-general of the Kuwait Insurance Company, says 

Takaful accounts for 10% to 15% of the total market, despite 

Takaful being a relatively young sector. 

In Bahrain, the establishment of Allianz Takaful Bahrain will 

serve as the group’s global Takaful hub. Allianz Takaful will 

undertake family Takaful, while also focusing on investmentlinked 

insurance, life and health insurance. 

The Central Bank of Bahrain’s (CBB) license to Allianz is the 

third to be issued to foreign Takaful and reTakaful insurers — the 

previous two went to American International Group (AIG) Takaful 

and ACE group. CBB also approved the establishment of the 

US$20 million Aman Bahrain Insurance Company (ABIC), whose 

shareholders include Al Salam Bank, Aman and other investors. 

The growth of Takaful has also been aided by Shariah 

compliant home fi nance solutions. For example, Solidarity 

in Bahrain is the sole provider of Takaful home fi nancing 

protection and family protection products for Sakana Holistic 

housing solutions’ mortgage fi nance customers. Solidarity’s 

SolidFoundation Takaful policy will pay outstanding mortgage 

repayments and award the property to Sakana homeowners’ 

families in the event of death. 

Customers can also access optional Takaful protection 

benefi ts such as critical illness and total permanent disability. 

Solidarity’s general Takaful business will also provide 

Sakana’s mortgage customers with property, fi re and allied 

perils cover to compensate for any loss of property in the 

event of damage. 

Pakistan 

In Pakistan, the Securities Exchange Commission of Pakistan 

introduced a comprehensive Takaful regulatory framework in 

2005. 

Qatar Islamic Insurance Company, Qatar Islamic Bank, Qatar 

International Islamic Bank, Qatar National Bank and the 

Amwal group together with Pakistani nationals (residents and 

non-residents) recently established the Pak-Qatar General 

Takaful Company and the Pak Qatar Family Takaful Company 

in Pakistan. 

The Pak-Qatar General Takaful Company has an initial paid-up 

capital of PKR250 million (US$4 million), while the Pak-Qatar 

Family Takaful Company will have a capital base of PKR400 

million (US$6.35 million). The Pak-Qatar Family Takaful 

Company has entered into a cooperation agreement with 

FWU Group in Germany. It will offer investment and protection 

products, savings products, and retirement and education 

policies. 

The Pak-Qatar General Takaful Company will offer specialized 

products covering accident, fi re, marine, engineering, money 

and banking, property insurance and liability. 

Asia-Pacifi c 

• Malaysia 

According to Bank Negara Malaysia’s (BNM) 2006 

report, new life business premiums and family Takaful 

contributions posted a growth of 13.5%. Growth was driven 

primarily by investment-linked business, which expanded at 

an impressive annual rate of 89% to offset the decline in 

ordinary life business. At the end of 2006, investment-linked 

products accounted for more than 40% of new business. 

In terms of distribution channels, new premiums garnered 

through bancassurance tie-ups accounted for a higher 

share of 44.2% while the market share of agency business 

declined to 44.8% in 2006. 

According to the same report, the Takaful industry continued 

to record a strong performance in 2006. Total assets grew 

by 17.9% to account for 6.1% of total assets of the insurance 

industry, while combined Takaful contributions rose to 6.5% 

of the total premiums of the industry. In the family Takaful 


Page 65




sector, new business contributions increased signifi cantly by 

74.6%, mainly due to the growth in mortgage Takaful and 

investment-linked businesses which accounted for 68.2% of 

new business. 

In Malaysia, the current market penetration is low but 

“Takaful is expected to constitute 20% of the total insurance 

market by 2010 (currently 6.5%). By then, Takaful’s share of 

the Malaysian insurance industry is estimated to be worth 

US$1.85 billion (RM7 billion)”. 

As part of Malaysia’s drive to attract global insurance 

brands, Aviva UK formed a JV with the CIMB group. The 

JV permitted Aviva to acquire a 49% equity stake in two 

of CIMB’s subsidiaries, Commerce Life Assurance and 

Commerce Takaful . 

• Indonesia 

The growth of Takaful operators in Indonesia was slow at the 

beginning, with only fi ve Takaful companies until 2002. The 

development of the Takaful business has lagged far behind 

that of the conventional insurance industry. 

Data from the State Finance Department shows that the 

assets of Takaful companies in 2006 stood at only US$95 

million compared to total insurance assets of some US$10.2 

billion. However, in 2007, the number of Takaful operators 

jumped signifi cantly from fi ve to 43 with 20 in life insurance, 

19 in general and four in reinsurance. International insurers 

active in this market include Allianz, ING and Manulife. 

UK 

A new Islamic insurance fi rm, British Islamic Insurance 

Holdings (BIIH), is awaiting regulatory approval from the UK’s 

Financial Services Authority (FSA) to offer Shariah-based 

insurance solutions to British Muslims. BIIH is currently 

working on strategy and recruiting management . 

Industry developments 

ReTakaful capacity 

Vital to the growth of the Takaful industry is the corresponding 

development of Shariah compliant reinsurance. Few 

reTakaful operators have been established in comparison 

to the number of direct Takaful operators. Noteworthy is the 

entry of international reinsurers as Tokio Marine ReTakaful 

(TM ReTakaful) , Swiss Re and Converium into the reTakaful 

business in various jurisdictions such as Bahrain, the Dubai 

International Financial Center and Malaysia. 

Page 66 


Recently, CBB issued a license to Hannover Re in Germany 

to establish a wholly owned Islamic reinsurance company 

in Bahrain. Hannover Re Takaful will have a paid-up capital 

of BHD20 million (US$53 million) and will focus on general 

and life classes. Hannover Re Takaful will be the principal 

underwriter of Hannover Re’s worldwide reTakaful business. 

“The growth of the global Takaful 

industry would be encouraged 

by the introduction of uniform 

regulation and conduct of Takaful 

business to promote cross-border 

activity and the global marketing of 

Takaful” 

BNM, the central bank in Malaysia, granted three reTakaful 

licenses to, inter alia, Munich Re to conduct general and 

family reTakaful business . Recently, London-based Lloyd’s 

announced plans to offer reTakaful from its newly incorporated 

offshore reinsurance unit in Labuan. Lloyd’s is optimistic 

about the reinsurance market in Malaysia and expects it to 

grow to US$100 million by 2010 . 

The Monetary Authority of Singapore has authorized SCOR 

Asia-Pacifi c to apply to the Labuan Offshore Financial Services 

Authority for a license to allow SCOR Asia-Pacifi c’s non-life 

branch to expand and underwrite reTakaful contracts. 

Global Takaful standard 

Currently, the regulation of Takaful is at various stages of 

development throughout the world. Jurisdictions such as 

Malaysia, Bahrain and Pakistan have introduced specifi c 

Takaful laws or regulations. However, the growth of the global 

Takaful industry would be encouraged by the introduction of 

uniform regulation and conduct of Takaful business to promote 

cross-border activity and the global marketing of Takaful. 

To this end, the International Financial Services Board (IFSB) 

and the International Association of Insurance Supervisors 

(IAIS) have established a joint working group which released 

an issues paper on the applicability of the existing IAIS core 

principles to the regulatory and supervisory standards for 

Takaful to be developed by the IFSB. 

The issues paper dated August 2006 identifi ed four critical 

areas to the regulatory and supervisory framework of the 






Takaful industry, which need to be addressed in an integrated 

way: 

• Corporate governance (including the appointment, composition 

and report of the Shariah board); 

• Financial and prudential regulation; 

• Transparency, reporting and market conduct; and 

• Supervisory review process. 

According to BNM’s deputy governor in a keynote address at 

the 2 nd Seminar on Regulation of Takaful, the issues paper 

may lead to the “issuance of a specifi c guidance paper or 

standards that correspond to the IAIS core principles”. 

Conclusion 

The Takaful industry is an important component in the 

overall Islamic fi nancial system, given its role in providing 

risk protection. Future challenges and opportunities include 

the development and harmonization of the regulatory 

framework and prudential standards for the Takaful industry, 

the promotion of corporate governance, transparency and 

market discipline, the creation of suitable Shariah compliant 

investment securities and the development of viable Islamic 

capital markets. This is in addition to the introduction of 

internationally recognized rating system, the education 

of consumers, building brand loyalty, optimizing the use 

of technology for customer after care and the creation of 

strongly capitalized global reTakaful and multiline Takaful 

providers. 

“The Takaful industry needs to 

cater to the growing needs of 

both Muslim and non-Muslim 

customers” 

Creative product design and packaging, customer 

convenience and transparency of product terms, conditions 

and pricing are key to gaining a competitive advantage 

across general, life, health and pensions business and 

multiple distribution channels. The Takaful industry has 

been successful in distributing products through its agency 

sales force, direct channel, e-commerce and, to a limited 

extent, via certain retail banks. Business management skills 

and scalable distribution models need to be crafted and 

redeployed intelligently in the development of new markets. 

Use of web-based point of sale and online administration 

systems and the enlightened deployment of e-commerce 

can optimize customer interface, relationship management 

and effective after-sales customer service. Major Takaful 

operators need to enhance their capacity to innovate, 

carefully review and understand evolving customer and 

market specifi c needs, carefully reengineer their product 

design and customer benefi ts package, strengthen customer 

education and interaction and expand customer reach 

across multiple distribution channels. 

The Takaful industry needs to cater to the growing needs of 

both Muslim and non-Muslim customers. Primary markets 

within Europe with a sizeable Muslim population include the 

UK, France and Germany. 

In Asia, China, India and Indonesia offer opportunities. Islamic 

centers of product excellence include Malaysia, Bahrain 

and the UAE, but Indonesia, Saudi Arabia and Pakistan are 

fast evolving and building their product expertise. There is 

signifi cant latent potential for Islamic fi nancial services in 

the US, Europe and Asia. 

Global insurance brands such as Allianz, Aviva, AIG, AXA, 

ING, Prudential UK and international reinsurers like Swiss 

Re, Hannover Re and Munich Re have recognized the 

opportunities in the Takaful and reTakaful industry and, as a 

result, recently entered the market. 

Major GCC banks such as Al Rajhi Bank, National Commercial 

Bank, Kuwait Finance House, Dubai Islamic Bank, National 

Bank of Dubai and Abu Dhabi Commercial Bank; regional 

banks in Southeast Asia like Maybank and Hong Leong 

Bank, and international cross-border banks like HSBC, ABN 

Amro and Standard Chartered Bank are also well positioned 

to package premier products and services for their middleincome 

and affl uent customers and to expand their crossborder 

distribution reach across multiple distribution 

channels including — but not limited to — direct marketing 

and corporate group plan sponsors. 

Sohail Jaffer is a partner at FWU Group. He can 

be contacted via email at s.jaffer@fwugroup. 

com. References are available on request from 

the writer. 

Page 67

Takaful Markets & Products: 

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This unique publication is designed for self study and classroom use and offers a comprehensive 

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21 st – 23 rd July 2008, KUALA LUMPUR 

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Introduction to Takaful 

Risk and Risk 

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Origins of Takaful 

Islamic Law and 

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Takaful Operations 

Products and Plans 

Effective Sales 

Presentations 

Accounting Treatment 

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Investment of 

Premiums and Takaful 

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Re-Insurance and 

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Profile of Global 

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Conclusions, Trends 

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Please contact Andrew Tebbutt at andrew.tebbutt@REDmoneygroup.com for more information



Why Sukuk Pioneer Still the Preferred Venue 

By Jane Dellar 

Bahrain is today widely acknowledged in the Arab 

world as the hub for Islamic fi nance, thanks to an 

extensive heritage and its progressive approach. 

The kingdom has become a global leader, playing 

host to the largest concentration of Islamic 

fi nancial institutions (IFIs) in the Middle East. 

Its evolution into an international center for Islamic finance 

came in part in 1978 at the Organization of the Islamic 

Conference, when Bahrain was identified as the natural 

location to develop Islamic banking as a solution to the 

Muslim community’s requirement for financial products 

and services to mirror their faith. 

In 2001, Bahrain developed the world’s first Sukuk 

(Islamic bond). It introduced the first bespoke regulations 

for the Shariah compliant industry in 2005. It is now 

in the forefront of the Sukuk market, including shortterm 

government Sukuk, as well as leasing securities. 

Sukuk Al Salam Islamic bonds and Sukuk Al-Ijarah shortterm 

Islamic leasing bonds are issued by the Bahraini 

government on a monthly basis to promote the kingdom’s 

domestic market. 

Currently, there are 29 Islamic banks and 15 Islamic 

insurance (Takaful) companies operating in the kingdom. 

Most Takaful operators entered the market in the past 

five years; such has been Takaful’s growth. 

Best regulated market 

Bahrain’s pragmatic regulations and limited bureaucracy 

have paved the way for it to become the location of 

choice for Islamic funds too, and it is now one of the largest 

drivers of growth in the kingdom. Bahrain has over 

2,300 funds registered and more than 100 domiciled, 43 

of which are Islamic. 

The growth of Islamic banking worldwide has been remarkable, 

with total assets in this sector now estimated 

at US$500 million. Bahrain is home to 29 Islamic banks 

with a total US$15.9 billion in banking assets (as at August 

2007). These include ABC Islamic Bank, Al Baraka Islamic 

Bank, Shamil Bank, Noriba Bank, First Islamic Investment 

Bank and Al-Amin Bank Bahrain. They provide a variety of 

products, including Murabahah, Ijarah, Mudarabah, Musharakah, 

Al Salam and Istisna, restricted and unrestricted 

investment accounts, syndications and other structures 

used in conventional fi nance, which have been appropriately 

modifi ed to comply with Shariah principles. 

Bahrain is arguably the best fi nancially regulated market in 

the Middle East, with regulator Central Bank of Bahrain (CBB) 

playing a fundamental role in the adoption and success of 

Islamic banking in Bahrain. 

CBB’s record for transparency and business-friendly 

regulation is the best in the Middle East region. It has 

installed a comprehensive prudential and reporting 

framework, tailored for the specifi c concepts and needs of 

Islamic banking and insurance. 

The CBB’s rulebook for Islamic banks covers areas such as 

licensing requirements, capital adequacy, risk management, 

business conduct, fi nancial crime and disclosure/reporting 

requirements. Similarly, the insurance rulebook addresses 

the specifi c features of Takaful and reTakaful fi rms. Both 

rulebooks were the fi rst comprehensive regulatory frameworks 

that dealt with the Islamic fi nance industry. 

Developing the industry further, the CBB established a special 

fund to fi nance research, education and training in Islamic 

fi nance (the Waqf fund); and is actively working with the 

industry and stakeholders in developing industry standards 

and the standardization of market practices. 

In addition to the numerous IFIs active in the fi nancial 

sector, Bahrain plays host to organizations that are central 

to the development of Islamic fi nance. These include The 

International Islamic Financial Market (IIFM), which is working 

towards the development of a unifi ed derivates and hedging 

instrument for the Islamic industry; the Liquidity Management 

Center (LMC), which contributes to the Sukuk market; the 

Islamic International Rating Agency; and the Accounting 

and Auditing Organization for Islamic Financial Institutions 

(AAOIFI), which has identifi ed at least 14 possible for Sukuk 

and continues to develop more. 

One of the most recent additions to Islamic fi nance 

development in Bahrain is the Shariyah Review Bureau (SRB), 

a provider of independent services related to Shariah review 

and compliance. It became the fi rst entity of its kind to be 

licensed by the CBB last year. 

Prosperous economy, strong framework 

A key factor that continues to draw IFIs is the kingdom’s 

prosperous and well-diversifi ed economy, which is less reliant 

on oil than other states in the region. Bahrain also boasts a 

strong well-established framework for fi nancial services and 

markets. 


Page 69


Page 70 

Why Sukuk Pioneer Still the Preferred Venue (continued...) 

The Bahrain Stock Exchange was established in 1989 and is 

recognized as the most open capital market in the Gulf region. 

Meanwhile, the Economic Development Board of Bahrain 

(EDB) is vital to the continued development of the fi nancial 

sector, with an ongoing strategy for growth designed to 

enhance its increasingly competitive business environment. 

In May 2006, the EDB established Bahrain Financial Services 

Development (BFSD), which provides a dedicated resource 

for the kingdom’s fi nancial institutions. The remit of the BFSD 

is to encourage foreign direct investment into the country 

by identifying and targeting growth sectors including large 

international and leading regional companies in the fi nancial 

services sector which have yet to build a base in Bahrain. 

Both organizations provide evidence of Bahrain’s strong 

public/private partnership. 

As well as boasting a thriving fi nancial services sector, a 30year 

regulatory track record and standardized industry rules, 

Bahrain also offers IFIs and related associations a large, 

experienced and cost-effi cient domestic workforce, high 

caliber raining and excellent communications links with other 

Gulf states. The kingdom’s geographical location, centered 

between the European and Asian markets and time zones, 

provides a gateway to the region and proximity to growing 

private wealth in Saudi Arabia. Planning for a new causeway 

connection to Qatar is also underway. 

Other benefi ts that make Bahrain an attractive destination 

for Islamic fi nancial investment include its highly favorable 

tax environment, with no corporate, personal, value-added or 

withholding tax. The kingdom also boasts 100% foreign ownership 

for most categories of business; a sustained low rate 

of infl ation of under 2% a year; no restriction on repatriation 

of capital, profi ts or dividends; a modern high standard of living 

with a cosmopolitan family atmosphere; and a world-class 

international airport and regional air traffi c hub. 

Bahrain’s reputation as the world’s Islamic fi nancial capital 

was cemented by signifi cant developments during 2007. Last 

October, the Islamic Bank of Asia (IB Asia), a joint venture 

between Singapore-based DBS Bank and 34 investors in 

the GCC region, received a banking license from the CBB to 

set up a representative offi ce in Bahrain. IB Asia chairman 

Abdulla Hasan Saif endorsed the kingdom as the location of 

choice for IFIs, explaining: “Bahrain is a renowned and wellregulated 

epicenter of the US$1 trillion global Islamic fi nancial 

industry.” 

New entrants into the market during 2007 included Al Masraf, 

which was set up in the kingdom with US$5 billion paid-up 

capital, and Global Banking Corporation (GBCORP), which 


opened as a wholesale Islamic investment bank with a paidup 

capital of US$250 million and an authorized capital of 

US$500 million. 

Meanwhile, fi nancial institution innovation and sophistication 

has developed in Bahrain’s Islamic fi nance market over the 

last year from the combining of talents and capabilities. In 

January 2007, Bahrain-based CIMB Kanoo Islamic Investment 

Company BSC(C), a joint venture between CIMB Group and 

The Kanoo Group, commenced business. The company 

markets and distributes specialized Islamic investment 

banking products and services to the Middle East, focusing 

on debt and equity capital markets, corporate banking, asset 

management and treasury services. 

“Bahrain’s reputation as the 

world’s Islamic fi nancial capital 

was cemented by signifi cant 

developments during 2007” 

Cross-border expansion was another feature of the kingdom’s 

IFI growth this year. Bahrain-based Al Baraka Group acquired 

a license to operate a new subsidiary in Syria with a capital of 

US$100 million, International Investment Bank bought a 49% 

stake in Azerbaijan’s Amrahbank to convert it to an Islamic 

bank, and Gulf International Bank (GIB) obtained a license 

to establish a securities company in Saudi Arabia, which will 

offer corporate fi nance advisory services. 

Growth in the Islamic fi nance market globally is evident in the 

increasing number of conferences dedicated to the subject, 

many of which prefer Bahrain as the venue. The 14 th annual 

World Islamic Banking Conference (WIBC), held last year in 

Bahrain and developed with the support of the CBB, is an example. 

With almost 1,000 delegates from over 35 countries 

attending each year, it has become the most signifi cant platform 

for decision-makers to explore new and emerging market 

opportunities for Islamic fi nance. Bahrain’s reputation as 

the preferred location for industry events such as the WIBC is 

a signifi cant recognition of the importance of the kingdom as 

a center for Islamic fi nance. 

Bahrain is in a strong position to take advantage of the global 

growth of Islamic fi nance, conservatively estimated at 10% to 

15% per year, and meet the increasing demand for Shariah 

compliant products and investments driving the industry in 

2008 and beyond. 

Jane Dellar is managing director of Bahrain Financial 

Services Development. She can be contacted at +973 

17589870.

The fi rst leasing company in Jordan was a 

conventional leasing company named Jordan 

Equipment and Machinery established in 1982, 

which ultimately ended in bankruptcy. From 1998 

to 2007, there were a total of 22 registered lessors. 

Of that number, four — two Islamic banks and 

two Islamic fi nance companies — provide Islamic 

leasing services to the people of Jordan. 

The leasing sector in Jordan has been very progressive, as 

depicted in the table below. Between 2000 and 2003, the 

cumulative leasing portfolio (both Islamic and conventional) 

reached approximately JOD50 million (US$70.52 million). 

In the following years, the growth rate accelerated with the 

volume of leases rising to an average 78% annually in 2004. 

In 2005, the cumulative leasing portfolio climbed to a total of 

JOD161 million (US$227 million). In 2007, the amount surged 

to JOD300 million (US$423.1 million), which represents about 

2.5% of total bank loans in Jordan. 

There are currently three major players in Jordan’s leasing 

sector: the Arab Leasing Company, the Industrial Development 

Bank and the Arab International Islamic National Bank. 

Between them, they contribute more than 88% of the total 

new leases in the market. 

The majority of Islamic bank-related leasing transactions 

involve the fi nancing of real estate. The practice differs 

from the conventional leasing sector, which deals with 

various types of fi nancing including real estate, construction 

equipment, production equipment and vehicles. In 2005, real 

estate leases constituted about 48% of total leased assets in 

Jordan. 

Because of the positive benefi ts of Ijarah, Islamic banks use 

Ijarah in fi nancing real estate instead of Murabahah. In 2006, 

Islamic Leasing in Jordan 

By Raed Rafi Al-Ali 



Islamic banks fi nanced a total of JOD64 million (US$90.3 

million) worth of leases — a signifi cant increase compared to 

past years. 

Leased asset types in 2005 (%) 

Real 

estate 

Construction 

equipment 

Transportation 

equipment 

Defi nitions in the Jordanian context 

Production 

equipment 

48 2 27 20 30 

Ijarah means “to transfer the usufruct of a particular property 

to another person in exchange for a rent claimed from him”. 

The term “Ijarah” is analogous to “leasing” in the English 

language. Conventional leasing institutions and Islamic 

leasing institutions in Jordan are referred as “lessor Mu’jir”, 

the lessee “musta’jir” and the rent payable to the lesser is 

“Ujrah”. 

Islamic fi nance institutions in Jordan classify Ijarah as operating 

Ijarah and Ijarah Muntahia Bittamleek (the Islamic equivalent 

of fi nance leasing). The main criteria used for this classifi 

cation is whether the lease includes a promise that the legal 

title will pass to the lessee at the end of the Ijarah term. 

Various sectors in Jordan use “conventional leasing product” 

as “Islamic fi nancial product” without considering the 

differences between the two. The differences between 

conventional leasing and Ijarah in Jordan include: 


Development in conventional leasing and Islamic fi nance in Jordan 

Islamic banks Islamic fi nancial companies Conventional leasing institutions Islamic insurance companies 

Until end-2005 2 6 16 1 

Expected at end- 

2008 

4 8 20 3 

Volume of leasing (Conventional and Islamic) in Jordan (JOD million) 

2000 2001 2002 2003 2004 2005 2006 2007 

Annual leasing 3 5 7 10 36 82 150 50 

Cumulative leasing 28 33 40 50 86 168 250 300 

Other 

Volume of leasing in Islamic banks and in Industrial Development 

Bank (JOD million) 

2003 2005 2006 

International Islamic Arab Bank 4 19 41 

Islamic Bank for Trading & 

Investment 

3 7 23 

Industrial Development Bank 3 7 21 32 

Page 71


Page 72 

Islamic Leasing in Jordan (continued...) 

Temporary Jordanian Leasing Law No 16/2002 

This law considers leasing as conventional leasing and uses 

international accounting standard (IAS). It was issued by the 

Ministry of Industry and Trade and it states that an entity 

practicing leasing must have a legal entity status with paid-up 

capital of at least JOD1 million (US$1.41 million). This law is 

set to be amended in early 2008 and among the issues are: 

(a) Right of ownership: Leasing is a fi nancial instrument 

if the right of ownership is held by the lessor. But in 

this case, the right of possession and usage is held by 

the lessee. The right of ownership of the leased asset 

belongs to the lessor until the lessee has paid all of the 

lease payments. 

(b) Obligations: The lessee is obligated to make all leasing 

payments without regard to the actual use of the asset 

while the lessor’s responsibilities with regard to the 

leased asset should be limited. 

(c) The lessor should only be responsible for the failure on 

the part of a supplier when the lessor selects the supplier 

and the leased asset or if the supplier’s failures were 

the result of the lessor’s wrongful acts or omissions the 

rationale for this is that in a fi nance the lessor typically is 

a fi nancing agent for a lessee who usually identifi es the 

supplier and chooses the equipment. 

Accounting treatment 

Jordan’s law on leasing states that International Accounting 

Standard (IAS) 17 is applicable to all leasing operations in 

Jordan. IAS 17 covers many areas, including the allocation of 

lease payments to fi nance charges and the reduction of the 

outstanding liability. But Islamic fi nance institutions in Jordan 

use standards set by the Accounting and Auditing Organization 

for Islamic Financial Institutions (AAOIFI). 

Ownership responsibilities 

The conventional lease aims to move the lessor as far away 

as possible from any ownership responsibilities in contrast 

to the Ijarah, which requires the lessor to maintain the 

basic responsibilities of ownership such as repairs and 

maintenance. 

Interest rates 

In conventional leasing where an asset is fi nance fl oating rate 

funds, the lessor will usually pass the risk of rate fl uctuations 

down to the lessee through the rentals payable by the lessee. 

But for Ijarah, lease rentals cannot be expressed by reference 

to interest rates. Instead, the amount and timing of the lease 

payments should be agreed upon in advance, although the 

agreed schedule and amount of payments need not be 

uniform. 


Islamic International Arab Bank and Jordan Islamic Bank have 

overcome the problem by referring to the rental payable under 

the lease at the date of signing, but subject to adjustments by 

reference to provisions in other documents, or the rent was 

adjusted by using benchmarks (like the London interbank 

offered rate, or LIBOR) to determine the rental amounts. 

“Although many positive 

developments took place in the 

Islamic fi nance and Islamic leasing 

sectors in Jordan, the number 

of Islamic fi nance and Islamic 

leasing institutions and their 

entire operations is considered 

to be minimal in comparison to 

conventional leasing institutions” 

Allowable assets 

An asset subject to an Ijarah contract prohibits assets of 

whatever kind that are connected with an activity or product 

that is unIslamic or is not Shariah-compliant. 

Penalty for late payment 

In conventional leasing, a penalty is imposed on the lessee in 

the event the payment of rent is delayed after due date. This 

penalty fee adds to the income of the lessor. Ijarah does not 

allow penalty for late payment. 

Factors for success 

Although many positive developments took place in the Islamic 

fi nance and Islamic leasing sectors in Jordan, the number 

of Islamic fi nance and Islamic leasing institutions and their 

entire operations is considered to be minimal in comparison 

to conventional leasing institutions. 

The following recommendations can be considered to improve 

the Islamic leasing sector in Jordan: 

1. Improving the quality of services — Islamic leasing 

institutions should develop their manpower and 

working environment and the systems of marketing and 

operations to be on par with the services provided by 

their conventional counterpart. 

2. Creating awareness — Marketing units within Islamic 

leasing institutions must play a bigger role in improving 

public awareness of the difference between the

Islamic Leasing in Jordan (continued...) 

conventional and Islamic leasing sectors. Ignorance in 

this regard has led many to use conventional leasing 

thinking that it is an Islamic fi nancial product. 

3. Transfer of expertise — Islamic fi nance institutions in 

Jordan should consider seeking expert advice from 

experienced Islamic fi nance institutions in the Islamic 

world, mainly Malaysia and the Gulf. 

4. Bank on Sukuk — Islamic fi nance institutions in Jordan 

should get involved in Sukuk Al-Ijarah because it is the 

most popular and common type of investment in the 

Muslim world. 

Bright future ahead 

Jordan’s political system and economical stability encourage 

banks, investment fi rms and real estate companies to invest 

in Jordan. In 2006 and 2007, the Islamic leasing and fi nance 

sectors in Jordan saw major positive developments. 

Many Shariah compliant real estate, leasing and investment 

companies were launched, including the First Finance 

Company and the Jordan Real Estate Company for 

Development. 

In addition, several leading Arab Shariah compliant companies 

had announced their intentions to start operations in Jordan. 

The announcements include: 

Tameer Holding Co, a leading property development fi rm 

in the UAE. It is set to launch a unique residential project 

in Jordan. 

Kuwait Finance House Jordan registered as a private 

shareholding company with a capital of JOD35.4 million 

(US$50 million). It will be investing in real estate, fi nance, 

stocks, securities, industry, trade, agriculture and land 

reclamation, in addition to tourism and mining. 

Amlak Finance (PJSC), also from the UAE, will be setting 

up Amlak Finance (Jordan) this year. 

Islamic Dubai Bank forms a strategic partnership with 

the Industrial Development Bank to start an Islamic 

bank. 

Raed Rafi Al-Ali is a manager of the leasing department at Bank of 

Jordan. He can be contacted at +962 6554 2695. 



Upcoming supplements 

We will be publishing a series of sector and country 

focused out-bound supplements in 2008. These 

supplements will be a comprehensive roundup of the 

targeted sector and will feature the following: 

• Exclusive interviews 

• Roundtable discussions 

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Page 73


Page 74 

Sky’s the Limit for Islamic Banking in Lebanon 

By Badih S Khatib 

Lebanon is a small country marked by an open 

multi-faith society with a Muslim population of 

almost two million, but it has one of the most solid 

conventional banking sectors in the greater Middle 

East and a thriving Islamic banking sector. 

In 1956, Parliament passed the Banking Secrecy Act which 

essentially rendered Lebanon the tax haven of the Middle 

East and attracted petrodollars from the Gulf countries in the 

early 1970s. Naturally, the banking sector thrived and Beirut 

became the fi nancial capital of the Middle East. It is this 

experience and fi nancial background that brought the country 

and its economy back to its feet in record time following the 

end of the civil war and the devastating effects of the July 

2006 war against Israel. 

Today, the banking sector is still one of the most solid in the 

world. Lebanese banks are becoming regional powerhouses 

and spreading their presence and experience in the Middle 

East, from Algeria to Iraq. 

Islamic banking history 

Islamic banking in Lebanon is relatively new as laws to 

establish Islamic banks with all their different instruments 

were passed only in February 2004 by Parliament under 

legislation No 575, giving the Central Bank of Lebanon (CBL) 

authority and supervision. 

Shortly after, CBL circulated the fi rst executive circular which 

paved the way for the establishment of the country’s fi rst 

Islamic bank. In order to be issued a license, CBL stipulated 

that an Islamic bank owned by a foreign entity must have 

a minimum paid-up capital of US$100 million whereas a 

Lebanese entity needed to put up only US$20 million. 

Currently, there are four full-fl edged Islamic banks, with 

another two pending approval. The four banks are: 

• Arab Finance House, part of Qatar Islamic Bank 

Network established at the end of 2004 and that has 

now become the largest comprehensive Islamic bank 

in Lebanon. 

• Al Baraka Bank Lebanon, part of the Dallah Baraka 

Network established in 1993 as a merchant bank and 

operating under fi duciary laws and in compliance with 

Shariah directives. In 2007, it became a full-fl edged 

Islamic bank. 

• Lebanese Islamic Bank, part of Credit Libanais Bank, 

one of the largest conventional banks; and 

• BLOM Development Bank, part of the BLOM Network. 


Compared to other economies in the region, to have four 

Islamic banks operating in an economy with two million 

Muslims within three years is extraordinary. This proves that 

Lebanon is becoming the hub for Islamic banking for the 

Middle East (Lebanon, Syria, Jordan and Iraq). Local banks are 

capitalizing on their know-how and their already established 

regional channels to attract Islamic businesses. 

On the other hand, it will be observed from the above 

mentioned list that of the four banks, two are owned by 

international Islamic entities and two by existing conventional 

Lebanese banks. 

“With land prices escalating and 

real estate projects sprouting up 

like mushrooms, Islamic banks 

in Lebanon are trying to set up 

special real estate funds in order 

to capitalize on the booming 

economies of the Gulf and attract 

additional funds” 

Foreign Islamic entities are trying to capitalize on the status 

of the Lebanese banking sector, the soundness of the 

economy supported by a strong deposit base and the liberal 

economic laws with its most important Secrecy Act of 1956, 

in order to open Islamic subsidiaries in Lebanon. 

This is despite all the problems that the economy has been 

facing and the repercussions from the political situation and 

the July 2006 war with Israel. 

Functions of Islamic banks 

As Islamic banks in Lebanon are full-fl edged banks and 

not merely Islamic windows, they are allowed to conduct all 

Islamic transactions ranging from Murabahah, Mussawama 

and Istisna to Mudarabah, Musharakah and Salam. 

With land prices escalating and real estate projects sprouting 

up like mushrooms, Islamic banks in Lebanon are trying to 

set up special real estate funds in order to capitalize on 

the booming economies of the Gulf and attract additional 

funds. 




Sky’s the Limit for Islamic Banking in Lebanon (continued...) 

In addition, due to the presence of a strong conventional 

banking sector, Islamic banks used the commodity Murabahah 

in order to manage their liquidity in the local market. Through 

commodity Murabahah agreements, Islamic banks would 

purchase commodities such as palladium or platinum on spot 

basis from the international commodity markets and sell them 

to conventional banks on the same basis, but with deferred 

payment dates adding their profi ts on the initial price. 

This cooperation has enabled Islamic banks to grow in 

harmony with their conventional counterparts, considering 

that competition is virtually nonexistent between the two 

sectors. 

“The intention was to have two 

banking sectors that operate 

independently of each other yet 

are in complete harmony under an 

integrated fi nancial industry” 

Central bank policies and procedures 

Since Parliament enacted the Islamic banking laws, CBL 

has been working slowly but surely to introduce executive 

circulars with the coordination of Islamic banks. It is central 

bank policy to separate Islamic and conventional banks. This 

is the reason conventional banks are not allowed to open 

Islamic windows. 

On the other hand, the central bank gave an advantage to 

Lebanese conventional banks in allowing them to open fullfl 

edged Islamic banks with a minimum paid-up capital of 


The intention was to have two banking sectors that operate 

independently of each other yet are in complete harmony 

under an integrated fi nancial industry. 

In its efforts to integrate Islamic banks into this new harmonious 

fi nancial system, the central bank has signed commodity 

Murabahah agreements with existing Islamic banks allowing 

them to deposit their legal reserve requirement with the 

central bank in a Shariah compliant way, earning purifi ed 

profi ts. 

This has put Islamic banks on equal footing with conventional 

banks and paved the way for the central bank to attract funds 

and accept deposits from international Islamic banks. Bear in 

mind that the Central Bank of Lebanon is the only conventional 

central bank that has developed such a program. 

In addition, many steps have been taken to transform 

government programs such as Kafalat and render them 

Shariah compliant. These programs are tailored for the small 

to medium-level companies where the government would help 

in acquiring a durable asset such as a machine or a small 

factory in the form of interest subsidy on an installment loan. 

With the cooperation of the Shariah board at Arab Finance 

House sal, many steps have been taken to modify the 

contracts and adapt this program to Islamic Shariah. 

Once transformed and introduced, hopefully during the fi rst 

quarter of 2008, Islamic banks would be able to use this 

program on a retail level and give the end client the option 

to choose a fi nancing method that best suits his needs 

and beliefs. This would have a ripple effect on the entire 

economy. 

Conclusion 

Islamic banking in Lebanon is still in its infancy and has a long 

way to go. But with the earnest supervision of top management, 

the relentless efforts of Shariah boards, the vision of the 

central bank and the cooperation of the conventional banking 

sector, Islamic banking is bound to fl ourish. Lebanon is poised 

to become the hub for its activities. 

As our general manager Dr Fouad Matraji puts it, the sky’s 

the limit. 

Badih S Khatib is 

manager of the treasury 

division at Arab Finance 

House sal. He can be 

contacted via email at bkhatib@arabfi nancehouse.com 

Page 75


Page 76 

The Syrian ‘Experiment’ on Islamic Banking 

By Louay Habbal 

The year 2007 will surely be remembered in 

modern Syrian history, for it was the year that the 

fi rst Islamic bank (Cham Bank) was inaugurated. 

Shortly after, Syria International Islamic Bank 

opened its doors to overly excited customers 

with a strong appetite for Shariah compliant 

banking services. A third Islamic bank, Albaraka, 

is expected to start operations in the second half 

of this year. 

Islamic banking in Syria is expected to grow at a strong 

pace and new players will continue to enter the market. 

Adeeb Mayaleh, governor of the Central Bank of Syria (CBS), 

confi rmed in a statement during the opening ceremony of 

Cham Bank that there are several pending applications 

from newer players set to make a foray into the booming 

Islamic fi nance and banking sector. He also confi rmed that 

Islamic banks will soon be required to raise their capital 

from the current US$100 million to US$200 million. 

“Syria has adopted a prudent 

policy in the area of economic and 

administrative reforms, targeting 

a more conducive economic 

environment based on private 

sector involvement but with due 

attention to social balance” 

The arrival of private banks into Syria started on the 29 th 

March 2002, when the Syrian Parliament approved an Act 

establishing the Monetary and Credit Council (MCC). For 

the fi rst time since the 1950s, foreign banks could enter 

the Syrian market although the institutions that applied 

were still required to be 51% Syrian-owned and could not 

be offshore branches of existing banks. 

In April 2003, Syria issued licenses to three private sector 

banks with 49% foreign ownership, all from Arab countries. 

By January 2004, two had offi cially opened; the third followed 

shortly thereafter. By the end of 2007, there were seven 

conventional banks operating in Syria. More importantly, 

in 2005, the CBS also issued separate regulations for the 

creation and operation of Islamic banks. 

New fi nancial era 


Syria opened up to the outside world only very recently, when 

President Bashar Assad was sworn into offi ce in 2000. The 

previous period (1960-2000) was marked by a socialist, 

nationalized economy with strong restrictions on private 

investments. 

Beginning in 2003, the government began to revisit many 

of these restrictive policies. Starting with the fi nancial 

sector and the trade regime, it embarked on a policy of 

incremental and gradual reforms. For the fi rst time since the 

1950s, the authorities seemed keen on encouraging private 

entrepreneurship, promoting market mechanics and opening 

up the Syrian economy. 

The government has redirected its economic priorities away 

from industrial expansion to the agricultural sector to achieve 

food self-suffi ciency, enhance export earnings and stem rural 

migration. A number of major reforms, particularly in the 

fi nance sector, have led to an improved economic environment 

and growth. 

Syria has adopted a prudent policy in the area of economic 

and administrative reforms, targeting a more conducive 

economic environment based on private sector involvement 

but with due attention to social balance. The state has 

started to modernize the country’s banking structure, revise 

the foreign exchange (forex) system, privatize a number of 

public companies, improve the business climate and simplify 

customs formalities. 

Certain state monopolies were opened to competition, 

notably in metallurgy, textiles and dairy products. Special 

attention has also been paid to education and training. Syrian 

authorities enacted several laws that gave a strong signal 

to local and international communities that the country was 

embracing across-the-board, reform-based policies and a free 

social economy. 

The last four years have witnessed the enactment of several 

important laws that have changed the Syrian fi nancial 

landscape forever. For example, in May 2005, law no 43 was 

passed, authorizing private insurance companies to establish 

a local presence in Syria for the fi rst time in four decades. The 

minimum capital requirement for insurance fi rms was set at 

US$14.5 million. 

Since this law was passed, nine companies have been 

licensed to start operations. Another law was passed in 




The Syrian ‘Experiment’ on Islamic Banking (continued...) 

May 2005, authorizing private investors to establish Islamic 

banks. The requirements were similar to those for traditional 

banks, which had been approved a few years earlier, except 

for the minimum required capital of US$100 million instead 

of the US$30 million for traditional banks. 

“Foreign currency converted locally 

by selling Syrian pounds can be 

credited to the foreign currency 

accounts but cannot be remitted 

overseas in foreign currency” 

Other laws include law no 15, which was enacted in 2007, 

allowing the establishment of fi nancial institutions with a 

focus on small loans and microfi nance. The establishment 

of the Damascus Stock Exchange (DSE) in October 2006 

was another milestone in the reform process. 

Although the DSE is not expected to start trading until the 

second half of 2008, its mere presence has encouraged 

Syrian businesses to upgrade their accounting, fi nancial 

and disclosure procedures. The new banking and fi nancial 

laws include provisions for opening bank accounts by Syrian 

citizens, in foreign currency and the possibility of transferring 

funds overseas. 

These laws confi rm Syria’s commitment to adopting forwardlooking 

monetary and fi nancial policies. The opening of the 

fi nancial sector to private investors has improved confi dence 

of economic operators and stimulated competition between 

newly established private banks. 

Private banks have attracted many new customers and 

considerable deposits; and public banks, in particular the 

Commercial Bank of Syria, started modernizing and launching 

new services including Visa, an electronic payment network, 

bill-payment and e-banking. 

Regulatory environment 

CBS was established by Legislative Decree No 87 dated the 

28th March 1953, which included the basic monetary system 

of Syria. The bank started operations on the 1st August 

1956 with its headquarters in the city of Damascus and 11 

branches located in the provincial capitals of Syria. 

CBS formulates and conducts monetary policy towards the 

achievement of maximum sustainable long-term growth 

and price stability. It has the important role of promoting 

a safe, sound, competitive and a stable fi nancial market 

through supervision and regulation of the nation’s banking 

and fi nancial systems. It fosters the integrity, effi ciency 

and accessibility of the domestic currency payments and 

settlement systems, issue a uniform currency and act as the 

fi scal agent and depository of the government. 

In its capacity as a bankers’ bank, CBS requires the banks to 

invest their required reserves, and their special reserves in 

securities issued by the state or guaranteed by it, or to invest 

a fraction of its surplus funds and a part of their deposits in 

government securities. 

The reserve requirements for conventional as well as Islamic 

banks are the same. Banks are required to put 10% of their 

capital with CBS, which is only refundable upon the liquidation 

of the bank. In addition, all banks are required to keep 5% of 

their deposits as cash reserves and there are no returns paid 

by CBS on these reserves. However, as at the end of 2007, no 

government securities were being issued. 

As part of the initiatives by the government and CBS to 

modernize the Syrian fi nancial industry, the central bank is 

currently implementing the following activities. 

(1) Establish a national automated clearinghouse for 

interbank and international settlements. This is expected 

to commence operations during the fi rst quarter. 

(2) Establish an infrastructure for issuance and 

management of short-term Treasury Bills and long term 

government bonds. This is expected to commence in 

2008. This applies only to conventional banking and as 

at the end of 2007; there were no plans to develop any 

such instruments for Islamic banking. 

(3) Establish a national credit information bureau to 

warehouse information on bad debt. This is still at the 

conceptual stage and no real work has been done on 

it yet. This could be a potentially lucrative business 

opportunity while doing a great service to the banking 

industry. 

(4) Adopt rules and regulations to actively monitor moneylaundering 

activities and to fully comply with Basel II. 

One of CBS’ success stories in its efforts to reform the fi nancial 

sector was the long-awaited reform of the forex regime. The 

forex system has been relaxed over time from a stage where 

it was a criminal offense to possess foreign currency to a 

stage that it can be freely and legally be purchased and sold 

through banks and money changers. Under the new system, 

banks are allowed to make remittances overseas for all traderelated 

transactions. 

Foreign currency converted locally by selling Syrian pounds 

can be credited to the foreign currency accounts but cannot 


Page 77


Page 78 

The Syrian ‘Experiment’ on Islamic Banking (continued...) 

be remitted overseas in foreign currency. Profi ts and interest 

generated annually by the contributions and shares held by 

foreigners who were originally bought in foreign currency can 

be remitted back in foreign currency. Remunerations and 

bonuses due to non-Syrian members of the board of directors 

of local private banks or those who hold similar status can 

also be remitted in foreign currency. 

Half of the net wages, salaries and remunerations and 100% 

of the end-service compensation due to foreign experts and 

technicians working with the banks can be remitted back in 

foreign currency. Capital remitted in foreign currency to Syria 

by foreigners can be remitted back and placed overseas for 

better returns. 

“The Syrian Islamic banking 

market will witness during 2008 

the arrival of three more Islamic 

banks: Syrian Bank for Trade and 

Finance, Dubai Islamic Bank and 

Noor Islamic of Kuwait” 

The interest rate management regime has also been 

liberalized. For a long time, CBS would determine the 

minimum and maximum rates on deposits and loans and 

in turn also control the spreads. As a fi rst step, the banks 

were allowed to determine their own rates for loan products. 

In the latest development, banks are now free to decide the 

rates for deposits products. 

Current Islamic banking players 

A new law enacted in May 2005 allowed the establishment of 

Islamic banks. Unlike the traditional private banks that were 

initially capitalized at a minimum of SYP1.5 billion (US$30 

million), the minimum capital requirement for any aspiring 

Islamic bank in Syria is SYP5 billion (US$100 million). 

Islamic banks in Syria will benefi t from the religiously 

conservative nature of the Syrian population. The initial 

public offering launched by Cham Bank, the fi rst Islamic 

bank to begin operations, was well oversubscribed. Syria 

International Islamic Bank and Cham Bank are overwhelmed 

with customers wishing to open accounts and requiring more 

services. 

No statistical information from CBS is yet available on the 

fi nancial performance of these banks. Lack of hard data 

makes it diffi cult to assess the potential of Islamic banking 


in Syria. However, the success of Islamic banks throughout 

the region is indicative of the future of Islamic banking 

in Syria. Moreover, Islamic banks may have an edge over 

conventional banks as the law allows Islamic banks to invest 

in a wider scope of activities, enter into partnerships and 

own real estate. 

The Syrian Islamic banking market will witness during 2008 

the arrival of three more Islamic banks: Syrian Bank for 

Trade and Finance, Dubai Islamic Bank and Noor Islamic of 

Kuwait. More, most notably the well capitalized and newly 

established Al-Salam Bank of Bahrain, are expected to 

submit their applications. 

Although it is expected that demand for Islamic banks 

in Syria will outstrip demand for conventional ones, both 

Islamic and conventional institutions face the same threats 

that conventional banks do. Lack of availability of trained 

human resources is by far the biggest threat faced by the 

banking industry in general and Islamic banking in particular. 

Staffi ng constraints will result in delays in the opening of a 

new bank with a potential adverse impact on earnings and 

market image. Delays by CBS in introducing treasury bills 

and long-term government bonds, particularly for Islamic 

banking, will also affect the earnings. 

Another threat could be the result of an aggressive 

expansion of the branch network. Expansion could have an 

adverse impact on earnings due to high front-end expenses 

without the associated revenues to support them as well 

as generating excess liquidity which cannot be productively 

deployed. 

Finally, critics and supporters of the Syrian experiment are 

monitoring the performance of both Islamic and conventional 

banks and their impact on the economy. CBS is also under 

scrutiny. It is expected to conduct effective supervision 

despite stretched resources and be equipped with the 

necessary skills and expertise to successfully manage the 

transition into a free economy. More importantly, the success 

of CBS at this stage will encourage European institutions to 

enter the highly lucrative Syrian fi nancial market. 

Louay Habbal is a Damascus-based banker with 20 years’ US 

experience in commercial, investment and private banking. 

Currently a project manager for an Islamic bank under 

establishment, he can be contacted at +963 93 359 9693 or via 

email at lhabbal@menabanking.com



Islamic Banking in the United Arab Emirates 

By Dr Taha El Tayeb Ahmed 

The United Arab Emirates (UAE) was founded in 

1971 as a federal state comprising seven emirates 

(Abu Dhabi, Dubai, Sharjah, Ajman, Fujairah, Umm 

Al Quwain and Ras Al Khaimah). The UAE is a major 

oil producer, and is the third-largest economy in 

the Middle East after Saudi Arabia and Egypt. 

Apart from oil, the UAE exports many non-oil goods including 

aluminum. However, re-exporting of goods accounts for a 

noticeable share of trade. After all, it is strategically located 

between Asia/Europe/Africa and the Middle East. This has 

made Dubai a major regional and international trade hub. 

In fact, the UAE is the third-largest re-export center in the 

world after Hong Kong and Singapore, but with higher 

growth rates. The generous free trade zone rules have 

been instrumental in positioning the UAE as a commercial 

re-export center. 

The UAE produces approximately 10% of world oil reserves, 

which generate one-third of UAE gross domestic product 

(GDP), and approximately half of export earnings. GDP in 

2007 increased to US$195 billion but oil represented 38% 

of this fi gure. The average annual growth rate over the last 

four years was 9% and the per-capita income is currently 

close to US$50,000. 

The UAE has steadily maintained current-account surplus 

over the years. The contribution of exports to GDP had 

increased to 87.3% by the end of 2005. This is at a growth of 

26.9%, which was more than double the growth in imports 

of 12%, resulting in a trade surplus of AED162.8 billion 

(US$44.6 billion). The driving forces of the economy in the 

next few years will continue to be the surging oil prices, 

tourism and investments in project fi nance. 

Table 1 

UAE banking sector 

These impressive macroeconomic indicators have a positive 

impact on the banking sector in the UAE, which has 47 banks 

licensed by Emirates Central Bank. Of the 47, 22 are local 

and 25 are foreign banks, operating through 677 branches. 

By the end of the third quarter of 2007, total assets of the 

banking industry stood at AED1,065 billion (US$292 billion) 

and bank deposits were AED652 billion (US$179 billion). 

Loans and advances outstanding as at 30 th September 

2007 were AED645 billion (US$177 billion). Total capital and 

reserves of the industry as at the same date were AED111 

billion (US$30.4 billion), and the average return on equity 

was 21.4 % and average RoA was 2.28%. 

Islamic banking 

Islamic banking began in the UAE in 1975, when Dubai 

Islamic Bank was licensed to commence operations as the 

fi rst public holding company conducting business governed 

by the precepts of Shariah. Nothing happened until Abu 

Dhabi Islamic Bank (ADIB) was established in 1997. Later on, 

Sharjah Islamic Bank, Emirates Islamic Bank and Dubai Bank 

made their entrance in 2002, 2004 and 2007 respectively as 

a result of board decisions to convert those institutions from 

conventional to Islamic banks. More recently, Central Bank of 

the UAE has licensed Noor Islamic Bank, Al Hilal Islamic Bank 

and Ajman Islamic Bank. 

Table 1 provides a summary of assets, liabilities and net profi t 

of fi ve Islamic banks for which fi nancial data is available. 

The Islamic fi nance industry in the UAE comprises eight fullfl 

edged banking institutions, three Takaful companies, 11 

AED million Assets Deposits Net profi t 

Bank 2005 2006 2007 Growth 

(%)* 

2005 2006 2007 Growth 

(%)* 


2005 2006 2007 Growth 

(%)* 

Dubai Islamic Bank 43,500 64,500 74,100 70 39,100 55,600 57,500 47 1,060 1,560 1,900 79 

Abu Dhabi Islamic Bank 22,000 36,000 44,000 86 20,100 33,000 36,000 79 344 572 137 -6 

Emirates Islamic Bank 4,800 10,500 14,000 192 3,900 9,500 12,000 208 51 117 145 184 

Sharjah Islamic Bank 5,300 7,600 10,000 89 3,200 5,500 6,400 100 186 201 172 -7 

Dubai Bank 4,800 5,500 9,800 104 4,200 4,900 5,500 31 103 105 125 21 

* Figures as at 30 th September 2007 

* Growth is calculated using 2005 fi gures as base years, so the growth rates calculated above are over a period of two years. 

Page 79


Page 80 

Islamic Banking in the United Arab Emirates (continued...) 

Islamic fi nance companies and 14 Islamic banking divisions 

or windows of conventional banks. Then there are the National 

Bonds Company and two conventional fi nance companies 

offering Islamic fi nance products alongside conventional 

products. 

A unique feature of the UAE banking and fi nance industry 

is the noticeable presence of fi nance companies. Finance 

companies are formed under Federal Law No 8 (Commercial 

Companies Law). They undertake one or more of the following 

activities: 

1. Extending advances and/or personal loans for various 

consumption purposes. 

2. Financing trade, opening L/Cs and issuing guarantees 

in favor of corporate customers. 

3. Subscribing to the capital of projects and/or issuing of 

stocks, bonds and/or certifi cates of deposits. 

However, fi nance companies have the following restrictions: 

1. Subscription to capital of projects, issuing of stocks/ 

bonds or certifi cates of deposits should not exceed 7% 

of capital. 

2. Legal capital should not be less than AED35 million 

(US$9.6 million) and national shareholding not less 

than 60% of the paid-up capital. 

3. Single obligor exposure should not exceed 35% of capital. 

Many investors have set up their fi nance companies to be 

Shariah compliant. As mentioned, there are 11 Islamic fi nance 

companies licensed to operate in the UAE, most of which are 

under establishment. Table 2 shows the fi nancial fi gures for 

three Islamic fi nance companies in operation. 

Islamic banking windows are a feature of Islamic fi nance in 

many countries. Fourteen conventional banks in the UAE offer 

Table 2 

“It is a regulatory and Shariah 

requirement that activities of 

Islamic banking windows be 

separated from conventional 

activities” 

AED million 

Islamic fi nance companies 


Islamic retail, corporate and investment banking products 

through a specialized division known as “windows”. It is a 

regulatory and Shariah requirement that activities of Islamic 

banking windows be separated from conventional activities 

(separate books of accounts). Many banks in the UAE have 

been selling their Islamic banking services under selected 

brand names such as Amanah, Badr Al Islami, Sadiq, Meathaq 

and Siraj. 

In terms of products and services, the industry offers a range 

as shown in Table 3. 

Table 3: Islamic banking products available in the UAE market 

Retail deposits: Corporate deposits 

Current account — Qardh Current Account — Qardh 

Saving account — Mudarabah Term Deposit — Mudarabah 

Term deposit — Mudarabah Term Deposit — Wakalah 

Term Deposit — Commodity 

Mudarabah 

Consumer fi nance (Personal) Corporate fi nance and services 

Personal Murabahah Finance 

(Tawarruq)* 

Ijarah term fi nance (Acquiring Land, 

Real Estate, equipment, etc.) 

Home fi nance (Ijarah) Istisna (Project fi nance) 

Vehicle fi nance (Murabahah) Musharakah (syndicated term 

fi nance or Sukuk) 

Goods fi nance (Murabahah) Mudarabah (L/C, syndicated term 

fi nance or Sukuk) 

Islamic credit card (Tawarruq or Ajr + 

Qardh Hasan) 

Murabahah Share Financing (only 

available from Badr Al Islami) 

Trade fi nance L/C ( Musharakah, 

Murabahah, or Wakalah) 

International Mudarabah Tawaruq 

(term fi nance) 

Service Ijarah Sukuk Structuring and advisory 

service 

Takaful coverage (life, fi nance risk Letter of guarantee (Kafala) 

coverage obtained from Takaful fi rms) 

Investment products and services 

Equity Sukuk and commodity funds 

Asset management 

Real estate investment/advisory 

services 

Private banking service 

*Tawarruq is only available from a couple of Islamic fi nancial institutions 

in the UAE because it is not widely accepted by Shariah supervisory 

boards and/or the management of many institutions 

Assets Deposits Net profi ts 

2005 2006 2007 Growth 

(%) 


2005 2006 2007 Growth 2005 2006 2007 Growth 

(%) 

Amlak 4,700 5,000 7,000 49 — — — — 106 130 137 29 

Tamweel 1,300 2,600 4,300 231 — — — — 42 852 244 481 

Al Badr Islamic Finance Co* — — 734 217 — — 15 — 

*Al Badr Islamic Finance Co commenced business early last year



Islamic Banking in the United Arab Emirates (continued...) 

National Bonds is the UAE Shariah compliant savings scheme 

based on the Mudarabah structure. The organization is jointly 

owned by the government of Dubai, Dubai Holdings, Emmar 

Properties and Dubai Bank. Its main mission is to raise 

Shariah compliant fi nance. A saver can buy any number of 

bonds to join the monthly draw to win a prize. The scheme 

offers up to 260,000 prizes ranging from AED100 to AED1 

million (US$27.23 to US$272,331) every year, including one 

top prize for AED1 million. The scheme invests the money in 

Shariah compliant earning assets (mainly properties) and 

distributes 2% of the profi ts to savers. 

“Comprehensive fi nancial data 

from the Islamic fi nance industry 

in the UAE is not available, either 

because fi nancial data is not 

published separately or because 

the institution is new” 

In January 2008, the fund announced Mudarabah return 

of 6.03%. The bond denomination is AED10 (US$2.72) and 

minimum purchase is AED100 (10 bonds) in order to enter 

the draw. No fi nancials have so far been published by the 

company. 

Are you SUBSCRIBING to 

Islamic Finance news? 

Vol. 5, Issue 4 1 st February 2008 

The World’s Global Islamic Finance News Provider 

In this issue 

HONG KONG 

Islamic Capital Markets Briefs ................ 1 

Tsang woos Arabs to Fragrant Harbor 

Islamic Ratings Briefs ..............................12 

In an effort to develop a market for Islamic should capitalize on their fi scal freedom. In 

fi nance, Hong Kong’s chief executive Donald Kuwait, he signed a letter of intent for the IFN Reports ................................................13 

Tsang went on a three-nation tour to Kuwait, development of bilateral trade relations 

Hong Kong Forging Ahead with 

the UAE and Saudi Arabia. Accompanied during the two countries. 

New Venture ..............................................15 

by a high-level business delegation, 

Tsang created deep impressions with In Saudi, he announced that all Saudi Will Hong Kong Stand Up to 

his persuasive words and determination citizens would have the opportunity to the Competition? ...................................... 17 

to explore business ties with the three receive a one-month free visa to Hong Kong 

Malaysian Tax Incentives for Islamic 

countries. 

to encourage locals and businessmen to Finance — Trends and Issues ..................19 

visit the Asian business hub. 

In Abu Dhabi, Tsang praised UAE’s sovereign 

The UK Approach to Taxation of 

Islamic Finance .........................................21 

wealth funds and said that the two countries (Also see IFN Reports on page 14) 

Fitch on Rating it Right ............................23 

ASIA 

Meet the Head ..........................................26 

Zulkifl i Ishak, Prudential Fund Management 

Lawyers want standardized regulation 

Members of the International Bar Association’s focused on the latest developments of Islamic Term Sheet ................................................27 

who attended the recent “Islamic Finance fi nance in the Middle East. In highlighting the Hajj Terminal Financing 

in the Middle East” conference were nearly issue, Husam Hourani, who is partner and 

Takaful News Briefs..................................28 

unanimous about the need to apply some level head of the banking and fi nance department 

of consistency in Islamic fi nance laws across the at Al Tamimi & Company, said: “There is an Takaful Report ..........................................29 

GCC countries in order to establish regionally- urgent need to deepen our understanding Different Models of Takaful in the Global Market 

accepted regulatory standards. 

and awareness of Islamic fi nance and 

Moves .........................................................32 

ensure that sound regulatory frameworks 

The conference, which was attended by 70 are implemented on the ground for effi cient Deal Tracker ..............................................33 

banking professionals and legal experts, fi nancial intermediation.” 

Islamic Funds Tables ................................34 

Dow Jones Islamic Indexes .....................35 

QATAR/UK 

Malaysian Sukuk Update .........................36 

Qataris own 80% of London Bridge Quarter 

A consortium of Qatari investors has designed by the award-winning international Islamic League Tables .............................37 

acquired 80% of the building of the London architect, Renzo Piano. 

Bridge Quarter, which includes the famous 

Events Diary...............................................40 

“Shard of Glass” new London Bridge Tower. The consortium members will each hold Subscriptions Form .................................. 41 

The four Qatari institutions — QInvest, Sellar 20% in the newly formed London Bridge 

Property Group, Qatar National Bank, Qatari Quarter Holdings Ltd. Sellar Properties of Country Index ............................................ 41 

Islamic Bank and Barwa — are to undertake London will retain the remaining 20% of the 

Company Index ......................................... 41 

the £2 billion (US$4 billion) development deal. 

Comprehensive fi nancial data from the Islamic fi nance 

industry in the UAE is not available, either because fi nancial 

data is not published separately (in the case of windows) or 

because the institution is new. Anyway, most of the Islamic 

fi nance companies and the Islamic banking windows are 

under establishment. 

Table 4 summarizes the fi nancials available for the UAE 

banking industry and compares it with what is available for 

the Islamic fi nance industry. The fi gure shows that Islamic 

fi nance commands 15.4% of aggregate banking assets and 

18% of aggregate banking deposits. These fi gures do not 

include Islamic fi nance under the Islamic banking windows 

and the National Bonds Company. 

Table 4 

Islamic fi nance 

(AED billion) 

Total banks 

(AED billion) 

Islamic as a 

percentage of total 

Assets 164 1,064.9 15.4 

Deposits 118 651.5 18 

* Figures for year 2007 

Dr Taha El Tayeb Ahmed is 

head of Shariah structuring and 

documentation at Mashreqbank. 

He can be contacted via email at 

tahae@badralislami.com. 

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Page 81


Page 82 

Islamic Financial Services in Italy 

By Alberto Brugnoni 

The history of Islam in Italy started when Sicily 

and some Italian regions were part of the Muslim 

Umma between 828 and 1300. From that time, 

and through the country’s unifi cation in 1861, 

Islam was almost entirely absent. In the 1970s, 

the fi rst trickle of North African immigrants began 

arriving: They were mostly of Berber and Arab 

origin and came mainly from Morocco. In more 

recent years, they have been followed by people 

from Albania, Egypt, Tunisia, Senegal, Somalia, 

Pakistan and other Islamic countries. 

Immigrants and their status in Italy became politically visible 

only in the early 1990s with the adoption of the fi rst of four 

laws legalizing immigrant status. As such, the melting pot 

phenomenon that has characterized the major western 

societies for the last 50 years is a new experience in Italian 

public opinion. 

Italy’s situation also differs from that of other major European 

countries in the sense that it has developed industrially without 

much dependence on foreign workers. Therefore, the new 

immigrants have sometimes been perceived as connected to 

structural problems in Italian society or as a competing force 

with local labor. 

Present situation 

According to the latest Italian offi cial statistics, Muslims make 

up about 32% of the 3.7 million foreigners living in Italy as at 

January 2007. To these 1.2 million Muslim legal residents, 

another 100,000 to 150,000 unoffi cial Muslim immigrants 

should be added. The number of foreign Muslims who have 

been granted Italian nationality is estimated at 50,000, while 

Italian Muslims (converts of full Italian ancestry who previously 

belonged to the Catholic faith or had no religion) are estimated 

to be 10,000. Therefore, the number of Muslims living in Italy 

is currently around 1.4 million. 

Today, Muslims represent around 2.3% of Italy’s population, 

a percentage much lower than that of other major European 

Union countries, and still slightly lower than that recorded in 

Italy between the middle of the ninth century and the end 

of the 13th century. While in medieval times the Muslim 

population was almost totally concentrated in insular (Sicily, 

Sardinia) and southern (Calabria, Puglia) Italy, it is now more 

evenly distributed, with almost 55% of Muslims living in the 

north of Italy, 25% in the center and 20% in the south. 


The relatively small size and young age of the local Muslim 

community means that Islam has yet to make a signifi cant 

impact on public life, but there are signs that this is 

changing. 

For example, while Islam is not yet formally recognized by the 

state, despite being the second-largest faith after Catholicism, 

Rome houses the biggest mosque in Europe. This postmodern 

building, designed almost 25 years ago, displays an 

impressive unity of oriental and occidental architecture. 

Italian regulation of Islamic fi nancial services 

The modern Italian banking system has witnessed, since the 

country’s unifi cation, the promulgation of banking laws that 

met the specifi c regulatory needs of the different periods of its 

industrialization process. The last major reform of the entire 

credit and fi nancial market took place between 1985 and 

1993, and resulted in a model that follows the rules of both 

public and business laws and that requires an interdisciplinary 

approach to individual issues. 

The last issue to which the banking system has been confronted 

is the emergence of new models of credit brokerage based 

on principles that are religious in nature and that fi nd their 

source in the Quran. This issue has resulted in a lively — and 

still open — debate on the compatibility of Islamic activities 

with the current Italian banking regulatory system. 

The debate focuses on the resolution of important 

interpretative issues on the legal classifi cation of the Islamic 

activities; and it also aims to determine whether the current 

regulatory structure can embrace the Islamic model of banking 

activity or whether, in light of any pronounced incompatibility, 

it becomes necessary to identify other norms that actually 

permit the legal regulation of the Islamic model. 

The issue of the difference in the level of risk that the depositor 

assumes in the Islamic versus the Italian system and the fact 

that the Islamic banks do not collect interest when providing 

fi nancing has been addressed with particular care. 

The issue of the so-called “EU (European Union) passporting” 

— where an institution authorized in a EU country may 

offer products throughout the EU without the need to have 

separate authorization in each member country — and the 

second EU directive on banking (646/1989) with its two 

fundamental principles of mutual recognition and prudential 

vigilance has also had a signifi cant bearing on the debate. 

The proposed solutions can be found in La Banca Islamica 




Islamic Financial Services in Italy (continued...) 

e la Disciplina Bancaria Europea (The Islamic Bank and the 

European Banking Legislation), G Gimigliano/G Rotondo (ed. 

by), Giuffré Editori, Milano (2006). 

Events in 2007 

Last year saw an array of events and publications that have 

fostered awareness of the Islamic fi nancial services (IFS) 

industry and helped build up the momentum. In January, 

the Fondazione Housing Sociale — set up by the Fondazione 

Cariplo, one of the largest banking foundations in the world 

— commissioned to ASSAIF a study on the structuring of 

Shariah compliant home fi nance products for the Italian 

Muslim community. 

“There is a viable local market 

for Islamic fi nancial products in 

Italy. Given its size, a number of 

research institutes, banks and legal 

partnerships are looking at IFS with 

keen interest.” 

In early May, the city of Padova and Banca Popolare Etica 

organized a widely attended conference on Islamic fi nance. 

At the end of May, the well-known Università Cattolica of 

Milan held a seminar on Islamic fi nance attended by several 

students of the prestigious university. In July, the European 

Business Ethics Network (EBEN) hosted in Bergamo a twoday 

seminar on “Finance & Society in Ethical Perspective” 

where, inter alia, different aspects of Islamic equity fi nance 

were discussed. 

In October, the Italian Banking Association (ABI) and the 

Union of Arab Banks (UAB) signed in Rome a memorandum 

of understanding that, in due time, shall lead to the 

establishment of the fi rst Islamic bank in Italy. ABI, the Islamic 

Development Bank and UBAE had previously organized a 

major event in Rome on “Banks and Islamic Finance”. At 

the end of October, Welcomebank/Etnica published “Stili 

Migranti”, a thorough study where the “Islam marketing” issue 

in Italy is widely analyzed. November saw the presentation of 

Banche e immigrati: credito, fi nanza islamica e rimesse by 

N Borracchini that focused on Islamic fi nance and money 

transfers. In December, M Mauri, a researcher at ASSAIF, put 

the fi nal touches to Islamic Banking in Italy. This work, shortly 

to be published by Il Mulino, will be the reference book for the 

IFS in Italy. 

Features 

The fi rst Murabahah deal ever transacted in Italy has been 

concluded in the historical city of Pavia. It featured the 

acquisition of an industrial building by a special purpose 

vehicle and its disposal to a local Muslim association for 

its use as a cultural center. It will soon be followed by an 

Ijarah wa iqtina transaction. This single shot deal required 

several months of legal and fi scal work, performed by ASSAIF 

members, to put together a transaction that could satisfy both 

the Shariah requirements and the Italian civil code. 

In the end, the Murabahah, which had been privately funded, 

went through with the full satisfaction of the Ministry of 

Finance and local Shariah scholars. It must be noted, though, 

that the double stamp issue, common to many EU countries, 

made this transaction pricey. 

Home fi nance is a particularly promising market for the IFS 

industry. Last year, 20% of the real estate transactions, 

equivalent to €17.5 billion (US$26 million), registered an 

immigrant as a buyer. Very detailed market studies that 

analyze regions, cities, trends, fl ows and the buying power 

of different groups of immigrants are available. Cassa di 

Risparmio di Fabriano e Cupramontana, a regional bank in 

Central Italy, proposes a mortgage for the Muslim immigrants 

that is “Quranic compliant”. 

Conclusion 

There is a viable local market for Islamic fi nancial products 

in Italy. Given its size, a number of research institutes, banks 

and legal partnerships are looking at IFS with keen interest. 

Important initiatives are expected this year in areas such as 

fi nancial inclusion and religious diversifi cation, consumer 

fi nance, home fi nance, pensions and investments. 

Although not part of the Islamic world, Italy plays a key role in 

the Euro-Arab dialogue and is taking the initiative in shaping 

a new EU Mediterranean policy. Italy is also relevant to Middle 

Eastern investors for its industrial heritage and real estate, 

whether they are adhering to Shariah principles or not. 

Alberto Brugnoni is president of ASSAIF, a prime Italian 

boutique of fi nancial engineering based in Milan. He can 

be contacted at +3902 3652 1705 or via email at alberto. 

brugnoni@assaif.org. Visit www.assaif.org 

Page 83


Page 84 

Marking the Next Phase: Innovation 

By Paul Wouters 

The sector keeps growing steadily. And this is 

not only in nominal fi gures, but also vis-à-vis the 

conventional counterpart. Dating from the crisis in 

2001, the market share has consistently increased 

for the last six years now, so in deposits taken and 

loans given. 

This has happened without any particular incentive or 

preferential treatment from the government and with a rather 

limited range of products. 

Turkish participation banks compared to Turkish banking 

(September 2007) 

Deposits (%) Loans (%) Assets (%) 

2005 3.33 4,89 2.54 

2006 3.65 4.93 2.83 

2007/3Q 3.87 5.66 3.32 

Source: Participation Banks Association Turkey 

At the same time, participation banks have grown stronger 

in equity and fi nancial means. Bank Asya had a successful 

initial public offering in 2006, followed by Albaraka Türk 

(Albaraka Banking Group ABG – Bahrain) in 2007, and Kuveyt 

Türk (Kuwait Finance House KFH – Kuwait) will round this off 

during the fi rst quarter of 2008. 

Türkiye Finans gained a solid partner in National Commercial 

Bank NCB (KSA) that took a 60% shareholding and will give 

access to substantial additional fi nancial resources. After 

Türkiye Finans broke the ceiling of 100 branches in 2006, 

Bank Asya followed suit a year later. Albaraka Türk and Kuveyt 

Türk might be assumed to open their 100 th branches in 2008 

or at the latest, early 2009. 

All this is not so much a luxury as it is a necessity in order 

to stay ahead in (or at least keep abreast with) the growing 

banking market, as the present economical boom spreads 

welfare throughout the country. 

The participation banks now all have a more solid basis that 

allows renewed expansion. Currently, all of them have an 

adequate strategy of branching out and Bank Asya and Kuveyt 

Türk are reported to be looking “beyond the borders”. 

As in the past, direct contribution by the participation banks 

to the real estate sector surpasses that of their conventional 

counterparts. 


Turkish participation banks 

Total shareholders’ equity 2007/3Q 

Shareholders’ equity 

(thousands YTL) 

Shareholders’ equity 

(thousand US$) 

2001 203,000 141,000 

Total change 

(%) 

2002 400,000 245,000 74 

2003 670,000 478,000 95 

2004 891,851 664,222 39 

2005 951,089 705,398 6 

2006 1,559,717 1,104,303 57 

2007/3Q 2,197,241 1,815,002 64 

Source: Participation Banks Association of Turkey 

Some of the conventional banks have reportedly begun 

exploring the possibility of offering compliant products, or 

maybe even opening up “participation windows”. However, the 

current status of the legislation does not allow easy entry. 

Turkish banking system 

Ratio used funds — Deposits/Loans 2007/3Q 

% Deposit banks % Participation banks 

2002 40 66 

2003 42 75 

2004 47 82 

2005 59 88 

2006 68 93 

2007/3Q 74 110 

Source: Participation Banks Association of Turkey 

Innovation 

After the initial transaction in December 2006 by Kuveyt Türk 

(US$200 million), both Türkiye Finans (US$100 million) and 

Bank Asya (US$175 million) issued their fi rst well received 

Murabahah facilities in 2007. 

In July 2007, Kuveyt Türk announced a fi xed currency 

exchange rate service to help companies with forward 

currency transactions. 

Both Bank Asya and Türkiye Finans entered into individual 

protocol agreements (for a framework of YTL 200 million 

[US$172 million] each) with the Istanbul Chamber of 

Commerce ITO, giving the members thereof access to 

individual fi nancing up to YTL 250,000. 




Marking the Next Phase: Innovation (continued...) 

Kuveyt Türk and Bank Asya became members of the Istanbul 

Gold Exchange in 2007 and Türkiye Finans announced a 

project budget of US$5 million for microfi nance. With all the 

liquidity at hand, more creativity and progress in product 

development can be expected, more branches proliferating 

Turkey and, who knows, maybe even international expansion. 

Sukuk 

The long-awaited Sukuk regulations have not yet been issued, 

though lobbying behind the scenes goes on. Recently, the 

sector has also started to more openly suggest the need for 

those new products. Still, in December 2007, the secretarygeneral 

of the Association of Turkish Participation Banks, 

Osman Akyüz, made a strong case for the need to issue a 

fi nancial instrument called a “leasing certifi cate” (Sukuk 

Ijarah) in order to attract more investments from the Gulf 

region. He pointed out that the Turkish Treasury is working 

on it, and if they (the treasury) would take some pioneering 

steps, attracting additional funds could well be a possibility. 

“The long-awaited Sukuk 

regulations have not yet been 

issued, though lobbying behind 

the scenes goes on. Recently, the 

sector has also started to more 

openly suggest the need for new 

products.” 

In an interview in December 2007, Ufak Uyan (CEO of Kuveyt 

Türk) confi rmed that because of the high capital defi cit, Turkey 

would need a yearly capital infl ow of around US$40 billion 

to US$50 billion, and therefore it should prepare the legal 

grounds for issuing Sukuk. The Capital Markets Board SPK 

would have a particularly large responsibility on this issue. 

And in the special edition of Todays Zaman for the “Banking in 

Turkey” Conference (London, November 2007), Yunus Nacar 

(CEO of Türkiye Finans) confi rmed “participation banks in 

Turkey need an alternative instrument for investing the gains 

and these are what the Treasury calls ‘Sukuk paper’... The 

projects in this fi eld should be fi nalized as soon as possible”. 

The participation banks are not asking for these instruments 

in order to shelve them. For some time now, interested parties 

have been waiting to bring liquidities to the Turkish economy, 

provided that a sound regulatory and tax environment is in 

place. 

Participation Banks 

Albaraka Türk 

With regard to Albaraka Türk’s IPO in June 2007, 20.57% 

of the stock was opened to the public and the transaction 

generated a net profi t of approximately US$170 million. 

Domestic demand was 60.4 times over its value, while foreign 

demand reached 21.3 times above the expectations. Total 

demand for the Albaraka Türk IPO was 32 times above the 

allotment. 

At the opening of a new branch offi ce in Mersin last November, 

Adnan Büyükdeniz (CEO of Albaraka Türk) stated correctly 

that half of the (young) population of Turkey do not as yet have 

suffi cient access to banking services. This situation offers 

substantial growth potential for individual banking services 

such as loans for vehicles, housing and durable goods as well 

as credit cards. When these services become more accessible 

to a larger part of that population, they will bring considerable 

positive advancements in the banking business. 

Bank Asya 

In April 2007, Bank Asya closed a US$175 million syndicated 

Murabahah fi nancing facility with strong support from both 

regional and international banks. The facility was structured 

as a dual one- and two-year tranche facility, with proceeds 

going towards the bank’s general fi nancing activities. ABC Islamic 

Bank, Standard Chartered Bank and Unicredit Markets 

& Investment Banking (acting through Bayerische Hypo-und 

Vereinsbank) were the deal’s mandated lead arrangers. More 

such arrangements are in the pipeline. 

That same month, Bank Asya CEO Unal Kabaca confi rmed 

management was looking at expansion opportunities abroad, 

such as buying a bank or opening an offi ce or branch, with an 

eye on neighboring countries and wherever Turkish fi rms do 

business. 

Kuveyt Türk 

Already in May 2007, Kuveyt Türk had raised their capital by 

30% (from YTL 200 million up to YTL 260 million). 

Late December, it was fi nally confi rmed that they are planning 

an IPO in the fi rst quarter of 2008. Kuveyt Türk has applied to 

the Capital Markets Board SPK to go public and list up to 20% 

of its shares, worth approximately YTL 57.2 million. 

This year will be an important year for Kuveyt Türk. Management 

plans to increase the number of branches. To this end, 

they announced the forthcoming opening of a branch in Dubai 

in addition to their offi ce in Bahrain to mediate investment 

relations between the Gulf region and Turkey. The impressive 


Page 85


Page 86 


goal would be to become one of Turkey’s seven-largest banks 

in terms of asset value by 2010. 

Türkiye Finans 

In July 2007, National Commercial Bank NCB, the biggest 

bank in Saudi Arabia, announced — subject to regulatory 

approval — the acquisition for US$1.08 billion of a 60% share 

of Türkiye Finans. The price will be revised based on 2007’s 

revenue and the total amount may increase by US$120 

million or US$130 million. 

The amount paid by NCB is said to be 5.8 times higher than the 

book value of the bank, marking this the highest relative price 

paid for a bank in Turkey to date. With upcoming revisions, 

the price may end up being six times book value. The existing 

shareholders (industrial groups Ülker and Boydak) will retain 

a stake of 20% each. 

Last September, a two-year syndicated Murabahah of US$100 

million was confi rmed in order to fund small and mediumsized 

enterprises and to contribute to the real estate sector 

in Turkey. 

The Banker 

Top 500 Islamic 

institutions #ranking 

Fitch Ratings 


Rating Date (2007) Outlook 

Albaraka Türk 52 BB- 8th June Stable 

Bank Asya 33 B 13th July Positive 

Kuveyt Türk 45 BB 14th December 

Stable 

Türkiye Finans 35 

Rep Turkey BB 13 th 

Final remarks 

Source: The 

Banker – Top 500 

Islamic Institutions 

November 2007 

December 

Source: Fitch Ratings 

Stable 

With the market being “locked up” by the IPO and strategic 

partnerships, one can only hope for more rapid expansion 

when the government allows conventional banks to open 

“participation windows”. 

Moreover, it is not clear whether or not new “participation 

bank licenses” are available. For now, the authorities seem 

reluctant to allow new market entries (either conventional 

or Islamic). 

Several times, the sector has publicly announced the need 

for Sukuk (and inherently the availability of liqiuidities for 


that instance), but so far there hadn’t been positive follow 

up by the government. 

On the positive side, note that the economy has picked 

up suffi ciently to allow the “second wave” of mergers and 

acquisitions to get started. After the fi nancial services 

industry, larger production and service providers might get 

their turn for foreign acquisition/input. On the downside, 

the Central Bank decided to relax the interest rates and the 

government will renegotiate new terms with the Internationa 

Monetary Fund. This happens mostly under pressure from 

the Turkish business world that wants better access to 

cheaper money. 

After the recent interest rate cuts (and the central bank 

is rumored to plan more), infl ation (though still contained) 

already rose to 8.4%, twice the year-end target. Gas and 

electricity prices will go up another 20% at least. Combined 

with the rise in oil prices, the effect will be felt throughout 

the economy. The somewhat unrealistic gain upon the US 

dollar during the last year might come to an end and the 

fi nancial markets expect a slight readjustment of at least 

4% for the YTL (and other emerging market currencies). And 

then, of course, the last waves of the subprime mortgage 

crisis will ripple through Turkey. 

“On the positive side, note that the 

economy has picked up suffi ciently 

to allow the “second wave” of 

mergers and acquisitions to get 

started” 

On the political side, the government managed to avoid 

loopholes. The levels of democracy, minority protection and 

freedom of speech are rising, but apparently, there still is 

too much hesitation in bringimg the participation banks fully 

at par with the conventional banks. 

In 2007, Unicorn Investment Bank (Bahrain), Kuwait 

Investment Authority (Kuwait), National Bank of Kuwait 

(Kuwait), Global Investment House (Kuwait), Dubai Financial 

Group (UAE) and Orion Holding Overseas (UAE) established 

themselves in the Turkish fi nancial landscape, either through 

partnerships or acquisitions. It has been rumored that DIB is 

looking to take over a bank. 

Just last December, Shamil Bank (Bahrain) launched its 

US$90 million Shamil Bosphorus Mudharabah, investing in 

Shariah compliant real estate developments in Turkey. And 





fi nally, at the years ending, the US$60 million Murabahah of 

DRD Derindere (car leasing company) was announced. The 

fi ve-year contract is the longest ever to a Turkish company 

and reaffi rms the trust shown in the company and the future 

of the Turkish economy. 

This year looks to be promising and challenging. The 

participation banks defi ned a strategy of fi rm growth (branch 

and equity), within and maybe even outside Turkey. The 

participants of the fi rst “Sukuk issuance”, which will bring 

new means to the existing fi nancial needs, have been in the 

pipeline for some time. Some conventional banks were also 

reluctant to open “windows” to get a piece of the growing 

pie. The big question is what kind of legal framework will be 

handed to them by the government. Responsibilities have to 

be taken or chances might be lost. 

MAIN FINANCIAL FIGURES OF THE PARTICIPATION BANKS 

(Thousand YTL) (September 2007) 

Total 

(September 2007) 

% Total growth since 

December 2006 

FUNDS TLY 6,756,290 28 

COLLECTED FX 6,684,907 12 

TOTAL 13,441,197 20 

LOANS 14,741,625 40 

PROBLEM LOANS 201,937 56 

TOTAL ASSETS 17,452,083 27 

SHAREHOLDERS 

EQUITY 

2,197,241 41 

PROFIT NETT 367,409 37 

STAFF 8,688 22 

BRANCHES 401 13 


January 1, 2007 – 1 US$ is approx 1,1 YTL 

Turkish banking system 

(Deposits per September 2007) 

Participation 

4% 

Deposit 

96% 

Dev & Invest 

0% 

T 

Türkiye Finans 

29% 

Kuveyt Türk 

19% 


(Deposits per September 2007) 

Albaraka Türk 

20% 

Bank Asya 

32% 


BENER 

Istanbul – Turkey 

Paul Wouters ia an adviser to Bener Law Offi ce, in Istanbul, Turkey. 

He can be contacted via email at paul.wouters@bener.com.tr 

Page 87


Page 88 

Challenges for Islamic Banking in Africa 

By Ahmed Moola 

Two international organizations held Islamic 

banking conferences in Johannesburg for the fi rst 

time this year. Delegates from several African 

countries fl ocked to these events in the hope 

of fi nding answers to the many questions and 

challenges they have and are facing in setting up 

or implementing Shariah compliant banking in 

their home countries. 

Islam has the largest number of practicing followers of any 

religious group on the African continent. With a Muslim 

population of about 400,000 million, demand for Shariah 

compliant banking should be enormous. Those seeking 

to realize this opportunity are experiencing many of the 

challenges that we did as we started operating in South 

Africa in mid-2006. It makes sense for countries with a high 

concentration of Muslims, such as those in North Africa, large 

parts of West Africa as well as down the eastern seaboard, to 

offer fi nancial services that comply with Muslim beliefs. South 

Africa was identifi ed as an attractive market due to its large 

base of Muslim businesspeople. 

“The shortage of experienced 

Islamic banking professionals 

is not exclusive to Africa but is 

more severe on this continent. 

There is enormous scope for more 

education and training, both for 

university degrees as well as inservice 

training courses.” 

Kenya’s second Shariah compliant bank opened in April 2007. 

Gulf African Bank (GAB) is registered and headquartered in 

Kenya. Nigeria is also increasing its range of Shariah fi nancial 

services and even delegates from Zimbabwe were eager to 

identify ways to realize the Shariah opportunity. 

Limited talent pool 

Forums at the conferences highlighted the challenges that 

seem common to all African countries. The fi rst among these 

is suitably qualifi ed people. In many African countries, Islamic 

banks are being set up by people who understand the principles 

and see the opportunity but have no hands-on experience in 

establishing such a fi nancial services institution. 


The hunger for skills and experience seems insatiable. This 

covers not only Islamic banking experience but also the 

services of appropriately senior scholars to participate in 

Shariah supervisory boards that will oversee the product 

development and delivery processes. 

Shariah compliance is another key challenge, as there is 

divergence of opinion on whether particular processes are 

Shariah compliant or not. Representatives from all over Africa 

supported the concept of the establishment of a common set 

of Shariah standards. 

Greater standardization could reduce the potential for 

Shariah “arbitrage” while making it easier for bankers 

and investors to understand the market. In addition to the 

potential for differences of opinion between scholars, there 

is also a shortage of appropriately qualifi ed Shariah scholars, 

which means that some scholars serve on a number of 

different Shariah supervisory boards, often of competing 

organizations. 

The shortage of experienced Islamic banking professionals 

is not exclusive to Africa but is more severe on this continent. 

There is enormous scope for more education and training, 

both for university degrees as well as in-service training 

courses. In South Africa, Absa Islamic Banking approached 

the BANKSETA (Banking Sector Education and Training 

Authority) to assist with the development of suitable training 

material. 

We then approached all of the banks interested in the Islamic 

opportunity in South Africa and set up the Islamic Interbank 

Committee, so that we could work together to develop 

training material that will be common and useful to the entire 

organization. The committee may also collaborate in future 

to address industry issues that are common to all Islamic 

banks. 

Still a new concept 

Acceptance by the community continues to be a challenge as 

the concept of Islamic banking is still new and there is a need 

for education and familiarization if banks are to win over the 

skeptics in each community. 

Coping with regulation is an enormous challenge for Islamic 

banks. Not only do they have to follow the requirements 

of Shariah law and guided by Shariah regulatory bodies’s 

standards but also the regulations of the central bank of 

the country in which they operate. This applies also to the 




Challenges for Islamic Banking in Africa (continued...) 

risk environment as many risks are different from those of 

conventional banking. 

Product development continues to be a challenge, including 

the time this process takes. Offering basic transactional and 

savings products is not diffi cult but the product development 

process to deliver full-service banking, including mortgages 

and credit cards, presents real diffi culties. Innovative 

investment products also require enormous skill and depth of 

knowledge in the development process. 

One challenge that is specifi c to Africa is illiteracy. It’s hard to 

persuade a man to hand over his hard-earned cash in return 

for a piece of paper that he cannot read and for him to believe 

that his money is safe and that he can get it back whenever 

he wants. 

Twenty per cent of Muslims will demand Shariah compliant 

banking, no matter how much it costs them in terms of 

inconvenience or loss of revenue. Another 20% will never 

accept Shariah compliant banking and will give all kinds of 

excuses to justify their choice. Gaining this market share from 

the remaining 60% is an opportunity that will be achieved 

based on value creation for the customer. 

The bank that can win them over through a compelling 

fi nancial service offering that satisfi es the dictates of their 

faith as well as their need for a value-based offering will 

undoubtedly succeed. This challenge is particularly true on 

the African continent. 

Ahmed Moola is managing 

director of Absa Islamic 

Banking in Johannesburg, 

South Africa. He can be 

contacted via email at ahmed. 

moola@absa.co.za 

Page 89


Page 90 

Scope of Islamic Investments in India 

By Taher Badshah 

While the roots of Islamic fi nance lie in ancient 

Islamic principles, the development of Islamic 

fi nance as an industry is relatively new. This 

industry, which is progressing at a remarkable 

pace of 10% to 15% per annum, now represents 

a vast global practice that has developed a 

worldwide presence. 

This can be attributed to the fact that many Islamic nations 

have seen an increase in fi nancial wealth mainly due to a 

surge in exports and increasing oil prices. This is fueling 

demand for new Islamic fi nancial instruments along ethicallyaware 

Shariah principles as an alternative to conventional 

commercial banking and investment products. 

While the US’ share of world GDP is expected to fall (from 

21% to 18%), India’s GDP looks set to rise (from 6% to 11% 

by 2025). The rising GDP of emerging nations like India 

has opened up newer investment avenues for rich Islamic 

investors from the Gulf. In addition, there is tremendous 

scope for developing and marketing new Islamic fi nancial 

instruments and Shariah compliant funds in India. 

The Indian economy 

Today, India is one of the fastest-growing economies in 

the world and an exciting investment destination. The 

Source: Islamic fi nance: Relevance and growth in the Modern Financial Age, Iqbal Khan-Feb 07 


world’s economic center of gravity is gradually shifting from 

established wealthy economies to emerging economies, 

including India. 

“By 2035, India is likely to be a 

larger growth driver than the six 

largest countries in the European 

Union, though its impact will be a 

little over half that of the US” 

The country experienced GDP growth of 9% during 2005- 

06 to 9.4% during 2006-07. By 2025, India’s economy 

is projected to be 60% the size of the US economy. The 

transformation into a tri-polar economy will be complete by 

2035, with the Indian economy slightly smaller than that of 

the US but still larger than Western Europe. 

By 2035, India is likely to be a larger growth driver than 

the six largest countries in the European Union, though its 

impact will be a little over half that of the US. India, which 

is now the fourth-largest economy in terms of purchasing 

power parity, will become the third major economic power 

within 10 years. 




Scope of Islamic Investments in India (continued...) 

A survey conducted by the United Nations Conference on 

Trade and Development showed that 42% of experts on 

foreign direct investment (FDI) have ranked India as the 

third most attractive location after China and the US. In the 

same survey, multinational corporations ranked India as the 

second most attractive location for FDI after China. In fact, 

India is projected to be one of the three largest economies 

in the world by 2050. 

Indian markets 

The Indian capital market is well regulated, and its stock 

markets are among the most developed and organized 

in the world. Two of India’s 23 exchanges, the Bombay 

Stock Exchange (BSE 500 Index) and the National Stock 

Exchange (NSE), are at par with the best in the world. 

India is now considered one of the most appealing 

destinations for FDI. Also, due to a large number of 

companies being listed on the Indian stock exchange and 

conforming to Shariah investment norms, India is looking 

like an interesting option for Islamic investors seeking 

Indian exposure. 

Study on Shariah compliant stocks 

To gauge the scope of Islamic investment opportunities in 

the Indian stock market, it is imperative to examine stocks 

that conform to the norms stipulated by the Islamic Shariah 

principles. A detailed study was conducted by Dr Shariq 

Nisar, an eminent personality in the fi eld of Islamic fi nance 

in India. 

Below are a few fi ndings from his study on Islamic investing 

in India: 

Shariah compliant stocks in India 

Parameter NSE BSE 500 

Number of companies listed 1,331 500 

Number of Shariah compliant companies 405 257 

% of Shariah compliant market cap of total 

*As at 31 

61.4 60.44 

st December 2007 

• NSE 

Of the 1,331 companies listed on the NSE, 405 qualified 

on Shariah parameters. The market capitalization of 

the qualifying stocks was 61.4% of the total market 

capitalization of companies listed on the NSE. Also, 

even though the number of Shariah compliant stocks 

was limited, the share of market capitalization of these 

stocks never dipped below 50% of the total market 

capitalization. 

The current share of Shariah compliant market capitalization 

in India is higher than that of most Islamic countries such 

as Malaysia, Pakistan and Bahrain, where the share of 

Shariah compliant market capitalization was 57%, 51% and 

6% respectively of the total market capitalization. Sectors 

such as computer software, drugs and pharmaceuticals and 

automobile ancillaries constituted about 36% of the total 

Shariah compliant stocks on the NSE. 

“The Indian capital market is well 

regulated, and its stock markets 

are among the most developed 

and organized in the world. Two of 

India’s 23 exchanges, the Bombay 

Stock Exchange (BSE 500 Index) 

and the National Stock Exchange 

(NSE), are at par with the best in 

the world.” 

• BSE 500 

Research conducted on Shariah compliant stocks listed 

on the BSE 500 shows that the number of companies that 

comply with the Shariah is slowly growing from merely 95 

in March 2002. The total number of Shariah compliant 

companies on the BSE 500 rose to 164 in 2004, 237 at the 

end of March 2005 and 257 in 2007. 

At the end of March 2006, a total 279 out of India’s fortune 

500 stocks had qualifi ed on Shariah screens. Below are the 

top Shariah compliant sectors on the BSE, along with their 

market cap. 

Top Shariah compliant sectors at the BSE 

Sr No. Top sectors Number of 

companies 

Market cap (Rs Crore) 

1 Computer software 36 442,310.95 

2 Telephone services 4 316,974.73 

3 Infrastructure and 

real estate 

26 227,965.31 

4 Drugs and 

pharmaceuticals 

27 135,499.31 

5 Finished steel 5 119,842.37 

6 Trading 10 112,404.58 

7 Cement 11 97,039.16 

*As at 31st December 2007 


Page 91


Conclusion 

Page 92 

Scope of Islamic Investments in India (continued...) 

The opening up of the Indian economy and improving global 

competitiveness have put India on the economic radar of 

global players. FDI infl ows increased from US$2.2 billion in 

2003-04 to US$15.7 billion in 2006-07. 

Slowly, the world’s economic center of gravity is shifting 

from the established, wealthy economies to emerging ones 

including India — the world’s largest democracy is one of 

the fastest-growing economies with enormous investment 

opportunities. 

“The scope for Islamic 

investments in India has widened 

mainly due to two reasons: fi rst, 

internal demand; and second, 

external supply” 

Over the last decade, the Islamic fi nance industry has grown 

considerably. The scope for Islamic investments in India has 

widened mainly due to two reasons: fi rst, internal demand; 

and second, external supply. Internal demand arises due to 

the huge Muslim population in the country, which ranges 

from 150 million to 160 million (India is the second-largest 

Muslim populated country in the world). There is high 

awareness of Islamic fi nancial products and high savings 

in this Islamic community (more than Rs. 40 billion every 

year). 

The external supply i.e. the investment opportunities in other 

Islamic countries are limited and hence investors seeking 

to invest in Shariah compliant funds are on the lookout for 

opportunities in emerging economies like India. 

With hundreds of Indian companies complying with economic 

laws of Shariah, India is becoming an attractive destination 

for Islamic investments. Islamic fi nancial institutions and 

Shariah-conscious domestic investors are fi nding the Indian 

stock market an attractive alternative to investing in other 

economies. 

Taher Badshah is an investment adviser with Kotak Mahindra 

Offshore Funds. References are available on request from the 

writer. For further information, call +44 207 977 6900. The writer 

wishes to thank Dr Shariq Nisar for sharing his research and 

study. 


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Interest Picking Up in Sri Lanka’s Islamic Market 

By Faizal Salieh 

Sri Lanka is a mixed economy, about US$25 

billion in size in terms of GDP at current prices. It 

has a population of about 19.8 million, of whom 

1.8 million are Muslims. The GDP per capita 

is currently about US$1,400, which places the 

country in the “middle-income country” category. 

The government’s strategy is to make Sri Lanka 

the “services and trading hub” in the region. 

The current account is fully convertible while the capital 

account is liberalized to a large extent. The GDP growth rate 

has been consistent at an average of 6% per annum over the 

past few years, which is comparable with growth rates in the 

region. The economy, due to its relatively small size, has shown 

remarkable resilience despite the security concerns, the 

effects of the 2004 tsunami and the recent oil price shocks. It 

grew at 6.7% in 2007. The services sector contributed 59.5% 

of this growth. 

Infl ation on a 30-year average is 11%, which is comparable 

with the region. It averaged 13.7% in 2006 but has shown 

strong upward pressures since the latter half of 2007. The 

current month-on-month rate is 19.5% and the 2007 average 

is 15.8%. The fundamental cause for the high infl ation is the 

attempts made by the government and the Central Bank of 

Sri Lanka (CBSL) to address the fi scal weaknesses through 

monetary policy, which has created tremendous stress on 

monetary stability. The local currency depreciated by 5.7% in 

2006 and 6% in 2007. 

Sri Lanka’s country risk is rated BB- by Fitch Ratings and B+ 

by Standard & Poor’s. The island has consistently had a good 

long-term international rating view. The government, taking 

advantage of the country risk ratings, chose to raise private 

debt in the international market in 2007 by issuing US dollardenominated 

fi ve-year Treasury bonds up to US$500 million. 

The issue was oversubscribed by US$1 billion, at an interest 

rate of LIBOR + 8.25%. 

This led to protests by the opposition political parties, who 

alleged that the government was raising high cost international 

foreign currency debt to fi nance consumption expenditure and 

for the acquisition of military equipment to fi ght the Northern 

Tamil rebels (LTTE). The government has maintained that the 

monies will be used to fi nance infrastructure development 

projects and the rehabilitation of the Eastern province which 

it had recently liberated from the control of the LTTE. Military 

expenditure, however, is well within the range seen in countries 

facing geopolitical or terrorism risks. 

Page 94 


Infrastructure development, which has lagged behind due 

to the security situation, is now under tremendous pressure. 

The business environment, particularly with regard to the 

ease of doing business, compares well with peer countries 

in the region and Sri Lanka is ranked 79 th in the Global 

Competitiveness Report. But there is much more room for 

improvement. 

“The country’s workforce is 

92% literate, with about 63% 

employed in the private sector. 

Unemployment is 6%. Population 

growth is 1.5% and is ageing.” 

The country’s workforce is 92% literate, with about 63% 

employed in the private sector. Unemployment is 6%. 

Population growth is 1.5% and is ageing. 

Political situation 

The 30-year confl ict between the government and northern 

rebels has taken its toll on the pace of economic growth 

and development. While a ceasefi re agreement (CFA) was 

signed between the LTTE and the government in February 

2002, the country missed out on the opportunity to develop 

its infrastructure while the CFA was in force. Over the past 

two years, the CFA was ineffective with both sides having 

violated it. The government withdrew from the CFA in the 

fi rst week of January 2008. 

The present regime has opted to pursue a mixed strategy 

of dealing with terrorism by militarily engaging the LTTE 

and driving it towards a politically negotiated solution to 

the Tamil problem. The strategy appears to be working. 

Needless to say, India is a critical factor in this process 

and warm relations with the big neighbor are absolutely 

essential. 

The security situation in the country, however, is not 

as bad as has been portrayed by international media. 

Visitors will vouch for this fact. The battles between the 

LTTE and government forces are mostly confi ned to the 

northern theatre now, following the liberation of the east 

by government forces. For this reason, the country’s GDP, 

which is mostly concentrated in the non-confl ict areas, has 

been little affected. The confl ict areas contribute only 8% 

of the GDP. 




Interest Picking Up in Sri Lanka’s Islamic Market (continued...) 

Nevertheless, the threat of LTTE attacks is a real risk. 

We are also seeing a higher degree of intelligence 

and surveillance by the government forces, which has 

contributed signifi cantly to the management of security 

risks in the present time. 

The fi nancial sector 

There are 23 licensed commercial banks (including 11 

foreign banks), 15 specialized banks, 11 merchant banks, 29 

fi nance companies, 45 leasing companies and 16 insurance 

companies, of which two are wholly Islamic insurance 

providers. 

The banking system is the dominant component of the 

fi nancial sector with 58% ownership of the total assets in 

the sector. Total assets amount to US$34 billion. Eight large 

banks, including the two that are state-owned, account for 

81% of the total banking assets; the balance is fragmented 

among 30 other small to medium-sized banks. There is little 

rural penetration by the banks, leaving a large untapped 

informal sector. 

Net interest margins have remained high and stable at 4% 

to 4.5% through many years, particularly owing to the shortterm 

nature of the assets and liabilities which allow for quick 

repricing and pass-through; and the large-scale ineffi ciencies 

in the state-owned banks. The banking spreads are high 

compared to the region, which are around 1% to 2.5%. The 

more effi cient foreign and local private banks generate 

returns of more than 18% to 22% on their investments in this 

scenario. 

The sector has grown in line with real GDP and infl ation, 

averaging 22% per annum over the past fi ve years. Bank loans 

amounted to 52% of GDP in 2007, spurred by loose monetary 

policy and defi cit fi nancing. Asset quality has improved since 

2002 with increasing regulatory focus on risk management 

practices. Non-performing loans declined from 14% (2002) to 

5.7% (2006), also helped by rapid loan growth. 

Credit growth to the private sector is forecast to be around 

20% as at year-end 2007 against a 17.5% target set by CBSL 

in a rising interest-rate environment. The central bank has 

called upon the fi nancial institutions to tighten their credit 

standards and avoid asset-liability mismatches following 

attempts by some banks to fi nance their lending expansions 

from short-term money market borrowings. 

CBSL is under pressure to address the fi scal defi cit and the 

fi nancing of the defi cit from the banking system, which has 

resulted in infl ationary pressures and high interest rates. The 

banking system is, however, adequately capitalized with CBSL 

fi rmly moving the banks towards Basel II prudential standards 

and having a greater focus on systemic risks. The regulator 

has also been trying to move the banking sector towards 

consolidation but has seen little success so far. 

The composite tax rate, which includes a 35% corporate 

income tax, VAT and a social levy tax, resulting in an effective 

rate of 56% for some banks, has become an area of growing 

concern in the banking sector. 

“In January 2005, the Banking 

Act was amended to allow Islamic 

banking products, following 

which two existing conventional 

commercial banks — namely 

Union Bank of Pakistan and MCB 

— opened Islamic windows” 

Islamic fi nancial services 

Sri Lanka has yet to see a full-fl edged Islamic bank operating 

in its fi nancial sector. Amana Investments Limited, which 

is a 48% foreign-owned public limited company with Bank 

Islam of Malaysia holding 10% and a board seat, pioneered 

Islamic fi nancial services in the country beginning 1997. That 

same year, it had applied for a commercial banking license 

to operate as an Islamic bank on a level playing fi eld with the 

conventional banks. It is still actively campaigning for this. 

In January 2005, the Banking Act was amended to allow 

Islamic banking products, following which two existing 

conventional commercial banks — namely Union Bank 

of Pakistan (now acquired by Standard Chartered Bank, 

Pakistan) and MCB — opened Islamic windows. 

Amana is the market leader in the Islamic segment and is 

larger than four conventional banks operating in the country, 

including the two aforesaid names. It continues to be in 

discussions with CBSL to obtain a banking license. 

The Amana Group is involved in the provision of Islamic 

fi nance, insurance, fund management, stockbroking and 

corporate advisory services. It has obtained regulatory 

licenses for Islamic insurance (2002), fund management 

and stockbroking activities (2006), and is the only operator 

in the market providing such a gamut of Islamic products and 

services in the market. 


Page 95


Page 96 

Interest Picking Up in Sri Lanka’s Islamic Market (continued...) 

In 2007, Amana set in motion the Dow Jones Amana Sri 

Lanka Index, the fi rst Shariah-compliant and co-branded stock 

market index on the Colombo Stock Exchange in collaboration 

with Dow Jones Market Indexes. It also launched the fi rst 

Shariah compliant equity fund in Sri Lanka called the NAMAL 

Amana Equity Fund in collaboration with National Asset 

Management Limited, a subsidiary of DFCC Bank, which is a 

large development bank in the country. 

“Some quarters are lobbying the 

government on the need for Sri 

Lanka to have at least one fullfl 

edged Islamic bank, not only to 

meet the religious requirements 

of the 1.8 million Muslims in 

the country but also to enhance 

awareness of the potential benefi ts 

that can be reaped from the vast 

fl ight of Islamic funds into the 

Asian region since 9/11” 

Other players in the Islamic market segment are all new 

entrants over the past three years, namely Ceylinco Profi t 

Sharing, Ceylinco Takaful, the two Islamic windows of 

Standard Chartered Bank (Pakistan) and MCB, the Islamic 

window of People’s Leasing Company and the Barakah 

Financial Services unit of ABC Investments Ltd and First 

Global Investments. 

There is considerable interest now among the conventional 

players to enter this market segment, primarily driven by the 

need to retain their own Muslim customers. The state-owned 

Bank of Ceylon and Lanka Orient Leasing Company are also 

on the threshold of entering the market through windowtype 

operations. Some of the foreign banks operating in the 

fi nancial sector also plan to open Islamic windows. 

The size of the Islamic market segment is estimated at 

US$750 million, growing at about 15% per annum. 

Outlook for 2008 

The challenges before the government in 2008 would be a 

speedy resolution to the Tamil confl ict, achieving a more than 

7% GDP growth, developing the economic infrastructure, and 

lowering the infl ation and high cost of living while maintaining 

its pro-poor policy stance. 


The government has declared its intention to bring the confl ict 

to an end in 2008. The GDP growth target is 7.5% against a 

budget defi cit of 7%. 

The economy is poised for rapid take-off when the confl ict is 

resolved. In this regard, the existing Free Trade Agreement 

(FTA) and the proposed Comprehensive Economic Partnership 

Agreement (CEPA) with India would be of particular 

signifi cance as these would create the gateway into India’s 

economic and fi nancial sectors and vice-versa. From that perspective, 

new vistas could open for enterprising Islamic fi nancial 

services providers to leverage off the local platform and 

access the huge Indian Islamic market which is thirsting for 

Shariah-based fi nancial products and services. 

Some quarters are lobbying the government on the need for 

Sri Lanka to have at least one full-fl edged Islamic bank, not 

only to meet the religious requirements of the 1.8 million 

Muslims in the country but also to enhance awareness of the 

potential benefi ts that can be reaped from the vast fl ight of 

Islamic funds into the Asian region since 9/11. It is hoped 

that the regulators will be receptive to this and build the 

necessary internal capabilities to facilitate and supervise 

Islamic fi nancial institutions. 

With the growth in the number of Islamic fi nancial operators, 

there is a critical dearth of Shariah scholars in the country 

with the required levels of competence in Islamic law, 

commerce, fi nance and banking to rightly guide the existing 

local institutions and prospective new entrants. There is also 

increasing concern that some of the Islamic fi nancial services 

providers are not paying due attention to Shariah compliance 

at the transaction level and that there are serious lapses in 

their internal supervision process. 

Being a non-Islamic country, it is unlikely that the regulators 

will play a dominant role in safeguarding Shariah compliance 

in the market. The onus squarely rests on the shoulders of the 

market participants and that is where the true sincerity of the 

institutions providing Islamic fi nancial services will be tested. 

Market discipline with regard to Shariah compliance and good 

corporate governance is now a critical factor to the success of 

Islamic fi nance in the country. 

Faizal Salieh is managing director of Amana 

Investments Limited, which is the pioneer 

of and the largest Islamic fi nancial services 

provider in Sri Lanka. He can be contacted 

via email at fsalieh@amana.lk



Developments in the Islamic Banking and Capital 

Market in Brunei Darussalam 

By Mohamad Daud Ismail 

The Asian Development Bank recently ranked 

Brunei as the richest economy in the Asian region. 

The sultanate’s income per capita was recorded 

at US$34,629, more than 13 times the regional 

average of US$2,621. On the basis of this survey, 

there is immense prospect in advancing the pace 

of growth of the Islamic fi nancial market in Brunei 

Darussalam. 

As competition becomes stiffer among Brunei banks in 

the race to see who can carve out a bigger share of the 

small population market, these institutions have coped by 

introducing innovative products. With this, the development 

of a comprehensive and robust fi nancial industry offers 

bountiful opportunities to expedite the process of economic 

diversifi cation, particularly in supporting international trade 

and investment. 

“The Brunei government has taken 

an active role in promoting Islamic 

banking. One of the many schemes 

currently being undertaken is the 

development of an Islamic capital 

market.” 

As Islam is the main religion, it is not surprising that Islamic 

banking is big in Brunei. Islamic banking means providing 

banking products and services based along the lines of 

Islamic Shariah laws — the simplest being the absence of 

trade in prohibited items like alcohol, gambling and non-halal 

foodstuff, as well as usury in all transactions. 

The Islamic fi nancial system employs the “concept of 

participation in the enterprise, utilizing the funds at risk on a 

profi t- and loss-sharing basis”. However, this does not mean 

that investments with Islamic fi nancial institutions are pure 

speculation; careful investment policy, diversifi cation of risks 

and prudent management could ensure profi table returns. 

The growth of Islamic banking as an ethical means of investing 

wealth has been possible because Muslims wanted to invest 

their monies to get good returns, but in accordance with 

Islamic principles. We are seeing more examples of successful 

and viable Islamic fi nancing products in the international 

marketplace. 

Islamic banking is getting more widespread in Muslim and 

non-Muslim countries alike. Takaful (Islamic insurance) and 

Islamic mutual funds are becoming commonplace. Given the 

diverse fi nancial instruments provided by the Islamic fi nancial 

system and that a developed fi nancial system can make 

positive contributions to a country’s economic development, 

the existence of a vibrant and systematic capital market is 

necessary for the betterment of the economy. 

The development of the Islamic capital market (ICM) is 

integral to the progress of capital markets in general. Such 

markets are essential for effi cient resource mobilization and 

allocation, all the more so in an Islamic economy because 

prohibition of interest implies greater reliance on equities 

and asset-based fi nancing. We can expect to see Islamic 

fi nance develop further globally, eventually becoming an 

integral component of the international fi nancial system. It is 

estimated that Islamic banking globally is managing between 

US$200 billion and US$500 billion in funds today. 

The invention of Sukuk complements the surge in growth 

in Islamic capital market and shows increased focus on the 

structuring and development of new products and services to 

meet ever-increasing demand for Shariah compliant fi nancing 

alternatives. The introduction of Sukuk increased the variety 

of instruments that can be used to create an effi cient Islamic 

portfolio in line with portfolio theory and fi nancial planning 

and at the same time, it adheres to the rule of Shariah. 

As at the end of the third quarter of 2007, Islamic banking in 

Brunei Darussalam accounted for 39% of the total banking 

industry’s assets of BN$15.5 billion, 36% of the total banking 

deposits of US$12.1 billion and 51% of the total lending 

portfolio. This refl ects the positive developments and growth 

within the Islamic banking and fi nance industry in Brunei 

Darussalam, offering business and investment competencies 

in many diversifi ed fi elds, including asset management 

with particular emphasis on the provision of innovative and 

competitive Islamic fi nancial solutions. 

The Brunei government has taken an active role in promoting 

Islamic banking. One of the many schemes currently being 

undertaken is the development of an Islamic capital 

market, which will hopefully be an attractive investment 

avenue to keep excess banking liquidity circulating within 


Page 97


Page 98 

Developments in the Islamic Banking and Capital Market 

in Brunei Darussalam (continued...) 

the domestic economic and fi nancial system and be 

appropriately channeled towards investment and funding 

in the country. 

The Brunei Ministry of Finance offi cially launched the shortterm 

Brunei dollar Islamic bond Sukuk Al-Ijarah in November 

2006 where 91-day commercial papers worth BN$150 

million (US$92 million) were sold in what would be the fi rst 

of a series of planned sales from the Brunei government. The 

ministry issued 10 tranches of these Brunei dollar short-term 

Sukuk in July 2007 amounting to BN$1 billion, followed by 

the issuance of a one-year Sukuk in July 2007 amounting to 

BN$45 million. 

The Brunei government, which has no external debt, has said 

it has no fundamental need for the funds as the reason for the 

issuance is to develop the ICM to build Brunei as an Islamic 

market. Brunei planned to sell Islamic commercial papers 

in order to develop other areas of the economy, reduce the 

outfl ow of funds and encourage other local entities to sell 

Islamic debt. 

Islamic bond issuance has to be structured according to 

Shariah law that governs the Muslim faith and, among other 

things, cannot pay interest and must be backed by tangible or 

income-generating assets. 

The policy directive of the Ministry of Finance on personal 

loan capping was aimed at containing excessive personal 

loans and fi nancing to fi nance consumption, while conversely 

attempting to promote a savings and investment culture. In 

this regard, the 10-year strategic plan of the ministry clearly 

spells out that it is one of the conscious and continuous efforts 

through a set of integrated policies, strategies and designs to 

promote and facilitate the development of a dynamic deep 

and sustainable fi nancial industry in Brunei Darussalam. 

Consequently, fi nancial institutions need to be dynamic in 

reasonably meeting the increasing expectations of the depositors 

and investors in terms of product returns and diversifi cation 

in order to provide an attractive and sensible alternative 

in order to fulfi ll the requirements for Muslim investors. 

The formation of a national Shariah fi nancial supervisory 

board will help instill public confi dence in issues in relation to 

Shariah compliant products marketed in or from this country, 

he believes that Brunei Darussalam’s credentials with regard 

to Islamic matters puts the country in good stead in terms of 

the requisite Shariah governance and thereby facilitate the 

development opportunities of many more Shariah compliant 

products under our jurisdiction. 


The fi rst Islamic bank in the sultanate, the Islamic Bank of 

Brunei (IBB), was established on the 13 th January 1993. It 

was set up to meet the objectives that are to fulfi ll the needs of 

fardhu kifayah for the country, to broaden and accelerate the 

economic growth of Brunei by going in to the banking industry 

and to provide an alternative Islamic banking approach to 

the community. The merger of IBB and Islamic Development 

Bank of Brunei Ltd on the 1 st February 2006 marked another 

milestone in the development of Islamic banking in Brunei 

Darussalam. 

“Brunei planned to sell Islamic 

commercial papers in order 

to develop other areas of the 

economy, reduce the outfl ow of 

funds and encourage other local 

entities to sell Islamic debt” 

The bank, now known as the Islamic Bank of Brunei 

Darussalam, was established to strengthen the Islamic 

fi nancial institution of Brunei, in particular the banking 

sector and insurance, and make it more sustainable and 

competitive. 

IBB, the leading Islamic bank in Brunei, based on its 

unaudited fi nancial performance for 2007, registered a profi t 

of BN$126 million for 2007, which is equivalent to 70% 

increase in profi ts compared to 2006. This further proves 

that there was robust growth of the ICM in the fi nancial 

segment during the last fi ve years with the total assets 

estimated to exceed US$1 trillion and an average annual 

growth between 15% and 20%. 

In January 2008, IBB took another step towards the Ministry 

of Finance’s aspiration of developing Brunei into a reputable 

Islamic fi nancial hub by launching a new addition of its existing 

divisions. The assets and fund management division in July 

2006 to source consistent return on Islamic investments via 

the fund management and investment banking businesses. 

There is a need to enhance and diversify returns from banking 

business such as investment banking. 

The division has had signifi cant achievements such as 

the issuance of US$100 million Sukuk Al-Ijarah for Brunei 

Liquefi ed Natural Gas, active participation in the subscription 

in the subscription for Ministry of Finance’s series of shortcontinued...



Developments in the Islamic Banking and Capital Market 

in Brunei Darussalam (continued...) 

term issuance of Sukuk Al-Ijarah worth US$845 million as well 

as being the lead leader in the series of short-term issuance 

of Sukuk Al-Ijarah worth US$210 million. 

In addition to US$70 million in assets currently under 

management, the division is also involved in promoting the 

investment culture among the general public by launching 

IBB’s fi rst investment certifi cate in 2006, which sold out 

within the fi rst day of its launching. 

The latest investment product by the bank is the Principal 

Protected Investment (PPI) which was available for a month 

from mid-December 2007. A Brunei dollar-based investment 

product with 100% capital protection over three years, the PPI 

features two-tiered return structures with minimum potential 

return of 4.5% per annum. 

Global growth of the ICM is an opportunity for IBB to 

develop its expertise and skills in order to mobilize surplus 

funds domestically and internationally. With the backing of 

the Brunei government, the task ahead is to bring in the 

tremendous growth of the global ICM and enhance fi nancial 

scope into Brunei. 

In conclusion, it can be said that there is tremendous 

opportunity for development and growth of Islamic banking, 

especially the ICM in Brunei. The global markets are 

increasingly using Sukuk to tap the interest of Middle Eastern 

investors because of the increasing amount of accumulated 

wealth in the hands of Muslims, particularly in the oil-rich 

countries. 

As a result, the Islamic fi nance market is swiftly expanding 

globally. With the Brunei government’s proactive role in 

promoting Islamic banking and the increase of public 

awareness, the future of the sultanate of Brunei Darussalam 

to become a successful global Islamic fi nancial hub looks 

very bright indeed. 

Mohamad Daud Ismail is managing partner of Messrs Daud 

Ismail & Co, Brunei Darussalam. He can be contacted at +673 

242 6027/28 or via email at daisco@gmail.com 

Page 99


Accelerating Islamic Banking Growth in Indonesia 

By Ali Sakti and Nasirwan Ilyas 

Last year marked the second phase of the 

development of Islamic banking in Indonesia as 

part of the national long-term Islamic banking 

development plan stated in the “Blueprint of 

Islamic Banking Development (2002-11)”. While 

the fi rst phase focused on standardizing prudent 

policies, institutional regulation and developing 

effective public education, the second phase 

concentrates on increasing Islamic banking 

operational effi ciency and competitiveness. 

Attempts to increase effi ciency are being made 

through supporting infrastructure development 

for both Islamic banks and the Islamic fi nance 

industry, which will directly extend positive impact 

on Islamic banking fi nancial management. 

An important step is to synchronize Bank Indonesia’s policies 

as spelled out in the blueprint with the bank’s strategic 

plans stipulated in the Indonesian Banking Architecture 

(API) and Indonesian Financial System Architecture (ASKI). 

The synchronization covers additional strategic targets and 

development stages which focus on the integration process 

between the Islamic banking industry and other industries 

under one Islamic fi nancial system. 

Further, the focus on policies in strategic targets of Islamic 

banking development has been strengthened through 

Figure 1: Asset growth, DPK, fund channeling and FDR of Islamic commercial banks and Shariah business units 

Page 100 

40,000 

35,000 

30,000 

25,000 

20,000 

15,000 

10,000 

5,000 

0 

IV-2003 

I-2004 

II-2004 

Total Asset (left axis) 

GDep 

III-2004 

IV-2004 

I-2005 

II-2005 

III-2005 

IV-2005 


simplifi cation of six to four areas covering the following: 

(i) compliance with Shariah principles; 

(ii) regulations on compliance; 

(iii) operational effi ciency and competitiveness; 

(iv) systemic stability and benefi ts to the economy; 

(v) advancement of professional competency for human 

resources; and 

(vi) upgrading social function of Islamic banks in facilitating 

voluntary sector with an empowerment program for 

boosting the economy. 

General conditions 

Throughout 2007, the Islamic banking industry had to 

contend with ups and downs. Economic conditions at the 

beginning of 2007 were still infl uenced by the ensuing 

effects of fuel price hikes since 2005, which was signifi ed by 

high infl ation and increases in cost of production as well as 

dampening of the consumer’s purchasing power. This led to 

the creation of an unfavorable environment for businesses, 

including Islamic banking. However, due to consistent 

policies by Bank Indonesia and the government, infl ation 

gradually declined by the end of the year to 6.1%, in line 

with the target of 6% to 7%. 

Along with the movement especially in the second quarter, 

Islamic banking met its momentum. By the end of 2007, fund 

channeling of the Islamic banks had increased to IDR7.5 

trillion (US$814 million) and saw the fi nancing-to-deposit ratio 

GFin 

FDR 

I-2006 

II-2006 

III-2006 

IV-2006 

I-2007 

II-2007 

III-2007 

IV-2007 

140% 

120% 

100% 

80% 

60% 

40% 

20% 

0% 




Accelerating Islamic Banking Growth in Indonesia (continued...) 

of Islamic banking grow from 98.9% at the end of 2005 to 

99.8%. During the same period, third-party funds increased 

to IDR7.3 trillion (US$792 million). This indicated that almost 

all funds mobilized by the bank were fully distributed by 

Islamic banking; in other words, Islamic banks had optimally 

performed their intermediary function. 

However, due to the slow recovery of the investment 

climate and economic conditions in the fi rst quarter, fund 

channeling was slightly affected. This condition infl uenced 

investors to be more cautious about placing their funds in 

banks; moreover, as an alternative, portfolio placements in 

the money market became more attractive as they offered 

better fi nancial stability. The shortage of funds on investment 

fi nally impeded the expansion of their business. This was 

refl ected by the volume of Islamic banking growth that lost 

its momentum in the beginning of the year (growth was only 

9.3%, or 28.7% year-on-year) and fi nally reached 36.7% at 

the end of 2006. 

Institutional development 

Last year, the total number of banks operating on Shariah 

principles increased, as evidenced by the opening of nine 

Islamic rural banks (BPRS) and six Islamic business units 

(UUS). Therefore, at the end of 2007, the number of Islamic 

banking institutions increased to three Islamic commercial 

banks (BUS), 26 UUS and 114 BPRS. 

In line with the increasing number of Islamic banking 

institutions, the offi ce network also signifi cantly increased. 

During the reporting period, the number of offi ces (including 

cash units, sub-branch offi ces) increased by 75 offi ces from 

636 offi ces at the end of 2006 (see Table 1). From area of 

distribution, the Islamic banking networks reached people in 

more than 70 districts in 31 provinces. The number excludes 

the 1,135 conventional offi ces opening Shariah services 

(offi ce channeling) which offi cially started in the second 

quarter of 2006. This phenomenon indicates that investors 

still considered Islamic banks as potential developing 

institutions, especially in rural areas. 

Table 1: Islamic banking (IB) institutional development 

2003 2004 2005 2006 2007 

Full-fl edged Islamic banks 2 3 3 3 3 

Islamic banking division of 

conventional banks 

8 15 19 20 26 

Islamic rural banks (BPRS) 84 88 92 105 114 

Number of Islamic banks 337 443 550 636 711 

IB outlet in conventional bank 

offi ce (offi ce channeling) 

— — — 456 1,135 

Development of BUS and UUS 

Last year, the business volume of Islamic banking grew by 

IDR9.8 trillion (US$1.06 billion). At the end of the period, it 

reached IDR36.5 trillion (US$4 billion). Islamic banking assets 

by national banking grew from 1.6% at the end of 2006 to 

1.8% at the end of 2007, in which the assets were dominated 

by fi nancing products. Although BUS still dominated as the 

main player in the industry, UUS market share improved from 

20.8% in 2006 to 23.5% in 2007. 

Table 2: Structure of Third Party Funds 

Items Nominal (IDR billion) Growth (%) Share (%) 

2006 2007 2006 2007 2006 2007 

Number of 

accounts 

1,992,452 2,845,829 58.6 42.8 

Savings 

wadiah 

3,415,747 3,750,376 67.0 9.8 16.5 13.4 

Savings 

Mudarabah 

6,430,355 9,454,060 47.1 47.0 31.1 33.8 

Deposits 

Mudarabah 

10,826,079 14,807,234 18.1 36.8 52.4 52.9 

Third party 

funds 

20,672,181 28,011,670 32.7 35.5 100 100 

Amid stiff competition from various banks on funds 

mobilization, third party funds (TPFs) improved from 32.7% 

in 2006 to 35.5% in 2007. This was supported by the low 

interest rate, which the central bank had reduced eight 

times from 10.75% to 8.25% between November 2006 and 

November 2007. The structure of TPFs was dominated by 

unrestricted investment (see Table 2), and it moved to deposits 

(Mudarabah) with long-term maturities. This indicated that the 

liquidity preference of Islamic banking customers was likely to 

relatively decrease in 2007. 

The tendency was strongly evident with the structure of 

unrestricted investment term that moved to the shorter term 

(one month). Such fund composition potentially increased 

the bank liquidity risk mainly from fl uctuated corporate fund 

that is usually sensitive to the competitive return offered. 

Although the depositors are small in number (2.3%), the 

savings amount is dominant so that it is diffi cult to anticipate. 

This condition affected the banking investment preference 

with short-term orientation in order to mitigate the risk. So 

the liquidity transformation function, especially to meet the 

purpose of investment, was not optimally achieved. 

Meanwhile, fund channeling in the form of various fi nancing 

transactions was optimal, reaching the growth rate of 36.7% 

y-o-y or higher than that of 2006 or even a year before. 

High fi nancing expansion was mainly contributed by UUS 


Page 101


Page 102 


with growth of 40.44% y-o-y, and for a while, the fi nancing 

expansion of BUS recorded a lower rate of 24.5%, although 

the banks have striven to do their best as refl ected by the 

FDR from 93.6% in 2006 to 97.6%. Attempts by the Islamic 

banking industry to optimally distribute the fund to various 

production factors at a time when national banking was facing 

diffi culties in distributing funds should be noted in relation to 

the functioning of banks as intermediary institutions. Besides, 

the expansion raised the fi nancing share of Islamic banking 

from 2.6% in 2006 to 2.8%. 

Figure 2: Structure of unrestricted investment 

12 Month 

6 Month 

3 Month 

1 Month 

0.0% 

20.3% 18.8% 

11.6% 8.8% 

18.6% 9.5% 

49.5% 62.9% 

20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 

2006 

2007 

Based on type of contracts, the fi nancing group based on 

Qardh and Musharakah fi nancing increased along with a 

high phase of growth each at 115.6% and 88.7% (see Table 

3) while Ijarah fi nancing experienced negative growth (- 

38.3%). Meanwhile, Murabahah fi nancing growth decreased 

from 33.1% to 31.1%, even though it still dominated the 

fi nancing portfolio, but its share dropped from 61.7% to 

59.2%. Among the factors expected to support fi nancing 

growth using Qardh is the bank’s fl exibility to determine the 

use of the funds. This fl exibility is indeed supposed to be the 

factor for Islamic banks to maintain competitiveness of its 

long-term fi nancing products. 

Favorable public perception of the investment climate and 

in line with the boost in various production and investment 


indicators led to some movement in the fi nancing portfolio of 

Islamic banking. On the one hand, the investment fi nancing 

growth experienced rapid growth of 63%. On the other, the 

consumptive fi nancing growth that has short-term and low 

risk decreased signifi cantly to 28.2% y-o-y. 

Table 3: Development of fi nancing product 

Financing 

products 

Nominal (billion) Growth (%) Share (%) 

2006 2007 2006 2007 2006 2007 

Musharakah 2,334,751 4,406,360 23.0 88.7 11.4 15.8 

Mudarabah 4,062,200 5,578,146 30.0 37.3 19.9 20.0 

Murabahah 12,624,241 16,552,534 33.1 31.1 61.7 59.2 

Istisna 336,970 350,995 19.6 4.2 1.6 1.3 

Qardh 250,446 539,945 100.6 115.6 1.2 1.9 

Ijarah 836,299 516,230 164.7 -38.3 4.1 1.8 

Figure 4: NPF per-sector 

SRV 

TRNS 

SOC 

TRD 

AGR 

30.00% 

20.00% 

10.00% 

0.00% 

CONS 

MIN 

Nasional Shariah 

ELEC 

MAN 

One of the aspects assumed promoting the fi nancing 

reallocation is the different fi nancing risk in each sector of 

the economy. Some sectors in which the production cost 

signifi cantly increased due to the rise of oil and gas prices, 

such as industry and transportation sectors, showed higher 


Table 4 Development of BPRS business activities 

ITEMS 2003 2004 2005 2006 Nov-07 G2007 

Total Asset BPRS 292,959 471,454 604,971 906,325 1,186,540 31% 

Share (%) 2.32 2.82 2.88 3.78 4.13 

Financing 192,969 328,102 435,912 636,287 888,074 40% 

Number of account 47,627 74,698 90,181 21% 

Third Party Fund 184,925 267,062 353,565 530,150 702,717 33% 

Number of account 21,070 314,584 343,234 9% 

LDR BPRS 104.35% 122.86% 123.29% 120.02% 126.38% 

LDR total BPR 89.32% 94.80% 96.12% 107.87% 

NPF BPRS (Gross) 10.64% 8.29% 8.38%




risk. The risk is refl ected by the high ratio of non-performing 

fi nancing (NPF) gross in both sectors. Besides, the NPF ratio in 

other factors, including the three main factors, also increased 

so that in general the NPF ratio of Islamic banking increased 

from 4.8% in 200 to 5.66% at November 2007. 

From profi tability side, Islamic banking drew a profi t of IDR540 

billion (US$58.6 million) in 2007, IDR185 billion (US$20.1 

million) higher than the previous year. From the sources, 

the Islamic banking profi t was dominated from accounts 

receivable margin, especially from Murabahah margin and 

profi t and loss sharing fi nancing. 

Development of BPRS 

In line with the growth of BUS and Islamic business units, 

BPRS also showed signifi cant growth. In 2007, the BPRS 

business expanded to IDR3 billion (US$325,622;31%). The 

expansion increased BPRS’s share of national BPR industry 

to 4.21%. Growth was mainly supported by the expansion of 

fi nancing products, namely IDR25 billion (US$2.71 million) or 

an increase of 40% from the previous year. 

Table 5: BPRS fi nancing development 

Financing products 2006 2007 

Thousand Rupiah 

Growth (%) 

Murabahah 505,633,003 717,295,732 41.9 

Salam 30,000 38,350 27.8 

Istisna 1,361,194 13,356,040 881.2 

Mudarabah 26,350,660 42,172,436 60.0 

Musharakah 65,342,241 96,477,072 47.6 

Ijarah 6,783,056 6,163,280 -9.1 

Qardh 

Debtors 

9,969,052 18,929,678 89.9 

Micro 407,474,101 583,797,789 43.3 

Small 176,405,460 263,104,635 49.1 

Medium 

Sector 

31,589,645 47,530,164 50.5 

Agriculture 17,720,057 26,450,172 49.3 

Mining 484,808 1,176,654 142.7 

Manufacturing 12,465,465 13,608,387 9.2 

Electricity 748,034 557,124 -25.5 

Construction 6,569,748 18,586,533 182.9 

Trading 255,558,690 322,632,325 26.2 

Transportation and comm 8,704,141 8,705,516 0 

Business services 72,193,743 114,142,480 58.1 

Social services 5,632,065 10,807,309 91.9 

Others 235,392,455 377,766,088 60.5 

Meanwhile, TPFs raised by BPRS increased to IDR17 billion 

(US$1.84 million; 33%) so it indicated that all funds raised 

were fully distributed by BPRS. In other words, BPRS has 

functioned as an intermediary institution especially in its 

local area with the main market share of micro and small 

enterprises, either in villages or cities. The indication was also 

refl ected from the fi nancing to deposit ratio of BPRS, which 

was recorded at 126.4%. 

Last year marked the growth of all types of fi nancing products 

distributed by BPRS except Ijarah fi nancing. Based on type 

of transaction, the trading-based fi nancing with Murabahah 

transaction and profi t-loss sharing with Musharakah 

transaction dominated BPRS. Both types are intended to 

provide working capital of the customer in which recorded a 

growth of 45% in 2007 y-o-y. 

Murabahah-based fi nancing is also intended to meet the 

needs of products such as motorcycles/cars and houses. This 

fi nancing matched the characteristics of BPRS customers, 

who generally (65.7%) were micro customers to meet their 

consumptive and productive fi nancing with less than IDR50 

million (US$5,425). From the economic sector, trading and 

commercial services were the sectors which received the 

substantial portion of fund allocation from BPRS in 2007. 

While the amount for agriculture was not as high as that 

for the two sectors, it still enjoyed high fi nancing allocation, 

namely 49.3% y-o-y. 

Challenges 

However, for years to come, the national Islamic banking 

industry may have to deal with several challenges to maintain 

the high level of growth. These may include: 

Quality of human resources: The rapid growth of the Islamic 

banking industry needs to be supported by human resources 

with knowledge of Islamic banking and generally required 

fi eld of expertise such as capability for entrepreneurial 

risk management and service excellence. Islamic banking 

operation, which is closed to real sector, requires its human 

resources to be strong and competent in aspects related to 

real sector, i.e. capability for project evaluation in all aspects. 

At present, the need for Islamic human resources is fulfi lled 

partially from conventional banks and the rest by graduates from 

educational institutions. The Islamic/fi nance industry certainly 

needs the support of all kinds of resources and expertise, like 

analytical capability derived from formal education training or 

technical capability gained from fi eld experience. 

Services coverage: As new industry develops, Islamic 

banks still have limited operational coverage compared to 


Page 103


Page 104 


conventional banks, either in the form of service coverage 

or product variation that facilitates transactional needs. On 

the other hand, customers will consider aspects of effi ciency 

and convenience more than they would compliance with the 

principles of Shariah. Therefore, if Islamic banking is widely 

accepted, it should be able to place itself as a solution and 

not just as a vendor of fi nancial products that comply with 

Shariah but fail to meet the practical needs of customers. 

Low level of people understanding: Until now, the level of 

understanding of the operational nature of Islamic banking 

has been limited. It is necessary to have a program that 

enhances public awareness, hence the need to position 

Islamic banking properly at all levels of society. Yet, the need 

for information dissemination for the respective groups does 

not mean equality. For the academic segment, the need for 

an explanation on Islamic banking tends to be higher than 

that for businessmen or regular people who may need more 

information on how they can benefi t from Islamic banking 

services and the benefi ts being offered. 

Policy of IB development 

The policy of the Indonesian Islamic banking industry 

development in general is still directed towards strengthening 

industry structure as outlined in the blueprint, where the 

implementation is in line with the development condition 

and challenges faced by the industry or national economy. 

The momentum of rapid growth of Islamic banks should be 

maintained to enhance benefi ts for customers and to respond 

to challenges of improved intermediary function in solving the 

problem of national economy. 

In that regard, the policy and strategy of Islamic banking 

development in 2008 will be focused on efforts to expedite 

the quality and capacity improvement of Islamic banking 

services, either on the supply or demand side, to achieve the 

market share of 5% by end-2008. 

Table 6: Projection with acceleration 

Indicator Dec’05 Dec’06 Dec’07 Dec’08 

Asset 20.88 27.14 47.94 91.57 

Financing 15.23 19.79 38.39 68.95 

Third party funds 15.58 20.25 36.10 73.33 

Market share (%) 1.42 1.68 2.84 5.25 

From the supply side, the policy of Islamic banks will be to 

strengthen the structure of institutional and Islamic banking 

effi ciency so as to improve the level of competition and ability 

to cushion the impact of any economic shock. This policy 

direction is intended to emphasize some main policies as 

discussed below. 


Strengthening quality of human resources: Facilitating 

technical aid program for banks to improve its expertise, 

either in Shariah or other technical aspects such as project 

evaluation, service excellence, managerial capability and risk 

management. These aspects are expected to improve the 

management quality of Islamic banking assets which in turn 

will increase public confi dence in Islamic bank services. The 

improvement of capability on the Shariah aspect and service 

excellence will add to the convenience of doing Islamic 

banking transactions. 

With regard to the acceleration program of Islamic banking 

growth, the plan to strengthen human resources becomes 

more signifi cant since during its growth Islamic banks are 

expected to be able to extend the DPK properly and safely. 

Offi ce channeling: This program is conducted to assist 

customers who wish to receive Islamic fi nancial services either 

from Islamic commercial banks or conventional banks that 

offer Islamic services as well. Currently, the physical existence 

of a bank is still an important aspect since the majority of 

Indonesians are not actively connected with fi nancial services 

facilities by electronic means. 

Through this program, Islamic fi nancial products and services 

are expected to be offered more extensively to a wider customer 

base using the existing network of conventional banks. In 

relation to potential maximization of offi ce channeling, the 

coverage of services was already extended not only in the 

area of funding mobilization but also in fi nancing services. 

Product diversifi cation: This program for Islamic banking 

is implemented with the aim to place the Islamic banking 

industry as the solution that can meet public demand for 

reliable daily fi nancial needs at a retail or corporate sector 

level. Product diversifi cation in Islamic fi nance will effectively 

improve the competition level of the Islamic banking industry 

as a whole. In this regard, with the acceleration program 

where the system of Islamic banking has the potential to 

mobilize more quality funds, product diversifi cation would be 

very signifi cant in facilitating DPK distribution in more fl exible 

ways to a wide spectrum. 

Facilitating the formation of investor forums with related 

parties: Given the limited capital for the national Islamic 

banking industry, Bank Indonesia considers it necessary 

to facilitate foreign investor interest either through direct 

investment to IB institutions or investment in potential real 

sector that generates positive effects on capital infl ow. 

Meanwhile, looking at the demand side, the policy of 

Islamic banking will be to enhance market share of Islamic 





banking so that Islamic banks can propel the process of 

banking intermediary and the creation of systemic stability 

signifi cantly. 

Socialization of Islamic banks: This aims to introduce and 

disseminate Islamic banking through forums and dedicated 

events to different segments. The targeted segments include 

academia through writing of academic books, seminars and 

training for trainers. This dissemination program will involve 

many parties. It is hoped that the program of public education 

will change public perception on the relationship between the 

customer and Islamic banks, as opposed to one of creditor 

and debtor. Hopefully, the development of Islamic banking 

will be more stable. 

Linkage program: The aim of this program is to strengthen 

relationships between practitioners and the business 

sector. Research has been done and will be conducted at 

microfi nance, medium and even corporate levels, which will 

be benefi cial especially in terms of enhancing the fi nancing 

assessment and preventing adverse selection. Specifi cally, 

the objective of research is to obtain a benchmark fi nancing 

model for Islamic banks. 

Voluntary sector: It is to encourage the participation of 

Islamic banks in the development of voluntary sector that 

has strategic potential to alleviate poverty and contribute to 

CORPORATE 

Demand Side 

Customers 

INVESTORS 

Government 

SOCIAL 

FUNDS 

FINANCING 

EXPANSION 

RETAIL 

national improvement of the socio-economic structure. The 

Islamic bank as an intermediary agent is expected to be 

the catalyst in improving mobilization and management of 

voluntary funds (zakat, shadaqah, infaq and wakaf) by amil 

or institution of zakat, to support the process of economic 

empowerments for microbusiness and poverty alleviation, 

which in turn will enhance public awareness of the benefi ts 

of Islamic banking. 

“Bank Indonesia will complete and 

reaffi rm related regulations on risk 

management and evaluation of 

the soundness of Islamic banks, 

evaluation of asset quality and 

contracts of fund collection” 

Encourage government participation: Aimed at encouraging 

the extension of opportunity for Islamic banks to manage 

government funds, or the government could participate in 

fi nancing program in the level of Islamic banking within the 

national banks. This will improve the Islamic banking market 

share in the national banking industry. 


CONV. 

BANKS 

UUS 

BUS 

NETWORK, PRODUCT 

& SERVICES 

DEVELOPMENT 

Subsidiary BUS 

CONVERSION 

BUS 

ESTABLISH UUS 

ESTABLISH BUS 

Supply Side 

STRONG CAPITAL, 

MGT, HUMAN 

CAPITAL 

Page 105


Page 106 


However, some measures to enhance Islamic banking 

profi le through acceleration of Islamic banking growth will 

be more effective with regulatory support that provides 

legal certainty for investment activities through Islamic 

instruments. Therefore, Bank Indonesia will continuously 

support ratifi cation of the Islamic banking law, tax law and 

regulation on Islamic bonds (Sukuk). The enactment of 

these laws would enhance legal certainty, which is expected 

to improve the competitiveness of Islamic banking products 

and Islamic market instruments that hitherto are troubled 

by double tax imposition. 

Apart from supporting the effi ciency and competitiveness 

of Islamic banks, Bank Indonesia will complete and reaffi rm 

related regulations on risk management and evaluation 

of the soundness of Islamic banks, evaluation of asset 

quality and contracts of fund collection and distribution 

by considering prudent principles of bank management 

and Islamic principles. With this, it is expected that the 

development of Islamic banking industry will be much 

better. 

Acceleration Program 2007-08 

The development of the Islamic banking system from time 

to time seems to show good performance. There has been 

improvement in some Islamic banks followed by impressive 

and high-quality growth of business volume. With all 

advantages attached to Islamic banking, all parties involved 

certainly have to make a concerted effort in order for Islamic 

banks to grow signifi cantly. 

The market share of Islamic banks over national banks is 

still small, only 1.5% with total assets amounting to IDR25.6 

trillion (US$2.77 million) (as at October 2006). The number 

of Islamic banks so far comprising three Islamic commercial 

banks, 19 Shariah units of Islamic commercial banks and 

105 BPRS (Islamic rural banks) that covers 600 offi ce 

networks are insuffi cient compared to potential market and 

existing current opportunities. 

An analysis of research preferences shows high public 

awareness of the existence of fi nancial industry and Islamic 

banks. The growth of Islamic banking internationally is in 

a rapid phase so it provides opportunities as fi nancing 

resources for the development of Indonesian economy 

in general and the growth of Islamic fi nancial industry 

in Indonesia in particular. The existence of voluntary 

sector funds (either resulting from business of banks or 

from third party funds) is a potential avenue for Islamic 

banks to channel it to related parties. This fact certainly 

will contribute to value-added on the existence of Islamic 

banking industry when Islamic banks become effectively 


involved in the linkage program and function as funds 

distributor to SME development. 

Afterwards, the share of Islamic banks will increase in the 

national banks and it will contribute positively to support the 

development of qualifi ed national economic growth (quality 

of growth) through the achievement of social, material and 

spiritual (falah) objectives based on the principle of falah 

which advocates justice, balance and public benefi t. 

In order to enhance the role of Islamic banks, this calls for 

an acceleration program that involves all components of 

stakeholders and positioning of Islamic banks not only as 

complementary but also as national assets. During 2007- 

08, it is expected that the portion of Islamic banks can be 

raised to 5% by the end of 2008 by maintaining prudent 

principles and Shariah compliance. 

With reference to systematic policy and strategic initiatives 

in the blueprint of national Islamic banking development, 

the acceleration program in 2007-08 will be focused more 

on the quantitative target achievement through policy 

packages and initiatives that will contribute to signifi cant 

growth within a short period. The effort to push for faster 

development from the supply and demand side in turn 

will demand the commitment of and synergic cooperation 

from all stakeholders of Islamic banks, including the 

government. 

Projected growth 

Taking into account the result of assessment on the 

fundamental conditions of the Islamic banking industry, 

assumptions such as there would be several new banks 

established in various forms (BUS, UUS or BPRS), 

endorsement of Islamic banking, tax and Islamic bond 

laws, as well as required policy response during 2008, 

the projection of Islamic banking development for 2008 

basically will be the same as that for 2006, which calculated 

5% share of Islamic banking. 

With the implementation of consistent acceleration 

program and support from the stakeholders of Islamic 

banks, national Islamic banking growth can be pushed 

much faster. Thus, the expected achievement of market 

share 5% in 2008 is plausible. 

Ali Sakti is a bank researcher and Nasirwan Ilyas is a senior bank 

researcher with the Islamic banking directorate at the Central 

Bank of Indonesia. They can be contacted via email at a_sakti@ 

bi.go.id and nasirwan@bi.go.id respectively.



THE RESULTS ARE NOW OUT 

With over 212 unique submissions, the 2007 Deals of the Year awards were one of our greatest challenges ever to review 

and arrive at our fi nal selections. The fourfold growth in submissions refl ected the dramatic increase in the volume of new 

deals. 

Many of these transactions refl ect the depth of the players from the regional institutions in Malaysia and the GCC, as well 

as the importance of the global banks. Innovation was a hallmark of the transactions, with many bankers and their clients 

testing new frontiers. 

Deal of the Year: DIFC Investments LLC 

A 

wards 

2007 

Size: AED7.5 billion (US$2 billion) 

Arrangers: Barclays Capital, Deutsche Bank, Dubai Islamic Bank, Lehman Brothers 

Lawyers: Allen & Overy, Clifford Chance, Lovells, Maples & Calder 

Rating: A1/A+ (S&P) 

Date: 20th November 2007 

Shariah Adviser: Dubai Islamic Bank Shariah Board 

These Sukuk al Mudarabah issued by the Dubai International Financial Center (DIFC) through a DIFC-registered special 

purpose vehicle represent both the capability of the DIFC to serve the market, as well as funding the DIFC in its investment 

strategy. It is a case of proof of concept in that the DIFC is able to demonstrate how its law and vehicles can serve a 

global market. The DIFC’s general funding needs include expanding infrastructure for the DIFC in hard and soft assets, 

acquisitions and all other activities that support the growth and success of the DIFC as a whole. This in itself bodes well 

for the growth of the global Sukuk market. Indeed, the world bought into the story with 47% of the investors coming from 

Europe and 20% from Asia; 7% of the investors were themselves governments and central banks. 

Best IPO: DP World 

Size: US$1.5 billion 

Lead Arrangers: Deutsche Bank, Merrill Lynch International, Shuaa Capital, Millennium Finance 

Corporation 

Lawyers: Clifford Chance, Linklaters 

Rating: A+ (S&P) 

Date: June 2007 

Shariah Adviser: n/a 

This transaction opened on the 4 


th November 2007 and closed on the 15th (institutional closings the 20th ), with an overallotment 

option of US$700 million. The transaction fulfi lls the IPO promise to holders of the US$3.5 billion PCFC Development 

Sukuk Al Musharakah of 2006. The transaction is the largest ever and fi rst retail offering on the DIFX. 

Page 107


Page 108 

Deals of the Year (continued...) 

Most Innovative: Mobily Project Financing 


Lead Arrangers: ABN Amro, Al Rajhi Bank, Banque Saudi Fransi, Calyon, National Bank of Abu Dhabi, 

The National Commercial Bank, Saudi Hollandi Bank, SAMBA 

Lawyers: Al-Jadaan & Partners Law Firm, Baker & McKenzie, The Law Offi ce of Mohammed 

Al-Sheikh, White & Case 

Rating: n/a 

Date Closed: March 2007 

Shariah Advisers: Dr El Gari, Dr Nazih Hammad and Sheikh Nizam Yaquobi 

In a year of signifi cant innovation, we saw new structures from Malaysia; Red Sea Gateway, Egyptian Fertilizer Company 

acquisition and Tamweel, among others, all gave close competition to Mobily. In the end, it was the demonstration of the 

fungibility of air time, an intangible asset, and its use as the underlying asset for a proper Islamic sales transaction applying 

the Islamic rules of agency that won in this category. This transaction demonstrates that innovation does not require 

complication and paves the way for funding other high-technology and communications deals in the future. 

Best Equity: Cherating Capital (Khazanah) 

Size: US$850 million 

Lead Arrangers: CIMB Islamic, Deutsche Bank, JP Morgan Malaysia 

Co-Arrangers: European Islamic Investment Bank, Mashreqbank 

Lawyers: Adnan Sundra & Low, Clifford Chance Wong Private Limited, Kadir Andri & Partners, 

Linklaters Allen & Gledhill 

Rating: n/a 

Date: 5th July 2007 

Shariah Adviser: CIMB Islamic Shariah Committee 

This transaction replicates the exchangeable structure fi rst pioneered by Khazanah in 2006. In this case, the Sukuk holders 

will have the option to exchange their units for shares of PLUS Expressways at the maturity of the Sukuk. In addition to being 

the largest Malaysian equity-linked deal, this Dubai International Financial Exchange (DIFX)-listed transaction is the thirdlargest 

Asia-Pacifi c deal outside of Australia and Japan. 

Best Cross-Border: Cherating Capital (Khazanah) 


Lead Arrangers: CIMB Islamic, Deutsche Bank, JP Morgan Malaysia 

Co-Arrangers: European Islamic Investment Bank, Mashreqbank 

Lawyers: Adnan Sundra & Low, Clifford Chance Wong Private Limited, Kadir Andri & Partners, 

Linklaters Allen & Gledhill 

Rating: n/a 


Shariah Adviser: CIMB Islamic Shariah Committee 

Perhaps no sponsor has been as successful in attracting capital on a global basis as Khazanah. With the Cherating 

exchangeable deal, Khazanah continues this trend and draws capital from Japan to North America, and critically 

strengthens bonds with the GCC. The transaction is listed on the Hong Kong Stock Exchange, the Dubai International 

Financial Exchange and Malaysia’s Labuan International Financial Exchange. 



Best Structured Finance: Tamweel Residential ABS CI (1) Ltd 




Lead Arrangers: Morgan Stanley, Standard Chartered 

Lawyers: Allen & Overy, DentonWildeSapte 

Rating: Class A Notes - Aa2 (Moody’s)/AA (Fitch), Class B Notes - Baa1 (Moody’s)/BBB+ (Fitch), 

Class C Notes - Ba3 (Moody’s)/BB- (Fitch), Class D Notes not rated 


Shariah Adviser: Dr Hassan Hussain 

At last, this deal represents the fi rst true securitization of Islamic mortgage alternatives without excessive cash 

collateralization or recourse to the originator. The transaction creates a clever tiering of the Sukuk into unique classes in 

a Shariah compliant manner, and is the fi rst UAE-rated Islamic mortgage alternative instrument. 

Best Ijarah: Red Sea Gateway Terminal Limited 

Size: SAR 1.7 billion (US$453.93 million) 

Lead Arrangers: Al Rajhi KSA, Saudi Fransi Bank 

Lawyers: Allen & Overy, Linklaters 

Rating: n/a 

Date: 6th December 2007 

Shariah Advisers: Al Rajhi Bank Shariah Board 

Al Rajhi Bank underwrote SAR1.7 billion (US$507.35 million) of the SAR1.9 billion (US$453.93 million) required to execute this 

major project fi nancing. This project applied the unique structure developed as Al Rajhi’s approach to forward leasing, 

using Wakalah with the forward lease. In the deal, the lease has a 16-year tenor, and the client is the agent of the banks 

during the construction phase to build the asset. The transaction provides a new look at how to execute forward leases 

for construction, and provides a viable alternative to Istisna in structuring long-term project fi nancings. Competition was 

strong in this segment, with innovative presentations from Qatar, the UAE, Malaysia, the US and Europe. 

Best Mudarabah: Aldar exchangeable Sukuk 


Lead Arrangers: Barclays Capital, Credit Suisse, National Bank of Abu Dhabi 

Lawyers: Bedell Cristin Jersey Partnership, Clifford Chance, DentonWildeSapte, Simmons & 

Simmons 

Rating: Not rated 

Date: 8th March 2007 

Shariah Advisers: Sheikh Nizam Yaquobi and Dr Abdul Sattar Abu Guddah 

The Mudarabah space was very active last year and Aldar won in a tough competition that included DP World, Cornerside 

Investment (KFH Malaysia), Jebel Ali Free Zone and Gulf General Investment. This proved to be the largest exchangeable 

deal raising capital for the lesser-known Aldar Properties. The deal entrusts Aldar, Abu Dhabi’s largest property developer, 

to act as mudarib for investors in the Abu Dhabi property sector. The transaction proved popular in the international 

markets, with 80% sold in the international markets and penetration into the US institutional market. 

Page 109


Page 110 


Best Musharakah: KL Sentral Sukuk Musharakah 

Size: RM720 million (US$218.9 million) 

Lead Arrangers: HSBC Bank Malaysia, Kuwait Finance House (Malaysia) 

Lawyers: Newfi elds Advisors, Zaid Ibrahim & Co 

Rating: AA2 (Rating Agency Malaysia) 


Shariah Advisers: Kuwait Finance House (Malaysia) Shariah Board 

This structure refi nances KL Sentral’s prior Bai Bithaman Ajil debt. The proceeds are meant to transform 72 acres of prime 

land in Kuala Lumpur. The RM720 million (US$218.9 million) transaction includes a put option to the sponsor in order to 

enhance the credit of, and thereby improve, the pricing compared to the prior debt structure. The transaction leads the 

growing trend that expects Malaysian issues to seek globally acceptable Sukuk structures. 

Best Sovereign: Ras Al Khaimah Investment Authority 


Lead Arrangers: Credit Suisse, HSBC, National Bank of Dubai 

Lawyers: Allen & Overy, Lovells, Maples & Calder 

Rating: n/a 


Shariah Advisers: n/a 

This is the initial benchmark issue for the UAE constituent emirate of Ras Al Khaimah. The transaction refl ects the full faith 

and credit of the emirate’s investment authority and enjoys an irrevocable and unconditional guarantee from the 

government. The proceeds will be applied to the development of real estate assets. 

Best Sukuk: Jebel Ali Free Zone Sukuk 


Lead Arrangers: Barclays Capital, Deutsche Bank, Dubai Islamic Bank, Lehman Brothers 

Lawyers: Clifford Chance, Maples & Calder, Allen & Overy, Lovells 

Rating: A1 (Moody’s)/A+ (S&P) 


Shariah Advisers: Dubai Islamic Bank Shariah Board 

With so many excellent new issues, deciding on the best Sukuk for 2007 was incredibly diffi cult. In the end, Jebel Ali’s AED7.5 

billion (US$2 billion) Sukuk was chosen for achieving the largest UAE domestic issuance, yet it was also well accepted by 

international investors. The A1 (Moody’s)/A+ (S&P) deal was launched and closed in the midst of the current global credit 

crunch with attractive distribution in the UK, Europe and the US. 



Best Real Estate: Aldar Exchangeable Sukuk 




Lead Arrangers: Barclays Capital, Credit Suisse, National Bank of Abu Dhabi 

Lawyers: Bedell Cristin Jersey Partnership, Clifford Chance, DentonWildeSapte, Simmons & 

Simmons 



Shariah Advisers: Sheikh Nizam Yaquobi and Dr Abdul Sattar Abu Guddah 

With the proven success of Dubai, and great strides being made in Malaysian, Qatari, Saudi Arabian, Bahraini and Kuwaiti 

real estate, this deal puts Abu Dhabi on the map and highlights the opportunities in this strong market. This transaction was 

the largest exchangeable Sukuk, and is the fi rst Sukuk to be listed in London. 

Best Islamic REIT: Al-Hadharah Boustead REIT 


Lead Arrangers: Affi n Bank, Affi n Securities, Malaysian International Merchant Bankers, Pacifi c Alliance 

Capital 

Lawyer: Albar & Partners 

Rating: n/a 

Date: 15th January 2007 

Shariah Adviser: Islamic Banking and Finance Institute Malaysia 

As was thematic for 2007, this sector is heating up and we enjoyed real estate investment trust (REIT) entries for the fi rst 

time from outside of Malaysia. While the others were real estate investment funds or funds investing in REITs, the only 

true and new Islamic REIT was Al-Hadharah Boustead REIT. This was an IPO for legacy plantation group and generates a 

predictable income for REIT investors by leasing the REIT assets to various users in the palm oil sector. 

Best Murabahah/ 

Trade Finance: 

PT Krakatau Steel 


Lead Arrangers: HSBC Amanah, Dubai Islamic Bank, Kuwait Finance House (Malaysia) 

Lawyers: DentonWildeSapte, Hanafi ah Ponggawa & Partners 

Rating: n/a 


Shariah Adviser: HSBC Amanah 

The fi rst transaction to follow HSBC’s landmark Pertamina trade syndications in 2004 and 2006. HSBC Amanah and its 

counselors, Denton Wilde Sapte and Hanafi ah Ponggawa & Partners, had to manage complex trade cycle issues and tax 

issues while introducing Indonesia’s largest steel manufacturer to syndicated Islamic trade fi nance. 

Page 111


Best Tawarruq: Mada Leletisalat 


Lead Arrangers: ABC Islamic Bank, Al Rajhi Banking Corporation, Arab National Bank, Banque Saudi 

Fransi, BNP Paribas, Calyon, Citibank, Gulf International Bank, National Bank of Kuwait, 

Samba Financial Group 

Lawyers: Al-Jadaan & Partners Law Firm, Clifford Chance, White & Case 

Rating: n/a 

Date: July 2007 

Shariah Advisers: Citi Islamic Investment Bank Shariah Board 

This important Saudi Arabian transaction represents the acquisition of the third mobile operator’s license by Kuwait’s 

Zain (MTC Telecommunications). The massive US$6.11 billion transaction is indicative of the importance of the 

telecommunications sector in the GCC and emerging markets as a whole. We have set aside Tawarruq from Murabahah 

to refl ect the distinction of these processes in the view of Shariah scholars and to avoid confusion in the awards. 

Best Project Finance: Red Sea Gateway Terminal Limited 

Size: SAR1.7 billion (US$453.93 million) 

Lead Arrangers: Al Rajhi KSA, Saudi Fransi Bank 

Lawyers: Allen & Overy, Linklaters 

Rating: n/a 


Shariah Advisers: Al Rajhi Bank Shariah Board 

The demand for new project fi nance transactions is tremendous and this year’s competition including a rich group of 

submissions, all of which made the selection more challenging. Nonetheless, we found the novel Wakalah with the 

Forward Lease approach applied by Al Rajhi and its syndicate in the Red Sea Gateway project to represent the best of 

breed in a very strong fi eld. 

Page 112 


Best Corporate Finance: Egyptian Fertilizers Company 


Lead Arranger: Deutsche Bank 

Lawyers: Clifford Chance, Lovells, Maples & Calder 

Rating: n/a 

Date: November 2007 

Shariah Adviser: Dr Hussein Hassan 

The EFC leveraged acquisition is the largest MENA Islamic leveraged acquisition. Utilizing the concept of Bai al Salam for 

a commodities-based company, the transaction breaks new ground and sets an example in a market rich with primary 

commodity producers of signifi cant scale. 



BAHRAIN: Gulf Finance House Trust Certifi cates 

Size: US$200 million (fi rst tranche of US$1 billion program) 

Lead Arrangers: Dredner Kleinwort, HSBC 

Lawyers: Al-Sarraf & Al-Ruwayeh, Dechert, Lovells, Walkers 

Rating: n/a 





As a leading Bahrain-based Islamic investment bank, Gulf Finance House is the fi rst issuer under a trust certifi cate program. 

The transaction attracted a diverse investor universe, attracting 45% of the funds from outside of the Middle East with its 

London Stock Exchange listing. The deal structure is extremely fl exible as to both the volume of Sukuk that may be issued, 

and the diversity of the underliers. 

DJIBOUTI: Doraleh Containers Terminal 


Lead Arrangers: Dubai Islamic Bank, Standard Chartered, WestLB 

Lawyers: Allen & Overy, Lovells 

Rating: n/a 

Date: December 2007 

Shariah Advisers: Dubai Islamic Bank and Standard Chartered Bank 

This important Saudi Arabian transaction represents the acquisition of the third mobile operator’s license by Kuwait’s 

Zain (MTC Telecommunications). The massive US$6.11 billion transaction is indicative of the importance of the 

telecommunications sector in the GCC and emerging markets as a whole. We have set aside Tawarruq from Murabahah 

to refl ect the distinction of these processes in the view of Shariah scholars and to avoid confusion in the awards. 

EGYPT: Egyptian Fertilizers Company 


Lead Arranger: Deutsche Bank 

Lawyers: Clifford Chance, Lovells, Maples & Calder 

Rating: n/a 

Date: November 2007 

Shariah Adviser: Dr Hussein Hassan 

The Egyptian Fertilizers Company-leveraged acquisition is an exciting deal in that it is the fi rst major deal to apply the 

concept of Bai al Salam for a commodities-based company. In lieu of lending, Deutsche Bank structured the transaction 

uses a series of forward, or Salam, sales of the plant’s product to fund the acquisition. It is the largest ever Islamic deal in 

Egypt. 

Page 113


Page 114 


INDIA: SREI Infrastructure Finance Ltd. 


Lead Arrangers: HSBC, Kuwait Finance House (Malaysia) 

Lawyers: Norton Rose, Wadia Ghandy & Co, Walkers 

Rating: n/a 

Date: 10th August 2007 

Shariah Adviser: HSBC Amanah 

Although not a large transaction, this equipment leasing deal was arranged by HSBC Amanah with Kuwait Finance House 

(Malaysia) and represents one of the fi rst major syndicated Islamic transactions serving the Indian market. 

INDONESIA: PT Adhi Karya Sukuk Mudarabah 

Size: IDR125 billion (US$13.3 million) 

Lead Arranger: Mandiri Sekuritas 

Lawyers: Priyadi & Co 

Rating: idA-(Sy) 

Date: June 2007 


This transaction represented another success for Mandiri Sekuritas, which underwrote this deal. The proceeds of this 

Mudarabah Sukuk were used to repay traditional bonds outstanding by the sponsor, shifting them onto an Islamic basis. 

JORDAN: Queen Alia International Airport 


Lead Arranger: The Islamic Development Bank 

Lawyers: Ashurst, Norton Rose 

Rating: n/a 


Shariah Adviser: Islamic Development Bank 

This is a signifi cant deal in every way, including its application to the redevelopment of Jordan’s Queen Alia International 

Airport. Arranged by Islamic Development Bank, the deal blends Islamic and conventional facilities including those offered 

by International Finance Corporation (a member of World Bank Group). 

KAZAKHSTAN: Bank TuranAlem Syndicated Wakalah 


Lead Arrangers: Abu Dhabi Islamic Bank, Abu Dhabi Commercial Bank, Barclays Capital, CIMB 

Lawyers: Allen & Overy, Grata Law Firm 

Rating: BB (S&P), Ba1 (Moody’s) and BB+ (Fitch) 


Shariah Advisers: Abu Dhabi Islamic Bank Shariah and Fatwa Supervisory Board 

This is the fi rst major transaction executed for a Kazakh bank and the proceeds are to be applied in Islamic trade fi nance 

transactions. The syndicate brought together three of the leading players in the fi eld: Malaysia’s CIMB, the GCC’s Abu 

Dhabi Islamic Bank and global leader Barclays Capital. This was also the largest syndicated deal in the Kazakh market. 


KUWAIT: NIG Sukuk Limited 





Lead Arrangers: BNP Paribas, Citibank, NBK Capital, Standard Chartered, WestLB 

Lawyers: Al Sarraf & Al-Ruwayeh, Walkers, Allen & Overy 

Rating: Baa2, stable (Moody’s) 

Date: 16th August 2007 

Shariah Advisers: Standard Chartered Bank Shariah Board and Citi Islamic Investment Bank Shariah 

Board 

This is the largest program from Kuwait with an initial issuance of US$475 million for a leading Kuwait-based investment 

group. This transaction introduced NIG Holding, Kuwait’s largest listed holding company, to a new universe of investors. 

MALAYSIA: MBB Subordinated Capital Sukuk 


Lead Arrangers: Aseambankers Malaysia , HSBC Amanah, UBS 

Lawyers: Allen & Overy, Linklaters Allen & Gledhill, Shook Lin & Bok, Zul Rafi que and Partners, 

Zaid Ibrahim & Co 

Rating: Baa1 (Moody’s), BBB+ (Standard & Poor’s) and BBB+ (Fitch Ratings) 

Date: 18th April 2007 

Shariah Advisers: HSBC Amanah Shariah Committee and UBS Shariah Advisory Council 

In a market rich with new and attractive issuances, this stands out as one of the fi rst Sukuk supporting the issuances of new 

bank capital. The deal represents a benchmark for capital Sukuk deals, and achieved important diversifi cation in the 

Maybank investor base, capturing the attention of Middle Eastern and Saudi Arabian investors. 

PAKISTAN: Engro Chemical 

Size: US$200 million (in two tranches) 

(a) US$150 million Islamic syndicated loan arranged with participation from local as 

well as international banks; and 

Lead Arrangers: 

(b) US$50 million equivalent (PKR3 billion) Islamic Sukuk issue tapping local investors 

interested in participating in the Islamic mode of fi nancing. 

Citibank, Dubai Islamic Bank, Habib Bank, Meezan Bank, National Bank of Pakistan, 

Standard Chartered 

Lawyers: Haidermota & Co, Lovells, Mandviwala & Zafar 


Date: October 2007 

Shariah Advisers: Citigroup, Dubai Islamic Bank, Meezan Bank and Standard Chartered 

This project fi nance facility (US$200 million) and Sukuk al Musharakah (US$50 million) support the largest project fi nance 

and corporate fi nance transaction in the last decade in Pakistan. The complicated transaction includes a number of 

cooperative arrangements between conventional and Islamic fi nanciers to deliver a projects of this scale in the domestic 

Pakistan market. 

Page 115


Page 116 


QATAR: Qatar Real Estate Investment Authority Company (Alaqaria) 


Lead Arrangers: HSBC, Emirates Bank International, Gulf International Bank, Landsbanki Íslands, 

Mashreqbank, Masraf Al Rayan, National Bank of Abu Dhabi, Qatar International 

Islamic Bank, Qatar Islamic Bank 

Lawyers: DentonWildeSapte, Lovells, Maples & Calder, Patton Boggs 

Rating: A2 (Moody’s), BBB+ (Fitch) 

Date Closed: 2nd August 2007 

Shariah Advisers: HSBC’s Central Shariah Committee 

This is the fi rst rated Sukuk (A2 [Moody’s]/BBB+ [Fitch]) for a Qatari corporate. This marked Alaqaria’s continuous use of 

the Sukuk market to fund its development business. The deal enjoyed strong distribution in Europe and among bank 

investors. 

SAUDI ARABIA: Mobily Project Financing 


Lead Arrangers: ABN Amro, Al Rajhi Bank, Banque Saudi Fransi, Calyon, National Bank of Abu Dhabi, 

The National Commercial Bank, Saudi Hollandi Bank, SAMBA 

Lawyers: Al-Jadaan & Partners Law Firm, Baker & McKenzie, The Law Offi ce of Mohammed 

Al-Sheikh, White & Case 

Rating: n/a 

Date Closed: March 2007 

Shariah Advisers: Dr El Gari, Dr Nazih Hammad and Sheikh Nizam Yaquobi 

In the Saudi Arabian market, 2007 was the breakout year for both Sukuk and big-ticket Islamic fi nance transactions. Saudi 

Consolidated Electricity, Red Sea Gateway, Jubail Water & Power, Dar Al Arkan and Mada Letetisalat were all important 

and landmark transactions. Mobily squeaked past the competition because of its innovative structure and the model that 

it offers other projects in the communications sector as well as the M&A sector. 

TURKEY: Derindere Turizm Otomotiv Syndicated Murabahah 


Lead Arranger: Citibank 

Lawyers: Allen & Overy, Pekin & Pekin 


Date Closed: November 2007 


Last year saw an important increase in the number of Turkish submissions. Although none was a mega deal, the acquisition 

of vehicles by Derindere for subsequent leasing marked the fi rst fi ve-year syndication in the Turkish market and was 75% 

oversubscribed. 



UAE: Jebel Ali Free Zone Sukuk US$2.04 billion 




Lead Arrangers: Barclays Capital, Deutsche Bank, Dubai Islamic Bank, Lehman Brothers 

Lawyers: Allen & Overy, Lovells, Clifford Chance, Maples & Calder 

Rating: A1 (Moody’s)/A+ (S&P) 


Shariah Adviser: Dubai Islamic Bank Shariah Board 

As the largest AED issuance ever, do we need to say more about this AED7.5 billion (US$2.04 billion) Dubai International 

Financial Exchange-listed transaction? 

UK: Aston Martin 

Size: £225 million (US$925 million) 

Lead Arranger: WestLB 

Lawyers: Clifford Chance, Denton Wilde Sapte 

Rating: n/a 

Date Closed: 31st May 2007 

Shariah Adviser: Sheikh Nizam Yaquobi 

Kuwait leader Investment Dar successfully led the acquisition on a Shariah compliant basis of Aston Martin using Islamic 

fi nancial tools including the issuance of Sukuk Musharakah. This pure private equity investment is a groundbreaking entry 

into the automotive sector for Islamic investors. 

US: Rahmat e Alam Foundation 


Lead Arrangers: Devon Bank, Light of Christ Lutheran Church 

Lawyer: David Loundy, in-house counsel for Devon Bank 

Rating: n/a 

Date Closed: 24th August 2007 

Shariah Advisers: The Shariah Supervisory Board of America, under the supervision of Mufti Mohammed 

Nawal Ur Rahman 

The US market has many large-scale fund and private transactions, but only a fl edgling domestic Islamic fi nance industry. 

One of the pioneers in this is Chicago-based Devon Bank, which teamed up with Light of Christ Lutheran Church to 

fi nance the acquisition of church properties and subsequent lease under the rules of Ijarah Muntahia Bittamleek. The 

transaction refl ects positive inter-faith cooperation on a commercial transaction for the benefi t of the growing Muslim 

community in Chicago. 

Page 117


Page 118 

Members of the global Islamic fi nance industry have cast their votes on who 

they perceived as the best of the best in the 2007 Islamic Finance news Annual 

Poll. A record 1,502 votes were cast during the December polling period in the 

industry’s most comprehensive survey. A total of 35 categories were contested, 

representing all major facets of the global Islamic capital markets industry. 

The full results, which were originally published on the 4 th January, are reproduced 

on the following page. 

Kuwait Finance House scooped the award for Overall Best Islamic Bank, edging out Dubai Islamic Bank, which had claimed 

top spot for the past two years while Malaysia’s CIMB Islamic Bank placed third for the second year running. 

For the second consecutive year, the battle for Best Islamic Retail Bank was the closest fought, and again Saudi Arabia’s Al 

Rajhi Bank emerged victorious over Dubai Islamic Bank. 

In the Best New Islamic Finance Bank category, Bahrain’s Global Banking Corporation beat Singapore’s The Islamic Bank of 

Asia and Dubai’s Noor Islamic Bank into second and third respectively. 

In the poll’s most one-sided battle, Bank Negara Malaysia once again eclipsed its nearest rivals for the Best Central Bank in 

Promoting Islamic Finance category. With the vast majority of votes in this category coming from outside Asia, Malaysia is still 

widely recognized as the most industry-friendly country. 

Ernst & Young claimed the Best Islamic Advisory Firm award, Parsoli Corporation of India won Best Islamic Brokerage Firm and 

Dow Jones Indexes was selected for its impressive array of Islamic-based indices in the Best Islamic Index Provider. 

Clifford Chance leapfrogged Norton Rose, the 2006 winner, for Best Law Firm in Islamic Finance following another busy year. 

Other winners were Prudential Fund Management, Standard & Poor’s and International Turnkey Systems for the Best Islamic 

Fund Manager, Ratings Agency and Technology Provider sectors respectively. 

In the individual country categories, there were wins for Bahrain Islamic Bank (Bahrain); Islamic Bank of Brunei (Brunei); 

Faisal Islamic Bank (Egypt); Bank Syariah Mandiri (Indonesia); Kuwait Finance House (Kuwait); CIMB Islamic Bank (Malaysia); 

Meezan Bank (Pakistan); Qatar Islamic Bank (Qatar); Al Rajhi Bank (Saudi Arabia); The Islamic Bank of Asia (Singapore); 

Türkiye Finans (Turkey); Dubai Islamic Bank (UAE) and European Islamic Investment Bank (Europe). 

Methodology 

THE RESULTS ARE OUT 

Best Overall Islamic Bank 

1 st 2 nd 3 rd 

Kuwait Finance House — 27% Dubai Islamic Bank — 21% CIMB Islamic Bank — 13% 

A record 1,502 submissions were received for the third Islamic Finance news Annual Poll, a 22% increase over those received 

for the 2006 edition. Following strict due diligence, however, 186 of those votes were eliminated due to irregularities. 

Thirty-fi ve categories were contested in the 2007 poll, four more than the previous year. 

Islamic fi nance issuers, investors, non-banking fi nancial intermediaries and government bodies from around the world were 

invited to participate. Participants were requested to take only 2007 into consideration when casting their votes. 




Best Central Bank in Promoting Islamic Finance 


Bank Negara Malaysia — 49% Central Bank of Bahrain — 19% State Bank of Pakistan — 13% 

Best Islamic Bank by Country 

Africa ABSA 

Bahrain Bahrain Islamic Bank 

Brunei Islamic Bank of Brunei 

Egypt Faisal Islamic Bank 

Indonesia Bank Syariah Mandiri 

Iran Bank Melli 

Jordan Jordan Islamic Bank 

Kuwait Kuwait Finance House 

Malaysia CIMB Islamic Bank 

North America American Finance House — Lariba 

Pakistan Meezan Bank 

Qatar Qatar Islamic Bank 

Saudi Arabia Al Rajhi Bank 

Singapore The Islamic Bank of Asia 

Turkey Türkiye Finans 

Europe European Islamic Investment Bank 

UAE Dubai Islamic Bank 

Results (continued...) 

Best Individual Islamic Banker 


Badlisyah Abdul Ghani — 18.92% 

CEO, CIMB Islamic Bank 

Afaq Khan — 18.24% 

CEO, Standard Chartered Saadiq 

Categories 

Best Islamic Retail Bank Al Rajhi Bank 

Best Islamic Private Bank HSBC Amanah 

Most Innovative Islamic Bank Kuwait Finance House 

Best New Islamic Finance Bank 

Global Banking 

Corporation 

Best Islamic Advisory Firm Ernst & Young 

Best Islamic Brokerage Firm Parsoli Corporation 

Best Islamic Index Provider Dow Jones Indexes 

Best Law Firm in Islamic Finance Clifford Chance 

Best Islamic Leasing Provider First Leasing Bank 

Best Islamic Ratings Agency Standard & Poor’s 

Best Takaful/reTakaful Provider Solidarity 

Best Islamic Fund Manager 

Prudential Fund 

Management 

Best Islamic White Label Provider FWU Group 

Best Islamic Technology Provider 

Salman Younis — 11.82% 

MD, Kuwait Finance House Malaysia 

International Turnkey 

Systems 

Page 119


The State Bank of Pakistan announced the need to introduce 

Shariah compliant deposit insurance schemes locally. 

Société Générale’s London broking arm successfully launched the 

world’s fi rst Islamic hedge funds. 

Dubai Bank became 100% Shariah compliant six months earlier 

than the normal expectation of 18 months. 

AT Kearney affi rmed the need to boost human capital with the 

Islamic fi nance sector which requires a fulfi llment of 30,000 new job 

opportunities within the next decade. 

Al Salam Bank’s application to acquire a minority stake in the El 

Nilein Banking Group was pending regulatory approval. 

Liechtensteinische Landesbank, in association with ABN Amro 

Markets, launched the fi rst exchange-traded Islamic Middle East 

index certifi cate at US$1 billion. 

Maples and Calder LLP advised on the US$5 billion Sukuk by ADIB 

Sukuk Company Ltd. 

Aseambankers, subsidiary of Maybank, achieved investment banking 

status upon its acquisition of Mayban Securities (Holdings). 

Bank Persatuan Malaysia hired Microlink Banking Solutions for its 

total Islamic banking solutions needs. 

The two-year Murabahah fi nancing facility for Kuveyt Türk Katilim 

Bankasi AS was successfully closed at US$200 million. 

Ithmaar Bank invested US$180 million in CITIC International Assets 

Management (CIAM) in exchange for a combined stake of 60% in 

CIAM’s enlarged share capital. 

Abraaj Capital announced its target of US$630 billion in regional 

infrastructure investment opportunities, to be carried out via the 

Infrastructure and Growth Capital Fund (IGCF). 

National Commercial Bank of Saudi Arabia established an Islamic 

Banking Development Group. 

AmIslamic Bank issued RM400 million (US$113.6 million) in 

subordinated Sukuk Musharakah bonds. 

The Lagoon City Islamic Musharakah Sukuk successfully closed at 


Malaysian Islamic banks showed a slower profi t growth despite their 

advantage in terms of technological investments, compared to their 

counterparts in other countries. 

Indonesia received aid from Islamic Development Bank to boost 

infrastructure projects in the country. 

Asian Finance Bank opened its doors in Kuala Lumpur. 

Page 120 

JANUARY news briefs 


Barclays projected global Sukuk sales to grow by 30% to US$22 

billion in 2007. 

Abu Dhabi Islamic Bank issued AED1.5 billion (US$408.5 million) in 

Sukuk to expand investments and fi nance large projects. 

Dubai Islamic Bank launched a Shariah compliant three-year Capital 

Protected Global Diversifi ed Note, with a minimum investment of 

US$10,000. 

ABN Amro and Liechtensteinische Landesbank pioneered a Shariah 

compliant index-tracking investment product, which was listed on 

the SWX Swiss Exchange and linked to the performance of LLB’s Top 

20 Middle East Total Return Index. 

The National Bank of Dubai (NDB) Investment Bank became the 

fourth regional bank to be inducted into the Dubai International 

Financial Exchange. 

The Royal Bank of Scotland, Calyon, Kuwait Finance House and 

ABN Amro lent a total of US$10.05 billion to AirAsia to fund its 150 

A320 airplane buy. 

Law fi rm Clyde & Co was granted an operating license by the Qatar 

Financial Center Authority. 

Dubai Islamic Bank opened two new branches in the Al Hamriya 

Free Zone in Sharjah and Al Yahar in Al Ain. 

Hong Leong Bank targeted Indonesia and Vietnam as potential 

locations for expansion. The bank was also keen on merger and 

acquisition opportunities in the region. 

A total of RM900 million (US$256 million) was offered by Gamuda’s 

Islamic bonds endeavor. 

Amlak became the UAE’s fi rst Islamic home fi nance company to 

establish an overseas branch in Egypt. 

Public Bank launched the PB Islamic Asia Equity Fund (PBIAEF) and 

PB Cash Management (PBCMF) via its subsidiary Public Mutual. 

Tejoori procured 25% of Omniyat Properties Eleven via a Musharakah 

deal. 

MIMB Investment Bank, a wholly owned subsidiary of EON Bank, 

was looking to widen its stockbroking business and delve into asset 

management and unit trusts. 

Masraf Al Rayan launched its fi rst Murabahah retail product, allowing 

home, vehicle and goods fi nancing. 

Boustead REIT managers distributed 98% of its Al-Hadharah 

Boustead Real Estate Investment Trusts (REITs) come 2008. Lodin 

Wok Kamaruddin, Boustead’s chairman, also projected a RM0.0738 

(US$0.21) per unit distribution by 2010. 


The Islamic Financial Services Board elected Bank Negara Malaysia 

governor Dr Zeti Akhtar Aziz as council chairman. Dr Shamsad Akhtar, 

governor of the State Bank of Pakistan, was chosen as her deputy. 

Ithmaar Bank – along with two undisclosed investors – paid US$180 

million for a combined 60% share of Citic International Financial 

Holdings. CIFH is the asset management arm of Hong Kong-based 

Citic International. 

Global Investment House Kuwait acquired two residential properties 

in Bahrain via the GCC Real Estate Fund, under Islamic fi nancing. 

AEON Credit Service issued a seven-year, bank-backed conventional 

and Islamic commercial paper/medium-term note (CP/MTN) valued 

at RM400 million (US$114.3 million). 

Arab Banking Corporation was underwriter for a US$555 million 

fi nancing facility for Gulf Industrial Investment Company. 

Islamic Development Bank dedicated US$446.3 million towards 

project fi nancing and trade operations in Azerbaijan, Nigeria, 

Senegal, Ivory Coast and Sudan. 

Qatar National Bank opened its fi rst Oman branch. 

The Dubai Financial Services Authority granted a license to 

Prudential to operate in Dubai. 

Bank Muamalat approached Kuwait Finance House to take up a 

stake in the bank. 

Qatar National Bank opened four new QNB Al Islami branches in 

Qatar. 

Al Meezan Investment Management put up Pakistan’s fi rst Initial 

public offering. 

Barwa Real Estate signed a US$200 million Mudarabah deal with Al 

Rayan Bank. Proceeds from the fund were used to fi nance Barwa’s 

projects. 

Islamic Bank of Thailand proposed a capital raise of between THB2 

billion (US$58.7 million) and THB3 billion (US$88 million). 

Qatar Islamic Bank applied for a British banking license to establish 

the Europe Finance House. 

Bursa Malaysia collaborated with the FTSE Group to launch the FTSE 

Bursa Malaysia EMAS Shariah index. 

Istithmar increased its spending by 50% to US$1.5 billion. 

The Kuwaiti ambassador to Japan Ghassan Al-Zawawi encouraged 

Kuwaiti Islamic fi nance players to forge ties with their Japanese 

counterparts. 

Tokyo played host to 300 delegates at Japan’s fi rst ever international 

seminar on Islamic fi nance. The event was jointly organized with the 

Malaysia-based Islamic Financial Services Board. 

JANUARY news briefs (continued...) 



CIMB Islamic simultaneously launched its fi rst ringgit and its fi rst 

non-ringgit Islamic equity-linked structured product in Malaysia 

and Singapore. The Islamic All-Stars Global Restricted Mudarabah 

Structured Investment-I product has 100% capital protection if held 

to maturity. 

Central Bank of Bahrain called for a well developed and transparent 

Islamic capital and money market at a conference organized by the 

International Islamic Financial Market (IIFM). 

Kuwait Finance House reported a profi t of RM4.16 billion (US$1.19 

billion) for 2006, up 40% from the previous year. 

National Bank of Umm Al Qaiwain signed an MoU with National 

Commercial Bank to offer Islamic retail banking products in the 

UAE. 

Indonesia’s House of Representatives was slated to pass a draft 

Shariah banking law, giving Shariah banks legal power at last. The 

law is expected to boost the growth of Shariah compliant banks, as 

well as the overall Indonesian economy. 

Global Investment House concluded two new real estate acquisitions 

in Kuwait as part of its GCC Real Estate Fund investment strategy. 

The Shariah compliant investments held three-year tenures and is 

in accordance with the “Lessee-to-Own’ structure for a third party, 

allowing the simultaneous maximization of profi t and reduction of 

risk. 

BankMuscat declared a net profi t of OMR60.4 million (US$156.8 

million) for the 2006 fi nancial year, a 33% increase from OMR45.4 

million (US$117.9 million) in 2005. The bank’s OMR77.3 million 

(US$200.7 million) operating profi t was up by 34.9%, while operating 

expenses increased by 21%. 

INCEIF, supported by Bank Negara Malaysia, opened doors for its 

CIFP qualifi cation for young graduates. 

WestLB AG’s London branch was the mandated lead arrangers 

for Emirates Trading Agency’s US$100 million syndicated 

Musharakah. 

Dubai Islamic Bank announced plans to launch the fi rst Shariah, 

legal and fi nancial consultancy fi rm. The fi rm will serve as the Islamic 

sector’s one-stop center for fi nancial structuring, legal documentation 

and product development. 

Al Arkan Real Estate Development Company listed its threeyear 

US$425 million Sukuk on the Dubai International Financial 

Exchange. The bonds were offered at a rate of 2% above a threemonth 

LIBOR. 

Teejoori invested €6 million (US$7.77 million) in German company 

BEKON to acquire 16.7% of the company. BEKON is a biogas plant 

operator specializing in renewable energy via the conversion of 

biodegradable waste into electricity. The company injected up to 

€3 million (US$3.88 million) to buy out an existing shareholding 

and added €3 million (US$ 3.88 million) in equity to meet BEKON’s 

global expansion and working capital needs. 

Page 121


Page 122 

FEBRUARY news briefs 

Islamic Development Bank provided US$15 million to Indonesia for 

the reconstruction of Simolo Island. 

AmanahRaya JMF Asset Management’s REIT revealed plans to 

induct 11 new local properties worth RM700 million (US$200.3 

million), boosting AmanahRaya REIT’s net asset value to RM2 billion 


Albaraka Banking Group was awaiting ratings from an international 

rating agency in tandem with the group’s completion of its June 

2006 IPO. 

ALDAR Properties launched US$1.3 billion in Sukuk Mudarabah for 

the European market, while securing an additional 15% increase 

option. 

Union National Bank reported a consolidated net profi t surpassing 

AED1 billion (US$272 million) as at the 31 st December 2006. 

Al Salam Bank reported a gross revenue of BH$20.4 million 

(US$54.1 million), and a net profi t of BH$16.4 million (US$43.5 

million) as at the 31 st December 2006 following its listing on the 

Bahrain Stock Exchange in April 2006. 

Abraaj Capital’s Infrastructure and Growth Capital fund closed at 

US$2 billion, making it the largest Middle Eastern fund to date. 

Arab National Bank began subscribing to Infosys Technologies for 

IT banking solutions. 

European Islamic Investment Bank introduced UK’s fi rst Wakalah 

placement for funds. 

Citigroup announced plans to develop its consumer sector, corporate 

investment banking and wealth management to boost its Islamic 

banking business. 

Maybank Singapore launched its 12-month Premier Structured 

Deposit, marking Singapore’s Shariah compliant deposit debut. 

Masraf Al Rayan began offering a Shariah compliant profi t rate 

swap hedging product to corporate customers and high net worth 

individuals. 

Reef Real Estate Finance Company, signed a memorandum of 

understanding (MoU) with the owners of Fontana Towers - The 

Developers WLL, for the development of a US$130 million waterfront 

residential project. 

Gulf Finance House has launched projects and investments worth 

US$12 billion over the past seven years. 

Al Rajhi Bank offi cially launched its banking operations in Malaysia, 

with an initial 12 branches. 

Bank Islam Brunei Darussalam hosted a presentation on foreign 

exchange to further promote Islamic banking in the nation. 


The Dubai Strategic Plan was announced, which will see the emirate 

achieving GDP of US$108 billion and an increase in per-capita GDP 

to US$44,000 by 2005. 

Deyaar recorded a 192% increase in net profi t increase for 2006, 

attributed to sales accretions by almost 100%. 

Bank Negara Malaysia approved RM40 billion (US$11.4 billion) 

in new loans to over 84,000 small and medium sized enterprises 

(SMEs) in 2006. 

Prime Minister of India Manmohan Singh has set up a committee to 

study the feasibility of an Islamic bank, despite religious controversies 

in the country. 

Ruwad Establishment signed an MoU with the Abu Dhabi Islamic 

Bank to fi nance small and medium sized projects. 

Asya Katilim Bankasi of Turkey arranged a US$50 million Murabahah 

fi nancing facility, structured as a dual tranche one- and two-year 

facility. 

Central Bank of Bahrain revealed plans to issue Basel II by 2008 

to implement capital adequacy and risk management systems for 

banks. 

OCBC Bank (Malaysia) launched its fi rst Shariah compliant equitylinked 

structured investment product, the Equity-Linked RM 

Structured Investment, with a minimum investment of RM250,000 

(US$77,007). 

Kuwait Finance House Malaysia’s private equity division signed 

a joint venture agreement with Singapore’s Pacifi c Healthcare 

Holdings, at a 60%-40% share distribution. 

Clifford Chance and Linklaters advised Dubai Holding Commercial 

Operations Group in Dubai’s largest debt issuance program, worth 

US$5 billion. The program was also the fi rst to be exclusively listed 

on the Dubai International Financial Exchange (DIFX). 

The National Bank of Kuwait launched its fi rst Shariah compliant 

Islamic money market fund, dubbed the Watani KD Money Market 

Fund (WMMF). The Kuwaiti-dinar denominated fund was the fi rst of 

its kind in Kuwait. 

Doha Bank proposed a 5% dividend distribution to shareholders 

for 2006, in line with the bank’s intentions to fi nance its local and 

international expansions via consolidation of its reserves. 

Bank Islam Malaysia launched the Pewani RealRewards program for 

women, in a bid to double its account holders and increase deposits 

to RM50 million (US$14.3 million). 

Dar Al Arkan Real Estate Development closed its US$600 million 

Sukuk, initially priced at US$425 million. 


FEBRUARY news briefs (continued...) 

Emirates Islamic Bank inaugurated the Emirates Islamic Financial 

Brokerage to enable the bank’s customers to trade in the Dubai 

Financial Market and the Abu Dhabi Securities Market without 

compromising on Shariah principles. 

Cass Business School began offering the world’s fi rst MBA 

course with Islamic fi nance elements, one of the three alternative 

specializations in energy and general management and fi nance. 

The International Investment Bank acquired a portfolio of real 

estates in France, valued at US$105 million, with a 90% stake in 

the portfolio. 

Dubai Islamic Bank (DIB) disclosed plans to lead up to US$5 billion 

in fi nancing transactions for the year. 

Brunei sold BN$90 million (US$59 million) worth of 91-day Islamic 

debt securities at a yield of 3.15% via an Ijarah facility. 

Universiti Brunei Darussalam began planning for the construction 

of its Center for Islamic Banking, Finance and Management building 

slated for the end of 2008. 

The general assembly meeting of International Islamic Trade 

Finance Corporation was held in Jeddah. 

US law fi rm King & Spalding recorded worldwide revenues of 

US$582.4 million, and profi ts per partner of US$1.31 million. 

Al Salam Bank is looking to consolidate and to expand its operations 

globally, beginning with Algeria and Sudan. 

The Syrian government introduced new laws to encourage foreign 

investments and establish an investment authority to boost 

investments in the agriculture, industry, land, transportation, 

telecommunication, environment, electricity and mining sectors. 

DIB began distributing products from Deutsche Bank’s DWS Noor 

Islamic Fund range, which comprised three mutual funds – the DWS 

Noor Precious Metals Securities Fund, DWS Noor Japan Equity Fund 

and DWS Noor Asia Pacifi c Equity Fund. 

Bank Islam Brunei Darussalam (BIBD) introduced the fi rst entirely 

Shariah compliant investment certifi cate, tradeable and marketable 

before its maturity date via the short-term Musharakah Musahaman 

and Al Bai facilities. 

Gulf International Bank’s consolidated net income amounted to 

US$255.5 million for 2006, seeing a 26% increase over 2005. The 

post-tax profi t represented the highest profi ts garnered in GIB’s 

history. 

DIB selected Nucleus Software’s FinnOne CAS to manage its retail 

operations, allowing easy access and instant information availability 

to the bank. 

The Kuwait Finance House-led consortium and Utama Banking 

Group extended their negotiation period for the disposal of Utama’s 

stake in RHB Bank. 



CCH International signed an agreement with the European Islamic 

Investment Bank for a sterling-denominated fi nancing facility. 

Bangladesh Bank governor Salehuddin Ahmad disclosed a possibility 

of introducing Sukuk into the country. 

Barclays’ pre-tax profi ts hit an all-time high of £7.14 billion (US$27.27 

billion) for 2006. 

BIBD hosted a presentation on foreign exchange to further promote 

Islamic banking in the nation. 

BIMB Holdings aimed for equal revenue contributions from its two 

major subsidiaries – Bank Islam Malaysia and Takaful Malaysia; 

expected to be achieved by 2012. 

Amwal International Investing Company revealed plans to establish 

three Islamic investment funds targeting both Kuwaiti and Gulf 

fi nancial markets. The company’s fi rst fund was launched in March, 

with a minimum capital of KWD5 million (US$17.2 million). 

Increased oil revenue has created investment opportunities in the 

Gulf property market, according to the Gulf works and housing 

minister. 

Brunei’s banking sector was urged to boost its efforts in 

accommodating micro and medium-sized enterprises via the use of 

Islamic fi nance tools. 

State Bank of Pakistan revealed plans to offer Shariah compliant 

certifi cates equivalent to its treasury bill of PKR1.05 billion (US$17.27 

billion). 

Alburaq approved over £100 million (US$196.2 million) worth of 

mortgage business in 2007 and expects the market to reach £1 

billion (US$1.96 billion) come 2009. 

Deyaar increased its capital base by 56% to AED1.56 billion 

(US$424.8 million) following its 192% hike in net profi ts for 2006. 

Emirates International Investment Company revealed that it will not 

reap earnings from the AED1.5 billion (US$408.4 million) Sukuk it 

purchased from Abu Dhabi Islamic Bank. 

Al Meezan Investment Management saw net assets of PKR3.51 

billion (US$58.7 million), at PKR59.41 (US$0.97 per unit), ranking it 

top among Pakistani Islamic funds and open-end equity funds within 

the private sector. 

Standard Chartered Malaysia signed an MoU with Universiti Teknologi 

Mara to establish an internship program dubbed “School of Trade”. 

BankMuscat, Istithmar and a consortium of investors revealed plans 

to launch the Shariah compliant Gulf African Bank in Kenya. 

Goldman Sachs completed its acquisition of its stake in NBC Capital. 

NBC Capital had previously announced US$1.3 billion in real estate 

and private equity investments throughout Saudi Arabia and the 

GCC. 

Page 123


Malaysia’s deputy prime minister Najib Razak said that improved 

profi ciency in Arabic will further propel Malaysia’s status to become 

an Islamic fi nance hub. 

A study by the University of Wollongong in Dubai urged GCC countries 

to modify their international fi nancial reporting standards (IFRS) to 

an Islamic format. The modifi cation caters to the discrepancies in 

viewpoint within Islamic fi nancial accounting. 

Emirates Global Islamic Bank began structuring Istisna products for 

construction fi nance to boost the construction industry and generate 

job opportunities. 

Dubai Islamic Bank launched its Shariah compliant Capital Protected 

Global Real Estate Income Trust (REIT) Notes. 

Etihad Etisalat (Mobily) began talks to borrow US$2.8 billion in 

Sukuk from a consortium of Saudi Arabian and foreign banks by 

mid-March. 

Enmaa’s public offering of its Class A shares was extended until the 

21 st March 2007. 

Bank Sedarat Iran signed an MoU with Belarus Central Bank to 

expand banking activities and raise Iran–Belarus monetary and 

trade co-operation. 

Syria modifi ed its banking regulations for Islamic and private banks, 

including a capital volume increase from US$100 million to US$200 

million for Islamic banks, and a US$30 million to US$100 million 

hike for private banks. 

First National Bank of Bostwana became the fi rst conventional bank 

in Botswana to introduce an Islamic banking unit. 

Bank Negara Malaysia governor Dr Zeti Akhtar called for Islamic 

fi nancial institutions to expand their reach to untapped markets. 

The General Council for Islamic Banks and Financial Institutions 

proposed the setting up of a mega Islamic bank to fund large projects 

in Muslim countries. 

The Dubai Financial Services Authority signed a cooperation 

agreement with the New Zealand Securities Commission. 

Project fi nancing for the 288m Bishopsgate Tower — London’s tallest 

building — was sold at £200 million (US$391.4 million) to Islamic 

investment fi rm Arab Investment. 

The Sharjah Electricity and Water Authority closed its nine-year 

Sukuk Ijarah at US$350 million. The Sukuk was lead arranged and 

underwritten by ABC Islamic Bank, Gulf International Bank, Kuwait 

Finance House and Sharjah Islamic Bank. 

Citibank launched its Home Partner-I scheme, expected to account 

for 50% of new business under Citibank’s mortgage segment for 

2007. 

Page 124 

MARCH news briefs 


International Islamic Trade Finance Corporation commenced 

business with a start-up capital of US$3 billion. 

Dubai Islamic Bank (DIB) distributed a bonus share of 7% and a 

cash dividend of 35% to its shareholders. 

The Sharaf Group, along with Protea Hospitality Corporation of 

South Africa, launched Sharaf Protea Hotels Middle East to manage 

Shariah compliant hotels and furnished apartments. 

OCBC Bank’s Islamic banking income increased by 16% to RM52 

million (US$14.8 million) as at the 31 st December 2006. 

DIB’s Islamic home fi nance facility attracted applications worth 

PKR5.5 billion (US$90.6 million). 

The Bank of East Asia began acquisition talks with Affi n Holdings. 

British University in Kuwait considered offering an Islamic fi nance 

program due to open in 2008. 

Emirates Global Islamic Bank offi cially commenced operations in 

Pakistan. 

The Australia and New Zealand Banking Group successfully 

partnered with Malaysia’s AmBank Group for an equity stake 

acquisition of 24.95% in AMMB. 

Kuwait Real Estate Bank became the country’s third Shariah 

compliant bank. 

ABN Amro commenced talks to acquire 93.4% of Pakistan’s Prime 

Bank. 

National Company for Cooperative Insurance (NCCI) formed a 

Shariah committee to oversee all of NCCI’s regulations, laws and 

programs. 

Dubai Bank launched Sanad, its Shariah compliant personal 

fi nancing solution. 

Calls were made for the establishment of an electronic Sukuk trading 

market to increase liquidity. 

Malaysia’s Securities Commission and Bank Negara Malaysia 

produced a joint framework on the issuance of non-ringgit Sukuk, for 

multilateral fi nancial institutions, sovereigns and quasi-sovereigns, 

and local and foreign multinational corporations. 

Deutsche Bank began offering Islamic index certifi cates to Asian 

investors based on the bank’s cash return on capital invested 

model. 

National Bonds Corporation appointed Al Habtoor Engineering as 

the main contractor for Skycourts, the AED1.5 billion (US$789.6 

million) residential project set for completion in 2009. 


The monthly issue of the Central Bank of Bahrain’s Sukuk Salam 

was oversubscribed by 131%. 

HSBC Bank Malaysia became the fi rst foreign bank to offer online 

payment of zakat. 

ALDAR Properties’ US$2.5 billion deal was listed on the London 

Stock Exchange. 

Emirates Bank opened a representative offi ce in Singapore to tap 

increasing trade opportunities between Asia and the Middle East. 

Public Mutual obtained approval from the Securities Commission of 

Malaysia to increase the fund size of its overseas Public Asia Ittikal 

Fund to fi ve billion units from the existing two billion. 

OCBC launched the OCBC Treasury Mudarabah Account to cater to 

the increasing need for Islamic treasury products among Muslim 

corporate customers, Islamic fi nancial institutions, non-profi t 

organizations, mosques and regional Islamic bodies. 

The government of Abu Dhabi set up the Shariah compliant Al Hilal 

Bank with a paid-up capital of AED4 billion (US$1.08 billion). 

London Asia Capital established an Islamic fi nance division in 

western China, forming a credit guarantee company. 

The Employees Provident Fund revealed plans to sell 35% of RHB 

Capital to three partners, leaving 25% to the public to maintain 

listing. 

Gulf International Bank increased its paid-up capital to US$1.5 

billion from US$500 million. 

Dubai Islamic Bank sold its debut US$750 million fi ve-year Sukuk. 

Amlak Finance launched Amlak Finance and Real Estate Investments 

in Egypt. 

National Commercial Bank launched its 100% Shariah compliant 

AlAhli Ma’moun Fund for International Stock Trade D. 

Islamic Development Bank fi nanced a port upgrade in west 

Suriname. 

Dubai Bank launched the Shariah compliant MULKI Property 

Financing, available to UAE nationals and expatriates residing in the 

UAE. 

First Gulf Bank, along with Visa International, launched the Makkah 

card — the UAE’s fi rst stand-alone, unsecured Islamic credit card. 

Masraf Al Rayan launched the “Daily deposit,” a fi rst in Qatar’s 

Islamic banking sector. 

Unicorn Investment Bank successfully exited its Unicorn KSA Real 

Estate Fund I (KSA I) in Saudi Arabia and its private equity investment 

in The Gardens Residential Community (The Gardens) in the US, the 

bank’s fi rst two investments. 

MARCH news briefs (continued...) 



Gold and jewelry retailer Tomei Consolidated mandated 

Aseambankers Malaysia as lead arrangers and principal adviser for 

its RM100 million (US$28.5 million) Sukuk. 

WestLB arranged the Shariah compliant portion of sales of Aston 

Martin at £225 million (US$442.7 million) of the total £479 million 

(US$1.2 billion) to a leveraged buy out consortium. 

The UK government announced the equalization of tax treatment for 

Islamic and conventional debt securitizations. 

The Central Bank of Morocco authorized the launching of Shariah 

compliant products by commercial banks. 

Alliance Bank JSC successfully closed its US$150 million syndicated 

Wakalah restricted with commodity Murabahah fi nancing facility. 

An Arabic language facility was set up by the General Registry of the 

Cayman Islands Government to enable the issuance of registrations 

and certifi cates in both Arabic and English. 

Global Investment House launched the Global GCC Islamic Fund at 


State Bank of Pakistan issued its Draft Instructions and Guidelines 

for Shariah Compliance in Islamic Banking Institutions. 

Dow Jones Indexes and AMANA Securities launched the Dow Jones 

Islamic Market AMANA Sri Lanka Index. 

Qatar Islamic Bank funded Qatar Airways’ newest Airbus A340-600 

aircraft, making it the airline’s fi rst Shariah compliant deal. 

Bank Negara Malaysia signed two memoranda of understanding 

with the Qatar Financial Center Regulatory Authority and Dubai 

Financial Services Authority to increase cooperation between the 

countries. 

Hong Leong Islamic Bank signed a distribution agreement with UBS, 

allowing HLIB to distribute Shariah compliant, non-ringgit structured 

products to qualifi ed customers. 

Shariah Capital and GRT Capital partners launched a Shariah 

compliant managed account, where Barclays acted as the account’s 

sole prime broker. 

Kuwait-based Global Securities House established GSH-UK to 

expand its Islamic fi nance business. 

Maybank received approval from Bank Negara Malaysia to establish 

a stand-alone Islamic subsidiary. 

Old Mutual Asset Managers launched the Old Mutual Al Saqr Fund- 

a Shariah compliant neutral hedge fund linked to the equity market. 

Kuwait Finance House Malaysia partnered with Belanie 

Management of Hong Kong and Chongqing Risun Industry Group 

of China to establish the fi rst Sino-foreign real estate joint venture 

in Chongqing. 

Page 125


The Monetary Authority of Singapore awarded DBS Bank and its 

Middle East partners a license to open Singapore’s fi rst Islamic 

bank, The Islamic Bank of Asia. 

Sokouk Holding, International Leasing and Qatar Islamic Bank 

contributed US$200 million in start-up capital to the launch of the 

Sukuk Exchange Center in Bahrain. 

The Bank of Nova Scotia began mulling Islamic banking options. 

Dow Jones Indexes, along with the Dubai Financial Market, launched 

the Shariah compliant Dow Jones DFM Index and the Dow Jones 

DFM Titans 10 Index. 

Reuters affi rmed its commitment to propel the Malaysian Islamic 

fi nancial sector into a sophisticated, globally integrated fi nancial 

market via increased interaction with regulators, issuers of Sukuk, 

as well as buyers and brokers of the secondary market. 

Dubai Bank opened fi ve more branches throughout the UAE, doubling 

its presence to 10. 

Qatar Islamic Bank signed a Musharakah lease contract with the 

Al Habtour Company for the construction and engineering of the Al 

Faisal Offi ce Tower. 

AmInvestment Group entered preliminary talks with Saudi Arabian 

parties to set up a joint venture company to mobilize the group’s 

capital market activity in Saudi Arabia. 

HSBC Malaysia applied to Bank Negara Malaysia to set up a fullfl 

edged Islamic banking subsidiary. 

The Dubai International Financial Center commenced talks with the 

London Stock Exchange on the possibility of cross-listing stocks on 

both exchanges. 

National Bonds Corporation launched a Shariah compliant, fullfl 

edged and full-service real estate subsidiary – National Properties. 

National Properties’ services include design, development, 

marketing, sales as well as management of properties. 

Amlak Finance’s application for a full Islamic banking was rejected. 

AmIslamic Bank unveiled plans to provide fi nancing for the RM3 

billion (US$868.8 million) Pahang–Selangor water transfer scheme. 

Kuala Lumpur Sentral successfully placed its RM720 million 

(US$208.56 million) serial Sukuk Musharakah to investors. 

Kuwait Finance House Malaysia signed a master agreement with 

Bank Negara Malaysia for its Commodity Murabahah Deposit-I, 

utilizing local commodities underlying transactions. 

Al Rayan Investment received approval to operate from the Qatar 

Financial Center, making it the fi rst Islamic fi nancial institution to be 

domiciled at the center. 

Lloyds TSB became the fi rst British bank with an Islamic arm. 

Page 126 

APRIL news briefs 


Emaar Properties completed a US$141.99 million deal with its 

parent company Artoc Group, granting it total ownership of Emaar 

Misr, its Egyptian subsidiary. 

Dubai Islamic Bank, Samba Financial Group, Mashreqbank, Union 

National Bank, Abu Dhabi Commercial Bank and Commercial Bank 

International signed a SAR400 million (US$106.6 million) syndicated 

fi nancing facility for the expansion of the Prophet Muhammad 

Mosque in Madinah. 

Fortis and Kuwait Finance House Bahrain set up a fund to aid 

Persian Gulf Islamic banks manage their money. 

The Islamic Bank of Thailand voiced aspirations to list on the Thai 

Stock Exchange by the end of 2010. 

Rating Agency Malaysia signed a technical assistance agreement 

with Pakistan’s Credit Sustainability Rating for consultation on 

credit rating methodology, best practices and reporting methods. 

Dow Jones Indexes began talks with the Malaysian Securities 

Commission and Bursa Malaysia to establish an Islamic-based 

exchange-traded fund to be domiciled in Malaysia. 

Bahrain Islamic Bank reported a 37% increase in net profi ts for the 

fi rst quarter of 2007, at BH$5.2 million (US$13.79 million). 

Standard Chartered launched its Islamic global brand Saadiq. 

Twenty-six banks including First Gulf Bank, Mashreqbank, National 

Bank of Abu Dhabi, National Bank of Dubai, Standard Chartered, 

WestLB, CIMB Bank in London, HSBC Bank Middle East, KfW IPEX- 

Bank, Banque Du Caire in Dubai, Barclays Bank in Dubai, Doha 

Bank, Rabobank International and Union National Bank syndicated 

a US$405 million term loan facility for the Investment Group and 

FAL Oil Company. 

Maybank issued up to US$300 million in US dollar subordinated 

Sukuk. 

Magna Prima and Kuwait Finance House Malaysia signed a RM61 

million (US$17.71 million) Murabahah facility to part fi nance the 

acquisition of land from landowner TM Facilities. 

Bahrain Islamic Bank and the Bank of Bahrain and Kuwait acted 

as placement agent for a BH$4.8 million (US$12.73 million) 

international commodity Murabahah agreement for the Al Khaleej 

Development Company. 

Kuala Lumpur Sentral closed its Sukuk Musharakah worth RM720 

million (US$208.66 million). The Sukuk was arranged and managed 

by HSBC Bank Malaysia, Kuwait Finance House Malaysia and 

advised by Newfi elds Advisors. 

Shuaa Capital received a license from the Saudi Market Authority to 

operate in Saudi Arabia. 


Standard & Poor’s projected a potential weakening in asset quality 

and profi tability in Gulf banks in the future, despite a healthy local 

market outlook. 

Dar Al Arkan, Arab National Bank, Kingdom Installment Company 

and International Finance Corporation established a SAR2 billion 

(US$533.5 million) closed joint stock company for housing project 

fi nancing. 

Al Waab City completed its US$225 million initial Murabahah 

fi nancing facility, part of a QAR3.4 billion (US$934.14 million) 

project. 

National Leasing Company charted a 26% growth in net profi t for the 

fi rst quarter of 2007, at QAR7.09 million (US$1.94 million). 

Islamic Financial Services Board begun compiling fatwas issued by 

Islamic fi nancial institutions worldwide, in a bid to harmonize and 

remove confl icting issues to boost the Islamic fi nance industry and 

create new business opportunities. 

Qatar Islamic Bank’s Sanabel fund worth QAR1 billion (US$274.75 

million) received licensing from Qatar Central Bank and the country’s 

Ministry of Trade and Commerce. 

The Dubai Investment Group offi cially placed 27 million new shares 

in Sing Holdings, via its subsidiary Dubai Ventures. The shares were 

set at S$0.43 (US$0.28) apiece. 

Al Burj Real Estate achieved a net profi t of AED925 million (US$251.9 

million) in its fi rst full year of operations. 

Maan Al-Sanea, owner of Saad Group, sought to borrow US$5 billion 

to fi nance investments, including a US$6.63 billion stake in HSBC 

Holdings. 

Clifford Chance drafted a master agreement for its Shariah compliant 

International Swaps and Derivatives Associations. 

Arcapita Bank doubled the size of its Murabahah facility to US$1.1 

billion from its previous US$500 million. 

Dubai Bank launched its Islamic Covered Card, allowing its customers 

payback fl exibility according to a percentage of their choice. 

Qatar National Bank established its representative offi ce in 

Singapore after having been granted approval in August 2006. 

Kuwait Finance House’s profi ts for the fi rst quarter of 2007 totaled 

US$369.39 million – 42% higher than the same period in 2006. The 

bank’s shareholders contributed to 38% of the profi t – US$177.65 

million. 

Asya Katilim Bankasi closed a US$175 million syndicated Murabahah 

fi nancing facility with 40 international banks. 

Deyaar Real Estate has signed a AED600 million (US$163.39 

million) Mudarabah facility with Dubai Islamic Bank, a debut in nonproject 

fi nancing for the company. 

APRIL news briefs (continued...) 



Australia began seeking Islamic fi nance expertise from major 

Bahraini Islamic banks and fi nancial institutions. 

United Bank of Pakistan launched UCIF, its Shariah compliant fund. 

Islamic banks in southern Sudan were forced to convert to 

conventional systems or cease operations following a ban mandated 

in the country’s Comprehensive Peace Agreement. 

ABN Amro launched the Islamic Commodity Basket Capital Protected 

Note, domiciled in the GCC. 

Central Bank of Bahrain’s monthly short-term Sukuk Ijarah was 

oversubscribed by 340%. 

Standard & Poor’s launched its fully investable GCC Shariah Index 

series open to Gulf and global investors. 

Kuala Lumpur Kepong’s RM250 million (US$73.08 million) 

fi ve-year Sukuk Ijarah Islamic medium-term notes program was 

oversubscribed to RM300 million (US$87.7 million). 

National Bank of Abu Dhabi remained in the red for the fourth 

consecutive quarter. 

National Industrial Gases Company signed a SAR1.5 billion (US$400 

million) Murabahah facility with eight banks. 

Dubai Islamic Bank and ABN Amro launched the four-year Principal 

Protected Water Note. 

Al-Amanah Islamic Bank was put up for public bidding at a fl oor 

price of PHP900 million (US$18.7 million). 

A consortium which included Saba Islamic Bank and National 

Telecom Corporation of the Republic of Sudan was awarded a 

license to operate the second GSM network in the country. 

United Bank of Pakistan launched its fi rst Shariah compliant fund, 

the United Composite Islamic Fund in the UAE. 

Saudi Electricity closed its Sukuk subscription at US$1.33 billion, 

following initial plans to launch US$4 billion in Islamic bonds. 

Bank Negara Malaysia began running a trial run of its revised capital 

framework for insurers and banks effective January 2009. 

Samba Financial Group projected a 4% growth in the Saudi Arabian 

economy resulting from a rise in oil output. 

Sukuk Exchange Center domiciled in Bahrain revealed expectations 

to see up to US$600 million in bonds traded in 2007. 

Bank of Nova Scotia began studying Islamic banking options. 

Central Bank of UAE commenced discussions on the development 

of Islamic Certifi cates of Deposit to remove excess liquidity from 

banks. 

Page 127


The Pan-European Islamic Real Estate Fund purchased fi ve UK 

commercial properties worth £58.8 million (US$117.16 million). 

First Gulf Bank, ALDAR Properties, Surouh Real Estate and Reem 

Investments established the Shariah compliant Aseel Finance. 

The Pakistani government announced the issuance of Sukuk 

for Pakistan International Airlines and Karachi Shipyard and 

Engineering Works. 

Qatar Islamic Bank began studying the feasibility of establishing a 

mega commercial and investment bank in Sudan. 

Norton Rose became the sole law fi rm to be appointed by the British 

government to its new Islamic fi nance forum on tax issues and the 

UK regulatory environment for Islamic fi nance. 

Islamic Bank of Britain’s deposit base jumped by 75% to £83 million 

(US$165.19 million), with its assets charting a 32% growth. 

Barclays Capital topped the Islamic bonds Underwriter League Table 

for the fi rst quarter of 2007 due to the possession of 23% of the total 

market share. 

The International Islamic Financial Market launched a focused 

program to develop benchmarks and increase standardization, 

specifi c to Islamic capital markets. 

Maybank’s MBB US$300 million Islamic subordinated Sukuk was 

listed on the Labuan International Financial Exchange. 

ASAS Real Estate was established by Sharjah Islamic Bank to 

combine physical profi t and rendering services to the community. 

Qatar and Oman Investment Company, a new shareholding company, 

was established to boost ties between Qatar and Oman. 

Japan Bank for International Cooperation signed a memorandum of 

understanding with National Bank of Pakistan to allow collaboration 

on Islamic fi nance products and services. 

Etihad Airways utilized a US$400 million Islamic lease fi nancing 

facility to acquire four Airbus A340-500 aircraft. Citigroup and Abu 

Dhabi Commercial Bank acted as mandated lead arrangers and 

joint bookrunners for the consortium of six lenders, consisting of 

ABC Islamic Bank, First Gulf Bank, Qatar National Bank, Standard 

Chartered Bank, Arab African International Bank and China 

Construction Bank Corporation. 

Fortis Investment and HSBC Amanah Syariah began offering an 

Islamic mutual fund worth IDR500 billion (US$55 million) to tap the 

Indonesian mutual fund market. 

Cagamas issued its second Sukuk Musharakah worth RM2.3 

billion (US$676.13 million). The Islamic residential mortgage 

backed securities (IRMBS) involved the purchase of the Malaysian 

government staff Islamic home fi nancing. 

Page 128 

MAY news briefs 


AB Capital received a license from the Dubai Financial Services 

Authority to commence operations at the Dubai International 

Financial Center. 

ING Funds launched the Shariah compliant ING Baraka Capital 

Protected Fund with a target of 10% to 12% in yearly average 

returns. 

Al Rajhi Bank purchased over 4,000 Optimum dial-up and wireless 

card payment terminals from Hypercom. 

Bank Indonesia’s governor called for the Indonesian government to 

issue government Sukuk to attract Middle Eastern investments. 

Daman Investments launched the Daman Islamic Fund for 

investment in UAE equities. 

Assets under the management of Mellon Financial Corporation 

crossed the US$1 trillion mark. 

Liquidity Management Center was mandated to launch Al Imtiaz 

Investment Company’s US$75 million–US$150 million Sukuk. 

The Abu Dhabi Stock Market urged listed companies to open up the 

trading of their shares to foreigners. 

Islamic Development Bank allocated €10 million (US$13.55 million) 

to Pars Aluminum Company in Iran. 

Burooj Properties launched property investment products under its 

property development project “Burooj Jordan”. 

Public Bank launched the PB Islamic Cash Management Fund and 

PB Asean Dividend Fund managed by Public Mutual. 

ICICI Bank received a license to set up in the Qatar Financial 

Center. 

BankIslami sought out partners to fund a tenfold expansion of its 

local branch network in Pakistan, and to tap overseas markets. 

Haisan Resources proposed issuing a RM200 million (US$58.79 

million) asset-backed Sukuk Ijarah. 

Emirates Bank Group signed a cooperation memorandum with Bank 

TuranAlem. 

i-Flex Solutions developed a customized version of FLEXCUBE to 

cater to Shariah compliant fi nancing. 

The debt capital market committee of the Securities and Exchange 

Commission of Pakistan reported on the higher taxes on profi t on 

debt or interest, putting off foreign investors. 

Unicorn Investment Bank gained US$24 million in revenue, with a 

diverse mix of operating income in the fi rst quarter of 2007. 


Islamic Development Bank launched a Poverty Reduction Fund. 

Trans-Peninsula Petroleum chairman, Rahim Kamil Sulaiman 

extended an invitation to prominent Middle Eastern oil producers, 

Islamic funds and major consumers in East Asia to invest in a US$7 

billion pipeline in Malaysia. 

QINVEST was authorized to start operations by the Qatar Financial 

Center Regulatory Authority. 

National Bank of Abu Dhabi established an independent, wholly 

owned subsidiary in Switzerland under the moniker NBAD Private 

Bank (Suisse). 

US-based Calyx Financial signed a memorandum of understanding 

(MoU) with Muamalat Invest the asset management arm of 

Malaysia’s Bank Muamalat, to develop and distribute Islamic 

investment funds. 

Global Securities House and the London-based Islamic Asset 

Management sold the assets of the jointly sponsored Al Bait UK Real 

Estate Fund for US$116.5 million. 

Citibank entered into a distribution arrangement with DWS 

Investments, the global mutual fund arm of Deutsche Bank. 

Emaar Industries and Investments bought a 60% stake in Mammut 

Building Systems, a leading manufacturer of steel buildings. 

Kuwait Finance House Group offi cially launched its research arm, 

headed by Baljeet Kaur Grewal. 

Gulf International Bank signed a US$1.2 billion syndicated term 

loan facility, following an initial oversubscription to US$1.46 billion. 

Global Investment House launched the open-ended Global Islamic 

Fund of Funds. 

Sharjah Islamic Bank established “Durra” to encourage female 

involvement in the Islamic banking sector. 

Al Rajhi Bank opened eight car showrooms across Saudi Arabia in 

line with the bank’s car fi nancing drive. 

The UAE’s largest IPO issue for 2007– at AED3.17 billion (US$863.07 

million) – was 10 times oversubscribed upon closing, despite initially 

being met with weak demand. 

The Central Bank of Bahrain and the Central Bank of Egypt signed 

a deal to increase exchange of information for training, supervision 

and technical expertise. 

Marina West and Reef Real Estate Finance Company signed an 

MoU confi rming Reef as Marina West’s fi rst Islamic mortgage fi nance 

provider. 

FTSE Group launched the FTSE Bursa Malaysia Hijrah Shariah 

Index, a tradeable Shariah compliant index for the Malaysian equity 

market. 

MAY news briefs (continued...) 



Al Amanah Islamic Bank the fi rst and only Islamic bank in the 

Philippines, succumbed to privatization in light of weak fi nancials. 

Dechert was mandated as lead adviser for Capital Management 

House’s CMH Enterprise Fund I. 

National Bank of Dubai opened its second Sharjah branch, located 

in the Samnan area. 

The TAIB Bank of Qatar received a license to operate in the Qatar 


Gulf Finance House launched a US$395 million private placement 

to fund the infrastructure for Energy City India. 

Asset managers Schroders opened an offi ce in the Dubai 

International Financial Center. 

Unicorn Global Private Equity Fund I acquired an equity stake in 

Kuwait-based Al-Assriya Industries Holding. 

Shuaa Capital announced plans to open a branch in Beirut, 

Lebanon. 

Mashreqbank re-branded itself to Mashreq. 

Sorouh Real Estate sought more than US$1 billion in Islamic loans 

from local and international banks to fi nance new real estate 

projects. 

DBS Bank of Singapore launched The Islamic Bank of Asia, upon 

receiving a full banking license from the Monetary Authority of 

Singapore. 

Dubai Islamic Bank began selling Dubai’s new electronic toll 

cards at its branches, allowing cardholders to add credit to the 

cards. 

RAM Ratings projected a minimum issuance of RM50 billion 

(US$14.69 million) in new bonds domestically in 2007. 

ABN Amro revealed plans to align its Middle East and Asian 

businesses, in line with the unprecedented boom in cross-border 

investments and trade fl ows. 

A UK Regional Development Agency announced plans to offer £2 

million (US$3.98 million) in Shariah compliant and conventional 

loans for small businesses in Manchester. 

Parsoli Corporation revealed plans to launch one or two Shariah 

compliant mutual funds catering to the Muslim market in India, 

exceeding INR5 billion (US$121.86 million). 

The number of Muslims in Indonesia using Shariah banks for 

transactions and investment totaled only 1.71 million in 1Q2007. 

The Investment Dar began selling its 50% stake in Aston Martin at 

US$1 billion. 

Page 129


The Securities Commission of Malaysia called for Islamic venture 

capital to boost Malaysia’s stand in the emerging markets. 

Canadian fund managers iTrust Partners launched the world’s fi rst 

Islamic fund for Canadian assets. 

Allco Finance of Australia formed a structured fi nance partnership 

for large assets including airplanes and ships, with CIMB Group to 

provide onshore fi nancing options for Malaysian companies. 

Gulf Finance House and Abu Dhabi Investment House launched 

two Shariah compliant crude oil investment funds worth US$150 

million. 

Adeem Investment Company raised US$210 million in Sukuk, 

convertible into units of a fund investing in hotels and resorts. 

The Sokouk Exchange Center (Tadawul) received an operations 

license from the Central Bank of Bahrain. 

Shamil Bank launched the Shamil Navigator Mudarabah, a 100% 

capital protected note exposed to 18 Islamic stocks selected from 

the Dow Jones Islamic Index. 

Standard Chartered revealed plans to double its private banking 

units to 20 by 2011, targeting Asia and the Middle East. 

Qatar Islamic Bank launched its new identity in line with the bank’s 

25 th anniversary. 

Dar Al Arkan Real Estate Development listed its three-year US$600 

million Sukuk Ijarah on the Dubai International Financial Exchange, 

making it the fi rst Saudi Arabian company to do so. 

The First Community Bank became the fi rst Kenyan commercial 

bank to receive an Islamic banking license. 

Dubai Islamic Bank launched a US$47 million real estate fund 

investing in eight retail properties throughout the US. 

Rasmala Investments doubled its capital from AED185 million 

(US$50.37 million) to AED370 million (US$100.75 million). 

Istithmar launched a new business initiative, Imdaad to manage the 

group’s commercial, residential and industrial facilities. 

Al Rayan Bank arranged a US$530 million Mudarabah facility for 

Barwa Real Estate. 

Amlak Finance sent a delegation to Morocco to discuss potential 

expansion plans. 

Shariah Capital advised New York investment advisers William D 

Witter on Shariah compliant investment funds. 

Tamweel launched Soyoula, a Shariah compliant home refi nancing 

product. 

Page 130 

JUNE news briefs 


Lembaga Tabung Haji was commissioned to build a RM150 million 

(US$44.14 million) commercial building for the Federal Territory’s 

Islamic Religious Council. 

Bahrain Islamic Bank signed a BH$6.13 million (US$16.25 million) 

Ijarah Iqtinah agreement with Falcon Cement Company. 

Goldman Sachs commenced business in the Dubai International 


Gulf Finance House listed 10 million Global Depository Receipts – 

worth 100 million ordinary shares – on the London Stock Exchange. 

Professor Bala Shanmugam of Monash University Malaysia called 

for Islamic micro-fi nancing for the poor. 

Standard Chartered moved 50 to 100 jobs from London to Dubai. 

National Commercial Bank arranged for a US$530 million Islamic 

fi nancing facility with the Arab Centers Group, a subsidiary of the 

Fawaz Hokair Group. 

Dubai Capital Group upped its stake in Tamweel by over 5%. 

Sui Southern Gas Company signed a PKR2 billion (US$32.97 

million) Sukuk fi nancing for its PKR10 billion (US$164.87 million) 

infrastructural development program for 2006–07. 

Commercial Bank of Dubai was granted approval by Central Bank of 

Dubai to set up an Islamic window. 

Islamic investment fi rm Stehwaz Holding revealed plans to list in 

Dubai or London before listing locally in Kuwait. 

Mobitel, MTC’s Sudan arm, signed a €270 million (US$364.58 

million) Murabahah facility to fund Mobitel’s expansion plans. 

TAIB Brunei has launched an Islamic investment-linked deposit 

product dubbed the Taib Baraka Deposit Certifi cate. 

Morgan Stanley signed a market-making agreement with the Dubai 

International Financial Exchange for the provision of continuous buy 

and sell prices of Kingdom Hotel Investments shares. 

The Al Baraka Banking Group received regulatory approval from 

Bank Indonesia to set up a representative offi ce in the country. 

The National Commercial Bank in conjunction with MasterCard 

Worldwide, launched the world’s fi rst Titanium Islamic MasterCard 

credit card targeting the affl uent Arab population. 

International Investment Group issued Sukuk worth US$200 million, 

initially pegged at US$150 million. 

Standard & Poor’s launched the S&P Saudi Shariah Index with six 

Gulf stock indices. 


Australian-based Monarch Gold Mining Company listed on the Dubai 

International Financial Exchange, making it the third gold mining 

company to list. 

Dubai Islamic Bank launched the sixth installment of its banking 

training program “Emirati” to train UAE candidates to join the 

banking sector. 

International Investment Group’s US$200 million Sukuk listed on 

the Dubai International Financial Exchange. 

Merrill Lynch received a banking license from the Capital Market 

Authority to operate in Saudi Arabia. 

The Unicorn Global Private Equity Fund I saw a successful fi rst exit 

from its major investment, Orimix Concrete Products, where it sold 

a 40% stake in Orimix to a leading readymix concrete supplier in the 

UAE. 

SilTerra Capital’s seven-year RM1.8 billion (US$524.87 million) 

Sukuk Ijarah was oversubscribed by fi ve times. 

Al Khawarizmi International College’s Associate of Science Degree 

in Islamic Banking received accreditation by the UAE’s Ministry of 

Higher Education and Scientifi c Research. 

Bangladesh-based Al Arafah Islami Bank went online with Ababil, 

the Shariah compliant centralized banking solution by Millennium 

Information Solutions. 

Abu Dhabi Investment House revealed plans to set up the fi rst 

women’s bank upon approval by the Central Bank of Bahrain. 

The governor of Bank Negara Malaysia stressed the need for 

greater fi nancial integration among Southeast Asian markets. 

HSBC Qatar launched a Murabahah-based fi nancing package, 

available to all Qatari residents without any salary transfer 

requirements. 

Dubai Financial acquired a controlling 60% stake in TAIB Bank via a 

stock purchase agreement. 

Salam Bounian issued a US$150 million Sukuk to fi nance the 

construction of “The Gate” mall. Qatar Islamic Bank acted as the 

Sukuk’s investment agents, with Qatar National Bank/QNB Islami, 

and Central Bank of Qatar as mandated lead partners. 

CIMB Group signed a commodity Murabahah program and foreign 

exchange forward agreement with the UK-based European Islamic 

Investment Bank. 

General Electric mentioned a possible entry into Islamic fi nancing, 

having seen massive sales of aircraft engines and power generation 

equipment to the Middle East. 

The Sukuk frenzy had adversely affected Gulf bankers’ holidays, 

causing cancellations or postponements due to the infl ux of deals 

that poured in over the summer. 

JUNE news briefs (continued...) 



Diyaar Sukuk Company issued US$200 million in Sukuk Musharakah 

to fi nance the Diyaar Al Muharraq development. 

Meezan Bank launched the Meezan Bachat Account designed 

exclusively for Pakistan’s middle-income class. 

Mashreq was mandated lead arranger, underwriter and bookrunner 

for Qatar District Cooling Company’s US$285 million, 12-year 

secured term loan facility. 

Golden Belt 1 Company’s US$650 million Sukuk Manafa’a listed on 

the Bahrain Stock Exchange. 

Liechtensteinische Landesbank launched its fi rst exchange-traded 

Islamic certifi cates to be linked to the LLB Hijlal Index and track the 

performance of individual LLB Hijlal Indices. 

Global Banking Corporation was incorporated in Bahrain with a 

paid-up capital of US$250 million. 

Albaraka Banking Group fi nalized an agreement with Misys to utilize 

its Misys Equation Islamic core banking system. 

Cagamas launched its RM60 billion (US$17.29 billion) conventional 

and Islamic commercial papers and medium-term notes program 

– the largest issuance in Southeast Asia to date. 

Emirates Investment Services Asset Management began preparing 

for the launch of its three Islamic funds — the Islamic Global Equity 

Trading Fund, Global Islamic Real Estate Fund and the Islamic Hedge 

Fund of Funds. 

Liquidity Management Center gained US$8.9 million in operating 

revenue as at the 31 st December 2006, compared to US$4.4 million 

in 2005. 

Dubai Islamic Bank commenced talks with a Turkish lender to tap 

Turkey’s growing demand for Islamic products. 

CapitaLand invested US$130 million in the Shariah compliant 

Raffl es City Bahrain Fund. 

Kotak Mahindra revealed plans to launch a Shariah fund for Islamic 

investors in West Asia to mobilize up to US$150 million to US$200 

million in funds and acquire underlying Indian assets. 

3i Capital Group has launched the US$100 million open-ended 

Dubai Growth Fund dubbed Enmaa. 

The GCC economy revealed expectations to create a multi-billion 

dollar market for convertible bonds by 2011. 

The Institute of International Finance revealed that the GCC had 

surpassed China in terms of foreign assets — at US$1.6 billion, 

credit to soaring oil revenues. 

The Abu Dhabi Securities Market concluded its fi rst phase of 

presentations to UK investors. 

Page 131


Emirates Bank extended a US$54.5 million two-year term loan facility 

to First Dubai Real Estate Development Company, a subsidiary of 

Kuwait’s Al Mazaya Group. 

Abu Dhabi National Energy Company (TAQA) revealed plans to sell 

up to US$9 billion in bonds over fi ve years to fi nance its expansion 

and foreign acquisitions. 

Fitch Ratings introduced a spreadsheet for Islamic fi nancial 

institutions, allowing more analytical insight and transparency into 

the institutions’ performance. 

Kuwait Finance House Malaysia launched the KFH-MM2H-Hijrah-I 

program, complementing the Malaysian government’s Malaysia My 

2 nd Home program. 

Bank of Sharjah acquired a banking license in Lebanon via its 

acquisition of Banque de la Bekaa SAL. 

The value of traded shares in Saudi Arabia dropped by 43.49% at 

SAR1.11 trillion (US$295.94 billion), compared to 52.58% in 2006. 

Investment Dar and affi liated fi rms raised their stake in Boubyan 

Bank to 11.3% from an initial 10.2% for a 20% acquisition of the 

bank. 

Al Haramain Islamic began offering New Zealand’s fi rst Shariah 

compliant mortgage product to the country’s 36,000–odd Muslim 

population. 

Bear Stearns signed a letter of intent with a consortium of Saudi 

business leaders to form Bear Stearns Arabia Asset Management. 

Amlak Finance’s profi ts for the fi rst half of 2007 surged by AED25 

million (US$6.8 million), at 31% reaching AED106 million (US$28.85 

million), while its revenue saw a 54% hike. 

BNP Paribas completed the second-largest Sukuk issue for Saad 

Trading Contracting and Financial Services at US$650 million, 

making it the fi rst Sukuk to be issued in Saudi Arabia for a private 

business. 

Khazanah Nasional listed its US$850 million Sukuk on the Dubai 

International Financial Exchange. 

Al Rajhi Bank opened its 14 th branch in Melaka, bringing the bank 

closer to hitting its target of 50 branches in Malaysia. 

Controversy sparked over Prince Alwaleed bin Talal’s IPO sale of 

Kingdom Holding worth US$17.2 billion, with a Saudi cleric issuing 

a fatwa against investing in the company. The fatwa was biased 

against Kingdom Holding’s investments in specifi c companies 

including Time Warner, Apple, News Corporation, the Four Seasons, 

and selected Saudi fi rms which have not received cleric approval. 

Crescent Bank stated plans to set up an initial public offering of 10% 

to 20% of its shares to be sold to the private sector. 

Page 132 

JULY news briefs 


Barclays Bank appointed 10 new fi rms to its panel. The fi rms are 

Addleshaw Goddard, DentonWildeSapte, Eversheds, Hammonds, 

Milbank Tweed Hadley & McCloy, Macfarlanes, Magrath & Co, 

Latham & Watkins, Pinsent Masons and SJ Berwin. 

The Labuan International Financial Exchange listed its second 

exchangeable Sukuk, with the induction of Khazanah Nasional’s 

US$850 million Sukuk. 

Abu Dhabi Commercial Bank revealed no near-term plans to merge 

with any UAE banks. 

An Islamic banking guideline was being considered in Bangladesh, 

affi rmed Salehuddin Ahmed, governor of Bangladesh Bank. 

Al Mazaya Holding signed an OMR3.1 million (US$8.05 million) 

contribution contract with Oman Construction to share a Shariah 

compliant real estate investment portfolio in Oman. 

Qatar Islamic Bank mandated HSBC and Rasameel Structured 

Finance to structure its property-backed Sukuk worth SAR2.5 billion 

(US$687 million) in real estate assets. 

National Bonds Corporation signed a memorandum of understanding 

with the Dubai Sports Council to support the Sports Council’s sports 

and youth development programs. 

Türkiye Finans sold a 50% stake to Commercial Bank of Kuwait and 

Noor Group, at US$1.8 billion. 

The International Islamic Financial Market and the International 

Capital Market Association concluded three meetings in Bahrain 

and London focusing on the development of international Islamic 

capital markets. 

Kuwait’s Boubyan Bank set up the Bank of London and The Middle 

East in the UK. 

Qatar International Islamic Bank announced its fi rst-half profi ts 

at QAR209.7 million (US$57.6 million) from QAR191.8 million 

(US$52.69 million) in 2006, at a 9% increase. 

SEI launched the fi rst dedicated Islamic Manager of Managers equity 

funds, dubbed the SEI Islamic Investments Fund plc (SIIF) offering 

Shariah compliant investments. 

Kuwait Finance House reported a 72% increase in its second-quarter 

profi ts to US$227 million, with plans for overseas expansion. 

Velcan Energy, a French renewable energy company, expressed 

plans to raise up to €200 million (US$275.85 million) in Sukuk to 

fi nance a hydroelectric dam in India. 

Public Bank posted net profi ts of RM1 billion (US$289.45 million), 

marking an 18% hike, credit to the bank’s net income from its Islamic 

banking operations. 


Emirates Islamic Bank launched Evening Banking in line with the 

bank’s objective of serving its customers better. 

The Bank of London and Middle East chose Path Solutions’ iMAL for 

its Shariah compliant transactions. 

Dar Al Arkan closed a US$1 billion Sukuk issued via the Dar Al Arkan 

International Sukuk Company. 

Gulf Investment Corporation reported a profi t after provisions of 

US$212.9 million for the fi rst half of 2007, compared with US$167 

million for the previous corresponding period. 

International Bank of Qatar offered up to US$6.1 billion to acquire 

Bahrain’s Ahli United Bank. 

Trading of Ahli United Bank’s shares on the Bahrain Stock Exchange 

was suspended following a Gulf bank’s expressed interest in buying 

the bank. 

Arab Banking Corporation established a line of credit worth US$50 

million with the Arab Trade Financing Program to facilitate trade 

within Arab nations. 

Allen & Overy, Freshfi elds Bruckhaus Deringer and Linklaters 

advised on the mega merger of Emirates Bank International and 

National Bank of Dubai. 

Lovells Dubai closed its fi rst major Islamic fi nance deal after advising 

on Dar Al Arkan Real Estate Company’s US$1 billion Sukuk. 

Volaw Trust and Corporate Services was granted a license to operate 

in the Dubai International Financial Center. 

Amanah Capital signed a memorandum of understanding with 

Emaar Healthcare Group to develop specialist healthcare facilities 

in Abu Dhabi, focusing on women and children. 

Millennium Finance Corporation was mandated sole adviser to 

ArcelorMittal for its US$2.2 billion iron ore project. 

Aabar Petroleum Investments considered issuing a convertible 

Sukuk or conventional bonds to increase the company’s share 

capital. 

Tamweel priced its Shariah compliant asset-backed securities at 35 

basis points over LIBOR, backed by strong demand from the Gulf, 

Asian and European markets. 

The Dubai International Financial Exchange saw more than 40% 

growth in Sukuk listings for the year, at US$12.78 billion from 

US$7.63 billion as at the end of 2006. 

Nazir Razak, CEO of CIMB, called for Bank Negara Malaysia to play a 

prominent role in boosting mergers of local banks and reducing the 

size of the market to fi ve or six major players. 

Dubai Islamic Bank set up an escrow trust account for real estate 

developers. 

JULY news briefs (continued...) 



European Investment Bank set up a €300 million (US$414.61 

million) facility to encourage long-term fi nancing for small and 

medium-sized enterprises. 

Malaysian company Meridian Diversifi ed tied up with US-based 

Fiserv and China Systems Corporation to create Islamic fi nancial 

and banking solutions. 

Central Bank of Bahrain approved the establishment of a new mega 

Islamic investment bank, Bank Al Dar Istismaar with a paid-up 

capital of US$200 million. 

Saudi Basic Industries Corporation gained approval to raise its 

Sukuk value to SAR8 billion (US$2.1 billion). 

Gulf Finance House successfully closed its fi rst Sukuk issuance at 


Securities House of Kuwait revealed plans to establish an Islamic 

bank in the UK to tap into the 1.8 million Muslim market in that 

country. 

Shariah Capital realized a 9.7% net return for its Shariah compliant 

separately-managed account with a 130/30 quantitative hedge 

fund strategy. 

Path Solutions implemented iMal throughout BankIslami’s total 

core banking system for its entire 100+ network. 

Albaraka Banking Group obtained approval to open a branch in Syria 

to capitalize on the country’s recent efforts to open up its banking 

sector. 

Saudi British Bank’s profi ts crashed by 31% as at the end of June. 

The bank’s earnings stood at US$334 million, against US$482 

million in June 2006. 

ICICI Prudential opened an offi ce in Dubai to serve the 1.4 million 

Indian expatriate population. 

Qatar National Bank saw a 9.1% hike in profi ts in 1H2007 to US$331 

million. The bank’s assets also grew by 30% to US$20.8 billion. 

Bahrain Islamic Bank saw a 33% increase in profi ts to US$28.1 

million in 2007 from US$21 million at the end of June 2006. 

Doha Bank launched its representative offi ce in Shanghai. 

Abyaar Real Estate Development revealed plans to sell up to US$1 

billion in Sukuk in 2008 to fi nance projects, including a Dubai 

development. 

Pakistan’s state-owned Agricultural Storage and Services 

Corporation revealed plans to issue a PKR10 billion (US$165.67 

million) Sukuk. 

General Investment Fund of Saudi Arabia proposed a US$30 million 

injection into the Islamic Trade Financing Corporation. 

Page 133


Fresh from its roadshow, Qatar Real Estate Investment Company’s 

fi ve-year Sukuk was issued to the tune of US$300 million and priced 

at 73 basis points over the three-month LIBOR. 

Dubai Islamic Bank charted a 113% leap in net profi ts to AED1.5 

billion (US$408.7 million), while assets rose by 51%, standing at 

AED75.5 billion (US$20.5 billion) as at the 30 th June. 

Tabarak Partners received authorization from the Dubai Financial 

Services Authority to act as a fully Shariah compliant institution, 

providing structuring, advisory and distribution services out of the 

Dubai International Financial Center. 

Tamweel Residential’s Sukuk Ijarah fl oating rate notes acquired a 

listing on the Irish Stock Exchange. 

Dana Gas postponed pricing its highly publicized US$1 billion Sukuk 

to wait out the current global credit market volatility attributed to 

weakening US sub-prime mortgages. 

Dubai Islamic Bank agreed to fund Abyaar Real Estate 

Development’s AED125 million (US$34 million) Acacia Avenues 

project on an Ijarah Mutanhiyah Bitamliq basis with a two-year 

tenure. 

Kuwait Finance House Labuan’s Al Nibras Islamic Real Estate Fund 

bought two villa apartment blocks in Refl ections at Keppel Bay in 

Singapore for US$286 million. 

HSBC concluded its two-month summer internship program which 

saw participation of students from Carnegie Mellon, Qatar University 

and the London School of Economics. 

Islamic Development Bank, along with the Saudi Exports Financing 

Fund, commenced talks to fi nance the 40-year-old Sudanese 

Cotton Company’s US$50 million reparation costs to accommodate 

increasing cotton production. 

National Bank of Bahrain signed a US$82 Murabahah project 

fi nancing agreement with Riffa Views to fi nance the construction of 

the remaining phase of the Riffa Views project. 

International Islamic Union Bank stated that it will not come to 

Yemen until there is a change in the Islamic banking legislation. 

Saudi Arabia’s Capital Market Authority raised the ceiling cap for 

domestic Sukuk from SAR5 billion (US$1.33 billion) to SAR8 billion 

(US$2.13 billion) following the SAR8 billion (US$2.13 billion) issued 

by Saudi Electric Company. 

MSCI Barra launched the MSCI Global Islamic Indices designed to 

refl ect Shariah investment principles while retaining replicability for 

international investors. 

Boustead’s Al Hadarah Islamic real estate investment trust earned 

revenues of RM17.5 million (US$5.04 million) in a span of eight 

months. 

Page 134 

AUGUST news briefs 


Bank Simpanan Nasional set aside RM596,278.83 

(US$171,850.78) from its Islamic banking profi ts to pay zakat. 

Bank Islam Brunei Darussalam reported a 49% leap in profi ts. 

Bank Muamalat Malaysia launched the Shirkah Mutanaqisah home 

fi nancing targeting the secondary property market. 

BMB Investment Bank saw a whopping increase by 233% in net 

income to US$12.8 million from US$3.8 million. 

The Dubai Centre for Corporate Values highlighted the importance 

of corporate social responsibility in line with the facets of Islamic 

fi nance. 

Jordan Islamic Bank tied up with Western Union to allow money 

transfers across a network spanning 200 countries and territories. 

Post-launch, shares of Kingdom Holding hit a high of SAR14.5 

(US$3.86) from its initial opening at SAR13.5 (US$3.6). 

Investment Dar was launched in Bahrain, increasing the number of 

Islamic fi nancial providers in the country to 27. 

Bank of Scotland, Standard Chartered and First Gulf Bank completed 

a US$50 million Islamic lease fi nancing facility for Topaz Energy and 

Marine. 

Central Bank of Sudan signed an MoU to aid the development of 

ABC Investments’ Islamic trade and fi nance operations. 

Global Investment House’s fi rst-half profi ts hit KWD46.7 million 

(US$165.6 million), with earnings per share of 56 fi ls. 

QNB Al Islami signed a QAR300 million (US$82.42 million) Wakalahbased 

agreement with National Leasing Company. 

Deutsche Bank closed its retail customer operations in Iran due to 

the adverse effects of international regulations and sanctions. 

Gulf Finance House’s US$1 billion Sukuk was listed on the London 

Stock Exchange. 

Mashreq posted fi rst-half profi ts of US$260.3 million, at a 45% hike. 

Amanah xData signed an agreement with the Dubai International 

Financial Exchange to distribute the bourse’s market data, including 

share prices. 

Shuaa Capital posted profi ts of US$20.3 million, 20 times higher 

than those achieved in the fi rst half of 2006. 

Malaysia’s International Trade and Industry minister Rafi dah Aziz 

called for more halal linkages between Australia and Malaysia. 

Sharjah Islamic Financial Services opened a branch in Abu Dhabi. 


The Bank of London and The Middle East went live with iMAL from 

Path Solutions. 

Fitch Ratings published an exposure draft on the company’s 

approach to rating Takaful fi rms. 

Emirates Islamic Bank began providing home fi nancing to potential 

buyers of Emaar’s Ghadeer Townhomes. 

Gulf International Bank launched Barwa Real Estate Company’s 

Murabahah fi nancing facility of US$600 million. 

The International Investor’s bid to buy Turkey’s ADABANK was denied 

by the Turkish Banking Regulation and Supervision Agency DBBK. 

Qatar National Bank and its Syrian partners received preliminary 

approval to establish a Qatari–Syrian bank. 

King & Spalding advised on the GulfCap Group’s US$446 million 

acquisition of Dalma Energy, and Pramerica Real Estate Investors’ 

Shariah compliant majority stake buy in the European Business 

Center at US$110 million. 

Commercialbank’s Al Waseela funds were re-opened for subscription, 

following its initial success charting returns of 16%. 

Fortis gained shareholder approval to raise €13 billion (US$18 

billion) to up its bid for ABN Amro, in a takeover consortium with the 

Royal Bank of Scotland and Santander. 

Emirates Islamic Bank recorded a 48% hike in net profi ts to AED76 

million (US$20.6 million), from AED51 million (US$13.88 million) in 

the fi rst half of 2006. 

The Dubai government consolidated its shares in the Dubai 

International Financial Exchange and the Dubai Financial Market in 

a new holding company – the Borse Dubai. 

Amlak Finance became a founding shareholder of the Egyptian 

Mortgage Refi nance Company via Amlak Finance & Real Estate 

Investments in Egypt. 

Dubai Islamic Bank launched Al Islami Home Refi nance, allowing 

customers to convert equity gain from individual property into 

assets. 

Qatar Islamic Bank fi nanced the construction of Tadamon Islamic 

Bank’s headquarters in Sudan at an estimated cost of US$13 

million. 

BNP Paribas froze three European funds exposed to volatile US subprime 

mortgage markets. 

Dubai Islamic Bank entered a joint venture with Al Tajir Real Estate 

to provide Islamic fi nancing options to prospective customers of Al 

Tajir’s Fortunato development. 

EnergyMixx revealed plans to utilize Islamic fi nancing for its 

investment in renewable energy power ventures. 

AUGUST news briefs (continued...) 



DP World denied talks of a possible US$2 billion IPO. 

National Bank of Kuwait won a bid to take over the AlWatany Bank 

of Egypt. 

Standard & Poor’s launched the S&P Pan-Arab Shariah Index, S&P/ 

Citigroup Global Property Shariah Index and the S&P/Citigroup World 

Property Shariah Index. 

Amanah Warehousing began selling 60% of its shares in an initial 

public offering to raise KWD31.5 million (US$111.7 million). 

Investment Dar increased its stake in Boubyan Bank to 20%. 

State Bank of Pakistan warned banks and development fi nancial 

institutions against marketing Islamic products without a license. 

Dubai Islamic Bank opened two new branches in Dubai, increasing 

its total UAE-wide branch network to 41. 

Founder of Grameen Bank, Nobel Laureate Muhammad Yunus, 

mentioned the possibility of setting up a branch in Singapore. 

Bank Danamon Syariah and Baznas Dompet Dhuafa signed an 

agreement on the allocation of zakat and the charity funds generated 

from Dirham Card – Indonesia’s fi rst Shariah compliant card. 

Asiacell proposed a Sukuk sale of up to US$300 million a year to 

expand its Iraqi operations. 

Prudential Fund Management launched its fi rst Islamic structured 

fund, the PRUShariah FX fund at RM300 million (US$86.22 

million). 

Syria saw its fi rst Islamic bank with the opening of Kuwaiti-owned 

Cham Islamic Bank in Damascus. 

Bank Islam revamped its entire corporate identity in a bid to boost 

its position amid growing competition in the industry. 

Platinum Habib Bank introduced Islamic banking products; 

intergrating Shariah ruling into its conventional banking system. 

Commercialbank’s Al Waseela funds re-opened for subscription at 

par value of QAR10 (US$2.74) per unit, with a net asset value of 

QAR11.69 (US$3.21), following prior success. 

Takaful Malaysia’s general Takaful business dipped by 44.07% to 

RM38.01 million (US$10.84 million) in the fi rst-half of 2007. 

Malaysian prime minister Abdullah Ahmad Badawi called upon the 

fi nancial services sector to join government efforts in promoting a 

second wave of growth in Islamic fi nance. 

Lemabaga Zakat Selangor launched an online service dubbed 

“Zakat on-line”. 

Al Salam Bank revealed plans to split its shares and list outside 

Bahrain to boost liquidity. 

Page 135

Following the phenomenal success of the inaugural 

Malaysian Islamic Finance conference last year, 

Malaysia has once again successfully hosted the MIF 

Issuers and Investors Forum on the 13 th and 14 th August 

2007 at the Mandarin Oriental, Kuala Lumpur. 

MIF 2007 focused on Malaysia’s role as the dominant 

force in Islamic fi nance and how it could function 

to link the Middle East and Asian countries. Keynote 

addresses were delivered by Dr Zeti Akhtar Aziz, the 

governor of Bank Negara Malaysia, and Dr Nik Ramlah, 

senior executive director of Securities Commission. 

On the fi rst day, the issuers day, there were about 

450 attendees with approximately 19% international 

participants. While the second day – the investors day 

– witnessed the attendance of 420 participants including 24% international delegates. The delegates for both days came from 

over 35 countries across the globe. 

The panelists on the issuers day discussed various topics that focused on the effect of the US sub-prime market on Sukuk issuance, 

the benefi t of rating, the need to establish institutional investors (Takaful and pension funds) and also Japan’s interest 

in issuing its fi rst Sukuk. The sub-prime market credit crisis in the US 

has indirectly caused issuers to pay attention to the timing of the issuance. 

“The sub-prime market does impact the bond market. In the 

Islamic space there was a few transactions cancelled because the 

issuer felt the time is not right to go into the market. In my opinion, 

the current credit crises will bring some bad and good news. The bad 

news is the issuer will face more covenants and a thin pricing. Nonetheless, 

there is considerable amount of liquidity in the market and 

the Sukuk issuance will keep on continuing,” said Salman Younis, 

the managing director of Kuwait Finance House (Malaysia). 

Dr Nik Ramlah Mahmood, the senior executive director of Malaysia’s 

Securities Commission, highlighted during her keynote address on the investor’s day that the single most important catalyst 

for the development of the Islamic capital market products and services in Malaysia was the establishment of the Shariah 

Advisory Council (SAC) at the Securities Commission. 

“Not only is the SAC able to respond to inquiries and 

proposals from the industry, often times, the SAC is also 

able to make pronouncements to encourage innovation 

from industry. The guidelines issued by the SC such as 

those on Islamic unit trusts, Islamic REITS and Islamic 

Securities, always attract considerable interest from 

across the globe,” Dr Nik enlightened. 

The discussion on the second day revolved around 

how the Islamic fi nance industry as a whole faces 

a number of challenges. These include the need to 

modify the expectations of an investor. Currently, 

investors come into the market with the expectation 

of making high returns but only taking a low risk. 

This is where consumer education could play a role.

An acute problem in Islamic fi nance at present is the issue of human capital. We lack 

qualifi ed and experienced Islamic bankers, investment bankers, marketing teams, fund 

managers, lawyers, etc. This is where education and training plays a vital role to narrow 

the gaps in the workforce. Improvement of the regulatory framework is also fundamental 

to bring the industry forward because sometimes the law of the land that acts as the 

impediment of the industry. Last but not least, there is a vital need to work towards 

Shariah harmonization. 

Concluding the two-day event Abdulkader Thomas, the event chairperson, wrapped 

up the forum with an interesting thought. “Islamic fi nance has concentrated a lot on 

real estate projects. There was a 

raised concern from the audience 

that Islamic banks are over-exposing 

themselves on real estate. Despite 

that fact, the investment in real estate 

keeps on growing. Why? It’s due to our 

demographic factor. I will describe in 

simple three words – youth, vigor and shortage. Most emerging economies 

have a young population who are dynamic and there is a shortage of supply of 

real estate. Thus, the real estate investment will continue for some time in the 

future.” Thus he concluded the forum. 

TAKAFUL 

Lead Media Partner 

What was said 

An interesting event that provided a comprehensive picture of Malaysia as an international fi nancial center. Knowledgeable speakers and panelists that best 

addressed the issues. 

Bank Negara Malaysia 

A good opportunity to hear the issuer’s perspective, to refl ect on the issues and build on these issues in Malaysia’s efforts towards positioning the country 

as the leading fi nancial Islamic center, in line with MIFC’s objectives. 

Securities Commission 

Better understanding about Islamic fi nancing and very useful information to the potential Islamic investor. 

Ministry of Finance 

Excellent event, particularly due to the involvement of foreign players and panelist in sharing different experiences and perspectives. 

Bank Negara Malaysia 

Excellent forum to hear different perspectives from various parties involved in Islamic fi nance and Islamic capital markets. 

Securities Commission 

Excellent, well-organized forum, though no fee was charged. Keep up the good work. Hope there’ll be more to come! 

Employees Provident Fund 

The event was a good opportunity to understand current debates and issues of Islamic fi nance. Thank you. 

STIC Investments 

Abdulkader Thomas did a great job — a good conclusion, clear and concise. 

HL Management 

Very educational and motivational forum in promoting Islamic fi nance to a higher level. 

IGDX Holdings 

Well organized, interesting speakers, great forum. 

Microlink Systems 

SPONSORS 

Media Partners


SEPTEMBER news briefs 

Vinson & Elkins was mandated to advise on the fi rst Swiss Sukuk 

from renewable energy company EnergyMixx. The Sukuk is listed on 

the Frankfurt Stock Exchange. 

Franklin Templeton acquired a 25% stake in Dubai-based Algebra 

Capital at an undisclosed amount 

Al Baraka Islamic Bank opened its 12 th branch in Pakistan. 

Bahrain Islamic Bank offered up to 283.4 million in ordinary shares 

in a rights issuance. 

Commerzbank was granted a license by the Dubai Financial Services 

Authority to open a new branch in the Dubai International Financial 

Center. 

ALDAR Properties awarded AED2.7 billion (US$735.09 million) in 

contract to Arabian Construction to build three towers in Abu Dhabi’s 

Central Business District. 

Meezan Bank began providing technical assistance to KASB Funds 

Limited’s Islamic mutual funds, following an agreement by both 

parties. 

MIDF Amanah Investment Bank planned to approve up to RM3 

billion (US$854.89 million) in Islamic papers from its current 

RM660 million (US$118.04 million) in Islamic medium-term 

notes. 

First Gulf Bank began talks to set up a full-fl edged commercial bank 

in Libya. 

Al Salam Bank of Sudan launched the Al Salam First Property Fund 

at US$60 million. 

Islamic Bank of Thailand introduced its halal fi nancing program to 

penetrate a market dominated by Bangkok Bank, Krung Thai Bank 

and Siam Commercial Bank. 

National Bank of Dubai became the only bank in the UAE to offer 

escrow accounts both within conventional and Islamic banking. 

Public Bank launched its fi rst Islamic regional fund, the PB Islamic 

Asia Strategic Sector fund. 

The Qatar Investment Authority reduced its exposure to the US 

dollar by increasing its Asian investments. 

ABN Amro and Prime Commercial Bank merged in Pakistan and the 

new entity has offi cially been re-branded as ABN Amro. 

Prince Andrew, the Duke of York, called for cooperation between 

Malaysia and the UK to boost the Islamic fi nance sector in both 

countries. 

The Alliance Financial Group revealed plans to set up an Islamic 

banking subsidiary. 

Page 138 


Islamic Development Bank planned to inject US$2 billion from its 

Islamic Solidarity Fund for Development into Bangladesh to aid in 

the alleviation of poverty. 

Nomura Research International was mandated to aid Brunei in 

developing its domestic bond market and diversify the country’s 

economy. 

Gulf General Investment raised US$210 million via Sukuk, with 

Emirates Islamic Bank and Standard Chartered acting as the 

facility’s underwriters. A total of 24 lenders were involved in the 

Sukuk. 

Shamil Bank raised US$35 million in total via its 100% capitalprotected 

Shamil Navigator Mudarabah program. 

Abu Dhabi Commercial Bank acquired a 41% stake in Gulf 

Merchant Group worth US$51 million. 

Gulf International Bank obtained a license from the Saudi Arabian 

Capital Market Authority to establish a securities company in 

Saudi Arabia. 

Corecap Merchant Bank received a Category 3 license from the 

Qatar Financial Center Regulatory Authority to offer private equity, 

investment banking and asset management. 

Pacifi c Healthcare Holdings announced its second joint business 

investment to expand its presence in India’s high growth healthcare 

market with strategic partner Kuwait Finance House. 

Chairman of the Senate of Pakistan Mohammad Mian Soomro 

asked bankers to introduce Islamic banking in rural areas to cater 

to the needs of the agriculture sector. 

Good Morning Shinhan Securities worked out a strategic 

partnership with Malaysia’s Kenanga Investment Bank. 

Aabar Petroleum Investments approved a plan to sell Sukuk up to 

US$1.2 billion. 

Dubai Islamic Bank arranged fi nancing facilities totaling AED407 

million (US$110.8 million) for Al Hamad Group for its new AED1.39 

billion (US$378.46 million) project, “Villamar at the Harbor”. 

Dubai Group acquired 15% in BankMuscat, making it the largest 

fi nancial services cross-border investment in the Gulf region. 

Barclays Bank and Shariah Capital signed a memorandum of 

understanding to launch a unique Shariah compliant investment 

platform targeted at hedge fund managers. 

Al Aqar KPJ REIT received approval from Malaysia’s Securities 

Commission for the issuance of up to RM300 million (US$86.98 

million) Sukuk Ijarah commercial papers/medium-term notes (CP/ 

MTN). 


SEPTEMBER news briefs (continued...) 

ING Investment Management announced plans to be based at the 

Dubai International Financial Center. 

Dubai World Central signed a memorandum of understanding 

with Amlak Finance PJSC to fi nalize a DWC customers’ fi nancing 

agreement. 

State Bank of Pakistan issued guidelines for Islamic microfi nance 

businesses. 

Central Bank of Bahrain gave offi cial recognition to the Islamic 

International Rating Agency. 

Bahrain Islamic Bank announced the incorporation of Abaad Real 

Estate at BH$10 million (US$27 million). 

The Islamic Bank of Asia boosted its capital to US$500 million from 


Adeem Investment revealed plans to set up an investment bank in 

the UK. 

IDB Group’s fi nancing for socio-economic development in cumulative 

terms reached US$46 billion. 

Pakistan International Airlines fi rst Sukuk purchased two aircrafts 

at PKR2 billion (US$32.99 million). 

Mawarid Finance was launched with a paid-up capital of AED1 billion 


Maybank launched three new Islamic banking products: the net 

Current Account-i, HomeEquity-i and ShophouseEquity-i. 

Abu Dhabi-based Carlyle Group sold a 7.5% stake to Mubadala 

Development, the investment arm of the Abu Dhabi government at 

US$1.35 billion. 

Standard & Poor’s launched its stability ratings for Islamic banks 

with profi t-sharing investment accounts. 

Doha Bank sought cooperation from Japanese companies to trade 

greenhouse emission rights in Qatar’s upcoming market segment. 

Berber Cement Company closed its US$130 million Sukuk issuance 

arranged by Liquidity Management Center, Emirates Islamic Bank 

and Alpen Capital as fi nancial adviser. 

Pak Elektron raised funding of PKR1.2 billion (US$20 million) 

through a fi ve-year privately placed Shariah compliant Sukuk based 

on diminishing Musharakah. 

Canada’s bank regulator, the Offi ce of the Superintendent of 

Financial Institutions, began studying two proposals for the setting 

up of Islamic banks in Ottawa. 

The Shariah Review Bureau was licensed by Central Bank of 

Bahrain to provide independent services for Shariah review and 

compliance. 



The presidents of the Association of Italian Banks and the Union of 

Arab Banks confi rmed the establishment of the fi rst Islamic bank in 

Italy by 2008. 

The Islamic Bank of Britain and Bolton Business Ventures launched 

a scheme to make funding of up to £25,000 (US$50,545) available 

to Shariah compliant companies. 

CIMB Islamic launched the Fixed Return Investment Account-i, also 

known as Advance Profi t, with hopes to attract up to RM1 billion 

(US$288.84 million) in deposits. 

Bank of Japan was invited to be an observer member of the Islamic 

Financial Services Board. 

Mashreq extended a bid for state-owned Banque du Caire in Egypt. 

Islamic Development Bank, along with the United Nations and 

other institutions revealed plans to halve the poverty rate in Africa 

by 2015. 

Citigroup became the fi rst foreign bank to receive a merchant 

banking license in Bangladesh. 

New fi nancial rulings on banking contracts were discussed at the 

Islamic Economy forum. 

Eversheds’ London and Qatar Islamic fi nance teams advised on a 

US$600 million loan for Qatari real estate company Barwa. 

Amlak Finance applied for permission from the Securities and 

Commodities Authority to buy back 5% of its shares listed on the 

Dubai Financial Market. 

Sakana Holistic Housing Solutions signed a preferred Islamic 

mortgage fi nance provider agreement with the developers of Amwaj 

Plaza 1. 

Hong Kong hosted a full-fl edged seminar on Islamic fi nance along 

with the Islamic Financial Services Board. 

Al Salam Bank Bahrain approved a stock split of 10 shares to one, 

to be listed on the GCC stock exchange. 

BNP Paribas scheduled a re-launch of its two Sukuk by the end of 

2007, post-liquidity crunch which affected global debt markets. 

The 2 nd Annual Arab Asian Financial Forum honored the Adeem 

Investment Company in line with its maiden Sukuk launch. 

Markets saw an increase in demand for credible Islamic software 

solutions. 

Stockholm’s integration council called for Swedish banks to 

begin offering Islamic banking to Muslims looking for investment 

alternatives. 

Ithmaar Bank acquired a 100% holding in Shamil Bank. 

Page 139


Amlak Finance provided up to 90% fi nancing on Cayan Investment & 

Development’s two latest projects, Silverene Towers and the Cayan 

Business Center. 

The Islamic Banking and Finance Institute Malaysia organized the 

International Takaful Summit in London. 

Standard Chartered Bank revealed plans to increase its investments 

in Malaysia, concentrating on high growth sectors including oil and 

gas, tourism and hospitality industries. 

The Royal Bank of Scotland, Santander and Fortis consortium 

won ABN Amro at €71 billion (US$100.42 billion), after Barclays 

abandoned its €67.5 billion (US$95.5 billion) bid. 

Public Bank confi rmed the establishment of its Islamic subsidiary 

in March 2008. 

Kuwait Finance House Malaysia received approval from Bank 

Negara Malaysia to initiate negotiations to acquire up to 35 

branches of RHB Capital. 

Dow Jones Indexes launched the Dow Jones Islamic Market China/ 

Hong Kong Titans Index to track 30 of the largest Shariah compliant 

companies in mainland China and Hong Kong. 

Omniyat Properties revealed plans to launch three major projects 

in the UAE in 2008 and venture outside its domestic market for the 

fi rst time. 

UBL fund managers launched the United Islamic Income Fund, aimed 

at providing safe and stable Shariah compliant returns to investors 

by investing in Islamic income instruments while taking into account 

capital security and liquidity considerations. 

Malaysian law fi rm Zaid Ibrahim & Co signed an alliance agreement 

with Allen & Gledhill LLP (Singapore) in a bid to create a legal 

powerhouse for the Asean region. 

Bahrain Islamic Bank saw BH$17.5 million (US$46.43 million) in 

net profi ts in the nine months ended the 30 th September 2007, an 

increase of 81% over the BH$9.6 million (US$25.47 million) achieved 

during the previous corresponding period. 

Gulf International Bank BSC reported a consolidated net income 

after tax of US$184.5 million for the nine months ended the 30 th 

September 2007. 

Malaysian automotive company DRB-Hicom revealed plans for an 

Islamic takeover, buying Bukhary Capital’s 70% stake in full-fl edged 

Islamic bank, Bank Muamalat. 

The Emirate Securities & Commodities Authority banned three 

brokerages from making purchases for 15 days following a 

suspension implemented by the ESCA that prohibited 11 brokerage 

fi rms from purchasing operations for one month due to failure to 

fulfi ll new paid-up capital levels and bank guarantee requirements. 

Page 140 

OCTOBER news briefs 


AmInvestment Bank Group’s funds management division declared 

income distributions totaling RM5.6 million (US$1.73 million) for 

three AmMutual funds — AmBond, AmBon Islam and AmIttikal — for 

6,773 unit holders. 

Nakheel PJSC was mulling a share sale before its record US$3.52 

billion Sukuk matures in 2009. 

BankIslami successfully completed a private placement of Sukuk at 

PKR650 million (US$10.72 million) for Amtex Textiles Ltd. 

Direct investment in Pakistan’s Islamic banking industry as at 

September 2007 stood in excess of PKR20 billion (US$330.57 

million). 

Engro Chemical issued a three-tranche Shariah compliant US$150 

million syndicated loan comprising a US$50 million Sukuk, US$300 

million syndicated loan to banks and US$65 million loan. 

Shares of the Emirates NBD Bank commenced trading on the Dubai 

Financial Market. 

Kuwait Finance House showed a 28.8% boost in net profi ts for the 

3 rd quarter of 2007, crediting its overseas expansions. Net income 

also rose by 49% to KWD393.46 million (US$1.41 billion). 

Taurus Mutual Fund entered into a tie-up with Parsoli Corporation 

to launch Taurus Parsoli Ethical Fund, India’s fi rst Shariah compliant 

close-ended equity Islamic fund. 

Kenanga Investment Bank began looking at key markets outside 

Malaysia in its bid to create a niche in the corporate banking 

business. 

PLUS Expressways’ unit Projek Lebuhraya Utara-Selatan (PLUS) 

proposed to issue up to RM3.55 billion (US$1.05 billion) nominal 

value of Senior Sukuk mainly to enable the group to have a greater 

access to the Middle Eastern debt and equity markets. 

National Fullerton Asset Management revealed plans to launch two 

open-end Islamic Mutual Funds: the NAFA Islamic Income Fund and 

the NAFA Islamic Multi Asset Fund. 

Path Solutions opened a new offi ce in Petronas Twin Towers, 

Malaysia. 

Industrial and Commercial Bank of China revealed plans to open 

branches in Doha and Dubai. 

The International Monetary Fund produced a working paper stating 

that Sukuk could signifi cantly reduce the market risk of an investment 

portfolio. The paper was entitled: “Sukuk Vs Eurobonds: Is there a 

difference in VaR?” 

Microsoft and Tamweel began working on a major upgrade on 

Tamweel’s IT infrastructure. 


Amlak Finance delayed a sale of US$260 million in Sukuk, citing 

turmoil in international credit markets and increased corporate 

borrowing rates. 

The Arab Chamber of Commerce & Industry launched an Islamic 

index for China and Hong Kong companies comprising 50 companies 

mainly from the utilities and transport sector. 

The Philippines began to look into the business of halal food 

products. 

International Finance Corporation began mulling whether to 

fund Islamic banks in Kenya following the licensing of two Islamic 

institutions in 2007. 

Deutsche Bank closed an Islamic profi t rate collar structure with 

Dubai Islamic Bank amounting to US$500 million. 

The Dubai Multi Commodities Center and Shariah Capital signed 

an agreement to explore the development of Shariah compliant 

investment products based on hard assets such as commodities 

and precious metals. 

JPMorgan Japan revealed plans to double assets under management 

for Japanese individuals and open branches in the country to handle 

a greater share of household wealth. 

Global Investment House launched the Global Real Estate Ijarah 

Fund, capitalizing on the Middle East and North Africa real estate 

sector and Islamic fi nancing competencies. 

Masraf Al Rayan was awaiting approval to raise the portion of its 

shares open to foreign ownership from 31% to 49%. 

Commercial Bank of Kuwait denied reports on the sale of its 20.2% 

holding in the Bank of Bahrain and Kuwait to an unnamed Kuwaiti 

investor. 

ICICI Bank attributed US$300 million worth of Gulf investments into 

India through its private banking unit in Dubai. 

Asian Finance Bank and AmanahRaya Investment Bank teamed up 

to develop and manage Malaysia’s fi rst Islamic marine fund based 

on Bai Muajjal. 

Palestine Islamic Bank received warnings from Israel on its dealings 

with Hamas. 

Islamic Bank of Thailand revealed plans to boost its credit service 

for pilgrims of the Haj. 

Dubai Bank revealed plans to expand its capital base and seek 

regional expansion via acquisitions. 

Kuwait Finance House established a Sukuk company at KWD100 

million (US$357 million) to bolster secondary market trading. 

Etihad Airways confi rmed a sum of US$1.5 billion in borrowings to 

fund 16 aircraft. 

OCTOBER news briefs (continued...) 



Liechtensteinische Landesbank and ABN Amro launched the fi rst 

Islamic exchange-traded index trackers linked to the performance of 

the LLB MENA indices. 

Jadwa Investment received approval from the Saudi Arabia Capital 

Market Authority to launch a Global Sukuk Fund to satisfy the fi xedincome 

asset class. 

Dana Gas issued its highly anticipated Sukuk which however fell 

short of US$135 million to US$875 million from its pre-planned 

amount of US$1 billion. 

Cirrus Developments partnered with Badr Al Islami to deliver a trust 

management account protecting property buyers. 

The Islamic Finance Company signed an agreement with the Ministry 

of Labor to begin implementing the Daman & Aman program in the 

UAE. 

The value of shares and bonds bought by foreign investors at the 

Dubai Financial Market reached AED2.46 billion (US$669 million) 

at 39.1%. 

Boubyan Bank posted a third-quarter net profi t rise of 143.5% 

compared to the previous corresponding period. Its net profi ts grew 

to KWD4.53 million (US$15.35 million) from KWD1.86 million 

(US$6.68 million) last year. 

Ras Al Khaimah-based RAK Properties revealed plans to sell up to 

US$2 billion of Islamic bonds in early 2008 to fi nance new projects. 

The entity was in the process of selecting banks to arrange the 

sale. 

Standard Chartered Bank revealed plans to increase its investments 

in Malaysia, concentrating on high growth sectors including oil and 

gas, tourism and hospitality industries. 

Gulf International Bank reported a dip in post-tax consolidated net 

income at US$184.5 million. 

DRB-Hicom commenced talks with Bukhary Capital to acquire a 

70% stake in Bank Muamalat Malaysia. 

The Malta Institute of Management and Malta Union of Bank 

Employees organized a seminar on Islamic banking. 

Nakheel PJSC revealed plans to sell company shares before its 

US$3.52 billion Sukuk hits maturity in 2009. 

The committee of experts on Islamic fi nance from the UK Treasury 

were doubtful of the country’s Sukuk plans after the departure of 

Economic Secretary from the committee. 

Abyaar Real Estate Development revealed plans to sell up to US$1 

billion in Sukuk in 2008 to fi nance projects, including a Dubai 

development. 

Devon Bank announced the expansion of its Islamic fi nancing 

program along with added investor support. 

Page 141


NOVEMBER news briefs 

Rafe Haneef resigned from his post as head of Citigroup Asia’s 

Islamic banking unit. 

BIMB Unit Trust Management, a subsidiary of Bank Islam Malaysia, 

declared income distribution for three funds. ASBI Dana Al-Fakim 

gave a distribution of 2.25 sen (US$0.00668) per unit, equivalent to 

an annual distribution yield of 4.47%. The two other funds, Al-Munsaf 

and Al-Falah, gave a distribution of 9.15% and 7.17% distribution 

yield. 

Binariang GSM revealed plans to sell some RM12 billion (US$3.6 

billion) of bonds to fi nance its buyout of mobile network operator 

Maxis Communications. 

Citibank was considering the possibility of a joint venture with a local 

bank in Malaysia to set up a standalone Islamic banking unit. 

National Bank of Kuwait launched a US$ money-market fund 

according to Shariah principles. The fund started at a minimum 

investment of US$25,000 and additional investments of US$1,000. 

Qatar Islamic Bank launched two investment funds with a capital 

of QAR2 billion (US$550.36 million) under the name Al Sanabel, 

targeting Shariah compliant stocks on the Doha Securities Market. 

Amlak Finance signed a strategic alliance with Real Estate Bank 

headquartered in Abu Dhabi, offering its Islamic home fi nance 

solutions for the Al Maha Tower. 

The Dubai International Financial Exchange listed a range of Islamic 

structured products on the TraX platform, offering investors attractive 

new Shariah compliant opportunities. 

First Gulf Bank announced its fi nancial results for the fi rst nine 

months of 2007, showing an increase of 21.5% in net profi t, 

compared with the previous corresponding period, to reach AED1.39 

billion (US$378 million). 

HSBC and the Dubai International Financial Exchange launched 

a family of indices tracking the price movements of conventional 

Middle Eastern bonds and international Sukuk. 

Emirates Islamic Bank and Hydra Properties announced the 

signing of a memorandum of understanding establishing a strategic 

partnership to enable customers of Hydra Properties to avail 

themselves of EIB’s home fi nance solutions. 

Total Sukuk issuance accrued by 110.7% to US$37.3 billion over 

2007. Of the total, ringgit-denominated Sukuk made up 54%, at 

US$20.1 billion. Sukuk listed on the Dubai International Financial 

Exchange and London Stock Exchange also amounted to US$16.14 

billion and US$7.2 billion, respectively. 

Unicorn Investment Bank announced strong results for the ninemonth 

period ended the 30 th September 2007. Earnings rose by 32%, 

from US$64.1 million in the fi rst nine months of 2006 to US$84.6 

million in the corresponding period for 2006. 

Page 142 


Al Khaliji confi rmed its buy of French bank BLC Bank’s assets, in line 

with its bid to expand outside Qatari ground. 

Hong Leong Bank offered up RM877.5 million (US$263.48 million) 

for a substantial stake in a commercial bank in Chengdu City 

Commercial Bank in China. 

Shuaa Capital’s half-year results as at the 30 th September 2007 saw 

a revenue hike to AED277.2 million (US$75.48 million), a 62% rise 

over the fi rst half of the previous corresponding period. 

BMB Investment Bank revealed its results for 3Q2007 with a net 

income of US$16.2 million for the fi rst nine months of the year as 

compared to US$5.9 million in the previous corresponding period. 

BNP Paribas in the Gulf announced the creation of its combined 

syndications and bond origination platform on the ground. 

The Ras Al Khaimah Investment Authority began planning European 

and Middle East roadshows for its inaugural US dollar-denominated 

benchmark Sukuk offering. 

MAC Sharaf Securities began offering clients trading access to the 

Dubai International Financial Exchange. 

SABB Bank planned to raise its capital to SAR6 billion (US$1.6 

billion) by issuing three bonus shares for each fi ve shares held. 

The Dubai Financial Services Authority entered into a memorandum 

of understanding with the United States Banking Supervisors, 

making it the fi rst regulator in the Middle East to do so. 

National Bank of Kuwait launched a Shariah compliant, US$denominated 

money market fund for short and medium-term Shariah 

compliant instruments. 

Al Salam Bank-Bahrain launched its online banking system at www. 

alsalambahrain.com, allowing clients to place standing orders and 

transfer recurring payments from respective accounts. 

Abu Dhabi National Energy Company (TAQA) revealed plans to sell up 

to US$6 billion in bonds in 2008, subject to credit market conditions. 

Proceeds from the bonds will be used to fund the company’s US and 

Canada acquisitions of Pogo Producing’s Northrock Resources and 

oil and gas exploration fi rm Pioneer Canada. 

Al Salam Bank generated a net income of BH$17.4 million (US$46.2 

million) as at the 30 th September 2007, an increase of BH$12.2 

million (US$32.4 million) over the previous corresponding period. 

Ras Al Khaimah Investment Authority launched its debut DIFX-listed 

Sukuk at US$500 million, over a fi ve-year tenure. 

The governor of Qatar Central Bank called for increased corporate 

governance, disclosure and transparency in Islamic banking 

practices. 


NOVEMBER news briefs (continued...) 

Sharjah Islamic Bank completed its evaluation and preparatory 

stage of its eServices Banking project – Internet Banking. 

National Asset Management teamed up with Amana Capital to 

launch the NAMAL Amana Equity fund. 

Ithmaar Bank announced plans to complete the 100% acquisition of 

Shamil Bank, increasing its share by 40%. 

DP World utilized funds raised from the Middle East’s largest ever 

initial public offering to expand in emerging markets such as Latin 

America and Africa. 

OSK Investment Bank began contemplating a stand-alone Islamic 

banking subsidiary, having received approval from Bank Negara 

Malaysia. 

Standard Chartered launched the Islamic investment product TRAIni 

(Total Return Alternative Investments), the Islamic version of the 

conventional alternative investment, which captures yield spreads 

across a basket of global currencies to provide diversifi cation 

benefi ts to investors. 

Global consultants KPMG suggested the creation of a mega Middle 

East Islamic bank that would not only have a larger capital base to 

fi nance large projects but also offers competitive funds. 

DLA Piper revealed plans to establish an offi ce in Qatar by the fi rst 

quarter of 2008. 

Prestige Scale agreed to a proposed Musharakah arrangement with 

Kuwait Finance House Malaysia for the acquisition of Glomac Tower, 

KLCC from Glomac Al Batha. 

Abu Dhabi Commercial Bank was eyeing a stake in a Malaysian 

Islamic bank, speculated to be RHB Islamic Bank. 

The Dubai Financial Market listed Hajj and Umrah travel company 

Al Firdous Holdings. 

Investment Dar planned to increase its capital and list on the London 

Stock Exchange by end-2007 via the sale of US$500 million worth of 

shares, equivalent to 20% of its capital. 

The Chartered Institute of Management Accountants began 

producing a four-part study guide series covering topics on Islamic 

commercial law, Islamic banking and Takaful, Islamic capital markets 

and instruments and accounting and analysis of Islamic fi nancial 

institutions. 

The Islamic Financial Services Board cited limited availability of 

statistical information and lack of cross-country historical data 

with suffi ciently long time-series as major challenges in the Islamic 

fi nance industry. 

HSBC Malaysia was awarded an Islamic banking license to set up 

a stand-alone subsidiary by Bank Negara Malaysia. The bank had 

applied for the license in the middle of 2007, during Zair J Cama’s 

term as CEO and chairman. 



Atlas Asset Management launched its second pension fund, Atlas 

Pension Islamic Fund. 

KIPCO Asset Management Company launched the Al Raya 

Investment Company KSC, with the private placement of 170 million 

shares, targeting international investors in developed markets. 

The Employees Provident Fund revealed plans to increase its 

holdings of overseas investments to seek higher returns. 

OCBC received the go-ahead from Bank Negara Malaysia to set up 

an Islamic banking subsidiary in the country. 

State Bank of Pakistan reported 15% growth in Islamic banking in 

Pakistan in 1Q2007 to 3.2% in assets of the total banking sector. As 

at March 2007, total Islamic banking assets stood at PKR135.64 

billion (US$2.23 billion). 

NCB Capital launched the Al-Ahli BRIC Secured Equity Fund, investing 

in Shariah compliant companies in Brazil, Russia, India and China. 

The Bahrain Monetary Agency granted two separate licenses to 

ADDAX International Bank and the National Bank of Bahrain. 

Amlak Finance appointed Cedar Management Consulting 

International to draw up and implement a new growth strategy for 

the company. 

Dubai Islamic Bank opened three new branches in Sharjah and Abu 

Dhabi, increasing its total UAE-wide branch network to 44. 

Deutsche Bank offi cially opened its branch at the Qatar Financial 

Center, offering investment banking and private wealth management 

services. 

Securities and Investment Company concluded a transaction 

on behalf of the Dubai Financial Group to acquire a 60% stake in 

Bahrain’s Taib Bank. 

Central Bank of Bahrain revealed that the consolidated balance 

sheet of Bahrain’s banks, in both retail and wholesale reached 

US$222.4 billion at the end of 3Q2007. 

Arab Bank offi cially launched AB Capital, the investment banking 

arm of the Arab Bank Group, after being licensed by the Dubai 

Financial Services Authority to operate as a regulated entity. 

Morgan Stanley provided Dubai Holding with US$1.26 billion in 

fi nancing on a fully underwritten basis. The facility was provided as 

a short-term bridge loan to Dubai Holding Investments Group, the 

investment arm of Dubai Holding. 

The Dubai International Financial Center welcomed Malaysia’s 

crown prince Dr Raja Nazrin Shah, who visited Dubai to explore 

opportunities between the UAE and Malaysia. 

State Bank of Pakistan directed all banks having Islamic banking 

branches to submit details of products to be offered via its Islamic 

banking windows before operations commence. 

Page 143


Standard & Poor’s reported that the US credit crisis had affected 

pricing for project fi nance in Europe and the Middle East. However, 

credit quality remained strong. 

The British market for Shariah compliant mortgages failed to grow 

as fast as expected, due to a lack of awareness according to the 

Financial Services Authority. 

University Bancorp reported an unaudited net income of US$1.01 

million, compared to a loss of US$347,237 for the same period of 

the 30 th September. 

Moody’s Investors Service maintained a stable rating outlook for the 

Asian palm oil industry, with the sector’s prospects favorable. 

Infosys began marketing its universal online banking platform 

Finacle for Shariah compliant fi nancial products and services in the 

Middle East and Europe. 

National Bank of Abu Dhabi revealed plans to double the value 

of assets under management to more than US$3 billion through 

2009. 

Ithmaar Bank and Shamil Bank shareholders were unanimous in 

Ithmaar’s planned 100% acquisition of Shamil. 

The Development Bank of the Philippines was on track to complete 

the Bangko Sentral ng Pilipinas’ requirements for the takeover of 

Al-Amanah Islamic Investment Bank. 

Investate Bahrain tied up with Omniyat Properties to jointly develop 

a strategic project on Dubai’s high-profi le Madinat Al Arab on the 

Dubai Waterfront. 

Bear Stearns reported more jobs cuts as a result of the subprime 

crisis, with its Wall Street mortgage lending unit seeing 650 jobs 

depleted. 

Citigroup announced the sale of a US$7.5 billion stake to the 

investment arm of the Abu Dhabi government in a bid to access 

capital following the subprime mortgage crisis and the resignation 

of its CEO. 

NCB Capital introduced the world’s fi rst Shariah compliant real 

estate fund dubbed the AlAhli Global Real Estate Fund, investing in 

companies dealing with real estate development globally. 

Bahrain warned it would take action on foreign banks for unethically 

piling pressure on Gulf currency pegs. 

The Chartered Institute of Management Accountants became the 

fi rst accountancy body in the UK to train its members in Shariah 

law. 

Investment Dar began targeting investment opportunities in Asia, 

with the launch of a proposed US$300 million syndicated Murabahah 

facility. 

Page 144 

DECEMBER news briefs 


Meezan Bank unveiled plans to expand its branch network up to 100 

by the start of 2008. 

Abu Dhabi Commercial Bank sold AED2 billion (US$546.3 million) 

worth of two-year bonds as part of a borrowing program. Standard 

Chartered was the deal’s arranger. 

The Islamic Chamber of Industry and Commerce revealed plans 

to establish Al Emaar Bank in Bahrain with a capital of US$1 

billion. 

The Qatar Central Bank gave Al Jazeera Islamic Company initial 

approval to take the necessary steps to become an Islamic fi nance 

entity. 

Sakana Holistic Housing Solutions celebrated its fi rst anniversary. 

The Tokyo Stock Exchange launched a Shariah index of shares in 

companies that comply with Islamic law to meet growing demand 

from investors, particularly in the oil-rich Middle East. 

White & Case opened an offi ce in Abu Dhabi and expanded its 

Riyadh offi ce, raising the number of its lawyers in the Middle East 

to more than 60. 

Asian Finance Bank was granted a license by Bank Indonesia to 

open its representative offi ce in the republic’s capital of Jakarta. 

Deutsche Bank planned to double its headcount in the Middle East 

over the next two years. The bank currently staffs over 170 people 

in six Arabic countries, with the majority based in Dubai and Saudi 

Arabia. 

Moody’s Investors Service reported that European, Middle Eastern 

and African corporates are set to push through challenges in 2008. 

Albaraka Banking Group signed an agreement with the Islamic 

International Rating Agency to carry out a Shariah Quality Rating 

on the bank. 

Dubai Islamic Bank launched the seventh round of its “Emarati” 

training program, aimed at enhancing the banking and professional 

skills of UAE national graduates. 

Herbert Smith’s Dubai offi ce advised Thani Investments LLC as 

originator on the US$100 million issuance of Sukuk Musharakah 

certifi cates by Thani Investments Sukuk Company Limited, a special 

purpose company incorporated in the Cayman Islands. 

Emirates Bank offi cially inaugurated its new branch in the 

historical district of Shindagha, one of the oldest areas of Dubai. 

The Shindagha branch is designed to provide customers with a 

comfortable environment to perform their banking needs. 

Bank Negara Malaysia announced the opening of the country’s legal 

market to foreign law fi rms, only in the area of Islamic fi nance. 


DECEMBER news briefs (continued...) 

Emirates Aluminium Company planned to sell up to US$2 billion of 

bonds in 2008 to help fi nance construction. The bonds, a mixture of 

long and short sale, will most likely be Islamic to boost local investor 

demand. Citigroup, Goldman Sachs and National Bank of Abu Dhabi 

were mandated as managers for the sale. 

The Dubai International Financial Exchange listed its fi rst non-dollar 

security in the form of Jebel Ali Free Zone’s AED7.5 billion (US$2.04 

billion) local currency Sukuk. This was in line with the bourse’s 

attempt to broaden the range of choices for investors. 

Shamil Bank launched its US$90 million Shamil Bosphorus 

Mudarabah, investing in Shariah compliant real estate developments 

in Turkey. The bank will subscribed up to 10% of the commitment as 

a vote of confi dence. 

Meezan Bank and Eden Builders signed a PKR2.5 billion (US$40.82 

million) Islamic fi nancing facility mandate with a tenure of 5.5 

years. 

Barclays launched the UK’s fi rst Shariah compliant exchange-traded 

fund. The bank also formed a panel of Islamic scholars to supervise 

its Islamic products. 

The Bank of London and The Middle East provided US$24 million 

in Islamic fi nancing for two operating lease transactions, both with 

US Fortune 500 companies. BLME’s fi nancing aimed to fund energy 

exploration and surface mining equipment on lease terms of fi ve and 

seven years. 

State Bank of Pakistan governor Dr Shamshad Akhtar affi rmed that 

the prospects for growth in Islamic fi nance were promising but rested 

on building an effective system for the industry. 

Bahrain-based Unicorn Investment Bank received the nod on to 

convert its Kuala Lumpur offi ce into a full-fl edged Islamic bank. 

Central Bank of Bahrain granted an investment fi rm category 2 

license to the International Investment Bank to establish Investcorp 

Gulf Investments. The new fi rm was established to manage 

Investcorp’s Gulf-focused funds. 

AB Bank signed a contract with Millennium Information Solution 

for the implementation of its Shariah-based online Islamic banking 

solution, “Ababil”. 

The Islamic debt fi nancing of US$205 million for the Hajj Terminal 

at the King Abdulaziz International Airport in Jeddah, Saudi Arabia 

was concluded. 

Dubai Islamic Bank, Standard Chartered Bank and WestLB arranged 

a US$263 million, 10-year Islamic project fi nance facility to fi nance 

DP World’s 30-year new container port concession at Doraleh, 

Djibouti. The World Bank’s Multilateral Investment Guarantee 

Agency provided a tranche of political risk insurance. 

Emirates Islamic Bank clarifi ed that it was not the mandated lead 

arranger for government-owned company Limitless’ US$1.2 billion 

two-year syndication. 



Sui Southern Gas Company signed an agreement with BankIslami 

Pakistan and Pak Brunei Investment Company to fund its capital 

expenditure program budgeted at PKR10 billion (US$163.58 million) 

for 2007-08. 

Norton Rose secured an alliance with Saudi Arabian practice 

Abdulaziz Al-Assaf in a move set to boost the law fi rm’s profi le in the 

Middle East. 

The Singapore government released a mandate allowing foreign 

fi rms to practice Singaporean law, following recommendations made 

by a review committee of its local legal market. 

Tradewinds Plantation group inked an agreement with OCBC Bank 

(Malaysia) to issue its fi rst Islamic securities of up to RM400 million 


Barwa Real Estate revealed that it was seeking a credit rating and 

looking to sell at least US$800 million in Sukuk and global depository 

receipts in 2008 to fund expansion. 

Indian corporations had expressed great interest to raise funds in 

Malaysia, Bank Negara Malaysia’s assistant governor Muhammad 

Ibrahim affi rmed. 

The Chartered Institute of Management Accountants launched the 

fi rst global Islamic fi nance qualifi cation to be offered by a professional 

accountancy body. 

Industry observers cited the lack of scholars as a hindrance to British 

efforts to become an Islamic banking hub. 

The Center for Islamic Banking, Finance and Management, under 

the purview of Universiti Brunei Darussalam, held a three-day 

workshop on Shariah issues in Islamic fi nance. 

The Ras Al Khaimah Investment Authority listed a US$325 million 

Sukuk on the Dubai International Financial Exchange, taking the 

exchange’s total listed value of Sukuk to US$14.11 billion — the 

largest value of any exchange in the world. 

Dutch mayor Job Cohen revealed that there has been collective 

sentiment to urge fi nance minister Wouter Bos to allow banks to 

offer Islamic mortgages. 

DP World revealed investment commitments exceeding US$4 billion. 

The company, however, had not decided on a public sale of shares 

to support growth. 

Mawarid Finance signed a partnership agreement with real estate 

developer ETA Star, to provide fi nancing to purchasers of units in the 

Centrium project. 

The Qatar Investment Authority increased its share by almost 24%, 

in the London Stock Exchange, resulting in a controlling stake of 

nearly 52% by the Gulf state and Dubai. 

Standard & Poor’s announced the extension of its fund management 

ratings service to the Gulf. 

Page 145

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Refresher Day: Principles of Islamic Finance & Investment 

23 rd March, Dubai 

Sukuk & Islamic Capital Markets: Products & Documentation 

24 th – 26 th March, Dubai 

Introduction to Islamic Finance & Banking 

7 th – 9 th April, Singapore 

Islamic Financial Markets, Treasury & Derivatives 

20 th – 22 nd April, Manama 


13 th – 15 th May, Singapore 

Islamic Financial Engineering & New Product Development 

18 th – 21 st May, Dubai 


2 nd June, London 


3 rd – 5 th June, London 

Islamic Financial Instruments & Structured Products 

9 th – 12 th June, Kuala lumpur 

Essentials of Islamic Finance & the Islamic Finance Industry 

16 th – 18 th June, Jakarta 

Training calendar 2008 


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& Investment 15 th August, Kuala Lumpur 


6 th – 8 th October, Kuala Lumpur 


9 th November, Kuala Lumpur 


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Qatar Islamic Insurance Company revealed plans to establish itself 

in Pakistan in April. This would increase the number of Pakistani 

Takaful players to two. 

Prudential BSN Takaful aimed to fortify its presence in Malaysia 

through public education before going regional. The company would 

highlight the signifi cance of Takaful to Muslims and non-Muslims 

alike, as part of its expansion. 

Takaful Ikhlas announced plans to launch three new investmentlinked 

products - the fi rst being the Ikhlas Capital Investment-linked 

Takaful. Takaful Ikhlas also planned to launch three new branches in 

Kota Kinabalu, Kuching and Putrajaya. 

The outlook for BEST Reinsurance Company (BestRe) was revised 

from stable to positive by Standard & Poor’s Rating Services, with 

its BBB long-term counterparty credit and insurer fi nancial strength 

rating reaffi rmed. BestRe is wholly owned by Salama Islamic Arab 

Insurance Co in the UAE. 

AXA France took 100% control of AXA Assurance Maroc, its Moroccan 

counterpart. The deal worth MAD5.9 billion (US$694 million) saw 

AXA procuring a 49% stake in AXA-ONA, a holding company held by 

AXA’s local partner ONA. 

MAA Holdings was pending regulatory approval for its Takaful 

business in Malaysia via its joint venture company MAA Takaful. 

Group managing director and CEO Muhammad Umar Swift stated: 

“Going forward in the fi rst quarter, you will see us launching our 

Takaful business and by the second half, you will see us launching 

our mortgage products.” 

Ein Takaful Insurance Company was offi cially launched in Kuwait. 

The company was also advised by the Kuwaiti ministry of trade and 

industry to increase its capital from KWD5 million (US$17.29 million) 

to KWD10 million (US$34.5 million). 



TAKAFUL NEWS BRIEFS 

JANUARY 

FEBRUARY 

The Qatari government received calls from the Qatari insurance 

industry to raise motor insurance premiums. This increase was to 

aid with losses experienced from the surge in car prices, spare part 

costs and vehicle maintenance. 

Annual insurance premiums and rates in Kuwait grew by 12%–15%, 

equating to KWD150 million (US$518.9 million), as at 2006. This 

was aided by the increase in local development projects. 

Takaful BIBD earned double its profi ts from 2005, at US$1.4 million. 

The 47% increase was attributed to the company’s high-quality and 

proactive customer service, as well as innovative products offered at 

competitive premium rates. 

AXA and Bharti Enterprises established a joint venture general 

insurance company and signed a memorandum of understanding, 

with Bharti Enterprises holding a 74% stake and the French insurer 

AXA holding the remaining 26%. The partnership will capitalize on 

Bharti’s Indian market expertise, branding and India-wide retail 

distribution network and AXA’s technology expertise. 

SABB – an associated company of the HSBC Group – was awarded 

an insurance operating license for its SABB Takaful company. SABB 

Takaful is a joint venture 32.5% owned by SABB, and 32.5% by the 

HSBC Group. The balance of the company’s shares will be offered to 

the public via an initial public offering. 

AIG, Aviva, ING and Groupama were among the key industry players 

eyeing Garanti Sigorta. The Turkish insurance fi rm is expected to sell 

its shares in the fi rst half of this year. 

Enaya AIG Takaful revealed plans to procure 30% of Bahrain’s travel 

insurance market by the end of August. Enaya, which had a start-up 

capital of US$15 million, is the fi rst Takaful company from AIG. 

Takaful Ikhlas credited its 90% growth in 2006 to bancaTakaful. 

BancaTakaful, an agreement between fi nancial institutions and 

Takaful operators, serves as a distribution channel to the market for 

both Takaful and fi nancial products. 

UBL Insurers received the go-ahead to set up a general insurance 

operation and has approached the Securities and Exchange 

Commission of Pakistan with a view to commencing general Takaful 

activities in the future. UBL Insurers is a subsidiary of United Bank, 

which is jointly owned by UBL Abu Dhabi Group and the UK’s Bestway 

Group. 

The Insurance Board of Sri Lanka announced an increase in the 

capital requirement for insurers of up to LKR1 billion (US$9.2 million) 

by 2010, from the current LKR25 million (US$230,000). 

Solidarity acted as the sole provider of Takaful home fi nancing 

protection and family protection products for Sakana Holistic 

Housing Solutions’ mortgage fi nance customers. 

Insurance Australia Group and AMMB Holdings were given the go- 

ahead to begin talks with Pan Global Insurance, following IAG’s 30% 

acquisition in AmAssurance in 2006. 

The Monetary Authority of Singapore authorized SCOR Asia-Pacifi c 

to apply to the Labuan Offshore Financial Services Authority for a 

license to allow SCOR Asia-Pacifi c’s non-life branch to expand and 

underwrite reTakaful reinsurance contracts. 


Page 147


Page 148 

TAKAFUL NEWS BRIEFS (continued...) 

BMG Financial Advisors established an advisory board to give more 

focus to the company. BMG, which advises insurers on initial public 

offerings, assembled a team experienced in privatization exercises, 

mergers and acquisitions and private placements from Saudi Arabia, 

Egypt, Kuwait, Pakistan, Syria and the US. 

AXA Life Insurance collaborated with Mizuho Bank to launch an 

individual variable annuity product via Mizuho, dubbed the fi ve-year 

plan. The product was designed to respond to customer needs, 

and to insure security by allowing the extension or shortening of its 

deferment period. 

Bank Negara Malaysia proposed a regulatory regime to award 

greater fl exibility to insurers with strong corporate governance 

standards and risk management practices. 

The Dubai Islamic Insurance and Reinsurance Company (AMAN) 

signed an agreement with Boubyan Takaful Insurance to provide 

operational and management aid. The agreement’s three phases 

include the setting up of administrative and technical structure of 

Boubyan, managing the operations, and the maintenance which 

includes auditing and follow up. 

Allianz Re, the reinsurance arm of the Allianz Group, began 

operating as an authorized fi rm in the Dubai International Financial 

Center. The license adds to Allianz Re’s diversifi ed portfolio, which 

comprises Singapore, Labuan, Zurich and Dublin. 

Takaful Nasional shifted its operating model to Wakalah from 

Mudarabah. The transition began with its general Takaful products, 

followed by family Takaful. 

In light of the proposed Asian Free Trade Agreement, Filipino insurers 

were urged to consolidate in order to compete. The Insurance 

Commission of Philippines also began looking to implement new 

benchmarks to increase networking among local insurers. 

MARCH 

Allianz’s top executives attended a Takaful seminar organized by 

Central Bank of Bahrain. At the seminar, CBB offi cials spoke on 

the growth and development of the Bahraini insurance and Takaful 

industry, the regulatory framework governing insurance and Takaful, 

as well as the bank’s experience in developing the industry. 

Takaful International and Bahrain Credit (BC) signed a memorandum 

of understanding to provide health insurance to BC staff. 

Net profi ts of US$1.26 million, along with gross written premiums of 

US$15.04 million, spurred Takaful Re’s growth in its fi rst period of 

operations, despite its late licensing in December 2005. 

UK-based PPP Healthcare expressed its intentions to bring Takaful 

to the UK market. PPP Healthcare, one of the UK’s largest healthcare 

insurance companies, consistently records annual premiums 

exceeding US$1.95 billion. The company held a 25% market share 

as at 2007. 


Arab Insurance Group reported a dip in profi ts from US$48.2 million 

in 2005 to US$30.4 million in 2006. However, according to the 

company, this was not attributable to poor performance. 

Takaful Re charted a net profi t of US$1.26 million in its fi rst 

operational period. As at the 31 st December 2006, the company 

recorded gross written premium of US$15 million despite its late 

licensing in December 2005. 

In line with its bid to seek out the necessary talent, HSBC group 

launched several niche programs targeted to capture the right skill 

base across its business network, especially for its Takaful arm 

HSBC Amanah Takaful. 

Salama Islamic Arab Insurance Co reported a 65% boost in net 

profi ts to US$51.8 million in 2006. The company also began 

operations in Saudi Arabia. 

Pak-Kuwait Takaful and Polani Group signed an agreement to 

provide Shariah compliant Umrah and Hajj Takaful, making Polani 

Group as the countrywide general sales agent for Pakistan. 

Takaful Malaysia proposed plans to the Malaysian government to 

provide insurance coverage for foreign maids, suggesting that it work 

with a consortium of companies to execute its campaign. 

Insurance claims for fl oods in Jakarta were expected to hit an alltime 

high of US$452 million, due to the greater intensity of fl oods 

and the wider areas affected than in previous years. 

Central Bank of Bahrain approved the establishment of the US$20 

million Aman Bahrain Insurance Company. Dubai Islamic Insurance 

and Reinsurance Company (AMAN), Al Salam Bank Sudan and Al 

Salam Bank Bahrain, along with several other regional companies 

and individuals, were the main founders and shareholders of ABIC. 

Takaful Ikhlas revealed plans to rake in RM40 million (US$11.4 

million) from its subscribers by the 31 st March 2008 by targeting its 

housing loan scheme customers. 

AIG MEMSA Insurance Company and Qatar Insurance Company 

International began operations at the Qatar Financial Regulatory 

Authority. 

The CEO of Solidarity, Sameer Ebrahim Al Wazzan, was honored 

for his service as chairman of the board of directors of the Bahrain 

Insurance Association since 2000. 

Al Salam Bank Bahrain acquired a 20% stake in Aman Bahrain 

Insurance Company. 

London-based Lloyd’s began offering reTakaful products from its 

newly incorporated offshore reinsurance unit in Labuan. 



SABB Takaful planned to raise US$9.3 million in a 35% initial public 

offering of its capital. 

Allianz Group was granted an operating license from Central Bank 

of Bahrain. 

Takaful Pakistan became the second company to be licensed as a 

Takaful operator in the country. 

National Company for Cooperative Insurance appointed a Shariah 

Advisory Committee to assure the company’s Shariah compliance. 

Laksiri Seva, a shipping and logistical service provider, mandated 

Amana Takaful Insurance as its offi cial insurance provider for all 

consumer cargo goods handled and dispatched by the company. 

The National Shariah Board of the Indonesian Conference of Islamic 

Clergies began debating the issuance of a new fatwa to cap the 

commission rate derived from Takaful sales. 

The Malaysian insurance and Takaful industry saw a 17.8% growth to 

RM12.4 billion (US$3.57 billion) in 2006. 

APRIL 

Takaful International of Bahrain expressed interest in investing in 

petrochemical and real estate developments in Sabah. 

Takaful International Company announced compliance with Central 

Bank of Bahrain’s disclosure requirements to commence trading on 

the Bahrain Stock Exchange. The company was initially suspended 

from trading on the exchange for violating disclosure standards. 

India-based First Apex Software Technologies, along with Deloitte 

Consulting, began providing its business intelligence solution X- 

VISION ++ to Takaful Nasional. 

SABB Takaful’s share fl otation generated SR247.163 million 

(US$65.92 million) in subscriptions, accommodating 105,397 

requests. More than 63% of the requests were made electronically. 

International analysts predicted Takaful premiums to exceed US$7 

billion by 2017. 

Maybank Group signed a memorandum of understanding with Panin 

Life to form a joint venture which saw the Malaysian bank acquire a 

60% stake in Anugrah Life, a subsidiary of Panin Life. 

The Qatar Financial Center Regulatory Authority signed an MoU 

with the Department of Insurance of the state of Delaware, US, to 

establish a framework for cooperation. 

Salama’s IPO had more than 4,000 subscribers, covering 521% of 

the offered shares. Electronic subscriptions represented 84% of all 

subscription methods used for the IPO. 



The Foreign Investment Committee liberalized the Islamic banking, 

Takaful and reTakaful markets for foreign investors, allowing 100% 

foreign equity ownership in Malaysian Islamic fi nancial institutions. 

Stock trading for Takaful International was suspended by the 

Bahrain Stock Exchange, following a request from the capital market 

directorate at Central Bank of Bahrain. 

Al-Noor began offering South Africans Wakalah and Waqf-based 

commercial, property, personal and marine import and export risk 

cover. 

Tokio Marine & Nichido Fire Insurance revealed plans to expand its 

Takaful business, in line with its acquisition of Singapore-based Asia 

General Holdings. 

State-controlled Pakistan Re-Insurance Corporation revealed plans 

to establish a Takaful pool to launch its own Takaful business. 

AmIslamic Bank signed a tri-partite agreement with Takaful Ikhlas, 

FWU and AmIslamic to begin distributing Takaful investment-linked 

plans via AmBank and AmIslamic Bank. 

Nasser Al Shaali, CEO of the Dubai International Financial Center, 

addressed the issue of reTakaful at the World Takaful Conference. 

“ReTakaful must fl ourish to meet the needs of Takaful. The growth of 

Takaful cannot come in isolation of other aspects,” Nasser stated. 

Amana Takaful Insurance posted a 57% growth in premiums for 

2006. 

Takaful International resumed trading on the Bahrain Stock 

Exchange based on a recommendation forwarded by the Capital 

Directorate at Central Bank of Bahrain, and the handing in of 

the company’s audited fi nancial data for the year ended the 31 st 

December 2006. 

ISM Insurance Services Malaysia, a shared services provider for 

insurance and Takaful, received the ISO/IEC 27001:2005 from 

SIRIM QAS International. 

MNRB Holdings, the owner of Malaysian Reinsurance, Takaful Ikhlas 

and MNRB ReTakaful, projected a 20% rise in overseas operations 

income by 2010. 

The 14 member countries of the Arab Forum of Insurance 

Regulatory Commissions signed an MoU to enhance co-operation 

among regulatory members, facilitate the exchange of information, 

provide technical support and protect the rights of policyholders in 

Arab markets. 

Al Amanah Insurance Company kicked off with KWD10 million 

(US$34.58 million) in capital. 


Page 149


MAY 

Page 150 


Takaful International and Alpha Fire Services signed a memorandum 

of understanding for the provision of home Takaful products to 

AFS clients, and AFS CCTV and fi re and safety solutions to Takaful 

International subscribers. 

Shamil Bank and Solidarity signed an agreement mandating 

Shamil Bank as distributor for Solidarity’s general and family Takaful 

products. 

The American Life Insurance Company AIG Life was licensed to 

operate from the Qatar Financial Center. 

CIMB Wealth Advisors set a RM5 million (US$1.47 million) target for 

its Wealth Protector Series. 

Oman United Insurance Company and Al Ahlia Insurance Company 

proposed a possible merger. 

Arab Insurance Group saw a profi t dip for its fi rst quarter of 2006 to 

US$7.6 million, from US$8 million in 2006. 

Tamweel recorded a whopping 395% increase in its fi rst quarter 

profi ts, reaching AED50.47 million (US$1.23 million). 

The Dubai Islamic Insurance and Reinsurance Company (AMAN)’s 

net profi ts saw an AED4.5 million (US$1.22 million) growth, with 

technical profi ts reaching AED6.4 million (US$1.74 million). 

Takaful BIBD launched the Takaful Diamond Services, set to be a 

corporate and preferential client unit. 

Al Khaleej Insurance & Reinsurance Company revealed plans to 

establish a Takaful company in the GCC. 

JUNE 

Al Fujairah National Insurance Company listed AED75 million 

(US$20.4 million) in share capital on the Abu Dhabi Securities 

Market, making it the 13 th insurance company to be listed and the 

64 th on the stock market. 

National Bank of Dubai, along with the Dubai Islamic Insurance and 

Reinsurance Company (AMAN) and FWU, launched the NBD Takaful 

& Savings Program. 

British Islamic Insurance Holdings submitted its business plan and 

formal regulatory application to the UK Financial Services Authority 

to undertake general insurance businesses. 

The government of Pakistan permitted 100% foreign equity in 

Pakistan’s insurance sector, with the exception that foreign investors 

bring in a minimum paid-up capital of PKR500 million (US$8.23 

million) for life/family Takaful and PKR300 million (US$4.94 million) 

in non-life/general Takaful operations. 


Takaful International was mandated to insure all properties 

belonging to the Electricity and Water Ministry, amounting to BH$1.6 

billion (US$4.24 billion), including power plants, sewers and water 

treatment plants. 

Saudi Arabia’s Capital Market Authority granted permission for 

seven insurance companies to offer up 40% of their shares to the 

public. Of these, only Al Ahli Takaful did not sell off 40%. 

National Commercial Bank signed an agreement to launch Al Ahli 

Takaful’s initial public offering at a share capital of SAR100 million 


Takaful Re saw a whopping 400% growth in gross written 

contributions for 2007, amounting to US$9.2 million. The hike 

was attributed to good response from the Middle East and North 

African markets. 

It was reported that Indonesian Takaful insurers were fi ghting a 

tariff war in a competition that mirrors the conventional side of the 

industry. 

Middle East and North African governments were urged to harmonize 

insurance regulations and legal frameworks to increase insurance 

penetration. 

It was revealed that Malaysia was in need of more actuaries to 

implement the country’s risk-based capital framework and other 

insurance regulatory policies. 

Amlak signed an agreement with Arab Oriental Insurance to launch 

a comprehensive real estate and family protection insurance scheme 

for all Dubai and UAE customers. 

The IPOs of the Saudi Arabian Cooperative Insurance, Allied 

Cooperative Insurance Group, Al Ahlia and Al Ahli Takaful were all 

oversubscribed by 2.4, 1.4, 1.6 and 2.8 times respectively. 

Brunei’s postmaster general, Abdul Kadir Tengah, brought up the 

need for insurance coverage for postmen due to high exposure to a 

gamut of hazards. 

Standard & Poor’s opined that Malaysia’s Takaful environment is 

better regulated than that of the GCC. 

Prudential UK and Bank AlJazira signed an MoU which saw 

Prudential take over 39% of Bank AlJazira’s Takaful Ta’awuni life 

insurance. 

Takaful BIBD began offering a car fi nancing p rotector plan, the fi rst 

of its kind in Brunei. 



Aviva UK formed a joint venture with the CIMB Group, having 

received approval from Bank Negara Malaysia. The joint venture 

saw Aviva acquire up to ₤74 million (US$145.52 million), or 49% in 

equity in two of CIMB’s subsidiaries – Commerce Life Assurance and 

Commerce Takaful. 

Global management consultants Booz Allen Hamilton studied the 

fi ve key areas in the Middle East and North Africa insurance market, 

including legal frameworks, regulatory bodies and processes, nature 

of competition, skills and training, and market-led initiatives to study 

market gaps. 

JULY 

MAA Holdings began talks with prospective local and foreign partners 

for the sale of its 49% stake in MAA Assurance. The company was 

also in the process of cleaning up its current stock of RM779 million 

(US$225.94 million) to be completed by 2010. 

India’s life premiums leapt by 60% in 2006, boosting the global 

markets by 0.48% to 1.68%. The accretion which was seen across 

business lines and insurers, was attributed to aggressive business 

expansions and leveraging bancassurance sales. 

Takaful BIBD held a presentation at the ministry of fi nance, 

showcasing its products including Takaful Cahaya Mata, the Car 

Financing Protector, Fire Takaful and Mawaddah, along with other 

services. 

The Qatar Financial Center Regulatory Authority set new rules to 

enhance the business environment for insurance companies and 

increase benefi ts to policyholders and investors. 

Maybank introduced a range of special packages and rewards for its 

mortgage fi nancing, car fi nancing, credit card, savings and Takaful 

customers. The bank had also offered up an option facility for will 

writing services. 

The Dubai Executive Council and the Dubai Health Authority began 

developing a framework to devise new health insurance laws in the 

Emirate. 

AUGUST 

British Islamic Insurance Holdings appointed Gulf International 

Bank and Investec UK as its GCC and UK fi nancial advisers. 

Arab Orient Insurance Co teamed up with Tamweel to launch a home 

risk protection product linked directly to Tamweel’s Islamic fi nancebacked 

property funding. 

Profi ts for insurer SwissRe saw a 45% increase to CHF1.2 billion 

(US$1 billion), with revenue growing by 17% to CHF7.95 billion 

(US$6.64 billion) following the company’s US$7.4 billion acquisition 

of GE Reinsurance. 



SABB Takaful’s shares saw a 497.5% leap on its debut on the Saudi 

Arabian stock market. 

Malaysia’s general insurance and Takaful industry simultaneously 

adopted the Best Practices Framework to create a more dynamic 

and progressive industry. 

Takaful Ikhlas revealed that it was open to both foreign and 

local Islamic fi nancial institutions for the formation of a strategic 

partnership. 

Hannover Re opened a branch in Bahrain, offering both Shariah 

compliant and conventional insurance solutions. 

Qatar Insurance Company began preliminary talks to set up Takaful, 

real estate and asset management subsidiaries via a holding 

company based in Doha. 

India’s ICICI Prudential Life Insurance established a representative 

offi ce in Dubai, making it the fi rst Indian private life insurer to set up 

a UAE offi ce. 

Solidarity completed a series of anti-money laundering training 

workshops, attended by more than 40 of its employees. The 

workshops focused on identifying the various stages of money 

laundering, company and staff obligations and the reporting 

process. 

Islamic Corporation for the Insurance of Investment and Export 

Credit signed an agreement with the UAE government to set up its 

fi rst foreign representative offi ce in Dubai. 

Total life insurance premiums written in the Middle East and North 

African region grew by 13.6% to US$3.3 billion in 2006, while nonlife 

premiums increased by 16% to US$18.1 billion. The total fi gure 

of US$21.4 billion accounted for 0.58% of the total global insurance 

premiums. 

Perodua signed an MoU with Bank Rakyat Malaysia and Takaful 

Ikhlas to offer car fi nancing facilities and personal protection 

coverage for civil servants. 

Bahrain Institute of Banking and Finance introduced the world’s 

fi rst formal Takaful qualifi cation. 

The Dubai Financial Services Authority entered into an MoU with the 

integrated banking, insurance and securities regulator of Iceland, 

the Financial Supervisory Authority. 


Page 151


Page 152 


Al-Khaleej Insurance Company charted net profi ts of KWD30.9 

million (US$109.7 million) as at the 30 th June 2007. Kuwait Insurance 

took the second spot with KWD12.8 million (US$45.42 million) in 

profi ts with a year-on-year growth of 77.8%. 

Takaful International began insuring the assets and property of Gulf 

Aluminium Rolling Mill Company valid until 2010. 

Pak-Qatar Group became the fi rst Pakistan-based operators to 

gain a family Takaful license from the Securities and Exchange 

Commission of Pakistan. 

Takaful Malaysia’s General Takaful business dipped by 44.07% to 

RM38.01 million (US$10.84 million) in the fi rst half of the year. 

SEPTEMBER 

Zamani Abdul Ghani, Bank Negara Malaysia’s deputy governor, 

called for the Takaful industry to present itself as a united front with 

a common voice in operational and Shariah matters to spur growth. 

Syarikat Takaful Malaysia began mulling possible tie-ups with major 

foreign insurers keen on venturing into the Takaful business. The 

company also appointed 3i Infotech to implement and upgrade its 

informational technology system. 

Bank Negara Malaysia’s Budget 2008 stipulated tax exemption 

for Islamic banking units and Takaful companies until 2016 — after 

which the companies will be assessed. 

Prudential Asset Management signed a memorandum of 

understanding with Bank AlJazira to set up a new Takaful company, 

Takaful Taawuni. 

The Shariah Advisory Council of Bank Negara Malaysia allowed the 

distribution of surplus from Tabarru funds in Takaful schemes, and 

the application of Wakalah contract in deposit instruments. 

OCTOBER 

Malaysia’s Takaful industry was expected to grow with RM3 billion 

(US$876.37 million) in contribution for both family and general 

business combined, from almost RM2 billion (US$584.22 million) 

in 2006. 

Takaful IBB presented a total of BN$8,452.02 (US$5,691.52) in 

waqaf contributions to four organizations: Dana Pengiran Muda 

Mahkota Al-Muhtadee Billah, Persatuan Kanak-Kanak Cacat (KACA), 

Pusat Ehsan and Jabatan Hal Ehwal Masjid (Mosque Affairs) under 

the Ministry of Religious Affairs. 

A survey conducted by the Bahrain Insurance Trade Union revealed 

that 43% of employees in the insurance sector were paid less than 

the minimum wage of BH$350 (US$928.50), despite promising 

industry growth. 


HSBC and AIG Takaful-Enaya launched a travel protection product 

for its customers, providing fi nancial compensation for unforeseen 

setbacks while traveling abroad. 

Hong Leong Tokio Marine Takaful launched a regular contribution 

investment-linked Family Takaful scheme, i-Save. 

Takaful IBB launched the Takaful Retirement Plan under its Family 

Takaful Plan. 

Dr Ali Al Quradaghi, a Qatar-based Islamic scholar, announced 

that Muslims are permitted to subscribe to commercial insurance 

if it is made mandatory by the law of their country and no Islamic 

alternatives are available. 

MunichRe opened a branch in Kuala Lumpur, dubbed Munich Re 

reTakaful. 

Pak-Qatar Family Takaful issued Pakistan’s fi rst ever Family Takaful 

policy to Sidat Hyder Morshed Associates. 

Malaysian National Reinsurance proposed to issue up to RM200 

million (US$58.52 million) in fi ve-year Islamic medium-term notes. 

British Islamic Insurance Holdings raised US$40 million via a private 

placement for the company’s launching. 

Bahrain Insurance Association and the Arab War Risk Insurance 

Syndicate discussed specialized insurance lines for Gulf businesses, 

including protection against war, riots, strikes, and sabotage and 

terrorism. 

Solidarity launched its motor claims call center to service Solidarity’s 

motor Takaful policyholders. 

Kuwait called for its insurers to organize more public awareness 

programs to market products. The Federation of Kuwaiti Insurance 

Companies expressed plans to achieve solidarity among its 

members, provide them with moral and material help, raise 

effi ciency and ensure stability in relationships among members. 

State Bank of Pakistan, along with Pakistani insurers, launched the 

country’s fi rst crop loan-insurance scheme. 

The Board of the International Federation of Takaful & Islamic 

Insurance Companies held its second meeting in Cairo. The board 

discussed the federation’s performance in the last six months, 

reviewed the articles and basic rules of the federation and studied 

some of its suggested activities for the next period. 



Citibank launched the world’s fi rst Wakalah-based Islamic savings 

account, offering improved benefi ts and Takaful coverage. Dubbed 

the Citibank Guard Savings Account-I, the plan was expected to differ 

from other Wadiah-based Islamic banking accounts. 

Takaful IBB implemented a draft for a computerized system to boost 

its administration services and up effi ciency. 

NOVEMBER 

Fitch Ratings published a criteria report titled “Takaful Rating 

Methodology” for rating Takaful fi rms, as well as a special report on 

the industry, “Takaful Review and Outlook”. 

Low interest rates and active bancassurance sales continued to 

drive strong growth in the life insurance sector in Thailand. 

The city administration of Jakarta was planning to establish a 

special offi ce in charge of managing health insurance for the poor, in 

response to the rising number of claims. 

Central Bank of Bahrain approved the offi cial launch of Allianz 

Takaful (Bahrain) operations, a wholly owned subsidiary of 

Allianz, and granted a license to the Singapore-based Asia Capital 

Reinsurance to establish a representative offi ce in the kingdom. 

Bank Negara Malaysia deputy governor Zamani Abdul Ghani 

welcomed foreign fi nancial institutions explore strategic alliance 

opportunities in Islamic fi nance, especially in Takaful and reTakaful 

operations in Malaysia. 

Bank Negara Malaysia stated that it had no objection in principle to 

MAA Holdings beginning discussions with AmAssurance on disposing 

of its equity interest in wholly owned life insurance subsidiary, MAA 

Assurance. 

DECEMBER 

Berakas Car Workshop signed an agreement with Takaful BIBD to 

run an exclusive towing and authorized workshop. 

Wethaq Takaful Insurance, in partnership with Adeem Involvement, 

completed the setting up of a Takaful company in Egypt with a capital 

of EGP60 million (US$10.84 million). Wethaq’s stake amounted to 

60% and Adeem’s at 40%. 

The Central Bank of Bahrain authorized Germany’s Allianz Group 

to establish a holding company, overseeing the group’s operations 

throughout the Middle East and North African region as well as in 

the Indian subcontinent. The entity was dubbed the Allianz MENA 

Holding Company. 

British Islamic Insurance Holdings submitted its regulatory 

application to the UK’s Financial Services Authority for full FSA 

authorization. 



Amana Takaful Insurance reported half-year sales with 41% growth 

in gross written premiums against the fi rst half of 2006. 

The privatization of Societe Tunisienne d’assurances et de 

Reassurances attracted eight foreign insurers with a 35% stake 

interest, including Groupama, France’s AXA, Kuwait’s Gulf Insurance 

Co and Morocco’s RMA Watanya. 

ING Insurance initiated talks with Bank Negara Malaysia to produce 

and manage Takaful products for distribution to other countries. 

Zurich International Life opened a new branch in Qatar. 

The Ithmaar banking group sponsored the three-day International 

Takaful Summit in London. 

Hong Leong Tokio Marine’s Capital Protection Investment-Linked 

fund met its sales target of RM100 million (US$30 million). 

Central Bank of Bahrain granted a Takaful license to Unicorn 

Investment Bank’s subsidiary, T’azur Company. 

National Life and General Insurance signed a strategic agreement 

with BankMuscat’s bancassurance division to provide a 

comprehensive suite of life and non-life products to the bank’s 

customers. 

The Health Authority of Abu Dhabi reached an agreement with the 

National Health Insurance Co (Daman) to maintain the premium for 

basic health cover at AED600 (US$163.50) for 2008. 

Takaful Malaysia sold its 10% stake in Sri Lankan Amana Takaful. 

Dubai International Financial Center inducted Tokio Marine Group’s 

new company - Tokio Marine Middle East. 

Agriculture Insurance Company received reinsurance support from 

global reinsurers Munich Re, Swiss Re, Paris Re and Lloyd’s for its 

weather-based crop insurance scheme. 

Takaful Malaysia, which had received approval from Bank Negara 

Malaysia to resume talks with two Middle Eastern parties on the sale 

of its stake, was also approached by two multinational corporations 

from Europe. 

The Labor Fund and the Bahrain Insurance Association proposed 

boosting human capital in the insurance sector. 

AXA Insurance Gulf won the healthcare insurance bid for Qatar 

Petroleum. 

Page 153

A 

A Notes 

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ﺔﻠﻤﺠﻟﺎﺑ ﻊﻴﺒﻟﺍ ﻭﺃ ﺔﺋﺰﺠﺘﻟﺎﺑ ﻊﻴﺒﻟﺍ ﺔﻤﻴﻘﺑ ﺎﻣﺇ ًﺎﻣﻮ ﺴﻘﻣ ﻲﻠﺻﻷﺍ ﺕﺍﺭﺎﻴﺴﻟﺍ ﺽﺮﻗ ﻞﺻﺃ ﺪﻴﺻﺭ 

ﻦﻫﺮﻟﺎﺑ ﻥﻮﻤﻀﻤﻟﺍ ﺽﺮﻘﻟﺎﺑ ﻖﻠﻌﺘﻳ ﺎﻤﻴﻓ ﺮﻌﺳ ﺪﻌﻳﻭ . ﺕﺍﺭﺎﻴﺴﻟﺍ ﺽﺮﻗ ﻞﺒﻗ ﻦﻣ ﺔﻟﻮﻤﻤﻟﺍ ﺓﺭﺎﻴﺴﻠﻟ 

ﻞﺻﻷﺍ ﻲﻓ ﺽﺮﺘﻘﻤﻟﺍ ﺎﻬﻜﻠﺘﻤﻳ ﻲﺘﻟﺍ ﺔﺼﺤﻟﺍ ﻢﺠﺤﻟ ﺱﺎﻴﻘﻣ ﺔﺑﺎﺜﻤﺑ ﺪﻌﻳ ﺎﻤﻛ ،ﻲﻨﻜﺴﻟﺍ 

ﻱﺭﺎﻘﻌﻟﺍ 

. ﺽﺮﻘﻠﻟ ﻦﻣﺎﻀﻟﺍ 

ﺎﻤﻠﻛﻭ ﺽﺮﺘﻘﻤﻟﺍ ﺎﻬﺑ ﺮﻃﺎﺨﻳ ﻲﺘﻟﺍ ﺔﺼﺤﻟﺍ ﺔﺒﺴﻧ ﺖﻠﻗ ﺎﻤﻠﻛ ،ﻡﺪﻘﻤﻟﺍ ﺔﺒﺴﻧ ﺖﻌﻔﺗﺭﺍ ﺎﻤﻠﻛﻭ 

. ﻥﺎﻤﻀﻟﺍ ﺕﺎﺒﻴﺗﺮﺗ ﺐﺟﻮﻤﺑ ﺽﺮﻘﻤﻠﻟ ﺔﺣﺎﺘﻤﻟﺍ ﺔﻳﺎﻤﺤﻟﺍ ﺖﻀﻔﺨﻧﺍ 

Adverse Selection 

�� 

ﺩﺍﺩﺰﻳ ﻑﻮﺳ ﻝﻮﺻﻷﺍ ﻊﻤﺠﻣ ﺮﻃﺎﺨﻣ ﻞﻤﺤﺗ 

ﻥﺃ ﺎﻬﻟﻼﺧ ﻦﻣ ﺽﺮﺘﻔﻳ ﻲﺘﻟﺍ ﺔﻴﻠﻤﻌﻟﺍ ﻪﺑ ﺪﺼﻘﻳ 

ًﺍﺮﻄﺧ ﻞﻗﻷﺍ ﻦﻴﺿﺮﺘﻘﻤﻟﺍ ﻥﺃ ﻞﻤﺘﺤﻤﻟﺍ ﻦﻣ ﻪﻧﺄﺑ ﺪﺋﺎﺴﻟﺍ ﺽﺍﺮﺘﻓﻼﻟ ًﺍﺮﻈﻧ ﺖﻗﻮﻟﺍ ﺭﺍﺪﻣ ﻰﻠﻋ ًﺍءﻮﺳ 

. ﻢﻬﺿﻭﺮﻗ ﻎﻟﺎﺒﻣ ﺩﺍﺪﺴﺑ ﺍﻮﻣﻮﻘﻳ 

ﻥﺃ ﺢﺟﺮﻳ ﻦﻳﺬﻟﺍ ﺹﺎﺨﺷﻷﺍ ﻢﻫ 

Amortization 

�� 

ﺭﺍﺪﻣ ﻰﻠﻋ ﺔﻴﺠﻳﺭﺪﺗ 

ﺓﺭﻮﺼﺑ ﻦﻳﺪﻟﺍ ﻞﺻﺃ ﻎﻠﺒﻣ ﺾﻴﻔﺨﺗ ﺎﻬﺘﻄﺳﺍﻮﺑ ﻢﺘﻳ ﻲﺘﻟﺍ ﺔﻴﻠﻤﻌﻟﺍ ﻪﺑ ﺪﺼﻘﻳ 

ﺓﺪﺋﺎﻔﻟﺍ ﻊﻣ ﺽﺮﻘﻟﺍ ﻞﺻﺃ ﺓﺩﺎﻋﺇ ﻊﻣ ﻢﺘﻳ ﻝﻮﺻﻷﺎﺑ ﺔﻧﻮﻤﻀﻤﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻙﻼﻫﺇ . ﺖﻗﻮﻟﺍ 

ﺪﻋﻮﻣ ﺪﻨﻋ ﺓﺪﺣﺍﻭ ﺔﻌﻓﺩ ﻲﻓ ﻦﻳﺪﻟﺍ ﺩﺍﺪﺳ ﻊﻣ ﻙﻼﻫﻹﺍ ﻥﺭﺎﻘﻳ ﺎﻣ ًﺍﺮﻴﺜﻛ . ﻦﻳﺮﻤﺜﺘﺴﻤﻟﺍ ﻰﻟﺇ 

ﻥﻮﻳﺪﻟﺍ ﻙﻼﻫﺇ ﺪﻌﻳ . ﻕﺎﻘﺤﺘﺳﻻﺍ ﺪﻋﻮﻣ ﻲﻓ ﻲﻠﻜﻟﺍ ﺽﺮﻘﻟﺍ ﻞﺻﺃ ﺩﺍﺪﺳ ﻢﺘﻳ ﺚﻴﺤﺑ ﻕﺎﻘﺤﺘﺳﻻﺍ 

ﺦﻳﺭﺎﺘﻟﺍ ﻞﻴﺒﻗ ﺽﺮﻘﻟﺍ ﻞﺻﺃ ﺩﺍﺪﺴﺑ ًﺎﻄﺒﺗﺮﻣ 

ﻥﻮﻜﻳ ﻱﺬﻟﺍﻭ ،ًﺎﻣﺪﻘﻣ 

ﻊﻓﺪﻟﺍ ﻦﻋ ًﺎﻔﻠﺘﺨﻣ ﺔﻟﻭﺪﺠﻤﻟﺍ 

. ﻩﺩﺍﺪﺴﻟ ﻝﻭﺪﺠﻟﺍ ﻲﻓ ﺩﺪﺤﻤﻟﺍ 

Amortization Period 

�� 

ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻸﻟ ﻖﻠﻌﻤﻟﺍ ﺪﻴﺻﺮﻟﺍ ﺩﺍﺪﺳ ﺎﻬﻴﻓ ﻢﺘﻳ ﻲﺘﻟﺍ ﺔﻴﻠﻤﻌﻟﺍ ﺪﻳﺪﺠﺗ ﺓﺮﺘﻓ ﻊﺒﺘﺗ ﺪﻗ ﻲﺘﻟﺍ ﺓﺮﺘﻔﻟﺍ ﻲﻫ 

. ﻲﺋﺰﺟ ﻞﻜﺸﺑ ﺓﺩﺪﺴﻤﻟﺍ 

Arbitrage CDO 

�� 

ﻦﻋ ﺎﻬﺗﺍﺩﺍﺮﻳﺇ ﻉﻮﻤﺠﻣ ﺪﻳﺰﻳ ﻲﺘﻟﺍ ﻝﻮﺻﻷﺍ ﻰﻠﻋ ﺔﻴﻨﺒﻤﻟﺍ ﻥﻮﻤﻀﻤﻟﺍ ﻦﻳﺪﻟﺍ ﻡﺍﺰﺘﻟﺍ ﺔﻴﻠﻤﻋ ﻪﺑ ﺪﺼﻘﻳ 

. ﺔﻴﻠﻤﻌﻟﺎﺑ ﻖﻠﻌﺘﻳ ﺎﻤﻴﻓ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻞﻳﻮﻤﺗ ﻭﺃ ﻊﻴﺑ ﻦﻋ ﺔﻤﺟﺎﻨﻟﺍ ﺕﺍﺩﺍﺮﻳﻹﺍ ﻉﻮﻤﺠﻣ 

Asset-Backed Commercial Paper (ABCP) 

�� 

�� 

ﻞﺻﺃ ﺕﺎﻌﻓﺩ ﻰﻠﻋ ﻝﻮﺼﺤﻟﺍ ﻢﺘﻳ ﻲﺘﻟﺍﻭ ﻝﻮﺻﺄﺑ ﺔﻧﻮﻤﻀﻤﻟﺍ ﺔﻳﺭﺎﺠﺘﻟﺍ ﻕﺍﺭﻭﻷﺍ ﺎﻬﺑ ﺪﺼﻘﻳ 

ﻲﻓﻭ . ﻲﺳﺎﺳﻷﺍ ﻝﻮﺻﻷﺍ ﻊﻤﺠﻣ ﻦﻣ ﺓﺪﻤﺘﺴﻤﻟﺍ ﺔﻳﺪﻘﻨﻟﺍ ﺕﺎﻘﻓﺪﺘﻟﺍ ﻦﻣ ﺔﻘﺤﺘﺴﻤﻟﺍ ﺓﺪﺋﺎﻔﻟﺍ ﻭﺃ ﺎﻬﺿﺮﻗ 

ﺪﻋﻮﻣ ﻥﺎﺣ ﺔﻳﺭﺎﺠﺗ ﺔﻗﺭﻭ ﺩﺍﺪﺳ ﻢﺘﻴﻟ 

ﺔﻳﺭﺎﺠﺘﻟﺍ ﺔﻗﺭﻮﻟﺍ ﺭﺍﺪﺻﺇ ﺓﺩﺎﻋﺇ ﺔﻴﻧﺎﻜﻣﺇ ﻡﺪﻋ ﺔﻟﺎﺣ 

. ﻦﻳﺮﻤﺜﺘﺴﻤﻠﻟ 

ﺩﺍﺪﺴﻠﻟﺔﻟﻮﻴﺴﻟﺍﺮﻴﻓﻮﺘﻟ 

ﻢﻋﺪﻟﺍ ﺔﻟﻮﻴﺳ ﺕﻼﻴﻬﺴﺗ ﺐﺤﺳ ﻢﺘﻳ ،ﺎﻬﻗﺎﻘﺤﺘﺳﺍ 

Asset-Backed Securities (ABS) 

�� 

،ﺔﻌﻗﻮﺘﻣ 

ﺔﻳﺩﺍﺮﻳﺇ ﺕﺎﻘـﻓﺪﺘﺑ ﺔﻴﻟﺎﻤﻟﺍ ﻝﻮﺻﻷﺍ ﺕﺎﻌﻤﺠﻤﺑ ﺔﻧﻮﻤﻀﻤﻟﺍ ﻥﻭﺫﻷﺍ ﻭﺃ ﺕﺍﺪﻨﺴﻟﺍ ﻲﻫ 

ﻩﺬﻫ ﻰﻠﻋ ﺔﻠﺜﻣﻷﺍ 

ﻦﻴـﺑ ﻦﻣﻭ . ﻦﻳﺮﺧﻵﺍ ﻥﺎﻤﺘﺋﻻﺍ 

ﻱﺩّﺭﻮﻣﻭ 

ﻙﻮﻨﺒﻟﺍ ﻞﺒﻗ ﻦﻣ ﺎﻫﺪﻴﻟﻮﺗ ﻢﺘﻳ ﻲﺘﻟﺍﻭ 

. ﺕﺍﺭﺎﻴﺴﻟﺍ ﺽﻭﺮﻗﻭ ﺔﻳﺭﺎﺠﺘﻟﺍ ﺔﻴﻧﻮﻳﺪﻤﻟﺍ ﺕﺍﺪﻨﺳﻭ ﻥﺎﻤﺘﺋﻻﺍ ﺔﻗﺎﻄﺑ ﺔﻴﻧﻮﻳﺪﻣ ﺕﺍﺪﻨﺳ ﻝﻮﺻﻷﺍ 

Asset Originator 

�� 

ﻦﻣ ﺮﺜﻛﺃ ﻭﺃ ﺪﺣﺍﻮﻟ ﻥﺎﻤﺘﺋﻻﺍ ﺢﻨﻣ ﻝﻼﺧ ﻦﻣ ﻝﻮﺻﻷﺍ ﺔﻋﻮﻤﺠﻣ 

ﻭﺃ ﻞﺻﻷﺍ ﺄﺸﻧﺃ ﻱﺬﻟﺍ ﻑﺮﻄﻟﺍ 

. ﻦﻴﻨﺋﺍﺪﻟﺍ 

Average Life 

�� 

�� 

ﻎﻠﺒﻣ ﺩﺍﺩﺮﺘﺳﻻ ﺔﺑﻮﻠﻄﻤﻟﺍ ﺔﻴﻨﻣﺰﻟﺍ ﺓﺮﺘﻔﻟﺍ ﻝﻮﻃ ﻂﺳﻮﺘﻣ ﻰﻠﻋ ًءﺎﻨﺑ ﺭﺎﻤﺜﺘﺳﻻﺍ ﺓﺪﻣ ﺱﺎﻴﻗ ﻪﺑ ﺪﺼﻘﻳ 

ﻞﺻﺃ ﺩﺍﺪﺴﻟ ﺔﻌﻓﺩ ﻞﻛ ﺏﺮﺿ ﻞﺻﺎﺤﺑ ﻞﺟﻷﺍ ﻂﺳﻮﺘﻣ ﺏﺎﺴﺘﺣﺍ ﻢﺘﻳﻭ . ﺮَﻤﺜﺘﺴﻤﻟﺍ 

ﺽﺮﻘﻟﺍ ﻞﺻﺃ 

ﻞﺻﺃ ﺩﺍﺪﺳ ﺕﺎﻋﻮﻓﺪﻣ ﻡﻼﺘﺳﺍﻭ ﺭﺎﻤﺜﺘﺳﻻﺍ ءﺍﺮﺟﺇ ﻦﻴﺑ ﺔﻴﻀﻘﻨﻤﻟﺍ ﺔﻴﻨﻣﺰﻟﺍ ﺓﺮﺘﻔﻟﺍ ﻊﻣ ﺽﺮﻘﻟﺍ 

ﻂﺳﻮﺘﻣ ﺪِﻤﺘﻌ 

َﻳﻭ . ﺮَﻤﺜﺘﺴﻤﻟﺍ 

ﻎﻠﺒﻤﻟﺍ ﻲﻟﺎﻤﺟﺇ ﻰﻠﻋ ﻪﺘﻤﺴﻗ 

ﻢﺛ ﻞﺻﺎﺤﻟﺍ ﻊﻴﻤﺠﺗ ﻢﺘﻳﻢﺛﻦﻣﻭﺽﺮﻘﻟﺍ 

ﻞﺻﺃ ﺩﺍﺪﺳ ﻪﺑ ﻢﺘﻳ ﻱﺬﻟﺍ ﺮﻌﺴﻟﺍ ﻰﻠﻋ ﻝﻮﺻﻷﺎﺑ ﺔﻧﻮﻤﻀﻤﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻸﻟ ﻲﻠﻌﻔﻟﺍ ﻞﺟﻷﺍ 

ﺩﺍﺪﺳ ﻮﻫ ﺔﻨﻣﺎﻀﻟﺍ ﻝﻮﺻﻷﺍ ﺩﺍﺪﺳ ﺕﺎﻴﻠﻤﻋ ﻦﻣ ﺽﺮﻐﻟﺍ ﻥﺃ ﺚﻴﺣ ،ﺔﻨﻣﺎﻀﻟﺍ 

ﻝﻮﺻﻷﺍ ﺽﺮﻗ 

ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻸﻟ ﻊﻗﻮﺘﻤﻟﺍ ﻞﺟﻷﺍ ﻂﺳﻮﺘﻣ ﺏﺎﺴﺘﺣﺍ 

ﻦﻜﻤﻳﻭ . ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﺽﺮﻗ ﻞﺻﺃ ﺪﻴﺻﺭ 

ّﺪﻌﻳ ﻭ . ﺔﻨﻣﺎﻀﻟﺍ ﻝﻮﺻﻷﺎﺑ ﻖﻠﻌﺘﻳ ﺎﻤﻴﻓ ًﺎﻣﺪﻘﻣ ﺩﺍﺪﺴﻠﻟ ﺮﻴﻐﺘﻣ ﺮﻌﺳ ﻭﺃ ﺖﺑﺎﺛ ﺮﻌﺳ ﺽﺍﺮﺘﻓﺎﺑ 

ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻦﻳﺩ ﻙﻼﻫﺇ ﻦﻴﺑ ﺔﻧﺭﺎﻘﻤﻟﺍ ءﺍﺮﺟﻹ ﺔﻌﻓﺎﻧ ﺓﺍﺩﺃ ﺔﺑﺎﺜﻤﺑ ﻊﻗﻮﺘﻤﻟﺍ ﻞﺟﻷﺍ ﻂﺳﻮﺘﻣ 

. ﻯﺮﺧﻷﺍ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻊﻣ ﻝﻮﺻﻷﺎﺑ ﺔﻧﻮﻤﻀﻤﻟﺍ 

B 

B Notes 

( �) 

�� 

. 

ﺮﻐﺻﻷﺍ ﻭﺃ ﺮﺒﻛﻷﺍ ﻝﺎﻤﻟﺍ ﺱﺃﺭ ﻞﻜﻴﻫ ﻲﻓ ﺔﻌﺑﺎﺘﻟﺍ ﺔﺌﻔﻟﺍ

Balance-Sheet CDO 

ﺔﻴﻣﻮﻤﻌﻟﺍ ﺔﻴﻧﺍﺰﻴﻤﻠﻟ ﺎﻘﻓﻭ ﻥﻮﻤﻀﻤﻟﺍ ﻦﻳﺪﻟﺎﺑ ﻡﺍﺰﺘﻟﻻﺍ 

ﺎﻬﻜﻠﺘﻤﻳ ﻲﺘﻟﺍ ﻝﻮﺻﻷﺍ ﻞﻳﻮﺤﺘﺑ ﻞﻴﻔﻜﻟﺍ ﻪﻴﻓ ﻡﻮﻘﻳ ﻱﺬﻟﺍ ﻥﻮﻤﻀﻤﻟﺍ ﻦﻳﺪﻟﺎﺑ ﻡﺍﺰﺘﻟﻻﺍ ﺔﻴﻠﻤﻋﻪﺑﺪﺼﻘﻳ 

. ﺔﻴﻟﺎﻣ ﻕﺍﺭﻭﺃ ﻰﻟﺇ 

Bankruptcy-Remote 

�� 

ﺕﺍءﺍﺮﺟﺇ ءﺪﺒﻟ 

ﺰﻓﺎﺣ ﺎﻬﻳﺪﻟ ﻥﻮﻜﻳ ﻥﺃ ﻞﻤﺘﺤﻤﻟﺍ ﻦﻣ ﺲﻴﻟ ﻲﺘﻟﺍ ﺔﻬﺠﻟﺍ ﻰﻠﻋ ﺢﻠﻄﺼﻤﻟﺍ ﺍﺬﻫ ﻖﺒﻄﻨﻳ 

ﺕﺍءﺍﺮﺟﺇ ءﺪﺒﺑ ﻦﻴﻨﺋﺍﺪﻟﺍ ﻦﻣ ﺚﻟﺎﺛ ﻑﺮﻃ ﺃﺪﺒﻳ ﻥﺃ ًﺎﻀﻳﺃ ﻞﻤﺘﺤﻤﻟﺍ ﻦﻣ ﺲﻴﻟﻭ ،ًﺎﻋﻮﻃ 

ﺭﺎﺴﻋﻹﺍ 

. ﻲﻋﻮﻃﻻ ﻞﻜﺸﺑ ﺎﻫﺪﺿ ﺭﺎﺴﻋﻹﺍ 

ﺓﺩﺎﻬﺸﻟﺍ ﺮﻌﺳ ﻉﻮﻤﺠﻣ 

ﺔﺑﺎﺜﻤﺑ ﻲﺳﺎﺳﻷﺍ ﺮﻌﺴﻟﺍ ﺪﻌﻳ ،ﻥﺎﻤﺘﺋﻻﺍ ﺔﻗﺎ 

Base Rate 

�� 

ﻄﺑ ﺔﻴﻧﻮﻳﺪﻣ ﺔﻴﻠﻤﻌﺑ ﻖﻠﻌﺘﻳ ﺎﻤﻴﻓ 

. ﻦﻳﺪﻟﺍ ﺔﻣﺪﺧ ﺏﺎﻌﺗﺃ ﺮﻌﺳ ﻊﻣ 

Basis Point (bp) 

(bp) �� 

ﻝﺩﺎﻌﺗ ﺓﺪﺣﺍﻮﻟﺍ ﺱﺎﺳﻷﺍ ﺔﻄﻘﻧ ﻥﺃ ﻱﺃ ) ﺔﺋﺎﻤﻟﺎﺑ ﺪﺣﺍﻭ ﺔﺒﺴﻧ ﻦﻣ ﺔﺋﺎﻣ ﻦﻣ ءﺰﺟ ﺎﻬﺑ ﺪﺼﻘﻳ 

ﻦﻋ ﺔﻘﻴﻗﺩ ﺕﺎﻣﻮﻠﻌﻣ 

ءﺎﻄﻋﻹ ﻡﺪﺨﺘﺴﻣ ﺱﺎﻴﻘﻣ ﺮﻐﺻﺃ ﺔﺑﺎﺜﻤﺑ ﺱﺎﺳﻷﺍ ﺔﻄﻘﻧ ﺪﻌﺗﻭ .(% 0.01 

. ﺕﺍﺪﻨﺴﻟﺍﻭ ﻥﻭﺫﻷﺍﻭ ﺮﻴﺗﺍﻮﻔﻟﺍ ﺕﺍﺩﺍﺮﻳﺇ 

Basis Risk 

�� 

ﻊﻣ ﻝﻮﺻﻷﺍ ﻪﺑ ﻂﺒﺗﺮﺗ ﻱﺬﻟﺍ ﺮﺷﺆﻤﻟﺍ ﻦﻴﺑ ﻖﻓﺍﻮﺘﻟﺍ ﻡﺪﻋ ﻦﻋ ﺔﻤﺟﺎﻨﻟﺍ ﺓﺮﻃﺎﺨﻤﻟﺍ ﺎﻬﺑ ﺪﺼﻘﻳ 

ﻝﻭﺪﺠﺗ ﻱﺬﻟﺍ ﺮﻤﺜﺘﺴﻤﻟﺍ ،ﻝﺎﺜﻤﻟﺍ ﻞﻴﺒﺳ ﻰﻠﻋﻭ . ﺔﻠﺼﻟﺍ ﺕﺍﺫ ﻡﻮﺼﺨﻟﺍ ﻪﺑ ﻂﺒﺗﺮﺗ ﻱﺬﻟﺍ ﺮﺷﺆﻤﻟﺍ 

(LIBOR) 

ﻥﺪﻨﻟ ﻲﻓ ﻙﻮﻨﺒﻟﺍ ﻦﻴﺑ ﺽﻭﺮﻌﻤﻟﺍ ﻲﻜﻳﺮﻣﻷﺍ ﺭﻻﻭﺪﻟﺍ 

ﺮﻌﺴﻟ ﺎﻘﻓﻭ ﺔﻘﺤﺘﺴﻤﻟﺍ ﻪﻧﻮﻳﺩ 

ﺔﺘﺑﺎﺛ ﺮﻴﻏ ﺓﺪﺋﺎﻓ ﺕﺍﺫ ﻥﻭﺫﺄﺑ ﻆﻔﺘﺣﺍ ﺍﺫﺇ ﺱﺎﺳﻷﺍ ﺓﺮﻃﺎﺨﻣ ﻞﻤﺤﺘﻳ ،ﺮﻬﺷﺃ ﺔﺛﻼﺛ ﻥﻮﻀﻏ ﻲﻓ 

. ﺮﻬﺷﺃ ﺔﺛﻼﺛ ﻥﻮﻀﻏ ﻲﻓ ﺔﻴﻜﻳﺮﻣﻷﺍ ﺔﻨﻳﺰﺨﻟﺍ ﺕﺍﺪﻨﺳ ﻲﻓ ﺓﺪﺋﺎﻔﻟﺍ ﺭﺎﻌﺳﺃ ﻝﻭﺪﺠﺗﻭ 

Bullet Loan 

�� 

. ﻕﺎﻘﺤﺘﺳﻻﺍ ﺪﻋﻮﻣ ﻲﻓ ﻂﻘﻓ ﺓﺪﺣﺍﻭ ﺔﻌﻓﺩ ﻰﻠﻋ ﻞﻣﺎﻜﻟﺎﺑ 

ﺩﺪﺴﻳ ﻱﺬﻟﺍ ﺽﺮﻘﻟﺍ ﻞﺻﺃ ﻪﺑ ﺪﺼﻘﻳ 

C 

Callable 

�� 

ﺐﺴﺣ ﺎﻫﺪﻋﻮﻣ ﻞﺒﻗ ﺎﻫﺩﺍﺪﺳ ﻦﻜﻤﻳ ﺔﻴﻟﺎﻣ ﻕﺍﺭﻭﺃ ﻭﺃ ﺽﻭﺮﻗ ﻰﻠﻋ ﻖﺒﻄﻨﻳ ﻲﻔﺻﻭ ﺢﻠﻄﺼﻣ ﺍﺬﻫ 

. ﺽﺮﺘﻘﻤﻟﺍ ﺭﺎﻴﺧ 

Capital Adequacy 

�� 

ﻰﻟﺇ ( ﻱﺭﺎﻘﻌﻟﺍ 

ﻞﻳﻮﻤﺘﻟﺍ ﺔﺴﺳﺆﻣ ﻭﺃ ﻚﻨﺒﻟﺍ ﻞﺜﻣ) 

ﺔﺑﺎﻗﺮﻠﻟ ﺔﻌﺿﺎﺨﻟﺍ ﺔﻬﺠﻟﺍ ﺔﺟﺎﺣ ﻪﺑ ﺪﺼﻘﻳ 

. ﻪﻟﻮﺻﺃ ﻦﻋ ﻢﺟﺎﻨﻟﺍ ﺓﺮﻃﺎﺨﻤﻟﺍ ﻢﺠﺣ ﻊﻣ ﺐﺳﺎﻨﺘﻳ ﺎﻤﺑ ﻝﺎﻤﻟﺍ ﺱﺃﺭ ﻦﻣ ﻰﻧﺩﻷﺍ ﺪﺤﻟﺎﺑ ﻅﺎﻔﺘﺣﻻﺍ 

ﻊﻴﻄﺘﺴﺗ ﺪﻗ ،ﺔﻌﺟﺭ ﻥﻭﺩ ﺔﻴﻣﻮﻤﻌﻟﺍ ﺔﻴﻧﺍﺰﻴﻤﻟﺍ ﻦﻣ ﺎﻫﺩﺎﻌﺒﺘﺳﺍﻭ ﻪﻟﻮﺻﺃ ﻖﻳﺭﻮﺗ ﺔﻴﻠﻤﻋ ﻝﻼﺧ ﻦﻣﻭ 

ﺩﻮﻌﻳ ﻻ ﺚﻴﺣ ،ﺔﻴﺑﺎﻗﺮﻟﺍ ﺔﻬﺠﻟﺍ ﻦﻣ ﺏﻮﻠﻄﻤﻟﺍ ﻝﺎﻤﻟﺍ ﺱﺃﺭ ﻦﻣ ءﺎﻔﻋﻹﺍ ﻁﺮﺷ ﻖﻴﻘﺤﺗ ﺔﻬﺠﻟﺍ ﻩﺬﻫ 

ﺔﻟﻮﺤﻤﻟﺍ ﻝﻮﺻﻷﺎﺑ ﻖﻠﻌﺘﻤﻟﺍ ﺔﻴﺑﺎﻗﺮﻟﺍ ﺔﻬﺠﻟﺍ ﻦﻣ ﺏﻮﻠﻄﻤﻟﺍ ﻝﺎﻤﻟﺍ ﺱﺃﺮﺑ ﻆﻔﺘﺤﺗ ﻥﺃ ﺎﻬﻨﻣ 

ﺐﻠﻄُﻳ 

. ﺔﻴﻟﺎﻣ ﻕﺍﺭﻭﺃ ﻰﻟﺇ 

Cash Collateral 

�� 

ﻱﺬﻟﺍ ﻲﻃﺎﻴﺘﺣﻻﺍ ﺪﻴﺻﺮﻟﺍ ﻰﻠﻋ ﻅﺎﻔﺤﻟﺍ ﻦﻤﻀﺘﻳ ﻱﺬﻟﺍ ﻲﻧﺎﻤﺘﺋﻻﺍ ﺰﻳﺰﻌﺘﻟﺍ ﻝﺎﻜﺷﺃ ﻦﻣ ﻞﻜﺷ ﻮﻫ 

. ﻦﻳﺮﻤﺜﺘﺴﻤﻟﺍ ﻞﺒﻗ ﻦﻣ ﺔﻘﺣﻼﻟﺍ ﺐﻟﺎﻄﻤﻟﺍﻭ ﺔﻴﻧﺎﻤﺘﺋﻻﺍ ﺮﺋﺎﺴﺨﻟﺍ ﺔﻟﺎﺣ ﻲﻓ ﻪﻠﻴﻴﺴﺗ ﻦﻜﻤﻳ 

Cash Collateral Account (CCA) 

(CCA) �� 

ﻲﻓ ﻝﺍﻮﻣﻷﺍ ﺽﺍﺮﻗﺇ ﻢﺘﻳﻭ 

. ﺔﻴﻠﻤﻌﻠﻟ ﻲﻧﺎﻤﺘﺋﻻﺍ ﻢﻋﺪﻟﺍ ﻡﺪﻘﻳ ﻱﺬﻟﺍ ﻲﻃﺎﻴﺘﺣﻻﺍ ﺪﻴﺻﺮﻟﺍ ﻪﺑ ﺪﺼﻘﻳ 

ﺏﺎﻄﺧ ﺭِﺪﺼُﻳ ﻱﺬﻟﺍ ﻚﻨﺒﻟﺍ ﻞﺜﻣ ،ﺚﻟﺎﺛ ﻑﺮﻃ ﻞﺒﻗ ﻦﻣ ﺭِﺪﺼُﻤﻟﺍ ﻰﻟﺇ ﻱﺪﻘﻨﻟﺍ ﻥﺎﻤﻀﻟﺍ ﺏﺎﺴﺣ 

. ﺽﺮﻘﻟﺍ 

ﻕﺎﻔﺗﻻ ًﺎﻘﻓﻭ ،ﺩﺎﻤﺘﻋﻻﺍ 

Cash Flow Waterfall 

�� 

ﺔﻓﺎﻛ ﺔﻴﻄﻐﺗ ﺪﻌﺑ ﺭِﺪﺼ 

ُﻤﻠﻟ ﺡﺎﺘﻤﻟﺍ ﻱﺪﻘﻨﻟﺍ ﻖﻓﺪﺘﻟﺍ ﺎﻬﻟﻼﺧ ﻦﻣ ﺢﺒﺼﻳ ﻲﺘﻟﺍ ﺪﻋﺍﻮﻘﻟﺍ ﺎﻬﺑ ﺪﺼﻘﻳ 

ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻦﻣ ﺔﻔﻠﺘﺨﻤﻟﺍ ﺕﺎﺌﻔﻟﺍ ﺔﻠﻤﺤﻟ ﺔﻨﻳﺪﻤﻟﺍ ﻥﻮﻳﺪﻟﺍ ﻞﻴﺼﺤﺘﻟ ًﺎﺼﺼﺨﻣ ،ﺕﺎﻓﻭﺮﺼﻤﻟﺍ 

. ﺎﻣ ﺔﻴﻠﻤﻌﺑ ﻖﻠﻌﺘﻳ ﺎﻤﻴﻓ ﺓﺭﺩﺎﺼﻟﺍ 

Cherry-Picking 

�� 

ﻮﻫﻭ ؛ﺓﺩﺪﺤﻣ 

ﺮﻴﻳﺎﻌﻣ ﻰﻠﻋ ًءﺎﻨﺑ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﺔﻈﻔﺤﻣ ﻦﻣ ﻝﻮﺻﻷﺍ ﺭﺎﻴﺘﺧﺍ ﺔﺳﺭﺎﻤﻣ ﻪﺑ ﺪﺼﻘﻳ 

. ﺔﻴﺋﺍﻮﺸﻋ ﺓﺭﻮﺼﺑ ﺓﺭﺎﺘﺨﻤﻟﺍ ﺔﻨﻴﻌﻟﺍ ﺲﻜﻋ 

Collateral 

�� 

ﺽﺮﺘﻘﻤﻟﺍ ﻡﻮﻘﻳ ﻲﺘﻟﺍﻭ ﺽﺮﻘﻤﻟﺍﻭ ﺽﺮﺘﻘﻤﻟﺍ ﻦﻣ ﻞﻜﻟ ﺔﻤﻴﻗ ﻞﺜﻤﺗ ﻲﺘﻟﺍ ﻝﻮﺻﻷﺍ ﺎﻬﺑ ﺪﺼﻘﻳ 

ﻡﺪﺨﺘﺴﻳ ﻥﺃ ﺽﺮﻘﻤﻠﻟ ﻦﻜﻤﻳﻭ . ﺎﻬﺿﺍﺮﺘﻗﺍ ﻢﺗ ﻲﺘﻟﺍ ﻝﺍﻮﻣﻷﺎﺑ 

ﻖﻠﻌﺘﻳ ﺎﻤﻴﻓ ﺽﺮﻘﻤﻟﺍ ﻰﻟﺇ ﺎﻬﻨﻫﺮﺑ 

ﻲﻓ ﺽﺮﺘﻘﻤﻟﺍ ﻞﺸﻓ ﺍﺫﺇ ﺎﻬﺿﺍﺮﻗﺇ ﻢﺗ ﻲﺘﻟﺍ ﻝﺍﻮﻣﻷﺍ ﻞﻛ ﻭﺃ ﺾﻌﺑ ﺔﻴﻄﻐﺘﻟ ﺔﻧﻮﻫﺮﻤﻟﺍ ﻝﻮﺻﻷﺍ 

. ﺽﺮﻘﻟﺍ ﻕﺎﻔﺗﺍ ﻁﻭﺮﺸﻟ ﻊﻗﻮﺘﻤﻟﺍ ﻯﻮﺘﺴﻤﻟﺍ ﻖﻴﻘﺤﺗ 

Collateral Interest Class 

�� 

ﺔﻴﻧﻮﻳﺪﻣ ﺕﺍﺪﻨﺴﺑ ﻖﻠﻌﺘﻳ ﺎﻤﻴﻓ ﺓﺭﺩﺎﺼﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ 

ﻕﺍﺭﻭﻸﻟ ﺔﻌﺑﺎﺗ ﺔﺌﻓ ﻰﻠﻋ ﺢﻠﻄﺼﻤﻟﺍ ﺍﺬﻫ ﻖﻠﻄﻳ 

ﺓﺭﺩﺎﺼﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻦﻣ ﻰﻠﻋﻷﺍ ﺕﺎﺌﻔﻟﺍ ﻲﻓ ًﺎﻴﻧﺎﻤﺘﺋﺍ ًﺍﺰﻳﺰﻌﺗ ﻡﺪﻘﺗ ﻲﺘﻟﺍ ،ﻥﺎﻤﺘﺋﻻﺍ 

ﺔﻗﺎﻄﺑ 

. ﺔﻴﻠﻤﻌﻟﺍ ﻞﻴﻔﻛ ﻞﺒﻗ ﻦﻣ ﻥﺎﻤﻀﻟﺍ ﻰﻠﻋ ﺓﺪﺋﺎﻔﻟﺍ ﺯﺎﺠﺘﺣﺍ ﻢﺘﻳ ﺎﻣ ًﺍﺮﻴﺜﻛﻭ . ﺔﻴﻠﻤﻌﻟﺍ ﺲﻔﻨﺑ ﻖﻠﻌﺘﻳ ﺎﻤﻴﻓ 

Collateralized Debt Obligation (CDO) 

(CDO) �� 

ﻦﻤﻀﺘﺗ ﺪﻗ ﻲﺘﻟﺍﻭ 

،ﺔﻔﻠﺘﺨﻤﻟﺍ 

ﻦﻳﺪﻟﺍ ﻉﺍﻮﻧﺃ ﻦﻣ ﺔﻋﻮﻤﺠﻤﺑ ﺔﻧﻮﻤﻀﻤﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ ﺔﻗﺭﻮﻟﺍ ﻪﺑ ﺪﺼﻘﻳ 

ﻦﻣ ﺕﺎﻛﺮﺸﻠﻟ ﺎﻬﺿﺍﺮﺘﻗﺍ ﻢﺘﻳ ﻲﺘﻟﺍ ﺽﻭﺮﻘﻟﺍﻭ ،ﻝﺎﻤﻟﺍ 

ﺱﺃﺭ ﻕﺍﻮﺳﺃ ﻲﻓ ﺔﻋﺎﺒﻤﻟﺍ ﺔﻛﺮﺸﻟﺍ ﺕﺍﺪﻨﺳ 

. ﻖﻳﺭﻮﺘﻟﺍ ﺕﺎﺌﻓﻭ ﺕﺎﺴﺳﺆﻤﻟﺍ ﻦﻣ ﻦﻴﺿﺮﻘﻤﻟﺍ ﻞﺒﻗ 

Collateralized Loan Obligation (CLO) 

(CLO) �� 

ﻞﺒﻗ ﻦﻣ ﺕﺎﻛﺮﺸﻟﺍ ﺎﻬﺿﺮﺘﻘﺗ ﻲﺘﻟﺍ ﺽﻭﺮﻘﻟﺍ ﻊﻤﺠﻤﺑ ﺔﻧﻮﻤﻀﻤﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ ﺔﻗﺭﻮﻟﺍ ﻪﺑ ﺪﺼﻘﻳ 

. ﺔﻳﺭﺎﺠﺘﻟﺍ ﻙﻮﻨﺒﻟﺍ ﻦﻣ ﺓﺩﺎﻋﻭ 

،ﺕﺎﺴﺳﺆﻤﻟﺍ ﻦﻣ ﻦﻴﺿﺮﻘﻤﻟﺍ 

Collateralized Mortgage Obligation (CMO) 

(CMO) �� 

ﺕﺎﻋﻮﻤﺠﻣ ﺾﻌﺑ ﻭﺃ ﻦﻫﺮﻟﺎﺑ ﺔﻧﻮﻤﻀﻤﻟﺍ ﺽﻭﺮﻘﻟﺍ ﻊﻤﺠﻤﺑ 

ﺔﻧﻮﻤﻀﻤﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ ﺔﻗﺭﻮﻟﺍ ﻪﺑ ﺪﺼﻘﻳ 

ﻦﻤﻀﺘﺗ ﺎﻣ ﺓﺩﺎﻋﻭ . ﺔﻴﻟﺎﻤﻟﺍ ﺔﻟﺎﻛﻮﻟﺍ ﻕﺍﺭﻭﺃﻭ ﻲﻨﻜﺴﻟﺍ ﻱﺭﺎﻘﻌﻟﺍ ﻦﻫﺮﻟﺎﺑ ﺔﻧﻮﻤﻀﻤﻟﺍ ﺽﻭﺮﻘﻟﺍ 

ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻦﻣ ﺓﺩﺪﻌﺘﻣ ﺕﺎﺌﻓ ﻥﻮﻤﻀﻤﻟﺍ ﻦﻫﺮﻟﺍ ﺕﺎﻣﺍﺰﺘﻟﺍ ﺭﺍﺪﺻﺇ ﺎﻬﻴﻓ ﻢﺘﻳ ﻲﺘﻟﺍ ﺔﻴﻠﻤﻌﻟﺍ 

. ﺔﻔﻠﺘﺨﻣ ﺕﺎﻧﻮﺑﻮﻛﻭ ﻕﺎﻘﺤﺘﺳﺍ ﺦﻳﺭﺍﻮﺗ ﺎﻬﻟ ﻥﻮﻜﻳ ﺚﻴﺤﺑ 

Combined LTV Ratio 

�� 

�� 

ﺭﺎﻘﻌﻟﺍ ﺎﻬﻴﻓ ﻦﻤﻀﻳ ﻲﺘﻟﺍ ﻝﺍﻮﺣﻷﺍ ﻲﻓ ﺎﻬﺑﺎﺴﺘﺣﺍ ﻢﺘﻳ ﻲﺘﻟﺍ ﺔﻤﻴﻘﻟﺍ ﻰﻟﺇ ﺽﺮﻘﻟﺍ ﺔﺒﺴﻧ ﺎﻬﺑ ﺪﺼﻘﻳ 

. ﻦﻫﺮﺑ ﻥﻮﻤﻀﻣ ﺽﺮﻗ ﻦﻣ ﺮﺜﻛﺃ 

Commercial Mortgage-Backed Securities (CMBS) 

(CMBS) �� 

ﺔﻧﻮﻤﻀﻤﻟﺍ ﺽﻭﺮﻘﻟﺍ ﺕﺎﻌﻤﺠﻣ ﻦﻣ ﺮﺜﻛﺃ ﻭﺃ ﺓﺪﺣﺍﻮﺑ ﺔﻧﻮﻤﻀﻤﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﺎﻬﺑ ﺪﺼﻘﻳ 

ﺽﻭﺮﻘﻟﺍ ﻦﻣ ﺮﺜﻛﺃ ﻭﺃ ﺓﺪﺣﺍﻮﺑ ﻱﺭﺎﺠﺗ ﻦﻫﺮﺑ ﺔﻧﻮﻤﻀﻤﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻢﻋﺩ ﻢﺘﻳﻭ . ﻦﻫﺮﻟﺎﺑ 

ﺰﻛﺍﺮﻣﻭ ﺮﺳﻷﺍ ﺓﺩﺪﻌﺘﻣ ﺔﻴﻧﺎﻜﺳﺇ 

ﺕﺎﻌﻤﺠﻣ ﻦﻤﻀﺘﺗ ﺪﻗ ﻲﺘﻟﺍﻭ 

،ﺔﻳﺭﺎﺠﺘﻟﺍ 

ﺕﺍﺭﺎﻘﻌﻟﺎﺑ ﺔﻧﻮﻤﻀﻤﻟﺍ 

. ﻕﺩﺎﻨﻓﻭ ﺔﻳﺭﺍﺩﺇ ﻲﻧﺎﺒﻣﻭ ﺔﻴﻋﺎﻨﺻ ﺕﺎﻌﻤﺠﻣﻭ ،ﻕﻮﺴﺗ 

Commercial Paper (CP) 

(CP) �� 

270 ﻦﻋ ﺎﻬﻗﺎﻘﺤﺘﺳﺍ 

ﺦﻳﺭﺎﺗ ﻞﻘﻳ ﺔﻳﺭﺎﺠﺘﻟﺍ ﻕﺍﺭﻭﻷﺍ ﺐﻠﻏﺃﻭ 

. ﻞﺟﻷﺍ ﺓﺮﻴﺼﻗ ﻦﻳﺩ ﺕﺍﺪﻨﺳ ﻩﺬﻫ 

. ﻞﻗﺃ ﻭﺃ ًﺎﻣﻮﻳ ﻦﻴﺴﻤﺧ ﻰﻟﺇ ﻦﻴﺛﻼﺛ ﻦﻴﺑ ﺎﻣ ًﺎﻋﻮﻴﺷ ﺮﺜﻛﻷﺍ ﻕﺎﻘﺤﺘﺳﻻﺍ ﺦﻳﺭﺍﻮﺗ ﺡﻭﺍﺮﺘﺗ ﺫﺇ ،ًﺎﻣﻮﻳ 

Commingling Risk 

�� 

ﻊﻣ ﺓﺭِﺪﺼ 

ُﻤﻟﺍ ﺹﺎﺨﻟﺍ ﺽﺮﻐﻟﺍ ﺕﺍﺫ ﺓﺄﺸﻨﻤﻟﺎﺑ ﺔﺻﺎﺨﻟﺍ ﺔﻟﻮﻴﺴﻟﺍ ﺝﺰﻣ ﺓﺮﻃﺎﺨﻣ 

ﺎﻬﺑ ﺪﺼﻘﻳ 

ﻲﻓ ﺎﻬﻌﺿﻭ ﻭﺃ ،( 

ﻞـﱢﺼﺤﻤﻟﺍ ﻭﺃ ﺊﺸﻨﻤﻟﺍ ﻝﺎﺜﻤﻟﺍ ﻞﻴﺒﺳ ﻰﻠﻋ) 

ﺚﻟﺎﺛ ﻑﺮﻄﺑ ﺔﺻﺎﺨﻟﺍ ﺔﻟﻮﻴﺴﻟﺍ 

،ﻪﺳﻼﻓﺇ 

ﺔﻟﺎﺣ ﻲﻓ ﻭﺃ ﺚﻟﺎﺜﻟﺍ ﻑﺮﻄﻟﺍ ﺭﺎﺴﻋﺇ ﺔﻟﺎﺣ ﻲﻓ ،ﺎﻬﻧﺃ 

ﺚﻴﺤﺑ ﺚﻟﺎﺛ ﻑﺮﻃ ﻢﺳﺎﺑ ﺏﺎﺴﺣ 

ﺕﺎﺑﺎﺴﺣ ﻲﻓ ﺔﻟﻮﻴﺴﻟﺍ ﺪﻴﻤﺠﺗ 

ﻭﺃ ﻞﺼﻔﻨﻣ ﻮﺤﻧ ﻰﻠﻋ ﺔﻟﻮﻴﺴﻟﺍ ﻩﺬﻫ ﻒﻳﺮﻌﺗ ﻥﻭﺩ ﻝﻮﺤﺗ ﻑﻮﺳ 

. ﺚﻟﺎﺜﻟﺍ ﻑﺮﻄﻟﺍ 

ﺕﺎﻴﻠﻤﻋ ﻞﻳﻮﻤﺘﺑﻭ 

Conduit 

�� 

ﻦﻳﺩﺪﻌﺘﻣ ﻦﻴﻌﺋﺎﺑ ﻦﻣ ﻝﻮﺻﻷﺍ ءﺍﺮﺸﺑ ﻡﻮﻘﺗ ﻲﺘﻟﺍ ﺔﻴﻧﻮﻧﺎﻘﻟﺍ ﺔﻬﺠﻟﺍ ﺎﻬﺑ ﺪﺼﻘﻳ 

ﺔﻳﺭﺎﺠﺘﻟﺍ ﺔﻗﺭﻮﻟﺍ ﺭﺍﺪﺻﺇ ﻝﻼﺧ ﻦﻣ ﻭﺃ ﻞﺟﻷ ﻖﻳﺭﻮﺘﻟﺍ ﺕﺎﻴﻠﻤﻋ ﻝﻼﺧ ﻦﻣ ﺎﻣﺇ ءﺍﺮﺸﻟﺍ 

. ﻝﻮﺻﻷﺎﺑ ﺔﻧﻮﻤﻀﻤﻟﺍ 

Credit Default Swap 

�� 

ﻎﻠﺒﻣ ﺩﺍﺪﺳ ﻰﻠﻋ ﺔﻳﺎﻤﺤﻟﺍ ﻊﺋﺎﺑ ﻪﻟﻼﺧ ﻦﻣ ﻖﻓﺍﻮﻳ ﻱﺬﻟﺍ ﺪﻘﻌﻟﺍ ﺔﺒﻴﻌﻤﻟﺍ ﻥﺎﻤﺘﺋﻻﺍ ﺔﻟﺩﺎﺒﻤﺑ ﺪﺼﻘﻳ 

،ﺔﻳﺎﻤﺤﻟﺍ ﻩﺬﻫ ﻞﺑﺎﻘﻣﻭ . ﺓﺩﺪﺤﻤﻟﺍ ﻥﺎﻤﺘﺋﻻﺍ ﺕﻻﺎﺣ ﺙﻭﺪﺣ ﺩﺮﺠﻤﺑ ﺔﻳﺎﻤﺤﻟﺍ ﻱﺮﺘﺸﻣ ﻰﻟﺇ ﺔﻳﻮﺴﺘﻟﺍ 

. ﻊﺋﺎﺒﻠﻟ ﻂﺴﻗ ﺩﺍﺪﺴﺑ ﻱﺮﺘﺸﻤﻟﺍ 

ﻡﻮﻘﻳ 

Credit Derivatives 

�� 

. ﺮﺧﺁ ﻰﻟﺇ ﻑﺮﻃ ﻦﻣ ﻥﺎﻤﺘﺋﻻﺍ ﺓﺮﻃﺎﺨﻣ ﻞﻳﻮﺤﺘﻟ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻕﻮﺳ ﻕﺍﺭﻭﺃ ﺩﺍﺪﻋﺇ ﻢﺘﻳ 

ﻥﻭﺫﻷﺍﻭ ﺕﺍﺪﺋﺎﻌﻟﺍ ﻲﻟﺎﻤﺟﺇ ﺕﻻﺩﺎﺒﻣﻭ ﺔﺒﻴﻌﻤﻟﺍ ﻥﺎﻤﺘﺋﻻﺍ ﺕﻻﺩﺎﺒﻣ ﻕﺍﺭﻭﻷﺍ ﻩﺬﻫ ﻦﻤﻀﺘﺗﻭ 

. ﻥﺎﻤﺘﺋﻻﺎﺑ ﺔﻄﺒﺗﺮﻤﻟﺍ 

Credit Enchancement 

�� 

ﻱﺬﻟﺍ ﻱﺪﻘﻨﻟﺍ ﻖﻓﺪﺘﻟﺎﺑ ﺔﺻﺎﺨﻟﺍ ﻥﺎﻤﺘﺋﻻﺍ ﺓﺩﻮﺟ ﻊﻓﺮﺗ ﻥﺃ ﺎﻬﻧﺄﺷ ﻦﻣ ﻲﺘﻟﺍ ﺔﻴﻟﻵﺍ ﻭﺃ ﺪﻨﺴﻟﺍ ﻪﺑ ﺪﺼﻘﻳ 

ﻢﺘﻳﻭ . ﻲﻠﺻﻷﺍ ﻦﻳﺪﻟﺍ ﺓﺩﻮﺟ ﻦﻋ ﺪﻳﺰﻳ ﺎﻤﺑ ﻝﻮﺻﻷﺍ ﻦﻣ ﺮﺜﻛﺃ ﻭﺃ ﺪﺣﺍﻭ ﻩﺭﺪﺼﻳ ﻥﺃ ﻊﻗﻮﺘﻤﻟﺍ ﻦﻣ 

ﻝﻮﺻﻷﺍ ﻲﻓ ﺓﺪﺒﻜﺘﻤﻟﺍ ﺮﺋﺎﺴﺨﻟﺍ ﻦﻣ ﻦﻳﺮﻤﺜﺘﺴﻤﻟﺍ ﺔﻳﺎﻤﺤﻟ ﻖﻳﺭﻮﺘﻟﺍ ﻞﻜﻴﻫ ﻲﻓ ﺮﺻﺎﻨﻌﻟﺍ ﺩﺍﺪﻋﺇ 

. ﺔﻨﻣﺎﻀﻟﺍ 

Credit-Linked Note 

�� 

ﺎﻤﻴﻓ ﻲﻧﺎﻤﺘﺋﺍ ﺱﺎﻴﻘﻣ ﻭﺃ ﺔﻴﻧﺎﻤﺘﺋﺍ ﺔﻟﺎﺣ ﺩﻮﺟﻭ ﻭﺃ ﻉﻮﻗﻭ ﻰﻠﻋ ﻩﺩﺍﺪﺳ ﺪﻤﺘﻌﻳ ﻱﺬﻟﺍ ﻥﺫﻹﺍﻪﺑﺪﺼﻘﻳ 

ﻥﺫﻺﻟ ًﺎﻘﻓﻭ ﺩﺍﺪﺴﻟﺍ ﺪﻤﺘﻌﻳ ﺪﻗ ،ﻝﺎﺜﻤﻟﺍ ﻞﻴﺒﺳ ﻰﻠﻋﻭ . ﻝﻮﺻﻸﻟ 

ﻊﻤﺠﻣ ﻭﺃ ﺔﻴﻌﺟﺮﻣ ﺔﻬﺠﺑ ﻖﻠﻌﺘﻳ 

ﺽﻭﺮﻘﻟﺍ ﺔﻋﻮﻤﺠﻤﻟ ﻲﻌﺟﺮﻤﻟﺍ ﻊﻤﺠﻤﻟﺍ ﻕﺎﻄﻧ ﻲﻓ ﺮﺋﺎﺴﺨﻟﺍ ﻯﻮﺘﺴﻣ ﻰﻠﻋ ﻥﺎﻤﺘﺋﻻﺎﺑ ﻂﺒﺗﺮﻤﻟﺍ 

ًﺍﺮﻈﻧﻭ . ﻲﻠﺻﻷﺍ ﻊﻤﺠﻤﻟﺍ ﺪﻴﺻﺭ ﻦﻣ ﺓﺩﺪﺤﻣ ﺔﻳﻮﺌﻣ ﺔﺒﺴﻧ ﻥﻭﺩ ﺖﻟﺍﺯ 

ﻻ ﻲﺘﻟﺍ ﻦﻫﺮﻟﺎﺑ ﺔﻧﻮﻤﻀﻤﻟﺍ 

ﺪﻗ ،ﺎﻬﻜﻟﺎﻣ ﻭﺃ ﻝﻮﺻﻷﺍ ﺊﺸﻨﻤﻟ ﺔﻴﻣﻮﻤﻌﻟﺍ ﺔﻴﻧﺍﺰﻴﻤﻠﻟ 

ًﺎﻘﻓﻭ ﻲﻌﺟﺮﻤﻟﺍ ﻊﻤﺠﻤﻟﺍ ﻲﻓ ﻝﻮﺻﻷﺍ ءﺎﻘﺒﻟ 

ﻦﻴﻣﺄﺘﻟﺍ ﻝﺎﻜﺷﺃ ﻦﻣ ًﻼﻜﺷ ﺎﻫﺭﺎﺒﺘﻋﺎﺑ ﻥﺎﻤﺘﺋﻻﺎﺑ ﺔﻄﺒﺗﺮﻣ ﻥﻭﺫﺃ ﺭﺍﺪﺻﺇ ﻚﻟﺎﻤﻟﺍ ﻭﺃ ﺊﺸﻨﻤﻟﺍ ﻯﺮﻳ 

. ﻲﻌﺟﺮﻤﻟﺍ ﻊﻤﺠﻤﻟﺍ 

ﻝﻮﺻﺄﺑ ﺔﻘﻠﻌﺘﻤﻟﺍ ﻥﺎﻤﺘﺋﻻﺍ ﺮﺋﺎﺴﺧ ﺪﺿ 

Credit Risk 

�� 

ﺎﻤﺑ ﻪﻟ ﺩﺍﺪﺴﻟﺍ ﻭﺃ ﺽﺮﻘﻤﻟﺍ ﻑﺮﻄﻟﺍ ﻰﻟﺇ ﻞﻣﺎﻜﻟﺎﺑ ﺩﺍﺪﺴﻟﺍ ﻡﺪﻋ ﻲﻓ ﺔﻠﺜﻤﺘﻤﻟﺍ ﺓﺮﻃﺎﺨﻤﻟﺍ ﺎﻬﺑ ﺪﺼﻘﻳ 

. ًﻼﺻﺃ ﺎﻬﻴﻠﻋ 

ﻖﻔﺘﻤﻟﺍ 

ﺓﺮﺘﻔﻟﺍ ﻦﻣ ﻝﻮﻃﺃ ﺔﻴﻨﻣﺯ ﺓﺮﺘﻓ ﻲﻓ ﻪﻟ ﺩﺍﺪﺴﻟﺍ ﻭﺃ ﻦﻳﺪﻤﻟﺍ ﻎﻠﺒﻤﻟﺍ ﻦﻋ ﻞﻘﻳ 

Standard & Poor’s Extract from the Structured Finance - Glossary of Securitization Terms 

Full Glossary of Securitization Terms from www.sf.standardandpoors.com 

2

Cross-Collateralization 

�� 

ﺕﺍﺭﺎﻘﻌﻟﺍ ﻦﻣ ﺭﺎﻘﻋ ﻞﻛ ﻦﻫﺭ ﻝﻼﺧ ﻦﻣ ﺽﺮﻘﻤﻟﺍ ﻰﻟﺇ ﺔﻣﺪﻘﻤﻟﺍ ﺔﻳﺎﻤﺤﻟﺍ ﺰﻳﺰﻌﺘﻟﺏﻮﻠﺳﺃﻮﻫ 

ﺎﻬﺿﺍﺮﺘﻗﺍ ﻢﺗ ﻲﺘﻟﺍ ﺽﻭﺮﻘﻟﺍ ﺔﻓﺎﻛ ﻦﻋ ًﺎﻴﻃﺎﻴﺘﺣﺍ ًﺎﻧﺎﻤﺿ ﻩﺭﺎﺒﺘﻋﺎﺑ ﻱﺩﺮﻔﻟﺍ ﺽﺮﻘﻟﺍ ﻦﻤﻀﺗ 

ﻲﺘﻟﺍ 

ﺽﻭﺮﻘﻟﺎﺑ 

ﻖﻠﻌﺘﻳ ﺎﻤﻴﻓ 

ﺓﺩﺎﻋ ﻙﺮﺘﺸﻤﻟﺍ ﻥﺎﻤﻀﻟﺍ ﻲﻓ ﺮﻈﻨـُﻳﻭ 

. ﺔﺿﺮﺘﻘﻤﻟﺍ ﺔﻬﺠﻟﺍ ﺲﻔﻧ ﻞﺒﻗ ﻦﻣ 

. ﻱﺭﺎﺠﺘﻟﺍ ﻦﻫﺮﻟﺎﺑ ﺔﻧﻮﻤﻀﻤﻟﺍ 

D 

Debt Service Coverage Ratio (DSCR) 

(DSCR) �� 

ﺔﻣﺪﺧ ﺕﺎﻌﻓﺩ ﻰﻠﻋ ًﺎﻣﻮﺴﻘﻣ ﺭﺎﻘﻌﻟﺍ ﻞﺧﺩ ﻩﺭﺪﻳ ﻱﺬﻟﺍ ﻱﻮﻨﺴﻟﺍ ﻱﺪﻘﻨﻟﺍ ﻖﻓﺪﺘﻟﺍ ﻲﻓﺎﺻ ﺎﻬﺑ ﺪﺼﻘﻳ 

ﺔﻧﻮﻤﻀﻤﻟﺍ ﺽﻭﺮﻘﻟﺍ ﻭﺃ) 

ﻦﻫﺮﻟﺎﺑ ﻥﻮﻤﻀﻤﻟﺍ ﺽﺮﻘﻟﺍ ﻁﻭﺮﺷ ﺐﺟﻮﻤﺑ ﺔﺑﻮﻠﻄﻤﻟﺍ ﺔﻳﻮﻨﺴﻟﺍ ﻦﻳﺪﻟﺍ 

ﻦﻳﺪﻟﺍ ﺔﻣﺪﺧ ﺔﻴﻄﻐﺗ ﺔﺒﺴﻧ ﻦﻋ ﺮﻴـﺒﻌﺘﻟﺍ ﻢﺘﻳﻭ 

. ﺭﺎﻘﻌﻟﺍ ﻞﻳﻮﻤﺗ ﺽﺮﻐﺑ ﺎﻬﺿﺮﻓ ﻢﺗ ﻲﺘﻟﺍﻭ 

( ﻦﻫﺮﻟﺎﺑ 

. ( ﺓﺮﻣ 2.0 ﻭﺃ) 

ﻦﻴﻔﻌﺿ ﻝﺎﺜﻤﻟﺍ ﻞﻴﺒﺳ ﻰﻠﻋ " ﻑﺎﻌﺿﻷﺍ ﺩﺪﻋ" 

ﺎﻫﺭﺎﺒﺘﻋﺎﺑ 

Default 

�� 

ءﺎﻓﻮﻠﻟ ﻊﻗﻮﺘﻤﻟﺍ ﻯﻮﺘﺴﻤﻟﺍ ﻰﻟﺇ ﻝﻮﺻﻮﻟﺍ ﻲﻓ ﻱﺪﻗﺎﻌﺘﻟﺍ ﻕﺎﻔﺗﻻﺍ ﻑﺍﺮﻃﺃ ﺪﺣﺃ ﻕﺎﻔﺧﺇ ﻪﺑ ﺪﺼﻘﻳ 

. ﻱﺪﻗﺎﻌﺘﻟﺍ ﻕﺎﻔﺗﻼﻟ ﻙﺎﻬﺘـﻧﺍ ﺍﺬﻫﻭ ،ﻕﺎﻔﺗﻻﺍ ﺐﺟﻮﻤﺑ ﻪﺗﺎﻣﺍﺰﺘﻟﺎﺑ 

Defaulted Receivables 

�� 

. ﻞﺼﺤﻤﻟﺍ ﺮﻴﻳﺎﻌﻤﻟ ًﺎﻘﺒﻃ ﺎﻬﻠﻴﺼﺤﺗ ﻢﺘﻳ ﻻ ﻲﺘﻟﺍ ﺕﺍﺪﻨﺴﻟﺍ ﺎﻬﺑ ﺪﺼﻘﻳ 

Delinquency 

�� 

. ﺩﺪﺤﻤﻟﺍ ﻕﺎﻘﺤﺘﺳﻻﺍ ﺦﻳﺭﺎﺗ ﻲﻓ ﻦﻳﺪﻟﺍ ﺩﺍﺪﺴﺑ ﻡﺍﺰﺘﻟﻻﺍ ﻲﻓ ﻕﺎﻔﺧﻹﺍ ﻪﺑ ﺪﺼﻘﻳ 

Delinquent Receivables 

�� 

ﻰﻠﻋ ﺎﻬﺒﻄﺷ ﻲﻟﺎﺘﻟﺎﺑ ﻢﺘﻳ ﺪﻗ ﻲﺘﻟﺍﻭ ﺩﺍﺪﺴﻟﺎﺑ ﻦﻳﺪﻬﻌﺘﻤﻟﺍ ﺮﺧﺄﺘﺑ ﺔﺻﺎﺨﻟﺍ ﺔﻴﻧﻮﻳﺪﻤﻟﺍ 

ﺕﺍﺪﻨﺳ ﻩﺬﻫ 

. ﻞﻴﺼﺤﺘﻠﻟ ﺔﻠﺑﺎﻗ ﺮﻴﻏ ﺎﻬﻧﻮﻛ ﺱﺎﺳﺃ 

E 

Euro Interbank Offered Rate (EURIBOR) 

(EURIBOR) �� 

�� 

�� 

ﻭﺭﻮﻴﻟﺎﺑ ﻙﻮﻨﺒﻟﺍ ﻦﻴﺑ ﻞﺟﻷ ﻊﺋﺍﺩﻮﻠﻟ ﺔﻴﺳﺎﺳﻷﺍ ﻙﻮﻨﺒﻟﺍ ﺪﺣﺃ ﻪﺿﺮﻌﻳ ﻱﺬﻟﺍ ﺓﺪﺋﺎﻔﻟﺍ ﺮﻌﺳ ﺎﻬﺑ 

ﺪﺼﻘﻳ 

ًﺎﻜﻨﺑ ﻦﻴﺘﺳ ﻦﻣ ﺔﻔﻟﺆﻣ ﺔﺌﻴﻫ ﻡﻮﻘﺗﻭ . ﻭﺭﻮﻴﻟﺍ ﺔﻘﻄﻨﻣ ﻲﻓ ﺮﺧﺁ ﻲﺳﺎﺳﺃ ﻚﻨﺑ ﻰﻠﻋ ،ﻭﺭﻮﻴﻟﺍ 

ﺔﻘﻄﻨﻣ ﻲﻓ 

ﻦﻴﺑ ﺽﻭﺮﻌﻤﻟﺍ ﺮﻌﺴﻠﻟ ﺔﺒﺴﻨﻟﺎﺑ ﻝﺎﺤﻟﺍ ﻲﻫ 

ﺎﻤﻛﻭ . ﻙﻮﻨﺒﻟﺍ ﻦﻴﺑ ﻭﺭﻮﻴﻟﺍ ﺓﺪﺋﺎﻓ ﺪﻳﺪﺤﺘﺑ ًﺎﻴﺑﻭﺭﻭﺃ 

ﺦﻳﺭﺍﻮﺘﻟ 

ﺔﺒﺴﻨﻟﺎﺑ ﻊﺋﺍﺩﻮﻠﻟ ﺔﻴﺑﻭﺭﻭﺃ ﻭﺭﻮﻳ ﺓﺪﺋﺎﻓ ﺭﺎﻌﺳﺃ ﻙﺎﻨﻫ ، LIBOR ﻥﺪﻨﻟ ﻲﻓ ﻙﻮﻨﺒﻟﺍ 

. ﺔﻔﻠﺘﺨﻣ ﻕﺎﻘﺤﺘﺳﺍ 

Event Risk 

�� 

ﺕﺍﺮﻴﻐﺗ ﺐﺒﺴﺑ ﻦﻳﺪﻟﺍ ﺔﻣﺪﺧ ﺩﺍﺪﺳ ﻰﻠﻋ ﺭِﺪﺼ 

ُﻤﻟﺍ ﺓﺭﺪﻘﻣ ﺮﻴﻐﺘﺗ ﻥﺃ ﻲﻓ ﺔﻨﻣﺎﻜﻟﺍ ﺮﻃﺎﺨﻤﻟﺍ ﻲﻫ 

ﺔﻴﻋﺎﻨﺼﻟﺍ ﺙﺩﺍﻮﺤﻟﺍﻭ ﺔﻴﻌﻴﺒﻄﻟﺍ ﺙﺭﺍﻮﻜﻟﺍ ﻞﺜﻣ ،ﻕﻮﺴﻟﺍ 

ﺔﺌﻴﺑ ﻲﻓ ﺔﻌﻗﻮﺘﻣ ﺮﻴﻏ ﺔﻴﻜﻴﺗﺎﻣﺍﺭﺩ 

ﺔﻛﺮﺷ ﺔﻠﻜﻴﻫ ﺓﺩﺎﻋﺇ ﻭﺃ 

،ﺮﻴﻐﻠﻟ ﺔﻄﻠﺴﻟﺍ ﻝﺎﻘﺘـﻧﺍ ﻭﺃ ،ﺔﻴﻤﻴﻈﻨـﺘﻟﺍ ﺪﻋﺍﻮﻘﻟﺍ ﻲﻓ ﺮﻴﺒﻛ ﺮﻴﻴﻐﺗ ﺙﻭﺪﺣﻭ 

ﻞﻴﻠﺤﺘﻟ ﺔﻴﺳﺎﻴﻘﻟﺍ ﻞﺋﺎﺳﻮﻟﺍ ﻡﺍﺪﺨﺘﺳﺎﺑ ﺎﻬﺑ ﺆﺒﻨﺘﻟﺍ ﻦﻜﻤﻳ ﻻ ﺙﺍﺪﺣﻷﺍ ﻩﺬﻫ ﻞﺜﻣﻭ . ﺔﺴﺳﺆﻣ ﻭﺃ 

. ﻥﺎﻤﺘـﺋﻻﺍ 

Excess Servicing Fee 

�� 

ﻻ ﻲﺘﻟﺍﻭ ﻦﻴﻨﻣﺎﻀﻟﺍ ﻦﻳﺪﻬﻌﺘﻤﻟﺍ ﻰﻠﻋ ﺓﺪﺋﺎﻔﻟﺍ ﻦﻣ ءﺰﺟ ﻞﻴﻤﺤﺗ ،ﻖﻳﺭﻮﺘﻠﻟ 

ﺔﺒﺴﻨﻟﺎﺑ ،ﺎﻬﺑ 

ﺪﺼﻘﻳ 

. ﺔﻤﻈﺘﻨﻣ 

ﺔﻣﺪﺧ ﻡﻮﺳﺭ 

ﻢﻳﺪﻘﺗ ﻭﺃ ﻦﻳﺪﻟﺍ ﺔﻣﺪﺧ ﺩﺍﺪﺴﺑﺹﺎﺨﻟﺍﺓﺪﺋﺎﻔﻟﺍ 

ءﺰﺟ ﺔﻴﻄﻐﺘﻟ 

ﺔﺑﻮﻠﻄﻣ ﻥﻮﻜﺗ 

ﻡﻮﺳﺭﻭ ﻦﻳﺮﻤﺜﺘﺴﻤﻠﻟ ﻉﻮﻓﺪﻤﻟﺍ ﻥﻮﺑﻮﻜﻟﺍ ﻲﻓﺎﺻ ﻎﻠﺒﻣﻭ ﻥﻮﺑﻮﻜﻟﺍ ﻲﻟﺎﻤﺟﺇ ﻦﻴﺑ ﻕﺮﻔﻟﺍ ﻮﻫﻭ 

. ﺔﻣﺪﺨﻟﺍ 

Expected Maturity 

�� 

�� 

ﺽﺍﺮﺘﻓﺍ ﻰﻠﻋ ًءﺎ ﻨﺑ ،ﻞﻣﺎﻜﻟﺎﺑ 

ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﺩﺍﺪﺳ ﻪﻴﻓ ﻢﺘﻳ ﻥﺃ ﻊﻗﻮﺘُﻳ ﻱﺬﻟﺍ ﺦﻳﺭﺎﺘﻟﺍ ﻪﺑ ﺪﺼﻘﻳ 

. ﺔﻨﻣﺎﻀﻟﺍ ﻝﻮﺻﻷﺍ ﺩﺍﺪﺳ ﻪﻴﻓ ﻢﺘﻴﺳ 

ﻱﺬﻟﺍ ﺮﻌﺴﻟﺍ ﺹﻮﺼﺨﺑ ﺩﺪﺤﻣ 

Extension Risk 

�� 

ﻥﺎﻤﻀﻟﺍ ﻥﻷ 

ﻩﺪﻳﺪﻤﺗ ﻢﺘﻴﺳ ﺔﻴﻟﺎﻤﻟﺍ ﺔﻗﺭﻮﻠﻟ ﺢﺟﺮﻤﻟﺍ ﺮﻤﻌﻟﺍ ﻂﺳﻮﺘﻣ ﻥﺄﺑ ﺮﻃﺎﺨﻤﻟﺍ ﺎﻬﺑ 

ﺪﺼﻘﻳ 

. ﻊﻗﻮﺘﻤﻟﺍ ﻦﻣ ﺮﺜﻛﺃ ءﻂﺒﺑ ﺩﺪﺴﻳ ﻦﻣﺎﻀﻟﺍ ﻲﻃﺎﻴﺘﺣﻻﺍ 

External Credit Enchancement 

�� 

ﻲﻧﺎﻤﺘـﺋﺍ ﻒﻴﻨﺼﺘﺑ ﻊﺘﻤﺘﻳ ﺚﻟﺎﺛ ﻑﺮﻃ ﻞﺒﻗ ﻦﻣ ﻖﻳﺭﻮﺘﻠﻟ ﻪﻤﻳﺪﻘﺗ ﻢﺘﻳ ﻱﺬﻟﺍ ﻥﺎﻤﺘﺋﻻﺍ ﻢﻋﺩ ﻮﻫ 

. ﻊﻔﺗﺮﻣ 

F 

Fast Pay 

�� 

ﻥﺎﻤﻀﻟ ﺽﺮﻔﻳ ﻱﺬﻟﺍﻭ ،ﺔﻠﻣﺎﻌﻣ ﺔﻴﻠﻜﻴﻫ 

ﻭﺃ ﺔﻴﻟﺎﻣ ﺔﻗﺭﻭ ﻰﻠﻋ ﻖﺒﻄﻳ 

ﻱﺬﻟﺍ 

ﻲﻔﺻﻮﻟﺍ ﻁﺮﺸﻟﺍ ﻮﻫ 

. ﻉﺭﺎﺴﺘﻣ ﻝﻭﺪﺟ ﺱﺎﺳﺃ ﻰﻠﻋ ﺽﺮﻘﻟﺍ ﻞﺻﺃ ﺩﺍﺪﺳ 

Floating-Rate Notes 

�� 

ﺶﻣﺎﻫ ﺓﺩﺎﻋ ﻪﻳﺪﻟ ﻦﻜﻟﻭ ،ﺓﺪﺋﺎﻔﻟﺍ 

ﺕﺎﺒﺛ ﻡﺪﻌﺑ ﺯﺎﺘﻤﻳ ﻱﺬﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻦﻣ ﻉﻮﻧ ﺎﻬﺑ ﺪﺼﻘﻳ 

. ﻕﻮﺴﻟﺍ ﺮﺷﺆﻣ ﻕﻮﻓ 

Foreclose 

�� 

ﻥﺎﻤﻀﻛ 

ﻪﻨﻫﺭ ﻢﺗ ًﺍﺭﺎﻘﻋ 

ﻚﻠﺘﻤﻳ ﻱﺬﻟﺍ ﻦﻳﺪﻤﻟﺍ ﺪﺿ ﺬﺨﺘﺗ ﻲﺘﻟﺍ ﺔﻴﻧﻮﻧﺎﻘﻟﺍ ﺕﺍءﺍﺮﺟﻹﺍ ﻪﺑ ﺪﺼﻘﻳ 

ﻡﺍﺪﺨﺘﺳﺍﻭ 

ﺭﺎﻘﻌﻟﺍ ﻊﻴﺑ ﻖﺣ ﻰﻠﻋ ﻝﻮﺼﺤﻠﻟ ﺽﺮﻘﻤﻟﺍ 

ﻰﻌﺴﻳ ﻦﻫﺮﻟﺍ 

ﺲﺒﺣ ﺔﻟﺎﺣ ﻲﻓﻭ . ﺽﺮﻘﻟ 

. ﺽﺮﻘﻟﺍ ﺹﻮﺼﺨﺑ ﻦﻳﺪﻤﻟﺍ ﻰﻠﻋ ﺔﻘﺤﺘﺴﻤﻟﺍ ﻎﻟﺎﺒﻤﻟﺍ ﺔﻓﺎﻛ ﺩﺍﺪﺴﻟ 

ﻊﻴﺒﻟﺍ ﺕﺍﺪﺋﺎﻋ 

Foreclosure 

�� 

ﻰﻠﻋ ًﺎﻨﻫﺭ ﻞﻤﺤﻳ ﻱﺬﻟﺍ ﺽﺮﻘﻤﻟﺍ ﺐﻧﺎﺟ ﻦﻣ ﺔﻤﻜﺤﻤﻟﺍ ﺝﺭﺎﺧ ﻭﺃ ﻞﺧﺍﺩ ﻢﺘﻳ ءﺍﺮﺟﺇ ﻪﺑ ﺪﺼﻘﻳ 

ﻡﺍﺪﺨﺘﺳﺍﻭ ﺭﺎﻘﻌﻟﺍ ﻊﻴﺑ ﻦﻣ ﺽﺮﻘﻤﻟﺍ ﻦﻴﻜﻤﺘﻟﻲﻌﺴﻟﺍﻮﻫءﺍﺮﺟﻹﺍ 

ﺍﺬﻫ ﻦﻣ ﺽﺮﻐﻟﺍﻭ . ﺭﺎﻘﻋ 

ﻱﺫ ﺽﺮﻘﻟﺍ ﺹﻮﺼﺨﺑ ﻚﻟﺎﻤﻟﺍﻰﻠﻋﺔﻘﺤﺘﺴﻤﻟﺍ 

ﻎﻟﺎﺒﻤﻟﺍ ﺔﻓﺎﻛ ﺪﻳﺪﺴﺗ ﻞﺟﺃ ﻦﻣ ﻊﻴﺒﻟﺍ ﺕﺍﺪﺋﺎﻋ 

. ﺔﻠﺼﻟﺍ 

G 

Gearing 

�� 

ﻦﻣﻭ 

. ﺎﻣ ﺔﻛﺮﺷ ﻲﻓ ﻢﻬﺴﻟﺍ ﺔﺼﺤﻟ ﻦﻳﺪﻟﺍ ﺔﺒﺴﻧ ﻒﻳﺮﻌﺗ ﻲﻓ ﻡﺪﺨﺘﺴﻳ ّﻲﺒﺳﺎﺤﻣ 

ﺢﻠﻄﺼﻣ ﺍﺬﻫ 

ﺕﺎﻛﺮﺸﻟﺍ ﺔﺒﺴﻧ ﻦﻣ ﻰﻠﻋﺃ 

ﺔﺒﺴﻨﺑ ﺹﺎﺨﻟﺍ 

ﺽﺮﻐﻟﺍ 

ﺕﺍﺫ ﺕﺎﺴﺳﺆﻤﻟﺍ ﻞﻳﺪﻌﺗ ﻢﺘﻳ ﻥﺃ ﺩﺎﺘﻌﻤﻟﺍ 

. ﺔﻴﻠﻴﻐﺸﺘﻟﺍ 

Guaranteed Investment Contract (GIC) 

(GIC) �� 

. ﺪﺋﺎﻌﻟﺍ ﺩﺍﺮﻳﻹﺍ / ﺢﺑﺮﻟﺍ ﺔﺒﺴﻨﻟ ﻰﻧﺩﺃ ًﺍﺪﺣ ﻦﻤﻀﺗ ﺔﻴﻟﺎﻣ ﺔﺴﺳﺆﻣ ﻪﻣﺪﻘﺗ ﻉﺍﺪﻳﺇ ﺏﺎﺴﺣ ﻪﺑ ﺪﺼﻘﻳ 

. ﺓﺪﺋﺎﻔﻟﺍ ﺮﻌﺳ ﺕﺎﺒﻠﻘﺗ ﺮﻃﺎﺨﻣ ﻦﻣ ﻒﻔﺨﺗ ﺩﻮﻘﻌﻟﺍ ﻩﺬﻫﻭ 

H 

Hedging 

�� 

ﻦﻣﻭ . ﺭﺎﻤﺜﺘﺳﻻﺍ ﺮﻃﺎﺨﻣ ﺾﻳﻮﻌﺘﻟ ﺓﺎﻨﺒﺘﻤﻟﺍ ﺕﺎﻴﺠﻴﺗﺍﺮﺘﺳﻹﺍ ﻰﻟﺇ ﺓﺭﺎﺷﻺﻟ ﻡﺪﺨﺘﺴﻳ ﻡﺎﻋ ﺢﻠﻄﺼﻣ 

ﻦﻣ ﺔﻳﺎﻤﺤﻠﻟ ( ﺔﻴﻠﺻﻷﺍ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻦﻣ) 

ﺔﻘﺘﺸﻤﻟﺍ ﺕﺍﺪﻨﺴﻟﺍ ﻡﺍﺪﺨﺘﺳﺍ ﺔﻴﺋﺎﻗﻮﻟﺍ ﺔﻴﻄﻐﺘﻟﺍ ﺔﻠﺜﻣﺃ 

ﻊﻔﺗﺮﺗ ﻥﺃ ﻊﻗﻮﺘﻳ ﻲﺘﻟﺍ ﻝﻮﺻﻷﺍ ﻲﻓ ﺭﺎﻤﺜﺘﺳﻻﺍ ﻚﻟﺬﻛﻭ ﺔﻠﻤﻌﻟﺍ ﻭﺃ ﺓﺪﺋﺎﻔﻟﺍ ﺮﻌﺳ ﺕﺎﺒﻠﻘﺗ ﺮﻃﺎﺨﻣ 

. ﻢﺨﻀﺘﻟﺍ ﺪﺿ ﺔﻳﺎﻤﺤﻠﻟ ﻢﺨﻀﺘﻟﺍ ﻦﻣ ﻉﺮﺳﺃ ﺎﻬﺘﻤﻴﻗ 

I 

Interest Rate Swap 

�� 

ﺽﺮﻗ ﻎﻠﺒﻣ ﺹﻮﺼﺨﺑ ﺔﻳﺭﻭﺪﻟﺍ 

ﺓﺪﺋﺎﻔﻟﺍ ﺕﺎﻋﻮﻓﺪﻣ ﻝﺩﺎﺒﺘﻟ ﻦﻴﻓﺮﻃ ﻦﻴﺑ ﻡﺰﻠﻣ ﻕﺎﻔﺗﺍ ﻦﻋ ﺓﺭﺎﺒﻋ 

ﺓﺪﺋﺎﻔﻟﺍ ﻊﻓﺪﺑ ﻦﺒﻓﺮﻄﻟﺍ ﺪﺣﺃ ﻡﻮﻘﻳ ﻥﺃ ﺩﺎﺘﻌﻤﻟﺍ ﻦﻣﻭ . ﻲﻤﻫﻭ ﻎﻠﺒﻤﻛ ﻪﻴﻟﺇ ﺭﺎﺸﻳ ﻱﺬﻟﺍﻭ ،ًﺎﻘﺒﺴﻣ 

ﺩﺪﺤﻣ 

. ﺮﺧﻵﺍ ﻑﺮﻄﻟﺍ ﻰﻠﻋ ﻖﺒﻄﻳ ﺲﻜﻌﻟﺍﻭ ،ﺮﻴﻐﺘﻣ 

ﺮﻌﺴﺑ 

ﺓﺪﺋﺎﻔﻟﺍ ﻢﻠﺘﺴﻳﻭ ﺖﺑﺎﺛ ﺮﻌﺴﺑ 

Internal Credit Enhancement 

�� 

ﻥﺎﻤﺘﺋﻻﺍ ﺓﺩﻮﺟ ﻦﻴﺴﺤﺘﻟ ﻖﻳﺭﻮﺘﻟﺍ ﻡﺎﻈﻧ ﻲﻓ ﺎﻬﻟﺎﺧﺩﺇ ﻢﺘﻳ ﻲﺘﻟﺍ ﺔﻴﻠﻜﻴﻬﻟﺍ 

ﺕﺎﻴﻟﻵﺍ ﻭﺃ ﺔﻴﻟﻵﺍ 

ﻪﺑ ﺪﺼﻗ 

ﻰﻠﻋ ﺓﺩﺎﻋ ﺪﻤﺘﻌﺗ ﻲﺘﻟﺍﻭ 

،ﺔﻘﻔﺼﻟﺍ 

ﺺﺨﻳ ﺎﻤﻴﻓ ﺎﻫﺭﺍﺪﺻﺇ ﻢﺘﻳ ﻲﺘﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻸﻟ ﺎﻴﻠﻌﻟﺍ ﺕﺎﺌﻔﻠﻟ 

. ﺺﺋﺎﻘﻨﻠﻟﺽﺮﻌﺘﻟﺍﻦﻣ 

ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻚﻠﺗ ﻲﻤﺤﺗ ﻕﺮﻄﺑ ﻝﻮﺻﻸﻟ ﻱﺪﻘﻨﻟﺍ ﻖﻓﺪﺘﻟﺍ ﻞﻴﻐﺸﺗ 

Investment Grade 

�� 

ﻞﺟﻷﺍ ﻞﻳﻮﻃ ﻥﺎﻤﺘـﺋﻻﺍ ﻒﻴﻨﺼﺗ ﺎﻬﺑ ﺪﺼﻘﻳ ،ﺯﺭﻮﺑ 

ﺪﻧﺃ ﺩﺭﺪﻧﺎﺘﺳ ﺔﺴﺳﺆﻣ ﺕﺎﻔﻴﻨﺼﺘﺑ ﻖﻠﻌﺘﻳ ﺎﻤﻴﻓ 

. ﻰﻠﻋﺃ ﻭﺃ " BBB-" 

ﺔﺟﺭﺪﺑ ﻞﻴﻤﻌﻟﺍ ﺰﻛﺮﻤﻟ 

Issue Credit Rating 

�� 

ﻡﺍﺰﺘﻟﺍ ﺹﻮﺼﺨﺑ ﺪﻬﻌﺘﻤﻟ ﺔﻴﻧﺎﻤﺘﺋﻻﺍ ﺔﻴﻠﻫﻷﺍ ﻝﻮﺣ ﺯﺭﻮﺑ ﺪﻧﺃ ﺩﺭﺪﻧﺎﺘﺳ ﺔﺴﺳﺆﻣ ﻱﺃﺭ ﻪﺑ ﺪﺼﻘﻳ 

ﻚﻟﺫ ﻲﻓ ﺎﻤﺑ) 

ﺩﺪﺤﻣ ﻲﻟﺎﻣ ﺞﻣﺎﻧﺮﺑ ﻭﺃ ،ﺔﻴﻟﺎﻤﻟﺍ ﺕﺎﻣﺍﺰﺘﻟﻻﺍ ﻦﻣ ﺓﺩﺪﺤﻣ 

ﺔﺌﻓ ﺹﻮﺼﺨﺑ ﻭﺃ ،ﻲﻟﺎﻣ 

ﻞﻴﻤﻌﻟﺍ ﺰﻛﺮﻣ ﻒﻴﻨﺼﺗ 

ﺬﺧﺄﻳﻭ 

.( ﺔﻳﺭﺎﺠﺘﻟﺍ ﻕﺍﺭﻭﻷﺍ 

ﺞﻣﺍﺮﺑﻭ ﻞﺟﻷﺍ ﺔﻄﺳﻮﺘﻣ 

ﻕﺍﺭﻭﻷﺍ ﺞﻣﺍﺮﺑ 

ﻢﻋﺪﻟ ﻯﺮﺧﻷﺍ ﻞﺋﺎﺳﻮﻟﺍ ﻭﺃ ﻦﻴﻣﺄﺘﻟﺍ ﺕﺎﻛﺮﺷ ﻭﺃ ﻦﻴﻨﻣﺎﻀﻠﻟ ﺔﻴﻧﺎﻤﺘﺋﻻﺍ ﺔﻴﻠﻫﻷﺍ ﺭﺎﺒﺘﻋﻻﺍ ﻲﻓ 

. ﺕﺎﻣﺍﺰﺘﻟﻻﺍ ﻭﺃ ﻡﺍﺰﺘﻟﻻﺍ ﺔﺌﻓ ﺪﻳﺪﺤﺗ ﺎﻬﺑ ﻢﺘﻳ ﻲﺘﻟﺍ ﺔﻠﻤﻌﻟﺍ ﻚﻟﺬﻛﻭ ،ﻥﺎﻤﺘﺋﻻﺍ 

Issuer 

�� 

ﺔﻟﺎﺣ ﻲﻓﻭ 

. ﻦﻳﺮﻤﺜﺘﺴﻤﻠﻟ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻊﻴﺑﻭ ءﺎﺸﻧﺈﺑ ﺾﻳﻮﻔﺘﻟﺍ ﻰﻄﻋﺃ ﻱﺬﻟﺍ ﻑﺮﻄﻟﺍ ﻪﺑ ﺪﺼﻘﻳ 

ﺎﻤﻴﻓ ًﺎﻴﺗﺍﺆﻣ ًﺎﻴﻧﻮﻧﺎﻗ 

ًﺎﻣﺎﻈﻧ 

ﺮﻓﻮﻳ ﺪﻠﺑ ﻲﻓ ﺹﺎﺧ ﺽﺮﻏ ﺕﺍﺫ ﺓﺄﺸﻨﻣ ﻡﺎﻘﻣ ﺭِﺪﺼ 

ُﻤﻟﺍ ﻡﻮﻘﻳ ،ﻖﻳﺭﻮﺘﻟﺍ 

ﻢﺘﻳ ﻲﺘﻟﺍ ﻥﺎﻤﻀﻟﺍ ﺕﺎﺒـﻴﺗﺮﺗﻭ ،ﺭِﺪﺼ 

ُﻤﻠﻟ ﺪﻌ ُﺑ ﻦﻋ ﺱﻼﻓ ﻹﺍ ﺔﻟﺎﺣ ﻖﻴﻘﺤﺗ ﻰﻠﻋ ﺓﺭﺪﻘﻟﺎﺑ 

ﻖﻠﻌﺘﻳ 

ﻲﺘﻟﺍ ﺓﺭﻮﻬﺸﻤﻟﺍ ﻥﺍﺪﻠﺒﻟﺍ ﻦﻣﻭ . ﺔﻴﺗﺍﺆﻤﻟﺍ ﺔﻴﺒﻳﺮﻀﻟﺍ ﺔﻠﻣﺎﻌﻤﻟﺍ ﺮﻓﻮﻳﻭ ،ﻦﻳﺮﻤﺜﺘﺴﻤﻠﻟ 

ﺎﻬﻤﻳﺪﻘﺗ 

ﺔﻜﻠﻤﻤﻟﺍ ﻲﻓ ﺕﺎﻘﻔﺼﻠﻟ ﺔﺒﺴﻨﻟﺎﺑ) 

ﺍﺮﺘﻠﺠﻧﺇ 

ﺹﺎﺨﻟﺍ ﺽﺮﻐﻟﺍ ﺕﺍﺫ ﺕﺂﺸﻨﻤﻟﺍ 

ﺲﻴﺳﺄﺗ ﻲﻓ ﻡﺪﺨﺘﺴُـﺗ 

،ﺍﺪﻨﻟﺮﻳﺇﻭ 

( 130 ﻢﻗﺭ ﻲﻟﺎﻄﻳﻹﺍ ﻥﻮﻧﺎﻘﻠﻟ ﻊﻀﺨﺗ ﻲﺘﻟﺍ ﺕﺎﻘﻔﺼﻠﻟ ﺔﺒﺴﻨﻟﺎﺑ) 

ﺎﻴﻟﺎﻄﻳﺇﻭ 

( ﺓﺪﺤﺘﻤﻟﺍ 

ﺕﺎﻳﻻﻮﻟﺍ ﻲﻓ ﺮﻳﻭﻼﻳﺩ 

ﺔﻳﻻﻭﻭ ،ﻥﺎﻤﻳﺎﻜﻟﺍ 

ﺭﺰﺟﻭ ،ﻲﺳﺮﻴﺟ 

ﺓﺮﻳﺰﺟﻭ ،ﻍﺭﻮﺒﻤﺴﻛﻮﻠﻟﺍﻭ 

،ﺍﺪﻨﻟﻮﻫﻭ 

.( ﺔﻳﺭﺎﺠﺘﻟﺍ ﻕﺍﺭﻭﻷﺍ ﺭﺍﺪﺻﺇ ﺕﺎﻴﻟﻵ ﺔﺒﺴﻨﻟﺎﺑ) 

ﺔﻴﻜﻳﺮﻣﻷﺍ ﺓﺪﺤﺘﻤﻟﺍ 

Issuer Credit Rating (ICR) 

(ICR) �� 

�� 

ﻰﻠﻋ ﺪﻬﻌﺘﻤﻠﻟ ﺔﻴﻟﺎﻤﺟﻹﺍ ﺔﻴﻟﺎﻤﻟﺍ ﺓﺭﺪﻘﻤﻟﺍ ﺹﻮﺼﺨﺑ ﺯﺭﻮﺑ ﺪﻧﺃ ﺩﺭﺪﻧﺎﺘﺳ ﺔﺴﺳﺆﻣ ﻱﺃﺭ ﻪﺑ ﺪﺼﻘﻳ 

ﺰﻛﺮﻳﻭ 

. ﺪﻬﻌﺘﻤﻠﻟ ﺔﻴﻧﺎﻤﺘﺋﻻﺍ ﺔﻴﻠﻫﻷﺍ ﻝﻮﺣ ﻱﺃﺮﻟﺍ ﻲﺳﺎﺳﺃ ﻞﻜﺸﺑﻭ ،ﺔﻴﻟﺎﻤﻟﺍ 

ﻪﺗﺎﻣﺍﺰﺘﻟﺍ 

ﺩﺍﺪﺳ 

ﺪﻨﻋ ﺔﻴﻟﺎﻤﻟﺍ ﻪﺗﺎﻣﺍﺰﺘﻟﺎﺑ ءﺎﻓﻮﻠﻟ ﻩﺩﺍﺪﻌﺘﺳﺍﻭ ﺔﻣﺎﻌﻟﺍ ﺪﻬﻌﺘﻤﻟﺍ ﺓﺭﺪﻘﻣ ﻰﻠﻋ ﺭِﺪﺼُﻤ 

ﻟﺍ ﺔﻴﻧﺎﻤﺘـﺋﺍ ﻒﻴﻨﺼﺗ 

ﻥﺎﺒﺴﺤﻟﺎﺑ ﺬﺧﺄﻳ ﻻﻪﻧﻷ،ﻦﻴﻌﻣ 

ﻲﻟﺎﻣ ﻡﺍﺰﺘﻟﺍ ﻱﺃ ﻰﻠﻋ ﻖﺒﻄﻨﻳﻻﻮﻫﻭ 

. ﺎﻬﻗﺎﻘﺤﺘﺳﺍ ﺪﻋﻮﻣ 

ﺪﻨﻋ ﺔﻨﻴﻌﻤﻟﺍ ﺕﺎﻣﺍﺰﺘﻟﻻﺍ ﻪﻴﻓ ﻥﻮﻜﺗ ﺪﻗ ﻱﺬﻟﺍ ﻊﺿﻮﻟﺍ ﻭﺃ ،ﺔﻨﻴﻌﻣ 

ﺕﺎﻣﺍﺰﺘﻟﻻ 

ﺕﺎﺼﺼﺨﻤﻟﺍ 

ﻰﻠﻋ ﺔﻘﺒﻄﻤﻟﺍ ﺔﻴﻧﻮﻧﺎﻘﻟﺍ ﺕﻼﻴﻀﻔﺘﻟﺍ ﻭﺃ 

،ﻞﺒﻘﺘﺴﻤﻟﺍ ﻲﻓ ﺪﻬﻌﺘﻤﻠﻟ 

ﺔﻴﻔﺼﺗ ﻭﺃﺱﻼﻓﺇﻝﻮﺼﺣ 

ﻥﺈﻓ ،ﻚﻟﺫ ﻦﻋ ًﻼﻀﻓ ﻭ . ﺎﻫﺫﺎﻔﻧﺇ ﺔﻴﻧﺎﻜﻣﺇﻭ ﺔﻨﻴﻌﻤﻟﺍ ﺕﺎﻣﺍﺰﺘﻟﻻﺍ ﺔﻴﻋﺮﺷ ﻭﺃ ،ﺔﻨﻴﻌﻤﻟﺍ 

ﺕﺎﻣﺍﺰﺘﻟﻻﺍ 

ﺕﺎﻛﺮﺷ ﻭﺃ ﻦﻴﻨﻣﺎﻀﻠﻟ ﺔﻴﻧﺎﻤﺘﺋﻻﺍ ﺔﻴﻠﻫﻷﺍ ﻥﺎﺒﺴﺤﻟﺍ ﻲﻓ ﻊﻀﻳ ﻻ ﺭِﺪﺼُﻤ 

ﻟﺍ ﺔﻴﻧﺎﻤﺘـﺋﺍ ﻒﻴﻨﺼﺗ 

ﻡﺍﺰﺘﻟﺍ ﺹﻮﺼﺨﺑ ﺔﺣﺎﺘﻣ ﻥﻮﻜﺗ ﻥﺃ ﻦﻜﻤﻳ ﻲﺘﻟﺍ ،ﻥﺎﻤﺘﺋﻻﺍ 

ﻢﻋﺪﻟ 

ﻯﺮﺧﻷﺍ ﻞﺋﺎﺳﻮﻟﺍ ﻭﺃ ﻦﻴﻣﺄﺘﻟﺍ 

. ﻦﻴﻌﻣ 



3

J 

Jumbo Mortgage Loan 

�� 

ﺕﺎﻬﻴﺟﻮﺗ ﻊﻣ ﺓﺩﺎﻋ ﻖﻓﺍﻮﺘﻳ ﻰﻟﻭﻷﺍ ﺔﺟﺭﺪﻟﺍ ﻦﻣ ﻱﺭﺎﻘﻋ ﻦﻫﺮﺑ ﻥﻮﻤﻀﻣ ﺽﺮﻗ ﻪﺑ ﺪﺼﻘﻳ 

ﻪﺑ ﺡﻮﻤﺴﻤﻟﺍ ﻰﺼﻗﻷﺍ ﺪﺤﻟﺍ ﻦﻋ ﺪﻳﺰﻳ ﺪﻴﺻﺮﺑ ﻦﻜﻟﻭ " prime " ﻢﻬﻣ ﺔﺌﻓ ﻦﻣ ﺔﻳﺪﻴﻠﻘﺘﻟﺍ ﻥﺎﻤﺘﺋﻻﺍ 

. ﻙﺎﻣ ﻱﺪﻳﺮﻓ ﺔﺴﺳﺆﻣﻭ ﻱﺎﻣ ﻲﻧﺎﻓ ﺔﺌﻴﻫﻭ ﻱﺎﻣ ﻲﻨﻴﺟ ﺔﺴﺳﺆﻣ ﺎﻫﺎﻋﺮﺗ ﻲﺘﻟﺍ ﺞﻣﺍﺮﺒﻟﺍ ﺐﺟﻮﻤﺑ 

L 

Legal Final Maturity 

�� 

�� 

ﻞﻴﻠﺤﺗ ﺪﻨﻋﻭ . ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻸﻟ ﻲﺳﺎﺳﻷﺍ ﺪﻴﺻﺮﻟﺍ ﺩﺍﺪﺳ ﻪﻴﻓ ﻖﺤﺘﺴﻳﻱﺬﻟﺍﺦﻳﺭﺎﺘﻟﺍﻪﺑﺪﺼﻘﻳ 

ﺪﻋﻮﻣ ﻝﻮﻠﺤﺑ ﺩﺍﺪﺴﻟﺍ ﻥﺃ ﺯﺭﻮﺑ ﺪﻧﺃ 

ﺩﺭﺪﻧﺎﺘﺳ ﺔﺴﺳﺆﻣ ﺽﺮﺘﻔـﺗ 

،ﻖﻳﺭﻮﺘﻠﻟ 

ﺔﺒﺴﻨﻟﺎﺑ ﺎﻬﺗﺎﻔﻴﻨﺼﺗ 

ﻂﻘﻓ ﺔﻟﻭﺪﺠﻤﻟﺍ ﺔﻴﺴﻴﺋﺮﻟﺍ ﺕﻼﻴﺼﺤﺘﻟﺍ ﻡﺍﺪﺨﺘﺳﺎﺑ ﻪﺑ ﻡﺎﻴﻘﻟﺍ ﻢﺘﻳ ﻲﺋﺎﻬﻨﻟﺍ ﻲﻧﻮﻧﺎﻘﻟﺍ ﻕﺎﻘﺤﺘﺳﻻﺍ 

. ﺔﻨﻣﺎﻀﻟﺍ ﻝﻮﺻﻷﺍ ﺹﻮﺼﺨﺑ 

Letter of Credit (LOC) 

(LOC) �� 

ﺔﺣﺎﺘﻣ ﻝﺍﻮﻣﻷﺍ 

ﻞﻌﺟ ﻰﻠﻋ ﻪﺒﺟﻮﻤﺑ ﻚﻨﺒﻟﺍ ﻖﻓﺍﻮﻳ ﺮﺧﺁ ﻑﺮﻃﻭ ﻙﻮﻨﺒﻟﺍ 

ﺪﺣﺃ ﻦﻴﺑ ﻕﺎﻔﺗﺍ ﻮﻫ 

. ﻚﻟﺬﺑ ﺭﺎﻄﺧﻹﺍ ﻡﻼﺘﺳﺍ ﺪﻨﻋ ،ﻪﻨﻣ 

ﺐﻠﻃ ﻰﻠﻋ ءﺎﻨﺑ ﻭﺃ ﺮﺧﻵﺍﻑﺮﻄﻠﻟ 

Liquidity Facility 

�� 

ﻢﺗ ﻲﺘﻟﺍ ﻝﻮﺻﻷﺍ ﺔﻟﻮﻴﺳ ﺰﻳﺰﻌﺘﻟ ﻡﺪﺨﺘﺴُـﺗ 

ﻲﺘﻟﺍ ،ﺩﺎﻤﺘﻋﻻﺍ ﺏﺎﻄﺧ ﻞﺜﻣ ،ﺕﻼﻴﻬﺴﺘﻟﺍ ﺎﻬﺑ ﺪﺼﻘﻳ 

.( ﺔﻴﻧﺎﻤﺘﺋﻻﺍ ﺔﻴﻠﻫﻷﺍ ﻞﺟﺃ ﻦﻣ ﺲﻴﻟ ﻦﻜﻟﻭ) 

ﺔﻴﻟﺎﻣ ﻕﺍﺭﻭﺃ ﻰﻟﺇ ﺎﻬﻠﻳﻮﺤﺗ 

Liquidity Risk 

�� 

�� 

ﻮﻫﻭ ،ﻞﺻﺃ 

ءﺍﺮﺷ ﻲﻓ ﻥﻮﺒﻏﺮﻳ ﻦﻳﺬﻟﺍ ﻦﻳﺮﺘﺸﻤﻟﺍ ﻦﻣ ﺩﻭﺪﺤﻣ ﺩﺪﻋ ﺩﻮﺟﻭ ﺮﻃﺎﺨﻣ ﺎﻬﺑ ﺪﺼﻘﻳ 

. ﻪﻌﻴـﺑ ﻲﻓ ،ﺐﻏﺮﻳ 

ﻰﺘﻣ ﻭﺃ ،ﻞﺻﻸﻟ ﻲﻟﺎﺤﻟﺍ ﻚﻟﺎﻤﻟﺍ ﺐﻏﺭ ﺍﺫﺇ ،ﻲﻟﺎﻣ 

ﻞﺻﺃ ﺓﺩﺎﻋ 

Loan-to-Value (LTV) Ratio 

(LTV) �� 

�� 

ﺽﺮﻘﻟﺍ ﻪﻟﻮﻤﻳ ﻱﺬﻟﺍ ﺭﺎﻘﻌﻟﺍ 

ﺔﻤﻴﻗ ﻰﻠﻋ ًﺎﻣﻮﺴﻘﻣ 

ﺎﻣﺇ ﻦﻫﺮﺑ ﻥﻮﻤﻀﻤﻟﺍ ﺽﺮﻘﻟﺍ ﺪﻴﺻﺭ ﺎﻬﺑ ﺪﺼﻘﻳ 

ﻰﻟﺇ ﺽﺮﻘﻟﺍ 

ﺔﺒﺴﻧ ّﺪﻌﺗﻭ . ﺭﺎﻘﻌﻟﺍ ءﺎﻨـﺘـﻗﺍ ﻞﺟﺃ ﻦﻣ ﺽﺮﺘﻘﻤﻟﺍ ﻪﻌﻓﺪﻳ ﻱﺬﻟﺍ ﺮﻌﺴﻟﺍ ﻰﻠﻋ ًﺎﻣﻮﺴﻘﻣ ﻭﺃ 

ﺎﻤﻠﻛﻭ . ﺽﺮﻘﻟﺍ ﻦﻤﻀﻳ ﻱﺬﻟﺍ ﻞﺻﻷﺍ ﻦﻣ ﺽﺮﺘﻘﻤﻟﺍ ﺎﻬﻜﻠﺘﻤﻳ 

ﻲﺘﻟﺍ ﺔﺼﺤﻟﺍ ﺔﻴﻤﻜﻟ 

ًﺎﺳﺎﻴﻘﻣ 

ﺔﻤﻴﻘﻟﺍ 

ﺖﻠﻗﻭ 

،ﺮﻃﺎﺨﻤﻠﻟ ﺔﺿﺮﻌﻤﻟﺍ ﺽﺮﺘﻘﻤﻟﺍ ﺔﺼﺣ ﺖﻠﻗ 

ﺎﻤﻠﻛ ،ﺔﻤﻴﻘﻟﺍ 

ﻰﻟﺇ ﺽﺮﻘﻟﺍ 

ﺔﺒﺴﻧ ﺕﺩﺍﺯ 

. ﻥﺎﻤﻀﻟﺍ ﺐﻴﺗﺮﺗ ﺐﺒﺴﺑ ﺽﺮﻘﻤﻠﻟ ﺔﺣﺎﺘﻤﻟﺍ ﺔﻳﺎﻤﺤﻟﺍ 

London Interbank Offered Rate (LIBOR) 

(LIBOR ��) 

�� 

ﺽﺍﺮﺘﻗﺍ ﺪﻨﻋ ﻥﺪﻨﻟ ﻲﻓ ﺎﻬﻨﻴﺑ ﺎﻤﻴﻓ ﺓﺮﻴﺒﻜﻟﺍ ﺔﻴﻟﻭﺪﻟﺍ ﻙﻮﻨﺒﻟﺍ ﻪﻟﺩﺎﺒﺘﺗ ﻱﺬﻟﺍ ﺓﺪﺋﺎﻔﻟﺍ ﺮﻌﺳ ﻪﺑ ﺪﺼﻘﻳ 

. ﻕﺎﻘﺤﺘﺳﻻﺍ 

ﺪﻴﻋﺍﻮﻣ ﻑﻼﺘﺧﺍ ﻊﻣ ﺕﻭﺎﻔﺘـﺗ ﺕﺎﻋﺍﺪﻳﻺﻟ 

ﺭﻮﺒﻴﻟ ﺭﺎﻌﺳﺃ ﻙﺎﻨﻫﻭ 

. ﻝﺍﻮﻣﻷﺍ 

Loss Curve 

�� 

ﻲﻧﺎﻴﺒﻟﺍ ﻢﺳﺮﻟﺍ ﺓﺭﺎﺴﺨﻟﺍ ﻰﻨﺤﻨﻤﺑ ﺪﺼﻘﻳ ،ﺔﻨﻳﺪﻤﻟﺍ 

ﺕﺎﺑﺎﺴﺤﻟﺍ ﻭﺃ ﺽﻭﺮﻘﻟﺍ ﺝﺫﻮﻤﻧ ﺹﻮﺼﺨﺑ 

ﻭﺃ ﺓﺮﺧﺄﺘﻤﻟﺍ ﻥﻮﻳﺪﻠﻟ ﻲﻧﺎﻴﺒﻟﺍ ﻢﺳﺮﻟﺍ ﻰﻠﻋ ﺩﺎﻤﺘﻋﻻﺎﺑ ،ﻦﻣﺰﻟﺍ ﺭﺍﺪﻣ ﻰﻠﻋ ﺓﺪﺒﻜﺘﻤﻟﺍ ﺮﺋﺎﺴﺨﻟﺍ ﻂﻤﻨﻟ 

. ﺝﺫﻮﻤﻨﻟﺍ ﻲﻓ ﺓﺩﻮﺟﻮﻤﻟﺍ ﺔﻨﻳﺪﻤﻟﺍ ﺕﺎﺑﺎﺴﺤﻟﺍ ﻭﺃ ﺽﻭﺮﻘﻟﺍ ﻞﻛ ﺓﺮﺘﻓ ءﺎﻨﺛﺃ ﻊﻘﺗ ﻲﺘﻟﺍ ﺮﺋﺎﺴﺨﻟﺍ 

M 

Master Servicer 

ﺪﺋﺎﻘﻟﺍ ﻞﺼﺤﻤﻟﺍ 

ﺽﻭﺮﻘﻟﺍ ﻞّﺼﺤﻳ ﻱﺬﻟﺍ ﻮﻫ ﺪﺋﺎﻘﻟﺍ ﻞﺼﺤﻤﻟﺍ ،ﻱﺭﺎﻘﻋ ﻦﻫﺮﺑ ﺔﻧﻮﻤﻀﻤﻟﺍ ﺽﻭﺮﻘﻟﺍ ﺔﻟﺎﺣ ﻲﻓ 

ﻰﻠﻋ ﻑﺍﺮﺷﻹﺍ ﻞﻤﺸﻳﻭ . ﻦﻴـﻴﻟﻭﻷﺍ 

ﻦﻴﻠﺼﺤﻤﻟﺍ ﺔﻄﺸﻧﺃ ﻰﻠﻋ ﻑﺍﺮﺷﻹﺍ ﻦﻋ ًﻻﻭﺆﺴﻣ ﻥﻮﻜﻳﻭ 

ﻦﻴﻠﺼﺤﻤﻟﺍﻭ ﺪﺋﺎﻘﻟﺍ ﻞﺼﺤﻤﻟﺍ ﺕﺎﺑﺎﺴﺣ ﻦﻴﺑ ﻝﺍﻮﻣﻷﺍ ﺔﻛﺮﺣ 

ﺐﻘﻌﺗ ( 1) 

: ﻲﻠﻳ ﺎﻣ ﻒﺋﺎﻇﻮﻟﺍ 

ﻞﺒﻗ ﻦﻣ ﺔﻳﺮﻬﺷ ﺔﻔﺼﺑ ﺪﻘﻨﻟﺍ ﻞﻳﻮﺤﺗﻭ ﻞﻴﺼﺤﺘﻟﺍ ﺮﻳﺭﺎﻘﺗ ﻢﻴﻠﺴﺗﻭ ﺩﺍﺪﻋﺇ ﺔﺒﻗﺍﺮﻣ ( 2) 

؛ﻦﻴـﻴﻟﻭﻷﺍ 

ﺔﻄﺸﻧﺃﻭ ﻦﻫﺮﻟﺍ ﺲﺒﺣ ﺕﺎﻴﻠﻤﻋﻭ ﻞﻴﺼﺤﺘﻟﺍ ﺕﺎﻴﻠﻤﻋ 

ﺔﺒﻗﺍﺮﻣ ( 3) 


ﻦﻴﻠﺼﺤﻤﻟﺍ 

ﺹﻮﺼﺨﺑ ﺮﻳﺭﺎﻘﺘﻟﺍ ﺕﺎﻋﻮﻤﺠﻣ 

ﺩﺍﺪﻋﺇ ( 4) 


ﻦﻴﻠﺼﺤﻤﻠﻟ REO ﺔﻛﻮﻠﻤﻤﻟﺍ ﺕﺍﺭﺎﻘﻌﻟﺍ 

؛ﻦﻳﺮﻤﺜﺘﺴﻤﻟﺍ 

ﻰﻠﻋ ﺓﺮﺷﺎﺒﻣ ﻭﺃ ﺭﺎﻤﺜﺘﺳﻻﺍ ءﺎﻨﻣﺃ ﻰﻠﻋ ﻝﺍﻮﻣﻷﺍ ﻊﻳﺯﻮﺗ ( 5) 

؛ﻞﻴﺼﺤﺘﻟﺍ ﺕﺎﻴﻠﻤﻋ 

ﺔﻧﻮﻤﻀﻤﻟﺍ ﺽﻭﺮﻘﻟﺍ ﺔﻟﺎﺣ ﻲﻓﻭ 

. ﻲﻟﻭﻷﺍ ﻞﺼﺤﻤﻟﺍ ﻝﺰﻋ ﻭﺃ ﻝﺍﺪﺒﺘﺳﺍ ﺔﻴﺣﻼﺼﺑ ﻊﺘﻤﺘﻟﺍ ( 6) 

ﻦﻫﺮﺑ ﺔﻧﻮﻤﻀﻤﻟﺍ ﺽﻭﺮﻘﻟﺍ ﻞﻴﺼﺤﺗ ﻦﻋ ًﻻﻭﺆﺴﻣ ﺪﺋﺎﻘﻟﺍ ﻞﺼﺤﻤﻟﺍ ﻥﻮﻜﻳ،ﻱﺭﺎﺠﺗﻦﻫﺮﺑ 

. ﻱﺭﺎﺠﺗ 

Master Trust 

�� 

ﻕﺍﺭﻭﻷﺍ ﻦﻣ ﺓﺩﺪﻌﺘﻣ ﺕﺎﻋﻮﻤﺠﻣ ﺭﺪﺼﺗ SPE ﺹﺎﺧ ﺽﺮﻏ ﺕﺍﺫ ﺓﺄﺸﻨﻣ 

ﻦﻋ ﺓﺭﺎﺒﻋ ﻲﻫ 

ﺔﻄﺳﺍﻮﺑ ﻲﻟﺎﻤﻟﺍ 

ﻖﻓﺪﺘﻟﺍ 

ﺝﺎﺘـﻧﺇ ﻢﺘﻳ ﺚﻴﺤﺑ ،ﻝﻮﺻﻷﺍ 

ﻦﻣ ﺩﺮﻔﻨﻣ ﻊﻤﺠﻤﺑ ﺔﻣﻮﻋﺪﻤﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ 

. ًﺎﻘﺒﺴﻣ ﺎﻫﺪﻳﺪﺤﺗ ﻢﺘ ﻳ ﺔﻐﻴﺼﻟ ًﺎﻘﺒﻃ ﺕﺎﻋﻮﻤﺠﻤﻟﺍ ﻦﻴﺑ ﺺـﱠﺼﺨﺗ 

ﻲﺘﻟﺍ ﻝﻮﺻﻷﺍ 

Medium-Term Note (MTN) 

(MTN) �� 

. ﺔﻴﻨﻣﺯ ﺓﺮﺘﻓ ﺭﺍﺪﻣ ﻰﻠﻋ ﺭﺍﺮﻤﺘﺳﺎﺑ ﻪﺿﺮﻌﺑ ﺭِﺪﺼ 

ُﻤﻟﺍ ﻞﻴﻛﻭ ﻡﻮﻘﻳ ﺔﻛﺮﺸﻠﻟ ﻦﻳﺩ ﺪﻨﺳ ﻪﺑ ﺪﺼﻘﻳ 

ﻦﻴﺑ ﺎﻣ ﺡﻭﺍﺮﺘﺗ ﻥﺃ ﻰﻠﻋ ﻥﻮﻳﺪﻟﺍ ﻕﺎﻘﺤﺘﺳﺍ ﺦﻳﺭﺍﻮﺗ ﺔﻋﻮﻤﺠﻣ ﻦﻣ ﻥﻭﺮﻤﺜﺘﺴﻤﻟﺍ ﺭﺎﺘﺨﻳ ﻥﺃ ﻦﻜﻤﻳﻭ 

ﻰﻠﻋ ﺪﻳﺰﻳ ﺎﻣ ﻦﻴـﺑ 

ﻭﺃ ،ًﺍﺮﻬﺷ 

ﺮﺸﻋ ﺔﻴﻧﺎﻤﺛ ﻰﻟﺇ ﺔﻨﺳ ﻰﻠﻋ ﺪﻳﺰﻳ ﺎﻣ ﻦﻴـﺑ ﻭﺃ ،ﺔﻨﺳ ﻰﻟﺇ 

ﺮﻬﺷﺃ ﺔﻌﺴﺗ 

. ﺔﻨﺳ ﻦﻴﺛﻼﺛ ﻰﻟﺇ ﻞﺼﺗ ﻰﺘﺣ ﺍﺮﺟ ّﻢﻠﻫ ﻭ ،ﻦﻴﺘـﻨﺳ ﻰﻟﺇ ًﺍﺮﻬﺷ 

ﺮﺸﻋ ﺔﻴﻧﺎﻤﺛ 

Mortgage-Backed Securities (MBS) 

(MBS) �� 

ﻥﻮﻤﻀﻣ ﺽﺮﻗ ﻦﻣ ﺎﻬﺑ ﺹﺎﺨﻟﺍ ﺩﺍﺪﺴﻟﺍ ﻥﺎﻤﺿ ﻥﻮﻜﺘﻳ ﻲﺘﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﺔﻓﺎﻛ ﻞﻤﺸﺗ ﻩﺬﻫ 

ﻥﻭﺮﻤﺜﺘﺴﻤﻟﺍ ﻢﻠﺘﺴﻳﻭ 

. ﺔﻳﺭﺎﻘﻋ ﺕﺎﻧﻮﻫﺭ ﻭﺃ ﻱﺭﺎﻘﻋ 

ﻦﻫﺮﺑ ﺔﻧﻮﻤﻀﻣ ﺽﻭﺮﻗ ﻊﻤﺠﻣ ﻭﺃ 

ﺔﻧﻮﻤﻀﻤﻟﺍ ﺽﻭﺮﻘﻟﺍ ﻦﻋ ﺔﻤﻠﺘﺴﻤﻟﺍ ﺕﺎﻋﻮﻓﺪﻤﻟﺍ 

ﻦﻣ ﺔﻘﺘﺸﻤﻟﺍ 

ﺽﺮﻘﻟﺍ ﻞﺻﺃﻭ ﺓﺪﺋﺎﻔﻟﺍ ﺕﺎﻋﻮﻓﺪﻣ 

. ﻦﻣﺎﻀﻟﺍ ﻱﺭﺎﻘﻌﻟﺍ ﻦﻫﺮﻟﺎﺑ 

N 

Negative Amortization 

�� 

ﻪﻌﻓﺪﻳ ﻱﺬﻟﺍ ﻎﻠﺒﻤﻟﺍ ﻥﺃ ﺱﺎﺳﺃ ﻰﻠﻋ ﺽﻭﺮﻘﻟﺍ 

ﺪﺣﻷ ﻲﺴﻴﺋﺮﻟﺍ ﺪﻴﺻﺮﻠﻟ 

ﺔﻓﺎﺿﻹﺍ ﻪﺑ ﺪﺼﻘﻳ 

. ﺔﻘﺤﺘﺴﻤﻟﺍ ﺓﺪﺋﺎﻔﻟﺍ ﻎﻠﺒﻣ ﺔﻴﻄﻐﺘﻟ ﺏﻮﻠﻄﻤﻟﺍ ﻎﻠﺒﻤﻟﺍ ﻦﻣ ﻞﻗﺃ ﻮﻫ ﺔﻳﺭﻭﺩ ﺔﻔﺼﺑ ﺽﺮﺘﻘﻤﻟﺍ 

Non-Performing 

�� 

ﺙﻼﺛ ﺩﺍﺪﺳ ﻲﻓ ﺪﻬﻌﺘﻤﻟﺍ ﻞﺸﻔﻳ 

ﺎﻣﺪﻨﻋ ﺮﺧﺁ 

ﺔﻴﻧﻮﻳﺪﻣ ﺪﻨﺳ ﻭﺃ ﺽﺮﻗ ﻒﺻﻮﻟ ﻡﺪﺨﺘﺴﺗ ﺓﺭﺎﺒﻋ 

. ﻦﻳﺭﻮﻛﺬﻤﻟﺍ ﺔﻴﻧﻮﻳﺪﻤﻟﺍ 

ﺪﻨﺳ ﻭﺃ ﺽﺮﻘﻟﺍ ﺹﻮﺼﺨﺑ ﻞﻗﻷﺍ ﻰﻠﻋ ﺓﺭّﺮﻘﻣ ﺕﺎﻋﻮﻓﺪﻣ 

Notional Amount 

�� 

ﻡﺍﺰﺘﻟﺍ ﺹﻮﺼﺨﺑ ﺔﻘﺤﺘﺴﻤﻟﺍ ﺓﺪﺋﺎﻔﻟﺍ ﺏﺎﺴﺘﺣﻻ ﺱﺎﺳﺄﻛ ﻞﻤﻌﺘﺴﻳ ﻱﺬﻟﺍ ﺽﺮﻘﻟﺍ ﺪﻴﺻﺭ ﻪﺑ ﺪﺼﻘﻳ 

. ﺓﺪﺋﺎﻔﻟﺍ ﺏﺎﺴﺘﺣﻻ ﻡﺪﺨﺘﺴﻤﻟﺍ 

ﺪﻴﺻﺮﻟﺍ 

ﻥﻮﻜﻳ 

ﻻ ﺽﺮﻗ ﻞﺻﺃ ﺩﻮﺟﻭ ﻭﺃ ﺽﺮﻗ ﻞﺻًﺃ ﺩﻮﺟﻭ ﻡﺪﻌﺑ 

O 

Obligor 

�� 

ﻕﺎﻔﺗﻻﺍ ﻁﻭﺮﺷ 

ﺐﺟﻮﻤﺑ ﺕﺎﻴﻟﻭﺆﺴﻤﻟﺍ ﺾﻌﺑ ﻰﻟﻮﺘﻳ ﻥﺃ ﻰﻠﻋ ﻖﻓﺍﻭ ﻱﺬﻟﺍ ﻑﺮﻄﻟﺍ ﻪﺑ ﺪﺼﻘﻳ 

ﺎﻫﻻﻮﺘﻳ ﻲﺘﻟﺍ ﻝﺎﻤﻋﻷﺍ ﻞﻤﺸﺗ ،ﻥﺎﻴﺣﻷﺍ ﺐﻠﻏﺃ ﻲﻓﻭ 

. ﻯﺮﺧﺃ ﻑﺍﺮﻃﺃﻭ ﻑﺮﻄﻟﺍ ﺍﺬﻫ ﻦﻴﺑ ﻱﺪﻗﺎﻌﺘﻟﺍ 

ﻲﻓ " ﻦﻳﺪﻬﻌﺘﻤﻟﺍ" 

ﺢﻠﻄﺼﻣ ﻡﺪﺨﺘﺴﻳﻭ . ﻯﺮﺧﻷﺍ ﻑﺍﺮﻃﻸﻟ ﺕﺎﻋﻮﻓﺪﻤﻟﺍ ﺩﺍﺪﺴﺑ ﻡﻮﻘﻳ ﻥﺃ ﺪﻬﻌﺘﻤﻟﺍ 

ﻲﺘﻟﺍ ﻝﻮﺻﻷﺍ ﻦﻋ ﺕﺎﻋﻮﻓﺪﻤﻟﺍ ﺩﺍﺪﺴﺑ ﻡﻮﻘﺗ ﻲﺘﻟﺍ ﻑﺍﺮﻃﻷﺍ ﻰﻟﺇ ﺓﺭﺎﺷﻺﻟ 

ﻖﻳﺭﻮﺘﻟﺍ ﺕﺎﻴﻠﻤﻋ ﻕﺎﻴﺳ 


ﺎﻬﻨﻣ ﺩﺍﺪﺴﻟﺍ ﻢﺘﻳ ﻲﺘﻟﺍ ﺔﻳﺪﻘﻨﻟﺍ ﺕﺎﻘﻓﺪﺘﻟﺍ ﺭﺪﺼﻣ ﺕﺎﻋﻮﻓﺪﻤﻟﺍ ﻚﻠﺗ ﺪﻌﺗﻭ . ﺎﻬﻘﻳﺭﻮﺗ 

ﻢﺘﻳ 

Offering Circular 

�� 

ﻦﻳﺮﻤﺜﺘﺴﻤﻠﻟ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻸﻟ ﺪﻳﺪﺟ ﺭﺍﺪﺻﺇ ﻖﻳﻮﺴﺗ ﻲﻓ ﻡﺪﺨﺘﺴﺗ ءﺎﺸﻓﺇ ﺔﻘﻴﺛﻭ ﺎﻬﺑ ﺪﺼﻘﻳ 

ﻦﻣ ﺔﺌﻓ ﻞﻛ ﺺﺋﺎﺼﺧ 

ﻚﻟﺫ ﻲﻓ ﺎﻤﺑ ،ﺔﻠﺼﻟﺍ ﺕﺍﺫ ﺔﻘﻔﺼﻟﺍ ﺓﺮﺸﻨﻟﺍ ﻩﺬﻫ ﻒﺼﺗﻭ 

. ﻦﻴﻠﻤﺘﺤﻤﻟﺍ 

،ﻲﻧﺎﻤﺘﺋﻻﺍ 

ﻒﻴﻨﺼﺘﻟﺍﻭ 

،ﺓﺪﺋﺎﻔﻟﺍ 

ﺕﺎﻋﻮﻓﺪﻣ ﺱﺎﺳﺃ ﻞﺜﻣ) 

ﺎﻫﺭﺍﺪﺻﺇ ﻢﺘﻴﺳ 

ﻲﺘﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ 

ﺮﻓﻮﺗ ،ﻖﻳﺭﻮﺘﻟﺍ 

ﺔﻟﺎﺣ ﻲﻓﻭ . ( ﻯﺮﺧﻷﺍ ﺕﺎﺌﻔﻟﺍ ﺹﻮﺼﺨﺑ ﺔﻳﻮﻟﻭﻷﺍﻭ 

،ﻊﻗﻮﺘﻤﻟﺍ 

ﺮﻤﻌﻟﺍ ﻝﺪﻌﻣﻭ 

ﻝﻮﺻﻷﺍ ﻉﻮﻧ ﺎﻬﻴﻓ 

ﺎﻤﺑ ،ﺔﻨﻣﺎﻀﻟﺍ ﻝﻮﺻﻷﺍ ﺹﻮﺼﺨﺑ ﺕﺎﻣﻮﻠﻌﻣ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﺽﺮﻋ ﺓﺮﺸﻧ 

ﺎﻤﻛ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﺭﺍﺪﺻﻹ 

ﺪﺋﺎﻘﻟﺍ ﺮﻳﺪﻤﻟﺍ ﻡﻮﻘﻳ ﻥﺃ ﺩﺎﺘﻌﻤﻟﺍ ﻦﻣﻭ 

. ﺎﻬﺑ 

ﺔﺻﺎﺨﻟﺍ ﻥﺎﻤﺘﺋﻻﺍ 

ﺓﺩﻮﺟﻭ 

. ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﺽﺮﻋ ﺓﺮﺸﻧ ﺩﺍﺪﻋﺈﺑ ﻥﻮﻴﻧﻮﻧﺎﻘﻟﺍ 

ﻩﻭﺭﺎﺸﺘﺴﻣ 

ﻡﻮﻘﻳ 

Origination 

�� 

. ﺽﻭﺮﻘﻟﺍ ﻢﻳﺪﻘﺗ ﺔﻴﻠﻤﻋ ﺎﻬﺑ ﺪﺼﻘﻳ 

Originator 

�� 

ﻚﻠﺗ ﺹﻮﺼﺨﺑ ﺄﺸﻨﺗ ﻲﺘﻟﺍ ﺕﺎﻣﺍﺰﺘﻟﻻﺍ ﻥﻮﻜﺗﻭ ؛ﺽﻭﺮﻘﻟﺍ 

ﻡﺪﻘـﺗﻭ ﻝّﻮﻤﺗ ﻲﺘﻟﺍ ﺔﺴﺳﺆﻤﻟﺍ ﻪﺑ ﺪﺼﻘﻳ 

ﺽﺮﻐﻟﺍ ﺕﺍﺫ ﺓﺄﺸﻨﻤﻟﺍﻰﻟﺇﺎﻬﻠﻳﻮﺤﺗ 

ﻞﺒﻗ ﺔﺴﺳﺆﻤﻟﺍ ﻩﺬﻫ ﻰﻟﺇ ﻞﺻﻷﺍ ﻲﻓ ﺔﻘﺤﺘﺴﻣ ﺽﻭﺮﻘﻟﺍ 

. ﺹﺎﺨﻟﺍ 

Over-Collateralization 

�� 

ﻥﺎﻤﻀﻟﺍ ﻁﺍﺮﻓﺇ ﻡﺪﺨﺘﺴﻳﻭ . ﺕﺎﺑﻮﻠﻄﻤﻟﺍ ﻦﻋ ﻝﻮﺻﻷﺍ ﻪﻴﻓ ﺪﻳﺰﺗ ﻱﺬﻟﺍ ﻝﺎﻤﻟﺍ ﺱﺃﺭ ﻞﻜﻴﻫ ﻪﺑ ﺪﺼﻘﻳ 

ﻞﻴﺒﺳ ﻰﻠﻋﻭ 

. ﺔﻨﻴﻌﻣ ﻝﻮﺻﺄﺑ ﺔﻣﻮﻋﺪﻤﻟﺍ ﺕﺎﻘﻔﺼﻟﺍ ﻲﻓ ﻥﺎﻤﺘﺋﻻﺍ ﺰﻳﺰﻌﺘﻟ ﺔﻐﻴﺼﻛ 

ﻲﻃﺎﻴﺘﺣﻻﺍ 

ﻖﻳﺮﻃ ﻦﻋﺎﻴﻠﻌﻟﺍ 

ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻦﻣ ﻲﻨﻴﻟﺮﺘﺳﺇ ﻪﻴﻨﺟ ﻥﻮﻴﻠﻣ 75 ﺭﺍﺪﺻﺇ ﻥﺎﻤﺿ ﻦﻜﻤﻳ ،ﻝﺎﺜﻤﻟﺍ 

ﻞﺼﺗ ﺔﻟﺎﺤﻟﺍ ﻚﻠﺗ ﻲﻓﻭ ،ﻲﻨﻴﻟﺮﺘﺳﺇ ﻪﻴﻨﺟ ﻥﻮﻴﻠﻣ 100 ﻰﻟﺇ ﺎﻬﺘﻤﻴﻗ ﻞﺼﺗ ﻲﺘﻟﺍ ﻝﻮﺻﻷﺍ ﻦﻣ ﻊﻤﺠﻣ 

.% 25 ﻰﻟﺇ ﻲﻃﺎﻴﺘﺣﻻﺍ ﻥﺎﻤﻀﻟﺍ ﻁﺍﺮﻓﺇ ﺔﻤﻴﻗ 

P 

Performing 

�� 

ﺕﺎﻌﻓﺪﻟﺍ ﺔﻓﺎﻛ ﺩﺍﺪﺴﺑ ﻡﺎﻗ ﺪﻗ ﻪﻧﺄﺸﺑ ﺽﺮﺘﻘﻤﻟﺍ ﻥﻮﻜﻳ ﺮﺧﺁ ﻦﻳﺪﻣ ﺏﺎﺴﺣ ﻭﺃ ﺽﺮﻗ ﻪﺑ ﺪﺼﻘﻳ 

. ﻦﻳﺪﻤﻟﺍ ﺏﺎﺴﺤﻟﺍ ﻭﺃ ﺽﺮﻘﻟﺍ ﻁﻭﺮﺷ ﺐﺟﻮﻤﺑ ﺔﺑﻮﻠﻄﻣ ﻥﻮﻜﺗ ﻲﺘﻟﺍ ﺓﺪﺋﺎﻔﻟﺍﻭ 

ﺔﻴﺳﺎﺳﻷﺍ 

"Pfandbriefe" 

�� Pfandbriefe 

ﺔﻴﻧﺎﻤﻟﻷﺍ ﺔﻴﻟﺎﻤﻟﺍ ﺕﺎﺴﺳﺆﻤﻟﺍﻭ ﺔﻴﻧﺎﻤﻟﻷﺍ ﻦﻫﺮﻟﺍ ﻙﻮﻨﺑ ﻩﺭﺪﺼﺗ ﻱﺬﻟﺍ ﻦﻳﺪﻟﺍ ﺪﻨﺳ ﻪﺑ ﺪﺼﻘﻳ 

ﻪﻣﺪﺨﺘﺴﺗ ﻱﺬﻟﺍ 

" ﻱﺭﺎﻘﻌﻟﺍ ﻦﻫﺮﻟﺍ ﺪﻨﺳ" 

: ﺎﻤﻫﻭ ﻦﻫﺮﻟﺍ ﺕﺍﺪﻨﺳ ﻦﻣ ﻥﺎﻋﻮﻧ 

ﺪﺟﻮﻳﻭ . ﻯﺮﺧﻷﺍ 

ﻱﺬﻟﺍ 

" ﻡﺎﻌﻟﺍ ﻦﻫﺮﻟﺍ ﺪﻨﺳ" 

ﻮﻫ ﻲﻧﺎﺜﻟﺍ ﻉﻮﻨﻟﺍﻭ ،ﺎﻬﺑ 

ﺔﺻﺎﺨﻟﺍ ﺽﺍﺮﻗﻹﺍ ﺔﻄﺸﻧﺃ ﻞﻳﻮﻤﺗ ﻲﻓ ﻙﻮﻨﺒﻟﺍ 

. ﻡﺎﻌﻟﺍ ﻉﺎﻄﻘﻟﺍ ﺕﺎﺴﺳﺆﻣﻭ ﺕﺎﺌﻴﻬﻟ ﺎﻬﺿﺍﺮﻗﺇ ﻞﻳﻮﻤﺗ ﻲﻓ ﻙﻮﻨﺒﻟﺍ ﻪﻣﺪﺨﺘﺴﺗ 

Pool Factor 

�� 

ﻲﻓ ﺔﻘﺤﺘﺴﻣ ﻞﻈﺗ 

ﻲﺘﻟﺍ 

ﻝﻮﺻﻷﺍ ﻊﻤﺠﻤﻟ ﻲﺴﻴﺋﺮﻟﺍ ﺪﻴﺻﺮﻟﺍ ﻲﻟﺎﻤﺟﻹ 

ﺔﻳﻮﺌﻤﻟﺍ ﺔﺒﺴﻨﻟﺍ 

ﻪﺑ ﺪﺼﻘﻳ 

. ﻦﻴﻌﻣ 

ﺦﻳﺭﺎﺗ 

Portfolio Manager 

�� 

. " ﻝﺍﻮﻣﻷﺍ ﺮﻳﺪﻣ" 

ًﺎﻀﻳﺃ ﻰﻤﺴ ﻳﻭ 

؛ﺕﺍﺭﺎﻤﺜﺘﺳﻻﺍ 

ﺔﻈﻔﺤﻣ ﺮﻳﺪﺗ ﺔﺴﺳﺆﻣ ﻭﺃ ﺩﺮﻓ ﻪﺑ ﺪﺼﻘﻳ 

Premium 

�� 

ﺰﻓﺎﺣ ﺔﺑﺎﺜﻤﺑ ﺓﺩﺎﻋ ﻮﻫﻭ ،ﻝﻮﺻﻷﺍﺪﺣﺃﻦﻋﻉﻮﻓﺪﻤﻟﺍ 

ﻱﺩﺎﻌﻟﺍ ﺮﻌﺴﻟﺍ ﻕﻮﻓ ﻊﻓﺪُﻳ 

ﻎﻠﺒﻣ ﺎﻬﺑ ﺪﺼﻘﻳ 

. ﺔﻴﻟﺎﻤﻟﺍ ﺔﻗﺭﻮﻠﻟ ﺔﻴﻤﺳﻻﺍ ﺔﻤﻴﻘﻟﺍ ﻦﻋ ﺪﻳﺰﻳ ﻎﻠﺒﻣ ﻮﻫﻭ ؛ﻲﻌﻴﺠﺸﺗ 

ﻊﻓﺍﺩ ﻭﺃ 



4

Prepayment Rate 

�� 

ﺔﻴﻧﻮﻳﺪﻤﻟﺍ 

ﺕﺍﺪﻨﺳﻭ ﺔﻳﺭﺎﻘﻌﻟﺍ ﺽﻭﺮﻘﻟﺍ ﺩﺍﺪﺳ ﻦﻋ ﻍﻼﺑﻹﺍ ﻩﺪﻨﻋ ﻢﺘﻳ ﻱﺬﻟﺍ ﻊﻓﺪﻟﺍ ﻝﺪﻌﻣ ﻪﺑ ﺪﺼﻘﻳ 

ﻊﻤﺠﻤﻠﻟ ﻲﻘﺒﺘﻤﻟﺍ ﺽﺮﻘﻟﺍ ﻞﺻﺃ ﻦﻣ ﺔﻳﻮﺌﻣ ﺔﺒﺴﻨﺑ ﻪﻨﻋ ﺮﺒﻌﻳﻭ ،ﺔﻗﺮﻔﺘﻣ 

ﺕﺎﻌﻓﺩ ﻲﻓ ﻯﺮﺧﻷﺍ 

ﻲﻓ ﺓﺪﺋﺎﻔﻟﺍ 

ﺭﺎﻌﺳﻷ ﺔﺒﺴﻨﻟﺎﺑ ﺔﺳﺎﺴﺣ ًﺎﻣﺪﻘﻣ ﺩﺍﺪﺴﻟﺍ ﺕﻻﺪﻌﻣ ﺪﻌﺗ ،ﻥﺎﻴﺣﻷﺍ ﻢﻈﻌﻣ ﻲﻓﻭ . ﻲﻟﺎﻤﻟﺍ 

. ﻕﻮﺴﻟﺍ 

Prepayment Risk 

�� 

ﻲﺴﻴﺋﺮﻟﺍ ﻎﻠﺒﻤﻟﺍ 

ﺾﻌﺑ ﻭﺃ ﻞﻛ ﺩﺍﺪﺳ ﻢﺗﺍﺫﺇًﺎﻴﺒﻠﺳﺭﺎﻤﺜﺘﺳﻻﺍﻊﻳﺭﺮﺛﺄﺗ 

ﺮﻃﺎﺨﻣ ﺎﻬﺑ 

ﺪﺼﻘﻳ 

ﺮﻃﺎﺨﻣ ﻞﻤﺸﺗ ﻥﺃ ﻦﻜﻤﻳ ،ﻡﺎﻋ ﻪﺟﻮﺑﻭ . ﻊﻗﻮﺘﻣ ﻮﻫ ﺎﻤﻣ ﻉﺮﺳﺃ ﻭﺃ ﺭﺮﻘﻤﻟﺍ ﺪﻋﻮﻤﻟﺍ 

ﻞﺒﻗ ﺮﻤﺜﺘﺴﻤﻟﺍ 

. ﻊﻗﻮﺘﻣ ﻮﻫ ﺎﻤﻣ ﺄﻄﺑﺃ ﻞﻜﺸﺑ ﻲﺳﺎﺳﻷﺍ ﻎﻠﺒﻤﻟﺍ ﺩﺍﺪﺴﺑ ﻖﻠﻌﺘﻳ ﻱﺬﻟﺍ ﺪﻳﺪﻤﺘﻟﺍ ﺮﻄﺧ ًﺎﻣﺪﻘﻣ ﺩﺍﺪﺴﻟﺍ 

Primary Market 

�� 

. ﻝﻮﺻﻷﺍ ﻚﻠﺗ ءﺎﺸﻧﺈﺑ ﺖﻣﺎﻗ ﻲﺘﻟﺍ ﺔﻬﺠﻟﺍ ﻞﺒﻗ ﻦﻣ ﻝﻮﺻﻷﺍ ﻊﻴﺑ 

ﺎﻬﻴﻓ ﻢﺘﻳ ﻲﺘﻟﺍ ﻕﻮﺴﻟﺍ ﺎﻬﺑ ﺪﺼﻘﻳ 

Primary Servicer 

�� 

ﺔﻴﻟﻭﺆﺴﻤﻟﺍ ﻰﻟﻮﺘﺗ 

ﻲﺘﻟﺍ ﺔﻬﺠﻟﺍ ﻪﺑ ﺪﺼﻘﻳ ،ﻲﻨﻜﺳ 

ﺭﺎﻘﻋ ﻦﻫﺮﺑﻥﻮﻤﻀﻤﻟﺍ 

ﺽﺮﻘﻟﺍ 

ﺺﺨﻳ ﺎﻤﻴﻓ 

ﻭﺃ ﺽﺮﻘﻟﺍ ﺐﺣﺎﺻ ﻰﻟﺇ ﻝﺍﻮﻣﻷﺍ ﻊﻓﺩﻭ ،ﺽﺮﺘﻘﻤﻟﺍ 

ﻦﻣ ﺔﻳﺮﻬﺸﻟﺍ ﺕﺎﻌﻓﺪﻟﺍ ﻞﻴﺼﺤﺘﻟ ﺔﻴﺳﺎﺳﻷﺍ 

ﺔﻌﺑﺎﺘﻣﻭ ،ﻦﻴﻣﺄﺘﻟﺍﻭ 

ﺐﺋﺍﺮﻀﻟﺎﺑ ﺔﺻﺎﺨﻟﺍ ﺔﻃﻭﺮﺸﻤﻟﺍ ﺕﺎﺑﺎﺴﺤﻟﺎﺑ 

ﻅﺎﻔﺘﺣﻻﺍﻭ ،ﻪﻨﻋ ﺏﻮﻨﻳ ﻦﻣ 

ﺕﺍءﺍﺮﺟﺇ ﺫﺎﺨﺗﺍ ﻲﻓ ءﺪﺒﻟﺍﻭ ،ﺮﺋﺎﺴﺨﻟﺍ 

ﺓﺪﺣ ﻒﻴﻔﺨﺘﺑ ﺔﻘﻠﻌﺘﻤﻟﺍ ﺩﻮﻬﺠﻟﺍ ﻝﺬﺑﻭ ،ﺓﺮﺧﺄﺘﻤﻟﺍ 

ﺕﺎﻌﻓﺪﻟﺍ 

،ﺕﺎﻧﻮﻫﺮﻟﺍ 

ﺲﺒﺣ ﺪﻌﺑ ﺔﻧﻮﻫﺮﻤﻟﺍ ﺕﺎﻜﻠﺘﻤﻤﻟﺍ ﻲﻓ ﻑﺮﺼﺘﻟﺍﻭ ،ﺮﻣﻷﺍ 

ﻡﺰﻟ ﺎﻤﻠﻛ ﺕﺎﻧﻮﻫﺮﻟﺍ ﺲﺒﺣ 

. ﻪﻨﻋ ﺏﻮﻨﻳ ﻦﻣ ﻭﺃ ﺽﺮﻘﻟﺍ 

ﺐﺣﺎﺻ ﻰﻟﺇ ﺽﺮﻘﻟﺍ ﺔﻟﺎﺣ ﻦﻋ ﺔﻳﺭﻭﺩ ﺮﻳﺭﺎﻘﺗ ﻢﻳﺪﻘﺗﻭ 

Protection Buyer 

�� 

ﺮﻄﺨﻟﺍ ﻞﻳﻮﺤﺘﺑ ﻡﻮﻘﻳ ﻱﺬﻟﺍ ﻑﺮﻄﻟﺍ ﻪﺑ ﺪﺼﻘﻳ ،ﺔﺒﻴﻌﻤﻟﺍ ﻥﺎﻤﺘﺋﻻﺍ ﺕﻻﺩﺎﺒﻣ ﻞﺜﻣ ﺔﻴﻟﺎﻣ ﺕﺎﻴﻠﻤﻋ ﻲﻓ 

ﻢﺘﻳ ًﺎﻄﺴﻗ ﺪﻌﺗ ﻲﺘﻟﺍ ﻝﺍﻮﻣﻷﺍ ﺩﺍﺪﺳ ﻞﺑﺎﻘﻣ ﺮﺧﺁ ﻑﺮﻃ ﻰﻟﺇ ﺔﻨﻴﻌﻣ ﻝﻮﺻﺄﺑ ﻂﺒﺗﺮﻤﻟﺍ ﻲﻧﺎﻤﺘﺋﻻﺍ 

. ًﺎﻘﺒﺴﻣ ﻪﻌﻓﺩ 

Protection Seller 

�� 

ﺮﻄﺨﻟﺍ ﻞﺒﻘﻳ ﻱﺬﻟﺍ ﻑﺮﻄﻟﺍ ﻪﺑ ﺪﺼﻘﻳ ،ﺔﺒﻴﻌﻤﻟﺍ ﻥﺎﻤﺘﺋﻻﺍ ﺕﻻﺩﺎﺒﻣ ﻞﺜﻣ ﺔﻴﻟﺎﻣ ﺕﺎﻴﻠﻤﻋ ﻲﻓ 

ﻰﻟﺇ ﺔﻴﻧﺎﻤﺘﺋﻻﺍ ﺔﻳﺎﻤﺤﻟﺍ ﺕﺎﻌﻓﺩ ﺩﺍﺪﺴﺑ ﺔﻳﺎﻤﺤﻟﺍ ﻊﺋﺎﺑ ﻡﻮﻘﻳﻭ . ﺔﻨﻴﻌﻣ ﻝﻮﺻﺄﺑ ﻂﺒﺗﺮﻤﻟﺍ ﻲﻧﺎﻤﺘﺋﻻﺍ 

. ﻦﻴﻌﻣ ﻎﻠﺒﻣ ﻦﻋ ﺪﻳﺰﺗ ﻝﻮﺻﻷﺍ ﻲﻓ ﺓﺭﺎﺴﺧ ﻞﻤﺤﺗ ﺎﻬﺑ ﻢﺘﻳ ﻲﺘﻟﺍ ﺔﺟﺭﺪﻟﺍ ﻰﻟﺇ ،ﺔﻳﺎﻤﺤﻟﺍ ﻱﺮﺘﺸﻣ 

R 

Rated Securities 

�� 

ﺔﻟﺎﻛﻭ ﻞﺒﻗ ﻦﻣ ﺎﻬﺑ ﺹﺎﺨﻟﺍ ﻲﻧﺎﻤﺘﺋﻻﺍ ﻒﻴﻨﺼﺘﻟﺍ ﺪﻳﺪﺤﺗ ﻢﺘﻳ ﻲﺘﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﺎﻬﺑ ﺪﺼﻘﻳ 

. ﻒﻴﻨﺼﺘﻟﺎﺑﺔﺼﺼﺨﺘﻣ 

Receivables 

�� 

ﻦﻣ ﻖﻘﺤﺘﺗ ﻲﺘﻟﺍﻭ،ﺓﺪﺋﺎﻔﻟﺎﺑﻭ 

ﺽﺮﻘﻟﺍ ﻞﺻﺄﺑ ﺔﻄﺒﺗﺮﻤﻟﺍ ﺔﻳﺪﻘﻨﻟﺍ ﺕﺎﻘﻓﺪﺘﻟﺍ ﻰﻟﺇ ﺮﻴﺸﻳ ﻡﺎﻋ ﺢﻠﻄﺼﻣ 

ﻚﻟﺎﻣ ﻰﻟﺇ ( ﺔﻴﻧﻮﻳﺪﻣ ﺕﺎﺑﺎﺴﺣ ﻲﻟﺎﺘﻟﺎﺑ ﻥﻮﻜﺗﻭ) 

ﺩﺍﺪﺴﻟﺍ ﺔﺒﺟﺍﻭ ﻥﻮﻜﺗ ﺚﻴﺤﺑ ﻝﻮﺻﻷﺍ 

ﺪﺣﺃ ﻝﻼﺧ 

. ﻞﺻﻷﺍ ﻚﻟﺫ 

Reinvestment Risk 

�� 

ﻱﺬﻟﺍ ﺓﺪﺋﺎﻔﻟﺍ ﺮﻌﺳ ﻥﺎﻛ ﺍﺫﺇ ﻲﺒﻠﺳ ﻞﻜﺸﺑ ﺭﺎﻤﺜﺘﺳﻻﺍ ﻰﻠﻋ ﺪﺋﺎﻌﻟﺍ ﺮﺛﺄﺘﻳ 

ﻥﺄﺑ ﺮﻃﺎﺨﻤﻟﺍ ﺎﻬﺑ 

ﺪﺼﻘﻳ 

. ﻊﻗﻮﺘﻤﻟﺍ ﻦﻣ 

ﻞﻗﺃ ﺔﺘﻗﺆﻤﻟﺍ ﺔﻳﺪﻘﻨﻟﺍ ﺕﺎﻘﻓﺪﺘﻟﺍ ﺭﺎﻤﺜﺘﺳﺍ ﺓﺩﺎﻋﺇ ﻪﺑ ﻦﻜﻤﻳ 

Reserve Account 

�� 

. ﺮﺜﻛﺃ ﻭﺃ ﻦﻴﻌﻣ ﺽﺮﻐﻟ ﺹﺎﺧ ﺽﺮﻏ ﺕﺍﺫ ﺓﺄﺸﻨﻣ ﻞﺒﻗ ﻦﻣ ﻡﺍﺪﺨﺘﺳﻼﻟ ﺡﺎﺘﻣ ﻝﻮﻤﻣ ﺏﺎﺴﺣ ﻮﻫ 

ﺎﻀﻳﺃ ﻑﺮﻌﺗﻭ . ﻲﻧﺎﻤﺘﺋﻻﺍ ﺰﻳﺰﻌﺘﻟﺍ ﻝﺎﻜﺷﺃ ﻦﻣ ﻞﻜﺸﻛ ﻲﻃﺎﻴﺘﺣﻻﺍﺏﺎﺴﺣﻡﺍﺪﺨﺘﺳﺍﻢﺘﻳﺎﻣًﺎﺒﻟﺎﻏﻭ 

ﺕﺎﺑﺎﺴﺣ ﺔﻓﺎﻛ ﻞﻳﻮﻤﺗ ﻢﺘﻳ ،ًﺎﻴﻠ 

ﻤﻋﻭ 

." ﺢﺑﺮﻟﺍ ﺶﻣﺎﻫ ﺕﺎﺑﺎﺴﺣ" 

ﻢﺳﺎﺑ ﻲﻃﺎﻴﺘﺣﻻﺍ ﺕﺎﺑﺎﺴﺣ ﺾﻌﺑ 

ﺪﻳﺪﻌﻟﺍ ﻢﻴﻤﺼﺗ ﻢﺘﻳ ﻦﻜﻟﻭ ،ﺔﻠﺼﻟﺍ ﺕﺍﺫ ﺔﻴﻟﺎﻤﻟﺍ ﺕﻼﻣﺎﻌﺘﻟﺍ ﺔﻳﺍﺪﺑ ﻲﻓ ﻞﻗﻷﺍ ﻰﻠﻋ ًﺎﻴﺋﺰﺟ ﻲﻃﺎﻴﺘﺣﻻﺍ 

ﺕﺎﻌﻓﺪﻟﺍ ﺩﺍﺪﺳ ﺪﻌﺑ ﺔﺣﺎﺘﻤﻟﺍ ﺓﺪﺋﺍﺰﻟﺍ ﺔﻳﺪﻘﻨﻟﺍ ﺕﺎﻘﻓﺪﺘﻟﺍ ﻡﺍﺪﺨﺘﺳﺎﺑ ﺖﻗﻮﻟﺍ ﺭﻭﺮﻤﺑ ﺪﻳﺰﺗ ﺚﻴﺤﺑ ﺎﻬﻨﻣ 


Residential Mortgage-Backed Securities (RMBS) 

(RMBS) �� 

�� 

ﻦﻳﺩ ﺭﺍﺪﺻﺇ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻩﺬﻫ ﻦﻤﻀﺘﺗﻭ . ﻖﻳﺭﻮﺘﻟﺍ ﺔﻴﻠﻤﻌﻟ ﻝﻭﻷﺍ ﻲﺳﺎﺳﻷﺍ ﻞﻜﺸﻟﺍ ﻩﺬﻫ ﺪﻌﺗ 

ﺐﺟﻮﻤﺑ ﺎﻬﻧﺎﻤﺿ ﻢﺗ ﻲﺘﻟﺍ ﺕﺎﻧﻮﻫﺮﻟﺍ ﺽﻭﺮﻗ ﻦﻣ ﺲﻧﺎﺠﺘﻣ ﻊﻤﺠﻣ ﻝﻼﺧ ﻦﻣ ﻪﻧﺎﻤﺿ ﻢﺘﻳ 

. ﺔﻴﻨﻜﺳ ﺔﻳﺭﺎﻘﻋ ﺕﺎﻜﻠﺘﻤﻣ 

Revolving Period 

�� 

ﻰﻟﺇ ﻯﺮﺧﺃ ﺔﻴﻧﻮﻳﺪﻣ ﺕﺍﺪﻨﺳ ﻭﺃ ﺓﺪﻳﺪﺟ ﺽﻭﺮﻗ ﺔﻓﺎﺿﺇ ﺎﻬﻟﻼﺧ ﺯﻮﺠﻳ ﻲﺘﻟﺍ ﺓﺮﺘﻔﻟﺍ ﺎﻬﺑﺪﺼﻘﻳ 

. ﺓﺩﺪﺠﺘﻣ ﺔﻳﺭﺎﺠﺗ ﺔﻴﻠﻤﻌﺑ ﺹﺎﺨﻟﺍ ﻝﻮﺻﻷﺍ ﻊﻤﺠﻣ 

Risk-Weighting 

�� 

. ﺎﻬﻌﺒﺘﺘﺴﺗ ﻲﺘﻟﺍ ﺮﻃﺎﺨﻤﻟﺍ ﺔﺟﺭﺩ ﺱﺎﺳﺃ ﻰﻠﻋ ﻝﻮﺻﻷﺍ ﻒﻴﻨﺼﺗ ﺔﻴﻠﻤﻋ ﻲﻫ 

S 

Scheduled Interest 

�� 

. ﺔﻴﻟﺎﺤﻟﺍ ﺓﺮﺘﻔﻟﺍ ﺔﻳﺎﻬﻧ ﻲﻓ ﻊﻓﺪﻟﺍ ﺔﻘﺤﺘﺴﻣ ﺓﺪﺋﺎﻔﻟﺍ ﻎﻠﺒﻣ ﻲﻫ 

Scheduled Principal 

�� 

. ﺔﻴﻟﺎﺤﻟﺍ ﺓﺮﺘﻔﻟﺍ ﺔﻳﺎﻬﻧ ﻲﻓ ﻩﺩﺍﺪﺳ ﻢﺘﻳ ﻥﺃ ﺭّﺮﻘﻤﻟﺍ ﺽﺮﻘﻟﺍ ﻞﺻﺃ ﻎﻠﺒﻣ ﻮﻫ 

"Schuldschein" or "Schuldscheindarlehen" 

(Schuldschein) �� 

�� 

. ﻦﻳﺩ ﺪﻨﺴﺑ ﺎﻫﺭﺍﺮﻗﺇ ﻢﺘﻳ ﻲﺘﻟﺍﻭ ﺔﻴﻠﺤﻤﻟﺍ ﺔﻴﻧﺎﻤﻟﻷﺍ ﻕﻮﺴﻟﺍ ﻲﻓ ﻢﺘﺗ ﻲﺘﻟﺍ ﺽﻭﺮﻘﻟﺍ ﻲﻫ 

Seasoning 

�� 

ﺪﻌﻳ ﻮﻫﻭ ؛ﺔﻴﻟﺎﻣ ﻕﺍﺭﻭﺃ ﻰﻟﺇ ﺎﻬﻠﻳﻮﺤﺗ ﻢﺘﻳ ﻲﺘﻟﺍ ﻝﻮﺻﻷﺍ ﺮﻤﻋ ﻰﻟﺇ ﺓﺭﺎﺷﻺﻟ ﻡﺪﺨﺘﺴﻳ ﺢﻠﻄﺼﻣ ﻮﻫ 

ءﺍﺩﺃ ﻲﻓﻭ 

ﺔﻘﺤﺘﺴﻤﻟﺍ ﺕﺎﻌﻓﺪﻟﺍ ﺩﺍﺪﺳ ﻲﻓ ﺪﻬﻌﺘﻤﻟﺍ ﺎﻬﻗﺮﻐﺘﺴﻳ ﻲﺘﻟﺍ ﺓﺪﻤﻟﺍ ﻰﻟﺇ ﺓﺭﺎﺷﺈﻛ ًﺍﺪﻴﻔﻣ 

. ﺔﻴﻟﺎﻣ ﻕﺍﺭﻭﺃ ﻰﻟﺇ ﺎﻬﻠﻳﻮﺤﺗ ﻞﺒﻗ ﻝﻮﺻﻷﺍ ﺺﺨﻳ ﺎﻤﻴﻓ 

ﻯﺮﺧﻷﺍ ﻪﺗﺎﻣﺍﺰﺘﻟﺍ 

Secondary Market 

�� 

ﻲﺘﻟﺍ ﺔﻴﻟﻭﻷﺍ ﻕﻮﺴﻟﺍ 

ﺲﻜﻌﺑ) 

ﺔﻴﻟﺎﺤﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺎﺑ 

ﺓﺮﺟﺎﺘﻤﻟﺍ ﺓﺩﺎﻋﺇ ﺎﻬﻴﻓ ﻢﺘـﺗ 

ﻕﻮﺳ ﺎﻬﺑ ﺪﺼﻘﻳ 

ﻥﺃ ﺩﺎﺘﻌﻤﻟﺍ ﻦﻣﻭ ؛( 

ﻝﻮﺻﻷﺍ ﻚﻠﺗ ءﺎﺸﻧﺈﺑ ﺖﻣﺎﻗ ﻲﺘﻟﺍ ﺔﻬﺠﻟﺍ ﻞﺒﻗ ﻦﻣ ًﻻﻭﺃ ﻝﻮﺻﻷﺍ ﻊﻴﺑ ﺎﻬﻴﻓ ﻢﺘﻳ 

ﺔﻤﻈﻨﻣ ﺔﺻﺭﻮﺑ ﻞﺜﻣ ،ﻂﻴﺳﻭ 

ﻝﻼﺧ ﻦﻣ ﻦﻳﺮﻤﺜﺘﺴﻤﻟﺍ ﻦﻴﺑ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻚﻠﺘﺑ 

ﺓﺮﺟﺎﺘﻤﻟﺍ 

ﻢﺘـﺗ 

. Nasdaq ﻙﺍﺩﺯﺎﻧ 

ﺔﺻﺭﻮﺑﻭ Amex ﺲﻜﻴﻣﺍ ﺔﺻﺭﻮﺑﻭ NYSE ﻙﺭﻮﻳﻮﻴﻧ ﺔﺻﺭﻮﺒﻛ 

Securities and Exchange Commission (SEC) 

(SEC) �� 

ﻦﻴﻧﺍﻮﻗ ﻡﺎﻜﺣﺃ ﻖﻴﺒﻄﺗﻭ ﺔﻴﻤﻴﻈﻨـﺗ ﺪﻋﺍﻮﻗ ﺭﺍﺪﺻﺈﺑ 

ﺔﺿﻮﻔﻣﻭ 

ﺔﻴﻜﻳﺮﻣﻷﺍ ﺔﻣﻮﻜﺤﻠﻟ ﺔﻌﺑﺎﺗ ﺔﻟﺎﻛﻭ ﻲﻫ 

ﺕﺎﻣﻮﻠﻌﻤﻟﺍ ﻦﻋ ﺡﺎﺼﻓﻹﺍ ﻢﻜﺤﺗ ﻲﺘﻟﺍ ﺢﺋﺍﻮﻠﻟﺍ ﺎﻬﻴﻓ 

ﺎﻤﺑ ،ﺎﻬﺤﺋﺍﻮﻟﻭ 

ﺔﻴﻟﺍﺭﺪﻴﻔﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ 

ﺔﻟﻭﺆﺴﻣ ﺎﻀﻳﺃ ﻲﻫﻭ ؛ﺭﻮﻬﻤﺠﻟﺍ 

ﻰﻟﺇ ﻊﻴﺒﻠﻟ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﺽﺮﻌﺑ ﻖﻠﻌﺘﻳ ﺎﻤﻴﻓ ﺎﻬﻤﻳﺪﻘﺗ ﻢﺘﻳ ﻲﺘﻟﺍ 

. ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻚﻠﺘﺑ 

ﺓﺮﺟﺎﺘﻤﻟﺍ ﻢﻴﻈﻨﺗ ﻦﻋ 

Securitization 

�� 

. ﺔﻨﻴﻌﻣ ﻝﻮﺻﺄﺑ ﺔﻣﻮﻋﺪﻣ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﺭﺍﺪﺻﺇ ﺎﻬﺑ ﺪﺼﻘﻳ 

Security 

�� 

ﺎﻬﻨﻫﺮﻳ ﻲﺘﻟﺍﻭ ﺽﺮﻘﻤﻟﺍﻭ ﺽﺮﺘﻘﻤﻟﺍ ﻦﻣ ﻞﻜﻟ ﺔﺒﺴﻨﻟﺎﺑ ﺔﻤﻴﻗ ﺕﺍﺫ ﺪﻌﺗ ﻲﺘﻟﺍ ﻝﻮﺻﻷﺍ ﺎﻬﺑ ﺪﺼﻘﻳ 

ﻡﺮﺒﻤﻟﺍ ﺽﺮﻘﻟﺍ ﻕﺎﻔﺗﺍ ﺐﺟﻮﻤﺑ ﻪﺗﺎﻣﺍﺰﺘﻟﺎﺑ ﺽﺮﺘﻘﻤﻟﺍ ءﺎﻓﻭ ﻥﺎﻤﺿ ﻞﺟﺃ ﻦﻣ ﺽﺮﻘﻤﻠﻟ ﺽﺮﺘﻘﻤﻟﺍ 

ﺎﻬﺑ ﻦﻳﺪﻳ ﻲﺘﻟﺍ ﻝﺍﻮﻣﻷﺍ ﺾﻌﺑ ﻭﺃ ﻞﻛ ﺩﺍﺩﺮﺘﺳﻻ ﻝﻮﺻﻷﺍ ﻡﺍﺪﺨﺘﺳﺍ ﺽﺮﻘﻤﻠﻟ ﻖﺤﻳﻭ . ﺎﻤﻬﻨﻴﺑ 

. ﺩﺍﺪﺴﻟﺍ ﻲﻓ ﺽﺮﺘﻘﻤﻟﺍ ﻕﺎﻔﺧﺇ ﻝﺎﺣ ﻲﻓ ﺽﺮﺘﻘﻤﻟﺍ 

Senior/Junior 

�� / �� 

ﻕﺍﺭﻭﻷﺍ ﻦﻣ ﺮﺜﻛﺃ ﻭﺃ ﺓﺪﺣﺍﻭ ﺔﺌﻔﻟ ًﺎﻴﻧﺎﻤﺘﺋﺍ 

ًﺍﺰﻳﺰﻌﺗ 

ﺮﻓﻮﻳ ﻖﻳﺭﻮﺘﻟﺍ ﺕﺎﻴﻠﻤﻌﻟ ﻊﺋﺎﺷ ﻞﻜﻴﻫ ﻮﻫ 

ﺩﻮﺟﻮﺑﻭ . ﺔﻴﻧﺎﺜﻟﺍ ﺔﺟﺭﺪﻟﺍ ﻦﻣ ﻯﺮﺧﺃﻭ ﻰﻟﻭﻷﺍ ﺔﺟﺭﺪﻟﺍ ﻦﻣ ﺕﺎﺌﻓ ﻰﻟﺇ ﺎﻬﻔﻴﻨﺼﺗ 

ﻝﻼﺧ ﻦﻣ ﺔﻴﻟﺎﻤﻟﺍ 

ﻢﺳﺍ ﻥﺎﻴﺣﻷﺍ ﺐﻠﻏﺃ ﻲﻓ ﻰﻟﻭﻷﺍ ﺔﺟﺭﺪﻟﺍ ﻦﻣ ﺕﺎﺌﻔﻟﺍ ﻰﻠﻋ ﻖﻠﻄﻳ ،ﺕﺎﺌﻔﻟﺍ ﻚﻠﺗ ﻦﻴﺑ ﺔﻗﻼﻌﻟﺍ ﻚﻠﺗ 

ﻦﻣ ﻥﻭﺫﻷﺍ" 

ﺎﻬﻴﻠﻋ ﻖﻠﻄﻴﻓ ( ﺔﻌﺑﺎﺘﻟﺍ ﻭﺃ) 

ﺔﻴﻧﺎﺜﻟﺍ ﺔﺟﺭﺪﻟﺍ ﻦﻣ ﺕﺎﺌﻔﻟﺍ ﺎﻣﺃ " ﺃ ﺔﺌﻔﻟﺍ ﻦﻣ ﻥﻭﺫﻷﺍ" 

. " ﺏﺔﺌﻔﻟﺍ 

Servicer 

�� 

ﻒﻠﺘﺨﻣ ﻦﻣ ﺽﻭﺮﻘﻟﺎﺑ 

ﺔﺻﺎﺨﻟﺍ ﺕﺎﻌﻓﺪﻟﺍ ﻞﻴﺼﺤﺗ ﻦﻋ ﺔﻟﻭﺆﺴﻤﻟﺍ ﺔﺴﺳﺆﻤﻟﺍ ﻪﺑ ﺪﺼﻘﻳ 

ﺏﺎﺤﺻﺃ ﻭﺃ ﺐﺣﺎﺻ ﻰﻟﺇ ﺎﻬﻣﻼﺘﺳﺍ ﻢﺘﻳ ﻲﺘﻟﺍ ﻎﻟﺎﺒﻤﻟﺍ ﻲﻟﺎﻤﺟﺇ ﻞﻳﻮﺤﺗ ﻦﻋﻭ ﻦﻴﺿﺮﺘﻘﻤﻟﺍ 

. ﺽﻭﺮﻘﻟﺍ 

Special-Purpose Entity (SPE) 

(SPE) �� 

ﻭﺃ ﺔﺌﻴﻫ ﻞﻜﺷ ﻲﻓءﺍﻮﺳ) 

ﺱﻼﻓﻹﺍ ﺮﻄﺧ ﻦﻋ ﺓﺪﻴﻌﺑ ﺹﺎﺧ ﺽﺮﻏ ﺕﺍﺫ ﺓﺄﺸﻨﻣ ﺎﻬﺑ ﺪﺼﻘﻳ 

ﻞﻜﺷ ﻱﺃ ﻭﺃ ﺓﺩﻭﺪﺤﻣ ﺔﻴﻟﻭﺆﺴﻣ ﺕﺍﺫ ﺔﻛﺮﺷ ﻭﺃ ﺔﻴﻧﺎﻤﺘـﺋﺍ ﺔﻛﺮﺷ ﻭﺃ ﺔﻴﺻﻮﺗ ﺔﻛﺮﺷ ﻭﺃ ﺔﺴﺳﺆﻣ 

ﺔﺴﺳﺆﻣ ﻑﺮﻃ ﻦﻣ ﺭﺎﺒﺘﻋﻻﺍ ﻦﻴﻌﺑ ﺓﺫﻮﺧﺄﻤﻟﺍ ﺹﺎﺨﻟﺍ ﺽﺮﻐﻟﺍ ﺮﻴﻳﺎﻌﻤﺑ ﻲﻔﺗ ﺚﻴﺤﺑ ( ﺮﺧﺁ 

. ﺯﺭﻮﺑ ﺪﻧﺃ ﺩﺭﺪﻧﺎﺘﺳ 

Sponsor 

�� 

ﺎﻬﻠﻳﻮﺤﺗ ﻢﺘﻳ 

ﻲﺘﻟﺍ ﻝﻮﺻﻷﺍ 

ﺊﺸﻨﻣ ﻲﻫ ﺎﻬﻧﻷ ﺎﻣﺇ ،ﻖﻳﺭﻮﺘﻟﺍ 

ﺔﻴﻠﻤﻋ ﻦﻤﻀﺗ ﻲﺘﻟﺍ ﺔﻬﺠﻟﺍ ﻪﺑ ﺪﺼﻘﻳ 

. ﺔﻴﻟﺎﻣ ﻕﺍﺭﻭﺃ ﻰﻟﺇ ﺎﻬﻠﻳﻮﺤﺗ ﻞﺒﻗ ﺓﺮﺷﺎﺒﻣ ﻝﻮﺻﻷﺍ ﻚﻠﺗ ﻚﻠﻤﺗ ﺖﻧﺎﻛ ﺎﻬﻧﻷ ﻭﺃ ﺔﻴﻟﺎﻣ ﻕﺍﺭﻭﺃ ﻰﻟﺇ 

Stress Testing 

�� 

Standard & Poor's ﺯﺭﻮﺑ ﺪﻧﺃ ﺩﺭﺪﻧﺎﺘﺳ ﺔﺴﺳﺆﻣ ﻞﺒﻗ ﻦﻣ ﻡﺪﺨﺘﺴﻤﻟﺍ ءﺍﺮﺟﻹﺍ ﻪﺑ ﺪﺼﻘﻳ 

ﺞﺘﻨﻳ ﻥﺃ ﺢّﺟﺮ 

ﻳ ﻖﻳﺭﻮﺘﻟﺍ ﺔﻴﻠﻤﻌﻟ ًﺎﻴﻃﺎﻴ ﺘﺣﺍ ًﺎﻧﺎﻤﺿ 

ﻞﻜﺸﺗ ﻑﻮﺳ ﻲﺘﻟﺍ ﻝﻮﺻﻷﺍ ﺖﻧﺎﻛ ﺍﺫﺇ ﺎﻣ ﻢﻴﻴﻘﺘﻟ 

ﺔﻘﺤﺘﺴﻤﻟﺍ 

ﺕﺎﻌﻓﺪﻟﺍ ﺩﺍﺪﺴﻟ ﺔﻔﻠﺘﺨﻣ ﺔﻳﺩﺎﺼﺘﻗﺍ ﺕﺎﻫﻮﻳﺭﺎﻨﻴﺳ ﻂﻐﺿ ﺖﺤﺗ ﺔﻴﻓﺎﻛ ﺔﻳﺪﻘﻧ ﺕﺎﻘﻓﺪﺗ ﺎﻬﻨﻋ 

ﺕﺎﻫﻮﻳﺭﺎﻨﻴﺴﻟﺍ ﻦﻤﻀﺘﺗﻭ . ﺔﻠﺼﻟﺍ ﺕﺍﺫ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺎﺑ ﺔﺻﺎﺨﻟﺍ ﺓﺪﺋﺎﻔﻟﺍﻭ ﺽﺮﻘﻟﺍ ﻞﺻﺃ ﻦﻋ 

ﺰﻳﺰﻌﺘﻠﻟ 

ﺡﺮﺘﻘﻤﻟﺍ ﻞﻜﻴﻬﻟﺍ 

ﻥﺎﻛ ﺍﺫﺇ ﺎﻣ ﻰﻟﺇ ﺓﺭﺎﺷﺇ ﻡﺪﻘﺗ ﻲﻫﻭ " ﺔﻟﺎﺣ ﺃﻮﺳﺃ" 

ﻮﻳﺭﺎﻨﻴﺳ ﻡﺎﻋ ﻪﺟﻮﺑ 

ﻕﺍﺭﻭﻷﺍ ﺕﺎﺌﻓ ﻞﻜﻟ ﻭﺃ ﺾﻌﺒﻟ ﻦﻴﻌﻣ ﻲﻧﺎﻤﺘﺋﺍ ﻒﻴﻨﺼﺗ ﻖﻴﻘﺤﺘﻟ ﻦﻴـﻴﻓﺎﻛ 

ﻩﺍﻮﺘﺴﻣﻭ 

ﻲﻧﺎﻤﺘﺋﻻﺍ 

ﻉﻮﺟﺮﻟﺍ ﻰﺟﺮﻳ) 

. ﺔﻴﻟﺎﻤﻟﺍ ﺔﻘﻔﺼﻟﺍ / ﺔﻴﻠﻤﻌﻟﺎﺑ 

ﺺﺘﺨﻳ 

ﺎﻤﻴﻓ ﺎﻫﺭﺍﺪﺻﺇ ﻢﺗ ﻲﺘﻟﺍ ﺔﻔﻠﺘﺨﻤﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ 

ﺮﺋﺎﺴﺨﻟﺍ ﺓﺭﻮﻄﺧ ﻂﺳﻮﺘﻣﻭ WAFF ﺢﺟﺮﻤﻟﺍ ﺕﺎﻧﻮﻫﺮﻟﺍ ﺲﺒﺣ ﺭﺍﺮﻜﺗ ﻂﺳﻮﺘﻣ ﻰﻟﺇ ًﺎﻀﻳﺃ 

.( WALS ﺢﺟﺮﻤﻟﺍ 

Structured Finance 

�� 

ﻦﻣ ﺮﺷﺎﺒﻣ ﻥﺎﻤﺿ ﻰﻠﻋ ﻪﻴﻓ ﻦﻳﺪﻟﺍ ﻥﺎﻤﺘﺋﺍ ﺓﺩﻮﺟ ﺪﻤﺘﻌﺗ ﻥﺃ ﺽﺮﺘﻔﻳ ﻱﺬﻟﺍ ﻞﻳﻮﻤﺘﻟﺍ ﻦﻣ ﻉﻮﻧ ﻮﻫ 

ﺰﻳﺰﻌﺘﺑ ءﺍﻮﺳ ،ﻦﻳﺪﻤﻟﺎﺑ 

ﺔﺻﺎﺨﻟﺍ ﻝﻮﺻﻷﺍ ﻥﺎﻤﺘﺋﺍ ﺓﺩﻮﺟ ﻰﻠﻋ ﻭﺃ ﺔﻴﻧﺎﻤﺘﺋﺍ ﺔﻴﻠﻫﺃ ﺕﺍﺫ ﺔﻬﺟ 

. ﻪﺴﻔﻧ ﻦﻳﺪﻤﻠﻟ ﺔﻴﻟﺎﻤﻟﺍ ﺓﺭﺪﻘﻤﻟﺍ ﻰﻠﻋ ﺩﺎﻤﺘﻋﻻﺎﺑ ﺲﻴﻟﻭ ،ﻪﻧﻭﺪﺑ 

ﻭﺃ ﻲﻧﺎﻤﺘﺋﺍ 



5

Structured Investment Vehicle (SIV) 

(SIV) �� 

ﻲﺘﻟﺍﻭ ﺎﻬﻟﻮﺻﺃ 

ءﺍﺮﺷ ﻞﻳﻮﻤﺘﺑ ﻡﻮﻘﺗ ﻲﺘﻟﺍ SPE ﺹﺎﺨﻟﺍ ﺽﺮﻐﻟﺍ ﺕﺍﺫ ﺕﺂﺸﻨﻤﻟﺍ ﻦﻣ ﻉﻮﻧ ﻮﻫ 

ﺔﻳﺭﺎﺠﺗ ﻕﺍﺭﻭﺃ ﺭﺍﺪﺻﺇ ﻝﻼﺧ ﻦﻣ ،ﻊﻔﺗﺮﻣ 

ﻒﻴﻨﺼﺗ ﺕﺍﺫ ﺔﻴﻟﺎﻣ ًﺎﻗﺍﺭﻭﺃ 

ﻝﻭﻷﺍ ﻡﺎﻘﻤﻟﺍ ﻲﻓ ﻦﻤﻀﺘﺗ 

ﺭﺎﻤﺜﺘﺳﻻﺍ ﺓﺍﺩﺃ ﻦﻣ ﺭﻮﺼﻗ / ﻕﺎﻔﺧﺇ ﻝﻮﺼﺣ ﻝﺎﺣ ﻲﻓﻭ . MTN ﻞﺟﻷﺍ ﺔﻄﺳﻮﺘﻣ ﻥﻭﺫﺃﻭ CP 

ﺔﺴﺳﺆﻣ ﻒﻴﻨﺼﺗ ﻥﺈﻓ ،ﻲﻟﺎﺘﻟﺎﺑﻭ ؛ﺎﻬﺑ 

ﺹﺎﺨﻟﺍ ﻝﻮﺻﻷﺍ ﻊﻤﺠﻣ ﺔﻴﻔﺼﺗ ﺐﺟﻮﺘﻳ ﺪﻗ ،ﻢﻈﻨﻤﻟﺍ 

ﺭﻮﻫﺪﺘﻟﺎﺑ ﺔﻄﺒﺗﺮﻤﻟﺍ ﺮﻃﺎﺨﻤﻟﺍ ﻦـّﻴـﺒـﻳ ﻢﻈﻨﻤﻟﺍ ﺭﺎﻤﺜﺘﺳﻻﺍ ﺕﺍﻭﺩﺃ ﻯﺪﺣﻹ ﺯﺭﻮﺑ ﺪﻧﺃ ﺩﺭﺪﻧﺎﺘﺳ 

ﻊﻴﺒﺑ ﺔﻄﺒﺗﺮﻤﻟﺍ ﺔﻴﻗﻮﺴﻟﺍ 

ﺔﻤﻴﻘﻟﺍ ﺮﻃﺎﺨﻣ ﻚﻟﺬﻛﻭ ﺔﻳﺭﺎﻤﺜـﺘﺳﻻﺍ ﺔﻈﻔﺤﻤﻟﺍ ﻲﻓ ﻞﻤﺘﺤﻤﻟﺍ ﻲﻧﺎﻤﺘﺋﻻﺍ 

. ﻝﻮﺻﻷﺍ 

Subordinated Class 

�� 

ﺕﺎﺌﻔﺑ ﺔﻄﺒﺗﺮﻤﻟﺍ ﻕﻮﻘﺤﻠﻟ ﺔﻌﺑﺎﺗ ﺎﻬﺑ ﺔﻄﺒﺗﺮﻤﻟﺍ ﻕﻮﻘﺤﻟﺍ ﻥﻮﻜﺗ ﺔﻴﻟﺎﻤﻟﺍ 

ﻕﺍﺭﻭﻷﺍ 

ﻦﻣ ﺔﺌﻓ ﻲﻫ 

ﻥﺃ ﺩﺎﺘﻌﻤﻟﺍ ﻦﻣﻭ . ﺔﻘﻔﺼﻟﺍ / ﺔﻴﻠﻤﻌﻟﺍ ﺲﻔﻨﺑ ﻖﻠﻌﺘﻳ ﺎﻤﻴﻓ ﺓﺭﺩﺎﺼﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻦﻣ ﻯﺮﺧﺃ 

،ﺓﺩﻮﻋﻮﻤﻟﺍ ﻦﻳﺪﻟﺍ ﺔﻣﺪﺧ ﺕﺎﻌﻓﺩ ﻡﻼﺘﺳﺍ ﻲﻓ ﺔﻴﻟﺎﻤﻟﺍ 

ﻕﺍﺭﻭﻷﺍ ﻲﻠﻣﺎﺣ ﻕﻮﻘﺤﺑ ﺔﻴﻌﺒﺘﻟﺍ ﻂﺒﺗﺮﺗ 

ﻰﻟﺇ ﺓﺩﻮﻋﻮﻤﻟﺍ ﻎﻟﺎﺒﻤﻟﺍ ﺩﺍﺪﺴﻟ ﺔﻴﻓﺎﻛ ﺔﻳﺪﻘﻧ ﺕﺎﻘﻓﺪﺗ ﺎﻬﻴﻓ ﺮﻓﻮﺘـﺗ 

ﻻﻲﺘﻟﺍﻑﻭﺮﻈﻟﺍﻲﻓﺎﻤﻴﺳﻻﻭ 

ﺪﻨﺴﻟﺍ / ﻥﺫﻹﺍ ﻞﻣﺎﺣ ﻖﺤﺑ 

ًﺎﻀﻳﺃ ﻖﻠﻌﺘـﺗ ﻥﺃ ﻦﻜﻤﻳ ﻦﻜﻟﻭ 

،ﺕﺎﺌﻔﻟﺍ 

ﺔﻓﺎﻛ ﻦﻣ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻲﻠﻣﺎﺣ 

. ﺔﻘﻔﺼﻟﺍ / ﺔﻴﻠﻤﻌﻟﺍ ﻞﻴﻐﺸﺘﻟ ﺔﻄﺒﺗﺮﻤﻟﺍ ﻞﺋﺎﺴﻤﻟﺍ ﻰﻠﻋ ﺖﻳﻮﺼﺘﻟﺍﻲﻓ 

Subordinated Debt 

�� 

ﻦﻳﺪﻟﺍ ﺩﺍﺪﺳ ﻢﺘﻳ ﻥﺃ ﺩﺎﺘﻌﻤﻟﺍ ﻦﻣﻭ . ﺮﺧﺁ ﻦﻳﺩ ﻦﻣ ﺔﺟﺭﺩ ﻰﻧﺩﺃ ﻪﻧﺄﺑ 

ﻪﻔﻴﻨﺼﺗ ﻢﺘﻳ ﻱﺬﻟﺍ ﻦﻳﺪﻟﺍ ﻮﻫ 

ﺔﺟﺭﺪﻟﺍ ﻦﻣ ﻦﻳﺪﻟﺍ ﺏﺎﺤﺻﺃ ﻰﻟﺇ ( ًﺎﻘﺑﺎﺳ ﺔﻘﺤﺘﺴﻤﻟﺍ ﻭﺃ) 

ًﺎﻴﻟﺎﺣ ﺔﻘﺤﺘﺴﻤﻟﺍ ﻎﻟﺎﺒﻤﻟﺍ ﺩﺍﺪﺳ ﺪﻌﺑ ﻊﺑﺎﺘﻟﺍ 

. ﻊﺑﺎﺘﻟﺍ ﻦﻳﺪﻟﺍ ﺏﺎﺤﺻﺃ ﻰﻟﺇ ( ًﺎﻘﺑﺎﺳ ﺔﻘﺤﺘ ﺴﻤﻟﺍ ﻭﺃ) 

ﺎﻴﻟﺎﺣ ﺔﻘﺤﺘﺴﻤﻟﺍ ﻎﻟﺎﺒﻤﻟﺍ ﺩﺍﺪﺳ ﻞﺒﻗ ﻰﻟﻭﻷﺍ 

Subprime Mortgage Loan 

�� 

�� 

ﺽﺮﺘﻘﻣ ﻰﻟﺇ ﻪﻤﻳﺪﻘـﺗ ﻢﺘﻳ ﺔﻴﻧﺎﺜﻟﺍ ﻭﺃ ﻰﻟﻭﻷﺍ ﺔﺟﺭﺪﻟﺍ ﻦﻣ ﻲﻨﻜﺳ 

ﺭﺎﻘﻋ ﻦﻫﺮﺑﻥﻮﻤﻀﻣﺽﺮﻗ 

ﻮﻫ 

. ﻯﺮﺧﺃ ﺔﻴﻧﺎﻤﺘﺋﺍ ﻞﻛﺎﺸﻤﻟ ﺽﺮﻌﺘﻟﺍ 

ﻲﻓ ﻭﺃ ﺩﺍﺪﺴﻟﺍ ﻲﻓ ﺮﺧﺄﺘﻟﺍ 

ﻲﻓ ﻖﺑﺎﺳ ﻞﺠﺳ ﻪﻟ 

Swap 

�� 

ﻥﺃ ﻦﻜﻤﻳﻭ . ﺮﺧﺁ ﺭﺎﻴﺘﺑ 

ﺔﻳﺪﻘﻧ ﺕﺎﻘﻓﺪﺗ ﺭﺎﻴﺗ ﺔﻟﺩﺎﺒﻣ ﻰﻠﻋ ﻥﻼﺛﺎﻤﺘﻣ ﻥﺎﻓﺮﻃ ﻪﻴﻓ ﻖﻔﺘﻳ ﻕﺎﻔﺗﺍ ﻮﻫ 

ﻕﺎﻘﺤﺘﺳﻻﺍ ﺪﻴﻋﺍﻮﻣ ﺮﻴﻴﻐﺘﻟ 

ﺕﻻﺩﺎﺒﻣ ﻭﺃ ﺔﻠﻤﻌﻟﺍ ﺕﻻﺩﺎﺒﻣ ﻭﺃ ﺓﺪﺋﺎﻔﻟﺍ ﺮﻌﺳ ﺕﻻﺩﺎﺒﻣ ﻚﻟﺫ ﻦﻤﻀﺘﻳ 

. ﺔﻳﺭﺎﻤﺜـﺘﺳﺍ ﺕﺍﺪﻨﺳ ﺔﻈﻔﺤﻤﺑ ﺔﺻﺎﺨﻟﺍ ﺪﺋﺍﻮﻌﻟﺍ ﻭﺃ 

Synthetic Securities 

�� 

ﻝﻮﺻﻸﻟ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﺎﻬﻘﻘﺤﺗ ﻲﺘﻟﺍ ﺔﻳﺪﻘﻨﻟﺍ ﺕﺎﻘﻓﺪﺘﻟﺍ ﻞﻳﺪﻌﺘﻟ ﺔﻤﻤﺼﻤﻟﺍ ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻲﻫ 

ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻸﻟ ﺔﻴﻧﺎﻤﺘﺋﻻﺍ ﺔﻴﻠﻫﻷﺍ ﻰﻠﻋ ﻝﻭﻷﺍ ﻡﺎﻘﻤﻟﺍ ﻲﻓ ﺎﻬﻔﻴﻨﺼﺗ ﺪﻤﺘﻌﻳ ﻲﺘﻟﺍﻭ ﺔﻨﻣﺎﻀﻟﺍ 

. ﺔﻠﺛﺎﻤﻣ ﻯﺮﺧﺃ ﺕﺎﻗﺎﻔﺗﺍ ﻰﻠﻋ ﻭﺃ ﺓﺪﺋﺎﻔﻟﺍ ﺮﻌﺳ ﺕﻻﺩﺎﺒﻣ ﻰﻠﻋ ﻭﺃ ﺔﻠﻤﻌﻟﺍﻭ ﻝﻮﺻﻸﻟ 

Synthetic CDO 

�� 

ﻦﻣ ﺮﻃﺎﺨﻤﻟﺍ 

ﻞﻳﻮﺤﺗ ﺫﺎﻔﻧﺇ ﺎﻬﻴﻓ ﻢﺘﻳ CDO ﻥﻮﻤﻀﻤﻟﺍ ﻦﻳﺪﻟﺍ ﻡﺍﺰﺘﻟﺎﺑ ﺔﺻﺎﺧ ﺔﻘﻔﺻ / ﺔﻴﻠﻤﻋ ﻲﻫ 

. ﻝﻮﺻﻸﻟ ﺔﻴﻘﻴﻘﺣ ﻊﻴﺑ ﺔﻴﻠﻤﻋ ﺲﻜﻌﺑ ،ﺔﻴﻧﺎﻤﺘﺋﻻﺍ 

ﺕﺎﻘﺘﺸﻤﻟﺍ ﻡﺍﺪﺨﺘﺳﺍ ﻝﻼﺧ 

T 

Trigger Event 

�� 

ﻭﺃ ﺭِﺪﺼ 

ُﻤﻠﻟ ﺔﻴﻟﺎﻤﻟﺍ ﺔﻟﺎﺤﻟﺍ 

ﺭﻮﻫﺪﺗ ﻰﻟﺇ ﺮﻴﺸﻳ ﺙﺪﺣ ﻉﻮﻗﻭ ﻪﺑ ﺪﺼﻘﻳ ،ﻖﻳﺭﻮﺘﻟﺍ ﺔﻴﻠﻤﻋ ﺺﺨﻳ ﺎﻤﻴﻓ 

/ ﺔﻴﻠﻤﻌﻟﺍ ﻖﺋﺎﺛﻭ ﻲﻓ ﺙﺍﺪﺣﻷﺍ ﻩﺬﻫ ﻒﻳﺮﻌﺗ ﻢﺘﻳ ﺓﺩﺎﻋﻭ . ﺔﻘﻔﺼﻟﺍ / ﺔﻴﻠﻤﻌﻟﺎﺑ ﻂﺒﺗﺮﻣ ﺮﺧﺁ ﻑﺮﻄﻟ 

ﻢﺘﻳ ﻲﺘﻟﺍ ﺕﺎﻋﻮﻓﺪﻤﻟﺍ ﺔﻳﻮﻟﻭﺃ ﻭﺃ / ﻭ ﺔﻘﻔﺼﻟﺍ / ﺔﻴﻠﻤﻌﻟﺍ ﺔﻴﻠﻜﻴﻫ 

ﻲﻓ ﺕﺍﺮﻴﻴﻐﺘﻟﺍ ﻚﻟﺬﻛﻭ ﺔﻘﻔﺼﻟﺍ 

. ﺙﺪﺤﻟﺍ ﻚﻟﺫ ﻉﻮﻗﻭ ﺐﻘﻋ ﺎﻬﺋﺍﺮﺟﺈﺑ ﻒﻴﻠﻜﺘﻟﺍ 

True Sale Opinion 

�� 

ﺎﻬﻠﻳﻮﺤﺗ ﻢﺘﻳ ﻲﺘﻟﺍ ﻝﻮﺻﻷﺍ ﻥﺄﺑ ﻲﻧﻮﻧﺎﻗ ﺭﺎﺸﺘﺴﻣ ﻱﺃﺭ ﻪﺑ ﺪﺼﻘﻳ ،ﻖﻳﺭﻮﺘﻟﺍ ﺔﻴﻠﻤﻋ ﺺﺨﻳ ﺎﻤﻴﻓ 

ﺽﺮﻐﻟﺍ ﺕﺍﺫ ﺓﺭِﺪﺼ 

ُﻤﻟﺍ ﺓﺄﺸﻨﻤﻟﺍ ﻰﻟﺇ ﺊﺸﻨﻤﻟﺍ ﻦﻣ ﺎﻬﺘﻴﻜﻠﻣ ﻞﻳﻮﺤﺗ ﻢﺗ ﺪﻗ ﺔﻴﻟﺎﻣ ﻕﺍﺭﻭﺃ ﻰﻟﺇ 

ﻝﻭﺆﺴﻣ ﻱﺃﻭ ﺊﺸﻨﻤﻠﻟ ﻦﻴﻌﺑﺎﺘﻟﺍ ﻦﻴﻨﺋﺍﺪﻟﺍ ﻦﻣ ﻱﺃ ﻊﻣﻭﺊﺸﻨﻤﻟﺍﻊﻣًﻼﺑﺎﻘﺘﻣ 

ﺪﻌﻳ ﺏﻮﻠﺳﺄﺑﻭﺹﺎﺨﻟﺍ 

ﺱﻼﻓﻹﺍ ﺔﻛﺮﺗ ﻦﻣ ًﺍءﺰﺟ ﻞﻜﺸﺗ ﻦﻟ ﺎﻬﺘﻴﻜﻠﻣ ﻞﻳﻮﺤﺗ ﻢﺗ ﻲﺘﻟﺍ ﻝﻮﺻﻷﺍ ﻥﺃﻭ ،ﺊﺸﻨﻤﻠﻟ 

ﻊﺑﺎﺗﺱﻼﻓﺇ 

ﻊﻓﺩ ﻞﻴﺟﺄﺘﺑ 

ﺭﺍﺮﻗ ﻭﺃ ﻲﺋﺎﻘﻠﺗ ءﺎﺟﺭﺈﺑ ﻖﻠﻌﺘﻳ ﺎﻤﻴﻓ ﺔﻳﺭﺎﺳ ﻡﺎﻜﺣﺃ ﻱﻷ ﻊﻀﺨﺗ ﻭﺃ ﺊﺸﻨﻤﻟﺎﺑ ﺔﺻﺎﺨﻟﺍ 

. ﺔﻘﺤﺘﺴﻤﻟﺍ ﻥﻮﻳﺪﻟﺍ 

W 

Weighted-Average Coupon (WAC) 

(WAC) �� 

ﻪﺑﺎﺴﺘﺣﺍ 

ﻢﺘﻳﻭ ،ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻭﺃ ﺽﻭﺮﻘﻟﺍ ﻦﻣ ﺔﻋﻮﻤﺠﻤﻟ ﺔﺒﺴﻨﻟﺎﺑ ﺓﺪﺋﺎﻔﻟﺍ ﺮﻌﺳ " ﻂﺳﻮﺘﻣ" 

ﻪﺑ ﺪﺼﻘﻳ 

ﺮﺴﻜﻟﺍ 

ﻊﻣ ،ﺔﻋﻮﻤﺠﻤﻟﺍ 

ﻲﻓ ﺔﻴﻟﺎﻣ ﺔﻗﺭﻭ ﻭﺃ ﺽﺮﻗ ﻞﻛ ﻰﻠﻋ ﻖﺒﻄﻤﻟﺍ ﻥﻮﺑﻮﻜﻟﺍ ﺮﻌﺳ ﺏﺮﺿ ﻝﻼﺧ ﻦﻣ 

،ﺔﻠﺼﻟﺍ ﺕﺍﺫ ﺔﻴﻟﺎﻤﻟﺍ ﺔﻗﺭﻮﻟﺍ ﻭﺃ ﺔﻠﺼﻟﺍ ﻱﺫ ﺽﺮﻘﻟﺍ ﻞﺻﻷ ﻢﺋﺎﻘﻟﺍ ﺪﻴﺻﺮﻟﺍ ﻮﻫ ﻪﻴﻓ ﻂﺴﺒﻟﺍ ﻥﻮﻜﻳ ﻱﺬﻟﺍ 

. ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﻭﺃ ﺽﻭﺮﻘﻟﺍ ﺔﻋﻮﻤﺠﻣ ﻞﻣﺎﻛ ﻞﺻﻷ ﻢﺋﺎﻘﻟﺍ ﺪﻴﺻﺮﻟﺍ ﻮﻫ ﻪﻴﻓ ﻡﺎﻘﻤﻟﺍ ﻥﻮﻜﻳﻭ 

Weighted-Average Foreclosure Frequency (WAFF) 

(WAFF) �� 

ﺎﻫﺩﺍﺪﺳ ﻲﻓ ﻕﺎﻔﺧﻹﺍ ﻢﺘﻳ ﻲﺘﻟﺍﻭ 

،ﻖﻳﺭﻮﺘﻟﺍ 

ﻊﻤﺠﻣ ﻲﻓ ﻝﻮﺻﻸﻟ ﺓﺭﺪﻘﻤﻟﺍ ﺔﻳﻮﺌﻤﻟﺍ ﺔﺒﺴﻨﻟﺍ ﻪﺑ ﺪﺼﻘﻳ 

ﻦﻣ ﺎﻬﻘﻴﻘﺤﺗ ﻊﻗﻮﺘﻤﻟﺍ ﺔﻳﺪﻘﻨﻟﺍ ﺕﺎﻘﻓﺪﺘﻟﺍ ﺖﻧﺎﻛ ﺍﺫﺇ ﺎﻣ ﺭﺎﺒﺘﺧﻻ ﻢﻤﺼﻣ ﻱﺩﺎﺼﺘﻗﺍ ﻮﻳﺭﺎﻨﻴﺳ ﺐﺟﻮﻤﺑ 

ﺔﻴﻟﺎﻤﻟﺍ ﻕﺍﺭﻭﻷﺍ ﺔﻓﺎﻛ ﺩﺍﺪﺴﻟ ﺔﻴﻓﺎﻛ ،ﺡﺎﺘﻤﻟﺍ 

ﻲﻧﺎﻤﺘﺋﻻﺍ ﺰﻳﺰﻌﺘﻟﺍ ﻰﻟﺇ ﺔﻓﺎﺿﻹﺎﺑ ،ﻊﻤﺠﻤﻟﺍ 

ﻝﻼﺧ 

ﺢﺟﺮﻤﻟﺍ ﺕﺎﻧﻮﻫﺮﻟﺍ ﺲﺒﺣ ﺭﺍﺮﻜﺗ ﻂﺳﻮﺘﻣ ﻡﺪﺨﺘﺴﻳﻭ . ﻰﻠﻋﺃ ﻭﺃ ﺔﻨﻴﻌﻣ ﺔﺌﻔﺑ ﺎﻬﻔﻴﻨﺼﺗ ﻢﺗ ﻲﺘﻟﺍ 

ﻯﻮﺘﺴﻤﻟﺍ ﺪﻳﺪﺤﺘﻟ WALS ﺢﺟﺮﻤﻟﺍ ﺮﺋﺎﺴﺨﻟﺍ ﺓﺪﺷ ﻂﺳﻮﺘﻣ ﻊﻣ ﺐﻨﺟ ﻰﻟﺇ ًﺎﺒﻨﺟ WAFF 

. ﺔﻔﻠﺘﺨﻣ ﻒﻴﻨﺼﺗ ﺕﺎﺌﻓ ﻲﻓ ﺮﺋﺎﺴﺨﻠﻟ ﻊﻗﻮﺘﻤﻟﺍ 

Weighted-Average Loss Severity (WALS) 

(WALS) �� 

ﻝﻮﺻﻷﺍ ﻦﻣ ﻱﺃ ﺔﻤﻴﻗ ﺩﺍﺪﺳ ﻲﻓ ﻕﺎﻔﺧﻹﺍ ﻝﺎﺣ ﻲﻓ ﺎﻬﺛﻭﺪﺣ ﻊﻗﻮﺘﻤﻟﺍ ﺓﺭﺎﺴﺨﻟﺍ ﻂﺳﻮﺘﻣ ﻪﺑ ﺪﺼﻘﻳ 

ﺦﻳﺭﺎﺗ ﻦﻣ ًﺍﺭﺎﺒﺘﻋﺍ ﻢﺋﺎﻘﻟﺍ ﻞﺻﻷﺍ ﺪﻴﺻﺭ ﻦﻣ ﺔﻳﻮﺌﻣ ﺔﺒﺴﻨﺑ 

ﻪﻨﻋ ﺮﻴﺒﻌﺘﻟﺍ ﻢﺘﻳﻭ ،ﻖﻳﺭﻮﺘﻟﺍ 

ﻊﻤﺠﻣ ﻲﻓ 

ﺽﺎﻔﺨﻧﻻﺍ ﺹﻮﺼﺨﺑ ﺕﺎﺿﺍﺮﺘﻓﺍ ﻰﻠﻋ ًءﺎﻨﺑ ﺔﻌﻗﻮﺘﻤﻟﺍ ﺓﺭﺎﺴﺨﻟﺍ ﻥﺎﻴـﺑ ﻢﺘﻳﻭ . ﺩﺍﺪﺴﻟﺍ ﻲﻓ ﻕﺎﻔﺧﻹﺍ 

ﻡﺍﺪﺨﺘﺳﺍ ﻢﺘﻳ ﺎﻤﻛ . ﻞﺻﻷﺍ ﻦﻤﻀﻳ ﺪﻗ ﻱﺬﻟﺍ ﻲﻃﺎﻴﺘﺣﻻﺍ ﻥﺎﻤﻀﻠﻟ ﺔﻴﻗﻮﺴﻟﺍ ﺔﻤﻴﻘﻟﺍ ﻲﻓ ﻞﻤﺘﺤﻤﻟﺍ 

ﺕﺎﻧﻮﻫﺮﻟﺍ ﺲﺒﺣ ﺭﺍﺮﻜﺗ ﻂﺳﻮﺘﻣ 

ﻊﻣ ﺐﻨﺟ ﻰﻟﺇ ًﺎﺒﻨﺟ WALS ﺢﺟﺮﻤﻟﺍ ﺮﺋﺎﺴﺨﻟﺍ ﺓﺪﺷ ﻂﺳﻮﺘﻣ 

. ﺔﻔﻠﺘﺨﻣ ﻒﻴﻨﺼﺗ ﺕﺎﺌﻓ ﻲﻓ ﺮﺋﺎﺴﺨﻠﻟ ﻊﻗﻮﺘﻤﻟﺍ ﻯﻮﺘﺴﻤﻟﺍ ﺪﻳﺪﺤﺘﻟ WAFF ﺢﺟﺮﻤﻟﺍ 

Whole Business Securitization 

�� 

ﻥﻭﺰﺨﻤﻟﺎﺑ ﺔﻧﻮﻤﻀﻣ ﺕﺍﺪﻨﺳ ﺭﺍﺪﺻﺇ ﻰﻟﺇ ﺮﻴﺸﺗ ﻞﻣﺎﻜﻟﺎﺑ ﺔﻳﺭﺎﺠﺘﻟﺍ ﺔﺴﺳﺆﻤﻠﻟ ﻭﺃ ﺔﻛﺮﺸﻠﻟ 

ﻖﻳﺭﻮﺘﻟﺍ ﺔﻴﻠﻤﻋ 

ﺱﻼﻓﺇ ﺭﺎﻬﺷﺇ ﺕﺍءﺍﺮﺟﺈﺑ ﺓﺮﺷﺎﺒﻤﻟﺍ ﻝﺎﺣ ﻲﻓﻭ . ﺎﻣ ﺔﻛﺮﺷ ﻯﺪﻟ ﺔﻳﺪﻘﻧ ﺕﺎﻘﻓﺪﺘﻟ ﺔﺠﺘـﻨﻤﻟﺍ 

ﻝﻮﺻﻷﺎﺑ 

ﻭﺃ / ﻭ 

ﻦﻣ ﻪﺗﺭﺍﺩﺇ ﻦﻜﻤﻳﻭ ﺕﺍﺪﻨﺴﻟﺍ / ﻥﻭﺫﻷﺍ ﻲﻠﻣﺎﺣ ﺢﻟﺎﺼﻟ ًﺎﻴﻧﻮﻧﺎﻗ 

ﻥﺎﻤﻀﻟﺍ ﻝﺰﻋ ﺯﻮﺠﻳ ،ﺎﻫﺭﺎﺴﻋﺇ 

ﻭﺃ ﺔﻛﺮﺸﻟﺍ 

/ ﻥﻭﺫﻷﺍ ﻲﻠﻣﺎﺣ ﺢﻟﺎﺼﻟ ﺔﻳﺪﻘﻧ ﺕﺎﻘﻓﺪﺗ ﺝﺎﺘﻧﺇ ﻰﻠﻋ ﻥﺎﻤﻀﻟﺍ ﺓﺭﺪﻗ ﺪﻳﺪﻤﺗ ﻲﻟﺎﺘﻟﺎﺑﻭ ،ﻲﻃﺎﻴﺘﺣﺍ ﻞﻐﺸﻣ ﻞﺒﻗ 

ﻥﺃ ﻦﻜﻤﻳ ،ﺔﻴﻟﺎﻣ ﻕﺍﺭﻭﺃ ﻰﻟﺇ ﻪﻠﻳﻮﺤﺗ ﻢﺘﻳ ﻱﺬﻟﺍ ﻦﻳﺪﻟﺍ ﺔﻴﻠﻜﻴﻬﻟ 

ﺔﻴﻓﺎﻛ ﺰﻳﺰﻌﺗ ﺕﺎﻴﻠﻤﻋ ءﺍﺮﺟﺇ ﺪﻨﻋﻭ 

. ﺕﺍﺪﻨﺴﻟﺍ 

ﻦﻳﺪﻟﺍ 

ﻦﻣ ( ﺔﻴﻟﺎﻣ ﻕﺍﺭﻭﺃ ﻰﻟﺇ ﻪﻠﻳﻮﺤﺗ ﻢﺘﻳ ﻱﺬﻟﺍ) 

ﻦﻳﺪﻠﻟ ﻝﻮﻃﺃ ﺓﺮﺘﻓﻭ ﻰﻠﻋﺃ ًﺎ ﻔﻴﻨﺼﺗ ﻖﻳﺭﻮﺘﻟﺍ ﺔﻴﻠﻤﻋ ﻖﻘﺤﺗ 

. ﺕﺎﻛﺮﺸﻟﺍ ﻯﺪﺣﻹ ﻥﻮﻤﻀﻤﻟﺍ ﺮﻴﻏ ﻭﺃ ﻥﻮﻤﻀﻤﻟﺍ 



6


Full Year 2007 

Issuer Nationality Instrument Amt US$ m Iss. % Manager 

1 Binariang GSM Malaysia Sukuk Musharakah 4,509 9 12.4 CIMB, RHB, Aseambankers, ABN 

Amro, AmInvestment, OCBC 

2 Malaysia Malaysia Sukuk 2,863 3 7.9 Malaysian Government bond 

3 Aldar Funding UAE Exchangeable Sukuk 

Mudarabah 

Page 160 

Global Islamic Bond League Table 

by Issuer 


2,530 1 6.9 Barclays Capital, Credit Suisse 

Securities (Europe), National Bank of 

Abu Dhabi 

4 Saudi Basic Industries Saudi Arabia Sukuk Istithmar 2,133 1 5.9 HSBC Saudi Arabia, Riyad Bank 

5 JAFZ Sukuk UAE Sukuk 2,043 1 5.6 Barclays Capital, Deutsche Bank 

(London), Dubai Islamic Bank, 

Lehman Brothers International 

6 Nucleus Avenue (M) Malaysia Sukuk Musharakah MTN 1,994 9 5.5 CIMB 

7 DP World Sukuk UAE Sukuk Mudarabah 1,496 1 4.1 Barclays Capital, Citigroup Global 

Markets, Deutsche Bank, 

Lehman Brothers 

8 Saudi Electricity UAE Sukuk 1,333 1 3.7 HSBC Saudi Arabia 

9 Dubai Sukuk Center UAE Sukuk Mudarabah 1,248 1 3.4 Deutsche Bank, Goldman Sachs 

International 

10 Projek Lebuhraya Utara Selatan Malaysia Sukuk Musharakah 1,067 10 2.9 CIMB 

11 Dana Gas Sukuk UAE Sukuk Mudarabah 1,000 1 2.7 JP Morgan 

12 Dar Al-Arkan International Sukuk Saudi Arabia Sukuk Ijarah 1,000 1 2.7 ABC Islamic, Arab National, 

Deutsche Bank, Dubai Islamic Bank, 

Gulf International Bank, Kuwait 

Finance House, Unicorn Investment 

13 Cherating Capital Malaysia Exchangeable Sukuk 850 1 2.3 Deutsche Bank (Malaysia), 

JP Morgan, CIMB 

14 Hijrah Pertama Malaysia Sukuk Ijarah 847 2 2.3 Citigroup, CIMB 

15 Nakheel Development 2 UAE Sukuk Ijarah 750 2 2.1 JP Morgan 

16 DIB Sukuk UAE Sukuk Musharakah 750 1 2.1 Barclays Capital, Citigroup Global 

Markets, Standard Chartered Bank 

17 Cagamas Malaysia Bithaman Ajil Islamic 

Securities/Mudarabah MTN 

668 10 1.8 Cagamas, Aseambankers, HSBC, 

CIMB 

18 Golden Belt 1 Sukuk Saudi Arabia Sukuk Manafaa 650 1 1.8 BNP Paribas 

19 Cagamas MBS Malaysia Sukuk Musharakah Islamic 

Residential Mortgage 

Backed Securities 

620 7 1.7 Standard Chartered, National Bank 

of Pakistan 

20 DAAR International Sukuk Saudi Arabia Sukuk Ijarah 600 1 1.6 ABC Islamic Bank, Arab National 

Bank, Standard Bank, Unicorn 

Investment Bank, WestLB 

Total of issues used in the table 36,452 300 100.0 

For all enquires regarding the above information, please contact: Catherine Chu 

Email: Catherine.Chu@Hk.Dealogic.com 

Phone: +852 2804 1223; Fax: +852 2529 4377


Southeast Asian Islamic Bond 

League Table by Issuer 

Issuer Nationality Instrument Amt US$ m Iss. % Manager 



1 Binariang GSM Malaysia Sukuk Musharakah 4,509 9 25.3 CIMB, RHB, Aseambankers, ABN 

Amro, AmInvestment, OCBC Bank 

(Malaysia) 

2 Malaysia Malaysia Sukuk 2,863 3 16.1 Malaysian Government bond 

3 Nucleus Avenue (M) Malaysia Sukuk Musharakah MTN 1,994 9 11.2 CIMB 

4 Projek Lebuhraya Utara Selatan Malaysia Sukuk Musharakah 1,067 10 6.0 CIMB 

5 Cherating Capital Malaysia Exchangeable Sukuk 850 1 4.8 Deutsche Bank (Malaysia), 

JP Morgan, CIMB 

6 Hijrah Pertama Malaysia Sukuk Ijarah 847 2 4.8 Citigroup, CIMB 

7 Cagamas Malaysia Bithaman Ajil Islamic 

Securities/Mudarabah MTN 

8 Cagamas MBS Malaysia Sukuk Musharakah 

Islamic Residential Mortgage 

Backed Securities 

668 10 3.7 Cagamas, Aseambankers, HSBC, 

CIMB 

9 Rantau Abang Capital Malaysia Sukuk Musharakah 570 1 3.2 CIMB 

620 7 3.5 Standard Chartered, National Bank 

of Pakistan 

10 Silterra Capital Malaysia Sukuk Ijarah 530 1 3.0 CIMB, HSBC, Citibank 

11 Jimah Energy Ventures Malaysia Istisna Islamic MTN 416 20 2.3 AmMerchant, RHB Sakura, MIMB, 

Bank Muamalat 

12 Lebuhraya Kajang-Seremban Malaysia Sukuk Istisna 413 12 2.3 AmInvestment 

13 MBB Sukuk Malaysia Subordinated Sukuk Trust 

Certifi cates 

300 1 1.7 HSBC, Aseambankers, UBS 

14 Tesco Stores (Malaysia) Malaysia Sukuk Musharakah 210 2 1.2 CIMB, Standard Chartered 

15 Kuala Lumpur Sentral Malaysia Sukuk Musharakah 208 7 1.2 HSBC 

16 MISC Malaysia Murabahah MTN 201 1 1.1 CIMB, HSBC, AmIinvestment 

17 MTD InfraPerdana Malaysia Murabahah MTN 174 8 1.0 AmInvestment, CIMB, 

United Overseas Bank (Malaysia) 

18 Kuala Lumpur Kepong Malaysia Sukuk Ijarah MTN 147 2 0.8 Aseambankers 

19 Mukah Power Generation Malaysia Sukuk Mudarabah/Istisna 135 18 0.8 RHB Islamic 

20 Cerah Sama Malaysia Sukuk Musharakah 112 7 0.6 CIMB 


ARE YOUR DEALS LISTED HERE? 

If you feel that the information within these tables is inaccurate, you 

may contact the following directly: 

Catherine Chu 

Email: Catherine.chu@hk.dealogic.com 

Telephone: +852 2804 1223 

Page 161



Page 162 

Global Islamic Bond 

League Table by Bookrunner 

Issuer Amt US$ m Iss. % 

1 CIMB 6,351 76 17.4 

2 HSBC 3,785 31 10.4 

3 Malaysian Government bond 2,863 3 7.9 

4 Barclays Capital 2,403 6 6.6 

5 JP Morgan 2,033 4 5.6 

6 Deutsche Bank 1,904 19 5.2 

7 Citigroup 1,668 6 4.6 

8 AmInvestment 1,306 56 3.6 

9 Aseambankers 1,243 33 3.4 

10 Standard Chartered 1,173 28 3.2 

11 Riyad Bank 1,066 1 2.9 

12 Dubai Islamic Bank 1,022 6 2.8 

13 Credit Suisse 952 2 2.6 

14 RHB Investment 926 68 2.5 

15 BNP Paribas 845 3 2.3 

16 National Bank of Abu Dhabi 843 1 2.3 

17 Lehman Brothers 810 2 2.2 

18 Oversea-Chinese Banking 683 16 1.9 

19 Goldman Sachs & Co 624 1 1.7 

20 ABN Amro 620 8 1.7 


For all enquires regarding the above information, please contact: Catherine Chu 

Email: Catherine.Chu@Hk.Dealogic.com 

Phone: +852 2804 1223; Fax: +852 2529 4377 



Southeast Asian Islamic Bond 

League Table by Bookrunner 



Issuer Amt US$ m Iss. % 

1 CIMB 6,351 76 35.6 

2 Malaysian Government bond 2,863 3 16.1 

3 AmInvestment 1,306 56 7.3 

4 Aseambankers 1,243 33 7.0 

5 Citigroup 1,023 3 5.7 

6 RHB Investment 926 68 5.2 

7 HSBC 877 26 4.9 

8 Oversea-Chinese Banking 683 16 3.8 

9 ABN Amro 620 8 3.5 

10 Deutsche Bank 327 15 1.8 

11 JP Morgan 283 1 1.6 

12 Cagamas 217 7 1.2 

13 Standard Chartered 192 11 1.1 

14 Bank Muamalat Malaysia 116 28 0.6 

15 United Overseas Bank 109 17 0.6 

16 Kuwait Finance House 104 7 0.6 

17 UBS 100 1 0.6 

18 EON Bank 57 10 0.3 

19 MIMB Investment Bank 56 11 0.3 

20 HWANGDBS Investment Bank 51 9 0.3 


ARE YOUR DEALS LISTED HERE? 

If you feel that the information within these tables is inaccurate, you 

may contact the following directly: 

Catherine Chu 

Email: Catherine.chu@hk.dealogic.com 

Telephone: +852 2804 1223 

Page 163


Page 164 

Top 10 Islamic Funds by Key 

Performance Statistics 

Ranked by Annualized Returns 

Fund Fund Manager 2007 Returns Fund Domicile 

1 Jadwa Saudi Equity Fund Jadwa Investment 61.39 Saudi Arabia 

2 Bakheet Saudi Trading Equity Fund Bakheet Investment Group 73.87 Saudi Arabia 

3 Jadwa Arab Markets Equity Fund Jadwa Investment 42.19 Saudi Arabia 

4 Jadwa GCC Equity Fund Jadwa Investment 42.11 Saudi Arabia 

5 Hang Seng Islamic China Index Fund Hang Seng Investment Management 11.40 Hong Kong 

6 Al Qasr GCC Real Estate & Construction Equity 

Trading Fund 

Banque Saudi Fransi 50.52 Saudi Arabia 

7 Al Fursan Fund Banque Saudi Fransi 69.15 Saudi Arabia 

8 FALCOM Saudi Equity Fund FALCOM Financial Services 41.78 Saudi Arabia 

9 Islamic Certifi cate on the LLB MENA Top 20 Value 

TR Index 

Ranked by 2007 Returns 


1 Amanah GCC Equity Fund Saudi British Bank 81.68 Saudi Arabia 

2 Amanah Saudi Industrial Fund Saudi British Bank 81.23 Saudi Arabia 

3 GCC Al-Raed Fund Samba 79.87 Saudi Arabia 

4 Al Rajhi Local Shares Fund Al Rajhi Banking & Investment Corporation 78.98 Saudi Arabia 


6 Al Fursan Fund Banque Saudi Fransi 69.15 Saudi Arabia 

7 Al Rajhi GCC Equity Fund Al Rajhi Banking & Investment Corporation 64.36 Saudi Arabia 

8 Gulf Industrial Companies Fund The Saudi Investment Bank 62.91 Saudi Arabia 

9 TRIM Syariah Saham PT Trimegah Securities 62.54 Indonesia 


Eurekahedge Islamic Fund Index 19.76 

ABN AMRO 20.90 Switzerland 



Notes: 

* Based on 94.7% of the Funds reporting their December 2007 returns as at 31 st January 2008 

** All statistics have been calculated using funds’ returns since inception 

Contact Eurekahedge 

To list your fund or update your fund information: islamicfunds@eurekahedge.com 

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Tel: +65 6212 0900 

Disclaimer 

Copyright Eurekahedge 2007, All Rights Reserved. You, the user, may freely use the data for internal purposes and may reproduce the index data provided that reference to Eurekahedge is provided 

in your dissemination and/or reproduction. The information is provided on an “as is” basis and you assume and will bear all risk or associated costs in its use, and neither Islamic Finance news, 

Eurekahedge nor its affi liates provide any express or implied warranty or representations as to originality, accuracy, completeness, timeliness, non-infringement, merchantability and fi tness for 

any purpose. 




Ranked by Annualized Standard Deviation 

Ranked by Sharpe Ratio 




1 ING i-Enhanced Cash ING Funds 0.98 Malaysia 

2 Amwal Islamic Money Market Fund Kuwait & Middle East Financial Investment 7.59 Kuwait 

3 Al Rajhi Commodity Fund Euro (Mudarabah) Al Rajhi Banking & Investment Corporation 2.89 Saudi Arabia 

4 AlAhli Euro Murabahat Fund National Commercial Bank 3.06 Saudi Arabia 

5 Boubyan Financial Fund US$ Boubyan Bank 6.48 Kuwait 

6 Jadwa Saudi Riyal Murabaha Jadwa Investment 1.98 Saudi Arabia 

7 

Euro International Trade Finance Fund 

(Al Sunbula) 

Samba 3.38 Saudi Arabia 

8 Jadwa USD Murabahah Fund Jadwa Investment 2.20 Saudi Arabia 

9 MAAKL Al-Ma’mun MAAKL Mutual 2.61 Malaysia 

10 Emirates Dynamic Liquid Fund (Retail Shares) Emirates Bank International 5.40 Channel Islands 



1 Amwal Islamic Money Market Fund Kuwait & Middle East Financial Investment 7.59 Kuwait 

2 Boubyan Financial Fund US$ Boubyan Bank 6.48 Kuwait 

3 Boubyan Financial Fund KWD Boubyan Bank 7.16 Kuwait 

4 BIG Dana Muamalah Bhakti Asset Management 11.86 Indonesia 

5 Emirates Real Estate Fund (Accumulation Shares) Emirates Bank International 10.73 Channel Islands 

6 Insight I-Hajj Syariah Fund PT Insight Investments Management 15.27 Indonesia 


8 Atlas Pension Islamic Fund - Debt Sub Fund Atlas Asset Management Limited 1.09 Pakistan 

9 Al Dar Money Market Fund ADAM 7.95 Kuwait 



Notes: 






Tel: +65 6212 0900 

Disclaimer 




any purpose. 

Page 165


Page 166 



Geographic Mandate - Global - Ranked by 2007 Returns 


1 Solidarity Global Growth Fund Solidarity Funds Company 23.59 Bahrain 

2 

BNP Paribas Islamic Fund Equity Optimiser 

(Classic) 

BNP Paribas Asset Management 22.18 Luxembourg 

3 

DWS Noor Precious Metals Securities Fund 

(Class A) 

DWS Noor Islamic Funds Plc 21.14 Ireland 

4 Al Shamekh Islamic Portfolio Riyad Bank 20.41 Saudi Arabia 

5 AlAhli Islamic Global Equitybuilder Certifi cates National Commercial Bank 18.61 Germany 

6 HSBC Amanah Global Equity Index Fund Saudi British Bank 17.15 Saudi Arabia 

7 Global Equity Fund (Musharakah) Riyad Bank 16.75 Saudi Arabia 

8 Al Shuja’a Islamic Portfolio Riyad Bank 16.43 Saudi Arabia 

9 Global Equity Trading Fund (Al-Manal) Samba 16.20 Saudi Arabia 

10 EasyETF DJ Islamic Market Titans 100 AXA Investment Manangers 15.45 France 

Eurekahedge Global Islamic Fund Index 9.08 

Developed Markets - Ranked by 2007 Returns 


1 Alfanar Europe TT International 25.44 

British Virgin 

Islands 

2 AlAhli Europe Trading Equity Fund National Commercial Bank 16.93 Saudi Arabia 

3 

Islamic Al Yusr Certifi cate on the ABN AMRO US 

Opportunities Fund A 

ABN Amro Bank 16.44 Not disclosed 

4 Dow Jones Islamic Fund Allied Asset Advisors, Inc 15.72 US 

5 Al Madar US Index Fund Almadar Finance & Investment 14.39 Bahrain 

6 AlAhli US Trading Equity Fund National Commercial Bank 12.97 Saudi Arabia 

7 AlAhli Islamic US Equitybuilder Certifi cates National Commercial Bank 11.97 Germany 

8 Amana Income Saturna Capital 11.72 US 

9 Amana Growth Saturna Capital 11.27 US 

10 AlAhli Islamic Europe Equitybuilder Certifi cates National Commercial Bank 11.05 Germany 

Eurekahedge North America Islamic Fund Index 9.39 

Eurekahedge Europe Islamic Fund Index 3.59 

Notes: 






Tel: +65 6212 0900 

Disclaimer 




any purpose. 




Geographic Mandate - Asia Pacifi c - Ranked by 2007 Returns 

Geographic Mandate - Middle East/Africa - Ranked by 2007 Returns 





2 Danareksa Indeks Syariah PT Danareksa Investment Management 59.25 Indonesia 

3 CMS Islamic Fund CMS Trust Management 58.36 Malaysia 

4 TRIM Syariah Berimbang PT Trimegah Securities 57.59 Indonesia 

5 DWS Noor China Equity Fund (Class A) DWS Noor Islamic Funds Plc 55.60 Ireland 

6 IPB Syariah PT Kresna Graha Sekurindo Tbk 54.35 Indonesia 

7 Mega Dana Syariah PT Mega Capital Indonesia 53.68 Indonesia 

8 Al Rajhi India & China Equity Fund Al Rajhi Banking & Investment Corporation 52.74 Saudi Arabia 

9 CIMB Islamic Equity Fund CIMB Wealth Advisors 48.34 Malaysia 

10 RHB Islamic Growth Fund RHB Unit Trust Management 48.12 Malaysia 

Eurekahedge Asia Pacifi c Islamic Fund Index 20.48 


1 Amanah GCC Equity Fund Saudi British Bank 81.68 Saudi Arabia 

2 Amanah Saudi Industrial Fund Saudi British Bank 81.23 Saudi Arabia 

3 GCC Al-Raed Fund Samba 79.87 Saudi Arabia 

4 Al Rajhi Local Shares Fund Al Rajhi Banking & Investment Corporation 78.98 Saudi Arabia 


6 Al Rajhi GCC Equity Fund Al Rajhi Banking & Investment Corporation 64.36 Saudi Arabia 

7 Gulf Industrial Companies Fund Saudi Investment Bank 62.91 Saudi Arabia 


9 Al Danah GCC Equity Trading Fund Banque Saudi Fransi 59.49 Saudi Arabia 

10 Al-Saffa Saudi Equity Trading Fund Banque Saudi Fransi 58.73 Saudi Arabia 

Eurekahedge Middle East/Africa Islamic Fund Index 29.57 

Notes: 






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Disclaimer 




any purpose. 

Page 167

EVENTS DIARY 2008 

DATE EVENT VENUE ORGANIZER 

February 

5th – 6th 7th Annual Islamic Finance Summit London Euromoney Seminars 

12th – 13th Takaful Conference on Islamic Investment Management Dubai Asia Insurance Review 

17th – 20th Wealth Management Forum Middle East Dubai IIR Middle East 

18th The World Islamic Finance & Investment Conference Kuwait MEGA Events 

18th – 20th 3rd Annual Middle East Retail Banking Forum UAE IIR Middle East 

19th Islamic Investment Funds UK ICG Events 

19th – 20th The 2nd GCC Regulators Summit Bahrain Complinet 

20th March 

Seminar on Ratings Malaysia IFSB 

3rd – 6th Hedge Funds World Middle East 2008 UAE Terrapinn 

10th – 11th 3rd Islamic Banks & Financial Institutions Conference Syria Al Salam for International 

Exhibitions & Conferences 

10th – 12th Islamic Funds Asia 2008 Kuala Lumpur Terrapinn 

11th – 12th Seminar on Corporate Governance Issues in Islamic Finance Bahrain IFSB 

11th – 12th 3rd Conference Takaful in Asia Singapore MiddleEast Insurance Review 

16th – 19th Securitization World MENA 2008 UAE Terrapinn 

16th – 19th 3rd Middle East IPO Summit Abu Dhabi IIR Middle East 

24th – 25th 3rd International Conference on Islamic Banking and Finance: Risk Management, 

Regulation and Supervision 

Pakistan IFSB 

27th 5th International Seminar on Challenges Facing the Islamic Financial Services Industry Pakistan IFSB 

27th Interactive Session on Financial Health of Islamic Financial Services Pakistan IFSB 

30th – 2nd April 

Infrastructure Finance Forum 2008 Dubai IIR Middle East 

2nd Singapore IFN Forum Singapore Islamic Finance events 

7th – 9th International Ras-Al-Khaimah UAE Financial Events International 

14th – 15th The World Takaful Conference Dubai MEGA Events 

15th – 16th Asian Life Insurance Summit Vietnam MiddleEast Insurance Review 

16th Brunei IFN Forum Brunei Islamic Finance Events 

19th – 20th 8th Harvard University Forum on Islamic Finance ‘Innovation and Authenticity‘ Massachusetts Harvard Law School, Islamic 

Legal Studies Program 

21st – 22nd 9th Asian Conference on Bancassurance & Alternative Distribution Channels Malaysia MiddleEast Insurance Review 

22nd Islamic Capital Markets UK ICG Events 

28th – 29th 2nd Middle East Bancassurance Conference Bahrain MiddleEast Insurance Review 

30th May 

Hong Kong IFN Forum Hong Kong Islamic Finance Events 

7th Jakarta IFN Forum Jakarta Islamic Finance Events 

8th – 9th 2nd Asian CFO Summit Singapore MiddleEast Insurance Review 

13th – 14th 5th IFSB Summit: Financial Globalization of Islamic Financial Services Jordan IFSB 

20th – 23rd Islamic Finance World North America 2008 US Terrapinn 

21st Karachi IFN Forum Pakistan Islamic Finance Events 

25th – 29th Private Equity Forum Dubai IIR Middle East 

26th – 27th The World Islamic Capital Markets Conference Bahrain MEGA Events 

June 

The World Islamic Funds Conference Bahrain MEGA Events 

2nd – 5th Funds World Middle East 2008 Dubai Terrapinn 

3rd Cairo IFN Forum Egypt Islamic Finance Events 

15th – 19th Sukuk World Middle East Dubai IIR Middle East 

24th – 26th July 

Islamic Finance & Investment World Europe 2008 UK Terrapinn 

22nd August 

Innovative Product Development UK IGG Events 

11th – 13th October 

MIF 2008 Issuers & Investors Forum Kuala Lumpur Islamic Finance Events 

8th London IFN Forum UK Islamic Finance Events 

12th – 16th Middle East Retail Banking Forum Dubai IIR Middle East 

14th Middle East Hedge Funds 2008 Switzerland Jetfi n Events 

15th New York IFN Forum New York Islamic Finance Events 

21st Islamic Private Equity UK IGG Events 

26th – 30th Saudi Insurance Summit Saudi Arabia IIR Middle East 

28th November 

Istanbul IFN Forum Turkey Islamic Finance Events 

3rd The World Islamic Infrastructure Finance Conference Qatar MEGA Events 

11th – 13th December 

Islamic Funds World 2008 Dubai Terrapinn 

1st – 3rd The World Islamic Banking Conference Bahrain MEGA Events 

14th – 18th Debt Capital Markets Summit Dubai IIR Middle East

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continued... - Islamic Finance News

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