Category Archives: Bahrain

Bringing Islamic finance back to its roots in a regulated manner

Bringing Islamic finance back to its roots in a regulated manner



Islamic Finance is in vogue. Various financial centres around the world are vying with each other to assume the mantle of pre-eminence in Islamic finance, challenging upstarts with a wider variety of Islamic finance and product “innovation”

In the Gulf, Bahrain has tried to develop such a niche, while Malaysia has been a pioneer in the Far East. But it is London, with five licensed Islamic finance institutions, that has been making the running, and the finance institutions located in that city have been vigorous in lobbying the UK government to treat Islamic finance products on a par with non-Islamic offerings.

Read the rest …

Islamic banking boost: Central Bank of Bahrain (CBB) to launch key Islamic Financial Instrument


Islamic banking boost: Central Bank of Bahrain (CBB) to launch key Islamic Financial Instrument


The Central Bank of Bahrain (CBB) is set to launch a key Islamic financial instrument aimed at providing a liquidity management tool to Islamic financial institutions.

The Islamic Sukuk Liquidity Instrument (ISLI) has been jointly developed by the CBB and the Bahrain-based Liquidity Management Center (LMC), an organization which provides asset sourcing, structuring and market making capabilities.

ISLI has been designed to enable financial institutions, both conventional and Islamic, to access short term liquidity against Government of Bahrain Islamic leasing Ijara bonds, issued by the CBB.

Read the rest …


Murabaha contracts in London conference spotlight

Murabaha contracts in London conference spotlight

The Bahrain-based International Islamic Financial Market (IIFM) is spearheading the development of a master agreement for Islamic hedging, it was announced yesterday.

It also includes a master agreement for Islamic treasury Murabaha contracts and standardised documentation for sukuk and a Sharia-compliant repurchase agreement (Repo).

Progress on the three projects will be the focus of a briefing conference being organised by the IIFM in London on Monday.

More than 70 participants representing the UK Financial Services Authority, HM Treasury, London Stock Exchange, London Metal Exchange, legal firms and UK-based Islamic and conventional financial institutions will be taking part in the event.

The industry briefing session, which is sponsored by the European Islamic Investment Bank and Calyon Corporate and Investment Bank, follows the 18th meeting of the IIFM board of directors.

The briefing session will provide guidance to a selective group of industry experts of Islamic finance on industry trends and future directions as well as project specific presentations.

The projects were agreed with the industry during briefing sessions held in Bahrain and London last year.

“IIFM has been working hard to advance a number of key projects, which are critical to the next phase of development of a truly globalised Islamic finance industry and Islamic capital markets,” said IIFM chief executive officer Ijlal Alvi.

The centre piece of IIFM action plan is the master agreement for Islamic hedging, a key tool in risk management, which the IIFM is working on in conjunction with the International Swaps and Derivatives Association.

The two organisations are jointly developing the agreement for documenting privately negotiated Sharia-compliant hedging transactions.

The IIFM is working with the International Capital Market Association on development requirements for Islamic primary and secondary market instruments, including a Sharia-compliant Repo.

The work also includes developing recommendations, standard documentation, standard language and guidance for sukuk issuance in primary market; rules and recommendations for secondary market transactions involving sukuk and other Islamic financial instruments as well as the provision of on-line transaction matching, reporting and confirmation services for sukuk and other Islamic financial instruments.

IIFM has commissioned a prominent international legal firm to develop the relevant legal documents.

Ahli United Bank forays into Islamic banking

Ahli United Bank forays into Islamic banking

In the backdrop of a double digit growth in Islamic banking and growing appetite for Shariah compliant businesses in the market, a leading banking group Ahli United Bank (AUB) yesterday announced the launch of Islamic banking business under the name of Al Hilal Banking Services in Bahrain. AUB is looking at 50 per cent of its overall revenue stream coming from Islamic banking operations in few years time while doing business side by side with its conventional banking activities where it enjoys a distinctive position. AUB had reported a consolidated net profit of $225.9 million for the nine month period ended 30 September 2007, an increase of 37.5 per cent compared to the same period last year. As of 30 September 2007, total assets for AUB stood at $21.9 billion.

Bahrain has become the third country after the UK and Qatar for the AUB to launch Al Hilal Banking Services, an independent Islamic banking under the umbrella of AUB, a senior official at the bank said yesterday.

Abdulla Al Raeesi, Deputy Group CEO, AUB said that the decision was a result of the growing demand for Islamic banking and the trust that customers have placed on Al Hilal Islamic Banking products and services. “AUB will be expanding its Islamic Banking branch network in Bahrain. This is a testimony of the AUB’s commitment to foster Islamic Banking and to provide a comprehensive set of retail banking products and services”

The Deputy CEO said that the bank was also keen to enhance Islamic banking operations across the Gulf, Egypt, Iraq and Iran in addition to the other potential markets.
Al Raeesi said: “AUB met all the requirements of the Central Bank of Bahrain to enter into the business of offering Islamic banking products and services in Bahrain.”

The expansion of Islamic Banking operations in Bahrain is a result of the AUB Group’s strategy to provide greater Islamic product offerings across the different banks in the Group. The launch of Al Hilal Islamic Banking Services in Bahrain follows its successful launch in Qatar by Ahli Bank QSC and in the United Kingdom by Ahli United Bank UK. AUB, being a leading regional bank, has gained a wealth of knowledge operating in diverse markets across the region, helping it to offer a highly competitive product range across different countries. Al Hilal Islamic Banking Services currently has two branches in Bahrain in Arad and Sanad while third branch will be in Riffa area.
“Under the guidance from our esteemed shariah board, Al Hilal is geared to become one of the leading Islamic banking services providers in Bahrain,” added Al Raeesi. Following the launch of Al Hilal Islamic Banking Services in October 2007, Ahli United Bank (AUB) continues to enhance its Islamic banking offering to provide an unmatched range of products and services to its valued clients within Bahrain.

Professor Ali Al-Quradaghi, Chairman of the AUB shariah Board said: “We wish to acknowledge the efforts made by the Al Hilal Islamic Banking Division at AUB in going the extra mile to ensure that all contracts and financial products are in accordance with the principles and laws of the noble Islamic shariah. We wish to see Al-Hilal Islamic Banking Services grow to become one of the leading Islamic financial services providers in the region”.

The shariah supervisory board for AUB’s Al Hilal Islamic banking services include prominent scholars from around the Middle East comprising of Dr Ali Muhyealdin Al-Quradaghi, Chairman and members, Dr Fareed Hadi and Dr. Abdul Aziz Qassar. The shariah Supervisory Board works independently and is free to review and comment on all contracts and transactions. AUB strictly follows the required conditions of the shariah Board in order to ensure that all operations of Al Hilal Islamic Banking Services comply with shariah. AUB uses a modern and sophisticated operating system to maintain separate books and records for the Al Hilal Islamic Banking Division and ensure that funds and operations are fully segregated from the conventional banking operation.

Bahrain’s AUB upbeat on Islamic banking drive

Bahrain’s AUB upbeat on Islamic banking drive

Bahrain’s Ahli United Bank (AUB) AUBB.BH AUBB.KW, the kingdom’s largest lender by market value, on Monday said it expected its new Islamic division to generate revenue equivalent to half its current total in as little as three years.

The bank, whose consolidated net profit was $207.5 million in 2006, also expects to increase to 50 from four its Al Hilal brand Islamic branches in two years. Founded in 2000, the bank has about 100 conventional branches.

“Globally you see the growth of Islamic banking is much faster than conventional … We have got a large customer base across the region and there’s strong demand,” AUB Deputy Group Chief Executive Abdulla Al-Raeesi told reporters.

The bank has operations in Britain, Kuwait, Qatar, Iraq, Oman and Egypt and is targeting Saudi Arabia, the United Arab Emirates, Iran and Switzerland for expansion.

The lender has four Islamic branches — two in Bahrain, one in Britain and another in Qatar — and aims to expand Al Hilal in territories where it is already present.

It is in talks with the Egyptian central bank for an Islamic licence and will open another branch in Bahrain within a month and four more in Qatar this year.

Islamic finance prohibits interest and operates on the principle of sharing risk and reward among all parties in a business venture. Islamic law bans investing in certain sectors, such as alcohol, pornography and gambling.

The industry is set to hit $1 trillion in assets by 2010, management consultants McKinsey & Co said in December, and experts say it is growing at a rate of about 15 percent a year.