Latest news with #Sharia-compliant
The Star
a day ago
- Business
- The Star
Somalia launches first national stock exchange
MOGADISHU, June 19 (Xinhua) -- The National Securities Exchange of Somalia (NSES) was officially launched on Thursday to spur the country's long-term economic growth and its integration into regional and global financial markets. NSES will initially operate as a private and self-regulatory organization model, working closely with relevant public institutions to oversee and ensure market integrity and transparency, the bourse said in a statement issued in Mogadishu, the capital of Somalia. Trading on the exchange is projected to begin early next year, targeting key sectors including telecoms, banking, real estate, and energy to drive national economic growth. Yasin M. Ibar has been appointed as the first chief executive officer of NSES and will also serve as the exchange's primary spokesperson. He said the launch is an important milestone, not just for Somalia's financial sector but for the entire economy. "NSES will create opportunities for companies to access capital, for investors to support Somalia's growth, and for our economy to integrate effectively into regional and global markets," he added. Ali Yassin Sheikh, deputy governor of the Central Bank of Somalia, said a properly regulated and inclusive securities exchange can be transformative for Somalia. The Central Bank stands ready to provide technical support and policy coordination to ensure a stable, credible financial market architecture that benefits all Somalis, Yassin said. It will provide a platform for issuing government-backed, Sharia-compliant Sukuk (bonds) to finance priority infrastructure and development projects across the nation, according to the statement. As part of its preparation, the NSES team will conduct investor education campaigns and international roadshows targeting Somali diaspora communities in Turkey, Kenya, Britain, Norway and the United States. As a member of the East African Stock Exchanges Association, NSES is expected to benefit from cross-listings with regional exchanges in Kenya, Rwanda, Tanzania and Uganda, enhancing Somalia's integration into the broader East African financial market.
Mada
6 days ago
- Business
- Mada
‘Accounting games:' The sukukification of Ras Shokeir
The wording of a presidential decree published in the Official Gazette on Tuesday has stirred considerable debate over its potential implications. The decree allocates more than 41,000 feddans in the Ras Shokeir area along the Red Sea to the Finance Ministry, with the stated purpose of helping to reduce Egypt's public debt and facilitate the issuance of sovereign sukuk. The phrasing has caused confusion. How can the goal be to 'reduce public debt' while simultaneously issuing sukuk, a form of debt instrument? Beyond the ambiguity, the land allocation has also raised concerns over its implications for the strategically sensitive border zone. Could the move open the door to future land sales? Mada Masr spoke with legal and economic experts to help unpack the implications of the decree. According to the sources, the issuance of sukuk may nominally reduce the size of public debt through what one source described as an 'accounting game,' reclassifying certain items to create the appearance of a lower debt burden. Sovereign sukuk are one of several borrowing tools available to governments, alongside more familiar instruments such as treasury bills and bonds. What sets sovereign sukuk apart is that they are asset-backed: each issuance is linked to an asset that serves as collateral. The design — material asset as collateral in exchange for liquidity — allows sukuk to be framed as something other than a loan, which is prohibited under Sharia. Sukuk are therefore built around the idea that an asset is being acquired in some form, with the purchase price standing in for the loan value. By holding sukuk in a profit-generating asset, the holder earns returns that function like interest, without being labeled as such. This financial engineering is what allows sukuk to sidestep the prohibition on interest under Sharia. Without the need for this workaround, there would be no reason for assets to be part of the sukuk structure in the first place, sources said. This was a key driver behind the 2021 law that introduced sovereign sukuk. According to Senator Mahmoud Samy — who helped draft the legislation — as well as two other sources, one a member of Parliament and the other a World Bank official, the Egyptian government has long sought access to funding from sources that require Sharia-compliant financial instruments, particularly in Gulf countries and parts of Asia. Sovereign sukuk, they said, provide a gateway to these funds. Under the law, the state established the Egyptian Financial Company for Sovereign Taskeek (EFCST), a joint-stock entity owned by the Finance Ministry. The EFCST acquires usufruct rights to the sukuk-tied assets and acts as the agent on behalf of sukuk holders. The law sets out a series of regulations and conditions. The assets used to back sovereign sukuk can be fixed or moveable state-owned properties, but natural resources cannot be turned into sukuk. Sukuk may be issued for a maximum term of 30 years, during which usufruct rights are granted to investors — meaning they gain the right to use and benefit from the asset without any transfer of actual ownership from the state. These usufruct arrangements can be understood as akin to forming a company. In the case of the Ras Shokeir land, for instance, a company is expected to be established to manage investment in the area, with sukuk holders participating in the arrangement. However, this does not mean that sukuk holders become shareholders — sukuk do not confer ownership stakes in the company. Sukuk are similar to shares in that 'both represent a common stake in the ownership or usufruct right from a profit-generating asset, or in the capital of a profitable project,' as explained on the EFCST's website. The key difference, however, is that 'sukuk are a financing tool recorded outside the issuing company's budget, whereas shares represent a common stake in the company's capital, making shareholders part-owners in the issuing company.' Sukuk also have a fixed term specified as part of the deal unlike shares, which remain valid as long as the company exists. Upon the end of the term, the sukuk holder is entitled to their full capital amount 'regardless of the value of the issuer's assets or their ability to repay debts to others,' unlike shareholders. This renders sukuk a 'low-risk' investment, according to the EFCST's website. Since the law came into effect nearly five years ago, the Finance Ministry has issued sovereign sukuk only once in February 2023. The underlying assets were made up of a portfolio of government-owned properties under lease. The three-year issuance, worth US$1.5 billion, was met with strong demand. The anticipated issuance referenced in the latest presidential decree would mark Egypt's second sukuk offering. In April, Finance Minister Ahmed Kouchouk announced the government's intention to issue $2 billion in sovereign sukuk. This aligns with the ministry's statement on Thursday, which noted that part of the Ras Shokeir land will be used as collateral for the new issuance. Sources said the mechanism is intended to differ from the Ras al-Hikma deal, in which land ownership was directly sold to a strategic investor via a company in which the Egyptian government holds a stake. By contrast, in the Ras Shokeir case, the sukuk are expected to be offered to a broad range of potential investors — including Egyptian and foreign individuals, as well as banks and investment institutions. The offering would not transfer ownership of the land itself. Instead, sukuk holders would be entitled to a 'common right' to the project's profits or a share of its financial returns, without holding any direct ownership of the land. At the end of a sukuk term, holders are repaid the full value of their initial investment, at which point their relationship with the asset ends. Sources unanimously emphasized that, throughout the sukuk's duration, ownership does not get transferred under any circumstances. This, they stressed, is very clear. Even in the event that the government defaults on repayment, the asset cannot be seized or transferred. Senator Samy noted that the Senate was particularly keen to prevent any possibility of ownership transfer related to sukuk issuances — a departure from the earlier sukuk law passed in 2013, which did not address the issue of asset ownership and failed to explicitly prohibit agreement clauses that might entitle holders to a stake in the asset in the event of non-payment. Under the new framework, responsibility for repayment lies entirely with the issuer — in this case, the state — rather than with the asset itself. 'The public treasury is the guarantor,' an official at the Planning Ministry told Mada Masr. 'The investor doesn't need the asset itself, but instead relies on the state's ability to pay.' A judicial source, who is a deputy to the State Council president, told Mada Masr that the details of the underwriting terms will ultimately be defined in the sukuk's issuance prospectuses. The government could include clauses allowing for the sukuk's term to be extended or other conditions to be introduced. Still, 'if the state is unable to repay the sukuk and its profits, it may be forced to swap debt for assets once again,' the source added. This, however, would reflect the government's broader debt management strategy — not the legal nature of the sukuk itself. In its Thursday statement, the Finance Ministry reiterated that the land was transferred under its authority to issue sovereign sukuk and 'reduce the government's debt burdens' — a 'favorable' alternative to selling the land, according to the ministry, as it can 'partner with financial and economic entities to replace existing debt with joint investment projects […] and spur the development of the land to generate sustainable income and create new job opportunities.' The most ambiguous aspect of the presidential decree lies in its reference to debt reduction. After all, sukuk are a form of debt. According to the International Monetary Fund's Government Finance Statistics Manual — and as reiterated in the IMF report on its third review of Egypt's Extended Facility Fund — sukuk are classified as part of public debt in the state budget, just like bonds, treasury bills, and other forms of borrowing. If these sukuk constitute new debt, how can the decree possibly contribute to reducing Egypt's mounting debt burden? One straightforward scenario can be found in the Finance Ministry's statement following the decree: only a portion of the allocated land will be used to back the sukuk, while revenues generated from future economic activity on the remaining land could be channeled toward repaying debt and covering interest payments. The World Bank official, speaking to Mada Masr on condition of anonymity, explained that the government could use its share of project revenues to cover periodic dues to sukuk holders — a strategy they described as a form of 'debt recycling.' Economic researcher Mohamed Ramadan suggests another scenario: 'an accounting game' in which payments the government owes to sukuk holders are labeled as 'returns' rather than 'interest.' This classification would exclude them from debt servicing records, thereby reducing the nominal size of the country's total debt on paper. Ultimately, the decree appears to signal the start of a broader shift — one that is likely to be followed by a series of further decisions clarifying the specifics of this approach and its true implications for the public and for public finances.
Gulf Today
6 days ago
- Business
- Gulf Today
UAE's Islamic finance and halal industry poised for robust growth
The UAE continues to cement its status as a leading global hub for Islamic finance and the halal industry, aligned with a comprehensive development vision aimed at diversifying the national economy and enhancing global competitiveness. Backed by forward-thinking government policies, a modern regulatory framework, and cutting-edge financial and industrial infrastructure, both sectors are witnessing dynamic growth. The UAE is investing heavily in a knowledge- and innovation-based economy, with Islamic finance and halal products playing key roles in this transformation. In May, the UAE launched a national strategy for Islamic finance and halal industry development. The plan sets out to create an integrated ecosystem for Islamic financial activities, including banking, Takaful (Islamic insurance), Sukuk (Islamic bonds), and non-banking financial services-aligned with international best practices and standards. According to February data from the Central Bank of the UAE, Islamic banks now account for approximately 18 per cent of total banking assets and 22.8 per cent of total credit within the national banking sector. The Islamic Sukuk market, in particular, has expanded significantly. Notably, the federal government launch of the dirham-denominated Islamic Treasury Sukuk (T-Sukuk) in 2023, signaling a new era for the sector. The UAE is now recognised as one of the world's largest Sukuk listing centres. As of May, Sukuk listed on Nasdaq Dubai exceeded $95.7 billion, reinforcing the country's position as a global hub for Sharia-compliant fixed-income instruments. In the 2023, the country was ranked fourth globally in Islamic financial markets by assets, according to the 2023 Islamic Finance Development Indicator based on total assets. Jamal Saleh, Director-General of the UAE Banks Federation (UBF), noted that the strategy outlines ambitious goals to elevate the Islamic economy's role both domestically, regionally, and internationally. In statements to the Emirates News Agency, Saleh highlighted the UAE's successful development of financial systems that have empowered the Islamic banking sector as part of the nation's broader diversification agenda. He pointed to significant strides in Islamic banking, Sukuk issuance, and broader Sharia-compliant finance. Saleh also noted the sector's impressive growth trajectory. As of February 2025, total credit granted by Islamic banks reached Dhs503.5 billion, a 16 per cent year-on-year increase. Private sector credit alone stood at Dhs350.4 billion, growing 13.2 per cent annually. Meanwhile, deposits at Islamic banks surged to Dhs595.3 billion, marking an annual growth rate of 16.9 per cent. Parallel to its financial achievements, the UAE is asserting itself as a global halal industry hub. Under the newly approved national strategy, the UAE aims to increase halal exports from Dhs74 billion to Dhs315 billion by 2031, leveraging its strategic location and world-class infrastructure. Saleh Lootah, Chairman of the UAE Food and Beverage Manufacturers Group, in statements to WAM, said that the strategy is a landmark step toward establishing the UAE as a global halal production centre. He highlighted growing local manufacturer interest in expanding into this vital sector, particularly as global demand for halal products accelerates. According to a report by Bonafide Research on the halal food and beverage market in the UAE, the market size is projected to exceed $31.27 billion by 2029. This growth reflects the increasing demand for halal-certified products, both within the country and globally, as consumers become more conscious of dietary and ethical standards. The UAE's strategic location as a global trade and tourism hub plays a key role in driving this expansion. Its position enhances the country's appeal to both local and international consumers seeking trusted halal-certified goods, reinforcing the UAE's reputation as a leading centre for halal commerce. Meanwhile the Islamic finance sector in the UAE benefits from a dynamic economic environment and advanced regulatory policies that support Sharia-compliant financial activities. Since the establishment of the UAE's first Islamic bank in 1975, the sector has grown significantly over the decades, becoming a fundamental pillar of the national economy. The industry encompasses Islamic banks, Islamic windows in conventional banks, and sukuk (Islamic bonds), which have witnessed rapid growth in both domestic and international markets. The UAE is committed to developing economic policies and legislation to enhance Islamic finance and the broader Islamic economy. These efforts align with national objectives to ensure sustainable economic growth and establish the UAE as a global hub for the Islamic economy. WAM
Al Etihad
7 days ago
- Business
- Al Etihad
UAE's Islamic finance, halal industry poised for robust growth, economic diversification
14 June 2025 12:30 ABU DHABI (WAM)The UAE continues to cement its status as a leading global hub for Islamic finance and the halal industry, aligned with a comprehensive development vision aimed at diversifying the national economy and enhancing global by forward-thinking government policies, a modern regulatory framework, and cutting-edge financial and industrial infrastructure, both sectors are witnessing dynamic growth. The UAE is investing heavily in a knowledge- and innovation-based economy, with Islamic finance and halal products playing key roles in this May, the UAE launched a national strategy for Islamic finance and halal industry development. The plan sets out to create an integrated ecosystem for Islamic financial activities, including banking, Takaful (Islamic insurance), Sukuk (Islamic bonds), and non-banking financial services—aligned with international best practices and to February data from the Central Bank of the UAE, Islamic banks now account for approximately 18% of total banking assets and 22.8% of total credit within the national banking Islamic Sukuk market, in particular, has expanded significantly. Notably, the federal government launch of the dirham-denominated Islamic Treasury Sukuk (T-Sukuk) in 2023, signalling a new era for the UAE is now recognised as one of the world's largest Sukuk listing centres. As of May, Sukuk listed on Nasdaq Dubai exceeded $95.7 billion, reinforcing the country's position as a global hub for Sharia-compliant fixed-income 2023, the country was ranked fourth globally in Islamic financial markets by assets, according to the 2023 Islamic Finance Development Indicator based on total Saleh, Director-General of the UAE Banks Federation (UBF), noted that the strategy outlines ambitious goals to elevate the Islamic economy's role both domestically, regionally, and statements to the Emirates News Agency (WAM), Saleh highlighted the UAE's successful development of financial systems that have empowered the Islamic banking sector as part of the nation's broader diversification pointed to significant strides in Islamic banking, Sukuk issuance, and broader Sharia-compliant also noted the sector's impressive growth trajectory. As of February 2025, total credit granted by Islamic banks reached AED503.5 billion, a 16% year-on-year increase. Private sector credit alone stood at AED350.4 billion, growing 13.2% deposits at Islamic banks surged to AED595.3 billion, marking an annual growth rate of 16.9%.Parallel to its financial achievements, the UAE is asserting itself as a global halal industry hub. Under the newly approved national strategy, the UAE aims to increase halal exports from AED74 billion to AED315 billion by 2031, leveraging its strategic location and world-class Lootah, Chairman of the UAE Food and Beverage Manufacturers Group, in statements to WAM, said that the strategy is a landmark step toward establishing the UAE as a global halal production highlighted growing local manufacturer interest in expanding into this vital sector, particularly as global demand for halal products to a report by Bonafide Research on the halal food and beverage market in the UAE, the market size is projected to exceed $31.27 billion by 2029. This growth reflects the increasing demand for halal-certified products, both within the country and globally, as consumers become more conscious of dietary and ethical standards. The UAE's strategic location as a global trade and tourism hub plays a key role in driving this expansion. Its position enhances the country's appeal to both local and international consumers seeking trusted halal-certified goods, reinforcing the UAE's reputation as a leading centre for halal commerce.
Business Wire
11-06-2025
- Business
- Business Wire
AM Best Affirms Credit Ratings of Qatar Islamic Insurance Group Q.P.S.C.
LONDON--(BUSINESS WIRE)-- AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of 'a-' (Excellent) of Qatar Islamic Insurance Group Q.P.S.C. (QIIG) (Qatar). The outlook of these Credit Ratings (ratings) is stable. The ratings reflect QIIG's balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management. QIIG is a takaful insurer and operates through a hybrid model, whereby the shareholders' fund charges the policyholders' fund (PHF) a Wakala fee based on gross written contributions (GWC) and a Mudarabah fee based on investment income. QIIG's balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR). AM Best assesses the company's risk-adjusted capitalisation on a combined basis, including its policyholders' and shareholders' funds, due to the strength of domestic regulation and requirement that the shareholders' fund would have to support the PHF were it to fall into deficit. Other positive balance sheet factors include the company's track record of internal capital generation through the retention of earnings and QIIG's accumulated surplus within the PHF. An offsetting factor to the assessment is QIIG's exposure to illiquid real estate assets and investments in associates, which accounted for 41.3% of its total investments as at year-end 2024. Despite this, the company maintains a robust level of liquidity, with its consolidated cash and deposits covering net technical provisions by 170.5% at year-end 2024, indicating that the company holds sufficient surplus capital to manage the higher investment risk appetite. AM Best assesses QIIG's operating performance as strong, evidenced by a five-year (2020-2024) weighted average return on equity of 16.6%. QIIG's combined family and general takaful portfolios have exhibited excellent underwriting performance over the medium term, with the five-year weighted average combined ratio of 73.1%. Underwriting performance of the general takaful book was affected adversely by underperformance of the medical segment in 2023 and 2024; however, the company has taken actions to remediate this portfolio. QIIG holds a niche position within its domestic insurance market, where it is a market-leading takaful player. The company has good diversification by line of business, offering a range of Sharia-compliant insurance products. In 2024, QIIG wrote GWC of QAR 551.2 million (USD 157.4 million). The business profile assessment is constrained by the company's geographical concentration and limited competitive position within the wider Qatari insurance market. This press release relates to Credit Ratings that have been published on AM Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best's Credit Ratings, Best's Performance Assessments, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings & Assessments.
