Contents
01 Executive Summary
The purpose of this report
Market size and growth
Islamic Capital Market (ICM)
Future outlook
Opportunities and strategies
Conclusion
The structure of this report
Chapter 01
07 Introduction
The purpose of this report
Islamic finance ethics and principles
Basics of Islamic economic and financial systems
Islamic finance instruments
Quard-Hasan (interest-free loan)
Equity
Ijara (leasing)
Legal and economic features of Ijara contract and asset Ijara bonds
Instalment sales
Istisna’a (commissioned manufacture)
Mudaraba (profit and loss sharing)
Murabaha (cost-plus financing – trade-based mode)
Musharaka (partnership financing)
Bai-salam (advance purchase)
Sukuk
Takaful (Sharia-compliant insurance – mutual insurance)
The size of the Islamic finance market
Differences in the GCC and Malaysian approaches
The Malaysian regulatory and supervisory framework
Chapter 02
17 Islamic finance drivers and enablers
Introduction
Economic growth
Economic outlook in the GCC
GCC economic development
Future challenges
Economic outlook in Malaysia
Economic outlook in the member countries of the IDB
Regional liquidity
New emphasis on investment within the region
Financial centres
Bahrain
Dubai
Qatar
Saudi Arabia
Kuwait
Malaysia
Singapore
London
Islamic finance industry architecture
Islamic finance architecture: an update
Salient features of Islamic finance
International Islamic Fiqh Academy (IIFA)
The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI)
Islamic Financial Services Board (IFSB)
The International Islamic Financial Market (IIFM)
Liquidity Management Centre (LMC)
International Islamic Rating Agency (IIRA)
The International Arbitration and Reconciliation Centre for Islamic Financial Institutions
(ARCIFI)
General Council for Islamic Banks and Financial Institutions (GCIBFI)
Research and contribution of world class institutes
The Islamic Research and Training Institute (IRTI)
Harvard
Other Universities and research centres
Training
Support and media services
Conferences and seminars
Publications
Online news
Websites
Technology
Chapter 03
37 The main ICM players
Islamic Development Bank (IDB)
Government agencies
Saudi Arabian Monetary Agency (SAMA)
Kuwait Investment Authority (KIA)
Abu Dhabi Investment Authority (ADIA)
Global investment banks
HSBC
CIMB
Barclays Capital
Deutsche Bank
JP Morgan
Other global investment banks
Local and regional banks
Riyad Bank
Dubai Islamic Bank (DIB)
National Bank of Abu Dhabi (NBAD)
Arab National Bank (ANB)
Arab Banking Corporation (ABC)
Al Rajhi Banking and Investment Corporation (ARABIC)
The National Commercial Bank (NCB)
Maybank (Malayan Banking Berhad)
Kuwait Finance House K.S.C. (KFH)
Global Banking Corporation (GBCORP)
Bank AlBilad
Corporate borrowers
Nakheel Development
Ports, Customs & Free Zone Corporation (PCFC)
Saudi Arabia Basic Industries Corporation (SABIC)
Aabar Petroleum Investments (Aabar)
The National Air Services (NAS)
Qatar Gas Transportation company (Nakilat)
The Abu Dhabi National Energy Company (TAQA)
The National Industries Group (NIG)
Aldar properties
Dar Al-Arkan Real Estate Development Company (Dar Al-Arkan)
Savola Group
Cherating Capital
Rating agencies
Role of rating agencies in market development
The Islamic International Rating Agency (IIRA)
Standard & Poor’s
Moody’s
Fitch
Rating Agency Malaysia Berhad (RAM)
Malaysian Rating Corporation Berhad (MARC)
The Pakistan Credit Rating Agency (PACRA)
JCR-VIS Credit Rating Co. Ltd. (JCR-VIS)
Indices
Citigroup and Dow Jones
S&P Pan-Asia Sharia Index
HSBC and the Dubai International Financial Exchange (HSBC/DIFX)
Chapter 04
59 Outlook for ICM
Economic forecasts
ICM size and growth
Financial centres
New Islamic banks established or announced during 2007
Sukuk
Ijara and other Sukuk types
Structure of existing Ijara Sukuk
Other forms of Sukuk
Sharia-compliant funds
Project finance
Key factors in Maaden/SABIC breakthrough
Private equity (PE)
Takaful
Demand from non-Muslims
Opportunities in the ICM
Current markets (GCC, Malaysia)
Bahrain
Kuwait
Oman
Qatar
Saudi Arabia
UAE
Malaysia
New markets
Algeria
Indonesia
Libya
Pakistan
Turkey
Sectors and market segmentation
Challenges for the ICM
Sharia compliance and converging Sharia requirements
Regulatory framework
Standardisation
Rating
Short-term liquidity
Liquidity management in Islamic finance
Innovation
Education and training
Secondary market and cross-border transactions
New Islamic finance products and instruments
Sukuk
Equity
Project finance
Hedging
Derivatives
Sharia compliance risks
Nature of risks
Risk management
Chapter 05
87 ICM strategies
Recent experience in the ICM
Islamic finance architecture
Financial centres
Local/regional bank strategies
Global and investment bank strategies
Gaining competitive advantage
Borrowers’ strategies
Takaful insurance
Mergers and acquisitions
Efficiency and cost control
Chapter 06
95 Conclusion
Future prospects
Appendix 01
97 GCC countries
Bahrain
Kuwait
Oman
Qatar
Saudi Arabia
UAE
Appendix 02
103 Malaysia
Appendix 03
105 New markets
Algeria
Indonesia
Libya
Pakistan
Turkey
Appendix 04
111 Useful links
List of tables and figures
Table 1.1: Evolution of the Islamic financial system
Table 2.1: Malaysia economic and financial indicators, 2001–07
Table 2.2: Banks and insurance companies listed in the Qatar Financial Authority Public Register, Oct 2007
Table 3.1: IDB Group overview
Table 3.2: Sovereign wealth funds – estimated assets (US$)
Table 3.3: Kuwait Investment Authority
Table 3.4: Abu Dhabi Investment Authority
Table 3.5: Islamic bonds – global total, 2006, 2007
Table 3.6: Islamic bonds – HSBC, 2006, 2007
Table 3.7: Islamic bonds – CIMB, 2006, 2007
Table 3.8: Islamic bonds – Barclays Capital, 2006, 2007
Table 3.9: Islamic bonds – Deutsche Bank, 2006, 2007
Table 3.10: Islamic bonds – JP Morgan, 2006, 2007
Table 3.11: Islamic bonds – Riyad Bank, 2006, 2007
Table 3.12: Islamic bonds – Dubai Islamic Bank, 2006, 2007
Table 3.13: Islamic bonds – National Bank of Abu Dhabi, 2006, 2007
Table 3.14: Islamic bonds – Arab National Bank, 2006, 2007
Table 3.15: ABC – subsidiaries
Table 3.16: Islamic bonds – ABC, 2006, 2007
Table 3.17: Standard & Poor’s GCC ratings
Table 4.1: Total Sukuk issued, 2001 – 2007 (US$m)
Table 4.2: Domestic Sukuk issued, 2001 – 2007 (US$m)
Table 4.3: International Sukuk issued, (2001 – 2007 (US$m)
Table 4.4: Available capital market products
Table 4.5: Types of capital market products
Table 4.6: Risks specific to Islamic financial services
Table A1: Bahrain – selected socioeconomic statistics, 2002–08P
Table A2: Kuwait – selected socioeconomic statistics, 2002–08P
Table A3: Oman – selected socioeconomic statistics, 2002–08P
Table A4: Qatar – selected socioeconomic statistics, 2002–08P
Table A5: Saudi Arabia – selected socioeconomic statistics, 2002–08P
Table A6: UAE – selected socioeconomic statistics, 2002–08P
Table A7: Malaysia – selected socioeconomic statistics, 2002–08P
Table A8: Algeria – selected socioeconomic statistics, 2002–08P
Table A9: Indonesia – selected socioeconomic statistics, 2002–08P
Table A10: Libya – selected socioeconomic statistics, 2002–08P
Table A11: Pakistan – selected socioeconomic statistics, 2002–08P Pakistan
Table A12: Turkey – selected socioeconomic statistics, 2002–08P
Figure 2.1: Budget surplus (+)/deficit (-) as % of GDP, 2001–07f
Figure 2.2: Foreign reserves minus gold, 2001–07f (US$bn)
Figure 2.3: Current account surplus/deficit, 2001–07f (US$bn)
Figure 2.4: Total value of GCC projects by industry (US$bn)
Figure 3.1: Market share of top five Sukuk underwriters, January–mid-November 2007 (%)
Figure 4.1: Middle East gross official reserves and public debt, 1998–2007 (US$bn, %)
Figure 4.2: External developments in emerging market and developing countries, 2000–Jun 2007
Figure 4.3: Global outlook, 1996–2008f (real GDP; % change from a year ago)
Figure 4.4: Current and capital account flows in Middle East oil exporting countries, 1990–2007 (% of GDP)
Figure 4.5: Structure of a generic Ijara Sukuk
Figure 4.6: Istisna’a-based Ijara Sukuk (example of Darrat Sukuk)
Figure 4.7: Total Sukuk issued, 2001 – 2007 (US$m)
Figure 4.8: Domestic Sukuk issued, 2001 – 2007 (US$m)
Figure 4.9: International Sukuk issued, (2001 – 2007 (US$m)
Figure 4.10: Bahrain – total value of active projects by industry, 2007,(US$bn)
Figure 4.11: Kuwait – total value of active projects by industry, 2007 (US$bn)
Figure 4.12: Oman – total value of active projects by industry, 2007 (US$bn)
Figure 4.13: Qatar – total value of active projects by industry, 2007 (US$bn)
Figure 4.14: Saudi Arabia – total value of active projects by industry, 2007 (US$bn)
Figure 4.15: UAE – total value of active projects by industry, 2007 (US$bn)
