Islamic Finance

Fintech in Islamic finance: How Kuwaiti banks are pioneering the trend

This article was first published in IFN Volume 18 Issue 40 dated the 6th October 2021 Technology continues to disrupt the traditional industries and Islamic banking is not an exception. Fintech, short for financial technology, is an omnibus term that basically includes any technology which helps the banks and other financial institutions deliver services and products to their customers faster and in a more efficient way. Today anything from cryptocurrency to e-payment services come under the ambit of fintech. Islamic...

Secular trends underline long-term growth for Islamic asset management

This article was first published in Islamic Finance news Volume 17 Issue 41 dated the 14th October 2020 S&P global ratings expects Islamic finance industry (USD 2.4trillion) to witness subdued growth in low single digits for 2020/21 after registering strong growth of 11.4% the previous year, on the back of robust issuance and strong performance of Sukuk. We expect Islamic funds, which accounts for 4% of the overall Islamic finance industry, to fare better than industry as the demand for...

How to improve the Secondary Market for Sukuk Bonds

This article was first published in Islamic Finance news Volume 17 Issue 22 dated the 3rd June 2020 Sukuk bonds have been gaining in popularity since their first issuance in 1990. According to the International Islamic Financial market (IIFM), Global Sukuk Issuances with maturity over 18 months totalled USD 42 billion in 2019, a growth of 6% over 2018 and nearly 40% over 2009. However, in-spite of the rise in issuances, the secondary market for Sukuk Bonds has remained illiquid...

Islamic Liquidity Management – The Journey So Far

This article was first published in Islamic Finance news dated December 2019. Globally, the assets under Islamic finance industry have surpassed the USD 2.4tn mark. Digitalization which has emerged as a revolutionary trend in financial system is becoming popular in Islamic finance industry as well. Islamic banks account for over 70% of industry’s total assets, as of latest available. Islamic liquidity management instruments are still at their infancy, and there are very few instruments that meets the industry needs and...

Secondary Market of Sukuk: An Overview

This article was first published in Islamic Finance news Volume 17 Issue 1 dated the 8th January 2020 Sukuk are useful instruments, both for issuers as well as investors. They can be an alternative source of funds for governments and conventional institutions, a liquidity management tool for Islamic banks and institutions whose investments must be Shariah compliant and a source of portfolio diversification for conventional institutions. However, in order to benefit from the advantages of Sukuk, the primary and secondary...

Regulations governing liquidity risk in Islamic Banking

This article was first published in Islamic Finance news Volume 16 Issue 48 dated the 4th December 2019 Given the systemic importance and the pivotal role played by banks in a country’s economy, banking regulations are of paramount importance for all stakeholders. Guidelines and regulations enable all banks to maintain stability and monitor their risk. In the context of Islamic Banking, liquidity risk is challenging because of limited availability of Shariah compliant short term liquidity instruments and a shallow markets...

What affects the liquidity position of Islamic banks?

This article was originally published in Islamic Finance News (IFN). Maturity transformation is the primary business of banks and which by definition is the conversion of a bank’s short-term liabilities into longer-term investments through loans and advances. The very nature of a bank’s business model requires them to hold a mix of liquid liabilities with illiquid assets. While the primary target of banks is to strive for profitability by optimal utilization of available funds, they also have to maintain an...

Securitization platform for Islamic liquidity management

This article was originally published in Islamic Finance News (IFN). Liquidity management has been one of the major hurdles faced by Islamic banks since inception, owing to the dearth of instruments that help maintain liquidity while complying with Shariah laws. Due to the unavailability of compliant instruments, Islamic banks typically hold a large amount of liquid assets in their balance sheets until maturity and are dependent on their balance sheet assets for liquidity management. The excess idle cash adds pressure...

Sovereign Sukuk: Current Status, Opportunities & Challenges

This article was originally published in Islamic Finance News Innovation in Islamic finance, large-scale capital needs to fund infrastructure investments, and a slump in traditional revenue streams among oil-exporting Islamic countries has spurred Sukuk issuance in the recent past. Sovereign sukuk, which arrived in the global arena nearly two decades back, has firmly established its presence and accounts for the majority of Sukuk issuance. Growth in Islamic finance underpinned by Sovereign Sukuk issuance Islamic finance has continued to prosper and...

Novel liquidity instruments need of the hour for Islamic financial institutions

This article was originally published in Islamic Finance News. Islamic finance is still a relatively small part of the broader financial services industry. Compared to the conventional industry, Islamic finance lacks adequate liquidity instruments as Shariah restrictions limit the number of instruments that could be used for liquidity management. Islamic interbank and money markets also lack the volume and diversification of conventional markets leading to a sectoral disadvantage from the outset. Review of 2018 Since 2015, there has been a...