Azerbaijan Develops Islamic Financing

January 26, 2012 13:38 PM
Azerbaijan Develops Islamic Financing
BAKU, Azerbaijan, Jan 26 (Bernama) — Azerbaijan may soon become a regional Islamic financing centre and play a significant role in boosting cooperation in Islamic banking with Persian Gulf and Central Asian countries.
Islamic financing is one of the fastest growing segments of the global financial services industry worldwide. At the same time, interest in Islamic finance as a source of investment is high in the country, reports Azerbaijan’s news agency TREND.
Many countries’ interest in Islamic finance is associated with different factors, the foremost of which is the desire to attract liquid resources from the Middle East and Southeast Asia and a certain demand for financial products in accordance with Sharia law by local Muslims.
Today, Azerbaijan actively introduces Islamic financing. The independent authority of the International Bank of Azerbaijan (IBA) on Islamic banking will start its work in March, which plans to present six Islamic banking products to the market during the first phase.
The Islamic Corporation for the Development of the Private Sector (ICD) is also in talks to create the first Islamic insurance company in Azerbaijan, Takaful, which is popular in Europe, particularly in the UK.
European and Central Asian countries are considered experts in Islamic financing. Most of Takaful’s customers are non-Muslims in countries where the Islamic insurance market is the most developed in the world.
Ansar Leasing, organized on Islamic principles and established by the ICD, has successfully operated in Azerbaijan for three years.
During this period, the company has formed a portfolio worth US$15 million and the company plans to draw about US$6-US$7 million from its founder to expand operations. Some Azerbaijani private banks are also starting to expand the range of Islamic financing tools, introducing Ijarah (leasing) and Murabaha. One such bank is TuranBank, which plans to introduce these tools with the financial support of the Islamic Corporation.
Another bank, Nikoil, is actively introducing deposit products, which include Wadia yad Daman.
Evidently, Azerbaijani banks’ interest in Islamic products is growing gradually. The amount of money that enters the market through this channel is very small in Azerbaijan, since many issues related to Islamic financing have not been yet addressed.
Therefore, the successful development of Islamic finance on the domestic market will depend on the further improvement of legislation, regulatory prudential norms, and supply and demand. In the near future, it may become a subject of debate.
By developing Islamic financial infrastructure, Azerbaijan may indeed attract investments and financing from the Islamic capital market, not only from Arab countries.
Alternative financial tools can be provided for Azerbaijani investors in this way. Also, the number of practicing Muslims who cannot and do not want to use traditional financial services is growing in Azerbaijan.
Islamic financial tools can become the channel through which their assets can be involved in the economy.
– BERNAMA
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14 years on, Indonesia back on its feet

Indonesia finally regained an investment grade credit rating from Fitch Ratings, 14 years after losing the status following the country’s worst-ever financial crisis in 1997.
Fitch raised Indonesia’s sovereign rating for long-term foreign and local currency debts to BBB- from BB+, with a stable outlook.
“The upgrades reflect the country’s strong and resilient economic growth, low and declining public debt ratios, strengthened external liquidity and a prudent overall macro policy framework,” said Philip McNicholas, director of Fitch’s Asia-Pacific Sovereign Ratings group.
The BBB- rating is considered an investment grade indicating the country’s low risk for investment. The government is expecting other international rating agencies to follow suit.
Moody’s Investors Service upgraded Indonesia’s rating in January to Ba1, while in April, Standard & Poor’s raised the country’s rating to BB+, with a positive outlook. Both ratings are one level below investment grade.
Indonesia lost the investment grade rating in December 1997, during the Asian financial crisis, which severely hit the country’s financial sector.
Fitch projects GDP growth to average more than 6 per cent per annum over the forecast period (until 2013), despite a less conducive global economic backdrop. Indonesia’s domestically oriented economy and success in delivering relatively strong economic growth without the creation of external imbalances, or a reliance on short-term external financing suggests economic growth prospects should prove resilient to external shocks, as was the case in 2008. Low public debt and positive real interest rates give the authorities policy flexibility to respond to any slowdown.
BI deputy governor Hartadi Sarwono said the upgrade would ensure better economic prospects for Southeast Asia’s largest economy as it minimized investment risks and reduced borrowing costs to support Indonesia’s economic financing.
“An upgrade amid the worsening global economy shows lowering risks for investment, making [Indonesia] more attractive for capital inflows,” Hartadi said in a mobile phone text message.
Rahmat Waluyanto, the director general of the Finance Ministry’s debt management office, said with surging capital inflows, including foreign direct investment (FDI), financing for infrastructure development would be more plentiful.
“Economic growth will accelerate further,” he said.
Finance Minister Agus Martowardojo said the rating upgrade confirmed the market’s positive perception of Indonesia’s debts. He said that without the new rating, Indonesia’s government bond market had been treated as an investment grade-rated nation with lower yields or interest rates compared to investment grade nations.
Fauzi Ichsan, a senior economist at Standard Chartered Bank Indonesia, said the “rating agencies caught up with the bond market”, which had priced sub-investment grade Indonesian and Philippine bonds higher than Italian and Spanish bonds, for example.
The Indonesian government last month collected US$1 billion for seven-year US dollar-denominated Islamic bonds (sukuk) with a yield of 4 per cent, beating out investment grade-rated Italy’s five-year bonds at 6.29 per cent.
Fitch said long-standing structural weaknesses that needed to be resolved were poor physical infrastructure and corruption, which affected the business climate, as well as the low average income of S$3,600 versus the $9,800 average for investment grade nations.
Anggun C. Sasmi says she is “ecstatic” to represent France in the 2012 Eurovision Song Contest.
 “The show will be broadcast to millions of people across Europe,” the Indonesian-born singer said.”It’s a great honor.”
Although a French citizen since 2000, she still feels she has a foot in both nations, telling French newspaper Le Parisien that, “I eat as much rice as I do cheese”.
“I miss Indonesia a lot,” Anggun, 37, told The Jakarta Post on Thursday. “The optimism, the generosity, the real sense of the word “family”. I miss the kindness, real kindness. Of course, life is not easy in any part of the world, but in Indonesia you don’t have to fight the wrong fight with the wrong people to obtain something you don’t even want.”
The birth of daughter Kirana, 4, with her French husband Cyril Montana and her role as a UN Goodwill Ambassador in the campaign to end hunger have given her new roles.
 “Music gives me balance and identity, but my commitment to the world makes me happy.”
After 17 years abroad, she is considering a return to live in Asia one day. “Now that Kirana goes to school I tend
to get a bit worried about all the bad influences that she can get,” she said.
“I believe life in Asia is much easier because of the amount of kind people around. So, I’ll see about us relocating to Asia, probably Bali.”

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Wanted: Private equity high-flyers in growth areas

NEW YORK/LONDON/HONG KONG (Reuters) – Private equity firms, facing shrinking asset values and tough financing conditions, are trimming staff in mature markets, but are also looking to hire in growth areas so that they deliver the returns investors seek.
Shrinking fund sizes, crisis in the euro zone and hopes for emerging markets growth are all redrawing the global private equity map, determining the locations and sectors in which buyout firms hire and fire staff.
The industry boomed last decade as investor appetite created ever larger pools of capital, allowing firms to expand and cast their nets further and wider for deals. But in the financial turmoil, many buyout groups are now retrenching.
“This is still an active jobs market, the industry is focusing on niche businesses and smaller transactions and looking for senior advisors to succeed where the deals are,” said Todd Monti, who manages the global private equity and venture capital practice of headhunting firm Heidrick & Struggles.
The total capital garnered by private equity funds globally that have reached final close so far this year is about $240 billion, compared with $275 billion raised last year, according to market research firm Preqin.
The crunch has been most obvious in Europe, where a brief renaissance in private equity deals in the first half has stalled and the gloomy outlook is forcing some to reassess their approach.
Among the highest profile changes, TPG reshuffled its senior team in Europe, with co-head Philippe Costeletos taking a step back from daily duties and partner Matthias Calice leaving the firm by the end of the year.
But it is likely to be the satellite offices in European cities that come under the greatest pressure to close down.
“I think people are going to rein in on that if fund sizes shrink,” said one private equity managing partner.
Vestar Capital recently closed offices in Munich and Paris as part of a plan to focus back on the United States. And struggling mid-market group Cognetas has shut its office in Frankfurt and will close its London office later this year.
MOVING EAST
In line with the wider finance sector, the private equity jobs market has been more robust in Asia, where firms are actively hiring even as they shed tens of thousands of jobs in other regions, thanks to the continent’s economic resilience.
Buyouts in Asia-Pacific, excluding Japan and Central Asia, total $33 billion so far this year, up 54 percent from a year ago, compared with 9 percent growth in Europe and 36 percent in the Americas, Thomson Reuters data shows.
But there is a caveat. Language and cultural skills are key to new hires in Asia, as global and local private equity funds build teams to invest the capital flowing into the region.
“Limited partners are allocating a larger percentage of funds to Asia, and with that (private equity firms)are opening offices in the region,” said Julian Buckeridge, managing director for Strategic Executive Search based in China.
In contrast with Europe, where satellite offices are coming under pressure, the capital flowing to Asia is allowing firms to create new bases in places such as Singapore to provide a springboard into Southeast Asia.
In October, KKR appointed former Singapore government minister Lim Hwee Hua as a senior adviser [ID:nL3E7LA05L] and the firm is expected to locate a deal team of three in the region early in 2012 – KKR previously covered Southeast Asia from Hong Kong.
With firms such as TPG Capital and CVC Capital Partners already well established in the region, Blackstone Group LP is also mulling an expansion.
“We are seriously thinking of expanding our presence in the Southeast Asia region in terms of people on the ground and investment focus,” Michael Chae, Blackstone’s regional head, told the Reuters 2012 Investment Summit this week.
DIVERSIFICATION IS KING
The global shakeout will also create winners in the west. Buyout houses that have grown into private asset managers, such as Blackstone, KKR and Carlyle Group, are actively recruiting in areas such as credit investment and real estate.
This diversification, combined with the fee-based remuneration structure of private equity funds, has helped shield the pay of dealmakers from the economic headwinds battering the financial industry.
Incentive compensation in the U.S. private equity industry excluding carried interest is expected to fall between 0 and 5 percent in 2011, compared with plunges of up to 30 percent in investment banking and 45 percent in fixed income, according to compensation consulting firm Johnson Associates.
With competition for capital from institutional investors intensifying, major private equity firms are also ramping up their fundraising, increasingly bringing operations inhouse instead of relying on others for their marketing.
“Private equity firms used to raise money every five years, now they fundraise everyday. Good capital raising professionals are in strong demand,” said Joseph Healy, who co-heads the private equity recruiting operations of Korn/Ferry International Inc.
For those unfortunate enough to find themselves out of work, or just looking for more job security, there are options.
Sovereign wealth funds and pension funds, with aspirations to do more deals directly and cut out the private equity middlemen, could gain as firms shed experienced staff.
“Some of those people may well be happy to be employed by a sovereign wealth fund and have a more conventional salary, knowing that there is oodles of money to invest into deals,” said David Currie, chief executive of Standard Life Capital Partners. (Editing by Andre Grenon)

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