Islamic Finance 2015: Views from
Doha, Dubai and London
Doha - Amjad Hussain
Dubai - Natalie Boyd and Simon Mabin
London - Jonathan Lawrence and Jessica Gaddes
24 March 2015
© Copyright 2015 by K&L Gates LLP. All rights reserved.
Welcome and introduction to Islamic finance at
K&L Gates
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Doha
Qatar: Overview of market
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Population: 2.2 million (citizens: 350,000)
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Strong GDP Growth: 6.6% (2012 – CIA World Factbook)
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World's third largest natural gas reserves
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World's richest country per capita, ahead of Luxembourg and
Singapore
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Hosting FIFA World Cup 2022
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Investing billions in building infrastructure (Lusail City, Qatar
Integrated Rail Project, Hamad International Airport, Stadiums,
Ras Laffan Industrial City)
Qatar: Banking sector overview
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Two regulatory regimes dealing with banking sector:
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Qatar Central Bank – 18 licensed financial institutions
Qatar Financial Centre – 60+ licensed firms
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Robust asset growth - 11.6% in 2013
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Third largest banking sector in the GCC
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Strong net profit in 2013 and 2014
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Strong investment-grade ratings
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6 Independent Islamic banks
Dubai
The United Arab Emirates: Overview of market
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Dubai is aiming to be capital of the global Islamic economy by
2016
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Islamic banking assets in the UAE exceed US$100bn
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Islamic banking expected to increase market share from 25% to
50% by 2020
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Local market comprises a mix of Islamic banks and conventional
banks with Islamic windows
The United Arab Emirates: Regulatory
framework
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Securities & Commodities Authority and the UAE Central Bank
regulate the onshore market
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The Dubai International Financial Centre (offshore) is regulated by
the Dubai Financial Services Authority
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2012 - UAE Central Bank considers closing Islamic windows
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Federal Law concerning Islamic Banks, Financial Institutions and
Investment Companies
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Regulatory framework expected to be consolidated
London
United Kingdom: Overview of market
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First seen in 1980s but key growth since 2000
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London aiming to be capital of the Islamic finance industry outside
of Muslim world
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Islamic banking assets worth approximately USD$19 billion
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London Stock Exchange raised over US$38 billion through 53
sukuk issues
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Market comprises a mix of Islamic banks and conventional banks
with Islamic windows
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UK market generally uses sukuk, murabaha and ijara structures
United Kingdom: Islamic Banking
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6 Fully fledged Sharia Banks
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Al Rayan Bank (formerly IBB/Islamic Bank of Britain)
Bank of London and The Middle East (BLME)
QIB.UK (formerly European Finance House)
Gatehouse Bank
European Islamic Investment Bank (EIIB)
Abu Dhabi Islamic Bank (representative office)
Over 20 international banks offering Shariah products or services
HSBC Bank
Saudi American Bank (UK) Ltd
Qatar National Bank
Habib Bank
Arab Bankers Association
Arab African International Bank
National Bank of Pakistan
Habibsons Bank Ltd
Bahrain Middle East Bank
Riyad Bank
Arab Banking Corp
Dallah Al Baraka
United Kingdom: Development of Islamic Banking
Development of Islamic Financial Institutions in the UK
- UK Excellence in Islamic Finance by gov.uk/ukti
Doha
Qatar: Regulatory framework: Qatar Central Bank
Regime
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Qatar Central Bank: established August 1993
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18 banks licensed; last license issued in 2009
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4 Islamic banks
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2011 QCB Circular:
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Separation of Islamic and conventional banking
Closure of Islamic finance windows of conventional banks
New QCB Law (No. 13 of 2012):
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Supreme financial regulator: control, regulatory responsibility and
supervisory power over all financial services providers in Qatar
Governor has leading function for QCB, QFCRA and QFMA
Financial Stability and Risk Control Committee established
Qatar: Regulatory framework: Islamic Banks
licensed by QCB
Qatar Islamic Bank
Qatar International Islamic Bank
(QIIB)
Qatar Islamic Bank founded in 1982.
Qatar International Islamic Bank was founded in 1991.
Fully fledged Islamic bank with 30 branches, 160 ATM
installations. Most well established.
Historically a private banking offering but now
diversifying.
Paid up capital of QAR 2.36 billion at the end of 2014.
It has 16 branches and offices around Qatar and some
75 ATMs across Qatar.
Overseas affiliates include:
 QIB UK
 AFH in Lebanon,
 AFB in Malaysia,
 QIB Sudan.
Recently announced that its shareholders had approved
the issuance of sukuk for up to QAR 5 billion ($1.37
billion) to boost its Tier 1 capital.
Upgraded from A to A+
Paid up Capital of QAR 1.5 billion.
Looking to raise up to QAR 3 billion ($825 million)
through a capital-boosting sukuk issue.
Qatar: Regulatory framework: Islamic Banks
licensed by QCB
Masraf Al Rayan
Barwa Bank
Masraf Al Rayan was founded in 2006.
Barwa Bank was founded in 2009.
Fully fledged with focus on retail; wholesale and private
banking.
Fully fledged bank providing retail, corporate and
commercial banking, business banking, private banking,
real estate finance, structured finance, investments and
asset management.
Paid up capital of QAR 2.1 billion.
In 2008 established investment banking arm in QFC
(Al Rayan Investment LLC)
Al Rayan Brokerage Company was established in
2011.
Paid up capital of QAR 3 billion.
Privately held. Looking to list on Qatar Stock
Exchange soon.
In 2009 acquired investment bank, The First Investor.
Recently announced it will be launching two debut
funds, an ETF fund and a sukuk fund.
In July 2010 acquired First Finance and First Leasing
Company.
Actively involved in global sukuk and corporate finance
transactions.
Qatar: Regulatory framework: Qatar Financial
Centre (QFC)
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Has its own rules and regulations – based on English law
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No geographical delineation – all on shore
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QFC license is valid in the State
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More attractive to foreign firms
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QFC Authority is offering incentives to develop Islamic and
conventional:
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Asset Management
Reinsurance
Captive Insurance
Qatar: Regulatory framework: Qatar Financial
Centre (QFC)
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Separation of Islamic and conventional banks – Category 5
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2 independent banks licensed
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Qatar Finance and Business Academy: IF Training
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Mega Islamic Bank?
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Islamic Finance bridge between UK and Malaysia?
Qatar: Regulatory framework: Islamic Banks in
the QFC
Qatar First Bank (QFB)
QInvest LLC
Licensed by the QFCRA in April 2008.
Licensed by the QFCA in April 2007.
Fully licensed Islamic bank. Investment banking focus.
Main business divisions: Investment Banking, Principal
Investments and Asset Management.
Paid up capital of QAR 2 billion.
Paid up capital of US$ 750 million.
Wide shareholder base: financial institutions, prominent
individuals, banks, pension funds and other strategic
investors from the Gulf region.
Successful in cross border private equity transactions.
Shareholders include Qatar Islamic Bank.
Offices in Doha, Riyadh and Istanbul, as well as
affiliates in India and the UK.
Successful in global sukuk and advisory mandates.
Qatar: Recent developments and trends
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Foreign Expansion
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Diversification
Over-banked market
Better returns
Single borrower limits
Regulatory caps on profit
Likely to lead to further foreign expansion and M&A
Qatar: Recent developments and trends
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First Islamic Exchange Traded Fund (ETF)
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Masraf Al Rayan: shareholder approval obtained
Largest Islamic ETF in the world
FIFA World Cup 2022
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$200bn spending
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Railway-metro: $60 billion
Highways, roads and a new airport: $28 billion
Port: $11 billion
Islamic consortia:
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The Golden Line: QAR3.65 billion (US$1 billion) syndicate
Dubai
The United Arab Emirates: Recent experience,
deals and trends
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Recent sukuk listings and IPO of Shariah compliant REIT
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US$2.5bn theme park financing
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US$500m Garuda Airlines financing
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Derivatives
The United Arab Emirates: Requisites For
Shariah Compliant Derivatives
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All financial instruments (including derivatives) must be free of the
following:
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Riba (usury)
RishwahI (corruption)
Maysir (gambling)
Gharar (unnecessary risk)
Jahl (ignorance)
The United Arab Emirates: Common Islamic
Hedging Products
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Profit rate swaps (2007)
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Cross Currency Swaps
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Futures/Options
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Islamic repos
The United Arab Emirates: Challenges For
Growth
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Investor demand pales in comparison with conventional
derivatives market/varies significantly between jurisdictions
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Lack of progress of exchange traded market
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Conflicting views/opinions (fatwas) between Shariah scholars
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Limited standardisation of documentation - ISDA/IIFM Tahawwut
Master Agreement (2010)
London
United Kingdom:
Regulatory framework
Development of Islamic Financial Institutions in the UK UK Excellence in Islamic Finance by gov.uk/ukti
United Kingdom: Sukuk market
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UK government Sovereign sukuk
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Issued in June 2014
Raised £200 million
Matures 22 July 2019
UK sukuk Market: an overview
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US$38 billion through 53 sukuk issuances
Home to seven Shariah compliant exchange traded funds
UK Export Finance / Emirates airline sukuk
United Kingdom: Recent trends and opportunities
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Foreign investment into the UK
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The Shard
Chelsea Barracks
Harrods
Olympic Village
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Infrastructure opportunities
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Islamic Insurance
United Kingdom: Case studies
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What we are seeing in the UK Islamic Finance Market
Conclusion
Growth
Islamic Finance is growing
Development
Regulation of the Islamic industry is developing
Opportunities
Opportunities are on the horizon
Deals
Locations
Industry
Cross border deals are more prevalent
K&L Gates is well placed in key jurisdictions
Exciting time to be involved in the industry
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K&L Gates Contacts
Amjad Hussain
Jonathan Lawrence
Doha
London
+(0) 974 4424 6119
+44(0) 20 7360 8242
Amjad.Hussain@klgates.com
jonathan.lawrence@klgates.com
Natalie Boyd
Jessica Gaddes
Dubai
London
+(0) 971 4 427 2731
+44(0) 20 7360 8181
natalie.boyd@klgates.com
jessica.gaddes@klgates.com
Simon Mabin
Dubai
+(0) 971 4 427 2730
Simon.Mabin@klgates.com
klgates.com
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