Nurturing Islamic finance growth in Qatar IFN Reports

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IFN Reports

19-Sep-2012

Volume9.Issue37

Nurturing Islamic finance growth in Qatar

Amjad Hussain

August this year has coincided with the month of Ramadan in the Islamic calendar, a traditionally passive month especially combined with the Eid holidays. In spite of this, Qatar has managed to stay active in its Islamic finance endeavors.

Qatar Islamic Bank (QIB) has announced its intention to launch a new US$1.5 billion Sukuk issuance program. QIB, which has been awarded an ‘A’ rating by Fitch, is expecting to seek approval for the proposal from its shareholders in mid-September.

In addition, the bank has teamed up with Qatar International Islamic bank to provide a US$380 million

Murabahah financing deal for Nakilat (Qatar Gas and Transport Company).

Aiming to provide a full suite of Islamic services to a wider range of investors, Masraf-Al-Rayan, one of

Qatar’s premier Islamic banks, has set up an independent brokerage subsidiary with the purpose of offering Shariah compliant financial instruments. Al Rayan Financial Brokerage Company (ARB), is entirely owned by Masraf Al Rayan, but will operate as a completely independent business regulated by the Qatar Financial Market Authority and the Qatar Exchange.

Dlala Brokerage & Investment Holding Company has completed the process to issue a QAR110 million (US$30.1 million) Murabahah deal for its subsidiary, Dlala Real Estate Holding Company. Qatar

Holding, the direct investment arm of the sovereign wealth fund, continues to broaden its investment activities this month. In a move that creates greater exposure to emerging markets, it has purchased a

22% stake in China’s top fund, CITIC Capital Holdings, a partnership which could potentially have a significant impact globally and broadens Qatar’s exposure to new emerging markets. Qatar Holding has also purchased a 20% stake in the UK airport operator BAA for US$1.4 billion.

Higher hydrocarbon prices have led to an increase in revenue, achieving a record fiscal surplus of

QAR59 billion (US$16.2 billion) in 2012-13 (8.6% of GDP, significantly more than the 2.8% recorded in

2010-11). Due to this surplus revenue, Qatar National Bank has forecasted a 10% rise in Qatar’s revenue to QAR243 billion (US$66 billion) in 2012-13. With these current figures, the Economist

Intelligence Unit estimates that Qatar’s global GDP share will double by the year 2030.

According to the 2012 International Construction Costs Report by EC Harris, Qatar has the highest building costs in the Middle East. Despite this, Qatar’s construction sector is expected to grow considerably over the next few years in order to meet the demands under the ‘Qatar National Vision’ for 2030 and the 2022 FIFA World Cup. These construction activities will provide a continuing stimulus in the economy, thereby providing ample opportunities for Islamic finance activities to continue for the foreseeable future.

Finally, the news of the mega Islamic bank continues to dominate the Qatari press. The new Islamic bank with US$1 billion in capital is expected to be set up under the Qatar Financial Center. The initial paid-up capital of the proposed bank would be US$500 million and, of this, US$300 million will come from the Qatari government and the remaining US$200 million will be contributed by the Islamic

Development Bank and Al Baraka Bank of Lebanon. The proposal to establish the mega bank in Doha again reflects local and international investor confidence in the strong economic fundamentals of

Qatar.

Amjad Hussain is a partner at law firm K&L Gates’ corporate and finance practices. He can be contacted at Amjad.Hussain@klgates.com

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