Monthly Archives: July 2010

Japanese institutions go for Islamic financing

Japanese institutions go for Islamic financing


LONDON: After a hiatus of over three years largely due to inertia from regulators and head offices, Japanese institutions are finally going to the market to raise millions of dollars in Islamic financing. The good news is for Malaysia because much of this activity is centered in or out of Kuala Lumpur.

Over the last two weeks Nomura Holdings, Inc. appointed Kuwait Finance House (Malaysia) as the mandated lead arranger for its debut $100 million Sukuk Al-Ijara. The two-year issuance will be the first US dollar denominated issue by a Japanese corporation out of Malaysia.

Similarly Sumitomo Corporation, according to Malaysian banking sources, plans to go one step further by issuing the first yen-denominated Shariah-compliant paper in Japan. The paper will not be a classical Sukuk because Japanese regulations and tax laws do not facilitate the issuance of Sukuk currently, but may mirror an asset-backed Islamic bond type structure.

These developments follow the successful closure of Nomura’s $70 million syndicated commodity murabaha facility, which was lead, arranged by ABC Islamic Bank, the Islamic finance subsidiary of Arab Banking Corporation. Due to increased demand for both short-term investments and for investment grade Japanese risk, the issuance was increased from the original target of $50 million.

The Nomura issuance however is bound to set the pace for increased Japanese involvement in the Islamic finance industry. Not that Japanese institutions have been absent from the sector. Several Japanese sogo soshos have in the past accessed the odd commodity Murabaha structured primarily through London banks. Nomura itself was the fund manager for Al-Tawfeek Investment Company’s Islamic Japanese Equity Fund. Daiwa Securities two years ago launched an Islamic ETF (exchange-traded fund) which is listed on the Singapore Stock Exchange and which tracks the FTSE Asia Shariah 100 Index. In the Takaful sector, Tokyo Marine & Fire Insurance Company has a thriving joint venture in Malaysia with Hong Leong Islamic Bank and has a regional company in Dubai serving the GCC markets.

Japanese government agencies such as the Institute of Developing Economies have for the last two decades been studying Islamic finance and collating research on the industry. More recently the Islamic Financial Services Board (IFSB) organized the first Islamic banking seminars in Tokyo. Since then several have been held in Japan.

The Japan Bank for International Cooperation (JBIC) seriously raised expectations in 2007 when it announced that it plans to issue a debut Sukuk in Malaysian ringgit to fund its activities in Malaysia and the ASEAN region. JBIC appointed lead arrangers CIMB and Citigroup with the hope of attracting investors from both Asia and the GCC markets. Unfortunately, the proposed issuance was dragged out due to differences between the two lead arrangers over the appropriate Sukuk structure. Then the credit crunch and financial crisis set in which put paid to any JIBIC issuance.

However, privately, JBIC managers keen on tapping the Islamic finance market have been frustrated by the lack of Japanese government involvement and facilitation of Islamic finance in Japan and the lack of enthusiasm shown by the powers that be at JBIC itself. Because of Japan’s complex system of government, it seems that only the ruling prime minister can initiate changes in primary legislation to facilitate say the introduction of Sukuk and other Islamic finance products.

In the meantime, the Japanese Ministry of Finance in cooperation with the Bank of Japan, the central bank, did amend last year some of the provisions relating to the foreign subsidiaries of Japanese financial institutions, which are now allowed to conduct certain activities in the Islamic finance sector including the issuance of Sukuk in local currencies and the launching of investment funds.

With the global sukuk market now getting a second wind in the wake of the financial crisis and with Asia leading the way, does it mean that JBIC will also change its strategy, especially after the Nomura sukuk issuance and the planned one by Sumitomo?

Takumi Shibata, deputy president and chief operating officer of Nomura Holdings, could not be more to the point, stressing that “with this landmark transaction, Nomura has further diversified its funding sources and tapped the large and growing Islamic finance market for the first time. This issuance is part of Nomura’s ongoing push to diversify its funding sources to drive growth. Islamic investors and Islamic finance are a very important and rapidly growing sector globally and this transaction is highly significant for Nomura and for corporate Japan.”

The book for the issuance was opened on July 5 and closed the next day, according to Jamelah Jamaluddin, CEO, KFH (Malaysia). But Jamaluddin, a controversial doyen of the Malaysian Islamic finance sector and the first woman to head an Islamic bank in the world, RHB Islamic Bank, also threw down the gauntlet to other potential Japanese issuers: “I am pleased to inform you that this sukuk marks Nomura’s first step in diversifying its funding sources to include Islamic financial solutions. It involves financing the purchase of two aircrafts. I hope that Nomura’s sukuk will pave the way for more discerning Japanese clients, as well as other international corporations, to consider migrating or co-opting Islamic finance products in meeting their investment and financing requirements.”

The Nomura Sukuk is also listed on Bursa Malaysia, just becoming the second foreign listing on the bourse and the first sukuk listing by an Asian and a Japanese international entity. At the listing signing ceremony, Yusli Mohamed Yusoff, chief executive officer of Bursa Malaysia, explained that “Malaysia remains the world’s single most active corporate Sukuk market at present. We certainly have made great strides in the sukuk market and the listing of Nomura’s sukuk is a further demonstration of foreign players’ confidence toward Islamic securities and instruments issued out of Malaysia. The sukuk listing from Nomura will further strengthen Bursa Malaysia as a preferred Sukuk listing destination, elevating the overall position of Malaysia as an international Islamic financial hub.”

With this listing, Bursa Malaysia’s total Sukuk listings amount to $20.9 billion comprising 15 sukuk listed by 13 issuers, of which two are international issuers.

Nomura is of course elated by the investor demand to its two forays into the Islamic market this month – the sukuk and the Murabaha facility. According to Takuya Furuya, chairman of Nomura Middle East and Africa, “It reflects the strength of the Nomura brand and its reputation in the region. The issuance is part of Nomura’s strategy to diversify funding both geographically and by product and comes at a time when we have simultaneously launched a Sukuk in Malaysia. This Murabaha facility marks the first Islamic funding exercise by a Japanese corporate in the region and we hope that it will strengthen the financial ties between the Far East and the Middle East.”

The Murabaha facility has a three-year tenor and offers a profit margin of 175 basis points per annum. The facility will be used for general liquidity management purposes. Participants in the syndication included ABC Islamic Bank, Islamic Development Bank (IDB), Samba Financial Group, Sumitomo Mitsui Banking Corporation Europe Limited and Ahli United Bank.


How does RSS and other Sangh Parivar outfits escape terrorist tag?

By Adnan Alavi

The TV Today group’s English channel Headlines Today aired the sting operation that showed top Rashtriya Swayamsevak Sangh (RSS) leader Indresh Kumar’s involvement with Hindutva-inspired fanatics.

Enraged, Sangh parivar workers attacked the channel’s office and went on rampage. The sting operation was more shocking as a former BJP member of parliament was also caught on camera and a failed plot to target Vice-President Hamid Ansari at a function in Jamia Millia University was mentioned.

The fact that Indresh is not a fringe activist but top leader and close to RSS chief makes it even more serious. The BJP, which is the main opposition party takes orders from the Sangh, and is always ready to shield its masters.

During the investigation into Mecca Masjid, Ajmer Dargah and Malegaon blasts, already role of several RSS workers was found. Since independence, starting from Gandhi’s killing, the RSS cadre was involved in numerous communal riots.

The report clearly shows that Pune-based chemistry professor held camps to impart training to radicals, a Delhi-based prominent doctor Dr RP Singh bought arms & ammunition and planned terror strikes while top RSS-BJP leaders were discussing that they had no faith in constitution.

Now once again, it’s proved that there is a strong militant and anti-national group in RSS. But why no one even dares to take on Sangh Parivar. Why it’s not termed a terror group? How its top leaders manage to get away by claiming that a few fringe persons may be involved when any other organisation that gets involved in one incident, is dubbed terror group.

Take for example the recent incident in Kerala where a newly floated political party PFI was demonized and almost dubbed as terror group for one incident in which a professor’s palm was chopped off by its activist. Despite PFI leaders openly condemning it, there were raids on party offices and a witch-hunt followed.

In case of RSS, Bajrang Dal and Shiv Sena there is never any raid or sustained interrogation. Ram Sene leader Pramod Muthalik was caught on camera claiming that he could set off a communal riot for a fee but there was no action against his group.

Babu Bajrangi became a face of militant Hindutva in Gujarat and confessed that he murdered women and raped them. But he wasn’t touched.

While Muthalik and Bajrangi were active in states ruled by BJP, the Shiv Sena and MNS have done the same in Congress-ruled Maharashtra where outsiders including Biharis and UP-ites have been targeted and yet the parties escaped the terror tag.

On Friday, a group of Shiv Sena activists brutally beat up Karnataka politician Syed Mansoor and other leaders of Seema Rakshan Vedike over the claim of Maharashtra on Belgaum district and blackened his face in a Zee TV channel’s office in Kolhapur. Shiv Sena leader Sanjay Raut termed the action as correct.

The offices of these groups aren’t raided, their connections are never investigated and their leaders who openly pour out venom are not booked. It is no surprise that the radicals are getting bolder and bolder by the day, so much that they are even targeting Vice-President and planning to overthrow the state.

If SIMI operatives were involved in terrorism and it was banned, why not RSS and Bajrang Dal after all they also have their activists involved in terror plots? PFI’s freedom march was banned but despite open display of arms, firing gunshots and holding training camps for years, Bajrang Dal or even Sanatan Sanstha is not reined in.

There are a host of reasons:

Firstly, today BJP has strong presence across the country and every step against RSS is strongly opposed by its workers. The party terms it political vendetta and goes out of the way to defend terror accused, just like its leaders targeted late Hemant Karkare.

Especially, when the Congress govt is firmly in saddle why should investigation be sped up as it may force BJP in a combative position or anger sections of majority community. A top bureaucrat had reportedly asked the investigators to go slow in Samjhata Express blast case.

There is a fear of the so-called Hindu votebank and the fact that a section of majorty community may not like strong action. Lack of activism among educated and secular middle-class is another reason. Besides, there are few NGOs or individuals who decide to file cases, take legal action against fanatic groups and then pursue the cases.

In the last several decades, pro-Hindutva elements have infiltrated several institutions. They include agencies that are vital in keeping tab on the anti-national forces and destructive organisations within the country. A single officer posted at a key place can sabotage the entire investigation.

Journalist Ashish Khetan, who did the breaking story in Mail Today apart from the sting operation in Headlines Today, says that there were attempts to botch up investigation from various quarters and after ATS chief Hemant Karkare’s death, officers were reluctant to pursue cases because of the feeling that nobody wanted to burn their fingers.

The role of Saffron outfits in communal carnages like anti-Christian violence in Orissa’s Kandhamal, Karnataka and numerous anti-Muslim pogroms is well-known and documented. RSS and Bajrang Dal were running the risk of getting dubbed terrorist groups in America after attacks of churches.

It’s time that the government understands the seriousness of the issue. Just like SIMI, it should ban extremist Hindu organisations. BJP should also accept the reality, make its position clear and get rid of the fanatics from within the organisation.

Link to Headlines Today sting: Click for all videos