Shahinaz Rashad, general manager of Metropolitan Financial Consultations, said that the Corporation will establish two administrations; the first is Global Islamic Financial Advisory and the second is Metropolitan Academy for Islamic Finance, in a response to the increasing demand on Islamic financing. Islamic financing employees, inside and outside the Corporation, will be trained as it signed recently many cooperation protocols with foreign Islamic financing consulting corporations and training centers such as Chartered Institute Management Accounting CIMA.
The administration will hold workshops and conferences about Islamic financing in the upcoming period jointly with the Corporation’s partners. In addition, there will be training courses on SMEs. The Corporation plays an important role in offering consulting services, management deals and training services to meet the market’s requirements of the increasing demand on Islamic banking and other services, Rashad affirmed.
Metropolitan is offering EGP 950 m joint financing through banks and local fund leasing companies divided into two sections: EGP 700 million and EGP 250 million, Rashad added but declined to give details until the end of negotiations over funding.
Rashad added that the Corporation will open a new branch in Assiut this year. Metropolitan may establish a branch in Suhag if demand increased in Upper Egypt region. It is worth mentioning that the Corporation has three branches in Cairo, Alexandria and Tanta, while its customers are across Egypt. Rashad said that the Corporation targets establishing a branch or two this year.
Fund leasing is an important way of funding investments, so it is from Metropolitan’s top ways in financing SMEs that need purchasing equipments, machines and other industrial requirements. The lessee has the right to purchase the asset from the lesser at the end of the set period, if the purchasing option is available, representing an Islamic financing instrument “ijara”, on condition of applying all Islamic aspects, Rashad added.
Metroplitan has participated in the Annual Islamic Finance Summit held on last 22-23 February in London, which was on the most important instruments of Islamic financing, including all Islamic contracts and products: ijara, murabaha, istisna’a, and sukuk. The Conference also discussed the fatwas (juristic rulings concerning Islamic law) and the standards of Islamic funding.
The Conference asserted on the importance of choosing the right time for issuing Islamic sukuks as the first issuance affects the following issuances of sukuks. These sukuks shall be named “Islamic Sukuk”. Besides, these sukuks shall be used in generating return and cash flows helping in repayment, in order to avoid accumulating foreign debt.
Asset backed sukuks shall be marketed, as they represent an additional guarantees for sukuk holders, with credit enhancement system. Sukuk issuance procedures shall be unified and flexible in Middle East region so as to accelerate and decreasing the costs of the issuance process. The Conference also stressed on the importance preparing a study on sukuk, including enacting a law for Islamic sukuk, jointly with State’s Council consultants and Al-Azhar, as an Islamic legislation body.
Sukuk issuance rose to USD 290 billion from 2000 to 2011, and the growth rate of sukuk issuance increased by 62%, reaching USD 85 billion in 2011, compared with USD 52 billion in 2010.
Malaysia had a leading position in issuing sukuks in 2011 as it issued with a total value of USD 58 billion and Qatar follows with USD 9 billion. Sukuks of both Indonesia and Saudi Arabia are predicted soar, as the latter has issued sukuks for the electrical power plant with a 40% share rate for the government and 60% for citizens, and the government also assigned its share in profits for individuals for certain years, accordingly increasing the return on sukuks to 11%.
Rashad informed that ijara sukuks rate ranges from 60% to 70% of the total number of sukuks recently issued, especially after applying tough regulations, pointing out that these sukuks include securitizing the value of the leased institutions into sukuks to be offered in financial markets, enabling the owner of the securitized institution to have cash liquidity and the investors to participate in these institutions.
Rashad predicted that demand on sukuk will increase when enacting the sukuk issuance law and expanding in the prospective infrastructure projects, as they are from the best ways of providing finance, regarding costs the investor bore. Many countries have succeeded in establishing infrastructure projects through issuing sukuks such as Turkey, Saudi Arabia and United Arab Emirates (UAE).
The Council of the Islamic Fiqh Academy, subsidy of Organization of the Islamic Conference, held its fifteenth session in Masqat has resolved that ijara sukuks are based on securitization in issuing tradable securities, based on a profitable investment project. The council also said that ijara sukuk value shall not be fixed and does not represent a debt on personal or legal entities; instead it provides returns determined by ijara contract.
The Council also decided that the ijara sukuk’s ownership can be transferred through registering in a certain record, writing the name of the new owner or delivering as applied in bonds. Sukuks may represent an owned leased object, if it applies on it the ownership conditions replacing the (ijara) leasing contract. Sukuks can be sold in the secondary market to any purchaser, by the price they agree on. The owner of sukuks has the right of his share of the return, which is the “ojra” in the determined maturity dates in accordance with the sukuk conditions, subtracting the costs which the lesser bore in accordance with the terms of the ijara contract.
The lessee has the right to sublease ijara sukuks having multi-diverse benefits as long as the sukuk issuance process is before signing the contracts with the lessees, whether it is like the first ijara or not. In case of signing the contract with lessees, the first lessee cannot issue sukuks , as they represent a debt owned by the issuer of sukuks. The issuer and the manager of sukuks do not guarantee the value or return of sukuks. Besides, if the leased institutions are totally or partially depreciated, the sukuk holders will be fined.
