The use of offshore companies in Islamic finance is driven by many of the same factors as in conventional banking, as tax efficiency, bankruptcy-remoteness and privacy are considerations common to most cross-border transactions. Louise Groom and Joanna Hossack write on how the Cayman Islands are in a fortunate position as the preferred jurisdiction for Islamic financing structures originating in the Middle East and the UK.
Despite being one of the biggest economies in the region, Saudi Arabia has yet to fulfill its true potential within the Islamic economy. Dr Ahmed Al Ajlouni explores the opportunities and challenges facing the kingdom in its quest to develop a functional and accessible Islamic capital market.
The sixth-largest global economy, Brazil represents a very real opportunity for Islamic finance to spread its wings in a hitherto relatively untapped region, while Shariah compliant finance offers Brazil an exciting source of funding to boost development. Alexandre Lopes discusses the opportunities and challenges involved.
Raymond Davern, Dennis Ryan and David Pytches look at the ways in which the various types of trust products in each jurisdiction may be of interest to MENA families as succession planning vehicles.
The market share of participation banks in Turkey has increased since the 2001 crisis. Ali Ceylan and Burak Gencoglu delve into the banking laws in the country and discuss how it may affect the Islamic finance industry.
The introduction of the first draft of the Sukuk Islamic Financing Law of 2011 marks a welcome change in the Jordanian financing industry, particularly for Shariah compliant companies and entities. Khaled Saqqaf explains.
In Abu Dhabi and generally across the GCC, a company is not allowed to take in debt in excess of its share capital and if an entity is issuing a multi-billion dollar sukuk, it is inevitable that its debt raising will exceed its share capital. According to a GCC-based banker, the way to structure around the excess – conventionally and in Islamic finance – is to set up an offshore vehicle.
Tapping into the vast investor pool of money available in the Middle East is not an easy task. It is also not very different from marketing and selling funds anywhere else in the world, say the experts. While there is a debate about the merits and need for a local presence as well as the use and need of intermediaries, the majority of people in the fund industry working in the region agree that the approach will be roughly the same as anywhere else.
As the pace of business in the Middle East and North Africa accelerates, family businesses are looking to raise funds, sell out, restructure or offload non-core assets. Deregulation is opening new opportunities for Greenfield investment. Governments are increasingly willing to divest assets in privatisation sales. The list goes on.
Going forward, this means a growing number of private equity deals will originate from situations in which trust, transparency and good corporate governance are vital. As origination streams diversify beyond the usual sources, savvy industry players will embrace the reality that the full alignment of interests of all parties is becoming the key to sustainable growth.
The turmoil in global financial markets since last year has set an intriguing backdrop for examination of hedge funds in the Middle East region. After more than two decades of using hedge funds, private client investors from the GCC states have become familiar with their value as a source of additional returns and downside protection in their portfolios. But the financial climate has not often presented as many opportunities and challenges as we see today, according to Antoine Massad.
The Middle East is still better known for its wealthy investors than for its resident hedge fund community, but there are hedge funds operating in the region, hoping to capitalise on proximity to some of the world’s wealthiest investors.
Kevin Birkett, asset and fund management director at the Dubai Financial Services Centre (DIFC) notes there are already two small funds present in the DIFC. Local markets are prohibitive for them: it is not possible to short and although there are some synthetic products available they are not liquid enough to be really appealing to hedge funds.
Asia is currently reaping the benefits of being the developed world’s emerging market of choice, with new billion-dollar funds, and now, big deals to match. Yet the Middle East, driven by a combination of rising oil prices and internal reform and revitalisation, is equally in the spotlight as a new cluster of high-growth economies. Add the fact that several of Asia’s prime investment destinations – especially India – are positioned to tap the dynamism in both regions, and there seems plenty of cause to link the two together. PEAsia talked to experts in both regions, for perspective on the new Middle Eastern/Asian private equity connection.