March 11, 2014

Responsible investing as the basis of Islamic Finance: Deutsche Bank honoured in Euro Money Islamic Finance Awards 2013

Islamic finance is materially different from conventional financing as the payment and receipt of interest is strictly prohibited under Islam. Moreover, given that it is based on concepts such as “ethical investing” and “moral purchasing”, Islamic Finance is therefore governed by a set of rules which prescribe how to conduct business and trade within an economy based on justice for all participants.

Recognizing its excellence in Islamic Finance, Deutsche Bank received "Islamic Finance Deal of the Year" award from Euromoney Islamic Finance awards 2013. Deutsche Bank has been awarded for its successful execution of Saudi Electricity US$2 billion Sukuk (= debt capital instruments) issuance. In addition, it was recognized "Most Innovative Deal of the Year" for managing the Khazanah SGD $600 million exchangeable Sukuk transaction.

Salah Jaidah, Chairman of Islamic Finance at Deutsche Bank, said: “We are honored to receive these prestigious Islamic Finance awards from Euromoney. Through our long and extensive experience in Islamic Finance, we are able to structure complex Islamic Finance transactions that service the needs of the growing Islamic Finance market. We remain dedicated to delivering world-class Islamic Finance services to our clients around the world."

Clive Horwood, Editor of Euromoney, said “Our Islamic Finance Deal of the Year was the first ever 30-year international sukuk, and the largest international debt capital market issue from any Saudi entity. In both respects, it will provide benchmarks for other borrowers to follow. Deutsche Bank also played a key role in our Most Innovative Deal award, the latest in several successful efforts by Khazanah to monetize its stakes in key holdings through exchangeables. Both deals were eye-catching, have moved the industry forward, and will encourage new institutions to the market.”

The core principles that govern Islamic Finance

  • Prohibiting the collection and payment of interests or fees on loans (‘Riba’ or ‘usuary’) as money itself does not have an intrinsic value and therefore, the concept of making money from money is not allowed under Shariah principles;
  • Sharing of Profit, Loss and Risk as Islam encourages partnership and social integration and ensures that no return can be guaranteed without taking risk;
  • Prohibiting Speculation to ensure that return is linked to effort rather than chance or pure speculation;
  • Prohibition of Uncertainty ensuring that all aspects (such as price, nature of the goods, description, etc.) of a contractual transaction / relationship need to be clear and documented;
  • No hoarding of money and wealth to ensure widespread economic development and generation of wealth that benefits society as a whole;
  • No unethical or immoral investments prohibiting investments and transactions in certain products or industries such as alcohol, arms, gaming and gambling, pork and usurious financial transactions.

Under current practices, most Islamic financial institutions have a governing body made up of prominent Shariah Scholars who approve Islamic finance structures and transactions that are entered into by those institutions. By signing off, the board acts as a confirmation of Shariah acceptance and provides a stamp of adherence.

The core principles that govern Islamic Finance

Origins of Islamic Finance and widespread global presence

The origins of Islamic Finance date back many centuries and can be traced to the original of Islam as a religion. It is a form of financing which is based upon the principles of Shariah as prescribed in the Holy Quran, the Sunnah (practices and citations of the Prophet Mohammed and as deduced by way of analogy by Shariah Scholars).

If we look at recent history, Islamic Finance in its current form dates back to the 1970s when the first Islamic Financial institutions such as the Islamic Development Bank (a supranational Bank set up by member countries of the Organization of Islamic Cooperation) and Dubai Islamic Bank (the first commercial bank) were set up. We now talk about – and estimates vary – about an industry which includes more than 300 institutions with multi-billion dollars in assets under management. Despite the Middle East and South East Asia being where most of Islamic assets are concentrated, there is presence and activities across the world in global cities such as London, Geneva, Singapore, and Hong Kong.

With this sheer size and widespread global presence, the industry has grown and seen a multitude of innovations in terms of product offerings to its client base fueling further growth in this industry. When it first started, Islamic finance was limited to commercial banking activities, it has now grown to encompass more sophisticated structured finance, debt capital instruments (Sukuk) and risk management solutions.

Origins of Islamic Finance and widespread global presence

Islamic Finance at Deutsche Bank

Deutsche Bank has been a strong player in the Islamic Finance industry for over a decade. We have been committed to the development of the industry and are recognized as a world-class provider of Islamic financial solutions that caters to our Islamic clients’ funding and risk management needs. Deutsche Bank now has one of the most innovative and efficient structuring teams comprised of specialized Islamic Finance experts with cross product backgrounds and responsibilities enabling clients to benefit from Deutsche Bank’s world class expertise.

Deutsche Bank’s core Islamic Finance structuring team is based in Dubai (UAE) and Doha (Qatar) with resources in London (United Kingdom) and Kula Lumpur (Malaysia).

On the Islamic capital markets side, Deutsche Bank has been honored to work with our sovereign, quasi- sovereign and private clients such as the State of Qatar, Saudi Aramco, Saudi Electricity Company, Khazanah, Dubai Islamic Bank, Banque Saudi Fransi, Dar Al Arkan Real Estate Development Company and many others to arrange and book-run landmark Sukuk transactions enabling them efficient and swift access the Islamic capital markets to achieve their funding objectives.

Deutsche Bank has been active in developing innovative Shariah compliant structures across all assets classes, liabilities and derivatives. Offering the full spectrum of Islamic Finance products and services, Deutsche Bank is the partner of choice for key regional and international Clients. With the forecasted growth of the Islamic Finance market, Deutsche Bank is continuously striving to create new and innovative products for its Clients.

Over the years and as an example to Deutsche Bank’s commitment to the Islamic markets, Deutsche Bank has established strong and lasting relationships with some of the leading scholars in the world, including Dr. Hussein Hamid Hassan (UAE), Dr. Ali AlQaradaghi (Qatar), Dr. Mohamed Daud Bakr (Malaysia), Dr. Abdulrahman Al Atram (Saudi Arabia) and Dr. Yousef Al Shobaily (Saudi Arabia).

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Deutsche Bank is deeply committed to the development of the Islamic finance industry and is broadly recognized as a world-class provider of Islamic financial solutions.

Salah Jaidah Vice Chairman MENA

“Through our long and extensive experience in Islamic Finance, we are able to structure complex Islamic Finance transactions that service the needs of the growing Islamic Finance market.”

Salah Jaidah Chairman of Islamic Finance at Deutsche Bank

What is Islamic Finance?

Islamic Finance is based on concepts such as “ethical investing” and “moral purchasing”. Islamic Finance is therefore governed by a set of rules which prescribe how to conduct business and trade within an economy based on justice for all participants. The payment and receipt of interest is strictly prohibited under Islam.

Core principles comprise the following

No unethical or immoral investments prohibiting investments and transactions in certain products or industries such as alcohol, arms, gaming and gambling, pork and usurious financial transactions.

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