The Star Online > Business
Friday April 18, 2008
Banks to go big in risk management
BY DALJIT DHESI
PETALING JAYA: The recent credit squeeze and huge write-downs by US investment banks will see such banks worldwide beginning to adopt more prudent risk management, build up product innovation capabilities, and more concerted efforts to migrate to Islamic financial services.
OSK Investment Bank Bhd director and head of corporate and legal services Woon Chong Boon said due to the write-downs resulting from exposure to US sub-prime mortgages, investment banks were now putting more emphasis on implementing risk management frameworks.
He said since investment banks' cautiousness in taking excessive risks would stifle the market, he expected them to focus more on product innovation and offering value-added services to remain competitive.
Woon Chong Boon “As a long-term strategy, the financially stronger players may take the opportunity to broaden their markets or geographical coverage by expanding and investing abroad, particularly in the region,” he told StarBiz.
HwangDBS Investment Bank Bhd managing director Lee Jim Leng concurred, saying that risk management would grow in importance among these banks in the promotion of good corporate governance and to maintain investor confidence.
According to Lee, banks would also need to find ways to strengthen their funding positions or options to avert a liquidity squeeze crisis as that witnessed by some international investment banks.
“Asset positions need to be adequately classified and the liquidity framework must be sound to ensure that these banks are not forced to tap the financial markets for funding in its most adverse situation, '' she added.
Kuwait Finance House (M) Bhd (KFH), in response to queries from StarBiz, said the bank anticipates a migration to Islamic financial services in certain markets due to the loss of faith in the conventional banking system.
Lee Jim Leng “The overall market for Islamic banking and finance stood at more than US$700bil in 2006, and has been growing at 23.5% annually over the past five years.
“More importantly, Islamic banks have been fairly insulated from the credit crisis given the asset-backed nature of funding,'' KFH said.
The bank also said Islamic bonds, or sukuk, were becoming an important avenue for raising funds globally.
“To date, the announced sukuk pipeline for 2008 is estimated at US$29.5bil, while the global sukuk outstanding is expected to reach US$200bil by 2010 from the current US$97.3bil, an annual growth rate of 35%,'' it added.
On the impact of the credit squeeze and write-downs by the US investment banks on its counterparts in Malaysia, Lee said the local market had remained fairly insulated.
However, she added, the secondary effects could be seen in the softer trade and investment.
“We are seeing an influx of foreign bond issuers tapping into Malaysian domestic liquidity and via the swap markets swapping the funds into US dollars, thus putting upward pressure on credit spreads and cross currency interest rate spreads.
“HwangDBS Investment Bank’s business focus has been and will continue to be local for the next few years. Being a relatively new investment bank, we have been focused on building our local track record,'' she said.
KFH said the investment bank's business in Malaysia was sound and that the slowdown had not affected its asset base, prospects or outlook for the region.
Woon said the degree of the impact would depend on the business model of the individual investment bank in terms of market niche, product/service offering and diversification, geographical coverage and its value propositions.
Friday, April 18, 2008
Wednesday, April 16, 2008
A bounty awaits (wealth management potential in Asia)
The rapid growth of Asia's middle class offers enormous potential for financial planning in the region.
By Michael Laurence
Arun Abey, executive chairman of Australian-based financial planning group ipac Securities, takes what initially seems a surprising tactic. He encourages competing Australian firms to follow in ipac's path of establishing financial planning businesses in Asia. 'Frankly, quality competition will help us grow the market,' Abey says.
Abey is keen to promote among Asia's burgeoning middle classes and higher-income investors the concept of holistic financial planning, long practised by ipac. In short, this approach to financial planning involves a financial planner gaining a thorough understanding of an investor's aspirations, needs and goals; identifying a long-term asset allocation for their investments to maximise their opportunities with the least possible risk; and suggesting ways to protect their wealth.
'We want to understand the investor as a whole – to provide full advice,' Abey says. 'We do not act as a broker, providing bits and pieces of advice.'
For much of the emerging Asian market, this represents a significantly different approach to making investment decisions. Many Asian investors favour highly conservative bank accounts, yet at the same time speculate to a surprising degree in stocks and property.
Abey has great expectations for the growth of ipac's Asian business. 'I have no doubt that our collection of Asian businesses in terms of private clients will be bigger than our Australian private client business in 10 years,' he says. This should be seen in the context that Abey views Australia 'as a long way' from being a mature market.
The tremendous promise for financial planning in Asia comes from a combination of factors that all seem to be coming together at once: the blistering growth of its middle classes and the rapid ageing of its population against a backdrop of minimal social security nets and a savings rate that far outstrips the rest of the world.
Peter Promnitz, region head for Asia Pacific for Mercer – global consultants in investments, human resources and superannuation pensions – says Asia faces a massive challenge in terms of creating retirement savings for an ageing population. He points, for instance, to the ramifications of China's one-child policy and South Korea's extremely low birth rate.
The growth of Asia's middle class is well documented. The Chinese affluent, urban middle class already holds almost 10 per cent of income that can be disposed of on luxury goods – despite numbering just 1 per cent of the population, according to 'The value of China's emerging middle class', a special report published in The McKinsey Quarterly, 2006.
'And over the next 20 years,' states the report, 'more people will migrate to China's cities for higher paying jobs. These working consumers, once the country's poorest, will steadily climb the income ladder, creating a new and massive middle class.'
India is another story of fast-growing personal wealth. 'Hundreds of millions of Indians are being lifted out of desperate poverty to create a massive middle class in the cities,' reports 'Tracking the growth of India's middle class', a special report published in The McKinsey Quarterly, 2007.
And the number of high-wealth individuals (HWI) is, not surprisingly, expanding at a staggering pace. World Wealth Report 2007, published by Capgemini and Merrill Lynch, lists Singapore, India and Indonesia as the countries with the world's fastest growing numbers of HWI. Other Asian high-growth regions that have particularly fast growing numbers of super-wealthy residents are South Korea and Hong Kong.
David Thomas, chief executive of Think global – a consultancy specialising in promoting the use of Australia's financial services expertise overseas – believes that Asia represents a huge opportunity for Australian financial planners, and that this should not be lost. Thomas was a financial planner in Hong Kong for eight years.
Financial planning businesses establishing themselves in Asia have to deal with regulatory regimes that range from the highly developed to the rudimentary. Asian countries such as China, India, Indonesia and Malaysia have limited investment opportunities, according to Opportunity knocks – unlocking the wealth management potential in Asia pacific, published in 2007 by Deloitte.
Thomas says another of the challenges for Australian financial planners entering Asian markets is the importance that many local advisers place on up-front commissions and on the sale of products.
And he says financial planning to many Asians can mean investment advice rather than a holistic approach to fi-nancial planning.
Abey likens the current state of the financial planning market in Asia to Australia 20 years ago. 'Except,' he forecasts, 'Asia will catch up to us within five years.'
Mercer has 1000 employees in Asia providing advice ranging from corporate structures, employee remuneration and development of investment processes. Promnitz says the emphasis in China at this point is on getting the corporate structure right.
According to Promnitz the provision of holistic financial planning in mainland China is most definitely limited at this stage. But he forecasts that demand will greatly rise in response to expectations for fast-growing retirement savings.
Three years ago, the Chinese government established a voluntary corporate pension scheme, the Enterprise Annuity system. 'It is coming from a very low base,' Promnitz says. 'But once momentum is picked up, the scheme will accelerate past Australia's funds under management in superannuation.'
Noel Maye, chief executive of the Financial planning standards board in Denver, Colorado – which owns the certified financial planner (CFP) certification program outside the US – says that the concerns of Asia's emerging middle classes are the same as Baby Boomers anywhere. These involve educating children, managing their own wealth (including savings for their own retirement), and looking after ageing parents.
And just as in the West, Maye says Asia faces ageing populations that are living longer. 'Their needs [because of ageing] are greater and more complex,' he says. The CFP program in Asia is offered in mainland China, Hong Kong, Japan, South Korea, Taiwan, Indonesia, Malaysia, India and Thailand.
Another key reason why Asia represents such fertile territory for financial planners is the sheer level of household savings.
Deloitte's 2007 book Opportunity knocks – unlocking the wealth management potential in Asia pacific, states that the world's highest household savings rates are in Singapore (33 per cent of household income), Indonesia (28 per cent), India (22 per cent) and China (16 per cent). These figures, based on OECD statistics, leave the attempts at savings by Australians and Americans looking extremely miserable.
As ipac's Abey says, there is no problem in persuading Asians to save for their retirement: '[But a problem is that] the money in lazy bank accounts is huge.'
Derek Young, chief executive of ipac Asia, says, 'We are actually bringing a new language to Asia: the concept of financial planning.' And then he asks with a laugh: 'How do you translate asset allocation into Mandarin?'
One approach that ipac has adopted in dealing with cultural differences is to recruit some financial planners from Australia's Australian–Chinese community and bring them back to Asia.
Founded 25 years in Australia and bought by AXA Asia Pacific in 2002, ipac established businesses in Hong Kong and Singapore in January 2003. These offices have 25 financial planners among their 90 employees.
Today, ipac in Australia has $16B under management; $5B for private clients. And the Asian private client business has $500M under management – 10 per cent of its Australian private client business. Yet, as discussed, ipac's Abey expects the Asian private client business to be bigger within a decade.
Australian financial planning group Professional Investment Services (PIS), whose headquarters are on the Gold Coast, is a pioneer in terms of an Australian company offering financial planning in Asia. The location of its Asian offices include mainland China (Beijing), Hong Kong, Singapore, Malaysia and Thailand. PIS began its push into Asia by opening an office in Singapore six years ago.
PIS chief executive Robbie Bennetts likes to think his group's Chinese business will one day be bigger than its Australian operation. PIS develops its business in Asia by gaining referrals from local accountants.
Bennetts emphasises that an important factor for PIS is the reputation of accountants for professional and ethical conduct.
One point that concerns Bennetts is that some Australian financial planners offer their services in Asian countries such as Singapore without first gaining local licences. 'They don't realise they are breaking the law,' he says. 'And it's not showing much empathy.'
David Thomas of Think global says Australian financial planning firms operating in Asia have tended to focus more heavily, at least initially when opening a new office, on Australian expatriates because 'these are the low-hanging fruit'. But Thomas emphasises that the greatest long-term opportunities are from serving the Asians themselves.
Bennetts says at first his group concentrated on Australian expatriates, and then expanded to serving local Asian residents. A similar path has been taken by ipac, with Young emphasising that Australian expatriate clients remain highly significant contributors to its businesses in Hong Kong and Singapore.
Barry Lambert, founding chairman of the Count Financial Group, has built the core of Count's listed business on the concept of assisting accountants to provide financial planning services.
Lambert says that while Count is mindful of the growing personal wealth in Asia, Australia's superannuation system provides great opportunities for financial planners within Australia.
Count will only move beyond Australian shores when the right opportunities with suitable partners arise. Lambert says it is inevitable that Count will move into Asia one day. Count director and former CPA Australia national president Jocelyn Martin represents CPA Australia in Asia.
Lambert points out that the tremendous opportunities for financial planners within Australia perhaps underlines the basic reason why the numbers of successful Australian financial planning groups offering their services in Asia remains relatively small at this stage.
Financial planning by country
Singapore
Financial planning environment: This is the most mature market in Asia in terms of understanding the need for financial planning, says Derek Young, chief executive of ipac Asia. 'The principal reason is the government knows that people should save for their retirement.'
Young says Singapore's government has recognised that the amount of savings in Singapore's pioneering and mandatory Central Provident Fund, founded in 1955, is not enough to fund the retirement of its citizens. 'The government has taken steps to raise awareness that individuals should be saving for their retirement,' Young says.
Regulatory environment: Young describes Singapore's regulatory regime as strong, and points to the Financial Advisers Act that specifically covers those giving financial advice.
Robbie Bennetts, chief executive of Professional Investment Services (PIS), agrees that Singapore has a high standard of regulation of financial planners. 'It's modelled after Australia's system,' he says. 'There are very serious consequences for financial planners who don't behave themselves. The regulator is tough on [for example] churning.' (Churning involves recommending that clients unnecessarily sell one investment product to buy another in order to earn more commissions.)
A corporation carrying on business as a financial adviser must hold a financial adviser's licence, unless exempted. Individuals giving financial advice must hold a representative's licence, unless working for an exempt corporation.
Hong Kong
Financial planning environment: Hong Kong has long catered to managing the personal wealth of high-wealth individuals (HWI), largely through private banks. Yet Hong Kong is three to five years behind Singapore in the community's recognition of the need for financial planning, says Derek Young of ipac Asia.
Most of the financial planners in Hong Kong work for large banks and insurance companies.
Since 2000, all employees in Hong Kong have had to enrol in its pension scheme, the Mandatory Provident Fund. And Young says there is a growing acknowledgement that people must save for their retirement.
Hong Kong also has a well-developed corporate pension scheme.
Regulatory environment: Young says there is a reasonable regulatory regime for financial planners, and a review is under way about how to more definitely regulate them.
Robbie Bennetts of PIS describes the standard of regulation in Hong Kong as 'quite mature' against what he regards as the 'quite immature' development of its investment products.
Hong Kong's wide-reaching Securities and Futures Ordinance, which came into operation in 2003, is designed to improve the quality of the investment market and to improve protection of investors.
Mainland China
Financial planning environment: Derek Young of ipac Asia says mainland China presents a challenge for foreign financial planners offering their services. The regulatory regime is weak, there are restrictions on investments outside China, and the recognition of the need for financial planning advice is not strong.
Another challenge in mainland China for financial planning is the amount of local speculation on emerging businesses and property development.
Peter Promnitz, region head of Asia Pacific for Mercer, points out that a Chinese venture partner is required for such activities as funds management and the provision of trustee services.
Regulatory environment: Robbie Bennetts of Personal Investment Services (PIS) says the Chinese mainland has a 'web of regulation' that can differ from region to region. Nevertheless, Bennetts has high hopes for his group's move into mainland China: 'There are wonderful growth opportunities.'
Malaysia
Financial planning environment: Young describes Malaysia as 'immature' in its recognition of the need for financial planning. 'It is about 10 – 15 years behind the trend setting Singapore,' he says. 'But it won't take Malaysia long to catch up.'
Robbie Bennetts of PIS says the standard of investment products available in Malaysia is generally poor, and there is the need to educate advisers away from the practice of selling one product to dealing with a range of products.
Malaysia has long had an Employees Provident Fund for private-sector employees and public servants who don't have a pension.
Regulatory environment: Derek Young of ipac says Malaysia is learning about regulation from places such as Australia. Indeed, he points out that Australia has created something of an export industry, with former ASIC regulators working as consultants in Asia to help develop their regulations.
Bennetts describes regulation of financial advice as at an 'immature' stage of its development.
The Securities Commission, Malaysia, regulates those working in the financial markets. There are licences covering financial planners, investment advisers and investment representatives. However, key exemptions from licensing requirements exist.
Reference: February 2008, volume 78:01, p. 36 – 41
By Michael Laurence
Arun Abey, executive chairman of Australian-based financial planning group ipac Securities, takes what initially seems a surprising tactic. He encourages competing Australian firms to follow in ipac's path of establishing financial planning businesses in Asia. 'Frankly, quality competition will help us grow the market,' Abey says.
Abey is keen to promote among Asia's burgeoning middle classes and higher-income investors the concept of holistic financial planning, long practised by ipac. In short, this approach to financial planning involves a financial planner gaining a thorough understanding of an investor's aspirations, needs and goals; identifying a long-term asset allocation for their investments to maximise their opportunities with the least possible risk; and suggesting ways to protect their wealth.
'We want to understand the investor as a whole – to provide full advice,' Abey says. 'We do not act as a broker, providing bits and pieces of advice.'
For much of the emerging Asian market, this represents a significantly different approach to making investment decisions. Many Asian investors favour highly conservative bank accounts, yet at the same time speculate to a surprising degree in stocks and property.
Abey has great expectations for the growth of ipac's Asian business. 'I have no doubt that our collection of Asian businesses in terms of private clients will be bigger than our Australian private client business in 10 years,' he says. This should be seen in the context that Abey views Australia 'as a long way' from being a mature market.
The tremendous promise for financial planning in Asia comes from a combination of factors that all seem to be coming together at once: the blistering growth of its middle classes and the rapid ageing of its population against a backdrop of minimal social security nets and a savings rate that far outstrips the rest of the world.
Peter Promnitz, region head for Asia Pacific for Mercer – global consultants in investments, human resources and superannuation pensions – says Asia faces a massive challenge in terms of creating retirement savings for an ageing population. He points, for instance, to the ramifications of China's one-child policy and South Korea's extremely low birth rate.
The growth of Asia's middle class is well documented. The Chinese affluent, urban middle class already holds almost 10 per cent of income that can be disposed of on luxury goods – despite numbering just 1 per cent of the population, according to 'The value of China's emerging middle class', a special report published in The McKinsey Quarterly, 2006.
'And over the next 20 years,' states the report, 'more people will migrate to China's cities for higher paying jobs. These working consumers, once the country's poorest, will steadily climb the income ladder, creating a new and massive middle class.'
India is another story of fast-growing personal wealth. 'Hundreds of millions of Indians are being lifted out of desperate poverty to create a massive middle class in the cities,' reports 'Tracking the growth of India's middle class', a special report published in The McKinsey Quarterly, 2007.
And the number of high-wealth individuals (HWI) is, not surprisingly, expanding at a staggering pace. World Wealth Report 2007, published by Capgemini and Merrill Lynch, lists Singapore, India and Indonesia as the countries with the world's fastest growing numbers of HWI. Other Asian high-growth regions that have particularly fast growing numbers of super-wealthy residents are South Korea and Hong Kong.
David Thomas, chief executive of Think global – a consultancy specialising in promoting the use of Australia's financial services expertise overseas – believes that Asia represents a huge opportunity for Australian financial planners, and that this should not be lost. Thomas was a financial planner in Hong Kong for eight years.
Financial planning businesses establishing themselves in Asia have to deal with regulatory regimes that range from the highly developed to the rudimentary. Asian countries such as China, India, Indonesia and Malaysia have limited investment opportunities, according to Opportunity knocks – unlocking the wealth management potential in Asia pacific, published in 2007 by Deloitte.
Thomas says another of the challenges for Australian financial planners entering Asian markets is the importance that many local advisers place on up-front commissions and on the sale of products.
And he says financial planning to many Asians can mean investment advice rather than a holistic approach to fi-nancial planning.
Abey likens the current state of the financial planning market in Asia to Australia 20 years ago. 'Except,' he forecasts, 'Asia will catch up to us within five years.'
Mercer has 1000 employees in Asia providing advice ranging from corporate structures, employee remuneration and development of investment processes. Promnitz says the emphasis in China at this point is on getting the corporate structure right.
According to Promnitz the provision of holistic financial planning in mainland China is most definitely limited at this stage. But he forecasts that demand will greatly rise in response to expectations for fast-growing retirement savings.
Three years ago, the Chinese government established a voluntary corporate pension scheme, the Enterprise Annuity system. 'It is coming from a very low base,' Promnitz says. 'But once momentum is picked up, the scheme will accelerate past Australia's funds under management in superannuation.'
Noel Maye, chief executive of the Financial planning standards board in Denver, Colorado – which owns the certified financial planner (CFP) certification program outside the US – says that the concerns of Asia's emerging middle classes are the same as Baby Boomers anywhere. These involve educating children, managing their own wealth (including savings for their own retirement), and looking after ageing parents.
And just as in the West, Maye says Asia faces ageing populations that are living longer. 'Their needs [because of ageing] are greater and more complex,' he says. The CFP program in Asia is offered in mainland China, Hong Kong, Japan, South Korea, Taiwan, Indonesia, Malaysia, India and Thailand.
Another key reason why Asia represents such fertile territory for financial planners is the sheer level of household savings.
Deloitte's 2007 book Opportunity knocks – unlocking the wealth management potential in Asia pacific, states that the world's highest household savings rates are in Singapore (33 per cent of household income), Indonesia (28 per cent), India (22 per cent) and China (16 per cent). These figures, based on OECD statistics, leave the attempts at savings by Australians and Americans looking extremely miserable.
As ipac's Abey says, there is no problem in persuading Asians to save for their retirement: '[But a problem is that] the money in lazy bank accounts is huge.'
Derek Young, chief executive of ipac Asia, says, 'We are actually bringing a new language to Asia: the concept of financial planning.' And then he asks with a laugh: 'How do you translate asset allocation into Mandarin?'
One approach that ipac has adopted in dealing with cultural differences is to recruit some financial planners from Australia's Australian–Chinese community and bring them back to Asia.
Founded 25 years in Australia and bought by AXA Asia Pacific in 2002, ipac established businesses in Hong Kong and Singapore in January 2003. These offices have 25 financial planners among their 90 employees.
Today, ipac in Australia has $16B under management; $5B for private clients. And the Asian private client business has $500M under management – 10 per cent of its Australian private client business. Yet, as discussed, ipac's Abey expects the Asian private client business to be bigger within a decade.
Australian financial planning group Professional Investment Services (PIS), whose headquarters are on the Gold Coast, is a pioneer in terms of an Australian company offering financial planning in Asia. The location of its Asian offices include mainland China (Beijing), Hong Kong, Singapore, Malaysia and Thailand. PIS began its push into Asia by opening an office in Singapore six years ago.
PIS chief executive Robbie Bennetts likes to think his group's Chinese business will one day be bigger than its Australian operation. PIS develops its business in Asia by gaining referrals from local accountants.
Bennetts emphasises that an important factor for PIS is the reputation of accountants for professional and ethical conduct.
One point that concerns Bennetts is that some Australian financial planners offer their services in Asian countries such as Singapore without first gaining local licences. 'They don't realise they are breaking the law,' he says. 'And it's not showing much empathy.'
David Thomas of Think global says Australian financial planning firms operating in Asia have tended to focus more heavily, at least initially when opening a new office, on Australian expatriates because 'these are the low-hanging fruit'. But Thomas emphasises that the greatest long-term opportunities are from serving the Asians themselves.
Bennetts says at first his group concentrated on Australian expatriates, and then expanded to serving local Asian residents. A similar path has been taken by ipac, with Young emphasising that Australian expatriate clients remain highly significant contributors to its businesses in Hong Kong and Singapore.
Barry Lambert, founding chairman of the Count Financial Group, has built the core of Count's listed business on the concept of assisting accountants to provide financial planning services.
Lambert says that while Count is mindful of the growing personal wealth in Asia, Australia's superannuation system provides great opportunities for financial planners within Australia.
Count will only move beyond Australian shores when the right opportunities with suitable partners arise. Lambert says it is inevitable that Count will move into Asia one day. Count director and former CPA Australia national president Jocelyn Martin represents CPA Australia in Asia.
Lambert points out that the tremendous opportunities for financial planners within Australia perhaps underlines the basic reason why the numbers of successful Australian financial planning groups offering their services in Asia remains relatively small at this stage.
Financial planning by country
Singapore
Financial planning environment: This is the most mature market in Asia in terms of understanding the need for financial planning, says Derek Young, chief executive of ipac Asia. 'The principal reason is the government knows that people should save for their retirement.'
Young says Singapore's government has recognised that the amount of savings in Singapore's pioneering and mandatory Central Provident Fund, founded in 1955, is not enough to fund the retirement of its citizens. 'The government has taken steps to raise awareness that individuals should be saving for their retirement,' Young says.
Regulatory environment: Young describes Singapore's regulatory regime as strong, and points to the Financial Advisers Act that specifically covers those giving financial advice.
Robbie Bennetts, chief executive of Professional Investment Services (PIS), agrees that Singapore has a high standard of regulation of financial planners. 'It's modelled after Australia's system,' he says. 'There are very serious consequences for financial planners who don't behave themselves. The regulator is tough on [for example] churning.' (Churning involves recommending that clients unnecessarily sell one investment product to buy another in order to earn more commissions.)
A corporation carrying on business as a financial adviser must hold a financial adviser's licence, unless exempted. Individuals giving financial advice must hold a representative's licence, unless working for an exempt corporation.
Hong Kong
Financial planning environment: Hong Kong has long catered to managing the personal wealth of high-wealth individuals (HWI), largely through private banks. Yet Hong Kong is three to five years behind Singapore in the community's recognition of the need for financial planning, says Derek Young of ipac Asia.
Most of the financial planners in Hong Kong work for large banks and insurance companies.
Since 2000, all employees in Hong Kong have had to enrol in its pension scheme, the Mandatory Provident Fund. And Young says there is a growing acknowledgement that people must save for their retirement.
Hong Kong also has a well-developed corporate pension scheme.
Regulatory environment: Young says there is a reasonable regulatory regime for financial planners, and a review is under way about how to more definitely regulate them.
Robbie Bennetts of PIS describes the standard of regulation in Hong Kong as 'quite mature' against what he regards as the 'quite immature' development of its investment products.
Hong Kong's wide-reaching Securities and Futures Ordinance, which came into operation in 2003, is designed to improve the quality of the investment market and to improve protection of investors.
Mainland China
Financial planning environment: Derek Young of ipac Asia says mainland China presents a challenge for foreign financial planners offering their services. The regulatory regime is weak, there are restrictions on investments outside China, and the recognition of the need for financial planning advice is not strong.
Another challenge in mainland China for financial planning is the amount of local speculation on emerging businesses and property development.
Peter Promnitz, region head of Asia Pacific for Mercer, points out that a Chinese venture partner is required for such activities as funds management and the provision of trustee services.
Regulatory environment: Robbie Bennetts of Personal Investment Services (PIS) says the Chinese mainland has a 'web of regulation' that can differ from region to region. Nevertheless, Bennetts has high hopes for his group's move into mainland China: 'There are wonderful growth opportunities.'
Malaysia
Financial planning environment: Young describes Malaysia as 'immature' in its recognition of the need for financial planning. 'It is about 10 – 15 years behind the trend setting Singapore,' he says. 'But it won't take Malaysia long to catch up.'
Robbie Bennetts of PIS says the standard of investment products available in Malaysia is generally poor, and there is the need to educate advisers away from the practice of selling one product to dealing with a range of products.
Malaysia has long had an Employees Provident Fund for private-sector employees and public servants who don't have a pension.
Regulatory environment: Derek Young of ipac says Malaysia is learning about regulation from places such as Australia. Indeed, he points out that Australia has created something of an export industry, with former ASIC regulators working as consultants in Asia to help develop their regulations.
Bennetts describes regulation of financial advice as at an 'immature' stage of its development.
The Securities Commission, Malaysia, regulates those working in the financial markets. There are licences covering financial planners, investment advisers and investment representatives. However, key exemptions from licensing requirements exist.
Reference: February 2008, volume 78:01, p. 36 – 41
Islamic banking: a technical perspective
Islamic banking: a technical perspective
Blue horizontal line
How can Islamic finance be viable if interest is not charged or paid? Bala Shanmugam FCPA and Lokesh Gupta explain.
Islamic finance has emerged in recent decades as one of the most important alternative forms of funding in the financial world. There has always been a demand among Muslims for financial products and services that conform to the Shariah (Islamic law).
With the development of viable Islamic alternatives, Muslims as well as non-Muslims are beginning to employ Shariah-compliant solutions to meet their financial needs.
Islamic finance is based on the principles of Shariah. This system shares similar functions as the conventional financial system. The basic principles underlying Islamic transactions are that it must not be 'tainted' with elements of interest and that risk must be shared between banker and customer.
Islamic banking was more or less an abstract concept until the first half of the 20th century but now it has been given a practical shape and has developed into a fully-fledged system and discipline.
Perhaps the most important development has been the growing integration of Islamic finance into the global economy. According to the latest statistics presented during the fifth International Islamic Finance Conference organised by Monash University in Malaysia in September, assets of Islamic finance are estimated to be almost US$850bn.
This is partly due to oil-driven financial liquidity and increasingly savvy Muslim consumers seeking Islamic financial products.
Modus operandi
Conventional banks make profit by paying less interest on deposits and charging more interest on loans. Under Islamic finance, making money from money is strictly prohibited. Money is not perceived as a commodity and consequently it cannot be 'rented out' for a fee.
Hence, there is no direct linkage between deposits and credit under Islamic banking. In Islamic banking, deposits and financing transaction are conducted through underlying assets, following a profit and loss sharing principle. Alternatively, transactions can be structured as a direct sale and purchase, based on a mark-up amount that serves as the banker’s profit margin.
Islamic finance is therefore a mix of commercial bank and investment bank. As with conventional banks, Islamic banks have to be viable to attract investors by generating an adequate rate of return. Like other financial intermediaries, Islamic banks have at one end the 'source of funds' and at the other end 'application of funds'.
The special investment account is related to investment accounts exclusively specified for projects preferred by individual corporate investors. Shareholder funds and deposits are channelled into general financing, trade financing (such as working capital and domestic and international import/export-related financing) and treasury products (Islamic money market instruments) and services.
Rather than charging fixed rates to borrowers, Islamic banks share in the profits and losses of the borrowers’ business transactions, and divide their share of the profit with general and special investors who have deposited funds in the bank.
Rates of return, calculated ex post, are variable, depending on entire business transactions rather than on any predetermined fixed rate that would be tantamount to interest. The profits earned by banks undergo further deduction for operating expenses, zakat (Islamic welfare tax) and taxation before they are shared with shareholders as dividends.
Source of funds
Mobilisation of funds from surplus units in the economy is an important task of any financial intermediary. Muslim savers have unique needs related to returns, liquidity, maturity, safety and stability in that they must be Shariah-compliant.
The bank can raise its initial equity by following the musharakah (equity participation) principle. Under this principle the capital owner enters into a partnership by contributing equity in returns for sharing profit and losses at a predetermined ratio (for example 70:30 or 60:40).
Under the savings account mode of transaction, the bank accepts deposits from customers looking for safe custody of their funds and a degree of convenience in their usage together with the possibility of some profits. In this case the principle of wadiah is employed, whereby the bank requests permission to use these funds so long as these funds remain with the bank.
The depositors can withdraw the balance at any time and the bank guarantees the refund of all such balances. The profits generated by the bank from the deployment of such funds belong to the bank.
However, the bank may, at its absolute discretion, reward customers with hibah (gift) as a token of appreciation, by returning a portion of the profits generated from the usage of their funds. Such a 'gift' can be paid at any time, but in practice most Islamic banks pay on a regular basis (monthly, quarterly).
It is not uncommon to pay in kind rather than in cash. In some countries depositors receive gifts such as carpets or air tickets.
The current account is also based on the Islamic contract of wadiah, whereby depositors are not guaranteed a return on their funds. Normally, depositors do not receive any return for depositing funds in a current account, but some banks provide hibah, which again varies, depending on bank policies.
Banks allow depositors to withdraw their money at any time and conditions for minimum limits and withdrawals are relaxed in comparison to wadiah savings accounts.
In countries such as Iran, qard hassan (interest-free loan) is used as an underlying principle for a current account, whereby deposits are treated as benevolent loans by the depositors. The bank is free to utilise these funds at its own risk. The depositor in his/her role as the lender is not entitled to any return as the latter would constitute riba (excessive charging of interest). It must be reiterated that in either case (wadiah or qard hassan) the amount deposited is guaranteed to be returned.
Investment account
The investment account is based on the mudharabah principle and deposits are accepted by banks from investors for a fixed or unlimited period of time.
Under this principle the bank acts as an investment manager, invests the money in permitted investments and financing activities, realises profits and shares the outcomes with depositors based on the ratio agreed upon earlier.
The investment can be further classified into two categories: the general investment account where the investment account holder authorises the bank to invest the account holder’s funds in a manner which the Islamic bank deems appropriate, without laying down any restriction as to where, how and for what purpose the funds should be invested; and the special investment account where the account holder imposes conditions, restrictions and preferences as to where, how and for what purpose their funds are to be invested.
Application of funds in financing
Islamic financing comprises the financial services that are based on Islamic principles: risk sharing and prohibition of products and services having riba.
Profit and loss sharing is viewed as a major feature to ensure justice and equity in the economy. In addition, banks also follow other principles such as the avoidance of gharar: uncertainty, risk, speculation, focus on halal (religiously permissible activities, and other ethical and religious goals).
The future
Islamic finance has, over the 30-odd years of growth, recorded very impressive figures. This has happened not only in Muslim countries but in other countries as well.
The returns and prospects have been good enough to lure major global financial institutions such as HSBC, Citibank, ABN AMRO, Deutche Bank, and Standard Chartered to participate in this alternate form of financing.
Also, in view of the bright prospects, established financial centres such as London and Singapore have amended existing financial regulation to cater for Islamic transactions. In fact, last week Hong Kong declared its interest in becoming a prominent player in this market.
While on the one hand the Shariah dictates what is permissible and what is not it also provides guidelines on how to structure transactions so as to keep them halal. The flexibility allowed in undertaking most transactions makes room for a very innovative form of financing. In a nutshell, most facilities that conventional banks provide can be undertaken by Islamic financial institutions, so long as it is Shariah-compliant.
While Islamic finance, which is pretty much in its infancy, has some teething problems (standardisation, legal framework), it is only a matter of time before it becomes a force to be reckoned with and a very real alternative to conventional finance.
Forms of financing transactions
Bai bithaman ajil means sale with deferred payments (monthly instalments). In other words, it is not a spot sale. This is used for property and vehicles, as well as financing of consumer goods.
Technically, this financing facility is based on the activities of buying and selling. The assets that the customer wishes to purchase for example, are bought by the bank and resold to the customer at an agreed price, after the bank and the customer determine the tenure of the instalment period.
The price at which the bank sells the asset to the customer will include the actual cost of the asset and will also incorporate the bank’s profit margin. The profit earned by the bank is legitimate from the Shariah point of view since the transaction is based on a sale contract rather than a loan contract.
Murabaha is referred to as cost-plus financing and is a popular method for providing short-term trade financing. It is the sale of goods at a price, which includes a stated profit known to both the banker and the customer.
Under murabaha, the bank purchases, in its own name, goods that an importer or a buyer wants, and then sells them to the customer at an agreed profit. The bank takes title of the goods, and is therefore engaged in buying and selling. Its profit is derived from a real service that entails a certain risk, and is thus seen as legitimate.
Murabaha is one of the most widely used modes of short-term financing and follows a lump sum repayment schedule. It is suitable for purchase of commodities by customers operating in industry or trade. It enables customers to buy finished goods, raw materials, machines or equipment through the bank which may not be otherwise available directly to them due to their credit worthiness.
Ijarah in Arabic means to give something on rent. Ijarah can be defined as a process by which usufruct of a particular property is transferred to another person in exchange for a rent claimed from the customer. Ijarah resembles leasing as it is practised in today’s commercial world.
The unique feature offered by this financial instrument is that the asset remains the property of the bank and can be put on rent every time the lease period terminates. Ijarah is suitable for high-cost assets with a long life span. Both contracting parties benefit where the bank receives the rent as return and also retains the asset. On the other hand the lessee enjoys the immediate benefits of using the asset without incurring a large capital expenditure.
The Islamic concept of al-ijarah thumma al-bai or in brief AITAB refers to an ijarah contract ending with purchase.
It is a type of lease that concludes with an option to buy back in which the legal title of the leased asset will be passed to the lessee at the end of the lease period. AITAB comprises two contracts: an ijarah (leasing/renting) contract and then a bai (sale) contract.
Musharakah financing involves basic partnership principles of sharing in and benefiting from risk. The transaction is based on equity participation (musharakah) in which the partners bring together their capital and know how jointly to generate a surplus.
Profits or losses will be shared between the partners according to some agreed formula depending on the equity ratio.
However, it is permissible to have profit sharing not according to the proportion of shares (ownership) but liability is limited to contrib-ution of their shareholders. Investors cannot be held liable for more than the amount of capital they have invested.
Istisna financing (project financing) is a kind of sale where a commodity is transacted before it comes into existence.
For instance, one can order a manufacturer to make a specific commodity for the purchaser.
If the manufacturer undertakes to make the goods for the customer with material from the manufacturer, the transaction is known as istisna. The price of the commodity to be manufactured must be agreed by both parties.
Istisna is a contract of exchange with deferred delivery, applied to specified made-to-order items. Istisna is suitable for high-technology industries such as the automotive, shipbuilding and construction industries.
About the author
Professor Bala Shanmugam FCPA is the chair of accounting and finance and also director of banking and finance at the school of business at Monash University Malaysia
Lokesh Gupta, a senior business consultant by profession, is currently pursuing his M.Phil in the area of Islamic Banking at Monash University Malaysia. His specialisation is in the area of retail banking and electronic payments
Reference: November 2007, volume 77:10, p. 62-65 (Asia edition)
This page is available online at:
http://www.cpaaustralia.com.au/cps/rde/xchg/cpa/hs.xsl/724_24652_ENA_HTML.htm
Blue horizontal line
How can Islamic finance be viable if interest is not charged or paid? Bala Shanmugam FCPA and Lokesh Gupta explain.
Islamic finance has emerged in recent decades as one of the most important alternative forms of funding in the financial world. There has always been a demand among Muslims for financial products and services that conform to the Shariah (Islamic law).
With the development of viable Islamic alternatives, Muslims as well as non-Muslims are beginning to employ Shariah-compliant solutions to meet their financial needs.
Islamic finance is based on the principles of Shariah. This system shares similar functions as the conventional financial system. The basic principles underlying Islamic transactions are that it must not be 'tainted' with elements of interest and that risk must be shared between banker and customer.
Islamic banking was more or less an abstract concept until the first half of the 20th century but now it has been given a practical shape and has developed into a fully-fledged system and discipline.
Perhaps the most important development has been the growing integration of Islamic finance into the global economy. According to the latest statistics presented during the fifth International Islamic Finance Conference organised by Monash University in Malaysia in September, assets of Islamic finance are estimated to be almost US$850bn.
This is partly due to oil-driven financial liquidity and increasingly savvy Muslim consumers seeking Islamic financial products.
Modus operandi
Conventional banks make profit by paying less interest on deposits and charging more interest on loans. Under Islamic finance, making money from money is strictly prohibited. Money is not perceived as a commodity and consequently it cannot be 'rented out' for a fee.
Hence, there is no direct linkage between deposits and credit under Islamic banking. In Islamic banking, deposits and financing transaction are conducted through underlying assets, following a profit and loss sharing principle. Alternatively, transactions can be structured as a direct sale and purchase, based on a mark-up amount that serves as the banker’s profit margin.
Islamic finance is therefore a mix of commercial bank and investment bank. As with conventional banks, Islamic banks have to be viable to attract investors by generating an adequate rate of return. Like other financial intermediaries, Islamic banks have at one end the 'source of funds' and at the other end 'application of funds'.
The special investment account is related to investment accounts exclusively specified for projects preferred by individual corporate investors. Shareholder funds and deposits are channelled into general financing, trade financing (such as working capital and domestic and international import/export-related financing) and treasury products (Islamic money market instruments) and services.
Rather than charging fixed rates to borrowers, Islamic banks share in the profits and losses of the borrowers’ business transactions, and divide their share of the profit with general and special investors who have deposited funds in the bank.
Rates of return, calculated ex post, are variable, depending on entire business transactions rather than on any predetermined fixed rate that would be tantamount to interest. The profits earned by banks undergo further deduction for operating expenses, zakat (Islamic welfare tax) and taxation before they are shared with shareholders as dividends.
Source of funds
Mobilisation of funds from surplus units in the economy is an important task of any financial intermediary. Muslim savers have unique needs related to returns, liquidity, maturity, safety and stability in that they must be Shariah-compliant.
The bank can raise its initial equity by following the musharakah (equity participation) principle. Under this principle the capital owner enters into a partnership by contributing equity in returns for sharing profit and losses at a predetermined ratio (for example 70:30 or 60:40).
Under the savings account mode of transaction, the bank accepts deposits from customers looking for safe custody of their funds and a degree of convenience in their usage together with the possibility of some profits. In this case the principle of wadiah is employed, whereby the bank requests permission to use these funds so long as these funds remain with the bank.
The depositors can withdraw the balance at any time and the bank guarantees the refund of all such balances. The profits generated by the bank from the deployment of such funds belong to the bank.
However, the bank may, at its absolute discretion, reward customers with hibah (gift) as a token of appreciation, by returning a portion of the profits generated from the usage of their funds. Such a 'gift' can be paid at any time, but in practice most Islamic banks pay on a regular basis (monthly, quarterly).
It is not uncommon to pay in kind rather than in cash. In some countries depositors receive gifts such as carpets or air tickets.
The current account is also based on the Islamic contract of wadiah, whereby depositors are not guaranteed a return on their funds. Normally, depositors do not receive any return for depositing funds in a current account, but some banks provide hibah, which again varies, depending on bank policies.
Banks allow depositors to withdraw their money at any time and conditions for minimum limits and withdrawals are relaxed in comparison to wadiah savings accounts.
In countries such as Iran, qard hassan (interest-free loan) is used as an underlying principle for a current account, whereby deposits are treated as benevolent loans by the depositors. The bank is free to utilise these funds at its own risk. The depositor in his/her role as the lender is not entitled to any return as the latter would constitute riba (excessive charging of interest). It must be reiterated that in either case (wadiah or qard hassan) the amount deposited is guaranteed to be returned.
Investment account
The investment account is based on the mudharabah principle and deposits are accepted by banks from investors for a fixed or unlimited period of time.
Under this principle the bank acts as an investment manager, invests the money in permitted investments and financing activities, realises profits and shares the outcomes with depositors based on the ratio agreed upon earlier.
The investment can be further classified into two categories: the general investment account where the investment account holder authorises the bank to invest the account holder’s funds in a manner which the Islamic bank deems appropriate, without laying down any restriction as to where, how and for what purpose the funds should be invested; and the special investment account where the account holder imposes conditions, restrictions and preferences as to where, how and for what purpose their funds are to be invested.
Application of funds in financing
Islamic financing comprises the financial services that are based on Islamic principles: risk sharing and prohibition of products and services having riba.
Profit and loss sharing is viewed as a major feature to ensure justice and equity in the economy. In addition, banks also follow other principles such as the avoidance of gharar: uncertainty, risk, speculation, focus on halal (religiously permissible activities, and other ethical and religious goals).
The future
Islamic finance has, over the 30-odd years of growth, recorded very impressive figures. This has happened not only in Muslim countries but in other countries as well.
The returns and prospects have been good enough to lure major global financial institutions such as HSBC, Citibank, ABN AMRO, Deutche Bank, and Standard Chartered to participate in this alternate form of financing.
Also, in view of the bright prospects, established financial centres such as London and Singapore have amended existing financial regulation to cater for Islamic transactions. In fact, last week Hong Kong declared its interest in becoming a prominent player in this market.
While on the one hand the Shariah dictates what is permissible and what is not it also provides guidelines on how to structure transactions so as to keep them halal. The flexibility allowed in undertaking most transactions makes room for a very innovative form of financing. In a nutshell, most facilities that conventional banks provide can be undertaken by Islamic financial institutions, so long as it is Shariah-compliant.
While Islamic finance, which is pretty much in its infancy, has some teething problems (standardisation, legal framework), it is only a matter of time before it becomes a force to be reckoned with and a very real alternative to conventional finance.
Forms of financing transactions
Bai bithaman ajil means sale with deferred payments (monthly instalments). In other words, it is not a spot sale. This is used for property and vehicles, as well as financing of consumer goods.
Technically, this financing facility is based on the activities of buying and selling. The assets that the customer wishes to purchase for example, are bought by the bank and resold to the customer at an agreed price, after the bank and the customer determine the tenure of the instalment period.
The price at which the bank sells the asset to the customer will include the actual cost of the asset and will also incorporate the bank’s profit margin. The profit earned by the bank is legitimate from the Shariah point of view since the transaction is based on a sale contract rather than a loan contract.
Murabaha is referred to as cost-plus financing and is a popular method for providing short-term trade financing. It is the sale of goods at a price, which includes a stated profit known to both the banker and the customer.
Under murabaha, the bank purchases, in its own name, goods that an importer or a buyer wants, and then sells them to the customer at an agreed profit. The bank takes title of the goods, and is therefore engaged in buying and selling. Its profit is derived from a real service that entails a certain risk, and is thus seen as legitimate.
Murabaha is one of the most widely used modes of short-term financing and follows a lump sum repayment schedule. It is suitable for purchase of commodities by customers operating in industry or trade. It enables customers to buy finished goods, raw materials, machines or equipment through the bank which may not be otherwise available directly to them due to their credit worthiness.
Ijarah in Arabic means to give something on rent. Ijarah can be defined as a process by which usufruct of a particular property is transferred to another person in exchange for a rent claimed from the customer. Ijarah resembles leasing as it is practised in today’s commercial world.
The unique feature offered by this financial instrument is that the asset remains the property of the bank and can be put on rent every time the lease period terminates. Ijarah is suitable for high-cost assets with a long life span. Both contracting parties benefit where the bank receives the rent as return and also retains the asset. On the other hand the lessee enjoys the immediate benefits of using the asset without incurring a large capital expenditure.
The Islamic concept of al-ijarah thumma al-bai or in brief AITAB refers to an ijarah contract ending with purchase.
It is a type of lease that concludes with an option to buy back in which the legal title of the leased asset will be passed to the lessee at the end of the lease period. AITAB comprises two contracts: an ijarah (leasing/renting) contract and then a bai (sale) contract.
Musharakah financing involves basic partnership principles of sharing in and benefiting from risk. The transaction is based on equity participation (musharakah) in which the partners bring together their capital and know how jointly to generate a surplus.
Profits or losses will be shared between the partners according to some agreed formula depending on the equity ratio.
However, it is permissible to have profit sharing not according to the proportion of shares (ownership) but liability is limited to contrib-ution of their shareholders. Investors cannot be held liable for more than the amount of capital they have invested.
Istisna financing (project financing) is a kind of sale where a commodity is transacted before it comes into existence.
For instance, one can order a manufacturer to make a specific commodity for the purchaser.
If the manufacturer undertakes to make the goods for the customer with material from the manufacturer, the transaction is known as istisna. The price of the commodity to be manufactured must be agreed by both parties.
Istisna is a contract of exchange with deferred delivery, applied to specified made-to-order items. Istisna is suitable for high-technology industries such as the automotive, shipbuilding and construction industries.
About the author
Professor Bala Shanmugam FCPA is the chair of accounting and finance and also director of banking and finance at the school of business at Monash University Malaysia
Lokesh Gupta, a senior business consultant by profession, is currently pursuing his M.Phil in the area of Islamic Banking at Monash University Malaysia. His specialisation is in the area of retail banking and electronic payments
Reference: November 2007, volume 77:10, p. 62-65 (Asia edition)
This page is available online at:
http://www.cpaaustralia.com.au/cps/rde/xchg/cpa/hs.xsl/724_24652_ENA_HTML.htm
Saturday, April 5, 2008
Munich Re sets up first foreign retakaful ops in Malaysia
The Star - Friday April 4, 2008
KUALA LUMPUR: Germany-based insurance company Munich Re Retakaful has set up the first foreign retakaful operation in Malaysia with a working capital of RM25mil.
Chief executive officer Dr Ludwig Stiftl said the group was currently in talks with eight companies in Malaysia to offer its general and family retakaful products.
“We will make Malaysia the hub for our global retakaful activities,” he said at the launch of its Malaysian office yesterday.
The company was also in talks with several parties from South-East Asia and Middle Eastern countries on its retakaful products, he added.
According to Stiftl, Malaysia is the world’s largest takaful market and the Government had plans to increase its market share to 20% by 2012 from the current 6.1%.
The global market value for Islamic insurance was expected to reach US$7.4bil by 2015, he said, and growth rates were expected to be double-digit over the next 10 years.
On the challenges to operate in Malaysia, he said the group needed to identify the types of business and its target markets as well as strategies to compete with conventional insurance companies.
“We would need another three to five years to build up our business relationships in the market as well as business models for the region,” he said, adding that the group would tailor-make its products to its clients.
Currently operating with a staff of five, Stiftl said the group would increase its manpower in Malaysia and leverage on its existing 38,000 employees in other countries.
Meanwhile, Bloomberg reported that Munich Re, the world’s second-biggest reinsurer, planned to control as much as 20% of the global market for Islamic reinsurance within five years by tapping economic growth in the Middle East and Asian Muslim nations.
Demand for retakaful would expand at least 10% a year and feed off an annual Islamic insurance market as big as US$3bil, it quoted Munich Re director Ludger Arnoldussen as saying in an interview. Kuala Lumpur will be the base for the division.
http://biz.thestar.com.my/news/story.asp?file=/2008/4/4/business/20847212&sec=business
KUALA LUMPUR: Germany-based insurance company Munich Re Retakaful has set up the first foreign retakaful operation in Malaysia with a working capital of RM25mil.
Chief executive officer Dr Ludwig Stiftl said the group was currently in talks with eight companies in Malaysia to offer its general and family retakaful products.
“We will make Malaysia the hub for our global retakaful activities,” he said at the launch of its Malaysian office yesterday.
The company was also in talks with several parties from South-East Asia and Middle Eastern countries on its retakaful products, he added.
According to Stiftl, Malaysia is the world’s largest takaful market and the Government had plans to increase its market share to 20% by 2012 from the current 6.1%.
The global market value for Islamic insurance was expected to reach US$7.4bil by 2015, he said, and growth rates were expected to be double-digit over the next 10 years.
On the challenges to operate in Malaysia, he said the group needed to identify the types of business and its target markets as well as strategies to compete with conventional insurance companies.
“We would need another three to five years to build up our business relationships in the market as well as business models for the region,” he said, adding that the group would tailor-make its products to its clients.
Currently operating with a staff of five, Stiftl said the group would increase its manpower in Malaysia and leverage on its existing 38,000 employees in other countries.
Meanwhile, Bloomberg reported that Munich Re, the world’s second-biggest reinsurer, planned to control as much as 20% of the global market for Islamic reinsurance within five years by tapping economic growth in the Middle East and Asian Muslim nations.
Demand for retakaful would expand at least 10% a year and feed off an annual Islamic insurance market as big as US$3bil, it quoted Munich Re director Ludger Arnoldussen as saying in an interview. Kuala Lumpur will be the base for the division.
http://biz.thestar.com.my/news/story.asp?file=/2008/4/4/business/20847212&sec=business
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