Islamic Finance Bulletin
Gulf One Lancaster Centre For Economic Research
From the Editor Half-way through the first quarter of this year, markets across the world had swung both ways, profoundly unsure still of the strength of global economy recovery. How the US Federal Reserve in particular would react, having begun to taper its prolonged stimulus programme, was a key concern, mixed with (i) the uncertainties of the state of the Chinese economy, (ii) the ability of emerging markets in Asia to recover from recent capital flight, and (iii) the condition of sovereigns and corporates in the West to emerge convincingly from the post-crisis period. Bonds continued to suffer from the selling pressure of late 2013, but thereupon responded to investorsâ€™ search for safe havens once stocks wondered whether the easy money era was drawing towards an end. Gold was bought upon the same motivation, while oil and copper indicated that a lack of fundamental direction was the underlying truth. On the sukuk side, these instruments initially felt the triple effects of emerging-market turbulence, oil-price fragility, and weakened fixed-income sentiment generally. However, in the Gulf arena both local and overseas investors were evidently awaiting their next opportunity to capture yield, welcoming renewed issuance. In this edition we once again document those key trends, besides sampling news and comment on the expansion of Islamic finance, this time featuring Asia especially. Viewpoints are provided by voices from the multilateral bodies the World Bank and the Asian Development Bank, addressing financial exclusion and poverty alleviation -- also the scope that Islamic microfinance has to break through barriers and improve the lives of those who are currently under-banked and need support. Following last monthâ€™s item on Indonesia, in this issue we feature Pakistan, and its own vast potential for Shariahcompliant finance to make inroads into existing markets, as well as make a key-turning difference to millions of Muslim customers and entrepreneurs.
Contents HIGHLIGHTS (p.3) RECENT DEVELOPMENTS (p.4) VIEWPOINT (p.7) VIEWPOINT (p.9) FEATURE (p.11) STOCK MARKETS (p.14) COMMODITIES (p.17) BOND AND CDS MARKETS (p.18) PERSPECTIVE (p.21) DIARY (p.22)
Highlights Islamic Finance and Asia: The Asia region contains vast potential not only to advance Shariah-compliance across financial and non-financial sectors, but to utilize its methods for poverty alleviation and microfinance projects. Equally, those are matters both of natural demand, in terms of hitherto under-served Muslim populations, and promoting and enabling supply by official policy means. The issues of financial exclusion and distribution of wealth are pervasive concerns that Islamic mechanisms can be employed particularly to address.
Pakistan: As the world’s sixth most populous country, Pakistan has an ample base among its own citizenry to exercise the potential of the various strands of the Islamic economy. Following initial attempts to develop this dimension of economic growth and development in previous decades, a newfound emphasis has been brought to advance the cause of Islamic finance, especially by the central bank’s strategic plan. Claiming an enhanced share of banking business, and taking responsibility for agricultural financing, feature on the agenda.
MENA Markets: Both the stock and bond markets of the GCC states have performed relatively well in recent weeks and months, compared with both developed and emerging counterparts. Confidence has grown not only in the region’s financial standing, but also in its attempts to extend cyclical rebound, elements which to some extent are missing among other blocs. Dubai’s resurgence has been the star turn in this show, while the lingering political tensions in Egypt have been ignored by investors attracted to signs of solidity returning to the economy.
Recent Developments in the Islamic Finance Industry UK moves forward with Islamic finance plans
largest economy. Italy’s trade ties with the Gulf are
The UK government has chosen HSBC to handle and
booming, with exports to the UAE reaching 5.5 billion
advise on its debut Islamic bond planned for as early as
euros in 2012, a 16.7% rise from 2011, according to
this year. Other banks are to be mandated closer to the
government data. This month Kuwait’s sovereign
time of the issuance. Law firm Linklaters is expected to
wealth fund has announced that it will invest 500
provide legal support for the sukuk, including its tax and
million euros ($685m) in Italian companies, in
real estate implications. The timing of the sale will depend
coordination with the Italian government’s own
both on market conditions and the required preparation.
strategic investment fund, in line with a similar deal
In addition, the government has launched a new venture
with Qatar last year. Only about 2% of Italy’s
seeking to bolster London’s position as a centre for Islamic
population of 61m are Muslim; yet both bankers
finance by extending its ‘Help to Buy’ mortgage scheme
and academics hope that as Gulf companies and
to loans that comply with Islamic law. Help to Buy was
investors increase their activities in Italy, Islamic
launched last year, and offers banks insurance against the
finance will follow.
risk of lending to home-buyers who cannot afford large
Source: ArabianBusiness.com February 20th
mortgage deposits. Britain’s finance ministry announced that property finance plans that cater for Islam’s bar on interest payments would now be eligible in the same way as standard mortgages. Islamic mortgages are to be provided by the Islamic Bank of Britain, which is owned by Qatar’s Masraf Al Rayan. Source: Bloomberg, January 31st & ArabianBusiness.com, February 11th
GOLCER perceives that while there has been minor, marginal progress in the industry in continental Europe, witnessed mainly in France and Germany, it seems that Italy is seeking trade and investment with wealthy GCC states through Islamic finance instruments as a way to solve its substantial debt problems. Italian firms raising loans could use Islamic structures
GOLCER finds these initiatives to be active steps following
to attract Islamic banks from the Gulf through,
the UK’s recent official announcements of becoming the
for example, bonds and equities if they were
first non-Muslim nation to support the Islamic finance
certified as Shariah-compliant. Political and
industry and sell sukuk. Last October Prime Minister
legislative hurdles remain an issue for this
Cameron announced the plan to sell £200m ($330m)
attempted boost to the sector.
in securities that comply with Islam’s ban on interest, a development reflecting the “pragmatism and political
Takaful seen struggling in Kuwait
will” that has been pronounced. The issuance of sukuk
Kuwait’s takaful firms are said to be struggling still
will bring a series of benefits to the UK, helping to
in a crowded market with intense competition. This
establish a “fresh global capital” for Islamic finance
perception is borne out by stagnant growth and
alongside Dubai and Kuala Lumpur. According to
persistent losses for those firms, though operating in
PricewaterhouseCoopers, the industry is growing 17% a
one of the world’s richest countries on a per capita
year, and expected to be valued at $2.7trn by 2017.
basis. That reality has caused doubts to be raised about the sector’s long-term viability. Kuwaiti takaful
Islamic finance in Italy might need Gulf support
firms posted a combined 47.4m dinars ($167.7m)
Bankers in Italy are putting efforts towards developing
in premiums in 2012, an 18.7% share of the total.
Islamic finance in the country. Campaigns have been
However, this figure was spread across 11 locally-
launched which seek to benefit from growing economic
incorporated takaful firms, with many companies in
links between the Gulf countries and the eurozone’s third
the sector having failed to post consistent profits. In
a market with 32 insurers, takaful firms have said they are
GOLCER finds that this initiative is one of the
facing disadvantages relative to their conventional peers,
important Islamic finance tie-ups during 2014, in
which have been running their businesses in the country for
reaction to the increased competition among many
decades, allowing them to build solid customer bases and
countries contemplating cross-border activity in
large financial surpluses.
the industry. According to Thomson Reuters data,
Kuwait’s landscape in this regard seems to be quite
the two countries represent the largest Islamic
different from the situation in Bahrain, where the central
finance markets globally, holding a combined
bank will release a new regulatory framework for takaful
$682bn in Islamic banking assets. Still, however,
this quarter. The new rules, developed after two years of
there could be some challenges to face, given
consultation with the industry, cover the operations and
the traditional differences in the design and
solvency of takaful firms. They call for a new formulas to
implementation of Shariah-compliant financial
calculate capital and replace free loans (qarad Hassan)
products between the two countries. (See Focus.)
with capital injections. Under the proposed rules, total capital would include both the available capital of the
Morocco intends funds for Islamic finance
shareholders’ fund and the net admissible assets of the
Morocco, the only North African nation with an
investment-grade rating at Standard & Poor’s, has
Source: Reuters, January 31st & February 11th
announced plans to allow Islamic banking for the
GOLCER thinks that Kuwait’s takaful sector could even
first time, proposing to invest in the industry. The country approved a draft Islamic finance law on
shrink in the coming years, facing a critical position,
January 16th. This document offers a framework to
with reduced profit margins. Takaful firms are required
regulate Islamic banks, and allows for sukuk sales.
to distribute excess profits to policyholders, unlike
It awaits parliamentary approval, but is expected
conventional firms, which account for such surpluses
to be enacted by the middle of this year. The
as profits. The relative underperformance may also be
Moroccan Association of Participative Financiers
attributed to the lack of a supervisory body, which made
estimates total investment in Shariah-compliant
the takaful industry -- not only in Kuwait but worldwide -- vulnerable to sensitive performance results, as well as to uncompetitive practices.
products to reach $7bn by 2018 if the law comes into effect. Source: Bloomberg, January 31st
Saudi Arabia and Malaysia bourses link boosted
GOLCER sees the Islamic finance industry clearly
The stock exchanges of Saudi Arabia and Malaysia
responding to the accelerating demand worldwide
have signed an agreement to foster closer ties
for financing that complies with Islamic law. By
between them, with the aim to promote Islamic
2018 Islamic banking assets are expected to climb
finance. The deal is likely to enhance areas such
to $3.4trn from about $1.7trn in 2013, according
as equities, mutual funds and sukuk, and to build on
to Ernst & Young. Morocco has slowly joined the
sharing expertise and developing human capital.
race, with more than 95% of its population of 34
Saudi Arabia’s stock exchange hosts the largest
million supporting the introduction of banking that
Islamic banks in the world, while the exchange of
adheres to Shariah.
Malaysia has the largest and most liquid market for trading sukuk. Saudi Arabia’s exchange has already addressed, but not yet signed, similar agreements
Islamic finance body IILM plans further issuance
with its Abu Dhabi and Bahrain counterparts.
The Malaysia-based International Islamic Liquidity
Source: Khaleej Times, February 21st
Management Corp (IILM) announced its plans to
issue a $490m three-month Islamic bond by the end of
The methodology had previously included only qualitative
February, after expanding its issuance programme to
screens; for example, banning companies involved
$1.35bn in January. The auction of the sukuk is rated A-1
in sectors such as tobacco, alcohol, weapons and
by Standard and Poor’s, according to a filing lodged
gambling. Islamic fund managers in Malaysia now have
with Malaysia’s central bank. The IILM has already sold
six months to drop securities that are excluded from the
$860m of three-month paper this year, aiming to meet
list, which currently has a total of 653 Shariah-compliant
a shortage of highly-liquid, investment-grade financial
stocks out of 914 listed on the Bursa Malaysia.
instruments which Islamic banks can trade to manage
In another move, the Philippine Stock Exchange said it
their short-term funding needs. Shareholders of the IILM
would designate its first Shariah-compliant companies,
are the central banks of Indonesia, Kuwait, Luxembourg,
in a bid to keep Muslims’ money in the country. Another
Malaysia, Mauritius, Nigeria, Qatar, Turkey and the
strengthening player in the sector is Singapore, [whose]
UAE, as well as the Jeddah-based Islamic Development
government has undertaken initiatives in areas such as
taxation, capital markets, REITs, takaful insurance and
Source: Reuters, January 31st
Islamic equity indexes in order to improve Singapore’s
GOLCER views the IILM’s programme as being still in its early stages, and has doubts about the successful, active trading of its sukuk, and even the reasons behind issuing
attractiveness for Islamic finance. Source: Arno Maierbrugger, investvine.com, Inside Investor, December 2013
these additional sukuk, as the primary dealers have held on to the IILM instruments after auction and there has been little, if any, secondary market trade in them.
The Malaysia-Gulf Cooperation Council (GCC) framework agreement signed in January 2011 was intended to enhance bilateral economic links. Instead, co-operation grew at a disappointingly slow pace, [but
Focus: Gulf-Asia co-operation In October 2013 the Central Bank of the UAE announced it had signed an MoU with Central Bank of Malaysia on the sidelines of the annual IMF/WB meetings, aimed at co-operation, exchange of information and expertise, and training. It would contribute to the realisation of a sound financial system in the UAE and Malaysia, and represents a trend to stronger ties between Islamic finance centres in the Arabian Gulf and Southeast Asian regions, despite traditional differences in the design and implementation of Shariah-compliant financial products.
now] appears to be gaining momentum. Generous tax incentives to encourage commercial banks operating in Malaysia to establish Islamic banking subsidiaries and foreign companies have been drawing in a number of GCC banks to establish operations in Malaysia (e.g. Kuwait Finance House). Conversely, the GCC economies are attractive potential targets for Malaysian investment. Another interesting shift is that Arab countries are now looking to Malaysia to enhance halal standards and promote related products. Until recently, meat and halal products have been largely imported by the GCC from
Source: Khaleej Times, Reuters, November 2013
Australia, New Zealand, Ireland, Brazil, Canada, and the
New Malaysian standards for Shariah-compliant equities that are expected to attract more Islamic investment funds from the Gulf countries were introduced last November by the Malaysian Securities Commission. An improved screening methodology is used that encompasses quantitative filters such as benchmarks for financial ratios, moving closer to the
US. Although Malaysia had taken the lead in developing and modernizing this sector, it has essentially lost out to these competitors in the past. With the Gulf changing its focus to Asia, the food and chemicals industries in Malaysia that are largely bound by halal laws command an edge over other regional manufacturers.
approach generally used in the Gulf. The change is widely
Source: Evelyn Davadason, University of Malaya, June
expected to help further internationalise Malaysia’s Islamic
2013 for Middle East Institute
Viewpoint Islamic Finance and the fight against poverty in Asia Interview with Ashraf Mohammed, Asian Development Bank
What level of impact could be expected
from the growth of Islamic finance (IF) in the region, in terms of bringing basic banking
facilities to lower-income groups, and plans for development and poverty alleviation?
Is the ADB promoting or simply facilitating
ADB regards Islamic finance to have great
give details of how that is being done?
the development of the IF sector? Can you
potential in the fight against poverty in Asia. There is a sizable part of the population in the Asia &
Asian Development Bank (ADB) has 14 member countries that have a majority Muslim population,
Pacific region, especially in rural areas, that for
as well as other members with a sizeable
religious, cultural or moral reasons sees Islamic
Muslim component (including India, PRC, the
finance as the only method by which to access
Philippines, Sri Lanka and Thailand). ADBâ€™s
financial services which would otherwise result in
Developing Member Countries (DMCs) represent
their financial exclusion.
approximately 80% of the worldâ€™s Muslim
Apart from being a viable alternative to the
population. A number of these DMCs have
conventional interest-based financial system,
developed relatively sophisticated Shariah-
which is prone to extreme risks, the risk-sharing
compliant finance (SCF) industries which
solutions offered by Islamic finance may assist
complement their conventional financial services
in restoring equilibrium, as it encourages and
facilitates investment in real economic activity and
As the premier development institution of Asia,
societal welfare, while prohibiting investment in
ADB is well placed to play a catalytic role in
socially-harmful ventures such as gaming, alcohol and adult entertainment, or risky financial products such as highly-speculative derivative contracts, of
the development of SCF in the region. We can assist in the development of best practice for prudential standards and corporate governance
the kind which led to the 2008 sub-prime crisis.
rules for central banks and securities regulators,
In addition to the important complementary role
to enable them to properly and fairly regulate
that Islamic finance can play in global finance, the
Islamic financial institutions (IIFIs). ADB can also
sector provides an exciting opportunity to expand
play a catalytic role in helping to meet the nascent
the accessibility to finance which can play a more positive role in eradicating poverty. It can address the issue of financial inclusion from two directions:
demand for SCF from the private sector, that is becoming evident in certain DMCs. ADBâ€™s participation in SCF will assist the
one through promoting risk-sharing contracts
development of the SCF industry during its
which provide a viable alternative to conventional
formative early stages in DMCs, an involvement
debt-based financing, and the other through
which will ensure that SCF is being undertaken
emphasizing the socially-responsible principles of
using best international standards.
transparency and prohibition of speculation and exploitation.
ADB’s significant role in the development of Shariah-
have smaller shares, but their growth and regulatory
compliant finance in Asia has included:
developments in recent years have enabled them to
be en route to expanding on their volume of Shariah-
Supporting the development of international
compliant banking assets. These countries have
best practice in prudential standards and corporate
demonstrated that if government takes the trouble of
governance for IIFIs, by assisting through technical assistance (TA) and co-operation, standards-setting organizations such as the Islamic Financial Services Board (IFSB), and through knowledge-dissemination activities, e.g. workshops and conferences. •
Advising and assisting DMCs, through TAs
they will derive a huge dividend from private sector participation.
promotes economic or financial stability per se.
Islamic financial institutions, including development
Does your research on the Asian region support
of appropriate supervisory and regulatory laws and
frameworks Promoting the use of SCF through co-
The linkage of financial development with economic
financing opportunities with IIFIs such as the
development has already been established.
Islamic Development Bank, and developing and
However, a high level of financial development in a
participating in innovative financing structures such as the Islamic Infrastructure Fund and the International Islamic Liquidity Management Corporation •
strategy to create an enabling environment, then
It has been suggested that Islamic finance
and loans, in capital markets development for
developing an effective strategy and supports that
country is not necessarily any indication of alleviation of poverty in that country. There is growing realization that, in addition to financial development,
Providing credit enhancement in SCF non-
there should be emphasis to promote financial
sovereign transactions such as Pakistan’s Fauji Wind Power Project
stability, which in turn should assist to expand the
How do you perceive the relative roles of the
positive role in eradicating poverty.
of the IF industry?
basic financial services -- such as availability of
Public sector institutions have an enormous role to
management -- can facilitate sustainable growth
accessibility to finance which can play a more
public and private sectors in the regional growth
Enhancing the access to and the quality of finance, mobilization of savings, insurance and risk and productivity, particularly for micro, small and
play in the promotion and development of Islamic finance in their countries. Anecdotal evidence would suggest that those counties that have progressive
medium-scale enterprises. It can be argued that the core principles of Islam lay great emphasis on social justice, inclusion, and
regulatory and supervisory authorities providing
the sharing of resources between different strata of
the necessary legal and regulatory framework to
society, thus reinforcing financial stability. Islamic
establish a level playing-field for Islamic finance
finance further supports financial stability and equity
to take hold and expand are the ones which have
through specific instruments of redistribution of wealth
benefited the most in terms of the contribution that
amongst society as whole, such as Zakat and Waqf.
Islamic finance makes to the economy. Among the developed Islamic banking jurisdictions
Ashraf Mohammed is Assistant General Counsel, Practice
in Asia are Malaysia, Indonesia, Pakistan and
Leader in Islamic Finance at the Asian Development Bank
Brunei. Malaysia is one of the global leaders for
(ADB). The opinions expressed are his own.
Islamic financial services, and held an estimated 9% share of the global Islamic banking assets in 2013. Comparatively, Indonesia, Pakistan and Brunei
Viewpoint Islamic Finance and Financial Inclusion: the World Bankâ€™s view
About 700 million of the worldâ€™s poor live in
are not relevant for religiously-minded Muslim
predominantly Muslim-populated countries. In recent
individuals and firms in need of financing.
years, there has been growing interest in Islamic finance as a tool to increase financial inclusion
Based on a 2010 Gallup poll, about 90% of
among Muslim populations.
the adults residing in Organization of Islamic Cooperation (OIC) member countries consider
The main issue relates to the fact that many Muslim-
religion an important part of their daily lives
headed households and micro, small, and medium
(Crabtree 2010). This may help explain why only
enterprises may voluntarily exclude themselves
about 25% of adults in OIC member countries have
from formal financial markets because of Shariah
an account in formal financial institutions, which is
below the global average of about 50%.
Islamic legal systems, among other characteristics,
Muslim countries are far from uniform in terms
prohibit predefined interest-bearing loans. They also
of financial inclusion. For example, 34% of the
require financial providers to share in the risks of the
unbanked Afghan population cite religious reasons
business activities for which they provide financial
for not having an account in a formal financial
services (profit and loss sharing). Given these
institution, while only 0.1% of Malaysians do so,
requirements, most conventional financial services
although both countries have similarly high Gallup
religiosity indexes (97% and 96% respectively).
proportion of firms identifying access to finance as a major constraint. The negative correlation is greater
This can be traced to the extent to which Islamic
if one focuses on OIC countries and greater still if
financial institutions are present in a given country. An
one focuses on a subset of OIC countries with a
analysis suggests that the size of Islamic assets per adult
religiosity index above 85%.
population is negatively correlated with the share of adults citing religious reasons for not having an account.
These findings, which are mainly driven by small
This correlation is particularly strong if one focuses on the
firms, suggest that increasing the number of
group of OIC countries and, even more, on those OIC
Shariah-compliant financial institutions can make a
countries that show a religiosity index exceeding 85%.
positive difference in the operations of small firms (0â€“20 employees) in Muslim-populated countries
Based on the Global Findex [Financial Inclusion Index],
by reducing the access barriers to formal financial
for religious reasons, some 51 million adults in the OIC
countries do not have accounts in a formal financial institution. Given that a majority of the OIC population
Efforts to increase financial inclusion in jurisdictions
lives in poverty, Islamic microfinance could be particularly
with Muslim populations require sustainable
mechanisms to provide Shariah-compliant financial services to all residents, especially the Muslim poor,
Global surveys on Islamic microfinance completed by the
people who are living on less than $2 per day.
Consultative Group to Assist the Poor (CGAP) in 2007 and 2012 provide some initial insights into the rapidly growing
One obstacle is the lack of transparency and the
Islamic microfinance industry.
absence of a broadly-accepted standardized process for assessing the compliance of financial
The 2007 CGAP survey found fewer than 130 Islamic
institutions with Shariah guidelines, which makes it
microfinance institutions (MFIs) and 500,000 customers
difficult for many individuals to distinguish between
respectively. Within five years, these figures more than
financial institutions that are operating based on
doubled, reaching 256 MFIs and 1.3 million active clients.
Shariah specifications and institutions that are not.
These figures are on the conservative side because they
Another difficulty has been the lack of information
are based on data for 16 of the 57 OIC member countries
and training on Islamic finance.
(excluding economies such as the Islamic Republic of Iran, Malaysia, and Turkey, which have active Islamic finance
Finally, in their infancy and smaller in scale, Islamic
financial products tend to be more expensive than their conventional counterparts, reducing their
In short, the estimated unmet demand for Shariah-
compliant financial products, in conjunction with the rapid growth of Islamic MFIs, as well as the astonishing
This article is an abridged version of Box 1.4 in the
growth of the overall Islamic finance industry, all point to
Global Financial Development Report 2014: Financial
the growing attractiveness of Shariah-compliant financial
Inclusion, Washington, DC, 2014
products and the supply shortage of such products. Religiosity also has an impact on the access of firms to finance in OIC countries. The number of Islamic banks per 100,000 adults is negatively correlated with the
Feature Islamic finance report card: Pakistan by Rachel Latham and Andrew Shouler
Amidst all the talk of Islamic finance hubs inter-
account at a formal financial institution.
nationally -- whether in the Middle East or the Far East or Europe -- there remains much yet
While, not surprisingly, Pakistan was among
to be achieved on purely a domestic basis in
the pioneers of Islamic finance, progress in the
certain, key countries.
1980s and 1990s “met with limited success, largely due to slippages at the implementation
Indeed, can there be a nation that offers great-
and execution stage,” Mr Yaseen Anwar, then
er potential for the growth of Islamic finance (IF)
governor of the State Bank of Pakistan, admit-
than Pakistan, which essentially needs to look
ted at a conference earlier this year.
no further than its own people for the realization of the sector’s critical objective of mutual
Asian Development Bank’s Islamic Finance
development across society?
Team Leader Ashraf Mohammed refers to research citing an inadequate infrastructure
Pakistan has a population of 180 million (mak-
in that era, and insufficiently trained human
ing it the world’s sixth most populous country),
resources, factors that were rectified in the
and is the second largest Muslim nation in the
subsequent period by “a more practical and
world (representing around 97% of its total
population). Additionally, the large rural share, 63% of total, is evidently under-banked. Ac-
The re-launched official effort in 2001 envis-
cording to a 2011 World Bank study, roughly
aged Islamic and conventional banks co-ex-
90% of the entire population do not have an
isting, and enabling consumers to do banking
within the system of their choice, which opened
ing itself to align its regulatory framework with
the way for the IF sector to succeed, based on
international standards and best practices, SBP
says it regularly reviews and evaluates the output of the IFSB, AAOIFI, and IIFM for potential use,
With an annual growth rate of over 30% over
keeping in view local circumstances and norms.
the last five years, Shariah-compliant banking is now spread across 80 districts of the country,
Recently the SBP adopted a global standard,
with a network of 1200 branches, and Islamic
from Bahrain-based AAOIFI, for Islamic bonds,
banking assets currently constitute 8-10% of both
to help issuers attract investors from the Gulf and
assets and deposits, according to data last year
elsewhere. The number of individual sukuk issues
produced by State Bank of Pakistan (SBP), the
in Pakistan has eased in recent years, despite the
rapid growth of issuance globally.
Key to this advancement has been the crucial
Now the SBP has developed a five-year Strate-
role played by the SBP, with its introduction and
gic Plan (2014-18) in consultation with all rel-
application of key regulatory reforms and pru-
evant parties in the IF sector, to take the industry
dential measures to ensure financial stability and
to its next level of growth and development.
provide a comprehensive, multi-tiered framework to ensure the Shariah conformity of Islamic
Part of this initiative involves a mass-media
campaign to raise awareness of Islamic finance among consumers. “There still prevails a signifi-
Today, the IF industry in Pakistan includes five
cant population that is either unaware of Islamic
fully-fledged Islamic banks and five takaful firms,
banking or has confusions and misconceptions
with an additional twelve conventional banks
about its current paradigm,” said then governor
offering services through Islamic windows. The
Anwar at the campaign’s initiation last year.
central bank is also at an “advanced stage” towards issuing a detailed Shariah governance
Meanwhile, the Ministry of Finance has set up a
framework, which would outline roles for direc-
committee to explore areas to promote Islamic
tors, management and Shariah boards.
banking, including studying the conversion of conventional banks onto an IF basis, to submit
In the opinion of the Jeddah-based Islamic
recommendations by this year-end. Propos-
Development Bank (IDB), Islamic finance is
als involving Islamic money markets, and issues
“growing fast” in Pakistan, though facing “chal-
of secondary market liquidity and maximizing
lenges and constraints”, with demand “driven
equity-based financing rather than debt-based
by multiple factors such as a faith-based appeal
financing, will also be explored.
for the Muslim population, the potential to augment financial engineering by blending it with
Collectively, the authorities’ aim is to expand
socially- and ethically-responsive financing;
Islamic banks’ share of the total banking sector
[also to] service high-net-worth clients (whether
to 15% by 2017.
Muslim or non-Muslim), and attract cross-border oil revenue surpluses”.
Commenting on the nature, opportunity and outlook of the IF sector in Pakistan, London-based
The IDB has noted the “pro-active policy” of
Edbiz Consulting has argued that the same strict-
the country’s central bank in this regard. Pledg-
ness that has characterised the country’s view of
for Islamic finance’s overall, further growth and
Shariah compliance should enable it to become
a global ‘centre of excellence’ for Islamic banking and finance, by ensuring the authenticity of financial products. Chairman and CEO Humayon Dar has assessed that, in order to achieve parity of market share with conventional counterparts by 2025, Pakistan’s Islamic banks will have to grow
Trends in Islamic Micro Finance (MF) Islamic microfinance currently constitutes less than 1% of the microfinance industry globally, which has 126 institutions in fourteen countries, led by a 36%
by at least the recent rate of 35% per annum for
share located in the GCC.
the intervening period. “This is certainly a steep task, but a realistic target,” he says, and currently “the momentum is in the right direction”.
In Pakistan microfinance and Islamic banking were
Besides the scale of the sector’s potential, one
quently have grown significantly, although Islamic
initiated at the same time, in 2001, and subseMF lags quite far behind broader Islamic finance.
particular dimension that seems to hold promise and most immediate relevance is microfinance, which is especially attuned to the poverty alleviation aspect of Islamic finance, as well as focusing on the social and ethical concerns of self-respect, self-reliance and support for women and the most
While several institutions have launched Islamic microfinance products in Pakistan over the past few years, two providers offer a fully Shariahcompliant product line, one being Akhuwat, op-
vulnerable members of society (see box).
erating primarily on the disbursement of interest-
The SBP’s governor, describing Islamic microfi-
Wasil Foundation, which offers a range of Islamic
free loans through donations, the other being the
nance as a confluence of two industries, has said that financial inclusion is a key strategic goal of the central bank, and stressed that the industry should develop capacity to aid agriculture and SMEs
finance services designed to encourage enterprise and the creation of value chains. According to the Pakistan Microfinance Network, there is “huge potential for these providers to expand outreach in this niche market”, by way of
particularly, both for participants in those sectors and for the economy as a whole, with “every sup-
diversifying the product set as well as extending
port and facilitation” from the central bank.
geographic coverage. However, there is a need
These options include the establishment of fully-
Takaful models, “each with their own strengths
for further funding sources, including the Waqf and and weaknesses in terms of viability in the Pakistan
fledged Islamic microfinance banks, Islamic microfinance services by fully-fledged Islamic banks, and Islamic microfinance divisions in conventional microfinance banks. Allied with the institution’s
context”. Yet, recognition has grown among practitioners about the potential market for Islamic MF, and the scope therefore increased for meeting the needs of
inherent checks on the use of funds, the prospect
the underserved, with special attention to target-
for this segment of IF activity is “positive”, the
ing those who have previously declined conven-
Mr Anwar’s recent, acting successor at the State
Sources: State Bank of Pakistan, Reuters, IDB, ADB,
Bank of Pakistan, Mr Ashraf Wathra, has further underlined agri-financing as a policy priority, and indeed invited all key stakeholders to be on board
Edbiz Consulting, Kuwait Finance House, Islamic Finance Today, Pakistan Microfinance Network
Stock Markets GCC Gulf markets defied the trend elsewhere, prolonging 2013’s extended rally, with all the region’s bourses recording gains on conventional measures. Boosted by the Expo bid and a storming real estate market, Dubai has continued to stand out, up nearly 12% in January, with the property component up nearly 20%. Abu Dhabi’s index rose smartly too, by some 9%. In both cases, the banking and financial service sectors
being shaken by a series of explosions and the further
have prospered as well. The Saudi Tadawul index
deaths of followers of ousted president Morsi. The
improved moderately from the previously restrained
Egyptian pound has appreciated in this environment,
mood of last year-end, with the retail sector bouncing
which has seen 98% approval by voters of a revised
back. Qatar attracted investors eyeing low stock
constitution. Otherwise, a stock buyback by EFG-
valuations, while Kuwait remained held back, down
Hermes lifted sentiment, as did news that Dubai’s
slightly on the Islamic-based gauge, constrained
Majid Al Futtaim would be investing $2.3bn in the
by political and investment project snags. Better
retail sector in the coming years. Gulf SWFs are said
sentiment supported notable impetus in Bahrain’s
also to be interested.
South East Asia
Egypt / MENA
Asian stocks were very mixed in the latest period,
By late January the Egyptian stock index had climbed
ranging from the weakened Thai bourse, beset by
to its highest level in almost three years, as the
the country’s political disarray and violence, to a
market’s optimism grew in association with relative
resurgent Philippine index, as foreign funds regained
political stability, even while pockets of violence
a degree of confidence following the US Fed-related
continued to spark. The EGX approached a 50% vault
turbulence in emerging markets. Malaysia’s index well
since last year’s military takeover, though experiencing
represented the downbeat mood. While American
volatility along the way. Rallies in support of likely
monetary policy proceeded with the gradual tapering
presidential contender and armed forces chief al Sisi
and emollient outlook of incoming Fed chair Janet
have offset the intermittent concerns, despite Cairo
Yellen, both US and Chinese economic data were uneven, limiting the scope for international optimism, with credit prospects tightening in both cases, amid uncertain growth conditions. Sentiment overall was upheld to some extent by positive earnings results. The Philippines and Indonesia especially rebounded well from previous sell-offs. Thailandâ€™s bourse kept surprisingly stable overall considering continuing protests, an emergency decree and an inconclusive election in early February.
Rest of the World Equity markets globally slipped in the period covered, led by falls in Asia and other emerging markets. The key factor promoting turbulence was the decision of the US Federal Reserve to proceed further with its tapering plans for monetary stimulus, that has evidently been upholding overseas investment. In some cases (Brazil, Turkey, South Africa, India) countries have had to respond with higher interest rates to support their currencies, creating another drag on stocksâ€™ performance. US indices were also affected for a while, retreating from all-time highs. For Asia the fluctuating conditions in Chinese credit policy, besides economic sluggishness, were another key influence. Japanâ€™s indices also went conspicuously into reverse, with uncertainty persisting over Abenomics. European bourses remained modestly firm with the sense that the worst of the financial crisis has been left behind, and recovery may be consolidating. A more positive mood emerged later, as Fed chair Yellen promised policy continuity, interpreted as sustaining an easy money stance. US corporate earnings were also predominantly beating prior estimates. Sources: GIC, Global Investment House, Bank Audi, Bloomberg, Reuters, broker reports
Islamic Stock Indices Islamic or Shariah compliant indices exclude industries whose lines of business incorporate forbidden goods or where debts/ assets ratios exceed 33%. The increasing popularity of Islamic finance has led to the establishment of Shariah compliant stock indices in many stock markets across the world, even where local Muslim populations are relatively small, such as in China and Japan.
Evolution of Islamic Stock Markets in January 2014 for GCC, Far East, Middle East North Africa (MENA) and Rest of the World markets. Prices represent the closing price of the respective index at 31/1/2014. Percentage Month-to-Month (MTM) Change and percentage Volatility. Source: Datastream
Conventional Stock Indices
Volatility is a measure of uncertaincy of market returns. It is calculated as the standard deviation of the returns in the reported month. The formula for the standard deviation is: Ďƒ=E[(X-Îź)2]1/2
Evolution of Stock Markets in January 2014 for GCC, Far East, Middle East North Africa (MENA) and Rest of the World markets. Price represent the closing price of the respective index at 31/1/2014. Percentage Month-to-Month (MTM) Change and percentage Volatility. Source: Datastream
Commodities Oil The market had a slightly bearish tone early in 2014, concerned for world demand in the face of slower emerging markets and the Chinese economy. Brent was hit harder than WTI, allowing the wide spread previously between them to narrow, yet both series were upheld by softer data signals from the US that trimmed the dollar. Supply concerns over the North Sea and Libya also gave support. Inventories at the Gulf Coast surprised on the low side, below the five-year average, and freezing winter weather in the US further boosted Nymex crude. Later in January trade statistics from China gave prices a fillip. Geopolitical concerns as to conflicts in South Sudan and protests in Venezuela provided extra underpinning.
Gold Gold eased further down in January, but picked up again into February, surprising analysts who could see no obvious prospect of the recent trend late in 2013 turning around. The precious metal benefited in part from investors switching from equities because of repeated market jitters. A potential review of Indian import restrictions prompted short-covering. On the other side of the coin, the Fedâ€™s tapering process, and rising interest rates in certain developing countries, dulled the immediate sparkle in the market. Equally, Fed chair Yellenâ€™s declared commitment to monetary accommodation gave a helpful price lift. With the world economy seemingly muddling through, forecasters persisted expecting the rally
following the relative buoyancy of the second half of last year. Emerging market concerns have had
to peter out.
additional depressive effect. The most recent pickup
commodity prices generally on investment grounds. A
hinged on a declining dollar, which tends to promote
A firmer direction was taken by copper late in
drop in inventories at London-monitored warehouses
January, but only after prices softened sharply
brought extra market cheer, which was then reinforced
earlier in the month upon perceptions of weakness
by better credit numbers out of China and signs of
in the Chinese economy. Analysts have pointed
still to supply outstripping demand in 2014,
Sources: OPEC, Reuters, Bloomberg
Bonds and CDS markets GCC Whereas emerging market bonds, like stocks, have been hit by the US Fed’s monetary tapering plans, creating a background of considerable volatility, Gulf trading kept a better profile, with only limited correlation with Treasury benchmarks, and spreads narrowing. Although defensive at the start of the year, regional investors were then looking to add to their books again, though focused on yield. Technical indicators were aligned to assist, and underlying demand was strong, but tending to wait for new issuance. Names such as DEWA and Bahrain were well bid, while much activity was oriented to Kipco’s 5-year issue. International accounts added to the interest further along the credit yield curve. A deal to restructure Dubai’s $10bn debt load helped sentiment. Egypt / MENA Similar momentum was found in the broader region, with the North African bond market showing well, as bonds from Egypt and Morocco were sought by both local and international buyers. The gradual restoration of what investors perceive as a workable political framework promoted trade in Egypt’s 2020 and 2040 eurobond issues, rallying above par. National Bank of Egypt’s issue also improved. January saw foreign exchange reserves rise for the first time in several months, and the government was in talks to secure further aid from the Gulf states. Credit default swaps (CDS) have dropped by over 400 basis points since the military takeover. Economic growth may reach 3.5% this year, according to the finance ministry. Malaysia / South East Asia Trends in Asian bonds were less convincing, having being revealed to be so dependent on US monetary policy, where the easing cycle has been curtailed. Initially in the period covered regional currencies reflected the retreat of international investors, typically holding 20-30% of the bloc’s
sovereign debt, as they had drawn back to the dollar as safe haven. Borrowing costs locally were on the rise as expectations grew of higher yields over time across dollar-related zones. Inflation data also brought pressure to bear, for instance in Malaysia and the Philippines. Malaysian bonds fared reasonably well on a comparative basis, without the uncertainty of elections as are due in Thailand and
Indonesia this year. Some improved data on Chinese growth and credit figures lifted Asian currencies later
Sovereign Bond Markets
in the period, aiding market reaction to the collective sell-off that some saw as overdone.
Global Benchmarks Though still in a negative mood during January, at the global level key benchmark series were strengthened into February by signs that assumptions about quickening economic recovery were not so well founded. Bonds for a while advanced in rotation with stocks, which dipped sharply. US data such as car sales, manufacturing and employment generated doubts about the revival, and encouraged thoughts of central bank restraint on interest rate hikes, as were then confirmed by policy statements. The US lead was followed by both core and peripheral European trades, as well as JGBs, with the sense that both the real economy and monetary settings were somewhat limited in giving guidance. In recent weeks the jury has remained out in terms of the marketâ€™s likely direction.
Evolution of Bond Markets in January 2014 relative to the previous month. The table reports the price index on which the MTM Change is calculated (month-to-month) and the Yield of sovereign bond maturities typically between 6 months and 25 years. Data as at 31/1/2014.
Credit Default Swap Markets
Source: GIC, Invest AD, Bloomberg, Bank Audi, ADB online, broker reports
Evolution of CDS Spreads in January 2014 relative to the previous month. The index reported here represents the average basis points (bp) of a 5-year CDS for protection against sovereign bonds. Data as at 31/1/2014. MTM Change refers to the change relative to the previous month.
Islamic Bonds (Sukuk) The sukuk secondary market was soft in the early
DIP’s main asset is a mixed industrial,
part of the year, reflecting not only the retreat
commercial and residential block, next to
of conventional instruments but also that of
the World Expo 2020 site, according to
emerging markets, and doubts for Gulf energy
documentation. European accounts were much
producers over oil prices.
in evidence in the sale, also Islamic liquidity.
Investors were looking for returns instead from primary issuance, which has been expected by
Conditions otherwise were relatively quiet.
analysts (S&P, Fitch Ratings) and by banks (e.g.
Indonesia announced it would sell retail Islamic
HSBC) to put in a strong performance this year.
bonds this month, offering individual investors
Activity was focused most recently on the
returns clearly above the interest rates given
issuance of Dubai Investment Park’s $300 million
by the country’s leading banks. They would
debut sukuk, with orders finalized at well over
carry a coupon rate of 8.75% per annum,
$4bn, launched at 35bps inside guidance at
compared with bank deposit rates of 5-7.75%.
265bps over mid-swaps, yielding 4.296%.
The government auctioned a combination of
The deal was viewed as well-timed, into a
6-mth and 29-year project-based sukuk in mid-
market lacking Middle East paper, and likely
to trigger other issuers from the region. It
Meanwhile, the UK Treasury (finance ministry)
benefited from fast-improving sentiment towards
declared its proposed sukuk issuance would
Dubai, buoyed by its rapidly rebounding real
take place either in 2014 or 2015 by way
estate sector. The company is owned by Dubai
of a syndicated offering, having previously
Investments, and focused mainly on leasing and
announced plans for a £200m launch.
Sources: GIC, Invest AD, Bloomberg, Reuters, broker reports
Sukuk is the Arabic name for financial certificates, but commonly refers to the Islamic equivalent of bonds. Since fixed income, interest bearing bonds are not permissible in Islam, Sukuk securities are structured to comply with the Islamic law and its investment principles, which prohibits the charging, or paying of interest. Financial assets that comply with the Islamic law can be classified in accordance with their tradability and nontradability in the secondary markets.
Perspective Outlook for sukuk gains attention by Andrew Shouler intermediation and integration”, so benefiting Islamic
A flurry of reports recently about the prospects for
debt capital markets.
the sukuk market in 2014 all expect a pick-up in pace, for a number of reasons.
Yet, S&P suggests that “without standardization and
Standard & Poor’s envisages the industry expanding again, following a dip in volumes by some 13%
[the] architecture to support the industry, it is unlikely [to] reach a new dimension”, implying that official attention is necessary to complement potential
in 2013, as the market digested the promised
market supply and demand.
tapering of easy US monetary policy. The agency forecasts total issuance to exceed $100bn for the
Fitch Ratings, meanwhile, says Gulf nations’ efforts
third successive year “if yields remain attractive”,
to become Islamic finance hubs “is also likely to spur
driven by corporate and infrastructure deals in the
sukuk issuance”. Last year’s decline was likely “to
Gulf, and the resumption of Malaysia’s investment
be a blip in the longer-term trend of steady growth,”
it said. Fitch noted “evidence of increasing market efficiency”, with structuring costs having fallen
The UAE and Saudi Arabia are anticipated to lead
significantly, and dealmaking times down “from as
the way in the GCC, “as regulators continue to
much as six months to a few weeks”. It mentioned,
minimize barriers in the market”. Besides impetus
however, the caveat of “the lack of legal precedent
from project spending, economic growth based
over investors’ ability to enforce rights in many
on $100 oil prices will encourage banks as both borrowers and investors, also adjusting their capital bases to meet Basel 3’s gradual implementation.
jurisdictions”. Reported by Bloomberg, HSBC suggested issuance
In Malaysia -- whose sukuk offerings dropped
would probably rebound to a record level this year,
by 25% last year, though maintaining a dominant
echoing the idea of geographic dispersion, and
share of total -- a broad investor base and liquid
observing banks trying to tailor conventional products
market give underpinning. A phase of government
to meet Shariah’s requirements, as in perpetual sukuk.
cutbacks should be eased by GDP growth
US rate volatility might affect timing, but the pool of
exceeding 5% in 2014, with demand for ringgit
Islamic liquidity “remained strong”, and might be
issues liable to be buoyant.
orientated to issuers in local currencies instead.
S&P made note too of investors seeking sukuk in
Moody’s has remarked on the increasing
non-traditional markets, and that “Africa may soon offer a fresh alternative”. Senegal and South Africa have been looking at issuing sukuk, while Tunisia, Egypt, and Morocco have been finalizing their legal frameworks to do so. Multilateral institutions may
internationalization of sukuk, and “growing investor comfort with these instruments”. Longer maturities beyond 5-7 years are appearing, and enhancing the sector’s appeal. Like S&P, though, Moody’s saw the global market as “likely to remain fragmented”, a
further stimulate sukuk activity, either themselves
view which reflects awareness that differing locations
Islamic or representing countries with large Muslim
around the world are tending to compete as much as
populations. The IDB, ADB, and other forums, “are natural and prominent players”, aiming “to facilitate
co-operate, whether for a niche or a comprehensive role, chasing market share in this growing field.
call for papers 4th Islamic Banking and Finance Conference (IBF 2014) 23rd to 24th June 2014 Venue: Lancaster University Management School
Thorsten Beck Professor of Banking and Finance, Cass Business School The constraints applied by Islamic banks rendered them more resilient in the recent ﬁnancial crisis compared to their conventional counterparts. This has attracted the attention of market participants and researchers to their liquidity buffers, leverage ratios, managerial efﬁciency and bespoke ﬁnancial products. Islamic banking products are now offered in more than twenty countries and their expanding suite includes bonds, equity indices and insurance. The sector is estimated to exceed $1trillion in value, while growing at about 15% per annum. Among many issues still subject to debate is the purity of Islamic ﬁnance in practice, given the need to compete and to operate with customers whose expectations have been formed by conventional banking practices. EIBF centre at Aston Business School in collaboration with GOLCER Lancaster University Management School is organising a conference on Islamic Banking and Finance. The conference aims to provide a forum for an exchange of views on recent developments and to identify key issues/challenges underlying the paradigm of Islamic Banking and Finance in the 21st century.
Original contributions are invited on any of the listed topics: • • • • •
Financial risk and stability Transparency, governance and corporate social responsibility Earnings management and impression management Performance, efﬁciency and convergence Mutual funds
• • • •
Risk Management, Accountability and auditing Competition Microﬁnance and SMEs Behavioural ﬁnance
Conference Organisers: Dr Omneya Abdelsalam (Aston University), Dr Marwan Izzeldin (Lancaster University)
Journal of Economic Behaviour and Organisation (JEBO) Ana Timberlake Best paper Research Award: £500 Co-editors for the JEBO Special Issue Omneya Abdelsalam, Aston University Mohammed El-Komi, American University of Cairo Ana-Maria Fuertes, Cass Business School Stergios Leventis, International Hellenic University Gerald Steele, Lancaster University
Scientific committee Omneya Abdelsalam (Aston University), Nathan Berg (University of Otago), Rachel Croson (University of Texas at Dallas), Mahmoud El-Gamal (Rice University), Mohamed El-Komi, (American University Cairo), Meryem Fethi (Leicester University), Ana-Maria Fuertes (Cass Business School), Mohamed Shahid Ibrahim (Bangor University), Marwan Izzeldin (Lancaster University), Jill Johnes (Lancaster University), Stergios Leventis (International Hellenic University), Kent Mathews (Cardiff Business School), Khelifa Mazouz (Bradford Business School), Philip Molyneux (University of Bangor), Andrew Mullineux (University of Bournemouth), Steven Ongena (University of Zurich), Vasileios Pappas (Lancaster University), Mohamed Shaban (Leicester University), Mustapha Sheikh (Leeds University), Gerald Steele (Lancaster University), Emili Tortosa-Ausina (Jaume I University), Mike Tsionas (Lancaster University)
For paper submissions please email Marwa Elnahass: firstname.lastname@example.org Conference Abstract Submission 31st March 2014
Conference Full Paper Submission 27th April 2014
Submission for JEBO Special Issue 1st October 2014
TIMBERL AK E St atistics
Special Issue Publication October 2015
Global Forum on Islamic Finance 2014 Conference
Developments and The Way Forward March 10-12, 2014 Lahore, Pakistan Organised by Department of Management Sciences COMSATS Institute of Information Technology (CIIT) http://gfif.citilahore.edu.pk/
About the Conference The 2nd Global Forum on Islamic Finance (GFIF) will consider the spectacular political and socio-economic developments that we have been witnessing, and their probable effects on the performance and future position of Islamic financial institutions, the regulatory set-ups and popularity of Islamic products being offered to the public, governments and business. Much has been said about the phenomenal growth of the Islamic finance industry over the past decade and the growth rates have been outstandingly impressive. Industry supporters have also lauded how successfully Islamic banking has largely weathered the global economic crisis that engulfed the conventional banking industry. However, despite these achievements, much still needs to be done if the industry is to truly flourish and play its part on the world stage. On this great global forum, COMATS Institute of Information Technology will provide a platform to the leading industry players, academics and researchers to address key factors for achieving scale through novelty to strengthen the Islamic financial institutions and ensure long-term industry stability; GFIF 2014 will thus assist industry players to innovate the next generation of Islamic finance solutions that will meet the increasingly complex needs of corporate borrowers, consumers, issuers and investors; and create the conditions that will enable a more globally harmonized footprint for Islamic financial institutions - that, if achieved, will propel the Islamic finance industry to the next level of success. GFIF welcomes participants from academia, research institutes, corporate world and government sector to share their experiences, learning and research. GFIF comprises various sessions to make it the most comprehensive experience for its attendees.
Conference Topics • Islamic project financing
• Islamic wealth management
• Socially-responsible investment strategy
• Structuring Islamic securitization
• Shariah-compliant risk management
• Market penetration in non-Islamic contexts
• Islamic microfinance
• Business cycles, financial stability & crisis
• Management, leadership and governance of Islamic financial services providers • Corporate social responsibility of Islamic financial institutions
• Principles of Islamic jurisprudence and legal maxims • Housing finance and Shariah-compliant mortgage products
Marwan Izzeldin Director email@example.com Andrew Shouler Editor firstname.lastname@example.org
Research Team Gerry Steele email@example.com Vasileios Pappas firstname.lastname@example.org Marwa El Nahass email@example.com
DISCLAIMER This report was prepared by Gulf One Lancaster Centre for Economic Research (GOLCER) and is of a general nature and is not intended to provide specific advice on any matter, nor is it intended to be comprehensive or to address the circumstances of any particular individual or entity. This material is based on current public information that we consider reliable at the time of publication, but it does not provide tailored investment advice or recommendations. It has been prepared without regard to the financial circumstances and objectives of persons and/or organisations who receive it. The GOLCER and/or its members shall not be liable for any losses or damages incurred or suffered in connection with this report including, without limitation, any direct, indirect, incidental, special, or consequential damages. The views expressed in this report do not necessarily represent the views of Gulf One or Lancaster University. Redistribution, reprinting or sale of this report without the prior consent of GOLCER is strictly forbidden.