Phone time helps propel Sharia personal loans ? gulfnews.com ...

Kuala Lumpur: Islamic personal loans are poised for a record year in Malaysia as customers use everyday assets like mobile telephone minutes to back their financing.

IDOTTV, a company that helps arrange loans backed by phone airtime, expects the business will expand to 100 million ringgit (Dh122 million) per day next year from 1 million ringgit now, based on talks with banks, Chief Operating Officer Al Hadj Azahari Pawan Teh said in an August 25 interview in Kuala Lumpur.

Sharia-compliant loans to individuals grew 32 per cent to 15.5 billion ringgit in 2010 and 17.7 billion ringgit in the first seven months this year, according to Bank Negara Malaysia's data.

Malaysia, home to about 17 million Muslims, is already the world's biggest market for Islamic bonds, or sukuk, with 350.8 billion ringgit in assets that comply with religious tenets at the end of 2010, according to the central bank's March annual report.

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Loans backed by the cap-acity of a mobile phone network that comply with Islam's ban on interest will help the Southeast Asian nation maintain its leadership in a global industry with $1 trillion of assets, according to RHB Islamic Bank.

"We have used cellphone airtime as an underlying asset for personal financing for about two years and have found it to be fast and efficient," Marina Hamzah, head of product development at Kuala Lumpur-based RHB Islamic, a unit of Malaysia's fifth-largest banking group by assets, said in an interview yesterday.

"The transaction involves real money and gives customers greater confidence to take on the financing."

The loans provide credit by allowing a borrower to buy mobile-phone time on a deferred basis with funds from a bank. The individual then sells the minutes for cash that's returned in the future.

Deferred credit

IDOTTV uses airtime to back the loans in the same way crude palm oil is used to facilitate trades based on the Islamic principle of deferred credit, or Tawarruq, IDOTTV's Azahari said. The transactions are done through the company's fully automated trading system, known as AS-Sidq, which connects potential borrowers with Sharia-compliant banks, he said.

The system complies with standards set by the Accounting and Auditing Organization for Islamic Financial Institutions, Azahari said. The body has more than 200 members and has set 86 accounting and auditing standards that are used in Bahrain, the Dubai International Financial Centre, Jordan, Lebanon and Qatar, according to its website.

Kuala Lumpur-based RHB Islamic, Affin Islamic Bank, and Al Rajhi Bank Malaysia. all use AS-Sidq, Azahari said. Malaysia Building Society, which is one of the top Sharia-compliant personal lenders, has indicated interest in the system, he said.

Malaysia Building Society, the country's first property financier turned financial provider, is exploring the concept provided by IDOTTV, according to Azlina Mohd Rashad, head of the corporate planning and communications division at the Kuala Lumpur-based lender.

"It's certainly more accepted by Sharia scholars worldwide," Azlina said. "Our Islamic personal fin-ance receivables at the moment constitute over a third of our total assets, hence this can enhance our image as an Islamic lender among our customers."

Global offerings of sukuk climbed to $16.8 billion (Dh61 billion) in 2011 from $10.3 billion in the year earlier period, according to data compiled by Bloomberg.

The Bloomberg Malaysian Sukuk Ex-MYR Index, which measures foreign-currency Islamic debt sold by companies and governments in the country, held at 105.4880 yesterday, near the record 105.4980 reached on August 18.

Using mobile airtime as a commodity isn't new in the Islamic finance industry. Saudi Arabia-based telecommunications firm Etihad Etisalat set a new benchmark in the Middle East and Africa in March 2007 with its $2.9 billion Sharia-compliant syndicated loan, according to a press release by the company.

Malaysian sukuk reaches highest level

The yield on Malaysia's 3.928 per cent dollar-denominated sukuk due in June 2015 rose three basis points, or 0.03 percentage point, to 2.39 per cent yesterday, the highest level in a week, according to prices from Royal Bank of Scotland Group. The difference in yield with the Dubai Department of Finance's 6.396 per cent notes maturing in November 2014 narrowed two basis points to 254, Bloomberg data show.

Sukuk returned 6.8 per cent this year, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index, while bonds in developing markets gained 7.8 per cent, JPMorgan Chase & Co's EMBI Global Index shows.

Source: http://news.tradingedgemaster.com/phone-time-helps-propel-sharia-personal-loans-gulfnews-com/

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