gif Takaful Global Takaful Market $bn


$7 $8


$5 $6


$4


$2 $3


Neil D Miller, Partner & Glo- bal Head of Islamic Practice at Norton Rose LLP.docx


$1 $0


2.10 2.42 2.78 3,19 3.67 5.59 4.22 4.86 7.39 6.42


Source: Celent.com


2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Graph 1.


What are your views on Islamic finance progression in 2010?


2010 has been a year of managing recovery from the GFC. Lessons have been learnt about restructuring Islamic transactions. Different IFIs have handled this in different ways. The last quarter arguably has started to see a moderate uptick in confidence in certain quarters but transaction timelines are stretched as diligence is sensibly extended.


What do you personally feel are the future challenges for the Islamic finance and how do you think they can be overcome?


There is universal agreement in the industry that the biggest constraint on its development is the lack of liquidity management tools. Serious efforts are now being taken to start addressing this issue in a meaningful manner, most notably the recent announcement of the establishment of the IILMC in Malaysia.


The industry waits with bated breath to see what will materialise from this initiative and others are also in the preparatory stages so momentum is be- ginning to move in the right direction. In parallel with this, we are also see- ing a great deal of interest in the potential for designing and implementing a credible instrument that will allow the economics of a typical repo trans- action to be effected. The IIFM as well as several international investment banks are exploring the difficult issues that surround this type of product.


Where do you see the Islamic financial sector in the UK heading in the next few years?


I would like to think that the UK-based IFIs could start to develop a credible flow of European corporate transactions but they face difficult capital con- straints with the evolving bank regulations. This would be eased if the UK Government could be persuaded to revive the possibility of short term T-bill issuance but their is little optimism about that at the moment.


Which sectors of the Islamic Finance do you personally feel will be suc- cessful in the upcoming years?


We expect sovereign supported project finance in the Middle East and selected corporate transactions where assets underpin the balance sheet to be a source of transactions. We would like to see the syndication markets re-open but at the moment it seems more likely that transac- tions will be undertaken on more of a club basis. We would also like to see IFI’s co-operating more closely so that by combining efforts they can underwrite bigger tickets. In the capital markets there does seem to be a pipeline of Sukuk deals and we hope that the new year will see a surge in this activity.


Under the new liberalisation measures Bank Negara will issue:


• up to two new Islamic banking licenses in 2009, under the Islamic Banking Act 1983, to world-class foreign players for the purpose of establishing new Islamic banks


• these banks can be up to 100 per cent foreign owned • they must have a paid-up capital of at least US $1 billion


• and up to two new family Takaful (Islamic insurance) licenses in 2009, offered to players who can offer a significant value proposi- tion to Malaysia designed to spur the development of the Takaful industry.


Takaful potential, year 2015 Takaful premium US $7.4bn Total insurance premium $1.1 trillion Selected countries only


Saudi Arabia Indonesia Malaysia


Csd`pt U & C USA


UK Kuwait


China Jordan Qatar Algeria


India Pakistan


South Africa Oman


Singapore


Tunisia Bahrain Lobanon


Libya Turkey


Morocco Philippines


Syria


128 128 192


128


91 95


18 20 30 33 37 45 64 65 76


11 12 14


200 400 600 800 Takaful premium US m Source: Courtesy of Islamic Banking and Insurance 14 Global Islamic Finance February 2011 1000 1200 1400 853 Iran 480 467 260 776


1200 1220


936


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