Alberto Brugnoni

Managing Partner

ASSAIF

THE DIGITAL ECONOMY BREAKDOWN

THE STATE OF THE GLOBAL ISLAMIC ECONOMY REPORT 2015/16 2

An overview by: Alberto G Brugnoni Managing Partner ASSAIF October - 2015

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Further growth can be seen by the fact that new markets are very much in abundance around the world

the potential core Islamic Banking to be 1.27% of global banking in

2014.

THE STATE OF THE GLOBAL ISLAMIC ECONOMY REPORT 2015/16 5

A $1.8 trillion existing Islamic finance market and $1.35 Islamic Banking (assets, 2014)

THE STATE OF THE GLOBAL ISLAMIC ECONOMY REPORT 2015/16 6

Malaysia, Bahrain, and United Arab Emirates maintain the leadership in the Islamic Finance indicator

Several African countries are launching debut sovereign Sukuk & Islamic banking windows. East Asian countries are adapting their

regulatory frameworks for Islamic Finance. Central Asian such as Kazakhstan &Azerbaijan and European banks in Russia

&Germany are also tying up with Islamic finance

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Top 10 Countries in Islamic Finance

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Key Market Players in Islamic Finance Sector

THE STATE OF THE GLOBAL ISLAMIC ECONOMY REPORT 2015/16 9

The issue of OIC countries being more vulnerable due to national structure imbalances and regional political risk. Unemployment remains particularly high in Northern Africa and Western Asia. The issue of low oil prices and the potential of US interest rates impacting the interest rates of OIC countries

THE STATE OF THE GLOBAL ISLAMIC ECONOMY REPORT 2015/16 10

ASSAIF - Funding Halal Economy through Islamic Finance

The Islamic finance industry offers a comprehensive products ecosystem that

serves to address the financial needs of various types of clientele.

The world halal industry is a globalised and cross-border business sector. As

such, halal firms are heavily involved in international trade, particularly those

operating out of non-OIC countries and who export to cater to the markets

which are home to large Muslim population. In this process, halal firms are in

critical need of three financing lines:

1. Trade financing to support international trading activities;

2. Risk management products to hedge international exposures;

3. Working capital to help with the raw materials and other processing

expenditures.

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ASSAIF - Common Islamic Trade Finance Products (1)

Import Financing Export Financing

Documentary Credit Inward Letter of Credit

Wakalah Islamic Factoring

Murabahah Islamic Bankers Acceptance

Musharakah Islamic Export Credit Re-financing (preshipment)

Murabahah Working Captial Islamic Export Credit Re-financing (postshipment)

Islamic Bankers Acceptance Accepted Bills-i

Foreign Inward Bills for collection (FIBC-i) Foreign Onward Bills for Collection-i

Domestic Inward Bills for collection (DIBC-i) Domestic Onward Bills for collection-i

Debt Trading Working Capital Financing

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ASSAIF - Common Islamic Trade Finance Products (2)

USD 4tln worth of trade financing products are utilised to support trade just

between the OIC countries (intra-OIC); however the value of global Shariah-

compliant trade financing solutions is a mere USD250bln

Cash-flow tools known as factoring and reverse factoring:

Factoring is a short-term cash-flow solution in which a business sells its

accounts receivable for a nominal fee

Reverse-factoring entails the extension of payment terms of buying corporates

to match them with their receivables

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ASSAIF - Funding Capital and Refinancing Needs

Here, sukuk is playing a crucial role as a financing tool utilised by large and

medium-sized firms in the halal industry to finance their general corporate

purposes, specific project financing, investment programmes and debt

refinancing.

The sukuk market has been penetrated by halal industry players from different

operating backgrounds ranging from:

food manufacturing

processing,

finance and insurance

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ASSAIF – Institutional Players

The International Islamic Trade Finance Corporation (ITFC) is an

autonomous entity within the Islamic Development Bank Group:

• Shariah-compliant trade finance using the following modes of financing:

Murabaha, Installment Sale, Istisna'a

• Structured Trade Finance (STF) using off-balance-sheet collateral

The Islamic Corporation for the Insurance of Investment and Export Credit

(ICIEC) provides investment and export credit insurance:

• Trade Credit Insurance Program

• Foreign Investment Insurance Program

• Reinsurance Program