Citigroup beefing up Islamic ops


BY Hanim Adnan

CITIGROUP Islamic banking vehicle, Citi Islamic Investment Bank E.C. (CIIB), aims to strengthen its position in the global Islamic banking business through its diversified range of alternative Islamic products and services for the international market. 

Visiting Citigroup global Islamic finance business head and CIIB managing director Saad Ashraf told StarBiz that Citigroup, as a leading player in Islamic financing, was firmly set to be a viable alternative to the conventional financial services. 

Saad Ashraf

With an estimated 30% growth annually in the industry, he said: “There is a huge potential waiting to be tapped given the increasing awareness among Muslims and non-Muslim players alike on the uniqueness of Islamic products and services.” 

To date, the global Islamic finance industry has an estimated total capital of US$13bil with US$202bil in deposits, US$159bil in investments and US$262bil in assets. 

Over the past four years, Ashraf said CIIB had structured international Islamic transactions of more than US$5bil – drawing from its knowledge on Islamic banking market, strong investor relations and the support of its parent Citigroup, the world's largest financial services institution. 

CIIB's core operation is in the structuring and distribution of Islamic banking transactions in trade finance, structured trade finance, leasing, fund management and Islamic securities. 

Ashraf, who is responsible for Citigroup's institutional global Islamic products said: “We have successfully introduced Islamic finance products to issuers in new markets like Brazil, South Korea, the Netherlands, Japan, France, Hungary, Italy, South Africa, Pakistan, India and Bangladesh.” 

More recently, CIIB is involved in the structuring and syndication of a landmark project finance transaction for Turkey worth US$54mil. 

As a leading player in Islamic financing, particularly Islamic fund-raising globally, Ashraf said: “We are working closely with other Islamic banks to further develop a range of Islamic products which are active for a broad investor base and comparable in terms of economics to any similar products on the conventional side.” 

Over the years, CIIB has launched a series of Islamic products and services through the group's Islamic Finance windows. 

On Malaysia, Ashraf said: “There is also possibility for CIIB to tap Malaysia's successful Islamic products and services to be adopted into Citigroup's global Islamic finance network.” 

For example, Islamic technology of some of the products such as Islamic mortgages and deposit products that are being offered in Malaysia could be transferred to other countries offering similar products instead of reinventing the pool.  

He said Malaysia's achievement in aggressively promoting Islamic banking was mainly attributed to its government and Bank Negara's commitment to institute strong regulatory and institutional framework to set the “rules of the game”. 

Piyush Gupta

“Malaysia has also been working hard towards the development of an active Islamic liquidity market by creating and issuing liquidity management instruments such as Sukuks,” Ashraf said. 

Malaysia, Qatar and the Islamic Development Bank (IDB) have raised financing through sovereign Sukuks, which would help boost the Islamic capital market. 

“Sovereign instruments promote capital flows between countries, help development projects and also provide a benchmark for corporate issuances,” he said. 

Ashraf was instrumental in coming up with the structure of the highly successful international debut of the US$400mil SUKUK offering by IDB, the first ever issue by an Islamic bank, which CIIB lead managed solely.  

He also assisted in the advisory work to achieve AAA rating by IDB from Standard & Poors. 

Recently, the Bahrain Monetary Agency has appointed CIIB and Citigroup Global Markets Ltd to arrange, structure and lead manage its upcoming US$250mil Sukuk issue. 

According to Ashraf, the drivers for sustainable growth in Islamic banking lie in the regulatory and institutional framework, product depth, vibrant capital markets and retail distribution to make it on a par with conventional financial services. 

Sukuks, for example, are the key to developing Islamic capital markets.  

“Hopefully, there will be more issuance of Sukuk instruments to enable the development of Islamic Sukuk and balanced funds,” he said. “The development and acceptance of Islamic derivative instruments will allow more sophistication in the Islamic investment management industry.”  

Citigroup country officer (Malaysia) and Citibank Bhd chief executive officer Piyush Gupta said: “I am convinced that over the next five to 10 years, Islamic financing in Malaysia has a very strong future.” 

“The success of Islamic financing in Malaysia does not happen by the stroke of a pen, draconian laws and measures. It's happening because economics are making it reasonable and through persuasion.”  

Gupta said Citigroup would also bring a lot of new financial structures and products into the Malaysian market. 

“Currently, a significant portion of all issuance and fund-raising exercise in the ringgit debt market is Islamic and we foresee the market will continue to pick up in the near-term future,” he said. 

According to Gupta, Citibank is pleased with the progress of Islamic banking in Malaysia.  

For example, over the last three months, Citibank Islamic housing loan products had been doing well with volume picking up nicely month-on-month.  

This year, Citibank has launched a series of Islamic related products such as Islamic accounts, savings accounts, time deposit and housing loans.  

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