cimb islamic: a pioneer and trailblazer in islamic finance · cimb islamic: a pioneer and...
Embed Size (px)
CIMB Islamic: A pioneer and trailblazer in Islamic finance 31
CIMB Islamic: A pioneer and trailblazer in Islamic financeIntroductionCIMB Islamic – the global Islamic banking and finance franchise of CIMB Group, a leading ASEAN universal banking group – was officially launched on 2 January 2003. It started as a small Islamic investment banking boutique house licensed as an Islamic window pursu-ant to Section 124 of the Banking and Financial Ser-vices Act (Malaysia) 1989.
CIMB Islamic was established in order to achieve a bet-ter and more credible way of undertaking Islamic banking and finance business under CIMB Group. It emphasised the provisioning of an enterprise-wide Shari’a compliant framework and resisted the industry approach at the time of just concentrating on product development. Al-though in Malaysia, at inception there were no regula-tory provisions and requirements, CIMB Islamic was the first non-standalone Islamic bank in Malaysia to establish a Board and to appoint an independent Shari’a Commit-tee to help it manage and assess Shari’a compliance of products and services. It was also the first to undertake a Shari’a Audit in the country, and when external auditors were appointed, it pioneered and developed the audit methodology which incorporated Shari’a issues. From the beginning, CIMB Islamic revolutionised how Islamic financial institutions ought to be conduct their business, and this naturally positioned CIMB Group as a leading and premier service provider in the Islamic financial markets.
Over the last nine years, CIMB Islamic has emerged as the leading mid-sized, full-service universal Islamic banking franchise in ASEAN. Its success rests upon the adoption of an innovative dual banking leverage model – developed in-house – that offers its clients compre-hensive Islamic financial solutions in investment banking, consumer banking, asset management, takaful and pri-vate banking seamlessly using the full infrastructure and resources of CIMB Group regionally. The successful im-
plementation of this business model has allowed CIMB Islamic to be recognised as one of the fastest growing Islamic banks in the world in terms of assets and depos-its growth in its first five years of operations, the biggest sukuk manager in the world since inception and the larg-est Islamic bank by branch network globally.
CIMB Islamic is recognised year after year as being a trailblazer in Islamic finance. Its global and regional accolades include, amongst others, the Best Islamic Bank, Best Islamic Bank in Asia, Best Sukuk House, Most Innovative Islamic Bank, Islamic Investment Bank of the Year, Best Islamic Retail Bank and Best Islamic Fund Manager. Other noteworthy achievements in-clude the various country awards it has won, such as Best Islamic Bank in Malaysia, Best Islamic Bank in Indonesia, Best Islamic Fund Management House in Malaysia and many others. CIMB Islamic has also won countless Best Transaction and Best Product awards through the years.
Pioneering and trailblazing traitsCIMB Islamic’s pioneering and trailblazing traits, re-flected in their domestic and global business activities, stems from an in-built culture of excellence found at CIMB Group. CIMB Islamic is very focused in its business operations and builds its strategy around a clear value proposition for its customers, taking on an outside-in perspective i.e. looking at what its customers, partners, and investors say and need instead of what it wants to push. CIMB Islamic also fine-tunes its strategies to changes in the marketplace quickly and concentrates on growing its business in its core markets.
part_01.indd 31 28/03/2012 21:41:29
32 Global Islamic Finance Report (GIFR 2012)
In the first two years of its operations, CIMB Islamic focused on transforming and revolutionising its Islamic value proposition by developing a more effective busi-ness platform and bringing new, innovative Islamic in-vestment banking products to the market. It proceeded to launch the world’s first istisna’ sukuk, the world’s first musharaka sukuk and the world’s first Asset-Backed Securitisation to name a few, and directly changed the landscape of the Malaysian and the global sukuk market.
With an established presence in the Islamic investment banking space, CIMB Islamic then looked at expanding its horizons by evolving into an Islamic universal bank. In 2005, it merged with a stand-alone licensed Islamic bank, Commerce Tijari Bank Berhad, which was subse-quently renamed to CIMB Islamic Bank Berhad. CIMB Islamic further acquired the Islamic banking business of Southern Bank Berhad in 2006 and expanded its Islamic consumer banking product offerings. It introduced many new Islamic consumer banking products in Malaysia such as the WhyWait Fixed Return Investment Account (FRIA-i), the world’s first retail deposit product based on the concept of murabaha. FRIA-i took the market by storm as it was the first Islamic retail deposit product that provided a fixed profit rate and protected principal.
From a mere RM1 billion total assets in 2006, CIMB Islamic grew organically to reach RM48 billion in total assets by end 2011. It now sets its eyes on develop-ing other frontiers within its operation, with a focus to deepen its activities in ASEAN. Since implementing the dual banking leverage model for its Indonesia’s Islamic sub-brand, CIMB Niaga Syariah, in late 2010, CIMB Is-lamic has successfully elevated its market share in Indo-nesia and is now the fifth largest Islamic financial institu-tion by asset size. It has also introduced an Islamic debt capital market and Islamic consumer banking offerings in Singapore, making good business traction where before there were no tangible market activities.
The drive for an optimum Islamic finance marketEven when it first started its business, CIMB Islamic has always had a firm view as to what drives Islamic finance. It had a single-minded purpose of pursuing the establish-ment of an optimum Islamic finance market that is a part of the broader mainstream financial market dominated by conventional finance in today’s world. As a result of this, CIMB Islamic avoided being caught and dragged by the incessant and unending debate of what is permis-sible and what is not permissible in the market. Instead, it put a lot of focus on research and development and most importantly, on implementation of the business.
CIMB Islamic strives to be innovative and introduces new products to the market even when the regulatory framework is not ready. It is dedicated to working di-rectly with the rel¬evant regulatory authorities to come up with the desired and needed regulatory frame¬work to transact islamically. This level of commitment sets it apart from many other players. For example, CIMB Islamic worked together with the Securities Commis-sion of Malaysia to come up with new Malaysian Islamic
securities guidelines that facilitated the issuance of many worlds’ firsts, such as the sukuk al istisn’a and musharaka asset-backed securities.
CIMB Islamic also plays a crucial role in championing the development of the Islamic capital market outside Ma-laysia. For instance, it worked with the Indonesian gov-ernment on their sukuk Law to help push the develop-ment of the sukuk market in Indonesia. It has also been actively involved in assisting various other governments and government entities that are committed to estab-lishing an Islamic finance industry framework for their respective domestic capital markets, such as Thailand, Singapore, South Korea, Hong Kong, Nigeria and Japan.
To ensure that CIMB Islamic is able to deliver Islamic finance effectively and efficiently, it made sure that it firmly understands what Islamic commerce and finance is all about. In its research, CIMB Islamic acknowledged that Islamic commerce and finance is a comprehensive financial system that adheres to Islamic principles, which was originally established as an unregulated market in one form or another during the Umayyad (661-750AD) and Abbasid empires (750-1258 AD). It realised that the system’s continued vibrancy and significance as the mainstream financial platform under various Islamic em-pires in the west such as Andalusia (until 1492) and the Ottoman Empire (until 1918) had greatly influenced how the rest of Europe managed their finances at that time, making it easy for Islamic finance to be reintro-duced in the modern age. CIMB Islamic also recognised that the Islamic system was the foundation of the finan-cial market in major human civilisations including in its own backyard in Southeast Asia, such as the Sultanate of Malacca (until 1511). It is proud that its consumer base in ASEAN has been deeply connected to Islamic com-merce and finance throughout the centuries.
Taking cognisance of this deep history, CIMB Islamic pur-sued modern Islamic finance with great conviction and confidence in its viability and robustness. When it joined the industry in 2002, CIMB Islamic knew that it could tap into a heritage that was more than 1,400-years-old. Many products that were originally adopted and adapt-ed from pre-Islamic civilisations such as the mudharaba, was developed during the Mesopotamian era under the Babylonian/Akkadian/Assyrian empires (circa 2900 BC). Unearthing the practices of classical civilizations and dis-seminating these findings to the general public is difficult, and as a result, CIMB Islamic knew that there would be a lot of misperceptions in the world about Islamic finance.
In order to be able to manage the misperceptions, CIMB Islamic took a strategic view that the easiest way to maintain the right perspective and not to be lost in the quagmire of misinformation was to simply go back to basics – (1) understand why a financial institution un-dertakes Islamic finance; (2) understand why customers demand it and (3) understand why governments and regulators want to develop and facilitate it. Upon enter-ing the industry, CIMB Islamic identified its stakeholders’ expectations as illustrated in Exhibit 1.
Stakeholders’ expectations of Islamic finance are fairly similar to that found under conventional finance. The major difference with conventional finance is that there
part_01.indd 32 28/03/2012 21:41:29
CIMB Islamic: A pioneer and trailblazer in Islamic finance 33
Exhibit 1: Stakeholders’ expectation in Islamic Finance
of their choice
No fraud and misrepresenta-
Protect Public Interest, nation
Proper wealth distribution
Serious and com-mited employer in doing the business
is a codified requirement on social responsibilities under Islamic finance and this has to be equally balanced with achieving maximum profitability. CIMB Islamic endeav-oured to fulfill various stakeholders’ expectations and set out to provide optimum intermediation between parties in all types of Shari’a compliant financial activities. Services and transactions had to be done in a manner that meets the maqasid al Shari’a of each activity, which is simply means providing benefits to all mankind and protecting them from harm.
Ground-breaking worksCIMB Islamic now intermediates across all customer seg-ments in over 12 countries and has the most number of Islamic banking and finance products and services that
meet practically all known financial needs of its customers.
It provides financial solutions in investment banking, consumer banking, asset management, takaful and pri-vate banking, catering to all consumers from individuals, small and medium enterprises, corporates, to govern-ments and government bodies, irrespective of whether they are Muslim or non-Muslim. Some of the products available at CIMB Islamic are illustrated in Exhibit 2.
CIMB Islamic started out in Islamic investment banking and naturally its successes in this market segment are the most illustrious in all of its activities. The ground-breaking impact that CIMB Islamic has made in the Is-lamic capital market can also be seen in every other activity that it undertook over the last nine years. The
Islamic Short Term Money Market Deposit – STMMD-i Special Investment Account – SIA
Commodity Murabaha Deposit CMD-i
Negotiable Islamic Debt Certificate (NIDC)
USD Wadiah Deposit
USD Wakalah Deposit
Islamic All-Stars Global
Greater China and Commodities Income Protected Plus-i
168 Asian Infrastructure Income Protected PLUS-i
Islamic Foreign Exchange
Islamic FX Forwards
Islamic FX Options
Islamic FX Structure Forward
Islamic Profit Rate Swap (IPRS)
Islamic Cross Currency Profit Rate Swap
Islamic Commodity Hedging
NEGOTIABLE INSTRUMENT OF DEPOSIT
Bullish Chinese Yuan Linked NID-i
3-Months Bullish Ringgit NID-i
Dynamic Market Rider NID-I
Islamic Best of Commodities NID-I
Best of Asian Giants Access NID-I
Islamic Market Select NID-I
Flexi Select NID-i
Callable Islamic Range Accrual NID-i
Asia and Commodities Catch Up-i
Islamic All Stars Global Callable Islamic Protected Profit NID-i
Exhibit 2: Islamic Finance Products Available At CIMB Islamic
part_01.indd 33 28/03/2012 21:41:29
34 Global Islamic Finance Report (GIFR 2012)
ISLAMIC RETAIL FINANCING
Business Premises Financing-i
Variable Home Financing-i
Malaysian My 2nd Home Financing
DEBT CAPITAL MARKET
Islamic MTN Islamic CP Plain Vanilla Sukuk & Trust Certificate
Sub Sukuk Exchangeable Trust Certificate
Islamic ABS & Islamic MBS
CORPORATE TRUSTGEO FOCUS: ASEAN
Islamic Collective Investment Schemes
Islamic Private Debt Securities
Geo Focus: Malaysia
Wasiat writing services
Wasiat Dalam Talian
Estate Administration Trust
Hibah Harta Trust
CUSTODY SERVICESGEO FOCUS: ASEAN
Safekeeping of securities
Clearing and Settlement Services
Foreign Exchange & Remittance Services
CORPORATE AGENCYGEO FOCUS: ASEAN
Post Listing Sponsor
Fund Accounting Services
Geo Focus: ASEAN
Maintenance of Multi Currency Accounting Records
Calculation of Net Assets Value (NAV)
Preparation of Portfolio Valuation Reports
Calculation of Capital Call and Distribution
ISLAMIC BUSINESS FINANCING
Machinery, Equipment and Plant Financing (MEPF-i)
Revolving Credit (RC-i)
Capital Expenditure (CAPEX) Financing
SME Merchant Plus-i
PETROPACK-I Financing package
SAVINGS AND CURRENT ACCOUNTS
Wadiah Current (Business Banking)
Wadiah Children Savings
Fixed Return “Why Wait Account” General Investment Account Max InvestSave PSSIA-i
part_01.indd 34 28/03/2012 21:41:29
CIMB Islamic: A pioneer and trailblazer in Islamic finance 35
Geo Focus: Malaysia
Hasrat Eramas (AUM* RM60 mil) Focus on mid to late-stage significant minority investment
CIMB Private Equity I (AUM RM75 mil) Invest in Shari’a-compliant public and private companies in Malaysia & other ASEAN countries.
CIMB Mezzanine I (AUM RM66 mil)Invest in Shari’a-compliant companies which aim to get listed on Bursa Malaysia or other ASEAN bourses and are within 12 months from their intended public listing
CIMB National Equity Fund (AUM RM125 mil) Focus on mid to late-stage significant minority investment
ASSET TYPE: Real Estate
CIMB Real Estate Fund 2 Shari’a (CMREF 2 Shari’a) (AUM RM800 mil)
Geo Focus: ASEAN
Commerce Technology Venture (AUM RM100 mil)Invest in technology-related companies
Commerce Agro Ventures Fund (AUM RM150 mil)Invest in agricultural companies
Commerce-Khazanah Agro Teroka Fund (AUM RM120 mil)Invest in agricultural companies
Commerce-KPF Fund (AUM RM 100 mil)Invest in agricultural, ICT, foods, healthcare
ASSET TYPE: Infrastructure
Islamic Infrastructure Fund (IIF) (AUM RM1.6 bil)
ASSET TYPE: PRIVATE EQUITY & VENTURE CAPITAL
Documentary Credit (DC-i)
Accepted Bills (AB-i)
Inward Documentary Credit
Shipping Guarantee (SG-i)
Inward Bills Collection (iBC-i)
Outward Bills for Collections
Trust Receipt (TR-i)
Bank Guarantee (BG-i)
Foreign Bills of Exchange
Direct Marketing / Telemarketing (DMTM)
EasyLife Takaful Health Plan
Auto Personal Accident
Mortgage Reducing Term Takaful (MRTT)
Easylife Takaful Series
House owners and householders
Comprehensive Personal Accident
Hire Purchase (HPRTT)
Islamic MasterCard Islamic Co-Brand MasterCard (Petronas) CIMB Islamic Debit MasterCard
CORPORATE FINANCING & TRADE FINANCE
AB-i Export/ Sale
AB-i Import/ Purchase
Domestic Bills Purchased/ Discounted (DBP) (DC/ Non DC)
DBP-i/ DBD-i (DC/ Non DC)
DC-i Sight & Usance
ECR-i (Pre & Post)
Foreign Currency Trade Line-i (FCTL)
Term Financing (TF-i)
Standby Documentary Credit (SBDC-i)
part_01.indd 35 28/03/2012 21:41:29
36 Global Islamic Finance Report (GIFR 2012)
ASSET TYPE: EQUITY
Geo Focus: Malaysia
CIMB Islamic Equity Fund
CIMB Islamic Equity Aggressive Fund
CIMB Islamic Small Cap Fund
CIMB Islamic DALI Equity Theme Fund
CIMB Islamic DALI Equity Growth Fund
Geo Focus: Asia Pacific
CIMB Islamic Asia Pacific Equity Fund
CIMB Islamic DALI Equity Fund
Geo Focus: Greater China
CIMB Islamic Greater China Equity Fund
Geo Focus: Global
CIMB Islamic Global Equity Fund
CIMB Islamic Global Commodities Equity Fund
CIMB Islamic Global Emerging Markets Equity Fund
ASSET TYPE: MIXED ASSET/BALANCED
Geo Focus: Malaysia
CIMB Islamic Balanced Growth Fund
Geo Focus: Asia Pacific
CIMB Islamic Balanced Fund
Geo Focus: Global
CIMB Islamic Kausar Lifecycle 2017
CIMB Islamic Kausar Lifecycle 2022
CIMB Islamic Kausar Lifecycle 2027
ASSET TYPE: MONEY MARKET
Geo Focus: Malaysia
CIMB Islamic Deposit Fund
CIMB Islamic Money Market Fund
ASSET TYPE: SUKUK
Geo Focus: Malaysia
CIMB Islamic Sukuk Fund
CIMB Islamic Enhanced Sukuk Fund
preceding paragraphs highlight some of the more nota-ble activities undertaken by CIMB Islamic that has made significant impact to Islamic finance.
Islamic debt capital market
Its dominance in the Islamic debt capital markets or the sukuk market is evidenced by its top market posi-tion in both the local and global sukuk market league tables. The sukuk deals structured and completed by CIMB Islamic clearly show its capability in develop-ing and structuring innovative solutions. After con-tributing to the establishment of the Islamic securi-ties guidelines, CIMB Islamic brought to the market pioneering sukuk deals which drew a great response from the market. Some of the notable deals are high-lighted in Exhibit 3.
Over the years, CIMB Islamic has also been success-ful in promoting the growth of the sukuk market across the globe by attracting interest from leading foreign companies to issue sukuk in Malaysia, namely Japanese-based Toyota Financial Services Corpora-tion (a subsidiary of Toyota Motor Corporation) via Toyota Capital Malaysia Sdn Bhd and Aeon Credit Service Co. Ltd. via Aeon Credit Service (M) Berhad, UK-based Tesco plc via Tesco Stores (Malaysia) Sdn Bhd, Trans Thai-Malaysia (Thailand) Limited (a joint venture between Malaysia’s Petroliam Nasional Ber-had and Thailand’s PTT Public Company Ltd.) and the Islamic Development Bank, International Finance Corporation and International Bank for Reconstruc-
tion and Development.
Islamic Equity Capital Market
CIMB Islamic has also been prolific in promoting the Islamic equity capital market. In addition to assisting in the establishment of Islamic Initial Public Offering (IPO) guidelines, CIMB Islamic, through its Islamic window operations under CIMB Investment Bank Berhad, has been involved in over 25 Islamic IPOs in Malaysia since 2004. This has increased the number of Shari’a compli-ant listed companies available for potential investment. The knock-on effect was a further enhancement of the Islamic asset management and Islamic stockbroking ac-tivities in Malaysia, providing investors with greater di-versification opportunities.
Recent landmark Islamic IPOs undertaken are highlight-ed in Exhibit 4:
Islamic asset management
CIMB Islamic is one of the largest multi-boutique Islamic investment specialists set up in ASEAN, comprising of eight boutique partners that cover the entire spectrum of Islamic asset management services. CIMB Islamic, to-gether with its partners, provides a variety of investment capabilities across ASEAN as well as international mar-kets, from global equities, global sukuk and money mar-ket funds to alternative asset classes such as private eq-uity, venture capital, real estate funds and global Shari’a advisory services.
part_01.indd 36 28/03/2012 21:41:29
CIMB Islamic: A pioneer and trailblazer in Islamic finance 37
NOTABLE ISLAMIC EQUITY CAPITAL MARKET DEALS
In June 2011, Bumi Armada Berhad, a Malaysia-based international offshore service provider to the oil and gas industry in Malaysia and over 10 other countries in Asia, Africa and Latin America, launched its Shari’a compliant IPO. The amount raised was approximately USD 887 million. CIMB acted as joint principal adviser, joint global co-ordinator, joint bookrunner and joint managing underwriter.
In June 2011, the biggest sugar refiner in Malaysia, a unit of state-owned Felda, MSM Malaysia Holdings Berhad, launched its Shari’a compliant IPO. The amount raised was approximately USD 268 million. CIMB acted as the principal advisor, sole global co-ordinator, joint bookrunner, joint managing underwriter and joint underwriter.
In May 2011, UOA Development Bhd., A Malaysian leading property developer with comprehensive integrated in-house development and con-structions departments that allows development to be executed within shorter development cycle, launched its Shari’a compliant IPO. The amount raised was approximately USD 349 million. CIMB acted as the principal advisor, sole bookrunner, managing underwriter and joint underwriter.
In November 2010, Petronas Chemical Group Berhad, a unit of Malaysian state oil giant PETRONAS, launched its Shari’a compliant IPO. The USD 4 billion raised will be used to finance future expansion plans including acquisitions. This marks the largest IPO transactions in Malaysia, CIMB acted as global coordinator and bookrunner for this IPO
In May 2010, Malaysia’s largest nursing operator, Masterskill Education Group Berhad, launched a Shari’a compliant IPO with a value of USD 119.22 million. CIMB acted as the principal adviser, retail underwriter, joint global coordinator and joint bookrunner.
In February 2010, JCY Intl., a Malaysian manufacturer of hard drive components, launched its Shari’a compliant IPO, CIMB acted as joint under-writer and bookrunner for this IPO with a value of USD 103.48 million.
Exhibit 4: Notable equity capital market deals
NOTABLE ISLAMIC DEBT CAPITAL MARKETS OR SUKUK DEALS
Projek Lebuhraya Usahasama Berhad’s Islamic medium term notes issuance programme of up to RM 11.00 billion in nominal value, irrevocably and unconditionally guaranteed by the Government of Malaysia and Islamic medium term notes issuance programme of up to RM 23.35 billion in nominal value based on the Islamic principle of musharakah– largest corporate sukuk ever issued in the world
Khazanah Nasional Berhad’s (via Danga Capital Berhad) CNY 300 million trust certificates due 2014 – world’s first Chinese Yuan (CNY) sukuk issuance and the first CNY offering by an ASEAN quasi-sovereign issuer
Government of Malaysia’s (via Wakala Global Sukuk Berhad) USD 1.2 billion sukuk wakala due 2016 and USD 800.0 million sukuk wakala due 2021 – largest dual-tranche global sovereign USD sukuk ever issued
Government of Malaysia’s (via 1Malaysia Sukuk Global Berhad) USD 1.25 billion trust certificates due 2015 – largest global sovereign sukuk issu-ance when issued
Khazanah Nasional Berhad’s (via Danga Capital Berhad) SGD 600 million trust certificates due 2015 and SGD 900 million trust certificates due 2020 – largest sukuk issuance in Singapore, largest SGD issuance by a foreign issuer in Singapore, longest-tenured SGD sukuk (10-years)
Trans Thai-Malaysia (Thailand) Ltd’s (via TTM Sukuk Berhad) RM 600million sukuk – 1st sukuk issuance by a Thai entity, 1st issuance by a Thai entity out of Malaysia’s Islamic capital markets, 1st cross-border project finance local currency sukuk in Asia, longest-tenured sukuk in Malaysia by a foreign issuer (15-years)
Petroliam Nasional Berhad’s (via PETRONAS Capital Ltd. And PETRONAS Global Sukuk Ltd.) USD 4.5 billion trust certificate & guaranteed notes – 1st foreign-currency denominated sukuk under MIFC, 1st Emas dollar bonds & sukuk, 1st listing of bonds & sukuk on Bursa Malaysia under an Exempt Regime & largest USD issuance by an Asian (ex-Japan) corporate in 2009
City Developments Ltd.’s (Via Citydev Nahdah Pte. Ltd.) SGD 1.0 billion multi-urrency Islamic Trust Certificate Programme-Singapore’s inaugural Islamic trust certificate programme for a corporate & 1st corporate ijara trust certificate issuance
Khazanah Nasional Berhad USD 550 million Exchangeable. It was the first sukuk deal to use underlying assets in China i.e. the shares of a Chi-nese company listed on the HK Exchange
Exhibit 3: Notable Islamic debt capital markets or sukuk deals
part_01.indd 37 28/03/2012 21:41:29
38 Global Islamic Finance Report (GIFR 2012)
Additionally, CIMB Islamic has more than 22 institutional distribution partners across Malaysia, Indonesia and the Middle East. It also has more than RM10 billion of Is-lamic Assets under Management (AUM) with over 35 investment products registered in Malaysia, Indonesia, Singapore and recently in Ireland.
CIMB Islamic is continuously introducing innovative Is-lamic fund products that not only push the boundaries in Islamic finance, but also help to bring better value to investors, clients and society at large. In tandem with CIMB Group’s vision to be the leading ASEAN univer-sal banking franchise, CIMB Islamic is also aggressively maintaining its pioneering niche of serving the ASEAN region.
Some of the more notable initiatives by CIMB Islamic in Islamic asset management are highlighted in Exhibit 5.
Islamic consumer banking
CIMB Islamic went into Islamic consumer banking with rigor in 2005. Starting with only six basic deposits and financing products, CIMB Islamic now boasts over 100 products that cater to different customer segments, from the mass market to high net worth individuals, and from small enterprises to medium-sized corporates. Collectively, the Islamic consumer banking business of CIMB serves about 10 million customers regionally through the same infrastructure and resources available under CIMB Group. To date, CIMB Islamic has approxi-mately 1,100 branches across ASEAN as well as offices in major global financial centers such as London, New York and Hong Kong.
Its ambition to expand its business into Islamic consum-er banking was penned down in its 2015 Management Roadmap. However, CIMB Islamic did not want to en-ter immediately because there was a critical element missing in the whole industry: the ability to manage the Islamic asset and liability mismatch on the balance sheet in a Shari’a compliant manner. Aware of the need to meet stakeholders’ expectation of sustainability, stability and viability in embarking into any new business, CIMB Islamic focused on developing innovative Islamic deriva-
tives products and a formal Islamic derivatives market so as to allow it to manage risk effectively when it grows its balance sheet.
CIMB Islamic spent four years developing an Islamic Profit Rate Swap (IPRS), which is the Shari’a alter-native to the conventional Interest Rate Swap (IRS) product, as well as co-drafted the Islamic Derivatives Masters Agreement (IDMA) together with Interna-tional Swaps and Derivatives Association (ISDA). The pioneering standardised master agreement developed for the IPRS was later used by ISDA as the base documentation for the development of a global master Islamic derivative agreement, under the initiative of the International Islamic Financial Market (IIFM). With the capacity to effectively manage risk in a Shari’a compliant manner, CIMB Islamic blazed into the Islamic consumer banking space to become the second largest Islamic bank in terms of assets and deposits in ASEAN in less than five years.
As a late starter in the market, CIMB Islamic also had to make sure that it made a mark when it entered the market. As such, CIMB Islamic went on a differenti-ated products and services approach. CIMB Islamic’s WhyWait FRIA-i was one such example. It was the first Islamic retail deposit product that provided fixed profit rate and protected capital. Prior to “WhyWait FRIA-i”, such deposit products were exclusively en-joyed by corporate and ultra-high net worth indi-viduals as commodity murabaha, the principle under which the product is based, usually works on large placement of funds instead of small, retail-sized place-ments. This product has single-handedly changed the competitive landscape between conventional riba-based banking and Islamic banking in the market where CIMB Islamic introduced this product.
The secret behind the successCIMB Islamic’s pioneering efforts are a result of its complete adherence to the basic mechanisms of
NOTABLE ISLAMIC ASSET MANAGEMENT DEALS
2002 –Frst Islamic private equity fund launched in Asia Pacific – CIMB Muamalat 1 LP
2006 – First Asia Pacific ex-Japan equity fund launched in Malaysia – CIMB Islamic Asia Pacific ex-Japan Fund
2009 – First greater China equity fund launched in the World – CIMB Islamic Greater Equity Fund
2009 – First Islamic Infrastructure fund launched in Asia Pacific – CapAsia Islamic Infrastructure Fund LP. The first Islamic venture by the Asian Development Bank and the first collaboration between Asian Development Banks and the Islamic Development Bank
2010 – Converted venture capital funds, the first in the World – Commerce-KPF Venture Fund and Commerce Technology Venture Fund
2010 – First global commodities fund launched in the World – CIMB Islamic Global Commodities Fund
2011 – First UCITS Shari’a compliant Fund in Dublin, Ireland making it the first global Malaysian based Islamic asset management company to set up and create an Undertaking for Collective Investment in Transferable Securities (UCITS) Shari’a compliant Fund called CPIAM (Ireland) PLC
Exhibit 5: Notable Islamic Asset Management Deals
part_01.indd 38 28/03/2012 21:41:30
CIMB Islamic: A pioneer and trailblazer in Islamic finance 39
Rules to be observed
While Shari’a law prohibits interest (or Riba) this does not mean that capital is costless in an Islamic system. Islam recog-nizes capital as a factor of production but it does not allow the factor to make a prior or predetermined claim on the pro-ductive surplus in the form of interest. Any predetermined payment over and above the amount of principal is prohibited.
The impure activities prohibited are very limited such as:• financial services based on riba (interest);• entertainment activities that are non-permissible according to Shari’a;• manufacture or sale of non halal products (e.g. pork, tobacco-based, alcoholic beverages)
Observing that every contract possesses all its essential elements and that every essential element meets the necessary conditions.
Cannot gamble but no prohibition against speculation
The activities done must be of value to the parties
Avoidance of prohibitions: • Riba• Gharar• Impure goods• Gambling• No value/use
Equity Cap Market
Debt Cap Market
Exhibit 6: Islamic finance is pure commercial activities under Shari’a
Exhibit 7: Example of the exhaustive prohibitions under Shari’a principle of muamalat
Shari’a, which is the very heart of Islamic finance. CIMB Islamic holds tightly to the body of laws found under the Quran and the legitimate Hadith to drive its business. It recognised very early on that the ac-tual body of laws that governs Islamic finance under Shari’a falls under the ambit of fiqh, particularly mua-malat, under which the general principles of human relationships and conduct in economics, social scienc-es, politics, etc are found. Exhibit 6 below illustrates how CIMB Islamic sees Islamic finance and Islamic banking respectively as it exists under the Shari’a uni-verse, allowing it to serve the society in the markets it operates effectively and efficiently.
In coming up with various innovative products and services across its core markets, CIMB Islamic follows closely the basic underlying principle of muamalat, which provides that everything is allowed unless there is a clear and direct expressed provision in the Quran and legitimate Hadith that disallows it.
CIMB Islamic understands that the Shari’a is the easi-est part of Islamic finance as it is very rich and facilita-tive, operating across all types of legal systems, be it the common law, the civil code, as well as across all types of economics systems, be it capitalism, social-
ism, etc. Shari’a is not all about the few and exhaus-tive list of identified limitations (Exhibit 7) but it is about infinite possibilities. The onus in the delibera-tion of coming up with new products and services is to prove something is disallowed instead of to prove something is allowed.
With no legal precedent under Shari’a, CIMB Islamic is able to push the envelope to meet consumers’ needs in accordance with Maqasid al Shari’a. With no retroactive application of Shari’a, there is no risk of financial loss when opinions on Shari’a are revised or enhanced. This certainty of doing business drives CIMB Islamic to be innovative. Most importantly, CIMB Islamic knows that Shari’a does not make any Islamic financial product rigid and sanctimonious. Products can be innovated upon (i.e. innovations are not blasphemous) as the purview of Islamic finance is pure commercial transactions. CIMB Islamic also takes comfort from the fact that Shari’a applies on a jurisdictional basis subject to local laws of the land, customs, convention and circumstances that exist at any point of time, thus allowing it to develop prod-ucts and services that are country-specific rather than trying to push a product developed in one country into another country.
part_01.indd 39 28/03/2012 21:41:30
40 Global Islamic Finance Report (GIFR 2012)
ConclusionCIMB Islamic has come a long way since it started as a boutique Islamic investment franchise nine years ago. Its pioneering and trailblazing exploits over the years have not caused it to forget to give back to the soci-ety in the markets that it serves. It has rebuilt houses and whole villages in earthquake-torn Padang, Indo-nesia. It has contributed to the environment through its “EcoSave Account-i” where it gives a sum of mon-ey to environment protection and rehabilitation for every dollar it receives in deposit in Malaysia. CIMB Islamic, together with CIMB Foundation’s Community Link initiatives, which were conceived to forge closer ties with the communities served by CIMB Group via its large network of CIMB Bank and CIMB Islamic branches in the region, has contributed significantly to all walks of life. There have been approximately 700 Community Link projects across ASEAN with to-tal funding of RM29.3 million since Community Link’s inception. Social responsibility and philanthropy is a part of the CIMB Islamic culture.
fa1293_AIF AD_IslamicFinanceMagazine_ol.pdf 2/17/12 3:53:41 PM
part_01.indd 40 28/03/2012 21:41:32