Islamic banking in Kazakhstan Al Hilal

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Islamic banking in Kazakhstan Al Hilals
story
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The first Islamic Bank in Kazakhstan and
its relations with domestic regulative bodies
lessons and recommendations By Prasad Adraham
Chairman Al Hilal Bank Kazakhstan
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Quick Facts. Introduction

• Al Hilal Islamic Bank is a 100 subsidiary of Al
  Hilal Bank, UAE
• First Islamic bank in Kazakhstan and CIS
  countries
• Raise the profile of Islamic banking in the CIS
  countries whilst contributing to Kazakhstans
  national growth and prosperity
• Provide the right Islamic finance solutions to
  meet Customers needs
• Shariah Board Shariah Coordinator
• Almaty Astana More Planned for 2010.

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Quick facts. What has been done
Intergovernmental agreement approved by the
Governments of UAE and Kazakhstan
First transaction approved on amount of 8mln.
Presidents Nazarbayev visit to UAE
Introduction of amendments to Banking law,
related to Islamic banking activity
Intergovernmental working group started working
on agreement
Official registration of legal entity
May 2009
June 2009
January 2010
March 2010
April 2010
February 2009
August 2009
End of 2009
Al hilal, Abu Dhabi decides to enter Kazakhstan
market
First Islamic banking license obtained on 17th of
March
Al hilal, Abu Dhabi started working with Legal
advisors on basic documents and agreements
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The target investment range is between
750 and
Product philosophy

• Strict Adherence to Sharia Requirements
• To start with Basic products the must haves
• To evolve into Market Differentiation
• To take important role in syndication
• To develop strong Sukuk structuring capabilities
• Customer is at the Centre of Our Product
  Development Philosophy

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Industry breakdown of Al Hilal banks portfolio
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Industry breakdown. Financing Criteria
Industry Any industry except military, tobacco, alcohol, gambling, residential construction and other non-Sharia compliant industries
Track record The business should exist at least for three years stand-alone start-up projects are not acceptable
Owner contribution The project owner contributes at least 20 of the project value in cash
Financial reporting Financial statements for the last 3 years
Investment range The target investment range is up to USD 20 mln
Investment span Up to seven years, depending on the industry and project features
Investment purpose Working capital, trade finance or capital expenditures
Financial standing Business has been profitable over the last three years
Credit history Absence of existing past-due loans
Independent assessment Feasibility study done by a reputable independent consultant .
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Products offered by Al Hilal Islamic Bank
FINANCING PRODUCTS
FINANCING PRODUCTS
Product Structure Ijarah Murabaha/LC Murabaha Commodity Murabaha Currency
Working Capital Finance ? ? KZT, USD
Asset Acquisition Finance ? ? ? KZT, USD
Asset Finance ? KZT, USD
Project Finance ? ? ? KZT, USD
Contract Finance ? ? ? KZT, USD
Pricing Tenor
Fixed Less that 3 years
Floating More that 3 years
DEPOSIT PRODUCTS
Product Structure
Current Account Qard Al Hassan
Term Deposit Mudharaba and Wakala Investment
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Islamic Products

• Ijara
• - Ownership Registration Requirements
• - Transactions Subject to lease Law
• -Ijara Mawsuffa Fi Dimma (Forward Lease)
• Murabaha
• - Promise to Purchase
• - Non Recognition of Murabaha
• - Reverse Murabaha
• - Murabaha Transaction Sequence
• Letter of Credit
• Savings Account
• FX Forward Transactions
• New Islamic Products
• Interbank Transactions

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Practical Issues

• Off Balance Sheet Booking of Wakala and Mudaraba
• VAT Issue on Wakala transactions
• Penalty Clause
• Governing Law Clause
• Interest Waiver Clause
• Mudaraba Issues
• Investment Risk Reserves
• Sukuk
• Subordinatd Financing Tier 2 Capital
• Prudential Regulations

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