Hospitality industry focuses on Islamic leasing

The First Group in Dubai, a real estate investor and developer as well as an
investment company that specializes in hotels, plans to issue US$135 million worth of Islamic leasing bonds and has appointed investment bank Shuaa
Capital to look after the details.

What makes this announcement especially interesting is the timing where the announcement was made just aft er the holy month of Ramadan. Usually, there is not much business pertaining to Islamic leasing during such time. So far, the First Group has completed 11 different projects in the UAE and another seven new buildings under construction.

As of the 12th June 2019, parts of the UK’s financial sector were not ready and had no plans if there was to be a no-Brexit deal in October. In fact, industry insiders are getting worried that the industry will be split up on the 31st October deadline.

While the European Commission has indicated preparations for some insurance and payment companies, big players like Al Rayan Bank are left wondering how they will gain their financial footing in the event of a breakup. However, there are some indications that Islamic leasing transactions and deals through theIslamic financial institutions will be safe.

For example, Al Rayan Bank is fully regulated under the UK banking system which means that all clients including those dealing in Islamic leasing are protected by the Financial Services Compensation Scheme that protects deposits.

Twelve Turkish banks specializing in Islamic leasing and other Shariah
compliant products are planning to lend approximately US$431 billion to companies in an effort to boost the sagging economy. The move represents another effort to bring back the healthy economy. It is interesting to note how this move also includes Islamic leasing products by proxy.

A currency crisis last year drove the Turkish lira down by 30%. The move by these Turkish banks specializing in Islamic leasing illustrates the Shariah compliant focus, namely that financial transactions need to have a social
conscience too.

Qatari banks have also shifted their focus toward Islamic leasing. KPMG reported that the banks will continue to lend money through products like Shariah compliant financing; however, they are still taking a measured and
cautious approach. These Shariah compliant banks will focus on contracting state sectors and the small to medium businesses there while moving forward with the Second Strategic Plan for the Financial Sector 2017–22. The idea here is to improve the effectiveness of the financial sector including the issuance of Islamic leasing products.

The Qatar Financial Market Authority’s Second Strategic Plan for the Financial Sector 2017–22, issued in 2017, is a set of corporate codes that included Islamic leasing with a bigger focus on internal controls which is a central part of the plan.

Shoeb M Sharieff is the president and CEO of Ijara Community Development Corp. He can be contacted at shoeb@ijaracdc.com.