Ongoing merger talks on Islamic leasing and challenges

When firms start merging, it is a good sign signaling the growth of the industries involved. The merger talk between Waha Capital and Gulf Capital held for several months demonstrates an emerging trend in Islamic leasing. Gulf Capital which is based in Abu Dhabi manages over US$4 billion in Islamic leasing assets while focusing on a variety of different investments including real estate.

Both companies are optimistic although neither will report any deals being made yet. Waha Capital has a good resume of investments in Islamic leasing whereby one of their big portfolios is aviation leasing company AerCap Holdings. Besides fostering Islamic leasing, the merger plans can be seen as a by-product of other acquisitions where government spending and lower oil prices are the drivers.

Inroads into Islamic leasing in Indonesia

An Indonesia-based fintech company is also making inroads into Islamic leasing. Alami is the central hub for Islamic leasing and financing that obtained pre-seed funding recently.One of its goals is to finance small businesses and it is currently working with Shariah banks and other partners on financing projects and Islamic leasing.

Further expansions to make a mark in the Shariah compliant financing
sector depend solely on the successful registration of Alami which is still in
negotiations with Indonesia’s Financial Services Authority.

Islamic leasing challenges in Jordan
Fitch Ratings recently reported that banks in Jordan operate in an environment that restricts growth although the banks are stable. The report was critical of the risk in the country where restriction of growth affects the efficiency of banks which in turn challenges the growth of Islamic leasing and Shariah compliant financial products.

The report was also critical of Jordanian banks’ sovereignty where many financial institutions in the country only deal with domestic customers. That means the whole system is lacking financial flexibility, one of the components critical for an excellent international Islamic leasing platform.

Abu Dhabi has just launched a startup capital fund worth AED535 million
(US$145.63 million) that will include Islamic leasing. It is designed to foster an entrepreneurial culture and will be called the Ghadan Ventures Fund.

The main idea is to make sure that local start-ups have a direct connection to investment money. This is another great example of how Shariah compliance and western ideals can be compatible.

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