Saudi Arabia and Switzerland Join Islamic Leasing Forces

SEDCO Capital,  Saudi Arabia’s financial organization, has partnered with Switzerland’s Lombard Odier. They have put together  a new environmental, social and governance-related (ESG) fund. It will affect Islamic leasing.

The new fund will be Sharia compliant. It will employ a multifactor, systematic and pragmatic approach aligning sharia compliant investments and sustainability ideas. The idea is to allow investors to put together a portfolio with a high ESG score.

This is part of a recent trend where responsible financing and Islamic financing which includes leasing are converging. The idea is to focus on how the two can improve joint methods. There are implications for ijara and selling the right to use an object for a specific time frame.

More News on Islamic Leasing

The first Multiple CBDC Bridge (mBridge) Project Report was issued at the end of September. It involved the central bank of the UAE working together with several other authorities . Those included The Hong Kong Monetary Authority, The Bank of Thailand, and a branch of the People’s Bank of China.

 The mBridge agreement that came out of the report is important. It uses central bank digital currencies for transferring funds between international banks based on block chain technology.

Bitcoin uses this technology. It has the potential to open up single digital markets for Islamic leasing and financial services products. It does this by mediating and harmonizing different sharia compliant products and regimes.

Non-Bank Islamic leasing Institutions

The mortgage and Islamic leasing industry in Saudi Arabia is active. It is set to push more money into the non-bank financial institutions( NBFI) sector in that country. This information comes from a new report by the accounting consulting firm KPMG.

Khalil Ibrahim Al Sedais, Office Managing Partner – Riyadh at KPMG in Saudi Arabia, noted that there was a growing momentum. It continued in the first half of this year and began in 2021 when consumer confidence gained momentum.

A domestic demand in housing was part of that. In fact, the mortgage industry in Saudi Arabia reports that the volumes reached an all-time high with government guarantees and low interest rates. The Islamic leasing and mortgage industry in that country is growing.

Other Measures

Other measures are being used. Areas like Fintech, cyber security and business digitizing mission planning are active.

Presently there are over 35 NBFIs in Saudi Arabia.

Al Rajhi Company for Cooperative Insurance (Al Rajhi Takaful) has just signed a deal to proceed with a  contract with the Social Development Bank. They will provide life insurance for the financial institutions’ loan portfolio department as well as for automobile insurance.

Finally, a new report laid out a path for developing  moreShariah law compliant banking and leasing  assets in Africa. The country has a quarter of the world’s Muslim population. However, Islamic banking in the area only makes up 2% of global assets. Moody’s Investor Service recently suggested a solution in a new report. The answer is investing in more sovereign sukuks.