Kuwait Finance House (KFH), one of the pioneering Islamic banks, has declared encouraging third quarter (Q3} results for this year. The bank is bullish about the market, in particular the United States, which it stresses will weather the economic storm in the aftermath of the attacks on New York and Washington, and where KFH has over US$200m of realty and leasing investments. KFH has also strongly stressed that it complies with all the directives and global norms relating to anti-money laundering measures, in the light of a witch hunt against Islamic banks in the Western media. Mushtak Parker reports.

Kuwait Finance House (KFH), one of the largest Islamic banks in the world, has strongly stressed that it does not have any suspicious accounts on its books, and has in fact co-operated closely with the Kuwait Central Bank in implementing fully its' directives on money laundering and frozen accounts, in 'the aftermath of recent events in the United States.

KFH Chairman Bader Al-Mukhaizeem in a statement stressed; "We receive instructions from the Kuwait Central Bank and we apply them carefully, we also observe the list of 27 names (and organisations) sent by the Central Bank and we emphasise that there are no accounts in these names at our bank. We are certainly aware of the sensitivity of the current issue and we react to its (the Central Bank's) requests, includ­ing those relating to accounts of charitable and humanitarian organisations, an activity deep-rooted in Kuwaiti society.

"Kuwait has progressed through, official and popular charitable establishments, known to follow strict rules of examination and investi­gation. Funds for charities are transferred through the banks in an official way and accord­ing to legal regulations and procedure in force in the country."

KFH is one of several leading Islamic banks that have in recent weeks in the aftermath of the attacks on New York and Washington, been subject to a witch hunt by certain sections of the international media through innuendo, disin­formation and effectively 'trial by media', direct­ed not only at the institutions, but also at the global Islamic banking sector per se.

We receive instructions from the Kuwait Central Bank and we apply them carefully. We also observe the list of 27 names sent by the Central Bank and we emphasise that there are no accounts in these names at our bank. We are certainly aware of the sensitivity of the, current issue and we react to its (the Central Bank's) requests

Source Kuwait Finance House. Figures Rounded Off

* 2000 Full Year Profit

** Figures In First Column for Q3, 2000 Compiled by Islamic Banker October 2001

This disinformation campaign is aimed at tar­ring Islamic financial institutions (IFIs) as vehicles for money laundering and financing extremist groups. With the result that a number of IFIs from the Gulf states and North Africa have reportedly been included on so-called 'Suspect Lists' issued by Western regulatory authorities such as the French central bank.

KFH's Bader Al-Mukhaizeem emphasised that IFIs like conventional financial institutions are similarly subject to the regulatory and superviso­ry provisions of the banking jurisdictions in which they operate or the markets in which they invest.

In Kuwait, the government has passed strict banking laws including provisions for particu­lars of customers and source of funds, precise­ly to pre-empt vague or suspect operations such as money laundering and other transactions.

KFH, he added, follows all the current banking controls, and amendments and additions to existing laws. The bank also applies international account­ing and disclosure standards, supervision rules, and transparency requirements, and its operations are subject both domestically and internationally to supervision by the competent regulatory authorities.

Bullish Assessment

The bank, in a bullish assessment, stressed that the US economy was still powerful and would be able to overcome the impact of the 'events on 11 September 2001. The US market remains an important market for KFH, which is interested in the stability of the markets and as such would not allow events to be exploited to the contrary.

Any effect on its investments in the US would be limited as the investments are focused in real estate funds and leasing portfolios. "We are Investment makers; and those who make invest­ments are interested in continued stability; and contribute to the realisation of those investments and work for their continuity," added the bank.

Chairman Bader Al-Mukhaiaeem's com­ments coincide with KFH's announcement that it had declared a net profit of KD84.4m for end Third Quarter (Q3) 2001, compared with KD114.92m for the whole year 2000. The net profits of the shareholders totalled KD3.6m, an increase of 4.8 per cent (or KD1.6m) on the profits for the corresponding period last year.

Similarly, balance sheet assets, increased by 12 per cent or KD241m from the beginning of the year to KD2,267m at end Q3 2001; with the volume of deposits respectively rising by 11 percent or KD 170m to KD 1,717m in the same period. The profit earnings per share for Q3 2001 was 50fils compared with 54 fils for the corre­sponding period in 2000.

KFH is officially in a boom period with the bank responsible for a third of all new services and products launched by the Kuwaiti banking sector since the beginning of 2001. It now con­siders itself as a "global bank" offering diversi­fied products and services - for instance it has a construction fund; distributes short-term prof­its; and is in the process of launching a US$2bn money market/securities fund with BNP Paribas to initiate an Islamic financial market.

KFH, according to Mr. Al-Mukhaizeem, has pio­neered WAP services, mobile financing, internet banking, selling real estate through the Internet by using Tanweel WAP-SMS KFH. Online, in Kuwait, KFH currently has 26 branches, of which 17 has specially-designated counters for Ladies-only banking; 66 ATM machines; and 14 drive through machines. It issues Shariah-complaint credit cards under the VISA and Mastercard labels and claims to have 30 per cent market share of the Kuwaiti credit card market,

At home, the bank is focusing on consumer financing for cars, furniture, construction materi­als and so on, in an increasingly competitive mar­ket as demand for Islamic financing options grows. KFH says that it launched the 'Financing Guarantee' facility for the purchase of new cars, which adds two years guarantee to the liability of the agent. During the year, the bank, also entered a major new investment project, acquiring a stake in Al-Salam Hospital, in this way, added Chairman Bader Al-Mukhaizeem, KFH is contributing through the private sector, to the provision of pri­vate medical services; and in line with government policy in helping to convert family businesses into shareholding companies.

KFH confirmed that it has investments in the US, Europe, and in several Middle East and Gulf countries which are thriving and "realising growth rates as expected." Its international cor­respondent and other relations with global banking majors in the US and Europe, reflected its high reputation in the market.

However, Mr Al-Mukhaizeem did not mention the status of the KFH investment in Bahrain Islamic Bank (BIB), which has been subject to a fierce boardroom struggle over the last few months. KFH together with the Islamic Development Bank (IDB) and Dubai Islamic Bank (IDB), are founding members of BIB, which has yet to hold its AGM this year.

Source Kuwait Finance House, October 2001

Certificates Delay

KFH also signed an MOU on 17 May with BNP Paribas to launch a US$2bn. Islamic money mar­ket fund, which will invest in leasing assets on the books of BNP Paribas, and issue liquid tradable certificates, thereby offering a short-term investment opportunity of prime quality. The aim was to establish a special purpose vehicle (SPV) by last June; transfer the US$2bn leasing assets to the SPV after KFH had screened them to sat­isfy their own due diligence and Shariah com­pliance. Participation certificates were then tar­geted to have been introduced in September.

Unfortunately, Mr Al-Mukhaizeem did not shed any light on the progress of the Islamic money mar­ket fund, especially whether the Islamic certifi­cates have been launched or not. Perhaps events in the US and its fall-out have inevitably delayed the launch of these certificates, given also that KFH's partner is BNP Paribas, one of the top banks in France. Ironically, it was the French central bank that reportedly put KFH with other Islamic banks on its so-called 'Suspect List'. Bankers, however, stress that the money market fund is very much alive, and should be launched in due course.

movers & shakers

Zainol New Tabung Haji Chairman

Tan Sri Zainol Mahmood, the former Executive Chairman of POS Malaysia, has been re-appointed as Chairman of Lembaga Tabung Haji (Pilgrims Management Fund of Malaysia) effective 1 August 2001. Tan Sri Zainol replaces Tan Sri Dr Abdul Hamid Othman, who resigned in July after only six months in the post. Tan Sri Zainol previously served as Chairman of Tabung Haji from August 2000 till February 2001. Local Tabung Haji observers have expressed concern over the lack of stability in the last year at the top of Malaysia's largest Islamic savings institution. Tan Sri Zainol's two year term should help allay these concerns and steer the conservative Tabung Haji to much-needed institutional and structural reforms, which would bring it on par to financial market practices. Tabung Haji was also hit by a RM7.725m fraud in July (see page9) and some of its Investments have seen large enough losses, which has prompted the Mahathir Government to take action. Internal controls and procedures on deposit accounts have been tightened and a new nine-member Investment Panel has been appointed, headed by Dato' Syed Anwar Jamullail, who is also the Managing Director of Amanah Capital Partners, and effective from 1 September 2001.

More Appointments at Brunei Islamic

Islamic Bank of Brunei (IBB), following the appointment in August of YD Pehin Dato AH Abu Bakar bin AH Apong as its new Chairman, has appointed Haji Mohd Rosilan bin Haji Mohd Daut as its new Managing Director effective 18 September, 2001. Haji Rosilan is a senior official from the Ministry of Finance and will have the immediate task of steering IBB in becoming a regional force in Islamic banking, especially given Brunei's stated ambition of establishing an international off-shore" banking centre in which Islamic hank­ing and insurance will have a pivotal role.

Ismail Joins Stephenson Harwood

Tavek Ismail has been appointed as a Solicitor for the London-based legal firm Stephenson Harwood. Mr Ismail worked in the legal and documentation department of Al-Rajhi Investment Corporation(ARIC),the London Representative Office of Al-Rajhi Banking and Investment Corporation (ARABIC) Saudi Arabia, for several years.