ISLAMIC BANKS SLOWLY EMBRACE GREEN FINANCE 3 December

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1. BUSINESS SATURDAY , DECEMBER 3, 2016 Islamic banks slowly embrace green finance DUBAI: Islamic banks are gradually embracing socially responsible finance, from renewable energy to microfinance efforts, helping unlock new funding sources for environmentally-friendly projects, an industry survey shows. The two sectors have developed separately from each other, but green projects could benefit from tapping Islamic banks in countries like the United Arab Emirates and Malaysia, where they now hold a quarter of total banking assets. Around two-thirds of financing in Saudi Arabia follows Islamic principles, which forbid investing in gambling, tobacco and alcohol. This resembles the screening methodology used by ethical funds in Western markets. Commonalities could help converge two fastgrowing bond markets: Moody’s Investors Service estimates issuance of Islamic bonds, or sukuk, will reach $70 billion this year, compared to over $80 billion for green bonds. Green finance is increasingly important for Islamic banks seeking to differentiate themselves from their conventional peers, the Bahrain-based General Council for Islamic Banks and Financial Institutions (CIBAFI) said in a report. Islamic banks want to improve their contribution to local economies with job creation, infrastructure and SME financing as top priorities, a survey conducted by CIBAFI between May and August shows. The survey drew input from 86 Islamic finance institutions across 29 countries mainly from the Middle East and Southeast Asia, as well as Africa. Around a third of small Islamic banks cited a moderate exposure to the green and renewable energy sectors, compared to 15.5 percent for large Islamic banks. In Malaysia a local lender has introduced green mortgages to facilitate installation of solar systems, while an Islamic bank in Jordan is developing alternatives to medium-term loans to fund energy efficient and renewable energy projects. —Reuters Austerity and protests as Sudan economy crumbles Slew of subsidy cuts pushes prices up KHARTOUM: Mohamed Yassin’s minimarket occupies a prime spot in Khartoum but its shelves are largely empty as a plummeting currency and slew of subsidy cuts pushes prices up and customers away. “Prices rise daily after the government decisions and what we sell, we can no longer completely replace because our capital is losing value,” 44-year-old Yassin told Reuters. “Sales have dropped significantly ... We don’t know how long we can handle it. We’re afraid we’ll go out of business.” Inflation approaching 20 percent and government austerity have fuelled growing discontent and rare protests in Sudan in recent weeks. Protests have so far been small but, mindful of popular anger that swept away several Arab autocrats in 2011, the government of President Omar Hassan Al-Bashir has been quick to silence media criticism over its handling of the crisis. Sudan’s economic problems have been building since the south seceded in 2011, taking with it three-quarters of oil output, the main source of foreign currency and government income. Its revenues dwindling, the government began reducing fuel and power subsidies in 2013 and announced a new round of cuts in early November that saw petrol prices rise about 30 percent. At the same time, Sudan has sought to alleviate a dollar shortage by introducing a second exchange rate alongside the official peg of 6.4 Sudanese pounds per dollar. The so-called incen- tives rate allows the central bank to buy dollars from Sudanese expatriates for about 16 pounds and is meant to boost foreign currency flows into the banking system. To reduce dollar demand and protect local industry, Sudan also banned imports of meat and fish and raised import tariffs on other goods. But the restrictions have fuelled inflation in a country that relies heavily on imported goods. “Life has become unbearable. Prices of vegetables, meat, sugar and transport are always rising and the government doesn’t feel for us. We don’t know what to do,” said Fatima Saleh, 39, a state employee and breadwinner in a family of five. Growing discontent As more Sudanese feel the pinch, unrest is growing. In the past week, Khartoum and other cities have seen rare protests. On Wednesday, more than 150 lawyers held a sit-in in central Khartoum. Elsewhere in the capital, police used tear gas to disperse protesters who blocked a road. A call by activists for three days of civil disobedience also meant the streets of Khartoum were much quieter than usual this week as some teachers, pharmacists and others stayed home. Authorities have arrested four dissidents, closed a television channel and seized the print runs of four newspapers over the past week to silence criticism of reforms. Government officials were not available for comment but Rabih Abdel Fattah, a senior official in Bashir’s ruling party, told Reuters the government had to scrap the consumer subsidies. “The subsidy policies will result in a disaster and a burden on the economy,” he said. “The call for civil disobedience failed because those who called for it were suspect and those who backed it have no political weight in the country.” The mounting crisis is taking place in an economy already hobbled by US sanctions. Imposed in 1997 against a government accused of supporting terrorism, the sanctions were tightened in 2006 over Bashir’s role in the Darfur conflict. Companies struggle to obtain dollars from banks, which are barred by sanctions from receiving foreign transfers, forcing them to resort to the black market where rates are higher. “Like all importers, we buy foreign currency from the black market in some Gulf countries - and it’s sold at higher prices there than in Khartoum due to the US sanctions that prevent transfers into Sudan,” said a financial officer at a firm that imports agricultural products. “We revise the prices of our products daily in relation to the price of the dollar ... we’ve been in business for many years but this is the most difficult period in our history.” The isolation of Sudan, whose president is wanted for war crimes by the International Criminal Court, limits its options. Unlike neighboring Egypt, whose economic reforms helped it clinch last month a $12 billion IMF loan, Sudan is on its own. — Reuters Oil softens after OPEC decision prompts rally LONDON: Oil prices fell 1.5 percent to steady at around $53 a barrel yesterday after the biggest weekly rally since 2009 following OPEC’s decision this week to cut crude output in order to rein in a global glut. The market focus now shifts to the implementation and impact of OPEC’s first production agreement since 2008, which will be joined by non-OPEC producers, after data showed output in Russia rose in November to a post-Soviet high. Front-month Brent crude futures were down 81 cents by 1153 GMT from their last settlement at $53.12 per barrel. The contract was up around 12 percent this week, its biggest gain since March 2009. US West Texas Intermediate (WTI) futures were at $50.40, down 65 cents. The Organization of the Petroleum Exporting Countries, which accounts for a third of global oil supply, will reduce production starting in January by 1.2 million barrels per day, or over 3 percent, to 32.5 million bpd. Russia also agreed to cut output by 300,000 bpd. Russia and other non-OPEC producer are set to meet with OPEC on Dec. 9. “The lack of firm output commitments from some non-OPEC producers may not be a major cause of concern, but the threat posed by non-compliance and the potential for US shale operators to spoil the party should not be ignored,” brokerage PVM Oil Associates said. “Pockets of unease are already apparent and following the knee-jerk reaction that has produced unsustainable double-digit percentage price gains, signs are that the OPECinduced euphoria is fading this morning with both crude benchmarks opening on a softer note,” PVM added. Russia said yesterday that its output in November rose slightly to 11.21 million barrels per day, a post-Soviet high. As part of the OPEC deal, Russia has promised to gradually cut its crude output by up to 300,000 barrels per day in the first half of 2017. With cuts only being implemented next year against end-2016 levels, analysts said there was still a possibility that oversupply, which has halved oil prices since 2014, remains in place next year. —Reuters LAHORE: A Pakistani vendor waits for customers at a main fruit and vegetable market in Lahore yesterday. —AFP Morocco uses business diplomacy to win friends in Africa RABAT: With contracts across Africa running into billions of dollars, Morocco is placing business at the heart of its strategy to win support for its re-entry into the African Union. From Senegal to Madagascar, King Mohammed VI is leading a drive to invest in banking, insurance, telecoms, manufacturing and construction projects. And while it has long nurtured warm ties with its francophone neighbors in West Africa, Morocco is now using megaprojects to mend ties with East African countries long at odds with Rabat over the Western Sahara issue. Rabat officially requested in September to rejoin the African Union, 32 years after quitting the bloc in protest at its decision to accept Western Sahara as a member. “The Moroccan vision consists of making its national companies real ambassadors in Africa,” said Amine Dafir, professor at Hassan II University in Mohammedia near Rabat, who labels the strategy “economic diplomacy.” It is a drive that has seen the monarch lead a cohort of ministers and business leaders on official visits across the continent. In recent months they have been hosted by Rwanda, Tanzania, Gabon, Senegal, Ethiopia and Madagascar, where they finished a 10-day visit on Thursday. Nigeria and Zambia are next on the list. Each trip has resulted in a flurry of business deals. The king’s trip to Madagascar in November produced 22 agreements including a vast project to “upgrade” the Pangalanes canal, a series of waterways that extends around 700 kilometres (430 miles) along the country’s east coast. Also in November, Morocco signed an agreement to build a giant factory aimed at making Ethiopia self-reliant in fertiliser by 2025. The announcement came during as King Mohammed visited Addis Ababa-seat of the African Union. ‘African Strategy’ Morocco quit what was then called the Organization of African Unity in 1984 to protest at the admission of the Sahrawi Arab Democratic Republic declared by the Polisario independence movement. Morocco maintains that Western Sahara, a former Spanish colony under its control, is an integral part of the kingdom. The Polisario Front, which campaigns for the territory’s independence, demands a referendum on self-determination. Isolated in Africa for decades, Morocco launched an “African Strategy” in the early 2000s in partnership with its “national champions”Moroccan firms that have developed branches across the continent. Since then, the kingdom has inked around 500 deals in subSaharan Africa, according to the Moroccan think tank OCP Policy Center. The region is now the target of more than 60 percent of its foreign investments. Until 2016, those investments mainly targeted Rabat’s francophone West African neighbors, which largely support its position on Western Sahara. — AFP