Aug. 31 (Bloomberg) -- Emirates NBD PJSC of Dubai is waiving payments on personal loans for the holy month of Ramadan. Maybank Islamic Bhd. in Kuala Lumpur started automating charitable donations. Jakarta-based PT Bank Syariah Mandiri sponsors a television slot teaching Islamic banking.
Marketing campaigns aimed at reminding the world’s 1.6 billion Muslims to follow the teachings of Prophet Muhammad that ban receiving interest have increased as the global economy recovers this year, according to the Pan Arab Research Center in Dubai. The group estimates advertising spending by financial services companies in the Arab region is likely to grow by 40 percent this Ramadan compared with the previous season.
“As cautious optimism returns, the banking sector is engaged in brand-image building exercises and Ramadan offers the much needed platform for these promotions,” M Shaharyar Umar, an analyst at Pan Arab Research, said in an e-mail on Aug. 28.
Muslims refrain from food, drink and sex during the day in the month, which began this year at the sighting of the crescent moon on Aug. 11. Consumer spending increases as friends and families gather for meals to break their fasts and when they celebrate the Eid holiday, marking the end of Ramadan, next week.
Banks need their customers to gain confidence in Shariah-financing to sustain growth in an industry estimated by the Islamic Financial Services Board to expand 15 percent annually. Assets under management may quadruple to $2.8 trillion by 2015 from about $700 billion in 2005, the Kuala Lumpur-based regulator predicts.
Yapi & Kredi Bankasi AS, the Turkish bank part-owned by Italy’s UniCredit SpA, has had a 50 percent increase in loan applications this Ramadan compared with the rest of the year, Mehmet Cemalcilar, head of marketing and individual banking, said in an Aug. 19 interview. Noor Islamic Bank, a lender owned by the Dubai government, may see consumer finance business increase as much as 20 percent, John Chang, head of Noor’s consumer banking, said an interview on Aug. 25 in Dubai.
“We see a spike in the auto-finance business, small-business finance, and a marked improvement in credit-card spending as well,” Chang said.
Emirates NBD, the U.A.E.’s biggest bank by assets, said its campaign postponing installment payments on personal and auto loans has been successful.
In most households in the United Arab Emirates, people spend more entertaining family and friends during Iftar, when they break their fast at sunset, Shekhar Krishnamurthy, the head of retail assets and liabilities at Emirates NBD, said in an e-mail on Aug. 19. The Ministry of Labor reduced working hours for the private sector to six from eight this Ramadan, state-run WAM news agency reported on Aug. 10.
“Special packages and offers made by the bank during Ramadan do result in generating the desired level of customer interest,” he said.
The spread between the average yield for emerging-market sukuk and the London interbank offered rate was little changed at 381 basis points yesterday, according to the HSBC/NASDAQ Dubai Sukuk Average Spread. The difference narrowed 20 basis points in August and is down 86 points since the start of the year.
Islamic bonds, which are based on the exchange of asset flows rather than interest, returned 1.3 percent in August and 3.9 percent so far this quarter, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. Debt in developing markets gained 2.4 percent for the month and 6.6 percent for the quarter, JPMorgan Chase & Co.’s EMBI Global Diversified Index shows.
The yield on Malaysia’s 3.928 percent Islamic note due June 2015 rose two basis points, or 0.02 percentage point, to 2.75 percent today, and is down 18 basis points this month, according to prices from Royal Bank of Scotland Group Plc.
Bank Syariah Mandiri, the Islamic unit of Indonesia’s largest bank by assets PT Bank Mandiri, collaborated with a local TV operator for a show aimed at promoting Shariah-compliant banking for Muslims during the fasting month.
“It is an educational program to promote Shariah banking,” Ivan Baruna, the head of the bank’s product division, said in a phone interview from Jakarta on Aug. 23. “We invite customers who receive our funding and successfully expanded their businesses to talk about their experience on the show.”
Indonesia introduced a law two years ago to allow financial institutions to offer services that comply with Shariah principles, 25 years after Malaysia. Islamic banking assets totaled $93 billion in Malaysia in 2009, or 20 percent of the total, compared with 2.9 percent in Indonesia, according to central bank data.
Maybank Islamic, the Shariah-compliant unit of Malaysia’s largest lender, started a waqf program in July that will allow Muslims to make a religious donation through the bank, said Abdul Wahid Omar, chief executive officer of Malayan Banking Bhd.
“During the month of Ramadan, Muslims are encouraged to be generous,” Abdul Wahid said in an interview in Kuala Lumpur on Aug. 20. “So instead of donating elsewhere, they can actually donate it through Maybank Islamic, which then works with” a waqf foundation to manage the funds, he said.
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