Islamic Finance Instruments, growth & Real Estate. Maisam Fazal Head of Commercial Finance. Banking you can believe in. alrayanbank.co.

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1 Islamic Finance Instruments, growth & Real Estate Maisam Fazal Head of Commercial Finance

2 Islamic Finance Islam prohibits Interest (Riba) Uncertainty (Gharar) Gambling (Mayser) Principles of Islamic Banking Sharia compliant Sharing of profit and loss prohibition of the collection and payment of interest. 2

3 What are the main instruments? Musharaka (Partnership) Mudaraba (Special type of partnership) Murabaha (Special type of sale) Ijara (Lease) Qard (Loan without any benefit) Wakala (Agency agreement) 3

4 Musharaka (Partnership) Defini&on: Musharaka is a partnership between two people or more with the objec&ve of making profit Main condi&ons: The business ac&vity should be Sharia compliant Need to agree a profit sharing ra&o in advance Loses must be shared according to capital ra&o Capital can take the form of cash, goods or property Product type: Home Purchase Plan (HPP), Some CPF 5

5 Musharaka Model (Contractual Partnership) Partner 1 Partner 2 Capital Share of Profit / Loss Capital Joint Venture Project

6 Murabaha (mark up / cost plus financing) Defini&on: Murabaha is a special type of sale where the seller has to disclose the cost and the profit when making the sale Main condi&ons: The subject maier of the sale must be Sharia Compliant Commodity must be described, quan&fied, and priced clearly You cannot sell what you don t own Product type: Personal Finance / Commercial Property Finance / Dev Finance

7 Murabaha Model Financier / Bank Commodity (immediate delivery) Purchase of Commodity (Immediate Delivery) Immediate Payment (cost) Deferred Payment (Cost plus Markup) Commodity Supplier Customer

8 Murabaha Model the Commodity must exist at the time of contracting; be clearly identified prior to the purchase; the goods must be in the physical or constructive possession of the financier before they are on-sold to the customer, thus ensuring the financier assumes the risks of ownership; the cost price must be known at the time of sale and declared to the customer; and the time of delivery of the goods and the time of payment must be specified.

9 Islamic Banking providers - Players in the market 20 Banks providing property finance in UK Pure Islamic Banks Islamic Window Al Rayan Bank Bank ABC Gatehouse Ahli United Bank BLME QNB QIB (UK) ADIB UK offices of Arab Banks Others Europe Arab Bank Credit Suisse Na&onal bank of Kuwait German real estate Banks UK clearing banks Smaller banks providing one off Islamic product

10 Growth of Islamic Finance Double Digit growth during last decade US$200 billion in 2003 to US$2.1 trillion in Targeted to reach US $3.4 trillion by 2018 & US$4 trillion by Growth restricted to GCC countries, Iran, Malaysia and represent only 1% of global financial assets. UK issued first Sovereign Islamic Bond for US$ million two years ago, which was 10 Ymes over subscribed. Following the Drop in Oil price, many banks in GCC have issued Sukuks. 275: The number of Islamic financial insytuyons in the world. 76: The number of countries where they have a presence.

11 Challenges to Islamic Finance Islamic Financing is expensive Cost of funding is high??? Access to Finance comes at a cost Restrictions on where the funds can be invested. Shortage of medium long term maturities Sharia Compliance Set up costs Differences in interpretations between Scholars (lack of standardisation) Regulators will not take responsibility for SSB Countries with centralised Sharia Board can be an advantage

12 Challenges to Islamic Finance Human resources (no expertise readily available) The innovation and development of competitive products 2010 Lack of investments in the market The taxation issues related to the nature of the products The complexity of marketing Islamic financial products The reluctance from the consumers (lack of understanding of the products)

13 Future of Islamic Finance UK to remain as a major centre for Islamic Financing driven by demand for UK & Europe property from GCC client base. Increased Competition: Major brand names have emerged (AL RAYAN BANK) and will lead the growth in UK. Increased innovation in funding structures Investment to flow into UK, US and Europe China next growth area with 20 million Muslim population (southwest securities - Chinese brokerage) signed MOU with 2 banks in 2015 Russia working on it, in fact they would like to take over as leaders.

14 Notable transactions to date via Islamic Finance Chelsea Barracks Project Blue Qatari Diar South Bank Tower c 650m GDV

15 Notable transactions to date via Islamic Finance Grosvenor House Apartments TID c 300m Olympic Village Qatari Diar/Delancy (PRS) c 325m GDV

16 Notable Real Estate in the UK Shard Hotels- Claridge s Harrods

17 Major Player

18 Introducing Al Rayan Bank First wholly Sharia compliant retail bank

19 Masraf Al Rayan - our parent MAR is a Qatar-based Islamic bank providing banking, financial, investment and brokerage services. The Bank was incorporated in January 2006 and is licensed by Qatar Central Bank. MAR is the second largest bank in Qatar by market value. 5 th biggest Islamic bank in GCC Purchased IBB in Feb 2014 and we changed our name in Dec 2014 After 10 years of IBB, Al Rayan Bank hit profitability within first year of their acquisition

20 Al Rayan Bank Renamed Al Rayan Bank in Dec 2014 Capital base now at 100m 2014 was the first year of full profitability Assets to exceed 1.4 billion before year-end Within 5 years assets to exceed 2.5 billion

21 OUR 3 OFFERINGS AL RAYAN BANK COMMERCIAL RETAIL Premier / Private Banking

22 Al Rayan Bank Asset Retail: Owner occupier, Home Purchase Plans Investment property; Buy to Let up to 5 properties Help to Buy Scheme (backed by the UK Government) GCC: Residential finance to non-residents buyers in the UK Commercial Property Finance (UK and non UK investors) Commercial Investment property Residential investment property Residential Development

23 Al Rayan Bank Business model Grow existing retail banking business for UK nationals. Attract retail deposits to fund asset growth Develop Private Banking for HNW clients Build UK real estate asset book (CPF) Expansion into Europe: Paris Significant growth in the balance sheet over the next 5 years Grow the FX desk

24 Al Rayan Bank Modern relevant products Selection of table topping savings products that frequently offer the highest returns available in the UK ISA savings accounts for tax free saving Help to Buy scheme supported by the government Children s savings accounts Discretionary Portfolio Service

25 Moneyfacts Fixed Cash ISA

26 Moneyfacts Variable Cash ISA

27 Moneyfacts 12 months fixed term deposits

28 Moneyfacts 36 months FTD

29 Real Estate Deals by Al Rayan Bank (CPF) Commercial Deals in the last 3 years Development of Hotel in Islington million

30 Commercial Deals in the last 3 years Hotels million

31 Commercial Deals in the last 3 years Conversion of office into Resi in Luton million

32 Commercial Deals in the last 3 years Houses in Knightsbridge 49.3 million

33 Commercial Deals in the last 3 years Serviced Apartments in London million

34 Commercial Deals in the last 3 years Olympic Village (Stra\ord) c 325m GDV

35 Commercial Deals in the last 3 years Offices in Stoke & Maple Cross - 31 million Industrial portfolio (Tamworth/Doncaster/Glasgow/Leeds) - 18 million Shopping Centre in Telford - 24 million Student accommodation in Manchester - 6 million

36 Commercial Deals in the last 3 years Affordable Housing Forest Gate & Ilford 21 million Residential Building in Victoria - 18 million

37 FUTURE OF REAL ESTATE WITH BREXIT

38 Post Brexit Referendum GCC world Currency Property Funds - pressure Risk Appetite / Buying opportunity?? Alternate use of money

39 Any quesyons?