Innovation in Islamic finance

BNP Paribas has been at the forefront of innovation in the field of Islamic finance as the Sharia-compliant model gained in popularity progressively, after taking root in the Gulf region in the mid-1970s. The Bank was one of the first to offer Sharia-compliant deposits and loans in the 1980s, and in recent years has been a major player in the development of Islamic capital markets products.

A bank specialising in Sharia-compliant issuance, which, in addition, facilitates distribution this is of real benefit to clients in terms of speed and efficiency, is how Tariq Al-Samahiji, Chief Executive Officer of BNP Paribas Najmah now describes the Bank s role in Islamic finance.

In 2006, BNP Paribas Najmah and the CIB Global Equities and Commodities Derivatives (GECD) teams launched a platform for the issuance of Islamic certificates, enabling clients to trade in financial instruments representing various classes of underlying assets such as equity, commodity, indexes and funds.

BNP Paribas also worked with the Investment Partners team to set up the Bank s first Islamic mutual fund. By 2010, there were already five of these vehicles, two of them worldwide firsts : the Easy ETF DJ Islamic Market Titans 100 , the first Islamic exchange-traded fund (ETF) or tracker fund able to track a share index worldwide; and the My ETF DJ Islamic Market Malaysia 25 , the first fund to be indexed to Sharia-compliant securities in any one country, in this case Malaysia.

The Bank later launched the Sukuk Innovative Financing: Reaching New Frontiers project a client-centric approach that took BNP Paribas expertise in the area, honed in the Gulf region, to new markets for Islamic finance, such as South Africa, Luxembourg and Turkey. The initiative involved helping to formulate new legislative frameworks to permit sukuk issuances, as well as the provision of advice on Sharia-compliant financing and capital markets.

Islamic Finance

BNP Paribas first became involved in Islamic finance in 1985, at that time offering its first Murabaha deposits.

A decade later, in 1996, the Bank structured the first capital-protected equity fund for an Islamic bank. At the time, these Sharia-compliant products were developed independently by each business line.

In June 2003, the Bank officially announced the creation of a specific Islamic Banking Unit (IBU), based in the Kingdom of Bahrain. The activities of the new unit were carried out under the supervision of a special Sharia Board, comprising eminent and highly commended scholars, including: Sheikh Nizam Mohammed Saleh Yaquby in the Kingdom of Bahrain, Dr. Abdul Sattar Abu Ghuddah, who is based in the Kingdom of Saudi Arabia and Dr. Mohammed Daud Bakar in Malaysia. This new unit was not just intended to serve the Gulf region but was also designed to offer Sharia-compliant products to clients in Southeast Asian markets.

The IBU was officially inaugurated on 8 September 2003, by H.E. Sheikh Ahmed bin Mohammed Al Khalifa, Governor of the Bahrain Monetary Agency, and Philippe Blavier, member of the Executive Committee and BNP Paribas Group Head of Investment Banking.

In 2005, Euromoney recognised BNP Paribas as Best Islamic Project Finance House and also awarded the Bank Islamic Finance Deal of the Year.

In 2006, the unit was renamed Najmah, which means star in Arabic, and is a word that appears often in the Quran. The celestial imagery dovetailed perfectly with the BNP Paribas taking flight symbol.

The same year, BNP Paribas Najmah extended its product range with Islamic Exchange- Traded Fund (ETF) and Equity Optimiser offerings.

In October 2008, BNP Paribas received The Banker s Islamic Finance House of the Year Award, recognising the Bank s efforts to widen its range of Sharia-compliant banking products. The Bank s portfolio of services by this time had extended to equity derivatives, credit derivatives, Islamic securitisation, asset management, real estate, murabaha financing, structured finance, project finance, export credit facilities and debt capital markets.

Receiving this award on behalf of the Group, Jacques Tripon, Regional Head of Corporate and Islamic Banking, said, It gives me great pleasure to accept this award on behalf of the team, as a true recognition of their excellent work. BNP Paribas has made Islamic products more accessible and this underlines our commitment to fostering the growth of regional economies by playing a leading role in the Islamic finance industry.