In this issue, we introduce readers to Sundra Rajoo, “a man with a mission”. As director of the Kuala Lumpur Regional Centre for Arbitration (KLRCA), he has been mandated by Bank Negara Malaysia, the central bank, to promote arbitration in Islamic finance both in the region and beyond.
Rajoo would like to see more countries from the MENA region offering Islamic banking arbitration services, which would enable them to enter into a convention for the enforcement of arbitral awards much like the New York Convention, which was established in 1958 as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Several MENA countries, including Bahrain, UAE and Egypt, are already among the 145 signatories to the convention. Therefore, technically, awards rendered in arbitral proceedings conducted in KLRCA and other centres in the MENA countries are enforceable in any one of the contracting states to the New York Convention.
Another article in this issue suggests that the majority of corporates are concentrating on increasing internal efficiencies by re-shaping operational models to ensure that cashflow is directed to the heart of their businesses. The author talked to a number of companies and banks in Saudi Arabia and the UAE and came to the conclusion that corporates must plan for even the most unlikely market-disruption scenarios.
He says, “While this focus on generating internal efficiencies is admirable, it does not go far enough. The sustainability of business cycles depends on companies being prepared for all eventualities, regardless of how unlikely they may seem. The worst-case scenario always merits consideration and subsequent planning, as the ongoing supply chain and market disruption caused by recent environmental disasters and political uprisings demonstrates.”
The article suggests that the ability to navigate cashflow crises depends on two things. “First, sophisticated and diverse liquidity and working-capital management solutions are required in order to spread risk and maximise returns. Secondly, there is a need for data management and reporting capabilities that allow for the accurate assessment of funding, liquidity and counterparty risk so that potential ‘pain points’ can be identified before they can cause real damage.”
SMEs, too, are having their own difficulties because of the financial crisis and credit squeeze, especially in terms of accessing short-term bank finance.
Across the Gulf States, the global downturn has had major implications for mid-market companies and small-to-medium sized family-owned businesses, which have found it much harder to fill any gaps in their cashflows.
One of the challenges is that many banks are now basing their lending decisions on companies’ financial standing – and are more focused on meeting the needs of their larger corporate clients.
But, as we point out in this issue, there are other avenues of help for smaller businesses seeking to raise capital.
The Tajara Monitor is now in the process of broadening its coverage to include the other GCC countries in addition to the KSA. In this edition, Caroline Maginn from Cash Management Matters (CMM) looks at some of the UAE 2010 Tajara findings in relation to trade finance, revealing that National Bank of Abu Dhabi held on to its lead position in trade finance.
Overall, trade finance closed 2010 on a very positive note and is poised for further growth in 2011. Hence trade finance has proved to be robust in recent turbulent times and has been a cornerstone of corporate banking. This reflects Tajara findings in the KSA and other GCC markets.