First local Islamic Bank to use Japanese commodity exchange for fixed return investment product

At the signing ceremony - from left: Haji Megat Dziauddin Megat Mahmud, Chairman of Alliance Islamic Bank; Haji Yahya Ibrahim, CEO of Alliance Islamic Bank; Kazumichi Okachi, President of Okachi & Co. Ltd Japan and Datuk Kassim Maon, Director of Okachi Malaysia Sdn Bhd.

Kuala Lumpur, 9 June 2008 - Alliance Financial Group, via its Islamic banking subsidiary, Alliance Islamic Bank, today signed a Memorandum of Understanding (MoU) with Okachi Malaysia Sdn Bhd (Okachi Malaysia) in conjunction with the launch of Alliance Islamic Bank's new Islamic fixed deposit product, the Alliance Fixed Investment-i (AFI).

"AFI is the first Islamic banking product of its kind in Malaysia which uses commodities traded under the Tokyo Grain Exchange and Central Japan Commodity Exchange for deposit placement. We are targeting to attract RM100 million in deposits from AFI by the second quarter of this year and are looking to achieve this through Alliance Islamic Bank's existing and new corporate customers," said Alliance Islamic Bank Chief Executive Officer Tuan Haji Yahya Ibrahim.

A Shariah-compliant account, AFI is targeted at large corporate depositors and is based on the Tawarruq concept which requires a customer to appoint the bank as an agent to purchase commodities from a commodity trader. The Bank will then subsequently purchase the commodity from the customer on a deferred payment basis. The buying and selling of the commodities will be done on the same day to avoid any changes in the commodity prices and the trading cost will be absorbed by the Bank. Okachi Malaysia has been appointed as the commodity trader under the MoU.

"The objective of the AFI account is to offer customers a fixed return that is determined up-front. The account offers higher returns as compared to normal General Investment Accounts (GIA) for placements of above six months. AFI profit is fixed up-front on a per account basis, based on the Inter-bank Money Market rate, whereas normal GIA deposit rates are only determined at the maturity date of the placement," Tuan Haji Yahya explained.

The AFI allows a customer to place a minimum of RM1 million and a maximum of RM100 million for a minimum tenure of 1-month, and a maximum tenure of 60 months.

"AFI provides an alternative source of Islamic deposits from Government bodies and large corporate depositors. In addition, it will also help improve the Bank's liquidity position while improving its financing-deposit ratio.

"Alliance Financial Group and, by extension, Alliance Islamic Bank is committed towards developing innovative Islamic savings, wealth management and financing products, offerings and services that demonstrate our understanding of, and commitment to our customers in terms of offering them the best match financial solutions according to their individual and corporate needs.

"Alliance Islamic Bank will continue to explore opportunities for strategic tie-ups to introduce niche Islamic deposits and financing products for long-term sustainable growth. We aim to grow our market share of the Islamic financial segment by capitalising on our existing conventional banking sales and distribution channels to market and promote our Islamic banking products and services," concluded Tuan Haji Yahya.