December 2009 Issue

Australia Ripe for Islamic Finance

Malaysian Insider | November 30, 2009

Indian Plans 1st Islamic Bond Issue

The Economic Times, Mumbai, India | December 17, 2009

Islamic Finance in Russia: Issues and Solutions

Moscow Times, Russia | December 15, 2009

Islamic finance is the fastest growing market in ethical finance with an annual average growth rate of between 10 percent and 20 percent. Current global Islamic finance assets stand at $800 billion and are predicted by some to rise to $4 trillion by 2015. The credit crunch has provided Islamic finance with a unique opportunity to assert its values of ethically based financing, which could help to shape the global financial industry as a whole. Islamic finance distinguishes itself from conventional finance in its compliance with the principles of Islamic commercial jurisprudence. Islamic finance techniques seek to promote ethical and socially responsible investment while providing an alternative to interest-based finance. The main tenets of Islamic commercial jurisprudence prohibit interest payments on monetary loans or securities, speculation, uncertainty in certain contractual terms and engaging in anti-social business activities. Some of the main Islamic financing techniques include murabaha (cost-plus financing), sukuk (Islamic bonds), ijara (based on the leasing of an asset), istisna’a (production/construction financing) and musharaka (equity investment). The recent defaults in the Islamic finance industry have shown that the Gulf has been affected by the same liquidity issues as the West, with central banks actively intervening to encourage ......

Islamic Finance well positioned for GCC Recovery

Eyes of Dubai | December 11, 2009

National Commercial Bank, Saudi Arabia’s largest bank, believes that Islamic finance, an increasingly important element of the GCC financial sector, is well positioned to lead the way in the region’s pending economic recovery. Speaking at the World Islamic Banking Conference in Bahrain today, Dr Jarmo Kotilaine, Chief Economist of NCB Capital, said, “Islamic capital markets seem to have performed well in terms of returns compared to conventional markets and they have weathered the current financial crisis well. This is attributed to their inherent ethical and non-speculative nature.” Dr Kotilaine noted that in 2008, the S&P500, GCC Composite and Europe 350 Composite had worse returns than their Shariah counterparts and that so far this year the performance of the Shariah-compliant indices has been better than the conventional indices.........

Key economic role for Islamic finance

Gulf Daily News | November 27, 2009

Islamic finance has a potential role in contributing not only to global financial stability but also towards more balanced global growth. While Islamic finance by its very nature and its direct link to economic activity contributes to this process, the recognition of the new financial challenges ahead require further steps to be taken to strengthen its resilience and robustnes. Today, the Islamic banking system has emerged as a vibrant financial system with Islamic banking assets currently accounting for 18.8 per cent of the total banking assets of the Malaysian financial system. The product range has now expanded into an extensive range of innovative instruments while in the Islamic capital market, the sukuk market has surpassed the conventional market in terms of market share ......

Islamic Finance to lead in financial services industry

Daily Times, Asia | November 25, 2009

The global financial meltdown has presented an unprecedented opportunity for Islamic Finance to establish itself as a truly global leader in the financial services industry, thereby realising its full, unique potential. The speakers at Islamic Finance seminar arranged by Pakistan expressed these views. They said in marketing terms, a large gap exists between the perception and the reality of its current brand attributes......

Dow Jones Wins 18th Award for Islamic Market Index

Financials, USA | December 17, 2009

Dow Jones Indexes, a leading global index provider, on December 16 announced that it has been named “Best Index Provider Shari’ah compliant Indexes” by Dubai-based Islamic Business & Finance magazine. Islamic Business & Finance awards are designed to inspire and reward excellence in Islamic business and finance globally. "2009 marks the tenth anniversary of the Dow Jones Islamic Market Indexes and we proudly look back on a remarkable decade of leading-edge index innovation and excellence. Market participants globally have chosen our superior and unique Islamic indexes to be the standard for Shari’ah compliant indexing. We are honored to conclude this commemorative year with this prestigious award. We remain committed to provide meaningful, new Islamic indexes in the years to come,” said Michael A. Petronella, president, Dow Jones Indexes.......

Abu Dhabi Islamic Bank Offers Dh200m to Fund Realty Project

Khaleej Times | December 14, 2009

TADIB, has arranged over Dh200 million in Islamic finance facility for International Capital Trading, or ICT, to finance one of its real estate projects. ICT is a private investment company based in Abu Dhabi. Its business activities include owning, developing and managing real estate as well as investing in a wide range of asset classes — from equities to direct investments and real estate. The ADIB general manager said that the Islamic bank has shown growth in financing such big-ticket investments and has played a central role in project finance in the UAE. “We remain liquid and well capitalised, and our capacity for project finance is excellent. We will continue to play a leading role in bringing back business confidence and in supporting economic growth,” the banker added.....

Islamic Finance Still Profitable

Forbes - US, Europe, Asia | December 11, 2009

TPrior to the current financial crisis in Dubai, sukuk issuance had started to revive following two difficult years since the August 2007 peak. New issuance for the year to November 2009 exceeded $17.5 billion with 69 separate offerings. Confidence was demonstrated by the announcement on November 19 by General Electric that it was to raise $500 million through a five-year sukuk--the first Western industrial company to raise such financing.There are many varieties of sukuk, some--such as the short-term sukuk issued by the Government of Bahrain--being a substitute for treasury bills with a three-month maturity. Such sukuk are attractive for Islamic banks to hold, as they cannot hold conventional treasury bills. Trade financing through murabaha--in which a bank buys a good on behalf of a buyer, and sells it on to them in installments at a marked-up cost--has remained buoyant, as has personal financing for vehicles and household goods. Real estate has been the most troublesome, with mortgage lending reduced. In many instances, the value of property has fallen below the amount of credit outstanding, and ........

Analysis: Islamic Finance in North Asia

ALB Legal News | November 30, 2009

IThe Korean Ministry of Strategy and Finance announced earlier this month that it had submitted a tax revision to the National Assembly, which if approved would pave the way for local companies to start issuing sukuk (Islamic bonds). Yet even if the law is passed Islamic finance faces stormy times. Regulators and lawyers may benefit from looking at the troubles that Japan has had in kickstarting its own industry. Under existing Korean legislation uncertainty surrounds whether a sukuk meets the definition of a bond.So far this has meant that Islamic bonds did not stand to benefit from the tax incentives provided for foreign currency denominated bonds. "The hurdles are typical of those you find in conventional financial markets,” said Lee Do Heon, managing director of the global business department at Korea Investments & Securities Corporation. “The main hurdles are taxation issues relating to double stamp duty, VAT, capital gains and the definition of what constitutes a security.” ........

Worth of Islamic bond is tested

Times Online UK | November 27, 2009

A default by Dubai will put the world of Islamic finance to the test at a time when hard questions are being asked by bankers and lawyers about the protection afforded by financial instruments that are Shariah compliant. The bond that lies at the heart of the threat of default and financial ignominy for Dubai is a sukuk, an instrument invented by bankers and Islamic scholars to comply with a Shariah (Islamic law) prohibition against the payment of interest on money. Islamic finance has five pillars: a ban on interest, a ban on speculation, a ban on haram (forbidden) investments, such as pork or gambling, the requirement of partnership or sharing of profit and loss and the requirement of asset backing. Getting round the ban on interest is the problem and opportunity of Islamic finance. A bond that doesn’t (in theory) pay interest sounds unattractive but in the Gulf and Malaysia, Islamic finance has flourished over the past decade.........

Islamic Bank expected to ride out Dubai troubles

Birmingham Post, UK | November 29, 2009

Backers of the Birmingham-based Islamic Bank of Britain have insisted Islamic finance is still the way forward for investors, even after the sector was rocked by the massive failure in Dubai. The Edgbaston bank officially celebrated its fifth birthday at the start of the Eid festival – the same day Dubai shocked the financial world when it announced its government-controlled investment vehicle would need a six-month moratorium on debts worth more than £35 billion. The previously buoyant world of Islamic finance was dealt a blow by the revelation that Dubai World was unlikely to be able to repay a £2.1bn Islamic bond, or sukuk, that was set to mature on December 14. Experts said it would have a huge impact on confidence in the sector, even though the root of the trouble was not due to Islamic finance rules. There has been a sustained campaign to promote IBB and Islamic finance in Birmingham generally on the world stage as a growth industry. Birmingham Forward will be leading a trade delegation to the Islamic Finance Conference in Bahrain this weekend to talk up the city.....

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