September 2009 Issue

Islamic finance faces diversity crossroads

Reuters Blog, UK | August 12, 2009

Is diversity of opinion boon or bane for Islamic finance? Market participants gathered for a conference at Thomson Reuters’ London headquarters earlier this week discussed the need for more convergence in the industry estimated to be worth $1 trillion. Of particular focus was the role of sharia scholars who rule on whether investment products are in line with Islamic teachings. “Sharia scholars who sit as advisers have a crucial role to play in retaining public confidence,” Rifaat Ahmed Abdel Karim, secretary general of the Islamic Financial Services Board, an international standards-setting body for the industry, told the forum. Beyond commonly agreed principles such as the emphasis on shared profit and the prohibition on usury, divergent opinion has emerged among these scholars on issues ranging from financial derivatives and deferred payment contracts.
Last year, the issuance of sukuk or Islamic bonds was hit when the top scholar of an influential industry body declared that about 85 percent of sukuk was un-Islamic. “(In this case), the market was kept in the dark, unaware of how to respond. The industry needs a sharia governance system that is reliable and effective,” said Karim. But whether authorities can or indeed, should, move towards some common regulatory ground remains to be seen. One sharia fund manager I spoke to pointed out that diversity of opinion is seen as a blessing within Muslim tradition. “Even when it comes to religious customs, there are differing Muslim interpretations, so I don’t see how this would be any different,” he said. “We accept that the FSA (Financial Services Authority) in the UK and the SEC (Securities and Exchange Commission) in the U.S. are different regulatory regimes so why can’t we accept this in Islamic finance as well?”

Islamic bank assets up sharply

Straits Times, Singapore | 28-Aug-2009

ASSETS held by the world's 100 biggest Islamic banks grew 66 per cent in 2008 from the previous year despite the financial turmoil that clobbered mainstream lenders, a report said on Friday. The top 100 Islamic banks held assets totalling US$580 billion (S$836 billion) last year, up from US$350 billion in 2007, according to an annual report by The Asian Banker, a magazine for financial professionals. In the same period, Asia's 300 biggest banks saw their assets rise by a much slower 13.4 per cent, it said. A financial storm sparked by a crisis in the US housing market swept across the world late last year. Its impact spilled over into the general economy and sent several countries into recession. Prominent US investment bank Lehman Brothers collapsed into bankruptcy, while several other major Western banks suffered massive losses. ..

Scotland is emerging as new hub of Islamic finance

Pakistan Daily | August 10, 2009

The financial center of the world, may be stealing the limelight as far as promoting and developing Islamic finance in the UK and beyond, but another part of the UK, Scotland, is emerging as a new if complementary hub of Islamic finance out of and into the UK. The Glasgow-based Islamic Finance Council UK (IFC), a non-profit organization established to promote Islamic finance in Scotland and the UK, is now emerging as perhaps the most proactive entity in the country. Recently, the IFC held a roundtable on Islamic finance at the Scottish Parliament in Edinburgh hosted by MSP (Member of the Scottish Parliament) Frank McAveety. The aim of the discussion was how to promote Islamic finance in north of the border. A presentation from Bank of London and the Middle East (BLME) highlighted opportunities for Islamic finance in Scottish infrastructure projects; while McClure Naismith, a commercial law firm, discussed possible involvement of Islamic finance in financing SMEs (small and medium term enterprises) in Scotland.

Shariah Finance in Mauritius

International Financial Law Riview | 31 August, 2009

With the sub-prime crisis challenging conventional banking and financial products, there is mounting interest in Islamic products which comply with the principles of shariah law. The size of the global market for shariah-compliant products is estimated at $800 billion. The increase in wealth in Islamic countries (especially in the Middle East with its accumulation of petrodollars), the growth in the Muslim population, the huge capital requirements for infrastructure projects across the Muslim world as well as the active participation of investors and sovereign nations in Islamic capital market have not only resulted in a remarkable growth in the Islamic finance industry but have also led to the development of a wide range of shariah-compliant products. In Mauritius too, there is a growing demand for shariah-compliant products based on the sharing of risks and rewards. Over the past few years the government has taken an array of measures to encourage the development and promotion of Islamic banking and financial services.

Japan's top brokerage to tap Islamic finance investors

MENAFN - Kuwait News Agency | August 20, 2009

Nomura Holdings Inc., Japan's largest brokerage, plans to step up efforts to tap demand for investing in Islamic financial markets, including those in the Middle East, a major business daily here reported Thursday. Nomura will expand its operations in Malaysia, adding stock trading and research to its services in that Southeast Asian country, according to the Nikkei Shimbun. Nomura sees Malaysia as a key stepping-stone for its expansion into Islamic financial markets, according to the newspaper. The Tokyo-based firm already obtained approval for offering stock brokerage services in Malaysia from the country's Securities Commission in July. After completing a membership registration at the Malaysia Exchange, Nomura can now buy and sell stocks on the local stock exchange, the newspaper said. The firm also recently acquired a research team specializing in the Malaysia market from Citigroup Inc.

Indonesian gov't urged to seriously develop Islamic banking

China View, China | August 18, 2009

EJAKARTA, Aug. 13 (Xinhua) -- Indonesian Islamic banking required real steps of the government to make it par with those in other countries, head of the Islamic banking association Riawan Amin said here Thursday. Riawan said that Indonesian Islamic banking needs a quick real supports from the government through its policies in settling various problems that linger the banking system in developing itself. Comparing with what have already been applied by the government in the neighboring country Malaysia, Riawan said that as of now, the Indonesian government is yet to make actual moves to settle the problems. "The Malaysian government has provided tax incentives, but our government is yet to take any policy on the double tax issue that persists in national Islamic banking system," he said.

Thailand Keen To Learn Islamic Banking From Malaysia

Barnama National News Agency, Malaysia | August 13, 2009

Thailand has expressed interest in learning Islamic Banking from Malaysia, especially Sukuk bond. At a joint press conference after the second Joint Development Strategy (JDS) for Border Areas and the 11th Joint Commission for Bilateral Cooperation, Thailand Foreign Minister Kasit Piromya said cooperation in Islamic banking was also discussed at the meetings. "We (Thailand) already have an Islamic banking industry, but it is still small, so we would like to develop it further. "We have also agreed to explore a 'triangular cooperation' on Islamic banking with the Gulf Cooperation Council (GCC)," he told reporters. Kasit said Thailand are also interested in learning how to develop the halal food production industry in the private sector and work together, instead of competing against one another, in the industry. On Sabah itself, he expressed amazement on the vast development here and said he would be encouraging Thai businessmen to come here and explore possibilities of international cooperation.

Azerbaijan looks to expand Islamic finance

31-Aug-2009 | Business News Europe

Though there is currently no stand-alone Islamic bank in Azerbaijan due to a lack of legislation that could authorize or license such a lender, there is huge potential for Islamic banking in the country. An increasing number of Azerbaijanis are exploring ways to introduce Islamic banking into the country, within the existing legal and normative framework. Despite some progress in the sector, these activities are “hidden” under the forms of conventional system. Some elements of Islamic finance have already been introduced into Azerbaijan by Kovsar Bank, which positions itself as an Islamic bank even though officially it's just a conventional bank that happens to have interest-free products. Actually, it's the only stand-alone bank in Azerbaijan and the rest of the Commonwealth of Independent States that operates according to the principles of Shariah. At the moment, it has only four offerings – investment accounts based on mudarabah (investment partnership), loans to businesses based on musharakah (profit and loss sharing), loans for retail and corporate clients by purchase and sale of bills of exchange analogous to sukuk (islamic bonds), and consumer loans based on ijara wa iqtina (islamic leasing). Due to restrictions on banks’ trading activity stipulated in Azerbaijani legislation, Kauthar cannot base any of its operations on the murabaha (purchase and resale) principle.

Financial Crisis Exposes Deficiencies In Conventional Banks

Leadership Nigeria | 31-August-2009

In a paper entitled: "Islamic solution to global economic meltdown," which he delivered at the annual Ramadan symposium organised by the Movement for Islamic Culture and Awareness (MICA), in Kaduna, Sanusi said, "The global economic and financial crisis has exposed the inherent deficiencies in the convenSanusitional system. The crisis has severely undermined and damaged the confidence in the global governance system. But with crisis, come opportunities. The crisis has challenged scholars, lawmakers and bankers to reassess the opportunities provided by Islamic finance. "From the resilient nature of Islamic finance, it is quite evident that the opportunities are enormous, so are the challenges. Islamic finance is challenged on three different fronts, namely; theoretical, operational and implementation, and that each of these challenges have .....

Islamic Finance Emerging as Blue Ocean

Korea Times | 31-Aug-2009

Islamic countries form a major pillar of the world, and make up 17.8 percent of the global economy and the Muslim population represents 24 percent of the world's total. The number of Muslims is expected to reach 3 billion in 20 years. Islamic finance, or financial transactions and products that suit Islamic law, has been growing by between 15 and 20 percent each year. The total assets of Islamic finance stood at over $700 billion as of 2007, and are expected to breach the $1-trillion mark within two years, upon oil price hikes and the growing interest of oil-producing countries in financial investment as they ponder how to manage huge amounts of oil money.
Islamic finance, or financial transactions and products that suit Islamic law, has been growing by between 15 and 20 percent each year. The total assets of Islamic finance stood at over $700 billion as of 2007, and are expected to breach the $1-trillion mark within two years, upon oil price hikes and the growing interest of oil-producing countries in financial investment as they ponder how to manage huge amounts of oil money.

NCB Saudi Arabia launches Shariah compliant Visa Platinum Credit Card

AME Info, UAE | August 31, 2009

National Commercial Bank (NCB), one of the first and most prominent banks in the Kingdom of Saudi Arabia, has launched its latest Sharia-compliant premium credit card, The Visa Platinum Credit Card. The Platinum Credit Card is available in two separate loyalty schemes: Bonus (Cash Back) and Amyali (air miles). Cardholders can choose the scheme that best suits them, according to their lifestyle. NCB is the biggest Financial Asset Manager in the Arab region and was also the first to offer mutual funds in Saudi Arabia. Since the beginning of the1990s, NCB has been a pioneer in Islamic Banking, offering a wide range of unique alternatives to traditional banking services and products.

Islamic Finance To Generate Greater Interest This Year

Bernama National News Agency, Malaysia | August 20, 2009

Islamic finance will generate greater interest this year when the global economic outlook improves. RAM Holdings Bhd's group chief economist Dr Yeah Kim Leng said investors would seek alternative instruments that can mitigate risk of unsupervised leverage and debt creation. He told Bernama on the sidelines of the Malaysian Corporate Conference 2009 that investors would look at Islamic finance more seriously after the current global financial crisis. Yeah said there was growing interest for Islamic finance during the current crisis as investors shifted their focus to alternative instruments to reduce unmanageable risk of over-leveraging and over-speculation. The economist pointed out that the underlying risk for Islamic finance remained in terms of the issuers' ability to generate enough cash flow to repay borrowings. " However, the Islamic finance concept of no interest payment and share in risk capital provides a different avenue for investors," Yeah added. In terms of broadening the bond market, he said there was a need to to boost the ringgit-denominated Islamic bond or sukuk. A foreign currency denominated bond, he said, would provide an avenue to raise funds for capital expenditure.

  << Other Issues   Nov'09 | Oct'09 | Aug'09 | Jul'09 | Jun'09 | May'09 | Apr'09  >>