Latest from GIFC

Saturday, 8 September 2007

Islamic fund growing at fast pace

MANAMA: Islamic finance has progressed beyond expectations and is growing faster than conventional finance, says an expert. "We used to start with simple modes of financing like Musharaka and in the beginning Murabaha, but now we have product structuring and most of the income of Islamic finance now is made in the corporate sector from structured products," International Association for Islamic Economics president Mabid Al Jarhi told the GDN. "Islamic finance is now getting a more important share. We are now moving to critical mass in the market, 15 -17 per cent or 25pc of the market is not a small share and Islamic finance is growing very fast. "Assets grew in the Gulf on an average of over 30 per cent per year, between 2000 and 2006." At the Regional Forum on the Role of Islamic Financial Institutions in Financing for Development held in the Ritz-Carlton Bahrain, Hotel and Spa yesterday Al Jarhi also explained the new methods Islamic finance has developed to help make the Islamic finance sector more cost effective. "Islamic finance has developed the 'kitchen' approach, as it is very costly to document the products of Islamic finance and to make the contracts. "We used to go to law firms to do the contracts which would be wrong and we would have to discard them," Al Jarhi said. "For this reason we developed the kitchen approach, a way of getting the sharia experts along with ecomonic and financial experts so that we only seek the help of international lawyers for a limited period. "An example of this is when the Dubai Port Authority wanted to issue a sukuk, they wanted to do it quickly, they asked for tenders from legal firms. "The legal firms requested $9 million to document the sukuk and they wanted six months to complete the process. With the kitchen approach we did it in two weeks and took only $1m," Mr Al Jarhi. Concerning the growth of Islamic finance, Al Jarhi said that there are regulations and laws that should be changed to increase productivity of the market. "Another issue we need to tackle is that in certain Islamic countries we do not make enough profits due to legal impediments. "For example in countries like Indonesia the banking law does not allow explicitly for Islamic banks. Banks are taxed more heavily so we have been trying to convince them to change the law. "Indonesia has effectively the largest population of Muslims but only accounts for three per cent of the total assets of Islamic finance. "On the other hand ,Islamic finance is being adopted by countries China, Japan, Russia and other former members of the Soviet Union. For example we have spoken to Kazakhstan and they have promised to change their laws by the end of the year." Al Jarhi has also said that there are still challenges in the Islamic finance market concerning Sharia non-compliant issues from Islamic finance centres and issues of ill repute. "There are wrong products that are sharia non-compliant that are still being supplied by banks. This could be harmful to the reputation of the industry and individual banks. "Another important issue is that we must set corporate governance standards for sharia boards, so that a member of a sharia board must have a PhD in sharia. "Not having someone with a PhD in sharia on the sharia board is like having a nuclear physicist conducting a heart operation." - (GDN, 7 Sep 07)
---
Alfalah Consulting - KL: www.alfalahconsulting.com 
Islamic finance consultant: www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

No comments:

Upcoming Events on Islamic Finance, Wealth Management, Business, Management, Motivational Alfalah Consulting, KL-Malaysia: www.alfalahconsulting.com

ISLAMIC FINANCE EVENTS KUALA LUMPUR MALAYSIA

ISLAMIC FINANCE EVENTS KUALA LUMPUR MALAYSIA
Register Online . Register Today

Islamic Financial Planning & Wealth Management by Ahmad Sanusi Husain