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Sunday, 29 June 2008

Global cities race to become Islamic finance hubs

By Lionel Laurent,

Like several of its Gulf neighbours, Dubai has benefited from government support for Islamic finance, a favourable regulatory environment and strong domestic ties to Islam and Shariah. It has more listed sukuk, than anywhere else. What's more, Dubai is cosmopolitan and business-friendly enough to lure talent from far afield.

'Lawyers and banks are moving to Dubai,' says Darshan Bijur, director of auditor KPMG's Islamic finance division, adding that even Brits are not immune to the emirate's tax-free charms: One of the directors of Dubai's Financial Services Authority is a former London-based financial regulator and judge, Michael Blair. 'They have established a very high-quality regulatory system in the Dubai Financial Centre,' says Bijur.

Dubai's attractions are many: In addition to glitzy shopping malls, it boasts numerous free zones, which allow for 100% foreign ownership, 100% repatriation of capital and profits, exemption from corporate tax and no import duties.

Dubai will continue to be a major driver for Islamic finance in the near term, as it attempts to recycle the region's petroleum wealth into real estate, tourism, technology and other anchors of a truly diversified economy.

But its central role in Islamic finance isn't assured over the long haul. The UAE's dollar-pegged currency and booming economy are pushing inflation to dizzying levels.

Merrill Lynch said in January that inflation in the UAE would grow to 12% in 2008, up from 10% in 2007, unless big changes to monetary policy were forthcoming.

The rise in costs could tempt businesses to hubs like Bahrain. Industry insiders say the small island kingdom, which had an inflation rate of 4.6% in 2007, is a cheaper alternative.

International appeal

While the Islamic finance market was once a local affair, deeply rooted in the Gulf, now even Europe is getting in on the act.

The British government has voiced its determination to issue a sukuk, and the finance ministry is working to complete the necessary regulatory changes by next year.

The German state of Lower Saxony issued its own sukuk bond back in 2004 - the first European government to do so. The state hoped to attract more investment from the Middle East. It met its target of raising 100 million euros, but has not issued another sukuk since.

Even some highly unlikely contenders want a piece of the lucrative industry.

Malaysia has been strong in the market for the past decade, but now Asian countries with tiny Muslim populations are also looking to participate.

Japan wants to be the first nation in the G-7 to issue a sovereign sukuk bond - that is, if Britain doesn't get there first.

And Hong Kong Chief Executive Donald Tsang has said that he wants to develop an Islamic bond market in 2008, in order to boost the region's global financial standing.

London leads race to be Shariah capital

Among cities outside the Muslim world, London is the strongest Islamic finance centre.

'I think London will give Malaysia and the rest of the Islamic world a run for its money,' said Mark Toh, chief executive of Prudential's fund management business in Malaysia.

He believes London has all the strengths of a traditional financial centre, from a solid infrastructure to a qualified pool of prospective employees. Singapore, also seeking to attract Islamic capital, has the same lures but to a lesser degree.

London is already enjoying some success as a focal point for international Sharia-compliant investors, with both corporations and countries listing sukuk bonds in Britain.

London is also benefiting from New York's relative indifference to Islamic finance, which removes from the race a long-standing rival for global capital.

Analysts at Standard & Poor's have argued that America's financial capital has a narrower appetite for Islamic assets than other centres.

So far New York investors have shown an interest in Sharia-compliant equities, but not in Islamic bonds or in takaful, which is Islamic insurance.

One reason for New York's low interest level: European and Asian governments have been eager to change regulations to adapt to and attract Islamic finance - Britain, for example, struck down a law that double-taxed homebuyers who used a murabaha, a two-part Islamic financing structure, rather than a mortgage.

The US government, on the other hand, has shown little interest in chasing domestic or international investment in Shariah-compliant products.

That's not slowing down the rest of the world. With governments eager to grab a piece of the Islamic finance action, we can expect the competition to intensify over the next year.

DIFC watchdog urges transparency from Islamic scholars

The CEO of Dubai’s International Financial Centre Authority has called for more transparency from religious scholars that decide upon the viability of Islamic products.

Speaking at the 2008 Sukuk Summit in London on Thursday, Nasser Al-Shaali called for the sector to create “multi-lateral, internationally accepted” systems to inform investors about financial services’ compatibility with Islamic law.

He said more data should also be made available on the financial performance of sukuk, or sharia-compliant bonds.

“We need to force more transparency. There is a need for information systems to force transparency into the industry, to hold sharia scholars more accountable and to create consistency.”

Providers of sukuk have come under fire from scholars in recent months, with the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) stating earlier this year that as many as 85% of bonds did not conform to Islamic principles.

The industry has also complained about differences in regulatory approaches between national authorities.

Adressing the forum, Al-Shaali pointed to work being done by the Islamic Financial Services Board (IFSB) as being crucial to the development of the sector.

But he said too much focus was being placed on sharia standardisation and not enough on the “actual performance and uptake” of sukuk.

With the industry reported to be planning a certification scheme for Sharia-compliant bonds, he said: “When I buy a bag of potato chips in the States, I buy them for the potato chips, not necessarily for the small kosher symbol that’s on the back. But in case I wanted the comfort that they were kosher, that kosher symbol is there.”

Al-Shaali said services should always remain “true to the tenets of Islam”.

by Richard Agnew in London
(Arabaian Business)

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UK financial institutions to invest in Malaysia

Malaysia’s Islamic banking system has attracted the interest of financial institutions in Britain which are keen to start operations in the country and expand their activities.

Malaysia’s Deputy Prime Minister, Datuk Seri Najib Tun Razak, said that a UK-based financial institution involved in insurance and takaful has opened a branch in Labuan. In addition, he said, a bank in the UK had applied to expand its activities in Malaysia.

“The bank’s application to expand its activities will depend on approval from Bank Negara Malaysia,” he told reporters after meeting Lord Mayor of the City of London, David Lewis, at his office in Mansion House on June 9.

Najib was on a three-day working visit to Britain to attend the Commonwealth Mini Summit to discuss reforms in international institutions.

Conference on resilience and stability of Islamic financial system
Islamic Financial Services Board (IFSB) and the Institute of International Finance (IIF) are jointly organising a Conference themed Enhancing the Resilience and Stability of the Islamic Financial System November 20-21 in Kuala Lumpur, which Bank Negara Malaysia is hosting.
The Seminar is organised in response to the increasing global interest shown in Islamic financial services and is the first such cooperation between the IFSB and IIF.

The one and half-day conference will discuss and deliberate issues relating to the resilience and stability of the Islamic financial system during periods of economic difficulties and crisis.

(The Muslim News)

Kyrgyzstan Keen To Learn Malaysia's Model Of Islamic Economy

KUALA LUMPUR, June 28 (Bernama) -- The Kyrgyzstan government plans to introduce takaful (Islamic insurance), Islamic bond and production of halal products after having introduced Islamic banking one-and-a-half years ago, said Shamil M. Murtazaliev, advisor to the president of Kyrgyz Republic.

"InsyaAllah, I will lead a delegation to Malaysia next month to meet Malaysian companies involved in takaful, sukuk and the halal industry," he told Bernama recently.

"We want to adopt the Malaysian model of Islamic economy including how to manage haj pilgrims under a specialised body," he said.

The republic has undertaken a pilot project to implement Islamic bank as part of the republics adoption of a dual banking system comprising Islamic and conventional. The conversion was assisted by two experts, one of whom is a Malaysian.

It is now the most profitable bank among Kyrgyzstan's 22 banks, he said.

He said there was a big potential for Malaysian companies to engage in the production of halal products in Kyrgyzstan as demand for the products outstripped supply.

"All products with halal signs will be positively perceived in our country. Our main target is to raise the number of halal food production," he said.

Murtazaliev disclosed that a new halal legislation would be introduced in the republic soon to ensure that the environment was conducive for Malaysian companies to operate.

The former Soviet state is a landlocked country in Central Asia bordering Kazakhstan, China, Tajikistan and Uzbekistan. Eighty percent of its 5.01 million population are Muslims.

Agricultural processing is a key component of the industrial Kyrgyz's economy, as well as one of the most attractive sectors for foreign investment.


Saturday, 28 June 2008

Islamic Banking Blooms in Bangladesh

By Ferdous Ahmad, IOL Correspondent

DHAKA — The globally-booming Islamic finance is making strides and gaining popularity in Bangladesh, with experts predicting that the shari`ah-compliant industry will continue in steady steps to become the mainstream banking system in Muslim South Asian nation.
"The future of the Islamic banking systems is so bright," Mominul Islam Patwary, Chairman of the executive committee of Islami Bank Bangladesh Limited, told
The Islamic banking is seeing impressive growth in Bangladesh
Bangladesh entered the Islamic banking system only in 1983, with the establishment of Islami Bank Bangladesh.
Since then, five more full-fledged private Islamic banks and 20 Islamic banking branches of conventional banks have been established.
Patwary says that his bank is now one of the top performer banks in terms of business and profits among the 48 commercial banks operating in the country.
"Islamic Bank Bangladesh Limited has gained first position in the all private banks in term of deposits, investment, export & import and remittance collection."
According to the Bangladesh Bank (BB), the central bank of the country, the deposits of the Islamic banking systems are now 25 percent of all private banks deposits and its investments are 30 percent.
Bahauddin Mohammad Yousuf, vice chairman of Al-Arafah Islamic Bank, has an explanation for Bangladesh's Islamic finance boom.
He says that for a Muslim, whose religion prohibits earning or paying interests, Islamic banking makes it possible to operate interest-free business.
"People of this country are religious," Patwary, of the Islami Bank, agrees.
Islam forbids Muslims from usury, receiving or paying interest on loans.
Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.
Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.
Bangladesh is the world's third largest Muslim majority country, with Muslims making up more than 80 percent of the nation's 148 million population.
New Order
Bankers believe that the Islamic banking is set for even more progress, if a law governing Islamic Banking policies is introduced.
"If an Islamic banking Act is introduced, the Islamic banking systems will even further flourish," Patwary said.
Experts predict that with the rapid rise of Shari`ah-based systems, the industry will ultimately turn to be the financial mainstream in Bangladesh.
"The interest-free Shari`ah-based systems will be mainstream Banking and the conventional banks will be the minority systems in the OIC countries including Bangladesh within 2002," M Azizul Haque, a leading expert on Islamic banking in Bangladesh, told IOL.
Azizul Haque, who is also chairman of the Shari`ah Council of Dhaka, believes that Bangladesh will follow the rest of the world to the Islamic banking sector.
He explains that the growth rate of Islamic banking in the OIC countries for example is 15 to 20 percent while that of conventional banks is 10 to 15 percent.
Islamic finance is one of the fastest growing sectors in the global financial industry.
In defiance of the credit crunch, the global Islamic finance market has grown about 15 percent in each of the past three years, and is now worth about $700 billion worldwide.
Currently, there are nearly 300 Islamic banks and financial institutions worldwide.
Its assets are predicted to grow to $1 trillion by 2013.
Azizul Haque expects that higher growth rates in the next decade will force the global financial systems to Islamic banking.
"There is not any sort of apprehension regarding the success of Islamic banking," the renowned economic expert said.
"Capitalization could not solve the global economic problems.
"The world is looking for a new economic order. Islamic economic system will be that new economic order."
(Islam Online)
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Friday, 27 June 2008

British Treasury Says It's Committed to Islamic Bond-Sale Plan

By Anchalee Worrachate
June 27 (Bloomberg) -- The U.K. Treasury is committed to selling government bonds that conform to Islamic law, the first western country to sell such securities, Treasury Minister Kitty Ussher said today.
Decisions on tax rates and the underlying assets that would back the securities, known as sukuk, have yet to be made, said Ussher. A ``value-for-money assessment'' also must be carried out, she said yesterday.
``There's no doubt in my mind that if we can find a way that works for the taxpayers to do it, the benefit to the City of London in terms if prosperity, jobs and expertise will be enormous,'' Ussher said in an interview in London. The City of London is the capital's financial district.
The U.K. government wants to lure Middle East funds, which are flush with cash after crude oil prices doubled in the past year to over $139 a barrel. The sukuk market will expand by 35 percent to $200 billion in 2010, Moody's Investors Service said in February.
Sukuk bonds bar interest payments, typically paying an agreed profit distribution based on the underlying assets instead.
The U.K. Treasury will have more to say about the sukuk plan, most likely around the time of the government's pre-budget report that is typically is delivered between October and December, Ussher said.
Global sukuk sales climbed to $30.8 billion in 2007 from $18.1 billion a year earlier, according to data compiled by Bloomberg. Islamic bonds are mostly listed in Dubai, part of the United Arab Emirates. Malaysia and Singapore are also competing to become hubs for the sale of sukuk bonds.
More Study Needed
The Treasury said this month it favors a 2 billion-pound ($4 billion) rolling program of ``bill-like'' sukuk rather than ``bond-like'' sukuk.
Bills have maturities of one, three, and six months, whereas bonds have maturities of at least one year.
``A bond will have to be extremely large in order for it to work,'' Ussher said. ``We just felt that since this is the first time we are doing it, it would be simpler and less risky to sell Treasury bills.''
Ussher said the Treasury doesn't rule out selling ``bond- like'' sukuk in the future.
The government wants to show that ``London is serious about being a global center for Islamic finance,'' Ussher said. ``But it will have to be in the overall national interest.''
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MIFC Named Best International Islamic Finance Centre

KUALA LUMPUR, June 27 (Bernama) -- The Malaysia International Islamic Financial Centre (MIFC) has been named the 'Best International Islamic Finance Centre' at the 2nd Annual London Sukuk Summit Awards of Excellence.

However, the most poignant presentation of the evening was the special award for Outstanding Contribution to the Development of Global Islamic Finance, given posthumously to former Bank Negara Malaysia governor, Tan Sri Jaafar Hussein.

It was Jaafar, governor from June 1985 to May 1994, who famously declared in the late 80s, his dream of seeing an Islamic banking system operating alongside a conventional one.

The Awards secretariat said in a statement that Jaafar was in reality the architect of the modern Malaysian Islamic financial system.

The ceremony held on June 25 was to honour a host of regulators and bankers who had contributed significantly to the Islamic banking and financial movement over the last three decades.

A total of 14 awards were handed out and it also included one for Adnan A. Al Musallam, the chairman/chief executive officer of The Investment Dar in Kuwait. He was recognised for his Outstanding Leadership in Islamic Finance.

Adnan started his career in Islamic banking in the 70s at Kuwait Finance House and over the years trained several of the current generation of senior Islamic bankers in Kuwait.


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Wednesday, 25 June 2008

Sharia and Health Insurance

Riyadh, Asharq Al-Awsat-

Shariaa dictates that we must strive to maintain five main necessities: religion, spirit, progeny, mind and wealth. Thus, we are Islamically obliged to seek medical care when needed. The Prophet Mohammed's (PBUH) contemporaries relate that he encouraged the public to “make use of medical treatment, for Allah has not made a disease without appointing a remedy for it, with the exception of one disease, namely old age.”

Medical care has become unaffordable for many individuals and impossible for those whose states do not offer free care or sufficient resources.
In response, states are implementing plans to reduce ever-rising costs, most notably including health insurance schemes.
Many health insurance companies operate in accordance with the principle of takaful, or mutual insurance in accordance with Shariaa, as opposed to commercial insurance policies which are Islamically prohibited (haram). Prominent scholars proscribed commercial insurance with the exception of hospitals, as they offer medical services in return for insurance, rendering the exchange mutual and Islamically permitted (halal).
Those selling insurance policies are either insurance companies that specialize in medical insurance or general insurance companies. Hospitals sell their services to insurance companies not to patients, and thus medical insurance is no different from any other type of insurance in terms of being haram and halal.
Saudi Arabia recently set up a Health Insurance Council, which has implemented standards for health insurance companies and medical institutions and drafted codes of regulation. However, in order to be successful, I believe the Council must implement the following:
1- The requirement that medical insurance companies offer Islamic mutual insurance, and this is what the cabinet stipulates upon in general. As we are a society that adheres to religion, the authority of Shariaa is considered paramount to that of an individual choice. Consequently, if medical insurance does not comply with Shariah rulings then many people will not participate.
2- The allocation of courts for insurance-related cases to restore confidence in those who avoid insurance schemes because of the difficulty of conveying complaints, queries and litigation.
3- A unified insurance policy to balance the rights and duties of the concerned parties, drafted by a neutral party; namely, the Health Insurance Council.
4- The requirement that health insurance companies offer a reasonable minimal level of insurance to all clients.
5- An awareness campaign about the importance of health insurance through conferences, seminars, media and targeted advertising.
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Monday, 23 June 2008

Singapore, Hong Kong covet Malaysia's Islamic finance crown

By Saeed Azhar and Umesh Desai

SINGAPORE/HONG KONG, June 22 (Reuters) - Malaysia, Asia's biggest Islamic finance market, can expect growing competition from Singapore and Hong Kong, which are raising their game to tap Middle East funds keen on investing in the region's economies.

Malaysia has a stranglehold on the global market for Islamic bonds -- two-thirds of such bonds, called sukuk, were issued in the Southeast Asian state last year -- and it has built up expertise in Islamic fund management and insurance.

But latecomers Singapore and Hong Kong, leading Asian centres for conventional private banking and fund management, are adapting their financial systems with a view to getting a slice of the $1.3 trillion in global Islamic finance assets.

Hong Kong, for example, is considering scrapping a stamp duty on Islamic finance structures to avoid double taxation. Singapore is soon to launch new guidelines for sukuk.
Both need to build up expertise in a complex area.

"Singapore and Hong Kong are established financial centres so their clearest path to a prominent position in Islamic finance is to encourage a critical mass of Islamic finance experts," said Hooman Sabeti, an Islamic law specialist at law firm Allen & Overy.

Singapore and Hong Kong are unlikely to supplant Malaysia as the leading centre in Asia, Sabeti said, because they lack a large, natural domestic market for Islamic products.

But they could become increasingly active in selling Islamic products to private banking clients and fund investors.

Indonesian, Bruneian and Malaysian investors who already own conventional financial assets in Singapore would be obvious targets.

A Merrill Lynch/Capgemini study last year showed that 19,000 individuals of Indonesian origin resident in Singapore held around $93 billion in financial assets.
Hong Kong, for its part, could provide a gateway for new investors interested in mainland China, constructing sharia-compliant products with underlying Chinese assets.


Hong Kong and Singapore are not Islamic states and Muslims in each city are in the minority. But that does not preclude the emergence of an Islamic finance sector, as London is showing.
With their strong, corruption-free economies and robust banking and legal systems, Hong Kong and Singapore provide ripe environments in Asia for the development of products that comply with Islamic law, or sharia.

Singapore is offering incentives, while Hong Kong is amending laws to draw business and has propsed an Islamic bond issue by the city's airport authority.

"Hong Kong is now conducting a review of tax laws in Hong Kong to ensure that Islamic financial transactions will not be disadvantaged simply because of their special structure," said a spokeswoman for the Hong Kong Monetary Authority.

To get a level playing field, it needs among other things to eliminate double taxation on Islamic finance products structured to comply with Islam's ban on interest payments.
For example, in a mortgage under Islamic finance, a typical structure requires the financer to first buy the property and then sell it to the borrower on a cost-plus basis, so that the lender gets a profit rather than interest. Since that entails two sales, stamp duty is due twice over.

In February Singapore introduced a 5 percent concessionary tax rate on income derived from sharia-compliant fund management, lending and insurance.

It has succeeded in attracting Islamic banks such as Kuwait Finance House, which plans to manage regional funds sponsored by the group investing in Asia.

"There is huge potential for Singapore in the area of asset and fund management," it said in an emailed statement.

DBS Group Holdings , Singapore's biggest bank, last year set up Islamic Bank of Asia, the city's first Islamic bank.

Last month Japan's Daiwa Asset Management listed its first sharia-compliant exchange-traded fund on the Singapore Exchange.

In Hong Kong, Hang Seng Investment Management launched a sharia-compliant fund last year, and in March a $550 million exchangeable sukuk was listed on the Hong Kong Stock Exchange.
Rosita Lee, investment product head at Hang Seng Investment Management, said Hong Kong had the edge over Malaysia in pitching Islamic finance products to China-focused investors because there was a better understanding there of mainland policies.

But both Hong Kong and Singapore may need to adapt to satisfy investors who want separate regulation for Islamic banking.

Kuwait Finance House said it wanted Singapore to regulate sharia matters through a central body for Islamic banks and financial institutions. Such a set-up helped Malaysia create an environment where Islamic funds flowed into Islamic assets.

"Ultimately, if you want to sustain the industry as a key component of the financial markets, I would think that they require introducing some laws that are specific for the Islamic financial market," said Badlisyah Abdul Ghani, chief executive of Malaysia's CIMB Islamic Bank, a major sukuk deal maker. (Editing by Alan Raybould)
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Sunday, 22 June 2008

Stock Exchange Regulator Bursa Malaysia to Launch Two New Islamic Products By Q1 2009

STOCK exchange regulator Bursa Malaysia is expected to launch two new Islamic products by the first quarter of next year, namely a Commodity Murabahah and a syariah-compliant securities borrowing and lending (SBL).

The Commodity Murabahah will leverage on the country's competitive position in the crude palm oil market, Second Finance Minister Tan Sri Nor Mohamed Yakcop said.

This initiative will enable palm oil to be used as the underlying instrument for Islamic finance and capital market products, the first for Malaysia.

"This product has received tremendous support from palm oil producers who have committed close to RM600 million worth of crude palm oil to be used as the underlying commodity," he said in his keynote address at Bursa Malaysia's Malaysia Islamic Capital Market conference in Kuala Lumpur yesterday.

He added that the amount is expected to reach RM1 billion by year- end.

"I am confident this infrastructure will further expand to support multi-commodities to meet the demand of the international market."

The syariah-compliant SBL, meanwhile, is a structure that uses conventions of waad (exclusive promises) to support the creation and redemption of Islamic Exchange Traded Funds (ETFs).

"Through this syariah alternative SBL infrastructure, Bursa Malaysia hopes to match the needs of issuers with investor requirements," said Nor Mohamed.

(New Staits Times)

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Saturday, 21 June 2008

Malaysia: Need for better Islamic capital market (ICM) infrastructure

KUALA LUMPUR: Although Malaysia has successfully prepared to position itself as a global Islamic capital market (ICM) hub, it needs to improve its ICM infrastructure and offer more innovative Islamic financial products.

BNP Paribas Asset Management Sdn Bhd executive director Angelia Chin said local regulators must put in place a comprehensive infrastructure and regulatory framework for foreign players that were keen to expand and broaden their involvement in ICM.

“We want to see Malaysia easing its rules, allowing banks to conduct Islamic banking business in foreign currencies while continuing to develop and refine innovative Islamic financial products,” she told a media roundtable held in conjunction with the Malaysia ICM Conference 2008 yesterday.

The conference was jointly organised by Bursa Malaysia and the Malaysia International Financial Centre.

Hong Kong-based BNP Paribas Asset Management Asia Ltd structured funds manager Erkan Yilmaz said there was a need to develop specialised Islamic products to cater to both retail and institutional investors.

To date, the ICM products available include debt and equity instruments, global Islamic bonds or “sukuk”, Islamic real estate investment trusts (REITs), Islamic private equity funds and Islamic exchange traded funds (ETFs).

(An ETF is a unit trust fund that is listed and traded on a stock exchange and designed to track the performance of an index.)

Yilmaz said the launch of ETFs by Malaysia was a good move as it enabled fund managers to easily invest in core strategic investments.

CIMB Islamic Bank Bhd executive director and chief executive officer Badlisyah Abdul Ghani, meanwhile, described sukuk as the ambassador for all the Islamic financial products.

Malaysia has grown to be the world’s largest Islamic bond market, accounting for about 60% of global Islamic bonds outstanding, which are worth about US$100bil.

Badlisyah said Islamic REITs and ETFs were also gaining popularity among local and overseas investors keen to diversify their investments in ringgit-based instruments.

To date, syariah-compliant stocks account for about 86% of stocks listed on Bursa and 65% of total market capitalisation.

Aishaya Group head of share division Abdulkader S. Thomas said: “We are seeing an increasing uptake of Malaysian Islamic products outside the region.”

He said there was an interesting phenomenon lately whereby hedge fund managers were seen growing their investment in Islamic products.

Thomas also said there was a need to train and educate new talents to become experts in ICM.

Badlisyah added that Malaysia had a large pool of talent that could be groomed for ICM.

“We need to train bankers to become syariah experts, and syariah experts to be good bankers,” he added.

(The Star, Malaysia)

Malaysia to Give Islamic Bank, Fund Manager Licenses

June 20 (Bloomberg) -- Malaysia will allow more lenders to set up Islamic bank units and plans to issue licenses for overseas Islamic fund management companies to woo investments as it faces competition from Singapore, Hong Kong and Japan.

The central bank has given licenses to banks such as HSBC Holdings Plc, Oversea-Chinese Banking Corp. and Standard Chartered Plc to set up ``standalone Islamic subsidiaries,'' Mohd Razif Abd Kadir, Malaysia's deputy central bank governor, said in an interview in Kuala Lumpur yesterday.

``More are in the pipeline,'' he said, declining to name the banks. ``Investors' appetite for Islamic papers is huge'' and they are ``unaffected by the subprime issue.''

Malaysia is giving licenses and offering incentives to help cement its role as Asia's Islamic finance hub. The Asian country, which accounted for two-thirds of global Islamic bond sales last year, has also offered tax breaks to stay ahead of the newcomers vying for a piece of the market estimated to expand to $2.8 trillion by 2015.

Japan plans to sell as much as $500 million of Sukuk this year, according to Moody's Investors Service in February. Hong Kong raised its first Islamic fund last year, fetching $45 million by December. Singapore, which started offering investors incentives in the past few years, said May 13 it plans to develop a facility to start a domestic Islamic bond market.

Huge Potential

Malaysia, where 60 percent of the 27 million people is Muslim, also faces competition from other countries where a majority of citizens share the same faith. Indonesia, which has the world's biggest Muslim population, passed its first Islamic banking law this week to allow foreign and domestic investors to buy stakes of Shariah-compliant banks in the country.

``The potential for growth is huge because it's an underserved market,'' said Fiona Leong Wai, an analyst at AmSecurities Sdn. in Kuala Lumpur. ``That's why you see everyone going in, wanting to have a slice of that market.''

It makes sense for the nation to go after more investments in Islamic products because ``Malaysia is ahead of some of the other countries'' in terms of Islamic finance, she said.

The government said yesterday the stock exchange will introduce two new Islamic products in the first quarter of 2009. The first, called Commodity Murabahah, will use palm oil as the underlying asset for Islamic finance and capital market products, and the other will be a Shariah-compliant instrument that allows borrowing and lending of securities, using the Islamic concept of ``waad.''

New Licenses

In January, it also rolled out an 840 million ringgit ($257 million) Shariah-compliant exchange-traded fund, the first of its type in Asia.

Malaysia will issue new licenses for companies planning to set up an Islamic fund management business in Malaysia, said Mohd Razif, who oversees the development of an initiative called the Malaysia International Islamic Financial Centre, aimed at promoting Islamic finance.

The new licenses mean the funds, which will invest in ringgit and non-ringgit denominated assets, will be exempted from paying taxes until 2016, according to the central bank. The funds won't be restricted to investments in Malaysia, though they need to have experts operating in the country to enjoy the benefits, the central bank said.

`Quite Compelling'

Malaysia has five pure Islamic banks in the country, Mohd Razif said, including Kuwait Finance House KSC, the world's second-largest Islamic bank, and Saudi Arabia's Al-Rajhi Bank. There are nine local banks and 14 overseas banks in the country that already offer Islamic financial services, including HSBC, Oversea-Chinese and Standard Chartered, helping to make country a base for Middle Ease investors amid record oil revenue.

``The flow of capital from the Gulf, with the oil boom,'' will need to find a destination, Mohd Razif said. ``In terms of incentives, it's quite compelling for the banks to consider Malaysia as a gateway to this region.''

Islam's Shariah law bans the payment and receipt of interest, and investments in businesses such as gambling. Sales of Sukuks, or Islamic bonds, are expected to increase more than 22 percent a year in Malaysia, Mohd Razif said.

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Al Hilal inaugurated in Abu Dhabi - Fresh thinking inspires “Financial Mall”, innovative products and cutting-edge service

Al Hilal, the freshest face in Islamic banking, has been inaugurated under the presence and patronage of His Highness Sheikh Mohammed Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, Deputy Supreme Commander of the UAE Armed Forces and Chairman of the Executive Council and of His Highness HH Sheikh Mansour Bin Zayed Al Nahyan, Minister of Presidential Affairs.
ith a clear vision to become the region’s leading financial institution, Al Hilal has developed a completely new approach to Islamic banking by focusing on new products and technology while bringing excellence in service to the forefront.
The stated aim of this new concept is to set high standards of excellence in the UAE’s banking industry, and to maximise stakeholders’ value by acting as a catalyst towards the growth of local and regional economies. By doing so, Al Hilal seeks to offer contemporary and innovative financial services in accordance with Islamic Shari’a.
s a cutting-edge financial institution with a completely new outlook on banking, Al Hilal has placed great emphasis on recruiting the highest calibre of management staff.
His Excellency Eissa Mohamed Al Suwaidi, who serves as a director of the Abu Dhabi Investment Authority, serves as Chairman of Al Hilal Bank. In other roles, he holds a number of directorships in the UAE and in the Arab world.
Meanwhile, with a wealth of industry experience from around the region, Mohamed Jamil Berro heads up as the bank’s Chief Executive Officer; formerly the Global Head at the Personal Banking Group for Arab Bank, he has also been a board member at a number of prestigious institutions, including Arabian Insurance in Lebanon, Arab Islamic International Bank, Al Nisr Insurance and Visa, in Jordan.
The uniqueness of Al Hilal as a banking institution is matched by its revolutionary setting, and the inauguration took place at the main branch at the Al Sahel Tower. This “Financial Mall” is completely groundbreaking in its approach to business and customers.
The first of its kind in the Middle East, Al Hilal has brought a shopping mall feel to consumer banking by bringing its products and services into a retail environment that has been designed to be interactive and engaging for customers.
In this financial mall, customers are given the opportunity to feel the Al Hilal promise of “It’s all about you.” The 360-degree approach to banking here is divided into a variety of sections that specialize in each customer’s requirements.
Each line of business, such as real estate, automotive and personal banking, takes a separate area that is based on a “shop within a mall” concept. There is a main walkway with kiosks and displays with rest areas, similar to a commercial mall. Meanwhile, each product area has its own shop front and entrance archway.
A modular exhibition space has been built in to bring a third dimension to banking, to showcase local artists and act as an event venue.
There is a private area for ladies’ banking with a branded coffee shop and its own version of the art gallery. Children, too, are catered for with their own banking areas that are designed to be engaging and educational, alongside a separate area for youth banking that is sophisticated, trendy and technology driven.
Even a car showroom is available for customers who are interested in automotive finance, and a theatre has been installed for movie presentations, guest speakers and focus groups.
With this unique infrastructure in place, Al Hilal expects to enjoy enormous success very quickly. With its innovative approach to Islamic finance, customer service and location, it has already captured the imagination of customers and soon foresees growth beyond the national boundaries of the UAE.
About Al Hilal Bank:
Al Hilal Bank is wholly owned by the Abu Dhabi Investment Council, which is an investment body of the Government of Abu Dhabi. The Bank has an authorized capital of over AED 4 billion and is licensed to operate as an Islamic commercial bank. Al Hilal Bank is committed to becoming the region’s leading financial institution, escalating the development of Islamic Banking with a fresh approach to the industry, new technology and service excellence.

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Friday, 20 June 2008

Islamic finance is going from strength to strength

"High Finance"

Amid continuing turmoil in global credit markets, Islamic finance is going from strength to strength. Arabian Business examines the rise of Sharia investment, and analyses the challenges ahead.

With the credit crunch and markets in the West tightening their belts, more and more attention is becoming focused on the Middle East as a source of potential revenue and growth.

And with a host of Sharia-compliant products on offer, both local and international finance houses are scrambling to secure their slice of a lucrative market.

"Islamic finance is kind of like going fishing and having a net which is able to catch all kinds of fish - if you're going fishing in the Middle East and you have Sharia-compliant financing prospects, then a lot more people will likely be able to take advantage of your products," says Oliver Agha, head of Islamic Finance at DLA Piper, the world's largest law firm.

If you've only got conventional financing products then you're limiting your business. It's like appealing to a larger audience, and from a very simple commercial perspective, that's why it's becoming attractive.

Islamic finance has grown by between 15 and 20% in each of the past three years, and since the inception of modern Islamic banking, the number and reach of Islamic financial institutions worldwide has risen from one institution in one country in 1975, to more than 300 institutions operating in more than 75 countries today.

Although Islamic banks are concentrated in the Middle East and southeast Asia, they are also niche players in Europe and the US. Islamic banking assets and assets under management now exceed US$1.7 trillion, and the Islamic finance sector is expected to reach US$2.7 trillion by 2010.

"Project financings that previously were done purely conventionally are now beginning to be done on an Islamic basis, sometimes partially and sometimes wholly," says Agha.

Across the board you're seeing Islamic financing coming into the fray - insurance for instance has grown tremendously and the premiums now are at US$2bn to US$3bn, and we expect that to go up to US$10bn in a decade.

"So in all respects as the market develops and matures, we're seeing a growth that's pretty substantial."

While Islamic finance is still a nascent industry, with a small share of the global market - about 1% - the sector is benefiting from a number of favourable structural and cyclical drivers: strong growth in the GCC and emerging market economies of Asia, positive demographics of young and rapidly growing populations, and a shift of preferences of savers and investors towards Islamic finance in Muslim countries.

There are also handsome returns to be had.

"We have found that Sharia finance doesn't just help you pick good sectors from the broad universe, but it actually helps you move a step further and pick good companies from within those sectors," Jahangir Aka, senior executive officer for SEI in the Middle East, and author of a new report entitled Sharia Investing: Beating the Credit Crunch, tells Arabian Business.

In the report released last week, The New York-based investment operations solutions firm emphasises the consistent outperformance of the MSCI World Index by the Dow Jones Islamic Developed World Index.

"Sharia-compliant structures have many screens and requirements that should be recognised as contributing to this outperformance," the report reads. "The oft-quoted aversion to the financial services sector is only one of those."

"It is a much tighter, far more regulated market [than conventional finance]," says Aka. "There are so many screens and filters, and if you're applying your Sharia guidelines and principles then you have to be doing a very, very high level of due diligence."

In addition, the leverage component of Sharia finance has played an important role in assuring the security of investments. The broad Islamic screen on equities demands low-leveraged companies, with acceptable debt-to-revenue ratio levels below 33%.

"As a result, what we have ended up picking, in terms of stocks, have actually been far, far better performers," Aka continues. "We've been managing mandates for different religions for a while, and we have been pleasantly surprised by the performance of Sharia-compliant structures.

Despite the success stories, there are challenges ahead for the Sharia finance industry.

There is a dearth of large funds capable of investing in large project financings, and as a result some are calling into question the ability of Islamic institutions to be able to underwrite the massive projects with which the Middle East has become synonymous.

In addition, the issue of attracting and retaining staff to work in the Sharia sector requires education - and reeducation - at a number of levels.

"There is certainly a need for more professionals to get into the sector," says Agha at DLA Piper.

"We will have conventional bankers that make their way into Islamic finance, especially as it picks up while conventional banking goes into a downturn, but I think that the skills that they will bring will be conventional banking skills and not Islamic Sharia skills," he continues.

"The problem lies not in people failing to understand banking, but in people failing to understand the fundamentals of Islamic financing.

As Islamic finance booms and firms scramble to expand their capacity, so the movement of professionals schooled in conventional financing into the Sharia sphere appears inevitable.

However, it may also represent a threat to ‘pure' Islamic finance, as Sharia professionals and scholars are concerned that the market will witness the replication of conventional banking structures in an Islamic banking context - a shift that would be unlikely to benefit Sharia financing in the long-term.

"We are trying very hard to replicate the conventional world, and I think that in itself makes things a little bit difficult," says Aka at SEI.

"The challenge is we are trying to run too fast - I think there's some element in people's view that we're trying to catch up with conventional and I don't think we are.

"I think the Islamic principles are different, and I think it's important that we design products that are true to those principles and not try and get too close [to conventional]," he continues.

The challenge is that there aren't enough people that are coming out of Sharia degrees and I think that as a result you're hiring people from conventional, and with them they transport practices - ‘this is how I do it in conventional, so let me find a loophole so I can do it in Sharia'.

"There is a risk of diluting the Sharia ‘brand' - with too fast an innovation, that we start cutting corners around what is ‘Sharia'," he adds. "I'd say that 90% of organisations are trying to stay true to it, but there are some with big marketing dollars that are definitely going the other way and potentially creating some risk to the Sharia ‘brand'."

Islamic boards have already launched the fightback. Sheikh Muhammad Taqi Usmani, president of the AAOIFI Sharia Council in Bahrain, warned last year that around 85% of Islamic bonds (Sukuk) do not truly comply with Islamic law.

"It was expected that Islamic banks would progress in time to genuine operations based on the objectives of an Islamic economic system and that they would distance themselves, even step by step, from what resembled interest-based enterprises," he said. "What is happening at the present time, however, is the opposite.

"Islamic financial institutions have now begun competing to present themselves with all of the same characteristics of the conventional, interest-based marketplace, and to offer new products that march backwards towards interest-based enterprises rather than away from these."

Sukuk are the fastest-growing segment of Islamic finance, and global volumes up to 2007 reached almost US$100bn. Sukuk issuance in Europe, the Middle East and Africa and Asia-Pacific increased by 71% in 2007 to US$33bn, and the average deal size increased to US$270m from US$175m.

It is expected that in 2008, overall Sukuk issuance will grow by some 35%.

Sheikh Usmani's comments shook the industry - some 160 institutions in more than 30 countries are members of AAOIFI, whose standards are mandatory in Bahrain, the Dubai International Financial Centre, Jordan, Qatar, Sudan and Syria, and are used as guidelines elsewhere.

AAOIFI has a board of 20 Sharia scholars, who are members of the Sharia boards of most of the world's largest financial institutions.

"I think already people are starting to get nervous about whether it's really "halal' (permissible) and are starting to question it more and more," notes Aka at SEI. "I think you're going to get more and more scholars who will start challenging this and contesting this.

"We don't want [the sector] to be over-regulated because we need some flexibility to be able to do our own thing, but there is a lot we can do," he continues. "There is haste in just wanting to do more for the sake of it - and that is somewhat inherent in the Middle East at the moment.

"I think it's a danger to the extent that all that you're doing is using a conventional banking deal and slicing it to appear Islamic," agrees Agha at DLA Piper.

The answer lies in part in consulting early on with the scholars and with the Sharia consultants that can help guide the structures along more Sharia-compliant forms. We need to get more Sharia scholars and consultants into the fray.

If the sector can address these concerns, then its growth potential is enormous. The GCC countries are innovating, with Islamic financing structures increasingly used to finance projects in the MENA region.

The prospective MENA dollar volume of project finance is estimated to be more than US$167bn, of which nearly half is in Saudi Arabia, followed by the UAE and Egypt.

Qatar alone has stated that US$70bn will be needed in the coming years to finance projects in the energy and telecoms sectors, of which US$15bn is expected to be financed by long-term fixed-income securities, both conventional and Islamic.

Given the planned expansion of many of the GCC economies and the commitment to invest in infrastructure, including transportation networks, public utilities, housing, health and educational systems, infrastructure funding through Sharia-compliant finance is clearly a highly attractive source for such investments.

The total cost of infrastructure projects planned or underway in the Gulf countries is currently estimated at around US$1.8 trillion. Given the ease with which capital market products transcend geographical borders, Sharia-compliant financing projects which originate in one country can source investors globally.

"I think it's going to take some time before you start getting larger muscle behind these funds to start underwriting the really big projects," insists Agha.

"But if Islamic finance grows properly, I think that will happen," he continues, noting that the Middle East is not alone in pursuing the Sharia dollar.

"London has really made a concerted move to become a Sharia finance capital, while Singapore and Kuala Lumpur have made real strides too," he says.

"Hong Kong has made a very big play for Islamic finance and is looking at a Sukuk, and they want to take a lot of the Islamic funds into China and structure them through Hong Kong."

The race is on for the next US$1 trillion - and beyond.

(Arabian Business)

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Wednesday, 18 June 2008

Alliance Islamic eyes RM100m new deposits under tawarruq principle

KUALA LUMPUR: Alliance Islamic Bank hopes to garner RM100mil in deposits from its new Alliance Fixed Investment-i (AFI) by the second quarter this year.
The bank planned to achieve this through existing and new corporate customers, chief executive officer Yahya Ibrahim said in a statement.
“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,” he said.
A syariah-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 the agent to buy commodities from a trader.
The bank will subsequently purchase the commodity from the customer on a deferred payment basis.
Alliance Islamic Bank yesterday signed a memorandum of understanding with Okachi Malaysia Sdn Bhd, appointing the latter its commodity trader.
“AFI provides an alternative source of Islamic deposits from government bodies and large corporate depositors. It will help improve the bank's liquidity position as well as its financing deposit ratio,” Yahya said.
The product allows a customer to place a minimum order of RM1mil and a maximum of RM100mil for a minimum tenure of one month and a maximum tenure of 60 months. – Bernama
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Islamic Funds Are Avoiding the Financial Meltdown

Barron’s June 16, 2008 featured an article, Keeping the Faith, about how funds adhering to Islamic (Shariah) investment principles have avoided the greatest effects of the current credit crisis.
We found the same tendency to be true in a study we performed for Business Islamica Magazine of Dubai, U.A.E in 2007. (Download PDF version of article here.)
Interest, whether paying or earning it, is to be avoided in Shariah compliant investing. The result is that banks and insurance companies, for example (fund proxies: KBE, KIE, and XLF) are not found in Islamic funds.
There are other prohibited investments, but the overwhelming economic impact of Shariah investing is the avoidance of financial companies and leveraged companies.
The story is not all positive however. As logic would suggest, and as our study demonstrated, Shariah compliant funds outperform the general market (whether US, Europe, or Japan) in times when financials do badly, and underperform the general market when financials do well.
In any event, Shariah compliant funds are proliferating globally and their assets under management are growing very rapidly, due in part to the increased petro-dollar flows to regions where Shariah compliant investing is attractive.

(seeking alpha)

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United Kingdom"s New Islamic Bank Gatehouse Bank Starts on a High Note

Within a month of being authorized as a wholesale bank in the UK by the Financial Services Authority (FSA), Gatehouse Bank has amassed six strong mandates for deals. This, says David Testa, CEO of Gatehouse Bank, underlines that these are encouraging times for Islamic finance especially in the worst conventional financial market for decades, and is a “testament to the way we established the bank and the support of our Board.”

Gatehouse Bank, the latest Islamic bank to be established in London, is 100 percent owned by The Securities House of Kuwait. The bank has a paid-up capital of £50 million and an Authorized Capital of £225 million, which can be drawn down as and when the need arises. “We submitted the licence application in November 2007. The application process went very smoothly, because we have a clear and simply business strategy. We got the licence approval on April 22, 2008. Our focus is wholesale banking - especially capital markets, wealth management and real estate funds,” explained Testa.

The flow of mandates is very encouraging. These range from opportunities in Europe, Kuwait, Bahrain, Saudi Arabia and from the US. Bankers are encouraged by the level of activity and appetite for Islamic finance especially in the UK. Although, there is increasing interest from US institutions and corporates, David Testa confirmed that Islamic finance is still in an education process in the US, although he found the market demand for Islamic finance more encouraging than expected. However, this interest comes against a background of the US Treasury recently announcing that there will be a greater degree of scrutiny of Islamic finance. Such ambivalent attitude is creating confusion in the market which can potentially marginalize the involvement of US institutions in Islamic finance especially in the home markets.

In many respects there is a developing Islamic finance cottage industry with the involvement of the University Bank in Ann Arbor; Devon Bank and Lariba in offering bespoke Islamic products such as Shariah-compliant mortgages. There are some 7 million Muslims in the US and many of them are successful businessmen running small-to-medium-sized companies.

However, small-to-medium-sized banks such as Gatehouse Bank and the other five authorized in the UK - Islamic Bank of Britain; European Islamic Investment Bank; Bank of London and the Middle East; Securities House (UK); and European Finance House - do have their work cut out. Gatehouse Bank, for instance, was bidding for acquisition deal in UK, but lost out to a major conventional bank. “This is a warning to the smaller banks,” explained Testa. “The large global institutions just want to do the deal for market share even though the deal size was small. The big banks can come in as and when they like. The line of difference is the scale of transactions and not pricing or cost.”

Gatehouse Bank’s key client focus is on GCC corporations and financial institutions keen to access the global capital markets; Asian, European and US non-Islamic borrowers seeking investor diversification; and Islamic investors funding investments in Asian, European and North American Assets. The bank prides itself in the strength of its distribution function. It had already recruited four top people with another two joining imminently.

Testa, until recently a senior executive at WestLB’s London branch, aims to “hit the ground running” with a quality team; innovative products; and placement power. “We have to keep our name out there and start building our reputation with well structured products and good returns for investors. We want to succeed in the international sphere. That is why The Securities House established a bank in the most expensive environment,” he stressed. Gatehouse currently has a staff of 27 and plans to increase this to the mid-30s by the end of 2008.

Recruitment has gone surprisingly well with senior personnel coming from global players such as Merrill Lynch , Lehman Brothers and Goldman Sachs, and from institutions such as Investec and banks from the GCC.

Gatehouse Bank’s Shariah advisory board comprises Sheikh Nizam Yaquby from Bahrain; Dr Abdul Aziz Al-Qassar from Kuwait; Sheikh Haytham Tamim from Lebanon; and Mufti Muhammed Shikdar from the UK.

At the moment it is a lenders market. Until a year ago, Islamic finance was more expensive than conventional, but the repricing of conventional market has meant that spreads have been widening perhaps more so outside the GCC.

The UK is a natural focus for Gatehouse Bank. Real Estate is always an attractive asset class, but the market, said David Testa, is stressed at the moment. As such, banks have to exercise caution. Gatehouse Bank does have plans to launch a real estate fund or company to investment in UK real estate assets, but only when the timing, portfolios and projected returns are right.

He remains bullish about acquisition financing, following on from the £522 million Aston Martin acquisition through an Islamic LBO (leveraged buy-out), which he helped structure during his days at WestLB. Private equity is another potential area of focus. Banks such as Gulf Finance House and Arcapita Bank have already been active in this area in the UK. He stressed that it is not an appropriate time to go to corporates for refinancing business because of the credit crunch.

Of course, if the UK government decides to issue a debut sovereign Sukuk, this would be an important catalyst for the market. Gatehouse Bank is also talking to UK clearing banks about corporate issuances.

David Testa is not unduly concerned about the competition in the Islamic space in the UK. He believes there is a clear business differentiation between UK Islamic banks. Bank of London & Middle East is focussing on bilateral business; European Finance House is reliant on a proud parent, Qatar Islamic Bank for business; and Gatehouse Bank is strongly capitalized with a clear focus on capital markets syndications, wealth management and real estate.

Testa believes that the London-based Islamic banks are sustainable and that eventually some may be more a target for acquisition by institutions such as Noor Islamic Bank and others. The inflow of cash from the GCC countries, “present a continuous stream of opportunities, although in the UK the CIS (collective Investment Scheme) remains a major problem especially relating to Stamp Duty Land Tax (SDLT). “I am not convinced Sukuk are structured correctly. If a UK institution sells down to GCC investors then you have withholding tax, which will hit the pockets of GCC institutions,” he added.

He remains sanguine about the recent AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) Shariah Committee statement on Sukuk. This to him is not new but an ongoing debate and work in progress. The recommendations refer mainly to Mudaraba and Musharaka structures . “Again if we talk about acquisition finance, if a perfect LBO is involved, then the perfect instrument is Mudaraba, because you don’t have to worry about a separate purchase undertaking because it is an asset finance,” explained Testa. However he maintained that there is some legitimacy in the AAOIFI approach.

(Pakistan Daily)

Qatar Islamic Bank eyes funding USD5 bln Malaysia refinery

DUBAI, June 14 (Reuters) - Qatar Islamic Bank QISB.QA has agreed to study a plan to raise funds for a $5 billion refinery and petrochemicals project in Malaysia, the bank said on Saturday.
Under an initial agreement signed with a Malaysian unit of Gulf Petroleum Ltd, Qatar Islamic "would study and eventually lead a consortium of banks and financial institutions to arrange the funding covering both financing and equity elements of the project", the bank said in a statement.
Qatar-based Gulf Petroleum Ltd in April secured Malaysian regulatory approval to develop the complex in the northern state of Perak.
The project will also include a petroleum terminal, said the Qatari bank, which already has a subsidiary in the country.
Gulf Petroleum is leading a consortium of Gulf banking and energy firms to build the complex, intended to serve as a regional hub for its Asia-Pacific activities, the company has said.
Gulf Petroleum's shareholders include members of the Qatar royal family, the Qatar General Insurance and Reinsurance Company QGIR.QA, Al-Mana Group, National Petroleum Group and the banking arm of Al-Sari group, it said in March.
Gulf Petroleum has said it aims to invest between $1.5 billion and $2 billion in the project's first phase to build an oil refinery of capacity between 100,000 barrels per day and 150,000 bpd. Qatar is the world's top producer of LNG.

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UK: Shariah - compliant investing

Islamic finance provider alburaq has announced the launch of the UK’s first retail Shariah-compliant alternative to a guaranteed equity bond.
With a minimum investment of £400, the alburaq savings plan offers investors the opportunity to invest in accordance with their faith.
The product also provides savers with easy exposure to potentially unlimited returns linked to shares in major companies with the added comfort of capital protection.
Keith Leach, head of alburaq at ABC International Bank, says, ‘Over the past few years the UK has seen an increase in the availability of Islamic home finance products, but there remain very few options for Muslims wishing to save money in accordance with their religious beliefs. This new account is also an easy way for Muslim savers to gain exposure to the equity markets, in a secure way.
‘While it is considered permissible within Islam for Muslims to own shares, there are restrictions on the types of companies that are considered allowable. The companies must not be over-reliant on debt, nor must they be engaged in activities that conflict with the principles of Shariah. Many of these principles will be similar to those required by non-Muslim ethical investors.’
The savings plan will be offered to investors in partnership with the Bank of Ireland. Savers will be able to deposit funds with the Bank of Ireland for five years in an account structured following the Islamic principles of Wakala.
At maturity savers will receive their initial capital back, together with 100 per cent of any gain in the performance of a basket of 20 shares in global companies selected from the Dow Jones Islamic Titans 100 index.
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