Latest from GIFC

Monday, 31 March 2008

$3bn Islamic bank and stock exchange planned

(ArabianBusiness, 26 March 08)

Gulf banks and individual investors are planning to set up a $3 billion Islamic investment bank and an Islamic stock exchange in Bahrain by 2009, the chief executive of Albaraka Banking Group said."It will be the largest bank in the region for the issuance of sukuk and will create a secondary market for sukuk," Adnan Yousif told newswire Reuters on Wednesday. Sukuk are bonds that comply with Islam's ban on interest.The bank, which is aiming to be a global player, would also take projects from a conceptual stage to financing and eventually flotations, Yousif said.

Albaraka is one of the lenders that is looking to invest in the new bank, which will have a paid-up capital of $3 billion and plans to start operations in 2009.The bank will have a targeted capital of $11 billion, Yousif said.Other banks that have shown an interest include Saudi Investment Bank and Bahrain Islamic Bank, Yousif said."We are in discussions with the central bank of Bahrain and regulators and hope to finalise the details by the end of the year," he said.

Ernst & Young has been appointed to advise on the bank's establishment.The project is being promoted by the chairman of the General Council of Islamic Banks, Sheikh Saleh Abdullah Kamel, Yousif said.Value of assets under management in Islamic institutions has been growing at over 20% a year and reached $900 billion in 2007 and is set to hit $2 trillion by 2010, Ernst & Young said in February.Yousif said Bahrain also planned to set up a secondary stock market in Bahrain complying with Islamic law to encourage regional investment. (Reuters)
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Sunday, 30 March 2008

U.S. banks "missing a trick" with Muslim customers

LONDON, England (CNN, 28/3/08) -- When it comes to Sharia-compliant banking, few Western countries can compete with Britain. One of the world's prime financial centers, the City of London is also the key Western hub for Islamic banking.

With 23 banks, nine fund managers and a number of international law firms offering Islamic finance in the City, by 2006 British Sharia-compliant assets were thought to be in the region of $22 billion.
The global industry has trebled in the past decade and is now worth around $531 billion.
Britain is also in the vanguard when it comes to Sharia-compliant retail banking, catering for its population of approximately three million Muslims.
In 2004, the Islamic Bank of Britain (IBB) opened its doors for the first time, becoming the UK's first and only standalone Islamic high street bank.
A number of Britain's "big five" high street banks are getting in on the act. Lloyds TSB and HSBC offer Islamic banking, including mortgages, current accounts and trust funds for children.
In the retail market, Britain is the only European country that offers government-authorized Islamic banking products.
In the United States, only regional banks like University Bank, Michigan offer Sharia-compliant products.
Fact Box
Islamic law states that businesses and individuals should not pay or receive interest.
The Sharia system also says individuals and businesses can only invest in certain companies, prohibiting dealings with alcohol, tobacco, gambling or the arms trade.
Authorities and regulators in France -- despite having a Muslim population twice the size of Britain's at six million -- have been slow to realize the potential of this sector.
"In France, Islamic finance is at an embryonic stage. They are where we were three or four years ago," Sultan Choudhury, the IBB's director of sales told the Financial Times.
British mosques dating back 150 years attest to the long connection between the United Kingdom and Muslims, but it is the British government's staunch support of the sector -- backing words with legislative changes -- that has responded to the needs of Muslims in the financial world.
Junaid Bhatti, who was involved with the setup of the IBB, told CNN: "Government is a firm supporter of the industry down to amending legislation to create a level playing field for Islamic banking."
The British sector is currently experiencing phenomenal growth of around 20 percent per year compared with global growth of around 15 percent. Industry insiders feel there is still scope for continued growth.
Aktar Ahmed of Lloyds TSB Islamic finance told CNN: "Islamic finance is still in its infancy at the moment. We're seeing a fantastic rate of growth both globally and here in the UK."
Lloyds TSB now offers Sharia-compliant banking at all of its 2,000 UK branches. Services include an Islamic current account, mortgage and child trust fund.
Islamic mortgages have proved particularly successful in Britain, with the market growing from barely a trickle in 2003 to a value of $1.7 billion in 2007.
But Islamic banking in the United States is suffering from an image problem. Many Americans are felt to be hostile to the concept after the 9/11 attacks, equating it with "terrorist finance."

"There seems to be this misperception out there that the U.S. is perhaps Islamophobic," said Abdi Shayesteh, an attorney at law firm King and Spalding, which has had a practice dedicated to Islamic banking and finance since the 1980s.
"The U.S. regulators have been supportive and they've accommodated Islamic banking and finance since the mid 80s," Shayesteh told CNN.
With a best-guess figure of six million Muslims in the United States of whom around 60 percent are devout (and therefore likely to use Islamic banking services), Shayesteh considers domestic Sharia-compliant banking an untapped market.
"We have at least 3.6 million [potential customers] at the very base level market opportunity for banks from abroad and here to tap into," he explained.
Even so, with constitutional limits on promoting any one religion over another, which keeps legislators quiet about the opportunities, and no sign that any major American banks will be rolling out Islamic products, the market remains unexploited for now.
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Alfalah Consulting-Kuala Lumpur: www.alfalahconsulting.com 
Islamic Consultant & Trainer: www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

UAE set to centralise Zakat management


Abu Dhabi: The UAE's Zakat Fund, which collects zakat (alms) from Muslims as a percentage of their wealth, has said local Islamic banks and companies will have to pay 2.5 per cent of their net operating capital to the fund from the beginning of next year.

Abdullah Bin Aqeeda Al Muhairi, secretary general of the fund, said eight Islamic banks and 13 Islamic finance and insurance companies are among those that will have to make their zakat payments.

The fund's bylaws will be amended to make it obligatory for these companies to submit audited accounts and pay 2.5 per cent of their net operating capital to the fund, Al Muhairi told Gulf News in an interview.

The move, he said, is meant to streamline the distribution of zakat to needy people and charities.
Earlier, Islamic banks and other companies distributed zakat to underprivileged people and charitable organisations in the UAE on their own.

Zakat, the third pillar of Islam, is the money that every adult, mentally stable and financially able Muslim has to pay to support the poor and needy.
Although Al Muhairi expected an overwhelming response from these Islamic companies, he said any firm that fails to abide by the law will be penalised. He did not reveal penalties "as bylaws have not been worked out yet".

He said the Cabinet will issue a decree forming a grievances committee to look into any complaints submitted by Islamic companies with regards to the zakat payments.

Al Muhairi did not rule out that other companies that do not follow the Islamic system may also be obligated to pay their zakat to the fund once the initial pilot project succeeds. "Within five years of this experiment, other companies may be required to pay their zakat payments to the fund," he said.

Al Muhairi said that should the UAE's 70,000 millionaires pay their zakat, the fund would rake in more than Dh6.5 billion, which is enough to cover the country's expenditure on the needy.

Gulf News: The Ministerial Council for Services has instructed the Zakat Fund to amend its law to make it mandatory for Islamic banks and companies in the UAE to transfer their zakat money for the fund's disposal as of the end of this year. Why has it been made mandatory, given that it is optional now?Abdullah Bin Aqeeda Al Muhairi: The obligatory nature of zakat is firmly established in the Quran, the Sunnah, and the consensus of the companions and the Muslim scholars.


And once the Cabinet decrees that the zakat payments must be made to the fund, all companies must comply with it. Zakat is one of the basic principles in Islamic econ-omics, based on social welfare and fair distribution of wealth. Islam has made zakat a compulsory obligation on every Muslim.


Scholars infer that zakat purifies a Muslim's wealth and also suppresses ego, jealousy, greed and miserliness. It is not a form of tax but rather a divine duty and considered as a right of the poor over the rich, not a charity.


As zakat is imposed on wealth, it makes wealth circulate in the body of the country, which acts a powerful inducement to invest capital in productive enterprises, thus encouraging growth.


Are there not enough resources for the fund to carry on its charitable activities or are their specific expansion plans?Although the fund's resources are steadily growing, they do not cover expenditure on the poor and the needy.


Since the establishment of the fund in 2003, Dh117.6 million in zakat money has been collected, of which around Dh108 million has been spent on underprivileged people. The government has increased its subsidy to the fund from Dh7 million to Dh17 million, but again the resources fall short of meeting all charitable activities and expansion plans under our strategic plan.


This prompted us to think of other options. The country has more than 160,000 companies and 70,000 millionaires, but the collected money amounts only to the zakat of one member of the super-rich population.


The proposal was that the fund moves gradually. The first step included Islamic organisations of all types - banks, finance and insurance companies.


The proposal was approved by the Ministerial Council for Services. The fund is studying experiences of other Islamic countries that apply compulsory zakat such as Saudi Arabia and Malaysia.
Then the fund will work out a comprehensive system of the intended collection pattern and disbursement practices. We will start from where others ended.
Is the move prompted by the failure of Islamic banks to deploy their zakat money correctly?No, not at all. We have confidence in our local Islamic banks and the Zakat Fund cooperated with them. The point is that the fund is a federal specialised authority in charge of collecting and disbursement of zakat payments.


We have specialised staff in calculating zakat, whereas other organisations do not. They have accountants who lack experience in the field. So the fund will spare these organisation the burden of collecting and disbarment of zakat money.


Moreover, Islamic banks can still help us in collecting zakat payments from other organisations that will not be subject to the law in the first stage.


But certain banks have specific areas of disbursement for Zakat payments.
We do not mind that these banks suggest certain areas for disbursement of the zakat money. On the contrary we welcome any cooperation in this regard. We also coordinate with other charities in this regard.


What if these companies refuse to transfer the funds and decide to spend directly on zakat?The Zakat Fund does not expect any opposition to the Cabinet decision. I personally have a conviction that the decision will receive an overwhelming response from all local Islamic organisations.
However, those who fail to transfer their zakat money to the fund will be penalised in accordance with the the law. The penalties have not been drafted yet.


Can you give a list of these banks and companies to which the law will be applicable?The Zakat Fund has gathered information from the Central Bank, Chambers of Commerce and Industry, the Ministry of Economy and authorities about Islamic organisation operating in the UAE.


These organisations include eight Islamic banks, two Islamic investment companies, 10 Islamic finance companies and three Islamic insurance companies. The list, however, is not final yet.


How will the Zakat payment be calculated? Is it 2.5 per cent of these companies' profits?No, it is not 2.5 per cent of the profits. The zakat payments will be calculated by two equations. One is 2.5 per cent of the net operating capital. (Net operating capital = current assets - current liabilities)


Generally, net operating capital is equal to cash, accounts receivables and inventories less accounts payable and accruals. The second way is 2.5 per cent of the financial sources. (Financial sources = long-term liabilities - net fixed assets).


What are the main areas of focus in your strategic plan?The 2008-2010 strategic plan of the fund aims at increasing the number of zakat payers by 10 per cent annually. At present, we have 2,050 people who pay zakat to the fund.


Revenues from zakat payments are planned to be tripled by the end of 2010 from the current amount of Dh46,750,000. Revenues from other sources are planned to be increased by 20 per cent this year, 32 per cent next year and 42 per cent in 2010.
The fund also encourages companies to sponsor its various activities.
We also plan to increase awareness of the zakat concept by 20 per cent by the end of 2010. By the end of this year, the fund plans to receive requests from the underprivileged people to receive zakat.


We will also launch a campaign in Arabic and English through all media menas. Courses on zakat accountancy will also be organised for accountants and finance managers of companies.
Fact FileOnline payments


Payments to the Abu Dhabi-based Zakat Fund can now be made online at www.zakatfund.ae. The site was set up through Dubai eGovernment's ePay service. Payments can be made with Visa, MasterCard and American Express credit cards.


The fund, which was established in 2003 as the single federal entity authorised to collect and disburse zakat inside the country and abroad, is also the first such institution in the world to allow zakat to be paid by mobile phone.


Zakat is the payment that every adult Muslim must make to support the poor. It is obligatory after one lunar year passes with the money in the control of its owner. Then the owner must pay 2.5 per cent of his total wealth as zakat.
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Alfalah Consulting - KL: www.alfalahconsulting.com 
Islamic finance consultant: www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Saturday, 29 March 2008

Syariah jurisdictions urged to cooperate

KUALA LUMPUR (The Star, 28/3/08): The various syariah jurisdictions have to work together or come up with ways to “talk” to each other to manage the growth of the Islamic capital markets, which is seeing the value of financial instruments reach US$150bil today.
SHAPE Financial Corp president and chief executive officer Abdulkader Thomas said the differences in interpretation were not an impediment but boiled down to how well the different jurisdictions cooperated with each other.
“It’s something that they’ll have to learn to manage,” he told reporters at the inaugural International Islamic Capital Market Forum organised by the Securities Commission (SC) yesterday.
Abdulkader said there had been a lot of experimentation in the development of Islamic financial instruments in the past five to 10 years that had led to further exploration in their implementation through various jurisdictions in the Islamic world.

“For example, in ijarah (leasing), we’re seeing agreement in almost all jurisdictions while in the Gulf Cooperation Countries, there’s broad convergence in musyarakah (profit-sharing),” he said, adding that convergence had been taking place over time and would accelerate as various Islamic financial instruments such as sukuk achieved a certain mass.
Syariah scholar Dr Mohamed Ali Elgari said the differences were not an impediment to the growth of Islamic financial instruments but presented an opportunity.
“As long as all Muslims agree that the best principles are the same, they can come to a consensus and help each other in solving the problems that arise as well as help in standardising issues and positions,” he said.
He said one of the avenues in which convergence had been enhanced was through the setting up of branches of Middle Eastern financial institutions in Malaysia, which is recognised as a leader in the Islamic capital markets.
Deputy Finance Minister Datuk Ahmad Husni Hanadzlah was the keynote speaker at the forum, during which two memoranda of understanding were signed between SC and Universiti Sains Islam Malaysia (USIM) on the one hand, and Universiti Malaya (UM) on the other.
The MoU with USIM will facilitate the compilation of syariah rulings from around the world while the one with UM is to facilitate a visiting scholar programme.

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Alfalah Consulting - KL: www.alfalahconsulting.com 
Islamic finance consultant: www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Britain blazes a trail for Islamic investments


LONDON, England (CNN, 28/3/08) -- Known for its support of Sharia-compliant banking, the British government is continuing to make legislative changes to level the playing field for Islamic instruments. One of the most revolutionary has been the foundations the Chancellor laid in the latest budget for "sukuk" or Islamic bonds.

This would be the first time a Western country has raised money by issuing Sharia-compliant investment certificates in the Middle East. These certificates make similar payments to investors as conventional bonds but are not interest-based.
"Sukuk" are the most high-profile financial instruments in the Sharia-compliant world, having grown from almost nothing five years ago to a market of $70 billion in outstanding issues today.
Currently more money flows through London in the most commonly used instrument, "murabaha" -- a Sharia version of the conventional money and syndicated loan markets where banks lend and borrow to meet their short and medium-term financial needs.
In addition to these instruments, a handful of Sharia-compliant hedge funds and platforms have been established, despite the tight Koranic restrictions on their activities.
Investors are barred from selling something they do not own, undermining "shorting," the cornerstone of the hedge fund industry, and cannot earn interest.
Despite these constraints, Barclays Capital (the investment banking division of the UK bank) has teamed up with U.S.-based Sharia adviser, Sharia Capital, listed on London's AIM market, to develop the Al-Safi Trust.

It is a groundbreaking independent investment platform for Islamic finance, according to Richard Ho, head of fund-linked derivatives.

"This is the first platform of its kind for alternative investing. It is the first one which goes right back to basics with the aim of making -- in the short-term Sharia -- and more generally ethical investing a scaleable reality," Ho told CNN.

Al-Safi has reworked the traditional investment platform infrastructure to make it compliant from the ground up.
The aim has been to create a Sharia-compliant tool that can be used by investment specialists -- those people who are very good at earning investment returns but less good at interpreting how to invest in compliance with Islamic principles.
By teaming up with Sharia Capital, Al-Safi aims to provide a platform that is constantly monitored for compliance by a Sharia board. It's a complex issue. Unlike the rule of law, Sharia is open to interpretation: for example, what might be acceptable in Kuwait might not be under Saudi Arabia's much stricter terms.
"With our Sharia advisor, we have ensured the robustness of the fund platform to facilitate efficient due diligence by both managers and investors," Ho continued.
Ho hopes the platform will smooth the investing process for both managers and investors. "Managers that use the platform don't need to know that much about Sharia compliance framework and process. You start with an approved investment universe and a well-defined strategy implementation process from which you can build a Sharia-compliant fund easily," he explained. The fund launches publicly in a few weeks. [Link]
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Alfalah Consulting-Kuala Lumpur: www.alfalahconsulting.com 
Islamic Consultant & Trainer: www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic Principles Help Steer Muslim-American Investors Through Economic Shoals

(VOANews, 27 March 08)

At a time when the American economy is buffeted by the aftershocks of a mortgage crisis involving loans at sub-prime rates to consumers with shaky credit, many Islamic investment funds are prospering. They avoid banks, mortgages, and interest-related transactions. And they are attracting non-Muslim investors.
Muslim Americans used to joke about what they called the cost of being a Muslim, because their religion restricts them from paying or earning interest on investments. Over the years, they developed their own organizations that found ways to achieve high yields while abiding by Islamic teachings, which require that investors share in profit and loss. One such organization, Amana Mutual Fund, was developed to provide investments that are consistent with Islamic principles.

Munem Salam is an investment adviser there. He says Amana initially was started by a group of Muslims as an investment club in 1984. The demand grew so quickly that they realized they could not operate as an investment club anymore.
With the help of experts in mutual funds, Muslim Americans established Amana – the first investment fund of its kind – in 1986. Eight years later, in 1994, they launched the Amana Growth Fund.
Salam says the Amana Income Fund is now worth more than $1 billion, and both funds are doing well. "For the (last) three-year and five-year periods, the Amana income fund is the number one fund in the country in the category of equity income, where there are about 1,100 companies."
Munem Salam notes that while Islamic funds may not invest in businesses that deal in pornography, gambling, alcoholic beverages, or interest-based finance, he says Amana's success proves there is no special cost of being a Muslim in America. To the contrary, he says, its return of 9 to 22 percent over the past five years has caught the eye of non-Muslim investors as well.
"There are two basic categories of non-Muslim Americans who are coming to our fund," Salam says. "The first category is ethically or socially-based, because if you look at all of the socially responsible investing funds or the ethically-based funds, we are outperforming them as well. And we are seeing a lot of demand from brokers that are buying our fund just because of our performance alone."

Salam says that at a time when thousands of Americans are losing their homes because they were allowed – or even enticed – to borrow more money than they could afford to repay, more Americans would welcome the Islamic way of financing a home.
Ajaz Khan, who heads the Ameen Housing Cooperative in California, explains it as a "partnership."
"There is no fixed interest rate; it does not matter if the house price goes down or up. At Ameen Housing it is shared by the homeowner and members of Ameen Housing."
A member buys shares in a cooperative that purchases many units of housing. Once the member has invested about one third of the cost of a particular house, the fund buys the house, and the member and member's family move in. They pay rent, part of which becomes a return on shareholders' investment, and part of which builds equity in the house until the loan is paid and the member gains full ownership.
Ajaz Khan says that although Islamic fund members make a larger down payment compared to most Americans, they usually own their homes within six years, rather than the 30 years of the most popular conventional mortgage.
Kahn says the partnership would not extend sub-prime loans to risky prospects, and thus not face an implosion if loans were not repaid. Nevertheless, he says Muslim investors are plenty concerned about the subprime crisis. That's because worried consumers cut their consumption of gasoline and retail goods – two portfolios in which Muslim investors have lot of stock.

Bonds and sukuk may be the right tool

(GulfNews, 29 March 08)

The regional bond and sukuk markets are in the ascendancy. That is an understatement. They are positively robust - despite the recent subprime jitters - and it could not have come at a better time for the region.
The normally laidback Gulf monetary policy machinery is furiously at work these days. Governments are grappling with the inflation monster and many analysts see this as a golden opportunity for the authorities to set up a monetary policy that is not subservient to external forces.
"By having a pegged currency you are tying your hands and cannot hope to have a credible monetary policy. Monetary policy infrastructure requires independent interest rate setting institutions and money and bond markets," says Mohieddine Kronfol, managing director of asset management at Algebra Capital.

Apart from populist fiscal policies, the rational response should be to develop robust monetary instruments and a strong debt market to help absorb liquidity in times of high inflation.

Catalyst for change

Can the Gulf states turn this challenge into a catalyst for change and use strong bond markets as a monetary tool?
Indicators suggest that the groundwork is being prepared. A recent Standard & Poors report, quoting Zawya figures, show that the sukuk market alone will reach $100 billion in the next few years. Moody's see funding potential of up to $50 billion over the next 12 to 18 months, much of it driven by corporates.
This may give the impression that the Gulf governments have been sitting on the sidelines all this time, but nothing can be further from the truth.
"Two decades ago, regional governments made a conscious decision to promote the scope and scale of the private sector in regional economies," says Kronfol. "The fruits of that policy are large and competitive corporates that are funding themselves in regional stock and bond markets - with respect to debt, the phenomenon began in earnest after 2004 when non-bank institutions came to the market in a significant way, like DP World, Aldar and a whole host of players in the syndicated loans and international bonds arena. Now we see corporates are driving issuance and leading the way."
Philip Lotter of Moody's agrees that Gulf corporate bond market has demonstrated that it can prosper without an active monetary policy, but it does limit the government's ability to exercise independent influence over supply and borrowing costs.
Another reason for the debt market's attraction is the lackluster regional equity markets in the past two years.
"The poor regional stock market performance over the past two years has undoubtedly encouraged many companies to diversify their funding base away from equity issuance at 'depressed' share prices," says European Islamic Investment Bank's Doug Bitcon.
Despite the benign conditions, the bond markets have not fulfilled their greatest aspiration yet - helping regional governments develop monetary tools.

Unfulfilled potential

"We need to have mature financial markets and it is essential to have a bond market in the region, even though there is not much flexibility in the rate of movement," says Marios Maratheftis, Standard Chartered's regional head of research, who has been championing an independent monetary policy for some time. "We want to see changes in forex rates, but we understand there is no appetite for depegging."
Gulf governments are reluctant to step up and take the monetary policy bull by the horn. For example, Saudi Arabia has an efficient local bond market but the government has no appetite to depeg the currency from the dollar. As a result, the market has become smaller and less liquid over time.
The markets have started to see local currency bonds from Jebel Ali Free Zone Authority (Jafza) and National Bank of Abu Dhabi, and more will come to the market, but it is not an optimal way to operate, says Kronfol.
"To develop domestic money and bond markets, and be in credible position to debate abandoning the US dollar peg, GCC governments have to pass necessary laws, articulate medium and long-term policies and continuously promote their markets until they are deep and liquid."

Friday, 28 March 2008

A Just Society Makes No Room For Poverty


Bandar Seri Begawan - The Government of Brunei Darussalam is committed to eradicating poverty by year 2035 as contained in its National Development Plan. Poverty is one of the social ills of the economy, and it can lead to insecurity and acts of evil. This is a great challenge for all of us individuals and all the relevant institutions primarily the Ministry of Religious Affairs in achieving these objectives.
The Islamic institutions can certainly play a major role in achieving the zero poverty vision in line with the objectives of Islam - among others, the protection of religion and life. Surely, that will never be achieved without a plan of action and strategic planning through "Islamic Microfinance Project Enterprises” that leads to the empowerment of human beings.
Islam is a dynamic faith that gives a fair chance to each human being to enable him or her to live a decent life so he can be an active agent of Allah the Almighty on earth to serve the wider community, creating wealth and sharing it responsibly to achieve peace and justice.
What makes the rich richer is the opportunity that the poor don't have due to various reasons that need to be critically addressed by our government that has started to be seriously concerned about this social ill.
One of the many tools is by managing its zakat (alms) fund more effectively and efficiently - may it be collection, disbursement and effective utilisation of fund through "Islamic Microfinance Project Enterprises".
Indeed, if the scheme will be properly implemented and well managed, then we will see a new breed of successful entrepreneurs coming in to our country.
The Quran and the Sunnah perspective of the oppressed and the poor is very clear. Prophet Muhammad, peace be upon him, is known to ask Allah the Almighty for him to be resurrected among the poor on the Day of Judgment. Asked by his wife 'Aishah the reason for such a request, he explained that "because they will be resurrected and admitted to Paradise thousands of years before the rich. The Prophet was also heard saying that `Fear the prayer of the oppressed, for indeed between him (her) and Allah has no barrier'."
The payment of zakat is one of the most important pillars of Islam to achieve social justice through wealth distribution. Zakat and prayer are mentioned in the Qur'an 82 times. As for the five tenets on which Islam is based, if anyone denies any one of these, then he is a disbeliever. Thus zakat is an obligatory payment upon all Muslims who satisfy the necessary conditions.
Islam was entrusted by Allah the Almighty to Prophet Muhammad as a religion to eradicate social injustice and oppression on earth. This is the Maqasid of Syariah and this is the raison d'etre of Islam. Islam links the Ibadah (worshiping) with Muamalat (all kinds of socio-economic interaction).
It seeks to improve the condition of man by providing mutual cooperation and the spirit of brotherhood within society - so the strong will help the weak and the rich will help the poor.
And due to this fact, zakat is viewed as one of the tools, besides sadaqah and wagaf, in Islam in freeing the poor from poverty and discourage the hoarding of wealth among the rich.
It is not until recently when society felt an urgency to solve the problem of poverty' in the country. His Majesty raised this recently in the recent meeting of the State Legislative Council, stressing that the nation needs to look into this matter seriously.
Fighting poverty and other social evils is one of the greatest Ijtihad. We can never hope to establish a just society unless we uproot poverty.
According to the Prophet (pbuh), there is a thin line between poverty and disbelief (Kaada alfagaran yakum kufran), what this means that poverty maybe is regarded as one of the root causes of evil and disbelief.
The author is a student at the Centre of Islamic Banking, Finance and Management, Universiti Brunei Darussalam.-- Courtesy of The Brunei Times
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Alfalah Consulting - KL: www.alfalahconsulting.com 
Islamic finance consultant: www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Challenges holding back takaful's global growth

Leading industry figures from Islamic insurance (takaful) firms and service providers will meet in Bahrain at the end of the month for Takaful 2008, a conference to discuss issues and challenges facing the $1.1bn industry.

The growing Muslim middle class worldwide and relatively low insurance penetration rate will help drive international acceptance of takaful, according to experts in the industry, but challenges remain. Bradley Brandon Cross, CEO of British Islamic Insurance Holdings (BIIH) UK, said:
'The world takaful market is growing at a phenomenal rate and, we believe, will continue to do so. We are thrilled to be involved in this new and exciting sector. BIIH is the first independent takaful insurance company to launch in the UK and aims to be the insurance of choice for Muslims living in the UK as well as for those who are interested in ethical financial products'.Carlos Wong-Fupuy, managing senior financial analyst at ratings agency A.M. Best said that the emergence of new takaful companies could help address the low insurance penetration and reduced retention levels in the Middle East to date. He added: 'Having said this, from a credit ratings standpoint, in A.M. Best's opinion, takaful companies also face a number of challenges arising from their start-up nature, constraints in investment policy and product design, combined with the risks inherent to an untested business model whose details are yet far from consensual'. A spokesman for law firm DLA Piper said: 'The takaful market is at a critical stage in its evolution. Interest in takaful has never been greater, but there remain challenges ahead if the impetus is to be sustained, including the establishment of viable, commercial structures that genuinely reflect Shariah principles.' Takaful 2008 will look at various vital issues on Takaful & Re-Takaful such as, the scope and opportunities for Takaful product development, need for an international regulatory framework for Takaful, global insurance trends, challenges of Re-Takaful Industry and pre-requisities for Bancatakaful success. Ashraf Bseisu, deputy CEO - Solidarity group, said: 'Solidarity Group's participation in world class conferences and forums represents the management direction to further support the development of this industry. Believing in our role as an active member in the global village and the responsibility towards providing financial solutions, Solidarity committed itself to continually interact and share in providing opportunities and facing challenges for better global takaful infrastructure'. The Bahrain Institute of Banking and Finance (BIBF) will lead a workshop for delegates, focusing on challenges specific to the takaful industry. Takaful 2008 will be held at the Gulf Hotel and Convention Centre in Bahrain on March 30 and 31, in association with Arabian Banking & Finance magazine. It will feature leading industry speakers including Zainudin Ishak ,CEO, CIMB Aviva Takaful Berhad; Dr.Daud Bakar, President & CEO, International Institute of Islamic Finance, Malaysia; and Ahmad Feizal Sulaiman Khan, International Currency Business Unit, Etiqa Takaful Berhad.

The Islamic Bank of Thailand sets 40% loan-growth goal


The Islamic Bank of Thailand has set a lending target of 40% or 4.5 billion baht this year, according to chairman Kitti Patpong-pibul.


The bank, which operates under strict Islamic law forbidding the payment of interest, has outstanding loans of 10.5 billion baht.


Mr Kitti said that while lending growth this year in percentage terms was relatively high, the bank had actually slowed the pace of operations relative to past targets, which had set new lending targets at seven to eight billion baht per year.


He said the bank also had delayed plans to raise new capital through a share issue. ''We want to build up our profits for the next three years to help strengthen our capital base before raising new capital,'' Mr Kitti said.


The Islamic Bank, which posted a loss of 400 million baht last year, expects to turn a profit of 200 million this year.


Mr Kitti said interest among foreign investors in the bank was quite high. Less than 1% of the bank's stock is now owned by foreigners, compared with a foreign limit of 33%. ''In negotiating with investors, we should do so from a position of strength, to help maximise our share price,'' he said.


The Islamic Bank has capital of 3.2 billion baht, sufficient to cover operations over the next four to five years. Its capital adequacy ratio stands at 24%, well above the central bank's minimum requirement of 8.5% for commercial banks.


Deposits at the bank stand at 13 billion baht, with a growth target of 2.5 billion for the year. Non-performing loans stand at a relatively high 15% of total loans.


Mr Kitti said the bank planned to accelerate lending activities to the southern border provinces in support of government policy.


Lt Ranongrak Suwanchawee, a deputy finance minister, told bank officials yesterday that they should ensure that the bank met with international and Islamic banking standards, including the IAS 39 accounting standard. She also urged executives to reduce non-performing loan levels, support staff development and boost lending to the Deep South.

Cagamas Signs Islamic Financing Facility With Bank Rakyat

KUALA LUMPUR, March 28 (Bernama) -- Cagamas Bhd expects to issue the first Islamic bonds under its Islamic financing facility arrangement with Bank Kerjasama Rakyat Malaysia Bhd next month, its president and chief executive officer Steven Choy said Friday.

With the agreement, the range of asset classes that can be sold or transferred to Cagamas is expanded to personal financing i-Aslah and pawnbroking ArRahnu/Az-Zahab.

This will provide Bank Rakyat and Islamic banking institutions with an avenue for asset/liability and risk management as well as an alternative source of funding.

"We will be issuing Islamic bonds out there to raise money in order to buy or purchase these assets from Bank Rakyat and other financial institutions. That's basically how it works," Choy told reporters after the signing ceremony with Bank Rakyat here.

"It's on the card and as and when Bank Rakyat requires," he said, adding that Cagamas has yet to finalise on the credit lines with Bank Rakyat.

Bank Rakyat is Cagamas' first participating institution in the sale/transfer of new asset classes, namely Rahn financing and Islamic personal financing.

"This is part of our initiative to increase the availability of Islamic finance instruments in line with the government's objective to increase the range of Islamic products available in the market," Choy said.

He said the new asset classes will enable Cagamas to expand its current business by offering more innovative and diverse Islamic products to Bank Rakyat and Islamic banking institutions apart from its existing Islamic house financing and hire purchase.

Since established in 1987, Cagamas, the second largest issuer of debts instruments after the government, has cumulatively issued RM210.9 billion of conventional and Islamic debt securities.

Choy said that half of the issuances were Islamic bonds.

Bank Rakyat's managing director Datuk Kamaruzaman Che Mat said the facility will provide an avenue for asset or liability and risk management as well as an alternative source of funding besides relying on deposits.

"It will give an additional source of fund plus for hedging purposes because this is fixed rate. Let's say three years or five years at a certain rate, which is a fixed rate. If there's any increase of rate in future, you can use this as a hedging instrument," he said.

Kamaruzaman said the bank will be able to give customers future financing at a more competitive rate when it has access to such funds.

As at end of last year, the bank's financing assets of pawnbroking ArRahnu/Az-Zahab was RM594.7 million while for i-Aslah, it stood at RM17 billion, he said.

On new products, Kamaruzaman said the bank has finalised its arrangement with MasterCard and expects to launch its Islamic credit card by July this year.

The bank also planned to launch a wealth management product this year, he added.

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant/Speaker/Motivator : www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Malaysia: ISRA Established To Promote Islamic Finance

KUALA LUMPUR, March 26 (Bernama) -- Bank Negara Malaysia Wednesday announced the establishment of the International Shariah Research Academy for Islamic Finance (ISRA) to promote applied research in the area of Syariah and Islamic finance.In a statement, it said ISRA will also act as a repository of knowledge for Syariah views or fatwas and undertake studies on contemporary issues in Islamic financial industry.

It said ISRA aims to promote innovation and dynamism into new boundaries of Islamic finance through pioneering research and rigorous intellectual dialogue.ISRA will be part of the International Centre for Education in Islamic Finance (INCIEF) which would enable the academy to leverage on the existing infrastructure and facilities as well as to tap on the knowledge, expertise and resources of the academic faculty and post graduate students in INCIEF. A Council of Scholars, comprising local and international Syariah scholars will be set up to provide input and assistance in the strategic direction of ISRA's research works.

Dr Mohamad Akram Laldin, who has extensive research experience in the area of Islamic finance will be appointed as the executive director of ISRA.He is currently an Assistant Professor at the Kulliyyah of Islamic Revealed Knowledge and Human Sciences of the International Islamic University Malaysia.He also serves as a visiting lecturer at the University of Sharjah, United Arab Emirates.

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Alfalah Consulting - KL: www.alfalahconsulting.com 
Islamic finance consultant: www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Thursday, 27 March 2008

Islamic loans turn profit for banks in USA

Chicago, USA
(USA Today, 27 March 08)

A customer showed up at little Devon Bank on Chicago's North Side, asking for a loan to open a neighborhood shop. But there was a hitch, the would-be borrower explained: "We can't pay any interest. Can you help?"


At the time, seven years ago, the answer was: "Nope," recalls David Loundy, Devon's vice president and legal counsel.


That was then. Since fielding that first request, Devon Bank has transformed itself into a specialist in the kind of no-interest Islamic financing the customer was seeking. Islamic financing now accounts for more than 75% of the bank's mortgage portfolio, and Devon has made mortgages compliant with Islam's sharia law in 36 U.S. states, Loundy says.


Devon Bank, responding to local customers in a neighborhood filled with Pakistani and Middle Eastern immigrants, stumbled onto something big: Islamic finance is booming worldwide, fueled by the windfall from sky-high oil prices and a return to a more strict interpretation of the holy Quran across the Islamic world. Once Devon Bank introduced sharia-compliant mortgages and other loans, "People started coming out of the woodwork," Loundy says.


In a report last month, credit-rating agency Moody's Investors Service said that the global Islamic finance market has grown about 15% in each of the past three years and is now worth about $700 billion worldwide. The heavyweights of global finance have taken notice: Citigroup, HSBC, Deutsche Bank and others have affiliates devoted to Islamic finance.


Giant mortgage investor Freddie Mac began buying sharia-compliant mortgages in 2001. Freddie Mac today continues to buy from four banks that together originate mortgages nationwide. In addition to Devon, Freddie Mac buys mortgages from Guidance Residential in Reston, Va.; University Bank in Ann Arbor, Mich.; and American Finance House Lariba in Pasadena, Calif.


Freddie Mac spokesman Brad German says the company bought more than $250 million in Islamic mortgages in 2007, but volume is slipping as the housing market declines. The mortgages are "a steady, if modest, niche," German says.

Islamic banks get around the prohibition on interest by treating loans more like leases or profit-sharing arrangements.


An Islamic mortgage, for instance, looks like a lease-to-own deal. The bank, not the borrower, buys the house. The borrower makes installment payments to the bank for a period of years, at the end of which he or she gets the title to the house.


The bank's profit technically comes from renting the house, not lending the money. Loundy notes that Islamic mortgages are more costly than traditional mortgages because they involve paperwork for two home sales: the first by the bank, the second by the borrower after the installment payments are finished.


In business loans, the bank essentially shares profits with the borrower, making Islamic financing more like an equity investment than a loan. Even depositors at Islamic banks are supposed to share profits and losses with the bank, instead of receiving interest payments — an arrangement that U.S. banking regulators have so far balked at approving. "The FDIC is not anxious to see any bank agreeing in advance to share a loss," Devon Bank's Loundy says.


Booming bonds


Islamic bonds — known as sukuk — are booming: Nearly $33 billion of Islamic bonds were issued last year, up from $5.5 billion in 2001. Islamic bonds work something like Islamic mortgages. For instance, the German state of Saxony-Anhalt, which issued the first Islamic bond in 2004, sold government property to bond investors and then leased it back from them. The investors technically earned money from the rent, not interest.
Determining exactly what is and isn't a sharia-compliant transaction can get tricky. HSBC and Citigroup each have their own sharia advisory boards, made up of well-credentialed Islamic scholars. Devon Bank, which has assets of just $250 million, leans on opinions from the Sharia Supervisory Board of America.
Kuala Lumpur, capital of predominately Muslim Malaysia, has emerged as Islamic finance's global capital, thanks partly to tax breaks that encourage Islamic banking. But Singapore and Hong Kong are eager to catch up. "If Hong Kong truly wants to be a major international financial center, not just in the region, but globally, then Islamic finance must be amongst our portfolio of products and services," John Tsang, Hong Kong's financial secretary, said last year.
"It's here to stay," Loundy says of Islamic finance. "You're talking about one-fifth of the planet's population."

Malaysia: Islamic banking a vibrant alternative system

A mosque in Perak, Malaysia
(The Star, 27 March 08)

THE Islamic banking system has emerged as a vibrant alternative financial system in Malaysia.
Islamic banking assets (including Islamic assets held by development financial institutions (DFIs)) currently accounts for 15.4% (11.5% in 2003) of the total banking assets (including assets held by DFIs) of the Malaysian financial system.


Capitalising on the ready infrastructure and comprehensive Islamic financial system locally, the strategic development of Malaysia as an international Islamic financial centre was taken to a new level with the launch of the Malaysia International Islamic Financial Centre (MIFC) initiative in 2006.


To accelerate the development of Islamic finance, new banking and takaful licences were offered to attract leading global players to establish operations in Malaysia.


During the year, 16 approvals were granted for international currency business operations.Two additional retakaful licences were also granted in 2007 to local and foreign players, further consolidating Malaysia’s position as an international retakaful hub, while contributing to the development of enhanced underwriting and claims practices, and product innovations in the takaful industry.


To further facilitate the conduct of takaful business, a tax treatment that recognises the unique characteristics of takaful operators had been introduced.


The tax treatment provides for the appropriate recognition of income and expenses arising from takaful business, having regard to the distinct role of takaful operators as risk managers in contrast to conventional insurers, which are risk underwriters.


Other current initiatives include the review of the tax treatment for the business of leasing which aims to address taxation issues that currently impede the development and growth of leasing and ijarah business.


The Government continues to provide strong support for the MIFC vision by granting flexibilities to improve business efficiencies and to attract the best talent to Malaysia.


In 2007, the Government introduced an “executive green lane” for immigration procedures for foreign experts in Islamic finance, and made available long-term employment passes with multiple entry visas and professional visit passes.


The Government had also relaxed several Foreign Investment Committee rules for MIFC players. These include allowing 100% foreign equity ownership in Islamic financial institutions established under the MIFC and granting flexibilities in the acquisition of properties and land, both for own use and commercial purposes.


Further tax incentives were also granted to promote Malaysia as a centre for origination, distribution and trading of sukuk.

Dubai Bank 'fastest growing' Islamic lender

(Emirates Business, 26 March 08)

Since its conversion to a Shariah-compliant institution on January 1, 2007, Dubai Bank has not faltered in its ambition to become the region’s fastest growing Islamic bank. Ahmed El Shall, Dubai Bank’s Chief Financial Officer, gives an insight into the phenomenal growth of the banking sector.

What sort of growth are you predicting for the Islamic finance institutions in the Gulf region?
The Gulf Islamic finance industry has been growing at rates in excess of 40 per cent per annum for the past three years. I expect this will continue because of the high level of liquidity currently floating in the Gulf. My guess is that this will be channelled into the banking system.

In which industries do you predict the region’s Islamic finance industry will experience most growth?

All three main segments: corporate, retail and investment banking should see healthy growth because of the boom in housing and related sectors such as construction, real estate services and the sale of durable goods.

Other boom sectors will be tourism related sectors such as airlines and hotels, as well as infrastructure, particularly oil and gas capacity expansion, and the domestic capital markets.

Thani Investments was one of the region’s first privately owned companies to use sukuk. Do you predict that more family businesses will follow its lead?

We see sukuk picking up for private family businesses only if the banks’ capacity to lend becomes constrained due to regulatory ceilings or otherwise, or if the pricing of bank credit becomes clearly more expensive than going to the debt capital markets. We don’t foresee either of these situations happening in the near term.

In the past significant funds have gone to the United States or Europe. How big is the desire for individual investors to invest their assets locally?

Due to the stellar performance in recent times of Asian markets, including the Gulf markets, we expect more funds to stay close to home in the foreseeable future.

At one point Muslims forewent Shariah-compliant investments because of a lack of availability of products. Is this changing in the Gulf? Who finds Shariah products attractive?

t is no longer the case that Shariah-compliant products are not available. There are many compliant products that compete effectively with their conventional counterparts. Today both Muslims and non-Muslims bank with Islamic banks with the choice being made on the basis of the quality of service, convenient location and pricing.

If there is a different level of Shariah compliance for conventional and Islamic banks, does it matter? Do you think that Islamic financial products offered by a conventional bank are equally acceptable to Muslims as those offered by fully complaint Islamic financial institutions?

In theory there should be no difference in the level of Shariah compliance between conventional banks with Islamic windows and fully-fledged Islamic banks. However, in practice, it is quite difficult for conventional banks with Islamic windows to ensure compliance due to the potential for commingling Islamic and non-Islamic assets and liabilities.

But is “bigger better” in the sense that a commercial bank has a proven track record and higher degree of certainty than a newly established Islamic bank? Does it matter that Islamic banks are smaller and less diversified than conventional banks?

In the case of the competition between the Islamic banks on one side and the conventional banks on the other, bigger is not necessarily better for a number of reasons. First, Islamic banks are a new phenomenon and could not have started big from day one.

Secondly, Islamic banks are niche players and this justifies their smaller size. Interestingly, despite their newness and small size, Islamic banks have managed to raise their market share in the UAE market from less than one per cent in the late 1990s to more than 15 per cent today.

The Islamic private equity system is still at a very early stage of development. Many of today’s private equity transactions rely on leverage – a debt to equity ratio higher than 33 per cent. Would you like to see the Islamic financial system develop Shariah-compliant alternatives that can ape conventional instruments?

Newly launched Shariah-compliant private equity funds are arranging leverage through Shariah-compliant structures that will allow them to lever much higher than the constraining 33 per cent.

There are also ongoing discussions among banks about setting up Shariah-compliant mezzanine financing funds to aid the development of the Islamic private equity business.As home markets mature and new players enter the space, is there an increasing need for regional and international expansion into new markets that can provide sustainable growth?

There is no doubt that the UAE banking sector is already overcrowded and that the need for expansion across the borders is already recognised by many senior bankers in the country. We have been hearing about cross-border M&A deals by local banks. Many local banks are planning regional acquisitions to expand outside the UAE.

In Europe, Islamic finance is growing at a rapid pace, but tax hurdles remain. What about regulatory conditions in the Gulf?

The regulatory schemes to which Islamic banks are subjected across the Gulf vary from country to country. For example, in the UAE, Islamic banks are treated in exactly the same manner as conventional banks with a couple of exceptions that allow for Islamic banking transactions to be processed in a Shariah-compliant manner.

But in Saudi, despite the presence of two of the world’s largest Islamic banks and many Islamic banking windows, there are no clear promulgations for Islamic banking. Bahrain has an elaborate regulatory scheme for Islamic banking, while Oman simply does not allow Islamic banking. The Qatari model is between those of Bahrain and the UAE.Nonetheless, across the Gulf, Islamic banking customers are awarded the same protection given to conventional banking customers. However, when it comes to Shariah compliance, the models implemented by the Shariah boards of the various banks differ and could leave the consumer confused and perplexed.We hope for a convergence of the Shariah principles applied by Gulf banks under the surveillance of a unified Shariah body.Is it a problem that some Shariah rules create a particular challenge for financial institutions? There have been some recent developments that cast doubt about the true nature of compliance of some of the sukuks currently on issue.However, we are quite confident that this matter will be resolved to the satisfaction of all interested parties, as there is a taskforce that is currently working on recommendations to resolve this matter.


Growth Doubles

Profits of Dh211 million last year – 102 per cent higher than 2006 – reflect Dubai Bank’s ever strengthening retail, corporate and investment banking divisions.
Shareholders of Dubai Bank such as Dubai Holdings and Emaar will be pleased with the results as both have benefited from a tripling of the bank’s share capital from Dh500 million to Dh1.5 billion. The bank recently won Best Islamic Bank in the Middle East and Best Islamic Product Provider from World Finance, London.

Islamic finance seen eyeing Africa for growth - Moody's

(26 March 08)

MUMBAI (Thomson Financial) - Moody's Investors Service said Shari'ah-compliant banking is a recent phenomenon in Africa, discovered by most Muslim Africans only over the past decade but the potential value of the Islamic banking and finance market in Africa is huge.

Moody's said that the actual depth of Shari'ah-compliant financial intermediation was only 18 bln usd as of year-end 2007, equating to a market share of less than 8 pct of its potential size.

Additionally, the industry is focussed at this stage on its development in Africa -- more than half its assets are located in Sudan, with Egypt ranking second, but with a much lower share of around one-fifth, Moody's said.

The ratings agency said that the banking entrenchment in Africa represents an average 50 pct of the total GDP produced by African Muslims and the Islamic finance market on the continent is potentially worth close to 235 bln usd.

According to Moody's 37 Islamic financial institutions operate in Africa, serving a Muslim population of 412 mln.

Average per capita GDP on the continent was a low 1,137 usd in 2007, but given the fact that Africa is host to the second-largest Muslim population in the world, the absolute size of its economic production reached 469 bln usd last year, Moody's said.

Wednesday, 26 March 2008

Pakistan: More guidelines for Islamic banks issued

(Daily Times, 26 March 08)

KARACHI: The State Bank of Pakistan has issued Instructions & Guidelines for Shariah Compliance in Islamic Banking Institutions (IBIs) to further strengthen the Shariah compliance framework in Islamic banking industry. These ‘Instructions and Guidelines for Shariah Compliance’ have been finalized in consultation with various stakeholders and have been reviewed and approved by the SBP Shariah Board. These Instructions and Guidelines for IBIs are in addition to current Prudential Regulations, guidelines and other directives issued by the SBP. The ‘Instructions for Shariah compliance in IBIs’ cover various areas related to appointment, removal and working of Shariah Advisors; conflict resolution in Shariah rulings; Shariah compliant modes; use of charity fund; introduction of new products; and services and schedule of service charges. Essentials of Islamic modes of financing, issued by SBP in April 2005, have now been augmented and made part of these instructions. According to these instructions, every IBI will be required to appoint a Shariah Advisor in line with a clear set of instructions issued by the SBP including that the appointment of Shariah Advisor will be approved by the Board of Directors; Shariah Advisor will be required to meet the ’Fit and Proper Criteria for Shariah Advisors’ notified by the SBP; the Fatawa and rulings of the Shariah Advisor in all financial matters shall be binding on the IBIs, etc. The Shariah Advisor will be responsible to review operations of the IBI on periodic basis in coordination with officials responsible for Shariah compliance to ensure that all the products and services being offered by the IBI conform to the injunctions of Shariah. If any income is declared as non-Shariah compliant by the Shariah Advisor, the same shall be credited to Charity Account opened for this purpose. According to the instructions, the Advisor will also be required to prepare a report on the IBI’s annual financial statement in respect of its Shariah compliance. The instructions also deal with Conflict Resolution in Shariah rulings. If there is any difference of opinion between the Shariah Advisor of an IBI and the State Bank’s inspection staff or other SBP departments regarding Islamic banking practices, the State Bank may refer the case to the SBP Shariah Board and its decision will be final. The State Bank has also introduced a complete new set of Shariah-compliant modes of banking and financing for IBIs that include Mudaraba; Musharaka; Diminishing Musharaka; Equity participation in the form of shares in a corporate entity; Ijarah or Ijarah wa Iqtina; Murabaha; Musawamah; Salam; Istisna; Tawarruq; Qard; Wakalah; Assignment of Debt and Kafalah. These instructions also prescribe essentials of Islamic modes of financing as minimum requirement for Shariah compliance in respect of products developed on the basis of such modes. For the Islamic modes for which essentials have not been prescribed, IBIs may use Accounting and Auditing Organization for Islamic Financial Institution (AAOIFI) Shariah standards as guidelines in consultation with their Shariah Advisors. staff report.
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Islamic Consultant & Trainer: www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Tuesday, 25 March 2008

Al Salam Bank a major player in Sudan's Islamic banking sector


Khartoum, Mar 24, 2008 (Asia Pulse Data Source via COMTEX) -- Sudanese President, Omar Hassan Al-Bashir, today inaugurated the new premises of Al-Salam Bank of Sudan, located downtown the capital, Khartoum.


The inaugural ceremony, which was conducted amidst a big fanfare, attracted a large number of dignitaries, including ministers, members of the diplomatic corps and economic personalities, including the board chairman of Al-Salam Bank, H.E Mohammed Ali Al-Abbar and other board members and senior officials of the bank.


Having unveiled the plaque to declare the bank officially open, President Al-Bashir, accompanied by Al-Abbar and deputy board chairman and managing director of the Al-Salam Bank - Sudan, toured the various sections of the building premises to have first hand information about its facilities. He was briefed about the banks, facilities, development and activities.


In a keynote address, Al-Abbar expressed profound gratitude to the Sudanese president for taking time-off to officially open the new premises of the bank. He said the bank had now become a major player in Sudan's Islamic banking sector, thanks to the rapid growth of Sudan's economy and the giant leap forward made by the country's balanced economic development and transformation in its journey towards a total integration into the regional and international economy.


He said: "Our sister country, Sudan, is currently witnessing a rapid growth. Having made great progress towards achieving its targeted five-year development plan (2007-2011), including maintaining inflation rate to within the 8.8% limit on the average and achieving 10% GDP growth rate against the world?s rate of 9.3% in 2006. Generally, this reflects Sudan's success in its economic policies as well as the success of its financial and fiscal policy tools." He added: "The establishment of the Al-Salam Bank - Sudan, came as a fruit of cooperation between Sudan and its sister countries in the Gulf. This bank is a natural extension and significant development in bilateral relations between the private sectors of Gulf countries, in general, and those of the United Arab Emirates, in particular.


This sector has great impact on Sudan's economic drive having involved in many investment projects in various areas, including in the banking sector, through which Al-Salam Bank is making generous contributions in Sudan?s economic growth." "One of the main objectives behind the establishment of Al-Salam Bank is to play a leading role in the Islamic banking market by introducing and adopting unique banking products and solutions, designed by experts in this sector which is now taking a centre stage in the region's banking market, which now boasts of a total assets of more than US$450 billion." He pointed out that Al-Salam Bank - Sudan had achieved outstanding financial results in the few years of its existence having achieved in 2007 an income of 61.4 million Sudan Pounds (SP) (about US$30 million), compared to SP52 million (about US$25.3 million in 2006. The figures include the profit of depositors after tax and Zakat deductions.


He said the bank had also succeeded in achieving great results in meeting the demands of Sudan's Central Bank for the last quarter of 2007 in accordance with the CAEL indices which ranked the bank's performance under the Strong category. This is a commendation we are striving to maintain and add more to it," Al-Abbar added.


In delivering his keynote address, Al-Salam Bank's deputy board chairman and managing director, Hussein Al Meeza, applauded the significant role his outfit is playing in Sudan. He said: "Islamic banking is rapidly gaining grounds in various parts of the world in view of its innovative banking solutions, which made people opt for it increasingly. Reports now show that Islamic banking assets will be hitting a trillion dollar mark by 2010." He added: "Financial statistics also show steady growth in the number of people preferring to deal with Islamic banking and finance system, deposit has reached US$58 billion, while the assets of Islamic financial institutions continue to surge rapidly from the US$20 billion recorded in 1997 to US$84 billion in 2005.


Growth rate of the Islamic banking industry has also appreciated by about 35% with about 270 Islamic banking institutions now operating worldwide. This reflects a major switch from the conventional banking system to Islamic banking and investment system. It also provides the answer to why the free flow of investors' cash and kind to the Sharia-compliant investment opportunities in Europe, the Arabian Gulf, the Middle East and Asia." On the new building premises of Al-Salam Bank - Sudan, Al Meeza said the premises had been furnished with the state-of-the-art equipment and facilities to enable the bank operate at the highest international standards. He added that the bank also boasts of a superb architectural design, making it an architectural masterpiece and a major landmark in downtown Sudanese capital, Khartoum.


He pointed out that as part of its plans to rapidly spread its wings in major Sudanese towns, the bank has conducted studies for the opening of four branches by the end of this year. They include a branch on the Africa Street in Khartoum.


"A license had already been acquired from the Sudan Central Bank for the opening of this branch which is now being refurbished for operation. This branch is scheduled to be opened soon. Other branches are located in the towns of Umm Durman, Khartoum Al-Bahri and Port Sudan," he said, adding that Automated Teller Machines (ATMs) will be placed at various vantage points in Sudan to facilitate access to easy transaction of business for Al-Salam Bank clients.


"The bank's strategy also focuses on its human resources, which is a vital component of the strategy. Al-Salam Bank has succeeded in employing Sudanese national cadres to whom it offers regular training and development opportunities inside Sudan and abroad to boost their technical skills," he concluded.


Meanwhile, Al-Salam Bank -Sudan has held an ordinary general assembly meeting at the Nile Ballroom of Al-Salam Rotana Hotel. The general assembly approved a proposal by the bank's board for distribution of (10%) dividend to shareholders.


The general assembly reviewed a number of reports, including the bank's financial activities report released by the bank's board for the fiscal year ending 31/12/2007, a report issued by the Fatwa and Sharia monitoring Authority regarding the bank's operation. It also reviewed a report of the bank's auditors, the profit and loss accounts and discussed and approved the general budget and the profit and loss account for the fiscal year ending on December 31, 2007.
The general assembly cleared the board members and the auditors for their activities during the fiscal year ending December 31, 2007.


The assembly appointed auditors for the fiscal year 2008 and decided their remunerations and entitlements. And election the bank's board for new period.


It's worth mentioning here that Al-Salam Bank - Sudan, which started operation in Sudan in May 2005, is one of the biggest banks on the Khartoum Stock Market.


The bank has achieved fantastic financial results in the few years of its existence.
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Alfalah Consulting-Kuala Lumpur: www.alfalahconsulting.com 
Islamic Consultant & Trainer: www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Monday, 24 March 2008

Marina west signs deal with bahrain islamic bank to offer more options for home buyers


(AlBawaba, 23 march 08)

Marina west signs deal with bahrain islamic bank to offer more options for home buyers Islamic Mortgage Financing options allow for more variety when purchasing at Marina West. Marina West and Bahrain Islamic Bank (BisB) the flagship of Islamic Banking in Bahrain,, have today signed a memorandum of understanding, which will allow Bahrainis and expatriates to purchase homes at the Kingdom’s premier beachfront development. The deal comes as part of Marina West’s initiative to offer varied finance options to the public, making a marina lifestyle accessible to everyone.


The signing ceremony was held at Marina West’s headquarters and was attended by Abdul-Rahman Turki, General Manager Retails at BisB Mr. Mahmood Janahi, Managing Director of Marina West real estate project.


As part of the deal, BIsB is offering long term Islamic mortgage facilities for Bahraini’s, expatriates and GCC nationals. Marina West buyers choosing BisB Islamic mortgage financing will benefit from affordable instalments, as well as some of the lowest arrangement fees available in the market and attractive profit rates.


Mr Mahmood Janahi, commenting on the agreement, said: “BisB has a strong history in the Kingdom, and an excellent reputation in the wider Middle East, which is why Marina West are pleased to be able to offer our buyers finance options from BisB. With the introduction of these mortgages, customers of any nationality can purchase a home in Bahrain and benefit from the tranquil beachfront lifestyle that Marina West offers.”


“The real estate market in Bahrain is booming, and our reputation as a tourism hub is following suit – Marina West aims to contribute to this reputation by creating a beachfront community that is truly unique in the Kingdom. This latest financing move further demonstrates our vision to have no limits on who can buy a property in Marina West, with BisB’s mortgages allowing interested buyers the opportunity to own a luxurious piece of property at a reasonable price.”

Mr. Abdul-Rahman Turki, General Manager Retails at BisB commented, “We are pleased to be associated with a unique project like Marina West. We have tailored our mortgage options to make them as accessible and affordable as possible in keeping with BisB’s philosophy of providing banking products and services to the widest part of the society.”


“As part of its comprehensive Property financing offer, BisB will offer to Marina West customers finance facilities up to BD400, 000 with flexible tenors that goes up to 25 years, and competitive profit rate which is considered one of the markets lowest.” Mr. Turki added.


As Bahrain’s first and unique gated high rise residential beachfront community, Marina West will be set in tranquil and idyllic surroundings on the Kingdom’s west coast. In addition to breathtaking views, residents will be able to enjoy comprehensive recreational facilities and entertainment as well as the convenience of an extensive and high quality retail offering.

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant/Speaker/Motivator : www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Bank Islam clinches first corporate advisory deal

(Daily Edge, 24 March 08)


KUALA LUMPUR: Bank Islam Malaysia Bhd has clinched its first corporate advisory deal, Akarmas Sdn Bhd’s RM36.96 million mandatory takeover offer for PK Resources Bhd, a milestone which is in line with its strategy of boosting its corporate banking division’s investment banking services.


BIMB is looking to grow its business and corporate banking unit in an effort to increase non-fund based income.


Its managing director Datuk Zukri Samat said: “Currently, business and corporate banking constitute about 30% of the bank’s financing mix. Our goal is to increase this to 40% of our total financing assets.”


Consumer banking business contributes the remainder of the bank’s RM8.73 billion total financing assets.


Zukri told The Edge a focus of its corporate banking unit was to increase its investment banking services, which began operations in November 2006.


“This includes arranging financing for clients, such as sukuks, from the Islamic capital market. We have already completed a RM2 billion sukuk mandate with another issuer, and are currently working on two more,” he said, declining to elaborate further.


Bank Islam recently reported a 17.45% rise in net profit to RM175 million in the first half ended Dec 31, 2007. It had posted a record net profit of RM251.3 million in the year ended June 30, 2007, after incurring two years of losses.


In 2006, the bank had unveiled a five-pronged turnaround plan, including capital restructuring, revamping its information technology infrastructure, a transformation programme including re-branding, a cost rationalisation exercise and human capital development.


The bank had also revealed it would not proceed with plans to sell its non-performing financings (NPF), which in FY2005 stood at more than RM2 billion.


While the bank had reportedly carried out due diligence with a prospective buyer of its NPFs last year, Zukri had told reporters at a media briefing last week the bank decided the carving out of its NPFs was no longer necessary as it had been brought down to a “manageable level”.


For the half-year ended Dec 31, 2007, Bank Islam’s NPF fell to RM785 million from RM1.05 billion a year earlier. Its net NPF ratio improved to 8.8% from 10.8%.


Going forward, the bank is expected to step up domestic operations while also exploring the possibility of expanding regionally, namely to China, Thailand or Indonesia.


Meanwhile, on the outlook for the Islamic banking sector, Zukri said opportunities still abound despite growing competition.


“Certainly the competition is getting keener each day. However, with the Islamic financial services industry expanding rapidly locally and globally, the cake will expand, and there will be enough for everyone, especially in areas where the potential is not fully tapped. These include private banking and wealth management,” he said.

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Alfalah Consulting - KL: www.alfalahconsulting.com 
Islamic finance consultant: www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

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