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Sunday, 9 October 2011

Halal and Islamic finance markets will converge, says Al Islami CEO

The $1 trillion (AED3.68 trillion) global Islamic finance industry is in the process of developing a road-map to converge on $651 billion (AED2.4 trillion) halal market, says Saleh Abdullah Lootah, Managing Director of Al Islami Foods.  He was speaking during the 8th Kuala Lumpur Islamic Finance Forum 2011 (KLIFF).
“Islamic stock exchange for both Islamic financial services and halal FMCG companies is a logical outcome and a natural relationship of the two fast growing industries. The time has come to sustain and channel this growth,” said Lootah.
“Growing Muslim population, awareness and consumers, their rising literacy and professional training, sustainable nature of Islamic economy, role of press and social media are the contributing factors for the impressive growth of Islamic finance and Halal food industry.”
From the international Halal food industry, Al Islami was the only halal food company from the Middle East invited to the international event.
Concurrent industry events were organised to cover the complete package of Islamic finance industry that included: Shariah Forum, The Takaful Rendezvous, Ethics and Finance Roundtable Exhibition, Workshops, Islamic Finance Essay Competition, and Islamic Finance Awards.
KLIFF 2011 gathered more than 1,500 delegates ranging from regulatory authorities, Shariah scholars, bankers, legal practitioners, Takaful operators, consultants, and academicians in Islamic finance around the globe.
The size of Islamic Finance Market in the GCC
According to a 2009 report titled the Development of Islamic Finance in the GCC, published by the Centre for Study of Global Governance of the London School of Economics:“the value of shariah-compliant assets is impressive in the GCC. The current size of global Islamic finance industry is at over $1 trillion (AED3.68 trillion), with GCC having $262.6 billion (AED964.5 billion).”

Islamic finance in the UAE, reports said, has been recording a steady and impressive growth in last few years with $73 billion (AED269 billion). Industry experts estimate the global industry size to rise to $2 trillion (AED7.3 trillion) in five years.
Malaysia, notwithstanding the efforts of the Gulf countries, claims the world’s largest Islamic capital market with assets rose 15 percent to $123 billion (AED452.6 billion) in 2011. The country has integrated the Islamic sector into its broader financial system, providing institutions as well as intermediaries a deep market in shariah-compliant equities, sukuk, exchange-traded funds, real estate investment trusts and derivatives. (KippReport/9 Oct 2011)

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Islamic banks urged to boost short-term syariah-compliant products

KUALA LUMPUR (4 Oct 2011) : Islamic banks in the country Malaysia have been urged to introduce more short-term syariah-compliant products to attract foreign investors.

We always have investors in Malaysia looking for syariah-shariah compliant products and sometimes, from the risk management perspective, because of due to the risk management perspective, they are constrained in putting their investment into investing in Islamic assets. that they have.

Hence, they will go abroad and invest in syariah-compliant products overseas,” said Amanie Islamic Finance Consultancy and Education LLC managing director, Dr Mohd Daud Bakar.

Local institutions, he said, must make products that take ing into account the excess money in the financial system, so the the money will be retained in the country.

"Liquidity is not a problem in Malaysia because we have many products that can absorb the liquidity in the Islamic financial
intuitions. Investors in Malaysia are continuously looking for

syariah-shariah compliant products,” here,” he said on the sidelines of the Kuala Lumpur Islamic Finance Forum 2011 (KLIFF 2011), here, yesterday.

When asked on the effective role that can be undertaken by International Islamic Liquidity Management Corp (IILM), he suggested that it for IILM to offered multi-currencies products, which are is more cost effective and beneficial to other countries.

IILM, which is expected to be in operation this year, is a collaborative effort by 11 central banks or monetary agencies and two multilateral organisations to assist institutions offering Islamic financial services address in addressing their liquidity management issues.

The IILM will issue short-term papers in international reserve currencies, such as the US dollar and the euro.

Meanwhile, in his speech, Deputy Finance Minister Datuk Dr Awang Adek Hussin said in the midst of a gloomy economic outlook and the lacklustre performance by international banks, Islamic banks are still reporting positive growth.

"The industry must not miss the tremendous opportunity to establish a leadership role in the global financial landscape or to even realise its full potential within its primary Muslim markets," he said.

Global Islamic finance assets are projected to grow to US$1.6 trillion (RM5.13 billion) next year.

The Islamic finance industry has had a compound annual growth rate of 19 per cent from 2006 to 2010 and there are more than 10,000 publicly traded syariah-shariah compliant companies in more than over 40 countries. (Business Timess/4 Oct 2011)

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Malaysian Islamic Banking Assets Rise 15 Percent to $123 Billion

7 Oct. 2011(Bloomberg) -- Malaysia’s Islamic banking assets rose 15 percent to 389.3 billion ringgit ($123 billion) in the first seven months of 2011, strengthening the country’s position as the global hub for Shariah-compliant financing, a government report said.
Assets that comply with Islam’s ban on interest climbed to 21 percent of Malaysia’s total banking system in July from the same period a year earlier, according to the Ministry of Finance’s 2011-2012 Economic Report today. Islamic lending increased 17 percent to 246.8 billion ringgit and made up 23 percent of total loans, while deposits grew 14 percent to 299.1 billion ringgit, the report said.
“Malaysia has the most established Shariah regulatory and legal infrastructure” in the world, the report said. “The Islamic capital market now exceeds $1 trillion and is growing as rapidly as the conventional capital market.”
The Southeast Asian nation, where about 60 percent of the 27 million population are Muslim, has relaxed foreign-ownership rules for Islamic institutions in the past few years to attract investment and spur growth in the biggest market for Shariah- compliant bonds, or sukuk. The nation has $112.3 billion of such debt outstanding, 62.7 percent of the world’s total, the ministry said.
‘Risk Management’
Global sales of sukuk, which pay returns on assets to comply with Shariah law, climbed to $18 billion this year, from $11.8 billion in the same period of 2010, according to data compiled by Bloomberg. The debt is outperforming bonds in developing markets this year, with a return of 5.3 percent, the HSBC/NASDAQ Dubai US Dollar Sukuk Index shows. Fixed-income securities in emerging markets gained 3.4 percent, according to JPMorgan Chase & Co.’s EMBI Global Composite Index.
Malaysia will continue efforts to strengthen the nation’s position as an international Islamic financial center by developing tools to help facilitate cross-border transactions as well as products and services, the ministry’s report said, without providing further details.
Islamic insurance, or takaful, assets rose 17 percent to 16.3 billion ringgit at the end of July from the same period last year, according to the report. The sector accounted for 8.7 percent of Malaysia’s total insurance industry as of July 31, up from 8.3 percent a year earlier, the ministry said.
Takaful is based on the Koranic principle of mutual assistance where members are the insurers as well as the insured.
The finance ministry said five new guidelines to further enhance “sound risk-management practices” in Islamic insurance were issued in the first seven months.
The worldwide Islamic finance industry has expanded 20 percent annually since 2000 and is among the fastest-growing in global banking, according to the Kuala Lumpur-based Islamic Financial Services Board, an international standards setting body.

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Monday, 3 October 2011

Islamic finance spreads in Nigeria

Lagos, Nigeria (CNN) : 7 Sep 2011 -- Home to some 70 million Muslims, Nigeria is stepping up efforts to capitalize on the growing popularity of the one of the world's fastest-growing financial sectors: Islamic banking.
Earlier this year the Central Bank of Nigeria announced a final set of regulations which introduced Islamic banking to the country.
CNN's Christian Purefoy discussed the sector's potential with Hajara Adeola, managing director of Lotus Capital, one of the groups helping to pave the way for Islamic finance in Nigeria.
Adeola says there is a growing appetite for this form of banking.
"It is working in Nigeria and there is a lot of interest in doing Islamic banking, in West Africa in particular," she says.
Spread across the Middle East and other parts of the world, a slew of Islamic financial institutions have been offering interest-free services that advocates say can provide a more sustainable alternative to conventional banking practices.
The industry, which exists in more than 50 countries, is estimated to be worth around $1 trillion and has the potential to eventually be worth $5 trillion, according to ratings agency Moody's.
Charging and paying interest is not allowed in Islamic finance because it is prohibited under Sharia law. Instead, if a bank is providing finance for an infrastructure project, for example, the bank and customer agree to share the risk of investment and divide any earnings.
"One of the most well known (principles) is the lack of interest or usury, so you can't own a return simply for having money -- which is what interest is," Adeola says. "You would have to somehow employ that money into productive use and then you can earn a return on that money."
Islamic banks are not allowed to trade in financial risk areas or deal in mortgage-backed securities or credit-default swaps. Investing in Islamically unacceptable businesses such as alcohol and cigarette makers, casinos and adult-entertainment companies is also forbidden.
In June, Jaiz Bank International became the first group to be allowed to open a Shariah-compliant bank in Nigeria after gaining an approval in principal from the country's Central Bank.
Adeola believes Nigeria has the potential to become one of the largest Islamic banking sectors in the world.
"It is a huge market," she says. "There's about 70 million Muslims in Nigeria. Research shows approximately 30% of the Muslim population typically would be interested in Islamic finance and if you look at the projection they made for the size of the market, it is really quite tremendous -- and that's just the domestic."
But the Central Bank's decision has met opposition from some Christian leaders in Nigeria, who argue that the move could increase religious violence in a country whose population is almost evenly divided between Muslims and Christians.
According to a VOA news report in mid-July, the Christian Association of Nigeria said the introduction of Islamic banking could stir up religious tensions at a time when security forces are fighting Islamic fundamentalists who want an independent state in northern Nigeria ruled by Islamic law.
But Adeola says that Islamic finance is not a threat and can appeal to the country's Christian community as well its Muslims.
"Islamic finance is universal," she says. "There is nothing about it that offends anyone or offends their faith or their principles. If anything, there are many Christians who like to invest with us because it's also in line with their own ethical values."

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