Latest from GIFC

Tuesday, 28 February 2017

IMF, World Bank acknowledge Islamic finance as powerful development tool for members

Islamic finance continues to take the centre stage at global financial institutions. In early February, the International Monetary Fund’s (IMF) executive board held its first formal discussion on Islamic finance and adopted a set of proposals on the role that the IMF should play in this area. The fund concluded that Islamic finance presents an opportunity for many member countries to enhance financial intermediation and inclusion and mobilise funding for economic development. To utilise this potential, the fund says that there was a necessity to establish “a policy framework that promotes financial stability and sound development of Islamic finance in order to reduce systemic risks.”
In particular, the IMF saw merit in considering a proposal to formally recognise the “Core Principles for Islamic Finance Regulation for Banking,” prepared by the Islamic Financial Services Board, as a standard for the industry.
“We are looking forward to receiving a formal proposal for endorsement in the context of a forthcoming paper before end-April 2018,” the IMF says in a statement.
“We support the approach to developing and providing policy advice on Islamic banking-related issues in the context of fund surveillance, programme design and capacity development activities. We also support the work of the relevant international standard setters and other international bodies to help address current gaps in the international regulatory framework for Islamic banking,” the statement said.
Shortly after the IMF released its assessment of Islamic finance, the World Bank and the Islamic Development Bank (IDB) published their first “Global Report on Islamic Finance,” subtitled “A Catalyst for Shared Prosperity?” which focuses on the prospects of the global Islamic finance industry and its potential to help reduce worldwide income inequality, enhance and share prosperity, as well as achieve the United Nation’s Sustainable Development Goals.
“The report has been prepared with a focus on the widening disparity of global wealth and how Islamic finance can help in enhancing shared prosperity,” says Ahmed Mohamed Ali, president of the Islamic Development Bank Group.
“Given its potential role in economic development, Islamic finance can contribute toward achieving objectives of minimising disparity in wealth and enhance shared prosperity in order to reduce severe inequality that adversely affects economic growth and wealth creation and imposes social and environmental costs,” he adds.
The report is based on the assumption that Islamic finance advocates for just fair and equitable distribution of income and wealth. Unlike conventional finance, Islamic finance is based on risk-sharing and asset-based financing. By making people direct holders of real assets in the real sector of the economy, it reduces their aversion to risk. And the strong link to the real economy is another core benefit. With those principles, Islamic finance could help improve the stability of the financial sector, the reports notes.
Apart from that, Islamic finance plays an important role in enhancing financial inclusion as it can bring into the formal financial system people who are currently excluded from it owing to cultural or religious reasons. 
But, just as the IMF, the World Bank/IBD report points at the importance of establishing a strong regulatory regime to reach the full potential of Islamic finance. There should also be mechanisms in place to enhance harmonisation, implementation and also provide regulatory recognition of products from other jurisdictions to expand the markets through cross-border transactions, the report recommends.
It also advocates the creation of institutions that provide credit and other information to support equity-based finance, particularly for micro, small and medium-sized enterprises, and further develop capital market products and sukuk to help finance large infrastructure projects.
To achieve all these goals, Islamic finance should “go beyond banking,” the report notes, and support non-banking institutions which are currently underdeveloped or underutilised. This includes takaful operators with their risk-sharing, participation-based Islamic insurance products, as well as social finance organisations which could alleviate poverty by tapping into the potential of zakat and waqf, Islamic principles rooted in redistribution and philanthropy.

Source: Gulf Times/28 February 2017 --- 
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Tuesday, 21 February 2017

New Report Outlines Actions to Leverage Islamic Finance for Development

The World Bank Group and the Islamic Development Bank published the first Global Report on Islamic Finance, which details the prospects for the global Islamic finance industry and its potential to help reduce worldwide income inequality, enhance sharing prosperity, and achieve the Sustainable Development Goals.
Subtitled “A Catalyst for Shared Prosperity?”, the report provides an overview of trends in Islamic finance, identifies major challenges hindering the industry’s growth, and recommends policy interventions to leverage Islamic finance for promoting shared prosperity.
Islamic finance advocates for just fair and equitable distribution of income and wealth. With a strong link to the real economy as well as risk-sharing financing, Islamic finance can help improve the stability of the financial sector. It can also bring into the formal financial system people who are currently excluded from it due to cultural or religious reasons. Unlike conventional finance, Islamic finance is based on risk-sharing and asset-based financing. By making people direct holders of real assets in the real sector of the economy, it reduces their aversion to risk.
The report outlines a theoretical framework to analyze Islamic economics and finance based on four fundamental pillars:
  • Institutional framework and public policy
  • Prudent governance and accountable leadership
  • Promotion of an economy based on risk sharing and entrepreneurship
  • Financial and social inclusion
The report notes, however, areas where policy interventions are needed to develop Islamic finance’s effectiveness and fulfill its potential in helping to reduce inequality. These interventions include:
  • Enhance harmonization, implementation and enforcement of regulations
  • Create institutions that provide credit and other information to support equity-based finance, particularly for micro, small and medium-sized enterprises (MSMEs)
  • Develop capital markets and ṣukūk products to help finance large infrastructure projects
  • Provide regulatory recognition of products from other jurisdictions to expand the markets through cross-border transactions
What’s needed to overcome these challenges?
The Islamic finance industry needs to expand beyond banking, which is currently a dominant component of Islamic finance, accounting for more than three-quarters of the industry’s assets.
However, for the banking sector, the report recommends creating an enabling regulatory and supervisory environment that addresses systemic risk across jurisdictions; introducing innovative risk-sharing products and services, rather than replicating conventional risk-transfer products; unifying cross-country sharī‘ah rulings on Islamic finance; enhancing access to Islamic finance; and bolstering Islamic finance human capital and literacy.
Another area of development is Islamic capital markets. While still relatively young, they can provide opportunities to build assets but through equity- and asset-based finance. Particularly, the ṣukūk markets (Islamic bond) are suitable for financing infrastructure and encouraging entrepreneurship. The use of sovereign ṣukūk to mobilize financing is essential to develop the market, as well as to promote transparency and efficiency of the asset pricing, according to the report.
The report also notes that policy makers should prioritize the development of non-bank financial institutions, which are currently underdeveloped and underutilized. For example, Islamic insurance, takāful, could provide important benefits to households and firms, improving their access to financial services.
Lastly, the report notes that using Islamic social finance can alleviate poverty and create a social safety net for the extremely poor, considering that these institutions and instruments (qard hasanzakātsadaqāt, waqf) are rooted in redistribution and philanthropy. The report recommends to create governance systems to support orderly function of the Islamic social finance sector.
By tapping into the potential of the institutions like zakāt and waqf, the report estimates that resource needs for the most deprived in most countries in South and Southeast Asia and Sub-Saharan Africa could be met.
Source: The World Bank/21 February 2017
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Wednesday, 15 February 2017

Kuwait’s Islamic banks thrive despite continued economic uncertainty

Over the course of 2016, we witnessed a major upheaval of the global economic environment. With the UK’s shock decision to leave the EU, the equally unforeseen outcome of the US presidential election, and Chinese growth at its lowest rate in more than two decades, the global economy is facing a challenging and uncertain future.
As the banking industry looks to effectively respond to this ongoing economic and geopolitical turbulence, the challenge of ensuring stability is perhaps most important for the oil-rich Arab states of the Arabian Gulf. The global drop in oil prices poses a significant threat to the Gulf Cooperation Council’s (GCC) crude-driven economies, and so GCC nations have seen a marked change in government spending, foreign investment and implementation of development plans.
In light of this ongoing oil-related instability, the IMF has dramatically cut its annual economic forecast for the region, reporting GDP growth in the Gulf states slowed to just 1.8 percent in 2016.
Despite such challenges facing the region, one vital element of the Gulf states’ banking industry has continued to thrive: Islamic finance, a system of banking based exclusively on the principles of Sharia law, has been expanding rapidly in recent years. According to the consultancy and accounting firm EY, Sharia-compliant banking grew at an annual rate of 17.6 percent between 2009 and 2013, and is now projected to grow by an estimated 19.7 percent annually by 2018.
This rate of growth far outpaces that of conventional banks, putting pressure on traditional financial institutions to diversify their operations by including Sharia-compliant services. With the Islamic financial market becoming evermore competitive, leading Islamic banks are now exploring innovative solutions to enhance their position and deliver the best possible service to a growing pool of customers.
Staying competitive 
As new competitors flood the Islamic finance market, established Islamic banks must reassess their strategies in order to remain at the top of the industry. At Kuwait International Bank (KIB), which became an exclusively Islamic bank in 2007, maintaining a competitive edge has become a major priority, and is set to shape the future direction of the bank.

“The Islamic banking sector is in a constant state of growth and development, and competition is only getting fiercer”, Sheikh Mohammed Al-Jarrah Al-Sabah, Chairman of KIB, told World Finance. “Not only are we seeing an increase in the number of Islamic banking institutions, but there is a definite push among conventional banks to diversify their offerings and enhance their competitiveness by entering the Islamic banking market, with some of them establishing an Islamic banking arm to their business.”
Over the course of its 45-year history in Kuwait, KIB has developed a strong presence in the nation, firstly as the only real estate dedicated bank in the country and more recently as a full-service Islamic bank. Since converting to exclusively Sharia-compliant services in 2007, the bank has paved the way for Islamic finance in Kuwait, establishing a strong presence for the industry in the nation’s financial landscape.
According to EY’s calculations, Islamic banking assets now account for 45.2 percent of Kuwait’s total banking assets (see Fig 1), and this figure is only expected to rise as the industry continues to grow. Yet despite this increasingly competitive market, KIB is confident it can be the Islamic bank of choice in Kuwait for both customers and employees.
In order to reach this ambitious goal, KIB has recently been implementing a comprehensive transformation strategy, designed to revolutionise operations at every level of the bank.
“The changing economic climate and the evolving state of the Islamic banking sector have prompted KIB to adopt a more aggressive approach”, said Al-Jarrah. “With a new, focused strategic outlook, we hope to elevate our presence within the industry and augment our competitiveness.”
This innovative transformation plan is currently being rolled out throughout the bank in three distinct phases. Launched in 2015, the first stage of the new strategy focused specifically on enhancing the bank’s organisational structure. This brought about a significant change in both KIB’s franchise operations and its day-to-day activities. The second phase of the transformation, which was implemented during 2016, aims to develop and enhance the bank’s product and service offerings.
In addition to reviewing the services currently on offer to customers and boosting the KIB product portfolio, this vital stage of the strategy also looks to reinvigorate all internal operations at the bank, in order to maximise effectiveness and efficiency. The final stage of the plan, which is scheduled to take place during 2017, will focus on boosting KIB’s competitive edge within the Islamic banking sector and the wider banking industry as a whole.
By dividing this ambitious transformation plan into three manageable phases, the bank has successfully adapted to the changes to its organisational structure and has, in turn, enjoyed a boost in performance.
“The cornerstone of our strategic plan is our vision of becoming the fastest growing bank in Kuwait”, said Al-Jarrah. “Now, thanks to our transformation strategy, we are well on our way to achieving this goal.”
Strategic success
Since launching its transformation plan in 2015, KIB has gone from strength to strength, reporting impressive growth in a range of key areas. In addition to restructuring its core departments, establishing new business units and divisions, and bringing fresh talent to the executive management team, the bank has also focused on developing its digital banking experience. Recognising the growing importance of an efficient, on-demand banking service, KIB has invested heavily in upgrading its IT infrastructure and its portfolio of Sharia-compliant digital services. This is an investment that appears to be paying off, with the bank reporting a strong overall performance for 2016.

“Since the launch of our transformation strategy, we have seen significant growth across a number of crucial areas”, Al-Jarrah explained. “Overall in 2016, we achieved a net profit of KWD 13.5m ($44.3m) at the end of the third quarter, up 15 percent from the same period last year, when profits totalled KWD 11.8m ($38.7m).” The bank also reported strong growth in specific areas such as financing revenues, which rose by 21 percent compared to the same quarter in 2015.
Similarly, KIB’s total assets rose by five percent, to reach a total of KWD 1.83bn ($6bn), compared with KWD 1.74bn ($5.71bn) by the end of the same period the previous year. This impressive performance is also reflected in the bank’s asset quality, with its non-performing loans remarkably decreasing to reach a low of 1.39 percent – down from 4.39 percent for the same period in 2015.
Source: World Finance/15 Feb 2017
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Saturday, 11 February 2017

Al-Majallah al-Ahkam al-‘Adaliyyah #10 - Book 1 (Sale) - Chapter 2 (Subject Matter of Sale) - Section 2 (Things which may and may not be sold)

           Book 1, Chapter 2, Section 2  

           SECTION II. Things which may and may not be sold.
    • 205. The sale of a thing not in existence is void. Example:- The sale of the fruit of a tree which has not yet appeared is void.
    • 206. The sale of fruit which is completely visible while on a tree is valid, whether it is fit for consumption or not.
    • 207. The sale at one and the same time of dependent part which are connected together is valid. For example, in the case of fruit, flowers, leaves and vegetables, which do not arrive at maturity simultaneously, a portion thereof only having come out, that portion which has not yet arrived at maturity may be sold together with the rest.
    • 208. If the species of the thing sold has been stated, and the thing sold turns out to be of another species, the sale is void. Example:- The vendor sells a piece of glass stating that it is a diamond. The sale is void.
    • 209. The sale of a thing which is not capable of delivery is void. Example:- The sale of a rowing-boat which has sunk in the sea and cannot be raised, or of a runaway animal which cannot be caught and delivered.
    • 210. The sale of a thing which is not not generally recognised as property or the purchase of property therewith is void. Example:- The sale of a corpse or of a free man, or the purchase of property in exchange for them is void.
    • 211. The sale of things which do not possess any specific value is void.
    • 212. The purchase of property with property which does not possess any specific value is voidable.
    • 213. The sale of a thing the nature of which is not known is voidable.Example :- A vendor tells a purchaser that he has sold him the whole of the property he owns for a certain sum of money, and the purchaser states that he has bought the same. The nature of the things bought by the purchaser, however, is unknown. the sale is voidable.
    • 214. The sale of an ascertained, jointly owned undivided share in a piece of real property owned in absolute ownership prior to division, such as a half, a third or a tenth, is valid.
    • 215. A person may sell his undivided jointly owned share to some other person without obtaining the permission of his partner.
    • 216. The sale of a right of way, and of a right of taking water and of a right of flow attached to land and of water attached to canals is valid.
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    Friday, 10 February 2017

    Al-Majallah al-Ahkam al-‘Adaliyyah #9 - Book 1 (Sale) - Chapter 2 (Subject Matter of Sale) - Section 1 (Conditions affecting the subject matter of the sale and description)

    Book 1, Chapter 2, Section 1



    SECTION I. Conditions affecting the subject matter of the sale and description.

    • 197. The thing sold must be in existence.
    • 198. The thing sold must be capable of delivery.
    • 199. The thing sold must be property of some specific value.
    • 200. The thing sold must be known to the purchaser.
    • 201. The fact that the thing sold is known is ascertained by referring to its state and description which distinguish it from other things.Example:- A specific quantity of red corn, or a piece of land bounded by specific boundaries. If these are sold, the nature thereof is known and the sale is valid.
    • 202. If the thing sold is present at the meeting place of the parties to the sale, it is sufficient if such thing is pointed out by signs.Example:- The vendor states that he has sold a particular animal. The purchaser sees that animal and accepts it. The sale is valid.
    • 203. Since it is enough for the nature of the thing sold to be known to the purchaser, there is no need for any other sort of description or particularisation.
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    Speaker and Consultant on Islamic Finance & Islamic Financial Planning: Ahmad Sanusi Husain (Malaysia)

    Ahmad Sanusi Husain has over 25 years of experience in Islamic finance, professional training, consulting, education, business and management fields. He served at a public university, a government department, a leading Islamic bank, a national Islamic banking & finance institute, a national Islamic banking association and a premier consulting & training firm. Currently he is the CEO of Alfalah Consulting based in Kuala Lumpur, Malaysia.

    He is the former Executive Director of the Association of Islamic Banking Institutions Malaysia (AIBIM), a national association representing some 20 Islamic banking institutions in Malaysia, established in 1995. He had also served as the Director of Training and Professional Development at Islamic Banking and Finance Institute Malaysia (IBFIM) which was established in the year 2001.

    Prior to that he served as the Manager of Training at Bank Islam Institute of Research and Training (BIRT), which was established in 1995. During his service at both BIRT and IBFIM, he was entrusted with the planning, development and management of training and professional development programs in the fields of Islamic banking, finance, capital market, value-based management and other related subjects for institutions in Malaysia and other countries.

    Prior to joining BIRT, he served at Bank Islam Malaysia Berhad (BIMB), the first Islamic bank in Malaysia, from 1991 until 1995 as an officer in the Organisation and Methods Department. While serving at Bank Islam, he was responsible for research & development, manual writing and introduction of bank’s numerous Islamic financial products and services particularly Islamic consumer and retail banking facilities as well as advising and training other local and international financial institutions and organisations in developing their Islamic financial products and services. In the early part of his career life, he had served with Inland Revenue Board of Malaysia (IRB) and Universiti Utara Malaysia (UUM).

    Ahmad Sanusi is also a consultant and trainer in the field of Islamic banking and finance, management and personal development. Since 1992, he has been actively involved and delivered thousands of lectures in seminars, training, academic programs and also consultancy services to various institutions and organisations. Thousands of participants from more than 50 countries across 5 continents i.e. Asia, Africa, Europe, North America and Australia/Oceania have attended public training programs organised by him and his team over the years i.e. since 1992.

    His tour of duty takes him to various countries:
    1) Malaysia 2) Indonesia 3) Singapore 4) Brunei 5) Thailand 6) Philippines 7) Egypt 8) Bahrain 9) USA 

    He has managed professional training ranging from 1 day talk to 17 days international integrated course on Islamic banking and finance. He was one of pioneer trainers and consultants for Interest-free Banking Scheme introduced by the Bank Negara Malaysia (BNM) in 1993 (currently known as Islamic Banking Scheme). Beside Islamic finance, he is a trainer and consultant on management topics and personal development.

    He was appointed as a writer for learning module for the Certified Islamic Finance Professional Programme offered by the International Centre for Education in Islamic Finance (INCEIF). (INCEIF is an international centre of educational excellence in Islamic finance, established to develop talents including professionals and specialists in Islamic finance who are much needed to sustain market competitiveness and meet future challenges in the Islamic financial industry. INCEIF has been granted a university status by the Malaysian government).

    He is the Chief Moderator/lecturer/module writer (Islamic Banking) at the Financial Sector Talent Enrichment Program (FSTEP), an initiative of IBBM, ABM, IBFIM, AIBIM, MTA, MIBA, LIAM, PIAM and MII with the support of Bank Negara Malaysia and financial institutions.He is also a trainer/consultant on Islamic unit trust and syariah-compliant investment to leading Islamic fund management companies. He was appointed as Member of Board of Studies (BOS) for BBA (Muamalat) for Universiti Tun Abdul Razak (UNITAR).

    He has appeared on television interview programmes on Radio Television Malaysia (RTM), The Capital TV & Radio Television Brunei (RTB). He was also interviewed for radio program on Islamic financial planning by BFM 98.9 (The Business Station).  Invited to be chairperson in programs organised by international event organisers.

    Ahmad Sanusi is an economics graduate from Northern Illinois University (NIU), USA. He also obtained professional qualifications in Islamic financial planning, unit trust (mutual fund) investment, insurance/takaful and translation and keep on advancing his study various areas.

    He is also a graduate in the first Islamic Financial Planner (IFP) certification program conducted by Financial Planning Association of Malaysia (FPAM) and IBFIM. IFP is recognised by the Securities Commission (SC) in applying for a capital markets services representative's licence to carry out the regulated activity of financial planning and also recognised by Bank Negara Malaysia (the central bank of Malaysia).

    Professional affiliation:
    i)  Member, Association of Shariah Advisors in Islamic Finance in Malaysia (ASAS)
    ii) Member of Malaysian Institute of Management (MIMM) - the national management organisation and professional accreditation body in the field of management.
    iii) Member, Federation of Investment Managers Malaysia (FiMM)
    iv) Council Member of Gerson Lehrman Group (GLG), New York - Islamic finance & investment
    v) Committee Member, Islamic Chamber of Commerce Malaysia (KL)
    vi) Certified Trainer, Human Resource Development Fund (HRDF)
    vii) Certified Islamic Financial Planner (IFP-IBFIM&FPAM)

    He hailed from the northern Malaysian state of Kedah Darul Aman (the State of Peace).

    Ahmad Sanusi's areas of expertise (consulting/advisory/training/speaking):

    1) Global development of Islamic financial system
    2) Overview on Islamic finance
    3) Overview on Islamic banking
    4) Overview on Islamic insurance (takaful)
    5) Shariah principles in Islamic finance
    6) Fiqh muamalat (Islamic commercial rules/laws)
    7) Islamic economic system
    8) Islamic wealth management
    9) Islamic financial planning
    10) Islamic unit trust/mutual fund
    11) Islamic investment
    12) Islamic retail (consumer) banking/financiang
    13) Islamic product research, development and innovation
    14) Shariah compliance audit
    15) Risk management for Islamic financial institutions
    16) Marketing strategies for Islamic financial services
    17) Islamic finance syllabus & module development

    1) Islamic management & ethics
    2) Entrepreneurship excellence

    1) Al Falah success principles (Islamic success formula)
    2) Positive mental attitude/positive thinking
    3) Formula for excellence and success
    4) Team building and organizational excellence

    (The above courses or lectures can be delivered in English or Malay (Bahasa Malaysia/Indonesia).
    My contact info:
    Ahmad Sanusi Husain
    CEO, Alfalah Consulting

    Suite 14.02, GTower
    199 Jalan Tun Razak
    50400 Kuala Lumpur

    e-mail : 
    Mobile/WhatsApp: +6019-234 8786Office Tel: +603-2168 1879 

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    Monday, 6 February 2017

    Islamic Finance Spreads Globally

    In today’s connected world of business, Islamic finance is a concept that people working in the banking and finance industries are likely to come across in their careers. Islamic finance, despite its label, is not limited to Muslim countries. It has shown growth globally, including in Europe.
    Total Islamic finance assets worldwide are projected to grow to $3.5 trillion by 2021 from $2 trillion currently, according to Thompson Reuters’ Islamic Finance Development “Resilient Growth” report published in 2016.
    There are 622 institutions providing Islamic finance courses worldwide, and 201 provide Islamic finance degrees, according to the report.
    Europe is increasingly showing interest in Islamic finance education. There are 109 institutions that provide Islamic finance education in Europe, 63% of them in the UK.
    Britain issued its first Islamic bond (sukuk) worth £200 million (over $250 million), according to a statement by the treasury published on the government’s website in June 2014.
    In UK
    Being home to three million Muslims, according to the Office of National Statistics in 2016, the UK is a leading hub for the Islamic finance industry in Europe. It also has a fully Shariah-compliant retail bank: Al-Rayan Bank (formerly Islamic Bank of Britain). 
    "Britain is today the leading center for Islamic finance in the West, including British higher education institutions leading the non-Muslim world in the teaching of Islamic finance,” said Nyra Mahmood, managing director of the UK-based Simply Sharia Human Capital.
    She emphasized the important role of financial technology can play in further introducing Islamic finance and banking.
    “The opportunities emanating from the FinTech scene and the ethical financial space gives rise to how the UK’s Islamic finance can look at shaping and taking the lead in fulfilling the wider needs of society through technology and innovation, especially with a younger, more socially active generation wanting to join the industry,” she said. 
    She added that the younger generation expects more from their money, as they are socially conscious and want to see companies embrace their corporate social responsibility along with being part of a financial services sector.
    “These are the issues driving a new generation of Islamic finance practitioners and consumers alike, both Muslim and non-Muslim in Europe and beyond.”
    Mahmood said factors that can affect Islamic finance moving forward in the UK, directly and indirectly, include the aftermath of the Brexit vote, the UK’s economic outlook for 2017 onward, and customers’ needs. “With this in mind, the UK’s Islamic finance industry is well positioned.
    “As the country looks beyond the EU, there’s an opportunity to align the UK with investors and partners from other Islamic hubs, namely the (Persian) Gulf Arab countries and Malaysia, which is already happening,” she said.
    In a survey by Al-Rayan Bank in 2014, 57% of non-Muslim participants said Islamic finance was relevant to all faiths because they believed it was ethical.
    In Spain
    Spain is one of the countries curious about Islamic finance. One of its top business schools, IE Business School based in Madrid, has a center that teaches and researches Islamic finance.
    “There’s a lack of knowledge in Islamic finance. Everybody is looking but no one is pushing yet,” Gonzalo Rodriguez, general coordinator at the Saudi-Spanish Center for Islamic Economics and Finance, said.
    “After the financial crisis (in 2008), ethical banking became much more popular, especially among young people. We believe it’s fair, ethical and based on real economy, and we try to spread this approach.”
    "We’re trying to spread knowledge of Islamic finance in Spain, and to reach out to all players to explain to them what Islamic finance is, its potential in Spain, and the opportunities we have for Islamic finance in the country,” Rodriguez said.
    Source: Financial Tribune/1 February 2017
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    Saturday, 4 February 2017

    KL Conference on Islamic Wealth Management & Financial Planning 2017

    Date: 16-17 May 2017

    Event: KL Conference on Islamic Wealth Management & Financial Planning 2017

    Event site:


    Malaysia chases the big money in Islamic finance

    Source: Euromoney. Writer: Chris Wright. Date: 1 February 2017

    One can make an argument that one of the bright spots in Malaysian finance, commerce and politics today is Islamic finance. It is one of the areas where Malaysia leads the world. The Securities Commission intends to keep it that way and in January launched a five-year blueprint to cement its status.  

    How? Malaysia already leads the world in nearly all Islamic finance metrics: 54% of global sukuk outstanding; 314 Islamic investment funds (more than anywhere else) worth RM100.6 billion ($22.7 billion) at the end of 2015; and an Islamic capital market that has tripled in size since 2005, accounting for 60.1% of the total Malaysian capital market. If there is a gap, it is in Islamic fund and wealth management and this is the Securities Commission’s latest thrust. 

    Although Malaysia leads in the number of funds, Saudi Arabia still leads in terms of overall invested assets, and the Gulf states have the natural advantage of a disproportionate number of exceptionally wealthy people. The UAE, for example, with one third of Malaysia’s population, has 59,000 millionaires compared with 31,000 in Malaysia, according to Credit Suisse. Natural target Wealth management is a natural target to aim for.  

    Credit Suisse estimates that the number of affluent and high net-worth individual Muslims is expected to rise to about 12 million by 2030; even if Gulf Arabs prefer to use funds in their part of the world, Indonesia would be a terrific market for Malaysia to attract.  Credit Suisse expects it to have 151,000 millionaires by 2020 (by which time Malaysia will have 64,000). 

    The assets of total global Islamic funds have grown at a compound annual growth rate of 8.5% from 2004 to 2015, and those rates will be sustainable if more Islamic countries develop pension systems. This brings us to arguably Malaysia’s secret weapon – the Employees Provident Fund (EPF). By far the most powerful institutional investor in the country, it had RM712.5 billion under management as of September 30, 2016 and, crucially, it is very much on-side with Malaysia’s ambitions in Islamic finance.  

    In August, it launched its Simpanan Shariah (Shariah savings) scheme, to give members the option to convert their conventional EPF account to an Islamic one. It has said it expects to invest an average of RM25 billion in Shariah assets every year and it intends to allocate a minimum of 45% of its assets into Shariah-compliant forms. Game changer This is a game-changer for Malaysia and for more than one reason.  The first is that EPF has sufficient scale to be very interesting to asset managers worldwide. 

    This is already visible through the Malaysia International Islamic Financial Centre, launched in 2006. Largely through that mechanism, there are now 20 fully fledged Islamic fund management companies operating in Malaysia, half of them wholly foreign-owned and two of them local-foreign joint ventures.  Leading firms, including Aberdeen, BNP Paribas, Principal (with CIMB), Franklin Templeton, Nomura and Threadneedle, are represented, and many were attracted by seed investment that came, ultimately, from the EPF. The second point is that for all of Malaysia’s blueprint directives, most of them are things it already does.  Provide an enabling framework to support innovation in Islamic markets? 

    Malaysia has led in that regard since the 1990s.  Enhance market access and international connectivity? Same.  Develop a vibrant ecosystem to accelerate growth of Shariah-compliant investment? The whole reason Malaysia got this far in the first place is because Bank Negara Malaysia, the Securities Commission, the government, the EPF and most of the banks worked together from the outset to make it happen. The ecosystem is already vibrant. 

    The one truly transformative thing Malaysia can do is point seven on its list of recommendations: "Spur institutional participation in Islamic funds." If every sovereign wealth and pension fund in the Islamic world took the same approach as the EPF and if they came to believe that Malaysia was the best hub through which to do it, the industry would change for ever.  

    The Securities Commission cites a finding from the Esade Business School that "the governance bodies of 77% of Muslim countries’ sovereign wealth funds have expressed the wish to increase significantly the number of transactions carried out under Islamic finance."  Given that Muslim countries probably manage about half of the whole sovereign wealth sector – and that sector is worth $7 trillion globally – the potential is clear. Key details The blueprint says that an investment fund will be established to enhance and broaden the global capability of Malaysia’s Islamic fund managers and attract the participation of institutional and global investors. 

    The details of this fund will be key. The Securities Commission has also started talking about sustainable and responsible investing in Malaysia.  This actually requires very little to be done: SRI and Shariah portfolios tend to overlap very closely, with the biggest difference being Shariah’s exclusion of banks that make money from interest.  

    Malaysia now calls sustainability a national agenda and has numerous initiatives underway. Bursa Malaysia has the first ESG index in Asia and in 2015 Khazanah issued an inaugural SRI sukuk, channelling its proceeds to state schools.  

    Another driver will be the promotion of Shariah-compliant private equity, which is another easy win; private equity fits very nicely with the risk-sharing parameters of Shariah financing. "There is strong potential for greater and sustained demand for Islamic wealth management services globally," says Tan Sri Dato’ Seri Ranjit Ajit Singh, chairman of Securities Commission Malaysia. "This provides substantial opportunities for Malaysia."
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    Thursday, 2 February 2017

    Resolution: Hibah in Loan (Qardh) (Central Bank of Malaysia)

    Qardh is one of the contracts being applied to manage liquidity in Islamic finance. The contract obliges a borrower to return the loan amount to the lender, without contracting to pay any additional return.
    However, in normal practice, when paying off the debt, a borrower sometimes gives hibah, at his own discretion. The issue is whether the practice of giving hibahcomplies with the Shari’ah.

    The Council, in its 55th meeting, held on 29th December 2005 / 27th Zulkaedah 1426, resolved that the practice of giving unconditional hibah in a loan contract is permissible.
    Nevertheless, the Council advised that such practice should be
    implemented wisely, so as to avoid it becoming a norm (`urf), which can make it a condition attached to the loan contract.

    Shariah Advisory Council, Central Bank of Malaysia

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    Islamic Financial Planning & Wealth Management by Ahmad Sanusi Husain