Latest from GIFC

Thursday, 25 April 2019

UNHCR unveils the Refugee Zakat Fund, a global Islamic finance structure to help displaced populations worldwide

25 April 2019 (UNHCR)

Dubai, United Arab Emirates, April 25, 2019. The Muslim world has the potential to transform philanthropy through strategic targeting of tens of billions of dollars of obligatory alms, the United Nations High Commissioner for Refugees announced at an event attended by officials, ambassadors and specialists, to launch its Refugee Zakat Fund, a new global structure that transforms UNHCR’s existing Zakat program into a global fund aimed at aiding the most vulnerable displaced populations while meeting the needs of Islamic institutions as well as individuals in fulfilling their social responsibility.

UNHCR unveiled its “UNHCR Zakat Program: 2019 Launch Report”, developed in partnership with DinarStandard, a growth strategy research and advisory firm and the co-authors of the report, during the Refugee Zakat Fund launch today. The report indicates that UNHCR’s Zakat program globally received US$14.4 million from 2016 to 2018, directly assisting 6,888 displaced families, primarily Syrian refugees in Jordan and Lebanon. In addition, the report shows that the global Zakat giving stands at US$76 billion worldwide, and could potentially reach an amount as high as US$ 356 billion, if proper mechanisms are in place for Muslims to safely fulfill their Zakat obligations.

Zakat is the mandatory alms given by Muslims who meet the necessary criteria of wealth each year, particularly to the needy. UNHCR has pioneered the leveraging of Zakat and established its Zakat program to aid the most vulnerable displaced families. The decision to restructure the Zakat program into the global Refugee Zakat Fund is due to the high donor turnout UNHCR has witnessed in the past years.

The Fund allows individuals and institutions alike to fulfil their Zakat obligations efficiently through a globally trusted structure, governed by UNHCR, with 100% of contributions delivered directly to the most vulnerable refugees and internally displaced families. It is fully Sharia-compliant; backed by fatwas from leading Islamic scholars and institutions, and subject to strict governance, ensuring utmost transparency. UNHCR aims to bridge its required funding of US$208.6 million for some 154,740 of the most vulnerable displaced families.

“Over the past few years, UNHCR has seen the demand for a trusted and efficient way of fulfilling Zakat obligations, while making an impact on the lives of some of the most vulnerable populations in the world,” said Houssam Chahine, UNHCR’s Head of Private Sector Partnerships in the MENA region. “With Islamic finance becoming a prominent part of the global economy, we are launching our first annual Zakat report today on the occasion of the Year of Tolerance from Dubai, the capital of Islamic economy. It was inevitable for our Zakat program to evolve into a structure that better appeals to the global Islamic finance industry. The Fund allows UNHCR to be even more transparent and trusted in how it receives and distributes Zakat funds.” he added. 

“Zakat has the potential to release tens of billions of dollars into global philanthropic causes and humanitarian needs, inaugural UNHCR report reveals”, said Rafi-uddin Shikoh, CEO and Managing Director at DinarStandard. “Muslim obligatory charitable contributions might be just the solution to address UNHCR’s funding gap given that 60% out of the 68.5 million of forcibly displaced people worldwide (around 40.8 million people) are Zakat-eligible.” he added.

While the Fund was unveiled just before the Holy Month of Ramadan, traditionally a month of giving and charity for Muslims around the world, UNHCR’s Chahine was keen to emphasize that Zakat obligations can also be fulfilled all year round. “Ramadan is an important time for refugees, and this year we are launching a major campaign globally to encourage Muslims to remember refugees in their prayers, and remember them with their Zakat. However, the Refugee Zakat Fund accepts contributions all year round, helping individuals, institutions and businesses align their philanthropic Zakat with statutory finance requirements and their own calendars.”

The budget required by UNHCR in 2019 is US$7.9 billion, to respond to the overall needs of refugees and internally displaced and other people of concern around the world.

For more information about the Refugee Zakat Fund, click on the following link: zakat(dot)unhcr(dot)org.

Tuesday, 23 April 2019

Malaysia on right track to become global Islamic finance hub

23 April 2019 (Bernama)

KUALA LUMPUR: Malaysia is on track to becoming the world’s leading global Islamic finance hub, said Deputy Finance Minister Datuk Amiruddin Hamzah.

Amiruddin said Malaysia had the International Islamic Liquidity Management Corporation (IILM) which was established in 2010 in cooperation with 12 central banks around the world, and its main function is to pioneer government initiatives involving the development of Islamic finance globally.

“According to Thomson Reuters’s Islamic Financial Development Report in 2018, Malaysia remains the leader among 56 countries for Islamic financial institutions, and this shows that the establishment of the corporation in 2010, which was the government’s ‘frontier’ to develop the country’s Islamic finance at the global level was the right step towards making Kuala Lumpur the best Global Islamic Finance hub,“ he said in a question and answer session at the Dewan Negara today.

He was responding to Senator Asmak Husin’s question on the government’s measures to make Malaysia the world’s leading global Islamic Finance Hub.

Amiruddin said Malaysian banks were appointed as the regulator and lead manager of sovereign ‘sukuk’ or bonds for other countries such as Turkey and Hong Kong, which also proved that Malaysia was now internationally recognised as a leader in international Islamic finance.

In answering a supplementary question from Asmak on the government’s plans to increase talent and human capital in Islamic finance from Malaysia, Amiruddin said the International Centre for Education in Islamic Finance (INCEIF) offered bachelors degrees and doctorates that could provide the expertise needed to bring the sector to the international level.

“In fact, in 2018, INCEIF received the prestigious accreditation from the Association to Advance Collegiate Schools of Business (AACSB) which placed the centre among the top five per cent of international institutions offering business and Islamic finance programmes,“ he added.

Amiruddin said the International Shari’ah Research Academy for Islamic Finance (Isra) provides advisory and consultancy to emerging markets in matters related to Islamic finance. — Bernama

Sunday, 21 April 2019

Islamic Financial Services Board (IFSB) - an international standard-setting body for Islamic financial services industry

The Islamic Financial Services Board (IFSB), which is based in Kuala Lumpur, was officially inaugurated on 3rd November 2002 and started operations on 10th March 2003. It serves as an international standard-setting body of regulatory and supervisory agencies that have vested interest in ensuring the soundness and stability of the Islamic financial services industry, which is defined broadly to include banking, capital market and insurance. In advancing this mission, the IFSB promotes the development of a prudent and transparent Islamic financial services industry through introducing new, or adapting existing international standards consistent with Sharî'ah principles, and recommend them for adoption.

To this end, the work of the IFSB complements that of the Basel Committee on Banking Supervision, International Organisation of Securities Commissions and the International Association of Insurance Supervisors.

As at December 2018, the 180 members of the IFSB comprise 78 regulatory and supervisory authorities, 8 international inter-governmental organisations, and 94 market players (financial institutions, professional firms, industry associations and stock exchanges) operating in 57 jurisdictions.

Malaysia, the host country of the IFSB, has enacted a law known as the Islamic Financial Services Board Act 2002, which gives the IFSB the immunities and privileges that are usually granted to international organisations and diplomatic missions.
Adoption of Standards

Since its inception, the IFSB has issued thirty Standards, Guiding Principles and Technical Notes for the Islamic financial services industry. The published documents are on the areas of:
1. Risk Management (IFSB-1)
2. Capital Adequacy (IFSB-2)
3. Corporate Governance (IFSB-3)
4. Transparency and Market Discipline (IFSB-4)
5. Supervisory Review Process (IFSB-5)
6. Governance for Collective Investment Schemes (IFSB-6)
7. Special Issues in Capital Adequacy (IFSB-7)
8. Governance for Islamic Insurance (Takāful) Operations (IFSB-8)
9. Conduct of Business for Institutions offering Islamic Financial Services (IIFS) (IFSB-9)
10. Sharīʻah Goverance System (IFSB-10)
11. Solvency Requirements for Takāful (Islamic Insurance) Undertakings (IFSB-11)
12. Liquidity Risk Management (IFSB-12)
13. Stress Testing (IFSB-13)
14. Risk Management for Takāful (Islamic Insurance) Undertakings (IFSB-14)
15. Revised Capital Adequacy (IFSB-15)
16. Revised Supervisory Review Process (IFSB-16)
17. Core Principles for Islamic Finance Regulations (IFSB-17)
18. Retakāful (Islamic Reinsurance) (IFSB-18)
19. Recognition of Ratings on Sharīʻah-Compliant Financial Instruments (GN-1)
20. Risk Management and Capital Adequacy Standards: Commodity MurābahahTransactions (GN-2)
21. Practice of Smoothing the Profits Payout to Investment Account Holders (GN -3)
22. Capital Adequacy Standard: The Determination of Alpha in the Capital Adequacy Ratio (GN-4)
23. Recognition of Ratings by External Credit Assessment Institutions (ECAIS) on Takāful and
      Retakāful Undertakings (GN-5)
24. Quantitative Measures for Liquidity Risk Management (GN-6)
25. Development of Islamic Money Markets (TN-1)
26. Stress Testing (TN-2)
27. Disclosure Requirements for Islamic Capital Market Products (IFSB-19)
28. Supervisory Review Process of Takāful / Retakāful Undertakings (IFSB-20)
29. Core Principles for Islamic Finance Regulation [Islamic Capital Market Segment] (IFSB-21)
30.Revised Transparency and Market Discipline (IFSB-22)

The standards prepared by the IFSB follow a lengthy due process as outlined in its Guidelines and Procedures for the Preparation of Standards/Guidelines which involve, among others, the issuance of exposure draft and, where necessary, the holding of a public hearing.
Awareness Promotion

The IFSB is actively involved in the promotion of awareness of issues that are relevant or have an impact on the regulation and supervision of the Islamic financial services industry. This mainly takes the form of international conferences, seminars, workshops, trainings, meetings and dialogues staged in many countries.

Source: IFSB's website on 21 April 2019

The World Bank and Islamic Finance

The World Bank Group is working with Islamic finance to reduce poverty, expand access to finance, develop the financial sector, and build financial sector stability and resilience in client countries.

Islamic finance has emerged as an effective tool for financing development worldwide, including in non-Muslim countries. Major financial markets are discovering solid evidence that Islamic finance has already been mainstreamed within the global financial system – and that it has the potential to help address the challenges of ending extreme poverty and boosting shared prosperity.


The Islamic finance industry has expanded rapidly over the past decade, growing at 10-12% annually. Today, Sharia-compliant financial assets are estimated at roughly US$2 trillion, covering bank and non-bank financial institutions, capital markets, money markets and insurance (“Takaful”).

In many majority Muslim countries, Islamic banking assets have been growing faster than conventional banking assets. There has also been a surge of interest in Islamic finance from non-Muslim countries such as the UK, Luxembourg, South Africa, and Hong Kong.

Over the past decade Islamic finance has emerged as an effective tool for financing development worldwide, including in non-Muslim countries. Major financial markets are discovering solid evidence that Islamic finance has already been mainstreamed within the global financial system – and that it has the potential to help address the challenges of ending extreme poverty and boosting shared prosperity.

Islamic finance is equity-based, asset-backed, ethical, sustainable, environmentally- and socially-responsible finance. It promotes risk sharing, connects the financial sector with the real economy, and emphasizes financial inclusion and social welfare.

The following key principles guide Islamic Finance: 1) Prohibition of interest on transactions (riba); ii) Financing must be linked to real assets (materiality); iii) Engagement in immoral or ethically problematic businesses not allowed (e.g., arms manufacturing or alcohol production); iv) Returns must be linked to risks. 


The World Bank Group involvement in Islamic finance is directly linked to the Bank’s work on reducing poverty, expanding access to finance, developing the financial sector, and building financial sector stability and resilience in client countries.

By helping expand the use of Sharia-compliant modes of financing in World Bank Group operations, we are helping deliver benefits to client countries in three areas:
The sustainable development of Islamic finance offers benefits for economic growth, reducing poverty and fostering shared prosperity. Islamic finance can significantly contribute to economic development, given its direct link to physical assets and the real economy. The use of profit- and loss-sharing arrangements encourages the provision of financial support to productive enterprises that can increase output and generate jobs. The emphasis on tangible assets ensures that the industry supports only transactions that serve a real purpose, thus discouraging financial speculation.
Islamic finance helps promote financial sector development and broadens financial inclusion. By expanding the range and reach of financial products, Islamic finance could help improve financial access and foster the inclusion of those deprived of financial services. Islamic finance emphasizes partnership-style financing, which could be useful in improving access to finance for the poor and small businesses. It could also help improve agricultural finance, contributing to improved food security. In this regard, Islamic finance can help meet the needs of those who don’t currently use conventional finance because of religious reasons. Of the 1.6 billion Muslims in the world, only 14% use banks. It can help reduce the overall gap in access to finance, since non-Muslims aren’t prohibited from using Islamic financial services.

It helps strengthen financial stability. As the 2008 global financial crisis ravaged financial systems around the world, Islamic financial institutions were relatively untouched, protected by their fundamental operating principles of risk-sharing and the avoidance of leverage and speculative financial products.

Despite its recent years of rapid growth, Islamic finance is still in its early stages of development, and it will need to address several challenges. We are supporting our client countries to strengthen the legal, regulatory and institutional foundations of Islamic finance. We have also expanded our efforts in promoting the systematic and sustained use of relevant knowledge of Islamic finance to raise awareness, build consensus and promote the worldwide use of Sharia compliant financing instruments.

As part of its work on Islamic finance, the World Bank, in partnersip with the government of Turkey, established the Global Islamic Finance Development Center in 2013 as a knowledge hub for developing Islamic finance globally, conducting research and training, and providing technical assistance and advisory services to World Bank Group client countries interested in developing Islamic financial institutions and markets.

Recent Engagements

In recent operations in Egypt and Turkey, for example, the Bank Group helped governments to design Sharia-compliant financing frameworks to expand financing for small and medium scale enterprises.

Also, in July 2015, the World Bank and the General Council for Islamic Banks and Financial Institutions (CIBAFI), the global umbrella of Islamic financial institutions, signed a Memorandum of Understanding (MoU) to help foster the development of Islamic finance globally and expand its use as an effective tool for financing development worldwide, including in non-Muslim countries.

Islamic Finance Principles and Instruments

The term Islamic finance is used to refer to financial activities conforming to Islamic Law (Sharia). One of the main principles of the Islamic finance system is the prohibition of the payment and the receipt of riba (interest) in a financial transaction. The term riba covers all forms of interest and is not limited to usury or excessive interest only. The most critical and significant implication of banning interest is the indirect prohibition of a “pure” debt security. The key point to bear in mind is that Islamic law doesn’t recognize money and money instruments as a commodity but merely as a medium of exchange. Hence any return must be tied to an asset, or participation and risk-taking in a joint enterprise (such as partnerships). A pure debt security is replaced with an “asset-linked” security, direct financing of a real asset, and different forms of partnerships of which equity financing is the most desirable.

In addition to prohibition of riba, there are several other important provisions which may affect financial transactions. These include the prohibition of ‘gharar’ (uncertainty or asymmetrical information), ‘maysir’ (gambling, speculation), hoarding, as well as trading in prohibited commodities (for example, pork and alcohol).


Basic instruments include: cost-plus financing (murabaha), profit-sharing (mudaraba), leasing (ijara), partnership (musharaka) and forward sale (bay’salam). These constitute the basic building blocks for developing a wide array of more complex financial instruments. 

Murabaha – Trade with markup or cost-plus sale. The purchase of an asset is financed for a profit margin, with the asset purchased on behalf of client and resold at a pre-determined price. Payment could be in lump sum or in installments and ownership of the asset remains with bank till full payments are made

Ijara – Operational or financial leasing contracts. Bank purchases asset on behalf of client and allows usage of asset for a fixed rental payment. Ownership of the asset remains with the financier but may gradually transfer to the client who eventually becomes the owner (ijara wa iqtina).

Mudaraba – Trustee financing contract. One party contributes capital while the other contributes effort or expertise. Profits are shared according to a predetermined ratio and the investor is not guaranteed a return and bears any financial loss.

Musharaka – Equity participation contract. Different parties contribute capital and profits are shared according to a pre-determined ratio, not necessarily in relation to contributions, but losses are shared in proportion to capital contributions. The equity partners share and control how the investment is managed and each partner is liable for the actions of the others.

Sales contracts. Deferred-payment sale (bay’ mu’ajjal) and deferred-delivery sale (bay’salam) contracts, in addition to spot sales, are used for conducting credit sales. In a deferred-payment sale, delivery of the product is taken on the spot, but delivery of the payment is delayed for an agreed period. Payment can be made in a lump sum or in installments, provided there is no extra charge for the delay. A deferred-delivery sale is similar to a forward contract where delivery of the product is in the future in exchange for payment on the spot market. 

Sukuk – Certificates of Ownership. Sukuk are certificates of equal value representing undivided shares in ownership of tangible assets, usufruct and services, or (in the ownership of) the assets of particular projects. The returns on the certificates are directly linked to the returns generated by the underlying assets.

Source: World Bank's website on 21 April 2019

Islamic banking & takaful in Malaysia

Islamic Banking

Islamic banking refers to a system of banking that complies with Islamic law also known as Shariah law. The underlying principles that govern Islamic banking are mutual risk and profit sharing between parties, the assurance of fairness for all and that transactions are based on an underlying business activity or asset.

These principles are supported by Islamic banking's core values whereby activities that cultivate entrepreneurship, trade and commerce and bring societal development or benefit is encouraged. Activities that involve interest (riba), gambling (maisir) and speculative trading (gharar) are prohibited.

Through the use of various Islamic finance concepts such as ijarah (leasing), mudharabah (profit sharing), musyarakah (partnership), financial institutions have a great deal of flexibility, creativity and choice in the creation of Islamic finance products. Furthermore, by emphasising the need for transactions to be supported by genuine trade or business related activities, Islamic banking sets a higher standard for investments and promotes greater accountability and risk mitigation.

Islamic finance has grown tremendously since it first emerged in the 1970's. Current global Islamic banking assets and assets under management have reached USD750 billion and is expected to hit USD1 trillion by 2010.(1)

There are over 300 Islamic financial institutions worldwide across 75 countries According to the Asian Banker Research Group, The World's 100 largest Islamic banks have set an annual asset growth rate of 26.7%(2) and the global Islamic Finance industry is experiencing average growth of 15-20% annually.(3)

Malaysia's Islamic finance industry has been in existence for over 30 years.  The enactment of the Islamic Banking Act 1983 enabled the country's first Islamic Bank to be established and thereafter, with the liberalisation of the Islamic financial system, more Islamic financial institutions have been established

Malaysia's long track record of building a successful domestic Islamic financial industry of over 30 years gives the country a solid foundation - financial bedrock of stability that adds to the richness, diversity and maturity of the financial system. Presently, Malaysia's Islamic banking assets reached USD65.6 billion with an average growth rate of 18-20% annually.4

Today, Malaysia's Islamic finance continues to grow rapidly, supported by a conducive environment that is renowned for continuous product innovation, a diversity of financial institutions from across the world, a broad range of innovative Islamic investment instruments, a comprehensive financial infrastructure and adopting global regulatory and legal best practices. Malaysia has also placed a strong emphasis on human capital development alongside the development of the Islamic financial industry to ensure the availability of Islamic finance talent. All of these value propositions have transformed Malaysia into one of the most developed Islamic banking markets in the world.

Rapid liberalisation in the Islamic finance industry, coupled with facilitative business environment has encouraged foreign financial institutions to make Malaysia their destination of choice to conduct Islamic banking business. This has created a diverse and growing community of local and international financial institutions.

Currently, Malaysia has a significant number of full-fledged Islamic banks including several foreign owned entities; conventional institutions who have established Islamic subsidiaries and also entities who are conducting foreign currency business. All financial institutions are given permission to conduct both ringgit and non-ringgit businesses.

Malaysia continues to progress and to build on the industry by inviting foreign financial institutions to establish international Islamic banking business in Malaysia to conduct foreign currency business.   

The domestic Islamic financial institutions may also apply for ICBU, a dedicated division to conduct foreign currency business. ICBU will also be accorded various tax incentives and privileges that lead to reduction in the cost of doing business and expedient market entry in foreign currency Islamic finance business. For more information on the establishment and application procedure for ICBU, please contact MIFC Secretariat.

  1 Mckinsey, The World Islamic Banking Competitiveness Report 2007-08, "Capturing The Trillion Dollar Opportunity"
2 Ibid
3 Ibid
4 Bank Negara Malaysia: Annual Banking Statistics 2007

Takaful Industry

Takaful (Islamic insurance) is a concept whereby a group of participants mutually guarantee each other against loss or damage. Each participant fulfils his / her obligation by contributing a certain amount of donation (or tabarru) into a fund, which is managed by a third party - the takaful operator.

In the event of loss or damage suffered, the takaful operator will disburse the funds accordingly to its participants.  Any surplus is paid out only after the obligation of assisting the participants has been fulfilled. Through this principle, takaful operates as a protection and profit sharing venture between the takaful operator and the participants.

Globally, the takaful industry has been growing rapidly, appealing to both Muslims and non-Muslims. The industry is expected to grow by 15-20% annually, with contributions expected to reach USD7.4 billion by 2015.(1) Currently, there are more than 110 takaful operators worldwide.

Malaysia has achieved significant milestones in the development of its takaful industry. With the enactment of the Takaful Act 1984, the first takaful company was established in 1985. Since then, Malaysia's takaful industry has been gaining momentum and increasingly recognised as a significant contributor to Malaysia's overall Islamic financial system.

As at 2007, total assets of Malaysia's takaful industry amounted to USD2.8 billion, with market penetration of 7.2%.(2) Takaful assets and net contributions experienced strong growth with an average annual growth rate of 27% and 19% respectively from 2003 to 2007.(3)

The rapid liberalisation of Malaysia's Islamic financial industry has encouraged foreign institutions' participation in Malaysia, thus creating a diverse and growing community of domestic and international takaful operators. There are currently eight takaful operators and two retakaful operators, with five foreign participations from the UK, Bahrain, Germany and Japan. These takaful operators conduct both domestic and foreign currency business.

Malaysia continues to progress and build on the industry's rapid development by inviting financial institutions across the world to establish takaful and retakaful operations in Malaysia to conduct foreign currency business.

The domestic Islamic financial institutions may also apply for ICBU, a dedicated division to conduct foreign currency business. ICBU will also be accorded various tax incentives and privileges that lead to reduction in the cost of doing business and expedient market entry in foreign currency Islamic finance business. For more information on the establishment and application procedure for ICBU, please contact MIFC Secretariat.

1 Based on projection by Institute of Islamic Finance and Insurance & Investor Offshore Review, February 2006

2 Bank Negara Malaysia: Annual Takaful Statistics 2007
3 MIF Monthly 2008 Supplement Series - Takaful Industry in Malaysia: Performance and Key Developments

Source: Bank Negara Malaysia's website on 21 April 2019

Saturday, 20 April 2019

When Islamic financing may be introduced in Azerbaijan?

19 April 2019 (Azer News)

By Kamila Aliyeva

Islamic Financial Advisory Services (IFAS) company will complete studies on exploring the possibility of introducing Islamic financing principles in Azerbaijan by the end of this year, a source in Islamic Development Bank (IsDB) told Trend.

The Islamic financing project is carried out jointly with the Agency for the Development of Small and Medium-sized Enterprises (SMEs) in Azerbaijan.

"IFAS is actively working on this," the source said. "Experts are studying local legislation and in the near future will come up with proposals on how to apply Islamic financing in Azerbaijan."

In January 2017, IsDB signed a Technical Assistance Grant Agreement with Azerbaijan for development of legal and regulatory framework for Islamic Finance which marks a key milestone for the development of Islamic Finance sector in the country.

The preparation of an action plan began in June. IsDB provided technical assistance in the amount of $200,000 in order to develop the legal framework for Islamic financing.

Earlier, in an interview with Azernews, Saleh Jelassi, the Regional Director of the Islamic Development Bank Group Regional Hub Turkey, noted that Azerbaijan has a very thriving private sector whose further engagement with IsDB Group’s private sector development arms, ICD and ITFC can lead to a more mutually beneficial cooperation to support investments and income and employment generation.

IsDB Group’s cooperation with Azerbaijan is growing stronger with each year since the country joined the IsDB on July 4, 1992.

Currently, IsDB Group has an overall portfolio of about $1.1 billion in the country comprising $947 million financing by IsDB, $52 million of trade financing by ITFC (International Islamic Trade Finance Corporation which is IsDB Group’s international trade financing arm) and $130 million of ICD/UIF financing. ICD (the Islamic Corporation for the Development of the Private Sector) is IsDB Group’s private sector development arm.

IsDB’s Ordinary Capital Resources (OCR) development portfolio in Azerbaijan consists of 35 operations with approvals of $945 million (excluding cancelled operations) which includes 31 completed operations worth $676 million and 2 active projects (4 operations) worth $266 million. The largest portion of IsDB development operations in Azerbaijan is in the Energy Sector (53 percent), followed by Water & Sanitation (27 percent) and Agriculture (13 percent).

IsDB is currently providing support to Azerbaijan’s National Water Supply and Sanitation Program in Six Regions through a Project worth $200 million. This project aims to provide clean and safe drinking water and sewerage connections to more than 320,000 inhabitants (including refugees and internally displaced people) in the six regions by constructing new water and wastewater treatment plants and installation of new water distribution networks and sewerage collection systems.

IsDB is also implementing an Integrated Rural Development Project with an approved amount of $66 million to support reduction in rural poverty in Agdash, Yevlakh, Sheki and Oghuz regions through increased food security and enhanced income earning opportunities for small farmers. The Project is assisting the farmers in achieving better productivity and profitability as well as environmental sustainability from both irrigated and rainfed crop production and livestock.

Thursday, 18 April 2019

Capitalism is failing us all. Could Islamic economics be the answer?

18 April 2019 (EuroNews)

By Muhammed Yesilhark

Billionaire Ray Dalio, manager of the world's largest hedge fund Bridgewater, recently shocked the world when he announced that "capitalism is failing" and that a "revolution" is coming.

There is no denying that global inequality is at unsustainable levels, and that interest-based economies are no longer fit for purpose (in many countries interest rates are too low to incentivise saving at all).

I believe that Islamic economics, with its 2.5% zakat wealth tax (and much lower taxes in other areas) might give us a clue on how to eliminate the worst social inequality. And with a prohibition of abusive high-interest businesses and the incentivisation away from interest-based savings accounts, it can reinvigorate the global economy. These are not just Islamic economic concepts; these are universalist traditional Abrahamic ethics, and a common sense way for us all to enjoy a truly free market.

Dalio’s statements matter, not only because of how strongly worded they are but also because of how topical they are in today’s news climate. They are significant because of who Dalio is, that is to say probably the most successful hedge fund manager in the world. One of my colleagues commented last week that this was the equivalent of the Pope declaring that Catholicism is failing.

Dalio’s words are perhaps more shocking because they violate one of the most sacred unwritten rules of the global rich: you’re not allowed to criticise capitalism if you have benefited hugely from it. Protest - or even displeasure - with the system is a luxury only the poor can afford. It’s normal to see cleaners, or even Uber drivers, angry at inequality. It is less normal to see the world’s wealthiest publicly stating that the order to which they owe their success is “not providing the American Dream.”

The “no protest for the rich” rule has led billionaires to channel their sense of responsibility, frustration or even guilt into philanthropy. This means that we seldom have the wealthy discuss these issues, let alone the root causes from which these problems arise. Those root causes go deeper than many of us realise and addressing them will mean re-examining not only our economics, but our politics and values.

Most of us want a societal order where there isn’t a huge vacuum between the classes. Unfortunately, this gap keeps widening as “casino capitalism” and high interest consumer products entrench divisions.

To create societies where there is mutual respect and compassion, we need an environment of reconciliation between the elites and the masses. The only way to achieve this is through a wealth tax such as the payment of zakat - one of the pillars of Islam - and an effective tool in addressing our current issues. But first, to reform a failing capitalism, we need to fix two things: taxation and the interest rate system. Taxation is easier (and far less left field) to critique since there is an emerging consensus that the global tax system simply no longer works. Through a combination of tax avoidance schemes, tax havens and even relatively innocent methods like transfer pricing, high net worth individuals and their corporations have very little (if any) tax to pay on their wealth. In the absence of effective wealth taxes, governments have no choice but to enforce taxes that perhaps unfairly target the poor, like sales tax and inheritance tax. The injustice of some of these taxes further normalises tax avoidance and polarises society even more.

Critiquing the interest rate system is more controversial. Most people feel that possessing money has some inherent value that should be recognised in a zero (or almost zero) risk way. But with negative interest rates spreading around in the developed world, interest rates are so low in many countries that they simply do not fulfil their purpose of incentivising consumers to save any longer. In short, as Deutsche Bank’s Jim Reid titled his research report last year, we might be witnessing “The Start of the End of Fiat Money.”

Therefore, our current fiat-based monetary system might require a rethink. After all, in the grand scheme of global economic history, it can still be considered an experiment as the vast majority of human history was based on gold and silver-backed sound money. Current proponents of digital currencies (such as so-called Bitcoin maximalists) are proposing a new form of supra-national sound money based on maths - quasi-“digital gold” for the globalised world.

Islamic economics, on the other hand, can give us clues to solve both these issues. Zakat, or Islamic alms, is a simple, transparent annual wealth tax of 2.5%. Let’s only consider tax havens, where estimated wealth of $10 trillion is held around the world. That means if zakat was paid on these funds (perhaps as some kind of amnesty agreement), there would be $250 billion per year flowing into the world’s poorest areas and worthiest causes.

At the same time, other taxes could be reduced or eliminated. In return for the wealth tax, Islamic economics suggests almost zero tax in every other area, including inheritance.

Solving the interest problem will be more gradual and will require a rethink of the monetary system we currently live in, as I previously mentioned. I can’t see a sudden global ban on interest but governments (particularly those with low interest rates) could incentivise other forms of investment, increasing regulation around abusive high interest products and businesses to start with.

Some of these might seem very drastic but once we strip away the Arabic terminology, concepts like zakat can return our economies to the common sense-based, transparent and equitable set up that the architects of modern capitalism envisaged.

When the richest guy in the room is telling you the game is rigged, it’s time to change the rules.

Monday, 15 April 2019

Bank Islam Brunei Darussalam (BIBD) makes record profit of nearly BND148M

15 April 2019 (Borneo Bulletin)
BANK Islam Brunei Darussalam (BIBD), the nation’s largest Islamic financial institution, has amassed an asset size of over BND10 billion, a figure comparable among the region’s best Islamic bank.

The bank also posted a record profit of BND147.9 million in 2018.

These statistics were shared during an annual dinner hosted by the bank for its staff.

During the event, the bank celebrated the success of establishing itself as Brunei’s First Choice Bank.

BIBD’s Managing Director Mubashar Khokhar highlighted the bank’s achievements in recent years and acknowledged the contribution of everyone involved in its success.

BIBD attributed the success to the past and present staff and stakeholders of the bank, which was determined from key achievements with its employees, customers and stakeholders.

The bank’s internal employment survey revealed that over 83 per cent of its staff are happy and proud to be the bank’s employee with over 74 per cent saying that BIBD is a great place to work.

BIBD currently dominates the domestic market position. This is supported by the fact that it accounted for 61 per cent of Brunei’s banking profit before tax in 2018.

The bank’s ability to retain its A- S&P rating since 2015 also signifies the bank’s robustness and stability of its corporate governance, risk assessment and management adoption of best international practices.

Sunday, 14 April 2019

Bank Islam Malaysia Berhad - Malaysia

The establishment of Bank Islam can be traced even way back before World War II where Muslims in the country were already looking for an alternative financial system that would comply with the Shariah (Islamic jurisprudence) requirements. It was not until 1969 however that the Pilgrims Management and Fund Board (Lembaga Urusan dan Tabung Haji or “Tabung Haji”) was established as one of the first Islamic financial institutions, primarily to encourage savings and investments among the Muslims and help depositors perform Hajj.

At the international level, the call for the establishment of an Islamic banking system had been gaining in momentum but it was only in 1975 that the first Islamic bank was established in Dubai. The bank was formed after 15 years of extensive research and joint effort by professional Islamic economists, financiers and officers from various world Islamic organisations.

The inception of Bank Islam in 1983 was the culmination of intense determination, inspired by the Bumiputera Economic Congress in 1980, followed by a seminar on the Concept of Development in Islam in 1981, and the tireless efforts of Tabung Haji, PERKIM (a non-governmental organisation committed to looking after the welfare of Muslims across the country) and the National Steering Committee for Islamic Bank (“National Steering Committee”).

Starting with 30 pioneering staff, Bank Islam’s first year of operation was conducted by its temporary headquarter at the first floor of Kompleks Jemaah Haji at Subang, Selangor. By the end of its first financial year, Bank Islam has four (4) operating branches at Kuala Lumpur, Kuala Terengganu, Kota Bharu and Alor Setar, with 272 employees.

Via the innovative application of Waqf land development, today, Bank Islam’s headquarter is the pristine Menara Bank Islam, located in the midst of the ‘Golden Triangle’ of Kuala Lumpur. As at end of 2013, Bank Islam has 133 branches nationwide with a workforce of more than 4,200.

1 July 1983 is a date of historic significance. It was when Bank Islam Malaysian Berhad or Bank Islam, in short, was officially established, marking the beginning of Islamic banking not just in Malaysia but also within the ASEAN region. As the pioneer of the industry, Bank Islam has since set the benchmark for innovations with a number of groundbreaking Shariah-based banking products and services. It has grown from a banking organisation providing purely Islamic banking products and services to an institution that provides comprehensive, end-to-end financial solutions. Today, Bank Islam is transforming the country’s economic landscape, leading the way in the development of Malaysia as one of the world’s major Islamic financial hub.

Source/website: bankislam(dot)com(dot)my

Saturday, 13 April 2019

(Video) Islamic Financial Planning and Wealth Management by Ahmad Sanusi Husain


Improved regulations spur Takaful growth

Globally, gross Takaful premiums, or contributions, increased at a compound annual rate of 9% between 2014 and 2017

13 April 2016 (Khaleej Times)

The profitability of Takaful insurers will stabilise after falling in 2017 due to heavy price discounting in the GCC countries, and rising claims in south east Asia, Moody's said, noting that global demand for Islamic insurance is growing, helping premiums to rise and supporting profitability.

"We expect premiums to keep growing moderately in the next 2-3 years, and the industry will benefit from improved regulation," said Mohammed Ali Londe, an analyst at Moody's. "Takaful insurers' profitability should stabilise in 2018 and 2019 after falling in 2017 due to discounting in GCC countries and rising claims in south east Asia."

According to a recent insurance industry report, gross written premiums of the 30 publicly-listed conventional and Islamic insurance firms edged up marginally by 0.5 per cent to Dh21.9 billion in 2018, up from Dh21.8 billion in 2017. The gross written premiums from Takaful firms increased by six per cent to Dh3.7 billion, up from Dh3.5 billion in 2017. The total size of the Takaful market stood at around $20 billion globally, with Saudi Arabia generating around $10 billion of this and the UAE $3-3.5 billion.

The State of the Dubai Islamic Economy 2018/19 report published jointly by DIEDC and Thomson Reuters in October 2018 put the overall size of the Islamic Finance market at $2.44 trillion. Moody's report said the Takaful industry's capitalisation should remain at current robust levels as growing demand prompts greater regulatory sophistication in key regions, including GCC countries, south east Asia and Africa.

Globally, gross Takaful premiums, or contributions, increased at a compound annual rate of nine per cent between 2014 and 2017. In the GCC region, the largest market for Islamic insurance, and south east Asia and Africa, demand will continue to be bolstered by the widening of compulsory cover in products such as motor, travel and health, Moody's report said.

The GCC area will also benefit from activity linked to events such as the 2020 Expo and 2022 Fifa World Cup. Moody's expects regulatory regimes to strengthen across all Takaful markets, with improvements in risk management, underwriting and reserving. The report said profitability in south east Asia and GCC countries is likely to remain stable, helped by adequate pricing and improved operating efficiencies, with a return on capital of 8-10 per cent.

In Saudi Arabia, Moody's expects proposed increased capital requirements to drive consolidation in the Takaful sector. In Africa, profitability will probably be volatile as regulations evolve, creating short-term compliance and operational hurdles.

The report noted that a widening of compulsory insurance such as Umrah and Hajj travel insurance is expected to spur profitability in Southeast Asia, complemented by the rise of digital distribution.

"We expect regulatory regimes to become increasingly sophisticated across all Takaful markets as demand keeps growing. This will lead in turn to improvements in Takaful operators' risk management, underwriting, and reserving. In Africa, the introduction of Takaful regulations in many key markets will bolster take-up of the cover. In Malaysia and Indonesia, more rigorous regulation will support Takaful operators' capitalisation," said the report.

Friday, 12 April 2019

Islamic Bank to fund Suriname electricity upgrade, food and medicine

12 April 2019 (Caribbean News Now)

PARAMARIBO, Suriname – Suriname and the International Islamic Trade Finance Corporation (ITFC), an independent organization within the Islamic Development Bank (IsDB) signed two agreements with the minister of finance, Gillmore Hoefdraad, and the chief executive officer, Hani Salem Sunbol, on Friday, 5 April, in Marrakech.

One is a Murabaha agreement for US$25 million. This agreement is a credit facility intended for the import of basic goods, medicines and medical consumables as well as imports for the agricultural sector.

The second agreement is a framework agreement in which Suriname and the ITFC will enter into a strategic partnership for a maximum amount of US$75 million for the next three years. The focus will be on the financing of goods, the provision of ‘Line of Finance’ to support small and medium-sized enterprises, providing technical or financial assistance and promoting trade and trade relations.

In December 2018, Suriname became the 45th member of the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC). The CEO, Osama Abdel Kaissi, said he is therefore delighted to support the public and private sector in Suriname.

Both the CEO of ITFC and ICIEC will visit Suriname this year to build stronger cooperation, according to Hoefdraad.

Dr Bandar M.H. Haijar, CEO of the Islamic Bank Group and Hoefdraad on April 4, also signed a loan agreement with the bank for the expansion of P\power generation, transmission and distribution systems in Suriname for the amount of US$41.3 million.

The project aims to guarantee steady and sufficient energy supply for Suriname.

The project was prepared by a unique joint mission in January and is being funded by three other international partners alongside IsDB. The Kuwait Funds, OPEC Fund for International Development (OFID) and the Caribbean Development Bank (CDB) are also funding the project.

In Marrakech, Hoefdraad also met with the director-general of the OPEC Fund for International Development (OFID), Abdulhamid Al Khalifa. OPEC will support the energy and health sectors of Suriname.

The minister signed also two donation agreements. The first donation concerns the strengthening of the Bureau for Gender Issues for US$280,000. The second donation is for the Reverse Linkage project in cooperation with the IsDB and Indonesia for technology regarding the artificial insemination of cattle. The IsDB will contribute US$280,000, while the government of Indonesia will fund US$380,000.

Hoefdraad and Hajjar also discussed the progress of ongoing projects, including education and housing, and the other Reverse Linkage projects in the field of rice with Malaysia, and air traffic control with Turkey.

The IsDB president was also invited to visit Suriname soon and Guyana will be part of that Caribbean visit.

Also, in 2020 the the IsDB gave a firm commitment to open a regional hub in Suriname.

Further support for Islamic financing in Suriname was pledged in this case to Trust Bank Amanah and also the possibility of an introduction course of Islamic Finance at the Anton de Kom University was discussed according to Hoefdraad.

Thursday, 11 April 2019

Islamic finance rules binding on civil courts — Federal Court, Malaysia

11 April 2019 (The Edge Markets)

PUTRAJAYA: In a landmark decision, the Federal Court has ruled that the findings on Islamic finance by Bank Negara Malaysia’s Syariah Advisory Council (SAC) are binding on civil courts. 

A nine-member bench, in a narrow 5-4 decision, also ruled that the ascertainment of Islamic law by the SAC does not amount to a judicial decision.

The dissenting justices included Chief Justice (CJ) Tan Sri Richard Malanjum, Chief Judge of Malaya Tan Sri Zaharah Ibrahim, Chief Judge of Sabah and Sarawak Datuk David Wong Dak Wah, and Federal Court Judge Justice Tan Sri Idrus Harun.

Federal Court judge Datuk Mohd Zawawi Salleh wrote the majority judgement and it was also accepted by the Court of Appeal President Tan Sri Ahmad Maarop and Apex court Judges Tan Sri Ramly Ali, Tan Sri Azahar Mohamed and Datuk Alizatul Khair Othman Khairuddin. 

The majority held that the rulings by the SAC constitute an expert opinion in the matter of Islamic finance.

“The SAC members are highly qualified in the fields of syariah economics, banking, law and finance,” Justice Zawawi said.

The SAC could be referred to so as to ascertain which opinion or jurist was most applicable.

“It is for the courts to apply the ascertained Islamic law to the facts of the case. The final decision on the matter remains with the court,” the judge added.

The full nine-member bench was delivering on the decision in the referral by JRI Resources Sdn Bhd against Kuwait Finance House (KFH).

KFH filed a civil lawsuit in 2013 against JRI to claim RM118.82 million relating to four Ijarah Facilities agreements and one Murabahah Tawarruq agreement entered between them in 2008 and 2009. KFH also made a claim against three guarantors.

JRI referred several questions for the Federal Court to decide, namely whether Sections 56 and 57 of the Central Bank of Malaysia Act 2009 were constitutional or impinged on judicial power, as the sections stated that rulings by the SAC bind the civil High Court.

Justice Malanjum ruled Section 57 as unconstitutional, as judicial power cannot be removed from the judiciary, but the majority ruled otherwise.

“The effect of the section is to vest judicial power in the SAC, to the exclusion of the High Court in syariah matters. The section must be struck down as unconstitutional and void,” the CJ said.

JRI counsel Datuk Malik Imtiaz Sarwar, in commenting on the decision, said it was telling that Justices Malanjum, Zaharah, Wong and Idrus concluded that the provisions that made the SAC rulings binding on the courts were self-evidently an usurpation of judicial power.

“That they thought the provisions resulted in unfair trials in which the litigants were denied the opportunity to test material evidence and make submissions is even more so.

“Though the majority of the court upheld the validity of the provisions, the strong view of the minority is reason enough for the attorney general and the government to consider whether the legislative framework should be amended.

“The CJ noted that there are other methods by which certainty can be achieved which do not impinge on judicial power. This is something that should be seriously looked at,” Malik said.

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