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Friday, 4 May 2012

Researchers back idea of Islamic banks in Malawi

As the concept of Islamic finance captivates the international market, a paper released by Malawian researchers has supported the idea of introducing such banks in Malawi.

The paper, authored by scholars Abdul Sheriff Kaunde and Abdullah Omar I. Mdala, titled "A Case for Islamic Banking in Malawi" and released in April this year argues that Islamic banking and finance run in accordance with Islamic principles and the law of the land.

Their research follows Reserve Bank of Malawi's (RBM) refusal to licence the Islamic Bank of Malawi on the grounds that Islamic banking had Shari'ahh elements embedded in it.

The application was made by Shari'ahh Investments Limited.

However, it's the paper argues that Islamic banking follows the three essential features of banking stipulated in the Banking Act.

It further warns that the country risks losing millions in Foreign Direct Investment (FDI) due to her rigid laws and, with it, prospects of propping up her foreign currency reserves.

"As such, it could neither be seen to be at odds with the secular principles enshrined in the Constitution, nor as a means to support or promote a particular religion, as we may rightly suspect it here in the decision (to turn down the application).

"Secondly, the term 'banking', as defined in the Banking Act has three essential features: acceptance of deposits from the public; the use of money so accepted for lending or investment, and; liberty to the depositor to withdraw the money," argues the paper in part.

Kaunde and Mdala say, going by this definition, the Banking Act does not require an Authorised Dealer Bank to pay interest on deposits or charge interest on lending, "nor do the requirements beg the need to comply with that".

Under the RBM Act, an institution interested in opening shop first provides a synopsis of the nature of business to be conducted, after which the central bank determines whether the application has potential and is compatible with the interest of the national economy.

Applications to conduct banking business are made to the Minister of Finance through RBM, which is mandated to conduct an evaluation before making recommendations to the minister.

Apart from paying a licensing fee of US$1,250, the applicant is assessed on performance history, financial position, expertise, capacity to maintain an adequate capital base, soundness, solvency and liquidity of proposed business operations, impact of business on prospective customers, capacity to commence business within 12 months, among others.

Mdala, who holds a Bachelors Degree in Islamic Sciences, backed his paper in an interview last Friday.

He said he and United Kingdom-based lawyer Kaunde came up with the paper after noting that the Islamic Bank of Malawi met all the requirements to operate in Malawi.

"The ultimate test of such an alternative is whether it is successful or not. It can be safely said that Islamic banking has been successful (and) that is why it is not surprising to find several international banking institutions establishing their own Islamic units, windows, branches or fully-fledged Islamic banks to better serve their customers.

"Financial centres such as Singapore, Hong Kong, Geneva, Zurich and London have either changed laws or tweaked existing regulation to accommodate the Islamic Finance industry.

A March 2011 Economy Watch report estimated that the Islamic finance industry is worth US$800 billion and that it is growing at between 10 to 15 percent a year.

"To date, two major leading banks in South Africa- FBN and ABSA- have Shari'ah compliant services."

Another paper prepared by Boston Consulting Group in the United Kingdom says that the focus is "on leveraging deep and long-term relationships with worthy Muslim clients from the Middle East who are seeking private Islamic banking services".

At the peak of the derivatives boom, for instance, the industry body International Swaps and Derivatives Association even structured what it called an 'Islamic swap'.

The United Kingdom has not lagged behind, with commercial banks now offering Shari'ah-compliant mortgages. In 2003, for instance, HSBC became the first mainstream UK bank to offer mortgages designed to comply with Shari'ah, followed by United Nations Bank Limited's launch of the first Islamic product called UNB Islamic Mortgage.

"Malawi, as a former colony of the united Kingdom, largely borrows its laws from this colonial master, and has a lot to learn from the adjustments to allow an Islamic system of finance," Mdala said.

He said the country could get guidelines from the Islamic Financial Services Board, an association of central banks, monetary agencies and government organisations established on November 3, 2002 to develop universal Shari'ah compliant finance standards.

From humble beginnings in the 1990's, Islamic finance has become a trillion-dollar industry.

(The Daily Times / 02 May 2012)

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China: Islamic finance could host renminbi trades

China could be the next staging ground for Islamic finance deals, Malaysia’s central bank governor Zeti Akhtar Aziz has said
Islamic finance is set to build on its position as the fastest growing sector in international finance by expanding into new markets such as China, according to Zeti Akhtar Aziz, the governor of Malaysia’s central bank.
“It is taking place not only in Asia but the Middle East as well as other parts of the world and it is growing because this is a form of financing linked to the creation of economic activity, generating income and wealth,” she said.
Islamic finance had attracted a lot of interest because of the interdependent linkages that require all financial transactions to be linked to an underlying economic transaction in order to be compliant with Islamic finance regulations, often referred to as Shariah compliant standards, a form of religious law relating to finance.
“This is what is supporting the growth so it is not a sudden surge but it has been growing with the growth of emerging economies,” she told Emerging Markets.
Several institutions and multinationals including Toyota, Tesco and Nomura have recently tapped Islamic finance markets. Malaysia has also encouraged multi-currency issuance including Singapore dollar- and renminbi-denominated products.
“If they want to raise finance for investments in China there is potential to raise renminbi out of our market because we also have the infrastructure such as the settlement system that can facilitate it.”
Malaysia has become a global hub for Islamic finance that may be worth as much as $1 trillion worldwide, by putting in place a regulatory system that exists alongside the country’s traditional capital markets structure.
“We have the credentials and have put in place the regulatory and supervisory framework as well as accounting standards and a financial stability forum that looks at the risks and vulnerabilities to ensure sustainability.”
Malaysia is confident the Islamic finance market will continue to prosper, Zeti said, pointing to the interest in global Sukuk market, a form of Islamic bond, from both Islamic and non-Islamic countries.
“This shows that the structures meet financing requirements and more importantly that it is competitive with an intrinsic value proposition.”
Many analysts are also excited about additional market opportunities in fast growing economies such as Indonesia but say the overall market lacks critical mass or a universal trading platform.
Whether that leads to a much anticpated “big bang” in Islamic finance and greater mutualization of Islamic capital markets remains to be seen but Zeti said broader cooperation was undoubtedly beneficial.
“First of all we want to strengthen our economic linkages with other emerging economies and this represents a channel by which this linkage is enhanced and it is not only in Asia but in Africa, the Middle East and traditional markets such as Europe and UK.
(Emerging Market / 03 May 2012)
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12 Characteristics of a Highly Successful Entrepreneurial Mindset

Success does not happen overnight. It takes hard work, perseverance and continual self-improvement. Every highly successful entrepreneur has a great story to tell. Often times, you’ll be amazed by what most of them have gone through before becoming famous entrepreneurs. They may be ordinary people but they do not have ordinary minds. 

Here are the characteristics of highly successful entrepreneurs.

  1. Passion: They absolutely love what they do; it energizes them and makes them come alive. It doesn’t feel like work, because they feel they are doing what they were born to do. 
  2. Belief: Their self-belief and belief in their ideas enables them to succeed. They have faith in their ability to succeed and proceed when others doubt their ideas. They believe they can make it work and never allow their circumstances to place a limit on their potentials.
  3. Courage: They have the courage to take on new challenges, to follow their instincts and to go boldly where no one has gone before.
  4. Determination: Highly successful entrepreneurs have great determination. They are determined to make their ideas work, no matter how difficult. They are determined to nurture their ideas and watch them flourish.
  5. Instinct: They are good at making decisions, tuning into their gut feeling and weighing up consequences in a heartbeat. The more decisions they make, the better they become at decision making.
  6. Risk Taking: They are prepared to take risks and step outside their comfort zone to get what they want. Interestingly, a lot of their decisions are calculated risks.
  7. Vision: They begin with a dream of what they really want to achieve and they set clear goals and objectives. From that, they strategize, plan and act on what they want to achieve. They inspire others to focus on achieving results.
  8. Discipline: They are brilliant at getting things done and this takes commitment, hard work and dedication. They get up early, work late and never give up until they get what they want.
  9. Resiliancy: They have failed in the past and they know that they will fail again in the future. They are not afraid of it. They have learned great lessons from their failures. They turn the situation around to make it work for them. In fact, other innovations can even emerge from failures.
  10. Adapt: They are early adopters and quick to respond to changes that affect their business. They are not afraid of change, not afraid to adapt to unforeseen circumstances. They understand that change is a certainty and face whatever life throws at them with courage and hope.
  11. Inspire: They motivate and inspire others to achieve results. They recognize and nurture talents and qualities in others.
  12. Learn: They are always willing to learn and invest in their own personal development. They attend seminars, network and rub minds with like minds. They seek out others who share their passions and build relationships with people who support and encourage. They have great mentors and coaches and work on ways to continually improve. They grow daily, and never fail to make use of every opportunity.

Perhaps you can identify many of the characteristics of highly successful entrepreneurs in yourself.  Are there some you feel are stronger than others? Are there any of the characteristics of highly successful entrepreneurs that you would like to further develop?

(Great Minds/Sinead Duffy)

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