Malaysia: HDC, IDB to set up halal investment fund

KUALA LUMPUR: The Halal Industry Development Corporation (HDC) is in discussion with the Islamic Development Bank (IDB) to set up a halal investment fund.

Its focus will include to finance the development of agriculture businesses especially for IDB member countries.

An MoU was signed recently between the two parties to set the ball rolling, HDC chief executive officer Datuk Seri Jamil Bidin told Bernama in an interview.

“We can use the fund as a mechanism and propose it to the wealthy countries like in the Middle East and Brunei to inject funds and then, channel it to IDB member countries that have the ability to produce food supply,” he said.

Usually, the countries that have resources to produce food supply do not have enough financial capability to expand their production and reach export markets.

Richer Organisation of Islamic Conference (OIC) countries like in the Middle East, on the other hand, have the financial capability but do not have the resources like land and manpower to produce food.

For example, Jamil said, countries like Sudan and Pakistan have the ability to become halal meat producers but they do not have the financial capability to be global meat exporters.

In Malaysia, meanwhile, there were over US$500 million of halal investment opportunities, of which agriculture businesses were among the lucrative businesses that can be tapped into.

Jamil said this was where OIC countries can leverage on each other’s capability and at the same time ensure enough halal food supply for the Muslim world without relying on traditional food producers.

He said the move would not only tackle the shortage of halal food supply globally but also a way to tackle rising food prices.

“International food prices increased steeply from mid-2010 to 2011, raising alarm bells across the developing world about a repetition of the food price crisis of 2007-2008,” he said, citing data from the United Nations Economic and Social for Commission for Asia and the Pacific (ESCAP).

He said with growth in the economy, rising disposable income as well as increase in halal awareness, trading in halal products especially meat and food products would also increase exponentially.

Non-Muslim Dutch consumers had also shown interest in halal food where the total demand is estimated to reach about US$3 billion annually, he said.

With the possibility of supply-side disruption, he said, there was a dire need for invesment in agricultural projects especially in under-developed and developing Muslim countries.

“We are coming out with a blueprint with the IDB on food security to find a solution. The fund will be one of the proposed solutions as well as other new cooperation between us,” he said.

Jamil said the blueprint was expected to be finalised within the next six months.

Apart from agriculture projects, he said, the fund would also address the missing gap in other underfunded investment opportunities which are neither small nor big enough — valued between US$1 million and US$10 million.

(Borneo Post Online / 14 May 2012)

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Alfalah Consulting - Kuala Lumpur:

www.alfalahconsulting.com

Islamic Investment Malaysia:

www.islamic-invest-malaysia.com

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

Malaysians to bring Islamic banking to Germany

Islamic investing represents a 1.2 trillion euro market. Now one Malaysian firm wants to bring the trend to Germany. Others have tried and failed before, so it could be a struggle.

Confident and professional, the female chief executive of Malaysia-based CIMB-Principal recently gave a press conference in Frankfurt about the only registered Islamic investment fund in Germany.

Noripah Kamso said, "I want to share the new i-word with you. It doesn't stand for iPad, iPhone or inflation–but for Islamic banking."

The firm's goal is to win over Germany's roughly 4 million Muslim residents, along non-Muslims, to the bank's strategy of investing in accordance with the Koran.

The Muslim market

Islamic investment firms have been around since the 1970s. They prohibit interest, speculation and betting. They also do not put any money into companies that make alcohol or deal with pornography, gambling or pork. Islamic investment firms also keep away from companies with debts amounting to more than 30 percent of their own value.

In spite of these restrictions, customers of Islamic financial products can make money through a number of tricks. For instance, such customers earn no interest, strictly speaking, on their bank accounts. Yet it is a common practice for banks to contribute a sum to such customers' accounts every year in place of the interest.

An association of banks based in Muslim countries assesses whether or not firms conform to the Koran. According to CIMB-Principal, Germany has 27 publicly traded companies, including chemical giant BASF, that qualify.

The Islamic finance industry value is estimated at about 1.2 trillion euros (about $1.6 trillion), with yearly growth of more than 15 percent. Malaysia and countries in the Persian Gulf are the main nations to bind their firms to Islamic rules.

Even though Islamic banking accounts for just one percent of the global financial industry, there has been an increasing demand for alternative investments since the onset of the financial crisis. That's according to Daud Abdullah, president of the Global University of Islamic Finance in Malaysia's capital Kuala Lumpur.

"If people invested more in Islamic finance, the world would not have such problems," he said. "Then we wouldn't have highly speculative instruments that provide no economic benefit, but get countries deep into debt."

Branching out

Islamic financial products got their first major boost after the terrorist attacks of September 11, 2001. Many Arabs withdrew their money from the US at the time, and Abdullah says some of those funds ended up in Malaysia and the Gulf states.

A second boost came during the international financial crisis, when Islamic financial products actually showed profits. The Dow Jones Islamic Market Titans Index, which tracks the 100 biggest Islam-compliant businesses in Europe, the US and Asia, has nearly doubled over the last five years.

That is why a growing number of non-Muslims are also showing interest, said Abdullah, a scientist and Muslim convert.

"Islamic finance is for everyone," he added. "If you look at [Islamic finance] globally, 60 percent of investors are not Muslims."

If you build it, they will come?

In CIMB-Principal's first phase, the firm wants to arouse interest in Germany's Muslim population. According to studies by the firm, 23 percent of German Muslims want to put their money in Islamic investments.

"Most Muslims in Germany are from the second or third generation," Kamso said. "Many of them have good jobs."

CIMB-Principal's second phase is to target non-Muslim investors. But the prospects are not especially promising. Unlike in the UK, where many firms similar to CIMB-Principal have long been on the market, there is little experience of Islamic firms in Germany.

"German firms are making Islamic bond portfolios and investment funds available," manager Karim Zaazou said. "But they only offer these products in Arab countries, to get a share of the petro-dollars."

Scandal casts a shadow

CIMB-Principal's plan is not the first to try and encourage Islamic investment in Germany. In the 1990s, Commerzbank and the state of Saxony-Anhalt developed a Islam-compliant bond known as a "Sukkuk." But the scheme was undermined by a scandal concerning share certificates.

Some 300,000 Muslims invested in one product, known as the "Konya model," only to see its Turkish operators disappear with the money. The damage was estimated at five billion euros.

Based on this experience, the general secretary of Germany's second largest Muslim organization does not think the Turkish community will be eager to invest in the new fund.

"There is obviously a need to apply one's religious principles in investing," Milli Gorus said. "But there is also a great deal of scepticism because of the past."

CIMB-Principal's first phase in Germany might come to nought. But you don't have to be religious to be interested in a good investment. The firm might not make headway in Germany until its second phase begins – unless this latest attempt at Islamic investments falls by the wayside like others before it.

(D.W / 12 May 2012)

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