Entries in English and Malay (Bahasa Melayu)

Tuesday, 26 June 2012

Islamic finance ready to move into fast lane

Ethical banks could grab half of regional market within years

Islamic banks are set to have the same share of the Middle East’s banking industry as their conventional rivals by the end of the decade, a major international lender has said.
Leading executives at global institution Standard Chartered say Sharia-compliant banks are on track to boast around half of the region’s banking assets by 2020 - on the back of surging growth which has seen the industry expand by 30 per cent in the region in just two years. Standard Chartered say Islamic banking now accounts for 25 per cent of the UAE banking industry.
“It’s not niche any more - it’s becoming part of regular banking,” Khalid Elgibaly, head of consumer banking in the region at Standard Chartered, told 7DAYS yesterday.
Elgibaly admitted the potential revenues from Islamic banking are “absolutely huge”, but added: “It’s not just about that, it’s about values, trust, honesty. Is that not what you want from a banker?”
It is these factors that are making Sharia-compliant finance appealing to non-Muslims too, he said.
The bank’s global head of private banking, Stephen Evans, added: “Ethical investment has become a big driver for investment choices.”
According to Elgibaly, the reason that Muslims in the region have often used conventional banks, as opposed to Islamic institutions,
is simple.
“They’ve never had access to the same global investment opportunities - it’s always been local or regional banks at best,” he said.
Many Islamic scholars have expressed concerns about Muslims building large personal fortunes through conventional finance. But Evans insisted: “Making money is fine in Islam, trade is something that is absolutely fine in Islam - it’s the way you trade.
“Islamic banking is very respected in worldwide investment circles. We have the Muslim world to thank for the words ‘bank’ and ‘cheque’.”
According to Standard Chartered though, just 14 per cent of the world’s 1.6 billion Muslims have a bank account. And the bank spies a big opportunity for its Islamic division, despite the company’s own roots in conventional finance.
Evans said: “The biggest provider of halal products in the world is [Swiss conglomerate] Nestle. We’d like to be the Nestle of the banking world.”
(7 Days In Dubai / 26 June 2012)

Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Shariah Financing Helps US Muslims Achieve Home Ownership Dream

Khadijah Sahak, 59, sits in the family room of her neatly-kept townhouse in Sterling, Virginia. The Afghan news program broadcasting from her wall-mounted flat-screen television is discussing the Taliban. 

This leafy Washington suburb is a long way from the refugee camp in Pakistan where Khadijah’s family says they lived after leaving Kabul in 2002.

“We like the house very much,” she says in Dari, adjusting the white headscarf draped loosely around her face. “We are very comfortable here. We are at peace.”

It is a peace Khadijah thought she could never enjoy in the United States.
When her grown son, Nabi, offered to help his parents buy a home, Khadijah and her husband refused to live in a house bought with a traditional mortgage.

As practicing Muslims, they believe demanding or paying interest on money - like the kind paid on a home loan - is prohibited by strict Islamic practice.

“Everyone in my family was, in one way or another, against the idea of conventional mortgages,” says Nabi.  

A piece of the American Dream

Then he heard about the Michigan-based Ijara Loans, one of a handful of Islamic financing companies in the United States. They've tapped into a niche market of devout Muslim-American homebuyers by offering “Sharia compliant” home purchasing contracts which do not include actual interest.

“That day they got really excited, when they learned that they were able to still buy a house and not compromise their religious values,” Nabi says of his parents.

When the Sahak family bought the Sterling townhouse in 2010, they joined about 10,000 other Muslim-Americans who've purchased homes in the past 10 years using Sharia-compliant financial transactions.

Guidance Residential, based in Reston, Virginia, is the largest company in the United States which offers Sharia financing. At its spacious headquarters, phone operators manage calls from customers mostly in a mix of English and Arabic.

Spokesman Hussam Qutub says the company has processed $2.3 billion in Islamic home financing transactions since it launched in 2002.

“Relief that it does exist is definitely the feeling among the majority of the people who contact us,” Qutub says. “We are in a sense impacting the ownership rates of Muslim-Americans in a positive way.”

'Sharia' financing

Instead of charging interests on a monetary loan, Islamic finance companies generally offer homebuyers a sale, rent or partnership contract on the home.

In the sale model, the Islamic bank purchases the home, immediately sells it to its customer at a mark-up and the customer pays the bank in installments, according to Georgetown University law professor Babback Sabahi, who lectures widely on Islamic financing.

In the rent model, the Islamic bank purchases the home and rents it to the customer in a rent-to-own type agreement.

In the partnership model, says Sabahi, both the Islamic bank and customer purchase the home together. The customer gradually purchases the bank’s share of the home while also paying a fee for occupying the house.

“In order to be done right,” says Sabahi, “the bank needs to truly purchase the asset, own it and then transfer this ownership to its customers. And a trade - as opposed to lending in the conventional sense of the word - is what Sharia signs off on and approves.”

The arrangement works for devout Muslim-American homebuyers because Islam does allow making profit on a trade transaction or the sale of a commodity - in this case the house. The buyers never feel they are paying interest on money.  

“We feel we’ve only scratched the service here…with this niche market.” says Qutub of Guidance Residential. “There [are] still plenty of consumers out there of the Muslim faith that don’t even know this option is available.”

Keeping the faith 

Sharia financing in the U.S. has accounted for less than $3 billion in home sales over the past 10 years - a small fraction of the total U.S housing market. But Islamic finance companies are making the American dream of home ownership come true for more and more practicing Muslims, like the Sahaks.

“If I can live in America and feel that I own a home that is completely in line with my Islamic system,” says Nabi, “then I guess the pleasure of living in that house would be tenfold.”

“We were very happy that we found an Islamic bank,” Khadijah chimes in. “We didn’t like the other banks. If we want to buy another house it will be from an Islamic bank and I tell my friends that, too. We are more comfortable like this.”

(Voice Of America / 25 June 2012)

Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Oman's Bank Muscat plans $251 mln rights issue to venture into Islamic finance

Bank Muscat, Oman's largest bank by market value, is planning to raise 96.7 million rials ($251.17 million) from selling shares to existing holders, as the lender seeks to fund its credit growth and venture into Islamic finance.
Bank Muscat, in which Dubai Financial Group has a 14.7 percent stake, is offering 226.5 million shares at 0.427 rials per share as part of the issue, a document from the lender seen by Reuters showed.
Proceeds from the sale will be used to fund the bank's credit expansion and future foray into Islamic finance, the document said.
While lenders in neighbouring Gulf states have ramped up sharia-compliant services in recent years, Oman has stood out by refusing to participate in the industry.
The central bank reversed that stance last year, partly to prevent the outflow of Islamic funds.
The rights issue will be open from July 9 to July 23.
(Reuters / 26 June 2012)

Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Islamic banking assets set to reach $1.1 trillion in 2012

With the gap between Islamic and conventional banking solutions narrowing substantially, banking assets of the Shariah-complaint segment — growing twice as fast as conventional banking assets — are expected to reach $1.1 trillion globally in 2012, up 33 per cent from 2010, Standard Chartered said on Monday.

With the fast development of the Islamic banking industry, Muslim high net worth individuals, or HNWIs, are increasingly expecting Shariah compliance in managing their wealth, making Islamic wealth management solutions a key market need, Standard Chartered Private Bank said at the launch of a comprehensive suite of Islamic financial solutions for its clients. In an earlier forecast, Standard Chartered said Islamic banking assets in the UAE would grow to 20 per cent of the total banking sector in 2012 from an estimated 18 per cent in 2011.

The bank had said it expected Islamic assets to constitute 38 per cent of total consumer banking assets in the UAE in 2012, compared to about 35 per cent in 2010. It didn’t provide a 2011 estimate. According to the Dubai Chamber of Commerce and Industry, the collective assets of the eight Islamic banks in the UAE were at Dh269 billion at the end of 2010, accounting for around 16.2 per cent of the overall banking assets of Dh1.66 trillion.

Noor Islamic Bank chief executive Hussain Al Qemzi, speaking recently at the 2nd Annual Middle East Islamic Finance and Investment Conference, said the global Islamic finance industry could grow from its present $1 trillion to around $4 trillion within five years as untapped markets such as China open up and new products drive demand.

The new suite of financial solutions from Standard Chartered include fiduciary deposits, property financing, equities, Islamic fixed income instruments, or sukuks, mutual funds, third-party structured products and discretionary services. These solutions are now available to clients across the Private Bank’s booking centres in London, Geneva, Jersey and Dubai Standard Chartered Saadiq.

Khalid El Gibaly, Standard Chartered Bank’s regional head of consumer banking in the UAE and Middle East, said the bank had identified a latent demand among its existing and prospective private banking clients for Islamic private banking solutions. “The launch of our Global Islamic Private Banking offering out of the region is testament to our strategic focus on the Middle East region,” he said.

The new Islamic financial solutions will be delivered in collaboration with Standard Chartered Saadiq, the bank’s Islamic banking arm. With the launch of this offering, Standard Chartered is now able to provide private banking clients a full spectrum of financial solutions — from those who require conventional to those who require Islamic banking, said El Gibaly.

Commenting on the Islamic private banking potential, Stephen Richards Evans, Standard Chartered’s regional head of private banking for Europe, Middle East, India, Africa and Americas, said in the GCC alone, there are more than 500,000 HNWIs with net investible assets of over $1.7 trillion, and this number is rapidly growing in light of relatively better economic conditions in the region compared to other parts of the world.

“However, this segment remains one of the most underdeveloped and underserved amongst all the Islamic banking client segments,” he added.

Wasim Akhtar Saifi, Standard Chartered Saadiq’s group head of Islamic banking and consumer banking, said although Islamic banking solutions have become increasingly available, there are few viable Shariah-compliant alternatives for HNWIs. “There is a need to adopt a more holistic view towards wealth management for this segment. The launch of Islamic financial solutions for our private banking clients broadens the overall spectrum of wealth management solutions... We plan to continue to expand the range of Shariah-compliant solutions.

(Khalej Times / 26 June 2012)

Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Interest-free banking will benefit India: IDB President

New Delhi: Islamic Development Bank Group’s President, Dr. Ahmad Mohamed Ali conferred last week in New Delhi with Indian Vice-President Mohammad Hamid Ansari, Finance Minister Pranab Mukherjee, Minister for Minority Affairs, Law & Justice Salman Khurshid and Minister of State for External Affairs E. Ahmed, Chairperson of Hajj Committee of India Mohsina Kidwai and Former Deputy Chairman of the Rajya Sabha K. Rahman Khan.
During the meetings, Dr. Ali highlighted IDB Group’s role in economic and social development of the Bank’s member countries as well as Muslim communities in non-member countries. He touched upon ways for promoting social and economic cooperation between IDB Group and India’s Muslim community on a number of grounds including development of Awqaf properties and their cost-effectiveness improvement, savings management for successful Hajj Pilgrimage experiences, education programs including connecting madrasas via distance learning technology and scholarships.
IDB has so far supported 267 educational institutions in India with financial assistance amounting to US$ 42.8 million as grants. It has also launched a Scholarship Program since 1983 to enable outstanding Indian students to pursue higher studies in universities in various science and engineering related disciplines. To date the total number of beneficiaries in the Scholarship Program in India stands at 3,819 (comprising 2,986 males and 833 females), out of whom 2,564 have graduated as medical doctors and engineers. Refunding of US$ 2.25 million by 1,026 ex-scholarship holders now in the job market has practically led to offering 852 new additional scholarships.
Also during his visit to India, the IDB Group President addressed the opening session of a conference on “Hajj Pilgrimage Management” where he expressed IDB Group’s readiness to cooperate with India so that the Indian Muslim community could benefit from the Malaysian experience in Hajj management by replicating Malaysia’s “Tabung Haji” (TH) model. He thanked the organizers ‘Forum for Haj Pilgrimage Management in India’ to call him addressing such an important conference. Tabung Haji is an Islamic savings institution specialized in managing savings of its depositors enabling them to perform Hajj pilgrimage through investing these savings in various Sharia’h compliant economic activities.
“It is an important financial institution not only for management of Hajj affairs but also an institution which has practically turned into a significant financial institution encouraging individuals to save money for various purposes such as education and marriage in addition to investing in different economic sectors”, stated the IDB Group President.
During this meeting IDB Group President also discussed about scope of interest free banking and finance in India. Mr. Salman Khurshid also explained various schemes running through Minority Affair Ministry and the related benefits to Indian Muslims. He briefed the progress so far in India with regard to Islamic Banking and Finance. The IDB Group President also extended willingness to meet and discuss with RBI officials about relative challenges and scope of interest-free banking and finance in India.
Considerably if India opens gateway for Islamic Banking and Finance along with inviting IDB group for drawing foreign investor’s attention, India could get many big petro-dollar investors without interest burden; it would help India get required financial resources with putting control on fiscal deficit, rupee depreciation and inflationary pressures.
On the side lines of the event, Dr. Ali met with officials of India’s IDB Graduates Association (IGA), the Board of Trustees of Muslim Education Trust and the Indian Center for Islamic Finance.
(Two Cicle.Net / 25 June 2012)

Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Islamic banking presents ethical approach

Bayt Al Mal Investment’s banking philosophy is one of complete openness and full Sharia compliance
Taking its name from an Arabic term translated as ‘house of money’ or ‘house of wealth’, privately-held Bayt Al Mal Investment was historically a financial institution responsible for the administration of taxes in Islamic states, particularly in the early Islamic Caliphate.
It served as a royal treasury for the caliphs and sultans, managing personal finances and government expenditures, and was the department that dealt with the revenues and all other economical matters of the state.
Today, this practice is still going strong. As well as fulfilling the requirements of its clients – institutions and providers of Islamic products that need distinguished investment – Bayt Al Mal Investment also provides business opportunities for major national and international companies looking to secure funding from the Islamic market. “We invest where the opportunity lies,” says Al Qimlas. “Wherever it is – we will look for it.”
Thanks to this philosophy, the investment bank has been something of a success story in recent years. In 2008, it led an investment consortium to bring a major motor sport, entertainment and commercial complex to the Niagara region of Ontario in Canada, and with it, additional foreign direct investment and tourists from across the border.
Regional boost
Bayt Al Mal Investment’s smart investments have given it a significant market-leading edge. It is already looking to become a MENA region specialist.

“We do provide a fully fledged range of services – including advising on M&A, fund management, portfolio management, buying and selling mandates, restructuring, helping foreign entities. We do it all – you name it, we do it,” says Al Qimlas. “Restructuring is always in demand; currently there is more of an appetite for real estate and equity so we aim to be flexible in the way we do business.”
Staying flexible seems to be something of a mantra for Bayt Al Mal Investment. A more recent major success story at the bank is the The Investor for Securities (TIS) subsidiary, which required adapting to a new set of regulations in response to a flourishing and niche market. “The subsidiary has set up a good number of funds in response to high demand, especially in the Saudi Arabian market,” says Al Qimlas. “We set up funds for developers to do a number of things in the marketplace – particularly in real estate. It’s the proper way to do things – to help society along and provide people with housing – all part and parcel of the makeup of Sharia law.”
Ethical banking
The practice of societal responsibility has been a core principle of the Islamic faith as far back as the seventh century, and concepts of welfare and pensions were introduced in early Islamic law as one of the Five Pillars of Islam, part of the foundation of the religion.

Taxes, namely Zakat (charity), collected in the treasury were used to provide for the needy and a similar ethical strategy is still in play at the bank’s headquarters in Kuwait. Islamic trust and integrity principles ascertain that all transactions and deals are conducted in agreement with the provisions of Islamic law.
“The human element in the way we do business remains our utmost priority,” says Al Qimlas. “Sharia compliance is much like the software within the hardware. All our transactions and dealings must be monitored internally, and then renewed externally by a board. Our clients demand this of us – and we carry out our day-to-day business in a Sharia compliant way – an ethical way. As well as social responsibility, we provide confidence. I don’t withhold information from clients, and I don’t cheat them – which certainly aids reassurance in the way the bank does business.”
Awaqf, the Arabic equivalent of endowment, has become an important part of the economic sector of Sharia law. “This asset, be it in real estate, inheritance, or savings in benefits, is something that will help someone in society,” says Al Qimlas. “Awaqf must be cared for and protected to ensure it is enhanced, rather than diminished. This is a sector of the industry the bank is especially careful with when it comes to its dealings with investors.”
There are potentially trillions of dollars of Awaqf wealth in the Gulf region’s private and public sectors; it simply needs management. Studies indicate that Awaqf wealth in Muslim countries could amount to double that of the world’s trust funds. Bayt Al Mal Investment believes that the Islamic banking sector needs rehabilitation in order to compete with the western banks, who are more advanced in dealing with endowment issues.
Corporate change:

The company endeavours to maintain its leading position in the fast-growing Islamic markets and to identify and avail itself of the favourable investment opportunities therein. Competition in the industry is currently very healthy – Al Qimlas maintains that a company without competition is a dead one, and it presents an opportunity for the bank to motivate itself to remain one of the top providers in the country. “We are well established in Kuwait and Saudi Arabia but we’re always looking to expand,” says Al Qimlas. “It’s all about that right moment, with the right partners. That’s what certainly makes the difference with investment.”

He believes the recent Kuwait Capital Market Authority (CMA) laws and regulations, which came into effect last year, have given Bayt Al Mal cause for celebration rather than concern. “The investment banking sector has always been resistant to change, but the enactment of these new regulations recognises a change to the way in which the capital markets do business,” says Al Qimlas. “Despite a small level of concern, particularly regarding investments (due to the possibility of excessive regulation, higher work loads and more compliance), I don’t necessarily see the new regulations as a bad thing. We are yet to see the changes, but if they provide more security, well, that can only be a positive change in my opinion. We’ve passed that stage of resistance now, and I think that as long as the new regulations have the capacity for a bit of longevity, they will become more and more accepted. The CMA will ensure the events of 2007-2009 will never happen again. There is now an eye on the marketplace, and it will ensure people comply properly. We will learn from past mistakes.”
Al Qimlas also plans to keep recommending Kuwaiti Dinar Short-Term funds for its clients – “There’s no idle Dinar at our bank!” he jokes. “Many people are looking for better returns for short term loans, which is ultimately better for the client and for us. Our interests are concentrated on the activities that enable us to generate an added value to the company, and which utilise our distinctive specialities.”
Complementing world finance:

Looking to the future, Bayt Al Mal plans to introduce a hi-tech electronic stock trading system. The system will use the latest security techniques and will be user-friendly, efficient, and will support Arabic and English languages to enable the company to offer better and more effective service to its customers, particularly when compared to market competitors.

“We are always aiming to be more flexible in the services we provide and we want to reach our clients on a multi-channelled basis,” says Al Qimlas. “Websites, smartphones, and tablets can enable us to provide a better service. The electronic stock trading system will allow for the clearing and settling of traded deals on time, which in turn will allow stocks or funds to be deposited in the customer’s brokerage account upon finalisation, giving greater choice for clients. We are setting it up in Kuwait and Saudi Arabia, and there is some integration to provide access to both markets.”
With the bank maintaining its strong position as a leader in Islamic finance, Bayt Al Mal Investment still believes there is room for growth in the future. “Islamic finance should not be looked at as a competitor for traditional finance, but rather as a complimentary service,” says Al Qimlas. “In Islamic countries, people are more comfortable with Islamic banking. We are aiming to expand on a more regional scale initially, rather than globally. There will certainly be more news coming from us over the next few years.
(World Finance / 25 June 2012)

Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Latest Posts

Upcoming Events on Islamic Finance, Wealth Management, Business, Management, Motivational

Alfalah Consulting's facebook


Alfalah Consulting is NOT providing any kind of loan to finance project etc and asking for a fee. If you've received any email claiming to be from Alfalah Consulting, offering loan to you, please ignore it or inform us for further actions. Our official email is If you've received an email from, that's NOT from us. Be cautious!