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Thursday, 2 August 2012

Egypt Islamic finance plans include boosting waqf

The Freedom and Justice Party, the parliamentary arm of Egypt’s Muslim Brotherhood, aims to develop the practice of waqf or religious endowments as part of its plans to expand the use of Islamic finance, a party official said.

In waqf, people contribute a portion of their wealth, in cash or other assets, to sharia-compliant and charitable projects such as mosques and schools. But the management of such endowments in Egypt has been widely criticized as inefficient.

Ahmed al-Najjar, a member of the FJP’s economic committee, said in a telephone interview this week that waqf endowments (awqaf) in the country totaled about half a trillion Egyptian pounds ($82 billion), but the yield on them was very low - according to a report by the Ministry of Religious Endowments, it is about 1.5 billion pounds annually, he said.

One problem is that managers of a waqf often lack financial expertise, in contrast to countries such as Turkey and Malaysia. The solution may be to encourage the hiring of experienced financial managers for awqaf, Najjar said.

Another proposal under consideration by the FJP is to encourage the formation of awqaf not through a contribution from a single wealthy donor, but through multiple small subscriptions to a sukuk (Islamic bond) offered publicly.

The proceeds of the sukuk could then be used to purchase waqf assets. This would expand the number of people involved in awqaf and give managers more flexibility to invest endowment money, Najjar said.


Despite the election victory in June of Egypt’s President Mohamed Mursi, backed by the Brotherhood, a new cabinet has not yet been formed and there is no fully functioning parliament or constitution. This is likely to delay any administrative or legislative moves to boost Islamic finance.

But Najjar said the FJP would push for the creation of sharia-compliant financial instruments to be used in monetary policy. For example, Islamic instruments could be used by the central bank for short-term financing operations, allowing authorities to benefit from the liquidity held by Islamic banks, he said.

“We want the introduction of these tools along with traditional financing tools,” Najjar said.

FJP officials have previously said they aim to boost the market share of Islamic banks in Egypt to 35 percent in five years from roughly 5 percent now - but by increasing the total size of the banking sector, not by penalizing conventional banks.

Najjar said his party was also considering how Islamic investment funds could be launched to support the growth of small and medium-sized enterprises, which are crucial to create jobs.

(Al Arabia News / 24 July 2012)

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Pakistan Takaful industry enters new era

Lahore—Takaful Industry is growing rapidly around the world with 230 Takaful Companies, 13 Re-Takaful companies with the total volume of $11 Billion. Takaful was started in 2005 in Pakistan when Securities and Exchange Commission of Pakistan (SECP) introduced Takaful Rules 2005 according to which only full fledge takaful companies had the permission to operate and in this regard, 5 Takaful companies came into being due to efforts of investors of Malaysia, Qatar, Kuwait, UAE, Saudi Arabia and Pakistan. 

Among these 5 companies, 3 takaful companies are general whereas 2 takaful companies are providing the services of Shari’ah compliant life insurance. But in accordance with the recently issued SECP takaful rules 2012, conventional insurance companies can open window operations of Takaful due to which takaful industry would get promotion rapidly at national level.

Muhammad Zubair Mughal, Chief Executive Officer of AlHuda Centre of Islamic Banking and Economics has declared these Takaful Rules 2012 a good step for Takaful industry which will promote takaful industry rapidly at national level and masses will have the opportunity to fulfill their insurance needs in Shari’ah compliant manner because in Pakistan, due to the elements of Interest, Gharar and gambling in insurance, people avoid insurance. 

While analyzing the insurance industry, he said that there are 37 general insurance companies, 7 life insurance companies, 5 takaful and Re-Takafulcompanies are operating in Pakistan and now, in accordance with the Takaful Rules 2012, more than 40 insurance companies can start window operation of takaful by fulfilling SECP laws and conventional insurance companies can be transformed into takaful companies. He said that there are 3 types of business opportunities for takaful industry: 1) people, who do not use insurance due to interest factor; 2) people who use insurance by compulsion but they can come to Islamic insurance when this alternate is introduced; and 3) people who do not fall under the category of insurance as in Pakistan, the penetration of insurance is less than 1 percent.

Experts have declared Takaful Rules 2012 a is a very good sign for Pakistan which has the status of milestone in Pakistan insurance industry.

(Pakistan Observer / 02 August 2012)
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