China: Unified halal standard is recipe for success

Growing Muslim market requires food prepared in a certain manner but labeling can be confusing, Cui Jia reports in Beijing.

With shopping basket in hand, Hu Yi and his young son went through the shelves at a supermarket in Beijing's Niujie Street. For Yicheng, 5, it was just a regular grocery trip with his father, but Hu, a member of the predominantly Muslim Hui ethnic group, had another agenda - to teach his son how to shop for halal food.

Niujie Street, or Ox Street, lies in the center of Beijing's Muslim quarter. Under the section headed "Muslim supplies", the supermarket also sells taqiyah, the distinctive skullcaps worn by many believers, and small carpets for them to kneel on while praying.

"Let's see if you can find us some tasty beef jerky," Hu, 32, encouraged his son.

Yicheng jogged off happily and searched through the aisles. A few minutes later, he returned with three packets of jerky.

"Remember, what's the first thing we have to check before putting them into the basket?" asked Hu. "The sign of qingzhen (halal)," replied Yicheng, pointing at the back of the packet, where a round, green logo displayed the word "halal" in Chinese characters and Arabic script.

Dietary guidelines

In Arabic, halal means permitted or lawful. Halal foods are those that are allowed under Islamic dietary guidelines based on the Quran, the holy book of Islam. Muslims are prohibited from consuming alcohol, pork, blood and blood products, and meat from animals that have died accidentally or from natural causes, or have been slaughtered in the name of any god other than Allah.

One of the packs of jerky Yicheng had collected didn't bear the stamp of approval, and so he was instructed to put it back on the shelf. "Halal food is extremely important to us. It is never a small issue. For us, the first priority is whether the food is halal or not. Quality is a secondary issue," said Hu.

There are more than 23 million Muslims in China. Combining Islamic dietary guidelines and local culture during the past 1,200 years, they have adopted some culinary traits from the Han Chinese and created their own style of halal food. More than 97 percent of China's cities and counties have halal food manufacturers, according to China Inspection and Quarantine magazine earlier this year.

"The logos look a bit different," said Yicheng, as he placed the packets in the basket. His father explained that it's because the goods were produced in different provinces.

In China, halal food producers must have their products certified by local ethnic affairs commissions under regulations passed by provincial and regional lawmakers. If they meet the standards, producers are allowed to display a halal logo, designated by province or region, on their packaging and products.

Revised regulations:

The Ningxia Hui autonomous region, where Muslims account for more than 35 percent of the population, implemented its local halal food regulations in 2003, before revising them in 2011.

The revised regulations are stricter than the original version. In addition to the original requirement that the owners of halal food producers and key staff members who deal with food must be Muslim, the updated regulations require that all those in managerial positions must also follow the faith to guarantee the food chain won't contaminated by the introduction of non-halal products. The regulations also prohibit the presence of non-halal food and ingredients in halal food factories or restaurants.

The regulations vary from place to place and region to region, but all are based on Islamic dietary guidelines. The regulations in Ningxia and the Xinjiang Uygur autonomous region, implemented in 2005, require that when an animal is slaughtered, the jugular vein must be cut and the blood allowed to drain freely from the animal. Moreover, staff must ensure that they do everything possible to reduce the amount of pain the animal endures believers claim that slaughtering an animal in the halal fashion cuts off the oxygen supply to the brain and inhibits pain receptors. The animals are also blessed with prayers.

"In collaboration with the local administration for industry and commerce, we conduct random inspections, covering everything from large slaughterhouses to small noodle restaurants, to ensure that no one carries out non-hahal activities in these places," said Ding Yi, director of the halal certification management office in Ningxia. He said the region now has more than 10,000 certified halal producers and restaurants.

"The halal logos can be confusing, because there are so many designs on the market. Why can't there be just one?" asked a perplexed Hu.

(Chinadaily / 23 Oct 2012)

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Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Dana Gas sukuk: the clock is ticking

With less than a week until maturity, Dana Gas sukuks are trading at a significant discount to face value as negotiations continue on what would be the UAE’s first ever restructuring of an Islamic bond.

On Tuesday, the sukuk was trading at a 21 per cent discount, undermined by worries about the company’s cash position. In its first-half financial statements, the Sharjah-based energy company reported a cash balance of $164m, a fraction of the funds required to repay the debt.

The $920m five-year sukuk – the Shariah-compliant equivalent of a conventional bond in which certificates are issued against income-generating assets – was issued on October 31, 2007 with a 7.5 per cent coupon to be paid quarterly.

With three quarters of the company’s production in Egypt and most of the rest in Kurdistan, Dana has been vulnerable to political shocks. The revolution in Egypt and a rights dispute between the Iraqi and Kurdistani governments have disrupted revenues. Tariq Al-Rifai, director of Islamic Market Indices for S&P Dow Jones Indices, told beyondbrics: “It’s not the fault of Dana Gas. It was a properly run company and still is.”

There are now three options: default, bail-out or restructuring.

If Dana fails to repay the sukuk, some of its assets – valued at $3.39bn in June – will be seized by sukuk holders. Al-Rifai sees default as a real possibility: “If this was a quasi-government entity, the government would find a way to make it work. But it is a private company.”

One hope is that a knight in shining amour will bail the company out. Crescent Petroleum, a private energy company that is Dana’s largest shareholder with a 21 per cent stake, would be the most obvious candidate. But it said this year it would not provide any additional funds.

Although companies in the UAE have extended the maturities on tens of billions of dollars in bank loans since the onset of the financial crisis, no sharia-compliant bonds have been restructured so far. Saudi Arabia and Kuwait have seen companies default on Islamic bonds, prompting complex debt negotiations.

Even so, Ahmad Alanani, senior executive officer at Exotix, thinks restructuring is the most likely outcome: “I expect the company and its creditors to agree to waive some of the sukuk covenants allowing the negotiations to continue post the maturity.

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That promises to be difficult and drawn out, not least because of the need for Islamic clerics to vouch for the compliance with Shariah law of any changes to the sukuk’s covenants. Back in June, Dana said it had hired Deutsche Bank, Blackstone Group and law firm Latham and Watkins “to advise on various options for discussion with sukukholders”.

Alanani understands that Dana suggested a principle haircut with an extension of maturity a few months ago but that this was rejected by the two largest sukuk holders. A counter proposal involved a combination of an upfront cash payment, a debt for equity swap and an extension of maturity; but it is unclear where the talks stand today.

In any event, the outlook remains bleak for investors. Alanani forecasts a fall in the price of the sukuk as the maturity date nears; Dana’s shares were trading at 0.47 dirhams on Tuesday, less than half of their issue price of 1.01 dirhams in 2005.

(Beyondbrics / 23 Oct 2012)

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

Egypt association plans list of Islamic stocks

The list will filter out companies which fail to meet religious guidelines, such as avoiding excessive levels of debt and steering clear of industries that are deemed unethical, including alcohol and gambling.

"The association has put the finishing touches to a set of standards and controls for the index prior to launch," Mohamed El-Beltagy, head of the Egyptian Islamic Finance Association, told Reuters by telephone.

Details of the stock list will be announced next week, giving investors assurance about the stocks that they can legitimately buy and sell, he added.

The organisation's sharia board will approve the list, with rules based on the standards of the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), a major standard-setting body.

Last month, officials in the Egyptian association said the country's listed companies must raise their level of compliance with AAOIFI standards if they want to attract Islamic investors from the Gulf.

The association was founded in February of this year. The rise of Islamist movements including the Muslim Brotherhood after last year's ouster of president Hosni Mubarak has raised expectations for growth of Islamic finance in Egypt.

Countries such as Malaysia and Indonesia publish lists of sharia-complaint equities as part of efforts to raise the profile of the industry.

(Reuters / 23 Oct 2012)

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

New law opens door to formal Islamic banking in Somaliland

No financial institution has operated regularly in Somalia since the collapse of the central government in 1991, but a new law passed in Somaliland earlier this month established the framework from which privately owned institutions can open and operate banks in the region.

Somaliland President Ahmed Mohamed Silanyo signed the Islamic Banking Bill on October 4th after it was approved by regional parliament in September. The law had been in the works since 2007.

Three privately owned banks have been operating on a limited basis within Somaliland in the past few years, including Djibouti-based Salaam African Bank, Dahabshil Bank and Yemen-based Co-operative and Agriculture Credit Bank.

Abdiqani Harir, deputy operations manager of Salaam African Bank's Hargeisa branch, said the new law would facilitate the opening of commercial banks that operate under Islamic principles and are licensed by the Bank of Somaliland, the regional administration's central bank.

Since 2010, Salaam African Bank has had branches in several Somali cities but all financial transactions were processed through Djibouti, Harir told Sabahi.

"We have been delayed by the passing of this law and we welcome its implementation," he said.

Easing financial operations:

Since the passage of the new law, Harir said his bank is working on opening deposit accounts and money transfer services using Telex Transfers.

The bank has working relationships with a number of international banks such as Commerzbank of Germany, Barclays of London, Bank Asya of Turkey and Noor Islamic Bank based in Dubai, Harir said.

Customers who wire money through the bank will be able to easily access their funds by mobile phone using Telesom's Zaad service, he said. "In addition, every customer can view account transactions over the internet while at home, work or the office."

The bank also recently introduced a debit card that allows customers to purchase goods over the internet, he said.

Harir said most citizens keep their money in their houses and other insecure or unsuitable places, but banks will educate people on safer money management.

Opening privately owned commercial banks will also allow entrepreneurs to easily purchase goods from abroad.

"Before, I was forced to physically carry my money and send it [to vendors from banks] in Djibouti or Dubai, which was not safe," Faisal Ismail, a clothing importer in Hargeisa, told Sabahi.

Attracting foreign investors and growing the economy:

Opening banks that operate on Islamic principles will help the region's economy grow and achieve stability while prohibiting usury and anything religiously unlawful, said Abdirahman Osman Aden of the Hargeisa-based Beder Centre for Future Studies and Consultancy.

Now that the law has been established, Aden said his centre is preparing banking guidelines rooted in Islamic principles.

"We also want to educate youth on Islamic banks so they can find employment in them," he told Sabahi, adding that the centre has graduated 250 students in the past two years who studied business practices based on Islamic finance.

Since the Somaliland shilling is not a recognised currency on the international market, banks must use established international currencies, Aden said. "Even the Somali shilling, which is sometimes illegally printed, is not recognised, so banks have to base their transactions on US dollars," he said.

The law will encourage international investment companies to venture into Somaliland, Aden said, and allow citizens to borrow sharia-compliant money for investment. "That will result in improving the economic status of the Somali public," he said.

(Sabahi / 22 Oct 2012)

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

Oman: Call to find new ways to collect and utilise endowments in co-operation with Islamic banks

MUSCAT — Shaikh Abdullah bin Mohammad al Salmy, Minister of Awqaf and Religious Affairs, stressed the need to find new ways to utilise endowments as a means of investment to help ensure the biggest proportion of dividend. Endowments should not merely be treated as old-fashioned formulas, but as active tools that can provide wider grounds for investment provided the legal aspects of Sharia are respected.

Speaking at a weekly meeting of the ministry, Al Salmy underscored the importance of improving and developing methods of endowment investments through scientific studies that serve this area. The minister urged all to take advantage of Islamic banks in the Sultanate to find new sources of funding that are consistent with the Islamic law and open partnerships with other government agencies to develop endowments in the interest of all.

Al Salmy also stressed the need to use modern technologies that serve endowments and financial offerings like Zakat, Sadaqah (alms) and charity and make these accessible and easy for everyone who wishes to donate in co-operation with Islamic banks. Organised work in this direction will help maximise the potential of endowments and charity and this will play a significant role in serving the community at large, Al Salmy added.

Sulaiman bin Hamad al Harthy, Director-General of Methaq Islamic banking at bank muscat, made a presentation on aspects of co-operation with Islamic banks and their role in serving the community and facilitating ways of doing goodness. Dr Abdulrahman bin Sulaiman al Salmi, Editor-in-Chief of Tafahim (understanding) magazine, made another presentation on strategic plans for the work of the ministry.

The plan seeks to assess the progress of the work of the ministry, revise the methodology applied and the system in place in all areas with a view to upgrading managerial and technical performance and developing professional standards to improve current and future works.

A third presentation on the topic was made by Dr Mohammad bin Said al Maamary, Adviser at the Office of the Minister of Awqaf and Religious Affairs, who spoke about the “Exhibtion on Religious Tolerance in Oman”, which arrived at its twenty-second station in Europe. The presentation reviewed the exposition’s progress, its objectives, contents and achievements.

(Oman Daily Observer / 23 Oct 2012)

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