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Saturday, 28 September 2013

Malaysia Remains Forerunner In Global Sukuk

KUALA LUMPUR, Sept 24 (Bernama) -- Malaysia remains a forerunner in global sukuk with the global outstanding sukuk amounting to over US$148 billion (RM474 billion) as at June 2013, which represents 60.4 per cent of the total global sukuk.

Deputy Prime Minister Tan Sri Muhyiddin Yassin (pix) said the number reflected Malaysia's rapid growth in sukuk compared with its number of only US$1.5 billion (RM5 billion) of global sukuk in 2001.

"Being a conducive environment for sukuk transactions, I certainly believe that Malaysia has what it takes to attract more institutions from all regions of the global aiming to tap Malaysia's Islamic finance marketplace and the pool of liquidity," he said at the opening of the 10th Kuala Lumpur Islamic Finance Forum (KLIFF 2013) in the capital, Tuesday.

He said credit must be given to Bank Negara Malaysia, the Securities Commission Malaysia, Shariah scholars and the Islamic financial industry community for their efforts to bring Malaysia's Islamic finance marketplace to the current level of sophistication.

He said this was in line with the vision for a comprehensive and progressive Islamic finance marketplace, which has grown from strength to strength for over 30 years.

Muhyiddin said as Malaysia continued to grow its Islamic finance industry, there was a need to revisit and review any particular areas of divergence in order to come up with a better and more acceptable solution.

"Integrity, credibility and competency are the key success factors in developing the Shariah framework and governance. Albeit divergences of Shariah rulings, there should not be a major issue so long as they are backed by sound arguments and recognised legal methodologies," he said.

Muhyiddin, who is also Education Minister, also pointed out that shortage of qualified experts in Islamic finance was the constraining factor for the innovation of new products and services in most countries.

"Therefore, investment in developing the key resources of the industry must be further enhanced. Heightened market awareness of the huge potential that Islamic finance offers is also urgently needed, and this can be done through research, education and training," he said.

INCIEF, which produces high-calibre practitioners and professionals in Islamic finance as well as specialists and researchers in the disciplines of Islamic finance, has so far enrolled 2,224 students from 83 countries as at July 2013, he said.

Muhyiddin reminded Islamic banks to not be complacent and continuously strive to be the best banking system in order to attract the public, Muslims and non-Muslims alike.

"To remain relevant, Islamic banking must be robust and resilient and should continuously reposition itself if it desires the respect and recognition from the rest of the world," said the deputy minister.

KLIFF 2013, which is a two-day conference, saw about 400 delegates comprising industry players, policy makers as well as academics.

(National News Agency Of Malaysia / 24 Sept 2013)

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Malaysia: Waqf Is Missing Piece In Islamic Financial System, Says CIMB Islamic

KUALA LUMPUR, Sept 24 (Bernama) -- Waqf (Wakaf) is the missing piece in Malaysia's Islamic financial system despite the country being the market leader with various sophisticated products and services.

CIMB Islamic Bank Chief Executive Officer Badlisyah Abd Ghani said: "Malaysia has from the simplest saving products to sukuk as well as many different sophisticated products for institutional investors, corporate clients, small medium entrepreneurs and individuals.

"(But) what is missing in the market today is waqf in a commercial manner," he told reporters on the sidelines of the 10th Kuala Lumpur Islamic Finance Forum (KLIFF 2013) here today.

Waqf is an Islamic endowment of property to be held in trust for religious or charitable purposes.

Badlisyah said to have waqf in the financial market, there is a need for a conducive legal framework that will allow for its incorporation in an effective manner.

"If we have it, over time, waqf could be the bigger component of the Islamic financial market, as what was in the golden era of Islamic civilisation in the past," he added.

Badlisyah said in order to have that legal framework, there is a need for dialogues between the federal and state governments as the laws concerning waqf are currently under the jurisdiction of the state Islamic religious councils.

In his opening speech, he said the current legal framework for waqf does not allow for the proliferation of waqf across all areas of economy.

In the afternoon session, Badlisyah called on the government to provide incentives in the upcoming Budget 2014 to encourage industry players to list sukuk on Bursa Malaysia, a move which would further enhance the sukuk market.

"Of course, this need to be reviewed and studied by Bursa Malaysia and Securities Commission in terms of its viability but at the end of the day, it does create a good communication to the rest of the world that the market in Malaysia is significant because it is in the public domain," he said.

Badlisyah said, for example, on the London Stock Exchange, they have a few billion dollars worth of sukuk listed on the exchange and as a result, they claimed they are one of the largest sukuk markets in the world, despite some of these sukuk were issued outside London.

"It is the same in Malaysia. We already have the largest number of sukuk in the world, but it is just not listed and not in the public domain," he said.

With the listing of sukuk, overtime, it would encourage more trading of sukuk by individuals and the price discovery is also better as it is publicly available, resulting in a more vibrant sukuk market.

(National News Agency Of Malaysia / 24 Sept 2013)

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Tuesday, 24 September 2013

Live from Masjidil Haram - Makkah

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Expert expects India to allow Islamic banking

DOHA: Aiming to mobilise resources from the GCC states for the proposed mega infrastructure projects, there is a “very strong possibility” of India taking positive steps to amend the country’s banking regulatory laws to introduce the Islamic banking system in a full-fledged manner, before the upcoming parliamentary elections in 2014, said an expert yesterday.

The existing Banking Regulation Act (1949) of India hinders the establishment of Islamic banking as it does not allow banks to operate on a profit-loss basis and forbids murabaha, or, the buying, selling, or barter of goods.

“I strongly believe India soon will take some positive steps, either to amend the laws of the Reserve Bank of India (the country’s central bank) or promulgate ordinance to make way forward to establish Islamic banking system by 2014,” said Dr Manzoor Alam, President of Indo-Arab Economic Cooperation Forum, and also an expert of Islamic banking.

Recently the RBI permitted the Kerala government (a state in south India) to go-ahead to launch a Non-banking Financial Institution (NBFI) based-on the principles of Islamic finance.

Dr Alam, who has been striving for over two decades to introduce interest-free banking system in the country, advocated that participatory banking is the need of the hour to facilitate foreign investments to generate resources, especially at a time when the government has approved many ambitious programmes, including Food Security Bill and mega infrastructure projects, which alone will cost the exchequer over $50bn.

“I see a political will in the present government. A couple of  years ago, Prime Minister Manmohan Singh announced in Malaysia at an international conference on Islamic banking to form a committee to conduct a feasibility study in this regard, and subsequently, the committee made positive recommendations. However, there is tremendous pressure on the government from different quarters including right wing political parties, particularly Bharatiya Janata Party (BJP) to prevent introducing a system which will not only help the Muslims, but the whole nation,”  he said. 

Many think that unless and until full-fledged Islamic banks are permitted in India, an Islamic finance sector will find it hard to develop. 

However, some analysts suggest that the RBI’s recent decision with regards to the Kerela government reflects a significant and positive change in its attitude towards Shariah-based NBFIs. 

Some politicians and private organisations have been making efforts for years to start Islamic banking in India, but they have faced strong opposition from bureaucrats and conventional banking circles. Established in early 1970s over 50 countries have adopted the system of interest-free banking across the globe. 
“The global market capitalisation of interest-free banking is expected reach over $1.6 trillion by the end of 2013. And the world’s leading economies such as Japan, the UK and the USA have already allowed the system and becoming increasingly popular in other advanced countries. But in India, there is still some misnomer or misunderstanding that it will help Islamisation of the country,” added Dr Alam. 

Dr Alam also suggested that there is an urgent need to establish a global regulatory framework, similar to the Basel-based Bank of International Settlements (BIS), to make the Shariah-compliant banking more popular and sustainable.

(The Peninsula / 24 Sept 2013)

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Philippines: Bangko Sentral ng Pilipinas (BSP) pushes Islamic banking

MANILA,  - The Bangko Sentral ng Pilipinas (BSP) is pushing for the development of Islamic banking in the country.
BSP Deputy Governor Nestor A. Espenilla Jr. said this financial reform will allow the central bank to create regulations that could spur investments and support economic development in Mindanao.
“We just want to have an enabling provision in the BSP charter that will allow us to develop regulations that can support (Islamic) banking,” Espenilla told reporters.
“Today, there’s only one operating (Islamic) bank, Al-Amanah (Islamic Investment Bank of the Philippines)... so this will pave the facility for developing an Islamic banking system and not only individual entities,” Espenilla said.
The BSP, under its proposed amendments to its charter, aims to provide “financial facilities for Islamic banks.”
Espenilla explained that they carefully worded the provision in a “generic” way as some products of Islamic banks tend to be different as compared with what conventional banks have.
Islamic banks generally offer the same facilities as conventional ones but they adhere to the laws of Sharia, the moral code and law set by Islam, he explained.
One of the main differences of Islamic banking and conventional banking is doing away with interest or fees for loans as it is prohibited under the principles of Sharia, Espenilla said.
Supporting the Islamic banking industry may be crucial to the economic development of Mindanao as Muslims tend to avoid banks or products non-compliant with their religious law.
With regard to foreign Islamic banks that may want to establish presence in the Philippines, Espenilla said the central bank will allow them as long as they comply with the regulations governing banks in the country.

(Phil.Star.Com / 24 Sept 2013)

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London steps up Islamic finance ambitions

Aiming to build on London's status as a leading exporter of financial services, Britain hopes to step up the challenge to Islamic finance centres such as Dubai and Kuala Lumpur.
"We want to be the leading (Islamic) finance sector outside of the Muslim world," deputy mayor of London Edward Lister said in a press conference in Kuala Lumpur on Wednesday.
Islamic finance follows religious principles such as bans on interest and gambling, and is playing an increasingly prominent role internationally as often oil and gas-rich investors from Islamic countries put more of their money to work overseas.
Britain's Islamic finance task force, established in March, is led by several ministers and industry figures as well as top executives from Gatehouse Bank and Oakstone Merchant Bank Ltd.
It was launched ahead of London hosting the World Islamic Economic Forum in October and its mandate is to facilitate Islamic financial business, including investment in British infrastructure by Islamic sovereign wealth funds.
The forum, which saw 28 billion ringgit ($8.6 billion) worth of deals inked last year, is being held outside an Islamic city for the first time.
Islamic finance has already played a role in several major deals in London, with Qatari investors taking part in funding the city's Shard tower, Harrod's department store and the athletes' village used for last year's summer Olympics.
A Malaysian consortium is also spearheading the redevelopment of London's Battersea power station, after acquiring the site for 400 million pounds last year. Malaysia is the second largest investor in London's real estate market behind the United States.
"The task force has just started and its aim is to make it easier for banks in London to have Islamic products, which is still quite a new concept to any of them," Lister said.
"Only now people are beginning to understand what the products actually mean and how they comply ... What you will see is a lot of companies introducing those products."
Maybank Islamic, an arm of Malaysia's largest bank Malayan Banking Bhd, has launched a sterling-denominated and sharia-compliant mortgage product for high net-worth Malaysians looking to invest in London's real estate market.

Britain currently has 22 financial institutions, including five fully sharia-compliant banks, offering Islamic finance products. They are supported by 30 London law firms offering expertise on the sector.

(Reuters / 18 Sept 2013)

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Bangladesh: Islamic finance bears vow of playing beneficial role in socioeconomic dev

Bangladesh Bank (BB) Governor Dr Atiur Rahman has said Islamic finance bears the promise of playing a major beneficial role in the country's socioeconomic development.

"With its ethical, inclusivity promoting and stability enhancing attributes, Islamic finance undoubtedly bears the promise of playing a major beneficial role in our socioeconomic development," the central bank chief said while speaking at a seminar held in a local hotel Monday. 

The two-day-long seminar on 'the prospects and challenges in the development of Islamic finance for Bangladesh' was organised jointly by the Islamic Financial Services Board (IFSB) and the BB. 

Dr Rahman said Islamic finance market participants must exercise utmost caution in steering clear of any involvement with extremist dogma driven influences aiding or abetting terrorism; meticulously adhering to anti-money laundering (AML) compliance routines prescribed by BB's financial intelligent unit (FIU).

Islamic finance commenced in Bangladesh in early 1980s with just one Islamic commercial bank. By now there are eight Islamic banks run wholly on Shariah principles. 

Besides, as many as 17 conventional banks, including one globally active foreign bank, are running Islamic banking branches or windows side by side with their conventional banking, according to the central bank statistics. 

"Â….approval requests of a number of conventional banks for their conversion into wholly Shariah-based Islamic banks indicate robust customer demand in Bangladesh for Islamic financial services," the BB governor noted. 

He also said the BB has taken a move for structuring some appropriate Shariah-compliant small and medium enterprises (SME) refinance support line for the Islamic banks. 

"Apart from Islamic banking, Takaful or Islamic insurance is also now gaining ground in our financial market," the central bank governor said. 

Barring one exception of a small sick Islamic bank in process of restructuring, the Islamic banks in Bangladesh generally have higher capital adequacy ratios and lower non-performing loan ratios than their conventional banking counterparts, according to the BB governor. 

He also said aggregate assets and deposits of Islamic banks in Bangladesh have nearly doubled in the last four years; by end of 2012 aggregate assets and deposits both crossed the trillion taka threshold, comprising around a fifth of total banking sector assets and liabilities. 

"This share of Islamic banking looks set to grow further with time, given its faster growth than conventional banking," the BB governor said.

Speaking on the occasion Secretary General of the IFSB Jaseem Ahmed said Islamic finance is contributing to the deepening and widening of the global financial system through the use of innovative, Shariah-compliant, contractual forms. 

"Priority must be given to the creation of an enabling financial infrastructure consisting of common international standards for supervision and regulation, as well as for transparency and disclosure," Mr Ahmed noted. 

A collaborative effort between the supervisory authority, policy-makers and market players is the key to maintaining the balance between strong regulation and the market's ability to grow, according to the IFSB secretary general.

"At the end of day, we must be guided, in promoting Islamic finance, by the recognition that an enterprise has value only if it helps to transform the lives of ordinary human beings," he noted. 

Kuala Lumpur-based the IFSB was officially inaugurated on November 3, 2002 and started operations on March 10, 2003. 

It serves as an international standard-setting body of regulatory and supervisory agencies that have vested interests in ensuring the soundness and stability of the Islamic financial services industry, which is defined broadly to include banking, capital market and insurance.

Currently, 187 members of the IFSB comprise 57 regulatory and supervisory authorities, eight international inter-governmental organisations - such as the World Bank, the International Monetary Fund (IMF) and Asian Development Bank (ADB) - and 122 market players, professional firms and industry associations operating in 43 jurisdictions.

(The Financial Express/ 24 Sept 2013)

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Malaysia wants Islamic finance industry to ‘look West’

PETALING JAYA: With the backing of Maybank Islamic Bhd, the World Islamic Economic Foundation (WIEF) is working together with the Greater London Authority to boost trade and investment between Malaysia, the Association of South-East Asian Nations (Asean) and the UK.
The idea is based on the consensus of using Islamic finance as the platform for the transactions that will involve Malaysian investors and businesses in their efforts to diversify their portfolios into the UK, particularly in London, Maybank Islamic chief executive officer Muzaffar Hisham said last week in Kuala Lumpur.
“There is an increasing interest by Malaysian investors in diversifying their investment portfolios into the UK and particularly London. Maybank Islamic is well placed to encourage such opportunities”, Muzaffar said.
Muzaffar emphasised on the strategic importance of Islamic Finance for London as an opportunity to tap into a new source of capital, assets and liquidity in Islamic markets for London’s future growth and global ambitions.
Muzaffar has not only encouraged sovereigns but also UK corporate firms that are wishing to issue funds to consider Shariah-compliant instruments as they expand to new frontiers, especially in the Gulf Cooperation Council (GCC) and Asean/Malaysia.
“The deal will most probably be announced during the 9th WIEF in London in October,” Muzaffar told reporters after the soft launch of its new retail mortgage product at the WIEF headquarter in Kuala Lumpur.
Maybank Islamic has recently secured pound sterling cross border financing, making it the first Malaysian bank to have such financing instruments in London, Bernama reported.
Also present during the event were deputy mayor of London Sir Edward Lister and WIEF managing director Syed Abu Bakar Almohdzar, who both reiterated the importance of boosting trade, investments and business between Malaysia, Asean and London through Islamic Finance.
“Developing trade and investment links with Malaysia is a key priority for London and Maybank’s initiative significantly broadens the range of Shariah-compliant investment opportunities. Hosting the world,” Lister said.
The WIEF will showcase London’s role as the leading Western hub for Islamic Finance and lay the foundation for strengthening our bond with the Islamic world, Lister added.
London has taken proactive measures to grow Islamic Finance in an attempt to attract more investment from the Middle East and other Muslim countries in the Asean region, believing these are essential to further boost London’s standing as an important centre for the industry.
There is a growing appetite for Shariah-compliant investments in London as it grows in Malaysia and Asean, the Maybank Islamic feels that it is well placed to bridge prospective clients in facilitating their aspirations.
In addition, Maybank Islamic is also actively expanding its foreign currency business in the retail banking space.
The bank is in the final stage of launching an Islamic foreign currency property financing product for London properties due to be launched in fourthquarter of 2013.
On the other hand, Syed Abu Bakar said Malaysia will continue to play a leading role in Islamic finance, through the WIEF, with London as a new global centerpoint.
“As Malaysia continues to play a leading role in Islamic finance, the World Islamic Economic Forum continues to be a strong advocate of Islamic Finance in Muslim and non-Muslim communities around the world,” Syed Abu Bakar said.

(F.M.T News / 23 Sept 2013)

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Friday, 20 September 2013

Western banks eye growth in Islamic trade finance

Bank of America Merrill Lynch (BAC.N) hopes to begin offering Islamic trade financing in the future, Chris Jameson, the bank's regional head of sales for global transaction services, said without giving a time frame.
"Our focus will be on Middle Eastern clients who are expanding their footprint internationally," Jameson said on the sidelines of a banking conference in Dubai.
"You can see that local banks are setting up Islamic units to cater for the needs of their clients. This is driving more and more international institutions to focus on the Islamic sector."
Islamic trade finance, which uses instruments that obey sharia principles such as Islam's ban on interest, has remained a backwater even as other areas of Islamic business, such as sukuk issuance, have boomed in the last few years.
This is partly because Islamic banks are relatively small and lack the expertise and large international networks of mainstream Western banks.
Foreign trade conducted by the 57 member states of the Organization of Islamic Cooperation totaled $3.9 trillion in 2011. But only a tiny fraction was financed in a sharia-compliant way; the Saudi Arabia-based International Islamic Trade Finance Corp, which promotes Islamic trade, approved transactions worth just $3 billion in 2011.
There are signs that this is changing, however, as trade flows between the Gulf and Asia - including predominantly Muslim countries in southeast Asia - become large enough to support specialist trade financing operations.
Trade between the six Gulf Cooperation Council countries and emerging Asia economies is growing at 30 percent annually, according to Kuwait-based Asiya Investments (KCIC.KW), which launched an Islamic trade finance fund with $20 million in seed capital last December.
Some Islamic banks in the Gulf are trying to expand in sharia-compliant trade finance through tie-ups with Western institutions; this week Dubai Islamic Bank (DISB.DU) said it would use Deutsche Bank's (DBKGn.DE) expertise to facilitate its letters of credit in Europe.
Dubai's oldest and largest Islamic bank hopes to serve local companies which are increasingly looking abroad for business, chief executive Adnan Chilwan said in a statement.
"In this regard, trade flows have become a critical component of this growth as has the provision of trade finance activities for businesses," he said.
Bank of America could opt for a strategic partner as well, Jameson said.
"We would consider that - that's the model we have followed to date on cash management and trade. We can leverage the local expertise that they already have."
Haytham El Maayergi, head of transaction banking in the United Arab Emirates for Standard Chartered Bank (STAN.L), which provides Islamic services, said he was seeing demand for Islamic trade finance that was partly due to the convenience of its structures, not just its religious permissibility.
Islamic finance deals are backed by income from real assets, providing a layer of security which is attractive for many exporters of goods.
"A lot of Islamic structures are more appealing to clients not only because these clients are sharia-compliant, but also these structures are suitable for their business models. Clients want the ownership structure, less risky transactions and the ethical proposition that Islamic trade financing provides."

Maayergi added, "We see an increase in appetite from many of our MENA-based multinational clients."

(Reuters / 17 Sept 2013)

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Qatar Islamic banks set to outpace rivals

Growth of Shariah-compliant banks in Qatar is poised to outpace that of the UAE lenders as borrowing rises amid $200bn in government spending for the 2022 soccer World Cup.

Qatar’s four Islamic lenders will almost double their asset base to $100bn by 2017, Standard & Poor’s has said in a report. The assets of the largest Shariah-compliant bank in the country, Qatar Islamic Bank, last year grew five times faster than those of the biggest one in the UAE, Dubai Islamic Bank.

Spending for the world’s most-watched sporting event will spur lending for roads, stadiums and hotels. Bond sales by Qatari Islamic banks, only two of which have sold sukuk, also stand to benefit from the implementation of new global capital rules, S&P said.

“Qatari banks in general clearly have substantial scope to grow their asset base given the sheer magnitude of projects and infrastructure development going on in Doha at present,” said Chavan Bhogaita, head of markets strategy at the National Bank of Abu Dhabi.

The project pipeline in the UAE is also flowing, “albeit not at the same aggressive pace,” he added.
QIB’s Islamic bonds due in October 2017 yielded 2.74% by afternoon in Doha, according to data compiled by Bloomberg. DIB’s sukuk maturing in May the same year has a yield of 3.34%.

Both banks are rated A by Fitch Ratings, the sixth-highest investment grade. That compares with a yield of 3.32% for the HSBC/Nasdaq Dubai GCC Financial Services US Dollar Sukuk Index.

Qatar now has one of the fastest-growing Islamic banking industries in the world because of the surge in demand for local credit, S&P said.

“Unlike the UAE, conventional banks in Qatar aren’t allowed to offer Islamic products, which allows the Shariah-compliant banks to completely capture the Islamic banking market,” said Chiradeep Ghosh, a Bahrain-based analyst at Securities and Investment Co.

“We expect to see stronger borrowing appetite from corporations in Qatar compared to the UAE, supported by the roll-out of Qatari government projects.”

Qatar’s economy will grow 5.2% next year, the fastest in the GCC, according to the median of 17 estimates compiled by Bloomberg. Economic growth will reach 3.4% in the UAE and 4.2% in Saudi Arabia.
Still, total loans at QIB fell 14% to $11.5bn in the first six months of the year. Loans at DIB declined 3.3% to $16.2bn in the same period, while UAE loans grew 4.4%.

“We have seen an up-tick in lending in the UAE,” Jaap Meijer, the Dubai-based director of equity research at Arqaam Capital, said. “There are a lot of opportunities for UAE banks in the retail and corporates sectors” that will help drive their expansion, he added.

The UAE central bank expects to release revised limits for bank exposures to government-related entities in the next two months, the chairman of the Banks Federation said.

The central bank said in April 2012 that banks must not lend more than 100% of their capital to local governments and the same amount to government-related entities to help reduce risk.

“The forthcoming GRE lending restrictions from the UAE central bank will certainly be a key factor for the future growth trajectory of certain UAE banks,” Bhogaita said. “While they will still have ample scope to expand their balance sheet, they may need to work harder for such growth.”

Lending growth in Qatar will re-accelerate in 2014 after a visible slowdown during the first half of the year due to “administrative delays with certain projects,” S&P said. Islamic banks may grow an average of 15% over the next five years, it added.

“If the banks grow, they need to find the matching funding,” Timucin Engin, S&P credit analyst, said in an interview. “We might see some of the banks more active on debt issuances.”

QIB has total assets of $20.32bn compared with $30.26bn for DIB, according Bloomberg data. Total loans at QIB grew 62% in 2012 to $13.4bn compared to a 5.9% increase to $16.8bn at DIB.
“On our numbers, it could take until about 2022 for QIB to overtake DIB,” Meijer said.

(Gulf Times / 19 Sept 2013)

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Islamic Finance: London Eyes Becoming Western Capital of Sharia-Compliant Banking

London is vying to be the capital of Islamic finance outside of the Muslim world, says the city's Deputy Mayor Sir Edward Lister.
A task force on building the UK's Islamic finance industry has been at work since early 2013 and London will host the World Islamic Economic Forum in October.
"The task force has just started and its aim is to make it easier for banks in London to have Islamic products, which is still quite a new concept to any of them," Lister told a press conference, reported Reuters.
"Only now people are beginning to understand what the products actually mean and how they comply ... What you will see is a lot of companies introducing those products."
Globally, the Islamic finance industry is forecast to be worth $2.6tn (€1.9bn, £1.6bn) by 2017. It has grown by around 30% each year since the millennium and consultancy firm Oliver Wyman predicts that there will need to be at least 150 Islamic finance institutions by 2020 to meet the ever-growing demand.
There are more than 20 UK banks offering Sharia-compliant products, such as HSBC and RBS. There are also three Sharia-only institutions, including the Islamic Bank of Britain (IBB).
By increasing the number of Sharia-compliant financial services in London it will be easier to facilitate investment in the UK from Islamic investors.
What is Islamic banking?
According to IBB's website: "Islamic banking operates without interest which is not permitted in Islam, as money in itself is not considered to have intrinsic value.
"As interest is income generated from money, it is seen as effortless return. Instead money must be used in a productive way and wealth can only be generated through legitimate trade and investment, which involves an element of risk.
"Islamic banking therefore uses various principles recognised as Sharia compliant such as Ijara (leasing), Musharaka (partnership) and Wakala (agency agreement). Islamic banks use these principles to develop Sharia compliant financial products, such as savings accounts and home finance, which allow Muslims to conduct their finances in an Islamic way."

(International Business Times / 19 Sept 2013)

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Monday, 16 September 2013

Sustainable investing: Opportunity awaits Islamic finance industry

Islamic finance and the forms of finance generally referred to as sustainable and responsible investing (SRI) are yet to actively collaborate with each other. One would think that to strengthen their position in a market dominated by conventional finance, Islamic finance and SRI would be sharing their successes and failures, coming together for joint ventures, and supporting each other on issues where they have similar views. But such collaboration has not occurred. Building bridges between the two remains an opportunity that is waiting to be seized upon by the industry leaders from the two sides.
Islamic finance and SRI share some obvious similarities in their objectives (do good; avoid harm), methods (e.g. exclusionary screening) and claims (such as emphasis on ethics). Both seem to trigger similar expectations among their proponents of being ethically different from conventional finance. They also face similar criticism of not being able to live to up to these expectations as shown by the ‘form versus substance’ debate in Islamic finance and ‘green washing’ debate in SRI. Although SRI is older and larger than Islamic finance, which is estimated between $1 to $2 trillion in terms of global assets, both are relatively small and growing segments.

(Gulf.News.Com / 16 Sept 2013)

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Islamic pensions make inroads among asset managers

SYDNEY/KUALA LUMPUR (Reuters) - Islamic pensions are making inroads in several majority-Muslim countries, and their success may help the growth of asset management industries across much of Asia and the Middle East.

Most pension plans around the world are state-funded. But many countries are trying to develop private pension sectors as a way to deepen their financial markets, and the experience of Pakistan, Turkey and Malaysia suggests Islamic finance can become a significant part of this effort.

If state-owned pensions in major Islamic markets shifted a portion of their money into sharia-compliant schemes, that could add between $160 billion and $190 billion to the sector, according to consultants Ernst & Young.

"So you've got a pent-up demand - your challenge is how to create a supply-side mechanism to cater to that latent demand," said Ashar Nazim, Islamic financial services leader at E&Y.

Pakistan launched such a mechanism in 2005, creating a voluntary pension system (VPS) which now holds 3.4 billion rupees ($32.4 million) of Islamic assets, or 61 percent of all VPS assets.

While modest in absolute terms, Islamic pension assets account for a much larger proportion of the VPS sector than Islamic bank deposits' 10 percent share of all Pakistani bank deposits.

All seven VPS managers offer Islamic pensions and the largest, run by a unit of Meezan Bank , is triple the size of its conventional peer. Islamic assets under management have doubled in the last year.

Growth was initially stagnant until 2010, when changes in the tax regime, favorable market conditions and a wider product range boosted the sector, said Muhammad Afzal, a director at Pakistan's Securities and Exchange Commission.

"The popularity of Islamic pension funds can be attributed to demand from the general public for retirement products designed in accordance with the Islamic precepts," said Afzal.

"This money can be retained for a very long-term basis given 70 percent of the country's population is under 35 years of age," said Wasim Akram, fund manager at HBL Asset Management, a VPS provider and a unit of Habib Bank .

"With time, I believe that the performance of the already-launched funds will attract more and more members as the opportunities for growth are enormous."


Islamic fund managers screen their portfolios according to religious guidelines such as bans on tobacco, alcohol and gambling, in much the same way as socially responsible funds in Western markets.

They have an additional constraint, Islam's ban on interest payments, which confines them to sukuk in the fixed-income space - a relatively small market globally where demand has exceeded supply in many countries.

Islamic fund managers see potential, however, in countries such as Turkey, where a 2001 private pension law has been energized by government reforms introduced this year. The number of contributors to private pensions has reached 3.8 million, up from 3.1 million in December, after the Turkish state began making a 25 percent contribution to private pension premium payments and fund management charges were cut.

The vast majority of private pension assets in Turkey are conventional financial instruments. But Cuneyt Cicek, chief financial officer at Asya Emeklilik, the Islamic pension unit of Bank Asya , predicted customer preferences could help Islamic pensions reach the target of 15 percent market share by 2023 that the government has set for Islamic banks overall.

Islamic pension products reached $175 million in assets as of September, according to Turkey's Capital Markets Board. That is equivalent to about 1.5 percent of the industry.

"The asset volume and number of participants in the system are likely to grow significantly with the incentives," said Cicek.

Asya Emeklilik is one of 17 conventional and Islamic pension firms in the Turkish system; it is the only full-fledged Islamic firm, although a few others offer sharia-compliant products.

(Chicago Tribune Business / 15 Sept 2013)

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Sunday, 15 September 2013

KFH major trader with USD 490 mln in IILM sukuk program

KUWAIT, Sept 14 (KUNA) -- Kuwait Finance House (KFH) has participated, as a major trader, with USD 490 million in the first issuance of a short-term sukuk program released by the International Islamic Liquidity Management Corporation (IILM), Baitik's Treasury General Manager Abdulwahab Al-Roshood said Saturday.

In a press release, Al-Roshood noted that program is sharia compliant, tradable and able to provide sources to finance corporations and governments through new mechanisms.

He continued as saying that IILM has recently issued the first issuance for 3 months with the participation of 8 gulf and foreign banks, including KFH. He added that sukuk issued by IILM enjoys the privilege of being short term, rated as the short-term highest credit rating A-1 by the international Standard and Poor's. It contributes in enhancing asset quality for participants and it is considered a source of good income due to its rewarding returns compared to its short term periods.

Al-Roshood explained that the IILM is a new corporation based in Malaysia. The goal behind establishing such corporation lies on the deployment of short-term Sovereign sukuk ranging from one month to one year with USD 2 billion program volume.

IILM aims to enhance cross-border investment flows, international linkages and financial stability. It was established on 25 October 2010, the current shareholders are from the central banks and monetary agency of Indonesia, Kuwait, Luxembourg, Malaysia, Mauritius, Nigeria, Qatar, Turkey, the United Arab Emirates and the Islamic Development Bank. 

(Kuwait News Agency / 14 Sept 2013)

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AAOIFI: Testing Islamic finance skills

MANAMA: Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) held the examinations for its certified Sharia adviser and auditor (CSAA) and certified Islamic professional accountant (CIPA) professional development programmes on September 11 in several locations across the globe.
AAOIFI secretary-general and chief executive Dr Khaled Al Fakih said through the CSAA and CIPA programmes, Islamic finance professionals can gain technical understanding of AAOIFI international Islamic finance standards and be guided on practical application of those standards.
"The programmes go a long way towards promoting adoption of AAOIFI standards in major Islamic finance markets.
"We are thankful for the support that we have received from the international Islamic finance industry," he said.
"We are especially grateful for assistance given by central banks, Islamic banks and higher learning institutions across the world in hosting the examinations for us," Dr Al Fakih added.
The examinations were held in major Islamic finance markets including Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Malaysia, Oman, Pakistan, Qatar, Saudi Arabia, South Africa, the UAE and the UK. AAOIFI will also be holding the next round of training courses for CSAA and CIPA professional development programmes from November 20 to 23 in Manama.
The training courses will follow the conclusion of AAOIFI-World Bank Annual Conference on Islamic Banking and Finance on November 18 and 19 in the kingdom.
(Gulf Daily News / 15 Sept 2013)

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Saturday, 14 September 2013

Management: What is Five S?

5S is a basic, fundamental, systematic approach for productivity, quality and safety improvement in all types of business.

What is a Five S?

A Five S program is usually a part of, and the key component of establishing a Visual Workplace. and are both a part of Kaizen -- a system of continual improvement -- which is a component of lean manufacturing.

Improve manufacturing with a 5S ProgramThe Five S program focuses on having visual order, organization, cleanliness and standardization. The results you can expect from a Five S program are: improved profitability, efficiency, service and safety.

The principles underlying a Five S program at first appear to be simple, obvious common sense. And they are. But until the advent of Five S programs many businesses ignored these basic principles.

What types of businesses benefit from a Five S program?
Everyone and all types of business benefit from having a Five S program.

Manufacturing and industrial plants come to mind first, as those are the business that can realize the greatest benefits. However, any type of business, from a retail store to a power plant -- from hospitals to television stations -- all types of businesses, and all areas within a business, will realize benefits from implementing a Five S program.

What are the Five S's?
Use the following links to learn more about 5S
  • Sort - the first step in making things cleaned up and organized
  • Set In Order - organize, identify and arrange everything in a work area
  • Shine - regular cleaning and maintenance
  • Standardize - make it easy to maintain - simplify and standardize
  • Sustain -maintaining what has been accomplished

What will it cost me?
The shipyard industry is spending nearly a million dollars to develop a Five S program the industry can use, and to implement that program at two shipyards. On the other hand you can implement a Five S program without adding an extra dollar to your budget.

%S focuses on creating visual orderRealistically you probably will need to spend some extra money to get your Five S program going. There will be training time; man-hours spent to get your facility cleaned up                            and organized; equipment purchases, such as buying a quality labeling system; and time spent on sustaining your Five S program once it is in place.

Your actual costs will depend on where you are now - for example what is the condition of your facility? The further you are from meeting the goals of a Five S program, the more it will cost to implement one and the greater the benefits you'll see as a result of your Five S program.

(Graphic Products)

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