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Saturday, 5 January 2013

Canada: Bank may offer Shariah loans

Islamic Shariah-compliant mortgages could be available in Canada through one of the major conventional banks as early as this summer, says a Toronto-based financial firm operating within the Muslim community.
"We're confident by the summer time we will have a solution in place," said Omar Kalair, chief executive officer of UM Financial Inc.
"We plan to launch with one of the big five banks a whole suite of products under the UM branded name, which will be structured to be Shariah compliant."
Islamic financing, based on the principle that no interest is charged, is in its infancy in Canada, although widely available in the U.K. At least two U.S. banks currently offer Shariah mortgages.
To get around forbidden interest payments on loans, Shariah-compliant mortgages function by having the lender become an equity partner in a home purchase. The homeowner pays the financial institution putting up the rest of the purchase price monthly "rent" or "profit" payments, and principal.

(The Star.Com / 04 Jan 2013)

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Islamic Banking Expects Strong 2013 reports SL Info

San Francisco, CA- The state of Islamic banking and finance is nearly certain to continue a growth period over the next year. The growth is in despite to the upcoming landscape being challenging as the slowdown of the global economy continue to look cumbersome.

The achievement of the sector over the last year, coupled with “safe-haven investment” among investors will help keep the industry to remain in favorable light.

According to the Economic Report 2012/2013 by the Ministry of Finance, the Islamic banking business will continue to expand over the first seven months of the year, with assets increasing 20.6%. That represents 24.2% of the country’s banking system’s assets.

In 2011, the expansion was 24.1%, reflecting 23.7% of total banking assets.

RHB Islamic Bank Bhd Managing Director Abdul Rani Lebai Jaafar stated that the Islamic finance within Malaysia was prepared to continue to the next stage of its aggressive maneuvering in the global market.

He went on to state the Islamic finance seemed to be capable of being accepted by both the Muslim and non-Muslim communities.

The director did state that 2013 had challenging roads ahead concerning the issue of “funding versus financing” and will remain within the industry where sourcing funding questions created limited resources to be added locally.

Among the challenges was the finite number of trained Islamic bankers that were available to the industry. The demand for the said positions simply outweighed the supply at the current moment.

The International Center for Education in Islamic Finance Chair, Prof. Dr. Abbas Mirakhor stated that authorities would need to have strong commitment in its endeavor to appeal to the pluralistic society.

“It must be framed, communicated and explained to the society in a way that all segments of the society will understand its benefits and no segment is threatened by either the commitment or the progress,” he said, adding that innovation in products would be also important.”

“Malaysia is seen to be in the driver’s seat when it comes to Islamic Banking. Innovation is a key factor to push Islamic banking to a higher level.”

(Official Wire / 04 Jan 2013)

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Mercy Corps pitches for Islamic banking in Kashmir

Srinagar, Jan 4: Global humanitarian relief organization, the Mercy Corps, has in its latest report pitched for Islamic banking in Kashmir. 

“The (Islamic banking) concept is an increasing phenomenon in the West and across the globe. Shariah-complaint financial products and services should be developed and made available to Kashmir,” the agency has said in its latest report which it presented to the state government.

Underlining the importance of loans and start-up capital for promoting entrepreneurship, the NGO has recommended to the state government to provide hassle-free finances to educated youth. 

In its ‘Start-up Kashmir Youth Entrepreneur (SKYE) Development Project, the agency has compiled the report based on research conducted through sampling. The report has urged the state government to encouraging entrepreneurship by giving easier access to youth to finances.

“Rather than offering ‘free money’, the state government should make access to finances easier with more favourable terms and conditions (soft loans, etc) to youth,” it reads.

Pertinently, the state government has been continuously stating that it cannot provide government jobs to all the educated youth and has been urging them to focus on private sector and entrepreneurship. 
“The state government should carry mass awareness programs for their staff to orient them towards implementing various start-up financial services and products offered through public sector schemes,” it states. 

“Awareness campaigns, publications, websites, books and guides should be developed to help Kashmiris youth gain knowledge, understanding and awareness of various start-up services and products available in Kashmir through financial institutions,” the report reads. 

The agency in its recommendations for promoting entrepreneurship has suggested to the banks operating in the state to drop their risk-averse approach to lending to youth and focus on actively seeking out, identifying and financial potential high-impact Kashmiris youth start-ups.

“Banks should sponsor business plan competitions to identify such entrepreneurs. JK Bank should seriously explore creating a range of specialized financial products for youth entrepreneurs with less stringent and more targeted conditions.”

“The processing time of loans for youth should be reduced to minimum possible level, and banks should create financial awareness among Kashmiri youth by holding awareness programs on the process and procedures for applying for loans,” the report said.

It adds that funding to start-up entrepreneurs should be included in the list of public services under the newly enacted Public Service Guarantee Act.

(Greater Kashmir / 04 Jan 2013)

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Malaysia: Banking on the ummah

OF MALAYSIA’S claims to fame, leadership in financial services is not an obvious one. Yet in some ways the country is the world’s most important Islamic-finance centre. Just over a fifth of the country’s banking system, by assets, is sharia-compliant; the average for Muslim countries is more like 12%, and often a lot less. Malaysia dominates the global market for sukuk, or Islamic bonds. The country issued the world’s first sovereign sukuk in 2002; in the first three quarters of 2012 it was responsible for almost three-quarters of total global issuance (see chart). Malaysia is also home to the Islamic Financial Services Board, an international standard-setting body.
These are big achievements for a relatively small country of just 30m people, of whom only about 60% are Muslim. In neighbouring Indonesia, which is home to the largest Muslim population in the world, only about 4% of the financial sector is sharia-compliant. Although the much richer Gulf states and Saudi Arabia have bigger Islamic banks, it is Malaysia, argues Iqbal Khan of Dubai’s Fajr Capital investment fund, that is the centre “for thought leadership in Islamic finance”.

How did the country carve out this niche? Malaysia’s Muslim heritage, outward-looking nature and links with financial hubs like Britain and Singapore made the place a natural candidate to bridge the worlds of religion and capitalism. The central bank, the Bank Negara Malaysia, is also supportive.
Two institutions in particular, both set up by the central bank, have contributed to Malaysia’s pre-eminence in the field. The first is the International Centre for Education in Islamic Finance (INCEIF). Established in 2005 and boasting about 2,000 students, INCEIF is the world’s leading university for the study of Islamic finance. The International Sharia Research Academy, housed within INCEIF, brings together scholars to produce an internationally acceptable rule-book for Islamic finance.
The second institution is the Islamic Banking and Finance Institute of Malaysia (IBFIM). It concentrates on vocational training, offering a variety of certificates in Islamic finance. IBFIM also acts as a consultancy to banks and firms that want to become sharia-compliant.
Zeti Akhtar Aziz, the head of the central bank, says that these bodies are the “pipeline to provide the banks with talent”. And not just in Malaysia. There are currently students from 80 countries at INCEIF; and IBFIM has taught people from Afghanistan, Nigeria, Palestine and elsewhere.
All of which gives Malaysia greater status within the ummah, the global Islamic community, important to a country that often feels on the periphery of the Muslim world. There are more tangible benefits, too. The Islamic subsidiary of Maybank, a big local lender, already accounts for about half of the group’s customers and is expanding abroad: it set up a subsidiary in Singapore 18 months ago and has also moved into Indonesia.
Ms Zeti argues that sharia-compliant banks are inherently more stable than conventional peers. Speculation is forbidden, and because charging interest is prohibited under sharia law, returns are based on profit-sharing. Perhaps. Islamic finance is hardly foolproof: Dubai’s debt crisis in 2009 showed that sukuk can help to inflate debt to unsustainable levels. But whatever its pros and cons, Malaysia will provide much of the evidence either way.

(The Economist / 05 Jan 2013)

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