Growing number of Mid East Shariah-compliant funds launch in Luxembourg

Luxembourg ranks fifth worldwide by number of Shariah compliant funds and the number of Middle East-based managers launching investment funds in Luxembourg has increased constantly. There are 41 regulated Shariah compliant investment funds domiciled in Luxembourg and total Assets under Management in Shariah compliant funds are estimated at $5.3bn

As such four Luxembourg-based companies are now joining forces to create a specialised platform that will service Shariah-compliant investment funds. Amanie Advisors, ADEPA Asset Management, Theisen Law, and KBL European Private Bankers have launched a service that will be branded ALIF (Alliance for Luxembourg Islamic Finance), offering fund managers a service to have their custodianship and fund servicing carried out in a Shariah-compliant manner.

Specifically assets will be held in segregated pools and prohibited from being used for short-selling or as security for interest-based lending, two activities prohibited under Islamic law. ALIF aims to compete on price and service in order to take advantage of the growing number of such funds in the market. 

Commenting on the launch, Carlos Alberto Morales, CEO of ADEPA Asset Management, said: "Our clients will be able to take advantage of all the benefits of the Luxembourg fund structures and also have their funds administered locally in a professional and transparent way, and in a way that is in keeping with the religious practice."

The ALIF service will feature legal work covered by Theisen Law, a well-established and leading law firm active in Luxembourg; as well as the Islamic Finance expertise by Amanie Advisors. 

Funds registered by ALIF will be registered under the Luxembourg fund regime and be established to comply with Islamic prohibitions on investing in gambling, interest-based banking, alcohol and pornography-related industries, amongst others. Additionally, the securities will be disallowed as security for lending activities. 

The portfolios and processing of these funds will be periodically reviewed by the Shariah Supervisory Board of Amanie Advisors, which is comprised of Dr. Mohamed Ali Elgari, Dr. Mohd Daud Bakar, Dr. Muhammad Amin Ali Qattan, and Dr. Osama Al Dereai.

Commenting on Amanie Advisor's role in ALIF Dr. Mohd Daud Bakar, Amanie's founder and group chairman commented, "For many years the market for Islamic funds has concentrated on the Shariah-compliant investment of the assets only. Whilst this is important, it is a great development to have one efficient service that assures the compliance of both the investment activities as well as the administration and custody of Islamic funds."

(Ameinfo.Com / 14 Jan 2013)

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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

Difference between Islamic and conventional banking

Times of Oman is offering an opportunity for our readers to ask questions on Islamic banking to Khalid Yousaf, an expert in Islamic banking and Director (Islamic Finance Advisory Services) of KPMG in Oman. The readers have to mention their full name and location while sending the questions.

Q: What exactly is the difference between Islamic banks and other conventional banks? Whereas a conventional bank is allowed to provide Islamic banking through a Window operation, can an Islamic bank also provide conventional banking services through a window operation?

Raj Krishnan, Sohar

A: The basic difference between Islamic and non-Islamic banks is that all Islamic Banks are required to follow Sharia principles in structuring their products and services for their customers. Whereas Current, Savings & Time Deposits, Loans & Advances may appear to be similarly priced by both types of banks, all products and services offered by Islamic Banks will be based upon and structured in line with Islamic Modes of Financing like Mudaraba, Murabaha, Musharaka, Wakala and others.

These Islamic Modes of Financing ensure the elimination of Riba from any product and services and their structures are based either upon an asset or a commodity, rather than straight-forward interest-based borrowing or lending offered by conventional banks. A simile could be whereby a super-market may offer meat for both non-Muslims and Muslims. The essential difference being that meat sold to Muslims has been processed following Sharia' principles and therefore, is Halal for consumption by Muslims.

In order to ensure that Islamic Banks comply with Sharia' principles, they appoint Sharia' Supervisory Board consisting of Sharia' Scholars who are experts in Fiqh-ul-Muamlat as well as knowledgeable in banking products and services.

All products and services offered by Islamic Banks are reviewed and approved through Fatwas issued by the Sharia' Supervisory Board of the respective bank. Further, Internal Sharia' Auditor and Compliance Functions ensure that processing and workings of an Islamic Bank are in total compliance with Fatwas issued by their Sharia' Supervisory Board. Conventional Banks are permitted to open Islamic Windows with the conditions that funds and operations of Islamic banking will be kept totally separate from those of the parent bank.

Further, the Window is expected to operate exactly like a full-fledged Islamic Bank in terms of Sharia'-compliance through the appointment of Sharia' Board, Sharia' Internal Audit and Compliance functions. The funds from Islamic Depositors cannot be used by the parent bank and similarly, the funds of parent bank's depositors cannot be used to fund Islamic Window assets. Some Sharia' Scholars express doubts about water-tight control  over the commingling of funds and have therefore, lobbied either for the closure of Islamic Windows or disallowing the practice. Islamic banks on the other hand, are not allowed to offer conventional banking windows at all for concerns that control over the commingling of Halal and Haram funds may be compromised.

(Times Of Oman / 13 Jan 2013)

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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