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Wednesday, 13 February 2013

Pakistan: Campaign for promotion of Islamic finance

Tuesday, February 12, 2013 - Karachi—The Deputy Governor, State Bank of Pakistan (SBP), Kazi Abdul Muktadir has said that a comprehensive media campaign for promoting inherent strengths of Islamic finance and clearing common apprehensions, confusions and misconceptions about Islamic banking and finance is being launched shortly. ‘This campaign is to be led by the Islamic banking industry with the support of SBP’, he added.

In his opening remarks while chairing a meeting for initiating the media awareness campaign to promote Islamic banking in Pakistan at SBP, Karachi today, he said that preliminary findings of SBP comprehensive country-wide survey on “Knowledge, Attitude & Practices of Islamic Bankingin Pakistan” suggest the dire need for initiating mass awareness campaign to increase public trust and confidence in Islamic banking.

SBP Deputy Governor said that since 2001, the Islamic banking industry has been able to maintain strong momentum with annual growth rate of above 30 percent, a network of 1100branches in 79 districts across the country, and market share of approximately 10 percent.

He observed that despite this growth, the industry is still facing many issues and challenges which, among others, include limited human resource capacity and low awareness and understanding of public at large about Islamic banking and its distinction over conventional banking. ‘The low awareness and understanding has been a major reason for misperceptions and confusions about the need, utility and Shariah permissibility of Islamic finance’, he added.

Abdul Muktadir set up a 7-member Steering Committee for launching the media awareness campaign. Headed by Mr. Irfan Siddiqui, President, Meezan Bank, the Committee members include Mr. Hasan Bilgrami, President Bank Islami Pakistan, Mr. Junaid Ahmad, President Dubai Islamic Bank, Mr. Mohsin Ali Nathani, President Standard Chartered Bank, Mr. Nauman K. Dar, President Habib Bank, Mr. Atif Bajwa, President Bank Alflah, and Mr. Saleem Ullah, DirectorIslamic Banking Department, SBP. ‘The Committee may constitute one or more sub-committees to undertake and execute various components of the media campaign,’ he added.

He said the State Bank and Islamic Banking Institutions (IBIs) have taken several initiatives to enhance the public awareness about Islamic Banking and Finance by holding seminars,conferences etc., but no significant effort has so far been made to create mass awareness using electronic and print media. ‘

SBP Deputy Governor expressed his confidence that this initiative will be instrumental in significant improvement in awareness about Islamic banking and lead to further acceleration in the growth of Islamic banking.

(Pakistan Observer / 13 Feb 2013)

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UAE: Clear direction helping Dubai to form ambitious Islamic finance hub

Dubai's aim to become the economic hub of the Islamic world is so ambitious that, to achieve it, the grand strategy will have to be split into manageable parts for implementation.

Plans for one vital part - the reclaiming of the sukuk industry as an Arabian Gulf-centred business - are well under way, but are about to get a boost from a proposal prepared by Nasdaq Dubai and circulated among that exchange's member firms.

If the strategy works, Dubai will stand a good chance of becoming the leading market for the issuance and trading of sukuk and other fixed-income securities not just in the region, but in the world.

Historically, the global sukuk business has split between two rather unlikely hubs - London and Malaysia. London is a leading global centre for conventional finance, but has also achieved a commanding position in the sukuk business.

The United Kingdom capital's efficiency in listing procedures and track record in running orderly markets has given it a commanding position in the sukuk business, with an estimated US$27 billion (Dh99.17bn) worth of sukuks listed there.

Malaysia, of course, is an Islamic country and a recognised trading centre at the heart of the big Muslim populations of South East Asia. It is second behind London with $25bn of sukuks listed on two exchanges.

The mystery is why the Middle East has not developed a single hub for sukuk trading. The UAE, with slightly more than $10bn of sukuk listed, is the biggest, with Saudi Arabia at $6.7bn. The rest of the GCC financial centres trail away into the distance.

No Gulf centre can rival the great hubs to west and east, which is perplexing, given the region's history as the birthplace of Islam and the source of huge energy-related capital.

The Nasdaq Dubai proposal would be a big step towards correcting that anomaly. Currently sukuks (and other fixed-interest securities) are traded on what the professionals call the "over the counter" market, meaning that brokers and investors do ad-hoc deals to buy a specific instrument from a counter-party.

Nasdaq Dubai is instead proposing the creation of an electronic, automated fixed income trading platform to allow institutional and professional investors access to a transparent and regulated exchange for these securities.
The big advantages are the transparency and efficiency such a market, under the regulatory auspices of the Dubai Financial Services Authority, would bring to the emirate.

The new structure would make use of the DFM X-Stream trading system, already used as the common platform for equity trading on both the Dubai Financial Market and Nasdaq Dubai, and transaction would be settled through the Euroclear Bank via its existing system of delivery versus payments.

Having the right mechanism in place is a crucial step, but there must also be a will on the part of the Dubai authorities to use it. Some government and government-related sukuk issues have in the recent past gone to London, instead of exploiting the opportunity to enhance the home market.

It would be very difficult indeed to persuade the rest of the world to use Dubai as its Sharia-compliant hub if future new instruments from local issuers, whether of equities or fixed-interest, headed towards London or Kuala Lumpur.
The market authorities are reacting quickly following the policy statement from Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, that the emirate should aim to be the Sharia-compliant centre of the world.
Recently, the DFM issued new guidelines for standardisation of sukuk issues that are being considered by market participants. Their response is expected by the end of the month.

Once the guidelines are agreed, and the Nasdaq Dubai trading platform introduced, two of the big hurdles to building an Islamic financial hub will have been overcome.

There is more to do, especially on agreeing unified criteria for fatwa pronouncement and arbitration. But progress so far shows how quickly and effectively the Dubai markets can cooperate when incentivised by a clear direction from the very top of the policymaking pyramid.

(The National / 13 Feb 2013)

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Kuwait's Capital Market Authority urges better Islamic finance oversight

Feb 12 (Reuters) - Islamic financial institutions in Kuwait should hire enough personnel to ensure they comply with sharia standards, and work with the personnel in a transparent way, the country's market watchdog said on Tuesday.

The statement by the Capital Market Authority (CMA) appeared to be in response to concern about uneven self-regulation by the institutions.

The number of Islamic financial firms, which obey religious principles such as a ban on the payment of interest, has increased substantially in Kuwait and elsewhere in the Gulf over the past decade.

The companies have in-house sharia boards of scholars who rule on whether their products and actitivies are sharia-compliant, and sharia compliance officers who check whether guidelines are being followed on a day-to-day basis.

But around the Gulf, the industry has been hampered by shortages of experienced scholars and qualified staff, and by rulings by sharia boards at different companies that sometimes conflict with each other, confusing investors.

The CMA's statement on Tuesday called for "the appointment of a sufficient number of legal observers in accordance with the size of the institution". It urged institutions to provide "full transparency" in their communications with compliance officers.

The watchdog also urged companies' sharia boards to take more care to issue rulings that were in line with each other.

The CMA's statement was a recommendation, not a new set of regulations. CMA officials could not be reached for comment.

There are five Islamic banks and around 30 mostly Islamic investment companies listed on Kuwait's stock market, as well as 15 "takaful" Islamic insurance companies. (Reporting by Ahmed Hagagy; Writing by Sylvia Westall; Editing by Andrew Torchia)

(Reuters / 12 Feb 2013)

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