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Monday, 18 February 2013

Global Islamic investments to hit USD1.8tr in 2013: E&Y

(MENAFN) Ernst and Young (E&Y) stated that during the current year, investments in accordance with Islamic law (Shari'ah) will hit USD1.8 trillion, reported Xinhua News.

E&Y said that Islamic financial institutions in Southeast Asia and the Middle East and Africa (MEA) region are boosting their investments that are carried out in line with Shari'ah, as these economies have surpassed the global economic expansion since the start of the new millennium, and developed their regulatory system to stimulate Islamic banking.

However, financial institutions and banks in the US and Europe have trimmed their exposure in banking in line with Islamic law, due to the financial crisis that forced them to return to their roots by lowering their exposure in foreign fields, including Islamic finance, and by limiting their investments in emerging markets.

The Shari'ah law forbids interest-based and speculative investment, including short-selling or trading derivatives, furthermore, it bans stocks from firms that produce alcohol, weapons, entertainment or pork meat.

E&Y said that sukuk (Islamic bonds) are not like ordinary bonds, as they do not pay interest based on a coupon, but share profits of a specific, tangible asset, such as a real estate or a commodity, with the investors. 

Last year, global issuances for sukuk surged by 43.36 percent from 2011, reaching USD121 billion, with Malaysia contributing with more than 60 percent of total issuances

It is worth noting that the Islamic finance industry is expanding by 15 percent annually, and is expected to double every 5 years.

(Mena.Com / 17 Feb 2013)

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India: RBI has a positive approach towards Islamic banking: Minister

“I have written to the RBI Governor, invoking Section 25 of the Constitution, saying that it was the duty of the State to facilitate every citizen to practice and follow his/her religion,” he said, adding that Muslims being given no option but interest-based banking amounted to obstruction in practice of religion.

Khan said the RBI Governor had written back accepting his view, but pointing to the need for certain amendments to the laws concerned. The Minister was addressing a session on ‘Islamic Banking and Finance: Global Trends and India’ at a two-day conference organised by the Institute of Objective Studies.

The Minister said, in India the biggest issue was who should regulate the proposed alternative system, as it needed a strong monitoring mechanism. It could be a new law or amendments to the existing law, but I am hopeful of an outcome soon, he added.

At present, about 60-70 per cent of the 200 million Muslims in India are excluded from the conventional banking system (Shariah law prohibits riba (interest)-based financial transactions) because of lack of Shariah-compliant financial instruments.

Khan said Islamic banking had been adopted by 75 countries, including the UK, and added that India could no longer afford to stay away from the $1.5-trillion Islamic financial market, which could even help address the country’s huge fiscal deficit.

However, the Minister pointed out that no concrete effort had been made by the Muslim community in this regard. “Raising a demand alone will not help,” he said, and added that concrete efforts should be made, such as setting up an expert committee to draw up a framework of an alternative banking system, along with a strong legal system to back it.

(Business Line / 17 Feb 2013)

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