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Wednesday, 8 May 2013

Going high-tech to keep the world's Muslims halal


Hamzah Mohd Salleh's lab is trying to ensure the world's 1.6 billion Muslims can stick to their religion's strict halal rules
Can you explain the concept of halal?
In Islamic law, there are things that are allowed, known as halal, and things that are forbidden. In terms of Islamic dietary laws, things that are forbidden include pork, products derived from pork, and alcohol. But many products are in a grey area. Muslims are advised to only consume things which are clearly halal.

What type of research do you do?
My colleagues and I aim to find ways to detect non-halal materials in products that are to be certified halal. Our chemists check for porcine DNA or an unacceptable level of alcohol, for example. We also try to find alternatives to forbidden ingredients, such as gelatin made from fish skin instead of from pigs. Our research assists the halal industry – estimated to be worth trillions of US dollars per year globally – and the religious organisations that certify products as halal.

Does halal go beyond food?
Yes, it extends to cosmetics, personal care products and pharmaceuticals, to name but a few. Most capsules for medicines contain gelatin, for example. More and more pharmaceutical companies, at least those in the Muslim world, are trying to source gelatin from halal sources. And Muslims want to know whether the lipstick they wear or the lotion they put on their skin is acceptable. We are also looking at the food animals eat, so whether it is OK to use a pig's body parts as animal feed, and whether pig hair is permissible for use in, for example, a pastry brush.

Are there other areas of active research?
We are working on making sure the processes used to make drugs are halal. To make vaccines and other proteins, you need to culture cells in a bioreactor. To increase the density of the cells you can use microcarriers – insoluble particles that the cells congregate around – usually made of porcine gelatin. I'm developing a microcarrier that works in the same way but is made of halal materials. The next step will be ensuring that nutrients given to the cells to make them grow are also permissible.

Halal slaughter involves cutting the animal's throat with a sharp knife, before draining the blood. Does your work inform this area?
The Malaysian halal regulatory body doesn't encourage stunning before slaughter, but since the country imports meat from countries such as Australia and New Zealand, where stunning is required, guidelines have been drawn up. These detail the current to be used and how long it should be applied, based on an animal's weight. We want to detect if guidelines are violated. So we are trying to find biomarkers – increased levels of hormones or enzymes – that are produced if an animal is overstunned, to make sure that the electricity is only used to stun rather than kill.

Do you think the growth of halal science is because halal certification is big business?
That's one reason. There are great opportunities for companies to address the needs of Muslims around the world. If you fulfil the requirements and accommodate those needs, that is OK, even if the driving force behind this is profit.

(News Scientist / 07 May 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

Azerbaijan: Legislative amendments on Islamic banking not on CBA agenda



The Central Bank of Azerbaijan (CBA) does not currently consider amending the domestic legislation to ensure the implementation of Islamic banking in Azerbaijan, CBA Chairman Elman Rustamov told Trend news agency.
Prohibition on charging interest for loans is the major distinction between Islamic and Western-style banking. Instead of interest, Islamic banks take a stake in businesses to which they loan money and share both the profit and loss with the client.
There is a special order of taxation of Islamic financial instruments, forms and methods of regulation and supervision of Islamic banks, along with the procedure for the issuance and circulation of Islamic securities and the requirements of Islamic investment funds in the world.
Banned activity includes speculation in financial markets, financing the economy through methods of interest calculation and financing production, trade or services prohibited by Islam, such as producing alcohol, food containing pork, gambling, etc.
"It is necessary to first create a legislative basis, then a regulatory one based on it, then licensing and the issuance of permits can begin. If there is no such basis, these actions remain exploratory by nature," Rustamov said.
The only 'Islamic window' in Azerbaijan, created by the International Bank of Azerbaijan, has already begun serving customers. The amount of assets attracted from Islamic financing sources has hit $60-70 million. At the same time, Islamic leasing products are actively offered via the Joint Leasing Company, one of the co-founders of IBA.
The range of services offered by the bank includes such products of Islamic banking as Ijara, an analogue of traditional leasing, Vakala deposit, an equivalent of a conventional deposit, Islamic bank cards, and opening of Gard Hassan accounts.
IBA Islamic Banking Department head Behnam Gurbanzade earlier said that the above-said products of the IBA have undergone relevant certification in independent Sharia financial and legal advisory company Dar al Sharia, founded by Dubai Islamic Bank in accordance with international practices.
Thus, all procedures and documentation on these types of services provided by the IBA Islamic Banking Department meet the standards assigned by leading Islamic financial regulator AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions).
To create a legislative basis for Islamic banking, the IBA jointly with international financial institutions is preparing proposals for amendments to the banking legislation.
Experts believe that the application of Islamic window in Azerbaijan would influence positively the development of Islamic banking in the country. They suggest that as long as loan interest rates stay above the 20-percent mark, Islamic banking could potentially gain market share.
The IBA is not alone in studying the field of Islamic finance. Earlier, the Russian-owned Nikoil Bank started offering clients the opportunity to make interest-free deposits, which would then be invested into Sharia law-compliant business ventures.
Also, Amrahbank, partly owned by the Bahrain-based International Investment Bank, has plans to offer "Sharia-complaint financial products" to cash in on "the untapped Islamic banking market both in Azerbaijan and neighboring regions."
Earlier, Kovsarbank attempted to offer a full range of Islamic banking services in Azerbijan. However, the CBA withdrew its license, saying it was violating the law and citing a small portfolio. The bank subsequently closed down.


(Azernews / 07 May 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

Record Sukuk Seen on Indonesia $92 Billion Plan: Islamic Finance



Indonesian corporate sukuk sales are off to their best ever start and the top underwriter predicts a full-year record as $92 billion of state-backed development projects buoy issuance.
Bank Muamalat Indonesia and Adira Dinamika Multi Finance were among issuers of Rp 1.5 trillion ($154 million) of securities, Financial Services Authority data show. That compares with Rp 1.9 trillion for the whole of 2012 and a record Rp 2.3 trillion in 2008. The market is still just a fraction of Malaysia’s, where companies sold 95.8 billion ringgit ($32 billion) of sukuk last year.
President Susilo Bambang Yudhoyono is seeking to reduce fuel subsidies to set aside more funds for roads, railways and power stations to spur growth from the slowest pace since 2010 last quarter. Finance companies have accounted for 72 percent of sales this year, while state-owned construction company Hutama Karya and electricity producer Perusahaan Listrik Negara may sell Islamic bonds in 2013, according to Danareksa Sekuritas, the top underwriter last year.
“The other sectors with the biggest potential to actively tap into the sukuk market will be those involved in infrastructure-related projects and utilities,” Alhami Mohd Abdan, head of international finance and capital markets at OCBC Al-Amin Bank Bhd. in Kuala Lumpur, said in a May 3 interview. Sales will reach Rp 2.5 trillion to Rp 3 trillion this year, he forecast.
State-owned companies
State-owned enterprises have committed about Rp 900 trillion through the end of 2014 for infrastructure and real- sector projects, Coordinating Minister for the Economy Hatta Rajasa said on Dec. 18. Listrik Negara last sold Rp 500 billion of Islamic securities in 2010, while Hutama Karya would be issuing Shariah-compliant notes for the first time, data compiled by Bloomberg show.
Construction company Adhi Karya sold Rp 125 billion of sukuk in March, after Pefindo Credit Rating Indonesia raised it to five steps above investment grade from four last June, citing strong cash flow. Property companies Bumi Serpong Damai and Lippo Karawaci have also been upgraded by Pefindo in the past year. Indonesia’s non-Islamic corporate debt market will triple in five years, Mandiri Sekuritas forecast last month.
‘Great demand’
“Property and construction companies will boost debt sales as their ratings rise, reducing borrowing costs and brightening the option to sell debt,” Yudistira Slamet, head of debt research at Danareksa, said in a May 3 interview from Jakarta. “We recommend our clients tap the sukuk market because of the great demand, which will further suppress coupons,” he said, adding that he was forecasting Rp 2.5 trillion to Rp 3 trillion of company issuance this year.
The average yield on global Shariah-compliant debt fell one basis point, or 0.01 percentage point, to 3.12 percent on May 2, the HSBC/Nasdaq Dubai US Dollar Sukuk Index shows, after reaching an all-time low of 2.67 percent on Jan. 10. The premium over the London interbank offered rate, or Libor, declined one basis point to 188 basis points.
Indonesia’s finance ministry plans to sell Rp 53 trillion of Islamic bonds this year, compared with Rp 57.1 trillion in 2012, as it seeks to boost trading volumes by selling less to the national Hajj fund, which holds the notes until maturity, Dahlan Siamat, director of Islamic financing at the debt management office, said Jan.
Tax Rules
Indonesia’s 8.8 percent dollar sukuk due April 2014 yielded  six basis points less than Malaysia’s 3.928 percent Islamic notes due June 2015, even though the former country is rated four levels lower by Standard & Poor’s. The yield on the Indonesian securities was 96 basis points higher on Jan. 11, the biggest gap in seven months, data compiled by Bloomberg show.
There is no specific rule on how sukuk should be taxed in Indonesia, although the Financial Services Authority has made sure that no corporate Islamic bonds have been double-taxed, Etty Retno Wulandari, a director at the regulator, said in July 2012. Bank Indonesia asked the taxation department in 2009 to issue a circular to clarify equal treatment for Shariah- compliant debt, Executive Director Edy Setiadi said last September, but this still hasn’t happened.
“The country is well-positioned to become a global center of Islamic finance and one of the key ingredients in achieving this is having clear tax laws,” Mohamad Safri Shahul Hamid, the Kuala Lumpur-based deputy chief executive officer of CIMB Islamic Bank Bhd., a unit of CIMB Group Holdings Bhd., said in a May 3 e-mail. “The first step is to formalize a tax neutrality provision for Islamic finance transactions, including sukuk.”
Bigger Market  
Islamic bonds have returned 1.5 percent this year, according to the HSBC/Nasdaq index, while debt from emerging markets gained 0.9 percent, JPMorgan Chase & Co.’s EMBI Global Index shows.
Worldwide sales of Shariah-compliant notes, which pay returns on assets to comply with the religion’s ban on interest, increased 3.8 percent to $14.8 billion in 2013 from the same period last year, data compiled by Bloomberg show. Issuance amounted to an all-time high of $46.5 billion in 2012.
There will be $950 billion of worldwide demand for Islamic bonds by 2017, according to a December report by Ernst & Young LLP. That compares with $267.6 billion of outstanding sukuk at the end of June 2012, according to Malaysia’s Securities Commission. Indonesia sold $3 billion of non-Islamic global bonds on April 8 at the country’s lowest-ever yield for dollar notes, with investors bidding for more than four times the amount offered.
“Supply is beginning to increase and catch up to ever- growing demand,” Akbar Syarief, a fund manager overseeing about Rp 3.3 trillion at MNC Asset Management in Jakarta, said in a May 3 interview.
“We hope a bigger corporate sukuk market will mean better liquidity and more efficient pricing, and therefore greater demand for the instruments.

(Jakarta Globe / 07 May 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

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