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Wednesday, 12 June 2013

IIFM issues global standards for syariah Wakalah agreements

The International Islamic Financial Market (IIFM), a Bahrain-based regulator, issued global guidelines yesterday to unify and govern syariah-compliant contracts used between an agent and a service provider.

The Wakalah agreements will seek to broaden the range of liquidity-management products for lenders, Ijlal Ahmed Alvi, the institution’s chief executive officer, says in a statement issued in Singapore, where the World Islamic Banking Conference is taking place.

They will cut reliance on commodity-backed contracts amid limited supply of products that conform to Koranic principles.

Islamic law prohibits the payment of interest and bans investment in industries such as gambling and alcohol deemed as unethical.

Under a Wakalah agreement, a lender acts as an agent between say an importer and exporter by issuing a letter of credit and is paid fees and commissions in the place of interest.

IIFM was established in 2002 by the monetary authorities of Bahrain, Malaysia, Brunei, Indonesia and Sudan, as well as the Islamic Development Bank based in Jeddah, Saudi Arabia, to focus on global syariah-compliant capital and money markets, according to its website. The body’s primary objective is the standardisation of Islamic financial products and documentation.

The Islamic Financial Services Board, another global standards-setting body in Kuala Lumpur, estimates the syariah-compliant financial-services industry grew 20 per cent in 2012 to US$1.6 trillion in assets, according to a 2013 stability report. Banking assets amounted to US$1.27 trillion, with US$229 billion of sukuk outstanding, the article said.

Global sales of sukuk, which pay returns on assets to comply with the interest ban, climbed four percent to US$18.2 billion in 2013 from a year earlier, according to data compiled by Bloomberg. The bonds returned 0.5 per cent this year, the HSBC/Nasdaq Dubai US Dollar Sukuk Index shows, while debt in developing markets lost 3.4 per cent, according to JPMorgan Chase & Co’s EMBI Global Diversified Index.

(Borneo Post Online / 04 Jun 2013)

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Chad's Islamic finance moves get involvement from The Islamic Corporation for the Development of the Private Sector (ICD)

(MENAFN - Arab News) The Islamic Corporation for the Development of the Private Sector (ICD), a private sector arm of the Islamic Development Bank Group (IDBG), and Chad's Ministry of Finance and Budget, have signed a partnership agreement aiming at the creation of a local leasing company (ijara) and a local Islamic bank compliant to the principles of Islamic finance.

Through this agreement, ICD will have its first footprint in the financial institution industry in Chad and will then contribute to promote the development of Islamic finance and support the small and medium enterprises (SMEs). The two future entities - leasing company and Islamic bank - will provide Shariah-compliant financial services and products with a special focus on the SME sector.

Khaled Al-Aboodi, CEO and MD of the ICD, has welcomed the signing of this partnership agreement that aims to support the private sector in Chad and also to provide a better access to finance for SMEs.

Minister of Finance and Budget of Chad Atteib Doutoum thanked the ICD and reaffirmed his full support to make the private sector a key player in the economic development of the country. He then promised to provide the necessary support of his Ministry to implement the two financial institutions.

ICD is a multilateral organization and a member of the IDB Group established in 1999 with a paid-up capital of 2 billion. The mandate of ICD is to support economic development and promote the development of the private sector in its member countries through providing financing facilities and/or investments, which are in accordance with the principles of Shariah.

ICD also provides advice to governments and private organizations to encourage the establishment, expansion and modernization of private enterprises.

(Menafn.Com / 09 Jun 2013)

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Need to Strengthen Islamic Social Finance Sector

Issues raised and discussed at length during “International Workshop on Zakat, Waqf and Islamic Microfinance” and the idea of “Strengthening Islamic Social Finance Sector” during 29-30 April at Bogor in Indonesia were presented by Arshad Ajmal, Vice President, Sahulat Microfinance Society at a programme organised by Forum for Discussion on Economic Issues, a joint forum of Sahulat and Radiance Viewsweekly in the national capital on 26 May.  
Mr. Ajmal, who was the only person invited from India as a resource person on Islamic Microfinance, shared his experience which he gathered and the points he raised during the workshop which was jointly organised by the Bogor Agricultural University (IPB), Islamic Research and Training Institute (IRTI), and Islamic Development Bank (IDB). He raised the issue of clubbing Zakat, Wakf and Awqaf under Islamic Social Finance which may be considered in the days to come. Another notable point discussed was whether an Islamic Microfinance institution should and can be treated as a banking institution. Mr. Ajmal, while replying to a question, said Islamic Microfinance is a concept which is about seven years old and the possibility of Islamic microfinance addressing the issue of poverty is likely to become a reality in the next 15 years or so.  
In order to ensure the growth and viability of Islamic Microfinance, it has to be divided into Conceptual Development of Fiqh, Economics and Finance Regulatory Framework, Supervision, Risk Management and Governance. Another pertinent issue that came up and requires a second thought is whether Baitul Maal wat Tamweel (BMT), a typical Indonesian concept, and other financial institutions can be merged with Microfinance Institutions with a single regulatory framework. The idea put forward has got advantage and disadvantage and therefore some are against its merger or to be regulated as a single unit. A majority of thinkers are of the view that there should be separate regulations for for-profit and not for-profit MFIs. There is one view that Islamic finance has so far failed to meet social obligations. Moreover, Islamic finance places itself heavily on debt instruments and less on equity instruments.
The basic concern with the institutional or legal framework of microfinance is that of raising deposits. NBFCs or other forms of MFIs are normally not allowed to raise deposits since safety of deposits remains a major issue. So far the MFIs have been financed by Banks or other financial institutions. This dependency factor affects the self-sustainability of MFIs. During the question session, Dr. Waquar Anwar emphasised that service charges should be often revisited and cannot be fixed as far as Islamic Microfinance is concerned.
Presiding over the programme, Dr Ausaf Ahmed cautioned the audience against n using Baitul Maal and Tamweel in the same capacity and stressed not to merge it because historically they have different connotations. 

(Radiance View Wekkly / 11 Jun 2013)

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