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Monday, 17 June 2013

Islamic Financial System Offers Promising Avenue For Future Financial Resiliency

KUALA LUMPUR, June 4 (Bernama) -- The Islamic financial system seems to offer a promising avenue for future financial resiliency and hence economic sustainability, said INCEIF president/chief executive officer, Daud Vicary Abdullah.

He said the financial markets operating on the basis of interest rate, normally referred to as conventional financial markets, had come under close scrutiny.

"While some have looked at ways and means to fix the instability inherent in the conventional interest-based system, others have searched for alternative financial systems," he said in a statement today.

INCEIF, The Global University of Islamic Finance, hosted the three-day 15th Malaysian Finance Association (MFA) Conference themed "Financial Challenges and Economic Growth -- The Way Forward", which ended Tuesday.

He said more importantly, the roles of Islamic banking and finance had been given emphasis with the papers in Islamic banking and finance to be selected for publication in the Pacific-Basin Finance Journal and two papers chosen for the best paper awards sponsored by the journal.

Daud said the conference received huge interest from researchers not only from Malaysia but also from abroad.

"Aside from Malaysia, the participants came from Australia, New Zealand, Indonesia, Pakistan and Saudi Arabia," he said.

The conference discussed, among others, the challenges to economic growth as a result of recurring financial shocks and turbulence which in turn caused drastic falls in real sector activities.

The participants also highlighted the pressing need to explore mechanisms for propelling sustainable economic growth in the face of these challenges.

A total of 180 research papers were submitted for evaluation.

Of these 125 were accepted for presentation at the conference and 10 for the Doctor of Philosophy colloquium.

INCEIF was set up by Bank Negara Malaysia to develop human capital for the global Islamic finance industry.

(Bernama / 04 June 2013)

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‘Zakat should reach needy punctually’

Zakar and Usher Provincial Minister Malik Nadeem Kamran on Sunday directed all divisional and district Zakat officers to ensure the timely distribution of zakat, guzara allowance and marriage grants to deserving people in a departmental briefing meeting. Zakat Secretary Jehanzeb Khan, Zakat Administrator Muhammad Yousuf and other concerned officers were also present. The minister was told that as many as 24,115 zakat committees were working in the whole province; however, 305 committees were not functional due to various reasons. The minister directed to meet the required number of zakat committees at every cost. He also constituted a monitoring committee headed by the Zakat secretary to review all these matters and submit a report within fifteen days. He also ordered the secretary to wind up local zakat committees’ cases pending hearing so that Zakat’s punctual distribution could be ensured. He ordered to initiate the election process for filling vacancies of eight chairmen and 16 District Zakat Committee members and said that recommendations for a new Provincial Zakat Council should be conveyed soon. The provincial minister ordered that the number of women members in zakat committees throughout the province be increased to 33 percent throughout the province. He also directed the divisional and district zakat officers to contact philanthropists, industrialists, and others to convince them to donate in the zakat fund for needy people. He mentioned that a novel system of giving financial assistance to blind persons from the zakat Fund was introduced and as many as 8,500 blind people were helped. The campaign was successful and should be continued, he said. 

(Pakistan Today / 17 June 2013)

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Islamic finance in Tunisia could reach up to ‘40% market share’

Tunisia’s fledgling Islamic finance industry could take a 25% to 40% share of the country’s financial sector in five years’ time if necessary rules, consumer education and private investment plans materialise, a Thomson Reuters study found.

Islamic finance was previously neglected by Tunisia’s rulers but in the wake of the 2011 revolution, the new Islamist-led government is promoting the industry.

Currently, Shariah-compliant business accounts for just 2.5% of the Tunisian financial sector, the study said. In the Gulf Arab states, the ratio is believed to be about a quarter.

The study estimates that Islamic financial assets in Tunisia could reach $17.8-$28.5bn by 2018, up from $1.4bn at present.

In a poll of about 700 ordinary Tunisians conducted for the study, 54% said they would consider switching to banking with Islamic lenders even if that meant lower rates of return, while 40% would be open to switching even if their money was not guaranteed. But 64% of respondents said they were unclear about how Islamic finance worked.

One boost for Islamic finance in Tunisia would be issuance of the country’s first sukuk, which the government is planning.

“I expect the issuance process to take place in the second half of 2013,” Chaker Soltani, general director of debt management and financial co-operation at the finance ministry, was quoted as saying in the study.

The Jeddah-based Islamic Development Bank (IDB) has given Tunisia a financial guarantee to issue a sukuk worth $600mn. Last week, the IDB extended said it would extend $1.2bn in funding to Tunisia for industrial, agricultural and trade projects.

Mohamed Sadraoui, deputy director of general supervision and banking regulation at the central bank, said Islamic windows - units of conventional banks that offer Islamic financial services - would be permitted to operate under central bank guidelines that ensured operations were segregated.

“There are four or five well-known banks in Tunisia that are trying to facilitate the way for their Islamic finance businesses,” said Mahmoud Mansour, deputy general manager of the Tunisian arm of Bahrain-based lender Al Baraka Bank. He added that three takaful (Islamic insurance) companies had applied for licences.

Al Baraka, which entered the country in 1983, is awaiting approval for an onshore banking licence so it can open more branches and serve a broader client base, said Mansour.

Zitouna Bank, the country’s only full-fledged domestic Islamic lender, also plans expansion.
“We are planning for over 100 branches across the country within the next five years,” Ezzedine Khoja, president and general manager of Zitouna Bank, said in the study.

The bank, set up in 2009, plans to increase its capital base to 100mn dinars ($61.7mn) from the current 70mn dinars by the end of this year, as well as launching an investment funds unit and possibly expanding abroad, he added.

Some industry practices that are controversial among some Islamic scholars, and could therefore affect customer perceptions, are generally being avoided in Tunisia, the study found. One of these is tawarruq or commodity murabaha, a common cost-plus-profit arrangement in Islamic finance.

“We here in Tunisia do not consent to tawarruq, a product that is widely spread in the GCC (Gulf Co-operation Council),” said Khoja. “We don’t believe in this product and reject its use for Tunisia, despite its widespread use in other jurisdictions.”

(Gulf Times / 16 June 2013)

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