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Sunday, 25 August 2013

Malaysia exposes Shariah scholars to jail for breaches

The Malaysian law that exposes Shariah scholars to jail terms for rule breaches will ensure tighter compliance, in a market where the regulator has already made progress in unifying standards.

Under the Islamic Financial Services Act 2013, which took effect June 30, scholars may be jailed for up to eight years or fined as much as 25mn ringgit ($7.6mn) if they fail to comply with central bank rules. It is the first time Shariah advisers have been expressly made accountable, according to Lee Hishammuddin Allen & Gledhill, a Kuala Lumpur-based law firm.

Malaysia set up a dedicated system in the 1990s to avoid disputes over the financing methods that comply with the Shariah. Goldman Sachs Group was criticised by some advisers in 2011 for not ensuring its debut sukuk, approved by Ireland’s central bank, would be traded at par value as mandated by Islamic law. Some lenders are appointing scholars who don’t have a thorough understanding of financial products due to a shortage of experts, according to consultancy Amanie Advisors in Kuala Lumpur.

“It’s a very good move to stress the accountability of Shariah boards,” Said Bouheraoua, a scholar who advises Affin Islamic Bank Bhd, said in an August 16 interview in Kuala Lumpur. “A doctor who goes against the fundamental rules of medicine is accountable. The same goes for Shariah scholars.”

Religious experts advise companies on whether their products and services comply with Shariah laws. Under Bank Negara Malaysia regulations, a Shariah scholar can only sit on one board for each type of Islamic financial institution, meaning they can only advise one bank or insurer.

In most countries there is no limit to the number of companies an expert can assist. One Syrian scholar was advising 101 financial institutions, standard-setting bodies and other entities, according to a 2011 report by Funds@Work AG, an investment research company based near Frankfurt.

The Malaysian single board rule has led to a shortage of scholars, according to Baiza Bain, the Kuala Lumpur-based managing director at Amanie. Demand for advice has increased as the nation’s Islamic banking assets climbed 6.3% to $162bn in May from the end of last year, figures from the Malaysia International Islamic Financial Centre show.

“What the liability that’s presented by the Act does is to actually put more emphasis on training or retraining of experts,” Baiza said in an interview yesterday. “Financial institutions would have to put a higher standard of care because they know that the Shariah advisers are not going to just sit there and stamp whatever they have produced.”

Worldwide sales of sukuk, which pay returns on assets to comply with Islam’s ban on interest, have declined 35% to $21bn so far in 2013 from the same period in 2012, data compiled by Bloomberg show. Issuance totalled a record $46.5bn for the whole of last year.

Goldman Sachs set up a sukuk programme based on a so-called commodity Murabaha structure, or a cost plus mark-up transaction, that was approved for listing on the Irish Stock Exchange by the Central Bank of Ireland in October 2011. Goldman declined to provide any more details on the debt, it said in an e-mailed response to Bloomberg.

In 2007, BLOM Development Bank of Lebanon signed a contract with Investment Dar Co to place a Wakalah deposit, where capital is raised to acquire assets that are entrusted to an agent. BLOM sued Investment Dar after the Kuwaiti company missed a payment on its deposit. Investment Dar contradicted its own scholars’ assessment and argued the financing from BLOM breached Shariah principles because Dar “was taking deposits at interest,” according to a court document.

The new Malaysian regulation would raise the standard of advice and level of services dispensed by religious experts, according to Mohamad Akram Laldin, a member of the Malaysian central bank’s Shariah Advisory Council.

“People will be more aware of their duties and responsibilities,” Akram said in an August. 15 interview in Kuala Lumpur. “This means that before they sign off on certain things, they will think twice.

(Gulf Times / 24 Aug 2013)

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Malaysia: Bank Islam confident of over 15% growth in profit before tax, zakat

KUALA LUMPUR (Aug 23, 2013): Bank Islam Malaysia Bhd is confident of achieving more than 15% growth in profit before tax and zakat this year from RM600.3 million last year.
Managing director Datuk Seri Zukri Samat said consumer banking would continue to be the main contributor to achieve the target.
"We target 70% of the financing portfolio to be contributed by consumer banking and the balance of 30% from corporate and commercial banking.
"For the first quarter of this year, the bank raked in profit before tax and zakat of RM151.5 million, and looking at the achievement for the first-half year, we can achieve more than 15% growth that has been set," he said to reporters after the handing over of fund sponsorship for mosques in Malaysia here yesterday.
Zukri said the economic growth which is somewhat slow currently and the new guidelines on responsible lending might affect the bank's financing growth.
"For the moment, as far as Bank Islam is concerned, we are still able to achieve the target that we have set, that is, a financing growth of 20%-25% this year, better than last year.
"I think the new guidelines will affect most of the banks but for Bank Islam we have not see the effects and at this juncture, we are still confident that we are able to show respectable financing growth for this year," Zukri said.

(The Sun Daily / 23 Aug 2013)

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PM Najib Launches International Islamic University of Malaysia (IIUM) Islamic City

KUALA LUMPUR, Aug 23 (Bernama) -- Datuk Seri Najib Tun Razak Friday launched the International Islamic University of Malaysia (IIUM) Islamic City which is set to reflect the university's success qualities on a multi-faceted scale.

The prime minister said the Islamic City, with its unique design and functions, would propel the university to be among the global league of premier universities in the 21st century.

"I believe the Islamic City will boost the IIUM efforts to become the central player in recapturing the historical and central role that Islam had once played in all fields of knowledge to benefit all of mankind.

"This city will bear witness to the progress of Malaysia as a modern state that truthfully embodies the values of moderate Islam," he said at the launch of the Islamic City in conjunction with IIUM's 30th anniversary at its Gombak Campus, near Kuala Lumpur.

Also present were IIUM president and advisor to the government on social and cultural affairs, Tan Sri Dr Rais Yatim, and IIUM rector Prof Datuk Seri Dr Zaleha Kamaruddin.

The Islamic City, to be built on 17.6 acres (7.1 hectares) at an estimated cost of RM800 million, would comprise an Islamic Centre, a medical centre, serviced apartments, a convention centre, a hotel, a shopping mall and a food court.

The project, which would use water as its underlying concept, was expected to be fully completed within five to seven years.

Najib said that with the implementation of the contemporary findings of modern architecture through the model of Madinah Al-Munawarah, Damascus, Baghdad and Cordoba, the prism of the Islamic civilisation model would allow the Islamic City to be set as a new benchmark for excellence in Islamic architecture.

The prime minister noted that the innovative city would be built on the basis of endowment, which would provide for government funds to be saved for the new requirements of IIUM to achieve research university status.

"The Islamic City will be a commercial hub for IIUM and I hope that many will generously contribute towards making this project a success," he said.

On IIUM's anniversary, Najib said he hoped that as a premier international Islamic university, it would play its part as a platform for all Islamic leaders to find solutions to problems in the Islamic world.

"I hope IIUM could provide the intellectual basis or intellectual impetus for world Islamic leaders to come together to resolve conflicts in the Islamic world.

"Do not allow other considerations to separate us in efforts to resolve the ummah's problems," he said.

(National news Agency Of Malaysia / 23 Aug 2013)

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