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Expert expects India to allow Islamic banking

DOHA: Aiming to mobilise resources from the GCC states for the proposed mega infrastructure projects, there is a “very strong possibility” of India taking positive steps to amend the country’s banking regulatory laws to introduce the Islamic banking system in a full-fledged manner, before the upcoming parliamentary elections in 2014, said an expert yesterday.

The existing Banking Regulation Act (1949) of India hinders the establishment of Islamic banking as it does not allow banks to operate on a profit-loss basis and forbids murabaha, or, the buying, selling, or barter of goods.

“I strongly believe India soon will take some positive steps, either to amend the laws of the Reserve Bank of India (the country’s central bank) or promulgate ordinance to make way forward to establish Islamic banking system by 2014,” said Dr Manzoor Alam, President of Indo-Arab Economic Cooperation Forum, and also an expert of Islamic banking.

Recently the RBI permitted the Kerala government (a state in south India) to go-ahead to launch a Non-banking Financial Institution (NBFI) based-on the principles of Islamic finance.

Dr Alam, who has been striving for over two decades to introduce interest-free banking system in the country, advocated that participatory banking is the need of the hour to facilitate foreign investments to generate resources, especially at a time when the government has approved many ambitious programmes, including Food Security Bill and mega infrastructure projects, which alone will cost the exchequer over $50bn.

“I see a political will in the present government. A couple of  years ago, Prime Minister Manmohan Singh announced in Malaysia at an international conference on Islamic banking to form a committee to conduct a feasibility study in this regard, and subsequently, the committee made positive recommendations. However, there is tremendous pressure on the government from different quarters including right wing political parties, particularly Bharatiya Janata Party (BJP) to prevent introducing a system which will not only help the Muslims, but the whole nation,”  he said. 

Many think that unless and until full-fledged Islamic banks are permitted in India, an Islamic finance sector will find it hard to develop. 

However, some analysts suggest that the RBI’s recent decision with regards to the Kerela government reflects a significant and positive change in its attitude towards Shariah-based NBFIs. 

Some politicians and private organisations have been making efforts for years to start Islamic banking in India, but they have faced strong opposition from bureaucrats and conventional banking circles. Established in early 1970s over 50 countries have adopted the system of interest-free banking across the globe. 

“The global market capitalisation of interest-free banking is expected reach over $1.6 trillion by the end of 2013. And the world’s leading economies such as Japan, the UK and the USA have already allowed the system and becoming increasingly popular in other advanced countries. But in India, there is still some misnomer or misunderstanding that it will help Islamisation of the country,” added Dr Alam. 

Dr Alam also suggested that there is an urgent need to establish a global regulatory framework, similar to the Basel-based Bank of International Settlements (BIS), to make the Shariah-compliant banking more popular and sustainable.

(The Peninsula / 24 Sept 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

Philippines: Bangko Sentral ng Pilipinas (BSP) pushes Islamic banking

MANILA,  - The Bangko Sentral ng Pilipinas (BSP) is pushing for the development of Islamic banking in the country.

BSP Deputy Governor Nestor A. Espenilla Jr. said this financial reform will allow the central bank to create regulations that could spur investments and support economic development in Mindanao.

“We just want to have an enabling provision in the BSP charter that will allow us to develop regulations that can support (Islamic) banking,” Espenilla told reporters.

“Today, there’s only one operating (Islamic) bank, Al-Amanah (Islamic Investment Bank of the Philippines)... so this will pave the facility for developing an Islamic banking system and not only individual entities,” Espenilla said.

The BSP, under its proposed amendments to its charter, aims to provide “financial facilities for Islamic banks.”

Espenilla explained that they carefully worded the provision in a “generic” way as some products of Islamic banks tend to be different as compared with what conventional banks have.

Islamic banks generally offer the same facilities as conventional ones but they adhere to the laws of Sharia, the moral code and law set by Islam, he explained.

One of the main differences of Islamic banking and conventional banking is doing away with interest or fees for loans as it is prohibited under the principles of Sharia, Espenilla said.

Supporting the Islamic banking industry may be crucial to the economic development of Mindanao as Muslims tend to avoid banks or products non-compliant with their religious law.

With regard to foreign Islamic banks that may want to establish presence in the Philippines, Espenilla said the central bank will allow them as long as they comply with the regulations governing banks in the country.

(Phil.Star.Com / 24 Sept 2013)

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London steps up Islamic finance ambitions

Aiming to build on London's status as a leading exporter of financial services, Britain hopes to step up the challenge to Islamic finance centres such as Dubai and Kuala Lumpur.

"We want to be the leading (Islamic) finance sector outside of the Muslim world," deputy mayor of London Edward Lister said in a press conference in Kuala Lumpur on Wednesday.

Islamic finance follows religious principles such as bans on interest and gambling, and is playing an increasingly prominent role internationally as often oil and gas-rich investors from Islamic countries put more of their money to work overseas.

Britain's Islamic finance task force, established in March, is led by several ministers and industry figures as well as top executives from Gatehouse Bank and Oakstone Merchant Bank Ltd.

It was launched ahead of London hosting the World Islamic Economic Forum in October and its mandate is to facilitate Islamic financial business, including investment in British infrastructure by Islamic sovereign wealth funds.

The forum, which saw 28 billion ringgit ($8.6 billion) worth of deals inked last year, is being held outside an Islamic city for the first time.

Islamic finance has already played a role in several major deals in London, with Qatari investors taking part in funding the city's Shard tower, Harrod's department store and the athletes' village used for last year's summer Olympics.

A Malaysian consortium is also spearheading the redevelopment of London's Battersea power station, after acquiring the site for 400 million pounds last year. Malaysia is the second largest investor in London's real estate market behind the United States.

"The task force has just started and its aim is to make it easier for banks in London to have Islamic products, which is still quite a new concept to any of them," Lister said.

"Only now people are beginning to understand what the products actually mean and how they comply ... What you will see is a lot of companies introducing those products."

Maybank Islamic, an arm of Malaysia's largest bank Malayan Banking Bhd, has launched a sterling-denominated and sharia-compliant mortgage product for high net-worth Malaysians looking to invest in London's real estate market.

Britain currently has 22 financial institutions, including five fully sharia-compliant banks, offering Islamic finance products. They are supported by 30 London law firms offering expertise on the sector.

(Reuters / 18 Sept 2013)

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Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
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Bangladesh: Islamic finance bears vow of playing beneficial role in socioeconomic dev

Bangladesh Bank (BB) Governor Dr Atiur Rahman has said Islamic finance bears the promise of playing a major beneficial role in the country's socioeconomic development.

"With its ethical, inclusivity promoting and stability enhancing attributes, Islamic finance undoubtedly bears the promise of playing a major beneficial role in our socioeconomic development," the central bank chief said while speaking at a seminar held in a local hotel Monday. 

The two-day-long seminar on 'the prospects and challenges in the development of Islamic finance for Bangladesh' was organised jointly by the Islamic Financial Services Board (IFSB) and the BB. 

Dr Rahman said Islamic finance market participants must exercise utmost caution in steering clear of any involvement with extremist dogma driven influences aiding or abetting terrorism; meticulously adhering to anti-money laundering (AML) compliance routines prescribed by BB's financial intelligent unit (FIU).

Islamic finance commenced in Bangladesh in early 1980s with just one Islamic commercial bank. By now there are eight Islamic banks run wholly on Shariah principles. 

Besides, as many as 17 conventional banks, including one globally active foreign bank, are running Islamic banking branches or windows side by side with their conventional banking, according to the central bank statistics. 

"Â….approval requests of a number of conventional banks for their conversion into wholly Shariah-based Islamic banks indicate robust customer demand in Bangladesh for Islamic financial services," the BB governor noted. 

He also said the BB has taken a move for structuring some appropriate Shariah-compliant small and medium enterprises (SME) refinance support line for the Islamic banks. 

"Apart from Islamic banking, Takaful or Islamic insurance is also now gaining ground in our financial market," the central bank governor said. 

Barring one exception of a small sick Islamic bank in process of restructuring, the Islamic banks in Bangladesh generally have higher capital adequacy ratios and lower non-performing loan ratios than their conventional banking counterparts, according to the BB governor. 

He also said aggregate assets and deposits of Islamic banks in Bangladesh have nearly doubled in the last four years; by end of 2012 aggregate assets and deposits both crossed the trillion taka threshold, comprising around a fifth of total banking sector assets and liabilities. 

"This share of Islamic banking looks set to grow further with time, given its faster growth than conventional banking," the BB governor said.

Speaking on the occasion Secretary General of the IFSB Jaseem Ahmed said Islamic finance is contributing to the deepening and widening of the global financial system through the use of innovative, Shariah-compliant, contractual forms. 

"Priority must be given to the creation of an enabling financial infrastructure consisting of common international standards for supervision and regulation, as well as for transparency and disclosure," Mr Ahmed noted. 

A collaborative effort between the supervisory authority, policy-makers and market players is the key to maintaining the balance between strong regulation and the market's ability to grow, according to the IFSB secretary general.

"At the end of day, we must be guided, in promoting Islamic finance, by the recognition that an enterprise has value only if it helps to transform the lives of ordinary human beings," he noted. 

Kuala Lumpur-based the IFSB was officially inaugurated on November 3, 2002 and started operations on March 10, 2003. 

It serves as an international standard-setting body of regulatory and supervisory agencies that have vested interests in ensuring the soundness and stability of the Islamic financial services industry, which is defined broadly to include banking, capital market and insurance.

Currently, 187 members of the IFSB comprise 57 regulatory and supervisory authorities, eight international inter-governmental organisations - such as the World Bank, the International Monetary Fund (IMF) and Asian Development Bank (ADB) - and 122 market players, professional firms and industry associations operating in 43 jurisdictions.

(The Financial Express/ 24 Sept 2013)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
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Malaysia wants Islamic finance industry to ‘look West’

PETALING JAYA: With the backing of Maybank Islamic Bhd, the World Islamic Economic Foundation (WIEF) is working together with the Greater London Authority to boost trade and investment between Malaysia, the Association of South-East Asian Nations (Asean) and the UK.

The idea is based on the consensus of using Islamic finance as the platform for the transactions that will involve Malaysian investors and businesses in their efforts to diversify their portfolios into the UK, particularly in London, Maybank Islamic chief executive officer Muzaffar Hisham said last week in Kuala Lumpur.

“There is an increasing interest by Malaysian investors in diversifying their investment portfolios into the UK and particularly London. Maybank Islamic is well placed to encourage such opportunities”, Muzaffar said.

Muzaffar emphasised on the strategic importance of Islamic Finance for London as an opportunity to tap into a new source of capital, assets and liquidity in Islamic markets for London’s future growth and global ambitions.

Muzaffar has not only encouraged sovereigns but also UK corporate firms that are wishing to issue funds to consider Shariah-compliant instruments as they expand to new frontiers, especially in the Gulf Cooperation Council (GCC) and Asean/Malaysia.

“The deal will most probably be announced during the 9th WIEF in London in October,” Muzaffar told reporters after the soft launch of its new retail mortgage product at the WIEF headquarter in Kuala Lumpur.

Maybank Islamic has recently secured pound sterling cross border financing, making it the first Malaysian bank to have such financing instruments in London, Bernama reported.

Also present during the event were deputy mayor of London Sir Edward Lister and WIEF managing director Syed Abu Bakar Almohdzar, who both reiterated the importance of boosting trade, investments and business between Malaysia, Asean and London through Islamic Finance.

“Developing trade and investment links with Malaysia is a key priority for London and Maybank’s initiative significantly broadens the range of Shariah-compliant investment opportunities. Hosting the world,” Lister said.

The WIEF will showcase London’s role as the leading Western hub for Islamic Finance and lay the foundation for strengthening our bond with the Islamic world, Lister added.

London has taken proactive measures to grow Islamic Finance in an attempt to attract more investment from the Middle East and other Muslim countries in the Asean region, believing these are essential to further boost London’s standing as an important centre for the industry.

There is a growing appetite for Shariah-compliant investments in London as it grows in Malaysia and Asean, the Maybank Islamic feels that it is well placed to bridge prospective clients in facilitating their aspirations.

In addition, Maybank Islamic is also actively expanding its foreign currency business in the retail banking space.

The bank is in the final stage of launching an Islamic foreign currency property financing product for London properties due to be launched in fourthquarter of 2013.

On the other hand, Syed Abu Bakar said Malaysia will continue to play a leading role in Islamic finance, through the WIEF, with London as a new global centerpoint.

“As Malaysia continues to play a leading role in Islamic finance, the World Islamic Economic Forum continues to be a strong advocate of Islamic Finance in Muslim and non-Muslim communities around the world,” Syed Abu Bakar said.

(F.M.T News / 23 Sept 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