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Thursday, 26 December 2013

Hong Kong must attract Islamic finance to remain a global market

Peter Forsythe denounces Islamic banking practices as being "the work of global Islamists" ("No place for 'sukuk' bonds in HK market", November 22).
The adjective "Islamic" refers to rules of procedure (as "kosher" refers to Judaic procedures for food and is commonly patronised by Muslims overseas, not only by Jewish people). It is simply advertising to buyers that here is a product which is of a certain nature. The word "halal" would do just as well. The fundamental premise is that money not be allowed to grow by time alone, i.e., by interest. The lender must accept some risk in the venture being financed.
It also makes foreclosure on "pledged" assets somewhat difficult, and is in general more lenient towards the borrower than conventional debt.
Islamic financing tries to, or is at least designed to, link social benefits to purely monetary ambitions, which is hardly a bad thing in the "me-my" culture of today. Let us not denounce it just because it is associated with the current Western hype regarding Islam.
The ethos of Islamic financing is related to the concept of social justice, and is not limited to Islam: the Old Testament categorically forbids interest. Several Catholic popes have historically condemned the practice, as have Plato, Gautama Buddha, Moses, and Thomas Aquinas, among others.
Philosophy aside, on a fully practical note there is obviously a large population of Muslims worldwide, and therefore Islamic financing is seen by some banks and financial institutions as a good market (US$1.3 trillion by some estimates). Hong Kong is now trying to actively tap into this market, and very rightly so, in my opinion.
At 1.62 billion, Muslims are 23 per cent of the world's population, and more than 40 per cent of Southeast Asia's. As a global financial centre, without any doubt Hong Kong must try to attract this large and growing market. You can hardly be a global centre while ignoring a quarter of the world and almost half your largest neighbouring region.
Mr Forsythe is plainly fatuous in connecting Islamic financing to some global religious conspiracy. His labelling of Islamic financing as "inefficient" is hardly credible, especially in light of the "efficiencies" of Wall-Street-type banking practices as seen over the last few years.
(South China Morning Post / 07 Dec 2013)
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Islamic wealth management: Adding value to financial services

GROWTH POTENTIAL: Malaysia can lead in Islamic wealth management, which is still in its infancy, just as we are world leaders in sukuk industry

ASEAN continues to be a very exciting region. The region has weathered through the 2008-09 financial and economic crises and we are coping well in dealing with the resulting economic fall-out.
The Asean region is expected to have sustainable economic growth of at least 5-6 per cent over the next decade, bringing wealth and prosperity to its 600 million population.
Anticipating this development, our regulatory authorities have identified wealth management, especially Islamic wealth management, as one of the major thrusts for Malaysia's financial services industry.
It is still in its infancy with various domestic banking groups dipping their toes, quietly gathering expertise and talent, to take on the challenges in developing their wealth management businesses.
It has been estimated that last year there were 780 ultra high net-worth Malaysians, each with a minimum of RM100 million of net assets, with collective wealth of RM330 billion.
Managing wealth at this level requires a very high degree of expertise. However, in this globalised, borderless cyber-connected world, one can manage funds from anywhere.
What is instrumental in providing "stickiness" are the personal relationships a high net worth individual develops with his or her advisers.
Malaysia began industrialising its economy some 30 years ago. Now, in this second decade of the 21st century, the founders of first generation wealth are looking for succession planning solutions.
It would be a loss to our economy if businesses of these families were broken-up because there was insufficient predeceased planning.
Yes, traditionally it may be a taboo to speak of these things, but we must be pragmatic in our ways of the world.
Kuala Lumpur has the infrastructure and expertise in the Islamic finance space to develop a strong competitive value proposition in syariah-compliant wealth management. Both the public and private sectors have worked very hard to develop the sukuk industry. Our present success is only too evident.
I believe we can devote just as much energy and resources, if not more, in building our future Islamic wealth management industry. In the early days of the sukuk industry, regulatory and taxation impediments were numerous, talent was sparse and the supporting syariah doctrines few, but we determinedly soldiered on.
Look where we are now -- seventy per cent of all sukuks in the world originated here in Kuala Lumpur. In the sukuk field, we hold supreme.
Malaysia's wealth management industry, targeted at both local and regional wealth, can bring numerous benefits to our financial services industry.
The industry's value chain is long, from acquisition of assets, to advisory and management services, in addition to legal, taxation and syariah advice, to trust and custodial services and, right at the end, distribution of the assets.
This value chain can be diced and divided across a number of enterprising businesses, each offering its specific value-added competency to the chain.
Labuan International Business and Financial Centre (Labuan IBFC) serves to complement our domestic offerings. After all, at the end of the day, there will be far more millionaires outside Malaysia then in.
Labuan IBFC offers a range of legal entities for the purpose of wealth management, from foundations to special trusts, both conventional and Islamic.
However, we do not want to come to a situation where even though the asset holding entities are from Labuan IBFC, the fee income, derived from accompanying advisory services across the aforesaid value chain, fall into foreign hands. As much as possible, these services should emanate from Malaysian advisers with international expertise.
It is for this reason that Labuan IBFC took the initiative to host, in association with the Financial Times, the Asean Wealth Management Summit today, followed by the Islamic Wealth Management Seminar tomorrow.
The summit, graciously officiated by Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah is the first major wealth management event ever held in Malaysia. We are proud of this fact.
Building this ecosystem is not easy but I can already see stirrings of interest. Let us build domestic collaborations and develop our international inter-linkages, to grow our domestic high-value wealth management industry.

(New Straits Times / 26 Dec 2013)
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Malaysia: Islamic wealth management needs to develop further

KUALA LUMPUR: Islamic wealth management is still new in Malaysia and needs to be developed further, said Professor Datuk Syed Othman AlHabshi, chief academic officer of INCEIF, the global University for Islamic Finance.
He said that only a few high net-worth individuals had embraced Islamic wealth management as they wanted their wealth to be well-managed by experts.
“Wealth management is not confined to only the rich but is also for the poor. We should not look at the wealth creation and accumulation aspects only, but also distribution and the taking care of the poor,” he said after speaking at the BNP Paribas-INCEIF Centre for Islamic Wealth Management’s inaugural colloquium.
Othman, who is also the centre’s chairman, added that people were still doing what they used to do in the conventional system to manage their wealth.
“Now with syariah compliance policy, there is more to it,” he said.
On waqaf (property put under a trustee’s care), he said that once set up it would be transferred to an Islamic council to be managed, but whether they had the expertise to manage the property was an issue as the property should not be idle and should benefit the beneficiary.
(The Star Online / 20 Dec 2013)
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Azerbaijan aims for Islamic banking law in 2014

Nov 26 (Reuters) - Azerbaijan's largest lender, International Bank of Azerbaijan (IBA), is working with national authorities on a draft Islamic banking law and a final version could be presented to parliament in 2014, a senior executive said.
Islamic finance has developed slowly in the former Soviet state, where an estimated 93 percent of the 9 million people are Muslim. But IBA's Islamic banking business is now growing strongly, which is encouraging authorities to take action.
"The main aim is legislation. The cabinet of ministers of Azerbaijan has already started the project together with the ministry of economic development and IBA," Behnam Gurbanzada, IBA's director of Islamic banking, told Reuters.
With strong state support, the draft legislation could be ready by May with a final version presented to parliament by the end of 2014, Gurbanzada said on the sidelines of the Global Islamic Economy Summit in Dubai.
"It covers banking, taxation...It covers some specific issues like civil law." Among other provisions, Islamic banking bans interest payments and pure monetary speculation, and the structures which it uses to achieve this can be expensive unless special tax arrangements are made.
IBA now offers sharia-compliant products through an Islamic window, but legislation would pave the way for a stand-alone Islamic banking unit, Gurbanzada added.
The bank, 50.2 percent owned by Azerbaijan's Ministry of Finance, holds 40 percent of banking assets in the country.
"By the end of 2013 we will reach $200 million of Islamic banking assets and with a goal for 2014 of around $300 million to $350 million," Gurbanzada said. The bank held $60 million of Islamic banking assets last December.

Next year, the lender plans to open four dedicated Islamic banking branches, Gurbanzada added. 
(Reuters / 26 Dec 2013)
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