Experts stress interest-free banking

Muslim scholars should collaborate with bankers to eliminate interest from the banking system which should be fully in accordance with Islamic economic system, stressed Dr Yasin Mazhar Siddiqi Nadvi, an eminent Indian scholar.

Addressing the members of Faisalabad Chamber of Commerce and Industry, he said that the Muslims enjoy the same status being followers of Prophet Muhammad Peace be Upon Him but the businessmen have an edge and advantage as the custodian of the profession adopted by our Prophet Muhammad (PBUH).

Commenting on Islamic history, he quoted numerous examples and said that partnership and Mudaraba are Islamic modes of banking system but still there was need for further research to fine-tune the system in accordance with Islam and need of the era. He said that interest is not allowed in any religion. Even before Islam, it was prohibited but some tribes of Quresh practiced it for their own financial benefits. He said that religious scholars and bankers should sit together and discuss workable Islamic system to face the emerging challenges.

He said, “There is clear difference between profit and interest and we must have ability to understand this delicate difference coupled with the intention while making any transaction.” He also responded to questions and said that Indian scholars have recently given a “fatwa” justifying life insurance particularly in Indian scenario where the life of Muslims is in danger.

Earlier, in his welcome address, FCCI President Engineer Suhail Bin Rashid said that Islam is complete code of life which has potential to manage the international affairs with the fundamental of merit, justice and fair-play. He said that despite material developments by the West, the world is facing anarchy like situation and unluckily among most disturbed nations, Muslims are on the top. He said that members of FCCI are directly linked with trade and business and requested Dr Nadvi to throw light on Islamic banking system with special reference to Riba.

Earlier, Mufti Muhammad Tayyab introduced Indian scholar Dr Yasin Mazhar Siddiqui Nadvi and said that he is author of 50 books on Seerat written in Urdu, Arabic and English languages. He has also 500 research articles at his credit.

FOOD EXHIBITION: The food industry can fetch heavy revenue by promoting value addition and quality of packaging at par with international standards, said an expert.

University of Agriculture Vice Chancellor Dr Iqrar Ahmad inaugurated the Food Exhibition set up by the National Institute of Food Science and Technology. He was flanked by NIFSAT Director General Dr Masood  Sadiq Butt. At the exhibition, the students exhibited the skills in producing the different value-added food items.

The vice chancellor said that the value addition in the food industry was essential to compete with the rest of the world. He said that in the modern era, the world is changing rapidly because of technology advancement.

He urged the food experts to ensure the quality of food compatible to the international market. He was of the view that youth of the country was blessed with extreme potential that must be explored in order to give voice to their inner qualities. He appreciated the efforts made on the part of the students.

He announced that the best brains of the exhibition would be provided incubates at the Business Incubation Centre with funding so that they could launch their business.

He also advised them to come up with the innovative ideas that will make their practical life easier. Dr Masood Sadiq Butt said the NIFSAT was making efforts to produce skilled manpower in the food industry.

He said that the exhibition was aimed at providing the platform to the students to exhibit their skills and to create an environment of competition.

(The Nation  / 14 March 2014)

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Oman Central Bank Says No Quick Introduction Of Islamic Instruments

The need for Islamic interbank tools is relatively acute in Oman because its Islamic banking regulations prohibit the use of commodity murabaha.

Islamic banks in Oman look set to wait many more months for access to additional sharia-compliant money market tools after the central bank ruled out introducing them until the government issues its first sovereign sukuk.

A viable interbank market could boost the profitability of Oman’s Islamic banks, which have so far mainly relied on wakala, which are sharia-compliant agency agreements, to manage their short-term funding needs.

Asked if the central bank would soon introduce its own Islamic instruments to broaden and deepen the market, central bank executive president Hamood Sangour al-Zadjali said on the sidelines of a financial conference in Kuwait on Wednesday:

“Not yet. We do not have anything planned about this. We are just waiting for the government to issue the sukuk, at the end of the year probably, but at the moment we are not planning any liquidity instruments because we have to set the framework for it.”

He added, “It is not straightforward. Islamic instruments, they have to be asset-based. As a central bank we do not have that much of assets to be in line. But we will see what is the experience of other countries, and if it is possible that we will be issuing instruments similar to CDs.”

The need for Islamic interbank tools is relatively acute in Oman because its Islamic banking regulations prohibit the use of commodity murabaha, a widely used money market contract favoured elsewhere in the Gulf.

Commodity murabaha is criticised by some sharia scholars as not being sufficiently based on real economic activity, a key principle in Islamic finance.

Last year Oman’s central bank granted Islamic banks a one-year relaxation of limits on the amount of foreign assets which they can hold, to give more time for Islamic financial instruments to be developed domestically.

Banks’ wakala network leaves them open to counterparty risk; an Islamic tool from the central bank would effectively remove that risk.

In addition to Oman’s two full-fledged Islamic institutions, Bank Nizwa and Al Izz Islamic Bank, several conventional banks have launched sharia-compliant products through Islamic windows, including Bank Sohar, Bank Dhofar, Bank Muscat, Ahli Bank and National Bank of Oman.

(Gulf Business / 17 March 2014)

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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

Malaysia: Islamic banking growing at fast pace

KUALA LUMPUR: The Islamic banking industry in Malaysia is expected to achieve a market share of more than 25% of total banking assets in 2014, before it reaches 40% of the entire banking sector by 2020, Standard Chartered Saadiq Bhd (StanChart Saadiq) CEO Wasim Saifi said, adding that market demand and support from the government will drive the industry forward.

"As the (Islamic banking) industry grows further, you will see more and more people beginning to use Islamic banking services, while the government-linked companies and large corporations will also see the value of Islamic finance," Wasim told a press conference after launching the Saadiq-branded window at Standard Chartered Bank's main branch here yesterday.

Market demand could come from the corporate sector, small and medium enterprises (SMEs), as well as the retail customers, he said, while the industry will see growth across all market segments, including sukuk, personal finance, mortgages and corporate finance.

"Retail customers will be very important to the growth, but as the industry grows bigger and the product range wider, the corporate and SMEs will start using the Islamic banking service," said Wasim.

As for StanChart Saadiq, the Islamic banking subsidiary of Standard Chartered Bank Malaysia Bhd, it is tackling both retail customers as well as corporate clients, he said.

"For us, the bigger contribution still comes from retail customers, but the contribution of corporate clients is expected to grow substantially," he added.

Wasim said the Islamic banking industry in Malaysia is expected to grow by 18% annually from 2018. Thus far it has grown twice as fast as its conventional counterpart with a compounded annual revenue growth of 22%.

StanChart Saadiq has recorded a growth rate of 10% to 20% over the last two to three years, said Wasim, who is also the global head of Islamic consumer banking for Standard Chartered Group.

To date, the international banking group has set up Islamic banking units in seven countries, namely Kenya, the UAE, Bangladesh, Bahrain, Indonesia, Pakistan and Malaysia. The local business now contributes some 25% of the total Islamic banking assets under the group, Wasim said, adding that the banking group is exploring new market opportunities in the African region.

Currently, syariah-compliant solutions are offered at 10 StanChart Saadiq branches. Islamic banking windows have been introduced at eight StanChart branches in the Klang Valley and other parts of the country with plans to cover all 33 conventional branches over the next two years.

"This latest move to leverage our existing infrastructure is aimed at increasing our Islamic banking penetration especially in high traffic areas where the conventional branches are located. It complements our Saadiq branches very well as our main delivery channel," said Wasim.

Meanwhile, Standard Chartered Bank Malaysia country head of consumer banking Sonia Wedrychowicz-Horbatowska said the introduction of Islamic banking windows fits with the bank's overall consumer banking strategy in its aspiration to be the main bank for customers by enhancing their banking experiences.

"As it is, various innovations that we introduced in conventional banking have also been replicated in our syariah-compliant offerings," she said.

(The Sun Daily / 12 March 2014)

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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

Dubai Islamic Bank eyes Kenya, Indonesia for expansion

Dubai Islamic Bank plans to expand its operations into Indonesia, Kenya and other African countries as it emerges from a period of consolidation, the bank's chief executive said.

The emirate's largest sharia-compliant lender, which currently makes some 95 percent of its revenue within the United Arab Emirates, says it is entering a growth phase domestically and internationally.

"We are exploring opportunities in Indonesia, Kenya and surrounding countries in Africa, the Indian subcontinent and the GCC (Gulf Cooperation Council)," Adnan Chilwan said in an interview late on Wednesday.

"We could acquire, set up a JV, establish a finance company or start a greenfield operation as long as we keep management control and operate under our brand."

Like many other banks in the UAE, the sharia-compliant lender saw its profits nosedive after Dubai's financial crisis erupted in 2009 and it was forced to set aside billions of dirhams (hundreds of millions of dollars) to cover bad loans.

The bank focused over the last few years on strengthening its balance sheet and reducing costs, and says it has now dealt with most of its bad loans. Last year DIB completed the takeover of Dubai-based mortgage lender Tamweel, in which it already held a majority stake, through a share swap.

DIB posted a 66 percent jump in fourth-quarter net profit to AED518m ($141m), beating analysts' forecasts, on the back of lower financing costs and impairment charges. Net profit for the full year increased 42 percent to AED1.72bn.

Chilwan, who was promoted to CEO in July last year, described Africa as virgin territory for Islamic finance. In Kenya, most estimates put the number of Muslims at only about 15 percent of the population of 40 million, but the financial regulator is preparing a ten-year capital markets development strategy that includes Islamic finance.

"Both consumer and wholesale opportunities are there, especially in the countries we are targeting and while the initial investments are not too intensive, the returns are extremely decent and more than acceptable in our line of work," Chilwan said, without giving details of his plans for Africa.

He added, however, that entry into one country would ease expansion into other countries around the region.

"Given a five-year scenario, we expect a decent franchise spread across these countries with stable and solid yields across all sectors."

However, Chilwan said the bank also expected strong growth in its domestic market, so the balance between local and international business would not change radically.

"We are pretty much skewed towards the domestic franchise with nearly 95 percent of the contribution coming from the UAE.

"With all the plans in place, we do not expect a dramatic change in the medium term, with international business perhaps getting at best 10 percent to 15 percent of the overall group numbers in about six to eight years."

The bank's liquidity position is strong so "there appears to be no current requirement to enter capital markets at this time," Chilwan added.

(Arabian Business.Com / 13 March 2014)

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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