Islamic finance (Revolution in the Making) 2014

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Revolution in the making in Global Finance... everyone's products... It is a Reality... Bai ( Sale & Purchase ) Ijarah ( Islamic Leasing ) Basic Mode of Financing ( Musharkah & Modarabah) Takaful ( Islamic Insurance ) Sukuk ( Islamic Bonds ) Qard Zakat & Ushar

Transcript of Islamic finance (Revolution in the Making) 2014

  • 1.ASA

2. Islamic products and services offered by 400+ Financial Institutions around the world.Germany:4UAE: 13- Bank Sepah - Dubai Islamic Bank - Commerz Bahrain: 26 Abu Dhabi Islamic Bank9 Kuwait: United States: 20 Bank - HSBC Amanah - Bahrain Islamic Bank - Kuwait Finance - Deutsche - Al Manzil Financial - Al Baraka House UK: 26 Qatar: 4 Bank Services - ABC Islamic Bank - HSBC Amanah - Qatar Islamic Bank - American Finance House Switzerlan - CitiIslamic Investment Finance - Qatar International - Failaka Investments Bank d: 6 - Al Baraka Islamic - HSBC Iran: 8 International Ltd Pakistan: - Ameen Housing - Takafol UK Ltd 21 Cooperative - The Halal Mutual India: 3 Turkey: 7 Investment Company Bangladesh - Faisal Finance Egypt: 12 - J Aron & Co Ltd :9 Institution - Alwatany Bank of Egypt (Goldman Sachs) Malaysia: 49 - Ihlas Finance - Egyptian Saudi Finance 2 - Pure Islamic Banks Arabia: 17 Sudan: 9 SaudiHouse (Bank Islam, Bank - Al Rajhi Muamalat) - SAMBA Rest - conventional - Saudi Hollandi Indonesia: 4 banks - Riyadh Bank Yemen: 5ASA 3. International Overview The size of Islamic Financial Industry has reached US$ 800 Bln. and its growing annually @ 15% per Anum. 71 countries have Islamic Banking Institutions 37 Muslim countries including Qatar, Kuwait, Bahrain, UAE, Saudi Arabia, Malaysia, Brunei and Pakistan 34 non-Muslim countries including USA, UK, Canada, Switzerland, South Africa and AustraliaASA 4. International OverviewLeading foreign Banks have opened Islamic Banking windows or subsidiaries such as: Standard Chartered Bank Citibank HSBC ABN AMRO UBS ASA 5. International Overview In Feb 1999, Dow Jones introduced the Dow Jones Islamic Market Index (DJIM) of 600 companies world wide whose business complies with Islamic Shariah laws At present there are more than 105 Islamic Funds operational through out the world with a total fund base of over USD 8.50billionASA 6. International Overview Governments of many Islamic countries have issued Islamic Bonds (Sukuk) in order to facilitate Islamic Banks in managing their liquidity. Issuance of these bonds has also paved the way for Shariah compliant Government borrowingsASA 7. International Overview Institutions like Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and Islamic Finance Services Board (IFSB) have been formed. These institutions are playing a key role in setting up and standardizing Shariah , Financial and Accounting standards for Islamic Financial Institutions. Due to these collective efforts Islamic banking is now recognized by IMF, World Bank and Basel Committee.ASA 8. Islamic BankingASA 9. Important Elements of Islamic Economics Bai ( Sale & Purchase ) Ijarah ( Islamic Leasing ) Basic Mode of Financing ( Musharkah & Modarabah) Takaful ( Islamic Insurance ) Sukuk ( Islamic Bonds ) Qard Zakat & UsharASA 10. PRODUCT TREEIslamic ModesPartnership Based ModesMusharaka MudarabaTrade Based ModesMurabaha Musawama Salam Istisna ASARental Based ModesIjarah Diminishing Musharaka 11. Musharakah Characteristics All parties share in the capital All parties share profits as well as losses Profits are distributed as per agreed ratio Loss is borne by the parties as per capital ratio Every partner is agent of otherASA 12. MUSHARAKAH PROFIT Rs. 100 Rs. 60Rs.1000PARTNER ARs. 40Rs.1000VENTURERs. 50Must be according to capital ratioMay be in any agreed ratioPARTNER BRs. 50 LOSS Rs.100 ASA 13. Mudarabah One partner (Rab al Mal) contributes capital and the other (Mudarib) contributes his skills or services to the venture Venture may for a fixed period or purpose Both share profit in pre-agreed ratio Loss is borne by Rab al Mal only, Mudarib loses his servicesASA 14. MUDARABAH PROFIT 60 %40 %SERVICESCAPITALRABBUL MALVENTUREALL MONETORY LOSSMUDARIBLOSS OF SERVICES LOSSASA 15. Bai (Buying & Selling)Bai Buying & Selling ASA 16. Basic Rules of Bai Existence of Product/Commodity Ownership of Product/Commodity Possession of Product/Commodity Unconditional basis Product have value/Price.ASA 17. Basic Rules of Bai Bai on Such product which is permissible in Islam. Product Must be Identify, clear with all demanding Qualities. Not based on any incident, struggle etc Price must be clearly identified.ASA 18. Kinds of Bai Bai Musawamah Bai Murabaha Bai Surf Bai Salam Bai Istisna Bai UrboonASA 19. Basic Kinds of Bai Bai Eenna Bai Touliya Bai Wadhia Bai TawaruqASA 20. Type of Bai according to Quality Bai Salah Bai Fasid Bai Batil Bai Maqoof Bai Majool Bai Muqayaddah Bai MuajalASA 21. IntroductionTakaful is the Sharia Compliant brand name for the Islamic alternative to conventional insurance. Its based on the principle of Taawan or mutual assistance. It provides mutual protection and joint risk sharing in the event of a loss by one of its memberASA 22. Origins of TakafulIn the event of death caused by someone from another tribe, the member of the offenders tribe would share the blood money (Feediah) to provide for the family of the victim.ASA 23. Why Insurance ?Is Some thing wrong with Concept ? Risk Aversion Assuring others Risk sharingASA 24. From the Holly Quran The need for insurance is shown in the following verse of The Quran. Those of you who die and leave widows should bequeath for their widows a years maintenance and residence (2.240)ASA 25. From the Hadiths By Anas-bin-Malik, One day Prophet Muhammad(PBUH) notced a bedouin leaving his Camel without tying it. He asked the bedouin, Why dont you tie down your camel? The Bedouin answered, I put my trust in Allah (SWT). The Prophet (PBUH) then said, Tie your camel first, then put your trust in Allah(SWT) ASA 26. What wrong with practice ?The contract between the insurer & the insured is technically wrong from the sharia perspective because of Gharar (Uncertainty)) Gambling (Qamar & Maisir) Interest (Riba)ASA 27. Riba in Insurance Direct Riba Excess on one side in case of exchange between the amount of premium. Indirect Riba The interest earned on interest based investmentsASA 28. Gharar Lexically it means uncertainty and technically it means the uncertainty of the counteract or the subject matter.ASA 29. Different Models of Takaful Pure Mudarabah Model : The participants and operator enter into modarabah Contract. Wakalah Model : An Agency Agreement is made between participants and Operators on the basis of Wakalah ( Agency agreements) Wakalah Based on Waqf Model : The participant's donate the fund and operator charge an agency fee.ASA 30. Wakala-Waqf Model SHAREShare Holder Wakalah FeeH O L D E R SF U N D (S.H.F.)Mudaribs Share of PTFs Investment IncomeInvestmen t IncomeManagement Expense of the CompanyProfit/LossTakaful Operator Investment by the CompanyWAQFParticipantOperational Cost of Takaful / ReTakafulInvestment IncomeClaims & ReservesSurplus (Balance)P A R T I C I P A N T S T A K A F U L F U N D (P.T.F.) ASA 31. Shariah Compliance Shariah compliance is an essential element in Takaful . It is ensured through a Shariah Supervisory/ Advisory Board at the level of each Takaful company. The role of the Shariah Board is vital in meeting the specific demand of a public who would not insure otherwise.ASA 32. General Takaful Types General Takaful offers all kinds of non-life risk coverage. It is normally divided into following classes: Property Takaful Marine Takaful Motor Takaful Miscellaneous TakafulASA 33. Types of Family Takaful Term Life Takaful Whole Life Takaful Endowment Takaful Universal Takaful Marriage Plan Education Plan ASA 34. BANCATAKAFUL Background Range of Products Savings Personal Accident, Homeowners Comprehensive, Credit Cards, etc. Financing, Individuals Car Ijarah, Housing Musharika, Mortgage Takaful. Financing, SMEs Trade Credit Takaful, Business, Office, Equipment, Assets. E-Commerce ASA 35. BANCATAKAFUL (Contd.)Advantages of BancaTakaful: Facilitation Desk / Equipment. Fast Turnaround Time. One-Stop shop for Clients. Concept of Islamic Financial Supermarket. Value Added Services. Law of Large Numbers. Lower Contribution Rates. Attraction for Depositors. ASA 36. ReTakaful Currently few ReTakaful companies worldwide offering a relatively small capacity: Sudan (1979) National Reinsurance. Sudan (1983) Sheikhan Takaful Company. Bahamas (1983) Saudi Islamic Takaful and ReTakaful Company. Bahrain/Saudi Arabia (1985) Islamic Insurance and Reinsurance Company. Tunisia (1985) B.E.S.T. Re Malaysia (1997) ASEAN ReTakaful International. Dubai (2005) TakafulRe by ARIG. Lloyds of London to have a ReTakaful Syndicate in 2007. ASA 37. Takaful Pioneers Takaful started some 27 years ago in the Middle East with the launching of two companies: The Islamic Arab Insurance Co. (IAIC) in the UAE and The Islamic Insurance Co. of Sudan But it took some time for the movement to take shape. ASA 38. Takaful Pioneers Later in 1984, Malaysia played a pioneering role in setting the first Legal framework specific to Takaful (Takaful Act). This was instrumental in the successful launching of the Takaful movement in Malaysia and in other countries of South East Asia.ASA 39. Takaful Operators The number of Takaful operators worldwide is now estimated at: 108 Takaful companies 6 Retakaful companies In 35 Countries. Average growth rate higher than conventional insurance companies (around 25%). NonMuslims increasingly opting for Takaful products for commercial benefits.ASA 40. Takaful Premium Takaful is one of the fastest growing segments in insurance (at around 20% pa. on average) World Takaful contributions are conservatively estimated at around US$ 3billions, of which: 60% General Takaful 40% Family TakafulASA 41. Takaful Geographical Spread South& East Asia : Middle East : Africa: Europe, USA & Others:ASA56% 36% 7% 1% 42. TAKAFUL - TARGET MARKET People who do not insure due to religious reasons. People who insure and are insensitive to religious re