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BPM Report # 118 BUSINESS AND POLITICS IN THE MUSLIM WORLD

Weekly Report on Global Islamic Finance and Business in the Muslim World Period: May 01 – 08, 2010

Submitted By: Muhammad Ibrahim Presentation: May 12, 2010

Report Outline

• GLOBAL FINANCE & GLOBAL ISLAMIC FINANCE 04 o Australia mulls moves to attract Islamic finance

o India looks to start Shariah-compliant financial products

o Abu Dhabi Securities Exchange (ADX) may be open to Shariah compliance

o Dundee first university in UK to offer Islamic course in financing

o Malaysia-Gulf countries to join hands

o Malaysia calls for Kingdom help to foster Islamic finance

o Lack of liquidity among risks facing Islamic financing

o Islamic finance needs effective system-wide crisis management framework

o Britain to continue Islamic finance initiative

o Absa launches Islamic Banking in Tanzania

o KFH-Group Platinum Sponsor of the 7th IFSB Annual Summit in Bahrain

o African Islamic finance faces image problem: banker

o Islamic Finance Also Draws Interest from Non-Muslims, Says Zeti

o Islamic Banks Must Play Role in Industrialization of Muslim Nations, Dr.

Mahathir Mohamad

o Tanzania: Shariah Banking Services Launched

o Saudi Islamic bank to set up coaching centre in Delhi

o Islamic finance could be an answer to global economic problems

o Winner sells Islamic Banking course in Shanghai

o Shariah Banks Are the Future, Kenya drives Islamic financing in East Africa

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• ISLAMIC BANKING & INSTITUTIONS 28

o ADIB heads to Iraq as trail-blazer for Emirates

o Qatar International Islamic Bank (QIIB) launches unique finance scheme

o Kuwait Finance House posts lower Q1 profit

o Dubai Islamic Bank Named ’Best Islamic Bank’ In UAE by Global Finance

Magazine

o Sharjah Islamic Bank appoints new Head for Corporate Banking Group

o Dubai Islamic Bank celebrates 35th anniversary

o Bahrain bank eyes Muamalat

o Dubai Group may not sell Bank Islam stake - Report

o Dubai Islamic Bank Q1 net plunges 46 per cent

• SUKUK (ISLAMIC BONDS) 37

o RPT-Malaysia's Kencana plans 250 million Rgt Sukuk

o Nakheel May Pay Bonds May 13 without Formal Debt Agreement

o Al Rajhi turns to untapped Sukuk

o International Financial Centre (DIFC) to set template for Sukuk issuance

o Central Bank Kenya targets Gulf cash with Shariah compliant bonds

o Cagamas and Al-Rajhi to develop, issue Sukuk for Mideast market

o Sukuk still a niche despite huge potential

o ADB mulls multi-billion dollar Sukuk

• TAKAFUL (ISLAMIC INSURANCE) 50

o Britain’s only Takaful insurer closes

o Pak-Qatar to invest Rs500m in Family Takaful

o Bringing Family Takaful into the 2nd Decade of the 21st Century

• ISLAMIC INVESTMENTS; EQUITIES/SECURITIES & FUNDS 54

o Market for Shariah-compliant products, mutual funds tepid

o Islamic Investors' Risk Tolerance Will Determine Demand for Shariah Fund

Ratings, Report Says

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o S&P rates Shariah fund to raise transparency

• ISLAMIC FINANCE EVENTS; SEMINARS, WORKSHOPS &

CONFERENCES 57

o Islamic Banking, capable of protecting economy from unprecedented meltdown,

Aligarh Muslim University (AMU) holds conference on Islamic Finance: An

Alternative Financial System

o Luxembourg to Hold Country Showcase at the 7th IFSB Annual Summit in

Bahrain

o Major Islamic finance challenges in spotlight in 7th IFSB Annual Summit

o 2nd Annual World Islamic Retail Banking Conference to be held in Dubai

o Islamic Bankers from More Than 10 APAC to Gather in Kuala Lumpur This July

• ARTICLES / COMMENTARIES 63

o A more positive image for Islamic nations

o Rev. Franklin: The USA is the most Shariah Compliant Country in the world

o Debt or equity? Shariah allows both

• BOOK REVIEW 69

o The Stability of Islamic Finance: Creating a Resilient Financial Environment for a

Secure Future

o Summary of Book Review “The European Economy since 1945: Coordinated Capitalism and Beyond”, Written by: BARRY EICHENGREEN, as it appeared in Foreign Affairs; Jan/Feb2007, Vol. 86 Issue 1, p158-158, 1/2p, Reviewed by: Cooper, Richard N.

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GLOBAL FINANCE & GLOBAL ISLAMIC FINANCE Australia mulls moves to attract Islamic finance Tuesday, April 27, 2010 Australia’s Board of Taxation will be undertaking a comprehensive review of laws that need to be changed to encourage the expansion of Islamic finance, banking and insurance products in Australia, Australian Assistant Treasurer Senator Nick Sherry has said. He is set to meet Qatar government officials today to discuss these changes and the resultant opportunities for Qatar investment in Australia. Sherry will meet Prime Minister HE Sheikh Hamad bin Jassim bin Jabor al-Thani and Finance Minister HE Yousef Hussein Kamal, as well as officials from the Qatar Investment Authority and Qatar Islamic Bank tomorrow, with whom he will discuss how best to develop Islamic finance in Australia, as well as opportunities for sovereign wealth funds and other investments. He explained that his trip to Qatar and the region is aimed at learning more about Islamic finance, as the Australian government has identified the development of Shariah-compliant financial vehicles as essential to the country’s economic development. Sherry confirmed the review yesterday at a meeting of the Australia and New Zealand Business Group in Doha, where he said that details of any reviews will be made in the near future. He also stated that the introduction of Qatar-based Islamic banks in Australia is something that would be welcomed by the Australian government.“I would like to be clear: this is not about special treatment or concessions for Islamic finance or its providers, but about ensuring that our system doesn’t unfairly disadvantage or preclude such instruments and, in doing so, deprive Australia of capital, jobs and growth,” he said. “Islamic finance is a rapidly growing part of the global financial system and Australia is in an excellent position to capitalize on that growth, but we have to ensure our tax system doesn’t unnecessarily prevent that from happening,” the assistant treasurer said. A report by the Australian Financial Centre Forum earlier this year suggested that such a review should be taken “in order to ensure that Islamic finance products have parity with conventional products, having regards to their economic substance”. Sherry explained that the growth of global Islamic financial investments has been a major factor in the decision to amend laws, as well as the fact that Australia already has a Muslim population of between 300,000 and 400,000. He also pointed out that the Australian economy is one of very few which made it through the recent global recession unscathed, claiming that a major government stimulus plan as well as record low interest rates led to this achievement. Describing the present as “a very good time” for investment in Australia, Sherry said that

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the unparalleled capacity of the country to produce such a selection of export goods means that Shariah-compliant investment – which requires a tangible base for investment – could work perfectly. He pointed to agricultural and infrastructure opportunities, arguing that agricultural investment is particularly beneficial to Qatar as it will also help to ensure food security for the future. “Australia has made major inroads into integrating an economic substance approach into our tax laws, particularly with the latest Taxation of Financial Arrangements (TOFA) legislative reforms progressed by the Rudd government,” he said. “The Board of Taxation review will take this work to the next level by examining the Australian tax laws to make sure the wholesale market for Islamic instruments is not being hampered,” Sherry added. http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=357833&version=1&template_id=36&parent_id=16 India looks to start Shariah-compliant financial products Tuesday, April 27, 2010 New Delhi: India needs to actively consider allowing introduction of Shariah-compliant Islamic finance products to channelize savings of the Muslim community, K Reh-man Khan, deputy chairman of Rajya Sabha, said on Tuesday. Speaking at the India Shariah Finance Summit in the capital, Khan said the mutual fund industry is the best vehicle for popularizing Shariah-compliant products. He pointed out that mutual funds are largely compliant with Islamic finance principles since they do not pay interest. The concept of charging or paying interest is prohibited under Islamic law. “We should start adopting the mutual fund route in a bigger way for Islamic banking. Shariah-compliant mutual fund schemes will help to channelize savings of the huge Islamic population in India,” Khan said. Khan said Indian Muslims should have the option to invest in Shariah-compliant products. “Muslims have every right to seek an avenue for investment that complies with their religious faith,” he said. Speaking on the occasion, Abizer Diwanji, executive director and head of financial services, KPMG, said the mutual fund sector could be opened up for Shariah-compliant products. “The present laws are amenable to mutual fund instruments that are compliant with Islamic finance. However, innovation in the industry is lacking and hence such products are not hitting the market,” he said.

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Diwanji said bringing out Islamic finance products would be a step towards greater financial inclusion. “Muslims are an under banked community in India. Islamic finance could be a very big component for financial inclusion that the government is pushing for,” he said. Muslims account for around 13.4 per cent of the population or around 175 million people in absolute terms. Diwanji said the Reserve Bank of India could also consider offering specialized licenses for Islamic banks, while doling out fresh bank licenses as promised in the Union budget. Sashi Krishnan, chief investment officer, Bajaj Allianz Life Insurance, which offers Pure Stock Pension Fund – a Shariah-certified scheme, said Islamic financial products have seen growing acceptance in India over the past few years. “The government is already working on a project to analyze the future of interest-free banking in India, while the mutual fund and insurance industry are also developing Shariah-compliant products,” he added. Krishnan said the challenges to the popularity of Islamic finance in India are distributors who are not equipped to sell Shariah-compliant products, besides a lack of certifying agencies and standardization of Shariah-based products. Financial Chronicle, mydigitalfc.com (India’s first global business networking platform) http://www.mydigitalfc.com/mutual-funds/india-looks-start-Shariah-compliant-financial-products-737 Abu Dhabi Securities Exchange (ADX) may be open to Shariah compliance Wednesday, April 28, 2010 The Acting Chief Executive and Director of Operations, Rashed Al Baloushi, yesterday said that there is no current policy for the ADX to operate in compliance with Shariah, but this may happen in future. Al Baloushi was speaking to Emirates Business on the sidelines of the signing of a memorandum of co-operation with Istanbul Stock Exchange (ISE).

He said no steps have been taken as yet to classify listed companies as Islamic and non-Islamic. But since the ADX has a strategy that focuses on the diversification of financial derivatives and services, the signing of the memo aims to benefit from the major expertise of Istanbul Exchange in the fields of exchange and Islamic derivative products, he said.

"We will benefit from them if we decide to classify listed companies as Islamic and non-Islamic, or when we launch Islamic products in Abu Dhabi market, which is probable in the future."

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Asked whether the listing of Turkish companies in the ADX is expected, Al Baloushi said there is no plan at the moment for such listing, but "we found a strong Turkish desire for co-operation with exchanges of Arab and Gulf countries, and we are happy for that and (hope to) integrate with it".

There is no policy to set up a link between the financial markets of the UAE and Turkey, said Al Baloushi. The link between the ADX and the DFM is the best in the Middle East, he said, adding that the experiment succeeded because of a strong will.

Al Baloushi declined to comment on the merger between the two markets and the impact it would have on the country's financial markets. However, a Reuters report yesterday quoted a source saying a merger of the bourses is imminent. "The merger is being discussed at the highest level and the outcome is awaited imminently," an ADX official told the news agency, declining to be identified. "It would be good for both markets, instead of them competing against each other. This is a sign of consolidation in the UAE."

The ADX recently launched the country's first exchange-traded fund, and Al Baloushi said: "We have received several listing requests, but we will not disclose them at the moment until the process is complete."

He described as "very good" the demand for the National Bank of Abu Dhabi ETF, the first to be listed at the ADX last month. Preparations are under way for the launch of a second fund, a partnership between an international company and the NBAD. It will be a health service fund. Several other funds are expected soon, said Al Baloushi.

ADX yesterday hosted the third meeting of the 57 exchanges of the Organization of Islamic Conference, which discussed the challenges facing Islamic banking and financial work.

Shariah scholar Hussein Hamed Hassan said markets in Arab and Islamic countries badly need Islamic financial and investment derivatives and tools. The past few years saw new products, mainly Sukuk and Ijarah, he said.

The volume of Islamic Sukuk currently stands at $1.7 trillion (Dh6.24trn) and Sukuk issued in the UAE over the past three years totaled $33bn, the scholar pointed out.

Meanwhile, ISE Chairman and CEO Huseyin Erkan said the co-operation agreement signed with the ADX will strengthen relations between Abu Dhabi and Turkey. The memorandum comes within other agreements to be signed with other Arab exchanges, mainly Dubai, Egypt, Qatar and Oman.

Emirates Business 24-7 http://www.business24-7.ae/companies-markets/markets/adx-may-be-open-to-Shariah-compliance-2010-04-28-1.237677

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Dundee first university in UK to offer Islamic course in financing Thursday, April 29, 2010 SCOTTISH university is to offer the UK's first postgraduate course in Islamic finance. Dundee University will unveil its MSc in Islamic accounting and finance at a conference on ethical finance in Edinburgh today. The course has been created to meet increased demand from the banking sector. Dr Rania Kamla, a lecturer in the accountancy and finance department at Dundee who will lead the new course, said high street banks were increasingly catering for Muslims and needed knowledgeable staff. She said Islamic banking should not invest in areas in conflict with the religion's teachings such as pork products, alcohol, the arms trade, or pornography. "But it is also about the deeper impact, so it would also encourage investment in communities and try to reach out to disadvantaged groups”, she added. There is only one dedicated bank that adheres to the teachings of Shariah law, the Islamic Bank of Britain. Dr Kamla said: "It was originally based in London and Birmingham, but has now expanded to Scotland. Up to 20 financial institutions in the UK now provide Islamic products, including HSBC. It is not allowed in Islam to charge interest; therefore they promote interest-free banking. "Instead, they depend on profit and loss sharing, so you both share in the risk." The MSc course, which begins in September, is expected to take a handful of students in the first year while the university gauges demand. Omar Shaikh of the Islamic Finance Council said: "This is a wonderful opportunity for Scottish students to study Islamic finance, in Scotland. "Education is extremely important if we are to realize the ambition to make Scotland and UK a global gateway for Islamic finance." Legal firm Tods Murray, which created the first Islamic mortgage in Scotland, organized today's conference. Partner Graham Burnside said: "The role of Islamic finance and ethical-based financial systems in today's economy has not been fully explored, and the launch of Dundee University's course is an important step to ensure that Scotland does not miss out on the potential it offers." The Islamic and Ethical Finance Conference, takes place at the Tods Murray headquarters in Edinburgh Quay, and will explore the various faces of ethical finance and Scotland's heritage in faith-based finance.

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Speakers include specialists from the Islamic finance industry and representatives from the Church of Scotland, the Co-Op Bank and the Scottish Widows Investment Partnership. Professor Christine Helliar, dean of the school of accounting and finance at Dundee University, said of the new course: "Graduates will be able to bridge the gap between accounting and financial knowledge and how it relates to Islamic law. The programme will include an introductory element to the main issues, coverage of the most popular products and how they relate to Shariah law, and how conventional banks compare with the practices of Islamic banks." DIVINE PROFITS UNDER Islamic teaching usury is not allowed therefore borrowing money must be done under special arrangements. For example if you wanted a mortgage to buy a property, the bank would buy the house and then sell it back to you but charge you profit. In other words the deal would be based on profit sharing by both parties rather than interest payments. This is because profit is allowed under Shariah law while charging interest on debt is considered immoral. Islam also precludes banking which invests in businesses which go against the teachings of the religion. So for example, it would be un-Islamic to invest in the arms trade or pornography. But it would also not be seen as ethical to gain profit out of firms that are involved with pork products or alcohol which are also barred by the religion. http://news.scotsman.com/education/Dundee-first---university.6260822.jp

Malaysia-Gulf countries to join hands

Saturday May 01, 2010

ABU DHABI: Malaysia and the Gulf countries can join hands in creating more opportunities to boost trading in the secondary Sukuk market.

Enhanced trading activities in the secondary Sukuk market could help develop the Malaysian Sukuk market to a higher level, said Labuan Financial Services Authority (Labuan FSA) deputy director-general Danial Mah Abdullah.

“We want to create a more vibrant secondary market in Malaysia.

“Then, you can at least say, the Malaysian Sukuk market will be more competitive, as you have a primary as well as secondary market,” he told Bernama after a roundtable with the Gulf Board Sukuk Association (GBSA) here recently. He said currently the secondary market was not very active as most institutions bought and kept the Sukuk in their books.

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According to Danial, through the GBSA, a partnership can be forged to develop the Sukuk market in Malaysia and the Gulf countries.

“It can be a starting block to create more cross-border transactions and create some trading in the secondary market.

“We can explore creating a framework that can benefit the Sukuk market,” he said.

According to a news report, the Gulf Cooperation Council is poised to play a key role in driving the global Islamic bond market to a two-fold growth of about US$200bil in 2010.

It was reported that a strong demand from Muslim countries and outside the circle, for Syariah-principled bonds, would boost the potential for the Sukuk market despite the global credit crisis.

Meanwhile, there were concerns expressed by some panelists on the need to address issues on the misconception over Sukuk defaults, which has slightly affected the Sukuk issuance globally.

The session was organized as part of the Malaysia International Islamic Financial Centre road-show to the United Arab Emirates and Saudi Arabia.

The road-show, which completed the first leg in Abu Dhabi on Wednesday, concluded in Makkah and Jeddah yesterday and is headed for the final leg in Riyadh.

http://biz.thestar.com.my/news/story.asp?file=/2010/5/1/business/6171241&sec=business Malaysia calls for Kingdom help to foster Islamic finance Sunday, May 02, 2010 RIYADH - Saudi Arabia can be a strategy partner of Malaysia to promote international Islamic finance industry, said a high-ranking official of Malaysia bank currently visiting the Kingdom. Mohamed Razif Abd Kadir, deputy governor, Bank Negara Malaysia said at a press conference Saturday that the dynamic nature of economic ties and historical relations between the two countries, Saudi Arabia could be a strategic partner for Malaysia in shaping the global Islamic finance industry. A 50-member delegation led by Raja Dr. Nazrin Shah, financial ambassador of Malaysia International Islamic Financial Center (MIFC) is currently visiting Saudi Arabia. MIFC is an initiative to promote Malaysia as an Islamic financial hub by global integration of economic linkages among organizations related with Islamic finance.

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The MIFC delegation is comprised of representatives from Malaysia’s regulatory authorities, national investment agencies, Islamic banks, Islamic fund managers, Takaful operators and professions services firms and Shariah research institute. The delegation is organizing road shows in Riyadh, Jeddah and Makkah seeking to establish contacts with Saudi businessmen and investors. Kadir said about 60 percent of Sukuk in the world’s financial market originate from Malaysia. “In fact, Malaysia has a 60 percent of the Sukuk world’s market share,” he said. Sukuk, a “legal instrument, deed, check” is the Arabic name for a financial certificate, but commonly refers to the Islamic equivalent of bond. Kadir said during the visit MIFC members will hold talks with officials of Capital Market Authority (CMA) and Saudi Arabian Monetary Agency (SAMA). “We will explore possibilities of establishing close links that can shape the global Islamic finance industry,” he said. He said the countries in ASEAN Free Trade Area (AFTA) alone comprised of a population of 500 million people that offers huge potential for Islamic finance. The awareness among the people in ASEAN -member countries namely Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam, Laos and Myanmar is increasing remarkably, he said. “Saudis can join hands with Malaysia and other players in the region to tap this huge potential for Islamic finance,” he said. Nik Mohamed Din Nik Musa of MIFC Promotions Unit said the level of interest for Islamic finance is rising among Saudis. He said more number of Saudi businessmen and investors started looking for Shariah compliant projects. “During our current visit we want to establish contacts with more number of Saudi businessmen before entering into transaction dealings,” he said. Dr. Nazrin Shah, MIFC Finance Ambassador said there has been a 30 percent growth in the corporate Sukuk that rose to SR32 billion in 2009 from SR24 billion in 2008. “The annual compound rate of growth in Sukuk issues is 21 percent since 2001,” she said. Saudi Gazette http://www.saudigazette.com.sa/index.cfm?method=home.regcon&contentID=2010050271066

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Lack of liquidity among risks facing Islamic financing Sunday, May 02, 2010 Lack of liquidity, questionable Shariah-compliance by some Sukuk and replenishment of capital remain risks to Islamic financing, according to Qatar First Investment Bank (QFIB). “A tipping point has been reached in the finance across the GCC markets which could lead to accelerated growth. All the main economies in the GCC have a positive outlook and it is important that Islamic Finance links into this growth,” QFIB CEO Mike de Graffenried said ahead of his keynote address on ‘Future of Islamic Investment Banking Industry’ at the Arab Investment Summit, which will begin today in Abu Dhabi. Finding risks to this growth, he said many Islamic banks have been hit by the lack of liquidity with the less conservative having large real estate and private equity exposures and have had to adapt their business focus to emphasize liquidity. The Shariah-compliant basis of some Sukuk was being questioned as there was no direct link to assets and therefore they were being seen as straight debt issuance, according to Graffenried. “Banks now need to replenish capital to substantially higher levels than before, and this needs to be ‘tangible money’ not debt disguised as equity,” he said. He said private wealth in the GCC remained strong and the intergenerational transfer of wealth would spur the need for corporate advisory work. “Much family wealth is tied up in the form of illiquid business assets, the passage of these assets from generation to generation would be facilitated and familial disputes reduced through the incorporation and provision of liquidity of family shareholdings,” he said, adding this would release investment capital and may well be vital for the continued development and strengthening of Islamic finance in the region. http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=358928&version=1&template_id=48&parent_id=28 Islamic finance needs effective system-wide crisis management framework Monday April 03, 2010 RIYADH: Islamic finance needs to establish an effective system-wide crisis management and harmonized regulatory framework, in order to keep up with new challenges in the industry. In making the call, the Raja Muda Perak Raja Dr Nazrin Shah said Islamic finance, had very unique characteristics and risks that also required unique risk management solutions.

"To optimize its potential, there is a need to address current gaps and challenges in the Islamic financial system. In particular, Islamic finance requires the expansion of enabling infrastructures to support its efficient functioning," he said, in his keynote address on

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Saturday in conjunction with the Malaysia International Islamic Financial Centre (MIFC) road show here.

Raja Nazrin, who is the MIFC Financial Ambassador, said the infrastructure needed would entail a robust regulatory and supervisory framework, adequate financial safety nets and effective punitive and problem-resolution mechanisms.

He said devising such solutions is complex and therefore, must be pursued collectively by Islamic finance experts and regulators.

"Regulators and market practitioners should work hand in hand to develop a deeper understanding of the behaviour of the market, the likely interactions between the Islamic and conventional systems and the effect of changes in macroeconomic policy on the two systems," he explained.

Raja Nazrin said as competition in Islamic finance intensifies, there would be increased pressure for market participants to innovate, potentially testing the boundaries of Shariah-compliance.

He added that while continuing to offer new opportunities and portfolio diversification to investors, it would be good to have a clear and universally-agreed set of Shariah parameters, as a common reference for participants.

According to Raja Nazrin, these parameters should emphasize good risk management, strong governance practices, ethics and transparency as underpinning factors.

"This will ensure Islamic finance continues to offer genuine benefits to the global financial market instead of merely mimicking conventional finance," he said, to some 80 businessmen from Saudi Arabia and Malaysia, who attended the luncheon talk organized by MIFC.

Addressing the emergence of ethical funds, Raja Nazrin said this move was a positive step in transforming the current financial system into one that is more accountable, and which makes investors more aware of their responsibilities in economic decision-making.

Citing the recent launch of a Christian index in Europe, he said this trend, however, should not be viewed as a new point of contention from a religious perspective as that will only serve to divide the world further.

Instead, he highlighted, it should be viewed as contributing to the betterment of the global financial system.

Meanwhile, on Malaysia and Saudi Arabia, he said both countries must continue to pursue the priorities crucial to making Islamic finance play a leading role in the economic development of both.

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"By doing that, the two countries could capitalize on their potential by exploring new business ventures and tapping into each other's strengths while at the same time, becoming the bridge between East and West Asia," he added.

Raja Nazrin was leading the MIFC delegation to the United Arab Emirates (UAE) and Saudi Arabia with the objective of among others, strengthen relationships and woo investors to Malaysia.

The more than 50-member delegation included, the Deputy Governor of Bank Negara Datuk Mohd Razif Abd Kadir, the Securities Commission Malaysia Chairman Tan Sri Zarinah Anwar and Bursa Malaysia Bhd Chief Executive Officer, Datuk Yusli Mohamed Yusoff as well as several local and foreign fund managers.

The roadshow, which ended here on Sunday, saw the delegation visit the Tadawul Stock Exchange, the Saudi Arabia General Investment Authority (SAGIA), the Public Investment Fund (PIF) and the General Organization for Social Insurance (GOSI). (By Nor Baizura Basri/ Bernama) http://www.mysinchew.com/node/38531

Britain to continue Islamic finance initiative

Monday April 03, 2010 Whichever party wins the British general election next Thursday, the UK government's policy on Islamic finance will be "business as usual" and all of the three main parties - Labour, Conservatives and the Liberal Democrats - have confirmed cross-party support to continue the Labour government's Islamic finance initiative.

A few days ago, the City-based international law firm, Norton Rose, published a fascinating report - "The Election Briefing: Implications for Business" - which is effectively a roadmap of the positions of the above three parties on a cornucopia of issues including Islamic finance.

Norton Rose, which has a sizeable Islamic finance legal business and one of the top firms with a specialized Islamic finance expertise, concludes that "Islamic finance is an area with clear potential for development. The UK government and the City of London are both promoting its growth, in both the retail and wholesale markets. London's emerging role as a center of excellence for Islamic finance seems likely to continue to develop irrespective of which party wins the election."

At the core of the Brown government's policy is the stated ambition of developing the City of London into a major international center for Islamic finance, which already generates millions of pounds of revenues every year for UK law firms, fund managers, investment banks, auditing and advisory companies, and academic and professional training organizations.

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"Islamic finance is an increasingly important part of British business," declares Norton Rose. "UK government policy has in recent years recognized this, and measures have been taken to promote and facilitate Britain as a center for Islamic finance."

But how will the general election affect the above assertion? Although issues relating to Islamic finance are not at the center of the national political debate, it is clear, according to Norton Rose, from government policy where the Labour Party stands. With regards to the Conservative Party, private and public statements indicate that they are broadly supportive. The Liberal Democrats also have privately stated cross-party support for the Brown government's Islamic finance initiative.

As such, whatever the outcome of the election, Islamic bankers in London maintain that there is most likely to be considerable continuity with current UK government policy.

Under Labour, the party in power since 1997, the briefing stressed that there have been significant symbolic and legislative changes relating to Islamic finance under both the Blair and Brown Government's "financial inclusion" policy.

All the enabling legislation do not specifically mention the word "Islamic" but defines certain types of transactions and instruments as alternative and cater for them under relevant changes by specifying tax neutrality treatment for them.

In fact, the UK model for Islamic finance is being replicated in other jurisdictions such as France, Luxembourg and elsewhere. Indeed government-led initiatives started in 2001 involving Treasury, RC (Revenue and Customs), the Bank of England and the Financial Services Authority (FSA). The Treasury has introduced a spate of enabling laws dealing with the abolishing of double stamp duty for equivalent Islamic financial products such as the Diminishing Musharaka and Ijara mortgages; exemption from stamp duty land tax (SDLT) in real estate-backed Sukuk; equal risk weighting for conventional and Islamic mortgages; and the facilitation of Sukuk or alternative financial investment bonds.

Although the Conservatives have not published any formal policy on Islamic finance, informal understandings of Conservative and Liberal Democrat positions, added the Briefing, is that they will further the development of Islamic finance on the same basis as the Labour government.

Earlier this year at a Norton Rose seminar on Islamic finance, Mark Hoban MP, Conservative shadow financial secretary to the treasury, confirmed that his party has supported the steps taken by the government to create a level playing field for Islamic finance and that it would continue the same approach. He recognized the concerns raised by the audience in respect of a need for clearer criteria to enable the industry to address any government concerns in relation to a UK government Sukuk.

Should the Conservatives win, then Hoban is most likely to become the financial secretary to the treasury and lead the new government's Islamic finance initiative.

This cross-party support (including by the Opposition Liberal Democrat Party) for UK government's Islamic finance initiative has been welcomed by the industry. Farmida Bi,

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London banking partner at Norton Rose, emphasized, "It is extremely good news for the City of London that there is cross party support for the promotion of Islamic finance and that the helpful legislative changes that have been made will be continued irrespective of which party is in power."

One interesting area is that of a UK sovereign Sukuk issuance, which the Labour government ruled out in December 2008 because such an issuance would not "offer value-for-money" at the time because of market conditions. Market players have queried this rationale and would like any future UK government to explain the criteria that need to be fulfilled in order for a sterling Sukuk issuance to be viable.

The briefing adds that there has been considerable interest in the possibility of the UK government issuing a 2012 London Olympic Sukuk since the decision not to proceed with the UK Treasury Sukuk was taken. "Our discussion with market participants has shown that there is a huge amount of interest in the Islamic finance investor market for a UK government Sukuk issue, for largely strategic reasons," confirmed Norton Rose.

Some City observers stress that a Conservative government under David Cameron may revise the Labour government decision on the issuing of a sovereign Sukuk in the wholesale sterling market, because it would be an efficient and cost-effective way of raising funds off the national balance sheet to finance projects such Crossrail and other planned infrastructure developments.

http://arabnews.com/economy/islamicfinance/article49487.ece

Absa launches Islamic Banking in Tanzania Monday April 03, 2010 Tanzania: The National Bank of Commerce (NBC), a subsidiary of Absa, has placed itself ahead of competitors in the Banking Industry by launching Islamic Banking to the public. This move is in line with Absa strategy of expanding its offering in Africa.NBC Managing Director Mr. Christo De Vries said this new service is part of NBC’s business banking strategy, to provide innovative products to meet the needs of the market. The introduction of Islamic Banking in the Tanzanian market is aimed at ensuring that we offer products that appeal to all Tanzanians regardless of their faith or background.

The concept of NBC Islamic Banking - which offers the options of the Cheque Account and Saving Account with an embedded Funeral Plan - is built around the Shariah Laws which govern the way in which Muslims live their lives and conduct their daily business including their financial affairs. The service will be managed in line with clear guidelines Shariah lays down for the management of money, one of these guidelines being the absence of interest on current and savings accounts. The Shariah Law forbids the earning of interest. Funds deposited in the accounts will be invested in businesses that are approved under Shariah Law.

Islamic Banking will be a new and innovative solution to modern day banking in Tanzania. Though this service will mostly appeal to our Muslim clientele, it is

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completely open to everyone regardless of their faith. Islamic Banking services will be available to all who choose an alternative to conventional banking, “Muslims and non-Muslims globally are choosing to make use of Islamic Banking. It is a service that gives them the assurance that their money will be invested well. All investments made under Islamic Banking are never associated with any of the traditional ‘sin’ industries, such as alcohol, tobacco, gambling or pornography; as a result the product stands on an individual’s faith, ensuring not only financial security but also moral and mental satisfaction,” said NBC Islamic Banking Board Chairman Dr. Mussa Assad

In terms of account opening, Islamic Banking will be conducted in exactly the same manner as opening a conventional account, however, the product features will differ based on the Shariah principles. The costs associated with opening Islamic Banking accounts will also remain the same as for conventional accounts.

NBC will be the largest bank in Tanzania with the broadest branch and ATM footprint offering Islamic Banking services. This will combine the best of traditional Islamic values with the technology and innovation that characterize the best of modern banking.

Here at home, Absa Islamic Banking (AIB) has scooped yet another Global Finance Award for 2010. AIB has all the convenience of a national branch and ATM footprint as well as the 24hour access of cellphone and internet banking.

Supermarket.Co.Za (The Online Home of Supermarket & Retailer and Wholesale Magazines) http://www.supermarket.co.za/news_detail.asp?ID=2152 KFH-Group Platinum Sponsor of the 7th IFSB Annual Summit in Bahrain Tuesday, May 04, 2010 Kuwait Finance House-Group (KFH) is supporting the 7th Islamic Financial Services Board (IFSB) as Platinum Sponsor, which is currently being held at the Ritz Carlton Hotel and Resort Bahrain, during the period 3-5 May 2010. The Central Bank of Bahrain is hosting the Summit and this year's theme is "Global Finance Architecture: Challenges for Islamic Finance".

The IFSB, is a transnational organization that sets mandates for prudential and supervisory standards for the global Islamic finance sector.

Among the participants are high profile delegates, including central banks governors, chairmen, executive managers from Islamic banks and a number of highly respected experts within the Islamic banking industry.

As a group, KFH-Kuwait, Kuveyt Türk and KFH-Bahrain are jointly co-sponsoring the event. Commenting on the occasion, Mr. Abdulhakeem Alkhayyat, Managing Director and CEO of KFH-Bahrain, emphasized the importance of the IFSB as an umbrella that

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supports Islamic banks, especially in terms of consolidating relations between central banks, regulatory bodies and Islamic banks.

During the summit a number of pressing topics and issues are being addressed that have a direct impact and relevance to the unprecedented challenges faced by the Islamic finance industry as a result of the global financial crisis. It will examine the extent of change brought forth by the crisis on the economic growth trends and stimulate strategies that identify the best means to develop new regulatory paradigms for the financial and banking markets.

This year Summit theme "Global Financial Architecture: Challenges for Islamic Finance" provides an alternative platform to devise new methods of pre-empting the very issues that caused a near collapse of the global financial system.

The main issues of this year's Summit are also being reflected in the five session topics which cover; the Changing Landscape of Financial Regulation: Implications for Islamic Finance; Macro-Prudential Surveillance Issues for Islamic Finance; New Architecture for Liquidity Management for Islamic Financial Instruments; Balanced growth of Islamic finance - the Sectoral Composition of the Islamic Financial Services Industry as a Contributor to Growth with Stability; and New Islamic Financial Architecture: Challenges Ahead.

About Kuwait Finance House, Bahrain

Kuwait Finance House-Bahrain is a leading provider of Islamic commercial and investment banking services. Established in 2002 as a wholly owned subsidiary of Kuwait Finance House (Kuwait) -- an industry leader for more than 30 years -- KFH-Bahrain specializes in developing and bringing to market the highest quality Islamic compliant banking and investment products, all of which are delivered by a staff of experienced and dedicated professionals with a deep understanding of the market and the clients we serve.

http://www.zawya.com/story.cfm/sidZAWYA20100504134830/KFH-Group%20Platinum%20Sponsor%20of%20the%207th%20IFSB%20Annual%20Summit%20in%20Bahrain

African Islamic finance faces image problem: banker Tuesday, May 04, 2010 NAIROBI: Africa Islamic finance industry needs to overcome negative perceptions among non-Muslims to successfully expand into predominantly Christian sub-Saharan Africa, an industry leader said on Tuesday.

Northern Africa is largely Muslim and countries such as Egypt and Sudan have offered Islamic banking for decades. Now some lenders are looking to expand into sub-Saharan nations, such as Uganda which is 80 percent Christian.

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Islamic finance caters for customers who want to avoid earning interest, which is viewed as usury under Islamic law.

Islamic banking operates on a small scale in a few sub-Saharan countries, such as Kenya, South Africa, Botswana and Nigeria. Industry participants say Tanzania, Malawi, Uganda and Zambia would be next. Each has minority Muslim populations.

"The biggest challenge we face is the perception that this is a bank only for Muslims, which is not correct," said Suleiman Shahbal, chairman of Gulf African Bank, which was launched in 2008 and is one of Kenya's two Islamic banks.

"This is a business and frankly we are indifferent to whether you are Muslim, Christian, Hindu, a non-believer or whatever," Shahbal said, who added that Islamic banking institutions were still accused of hiding political agendas.

"Some people are extremely hostile and they see a political agenda in Islamic banking. It is not political at all, we have no political agenda ... some even think we support al Qaeda, which is of course complete nonsense," Shahbal said.

The Islamic finance industry is eager to grow outside its main centers in the Gulf Arab region and South East Asia.

Ebrahim Ahmed Patel, chief of South Africa FNB and WesBank Islamic Finance, told a Nairobi conference the Islamic finance market in Africa is potentially worth $235 billion.

Experts say national regulatory bodies need to be open to facilitating an alternative system of banking. Kenya has made adjustments to its banking laws which allowed the emergence of Islamic finance in the east Africa.

Reuters Africa

http://af.reuters.com/article/topNews/idAFJOE6430HJ20100504

Islamic Finance Also Draws Interest from Non-Muslims, Says Zeti

Tuesday, May 04, 2010 MANAMA: The sustained and largely uninterrupted expansion of the global growth in Islamic finance has drawn significant international interest, not only from Muslim countries but also from non-Muslim communities, Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz. She said Islamic finance continued to demonstrate its resilience against the background of the current challenging international financial environment. "Financial centers such as London, France, Hong Kong and Singapore are increasing their efforts to enhance the development of Islamic finance in their financial centers," she

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said in a speech read out by Deputy Governor Datuk Mohd Razif Abd Kadir at the Malaysia Showcase Dinner in this Bahrain capital Monday. The showcase was held in conjunction with the Seventh Islamic Financial Services Board (IFSB) Summit which starts tomorrow. Zeti said the internationalization of Islamic finance had also observed the strengthening of ties between Asia and the Middle East in trade and investments in the recent years. "The emergence of new financial centers in Asia and the Middle East and their increased integration has strengthened the foundations for a New Silk Road," she said. Furthermore, it had also opened up and extended this potential to developed economies to forge stronger financial linkages with the growth regions of Asia and the Middle East, said the central bank governor. She said, while Islamic finance had demonstrated its resilience during the challenging period, continuous efforts were being taken to further strengthen its resilience and facilitate effective liquidity management across the border. The Islamic Development Bank, for example, has collaborated with IFSB and formed two task forces -- the Task Force on Islamic Finance and Global Financial Stability and the High Level Task Force on Liquidity Management. Through the task force on financial stability, it has established an Islamic Financial Stability Forum which is held twice a year, a strategic platform for productive dialogue to promote financial stability. Zeti said an important dimension of Islamic finance was not only its potential role and relevance in contributing to global financial stability but also its potential to support overall global economic growth. More importantly, it also represented an important channel for greater connectivity among emerging economies to not only enhance trade and investment flows but also international financial flows between nations. She said these combined efforts would contribute to the stability of the international financial system and global economic prosperity. BERNAMA

http://www.bernama.com/bernama/v5/newsindex.php?id=495452

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Islamic Banks Must Play Role in Industrialization of Muslim Nations, Dr. Mahathir Mohamad

Tuesday, May 04, 2010 MANAMA (Bahrain: Islamic banks and financial institutions must play a role in the industrialization of Muslim countries to be able to withstand future challenges in the global financial system.

In making the call, Former Prime Minister Tun Dr Mahathir Mohamad said banks role in the industrialization of developed countries in Europe and East Asia cannot be understated. "There is no reason why Muslim banks and financial institutions cannot play the same role. In fact, considering the lack of knowledge and initiatives in this area among Muslims generally and Muslim investors specifically, the Islamic banks must play an even bigger and more aggressive role than conventional banks," he said in his special address at a Malaysia Showcase dinner in this capital city of Bahrain Monday.

Dr Mahathir said currently there was not a single Muslim country that was fully industrialized, with some of these countries having no natural resources to support industrialization. However, they make up by having the most valuable resources of all -- they have people who are intelligent, knowledgeable and skilled in the development of industries.

BERNAMA

http://www.bernama.com/bernama/v5/newsbusiness.php?id=495540

Tanzania: Shariah Banking Services Launched

Wednesday, May 05, 2010

Dar Es Salaam: SHARIAH banking products were officially launched in Dar es Salaam on last night, with the government challenging bankers to strive for more education to the masses on the sector.

Minister for Planning and Economic Affairs, Mr Mustafa Mkullo, while launching the services in Dar es Salaam, said that banks should also take their services to rural areas where the majority of Tanzanians dwell.

"People in rural areas have to be educated on banking because due to habits it would be hard for them to believe in banking their money if there is no proper sensitization and education," he said.

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He also challenged Stanbic Bank, a member of the Standard Bank Group, the leading emerging markets bank with the largest presence in Africa, to also educate both Muslims and non-Muslims about Shariah banking which, he said, is not familiar to many.

The Minister maintained that the government was happy to having Shariah banking in the country and that there are several requests for operating similar services tendered by other banks.

The Managing Director of Stanbic, Mr Bashir Aawale, explained that Shariah banking is a system of banking that is consistent with the principles of Islamic law.

"In practice, it prohibits the payment or acceptance of interest fees for the lending and acceptance of money", said Mr. Bashir, adding that It also prohibits Muslims from investing in businesses that provide goods or services that are considered contrary to the Islamic principles.

In practice, Islam prohibits the taking and giving of interest, there should be no gambling (speculation) and no investments in prohibited industries.

He said the first products that will be offered under this proposition will be a transactional product 'TransactPlus' and current account, which is 100% Shariah compliant and provides the same convenient features of conventional accounts, including internet banking, Visa electron or Maestro debit card and prepaid airtime services.

Mr Awale said Tanzania is an important market for Standard Bank as the gateway to East Africa and we are proud to be the first bank in Africa to offer our first Shariah banking product in this market, where about 50% of the population is Muslim.

"There is a substantial untapped market among Muslims who make up a large portion of the population in Africa and Standard Bank is mindful of the fact that to be truly an African bank, it needs to ensure that there are products in the market that cater for them," says Terry Moodley, Chief Executive, Personal and Business Banking, Standard Bank Africa.

As the leading bank in Africa, Standard Bank is constantly looking for ways to provide banking products and services that allow all customers in Africa to save and transact. It also aims to demonstrate its confidence in the future of Africa and other emerging markets by making the right connections with its customers and stakeholders across the continent.

"Standard Bank plans to roll out its Shariah banking value proposition to all other markets in the coming months," concluded Moodley.

Standard Bank trading as Stanbic Bank is part of one of Africa's leading financial services groups, the Standard Bank Group Limited, which is based in South Africa and listed on the Johannesburg Securities Exchange.

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The group trades under the name Stanbic Bank in Botswana, Ghana, Kenya, Nigeria, Tanzania, Uganda, Zambia and Zimbabwe and is known as Standard Bank in Angola, the DRC, Malawi, Namibia, Swaziland, South Africa, Lesotho, Mauritius and Mozambique.

The group has the largest presence in Africa with the Group total assets of approximately 182 billion USD as at December 2009 and employing about 35,000 people worldwide.

Tanzania Daily News (Dar es Salaam)

allAfrica.com http://allafrica.com/stories/201005050986.html Saudi Islamic bank to set up coaching centre in Delhi Wednesday, May 05, 2010 Dubai: In a major expansion plan in India, which will benefit mostly Muslim educational institutions, Saudi Arabia-based Islamic Development Bank (IDB) has approved several new projects for its financial grants. Initial investments, totaling 600,000 dollars, would be to start among others an extension centre in New Delhi of a premier civil services coaching institute presently run by Hamdard Education Society. Three more such world-class coaching institutes would be opened in the country. ''The IDB has pledged to support the educational projects within the framework of the regulatory provisions of the Indian government,'' Kamal Faruqui, an IDB representative in India, who made a presentation in Riyadh on Sunday, said. Mr Faruqui, who is also Delhi Minorities Commission Chairman and Central Bank of India Director, is currently visiting the Kingdom at the invitation of the IDB. He, a member of the board of Aligarh Muslim University, urged Saudi aid organizations and Indian expatriates to ''support minority projects and set up viable educational projects along commercial lines.'' He pointed out that a major educational project had been launched in Hapur city of Uttar Pradesh, which would primarily cater to the needs of Muslims. In his speech, he also gave an overview of the problems faced by Indian Muslims. He said the relationship between education and development was strong. ''Education is a key instrument of socio-economic development,'' Mr Faruqui said, adding the areas with better education have a higher GDP growth. Nafees Ahmed, an IDB employee, said the vision of the IDB was to promote education

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and training in India. He said the basic objective of the IDB special assistance programme was to ensure development of Muslims in non-member countries. Since its beginning, the number of projects supported under the programme worldwide exceeds 1,500 in which millions of dollars of IDB grants have been invested. http://www.newkerala.com/news/fullnews-101967.html Islamic finance could be an answer to global economic problems Thursday, May 06, 2010 Adopting Islamic finance practices could lead to a more equitable global economic system, an Islamic finance expert told an AUB audience. Sheikh Zaher Nsouli, chief of Shariah audits at the Lebanese Islamic Bank, added that methods applied in Islamic institutions could help prevent future economic meltdowns. Nsouli, in the talk “Islamic Finance in the Midst of the Meltdown Crisis,” held at AUB Suliman S. Olayan School of Business, praised the Islamic Zakat system where a 2.5 percent of all revenue is continually redistributed to the poor. “No economy is capable of doing or reaching such results except with Islamic finance, which is divine. As GDP increases, the Zakat increases and goes towards poverty alleviation,” he said. Anwar Soubra, Shariah compliance officer at Elaf Bank, Bahrain, praised the Islamic finance system due to its refusal to allow speculation. According to Soubra, 97 percent of all transactions done on the New York Stock Exchange were based on speculation. “Nobody goes for real delivery and this is not acceptable in Islamic finance,” he said. Speculation is an action that does not guarantee the safety or return of initial investment. It typically involves lending money or purchasing assets, equity or debt in an imprecise manner and is deemed to have a significant risk of the loss. The end result, according to Soubra, is a worrying disparity in the value of the real economy and that created by speculation. “We produce what is worth $60 trillion in the market but we buy and sell what is worth $2000 trillion”, he said. “It is a very big bubble and when it burst it hurts everybody.” Nsouli rounded on the greed of world finance, suggesting it was “malign neglect” which brought about the recent financial meltdown. “According to (ratings agency) Fitch, $1.4 trillion of sub-prime mortgages originated from 2005 to 2007. The heart of the sub-prime meltdown rests with the default of these loans. This is inadequate and it is something that I refer to as a malign neglect,” he said.

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A sub-prime mortgage is a loan granted to individuals with poor credit histories, who would not be able to qualify for conventional mortgages. Since sub-prime borrowers present a higher risk for lenders, sub-prime mortgages charge interest rates above the prime lending rate, something which Nsouli disapproved of. “We actually have a crisis in the system,” Nsouli added. He said that Adjustable Rate Mortgages – which charge repayment rates, linked to financial indexes – comprised 80 percent of US mortgages and accused derivatives markets of helping bring down some of the world’s biggest banks. “Derivates are estimated by the Bank of International Settlements to be $600 trillion, 10 times greater than the size of the world economy”, he said. A derivative is a security whose price is dependent upon or derived from one or more underlying assets, he explained. “Its value is determined by fluctuations in the underlying asset”, Nsouli said. “Derivatives are referred to by the American philanthropist Warren Buffett as being financial weapons of mass destruction.” Nsouli said that the current world economic system led to the 2007 world food crisis. “Food prices increased by 40 percent in 2007 and 50 percent in 2008,” he said. He added that 850 million people went to bed hungry in 2008 but the number today reached 1 billion. “To prevent the death of 50 million children it is estimated that $2.5 billion a year is needed, which is the same amount that a cigarette company spends on advertisements,” Nsouli said. He added that the problem lay not in scarcity of food, but in reallocation of wealth. “The GDP of 41 poor countries is less than the wealth of the richest seven persons combined,” he said. Al Bawaba http://www.albawaba.com/en/countries/Lebanon/315890 Winner sells Islamic Banking course in Shanghai Thursday, May 06, 2010 AMONG the many booths located in the Brunei Pavilion in Expo 2010 Shanghai, one booth stands out due to it’s promotion of a field that is very much unknown in China, Islamic banking. Hjh Salma Latiff, the Managing Director of Crescent Sdn Bhd, third prize winner of the ThinkBig Business Plan Competition 2009/10, is at the expo to promote her company’s Islamic Banking course to the rest of the world.

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Speaking to The Brunei Times, Hjh Salma revealed her bold plans to link up with universities from various parts of the world to provide either a Masters degree or an Advanced Diploma to students who joins the course conducted by her school. “We’re currently in talks with several universities, and they are very keen in such a collaboration, where our students will complete the course online, and then receive their diploma or degree,” said Hjh Salma. There will be 10 modules in the course, including Syariah Law of Contracts in Banking and Finance, Islamic Economics and Islamic Risk Investment. “Our discussion with Singapore University is in an advanced stage, and I believe we can conclude a deal by the end of the year, and students of Crescent can choose to receive an Advanced Diploma in Islamic Banking and Finance issued by them. We’re also hoping that we can collaborate with universities from China, and I hope we can start something early next year,” she said. Besides Singapore and China, Crescent is also looking at expanding into the markets of USA, Canada, Korea, Japan and the Middle East. The pricing for the course will vary according to the country of origin of the degree requested by students, and the certification offered in Singapore will cost about US$12,000. The Brunei Times http://news.brunei.fm/2010/05/06/winner-sells-islamic-banking-course-in-shanghai/

Shariah Banks Are the Future, Kenya drives Islamic financing in East Africa

Friday, May 07, 2010

NAIROBI (Xinhua): Kenya is angling herself to reap from the growing appetite for Islamic banking products by countries in East Africa as investors from the Gulf region show a renewed interest in the region.

Central Bank of Kenya (CBK) Governor Prof. Njuguna Ndungu said the renewed interest in Shariah compliant banking in the neighbouring countries could greatly benefit the country as it seeks to transform herself into a regional Islamic finance hub in tandem with her ambitious growth plan dubbed the Vision 2030.

“Under this vision, one of the key aspirations for the financial sector is positioning of Nairobi as a regional financial hub by 2030,” Njuguna told a major Islamic banking conference in Nairobi.

The two day conference, dubbed, Second Gulf African Bank Annual East and Central Africa Conference themed “Islamic Finance: The African Experience”, seeks to explore the African Perspective on Islamic finance and finance products and the challenges faced in the African market as well as applicable solutions.

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The conference also explored the global scenario, Islamic infrastructure bonds (Sukuk), Risk in Islamic finance, Islamic Insurance (Takaful), Technology, and the role of the Shariah board.

“There is a move by countries in the region to permit their institutions to offer Islamic products and the CBK is sharing its experience in Shariah compliant banking with other Central Banks in the East African Community,” Ndungu said.

Kenya has made great strides in Islamic banking since the licensing of the first two fully fledged Shariah compliant banks in 2008.

The two, Gulf Africa Bank (GAB) and First Community Bank currently boast of 1,570 loan accounts and 58,548 deposit accounts and control 0.8 per cent of the banking sector’s net assets after being in operation for less than two years.

These developments have enabled the formerly unbanked Kenyans and specifically the Muslim community in the marginal areas to have access to financial services adding to the wealth creation in the economy.

“This is a solid testimony of the vast potential of Islamic finance in Kenya, which should be tapped, and opportunities explored in the insurance and capital market segments using Shariah compliant vehicles,” Ndungu said.

Islamic Finance is so far the fastest growing segment in the global financial industry.

Despite the global financial crisis, Islamic finance has demonstrated strong growth with new areas of business such as mutual funds and Takaful industry attracting a lot of attention. We need to understand this business model that will support our comparative ad-vantage in the E.A.C. region”.

“The world is now looking at Islamic Finance as an alternative to the conventional finance system after the global financial turmoil,” GAB chairman Suleiman Shahbal said.

Kenya pioneered Islamic Banking in East and Central Africa with the licensing of the first two banks to exclusively offer Shariah compliant products, with many other conventional banks establishing a window specifically for Shariah compliant products. http://www.coastweek.com/3319-04.htm

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ISLAMIC BANKING & INSTITUTIONS

ADIB heads to Iraq as trail-blazer for Emirates

Thursday, April 29, 2010 Abu Dhabi Islamic Bank (ADIB) will become the first Emirati bank with a presence in Iraq when it opens a branch in Baghdad next month. The company plans to open other branches across Iraq. “We’ll have a branch in every major business city,” said Hussain Qaragholi, a senior vice president at ADIB and the company’s head of Iraq business.

Construction of the first Baghdad branch is under way, and the Central Bank of Iraq has given ADIB a preliminary license. “The next branches we’re looking for is Basra, Erbil, Najaf, Karbala, and eventually Mosul,” Mr Qaragholi said yesterday at an Iraqi Business Council conference in Abu Dhabi. Iraq’s banking sector continues to be dominated by public entities such as Rafidain Bank and Rashid Bank, as they control 85 per cent of the transactions in the country, while private banks account for 15 per cent. There are 36 local banks in the country, according to the Central Bank website.

Several foreign banks – including Capital Bank of Jordan, HSBC, National Bank of Kuwait and Ahli United Bank of Bahrain – have already set up in Iraq, but they have entered through partnerships with local banks. In the past, foreign banks shied away from opening branches under their own names because of security concerns. ADIB is only the second foreign bank to enter the market by starting a branch from scratch rather than through a partnership.

The first foreign bank to open a branch in Iraq was Byblos Bank of Lebanon, said Wassim Jazrawy, the head of Al Karmal Stock Exchange, a brokerage company in Baghdad. ADIB entry into the market was “a good and timely decision”, Mr Jazrawy said. The financial sector accounts for 80 per cent of shares traded on the Iraq Stock Exchange. Iraq banking sector suffered from years of isolation during the rule of Saddam Hussein and still lacks strong links with the outside world.

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Mr Qaragholi, an Iraqi-American, said bankers in Baghdad thought they could run the sector alone after the US invasion in 2003, but now realized the benefits of opening to foreign participation. ADIB planned to invest in power generation and oil services, he said. The property and manufacturing sectors are potentially attractive to investors, but accurate and detailed feasibility studies would be required, Mr Qaragholi added.

Foreign banks are hoping to capitalize on economic growth driven by rising oil production in Iraq. ADIB shares rose 3.2 per cent to Dh2.84 yesterday on the Abu Dhabi Securities Exchange. “The financial sector in Iraq is one that has remained in the shadows against the global financial crisis,” Mr Qaragholi said.

THE NATIONAL http://www.thenational.ae/apps/pbcs.dll/article?AID=/20100429/BUSINESS/704299889/1005 Qatar International Islamic Bank (QIIB) launches unique finance scheme Sunday, May 02, 2010 DOHA: Qatar International Islamic Bank (QIIB) has launched a new unique product providing the bank’s customers and non-customers to pay their financial obligations owed to other banks at competitive profit rates which are considered the lowest in the country.

International Islamic Assistant General Manager, Banking Services, Massoun Mohammed Al Asfar (pictured) said that anyone with a salary of QR5, 000 can be among the beneficiaries of this unique product provided the salary is transferred to International Islamic. He said that as per the provisions of the new offer 4.66 percent annual profit rates on financial obligations with a 5-year financing period will be applied. Besides, the profit rates for a financing period ranging from 6 to 10 years will amount to 5.23 percent.

Massoun added that the launch of the new product is in line with QIIB efforts to implement its philosophy in practice which is based on financial pressures and obligations that a large section of customers of banks may be facing.

He also said that customers of banks are now being provided an opportunity to benefit from the new offer by transferring their salary to International Islamic and thus pay their financial obligations to these banks at competitive profit rates.

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Many customers of other banks have been interested for a long time to deal with Islamic banking specifications which provide an opportunity to benefit from fixed terms and values contracts, fixed monthly installments and unchanged and non-cumulative total values for credits, said Massoun in a news release yesterday.

International Islamic customers and non-customers can take advantage of the new offer by approaching any of the QIIB branches.

QIIB is rapidly growing as one of the prominent Islamic banks in the Middle East region and beyond. The bank is one of the founders of Islamic Bank of Britain and of Syria International Islamic Bank.

The Peninsula (Qatar’s Leading English Daily) http://www.thepeninsulaqatar.com/Display_news.asp?section=Local_News&subsection=Qatar+News&month=May2010&file=Local_News201005023241.xml

Kuwait Finance House posts lower Q1 profit

Monday, May 03, 2010

KUWAIT: Kuwait Finance House (KFH), the country's biggest Islamic lender, yesterday reported a 21.4 per cent fall in first-quarter net profit, missing analysts' expectations. Net profit for the quarter was 30.9 million Dinars, or US$107 million (US$1 = RM3.19), down from 39.3 million Dinars in the same period a year earlier, KFH said in a statement on the bourse.

Earnings per share stood at 12.6 Fils, down from 15.9 Fils in the first quarter of last year. There are 1,000 Fils to the Dinar.

Two analysts had forecast net profit of 46 million and 65 million Dinars for the lender, according to a Reuter’s survey.

Chairman and managing director Bader al-Mukhaizeem said the bank would maintain its conservative policy and continue to add provisions to face the consequences of the global financial crisis. KFH said its assets on March 31 increased 11 per cent to US$40.5 billion, from US$37 billion a year ago. Deposits rose 7 per cent to US$25 billion at the end of the first quarter, while shareholders' equity inched 2 per cent higher to reach US$4.17 billion. Bader said in a statement the lender continued to book "sufficient provisions to face any consequences of the crisis". He did not provide any figures.

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Naser al-Nafisi, general manager of Al Joman Center for Economic Consultancy, said the drop in profit was due to the bank's investments in troubled Kuwaiti companies and reported trouble at its Malaysian unit. "Kuwait Finance House invests in many Islamic investment companies that are in financial trouble ... and at the same time it gives them loans," the analyst said. He said it was not clear if the problems in Malaysia were related to the lender's investments there or to its clients. However, Naser said the first-quarter figure was "very good" compared with earlier rumours about possible losses from the lender. The stock had fallen nearly 12 per cent over the past five weeks as investors fretted over its likely results. Business Times http://www.btimes.com.my/Current_News/BTIMES/articles/kufw/Article/ Dubai Islamic Bank Named ’Best Islamic Bank’ In UAE by Global Finance Magazine DIB recognized for third consecutive year by international jury of editors, banker and analysts Monday, May 03, 2010 Dubai Islamic Bank (DIB) announced today that it has been named the “Best Islamic Bank” in the UAE for 2010 by Global Finance magazine. Marking the third consecutive year that DIB has received this international award, this latest accolade underscores DIB leadership position in the UAE growing Islamic finance sector.

This award caps a string of industry accolades for DIB so far in 2010, following the 34 awards won by the bank in 2008 and 24 accolades in 2009.

Global Finance magazine’s annual award winners are selected by a jury of the magazine’s editors, following extensive consultations with bankers, corporate finance executives and analysts across the world. Additional criteria include growth in assets, profitability and product innovation, as well as opinions of equity analysts, banking consultants and other industry participants.

“We are delighted to have been named ‘Best Islamic Bank’ in the UAE for the third consecutive year by Global Finance,” said Abdulla Al Hamli, Chief Executive Officer, Dubai Islamic Bank. “Backed by a 35-year track record of success and committed to product innovation and service excellence, Dubai Islamic Bank continues to set new benchmarks in the UAE and the world at large.”

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Al Hamli continued: “At a time when the global economy is entering a period of recovery, we will maintain our focus on meeting the needs of our more than 900,000 customers across the UAE. We are grateful to Global Finance for recognizing our sustained efforts in that regard.”

DIB continues to be recognized by its peers for the excellence of its operations and innovative nature of its Shariah-compliant products and services. Most recently, the bank was named “Best Islamic Bank in the UAE” by Asiamoney, “Best Islamic Bank in the UAE” for the fifth consecutive year by Islamic Finance News, as well as “Best Investment Bank” by emeafinance.

Global Finance is a monthly magazine with a mission to help corporate leaders, bankers and investors chart the course of global business and finance. Headquartered in New York, the magazine offers analysis, articles and awards that are the heritage of 22 years of experience in international financial markets and provides a valuable source of data on 192 countries.

http://www.dubaicityguide.com/site/news/news-details.asp?newsid=29449 Sharjah Islamic Bank appoints new Head for Corporate Banking Group Tuesday, May 04, 2010 Sharjah: Sharjah Islamic Bank (SIB) has announced the appointment of Mr Rahma Mohammed Al Shamsi as Head of the bank's Corporate Banking Group. In his new position, Al Shamsi will oversee all the corporate banking services and products, and develop these services in compliance with Shariah principles, and the standards adopted by the bank.

The new appointment comes in line with SIB drive for Emiratisation as strategy outlined by the Board of Directors. SIB also contributes to community development by providing training to UAE nationals, enabling them to obtain the necessary qualifications and skills for the industry, and to become leaders, in line with the community partnership principle, and with SIB belief that the private sector has a significant role to play in developing a specialized national workforce and enabling them to compete in the job market.

Speaking on the occasion, Mr Al Shamsi, said, "The responsibility of the Corporate Banking Group is to take the initiative in rendering innovative corporate banking products and services to a broader base of corporate clients, and introducing Shariah-compliant innovative business solutions that are tailor-made to fit particular company requirements".

Mr Al Shamsi brings with him a wealth of financial and banking experience that make him suitable for this senior position and for managing SIB Corporate Banking Group.

Since joining SIB in 2004, Mr Al Shamsi held various senior positions throughout the bank, in the Strategic Planning Division, and the Investment and Banking Relations

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Division, before being promoted to the position of Deputy Head of the Credit Group, the position he held prior to his appointment to SIB Corporate Banking Group.

About Sharjah Islamic Bank Sharjah Islamic Bank, formerly known as National Bank of Sharjah, was founded by an Amiri decree issued by H.H. Dr. Sultan Bin Mohammed Al Qassimi, Member of the Supreme Council, and Ruler of Sharjah, to provide commercial banking services to firms and individuals. Originally a conventional bank, Sharjah Islamic Bank became the first in the world to convert successfully to Islamic banking in 2002. Since then, all operating systems and procedures have been modified to facilitate this conversion and all employees trained in Islamic banking. http://www.zawya.com/story.cfm/sidZAWYA20100504080809/Sharjah%20Islamic%20Bank%20appoints%20new%20Head%20for%20Corporate%20Banking%20Group Dubai Islamic Bank celebrates 35th anniversary 1,300 bank staff attend one-day event led by H.E. Mohammed Ibrahim Al Shaibani, Chairman of DIB, and DIB CEO Abdulla Al Hamli Performance Excellence Awards presented to outstanding employees and business departments Tuesday, May 04, 2010 Dubai: The world first Islamic bank and the largest Shariah-compliant financial institution in the UAE, Dubai Islamic Bank (DIB) recently celebrated the 35th anniversary of its establishment at a special one-day event, which was attended by more than 1,300 bank staff from across the country.

The event, which was held in Dubai, was led by His Excellency Mohammed Ibrahim Al Shaibani, Director-General of His Highness the Ruler's Court of Dubai and Chairman of Dubai Islamic Bank, and Abdulla Al Hamli, the Bank Chief Executive Officer. The highlight of the evening was the awarding of Performance Excellence Awards to outstanding employees and departments of the bank.

Introducing the awards, His Excellency Mr. Al Shaibani told the audience of DIB staff: "It is a joy to be here among my colleagues and friends. Our gathering reflects the strong relationship our employees have with this great organization, as well as our shared determination to reach new heights."

"Our sustained success, despite challenging global conditions that have impacted the performance of financial services firms worldwide, is testament to the focus and dedication of DIB employees in providing innovative products and services that meet the needs of our more than 900,000 customers here in the UAE and many more across the world," Mr. Al Hamli added.

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"Three and a half decades after the bank was founded," he said, "we remain uniquely positioned to thrive, and to continue to contribute to the economic growth and diversification of the UAE and all the markets that we serve."

The Dubai Islamic Bank Performance Excellence Awards was launched in 2002, creating a platform for internal development among DIB staff in order to provide the highest standards of service and customer satisfaction. The award focuses on rewarding outstanding achievements of employees and departments which encourage them to improve their performance in order to contribute to the success and growth of the bank.

About Dubai Islamic Bank

Dubai Islamic Bank (DIB), established in 1975, is the first Islamic bank to have incorporated the principles of Islam in all its practices and is the largest Islamic bank in the UAE. DIB is a public joint stock company, and its shares are listed on the Dubai Financial Market. The bank enjoys a reputation as a leader and innovator in maintaining the quality, flexibility and accessibility of its products and services. The bank currently operates 63 branches in the UAE.

DIB has been proactive in creating partnerships and alliances at both the local and international level. The bank has established DIB Pakistan Limited, a wholly owned subsidiary which has a network of 37 branches across 15 major cities in Pakistan. DIB also has a representative office in Turkey to enhance its access to that market. DIB has also received a preliminary banking license by the Central Bank of Jordan to operate as an Islamic financial institution through a new entity - Jordan Dubai Islamic Bank.

DIB has won the respect of its peers around the world for many years, and its leading position has been reaffirmed by the 34 awards that it won in 2008 and 24 accolades in 2009, across diversified areas, including retail, corporate and investment banking. The bank was recently named "Best Islamic Bank" for the fourth consecutive year by Banker Middle East magazine. DIB has also received many awards from international organizations, such as the prestigious "Bank of the Year" award from The Banker (Financial Times), along with prestigious accolades from UK-based Euromoney and NY-based Global Finance magazines.

http://www.zawya.com/story.cfm/sidZAWYA20100504112619/Dubai%20Islamic%20Bank%20celebrates%2035th%20anniversary

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Bahrain bank eyes Muamalat

Wednesday, May 05, 2010

MANAMA: Bahraini Islamic lender Al Baraka expects to buy a stake in Bank Muamalat Malaysia Bhd by the year-end, its chief executive said yesterday, as it seeks growth outside of its home market.

"There is a correspondence between us and them. We have stated our intention," Adnan Yousif said on the sidelines of a conference here, adding that he expected a deal to close this year.

Conglomerate DRB-HICOM Bhd holds a 70 per cent stake in Bank Muamalat, while state investment agency Khazanah Nasional Bhd owns the rest.

Al Baraka interest in the Malaysian lender comes as Gulf Islamic banks seek new growth areas to diversify earnings as their domestic markets mature.

Al Baraka has already said that it is planning to spend US$30 million to US$50 million (RM96 million to RM160 million) to buy a bank in Indonesia. Yousif also said that Al Baraka planned to grow its assets to about US$21 billion (RM67 billion) from about US$14 billion (RM45 billion) currently over the next three years. The bank also plans to open a representative office in Libya this year, having obtained initial approval from that country's central bank, he said. Business Times http://www.btimes.com.my/Current_News/BTIMES/articles/bara3-2/Article/ Dubai Group may not sell Bank Islam stake - Report

Wednesday, May 05, 2010

KUALA LUMPUR: Dubai Group may not be keen to sell its stake in Malaysia No. 2 Shariah lender Bank Islam, the Business Times reported on Wednesday, citing a source. "They may not sell after all because they see value in the bank," the source was quoted as saying in a Business Times report.

Dubai Group, an investment vehicle owned by the ruler of Dubai, said last month that its plan to sell Bank Islam was unlikely to be completed by June. The sale was to help the Middle Eastern investor shift its focus closer to home and settle its debt burden.

Dubai Financial Group, a unit of Dubai Group, holds a 40 percent stake in the Malaysian lender, according to Bank Islam's website.

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Both Dubai Group and Bank Islam were not immediately available for comment.

The Business Times report said Dubai Group had initially hired investment bankers Rothschild to find potential buyers.

Bahrain's Unicorn Investment Bank has said it was mulling buying Dubai Group's stake in Bank Islam.

Several Islamic bankers have said the Islamic subsidiary of Malaysia's largest lender Maybank (MBBM.KL) was also keen to take up a stake in Bank Islam. Malaysian Islamic banking group BIMB Holdings Bhd (BIMB.KL) owns 51 percent of Bank Islam, with Lembaga Tabung Haji, or the Malaysian Pilgrims fund, holding the remaining 9 percent.

Reuters http://www.reuters.com/article/idUSSGE6430ND20100505 Dubai Islamic Bank Q1 net plunges 46 per cent Wednesday, May 05, 2010 Dubai: Dubai Islamic Bank (DIB), a leading Islamic bank in the region, said its net profit for the first quarter plunged 46 per cent to Dh200 million ($54.4 million) when compared to Dh370.3 million last year. Announcing the results on Wednesday, DIB said its total assets as on March 31, 2010, stood at Dh85 billion compared to Dh84.3 billion at the end of 2009. The customer deposits stood at Dh64.7 billion compared to Dh64.2 billion as of December 31, 2009. The bank reported a healthy financing-to-deposit ratio of 79 per cent, providing a clear indication of the bank’s healthy liquidity position. The bank also reported a robust Basel II capital adequacy ratio of 17.9 per cent, as of the same date. Commenting on the results, Mohammed Ibrahim Al Shaibani, director-general of The Ruler’s Court of Dubai and chairman of DIB, said the financial performance during the first three months was impacted by the bank’s ongoing policy of prudent provisioning, as well as lower contribution levels from group companies during the period. “Thirty-five years after the bank was founded, DIB continues to provide innovative products and customized services that help sustain public and private-sector organizations, and facilitate personal growth opportunities for its more than 900,000 customers in the UAE alone,” he remarked.

In line with its long-term domestic retail expansion strategy, Dubai Islamic Bank continues to focus on the opening of strategically located branches and express banking centers, while also increasing its total customer base, he added.

Trade Arabia News Service

http://www.tradearabia.net/news/BANK_179287.html

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SUKUK (ISLAMIC BONDS) RPT-Malaysia's Kencana plans 250 million Rgt Sukuk Friday, April 30, 2010 Malaysia's Kencana Petroleum says to sell up to 250 million Rgt Sukuk

The Sukuk will be guaranteed by Danajamin Nasional Berhad, Kencana said in a stock exchange filing.

AmInvestment Bank Berhad has been appointed as the principal adviser and lead arranger for the proposed Sukuk.

The purpose of the Sukuk is to mainly finance/refinance the Kencana Petroleum Groups acquisition of offshore support vessels. The Sukuk issuance is still subject to relevant documentations and approval by the Securities Commission, it said.

Reuters India http://in.reuters.com/article/rbssEnergyNews/idINSGE63T05Z20100430?sp=true Nakheel May Pay Bonds May 13 without Formal Debt Agreement Sunday, May 02, 201 Nakheel PJSC may pay about 3.6 billion Dirhams ($980 million) of Islamic bonds due May 13 even if its parent Dubai World doesn’t reach a formal debt-restructuring agreement, a government spokeswoman said.

A formal agreement with creditors isn’t needed to repay the bonds, said the spokeswoman for Dubai’s Department of Finance yesterday. Dubai World in March said Nakheel local-currency and dollar-denominated Sukuk will be paid on time “assuming sufficient support” for the restructuring plan from banks.

“Repayment of the Nakheel 2010 Sukuk would be an important step towards restoring investor confidence in Gulf credit,” said Chavan Bhogaita, head of credit research at National Bank of Abu Dhabi PJSC, the United Arab Emirates second-biggest bank by assets. “Despite the fact that there’s still some way to go in terms of the broader Dubai World restructuring, the market is expecting the Nakheel ‘10s to be repaid.”

Nakheel floating-rate Sukuk closed at 97.33 Fils to the Dirham on April 30, according to data compiled by Bloomberg. They have climbed 47 percent since Dubai World on March 25 proposed to renegotiate terms of its debt.

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Dubai World, one of the Emirate’s three main state-owned holding companies, and Nakheel are seeking to renegotiate about $24.8 billion of liabilities after the global credit crisis hurt Dubai’s property market and left the emirate’s companies unable to get loans. Nakheel has a total $1.73 billion of Islamic bonds maturing this month and in January 2011.

Interest Rates

Dubai World asked its almost 100 creditors on March 25 to roll over liabilities into two new loans of five and eight years maturities. The company offered to pay creditors an additional 1 percent interest upon the maturity of rolled-over loans that are part of a $14.2 billion debt restructuring, a banker familiar with the plan said last week.

Dubai World’s creditors will be paid interest below the market rate in cash, although that will be supplemented by so- called payment-in-kind interest, a person close to the Dubai government said March 29. Nakheel, which owes $10.5 billion to suppliers, contractors and banks, plans to pay market-linked interest rates, according to the restructuring proposal.

Banks are asking for different rates on dirham and dollar loans rather than the uniform 1 percent, the banker said last week. The 1 percent rate would be on top of the 1 percent offered over the life of the loan.

The spokeswoman for Dubai’s Department of Finance declined to be identified, citing government policy. Bloomberg http://www.businessweek.com/news/2010-05-02/nakheel-may-pay-bonds-may-13-without-formal-debt-agreement.html Al Rajhi turns to untapped Sukuk Monday, May 03, 2010 After a fivefold increase during a run from 2000 to 2006, the Saudi stock market lost two-thirds of its value in downturns in 2006 and 2008. It is little surprise, then, that falling trading volumes have dented revenues at Al Rajhi Capital, the kingdom’s largest brokerage by market share. Al Rajhi Capital is the investment banking subsidiary of Al Rajhi Bank, the largest commercial bank in the Gulf Co-operation Council countries by market capitalization, and the largest Islamic bank in Saudi Arabia.

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“Our brokerage is our biggest business, so low volumes directly affect us, even though we are the current market leader,’’ says Marcus Andrade, chief executive officer. He says many risk-averse investors have shunned equities for commodities.

To compensate, Al Rajhi is looking at structuring and trading Sukuk, or Islamic bonds, as the market develops. Gaurav Shah, head of asset management at Al Rajhi Capital, says Sukuk are likely to gain importance and increase in size over the years. “GCC institutions have a multibillion dollar infrastructure spending programme and we foresee Sukuk issuance to be one of the key instruments to finance this. This will fuel growth and enhance liquidity for Sukuk,” Mr Shah says.

Yet until last year, only four significant Sukuk offerings had been approved by the Saudi Capital Market Authority, two for the Saudi Electric Company and two for the Saudi Basic Industries Company. Both are majority owned by the government or government funds, and both are among the largest in the region.

Saudi Arabia is therefore a relatively small issuer of Sukuk. Dubai has sold more Sukuk than all Saudi Arabian entities together.

Bankers blame the lack of issuance in Saudi Arabia on a complicated regulatory regime and a lack of suitable laws, allowing, for example, the creation of special-purpose vehicles.

“Unless you absolutely have to raise finance Islamically, you will think long and hard before issuing Sukuk. If you’re a strong, government-linked entity, you can get waivers on some conditions, but this takes time,” says one banker who works in Saudi Arabia.

While the Sukuk market is likely to evolve in the long term, Al Rajhi Capital also intends to target the dramatic growth in the number of Shariah-compliant insurance companies on the Saudi stock exchange by offering Shariah-compliant products.

Since regulations for the insurance industry took effect in 2007, 27 insurance companies have listed.

It is also looking to raise its market share with the launch of three principal-protected Shariah-compliant funds focused on Saudi Rabian, Arab Gulf and global equities.

Mr Andrade says he is targeting retail and institutional investors who want to invest in three-year Islamic products.

He also intends to launch an actively managed offshore Saudi equity fund targeting foreign investors looking to tap the Middle East’s largest economy.

Al-Rajhi believes that Saudi investors are cautious on equities after suffering losses, but that they may invest in principal-protected products that guarantee the return of capital.

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FT.com (Financial Times) http://www.ft.com/cms/s/0/a0764952-56c5-11df-aa89-00144feab49a.html International Financial Centre (DIFC) to set template for Sukuk issuance Tuesday, May 04, 2010 The Dubai International Financial Centre (DIFC) has started to create 'Dubai docs', a standardized document for anyone who wishes to list or raise a Sukuk from the centre, a move that is aimed to reduce the cost of Sukuk documentation.

The centre will use the International Finance Corporation (IFC) Sukuk listed on Nasdaq Dubai to set a benchmark for new issuances. The $100 million (Dh367.3m) Sukuk, the first Islamic bond by the World Bank in the region, is a dollar-dominated non-amortizing issue with a five-year maturity.

"What we are trying to do is to build on the IFC Sukuk and make it a standard model for the issuance of those types of Sukuk," Dr Nasser Al Saidi, DIFC chief economist told Emirates Business on the sidelines of a Sukuk symposium yesterday.

"Instead of each issuer having to do the work all over again, they will take the standard Dubai doc. There will be something specific for a particular project, but the basic document will be unchanged," he said, declining to give a specific time frame for the project.

Because of the relative infancy of the product, Sukuk documentation is often highly negotiated and based on no existing template, making the process costlier than conventional bonds and other securities.

The industry estimates that to justify the cost structure, the ideal size of a Sukuk needs to be at least $500m. This is because documentation cost tends to be fixed at $100,000-250,000 per issuance, a negligible cost if the issue is sizeable.

"If you are raising $1 billion, how much is that for you?" a senior banker told this newspaper on condition of anonymity. "But if you want to issue a $200,000 or $100,000 Sukuk, the cost of documentation is still around $250,000 because all the legal work is the same. Is Sukuk the right product for $50m? I say, no."

Standard & Poor's (S&P) confirms that the costs of structuring and issuing Sukuk remain high relative to conventional bank loans and bond issuance. Legal and accounting fees contribute to this higher cost structure, as does uncertainty regarding the perceived risk associated with these instruments.

In addition, the lack of standard structures, perceived differences in approach to Shariah compliance, and a relatively illiquid secondary market also tend to discourage investors.

IFC, itself had spoken of the relative difficulty in the whole Sukuk process. Nina Shapiro, IFC Vice-President for Finance and Treasurer, told this newspaper in October that structuring the instrument was "more expensive" and "more difficult".

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The lack of standardization is just one of the many hurdles in Islamic finance. "Because there is no standard documentation, the set-up and transaction costs are high. You see, there is nothing that says this is a Sukuk," Saidi said, stressing that Saudi Arabia's interpretation may be different from those in Malaysia.

These two countries have the lion's share of the global Sukuk market. Data from S&P show that new Sukuk issuance in 2009 increased to $23.3bn from $14.9bn in 2008. Despite the crisis, the geographic spread of Sukuk issuance showed a marked resurgence in Asia in general and Malaysia in particular with 54 per cent of the total volume. Saudi Arabia also saw an increase to $3.1bn in 2009 from $1.7bn in 2008.

Meet for industry consensus

The DIFC and The Graduate School of Management at the University Putra Malaysia yesterday hosted a symposium to discuss various approaches for establishing industry consensus on the key characteristics of Sukuk.

Titled 'Sukuk: Theory, Practice and Issues', the symposium formed part of DIFC's and University Putra Malaysia's joint efforts to promote standardization and the development of academic literature on Islamic Finance issues.

Dr Nasser Al Saidi, Chief Economist of DIFC Authority, said: "Over the past few years, Sukuk has gained wider interest beyond the Islamic world as a tool for raising finance and securitization. With the global financial crisis reducing the appetite for risk and volatile asset classes, investors are increasingly looking at Sukuk as a safe investment option. However, one of the key concerns investors have with Sukuk is the lack of industry consensus on what constitutes a Shariah-compliant product."

Peter Casey, Director, Policy and Head of Islamic finance at DIFC, said: "At present, most issues in the Sukuk market, whatever their form, are structured to have a similar economic effect to conventional bonds. In this situation, the regulatory issues are relatively straightforward. For the future, there may well be ?challenges posed by novel structures, especially if these involve real elements of asset or business risk."

Emirates Business 24-7 http://www.business24-7.ae/companies-markets/markets/difc-to-set-template-for-Sukuk-issuance-2010-05-04-1.240091 Central Bank Kenya targets Gulf cash with Shariah compliant bonds Tuesday, May 4, 2010 Kenya: The Central Bank is working on a framework that will eventually lead to the flotation of Shariah - compliant bonds and treasury bills in the local money market.

The move to entrench Sukuk bonds and bills in the law is seen as a push by CBK to tap the increasing amount of cash flowing into Africa from the Gulf region.

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Sukuk — bonds that are structured to be in compliance with Shariah law which bars payment of interest — have seen rapid uptake in recent years as more and more businesses and governments have used them to raise financing.

They has a maturity that is determined in advance and is backed by an asset which makes it possible for the investor to earn a return from the profits derived from the assets.

Much of this activity has taken place in the Gulf and South East Asia so far, and analysts believe a government issue could be the key that Kenya needs to place it as the premier Islamic finance hub in the region.

“We’re still waiting for the structured Sukuk to cover bonds and the Treasury bills market,” says Alex Nandi – deputy director banking supervision at the CBK.

Plans for a framework to oversee the flotation of Sukuk come two years after the licensing of the first Islamic banks in Kenya. Gulf African Bank and First Community Bank are still finding their footing in the Kenyan banking sector and are on course to turning profitable two years into operations. But unlike conventional banks which are able to trade in bonds and treasury bills, Shariah law has constrained income avenues for Islamic banks.

With the flotation of Sukuk bonds, Islamic banks will have an investment avenue to generate income from the new form of government securities.

Infrastructure bond Gulf African Bank for instance invested Sh500 million in the Sukuk portion of a government infrastructure bond issue last year and received a 13.5 per cent rate of return.

In 2009 the bank earned Sh56.6 million from its investment in government securities compared to no income from government securities in 2008.

The banks are also benefiting from cash flowing from the Middle East into investment projects in the country.

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Sovereign funds in Gulf States, flush with cash are eyeing African countries as lucrative investment zones and most of this cash is handled by these institutions.

“There is a huge appetite by business people from the Gulf region to invest in Africa,” says Suleiman Shahbal, the chairman of Gulf African Bank.

Since the break-out of the global economic crisis which took it’s toll on conventional banking, Islamic banking and financing has enjoyed a growing popularity.

Touted as the answer to conventional banking whose risky practices have come under the spotlight since the start of global financial crisis back in 2008, it presented an attractive alternative.

Last year, global issuance of Shariah - compliant bonds and loans grew 40 per cent in the first 10 months of 2009 compared to the same period a year ago, as reported by the New York Times. The total amount of Shariah - compliant debt outstanding is estimated at about $1 trillion, up from $700 billion just two years ago.

Still, Sukuk issues were not spared the snowball effect of the global financial crisis that hit conventional banks.

Sukuk issues fell from $25 billion in 2007 to $15 billion last year.

Jawal Ali a managing partner at law firm King and Spalding’s Middle East office says that by 2008, up to 85 per cent of Sukuk issued were not considered Shariah compliant.

But the Dubai Debt crisis early this year did nothing to firm-up the credibility of Islamic financing as a bright spotlight was cast on Sukuk.

About 10 per cent of the Dubai’s $80 billion debt load is estimated to comply with Shariah, casting the spotlight on the credibility pedestal Islamic financing has ridden on over the years.

Underlying assets A key problem was a collapse in value of underlying assets – primarily real estate investments – which back Sukuk issues.

Islamic bonds are structured as profit-sharing or rental agreements, and their returns are derived from underlying physical assets such as real estate or commodities.

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Unlike conventional banking which has a vast array of investment options, Islamic banks are heavily concentrated in real estate placing them at high risk should property values fall as they did during the financial crisis.

But as the global economy limps out of the recession and the choke-hold on credit eases, Islamic financing is expected to gain traction this year.

“There is a lot of market activity and there might be a pick up this year,” says Mr Ali. Business Daily, Africa http://www.businessdailyafrica.com/CBK%20targets%20Gulf%20cash%20with%20Shariah%20compliant%20bonds/-/539552/911328/-/item/0/-/15hxuj3/-/index.html

Cagamas and Al-Rajhi to develop, issue Sukuk for Mideast market

Tuesday, May 04, 2010

RIYADH: National mortgage corporation Cagamas Bhd will join hands with Al-Rajhi Banking and Investment Corp (M) Bhd to develop and issue first-of its kind Sukuk by June to woo Middle East investors.

President and chief executive officer Steven Choy said: “We have partnered Al-Rajhi to do this new structure under which Al-Rajhi itself will also be investing in the Sukuk.”

“If they (investors) see Syariah advisory from Al-Rajhi, they will see this Sukuk is in line with their Syariah principle,” he told Bernama in an interview on the sidelines of the Malaysia International Islamic Financial Centre road show recently.

The Sukuk, also tradable in the secondary market, was targeted at not only Middle East investors but also other investors, said Choy.

The Sukuk will be a Malaysian issuance and ringgit-based.

Asked to elaborate on the Sukuk size, Choy said: “We’ve issued from a few hundred million up to RM 2 billion.

“It will be around that range (and) it will depend on what assets we buy, but it will be sizeable.”

Since Cagamas’ incorporation in 1986, the country’s biggest buyer of home loans has cumulatively issued RM241.39bil of conventional and Islamic debt securities.

http://biz.thestar.com.my/news/story.asp?file=/2010/5/4/business/6184143&sec=business

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Sukuk still a niche despite huge potential Islamic bond issuance in 2009 increased to $23.3 billion. Wednesday, May 05, 2010 If you kept stacking dollar bills vertically, one on top of another, a trillion dollars would reach the moon – that is about the current size of Islamic finance. However huge it may sound though, the industry is just one per cent of the total global finance market despite the 10 to 15 per cent growth it has enjoyed in the past few decades.

"Despite its big potential and huge growth in the recent past, Islamic finance is still a small, niche market. The main question is how do we [take it] mainstream and standardize it," said Dr Nasser Saidi, DIFC chief economist, adding that the share of listed Islamic securities in the whole pie is only $54 billion (Dh198bn) or five per cent.

Sukuk, or Islamic bonds, have consistently been tapped as a forerunner of Islamic finance and the financial crisis has only served to increase the size of the world's debt markets, including Sukuk. In 2009, bond issuance by corporate bodies was about $1.7trn, 80 per cent of which was investment grade, according to Bank Sarasin.

Debt issuance increased as corporations found it difficult to borrow from banks, and as investors were lured by attractive corporate bond returns.

In line with this, new Sukuk issuance in 2009 increased to $23.3bn compared to $14.9bn in 2008, with a marked resurgence in Asia in general, and Malaysia in particular, with 54 per cent of the total volume.

Saudi Arabia saw an increase to $3.1bn in 2009 compared to $1.7bn in 2008, figures from Standard & Poor's show. This growth is expected to continue because there are 1.57 billion Muslims in the world, or 23 per cent of the global population, and most of them prefer Shariah compliant solutions.

"Out of this, 60 per cent are in Asia which has low banking penetration. In Egypt, for example, only one out of 10 households has a bank account," Saidi said.

To service this population and match growing economies, long-term funding needs to be put in place. MEED estimates that the GCC would need $2.8trn worth of infrastructure projects over the next 15 years.

Fluctuations in the oil and gas markets and the probability of banks to offer loans with long-term tenures makes it less ideal for these states to depend on oil revenues and even on the loan market.

Tenor of investment

Saidi said governments should issue securities according to the tenor of investments rather than obtaining short-term funds to fuel long-term projects and be stuck with the pressure of rolling over the debts each time the obligation matures. Thus, governments should introduce Sukuk as a part and parcel of their overall public finance programmes.

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"Unless we see the government and central banks use Shariah concepts we'll not be able to grow the market," he said.

But this is just one of the hurdles. Experts agree that unless a list of pressing issues in Islamic finance – Sukuk in particular – is addressed, the market will grow at a much slower rate than expected.

First among the many unresolved issues is whether Sukuk are Islamic or not. Sukuk are widely regarded as controversial due to their perceived purpose of evading the restrictions on Riba, or interest. Conservative scholars do not believe that this is effective, citing the fact that Sukuk effectively require payments for the time-value of money, which can be regarded as the fundamental test of interest.

Sukuk offer investors fixed returns on their investments, which is also similar in appearance to interest, in that the investors' returns are not necessarily dependent on the risks of the particular venture.

Sukuk can be structured using different techniques. While a conventional bond is a promise to repay a loan, a Sukuk constitutes partial ownership in a debt (Sukuk murabaha), asset (Sukuk al ijara), project (Sukuk al istisna), business (Sukuk al musharaka), or investment (Sukuk al istithmar).

Such structures can be listed on exchanges and be made tradable through conventional organizations like Euroclear or Clearstream – settlement systems for securities transactions, covering both bonds and equities.

Some interpretations say that under Shariah law, certificates of debt are not tradable – hence certain structuring elements for Sukuk al musharaka, Sukuk al mudaraba and Sukuk al istithmar have been criticized.

Debt certificates can be only bought before the actual financing occurs and then held to maturity from an Islamic perspective, which is critical on debt trading at market value, regarding any difference in price as prohibited interest on money.

As Shariah considers money to be a measuring tool for value and not an asset in itself, it requires that one should not receive income from money [or anything that has the genus of money] alone. This generation of money from money is Riba and is forbidden.

"Most Sukuk are structured to replicate the economic effects of a conventional bond… These may be hard words but this is the reality. I've picked up a few Sukuk documents recently and that, it seems to me, is what is actually going on," Peter Casey, Director, Policy & Head of Islamic Finance, DFSA, said.

Sale of debt

While Sukuk offer a useful potential mechanism for secondary market resource mobilization, they also open the way for sale of debt receivables as minority share in a general Sukuk issue.

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"Since the sale of debt, except at its face value, is not generally acceptable by scholars, the use of Sukuk where debt receivables are a noticeable proportion remains suspect from a Shariah point of view," Dr Munawar Iqbal, former Chief of Research, Islamic Banking and Finance, Islamic Development Bank Group, said.

Furore had also broken out when it was incorrectly reported that Sheikh Taqi Usmani of AAOIFI declared that 85 per cent of Sukuk were not Shariah-compliant. Usmani had said no such thing and his remarks were directed towards certain malpractices in structuring Sukuk based on partnerships (musharaka). But the controversy demonstrated investor insecurity regarding the Sukuk market.

Iqbal said such remarks sent shock waves into the Sukuk market around the globe, pushing issuance down to $14bn in 2008, compared to some $50bn in 2007. Though Standard & Poor's estimated in September 2008 that the Sukuk market in its entirety would exceed $100bn by 2009 with the latest hiccup, "no reliable" statistics exist that can confirm that their estimates were fulfilled, he said.

"Damage control efforts have started earnestly, but my view is that even if the Sukuk market witnesses some recovery, it will in the short run be only due to excess liquidity in the market," he said.

Iqbal added that Sukuk will remain "under cloud for some time" and there is a big challenge for financial engineers to come up with new Sukuk structures that can reassure investors about their Shariah-compliance.

While the issue of being Shariah-compliant remains in the hands of scholars to debate, the fact that some Sukuk have begun to default is not debatable.

"Default and potential default is an issue," Saidi said. "How do you deal with insolvency? The debt bond market has been here for 180 years and has been tested, but the system to deal with Sukuk default is not yet developed." The industry is still waiting to see what will happen on the bankruptcy filing by East Cameron Partners in the United States, which was behind the issuance of the US's first and only Sukuk.

Since this is largely uncharted territory, Sukuk holders will be keen to see where they appear on the list of creditors.

TID and Blom case

Another issue that remains to be resolved is the default by The Investment Dar (TID) of Kuwait on a Sukuk payment that matured in 2009. The case is on-going and has been controversial because the issue involves whether an instrument is Islamic or not.

The case started when a Lebanese bank, Blom Developments Bank, provided TID with $10 million in funds, the principal amount, through a wakala or agency-based deposit/investment structure. It was intended that TID would ultimately return the principal amount along with an expected amount of profit based upon an anticipated profit rate for each investment transaction.

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When TID failed to pay the expected profit and to return the principal amount at the end of the investment period, Blom sued TID on the grounds of breach of agreement.

TID however countered that the arrangements were void because the wakala did not comply with Shariah. The English court issued a summary judgment ordering TID to pay to Blom the principal amount but not the expected profit in respect of which the court felt there was a case to be argued. TID elected to appeal the summary judgment with a view to overturning the order to pay the principal amount to Blom. "The TID-Blom litigation is an important and timely reminder to legal practitioners and other stakeholders in the Islamic finance industry that the importance of an obligor's own approach to Shariah compliance should not be overlooked," law firm Clifford Chance said.

"In practice, it seems inevitable that this will lead banks, both Islamic and conventional, to conduct a closer examination of the capacity and authority side of transactions that they enter into with Islamic clients," it added.

Nakheel was also feared to default on a $3.52bn Sukuk, which matured in mid-December 2009, together with an approximately $500m profit payment on the Sukuk.

While some observers have speculated that refinancing the Sukuk would be expensive, the Dubai Department of Finance advised Zawya Dow Jones in September 2009 that defaulting on the Sukuk "isn't an option". The Nakheel Sukuk was nevertheless paid on time with support from Abu Dhabi.

And just last month, Saad investors have agreed to dissolve the $650m Sukuk. The dissolution may allow investors to claim assets used to back the Islamic securities sold in May 2007 by the Saad Group's Golden Belt 1 Sukuk Co BSC.

Because of these cases, Sukuk are no longer viewed as havens that offer predictable returns with minimal risk. "The market is unlikely to grow until default and bankruptcy situations are clarified," Sarasin-Alpen said.

"If we don't address this, Sukuk will be viewed as unduly riskier," Saidi added.

Teething problems

While Sukuk typically have underlying assets, two questions need to be resolved about these, according to a senior regulator.

"The first one is, can those assets be accessed by the Sukuk holders if they wanted to make that claim? And the second: if they could, would they want to?" asked Peter Casey, Director, Policy & Head of Islamic Finance, DFSA.

He said assets often include real estate in jurisdictions whose worth is likely to have dived and where Sukuk holders may have difficulty of access.

"Put yourself in the position of a Sukuk holder who has a choice between trying to make good of the assets and trying to make good of the claim against the ultimate obliger. The

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best you could do is to take and sell them," he said, adding that a platform to stage this move has not yet been established.

Another issue relates to continuing disclosures, which he said, will be "trickier" going forward. He said the easier way is for regulators to put a full set of disclosures for both but it may result in overburdening the market. "I think regulators would choose to specify the disclosures initially on very broad risk terms before specifying them precisely. However, with very limited experience in asking for disclosures and imposing them in the market, there will be bound to be some teething troubles," Casey said.

On May 2, Nasdaq Dubai suspended select Sukuk and other securities from the official list for not disclosing their 2009 financial statements and annual reports to the exchange. The list of suspended Sukuk and other securities includes IIG Funding, Nakheel Development 2, Nakheel Development 3, TID Global Sukuk I, and Dubai Holding Commercial Operations MTN.

Continuing corporate governance also needs to be addressed, Casey said. In principle some investors will invest on the basis that underlying investments are, and will remain, Shariah compliant.

"It's quite possible [this] might be breached, which would have an impact on the market," he said.

Emirates Business 24-7 http://www.business24-7.ae/banking-finance/islamic-finance/Sukuk-still-a-niche-despite-huge-potential-2010-05-05-1.240580 ADB mulls multi-billion dollar Sukuk Wednesday, May 05, 2010 Manama: The Asian Development Bank (ADB) is considering launching a medium-term note (MTN) programme worth several billions dollar for Islamic bonds, or Sukuk, to finance infrastructure in Asia, an official said on Wednesday.

"If we use such an instrument we're able to tap a wider wealth pool," Jaseem Ahmed, a director of ADB Southeast Asia Department, told Reuters on the sidelines of a conference in Manama.

"It would be really nice if we could do a large programme, several billion dollars over a number of years," he said.

Payments to Sukuk holders are made from cash-flows generated by underlying assets such as real estate or infrastructure.

The Sukuk market in the Gulf region has been dominated by real estate projects and there is a dearth of highly- rated issues such as those by sovereigns or multinational organizations.

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The Islamic Development Bank (IDB), with which the ADB is cooperating on advising countries on building their Islamic finance regulations, has become an important issuer with its multi-billion dollar MTN Sukuk programme.

"In Asia, we need at least $300 billion investments every year in infrastructure, in water, roads, communications ... so this is a very exciting development for us," Ahmed said.

Ahmed said the ADB was still studying whether the Sukuk programme would be compliant with its charter. "The question is whether we need to make any adjustments in light of our charter ... we are now carrying out that evaluation," he said.

"The sooner, the better. Can we do it this year? I can't say but I'd be happy if we could," he said when asked when the programme could be launched. - Reuters

http://www.tradearabia.com/news/newsdetails.asp?Sn=BANK&artid=179268

TAKAFUL (ISLAMIC INSURANCE)

Britain’s only Takaful insurer closes Sunday, May 02, 2010 Britain’s first Takaful insurance company is no more. Salaam Halal offered car insurance from July 2008 and home insurance from April 2009.When it went into run-off in October 2009 it had 10,000 motor and a few home policies. It is not renewing any policies or taking on new business. The company claims it is close to a deal to sell the assets and liabilities, but by October there will be no customers left. The company hoped to raise £80m but Salaam Halal’s parent company Principle Insurance Holdings only raised £60m from investors when it was launched. Bradley Brandon-Cross, chief executive, says: “We had planned to raise some more, but unfortunately the Gulf States have been as badly impacted by the recession.” To its credit, and to the FSA’s shame, it was the insurer who pulled the plug. Spokeswoman Bree Sims explains: “The Company approached the FSA about its solvency capital position as it was in danger of breaching the minimum of solvency capital. The Company voluntarily applied to have its permissions varied to cease transacting insurance contracts. All policy liabilities and claims continue to be met. The economic turndown has affected the GCC region. This meant that a planned rights issue during 2009 did not produce sufficient funds to support the company’s continuation. Although the company had more than sufficient funds to meet current policy liabilities and creditors, FSA rules mean all insurers have to have sufficient capital for a minimum

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of the next three years. The board was not certain it could meet that condition and hence the decision to cease issuing and renewing Takaful contracts.” The company had investors throughout the Gulf region, including from Saudi Arabia, Bahrain, Kuwait, Qatar, the UAE as well as Malaysia. Most Takaful insurers are backed by insurance groups, banks or property groups. But according to Bree Sims: “The Company has 54 shareholders who are a mix of corporate, family and HNW individual investors, based primarily throughout the GCC region.” Moneymarket.com (United Kingdom) http://www.money-marketuk.com/index.php?option=com_content&view=article&id=811:britains-only-Takaful-insurer-closes&catid=69:opinion&Itemid=317 Pak-Qatar to invest Rs500m in Family Takaful Tuesday, May 04, 2010 KARACHI: The sponsor of Pak-Qatar Takaful has planned an investment of around Rs500 million in Pakistan for expanding its Family Takaful business and other related projects, said P. Ahmed, Chief Executive Officer, Pak-Qatar Family Takaful Limited talking to The News on Monday. “Considering potential growth in Takaful business the board of directors of the company decided to make investment during the current year,” he said. The company would invest further Rs500 million in Family Takaful and other related projects for expansion, Ahmed said. Pak-Qatar initiated the Takaful – Shariah-compliant insurance - in Pakistan with the help of leading Qatar bank in 2005. The company operates in both general and family Takaful. During the last financial year the family Takaful business of the company has registered tremendous growth. The contribution of the company reached to Rs466.64 million during the last financial year from Rs129.68 million in 2008. “The clients have entrusted the Shariah compliant insurance system that resulted in exponential growth,” the CEO said. “The robust growth in contribution provided opportunity for expansion,” Ahmed said. The Family Takaful was incorporated in 2006 and started operation in 2007 with the paid up capital of Rs533 million. In the very first year the company received overwhelming response amid global recession and economic deterioration at the domestic front. To a question on the impact on Takaful business of global recession and domestic economic deterioration, the CEO said that the insurance on Shariah principles was in initial phases. “The insecurity in conventional insurance system attracted the people to adopt Takaful,” he said. He said that the global recession was due to financial crisis but in Pakistan it has its own reasons attributed to energy crisis etc. As the contribution for family Takaful increased the number of claims also rose significantly in 2009. “The claims are integral part of

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insurance business. Though the claims went up the ratio against the contribution has declined during the year,” he said and adding the ratio would further decline in upcoming years because the family Takaful is in its initial phases. Surplus, which is an inherent benefit of Takaful, is calculated as the remaining amount in Waqf Fund after paying off all claims and meeting all expenses for the year. The company will share 15 per cent of the surplus amount with the Individual Takaful participants. “The advantage of surplus makes the Takaful different from conventional insurance system. The Pak-Qatar Takaful is the first company to declare the surplus,” the CEO said. About the insurance business share in Pakistan comparing with GDP growth, he lamented that the insurance industry shares 0.3 per cent to the GDP whereas Takaful is even less. The overall Takaful size is around Rs1.4-1.5 billion in the last year, in which the Pak-Qatar has major share. Considering the rapid growth during the last two years, the company is aiming to achieve Rs1.8 billion in 2010. “Though the target is ambitious but we hope to achieve it considering outstanding performance in years 2008 and 2009,” he said. About launching the new products, the CEO informed that the customers would have access to an assortment of Individual and Corporate Takaful Plans. For the corporate sector group, the company will soon launch pension plan. For the individual, the company is launching debt protection and critical illness plans. Further, he also said that micro Takaful is also part of plans to reach different segments of the market. Ahmed stressed the need of human resource for the industry. “The growth of Takaful business requires skilled human resource and in this regard government should initiate introductory courses at intermediate levels,” he added. About the Bancassurance and Takaful line of business, he said that the company believes in joint ventures. He said that big financial institutions such as Dubai Islamic Bank, Standard Chartered, Emirates Global Islamic Bank are already on board and distributing Takaful products through bank counters. Other banks such as Bank Islami, MCB Bank and Bank Alfalah will shortly commence their Takaful operations for the benefit of the people. An idea of allowing a window to conventional insurance companies for Takaful, the CEO rejected it and said that the two different mode of insurance cannot be operational together. The NEWS (Online) http://www.thenews.com.pk/print1.asp?id=237446

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Bringing Family Takaful into the 2nd Decade of the 21st Century The launch of the 1st Annual World Takaful Conference: Family Takaful Summit-Malaysia Thursday, May 06, 2010 Malaysia: Family Takaful has achieved significant success in South East Asia, with the family segment in Malaysia reaching a substantial 73% of net contributions, according to the Ernst & Young World Takaful Report 2010, launched recently at the 5th Annual World Takaful Conference (WTC 2010) held in Dubai.

Working in strategic partnership with Etiqa, the launch of the 1st Annual World Takaful Conference: Family Takaful Summit-Malaysia to be held in Kuala Lumpur on the 14th and 15th of July 2010, builds on this solid foundation and focuses on: "Bringing Family Takaful into the 2nd decade of the 21st century." This innovative and focused Summit builds on the successful 5 years of history of the World Takaful Conference, which gathers more than 350 senior executive leaders from across the world in Dubai each year.

Tackling core issues relevant to both Takaful Operators and Takaful Agents through a unique conference format featuring a combination of joint plenary and break-out sessions for agents and operators, the WTC Family Takaful Summit Malaysia will provide an innovative platform for taking Family Takaful to the next level of development and growth.

Shahril Azuar Jimin, Chief Executive Officer, Etiqa Takaful Berhad speaking ahead of the event said "Etiqa is very much committed to the growth of the burgeoning Takaful and Re-Takaful industry, both in Malaysia and globally and we are delighted to draw on the expertise and experience of MEGA, which has shaped the Islamic finance industry since 1993, in bringing a regionally focused event to Malaysia. The World Takaful Conference: Family Takaful Summit, Malaysia will provide the industry with a unique platform to share experiences from established centers of Takaful operators as well as engage the distributors of these products so as to acquire a first hand view of product needs and opportunities, as well as best practices in sales and distribution. It will be great place to get insights on the industry direction and we are calling on all players to mark their calendar for this event."

Family Takaful is providing huge opportunities for Takaful players. Planning how to best capture this growth, industry leaders are asking key questions: How can Takaful players position themselves to capitalize on new opportunities as markets pick up; how can the Takaful industry engage conventional insurance players; what practical strategies can effectively translate Family market potential to real growth; what innovative new Family Takaful solutions are being developed internationally; sales/marketing - how can Takaful Agents leverage the advantages of a multi-channel organization; what will be the customer's new experience of the future; communications - how is a strong Family Takaful brand developed and how can it be best leveraged and what is the future outlook for the Re-Takaful market in South East Asia.

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Pursuing these key questions will help determine which Takaful players will be best placed to take advantage of strongly increasing product demand based on consumer demographics, rising income levels and an increasing appetite for Shariah-compliant products. With huge untapped growth potential in the Islamic insurance industry, the 1st Annual World Takaful Conference: Family Takaful Summit, Malaysia promises to be highly influential in charting the future direction of the Family Takaful industry.

Zawya http://www.zawya.com/story.cfm/sidZAWYA20100506064601/Bringing%20Family%20Takaful%20into%20the%202nd%20Decade%20of%20the%2021st%20Century

ISLAMIC INVESTMENTS; EQUITIES/SECURITIES & FUNDS Market for Shariah-compliant products, mutual funds tepid Wednesday, April 28, 2010 New Delhi: Although Islamic finance is estimated to be a $1trillion business across the world, in India there has been muted response to the few Shariah-compliant products launched by a couple of mutual fund houses and an insurance company. While Taurus Mutual Fund and Benchmark Mutual Fund launched Shariah-compliant funds in March 2009, Bajaj Allianz Life Insurance has three ethical funds, one of which is a Shariah-certified pension plan called Pure Stock Pension Fund launched a year back. Public sector re-insurer GIC also launched a reinsurance product based on the Shariah principle. In addition, in May 2009, Secure Investment Management India lau- nched the country’s first fully Shariah-compliant and Securities and Exchange Board of India-registered venture capital fund Secure India Real Estate Fund. Mumbai-based Taqwa Advisory & Shariah Investment Solutions (TASIS) is the adviser for the fund, while IL&FS Trust Company has been appointed as the trustee. The response to these products remains subdued. While Taurus Ethical Fund raised Rs 4.5 crore when the new fund offer closed in March 2009, the corpus has grown to Rs 25 crore since then. Benchmark’s Shariah BeES has a total asset of just Rs 1.24 crore. Rajan Mehta, chief executive officer, Benchmark Mutual Fund, said the major challenge in selling Shariah-compliant fund is that everyone has his own interpretation of Shariah compliance and therefore, it becomes tough to convince people what a pure Shariah product. “One of the solution to this issue is a single certification body is, either globally or nationally,” he added. Shariah-compliant products are prohibited from offering interest and are also not allowed to invest in some banned sectors such as those dealing with tobacco, alcohol or pork products.

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Waqar Naqvi, CEO, Taurus Mutual Fund, said the only way one can attract investors is through good performance. “Our Ethical Fund has grown seven times in the past one year by virtue of its performance, and we have investors across all communities in our fund,” he added. Taurus’ Ethical Fund has generated a return of 114 per cent in the past one year, whereas Benchmark’s Shariah BeES has seen its net asset value appreciating by 48 per cent. Sashi Krishnan, chief investment officer, Bajaj Allianz Life Insurance, said that there is no standard definition of Shariah finance. Another major reason for the slow start of Shariah products is that distributors in India are not equipped to sell such products. Financial Chronicle, mydigitalfc.com (India’s first global business networking platform) http://www.mydigitalfc.com/mutual-funds/market-Shariah-compliant-products-mutual-funds-tepid-841 Islamic Investors' Risk Tolerance Will Determine Demand for Shariah Fund Ratings, Report Says Tuesday, May 04, 2010 LONDON: The economic boom in the Gulf Cooperation Council (GCC) region has fueled the emergence of Islamic finance in the international market in the past decade. Revenue growth in this region has particularly benefited the asset management sector, as Standard & Poor's noted in a report, "Using Fund Ratings to Assess Credit and Market Risks In Shariah Funds", published today.

The Middle East is by far the largest market for Shariah-compliant funds, but conventional players in Europe, South Africa, and the U.S. have also launched a number of funds that comply with Shariah law during past years, enhancing their product range to meet the specific requirements of Islamic investors seeking to invest in this asset class.

The number of product types remains limited, which Standard & Poor's Ratings Services believes is largely due to the nascent nature of Shariah funds. Funds also have to be invested in ways that are permitted under Islamic law. Shariah funds, unlike traditional bond funds, do not invest in conventional rated fixed-income securities because these are, by definition, financial instruments that accumulate interest and are therefore not considered Shariah-compliant.

In May 2010, Standard & Poor's assigned its first 'AAf/S1+' fund credit and volatility ratings to a newly established Shariah fund, EFH Funds SCA SICAV-SIF-Liquidity Sub-fund, domiciled in Luxembourg and managed by European Finance House, the European financial arm of Qatar Islamic Bank.

We see rating Shariah funds as a way to enhance credit-risk awareness in this asset class. Most Shariah funds are equity-, commodity-, or lease finance-based funds, but some of

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them, despite being invested in Islamic financial instruments, show some similarities with fixed-income funds.

About Standard & Poor's in the GCC Standard & Poor's is the leading provider of financial market intelligence to customers in the Gulf's credit risk management, wealth management, and data and information markets. Since entering the region in the late 1980's, Standard & Poor's currently has public ratings on more than 100 issuers. In equity markets, Shariah-compliant versions of Standard & Poor's global and regional equity market indices - S&P 500, S&P Europe 350, S&P Japan 500 and S&P/IFCI GCC - have created new opportunities for Islamic investors to benchmark their international investments and for asset managers to create new investment products serving the Islamic community. Standard & Poor's Fund Services launched a qualitative fund management rating service for regional asset managers in 2007 assigning 17 Fund Management Ratings. Zawya http://www.zawya.com/story.cfm/sidZAWYA20100504102340/Islamic%20Investors'%20Risk%20Tolerance%20Will%20Determine%20Demand%20For%20Shariah%20Fund%20Ratings,%20Report%20Says S&P rates Shariah fund to raise transparency Wednesday, May 05, 2010 Ratings agency Standard & Poor's (S&P) yesterday said that for the first time it assigned a rating to a Shariah fund, in a bid to boost transparency in an industry that has come under fire after some recent defaults.

S&P said it assigned a "AAf/S1+" fund credit and volatility rating to a Luxembourg-based, US dollar-dominated fund managed by European Finance House, a subsidiary of Qatar Islamic Bank, one of the Gulf's biggest banks by market value. The Islamic finance industry came under scrutiny in the aftermath of Dubai World's debt trouble and after some high-profile defaults from Middle Eastern issuers.

Investors raised questions about the structure of such Islamic deals and the risks it entailed linking it to the lack of transparency that prevails in the sector. Experts have said that even though the defaults are mainly a credit issue rather than an Islamic one, the perception of risk has dampened investors' appetite. "We see rating Shariah funds as a way to enhance credit-risk awareness in this asset class," the ratings agency said in a statement.

Strong economic growth combined with abundant credit available in the Gulf has helped fuel the Islamic finance industry in the past decade making the Middle East market the biggest, but also generating interest from Europe and the US.

"Revenue growth in this region has particularly benefited the asset management sector," S&P said. The Islamic finance industry is estimated to be worth around $1 trillion (Dh3.67trn) and is forecast by Moody's to hit $5trn over time.

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Emirates Business 24-7 http://www.business24-7.ae/banking-finance/investment/s-p-rates-Shariah-fund-to-raise-transparency-2010-05-05-1.240555

ISLAMIC FINANCE EVENTS; SEMINARS, WORKSHOPS & CONFERENCES

Islamic Banking, capable of protecting economy from unprecedented meltdown, Aligarh Muslim University (AMU) holds conference on Islamic Finance: An Alternative Financial System

Thursday, April 29, 2010

Aligarh: Faculty of Management Studies and Research, Aligarh Muslim University today organized an International Conference on ‘Islamic Finance: An Alternative Financial System’. The main thrust behind organizing this conference was to bring together students and professionals from different field to interact on one platform and contribute towards sharing, designing, propagating and implementing Islamic Finance. Modern Islamic Finance is a young but vibrant industry that is becoming an alternative form of Finance as well as an integral from mainstream finance. Its growth rate of 15 to 20 percent over the last few years and suggested future rate of 30 percent is encouraging. In his welcome address, Prof. Khalid Azam, Chairman, Department of Management Studies and Research at AMU has pointed out that in the present economic scenario, Islamic banking and finance has been recognized by economists and bankers as an alternative way of managing the economy to protect it from unprecedented meltdown. It is also going to be effective in moving upward a grossly slowdown economy. Professor Valeed A. Ansari, Course Coordinator said that AMU is the first and only Central University to introduce a Post Graduate Diploma in Islamic Banking and Finance 2009-2010. He said that all the students have done their training in most reputed firms like Reliance Capital Services, Secure Investment, Bajaj Allianz, Tauras Mutual Fund, etc. In his presidential address, AMU Vice Chancellor, Prof. PK Abdul Azis said that AMU is an institution of great historic legacy and this institution has a deeply inspiring feelings among its alumni. Prof. Azis said that new building for management institute will be constructed. Mr. Ameer Ahmad, an alumnus has donated rupees one crore to this project. Dr. Iqbal Masood Al-Nadwi, Shariah Scholar, Canada, Mufti Barkatullah, Advisor, Islamic Bank of Britain, Mr. Noorul Ameen, CEO, Reliance Capital Services, Mr. Sumesh Krishna, MD, Grameen Kovta, Micro Finance, Mr. Shariq Nisar, Director,

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TASIS, Bangalore, Dr. Abdul Hadi Shaikh, Senior Research Analyst, Data Rating Intellegence (S & P) and Mr. M.Y. Khan, Firmer Advisor, SEBI were the resource persons. Ms. Nida Ghawar conducted the inaugural session. http://www.ummid.com/news/2010/April/29.04.2010/amu_on_islamic_banking.htm Luxembourg to Hold Country Showcase at the 7th IFSB Annual Summit in Bahrain Sunday, May 02, 2010

Luxembourg, the first regulatory authority of a European Union (EU) country to join the Islamic Financial Services Board (IFSB) will hold a Luxembourg Country Showcase on 3 May 2010 at the Ritz-Carlton Bahrain. The Country Showcase is held on the eve of this year’s 7th IFSB Annual Summit themed “Global Financial Architecture: Challenges for Islamic Finance”, which the Central Bank of Bahrain is hosting.

The Luxembourg Country Showcase will highlight Luxembourg as a European hub for Islamic finance, focusing on the registration and listing of Islamic funds and Sukūk.

Panelists at the Showcase are:

- Mr. Fernand Grulms, Chief Executive Officer, Luxembourg for Finance

- Mr. Claude Zimmer, Member of the Council, Central Bank of Luxembourg (BCL)’

- Mr. Camille Thommes, Director General, Association of the Luxembourg Fund Industry (ALFI)

- Me. Marc Theisen, Lawyer, Theisen Law.

The Luxembourg event is complemented by a Malaysia Showcase Dinner on the evening of 3 May 2010, organized by the Malaysia International Islamic Financial Centre (MIFC). The dinner will be addressed by Tun Mahathir Mohamed, former Prime Minister of Malaysia.

The IFSB Country Showcases have acquired a prestige in their own right and are an effective platform for selected countries to portray their Islamic finance initiatives and experiences in adopting and promoting the growth of a sound and stable Islamic financial services industry, and presented to a high profile, focused group of potential investors and stakeholders. They also present an opportunity for networking and opening doors to potential investments and business partnerships - from among the IFSB members as well as the local, regional and international financial community - especially those attending the Summit.

The members of the IFSB comprise regulators and supervisors of the banking, capital markets and Islamic insurance (Tākaful) sectors, as well as international inter-

59

governmental organizations, and market players (financial institutions, professional firms and industry associations).

Mr Rasheed Al Maraj, Governor of the Central Bank of Bahrain, and host of the 7th IFSB Summit, will be delivering the opening address at the event themed “Global Financial Architecture: Challenges for Islamic Finance”. A number of regulators have confirmed their participation including EU regulators Yves Mersch, Governor Banque Centrale du Luxem bourg and Stefan Ingves, Governor, Central Bank of Sweden. This is in addition to nine other governors and deputies of central banks, and senior representatives of several international organizations, including Bank for International Settlements, International Organization of Securities Commissions, the World Bank, as well as market players from various industry players.

Mr Nigel Dudley, a renowned international journalist, broadcaster and producer with 30 years experience in reporting on banking in the Middle East and British and European politics will be delivering a Keynote speech at the Gala Dinner on the evening of 4 May 2010. The speech is entitled “Media, Public Relations and Islamic Finance” and the dinner is sponsored by Arcapita, Bahrain.

The IFSB is also organizing a Public Hearing on IFSB Exposure Draft (ED) on 3rd May. This year’s Public Hearing, which is part of the due process for preparing the IFSB Standards, will be on the Exposure Draft on Solvency Requirements for Takāful Undertakings (ED-11). The IFSB is inviting all stakeholders of the Takāful (Islamic insurance) industry to attend the session and share their views for on the IFSB document which is planned to be adopted by the IFSB Council end of this year.

Provided by Syndigate.info an Albawaba.com company

http://www.istockanalyst.com/article/viewiStockNews/articleid/4079711

Major Islamic finance challenges in spotlight in 7th IFSB Annual Summit

Tuesday, May 04, 2010

MANAMA: Challenges facing the Islamic finance industry will be discussed at a key summit which opens today in Bahrain.

The two-day 7th International Financial Services Board (IFSB) annual summit themed Global Financial Architecture: Challenges for Islamic Finance, which has attracted more than 250 delegates from 20 countries, will be held at the Ritz-Carlton Bahrain Hotel and Spa and is hosted by the Central Bank of Bahrain.

Luxembourg, the first regulatory authority of a European Union country to join the IFSB, yesterday held a Luxembourg Country Showcase which highlighted Luxembourg as a European hub for Islamic finance, focusing on the registration and listing of Islamic funds and Sukuk.

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The Luxembourg event was complemented by a Malaysia Showcase dinner organized by the Malaysia International Islamic Financial Centre.

The dinner was addressed by former Malaysian Prime Minister Mahathir Mohamed.

The IFSB Country Showcases have acquired a prestige in their own right and are an effective platform for selected countries to portray their Islamic finance initiatives and experiences in adopting and promoting the growth of a sound and stable Islamic financial services industry, and presented to a high-profile, focused group of potential investors and stakeholders.

The growing interest in Islamic finance from new markets and the Industry ability in general to relatively absorb the shocks of the financial crisis have attracted the attention of several countries and analysts. This interest is further manifested by the growth of the IFSB's own membership.

In its last meeting held on April 6 in Khartoum, Sudan, the council of the IFSB admitted four new members that included the National Bank of Tajikistan. The recently admitted four organizations bring the total membership of the IFSB to 191 members. They comprise 50 regulatory and supervisory authorities, six international inter-governmental organizations and 135 market players, professional firms and industry associations operating in 40 jurisdictions.

CBB Governor Rasheed Al Maraj will deliver the opening address at the event.

A number of regulators have confirmed their participation including EU regulators Banque Centrale du Luxem bourg governor Yves Mersch and Central Bank of Sweden governor Stefan Ingves,.

This is in addition to nine other governors and deputies of central banks and senior representatives of several international organizations, including Bank for International Settlements, International Organization of Securities Commissions and the World Bank, as well as market players from various industries. business@gdn.com.bh

http://www.gulf-daily-news.com/NewsDetails.aspx?storyid=277172

2nd Annual World Islamic Retail Banking Conference to be held in Dubai Tuesday, May 04, 2010

Dubai, UAE: Following the success of last year’s first conference, Fleming Gulf have announced the 2nd gathering of the world Islamic retail bankers. The conference, which heralds the consolidated growth of the Islamic banking market, will be held in Dubai between 25 – 27th October 2010.

Islamic banking operates according to the principles of Shariah law and prohibits the charging of interest. It is becoming big news not only in the Gulf, but across the Islamic

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world. The industry has seen recent expansion, with estimates of Islamic banks holding at least $800 billion of assets and bonds worth $100 billion. However this newer face of banking still faces stiff competition from the more conventional banks across the globe.

Gulf Jobs Market

http://news.gulfjobsmarket.com/second-world-islamic-banking-conference-to-be-held-in-dubai-7861057-news

Islamic Bankers from More Than 10 APAC to Gather in Kuala Lumpur This July Wednesday, May 05, 2010 Malaysia, with an Islamic banking sector of about $43 billion, has been a pioneer in Islamic finance in Southeast Asia where as Philippines, Singapore and Thailand have relatively small Islamic banking sectors, matching the smaller Muslim populations in these countries. The Malaysian government has recently made the announcement that it will introduce several key measures to support the speedy development of Islamic finance. The announcement has been welcomed by the Islamic financial industry. Malaysian Prime Minister Najib Abdul Razak confirmed in his 2010 budget speech that the government is to extend existing tax incentives for Islamic finance for another five years.

Fleming Gulf announces the inaugural Asia Islamic Banking Conference in supported by Malaysia International Islamic Financial Centre (MIFC) initiative on 5-7 July 2010 at Kuala Lumpur - Malaysia. Leaders from key Islamic Financial institutions from Malaysia, Singapore, India, Philippines, Pakistan, Turkey, Indonesia, Japan, U.A.E, U.K and U.S.A, will discuss the following:

KEY TOPICS

• Islamic Banking Opportunities in Asia : Focus Japan • Indonesian Islamic Banking Expansion • Creating and sustaining talents in Islamic Banking • Islamic Treasury Product Development • Islamic Microfinance: Balancing between Business and Social Responsibility • Risk Management In Islamic Banking

Key Speakers and Panelists

• Dr. Muliaman D. Hadad, Bank Indonesia , Deputy Governor • Ahmad Hizzad Baharuddin, Bank Negara Malaysia, Director-Islamic Banking

and Takaful Department • Badlisyah Abdul Ghani, CIMB Islamic Bank Berhad, Executive Director and

Chief Executive Officer • Azrulnizam Abdul Aziz, Standard Chartered Saadiq Berhad, Chief Executive

Officer

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• Shri K. Rahman Khan, Rajya Sabha, Government of India, Hon'ble Deputy Chairman

• Jamelah Jamaluddin, Kuwait Finance House (Malaysia) Berhad, Chief Executive Officer

• Fozia Amanulla, EONCAP Islamic Bank Berhad, Chief Executive Officer & Executive Director

• Syed Tariq Husain, Emirates Global Islamic Bank Limited Pakistan, President and CEO

• Etsuaki Yoshida, Japan Bank for International Cooperation • Prasanna Seshachellam, DFSA, Associate Director, Supervision • Dr. Necdet Sensoy, Central Bank of the Republic of Turkey, Member of the

Board • Datuk Mohamed Azahari bin Mohamed Kamil, Asian Finance Bank Berhad,

Chief Executive Officer

The event is also supported by Asian Bankers Association, Bahrain Association of Banks, International Compliance Association and International Shariah Research Academy for Islamic Finance.

About Fleming Gulf

Fleming Gulf specializes in developing strategic business-to-business conferences for the Middle East & North African market. Our vision is to be the premier choice of organizations worldwide seeking strategic knowledge in a rapidly changing environment. Fleming Gulf articulates its passionate belief in the power of knowledge through the provision of leading-edge business conferences. Our conferences welcome leading industrial experts from the international business arena for a high class executive meeting held in the most prominent premium hotels around the region.

About MIFC

In August 2006, the Malaysia International Islamic Financial Centre (MIFC) initiative was launched to position Malaysia as a hub for international Islamic finance. The MIFC initiative comprises a community network of the country's financial and market regulators, including Bank Negara Malaysia (Central Bank of Malaysia), Securities Commission Malaysia, Labuan Financial Services Authority and Bursa Malaysia (Kuala Lumpur Stock Exchange); Government ministries and agencies together with industry participation from the banking, Takaful, capital market institutions, human capital development institutions and professional services companies which are participating and working collaboratively in the field of Islamic finance.

The MIFC initiative is supported by global legal, regulatory and Shariah best practices that enable industry practitioners to conduct international business in Islamic finance activities anywhere in Malaysia in the areas of Sukuk origination, Islamic fund and

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wealth management, international Islamic banking, international Takaful and human capital development, while enjoying attractive incentives.

Through its "Shaping Islamic Finance Together" brand proposition, Malaysia welcomes global talents, leading players, issuers and investors to shape the future of Islamic finance together through the MIFC initiative, leveraging on and benefiting from Malaysia's more than 30 years of experience in Islamic finance.

Zawya

http://www.zawya.com/story.cfm/sidZAWYA20100505081039/Islamic%20Bankers%20from%20More%20Than%2010%20APAC%20to%20Gather%20in%20Kuala%20Lumpur%20This%20July%20

ARTICLES / COMMENTARIES

A more positive image for Islamic nations

By: Musa Hitam

Tuesday, April 27, 2010 Some have argued that none of the world's tensions are as profound or as far-reaching in their global consequences as the tension between the West and the Muslim world today. However if one takes a closer look, there is enough tension even among Muslim countries to cause alarm. The vast array of ideological standpoints on religion has spilled over into the economic and social front effectively splitting the Muslim world. There is a wide gulf between the haves in the Gulf States and the have-nots in Sub Saharan Africa. Poverty, high unemployment and poor sanitary conditions afflict large segments of the Muslim world. There is a huge investment in shining skyscrapers while shining talents are not given a proper education. These factors in turn have prevented Muslims from being as well connected to the rest of the world as they should be. The World Islamic Economic Forum (WIEF) intends to change this not by focusing on the Muslim world as a religious entity or an ideological bloc but by focusing on economics and business. We are not in the business of solving polemics, be it political or religious. The WIEF is in the business of business. We are a business gateway between the Muslim and non-Muslim world and provide a platform for business partnerships between the two. We want to share our knowledge from our various cultures and speak the common language of business. During the last WIEF in 2009 in Jakarta, a total of US$3.4 billion (US$1 = RM3.18) in business deals were signed between businessmen from countries who would never have had the opportunity to do so otherwise. We staunchly believe that when people get together for business, they forget their

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political, religious and ideological differences because there is one compelling commonality that matters most before them - and that is the impetus to be peaceful and prosperous. That is what matters most. The Muslim world wants to be seen as a strong, stable and independent entity wanting to get on with the job. By focusing on doing business and making money, away from politics and religion, we are creating a level of cooperation not seen in recent times. Intra-trade between the Organization of Islamic Countries (OIC) in 2003 was between 10-13 per cent of total trade. In 2009 this figure increased to 16.7 per cent and the OIC is working towards achieving a respectable 20 per cent or close to US$250 billion by 2015. Many of the OIC economies are showing strong fundamental growth potential and are increasingly becoming part of the global emerging markets. In addition institutions, such as the Islamic Development Bank has been helping OIC countries build up their infrastructure and development apart from financing intra-OIC trade. Islam can be a focal point that brings us together and this could be a rallying banner and a burning platform to organize and collaborate for the common good, especially within the context of doing business. Islam encourages development and prosperity, it is very much central to the religion itself. Islam sees everything as being connected so the act of producing and selling things that people need is a morally and religiously sound act. With more business activities come more development, more prosperity and more wealth for everybody. However, just because we are Muslims, does not mean that we wish to be perceived as an exclusive group. We want to be known as an investment and trade bloc that everyone can engage with. Muslims are part of the globalized world where every aspect of one's life, be it political, economic or cultural, is invariably interconnected to each other. By linking with any one of the attendees at the WIEF, you are tapping into a much bigger market. A market populated by 1.5 billion people worth more than a trillion dollars. It's as simple as that. While we acknowledge that dialogue is important, we advocate dialogues of action through business relationships. Business and trade are one of the best means for countries to be at peace with one another. Intricate economic links can bind both Muslim and non Muslim countries. The influence that economic cooperation and business partnerships can wield is enormous. We will be able to collaborate and do business with each other and the rest of the world for the common good of every citizen. The Muslim world has much to offer away from traditional areas like fossil fuels and minerals. With the search underway for a new monetary system for the post-financial crisis era, Islamic banking is gaining ground as a beacon of financial stability. The Islamic financial services industry valued has grown at an annual rate of 15 per cent and reached a volume of US$1 trillion in 2009, five times higher than in 2003. During the last decade, Islamic banking has transitioned into a dynamic, fast growing and

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competitive form of financial intermediation servicing the global community with participation from conventional global players. The Muslim world has a young population. 65 per cent of its population is below the age of 30. This in itself presents an array of opportunities for education service providers, the creative arts industry and the information technology sector. Most Muslim countries have burgeoning SMEs who drive their economies. Their ability to generate growth and employment has not been recognized fully and they are badly in need of investments and management to bring them to the next level. Undoubtedly negative perceptions of the Muslim world continue to exist but these have to be balanced by fact. And the fact is that a market of this magnitude and potential offers numerous opportunities. The WIEF is here to facilitate access to these opportunities. While the governments of the Islamic countries need to focus on peace and security, it is left to the private sector to power the economies of these countries. The future of the Muslim world lies in its economic agenda not its political or religious agenda. The WIEF is open to working with all parties to realize the economic agenda and jumpstart the economic resurgence that has long been waiting. * Tun Musa Hitam is a former deputy prime minister and the current chairman of the World Islamic Economic Forum. Business Times http://www.btimes.com.my/Current_News/BTIMES/articles/musa01/Article/ Rev. Franklin: The USA is the most Shariah Compliant Country in the world Wednesday, April 28, 2010 Some Americans are basing their understanding of “Shariah Law” on fear, on bad press or on innuendo. Much of the fear seems to suggest that it is based on the rampant Islamphobia that has been deliberately spread to justify war and occupation. It is easier to kill once you have demonized a population and their belief system. Those interested in learning more should read Imam Faisal’s “What’s Right with Islam”. I know him and have read the book. He is a patriotic American Muslim. He says “The United States of America is the most Shariah Compliant country in the world”. The US offer speedy justice, great opportunity for upward mobility, equal opportunity, safe society, liberation from rampant corruption, and the freedom to practice whatever we want. Of course all of us are working towards a “more perfect union”–but the US with all its flaws is the best country to live in. These are the qualities of a perfect or near perfect society that Islam preaches and wants implemented.

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For “you” (those who face the propaganda) “Shariah” is a bad word. For me, it is a good word. It brings justice, peace, and solace to the poor. Please also read the research of John Maksudi, “Islamic Origins of British Common Law” who has confirmed the evidence that Muslim Spain created the constitution (during the Jewish-Muslim-Christian symbiosis 711-1492) which would make the king face justice and allowed for a popularly elected government. Thomas Jefferson owned a copy of the Quran–and when he lost it he got another one. There is an overwhelming body of evidence the the Islamic principles of Haq e Qol (Freedom of Speech), Haq al Insan (Right of humanity), Haq e Hurriat (Right of Freedom) were taken by John Locke from Ibn Tufual’s treatise. Jefferson was an avid follower of John Locke and also Sir Isaac Newton (who was very much influenced by Islam). Sir Isac Newton also wrote at length about the corruptions that had crept into Christianity and how they need to be corrected. Kindly read “History of God” by Karen Armstrong, and “Muhammad for our times” by Karen Armstrong. All Quranic Laws are basically based on Biblical, Talmudic Law–with variations. However Shariah Law is more practical and leaves a lot of leeway for localized actions. “Denying the Holocaust” is freedom of speech. However it is illegal to do so in most European countries—including the ones that are now going gaga over “freedom of speech”. Calling blacks names are not acceptable in America. This is our country – and we have our traditions. We don’t have to be like Europe – who is essentially very racist. Calling Orthodox Jewish practices of making holes in their sheet while copulating is not a subject of ridicule. Snake Churches can play with the reptiles but all Christians are not demonized as snake charmers. In England one cannot criticize the Queen. Despite a flourishing democracy, people are put behind bars for saying something bad against the Queen. Freedom of Expression is not universals. Muslims do not make picture of Christian or Jewish prophets. All Muslims ask is that same courtesy be given to Prophet Muhammad. It is a request. As Americans we will form groups, lobbies, and ask the sponsors to withdraw their ads-boycott goods and use other democratic means to convince the media that if they do want Muslim Dollars, they will learn not offend Muslims. Other book that might help you understand the current struggle is “Islamo-Christian Civilization” by Dr. Bulliett of Princeton University. “Killing” is a red herring–sensationalized by the media. Islam has blasphemy laws, just like Christianity or Judaism does. Britain and even Holland has blasphemy laws on the

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books. The actual punishment or execution of blasphemy laws are to be accorded in a court of law. No one is allowed to take the law in his or own hands. The state cannot be defied. State law is supreme. No one can defy state law. The Quran says “the murder of one human being is like the murder of all humanity–and the saving of one life is like saving all of humanity”. There is no question of sanctioning murder–under any circumstances. Under US law a murderer has to be put to death if the judge so orders and it is under law. Some states like Texas have capital punishment. Under Islamic Law, if the victim’s relatives forgive the person, he is set free–despite his offense. This is because of the merciful nature of Islamic Law–which has to disbursed by a COURT OF LAW not by an insane person who thinks that someone should be killed–Just like Christianity is not responsible of David Quresh, David Hinkley and Jeffery Dahmer, Muslims and Islam are not responsible for the insane acts of an idiot. Muslims cannot be blamed for the act of a criminal, guilt by association and collective punishment are Nazi attributes and have not place in our America. 10,000 murders take place in the USA. Most are for various drug related and crimes of passion. If however by chance a Muslim is a perpetrator anywhere in the world, the media is prone to sensationalize it as a “honor killing” or so on and so forth. OJ Simpsons murder of his wife was a “honor killing” but it was not advertised as such. Cripps killing Bloods in LA are a normal happening on a daily basis. Some are GF-BF issues, other are related to money or revenge. Does this mean that all Christians are at fault–or that the Secular system is responsible? Should we demonize the US constitution–or begin harping on the 10 commandments being evil? Musalman Times http://www.musalmantimes.com/?p=82 Debt or equity? Shariah allows both By: Rusni Hassan /Kuala Lumpur Monday, May 03, 2010 It could be observed that the widespread use of fixed return techniques of debt financing transactions would have been necessary during the initial implementation of interest-free banking. This is because the entrenched conventional mindset in the interest-based system that has existed for hundreds of years would need its own gestation period to be uprooted, even among Muslims themselves. Debt financing, which is more palatable to the risk appetite of the bank’s commercial interests, was and is still seen as an ideal alternative financing pool to conventional interest-based banking. But after over 40 years since the inception of Islamic banking, perhaps the time has come for banks to adopt a more equitable and a more acceptable

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mode of financing in the eyes of Shariah: that is equity/profit and loss-sharing/investment-based funding, exemplifying the business activities conducted by the Prophet and thus being more acquiescent to the spirit of the Shariah. On the Shariah legal perspective, there is nothing objectionable to this form of transactions as they are permissible (mubah) contracts. However, reservations from the aspect of “debt versus equity financing” are that the roles of Islamic banks are similar to conventional banks as they are also in the same business of taking deposits and extending credits. Islamic banks are said to manipulate the trading modes in ways that retained their identity as “lenders” rather than traders. The Shariah does approve of both debt-based transactions and profit-and-loss sharing which is equity based, and there is no question of whether one or the other is less compliant or less Islamic. But they are meant for different segments of people. Whilst debt-based financing can cater to the needs of lower-income groups, equity-based activities could be a better fit for more affluent investors. As for the Islamic banking operations and instruments, a balance should be struck between debt-based and equity-based mechanisms. Islamic banks should develop balanced and competitive products based on both forms of activities that would accommodate the needs of public customers, traders and industrialists in the ever changing and complex world. The problem faced by the industry is that its equity portfolio is less than its debt portfolio, and that the industry is so much influenced by the conventional financial system which is debt based. The Islamic finance industry, being a follower to the conventional system, was initially set up on the same basis which is debt based operations. A swift change of focus from debt to equity would have an unfavorable effect on the industry, impinging on its development due to its inability to manage the risks, which are distinctive from what it is familiar with. Another challenge is to develop a whole new set of industry infrastructure, market framework and regulations to meet the new features of equity-based finance practices. Ultimately, educating the industry players and all the stakeholders will be the utmost challenge of all. From one perspective, the shift toward equity financing would be more attractive to investors as it provides more stability to an investment. However, in absence of a proper framework for such a practice, investors will be wary that such an investment could carry unknown risks. Eventually, investors will be looking for an investment mechanism that has minimum risks and greater return. Prior to the establishment of a comprehensive framework, the equity investment mechanism will not be attractive to both investors and financiers. Rusni Hassan is Shariah adviser to HSBC Amanah Malaysia and an associate professor in Islamic law at International Islamic University Malaysia. http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=359143&version=1&template_id=48&parent_id=28

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BOOK REVIEW The Stability of Islamic Finance: Creating a Resilient Financial Environment for a Secure Future Reviewed by: Robert E Looney Saturday, May 01, 2010 In 1936 in the depths of a world-wide economic depression, John Maynard Keynes described the decline of the world's financial markets as a result of playing at a casino: "Short-term speculation with little regard to fundamentals." A cursory examination of the current global financial crisis suggests little has changed since Keynes' day - the conventional financial system, despite various patches and fixes over the years, is still prone to periods of extreme instability and abuse. Unfortunately, the economics profession has provided little in the way of constructive input in re-designing a more stable financial architecture. Mainstream neo-classical equilibrium economic analysis has not systematically incorporated elements that would account for the conventional system's instability, let alone provide a framework for predicting the occasional bouts of extreme instability. Liberal-minded neo-Keynesians have done a bit better in identifying some important precursors of the crisis, in particular, the destabilizing role of huge private sector financial deficits in countries with large external deficits, such as the US. The Keynesian view certainly played a big part in the post-crisis response (fiscal stimulus) of many developed and emerging countries. On the conservative side, monetarists certainly raised doubts about the Federal Reserve's abnormally low interest rates and expansive monetary creation in the years preceding the crisis. Yet, at best, this line of analysis does not go very far beyond the warning of an impending bubble and likely bout of inflationary pressures. No doubt a leading monetarist, Milton Friedman, if alive today, would reaffirm a firm belief in Say's Law of the smooth functioning of unimpeded (free) markets. Those going down this road contend the current financial instability is wholly the fault of too much government. As Friedman often observed, "The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy". Lax money and credit policy of US Federal Reserve under Alan Greenspan would be the focus of his ire today. Monetarist offshoots such as the Rational Expectations School, while producing good explanations of the stagflation experience of the 1970s, have not been able to

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systematically incorporate irrational behavior into their models. The lemming or investor-herd mentalities observed in recent years remain well beyond their comprehension. As Martin Wolf of the Financial Times has noted, of the Western interpretations of the global financial crisis, it appears those economists working in the Austrian tradition were more nearly right than anybody else. In particular, they have argued that: central bank inflation-targeting is inherently destabilizing; that fractional reserve banking creates unmanageable credit booms; and that the resulting pattern of investment, linked not to the marginal efficiency of capital but rather to financial returns, explains the subsequent financial crash. The best non-Western explanation of the global financial crisis is presented in the book under review, The Stability of Islamic Finance: Creating a Resilient Financial Environment for a Secure Future by Hossein Askari, Zamir Iqbal, Noureddine Krichene and Abbas Mirakhor. However, this book is much more than just an alternative explanation of the current depressed state of the world economy - it is an elegant, sophisticated assessment of Islamic finance as a viable, realistic alternative to the current conventional system. Perhaps to the surprise of many, the author's assessment finds a number of similarities between the core elements of Islamic finance and that of the Austrian School. Certainly Islamic finance and banking institutions are thriving relative to conventional finance. The Banker's 2009 survey of Islamic finance found the volume of Shariah-compliant assets of the Top 500 grew by an extremely healthy 28.6%, rising to US$822 billion from $639 billion in 2008 (forecasts are that this figure will top $1 trillion in 2010). At a time when asset growth in the Top 1,000 world banks slumped to 6.8% from 21.6% the previous year, Islamic institutions were able to maintain the 28% annual compound growth achieved in the past three years. The industry also continued to expand, with 20 new entrants bringing the number of Shariah-compliant institutions to 435, with a further 191 conventional banks having Shariah windows. The Islamic banking geographies are stretching beyond the existing strongholds of Iran, Saudi Arabia, Bahrain, Malaysia and the UAE to Europe, South Africa, Kenya and Indonesia. Advocates claim Islamic finance has been immune because Shariah-compliant institutions are focused on the fundamentals, with simple products bearing robust mechanisms for risk mitigation. Market analysts have stressed the correlation between asset quality in Islamic institutions and their conservative approach to risk as an insulating factor. Many conventional bankers contend the success of Islamic finance in riding out the financial storm can be attributed to the fact it is underpinned by tangible assets such as real estate. Askari et al incorporate all of these considerations into their demonstration of the advantages of the Islamic alternative, but they also go several steps further than most previous assessments. Prior examinations of Islamic finance have devoted most of their

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attention to its ethical side - prohibition of interest and the ban on lending for certain activities - gambling, alcohol production and so forth. As its title suggests, The Stability of Islamic Finance demonstrates, in addition to Islamic finance's usual virtues, its relative stability with regard to the conventional system. As the authors note (p 209), conventional banks fail to meet inherent stability conditions even in the presence of prudential regulations. First, credit losses from debt default to the depreciation of assets may create a large divergence in relation to the liabilities that remain fixed in nominal value. Second, bank credit has no fixed relation to real capital in the economy and bears no direct relation to the real rate of return. Unbaked credit expansion through the credit multiplier and further leveraging is a fundamental feature of conventional banks. Cash flow could fall short of expectations and force large income losses on banks, especially when the cost of funds is fixed through a predetermined interest rate. Third, banks caught in a credit freeze, with a drying up of liquidity. may default on their payments. Fourth, banks are fully interconnected with each other through a complex debt structure; in particular, the assets of one bank instantaneously become liabilities of another, leading to fast credit multiplication. A credit crash causes a dramatic contagion and a domino effect that may impair even the soundest banks. While their analysis is much too rich to detail here, suffice to say they demonstrate that an Islamic system overcomes many of these limitations. In particular, in an economy governed by the principles of Islamic finance, the rate of return on equities is determined by the marginal efficiency of capital and time preference, and is positive in a growing economy. This implies that Islamic banks are always profitable provided that real economic growth is positive. This establishes a basic difference between Islamic banking where profitability is fully secured by real economic growth and conventional banking where profitability is not driven primarily by the real sector. A critical feature noted by the authors, and one consistent with the Austrian ideal for banking, is the fact that the Islamic system operates on a 100% reserve requirement. In this system, investment banking operates on a risk/profit sharing basis, with an overall rate of return that is positive and determined by the real economic growth rate. Islamic banks do not create and destroy money; consequently, the money multiplier, defined by the savings rate in the economy, is much lower in the Islamic system than in the conventional system, providing a basis for strong financial stability, greater price stability and sustained economic growth. In short, the requirements of Islamic finance - lower proportions of debt to equity, a condition that the lender share profits and losses with the borrower, and a focus on transactions based on tangible assets - mean that Islamic banks have not become entangled in the toxic-debt instruments that have laid waste to many of the conventional banking giants.

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In sum, The Stability of Islamic Finance has many strengths. Perhaps the greatest one is the ability of the authors to bridge the gap between the conventional and increasingly sophisticated global financial system and that represented by Islamic finance. Previous attempts at contrasting the systems largely failed because authors were strong in one area but lacked the expertise to provide an in-depth critique of the other system. Professor Askari is an acknowledged world-class expert in both systems and combined with his three co-authors anchors an analytical team uniquely capable of integrating the workings of an Islamic system into the increasingly complex global context. Still, there are many problems confronting a wider based adoption of Islamic financial systems. In addition to the usual West-Islamic differences over interest, ethical roles of business etc, a number of fundamental changes would have to take place in the way Western governments manage their economies. For one thing, the adoption of popular Keynesian stimuluses during recessions would be much more difficult than is currently the case. Central bank discretionary policy would have to be abandoned for strict rules on monetary expansion. Reserve requirements of 100% on banks would fundamentally alter the banking business - the list goes on. Having shown its inherent advantages over the current system, hopefully the authors will collaborate on a follow-on book detailing how the Islamic financial system can transition outside of its current narrow confines to be a viable alternative to the conventional system. The Stability of Islamic Finance: Creating a Resilient Financial Environment for a Secure Future by Hossein Askari, Zamir Iqbal, Noureddine Krichene and Abbas Mirakhor, John Wiley & Sons, Singapore (2010), ISBN: 978-0-470-82519-80, Price US$49.95, 256 pages. Robert Looney is a professor of national security affairs, and associate chairman of instruction, Department of National Security Affairs at the Naval Postgraduate School, California. ASIA TIMES (Online) http://www.atimes.com/atimes/Global_Economy/LE01Dj02.html Summary of Book Review “The European Economy since 1945: Coordinated Capitalism and Beyond”, Written by: BARRY EICHENGREEN, as it appeared in Foreign Affairs; Jan/Feb2007, Vol. 86 Issue 1, p158-158, 1/2p, Reviewed by: Cooper, Richard N. Like much modern history writing, this book gives a descriptive and narrative history of European Economic developments in the 2nd half of the 20th Century, and is equally an interpretive essay of the European Economy, the interpretive tools being those of the economist. Eichengreen's key thesis is that in the postwar era, most European countries

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had a workable corporatist system of social bargaining among government, business, and organized labor. That system assured enough business investment for "extensive" growth, providing increasingly skilled labor to narrow down the productivity gap with the United States, and was very successful for a quarter century. But as the productivity gap narrowed, further growth depended on innovation rather than simply installing high-quality physical capacity. European values, customs, and institutions were less suited than those in the more decentralized and flexible U.S. economy to the uncertainties, risk taking, and volatility required for "intensive" growth through innovation. This thesis is used to explain not only the relative slowdown in European growth but also the rise in European unemployment in the last quarter century. Europeans are now struggling to adapt their incentives to encourage innovation - the Lisbon agenda of 2000 - without compromising their greater commitment to equality and stability.