Islamic Banking

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PTI govt decides to promote Islamic banking in #Pakistan

The federal government of Pakistan has decided to initiate a comprehensive plan for the promotion of Islamic banking in the country. The National Assembly Standing Committee on Finance chaired by Asad Umar announced that the State Bank of Pakistan was in the process of formulating a seven-year plan and a comprehensive framework in this regard will be introduced within two months. The SBP officials gave a briefing to the committee about the Eradication of Riba Act, 2019. The chairman advised the standing committee on finance to expedite the work on the bill and constituted a sub-committee, headed by MNA Raza Nasrullah.

Steady uptrend for Islamic finance in Pakistan: SBP

The Islamic banking and finance sector in Pakistan continues to be on an upward trajectory, with assets, deposits and the number of branches of Islamic banks all showing solid growth. According to the latest Islamic Banking Bulletin issued by the State Bank of Pakistan on September 13, assets of Pakistan’s Islamic banking industry stood at Rs2,992bn ($19.8bn) by June-end, 2019, a growth of 20.6% as compared to June-end, 2018.

#Egypt mulls around $7 billion international bond issuance

Egypt will approach investment banks soon to advise on a planned international bond issuance to raise between $3 billion and $7 billion by June 2020. The new offering could include Egypt’s first Panda, Samurai, Sukuk and green bonds as well as euro- and dollar-denominated bonds. Khaled Abd Elrahman, the Egyptian Deputy Minister of Finance, said that the so-called request for proposal is being prepared and will be sent to banks imminently. Egypt was able to return to global bond markets in 2017, lowering its borrowing costs overseas as domestic rates soared amid a far-reaching economic reform programme. The government is now seeking to vary its instruments and gradually move toward longer-term credit to reduce the burden of debt. Finance Minister Mohamed Maait said that foreign holdings in Egypt’s Treasury bills and bonds currently stand at about $20 billion.

Duterte signs law regulating Islamic banks in #Philippines

President Rodrigo Duterte has signed Republic Act (RA) 11439 that allows the establishment of Islamic banks in the Philippines. Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said R.A. No. 11439 would unlock the full potential of Islamic financing in fostering inclusive economic growth. RA 11439 mandates the Bangko Sentral ng Pilipinas (BSP) to exercise regulatory powers and supervision over the operations of Islamic banks. The Trade department earlier said that several banks have expressed interest to open their branches in the Philippines, once a law on Islamic banking is signed. The banks were identified as CIMB, Islamic Development Bank, Qatar Bank, Credit Investment Bank of Malaysia and a Saudi bank.

Islamic banking law to unlock financing potential, foster inclusive growth —BSP

The Bangko Sentral ng Pilipinas (BSP) welcomes the enactment of a law putting Islamic banks under its regulation and supervision. Republic Act No. 11439 or "Act Providing for the Regulation and Organization of Islamic Banks" was signed by President Rodrigo Duterte on August 22. In the Philippines, the potential market for Islamic banking products mainly comprises the Muslims which account for about 10% of the population. The BSP noted that Islamic banking can also be attractive to non-Muslims, particularly investors who may be looking for new asset classes, instruments and products to diversify their portfolios. An Interagency Working Group on Islamic Banking and Finance has been constituted to develop a regulatory framework for Islamic banking.

ADIB UK provides Dh120m acquisition funding

Abu Dhabi Islamic Bank (ADIB) UK has provided financing for The Bank of London and the Middle East (BLME) to acquire a Dh120 million (£26.95 million) Grade A office building in Edinburgh. The building is now leased to Centrica as their corporate headquarters in Scotland until 2035. The building has received several design awards including the Scottish Design Award for Commercial Interior and the British Council for Offices National and Regional Awards for Commercial Workplace. BLME is a UK Shari’ah compliant bank with a branch in the Dubai International Financial Centre, regulated by the DFSA. Boubyan Bank is BLME’s largest shareholder. BLME sources and co-invests in commercial real estate opportunities alongside professional investors from the Middle East.

Islamic finance taking shape

In #Ethiopia, Muslim members of the business community are and had been severely underserved by the nation’s financial industry. This seemed to be changing in 2011 with the enactment of the nation’s first interest-free banking directive by the National Bank of Ethiopia. However, the directive only authorized interest-free banking window in the setup of a conventional banking system and not a full-fledged Islamic bank. Exactly six years later, three potential full-fledged Islamic banks have been established. The three have officially started selling shares while unofficially at least two more banks are said to be in the pipeline to take part in the interest-free banking game. This will bring the total number of new entrants to five.

Islamic finance a main pillar for the Islamic digital economy

Muslim countries are increasingly working on establishing an ecosystem called "inclusive Islamic digital economy."
Such a concept aims at combining the core sectors of what today constitutes the digital economy under Shariah compliance, besides Islamic finance and investment products, also e-commerce, food, transportation and logistics, the sharing economy, as well as lifestyle, travel and entertainment. Forecasts say that the global Islamic digital economy will reach an estimated value of $277bn as of 2020. This data suggests that the Islamic digital economy is going to be a huge opportunity for businesses in the future and cannot be ignored by any market player. In Islamic finance, micro-financing, co-investment platforms and online investment advisory are currently the most prevalent services. However, there is still accumulated demand for online incubation funds and start-up financing, including Islamic crowd funding.

How Islamic finance can build resilience to climate change

Worsening climate change impacts are having a negative impact on agricultural food production, livestock value chains and livelihoods. To tackle Sustainable Development Goal number 13, financial inclusion can be used as a tool to provide much-needed access to financial services. This in turn can help vulnerable communities break a vicious cycle to better prepare and cope with climate change shocks such as droughts or floods. Islamic microfinance institutions can fill a vital gap not met by conventional microfinance institutions by targeting pastoralists. A social collateral approach is taken by Crescent Takaful Sacco. The microfinance institution lends money to groups instead of individuals. This group-based lending approach is similar to the concept of asabiyah, otherwise known as social solidarity.

Why we need to embrace Islamic finance

In the Philippines the Senate approved a bill authorizing the expansion of the Islamic banking system, which shall be under the supervision of the Bangko Sentral Pilipinas and regulated by the Monetary Board. This measure can support families affected by humanitarian crises so that they may access formal banking systems and become more financially secure. Last May was the second anniversary of the Marawi siege; violence and conflict displaced 98% of the total population of the city. Recovery has been slow and full of challenges, particularly for those who could not access financial services. Agencies involved in the rehabilitation of Marawi conflict-affected communities can maximize assistance by considering an alternative financial system such as Islamic finance.

Virtual banks can attract more millennials to Islamic banks

According to Professor Datuk Dr Azmi Omar, President of the International Centre for Education in Islamic Finance (INCEIF), it is necessary to address millennials, as they constitute a significant proportion of the Malaysian population. Therefore, Islamic banks must be smart enough, in either that they create another subsidiary, a virtual bank, or roll out more of their services in terms of virtual applications. He added that virtual Islamic banks will attract millennials, but not everyone will go for digital banking. It is an alternative. In March this year, BNM governor Datuk Nor Shamsiah Yunus said the central bank had had some preliminary discussions with a few banks, with virtual banks overseas. In its report on Islamic Banking Moody's noted that Malaysia planned to issue new virtual banking licenses by end-2019. This could increase competition for deposits, especially among Islamic banks with weaker deposit franchises.

Gaps in Islamic finance a pressing issue, says ICIEC

The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) is trying to fill a gap in the absence of third-party guarantees, which has affected liquidity and hindered growth of Sharia-compliant financing. ICIEC head Oussama Kaisi said the group was engaging with central banks of several countries to find ways to increase liquidity for Islamic financing and allow more third-party guarantees. He added that by accessing the sukuk market companies can increase their investor base through stronger ratings, raise loan tenors and decrease borrowing costs. The value of sukuk issuance in 2018 was $115 billion (Dh422.33bn) and the market looks set for a similar amount this year. According to Standard & Poor’s, the UAE may sell $8bn worth of sukuk this year, slightly lower than $9.1bn recorded at the end of 2018, with private-sector corporations dominating the issuances.

Islamic banking industry continues to offer financing to eligible Malaysians: Aibim

The Association of Islamic Banking and Financial Institutions Malaysia (Aibim) has ensured that its member banks will continue to provide access for Islamic finance banking products. Aibim’s president Datuk Adissadikin Ali assured that customers who are eligible will not be deprived from access to financing. He added that customers should also recognise the need to make sound decisions based on their own affordability and in line with their financial conditions. Last year, Islamic banks approved a total of RM37.7 billion, representing 36.7% from the total financing for the purchase of residential properties. They also approved RM12.4 billion of personal financing and supported RM1 billion funding for the small and medium enterprises (SMEs).

What is a sharia-compliant investment and how should I save for a rainy day?

A shariah-compliant unit trust fund is a collective investment scheme that requires all investments in the fund to adhere to Islamic law or shariah requirements. These requirements are underpinned by Islam’s prohibition on charging interest and the avoidance of companies with more than 30% debt or investments that engage in activities that are deemed to cause social harm, for example gambling, alcohol and weapons manufacturing. Sharia-compliant equity unit trusts typically invest in equities that comply with the above requirements. In addition, sharia-compliant balanced funds provide a shariah-compliant retirement or pension fund investment that invests in shariah-compliant equities as well as sukuks. Most shariah-compliant equity and balanced funds invest in both local and global equities.

HSBC #Malaysia launches ESG Islamic structured product

HSBC has launched its first environmental, social and governance (ESG) Islamic structured product in Malaysia. The product offered by HSBC Amanah provides customers the opportunity to invest in a product that matches their values when it comes to environmental and social causes. It pays fixed coupon of 3.90% per annum (three years tenor) and 4.50% per annum (four years tenor) in the first two years of the investment. Payout at the end of third and fourth year is subject to Hang Seng Corporate Sustainability Index performance. Hang Seng Corporate Sustainability Index tracks the performances of Hong Kong listed companies that excel in corporate sustainability. The CEO of HSBC Amanah Malaysia Arsalaan Ahmed said the introduction of the ESG Islamic Structured Product clearly demonstrates HSBC’s pioneering strength in Islamic finance, particularly with regard to product innovation.

Islamic Banking already in #Uganda, says Kasaija

According to the Minister of Finance, Mr Matia Kasaija, no amount of opposition will stop the operationalisation of Islamic Banking in Uganda because it has already kicked off. He is the one who signed the instruments operationalising it and he said Ugandans should stop associating it with terrorism and Islamic fundamentalism. During their annual general meeting last Saturday the Uganda Joint Christian Council (UJCC) resolved to lobby against the implementation of Islamic Banking. The Christian bishops speculated that Muslims could be using Islamic Banking as a bait to lure Christians into Islam. This drew a backlash from Muslim leaders, who warned the bishops to refrain from mobilising against Islamic Banking and advised them to seek knowledge from Ministry of Finance or Bank of Uganda rather than undermining it through the media.

IFSB database disseminates data for Islamic Banking Systems in 22 countries

The Islamic Financial Services Board (IFSB) has published country-level data on financial soundness and growth of the Islamic banking systems for Q3 and Q4 of 2018 from 22 IFSB member jurisdictions. A special feature of this publication is the inclusion of full-fledged Islamic banking data of Kazakhstan for the first time as Kazakhstan joined the database project in January 2019. The total assets of the Islamic banking industry stand to USD 1,754 billion in 2018Q4 from USD 1,684 billion in 2017Q4. Financing by Islamic banks from the participating jurisdictions reached USD 1,052 billion in 2018Q4 from USD 1,024 billion in 2017Q4. The IFSB Task Force has been greatly facilitating the collection of Islamic banking data. The database is available at the IFSB website https://psifi.ifsb.org.

IFSB issues working paper on risk-sharing in Islamic Banking

The Islamic Financial Services Board (IFSB) issued its 10th research (WP-10) in the IFSB Working Paper series which explores the risk-sharing practices in the Islamic banking sector. It describes the views of both Islamic banks and regulatory and supervisory authorities (RSAs) on the practices of Islamic banks in IFSB member jurisdictions. This is in relation to the governance rights of unrestricted profit-sharing investment account (UPSIA) holders. The findings in WP-10 reveal that the capital treatment of the UPSIA in general varies across different jurisdictions and Islamic banking type. In most of the jurisdictions UPSIAs are considered to be 'investments' exposed to losses rather than 'deposits' with capital certainty.

Medina Islamic Finance Boost Financial #Inclusion in Africa

Medina Islamic Finance, an Africa-focused digital Islamic microfinance platform has announced a strategic partnership with United Labs, a New York-based data science venture studio. The announcement was made by the founder and CEO of Medina Islamic Finance, M. Wagane Diouf, at the 44th Annual Meeting of the Islamic Development Bank Group. United Labs will initially provide Medina Islamic Finance with access to Artificial Intelligence technology and automated local language customer support systems that will accelerate Medina’s underwriting while improving customer support. United Labs CEO Bachir Diagne said he was proud to support Medina's inclusive ecosystem with data science technology solutions and to boost financial inclusion in Africa. Medina Islamic Finance plans to roll out its suite of ethical banking solutions in key targeted African countries in partnership with established financial institutions later this year.

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