IslamicFinance.de

A Malaysia International Finance Centre (MIFC) delegation, headed by Raja Nazrin Shah, crown prince of Perak, visited Saudi Arabia recently to promote Islamic finance relations. The 33-member delegation included representatives of 17 Islamic banks and 12 Islamic fund management companies and some asset management firms, aside from Takaful operators, and legal and other professional services firms.
With the sukuk market acquiring going global dimensions market education and knowledge, especially of Islamic Capital Markets (ICM), becomes a necessity. This is met by the Islamic Markets Programme (IMP), which is held annually by the Securities Industry Development Corporation (SIDC), the training and development arm of the Securities Commission Malaysia (SC).

Fozia Amanulla has grown accustomed to the pressures of negotiating multi-million-ringgit deals during her career in Islamic finance.
At a meeting with a client in Saudi Arabia, where men and women are commonly segregated in public life, she was the only woman in the building -- a fact reinforced by the absence of any toilets for women.
Fozia, one of the first women to lead an Islamic bank in Malaysia, has had no shortage of reminders that her industry -- in which investments are made according to Islamic principles -- is a male-dominated one.
But the number of female faces is multiplying.
Jamelah was appointed managing director of RHB Islamic Bank in Malaysia in 2007 and is believed to have been the first woman in the world to head an Islamic bank.
Linda Eagle, president of the Edcomm Group Banker's Academy, a consulting firm based in New York, said that while branches for women only had existed in Saudi Arabia for decades, such branches had opened in Dubai and Iraq in recent years.

Islamic finance is struggling to streamline regulations as it moves into the mainstream, but seems overwhelmed by scholar reforms.
Islamic finance is toughening supervision of its powerful religious advisers as shareholders worldwide demand increasing accountability from directors, but key reforms may do little to boost independence and transparency.
Islamic banking is overhauling rules that govern the conduct of its influential sharia advisers, with competition for investor dollars and a growing market putting pressure on the once-arcane industry to adopt clearer, more uniform guidelines.
Key to these challenges is the small number of scholars advising a growing number of banks on increasingly complex financing structures, raising issues such as transparency of rulings, independence of advisers and how to groom new scholars.
The International Sharia Research Academy for Islamic Finance, which is backed by Malaysia's central bank, is planning a global regulatory body for sharia advisers.
Others point out that uniformity is hardly attainable, as markets range from Saudi Arabia's established sector to South Korea's infant industry.

The leading global Islamic Finance accounting regulator is introducing conditions for contracts that comply with religious laws, seeking to standardize an industry with $1 trillion in assets under management.
The Bahrain-based Accounting & Auditing Organization for Islamic Financial Institutions will for the first time provide a “Shariah-compliant way” for parties to enter and exit contracts, Mohamad Nedal Alchaar, secretary-general of the agency, in Manama.
While civil law already offers legal cover in disputes, counterparties want protection based on Shariah principles, according to Dawood Islamic Bank Ltd. in Karachi, Pakistan. Establishing a global standard would bolster confidence for sukuk investors, said Madzlan Mohamad Hussain, a partner at Zaid Ibrahim & Co., Malaysia’s biggest law firm.

Because of market developments and increasing competition which has led to product innovation and diversity, the Prudential Financial Policy Department of Bank Negara Malaysia has reviewed the regulatory framework for insurance and Takaful products "to further enhance consumer protection while according greater flexibility for insurers and Takaful operators to respond to changing market conditions, both in managing risks and enhancing their competitiveness".
The guidelines, stressed Bank Negara, which is also the insurance and Takaful regulator in Malaysia, aim to improve the time-to-market for insurance companies and Takaful operators to introduce new products; to promote sound risk management practices in managing and controlling product risk; and to further strengthen the duty of care owed to consumers in ensuring that products developed and marketed are appropriate to the needs, resources and financial capability of targeted consumer segments.

YARIKAT Borcos Shipping Sdn Bhd, Malaysia’s second-largest provider of offshore support vessels, had the A1 rating on RM160 million of Islamic medium-term notes placed on rating watch with a negative outlook at RAM Rating Services Sdn Bhd.
This reflects a decline in daily charter rates and low utilization of its offshore support vessels. A1 is RAM’s fifth-highest investment grade.

The developer of the planned Muslim community center and mosque near ground zero hopes to finance the bulk of the $140 million project using instruments developed to allow many Muslim investors to comply with religious prohibitions on interest.
Most of that core group, Mr. Gamal,the developer, expects, would be non-Muslim neighborhood residents and commuters. Muslims from around the region would make up a larger but less frequently visiting group — what he calls the “dinner and a date” crowd — many of them choosing the cheapest $375 family membership for cultural programs.
In sukuk construction projects, the investors own the real estate asset, and the developers lease it back; the investors’ profit on the rent is analogous to the yield on a bond. Some Islamic scholars do not accept the system, but it is widely used in places like Malaysia and Dubai.

Recent Western debate about the role of women in Islam may have centered on the veil, but from its early years, Islam was receptive to women in business and finance. And today, Malaysia is an example of how making money has little to do with gender in Islam.
Not only does Malaysia boast a female central bank governor devoted to helping Islamic finance grow, but Malaysia's Islamic institutions also boast women executives in top positions.
More surprising perhaps, Malaysia is also home to several woman scholars of Islamic law, or sharia, who provide companies with the approval they need to brand their business as compliant with Muslim principles that include a ban on interest.

Malaysia Debt Ventures Bhd, a venture capital firm owned by the Ministry of Finance, plans to issue about RM500 million of Islamic bonds in its third sukuk sale next year to fund investments, chief executive officer Md. Zubir Ansori Yahaya said in Kuala Lumpur.

With the Islamic finance industry worth an estimated $1 trillion and growing rapidly, it is perhaps no surprise that a number of Asia-Pacific nations are among a growing band of countries worldwide to signal their intention to carve out a larger share of the market.
Countries like Malaysia, Indonesia and Singapore, along with Hong Kong, have set their sights on becoming hubs for Islamic finance, where investments are made according to Islamic principles.
While their sectors may be at varying stages of development, they are facing a common predicament: a shortage of professionals skilled in Islamic finance.
Education institutions around the Asia-Pacific region, like their counterparts in the Middle East and Europe, are increasingly seeking to fill that gap by adding Islamic finance specialization to their master’s programs in business administration and elsewhere.

Islamabad —Pakistan, Afghanistan and Senegal, among the world’s 50 poorest nations, are turning to Islamic banking to spur economic growth by encouraging people to take out loans and open savings accounts. Outstanding domestic bank lending accounted for 3.5 percent of Afghanistan’s gross domestic product in 2008, 25 percent in Senegal, 27 percent in Nigeria and 46 percent in Pakistan, according to data compiled by the World Bank. The rates compare with 224 percent in the U.S. and 115 percent in Malaysia, a global hub for finance that conforms with Shariah principles.
Developing Islamic nations have shunned banking in part because of the religion’s ban on interest, limiting access to funds for project financing and stunting business growth, according to the International Monetary Fund. Governments should improve regulations, products and institutions that comply with Shariah law to accelerate the industry’s development, Patrick Imam and Kangni Kpodar, economists at the IMF, said in a telephone interview from Washington on Sept. 14.

The South African government's recent confirmation that it is in the process of introducing tax neutrality laws for Mudaraba (trust financing), Murabaha (cost-plus financing) and Diminishing Musharaka (diminishing shared ownership) contracts is a long overdue recognition of the potential Islamic finance has for the country and the region. Financial services industry sources stress that the proposed tax neutrality measures are just the start and the wider objective is to introduce a comprehensive regulatory and legal framework to facilitate Islamic finance in the country both for financial inclusion and market liberalization and development reasons.
It may also have something to do with the ambition of the country to develop Cape Town into an international financial hub, an ambition which was confirmed by Alan Winde, the finance minister of the provincial government of the Western Cape; and South Africa's aim of attracting inward foreign direct investment (FDI) from the Middle Eastern countries and others such as Malaysia and Brunei.

Jakarta-based Bank Syariah Mandiri joined Islamic lenders worldwide to use Ramadan to remind Muslims to obey the teachings of the Prophet Muhammad that ban interest. Emirates NBD of Dubai waived payments on personal loans during Ramadan, while Maybank Islamic in Kuala Lumpur started automating charitable donations. Banks in Indonesia, the world’s most populous Muslim nation, offered limited-edition products to generate Ramadan-linked revenue and publicity. Bank Syariah Mandiri, the Islamic unit of Indonesia’s largest bank by assets, Bank Mandiri, collaborated with a local TV operator on a program aimed at promoting Shariah-compliant banking during the holy month. Shariah finance prohibits the charging of interest as well as investments tied to gambling and alcohol. Returns are generated as a share of profits from assets.

MAYBANK, Malaysia's biggest lender, has set up a dedicated Islamic banking hub here as part of a concerted push to expand the business beyond its home market, as it strives to gain an edge over rivals vying to stamp their name on South-east Asia. About one-third of the bank's Islamic financing portfolio comprises corporate and business loans, while the rest includes home loans, receivables from car and equipment hire-purchase financing schemes, credit cards and personal loans, he said. In Indonesia, Maybank is converting its subsidiary Bank Maybank Indocorp into a full Islamic bank that will be re-branded Maybank Syariah Indonesia. It will then use the distribution network of Maybank's other subsidiary there, Bank Internasional Indonesia, which has 290 branches, to sell Islamic banking products and services.

Malaysia, the world’s largest market for sukuk, plans to improve its legal system to become an alternative location to the U.K. for resolving international Islamic finance disputes. The goal is to position Malaysian laws as the law of choice for Islamic finance transactions globally. Disputes about Shariah principles are a risk to the market for sukuk, bonds complying with Islam’s ban on payment of interest. Persian Gulf companies have traditionally based cross-border contracts on U.K. law to take advantage of the country’s developed legal system and neutrality, according to Unicorn Investment Bank BSC. The challenge will be to gain acceptance in the Middle East because of different religious interpretations in various jurisdictions. A group of scholars in Kuala Lumpur is helping to set up a committee to prepare the first global certification for Shariah experts said Aznan Hasan, the president of the oversight committee

Malaysia's largest lender Maybank on Friday announced plans to expand its Islamic finance business in Singapore and Indonesia to tap the markets' demand for such services. In Indonesia, home to the world's largest Muslim population, the bank will open at least one new branch a week to increase its network. Maybank chief executive Abdul Wahid Omar is also planning to expand its Islamic services in Singapore, whose population is 13 percent Muslim. Maybank is determined to become the number one Islamic bank in ASEAN. Maybank is aiming to break into the world's top 10 Islamic finance centres, Abdul Wahid said. Bank Melli Iran is the global leader in Islamic finance.

The possibility of the first sovereign or corporate sukuk origination out of France took a step nearer when the French government announced that it had passed new instructions to facilitate the introduction of sukuk, Ijara, Murabaha and Istisna products in France.

It is claimed that France now has a tax neutrality regime in place for facilitating Islamic financial products including Islamic bonds and certificates; cost-plus-financing; leasing and construction industry forward financing.

French banks such as Societe Generale, BNP Paribas, UBAF, Calyon (Banque Credit Agricole) have long been involved in global Islamic finance. BNP Paribas for instance recently listed its first Islamic exchange-traded fund (ETF) in Asia on Bursa Malaysia. Some two years ago it had advised the Malaysian Sovereign Wealth Fund, Khazanah Nasional Berhad, to launch its first Islamic ETF, MyETF i. The new measures are not limited to a particular transaction but form a basis for a framework for Murabaha, Istisna, Ijara and sukuk transactions which satisfy both French law and Shariah principles.

Consumer banking will continue to be an important revenue generator for banks with home loans being one of the major areas of focus amid the prevailing relatively low interest rates. Apart from home loans, the other sectors in consumer banking which banks are focusing on to beef up their revenue streams are car loans, credit cards, personal loans and wealth management. RAM Ratings head of financial institution ratings Promod Dass said the relatively low interest rate environment had fuelled consumer lending, which represented more than half of the banking system’s loans. Malaysian Rating Corp Bhd vice-president and head of financial institution ratings Anandakumar Jegarasasingam said the main challenge for banks would be to ensure the asset quality of household loans. Ernst & Young Malaysia partner (Assurance) Chan Hooi Lam foresee consumer banking facilities like car loans, purchase of residential properties and credit cards to continue its growth momentum into next year. RHB Banking group director of retail banking Renzo Viegas said that apart from credit cards, the focus would also be in debit cards as the bank saw tremendous growth potential in this area.

Affin Holdings Bhd (AHB) and The Bank of East Asia Ltd, Hong Kong (BEA) have formally established a partnership to jointly develop business in China, Hong Kong, Malaysia and other key markets where they both operate.

BEA chairman and chief executive Dr David K.P. Li said that the China Banking Regulatory Commission is studying the proposal to set up a joint venture between BEA and AHB to conduct Islamic banking in China, but that there are no related laws yet.

Leading Islamic finance scholars are preparing the first global certification for Shariah experts, seeking to bolster the industry’s reputation and make it easier for banks to find qualified advisers. The International Shariah Research Academy for Islamic Finance in Kuala Lumpur will pick a board of regulators by year- end to issue permits for scholars qualified to sit on Shariah boards. The scholars decide whether financial products meet the religion’s precepts, including a ban on interest payments. Scholars are now required to have recognized university degrees before they can act as advisers to banks and companies. The council of scholars at the academy includes Sheikh Nizam Yaquby of Bahrain, Mohammad Daud Bakar of Malaysia and Abdul Sattar Abu Ghuddah of Syria. A centralized regulator for scholars will help increase investment because banks would save time in choosing experts to ensure products meet religious principles. The institution doesn’t plan to restrict scholars on the number of advisory panels they can join.