MoU to raise awareness on Islamic banking

Minivan News:Two Memorandums of Understanding (MoU) were signed today to raise awareness about Islamic banking in the Maldives and to institute a Hajj fund to enable would-be pilgrims to travel to Mecca.

The MoUs were signed between the Islamic ministry and Fine Line Holding of Malaysia. The objective of the first MoU is to “work towards assisting the Maldivian government in its vision of enlightening the Maldivians on the basic operational and functional capabilities…of the Islamic Banking and Finance system...Read More

Why Islamic Banking Is Successful?

Islamonline.net:The collapse of leading Wall Street institutions, notably Lehman Brothers, and the subsequent global financial crisis and economic recession, are encouraging economists world-wide to consider alternative financial solutions...Continue Reading

A brighter future

ArabianBusiness.com:Islamic finance faces a stern test in 2009 amid the global economic crisis, and increased calls for more comprehensive industry regulation. Nevertheless, analysts argue that the sector's fundamentals remain sound.

Once seen as an obscure backwater of banking, the Islamic finance sector has registered phenomenal growth in recent years.

Islamic Banking likely to grow two-fold in 2009

KARACHI: The expansion of Islamic Banking network continues in spite of global economic slowdown and it is likely that the network grows double of its present size during the year 2009.

President Bank Islami Pakistan, Hasan Bilgrami during media briefing here Wednesday pointed out that the growth rate of Islamic banking is on the rise at a rapid pace and that his bank is also on the same track.

He said the current economic crisis did not affect his bank as it had no stake in the stock market or in the real estate.

Looking towards a new Mecca - Islamic banking

CIOL: The growth rate is nothing less than 15 to 30 per cent a year. From about 30 to 40 Islamic banks in 2005 the last three years have seen 400 financial companies registered and even more companies are now recreating financial instruments for the special genre.

Looks like Islamic Banking could be new oasis of growth in the deserts of slowdown if one goes by the prospects that Hanuman Tripathi, managing director, InfrasoftTech is banking upon.

Apart from obvious markets like Malaysia, and a big Middle East focus, there are surprisingly equal opportunities in Europe, UK, France as well, he avers.

"The trading levels have grown from $70 to 80 billion in 2005 to $300 billion in 2008 worldwide. Major countries like America and even South Africa are taking it up and India would also be looking into it with permissions expected next year," he hopes.

Islamic banking is a different species in the global financial ecosystem and draws its distinctive silhouette from the halo of ethics. As Tripathi sees it, it's a new business model emerging from people who follow Islam and its tenets, leading to certain common practices which are permissible under Shariah law and keeping firm about certain practices that are not permissible.

"The consequent banking and technology solutions are hence different from commercial banking ones. Calculations are more complex. In this genre of banking, contracts need to highlight where is the money being applied," he says.

"It's a positive way of banking with no negative trade, no speculation, no belief in interest, no investment allowed in negative industries like Alcohol, Tobacco, no lending allowed for speculative purposes." "We are targeting a top position as a supplier of Islamic Finance Solutions in the world market."

For Infrasoft Technologies that has been dealing in technology solutions to banking and financial institutions for ten years, this market segment is a big opportunity and the company would be investing in respective solutions, market geographies increasingly.

Yet, as the Institute of Islamic Banking and Insurance reckons Islamic Banking is not something entirely novel. According to this Institute, Islamic banks appeared on the world scene as active players over two decades ago, and many of the principles upon which Islamic banking is based have been commonly accepted all over the world, for centuries rather than decades.

As the Institute site further explains, the basic principle of Islamic banking is the prohibition of Riba- (Usury - or interest). "Disenchantment with the value neutral capitalist and socialist financial systems led not only Muslims but also others to look for ethical values in their financial dealings and in the West some financial organizations have opted for ethical operations.

"Islam not only prohibits dealing in interest but also in liquor, pork, gambling, pornography and anything else, which the Shariah (Islamic Law) deems Haram (unlawful). Speculation can be excluded by careful investment policy, diversification of risk and prudent management by Islamic financial institutions."

Islamic banking expanding rapidly

BERNAMA :Islamic banking continues to grow with total assets expanding by 12.6 percent to RM177 billion as at June 30 compared with RM157.2 billion as at end of last year, the Finance Ministry said.

Deposits increased by 17 percent to RM142.7 billion as at end of June, it said in the 2008/2009 Economic Report.

It said financing grew 8.5 percent to RM97.5 billion and accounted for 14.2 percent of total banking system loans.

Lending remained concentrated on the household sector, with loans amounting to RM58.5 billion or 60 percent of total outstanding loans.

On takaful industry, it said the industry grew strongly in the first six months of this year, with combined takaful contribution income increasing 23 percent to RM1.4 billion compared with RM1.1 billion in the same period last year.

In the family takaful sector, it said new business contributions recorded a stronger growth of 98.1 percent to RM1 billion, driven by the expansion in investment-linked products following new product launches in early 2008, and high growth in endowment products recorded by new takaful operators.

The ministry however said the general takaful net contributions declined 6.7 percent on account of the decrease in fire insurance by 34.2 percent to RM97.6 million and marine, aviation and transport insurance by 46 percent to RM13.8 million.

Takaful assets expanded 25.1 percent to RM9.6 billion as at June 30 and accounted for 6.9 percent of the total assets of the insurance industry.

Islamic banking not sparking in most of Asia

Moody's Investors Service has said the Islamic banking industry in Asia will need more support from regulators.

Moody’s claims the Islamic banking service has been patchy and will need help to grow.

The ratings agency said in a report that only Malaysia had shown how the Islamic banking sector could benefit from government reforms to develop the necessary legal and regulatory framework for the industry to flourish.

The adoption of various incentives, including tax breaks, had proven a boon to the business in Malaysia.

Islamic banking in Malaysia now accounts for 15.4 percent, or US$62 billion, of the country's banking system assets.

Islamic banking brings together the principles of Islamic law and modern banking.

Islamic funds are banned from investing in companies associated with tobacco, alcohol or gambling.

Islamic banking needs regulator support: Moody's

SINGAPORE (AFP) — East Asia's Islamic banking industry needs more support from regulators if it is to grow significantly, Moody's Investors Service said Monday.

Apart from Malaysia, the growth of Islamic banking has been "somewhat patchy" in the region, the ratings agency said in a report.

Malaysia, a multi-racial country with a majority Muslim population, shows how the Islamic banking sector can benefit from regulatory action, said Christine Kuo, author of the report.

"We believe the Malaysian experience over the last three decades demonstrates how instrumental regulators can and need to be in order to grow the Islamic banking sector," said Kuo.

Malaysian government reforms over the past 20 to 30 years "have really helped develop the necessary legal and regulatory framework and institutions for the industry to flourish," Kuo said.

"The adoption of various incentives, including tax breaks, has also proven critical to nourishing the business."

Kuo said Islamic banking in Malaysia now accounts for 15.4 percent, or 62 billion US dollars, of the country's banking system assets.

In Indonesia, the world's most populous Muslim nation, Islamic banking has grown rapidly in recent years but its market share still only accounts for less than two percent, or about three billion US dollars, Moody's said.

"The low penetration in Moody's opinion, can largely be attributed to the slow pace of change to related regulations and institutions -- though a few important changes seem to be gathering momentum," the report said.

It said Islamic banking has achieved relatively high market penetration in Brunei but Islamic banking services in the Philippines, Singapore and Thailand remain very small in terms of asset size.

Islamic banking fuses principles of sharia or Islamic law and modern banking. Islamic funds are banned from investing in companies associated with tobacco, alcohol or gambling considered taboo by Muslims.

Islamic banking a vibrant alternative system

THE Islamic banking system has emerged as a vibrant alternative financial system in Malaysia.

Islamic banking assets (including Islamic assets held by development financial institutions (DFIs)) currently accounts for 15.4% (11.5% in 2003) of the total banking assets (including assets held by DFIs) of the Malaysian financial system.

Capitalising on the ready infrastructure and comprehensive Islamic financial system locally, the strategic development of Malaysia as an international Islamic financial centre was taken to a new level with the launch of the Malaysia International Islamic Financial Centre (MIFC) initiative in 2006.

To accelerate the development of Islamic finance, new banking and takaful licences were offered to attract leading global players to establish operations in Malaysia.

During the year, 16 approvals were granted for international currency business operations.

Two additional retakaful licences were also granted in 2007 to local and foreign players, further consolidating Malaysia’s position as an international retakaful hub, while contributing to the development of enhanced underwriting and claims practices, and product innovations in the takaful industry.

To further facilitate the conduct of takaful business, a tax treatment that recognises the unique characteristics of takaful operators had been introduced.

The tax treatment provides for the appropriate recognition of income and expenses arising from takaful business, having regard to the distinct role of takaful operators as risk managers in contrast to conventional insurers, which are risk underwriters.

Other current initiatives include the review of the tax treatment for the business of leasing which aims to address taxation issues that currently impede the development and growth of leasing and ijarah business.

The Government continues to provide strong support for the MIFC vision by granting flexibilities to improve business efficiencies and to attract the best talent to Malaysia.

In 2007, the Government introduced an “executive green lane” for immigration procedures for foreign experts in Islamic finance, and made available long-term employment passes with multiple entry visas and professional visit passes.

The Government had also relaxed several Foreign Investment Committee rules for MIFC players.

These include allowing 100% foreign equity ownership in Islamic financial institutions established under the MIFC and granting flexibilities in the acquisition of properties and land, both for own use and commercial purposes.

Further tax incentives were also granted to promote Malaysia as a centre for origination, distribution and trading of sukuk.