Thomson Reuters Appoints Rushdi Siddiqui as Head of Islamic Finance

PR Newswire UK:Thomson Reuters today announced that it has appointed Rushdi Siddiqui to lead its Islamic Finance business. Mr. Siddiqui's appointment represents another investment by Thomson Reuters in this sector.

Thomson Reuters, which has been active in the Middle East, Africa and South East Asia since 1865, has strong Islamic Finance assets covering leading content, news, analytics and trading capabilities. In this newly created role, Mr. Siddiqui will be utilizing these assets and working closely with Islamic finance and banking professionals including fund managers, treasury, financial hubs, regulators, stock exchanges, central banks, Takafol (insurance) entities, Halal industry, intra-OIC (57 Muslim countries), trade, investment, as well as others to strengthen and grow this business...Continue Reading

Islamic financiers meet as downturn bites business

Reuters:Scholars, lawyers and investors will gather on Tuesday to discuss the future of Islamic finance just as the industry once thought resistant to the global downturn is showing signs of weakening.

Islamic finance had been seen as relatively safe until recently, because its ban on interest and strict guidelines on speculative instruments such as derivatives and hedge funds meant it had largely avoided toxic assets...Read More

Islamic banking rising but impact is minimal

The Staronline: Although Islamic banking business is expected to remain on the uptrend, its contribution will have minimal impact on the total income of local banks, analysts said.

TA Securities noted that while prospects were still good for Islamic banking in the country, it contributed only 10% to 11% on average to the total income of the country’s nine listed banks in the third quarter ended Sept 30, and 9% in the second quarter...Read More

How Islamic banks make money

The Standard:young man makes his career choice and decides to become a successful banker, just like his father.
He wants to prepare for the role and asks his father: "What must I do to become a successful banker, just like you?"

"Son," says the father, "you must follow these three simple rules: first, don't lend money to those who don't have any; second, don't lend money to those who need it badly; and third, the most important, don't lend your own money."

Sound advice in these troubled times. It is a shame that many of today's bankers either never received this sound advice, or ignored it!...Read More

Winds of Change in Favor of Islamic Banking

Asharq Al-Awsat:In the first statement made by Dr. Mohamed Al-Jasser, the new Governor of the Saudi Arabian Monetary Agency [SAMA], he spoke about long-term financing projects in Saudi Arabia, saying that in the past the burden of this type of financing fell upon governmental funds, and not commercial banks. Dr. Al Jasser revealed that there is a good opportunity for Saudi Arabia to secure long-term financing via other alternatives that have yet to be explored, such as through the issuance of bonds and Sukuk [Islamic bonds}...Continue Reading

Time for reality check for Islamic finance

Thepeninsulaqatar.com: The Middle East Financial Law Congress is taking place on February 17th and 18th at the Four Seasons Hotel, Doha.

The congress has brought together international banking experts and in-house counsel from leading banks in the Middle East, and their legal advisors, regulators, legislators, diplomats, Shari’ah-scholars etc.
The congress features detailed discussions on Capital Markets, Fund Management, Structured Finance and Mergers & Acquisitions...Continue Reading

Gulf states 'should resort to Islamic banking to finance public deficits'

GulfNews: Gulf governments should begin using Islamic finance instruments such as sukuk bonds to finance public spending deficits, according to Dr Nasser Saidi, chief economist at the Dubai International Financial Centre...Continue Reading

São Paulo to have lecture on Islamic banking

São Paulo – The Association of Capital Market Analysts and Professionals of the State of São Paulo (Apimec) will promote a free lecture entitled "Islamic Banking," to be given by the director at ABC Brazil bank, Angela Martins. She is the author of a book on the subject, and one of a few Brazilian specialists on the subject. The lecture will be held on June 10th at 04:00 pm at the Apimec headquarters.

According to information supplied by the association, the lecture will cover the following topics: Why learn about it?; The history of the region; Petroleum; Financial market principles in Islamic countries; Usury and payment of interest; Products; Eurobonds; and Future. A debate will also be held.

The Islamic financial market, governed by the Sharia – a set of rules based on religious tradition –, is growing in the Arab world and outside of it. In Brazil, the ABC Bank, which has predominantly Arab capital, offers credit contracts under the Sharia.

In the face of the international community's growing interest in investing in Brazil and the rising liquidity prompted by oil prices in the Arab world, many Brazilian financial institutions are seeking to attract investors from the region, therefore greater knowledge of the Islamic system is required.

This, by the way, was an issue raised by the audience during a seminar held recently in Dubai, United Arab Emirates, by Brazilian capital market representatives. The Securities and Exchange Commission (CVM) committed to organise a conference on the matter this month.

Lecture: “Islamic Banking”
Apimec-SP
Telephone: (+55 11) 3107-1571
E-mail: eventos@apimecsp.com.br
Date: June 10th, 2008
Time: from 04:00 pm to 06:00 pm
Place: Apimec-SP auditorium, Rua São Bento, 545, 5th floor mezzanine, Centre, São Paulo – SP

Islamic Banking Growing at 35%

Islamic banking is growing at an annual rate of 35 percent worldwide with assets of Islamic financial institutions amounting to a staggering $600 billion last year, Saleh Kamil, a prominent Saudi businessman and a pioneer in the field, announced yesterday.

Kamil, who is also chairman of the General Council for Islamic Banks and Financial Institutions, was speaking at a seminar organized on the sidelines of the 33rd annual conference of the governors of the Islamic Development Bank (IDB) Group.

Custodian of the Two Holy Mosques King Abdullah will open the conference at Jeddah Hilton today, which will be attended by the ministers of finance, economy and planning of the 56 countries of the Organization of the Islamic Conference.

IDB President Dr. Ahmed Muhammad Ali is expected to make some important comments during the opening session, especially on the bank’s plans to provide soft loans to poor member countries to stock food grains and expand micro financing as part of poverty-reduction measures.

At least 50 IDB governors have already arrived in Jeddah. A senior bank official said it is the first time such a large number of ministers are attending the annual conference. “It is a good opportunity for the governors and senior IDB executives to discuss future challenges and opportunities,” the official, who requested anonymity, told Arab News.

In his keynote speech at the seminar on “Human Capital Development for Islamic Financial Industry: Challenges and Initiatives,” Kamil said there are more than 470 full-fledged Islamic banks and financial institutions around the world. “Their number rose from 276 in 2005 to over 470 in 2007,” he pointed out.

Islamic banking, which started as experiments of individuals like Prince Muhammad Al-Faisal and Kamil, has now become a full-blown industry recognized by international bankers and economists. “But its tremendous progress also carries a lot of challenges for those who work in the field,” said Kamil, the founding chairman of the Jordan Islamic Bank for Finance and Investments, the Arab Union Investment Company of Egypt and the Islamic Arab Insurance Company.

He also emphasized the need for investing more in human capital development. “We know that humans, the makers of progress and success, are also behind failures and collapses,” he said emphasizing the need to focus more on education and training to strengthen the sector.

Kamil also revealed a significant factor that 85 percent of the more than 300,000 employees working in Islamic banks and financial institutions lacked knowledge of Shariah, as they studied conventional banking systems.

Dr. Mohammed Al-Beltagi, program manager of Shariah compliant banking at the Institute of Banking in the Kingdom, said employees’ lack of knowledge of Islamic banking principles would have a negative effect on the system, as they would not be able to market products effectively.

Dr. Mehmet Asutay of Durham University in the UK urged Islamic banks and financial institutions to sponsor research projects and think-tanks in the field. He said some British universities such as Durham, Bangor and Reading are offering masters and doctoral programs in Islamic finance.

The opening session of the conference today will be presided over by Bahrain’s Finance Minister Sheikh Ahmed ibn Muhammad Al-Khalifa. OIC Secretary-General Professor Ekmeleddin Ihsanoglu and Finance Minister Dr. Ibrahim Al-Assaf as well as ministers from Morocco, Togo and Bangladesh will speak at the opening session. More than 1,000 delegates, including bankers, economists and business executives are also taking part.

Nabil A. Nassief, advisor in charge of Islamic financial services industry at IDB, stressed the bank’s plan to focus on micro finance services to fight poverty in member countries. He said the bank would carry out four pilot projects in Bangladesh, Indonesia, Sudan and Senegal as part of its efforts to promote Islamic financial services industry development.

“We’ll also advise member countries on how to manage Zakah and Waqf successfully, following modern asset management principles.”

The official noted the IDB’s strategic role in boosting the development of member countries and Muslim communities in non-member countries. IDB has so far given about $50 billion to finance agricultural, industrial, educational, health and infrastructure projects in the Islamic world.

“The IDB was the first bank to introduce trade finance as a development tool,” the official said. “We are not a commercial bank. We are a multinational development bank,” he said when asked why the IDB was not extending conventional banking services. Standard & Poor’s and Moody’s have given triple-A rating to IDB.

Khalid Abdullah Al-Bassam, chairman of Bahrain Islamic Bank, one of the oldest banks in the GCC country, is also attending the conference. He said the bank was expecting strong results this year as a result of its business expansion in retail, corporate and investment banking. He added that the conference was a good opportunity for government officials and private sector development challenges.

One official said the meeting would not discuss the issue of rising oil prices, which concerns many member countries. He said oil-producing countries in the IDB were making generous contributions to the UN Food Program to resolve the world food crisis. Saudi Arabia alone has given $500 million to the agency.

Islamic finance in need of more diversity

Reuters - A lack of diversity in their investments could mean Islamic asset managers lose out to conventional firms, a report published last week said.

Accounting firm Ernst & Young said Muslim investors hold $1.6 trillion in assets of all kinds, a figure forecast to rise to $2.7 trillion by 2010.

Islamic funds, which invest in accordance with Islamic law, ignore important asset classes and in Saudi Arabia, one of the world's two biggest markets for Islamic asset management, fund subscriptions have fallen since 2005, the report said.

"As demand for diversification grows, Islamic institutions will face the risk of losing significant market share to conventional institutions that can provide more comprehensive coverage," Ernst & Young said in the report.

By the end of March there were more than 500 funds globally that comply with Islamic law, Ernst & Young said in its Islamic Funds and Investments report, launched at a two-day Islamic banking conference that ended last Monday.

Some 153 Islamic funds were launched last year, and the figure is projected to rise to 1,000 funds by 2010, Ernst & Young said.

A key gap in the variety of investments offered by Islamic funds are fixed income assets, such as Islamic bonds. Only seven per cent of Islamic funds target such assets, compared with 22 per cent of conventional mutual funds.

Issuance of Islamic bonds, or sukuk, has been slowed by a global credit crunch triggered by defaults on US home loans last year.

Secondary market

The secondary market for the instrument is small, as most sukuk buyers hold the asset to maturity, and bankers complain of a lack of market makers.

Other assets under-utilised by Islamic funds include commodities and Islamic Real Estate Investment Trusts (REITS).

Equities are the dominant asset class for Islamic funds, with allocation above that in conventional funds. In Saudi Arabia, a stock market crash in 2006 continues to weigh on investor sentiment. "Saudi investor confidence remains low following stock market corrections in 2006," Ernst & Young said.

Despite the lack of diversity in asset classes, Islamic funds have increasingly diversified the geographical reach of their investments, and last year 76 percent of them targeted regions outside the Middle East and Africa, Ernst & Young said.

Bahraini Islamic lender Ithmaar Bank was among a group of firms to launch a Latin America real estate fund this month, while fellow Bahraini lender Gulf Finance House has launched an energy fund in Kazakhstan.

Islamic law prohibits interest, and bans investment in certain business sectors, such as alcohol, pornography and gambling.

Islamic finance makes its case as the ethical choice - and not just for Muslims

By Claire Shoesmith

The growing number of self-employed entrepreneurs amongst Manchester's estimated 40,000 Muslim community is boosting demand for shariah, or Islamic-compliant, finance, according to Bashir Timol, a director at specialist financial advisor 1st Ethical in Bolton.

While traditional bank loans are unacceptable under Islamic law — both the payment and receipt of interest is forbidden, as well as investment in certain industries such as gambling, tobacco or alcohol — Timol said 1st Ethical has started offering specialist shariah business investment plans in response to demand from clients.

Latest accounts, up to November 2006, show turnover of £2m, up nearly 30 per cent on the previous year.

“There is a very high level of entrepreneurship amongst the Muslim community here in Manchester and as a result there is significant demand for finance,” he told Crain's, adding that the group's business angels-type investment, whereby 1st Ethical provides money for start-up businesses in return for a stake in the individual operation rather than providing an interest-bearing loan, is proving very popular.

Islamic-compliant

Certain Islamic-compliant products, such as current accounts which offer no credit interest and no overdraft facility, and mortgages, whereby the bank buys as much as 90 per cent of the home on behalf of the customer and then rents the property to the customer while he or she pays back the money over an agreed period, have been available in the UK for several years now.

As early as 2003, HSBC entered the Islamic finance arena and since then most of the other high street banks, including Lloyds TSB, have followed suit in a bid to win business from the estimated 1.5m Muslims in the UK — equal to about 3 per cent of the population.

However, things are now starting to change and Timol said that a recognition that many Muslims are actually sitting on quite large amounts of money has led to the development of several new shariah products, including investment funds that put their money into Islamic-compliant companies, ie not involved in alcohol or gambling; current accounts for businesses that pay no interest; and commercial mortgages that operate in the same way as the shariah compliant residential mortgages.

Moreover, 1st Ethical has recently decided to put a greater emphasis on offering Islamic-compliant wealth management and tax advice for the growing number of wealthy Muslims in the city.

“By offering these services we are allowing Muslims to become much more mainstream,” he said. “They are able to do with their money what other wealthy people can do.”

In the same vein, Deloitte has recently set up a 12-strong Islamic Finance Group in Manchester to cater for the increased demand for shariah finance in the corporate arena.

Middle Eastern demand

While the group carries out business all over the world from its Manchester base, Dawood Ahmedji, one of its directors, said the growth in demand is coming mainly from wealthy Middle Eastern investors looking to bring their money into the UK.

“Being able to play in this market is extremely important,” he said. “There is huge growth in the industry emanating from the Middle East and Asia and we want to be part of it.”

While Deloitte has been doing work in this area for a while, the dedicated team, which incorporates audit, tax and corporate finance expertise, was only set up last November to cater for the growth in demand.

According to Ahmedji, in the “pre-credit crunch” environment UK finance deals were done on very thin margins, which were not attractive to Middle Eastern investors, so they stayed away. However, in the current environment where local investors are finding it harder to source funds, the cash-rich Middle Eastern investors are coming into their own.

“The City is making a strong bid in terms of becoming a hub for Islamic finance in the West,” he said. “The aim is to compete against Japan and Singapore.”

As with shariah personal finance, shariah business banking uses the principle of deferred finance whereby a contract is drawn up allowing a customer to purchase goods and pay later without taking out a loan, on which they would usually pay interest.

The customer can pay for the goods immediately, but normally the payment is deferred or paid in instalments. The financier makes a profit through the mark-up on the deferred sale.

In response to this increased demand, several Islamic banks have also moved into the UK, with the Islamic Bank of Britain opening its seventh UK branch on Stockport Road in Manchester in December 2006.

Since then, demand for its services has grown, with a spokesman telling Crain's the bank is not only attracting more and more Muslim professionals, but is also seeing an increase in non-Islamic customers seeking an ethical-type of investment.

“Islamic finance is a growing area across the broad personal finance and business corporate sectors,” said Emile Abu-Shakra, a spokesman for Lloyds TSB, which has been offering Islamic-compliant banking in its 35 Greater Manchester branches since 2005.

The rise of Islamic finance

By Elisabeth Eaves,

Finance that complies with Shariah, or Islamic law, is still a niche within the ethical investing niche. In all, there are at least $500bn worth of Islamic finance assets worldwide. That's not much in terms of global banking - US banks alone hold about $12.7 trillion in assets.

But the industry's growth is eye-catching: Islamic banking has expanded by more than 10% annually over the past decade, according to Standard & Poor's. It's grabbing the attention of some of the biggest banks in the world and changing how they do business.

In the 1990s, HSBC and Citigroup established global Islamic finance divisions. Far beyond just offering a few mutual funds to suit religious investors, they and stand-alone Muslim banks are creating instruments that parallel many of the Western world's financial products, from consumer loans to insurance to bonds.

Central banks and corporations in other industries are likewise feeling the demand. The governments of Japan and the UK - whether in an attempt to lure Muslim investors or impress Muslim voters - have announced plans to issue sukuk, which behave like bonds but conform to Islamic law.

Ford Motor's $848m sale of Aston Martin to Investment Dar, a Kuwait-based Islamic bank, required Shariah-compliant financing, and Caribou Coffee, America's second-largest speciality coffee chain after Starbucks, is owned by a Shariah-compliant private equity firm based in Bahrain.

So just what does Shariah-compliant banking entail? Some of it is simply prohibiting things seen as immoral. Investing in casinos, pornography and weapons of mass destruction is out.

The animating religious goal behind other restrictions is to achieve greater social justice by sharing risk and reward. Islamic finance bans people from selling what they don't own, which rules out short selling, and from engaging in contracts deemed to have excessive uncertainty on either side. That rules out traditional insurance, so Islamic banks have instead developed takaful, in which a group of people pool risk.

The Shariah stipulation banning interest, though, is the one that poses the most problems for modern finance.

To be sure, from the Bible to Buddhism, most of the world's faiths have issued warnings against usury, and theologians through the ages have debated the line between permissible and excessive interest rates. But ultimately, in the West, governments and religious authorities deemed some amount of interest permissible.

Not so in Islam, in which most scholars deem fixed-interest payments forbidden. So, for example, the sukuk issuer does not sell a debt, as a traditional bond issuer would, but rather sells a portion of an asset, on which the buyer is then entitled to receive rent. Likewise, rather than take out an interest-bearing loan, a business in need of financing might enter a musharaka, a partnership with profit-and-loss sharing.

Why the growth in Islamic finance now? After all, Islam's rules have been around since the seventh century, and some Muslim countries have been rich since the discovery of oil.

One important factor has been the recent rise in religiosity in Muslim countries, says Ibrahim Warde, author of Islamic Finance in the Global Economy and an adjunct professor of international business at Tufts University. He dates the rise to shortly after the terrorist attacks of September 11, 2001. With the US-led invasions of Afghanistan and Iraq, 'there was a feeling in many countries that Islam was a religion under siege,' he says.

Some observers date the rise in religious observance back even further, to the 1980s, when guest workers in Saudi Arabia from across the Muslim world began returning to their own countries, re-importing with them the strict Wahhabi subsect of Islam for which the desert kingdom is known.

Whenever this burgeoning religious observance began there is now an increasing appetite for Shariah finance. In some cases, Warde says, Middle Eastern governments have embraced Islamic banking to advertise their religious chops.

There are, of course, glaring exceptions to this growing demand. Saudi billionaire (and member of the ruling sect) Alwaleed Bin Talal owns big stakes in Citigroup, the Walt Disney Co. and Planet Hollywood. But Saudi Arabia, where the ruling family is trapped delicately between reform and radical extremism, may prove Warde's point.

'The government did not encourage Islamic finance there at all. It was a grassroots movement,' says Warde. Now, many banks and financial products there are Shariah-compliant. 'Once there was nothing they could do about it, they accepted it,' he says.

Some of the growth in Islamic finance has also been due to clever marketing by Malaysia. After September 11, US authorities froze the bank accounts of several prominent Saudis, which triggered other wealthy Arabs to withdraw their funds from the United States.

Ultimately, some $200bn left the US. Many of the investors were from tiny Gulf states whose economies were too small to absorb their funds, and so they looked to Malaysia, a Muslim country with a relatively sophisticated financial system. It issued the first sovereign sukuk in 2002, and made a point of appointing Shariah scholars from the Gulf to monitor compliance.

'They marketed it all over the world, and especially in the Arab world,' Warde says. Today, Kuala Lumpur rivals traditional hubs like Dubai and Bahrain as a global centre of Islamic finance.

In the end, the maths behind the growth of Islamic banking may be pretty simple: There are 1.3 billion Muslims in the world - roughly a fifth of the world's population. Some live in quickly developing economies, some sit on vast oil wealth and some are newly middle-class Americans and Europeans.

No one can say for sure how many will seek out banking that complies with Islamic law, or even pay a premium for it. But even a small fraction of 1.3 billion is a market no one wants to ignore.

Islamic banks 'are making mark'

MANAMA: A new report from a global strategic management consulting firm shows that Islamic banks are making their mark in non-Muslim countries.

The AT Kearney study reveals that these wholesale banks target a broad set of corporate, institutional and high net worth clients, both Muslims and non-Muslims.

While Sharia-compliant banking has traditionally focused on the GCC and Malaysia, there has recently been a dramatic increase in the number of Islamic banks outside the core markets, most remarkably in the UK, where the number of Islamic banks has more than doubled over the past 12 months.

At the same time, their products remain popular in their core markets, where Islamic banks consistently outgrow their conventional competitors.

"While Islamic banks in their core markets take a universal banking approach, with retail, corporate and investment banking business lines, they focus on wholesale banking in the UK," said AT Kearney Middle East manager of financial services Dr Alexander von Pock.

Assets in the Islamic banking sector grew to over $250 billion globally in 2006, according to the UK Treasury.

In the GCC, this segment expanded to 15 per cent of the total system and is expected to reach 50pc within the next few years.

The success at home enables these banks to export their business abroad, as Islamic banks from the GCC are the major shareholders behind all of the newly set-up Islamic banks in the UK.

However, the strategic approach they take on differs between them and their home countries.

"Islamic investments have often been outperforming conventional investments, hence Western, non-Muslim investors are becoming more interested in Islamic finance.

"They account for up to 40pc of buyers," AT Kearney Dubai associate director Maktoum Al Maktoum.

Positive outlook

MANAMA: Gulf Finance House (GFH) has received a glowing report from TAIB Research in its latest investment report.

TAIB says it continues to be positive on GFH stock and is reiterating its advice to clients to be overweight in the shares.

"GFH's stock has soared 27.9 per cent from the beginning of this year, as against a rise of 2.4pc in the Bahrain Stock Exchange displaying an ability to outperform the index," the report states.

"Currently, the stock is trading at a price earnings ratio of 8.30 and a price book value of 3.21, making it an attractive investment proposition.

"We believe that riding on the booming Islamic financial sector, the bank will continue to witness strong growth. Its sound fundamentals along with expanding project-base will further enhance its bottom line."

After a successful global deposit receipt and Sukuk listing on the London stock market, GFH has achieved the status of an international blue-chip Islamic investment bank. Today, over 28pc of its shares are held by major international institutional investors, says the report.

GFH's Algerian, Tunisian, Libyan and Asian projects further underline its leadership position in the field of economic infrastructure. Once the $3 billion financial harbour is set-up it will be the first financial centre in North Africa, the report said.

"Within a short span of eight years, GFH has placed itself as a leading regional Islamic investment bank in general and in the business of infrastructure development in particular," the report adds.

"Last year, GFH witnessed record profits on the back of strong growth in its project base, mainly driven by innovative economic infrastructure projects in highly attractive emerging markets, especially in the Middle East, North Africa and Asia.

"Additionally, this solid performance last year also reflects management's continued focus on delivering the strategic objectives of the bank.

"The bank's exit from Energy City Qatar generated a return of 35pc to its investors. Further its infrastructure developments, conceived, planned and currently being implemented in partnership with the governments in Asia and the Middle East and North Africa region have an aggregate estimated development value of nearly $20bn," says the report.

GCC Islamic banks assets cross $300b

The Gulf Cooperation Council's 22 Islamic banks have in excess of $300 billion of Sharia-compliant assets and were poised for double digit growth sustainable over the next decade, leading global financial services firm, Morgan Stanley, revealed yesterday.

It predicted continued strong growth for the Islamic banking sector driven by a robust outlook for the region and an increasing share of system assets.

Morgan Stanley yesterday initiated coverage on Dubai Islamic Bank (DIB) and Kuwait Finance House (KFH) in a report that forecasts that Islamic assets in the GCC would grow to 18 per cent of system assets by 2012 from its current 13 per cent.

"A buoyant macro-economic backdrop, increased infrastructure spending and continued diversification from oil economies are driving the banking sector generally," said Marwa A. Elsheikh, an analyst at Morgan Stanley, in the firm's report 'Middle East and North Africa Islamic Banks - Structural Growth Story'.

"In terms of factors behind the growth in Islamic finance, a greater focus on Islamic identity, Government backing for the development and promotion of Islamic banking, low penetration and competition among conventional banks make Islamic banking more attractive and more favourable industry dynamics are all likely to fuel the growth."

The report suggests that, while the outlook for the sector remains strong, there are a number of potential hurdles to growth.

Most Islamic banks lacked scale, the products were complex and there was no single regulatory body. "Further, there are operational limitations, such as not being allowed to hedge, and there is often less transparency and financial disclosure than conventional banks," she pointed out. "However, despite these potential setbacks, the underlying growth drivers will more than offset these structural impediments," said Ms. Elsheikh.

ABE in Partnership With IIBI Launch Shari'ah Compliant Banking & Finance Modules

LONDON - The Association of Business Executives (ABE) has worked closely with the Institute of Islamic Banking & Insurance (IIBI), one of the world's leading independent academic and research organisations solely dedicated to the promotion and implementation of Islamic Finance, to develop two optional modules within the existing ABE Business Management qualification.

'Concepts and Principles of Islamic Economics' will be available at Diploma level (level 5), and 'Islamic Finance' will be available at Advanced Diploma level (level 6). Both modules will be examined for the first time in June 2008 and are accredited by the UK regulatory authorities for qualifications.

Jason Raife, Director of Business Development at ABE commented "Since the turn of the century demand for Shari'ah-compliant financial products and services has been growing, which has resulted in the establishment of a large number of Islamic financial institutions as well as large multinational banks diversifying into Islamic banking.

This has naturally led to an international demand for employees who are well versed in the principles and operations of Islamic finance. As an examination board ABE is well positioned to react to this demand and working closely with IIBI to develop Shari'ah compliant modules was a natural progression for ABE."

Students who pass these two units are eligible for exemptions from certain units of the IIBI's Post Graduate Diploma course subject to meeting the entry criteria and subsequently, IIBI students can go on to a Masters programme at the University of Durham.

Students who complete the full ABE Business Management Advanced Diploma have the option to progress directly on to the third year of a bachelor's programme or directly on to an MBA programme at one of 50 universities world wide (subject to entry requirements).

ABE is an examination board and members association with a presence in over 70 countries world wide. Currently over 40,000 members are studying for an ABE qualification through a network of over 500 accredited tuition providers or via self study.

ABE will be promoting its business & management qualifications including the two new Shari'ah compliant modules at this year's Careers & Jobs live and HRD events in April at London's ExCeL.

For more information on ABE, or to view syllabus and support material for any ABE qualifications visit: http://www.abeuk.com.

If you have any queries regarding these modules please email laurenb@abeuk.com or call ABE on +44(0)20-8329-2930. For further information about the Institute of Islamic Banking and Insurance visit: http://www.islamic-banking.com

The Association of Business Executives 5th Floor CI Tower St. George's Square High Street New Malden Surrey KT3 4TT

If you have any queries regarding these modules please email laurenb@abeuk.com or call ABE on +44(0)20-8329-2930.

Profit versus the prophet Islamic law has made Muslims into creative bankers.

By Joshua Kurlantzick

On a humid morning in downtown Kuala Lumpur, women wearing patterned head scarves and long skirts walk in groups to work, strolling beneath a futuristic, Epcot-esque monorail and past neatly trimmed coconut palms. One cluster of women stops for lattes at a Starbucks, one of many cafes blossoming on the ground floors of new glass-and-steel corporate skyscrapers in the Malaysian capital.

Young male information-technology workers sit in shorts at the Starbucks' outdoor patio, furiously typing on computers. When the call to prayer rings overhead, several of them quickly down their espressos, pack up their laptops and hurry to the mosque.

Since 9/11, Muslims -- and many Westerners -- have wondered if Arab Muslim nations can reconcile Islamization and globalization.

To some, Malaysia has found the balance of the two, creating a country comfortable for pious Muslims and for a company such as Intel, which has built a huge microprocessor plant in the northern city of Penang. The White House has praised the small Southeast Asian nation as a model of moderation.

Malaysia has benefited enormously from globalization, throwing itself open to trade, building a high-tech corridor and growing into one of the wealthiest nations in the region. Yet it has boomed in part by embracing one of the oldest concepts in Islam -- Islamic banking.

Islam has had its own concepts of banking and finance for centuries. The Koran, striving to promote equity, prohibited the charging of interest on loans because poor borrowers and wealthier lenders did not face equal risks. It also barred Muslims from making money off such products as alcohol because Muslims are not allowed to drink alcohol.

Over time, scholars in some Arab Muslim nations deemed a small number of investment practices asSharia-compliant.In an Islamic financial transaction called musharakah, for instance, the lending Islamic bank and the borrowing company pool their capital, rather than the bank providing the loan at a fixed rate.

The bank and the company jointly manage the money, so both profit or lose equally from the investment.

Before 2001, most Arab Muslim investors did not use transactions like musharakah. Instead, they placed their savings in Western banks.

But that has changed over the last six years. One reason is the skyrocketing price of oil, which has fattened the coffers of many Arab governments and investors and given them more money to invest, including in Islamic banks.

After 9/11, many leading Muslim investors also pulled out of the United States because they feared their money would be targeted. Finally, the growing power of Islamists put pressure on Muslim investors to save according to Koranic principles.

And these investors have. In 2006, there were 250 Islamic mutual stock funds worldwide with combined assets of $300 billion, according to Moody's. Overall, the Islamic finance industry may be growing as much as 15% annually. Deutsche Bank, HSBC, UBS and other banking giants have established Islamic finance subsidiaries or separate Islamic banks that offer products that comply with Sharia.

But it is Malaysia that stands at the forefront of this industry, which was virtually nonexistent before 9/11. Malaysian leaders recognize that Islamic finance allows Muslims to assert their religious identity without having to become involved in poisonous Islamist politics. Malaysian Prime Minister Abdullah Ahmad Badawi says as much when he embraces "civilizational Islam" -- Islam expressed through economics, science and culture, not just politics.

Malaysia's relative religious moderation and its progressive government, which is less focused on religious issues than some Arab regimes, have allowed it to push the limits of what is permitted in Islamic banking.

Its central bank has established a national Sharia board of scholars to approve banking products. The board has established the benchmarks needed to standardize the industry, ensure that Islamic banks meet international financial rules and reassure customers that they are getting truly Islamic products.

But it also has been progressive enough to consider how Malaysia could adapt Islam to such cutting-edge financial ideas as derivatives.

In just the last five years, Malaysian banks have introduced a staggering range of Islamic financial products. One of them was the world's first Islamic interest-less bond, or sukuk. Other products include Islamic mortgages, Islamic leases and Islamic funds that do not bear interest.

Malaysia even has created a kind of Islamic ATM network so devout Muslims can withdraw money across the globe without worrying whether the banks collected interest from their deposits.

As Islamic finance has become a pillar of Malaysia's economy, some moderate Middle Eastern states have tried to copy its successful model. Dubai is attempting to establish itself as an Islamic banking hub.

But as Islamic finance has become more mainstream, conservative Muslims have criticized it as not strict enough. Banks in more conservative Persian Gulf states initially refused to help their Malaysian peers sell the most progressive Islamic bonds because they believed they came close to offering interest.

Others believe there are too many modern thinkers on Malaysia's oversight board.

Some of the harshest criticism has come from Muslim reformers, some of whom have said that Islamic finance could serve as a bridge between globalization and Islam as well as a means of promoting Arab Muslim development. Timur Kuran, a prominent economist at the University of Southern California, is one such critic. In his 2004 book, "Islam and Mammon: The Economic Predicaments of Islamism," Kuran writes that one long-standing claim of Islamic economics is that it is uniquely fair and compassionate toward the poor.

But Kuran complains that wealthier Muslim governments like Malaysia's don't build their Islamic credentials by tackling the tough problems of Muslim underdevelopment -- fragile civil societies and vast income disparities. Instead, they burnish their Islamic reputations by promoting Islamic finance -- bonds, hedge funds and other financial tools used mostly by the wealthy and the middle class, not by the poor.

Mahmoud El Gamal, an expert on Islamic banking at Rice University, goes further. He says many new Islamic financial instruments merely employ tricks to get around the Koran's prohibitions on interest. To El Gamal, the industry has become obsessed with the narrow letter, rather than the spirit, of Islamic law, which was designed to be truly fair. "You are taking some item and sprinkling holy water on it," he said. "If it's pork, it's not going to turn into beef."

But in the long run, if Arab Muslim states are going to leap the development gap, they may have to accept these concerns and find ways around them. After all, Malaysia, unlike many Middle Eastern states, has achieved an effective compromise, building a real Islamic finance business while keeping most of its devout scholars satisfied.

Joshua Kurlantzick is a visiting scholar at the Carnegie Endowment for International Peace and the author of "Charm Offensive: How China's Soft Power Is Transforming the World."

Finance influenced by Islam

THE storm caused by the Archbishop of Canterbury this week would suggest it may take a while before Islamic laws become a widely accepted part of British society.

However, in the finance sector, Sharia law is very much an established part of life on these shores.

As the UK’s Muslim population grows, so too does the demand for Islamic financial services and in turn, the number of banking groups looking to cash in on the increasingly lucrative sector.

In simple terms Islamic finance differs from conventional finance in two ways. The first is the no-interest rule – you can not earn or pay interest on loans.

Second, that money is only allowed to be invested in worthy causes or in a socially responsible way. For example, under Sharia law, investors would be unable to invest in shops that sold tobacco, alcohol or pornography.

The North East may not have such a thriving Islamic finance sector as London or parts of the North West, but things are changing and there are a number of Sharia-compliant packages available to Muslims in the region.

Both HSBC and Lloyds TSB offer various Islamic services on the high street, including mortgages and pension funds.

But it is in the wholesale finance sector where there is real growth in the sector.

Last year a prominent building on Newcastle's Quayside was sold in what was thought to be the first real estate transaction to comply with Sharia law involving two Islamic institutions based in the UK.

The offices of Newcastle law firm Ward Hadaway were acquired by a fund sponsored by European Islamic Investment Bank (EIIB) plc.

Dr Jane Pollard, senior lecturer at Newcastle University's Centre for Urban and Regional Development Studies is currently writing a funded research project on the growth of Islamic finance.

She said: "Nationally people talk about Islamic finance growing at around 15% annually but most of that is not for consumers, it's large corporate wholesale trade deals fuelled by a lot of excess liquidity in the Gulf."

Andrew Fitton of PricewaterhouseCoopers LLP in Newcastle, said: "I'm certainly aware of North East businesses considering Islamic finance in certain cases as a financing option because, as is widely reported, there are Islamic funds looking for investment opportunities.

Its a funding opportunity for businesses in the region to consider."

QIB’s subsidiary, European Financial House, receives licence from the FSA

QIB's European subsidiary, European Finance House (EFH), has received authorisation from the Financial Services Authority to operate as an Islamic investment bank in the United Kingdom.

The European Financial House will provide Shari'ah compliant financial services to corporate clients, primarily in the UK and Continental Europe, as well as clients in the GCC.

The Financial Services Authority licence authorises the European Finance House to operate as a fully fledged bank including authorisation to operate in the personal banking sector. However, its short term strategy is to focus on investment banking and corporate clients.

Salah Jeidah, CEO of QIB and an EFH board member, explained "We are pleased to start the year with the FSA licence, which will allow us to operate officially in the United Kingdom. EFH is not just another bank entering the London Market, but a one of its kind institution for 3 reasons.

It is the only Islamic bank in London that can claim a pedigree going back twenty five years, thanks to its majority shareholder, QIB, which has been a pioneer Islamic bank since 1982.

Secondly, it is the only Islamic bank in London that is part of a global network and can thus offer its clients cross-continent transactions in the Middle East via QIB, and in Asia via our affiliates Asian finance bank (AFB). Last but not least, we have been able to attract high calibre executives with large experience in the European and UK banking sectors."

The objective of the European Finance House is to establish a cutting edge position in the rapidly expanding area of Islamic Finance. A key objective for the bank will be to build close partnerships with its corporate, institutional and high net worth clients by providing alternative Shari'ah compliant investment solutions.

The European Finance House is confident that it will become an integral part of the Islamic banking market in the UK as it is supported by the expertise of QIB, a majority shareholder of EFH , as well as Centuria, a second shareholder, which is a European asset management firm specialising in real estate.

EFH Chief Executive, Michael Clark added "With this license and the very significant backing of our shareholders, we intend to become one of the leading Islamic banks in Europe, by means of a sustained focus on the fastest growing sector of financing and investment.

London is now widely regarded as the principle financial hub for Islamic banking outside the Middle East and we intend to meet this expanding market with high quality products and services which will enable us to build close partnerships with our clients."

The European Finance House will offer products and solutions to a wide range of clients in the UK and will play a major role in attracting investment from the Middle East into the UK and Europe. The bank will also support and accompany UK and European investors who are interested in participating in the rapidly expanding Middle East market.