Islamic finance still fares better than conventional system

The StarOnline:ISLAMIC financial markets are not as badly affected by the global financial crisis as their conventional counterpart due to its unique structure, says MAA Takaful Bhd director Dr Zaha Rina Zahari.

“Fortunately, Islamic finance is structured in a more transparent and tangible way. You are not betting on something that is not real (intangible).

Islamic finance can help exchange companies

The Post: By regulating Exchange Companies according to the principles of Islamic finance in Pakistan, not only the business of Currency Exchange companies will be accelerated but also segment of economy will be regulated in a better way enabling to avoid any unpleasant incidents in future.

These points were expressed by The CEO of Al-Huda Centre of Islamic Banking, Muhammad Zubair Mughal in a Discussion on the topic of "Islamic Finance & Exchange Companies".

He said that in Islamic Finance the principles of 'Bai Surf, Sharai'Hawalah & Suftaja" are available which can be utilized for development of appropriate products by the exchange companies after better research. He said that "Bai Surf" is a relevant method of buying & Selling, in Islam this is a principle of Exchange in between Gold & Silver. Because in Arab era Gold & Silver were used as Durham & Dinar (Currency) & in Islam principles are available for their exchange.

So we can use these principles for the current era's currency exchange. He told about "Suftaja" that in Arab era these were used like Traveler Cheques, which is a kind of currency exchange instrument. When business delegates come to Arab for Buying and Selling then they can used this document, which becomes the reason of currency exchange. While talking about "Sharai' Hawalah", he said that in Hawalah one person's liability can be transfer to other person.

And exchange companies can get benefit from these Sharai' principles about money transfer. And through these Sharai; Principles today our exchange companies can run their businesses according to Sharia' principle.

Further on, Mr. Zubair indicated that Islam is a complete code of life, wherein solution to every economic and financial problem is available. By using these, we can solve many economic and financial problems in the light of Shariah.

Sukuk market to hit $100 bln in 2008: E&Y

By Daisy Ku

LONDON - The issuance of global Islamic bonds, or sukuk, is likely to double to $100 billion this year, thanks to higher take-up of Sharia-compliant financial products among Middle East investors, said Ernst & Young.

The sum of Islamic assets has been growing at over 20 percent a year and reached $900 billion in 2007, the firm said, and is set to hit $2 trillion by 2010.

Excess wealth has been created by the oil boom, and a growing proportion of that wealth has been allocated to financial products that comply with sharia, the Islamic legal code that prohibits interest payment, speculation and investments in sectors such as alcohol or gambling.

"We estimate that by 2009, $1.5 trillion of the world's high net worth individual wealth to come from the Middle East. And 70 percent of this wealth could invest in Islamic financial products," Ernst & Young Managing Partner Noor ur Rahman Abid told Reuters in an interview.

STRONG PIPELINE

The global sukuk market, which set off in 2002, reached a record market value of $51.5 billion in 2007, up 90 percent from $27.2 billion in 2006, according to the Islamic Finance Information Service (IFIS).

An estimated $10 billion of Islamic deals has been delayed by the dislocation in credit markets sparked by the U.S. subprime mortgage crisis, including Qatar Steel Company's $1.3 billion refinancing deal, the $2.5 billion fund-raising plan of Dubai Electricity & Water Authority (Dewa) and Emirates Aluminium's $2 billion bond sale.

But $10 billion worth of sukuk, mostly from property firms and financial institutions in the Gulf region, have been announced, said Abid.

UAE-based Rak Properties RPRO.AD and Kuwaiti real estate firm Abyaar (ABYR.KW: Quote, Profile, Research) have said they intend to sell $2 billion and $1 billion of sukuk, respectively, early this year, to finance projects. Kuwait's Gulf Holding Company and Qatar's Barwa Real Estate Co. BRES.QA are also lining up sukuk issues this year.

State-owned utility firm Dewa is expected to relaunch its sukuk program in the first quarter to help fund plant construction.

Doha Bank DOBK.QA plans to raise about $1 billion by the third quarter to invest in green technology. While Bahrain Islamic Bank BISB.BH, which is planning a $1 billion buyout next year, is also eyeing a sukuk issue to finance the purchase.

CONVERTIBLES

Sukuk issuance in the Gulf region took off two years ago when Nakheel and Dubai Ports Authority each offered $3.5 billion worth of convertible sukuk.

Nomura analyst Rossitza Haritova told the Reuters Islamic Banking and Finance Summit in London she expects convertible sukuk to continue to attract both Islamic and conventional investors, despite the global credit squeeze.

Following the $1 billion convertible sukuk issuance of Dana Gas DANA.AD, the Middle East's largest natural gas firm, in October and Dubai mortgage firm Tamweel's TAML.DU(TAML.BE: Quote, Profile, Research) $300 million deal, convertible Islamic bonds already account for 8 percent of total European convertibles issued last year.

"We're easily seeing that share increase to 10 or 12 percent by 2010," said Haritova.