Sector to grow by up to 25% annually despite crisis

The Islamic banking system will continue to grow by between 20 and 25 per cent annually worldwide in the long term despite the financial crisis, says Rushdi Siddiqui, Global Director of Dow Jones Islamic Market Indexes.

He said the current slowdown in Islamic banking would continue in the short term but the sector would soon pick up momentum. It would attract conventional investors by presenting itself as a holistic financing and investment solution.

But he said the drop in oil prices would have an impact on Islamic banks in the short-to-medium term.

"There is a lesson from the decline in oil prices," Siddiqui told Emirates Business. "Islamic banks should diversify their investments to generate revenues from different areas. They must use petro-liquidity to create new investments rather than focusing on deposits and retail businesses."

Workshop on Islamic microfinance held in Delhi

New Delhi: An international training program and workshop to discuss the nuances of Islamic microfinance was recently held in New Delhi under the aegis of Islamic Business and Finance Network (IBF Net) and its Institute of Microfinance and Development in association with Islamic Relief Worldwide.

Organizers of the programme are of the view that provision of appropriate microfinance products and services to the poor in a sustained manner helps bring down poverty levels. The needs of the poor in Islamic countries are no different from that of the poor in other societies. However, the poor in Muslim societies also demand that the provision of microfinance must not violate their basic beliefs and cultures, they say and this has resulted in the birth of the Islamic or Shariah-compliant microfinance industry.

IBF Net (www.ibfnet.in) is an India-based global network with over five thousand members from academia and the Islamic financial services industry. It offers professional certification programs in the field of Islamic finance through its online academy, International Institute of Islamic Business and Finance (www.iiibf.org).

The sessions in the workshop covered major norms and models of Islamic microfinance supplemented with practical insights from case studies.

NatWest launches sharia commercial property service

NatWest Business Banking is entering the Islamic financial services market with the launch a shariah-compliant commercial property mortgage product.

The product, introduced in response to demand, will not charge interest in accordance with Islamic law.

NatWest has over 40 relationship managers specially trained to meet the needs of the Islamic community, as well as a number of specialist diversity banking teams, including one in Birmingham.

The product is the first shariah-compliant facility NatWest Business Banking has launched.

NatWest Business Banking chief executive officer Paul Lynam said: "We are committed to meeting the business needs of all customers. By introducing a shariah-compliant commercial mortgage, we are demonstrating our commitment to this community, and the broadening of our focus on this market."

Head of NatWest's diversity banking team in Birmingham Manjit Kang said: "NatWest formed the diversity banking team to support the growing demand for business advice amongst the Black, Chinese and Asian business community. Now we have the shariah-compliant commercial mortgage we can take this to a new level."

The product, sanctioned by an internationally renowned and independent board of Islamic scholars, is based on the Islamic "Murabaha" structure a widely accepted shariah-compliant financing method.

KFH Concludes US$155 Million Syndicated Murabahah Deal

KUALA LUMPUR - Liquidity Management House, a wholly-owned subsidiary of Kuwait Finance House KSC (KFH), has concluded a US$155 million (RM556.84 million) syndicated secured master murabahah facility for commercial real estate company Al Tijaria.

Al Tijaria is a listed Kuwaiti shareholding company engaged in the development of properties in Kuwait and other Gulf Cooperation Council (GCC) countries.

The murabahah deal was oversubscribed by 50 percent over the original sum offered, KFH said in a statement released from Kuwait Tuesday.

The facility will be utilised for general corporate purposes as well as funding of several prestigious ongoing property projects which Al Tijaria is engaged in, it added.

Seminar on halal industry

TO PROMOTE the involvement of Malaysian companies in the Halal industry, the Chinese Chamber of Commerce and Industry of Kuala Lumpur and Selangor (KLSCCCI) and the Klang Chinese Chamber of Commerce and Industry will co-organise a seminar on Development Prospects of Halal Industry in Malaysia and Islamic Banking Facilities from 9.30am to 1.30pm on Nov 8 at Seng Peng Hall, Wisma Chinese Chamber. For registration and enquiries, call 017-283 2929 (Peter Loo) or 03-4253 2135 (Ching/Teo/Ng), or e-mail inquiry@chinesechamber.org.my. Closing date for registration is Nov 5

Credit crunch may spur Islamic finance

The fast growing Sharia financial system may receive a further boost as an alternative to capitalism amid the credit crunch and banking crisis, Islamic academics and clerics believe.

Already said to be worth $US300 billion ($A498 billion) and expanding at 15 per cent a year, the Islamic system forbids the levying or payment of interest, preferring shared ownership and splitting of profits.

The global economic meltdown shows "the need for a radical and structural reform of the global financial system. The system based on the principles of Islam offers an alternative which could reduce risks," Hatem al-Naqrashawi, head of theological studies at Doha University, told AFP.

"Islamic banks don't buy credit but manage concrete assets which shelter them from the difficulties that American and European banks are experiencing," explained Abdel Bassat al-Shibi, managing director of Qatar International Islamic Bank.

Jadwa teams up with Malaysian firm

RIYADH: Jadwa Investment and Khazanah Nasional Berhad, the investment arm of the Malaysian government, have signed a partnership agreement. Under the terms of the agreement, Khazanah will acquire an equity stake in Jadwa worth SR284.25 million, which represents 10 percent of Jadwa's capital.

This partnership will provide Jadwa with access to investment opportunities in Southeast Asian markets, where Khazanah enjoys a strong foothold. In addition, the agreement will foster the exchange of know-how and expertise in the area of Islamic investment banking in which Malaysia is a pioneer.

Khazanah manages the strategic investments of the Malaysian government and is chaired by the prime minister of Malaysia. The company has stakes in more than 50 companies worldwide with assets under management (AUM) in excess of $20 billion, diversified over several sectors including banking, energy, IT, airport management, infrastructure, telecommunications, vehicle manufacturing and real estate development.

StanChart to launch Islamic banking soon

Standard Chartered Bank is set to launch Islamic banking services in Bahrain by the end of the year. 

The initiative will herald a new era of Islamic banking products and services, including the launch of Islamic Credit Cards, a top official at the bank said.

Jonathan Morris, the CEO of Standard Chartered Bahrain, in his first interview since his arrival in the Kingdom, said his bank would introduce the Islamic banking services in Bahrain under the bank's global brand name for Islamic products, namely Standard Chartered Saadiq.

"We are keen to launch Islamic banking products by the end of the year as a window service," he said.

Standard Chartered, being one of the oldest banks in Bahrain, expects strong demand for Islamic banking services in the Kingdom and beyond. 

OSK to offer Islamic banking

Malaysia's OSK Indochina Bank, the newest entrant into Cambodia's banking sector, hopes to tap into the Kingdom's Muslim community by offering the Kingdom's first Islamic banking services within a year, its chief operating officer and country head, Lim Loong Seng, said Wednesday. 

"We are definitely looking into this market and hope to introduce [Islamic banking] services in one year," said Lim.

Islamic banking is a banking system that conforms with the principle of Shariah law, including a prohibition on interest-based loans, and has seen growing interest in Islamic countries.

Othsman Hassan, secretary of state at the Ministry of Labour and Vocational Training, said OSK's plans would offers Muslims in Cambodia an opportunity to obtain loans and to capitalise on the Kingdom's rapid economic growth.

Australia considers adopting Islamic banking

Financial institutions and the government are considering introducing Islamic banking and its principles to the Australian financial system. 

Industry experts say Islamic banking is one of the fastest growing sectors in the global banking industry, and is worth an estimated $US200 billion worldwide.

The Asialink Islamic Banking Colloquium, held in the Australian city of Melbourne, has heard Islamic banks have largely escaped the fallout from the economic crisis by adhering to Islamic principles of prohibiting interest and sharing of profit and loss between banks and borrowers. 

Saudi Arabia sees launch of Islamic real estate

Saudi Arabia's Sumou Holding and Geneva-based Encore Management have launched the first Islamic Real Estate Investment Trust (REIT) for the Kingdom of Saudi-Arabia. This Saudi-Swiss joint-venture may change the real estate landscape in the GCC.

A Real Estate Investment Trust or REIT is a company which invests in real estate projects. 

A REIT can be a publicly listed or privately owned entity. 

Usually nine tenths of the rents of the REIT are distributed to its shareholders in the form of dividends, but the legal aspects of a REIT vary from country to country.

In the US the first REITs were launched in the1960s. In Europe, this innovative securitization has only recently been passed. The global REIT-volume is estimated at around $700bn.

UK looks to become global provider of Islamic finance

Financial service providers looking to diversify in these unique times can learn about the opportunities in Islamic finance from some of UK's leading specialists.

On Tuesday, 4 November the Association of Corporate Treasurers' (ACT) will hold a Breakfast Briefing, endorsed by UK Trade & Investment, to educate UK companies on the sector that still has scope for growth.

Andrew Cahn, UK Trade & Investment Chief Executive said:

"In these tough times, it's more important than ever that we make the most of growing sectors like Islamic finance.

"Islamic finance is currently estimated at $500 billion and is still estimated to grow 15 per cent per annum over the next few years.

"That's why it is important the UK's financial industry provides an open door and positions London as a leading western financial centre for Islamic finance."

Gulf Arab Islamic banks eye slowing real estate

With their ban on interest, the Gulf Islamic banks that managed to avoid the types of debt which proved toxic for their conventional counterparts are now praying the global crisis will bypass their property holdings.

Islamic banks, which manage an estimated $1 trillion (576.5 billion pounds) worldwide, do not have the same flexibility as conventional banks in managing balance sheet risks, bankers say. For instance, they cannot reduce exposure to the real estate market by using derivatives.

So Islamic bankers watched last week's Cityscape real estate fair in Dubai with intense scrutiny. But even the unveiling of a planned km-high tower failed to allay their fears that a boom in Gulf Arab real estate may be grinding to a halt.

The fate of Islamic banks in the region is closely tied to the property markets as they are required to underpin transactions with physical assets due to the ban on interest, which is viewed as usury under Islamic law.

A Muslim's Guide to Investing and Personal Finance

NEW YORK, Oct. 15
Today Lightbulb Press released A Muslim's Guide to Investing and Personal Finance by Virginia B. Morris in association with Monem A. Salam. The guide was developed to meet the growing need by banks, brokerages, asset managers, insurance and home finance companies, and other financial services organizations to provide Shariah-compliant products for Muslim customers who want to live their financial lives in accordance with their beliefs.

"The guide is an invaluable reference for Muslims who need to invest and make personal finance decisions while adhering to the Shariah, or Islamic law - often a challenging endeavor," according to Salam, the Deputy Portfolio Manager for Saturna Capital and recipient of the "20 Rising Stars" award from Institutional Investor News.   

A Muslim's Guide to Investing and Personal Finance describes the newest, as well as more established, Shariah-acceptable investment products and specialized financial transactions that have been developed to help Muslims navigate the financial realities of the modern world, including investing for retirement, buying a home, paying for college, and maintaining a savings account, as well as insuring personal assets.

Islamic finance needs its own efficient price indicators

Sharia compliant assets have emerged as a viable alternative asset class as part of the strategy to diversify portfolios of investors.  The outperformance of a number of global Islamic indexes in the medium-to-long term should encourage investors to consider allocating a portion of their portfolios to Islamic investment vehicles. To conform to sharia requirements, Islamic products will have to avoid elements of riba (usury), gharar (ambiguity/uncertainty/ misinformation or deceit/fraud), maisir (gambling) and zulm (oppression), among others. Although the obligation to eliminate riba may result in complex structures for Islamic financial instruments, I believe the prohibition of other elements as mentioned above in Islamic contracts and in strict adherence to sharia rules and principles, should help assuage many investor concerns.

Whatever it is, a product structuring or innovation exercise should comply with sharia requirements in substance and in spirit.  In the absence of reference price indicators specific for Islamic finance, the Islamic financial services industry still relies heavily on interest rate-based benchmarks such as the London Interbank Offered Rates (LIBORs).  Without a viable sharia compliant alternative, the industry will still have to use these quoted market rates as a basis to price Islamic financial instruments and securities. As such, it's a fallacy to think that movements in global interest rates will not have any implications for Islamic securities although the impact may be limited to those that are pegged to observed interest rates, especially LIBORs.