Singapore's Islamic finance draws interest anew

SINGAPORE is well-placed to ride a new wave of interest in Islamic finance by global investors who have been badly burnt by the Western financial system. Middle Eastern Islamic finance expert Hari Bhambra said top-notch wealth management infrastructure here can be used to tap into the fast-growing industry.

Since about 2005, Singapore has stepped up efforts to develop an Islamic finance industry by drawing on its existing strengths in wealth management, trade financing and capital markets.

Ms Hari, 34, a senior partner at Dubai- based consultancy Praesidium, believes Islamic finance is set to gain momentum as investors look for safer investments and liquidity in the Middle East - the global Islamic finance centre.

Speaking at a lecture at the National University of Singapore (NUS) co-organised by the NUS Business School's Saw Centre for Financial Studies and the Securities & Investment Institute, Ms Hari predicted that the financial and economic crisis would accelerate plans by financial institutions to introduce Islamic finance products.

Crescent halal chicken lands on Wal-Mart shelves

Wal-Mart recently completed a deal with Crescent Foods, a Chicago-based Halal chicken producer, to supply products to the world's largest retail chain. Five Wal-Mart stores in the Michigan-area now stock a range of eight different Crescent chicken products, as the first deliveries were completed in November to stores in Dearborn, Sterling Heights, Rochester Hills, Chesterfield and Shelby Township.

Negotiations began in September 2008, when one of Wal-Mart's buyers approached Crescent's distributor in Colorado.

CEO Ahmad Adam talked about the importance of quality in his products. "We realized from the beginning that to succeed as a world class Halal chicken producer, we would have to meet, and even surpass, the highest standards of the mainstream food industry," said Adam. "This has always been part of our vision. Our latest round of upgrades and improvements meant that we were already in line with what was expected of us from Wal-Mart."

Crescent products currently carried at Wal-Mart include whole chicken (bagged), boneless skinless breast fillets, leg quarters, thighs, boneless skinless thighs, drumsticks and wings. The number of products and outlets could increase in the future if all goes well.

UK takes first steps towards Islamic finance rules

The UK government has launched a consultation on Islamic finance. The government hopes the joint Treasury-Financial Services Authority consultation on proposals for a legal framework for the regulation of alternative finance investment bonds, including sukuk, will support the growth of Islamic finance in the UK and to increase its position as a leading global centre in this market.

As well as the consultation, the government also published a paper, "The development of Islamic finance in the UK". The idea is to raise awareness of the growing role of Islamic finance in the UK by providing a stock take of achievements to date and examining the remaining barriers to growth.

The consultation on the regulation of alternative finance investment bonds (sukuk or Islamic bond) sets out the proposed legislative framework for the regulatory treatment of these vehicles. AFIBs refers to sukuk as well as any financial instrument with similar characteristics.

Japan moves carefully toward Islamic finance

The Japanese government has taken a small but important step toward introducing Islamic finance here amid the global financial crisis triggered by unsustainable subprime loans in the United States.

Earlier this month, the Financial Services Agency (FSA) amended financial regulations to let bank subsidiaries handle Islamic finance operations.

The Islamic finance market has become increasingly attractive for Japanese, having already grown to about $1 trillion with a potential to reach an estimated $4 trillion.

Obviously, "oil money" has been undermined by the global financial crisis. Yet the latest push forward by the FSA strongly suggests that Japan has a growing interest in Islamic finance as a competitive way to attract huge amounts of petro-funds.

Halal Investing: First Shari'ah-compliant ETF on the Way

Javelin Investment Management, a newly formed exchange-traded funds company, has filed with the Securities and Exchange Commission for the first U.S. ETF to be based on an Islamic index.

The JETS (Javelin Exchange Traded Shares) Dow Jones Islamic Market International Index Fund is the latest example of an ETF manager hoping to find success in the crowded ETF market with a first-of-its-kind portfolio.

Copycats are out, and niche strategies are in, as more managers enter the ETF space. Global X Funds has plans to launch a series of country ETFs that face no direct competition, while Northern Trust's NETS ETF family has launched a series of funds this year targeting previously untouched asset classes by U.S. ETF sponsors.

It is a fine line, though, between steering clear of the asset classes dominated by the big ETF companies, and creating portfolios so niche in nature that asset growth is a long haul.

What the JETS Dow Jones Islamic Market International Index Fund has going for it is not just the first-mover advantage with an Islamic ETF, but the overall size of the Islamic investment market. Various industry estimates put the size of Islamic investment at $700 billion currently, and project that the market is on its way to $1 trillion by 2010. It should be noted though that these estimates include a wide definition of "investment," which goes well beyond mutual funds.

UK Government working on sovereign Sukuk consultation paper

The British government is working on a consultation paper which examines the possibility of a sovereign Sukuk, which has been the subject of quite some speculation for well over a year.

The document sets out the proposed legislative framework for the regulatory treatment of what it describes as 'Alternative Finance Investment Bonds' or AFIBs. AFIBs, according to a press release on the HM Treasury website, refer to a type of financial instrument commonly known as Sukuk or Islamic bond, but can also refer to any financial instrument with similar characteristics.

The new consultation paper considers the regulatory policy options for Sukuk and is a joint consultation between HM Treasury and the Financial Services Authority (FSA). Sukuk, says Treasury and FSA, are one of the most prominent instruments used in Islamic finance. Since 2003, there have been several initiatives by the UK authorities (meaning the FSA and Treasury) to create what it frequently calls a 'level playing field' for Islamic finance. For example, the government has introduced, and has proposals to further introduce, various tax changes with respect to AFIBs, although it doesn't specify in the press release what they are.

Halal Tourism — is gaining ground in the region.

Attracting visitors and participants to the exhibitions is big business these days as the demand for Halal products is on the rise.

Halal Islamic Shariah-compliant products and services, with an estimated 1.8 billion world consumers, generating as much as $2.1 trillion annually, is gaining more popularity not only among Muslims but also among non-Muslims, regardless of their ethnic, religious and cultural backgrounds, according to industry experts who spoke to Khaleej Times.

Introducing a new concept of 'Halal Tourism', the Al Jawhara Hospitality Group (JHG) based in Dubai, brought on show the 'Pure Rooms' event, the first of its kind in the Middle East that strictly adheres to Islamic hospitality.

Hani Lashin, JHG general manager said the group was following international standards though offering totally Halal services. "No liquor is allowed within our apartments and hotels," Lashin said adding that the entire foodstuff presented is Halal and contains no pork or unlawfully slaughtered animals.

Observing that some 60 to 70 per cent of the group's customers are non-Muslims, Lashin said the company follows a strict dress code and does not tolerate allow for men and women to mingle or mix in public places, offering separate cafeterias, restaurants and swimming pools.

Malaysia Has Big Potential To Be Global Halal Product Manufacturer

Malaysia has big potential to be halal product manufacturer following the global recognition, especially from Islamic countries, International Trade and Industry Minister Tan Sri Muhyiddin Yassin said on Saturday.

He said the world has recognised Malaysia as an exemplary Islamic country and the country has the opportunity to market food and non-food products with confidence.

He was speaking to reporters after attending a marriage ceremony at the residence of former Kuala Perlis state assemblyman Bakar Saad at Kuala Perlis here.

Muhyiddin said Malaysia could also offer halal products in the services field such as banking.

"We hope our halal products can penetrate the global market and the confidence of societies worldwide in internationally certified halal standards will facilitate this," he said.

Muhyiddin said the government will always help small and medium scale entrepreneurs to market their halal products, including providing guidance and financial support.

"However, entrepreneurs should not depend completely on the government but also strive hard on their own, including finding new markets," he said.

Pak-Qatar Takaful & Almeezan Investments sign Takaful Agreement!

Pak-Qatar Family Takaful Ltd and Al Meezan Investments have signed an agreement that will provide all investors of Al Meezan Investments' Mahana Kharch Account (MMKA) with Shari'ah-Compliant Free Takaful Coverage of up to 1 million rupees. The agreement was signed by P. Ahmed CEO Pak-Qatar Family Takaful and Muhammad Shoaib CFA Chief Executive Al Meezan Investments in Karachi today.

According to this agreement, individual investors of MMKA would be entitled to get Takaful cover in case of natural death, accidental death, permanent total disability and medical expense in case of accidents.  This Takaful cover will be offered at absolutely no additional charge to the Al Meezan investors.

Muhammad Shoaib CFA said that Al Meezan Investments has always focused on coming up with Halal Riba-free and innovative investment options for its investors and this Takaful cover arrangement with PQFTL is a sign of our continuous efforts.

Islamic banks need experts

PARIS: As the world financial industry sheds jobs by the tens of thousands, the $1 trillion Islamic banking sector has a growing load of work for Shariah scholars but few candidates coming forward to do it.

Experts steeped in the Muslim scriptures are critical to Islamic finance, which requires a religious stamp of approval before a bond, mortgage contract or other financial product can be marketed as moral according to the standards of the Holy Quran.

But qualifying for this work takes much more time and effort than other jobs in finance require. Candidates must first study Islamic law or sharia for many years, and then master finance.

"Globally, and especially in Europe and America, there is a shortage of scholars familiar with both fields," said Mufti Abdul Kadir Barkatullah, an Indian-born imam in London who sits on Shariah boards for six banks including Lloyds TSB.

"A few scholars are going around the world (advising banks) and new scholars are not being trained fast enough to take their place," he said at an Islamic finance conference in Paris.

Part of the problem is linguistic. Many Middle Eastern scholars work only in Arabic, the language of Islam, but the global market needs scholars fluent both in Arabic and in languages such as English or French.

Riding The Islamic Banking Tide

Last October, Hong Kong Chief Executive, Donald Tsang, announced the island's financial hub would establish itself as an Islamic finance centre.

Last week, the Hong Kong Monetary Authority (HKMA) underlined that, despite the global financial crisis, the plan was still much on track and "considerable resources" would be devoted.

"Our priority is to push ahead with the development of an Islamic bond market. There should be no doubt about our determination to establish a platform for Islamic finance in Hong Kong," HKMA deputy chief, Eddie Yue, told an Islamic finance forum.

Hong Kong is looking beyond the current crisis which has reduced sukuk, or Islamic bond issuance, by 40 per cent in the first three quarters of the year, a development Yue called "a temporary setback."

What beckons not only Hong Kong but also conventional finance hubs like Singapore and London is the estimated Islamic assets of US$1 trillion (US$1=RM3.60) by 2010 and growing annually between 15 and 20 per cent.

Standard & Poor said in September that sukuk issuance was still expected to exceed US$20 billion this year.

More non-Muslims trying Islamic banking-OCBC

Islamic banking is gaining ground with non-Muslims worldwide due to its strict lending principles, Singapore's third-largest lender OCBC said on Monday, reflecting industry efforts to transcend religious beliefs to gain market share.

Sharia finance is a blend of Islamic economics and modern lending principles and its products can be sold to Muslims and non-Muslims.

While it was previously a small market catering to Muslims who wanted to avoid interest-based conventional banking, Islamic finance has become popular in recent years due to cash-rich Gulf Muslim investors and rising demand for ethical investing.

Non Muslim investors have also been looking for less risky alternatives since the onset of the global credit crisis over a year ago cast doubt on many Western risk management practices.

But the Islamic finance sector is still relatively small and the industry wants to grow its market share to become a global alternative to conventional banking.

Al Salam, Nordbank in Islamic finance JV

30 Nov 2008     

Dubai-based Al Salam Investment and HSH Nordbank plan to launch an Islamic finance house in 2009, as the German bank looks to tap the Islamic finance sector in the Gulf Arab region.

"We see opportunity and change in this region and this partnership will ensure we have the financial muscle and expertise to be at the forefront of the turnaround," said Pegman Haghshenas, chief executive of Al Salam Investment, in a statement on Sunday.

No details on the value of the joint venture were given.

The company will likely register on the Dubai International Financial Centre, Haghshenas said.