HK changing tax laws to allow sale of sukuk
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HONG Kong is changing its tax laws to allow the sale of Islamic bonds, or sukuk, its financial secretary John Tsang (picture) said.
"We're also enhancing market infrastructure and product development and educating market participants and investors in raising the profile of Hong Kong as an Islamic finance platform," he said at a business luncheon in Kuala Lumpur yesterday.
Hong Kong wants to use its position as the main financial gateway to China by bridging investment opportunities between Muslim economies like Malaysia and the mainland.
Malaysia is helping Hong Kong to develop an Islamic finance market following an agreement between the financial regulators of both countries last year.
Hong Kong's economy is heading for 4-5 per cent growth this year and its government has identified six industries as key engines of future economic development: educational services, medical services, testing and certification, innovation and technology, environmental industries, and cultural and creative industries.
To a question on a common currency for mainland China and Hong Kong, Tsang said there was no intention to move in this direction as Hong Kong's link to the US dollar has been operating well for the past 27 years.
"We're doing a lot to make the renminbi as the regional currency. We shall continue to strengthen our role as the testing ground for the regionalisation and internationalisation of renminbi," he said.
First Islamic exchange to launch in London in May
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The first electronic trading platform allowing sharia-compliant companies to raise cash will launch in London in May, the venture capital firm behind the project told Reuters on Thursday.
The Sharia Ummah Securities Information Exchange (UMEX) is designed to provide a platform to companies with a capital value of at least 20 million pounds ($31 million) and looking to raise the equivalent of at least 20 percent of their market value.
Mahesh Jayanarayan, chairman of Halal Industries, which will manage the exchange said it would operate as a Multilateral Trading Facility (MTF).
MTFs are low-cost electronic trading platforms created after the Markets in Financial Instruments Directive (MiFID) opened up exchanges to competition.
It would be the only MTF in Europe so far to help companies raise funds.
"Having been through its early days, it is now time for the Islamic banking and finance sector to strengthen and expand the industry infrastructure to ensure sustainable global operations," said Sheikh Hussein Hamid Hassan, the scholar heading the exchange's sharia panel.
"UMEX has lined up 10 Islamic Enterprises and over a 100 Sharia Compliant securities to be traded when it goes live," said Jayanarayan.
He said the exchange planned to bring "over a 100 global Islamic enterprise IPOs within a year from May."
ShariaUMEX will also offer the Islamic version of American and global depository receipts, the Islamic Sharia Depository Receipt (ISDR).
ISDRs represent ownership of a number of shares issued by a Sharia-complaint or Islamic firms traded on a foreign stock exchange.
A senior market practitioner, who declined to be named, said the MTF would need high trading volumes to succeed.
"Is it better for Islamic funds to trade among each other? If not, there is no real advantage to start a specific MTF, because any Islamic fund could buy or sell the same stocks on more liquid venues," the source said.
The exchange will operate two platforms, one to be launched in May to list small caps, the second to be launched in the third quarter for established Islamic companies with a market in excess of 50 million pounds. ($1=.6545 Pound) (Editing by Antonia van de Velde)
GCC expects to grow by 3.5 % in 2010, experts
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Wednesday, March 3, 2010
01 Mar 2010 02:48 PM
Dubai- The Gulf Cooperation Council (GCC) as an economic region is expected to grow at a pace of 3.5 per cent this year, compared with almost flat gross domestic product growth in 2009, economic experts said on Sunday.
They said Dubai will continue to lead as the region’s main economic hub.
The future of oil price is important for this part of the world, but good corporate governance and transparency Is needed to restore investors’ confidence in the regional economies.
“Growth in the region’s private sectors is likely to grow at a slower pace, with businesses focusing on stabilisation and deleveraging,” Deutsche Bank’s CEO for MENA region Dr Henry Azzam said at a forum, jointly organised by Dubai Chamber of Commerce & Industry and Gerogetown University.
Dr Azzam said that there was no growth in the region as a whole last year. “Saudi Arabia was almost flat and according to our estimates for the UAE there was a negative growth last year,” he said, adding: “In 2010 we would expect some growth coming back to the region mainly on oil and government spending.”
He said that the highest growth in this region is expected from Qatar, Saudi Arabia 4 per cent, Oman 3-5 per cent and for the UAE its below one per cent.
Eng Hamad Buamim, Director General, Dubai Chamber said that last year was more bad as was expected as oil prices dropped. Global economic recovery and more demand for oil will support higher oil prices that would help lift economies in the region, Buamim said at the seminar titled, ‘The Gulf Region after the Global Economic Crisis: The Way Forward’.
Buamim said that oil prices are expected to be better in 2010 compared with last year and will support the GCC countries. “Growth in this region is expected 4-5 per cent and this is higher than economies like Europe and America,” he said, adding: “We suffer a lot because of real estate and construction sector.”
He said that Dubai will continue to play as a hub for this part of the world specially GCC and African countries.
Hisham Al Shirawi, 2nd Vice-Chairman of Dubai Chamber, said the Emirate is poised to maintain its economic leadership status in the region as evident from a number of significant indicators.
“Despite a challenging 2009, a 2010 come-back looks imminent to us as the government continues to move forward with its infrastructure expansion plans such as the Dubai Metro, Al Maktoum International Airport and other major infrastructure projects.
We have come a long way, and we see an exciting future ahead. What we offer, as a city, goes far beyond mortar, tall buildings and roads. Dubai has undoubtedly become a multinational business and lifestyle destination and a role model for other neighbouring cities and countries to follow,” Al Shirawi said.
“The Dubai 2010 budget aims at balancing growth with economic welfare and this reflects the Emirate’s determination to move forward with its economic development plans which will surely help in boosting the investors’ confidence.
Also, the expected rise in crude oil prices will boost the government spending in UAE as last month’s discovery of a new oil field off Dubai’s coast will not only support its natural resources but the overall economic situation as well,” he said.
Source: Khaleej Times
More global banks may go for IIB licence
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More international banks may be keen to obtain the country’s international Islamic banking (IIB) licence as interest in syariah-compliant foreign currency business picks up, experts say.
RAM Rating Services Bhd head of financial institution ratings Promod Dass said foreign banking groups with a strong interest in cross-border non-ringgit deals were likely candidates for any future IIB licences.
“It is also possible to see some interest from Middle Eastern banking groups to obtain this specialised licence,” he told StarBiz.
The IIB licences are offered under the Malaysia International Islamic Financial Centre initiative which was launched in August 2006 to promote Malaysia as a major hub for international Islamic finance.
The licences enable financial institutions to conduct a full range of Islamic banking activities in non-ringgit foreign currency business.
So far, only four banks have obtained the IIB licence – Unicorn International Islamic Bank Malaysia Bhd, PT Bank Syariah Muamalat Indonesia Tbk, Al Rajhi Bank Malaysia and Deutsche Bank (Malaysia) Bhd, which announced yesterday that it had received the licence.
MIDF Research banking analyst Kelvin Ong said other global banks might be interested to use the country as a platform to tap the Islamic banking business in the Asian region.
“There is a possibility that these banks may be interested in obtaining an IIB licence. I am not surprised if this happens,” he said.
Ong said there were also attractive tax incentives offered to banks with IIB licences.
One such incentive is a tax exemption on income earned from international banking and takaful operations conducted in foreign currencies, either as a subsidiary or a branch, until 2016.
In addition, stamp duty exemption is provided for instruments executed on Islamic banking and takaful businesses conducted in foreign currencies until 2016.
Promod said that as the IIB licence was more institutional or corporate in nature and a distinct niche from the mainstream retail Islamic banking, it would help to deepen and broaden the country’s offerings as an international Islamic financial centre.
To be eligible for the licence, a financial institution must be well established and reputable, adopt international banking practices formulated by the Bank for International Settlements or other international standard-setting bodies, be regulated and supervised by a competent home regulatory authority and possess a sound track record.
The IIB entity can be set up as an incorporated company or branch, with the requirements for an incorporated entity to have a minimum paid-up capital of RM10mil and an annual licensing fee of RM50,000.
No Compromise On Syariah Principles
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Call to strengthen Islamic banking practices
Bandar Seri Begawan - The principles of Syari'ah must not be compromised as Islamic banking has come of age, said Pehin Orang Kaya Laila Setia Dato Seri Setia Awg Hj Abd Rahman Hj Ibrahim, Second Minister of Finance, during the official opening of the First International Conference on Islamic Finance 2010 at the Rizqun Hotel, Gadong yesterday.
Based on the theme 'Contemporary Challenges of Islamic Finance: Towards Realising the goals of Syariah', the aim of the inaugural conference, which is organised by the University Sultan Sharif Ali (UNISSA), was commended by the second minister for its "aim of contributing towards the continued process of solution building in Islamic banking and finance, by consolidating the numerous views and principles, acting as a catalyst towards effective knowledge sharing, as well as exchanging views and experiences among all its stakeholders".
"Our hope is not just to assist in the advancement of Islamic finance, but also bear witness to the industry's ability in the development of the Muslim Ummah as a whole," stated the second finance minister, but also emphasised the need to "remain humble and vigilant and that it is imperative that the principles of Syariah are not compromised".
The second minister based his statement on the fact that since Islamic finance ventured into the market more than three decades ago, "the demand for Islamic finance has been estimated to grow between 15 and 20 per cent annually and the demand is continuing to outgrow supply, as the industry grows to exceed $1 trillion in assets".
Furthermore, Pehin Dato Hj Abd Rahman also pointed out the encouraging indicator of the increasing number of conventional operators venturing into Islamic finance by "contributing towards innovation and assisting Islamic finance into many aspects of global trade and investment".
The expanding appeal of Islamic finance can also be illustrated in the move by large international banks and other private sector financial institutions to provide Islamic financial services, which includes the establishment of exchange-traded funds that are vetted to ensure their conformity with Islamic investment principles, as well as offering `Takaful' (Islamic insurance), said Pehin Dato Hj Abd Rahman.
The second finance minister was addressing the conference, attended by some 100 people, which include 24 Islamic finance scholars and practitioners from as far as the Middle East to countries closer in the region, as well as local academics.
Pehin Dato Hj Abd Rahman reminded that every growth story has its plentiful challenges. "In any fast growing industry, a healthy balance of regulatory supervision and self-regulation is critical. Many of the recent problems in financial institutions worldwide over the past 24 months are primarily due to poor corporate governance or inadequate risk management, or both."
This was the reason why the minister called on the scholars and practitioners of "the present need to further strengthen corporate governance", as well as "the need to build rigorous risk management systems", which he added, "cannot be overstated".
In reference to the industry's relative infancy and limited product offering as compared to conventional markets, Pehin Dato Hj Abd Rahman noted the need for continuous product innovation. But he warned against "just imitating conventional financial products" and that whatever form future Islamic financial products offer, two criteria must be maintained:
"Islamic financial institutions must aim to be models of excellence in every respect and that innovation must not compromise Syariah principles". As, in the second minister's opinion, "it is only a matter of time that Islamic financial product innovations accelerate at a faster pace", he emphasised on two other key areas of concern for the industry, which were the growing divergence of standards and Syariah principles between individual jurisdictions and the imperative of enhancing skill sets between Syariah scholars and the practitioners.
"We have no choice but to address these problems urgently," noted Pehin Dato Hj Abd Rahman adding that it was only through "open collaboration between stakeholders that would greatly assist our goal of establishing a more progressive Islamic financial community".-- Courtesy of Borneo Bulletin
Lack of experts plaguing Islamic finance industry
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LACK of experts on Islamic finance is one of the main issues facing both local and international Islamic financial institutions, said the dean of Sultan Sharif Ali Islamic University’s Faculty Business and Management Science.
Dr Mohamed Sharif Bashir said that most of the Islamic financial institutions all over the world, including Brunei, have generally been recruiting bankers and financial professionals from conventional institutions based only on their experience in banking system operations and not on their expertise in Islamic finance.
“The need for expertise in Islamic finance is very crucial because they will be (responsible) for explaining and creating awareness on Islamic financing among the society,” he said.
He added that to ensure the efficiency of Islamic financial institutions, a safe, sound and stable financial system needs to first be developed.“To have a stable financial system in the institutions, there must be robust financial institutions, strong regulation and reliable infrastructure. Corporate governance in the Islamic financial institutions is necessary to reinforce sound regulation and supervision,” said Dr Mohamed.
“It also contributes towards maintaining market confidence, strengthening transparency and accountability,” he added.
The dean used Malaysia as an example as he explained that Malaysia has now adopted a comprehensive domestic Islamic financial system that is diversified in terms of its institutions, markets and players.
“The strategy has been to institute the entire financial system chain to ensure the smooth functioning of the system. The initiatives include building the required financial institutions, including, the Islamic banking institutions, the takaful industry, the non-banking institutions and developing the Islamic money and capital markets,” he said.
“These respective components have recently been progressively liberalised to become internationally more integrated. The supporting financial infrastructure includes a robust regulatory and supervisory framework reinforced by the legal and syariah framework, the payment and settlement systems, the development of the pool of talent and the mechanism for the liquidity operations of the central bank as part of its monetary policy,” he added.
Dr Mohamed cited areas of improvement that should be pursued by Brunei Islamic financial institutions. “All Southeast economies, including Brunei, are experiencing a rapid change in economic environment due to globalisation. The changes in business landscape and market expectations, as well as demand create a new challenge in Islamic financial institutions in this country,” he said.
Addressing “the challenges in terms of globalisation, product innovation, increasing acceptance among customers, good corporate governance and producing expertise will ensure the effectiveness of Islamic financial institutions in this country,” he added.
He said Islamic institutions here are said to have slow product innovation and this could be caused by a number of factors.
“As the business environment moves towards globalisation, syariah-compliant versions of product portfolio including investment and underwriting services, asset and commodity finance and commercial insurance merits further development. Research and development therefore need to be intensified. This calls for greater cooperation between scholars and the practitioners,” he said.
Dr Mohamed added that there is also competition among Islamic and conventional financial institutions in providing products and services.
“Increasing public demand in this regard requires Islamic finance (institutions) to introduce and offer better quality and speedier products and services,” he said, further enforcing the need to broaden the product range of Islamic financial serves.
Islamic finance industry launches derivatives standard
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A template for an over-the-counter Islamic derivative contract was launched on Monday, offering a channel for the emerging industry to better hedge itself against risks.
The contract, in the making for three years, is expected to pave the way for quicker and cheaper Islamic risk management and more frequent cross-currency transactions by offering a template that is accepted by Islamic scholars.
The young Islamic finance industry has not yet developed all of the products used by conventional banks, and its banks are seen as at a disadvantage on making cross-border investments as they can not hedge against currency risks.
It is one of its principles of sharia, or Islamic law, that every transaction needs to be underpinned by tangible assets, which has made it difficult for the industry to develope hedging instruments.
"A few years ago, derivatives were not allowed, and not even allowed to be talked about because it was felt that this was not sharia-compliant," said Khalid Hamad, executive director at the Central Bank of Bahrain (CBB) during a news conference in Manama.
Bahrain is a regional banking centre in particular for Islamic banks catering to the Gulf Arab region.
The contract was developed by the IIFM, an Islamic finance industry body, and the International Swaps and Derivatives Association (ISDA) and is also backed by banks such as Bahrain's Arab Banking Corporation ABCB.BH, Credit Agricole CIB (CAGR.PA) and Standard Chartered (STAN.L).
It will create a standard legal framework for derivatives in the Islamic market, while currently contracts are arranged on an ad hoc basis, which can take between six to nine months. Ijlal Alvi, chief executive of the IIFM, said the standard was expected to be mostly used for profit rate and currency swaps.
Global Islamic hedging agreement is launched
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MANAMA: The International Islamic Financial Market (IIFM) and the International Swaps and Derivatives Association, (ISDA) yesterday launched the ISDA/IIFM Tahawwut (Hedging) Master Agreement at a meeting in Bahrain.
The development is a breakthrough in Islamic finance and risk management, and marks the introduction of the first globally standardised documentation for privately negotiated Islamic hedging products.
The agreement is the first financial industry framework document that is applicable across all jurisdictions where Islamic finance is practised.
The launch of the agreement was officially announced at an event in Bahrain hosted by IIFM and ISDA under the patronage of Central bank of Bahrain Governor Rasheed Al Maraj.
"Given the growing nature of the Islamic finance industry, the institutions operating on Sharia principles can no longer afford to leave their positions un-hedged," said IIFM chairman and CBB executive director of banking supervision Khalid Hamad.
"Hence, some key hedging products are now becoming common across jurisdictions to mitigate risk.
"The ISDA/IIFM Tahawwut Master Agreement gives the industry access to a truly global framework document which is neutral in terms of treatment to both the transacting parties and at the same time strictly conforms to Sharia principles.
"IIFM is honoured to have achieved this milestone in collaboration with ISDA and I am confident that such joint efforts will continue in the future," he added.
"Demand for customised, privately negotiated hedging tools that conform to the principles of Islamic finance has increased in momentum," said ISDA chairman and managing director and head of fixed income for the EMEA region for Credit Suisse Eraj Shirvani.
The agreement provides the structure under which institutions can undertake Islamic hedging transactions such as profit-rate and currency swaps, which are estimated to represent most of today's Islamic hedging transactions.
It is designed to be used between two principal counterparties as a master agreement. Parties understand that no interest shall be payable or receivable and no settlement based on valuation or without tangible assets is allowed.
Moreover, the counterparties to the agreement make representations as to the fact that they enter into Sharia-compliant transactions only.
The Importance of the Sharia Group in the Administrative Structure
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Monday, March 1, 2010
Riyadh, Asharq Al-Awsat - An Islamic Bank's commitment to the provision of Islamic Sharia law and the accuracy with which it implements these laws are considered critical factors when Islamic finance clients are choosing between one Islamic institution and another. Therefore we find that Islamic financial institutions try to exploit this factor and focus on this aspect of their operations and market themselves as an Islamic financial institution, utilizing a variety of methods such as the design of the institution's logo in order to express its Islamic identity, as well as selecting language that evoke the institute's Islamic identity and vision. Other measures that aim at instilling confidence in the client's subconscious include appointing figures who are well known to the target audience to the Sharia group administration. These marketing methods may have been effective in the past however clients today are more conscious and aware of the criteria that a financial institution must fulfil before it can truly be considered an Islamic financial institution. An Islamic logo or the presence of well-known Islamic figures is no longer sufficient to grant the confidence of customers in the Islamic integrity of financial institutions. Perhaps the most important criteria that clients look at is the location of the Sharia group in the Islamic financial institution's administrative structure, and whether this guarantees the Sharia group influence and independence with regards to decision making.
An Islamic financial institution is comprised of three departments; firstly there is the product development or research department that develops [financial] services and products that are compliant with the provisions of Islamic Sharia law in collaboration with the institution's administration. The second department is the Sharia commission department, and this presents these products and services to the Sharia authority and coordinates between the Sharia authority and the Islamic financial institution. The third department is the Sharia oversight department, which oversees the institution's financial activities and ensures that they fall within the provisions of Islamic Sharia law. Therefore it is not acceptable for the administration of the Sharia group to be affiliated to any department within the financial institution, but instead this should be directly tied to the Chief Executive of the institution and should also have direct representation on the Board of Directors review commission. Due to the sensitive and delicate tasks carried out by a Sharia group, the financial institution should be very careful in selecting staff-members, employing only those who possess knowledge of the Sharia, vocational competence, and administrative experience, because the Sharia group represents the financial institutions commitment to the provisions of Islamic Sharia law, and it is the gateway to competing in the Islamic financial market.
Observers today are surprised by some financial institution's claims that they are Islamic financial institutions when in fact the institution has no Sharia group whatsoever, or at best its Sharia group is powerless. What is even more astonishing is that one might find an Islamic financial institution that enjoys a good reputation in terms of its commitment to Islamic Sharia law as a result of the efficiency and independence of its Sharia Group – as this Sharia Group need only compete against its counterparts – that voluntarily gives this up by weakening its Sharia group and eliminating its independence. The Quran says: "And be not like her who unravels her yarn, disintegrating it into pieces after she has spun it strongly." [Surat al-Nahl; Verse 92].
Islamic financial institutions should be aware that clients today are inclined towards suspicion rather than trust and against giving institutes the benefit of the doubt as if they mean to say "if they do not have evidence to back up their claims then they are frauds." This is as a result of the media attention on Islamic finance which has effectively put the spotlight on the judicial disputes surrounding a number of Islamic financial services, and the mistakes made in the application of these financial services. Therefore these institutions must provide evidence of the credibility of their claims. The strongest and most credible evidence that an Islamic financial institution can provide is the existence of a strong, independent, and effective Sharia group, with a trusted and reliable staff. If they are unable to show this, these Islamic financial institutions will lose out
Pubali Bank launches Islamic Banking window
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Pubali Bank Limited Thursday began Islamic banking in a bid to facilitate and streamline the country's growing Islamic banking business.
Chairman, Board of Directors of Pubali Bank Hafiz Ahmed Mazumder, MP inaugurated its Islamic Banking Window at the Principal Branch in the city.
Managing Director Helal Ahmed Chowdhury presided over the inauguration function.
Directors of Pubali Bank Limited Monir Uddin Ahmed, Sk. Wahidur Rahman, Monzurur Rahman, Ahmed Shafi Chowdhury, Mohammad Yakub, M. Faizur Rahman, Romana Sharif and Mostafa Shahriar Ahmed also attended the ceremony.
In his speech Hafiz Ahmed Mazumder MP said that Pubali Bank is committed to provide the innovative banking services needs as per requirement of present market trend within fastest possible time.
He urged all valued clients and other professionals to avail the facility ofIslamic banking services to expand their business.
In his speech Helal Ahmed Chowdhury said that Pubali Bank has been providing quality and prompt services for its customer since 1959 with a promise to keep up its original tradition.
Chairman, Board of Directors of Pubali Bank Hafiz Ahmed Mazumder, MP inaugurated its Islamic Banking Window at the Principal Branch in the city.
Managing Director Helal Ahmed Chowdhury presided over the inauguration function.
Directors of Pubali Bank Limited Monir Uddin Ahmed, Sk. Wahidur Rahman, Monzurur Rahman, Ahmed Shafi Chowdhury, Mohammad Yakub, M. Faizur Rahman, Romana Sharif and Mostafa Shahriar Ahmed also attended the ceremony.
In his speech Hafiz Ahmed Mazumder MP said that Pubali Bank is committed to provide the innovative banking services needs as per requirement of present market trend within fastest possible time.
He urged all valued clients and other professionals to avail the facility ofIslamic banking services to expand their business.
In his speech Helal Ahmed Chowdhury said that Pubali Bank has been providing quality and prompt services for its customer since 1959 with a promise to keep up its original tradition.
London Can Prosper as Islamic Finance Center, HSBC’s Green Says
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London can expand as a global financial center by offering more Islamic banking services, HSBC Holdings Plc Chairman Stephen Green said.
Europe’s largest financial center is already “the leading hub in the Western world” for Islamic finance, with 12 Islamic banks and 10 global banks offering Islamic financial services, Green said yesterday in a speech at the London School of Economics.
“London’s financial center has a long history of gaining first-mover advantage when it comes to new markets,” Green said. Islamic finance is a “very important” addition “to what is otherwise a mature financial services sector here.”
The assets of the top 500 Islamic banks expanded 29 percent to $822 billion in 2009 from the year before, according to ratings company Standard & Poor’s. HSBC provides Islamic financial services through its Amanah unit, started in 1998.
Islamic financial products such as sukuk bonds are governed by Shariah laws, which ban the payment of interest and stipulate agreements be based on the transfer of goods or services.
To contact the reporter on this story: Simon Clark in London atsclark4@bloomberg.net
New Gateway to guide industry
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The launch of Thomson Reuters's supposedly "next generation Islamic Finance Gateway to guide the emerging industry to the next stage of growth and development" comes at a time when the industry is taking stock in the aftermath of the worst global financial crisis since the 1930s.
Perhaps Thomson Reuters can be forgiven for the hype of its indulgence in self-importance and its savvy use of language, after all, the Gateway was launched simultaneously in Abu Dhabi and Dubai, the capital of the Middle Eastern version of "bling-bling".
As usual there was no difficulty in finding the CEO endorsements of the Gateway even before the product has been tried and tested in a market notorious for its fickleness, under-developed culture of banking transparency, poor data collection and research.
The launch coincided with a string of summits on Islamic banking and finance held simultaneously (so it seemed) in Dubai, Manama, London, Geneva, Kuala Lumpur and Jakarta. "Next generation" also implies that Thomson Reuters had a previous version of the Gateway, and perhaps not surprisingly some Islamic bankers who have had a preview of the Gateway are bemused exactly how it will guide a disparate global industry to its next phase of development, albeit of course at a handsome subscription fee.
For Reuters, this is a departure from its tried and tested and staid soberness of yesteryear.
There have been several attempts at launching a number of information and data platforms targeted at the growing Islamic finance sector. HIPIF (the Harvard-based Islamic information platform), Islam-IQ and I-Hilal came, saw and failed to conquer the market. They were launched by those who were neither information nor data specialists, and as such failed to capitalize an opportunity in a market which is still screaming for quality, informed, objective, independent and up-to-date information, data and analysis.
For the man behind the Islamic Finance Gateway, Rushdi Siddiqui, global head of Islamic Finance at Thomson Reuters, this may turn out to be a much tougher task than his previous calling as the director of Islamic Indexes at Dow Jones Indexes, where he launched the Dow Jones Islamic Market (DJIM) family of Shariah-compliant indices.
True to form, Siddiqui did not disappoint. He emphasized in "Rushdi-speak" at the launch that "despite its image as an emerging industry, Islamic finance has now grown to be worth around $1 trillion and the Thomson Reuters Islamic Finance Gateway truly opens up this world of possibilities and opportunities for financial market participants and professionals. The conventional, Western finance industry is accustomed to clean, crisp, robust information, real-time news, connectivity to communities and the ability to act and transact with trusted counterparties. By providing these "must have" features the Thomson Reuters Islamic Finance Gateway demonstrates the industry's true breadth and makes the transition for all to Islamic finance a seamless one."
The Islamic finance industry coped and developed over the last three decades without the support of Reuters, APs, Dow Jones and the Bloombergs of this world. Indeed, it will continue to do so for the next three decades. The international media still today cover Islamic finance with a hint of stereotype and cynicism especially when it suits their agendas. Had it not been for the notable involvement of the global banking majors in Islamic finance, and the industry's phenomenal growth over the last decade or so, this coverage would have been confined to post-9/11 issues such as terrorism financing, money laundering and so on.
Quality, independent, real time information is the backbone of the conventional financial system, which has had a 150-year plus head start on the contemporary Islamic finance industry. Islamic finance, being a faith-based system of financial management, differs in its fundamental ethos to that of the conventional system. They are in reality diametrically-opposed. Yes, there are some similarities and some overlapping. But any Gateway or platform that purports to give comparisons should be careful that they are like-for-like. This is very difficult given the specificities of Islamic banking and finance and the fact that next generation of Islamic bankers are more interested in developing Shariah-based financial products as opposed to Shariah-compliant ones. This they argue is the true calling of Islamic finance - to develop real and sustainable products as true alternatives to conventional ones.
The growth of Islamic finance has also seen opportunities for financial information and data providers such as Moody's Investors Service, Standard & Poor's, Fitch Ratings and Capital Intelligence. The Thomson Reuters Islamic Finance Gateway is no exception in this respect. There is also no prospect (at least in the short-to-medium-term) for any generic competitor from OIC countries or from the South.
The involvement of Bloomberg, Micropal, Dow Jones, Thompson Reuters etc. in the Islamic finance space should be welcomed. Some of them have already contributed to the development of the Islamic finance market. But their involvement and contribution must be gauged rigorously like any other products and services, both in terms of quality and content, and whether they are merely fair-weather friends.
The Gateway is available on Thomson Reuters 3000 Xtra desktop. Some of the claims made for the Gateway may yet come to haunt Thomson Reuters. "The rich data and breaking news is complemented by a global rolling tickertape of Islamic and conventional indexes, multi-currency real time inter-bank conventional versus Islamic inter-bank rates, an information fund supermarket and click-through links to Gateways for the Organization of Islamic Conference, Gulf Cooperation Council, Association of Southeast Asian Nations and G20 countries," stresses Thomson Reuters.
Comparisons of conventional versus Islamic indexes and inter-bank rates are meaningless. The stock selection and criteria are intrinsically different. At best they can be used merely to compare pricing and the movements of certain industry sectors. And there are hardly any developed Islamic inter-bank markets other than the one in Malaysia. Similarly links to the OIC and GCC Gateways once again are meaningless given the paucity of the platforms in terms of updated news, lack of objectivity, blatant promotion and omission of politically and financially sensitive issues.
The Thomson Reuters Islamic Finance Gateway is light on detailed hardcore information and analysis. Relying on Reuters' existing news coverage on Islamic finance would not suffice, because the coverage is wanting both in substance and form. It would be better for Reuters to spend extra resources in training and sharpening the knowledge base of their reporters and analysts on Islamic finance.
Also, as one Islamic banker stressed, "Why would I want to go to the Reuters Gateway if I want to access an S&P report on Islamic finance. I would go directly to S&P." Surely, in the light of the role rating agencies played in the subprime debacle, it would be true to Reuters to scrutinize and analyze the S&P, Moody's and Fitch reports on Islamic finance and see whether they do meet the standards required of them.
The irony may be that the Thomson Reuters Islamic Finance Gateway may be too far ahead of its time for an industry that is nascent, evolving, beleaguered with bottlenecks, and in general can't even manage and maintain their existing websites to acceptable good practice standards.
Link: http://arabnews.com/economy/islamicfinance/article24126.ece
Islamic banking in the Philippines
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Not many of us are aware that there is such a concept as Islamic banking, and that there is actually a special bank for our Muslim brothers and sisters.
In a country like the Philippines where there is a significant Muslim population, this financial system is indeed very important.
Islamic banking pertains to a system of banking that is consistent with the principles of Sharia (Islamic law). In this type of banking system, the collection and payment of interest, which Muslims refer to as “riba,” is strictly prohibited.
Islam forbids transactions involving interest because of its teachings that all income must be determined by the supply of work associated with the factors of production.
It emphasizes that if money is lent for interest, capital is consequently augmented without any effort. Profit-Loss sharing in Islam encourages Muslims to invest their money and become partners in order to share the profits and risks of the business.
Islamic law prohibits investing in sectors contrary to Islamic values such as gambling, alcohol, tobacco, the arms industry and pornography.
In an Islamic mortgage transaction, instead of loaning the buyer money to purchase the item, a bank might buy the item itself from the seller and resell it to the buyer at a profit, while allowing the buyer to pay the bank in installments.
The Philippines actually pioneered in Islamic banking with the creation of the Al-Amanah Islamic Investment Bank of the Philippines in 1973. Al-Amanah even antedated the establishment of the Dubai Islamic Bank in 1975.
However, for a variety of reasons, principally lack of expertise in this new field and lack of general public awareness, Al-Amanah failed to really take off the ground.
In the 1980s, the Government of Malaysia and Bank Negara began actively promoting Islamic banking in Malaysia. The following decade saw the development of a regulatory regime for Islamic Financial Institutions by the Central Bank of Bahrain.
Financial institutions and products designed to comply with the central tenets of Sharia are among the fastest growing segments of the global financial industry. The number of Islamic financial institutions worldwide now exceeds three hundred, with operations in 75 countries and assets in excess of US$400 billion.
Islamic banking has also been estimated to be growing by as much as 20% a year, largely fuelled by wealth from oil.
With these developments, interest in Islamic banking has been rekindled. With Monetary Board approval, the Development Bank of the Philippines recently obtained full control of Al-Amanah Islamic Investment Bank by acquiring the national government’s 69 percent stake in the bank.
Forward-looking DBP President Rey David sees in Al-Amanah a new opportunity for DBP to expand its SME operations in Mindanao as well as other banking services to include remittances especially from the Middle East.
DBP has already sent 15 top executives to Malaysia to hone up their skills in Sharia banking.
Rey David believes that under new management, the refurbished and rebranded Al-Amanah could serve as gateway to Brunei, Indonesia, Malaysia and to the economies of other Muslim countries.
Link: http://www.mb.com.ph/articles/245575/islamic-banking-philippines
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