Two new mega players in Islamic banking

The issuance of two mega Islamic banking licences with US$1 billion (RM3.1 bln) capital to be announced in June is expected to boost the Malaysian Islamic finance industry.

Bank Negara Malaysia's deputy governor Datuk Mohd Razif Abd Kadir in disclosing this at the Malaysia International Islamic Financial Centre (MIFC) roadshow here yesterday called it a liberalising move for the
sector.

Razif said new players could bring better value products while creating competition among local players.

"Even though capital is important, a business plan is also very important. For example, what kind of value can
you bring to the Malaysian economy? We bring in new players so that there will be competition and a wider range of Islamic products can be offered," he said.

Besides the two mega Islamic banking licences, Razif said the central bank would also issue two more takaful licences and five conventional banking licences, by June.

He said Bank Negara had received a number of applications for the licences from international financial institutions and banks from Europe and the Middle East.

Asked when the new mega Islamic banks would start operating, Razif said the central bank would give a reasonable time for the parties concerned to commence business.

http://www.mmail.com.my/content/34712-two-new-mega-players-islamic-banking

Raja Nazrin: Christian index not a threat to Islamic finance growth

The launch of Europe’s first Christian equity index, Stoxx Europe Christian Index, will not be a threat to Islamic finance growth but will complement the rising demand for a more ethical type of investments, says the Raja Muda of Perak, Raja Dr Nazrin Shah (picture).

As a result of the financial crisis, people are becoming aware that some of the ethical lapses of conventional banking or excesses could be avoided or mitigated, he said.

For example, these can be avoided if some of the precepts of Islamic finance have been followed, said the Malaysia International Islamic Financial Centre (MIFC) financial ambassador.

On whether the recent launch of Christian-related products could pose a threat, Raja Nazrin said it would not be the case.

“The more asset class you make available to the investing public, it is more beneficial to the public. They can make a choice or they can allocate their resources on a balance, depending on their risk appetite.

“Certainly, lessons need to be learnt from the excesses of conventional financial system that has brought us too many sorry states today,” he told reporters in an interview in conjunction with the MIFC roadshow to the United Arab Emirates and Saudi Arabia.

Meanwhile, Bursa Malaysia Bhd chief executive officer Datuk Yusli Mohamed Yusoff said the new equity index should be seen as a healthy competition for syariah-compliant indices especially in meeting investors’ appetite for diversification and greater choice.

He said there was plenty of space in the market for Christian and syariah-compliant instruments to co-exist.

“Investors ultimately look at returns and the instruments that can give good returns on a sustainable basis as well as the managed risk involved are the ones that are going to be successful in the long run,” he said.

Yusli said the Christian index is the response to the growing demand for a more ethical type of investment instruments that have lower risks against the backdrop of the recovering global economy.

“This is similar to syariah-compliant investments as promoted in Malaysia. The recent growing trend is for fund managers to look at more sustainable and more ethical type of investment instruments,” he said, adding that syariah-compliant stocks are also based on similar ethical principles.

Yusli said if the demand for more ethical-based investments increased, the players in the industry would have to come up with such products.

The Stoxx Europe Christian Index, launched yesterday, comprises 533 European companies that derive revenue only from approved sources “according to the values and principles of the Christian religion.”

BP, HSBC, Nestlé, Vodafone, Royal Dutch Shell and GlaxoSmithKline are among the companies in the index. — Bernama

http://themalaysianinsider.com/index.php/business/61495-raja-nazrin-christian-index-not-a-threat-to-islamic-finance-growth

Saudi academicians, businessmen to participate in forum

Saudi businessmen expressed solidarity with the local academe for the propagation of Islamic finance in Europe, making Spain as its hub.

According to Dr. Abdullah Q. Turkistani, director of Islamic Economic Research Center, King Abdulaziz University, no less than the chairman of the Jeddah Chamber of Commerce and Industry (JCCI) showed strong support for the promotion of Islamic finance in Europe and Latin America through the Center of Islamic Economics and Finance (CIEF) which was established in Madrid last year under the collaborative efforts of the King Abdulaziz University and the Instituto de Empresa (IE) University in Madrid.

He said the visit of Dr. Rafael Puyol Antolin, president, IE University and Joe Luis Perez Estevez, director, CIEF last Saturday to King Abdulaziz University and the meeting with officials of JCCI the following day was fruitful, with the chamber officials manifesting their desire to participate in the upcoming conference in Madrid slated on June 16-17.

The two-day meeting titled “Beyond the Crisis: Islamic Finance in the New Financial Order” is “unique”, said Estevez, as “there won’t be main speakers. Instead, the participants will be divided into working groups to tackle issues” confronting Islamic finance and come up with summary, course of action and conclusion at the end of the second day.

Some 30 international Islamic finance experts will join in the forum that will begin at the Madrid Stock Exchange.

The conference will focus on banking and insurance, Islamic finance products, new technologies and public and government sectors.

Estevez stressed that there is a dramatic interest in the Islamic finance system since it “does not need radical change” as compared to conventional financial practices. 

It is more resilient that the latter, he added, with “built-in stability features,” though “it needs level playing field” vis-à-vis the conventional.

He pointed out that CIEF Madrid is strategically located, as it serves as a bridge to Latin American countries as well as to Europe, notwithstanding Spain’s Arab heritage.

He further said in the long run, CIEF will not only serve as the center for spreading awareness on Islamic economics, but would also serve as a conduit for exchange students. 

The CIEF “makes a lot of sense in Europe” as it will let people know about the “ethical” financial system. He said at present, Europe’s knowledge about Islamic finance “is very limited,” hence “a lot of lessons could be applied.” 

“The seminar in June is good both for the companies, academia and the government sectors to meet each other and understand” the system, he noted.

Dr. Ahmed Belouafi, assistant professor and researcher, Islamic Economics Research Center, added that though Islamic finance constitutes only one percent of the global finance, with approximately $1 trillion in global assets, yet the demand is dramatic because of its distinctive features, such of asset-backed finance where the credit facility is linked to particular activity or project and is transparent, among others.

The CIEF endeavors to strengthen the foundations and capacity of Islamic finance to contribute toward global growth.

In a meeting at Economic Research Center, King Abdulaziz University last Saturday, Turkistani said that the Center will, in the near future, be elevated to become the International Institute for Islamic Economic and Finance that would offer masters degree and online courses and at the same time provide professional certificates in Islamic finance.

He added that the center increases awareness on Islamic finance by going to malls and presents the topic there, saying that it plans to encourage “gifted students” to have doctorate degrees. – By Querubin 

http://www.saudigazette.com.sa/index.cfm?method=home.regcon&contentID=2010042770583

KPMG for Islamic banking

Global consultancy firm KPMG on Tuesday pitched for Islamic banking products in the country and urged the RBI to come out with norms for these interest-free saving instruments along with proposed guidelines on fresh banking licences.

“The scope for launching Islamic finance products is huge here as the savings of Muslim population is untapped. The government should come out with a regulation on the governance of Islamic banking products so that banks can launch such products soon,” KPMG executive director for corporate finance and head financial services, Mr Abizer Diwanji said.

According to KPMG, as the RBI is planning to issue fresh banking licences, it should also consider coming out with a guideline specifically for banks providing Islamic products. “India has the potential of becoming the next big market for Shariah finance in the world,” he said. Accor-ding to the Shariah, payment of interest is barred, besides any kind of speculative activities.

http://www.deccanchronicle.com/business/kpmg-islamic-banking-967

India looks to start Shariah-compliant financial products

India needs to actively consider allowing introduction of Shariah-compliant Islamic finance products to channelise savings of the muslim community, K Reh-man Khan, deputy chairman of Rajya Sabha, said onTuesday.

Speaking at the India Shariah Finance Summit in the capital, Khan said the mutual fund industry is the best vehicle for popularising Shariah-compliant products. He pointed out that mutual funds are largely compliant with Islamic finance principles since they do not pay

interest.

The concept of charging or paying interest is prohibited under Islamic law. “We should start adopting the mutual fund route in a bigger way for Islamic banking. Shariah-compliant mutual fund schemes will help to channelise savings of the huge Islamic population in India,” Khan said.

Khan said Indian Muslims should have the option to invest in Shariah-compliant products. “Muslims have every right to seek an avenue for investment that complies with their religious faith,” he said.

Speaking on the occasion, Abizer Diwanji, executive director and head of financial services, KPMG, said the mutual fund sector could be opened up for Shariah-compliant products. “The present laws are amenable to mutual fund instruments that are compliant with Islamic finance. However, innovation in the industry is lacking and hence such products are not hitting the market,” he said.

Diwanji said bringing out Islamic finance products would be a step towards greater financial inclusion.

“Muslims are an underbanked community in India. Islamic finance could be a very big component for financial inclusion that the government is pushing for,” he said. Muslims account for around 13.4 per cent of the population or around 175 million people in absolute terms. Diwanji said the Reserve Bank of India could also consider offering specialised licences for Islamic banks, while doling out fresh bank licences as promised in the Union budget.

Sashi Krishnan, chief investment officer, Bajaj Allianz Life Insurance, which offers — Pure Stock Pension Fund –a Shariah-certified scheme, said Islamic financial products have seen growing acceptance in India over the past few years.

“The government is already working on a project to analyse the future of interest-free banking in India, while the mutual fund and insurance industry are also developing Shariah-compliant products,” he added.

Krishnan said the challenges to the popularity of Islamic finance in India are distributors who are not equipped to sell Shariah-compliant products, besides a lack of certifying agencies and standardisation of Shariah-based products.

http://www.mydigitalfc.com/mutual-funds/india-looks-start-shariah-compliant-financial-products-737

Islamic finance to expand role, presence in Asia

Islamic finance is uniquely positioned to expand its role and presence amid Asia's new phase of growth, with huge opportunities for Muslim nations to boost trade with each other.

Perak regent Raja Dr Nazrin Shah said Asia is entering a new phase of growth, with increasing significance of the E7 emerging economies, of which four are in Asia.

He said while world trade has expanded by an average of 10 per cent, trade between the Middle East and the rest of Asia rose at the average of 25 per cent.

"Despite this, enormous opportunities remain for Muslim nations to increase trade with each other, given that intra-OIC (Organisation of Islamic Conference) trade currently accounts for only between 10 per cent and 13 per cent of the OIC's global trade," he said in a keynote address at a luncheon in conjunction with the Malaysian International Islamic Financial Centre (MIFC) roadshow here yesterday.

The luncheon was co-hosted by MIFC and Standard Chartered.

Raja Nazrin, who is MIFC financial ambassador, said Islamic finance, with its well-established regulatory and legal frameworks, also opens up prospects for developed economies to forge stronger financial linkages with Asian and the Middle Eastern countries.

"In the aftermath of the global financial crisis, there has been a heightened interest in Islamic finance as an alternative to conventional finance," he said.

Speaking to some 150 people from business and investment community in the UAE, in addition to some 50 delegates from Malaysia, Raja Nazrin said Malaysia is committed to expand the outreach of Islamic finance.

He elaborated the steps taken by the country to grow all aspects of Islamic finance, including human capital development.

Raja Nazrin also highlighted the reform measures under the New Economic Model, which will unlock investments, increase labour productivity and boost efficiency to life the real growth rates to an average of 6.5 per cent per year between 2011 and 2020.

Read more: Islamic finance to expand role, presence in Asia http://www.btimes.com.my/Current_News/BTIMES/articles/raja27/Article/#ixzz0mMLRnajE

Uk Students Can Now Achieve Islamic Finance Qualifications

The concepts of Islamic Finance are different in some key respects from those of its traditional western counterpart and demand for Islamic banking services is growing in popularity in the UK, especially since experts in the subject have suggested that its underlying principles have protected many Islamic investments from the global financial crisis.

Islamic Finance is a way of providing and receiving finance in compliance with Sharia law and has many notable features such as: - No dealing in any goods, services or products prohibited under Sharia law such as gambling, pornography, alcohol or pork - A prohibition on the payment or receipt of interest when borrowing or lending. - Individuals must not hoard their wealth, squander it, nor keep it idle, but must use it judiciously - Anything that is morally or socially harmful cannot be funded or supported by Islamic finance - Muslims are required to give a percentage of their wealth to help poor sections of the Muslim community

Among the consequences of these prohibitions are that traditional borrowing is not allowed nor is the use of derivatives for hedging or trading.

As illustrated, moral purchasing and ethical investing are fundamental principles of Islamic finance, but delve deeper and the nature of the subject it is extremely complex, and for those trained and schooled in western finance it can be very different indeed. This difficulty is compounded when it is understood that the way in which the precepts of the Qur’an are interpreted and implemented differ in different parts of the Islamic world. Because of the recent surge in interest in Islamic Finance a few universities and other higher education institutions in the UK are now offering formal qualifications in the subject, in some cases working with academics and scholars from other countries, for example, the International Centre for Education in Islamic Finance (INCEIF) and offer courses such as the full-time MSc in Investment Banking and Islamic Finance which can be accompanied by appropriate professional certification.

Formal education in the subject includes extensive study of the principles of Islamic Finance, as well as intensive learning about the mechanics and practice of the subject as practiced in the Middle East and in Malaysia, which has a very highly developed market in Islamic Finance. Indeed, some courses also offer a placement in an Islamic financial institution as part of the course, where students will get to see how Islamic finance works as an integral part of the economy.

Study of the subject can either supplement existing accountancy and finance qualifications or be studied in isolation without any prior knowledge, as it is a self-contained unit. The best courses recognise that Islamic Finance has to operate alongside its conventional counterpart and, therefore, require full study of western financial concepts alongside their Islamic counterparts. One thing is for sure, well designed courses in this vibrant and rapidly developing subject in the UK will be very popular.

Paul Buchanan writes for a digital marketing agency. This article has been commissioned by a client of said agency. This article is not designed to promote, but should be considered professional content.

http://www.oecdrccseoul.org/article/uk-students-can-now-achieve-islamic-finance-qualifications/

Affin eyes Islamic finance foray

Affin Bank Bhd will work with its parent company to convert PT Ina Perdana into a syariah bank once the purchase of the Indonesian lender is concluded, as the group expands into the populous Muslim country, reports Business Times.

"Our holding company is looking at it, it will acquire the bank and then we will work together to convert it into an Islamic bank. It is now a conventional lender," Affin Bank managing directorDatuk Zulkiflee Abbas Abdul Hamid told the business section of NST in an interview in Kuala Lumpur.

THE REPORT GOES ON:

The legal and financial due diligence have been done recently.

Affin Holdings Bhd, the bank's parent, in January said it was granted the regulatory approval to start negotiating for a controlling stake in PT Bank Ina Perdana, making Indonesia its first overseas venture.

The group's deputy chairman Tan Sri Lodin Wok Kamaruddin told reporters this month that he hopes the purchase will be concluded by the third quarter this year.

PT Bank Ina Perdana is a tiny lender in Indonesia's fragmented market, which has 121 commercial banks. It operates about 20 branches, most of them in Jakarta.

Despite its small size, Zulkiflee said the bank is profitable with relatively low non-performing loans. Most of PT Bank Ina Perdana's business comes from consumer banking, like car loans, while business banking only takes up a small portion of its portfolio.

The purchase will give Affin Holdings a toehold in Indonesia, and it will slowly grow from there, he added.

"We are of the view that, if we want to go (into Indonesia), this is the time for us to go. There are not too many Islamic banks in Indonesia considering its big population. Islamic finance is still in the early stage of development as compared to Malaysia, so there is vast potential for growth," he said.

With a population of 230 million and a fast growing economy, Indonesian banks have been a highly sought after asset. Global banks in the likes of HSBC plc, have all scrambled to get a slice of the market there.

Malayan Banking Bhd, Malaysia's top lender, had paid hefty premiums to buy Bank Internasional Indonesia two years ago, while CIMB Group Holdings Bhd also has a major presence there through CIMB Niaga. RHB Capital Bhd recently bought into PT Bank Mestika Dharma.

Indonesia aside, Zulkiflee said Affin is not eyeing expansion into other countries yet, and it wants to strengthen its operations back home for now.

"True, people say that the Malaysian market is saturated, but we think there are still pockets of opportunity. The big banks probably must go out, otherwise not sexy. But for us, I don't think we should follow them yet."

He said although the net interest margin (NIM) has been narrowing for Malaysian banks over the years, it is still decent at around 2 per cent to 2.5 per cent. Affin Bank's NIM stood at 2.57 per cent last year, improving slightly from 2.46 per cent in 2008.

This year, Affin Bank will hire more sales people to help grow loans by the targeted 13 per cent to 15 per cent. It is eyeing a deposit growth of 10 per cent this year.

Affin Bank will also beef up the branches to let every walk-in customer feel like a premier guest, no matter how much a customer is banking with it. It plans to put more branches within the city and create some flagship outlets in certain locations, overall adding between five and 10 more to the existing 90 branches.

The bank, which has significantly expanded its business banking in the past two to three years, also wants to increase the number of business centres to cover all the major cities.

Last year, the bank's profit after tax fell 4.1 per cent to RM317.8 million, even as operating profit was 17 per cent higher at RM614.1 million.

"Our business has grown. The profit after tax was lower because we had a lot more (loan) recoveries in the previous year," Zulkiflee explained. Loans grew at 12.7 per cent last year, slightly slower than the 15.8 per cent growth in the previous year.

Net NPL has fallen to 2.36 per cent, from 3.22 per cent at the end in 2008. Its return on equity (ROE), which measures how efficient profits are being reinvested, came in at 11.4 per cent.

This year, he said, the bank is targeting a ROE of 12 per cent to 13 per cent.

http://islamicfinanceasia.blogspot.com/2010/04/affin-eyes-islamic-finance-foray.html

IDB holds large-scale presentation in Turkmenistan

The Islamic Development Bank (IDB) held a large-scale presentation of its activity in Ashgabat, Turkmen national TV channel Altyn Asyr reported.

The IDB delegation arrived in Turkmenistan and met with officials of the ministries, departments, banking institutions in the State Bank for Foreign Economic Affairs of Turkmenistan.

During the presentation it dealt with the IDB activity, its largest departments and special programs, as well as the basic principles and forms of financing.

Moreover, work of the Institute for Research and Training included in the ADB, corporation providing investment insurance and export credit, corporation for private sector development, the International Islamic Trade Finance Corporation was covered.

Representatives of the Islamic Corporation for the development of the private sector discussed the possibility of developing a joint task of the program funding from the IDB to develop small and medium enterprises in Turkmenistan.

IDB was established by OIC member-countries (the Organization of Islamic Conference) in 1973. The main purpose of the bank is financial cooperation to promote socio-economic development of the participants.

"Turkmenistan's cooperation with the IDB is constructive and fruitful. A number of successfully implemented joint projects in such areas as transportation, health, construction, education, and programs aimed at developing the private sector were the result of long-term partnership," the statement said.

One of the last major projects implemented in Turkmenistan with the participation of the IDB, is the construction of the Turkmen section Bereket-Etrek of the transnational rail corridor North-South. In total, this project will significantly reduce the way for Central Asia to enter the markets of the Persian Gulf.

http://en.trend.az/capital/banks/1676212.html