Amazing statistics of my blog, Alhamdulillah

Alhamdulillah, with the grace of almighty Allah, this blog (islamicfinance2009.blogpost.com) has been viewed by  approximately more than 15,000 users (mostly from USA) as of 29-Sep-2011.

Pageviews by Countries

United States 13,616 Malaysia 1,914 United Kingdom 1,499 Sri Lanka 850 India 713 Netherlands 666 Pakistan 621 Germany 608 Russia 459 United Arab Emirates 456

Thank you very much and stay tune for more updates everyday.


Kind regards,
Muath Mubarak
muath2015@gmail.com
+94777626967

The $1.5t in Islamic banking - Shafeeq Rahman examines the possibilities of an alternative banking system in India

ISLAMIC BANKING,, believed to be an interest-free, participatory and ethical banking system, has been an emerging global paradigm of the banking system since the last quarter of the twentieth century. The essential feature of Islamic banking is the prohibition of taking and giving of interest in all form of banking and financial transaction. In place of an assured return on loan amount by the interest rate in the conventional banking system, the Islamic form of financing advocates the profit-loss sharing module. Taking a risk is the only provision that entitles one to profit, if there is no risk of loss then there is no assurance of profit to the depositor or the financer. The conceptual framework of Islamic banking is mainly developed by the Islamic economists of the Indian subcontinent; in particular, the complete non-interest banking module was developed for the first time in 1969 by Nejatullah Siddiqi though the business of Islamic banking flourished in West Asian countries, Iran, Malaysia and Indonesia.

The client network is now expanding beyond the conventional Muslim countries to European and other non-Muslim territories; in the UK, it is estimated that $18.4 billion business was done by the end of 2008. According to newest Global Islamic Finance Report 2011, the Islamic finance industry is valued at $1.14 trillion and is growing at a rate of 10 per cent. It was worth a mere $150 billion in the mid-1990s. Apart from Islamic banks, mainstream banks and financial institutions are opening Islamic product windows to woo Muslim consumers. For instance, HSBC has HSBC Amanah for its Islamic financial services. The governments of Iran, Pakistan and Indonesia have officially adapted to Islamic policies to run their banking and finance structure. And due to its cosmopolitan society, Malaysia follows the parallel Islamic system alongside conventional banking.

Banking without interest is a long term demand from Indian Muslims that has not been fulfilled so far due to the existing statutory and regulatory framework of Indian banking, which does not allow such an alternate system. Besides interest, a key point of contradiction is that conventional banks in India facilitate only intermediary services while banks have to be involved in trading and business activities in the Islamic banking system. Indian Muslims have seen several unsuccessful experiments in the unorganised sector and through the registration of NBFCS and cooperatives but the lack of government regulatory supervision has led to the failure of major interest-free banking initiatives.

Banking participation in Muslim-concentrated districts of India District % of Muslim population 2001 Number of Offices Number of accounts (000) Population 2011 (Million) % of population with bank account Bank offices per million population CD Ratio Anantnag (J&K) 98.5 61 455 1.07 42.48 57 41.88 Dhubri (Assam) 74.3 46 430 1.95 22.06 24 45.18 Malappuram (Kerala) 68.5 309 2,226 4.11 54.14 75 54.98 Kishanganj (Bihar) 67.6 57 300 1.69 17.73 34 48.98 Murshidabad (W Bengal) 63.7 248 2,419 7.10 34.05 35 36.74 Rampur (UP) 49.1 125 842 2.34 36.04 54 67.96 India 13.43 86,960 7,34,869 1,210.19 60.72 72 73.34

The non-availability of an interest-free banking option has distanced many Muslims from banking products and services. The Reserve Bank of India (RBI) data report for March 2010 indicates that banking participation in Muslim- concentrated districts is below the national average. They lack in banking access, infrastructure availability and low credit-deposit (CD) ratio. The results were based on an analysis of six districts, which were selected from various states, with fifty per cent or more Muslim share in the population. The detailed analysis is given in the table.

The Sachar Committee report of 2006 highlighted the numerous issues involved in Muslims accessing bank credit and the discrimination by scheduled commercial banks in facilitating credit and other services in Muslim-concentrated areas. Based on the recommendations of this report, the United Progressive Alliance government started the Prime Minister’s New 15 Point Programme for the welfare of minorities, and included the target of enhanced credit support to Muslims for economic activities.

The overall target was to provide 15 per cent priority sector lending to the minority community. But, the lending by public sector banks was 11.42 per cent, 13.14 per cent and 14.16 per cent as on March 31 of 2009, 2010 and 2011 respectively. The reason behind relative exclusion of Muslims from banking services, as pointed out by the Planning Commission-sponsored Raghuram Rajan committee on financial sector reforms in 2007, was that ‘the non-availability of interest-free banking products results in some Indians, including those in the economically disadvantaged strata of society, not being able to access banking products and services due to reasons of faith’.

Other eye-opening facts reported in the RBI study, with reference to a newspaper report, were that in India thousand of crores of rupees earned in interest are kept in suspended accounts, as Muslim believers do not claim it. The assets controlled by Muslims are estimated to be worth $1.5 trillion and growing at 15 per cent a year. In Kerala alone, it is reported that this money could be above Rs 40,000 crore. Research reveals that bulk of the money in India owned by Muslim believers is lying idle, which, if invested in profit-sharing basis and if utilised properly, can have a major impact on the Indian economy.

INDIA CAN also attract foreign investment from Muslim countries by providing an alternative interest-free banking system. A majority of the non-resident Indians (NRIS) working in the Gulf region belong to the Muslim community. Approximately 45 per cent of the total foreign remittance to India, worth $24 billion, came from GCC (Gulf Cooperation Council) countries in the year 2010. Impressed with the potential of nri remittance, the first government-sponsored interest-free NBFC, Al Barakah Financial Services Ltd, began last year in Kerala with the partnership of the state, specifically the Kerala State Industrial Development Corporation (KSIDC). Barakah would be a unique company with an authorised share capital of Rs 1,000 crore and would perform on the principles of an Islamic financial institution. It will not operate as a bank and extend loans but will make direct investments into infrastructure projects not linked with pork, alcohol and other non-Halal products, after which profits would be shared in the form of dividends and not as interest. KSIDC has 11 per cent stake and the rest would be raised by NRIS and the state’s Muslim population. After the introduction of the Shariah index in the Bombay Stock Exchange (BSE), this is the second serious attempt to include the Indian Muslim in a mainstream financial setup.

Shafeeq Rahman is a professional researcher on India-centric socio economic and political databases
rahman.shafeeq@gmail.com

Oman’s Bank Al Izz gets Islamic banking licence

MUSCAT - Oman’s Al Izz International Bank, a lender under formation in the Gulf Arab state, has been given a licence to operate as an Islamic bank, following a decision to open the country’s doors to the fast-growing industry, a central bank official said.

Ali Hamdan Al Raisi, vice-president of Oman’s central bank, said that the bank, also known as Bank Al Izz, is one of the two financial institutions that has been granted approval from the central bank to open as a fully-fledged Islamic institution.  

The central bank granted the first licence to lender Bank Nizwa in May, following Oman’s decision to embrace Islamic finance as a way to keep sharia-compliant investment funds within its borders.

“They (the banks) might open in one or two years, it takes some time for them to establish,” Raisi said. “They are in the process of being established and will become operational as soon as formalities such as regulatory requirements, raising of capital and constitution of management are met.” 

Bank Nizwa may begin operations by early 2012,  the sultanate’s central bank governor told a local newspaper earlier this month. Oman is the only Gulf Arab state which until now has not set up a bank specifically offering products and services complying with Islamic law

Khaleej Times

HERE COMES ISLAMIC BANKING

A pivotal part of the banking reform by the CBN is the planned introduction of Islamic Banking. Speaking to Senators about this during his screening exercise the CBN Governor Lamido Sanusi said, “the services (Islamic banking services), would be available to Muslims and non-Muslims. It is not a religion; it is a product available to the public. By definition, the CBN described the Islamic bank as “a non-interest bank which transacts banking business, engages in trading, investments and commercial activities, as well as the provision of financial products and services, in accordance with the principles and rules of Islamic commercial jurisprudence”. The CBN further highlighted that the system allows for a feasibility study or investigation to be carried out by the lending banks on the proposed business before granting of any loan in other to assess the feasibility and viability of such a venture or project . The survey will help the bank to envisage the prospects of the borrower to repay the loan within the maturity period of the loan and to ensure that all transactions are carried out within the tenets of the sharia laws.

 Ever since, this reform agenda has come under heat. In reaction to speculations that the Islamic banking is Sanusi's own ill-intentioned project, the CBN governor has stated clearly that the idea and approval of the Islamic Banking system was a heritage from his predecessor, Prof. Soludo. Speaking through Mohammed Abdullahi, Head, CBN Corporate Affairs, the governor said: "this policy has been on for about three years and has been approved in principle for some time now. I can recall that Jaiz International Bank Plc has been given approval in principle to operate as an Islamic Bank. All that the Central Bank is waiting for them to do is to mobilise their capital base of 25 billion required for operations in the Nigerian banking system. Approval-in-Principle has already been given during Soludo's time". BankPHB was also given approval in principle to operate Islamic banking started operation in this direction. Introducing this product, Bank PHB explained that "this product is designed for Muslim faithful desiring banking services without compromising their religious beliefs”

The name, 'Islamic Banking' sends shivers across the country especially among non-Muslims who fear that it is a hoax to get Nigeria fully Islamized. A source said, “they should find a more generic name for it as the mere mention of that word 'Islamic' brings a sudden fear and psychological trauma on our minds. I still think this is, and has always been a carefully thought out agenda by Sanusi and those who put him there”. ” How are we sure that this so-called islamic bank will not be used to fund jihad and terrorism in Nigeria?,  another asked. This is coming at the heels of the Central Bank Governor's avowed resolve to grow and nurture full scale Islamic Banking in the Nigerian banking sector as a hedge against future global economic crisis and as an alternative to supplement the regular or conventional banking system in Nigeria.

In other to dispel the fears of those who are scared of the nomenclature, 'Islamic bank' the Central Bank issued a directive and a guideline recently to prospective applicants for the Islamic bank license. It was signed by D.A.N. Eke, the Acting  Director of Banking Supervision. On the name, the guideline reads thus, “in line with the provisions of Section 39 (1) of BOFIA 1991 (as amended), banks offering non-interest banking products and services shall not include the words “Islamic” as part of their registered or licensed name. They shall however, be recognized by a uniform logo to be designed and approved by the CBN. The CBN shall require all the banks' signages and promotional materials to carry the logo to facilitate recognition by consumers. It also directed that non-interest banks should not perform transactions that involve interest, uncertainty or ambiguity relating to the subject matter, terms or conditions, gambling, speculation, unjust enrichment or exploitation/unfair trade practices. In other words, the banks will be known and operate as a non-interest bank. Furthermore, the directive stipulated that “in view of the ethical character of their business, all non-interest banks are required to screen their promoters, shareholders, customers, counterparties, transactions, products and activities against the proceeds of crime, corruption, terrorist financing and other illicit activities using legal and moral filters”. This guideline guarantees anti-money laundering and combating of the financing of terrorism.

Some of the basic principles that make Islamic banking attractive as explained by Muath Mubarak who is presently working for Brawa Bank (a newest full-fledged Islamic Bank in Qatar) include: The principle involves a contract under which the investor brings financing to the table and the entrepreneur brings expertise, effort, and in the case of Islamic venture capital, a business plan. Collectively, the parties share the proportionate profit from the results of the enterprise as per their pre-arranged agreement. The entrepreneur cannot be placed at risk of losing money since he has contributed only expertise. If the business venture fails, then the most the entrepreneur could lose is the investment he has already made in the business and the time and effort he had put into the venture. In other words no one can come after the entrepreneur for cash compensation.

http://nigerianorientnews.com/Business.html

FGKC celebrates Annual Convocation

FGKC celebrated its Annual Convocation of the class of 2009/2010 at its auditorium on September 22 2010. Muath Mubarak, Finance Executive, Barwa Bank Qatar who was the Guest of Honour made a presentation on "Why Islamic Finance?" which was a review on the Islamic Banking system and its relevance to the recent global financial crisis. In his presentation he emphasized the need not only to gain knowledge in Islamic banking and finance, but to also link it with one's daily life. Mr and Mrs Muath Mubarak, handed over the certificates. Witnessing this significant milestone in the audience were the faculty, parents, friends and relatives of the students. The FGKC award for "Best Results 2009/2010" went to Miss Fathima Sarah Zainul Afker.

"You have all achieved the goal you have set and you are here because you want to be a part of the new breed of professional Islamic Bankers. And we on our part have let you discover your perfect foundation to a brand new profession. Today, as you enjoy your well deserved celebrations, you can take stock of the skills and knowledge that our Institute has passed on to you. FGKC has rather an excellent knowledge of the Islamic Banking & Finance Industry and is above par. We are committed to raise the quality of professionalism in every student. We want all students regardless of community, creed or circumstances to achieve their full potential" said Ms. Arishda Fajurdeen-Hossen, Group VP - HR/Admin., in her address.

First Global Knowledge Centre is the brainchild of its Founder and Managing Director Muhammad Ikram Thowfeek, a Chartered Accountant by profession and an Islamic Banker by practice. FGKC was established in 2007 and is the pioneer in Sri Lanka in the field of Islamic Banking and Finance education. FGKC offers the internationally recognized Islamic Finance Qualification (IFQ) in Sri Lanka, Bangladesh, Pakistan, Maldives and Qatar, and is the accredited training centre for the prestigious Chartered Institute for Securities & Investments (CISI) UK. IFQ classes are conducted during weekends. The Full Time course during weekdays, especially for students who have sat the G.C.E. O/L and A/L examinations, is scheduled to begin in October 2010. Registration is now open for potential students. For further details students could call our hotline: 0774616710.

Two other significant future events to be held at FGKC are: "Tap Your Genius" - a Creative Memory & Management Training Programme in October 2010 conducted by Mr Zafer Mahmood and "Discover Yourself" - A 3 day workshop in December 2010 conducted by Mr A W Sadathullah Khan. Both are internationally renowned trainers with proven ability and success in their respective fields. The former who will amaze you with a variety of Memory Techniques thus demonstrating the real hidden potential of the human mind and the latter, who has built an illustrious reputation based on his personal philosophy "We need a Revolution, not for changing others, but to change ourselves" is set to enthrall you with his dynamic style as your mentor.

http://sundaytimes.lk/101017/Education/ed08.html

Sri Lanka: Uncovering the Islamic Finance Framework By Muath Mubarak

With the end of the civil war in the country that had plagued the economy for more than three decades, it is high time Sri Lankans began thinking about the development of the nation. Sri Lanka has to grow like other developed countries within a short time by exploiting untapped opportunities.

The post-war period requires rapid development in all sectors of the economy, especially the banking and financial sector. Unfortunately, the sector has seen lackluster growth due to the global fi nancial crisis. The crisis however has led experts and economists alike to consider an alternative financial system.

As one of the fastest growing industries in the world today, Islamic finance is growing at 20%-25% a year, according to analysts and rating agencies. It is forecasted that the industry will hold assets totaling US$4trillion by 2012. In addition, seven of the top 10 conventional banks with an international presence have commenced Islamic banking.

The following are the main barriers for the growth of Islamic fi nance in Sri Lanka (and most other emerging countries):

• Regulation

• Taxation

• Standardization

• Awareness

• Skill

The Islamic finance frameworkIslamic finance and Takaful are not unfamiliar to the Sri Lankan business community. The concept was introduced a decade ago, and several initiatives via seminars and workshops have also been undertaken by companies and organizations to create public awareness and educate the masses and offi cials concerned.

The Banking Law of Sri-Lanka was amended in 2005 to allow both commercial banks and specialized banks to operate on a Shariah compliant basis. But there is no specific law for Shariah compliant fi nancial transactions.

For example, the definition of “deposit” in the law provides the same treatment for deposits in conventional banks and Islamic financial institutions, which disadvantages these institutions in terms of taxes and statutory requirements.

On the other hand there is an initiative by the Securities and Exchange Commission of Sri Lanka to enact a law on securitization to facilitate the issuance of asset-backed securities through the creation of special purpose vehicles (SPVs) and for the regulation and supervision of securitized transactions.

One of the key principles of Islamic fi nance is that almost all the financial transactions should be backed by real assets. The proposed law can lead to the promotion of Sukuk in Sri Lanka.

According to offi cials, infrastructure development in the country can be financed via Sukuk, with Middle East and other foreign investors possibly interested in participating.

Today’s Challenges to regulators:

• Regulatory/law: Existing banking regulations in most countries (including Sri Lanka) are based on the conventional banking model, meaning the need for separate consideration for Islamic banks and financial institutions.
• Accounting, transparency and surveillance.
• An Islamic financial system needs sound accounting procedures and standards.
• Western accounting procedures are inadequate because of the differing nature and treatment of financial instruments.
• Well-defined procedures and standards are crucial for information disclosure, building investors’ confidence, and surveillance.
• Shariah compliance.
• Emerging fi nancial markets are trending towards Islamic banking.

Conclusion

The increasing acceptance of Islamic banking and fi nance in Sri Lanka is apparent. There are now eight institutions in the market and fi ve educational institutions offering Islamic fi nance courses as well as workshops to generate awareness among Sri Lankans. So, in order to nurture this industry in Sri Lanka, it is critical for us to fi rst understand the principles and advantages of Islamic finance.

Muath Mubarak works for First Global Group, a Sri Lanka-based conglomerate of companies involved in the Islamic fi nancial industry. He can be contacted at muath2015@gmail.com

http://www.wealthcity.in/blog/islamic-banking-finance-takaful/

Bank Nizwa gears up to open doors early

MUSCAT: Oman's first Islamic bank -- the RO150 million Bank Nizwa -- is expected to start operation by either towards the end of the year or early next year. 

"I think the bank will have a capital of RO150 million. Of this, 40 per cent will be offered to the public through an initial public offering," Hamoud bin Sangour Al Zadjali, Central Bank of Oman (CBO) executive president, told Times of Oman. The banking regulator recently gave an 'in principle' approval for the bank. The promoters, who have formed a founding committee, are in the process of establishing the bank. "We hope the bank to start operation by the end of the year or the beginning of next year." Sangour added that the CBO is now working on formulating a separate regulation for Islamic banks. "We will seek assistance from different parties (consultants) for formulating the regulation," he added. The CBO chief also noted that existing banks, intending to start window operation for Sharia-compliant products, can offer them through an existing branch and there is no need for opening an exclusive branch. "However, for offering Islamic products, the customers need to have separate accounts. The banks can either do it within an existing branch or an exclusive branch. It is up to them to decide. We will allow banks to offer these products through the existing branches." Several Omani banks are expected to launch Sharia-compliant financial products, once the banking regulator comes out with a set of regulation. The Omani banks, which have close association with regional institutions offering Sharia-compliant products, like ahlibank, BankMuscat, Oman Arab Bank and National Bank of Oman, will have an edge over others in offering these products in the local market. However, Sangour said none of the existing Omani banks have applied for a licence to offer Islamic banking products. Sources in banking sector said that there is a huge potential for Islamic banking in Oman as people (who parked their funds in other countries) are expected to bring back their money parked in other Gulf Cooperation Council (GCC) states. Further, domestic demand for such products is also expected to be good. Unlike traditional banking, an Islamic bank provides the entrepreneur with funds for his business venture and gets a return based on a profit sharing ratio that has been agreed earlier. Oman is the only state among the six GCC members which is yet to set up a bank specifically offering products and services complying with Sharia law. An expert on Islamic banking recently said that the Sharia-compliant financial institutions may capture 10 per cent of the market share of the total banking assets within few years. Oman's banking assets are in the region of $40-42 billion and are growing at a healthy pace. Once Islamic banking products are properly rolled out, institutions can expect up to 10 per cent of the market going to Islamic in the first few years.

© Times of Oman 2011