GCC Islamic finance set for robust growth

The global Islamic finance sector is booming and the Sharia-compliant assets estimated to be over $1.4 trillion are likely to sustain a double-digit growth in the coming two to three years, said a report.The global growth of the Islamic finance market has continued unabated this year, undeterred by the uncertain recovery elsewhere in the world's financial markets, according to the Standard & Poor's (S&P) report.Regional heavyweightsThe two regional heavyweights and pioneers of the industry - the GCC and Asia (most notably Malaysia) are set to spearhead the growth, said Standard & Poor's in its report entitled "Islamic Finance 2014: We expect continued double-digit growth, and a push for regulation and standards."
Islamic finance remains a demand-driven market, with scarce supply, still hampered by a limited range of Islamic financial centers and their various regulatory frameworks. In our view, expansion and enhancement of existing centers, and a more transparent regulatory environment could build the momentum for the growth needed to break into the mainstream.
"We believe that worldwide, Sharia-compliant assets -- which we estimate at upward of $1.4 trillion -- are likely to sustain double-digit growth in the coming two to three years," remarked Zeynep Holmes, the regional head of Eastern Europe, Middle East & Africa at S&P.
Despite more than a decade of heady growth, the industry is still in a formative stage.
"But we believe it's only a matter of time before it achieves critical mass, as the pool of assets broadens and deepens, and enhances liquidity. Nevertheless, the speed at which the industry matures and joins the mainstream comes down to how market participants address a classic imbalance between supply and demand," remarked Holmes.
"We believe that regulatory efforts to accommodate Islamic finance and the establishment of additional industry bodies at national levels will take center stage starting in 2014," she added.
According to Holmes, the newcomers in the industry -- such as Oman, Turkey, and Nigeria, for instance -- have started to trace the footsteps of fast-growing pioneers, such as Malaysia. Right behind the newcomers, a long line of countries is aspiring to enter the market, with the continent of Africa in the forefront.

© Times of Oman 2013

http://www.zawya.com/story/GCC_Islamic_finance_set_for_robust_growth-ZAWYA20131218042329/

Home» Islamic Finance» News Article Dec 17 2013 more articles from WAM (Emirates News Agency) Mohammed bin Rashid issues law establishing "Dubai Islamic Economy Development Centre" and decree on forming its Board of Directors

Photo Credit:REUTERS/Reuters Photographer

DUBAI, 17th December, 2013 (WAM) -- His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the U.A.E., in his capacity as Ruler of Dubai, has issued Law No 13 of 2013 on the establishment of the "Dubai Islamic Economy Development Centre". He also issued Decree No 42 of 2013 to form the Centre?s Board of Directors, to be chaired by Mohammed Abdullah Al Gergawi.

According to the provisions of the decree, the Board of Directors will comprise: Sami Daen Al Qamzi as Vice Chairman, with the board membership of Abdul Aziz Abdullah Al Ghurair, Hussain Nasser Lootah, Dr. Hamad Al Shiebani, Abdul Rahman Saif Al Ghurair, Hussein Daen Qamzi, Helal Saeed Al Marri, and Isa Abdul Fattah Kazim, who is appointed as Secretary General of the Centre as stipulated in article Two of the decree, in addition to his membership post on the Centre?s Board.

The decree is effective from the date of issuance and shall be published in the official Gazette.

Law No 42 of 2013 details the basic objectives of the Centre, which will have legal personality and financial and administrative independence as well as the legal capacity necessary to direct all actions and behaviours to achieve the goals of the Centre, including promotion of the Emirate of Dubai to become the global capital of Islamic economy, promotion of economic activities compatible with Islamic law in goods and financial services sectors, as well as the non-financial sector as a main pillar on which the economy of the Emirate is based. Promoting Dubai regionally and globally as a main centre for Shariah-compliant goods and financial and non-financial services, building a database on Islamic economic activities and encouraging recourse to arbitration in related Islamic economic activities disputes are also among the key objectives of the Centre.

The law specifies the terms of reference of "Dubai Islamic Economy Development Centre" which includes drawing up the Centre?s general policy and setting up strategic plans for the development of the sector in the Emirate, in addition to developing comprehensive and unified standards to judge the extent to which any commodity or financial service or otherwise complies with the provisions of Islamic law and promoting these standards locally and globally. The specialisations of the Centre also include the creation of a system to endorse compatibility of products, commodities and financial and non-financial services with standards adopted by the Centre and issuing necessary certificates in this regard. The Centre will, among its other specialisations, conduct specialised studies and researches on Islamic Economy, determining the extent of Shariah-compliant economic activities? contribution to the GDP of the Emirate, and how to develop them to achieve the objectives of the Centre.

Moreover, the Centre shall, within its terms of reference, launch Islamic economy awards and programmes and oversee them in accordance with the Board?s decision, establish or contribute to the establishment of companies and investment projects related to the objectives of the centre, as well as coordinating with various local and federal agencies in areas of relevance. Coordinating with centres and bodies, associations and local, regional and international organisations and concluding agreements and Memorandums of Understanding are among the other objectives that support of the goals of the Centre.

Law No 42 of 2013 specifies the specialisations of the Board of Directors of the "Dubai Islamic Economy Development Centre," including the design and development of the Centre?s general policy and supervising its implementation , adoption of strategic and development plans related to the board?s work , adopting of programmes and initiatives needed to implement its policy and its strategic and development plans. Moreover, the centre aims to ratify administrative, financial and technical rules and regulations related to the organisation of work at the Centre and its organisational structure, as well as endorsing of the annual budget and final accounts, and submitting them all to Dubai Crown Prince for approval, in addition to the formation of permanent and temporary committees and specialised work teams and determining their functions and powers in a manner that contributes to the achievement of the objectives of the Centre.

With regard to the executive apparatus, the law stipulates that the executive apparatus consists of an executive director who shall be appointed by a decision issued by the Crown Prince of Dubai, in addition to a number of administrative, financial and technical staff. The law also details the terms of reference of the Executive Director, which include proposing policies and strategic development and operational plans, as well as initiatives and programmes that will achieve the goals of the Centre, all of which are to be submitted to the board in coordination with the Secretary-General.

Moreover, the Executive Director will be responsible for proposing administrative, financial and technical draft rules and regulations to organise work in the Centre, and submit them to the Board for approval. He also bears the responsibility of developing plans needed to implement the general policy of the Centre and work programmes approved by the board of directors and follow up their implementation. The appointment of technical and administrative personnel necessary to conduct business at the Centre according to the Centre?s regulations and bylaws, as well as preparation of periodic reports on the implementation of approved policies and strategic plans and programmes and submitting them to the Board of Directors through the Secretary-General are among the other responsibilities to be carried out by the Executive Director.

Any texts in any other legislation which contradicts with the provisions of this law shall be deemed null and void.

The law is effective from the date of issuance and shall be published in the Official Gazette.

© Copyright Emirates News Agency (WAM) 2013

http://www.zawya.com/story/Mohammed_issues_law_establishing_Dubai_Islamic_Economy_Development_Centre-WAM20131217121040255/

Islamic banking more viable, sustainable model of financing

Islamic banking could be the more economically viable and sustainable model of financing going forward, Falak Consulting's Research Department (FCRD) said in a report.The report looks at the financial crisis of 2009 where conventional banks witnessed far greater levels of exposure in comparison to their Islamic banking counterparts and recognizes the overall potential Islamic banking and finance is able to offer the existing market. 
With discussions at this year's WIBC event highlighting similar themes including looking at "Business in the Middle East and the Role of Islamic Finance", or "New Strategic Approaches to Revitalize Global Growth", the potential for Islamic banking is certainly there. The FCRD report highlights recent statistics which indicate that Islamic banking is currently the fastest growing segment in the international financial system with an estimated asset size of US$1.1 trillion in 2011, representing 80.9 percent of Islamic Finance assets and 1 percent of total banking assets worldwide. Building on the same, the report goes on to establish a risk and return framework for "a healthy and transparent growth of the Islamic financial architecture" in the region. 
Commenting in light of the WIBC event and the published FCRD report, Suhail Ghazi Algosaibi, Co-Founder and Chairman of Falak Consulting, said: "The 2009 financial crisis has taught us a number of things, the first being that conventional banks and current models are not invincible. It has also opened our eyes to the need to consider other options of banking that are safer, sustainable and viable, which at this point Islamic banking could potentially offer. As a result, we are now witnessing a growing number of global conventional banks exploring this potential as well as increased discussions around the future and way forward for Islamic Finance and Banking, as seen last week at the 20th WIBC event in Bahrain."
At present there are a number of global retail banks introducing Islamic banking options including Lloyd's Bank, HSBC, Standard Chartered and the Islamic Bank of Britain. In Bahrain alone, there are over 26 Islamic banks currently in operation making up a total of $26.2 billion in assets, as of August 2013, according to the Central Bank of Bahrain. 
At present, Islamic banking has become the fastest growing segment in the international financial system. Since its inception, Islamic banking has been the main driving force of the global Islamic finance industry, with an estimated asset size of $1.1 trillion in 2011 representing 80.9 percent of Islamic finance assets worldwide and 1 percent of the total banking assets worldwide. Growth is mainly being driven by a fast increasing Muslim youth population, the fast growing halal food industry, lower penetration of Islamic finance products in Muslim dominated nations and government support for new products.
The GCC Islamic banking sector has experienced remarkable growth in the business/ financing activities and significant demand for Shariah-compliant products and services. 
The growth of theIslamic banking industry in the region was mainly driven by Saudi Arabia and Qatar. Islamic banks in these two countries are generally well capitalized and profitable with high capital adequacy and low NPF ratios. As of September 2012, Islamic banking assets in the GCC and Iran rose by 16.5 percent y-o-y. Growth was led by Qatar (+25.9 percent), followed by Saudi Arabia (+22.0 percent), the UAE (+16.9 percent), Kuwait (+7.8 percent) and Bahrain (+5.5 percent).

© The Saudi Gazette 2013

http://www.zawya.com/story/Islamic_banking_more_viable_sustainable_model_of_financing-ZAWYA20131217042116/

Tunisia potential Islamic finance hub for French-speaking countries

Islamic banking could be the more economically viable and sustainable model of financing going forward, Falak Consulting’s Research Department (FCRD) said in a report.

The report looks at the financial crisis of 2009 where conventional banks witnessed far greater levels of exposure in comparison to their Islamic banking counterparts and recognizes the overall potential Islamic banking and finance is able to offer the existing market.

With discussions at this year’s WIBC event highlighting similar themes including looking at “Business in the Middle East and the Role of Islamic Finance”, or “New Strategic Approaches to Revitalize Global Growth”, the potential for Islamic banking is certainly there. The FCRD report highlights recent statistics which indicate that Islamic banking is currently the fastest growing segment in the international financial system with an estimated asset size of US$1.1 trillion in 2011, representing 80.9 percent of Islamic Finance assets and 1 percent of total banking assets worldwide. Building on the same, the report goes on to establish a risk and return framework for “a healthy and transparent growth of the Islamic financial architecture” in the region.

Commenting in light of the WIBC event and the published FCRD report, Suhail Ghazi Algosaibi, Co-Founder and Chairman of Falak Consulting, said: “The 2009 financial crisis has taught us a number of things, the first being that conventional banks and current models are not invincible. It has also opened our eyes to the need to consider other options of banking that are safer, sustainable and viable, which at this point Islamic banking could potentially offer. As a result, we are now witnessing a growing number of global conventional banks exploring this potential as well as increased discussions around the future and way forward for Islamic Finance and Banking, as seen last week at the 20th WIBC event in Bahrain.”

At present there are a number of global retail banks introducing Islamic banking options including Lloyd’s Bank, HSBC, Standard Chartered and the Islamic Bank of Britain. In Bahrain alone, there are over 26 Islamic banks currently in operation making up a total of $26.2 billion in assets, as of August 2013, according to the Central Bank of Bahrain.

At present, Islamic banking has become the fastest growing segment in the international financial system. Since its inception, Islamic banking has been the main driving force of the global Islamic finance industry, with an estimated asset size of $1.1 trillion in 2011 representing 80.9 percent of Islamic finance assets worldwide and 1 percent of the total banking assets worldwide. Growth is mainly being driven by a fast increasing Muslim youth population, the fast growing halal food industry, lower penetration of Islamic finance products in Muslim dominated nations and government support for new products.

The GCC Islamic banking sector has experienced remarkable growth in the business/ financing activities and significant demand for Shariah-compliant products and services.

The growth of the Islamic banking industry in the region was mainly driven by Saudi Arabia and Qatar. Islamic banks in these two countries are generally well capitalized and profitable with high capital adequacy and low NPF ratios. As of September 2012, Islamic banking assets in the GCC and Iran rose by 16.5 percent y-o-y. Growth was led by Qatar (+25.9 percent), followed by Saudi Arabia (+22.0 percent), the UAE (+16.9 percent), Kuwait (+7.8 percent) and Bahrain (+5.5 percent).

(SAUDI GAZETTE)

http://www.amilin.tv/news/tunisia-potential-islamic-finance-hub-for-french-speaking-countries/

Islamic banking expected to 40% of Malaysia’s financial sector by 2020

Islamic financial business is at the heart of the Tun Razak Exchange (TRX) project, with some experts calculating that Sharia-compliant transactions could account for up to half of the business that will go through the new centre when it is complete

Dato’ Azmar Talib, the chief executive of 1 Malaysia Development Berhad (1MDB), the real estate business overseeing the project, says Islamic banking comprises about a quarter of Malaysia’s domestic financial market in terms of assets and financing, but this is expected to reach 40 per cent by 2020, when TRX will be well developed.

“We intend to use Malaysia’s strengths, particularly in Islamic finance, to provide the infrastructure that will enable innovation, attract skilled talents and promote ease of doing business in the sector,” he says.

Others are even more positive about Kuala Lumpur’s potential in the global race to build the leading Islamic financial market. Many analysts believe the competition will come down to a three-way pull between KL, Dubai and London.

Malaysia has longevity on its side, and a developed domestic market. About 60 per cent of primary market sukuk (Islamic bond) issuance was in KL in the first half of this year.

Mohammad Daud Bakar, the chairman of the Sharia Advisory Council of Malaysia’s central bank, says the country has advantages in Islamic finance, such as a developed pensions funds industry, takaful (insurance) and long-term project finance.

“We have established private Islamic ratings agencies that vet the sukuk, and we are the only country with a Sharia-compliant equivalent of the American mortgage firms like Freddie Mae,” Mr Bakar says.

But despite the strength of the domestic industry, Malaysia faces some challenges in the international market. “Around 90 per cent of our issuance is in local currency, so we don’t trade in London. Malaysia has never issued any global sukuk. London uses hard currency, and has deep pockets of dollar reserves, which we do not,” he adds.

“But I believe the UAE will be a leader in this market in the future. It has dollar reserves and will be in a position to take business from London.”

Mr Bakar also points to the potential of the Saudi market. “It is booming because of all the infrastructure that needs to be financed there. It’s a booming market and will probably overtake KL in terms of value of issuance, if not volume,” he says.

Read more: http://www.thenational.ae/islamic-banking-expected-to-40-of-malaysias-financial-sector-by-2020#ixzz2nc7VIZxz 

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Takaful gains popularity in Islamic countries

The Global Islamic Insurance ( Takaful ) industry made major inroads into the insurance business as it recorded a five-year compounded annual growth rate (CAGR) of 33.2 per cent compared to 19.9 per cent achieved by the conventional insurance industry, a recent study by Moody's Investor Services showed. Takaful premiums which exceeded $4 billion in 2007 are expected to reach $20 billion by 2017. The rising popularity of Takaful insurance globally is primarily supported by the countries in the GCC, Levant, Africa and South-East Asia . The global takaful industry grew 16 per cent in 2012, a noticeable moderation from a 22 per cent compounded annual growth rate (CAGR) over 2007-201, according to a recent Ernst & Young study (EY). Takaful in most markets is still in its infancy, and its potential to replace conventional insurance in leading Islamic finance markets is still largely untapped. Leading centres Currently, Saudi Arabia, the UAE and Malaysia lead the industry with their relatively well-developed Islamic banking sector. The role of authorities in simplifying regulatory frameworks across borders and encouraging consolidation will also be a key in propelling the industry's expansion. In order for the industry to maintain its growth trajectory, there is a need for larger regional players who can provide leadership for building capacity in the industry and to address a number of business risks that the industry executives cite as challenges to the industry as a whole. " Takaful operators must adopt a clear strategy and capital plan that includes both organic and inorganic growth, and maintain and refine segmentation or exit and acquisition strategies, which can mitigate potential risks," said Ashar Nazim , Global Islamic Finance Leader EY. As industry leaders look beyond their borders, growth and profitability of the industry vary significantly by markets and sectors, depending on each market's maturity, industry and regulatory structure. While it is common to focus on populous Muslim markets, operators should not lose sight of other markets across Europe , Africa and the Asia-Pacific . According to a recent report by Moody's Takaful premiums contributed roughly 43 per cent to the GCC region's composite premiums in 2010 compared to 31 per cent in 2005. "These figures hide considerable country variations, with takaful usage at very high levels in Saudi Arabia, but still showing modest overall Takaful penetration in the UAE , Kuwait and other GCC markets. This high usage level in the Saudi market is driven primarily by compulsory medical insurance, via Takaful providers," said Mohammad Ali Londe , an analyst with Moody's. The majority of takaful premiums were contributed by family and medical products, of which less than 5 per cent of premiums were from family (or life) takaful. A similar growth trend is observed, albeit to a lesser degree, in the other Takaful target regions. While Saudi Arabia, the UAE and Malaysia hold the lion's share of the takaful market, the acquisition of market share has not necessarily translated into profitability in many instances. Financial performance and managing key strategic issues remain challenging for takaful operators in many markets.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: Gulf News (United Arab Emirates)

http://www.hispanicbusiness.com/2013/11/24/takaful_gains_popularity_in_islamic_countries.htm

Twitter (TWTR) Shares Are Shariah-Compatible, According To Islamic Finance Watchdog, Opening The Door For Major Islamic Investment

Twitter Inc. (NYSE:TWTR) shares are eligible to be bought by Islamic funds, according to the group that determines if stocks meet Islamic principles.

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After repeated requests from fund managers around the world, California-based IdealRatings vetted Twitter after the Internet company made its debut on the New York Stock Exchange last week with an IPO of $1.8 billion.

IdealRatings has deemed 15,000 of 42,000 top stocks as eligible for Islamic investment, with Google Inc. (NASDAQ:GOOG) and Microsoft Corporation (NASDAQ:MSFT) among them. Managers of Islamic funds generally do not invest in firms involved with tobacco, alcohol and gambling, and they shun companies that use interest payments or have large debts.

Top stocks such as Citigroup Inc. (NYSE:C), because of its use of interest, and Moet Hennessy Louis Vuitton (LMVH), due to its alcohol production, are not compliant with Shariah law.

http://www.ibtimes.com/twitter-twtr-shares-are-shariah-compatible-according-islamic-finance-watchdog-opening-door-major

Saudi Property Stokes 3-Times Bigger Bond Gains: Islamic Finance

Dar Al Arkan’s Islamic bonds have returned more than three times the regional average as the property developer benefits from Saudi Arabia’s plan to build at least 500,000 new homes.

Dar Al Arkan Real Estate Development Co.’s $450 million sukuk due February 2015 earned more than 7 percent this year including profit rate, the most among Islamic bonds in the Gulf Cooperation Council, according to data compiled by Bloomberg. Dubai-based Emaar Properties PJSC’s (EMAAR) 2016 sukuk was second-placed with a return of 5.7 percent. The average gain was 2.1 percent.

Real estate companies in the Gulf are profiting as economic growth accelerates, with yields on sukuk from Emaar and Nakheel Properties PJSC tumbling amid surging Dubai property prices. Saudi Arabia’s construction program, part of a plan to avoid unrest that toppled governments inEgypt, Tunisia, Libya and Yemen, helped Dar Al Arkan pay a $1 billion sukuk last year, easing concern over its finances.

“There have been some major projects coming to the Saudi real estate market, and Dar Al Arkan is one of the companies that has benefited most,” Ahmed Shehada, head of trading at Qatar National Bank Financial Services in Doha, said by phone Nov. 3. People know the scale of real estate developments in Saudi and how property companies will gain, he said.

Yields Slide

The yield on Dar Al Arkan’s (ALARKAN) 2015 percent notes tumbled 130 basis points this year to 4.8 percent at 12:13 p.m. in Dubai, according to data compiled by Bloomberg. The yield on Emaar’s $500 million 2016 notes fell 80 basis points to 3.61 percent. That compares with an average 81 basis-point, 0.81 percentage-point, jump to 3.73 percent on Nov. 4 for sukuk from the six nation GCC, according to HSBC/Nasdaq Dubai indexes.

“This is a 2015 maturity, and we’re getting close to that,” Samer Mardini, Dubai-based vice president of fixed income at SJS Markets, said by phone yesterday. “Investors in Saudi who are aware of the company and its strategy, and the prospects for being repaid, are happy to hold to maturity.”

Dar Al Arkan, Saudi Arabia’s third-biggest real estate developer by market value, repaid a $1 billion sukuk in July last year. The price for the debt fell below 70 cents on the dollar in 2009 on concern over the company’s financial position.

‘Walk Out’

Now could be the time to sell the 2015 sukuk, QNB’s Shehada said. A market rally following the Sept. 18 decision by the Federal Reserve to maintain bond buying, boosted by the U.S. Congress’ October deal to raise the debt ceiling, pushed the yield on the Islamic bond 134 basis points lower.

“This is a great opportunity to walk out,” Shehada said. “The U.S. problems remain, they have just been pushed down the road. For those who bought when the price of this debt was low, there is no reason to take a risk over what will happen next.”

Dar Al Arkan’s cash and equivalents declined 17 percent in the third quarter from the previous, according to data compiled by Bloomberg. Profit fell 17 percent from a year earlier to 183 million riyals ($49 million) amid lower margins on property sales and finance charges, the company said in a statement.

While Dar Al Arkan’s cost of funding has improved, the company pays more than many Saudi borrowers because of its cash flow, Mardini said. The company is rated B+ by Standard & Poor’s, four levels below investment grade.

Needing Development

Dar Al Arkan’s 2015 notes were sold in 2010 with a profit rate of 10.75 percent. The company raised a further $450 million by selling sukuk in May that pay 5.75 percent. The notes currently yield 6.41 percent, according to data compiled by Bloomberg.

Saudi Arabia needs to build 85,000 homes a year to keep up with a population of 28.4 million that’s growing 2.5 percent annually, Mike Williams, head of MENA research at CBRE, wrote in a March report. Dar Al Arkan’s pipeline includes the Al Qasr project in Riyadh that will provide homes for 13,000 people, and the Shams Al-Arous project near Jeddah that will include more than 10,000 units.

“The prospects will be good for Dar Al Arkan, because real estate works in the long term,” Mardini said. “Investors will judge that the company will be around a long time because it’s a Saudi real estate company and Saudi needs a lot of development.”

To contact the reporter on this story: Samuel Potter in Dubai at spotter33@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

http://www.bloomberg.com/news/2013-11-05/saudi-property-stokes-3-times-bigger-bond-gains-islamic-finance.html

Kazakhstan reboots Islamic finance ambitions

A new head of Kazakhstan's central bank and a raft of initiatives from the Islamic Development Bank (IDB) are rekindling hopes for the development of Islamicfinance in that country.

This month, Kazakh President Nursultan Nazarbayev sacked central bank chief Grigori Marchenko and replaced him with Deputy Prime Minister Kairat Kelimbetov.

The move could herald a new start for Islamic finance, Yerlan Baidaulet, the Kazakhstan member of the board of executive directors at the Jeddah-based IDB, said on the sidelines of the World Islamic Economic Forum in London.

"Almost five years after introducing Islamic banking, the situation hasn't changed. The predecessor tried to stop everything," said Baidaulet.

Close to 70 percent of Kazakhstan's population of 17 million is Muslim. But even though the government has said it wants to make the country a centre for Islamic finance, progress has been slow, partly because the government also declares itself to be secular and officials do not want to appear overtly religious.

Currently, Abu Dhabi-based Al Hilal Bank is the sole Islamic bank in Kazakhstan, having opened its doors in March 2010; it has not so far tapped the retail market.

But a grant from the IDB, a multilateral lending institution, is now set to kick-start the drafting of a new Islamic banking law, superseding a law passed in 2008 which lacks sufficient detail to be effective, Baidaulet said.

"The Islamic banking law is but a package of different amendments. It's just phrasing but there is no depth, no structure, no mechanism. We hope to bring new legislation, a standalone law."

In March, the Islamic Corporation for the Development of the Private Sector (ICD), the private sector arm of the IDB, took a stake in Zaman Bank in order to convert it into an Islamic lender, a process which could be completed as soon as next year, Baidaulet added. "Hopefully next year this bank will start."

Also, the country will soon have a sovereign credit rating from the Bahrain-based Islamic International Rating Agency, another unit of the IDB, said Baidaulet.

In July last year, the Development Bank of Kazakhstan issued a 240 million ringgit ($75.5 million) Islamic bond in Malaysia, but no other Kazakh issuers have followed.

The ICD is in the process of launching an Islamic leasing company in Kazakhstan this year, with capital of $36 million. Meanwhile a Kazakh renewable energy fund managed by the ICD, currently in the closing stages of capital raising, aims to have up to $70 million in capital, Baidaulet said.

An Islamic mortgage company is seeking to attract foreign investors, with $50 million of capital already contributed by the ICD and a local partner. And in March, the ICD offered $20 million of Islamic financing for real estate development projects in Kazakhstan and earmarked $40 million for financing small and medium-sized businesses in the country. (Editing by Andrew Torchia)

http://www.reuters.com/article/2013/10/31/islamic-finance-kazakhstan-idUSL5N0IL32A20131031

UK sector still ‘thin’ on Islamic finance teaching

Despite government optimism over UK’s future role, university provision remains limited, forum hears

SOURCE: PA PHOTOS

Islamic finance: centres of excellence in UK universities are ‘highly variable’

British universities do not have “strength in depth” in the teaching of Islamic finance, an economic forum has heard, casting doubt on a recent government pledge for the UK to lead the West in the banking practice.

To coincide with the World Islamic Economic Forum held in London last week, the government announced plans to issue a £200 million sukuk, or Islamic bond, which would be the first to be issued by a non-Muslim country.

Islamic finance forbids the charging of interest, and instead uses other mechanisms to allow the lending of money.

The City of London can become the “unrivalled Western centre for Islamic finance”, the chancellor George Osborne argued last week.

The UK “has more than a dozen universities or business schools offering executive courses in Islamic finance”, Mr Osborne wrote in the Financial Times on 28 October.

But at a workshop on Islamic financial education at the forum on 31 October, Daud Vicary Abdullah, chief executive of the International Centre for Education in Islamic Finance (INCEIF), a Malaysian university that specialises in the discipline, said UK expertise was “spread very thin”. “The centres of excellence in terms of education in universities…are variable,” he said.

Ten years ago, Mr Abdullah said, Loughborough University had a good reputation for teaching Islamic finance but it no longer runs a dedicated course.

“The problem is that it [Islamic finance] tends to revolve around the individuals and personalities,” he argued. “There isn’t what I would call the strength in depth to really allow the education to take off.” But through collaboration, he said, it could “take off fairly quickly”.

Set up in 2005 by the Central Bank of Malaysia, INCEIF now has 2,000 students and offers qualifications up to PhD level, Mr Abdullah noted. This year it launched a joint research initiative with Henley Business School at the University of Reading.

Julia King, vice-chancellor of Aston University, agreed that while there were “excellent centres” of Islamic finance education in the UK, it was “an area that needs to grow”.

From this year, Islamic finance was a core part of Aston’s undergraduate finance programmes, she said, and should be incorporated further into such courses.

The workshop also heard a question from a graduate of a “red-brick” university who failed to find an Islamic banking job in London despite training in the subject.

Mr Abdullah agreed that there were only a few banks in the UK interested in Islamic finance.

david.matthews@tsleducation.com

http://www.timeshighereducation.co.uk/news/uk-sector-still-thin-on-islamic-finance-teaching/2008759.article

Islamic finance – the lowdown on sharia-compliant money

Islamic products are available to regular savers, investors and homebuyers, but unlike standard deals they don't charge interest

The Islamic Bank of Britain is wholly operated in accordance with Islamic Sharia principles. Photograph: Dan Chung for the Guardian

The government has announced plans for Britain to issue a £200m Islamic bond in a bid to attract new money to London. The bond will be aimed at institutions, but there are Islamic finance products available to regular savers, investors and homebuyers. Here us a guide to how sharia-compliant funds and mortgages work.

Why aren't regular accounts sharia-compliant?

Central to Islamic finance is the fact that money itself has no intrinsic value; it is simply a medium of exchange. Each unit is 100% equal in value to another unit of the same denomination and you are not allowed to make a profit by exchanging cash with another person. A Muslim is not allowed to benefit from lending money or receiving money from someone.

This means that earning interest (riba) is not allowed – whether you are an individual or a bank. To comply with these rules, interest is not paid on Islamic savings or current accounts, or charged on Islamic mortgages.

How do sharia-complaint banking products work?

There are several ways that banks can structure accounts so that they are sharia-compliant.

Ijara works as a leasing arrangement: the bank buys something for a customer and then leases it back to them. Different forms of leasing are permissible, including those where part of the instalment payment goes toward the final purchase. This might be used to help you buy a car or other item, or to help a business buy equipment.

Murabaha works by the bank supplying goods for resale to the customer at a price that includes a margin above the costs, and allows them to repay in installments. This might be used to provide a mortgage on a property. The property is registered to the buyer from the start.

Musharaka is a joint venture in which the customer and bank contribute funding to an investment or purchase and agree to share the returns (as well as the risks) in proportions agreed in advance.

Wakala is an agreement that the bank will work as the individual's agent. If a saver enters into this type of agreement, the bank can use their cash to invest in sharia-compliant trading activities to generate a target profit for them.

How do the banks make money?

Banks can profit from the buying and selling of approved goods and services. The principal means of Islamic finance are based on trading, and it is essential that risk be involved in any trading activity, so banks and financial institutions will trade in sharia-compliant investments with the money deposited by customers, sharing the risks and the profits between them.

Islamic banks are structured so that they retain a clearly differentiated status between shareholders' capital and clients' deposits in order to make sure profits are shared correctly.

Although they cannot charge interest, the banks can profit from helping customers to purchase a property using a ijara or murabaha scheme. With an ijara scheme the bank makes money by charging the customer rent; with a murabaha scheme, a price is agreed at the outset which is more than the market value. This profit is deemed to be a reward for the risk that is assumed by the bank.

There are firm laws governing the types of businesses with which the banks can trade. There should be absolutely no investment in unsuitable businesses, including those involved with armaments, pork, tobacco, drugs, alcohol or pornography.

It's similar to ethical banking, then?

There is some common ground. Some of the tenets of Islamic banking will appeal to anyone, Muslim or otherwise, who agrees with the underlying principles of equitable distribution for everyone, the ideals of fair trading, spending of wealth judiciously, and the well-being of the community as a whole. In the wake of the banking crisis, savers may also be drawn by Islamic banking's approach to investment: they can only invest in real assets, not financial instruments that are based on speculation.

The Move Your Money campaign rates one bank, the Islamic Bank of Britain, highly for ethics and customer service, but its overall score is diminished by a lack of women on its board and high directors' pay, among other things.

How does it work if I take out a mortgage?

Islamic mortgages, or house purchase plans (HPPs) can involve ijara, where you are technically leasing the property from the bank, or diminishing Musharaka, where you buy in partnership with the bank and your monthly repayments gradually buy it out. As with a standard mortgage you will usually need a deposit, and you will need to have the house valued before you enter into the arrangement.

You will also be able to fix the amount you pay each month if you wish – for example, the Islamic Bank of Britain offers a fixed rental rate of 3.79%to homebuyers with at least 35% to put down as a deposit, and 4.19% for those with a 20% deposit – both rates are fixed until 31 December 2015.

The bank also offers a buy-to-let house purchase plan.

How does it work if I open a savings account?

Instead of being offered an interest rate you will be offered a target profit, which the bank will try and make for you by investing your money in compliants investments (this might include homes bought through the bank's Islamic mortgage scheme). The profit is subject to tax, just like interest on standard savings and current accounts. Because there is an element of risk you need to agree that you are happy to make a loss.

As with standard savings accounts, you can choose for a fixed-term deal or an easy-access account. The target rates on offer are along the lines of those elsewhere in the savings market, and sometimes better – currently, the Islamic Bank of Britain is offering a table-topping 2.32% on a two-year savings bond, according to Moneyfacts.

Is my money safe?

If the bank is covered by the Financial Services Compensation Scheme (FSCS), up to £85,000 held on deposit with it will be protected if things go wrong. Check that it is before you hand over any money.

http://www.theguardian.com/money/2013/oct/29/islamic-finance-sharia-compliant-money-interest