Sharia investing leans to West

Islamic benchmarks have consistently outperformed conventional ones

• Image Credit: Supplied

To some observers of Islamic equity investing, Islamic or Sharia-compliant equity indexes seem to imply investing in publicly-listed companies in Muslim countries.

The end results contradict the assumptions. This also rebuts allegations by many from the anti-Sharia movement that Islamic investing is about investing in companies linked to terrorism or financing terrorism. The largest companies in the S&P Global BMI Sharia include ExxonMobil, IBM, Chevron, Nestle and Microsoft.

Today, there is a large stock count and market capitalisation weighting bias towards the non-Muslim G20 countries in all global Islamic equity indexes. We will look at country exposure of Sharia-compliant companies, the economic sector exposure and selected Muslim country Islamic indexes, and how to increase number of Sharia-compliant companies.

Conventional bias

The stock exchanges in Muslim countries have a bias towards the conventional financial sector, such as compromising mainly banks and financing companies, and therefore, also over-reliance on debt culture for corporate financing. Thus, many publicly listed non-financial companies in Muslim countries fail the debt-financial ratio for Islamic screening.

So where are the Sharia-compliant companies listed? And how does this contribute to local and regional economic and capital market development?

Today, we have Islamic equity indexes from all the six index providers from Dow Jones Indexes to S&P and Thomson Reuters IdealRatings. The Islamic indexes are about "doing good by avoiding the bad." Put differently, it's about negative screening much like Islamic finance, which is a prohibitive oriented industry way of funding and financing.

The Sharia universe

Table A shows the condensed universe of Sharia compliant companies, stock count and market capitalisation weighting of S&P Global BMI Sharia and S&P Global BMI as of October 31. Some of the observations on the S&P Global BMI Sharia index include:

- There is an obvious bias towards the developed countries where five countries, including the United Statesand the UK, account for 1,749 companies (50 per cent of stock count) and 74.34 per cent market capitalisation weighting. Is it because these developed countries have a robust equity culture, and hence the companies don't rely exclusively on banking (debt) financing, but also raise equity capital?

Does an equity capital market promote knowledge-based economies, as banks do not provide entrepreneurial capital? It's well-known and accepted that Islamic banks finance (exclusively) "old economy" companies.

- Sharia-compliant companies from Muslim countries include Turkey, Morocco, Malaysia, Indonesia and Egypt that account for 132 companies (3 per cent of stock count) and less than 1 per cent (0.86 per cent) market capitalisation weighting. Although there are 57 Muslim countries with 42 stock exchanges, the small representation is due to prohibitions against direct investing by all international investing such as in Saudi Arabia, small free float, that is, small shares of company available for trading, and illiquidity because stock does not trade the minimum amount according to the index provider's rule book.

- Interesting to note that there is larger market capitalisation weighting (0.44 per cent and 1.36 per cent) and total market capitalisation representation (of $60 billion (Dh220.35 billion) and $187 billion) in the index of Sharia-compliant companies from Israel and India, respectively, than any of the five Muslim countries. Thus, Islamic investing is not confined to Muslim countries.

Islamic equity indexes, especially at a global level, with a bias toward developed country compliant companies should then have a high correlation to conventional counter-part indexes.

Performance

Graph A shows the performance of the S&P Global BMI Sharia to S&P Global BMI since 2007 and we observe tracking market movement and outperformance by the Sharia index.

Thus, notwithstanding a smaller universe of Sharia-compliant companies, 32 per cent of total stock count (3,460) and 42 per cent of total market capitalisation ($13.813 trillion), Sharia-compliant indexes have consistently outperformed in Graph A. The underperformance of the S&P Global BMI is attributed to large exposure to the conventional financial sector, nearly 20 per cent of the index, and its impact by the credit crisis (sub-prime mortgages in the United States) and European sovereign debt situation.

Alpha strategy

There is nothing ‘Islamic' here; it's basically a style of investing and others have called it an ‘alpha strategy': low debt and non-financial and social-ethical investing. This may indeed be the need of the hour in these turbulent times.

Next week, we will look into a global Islamic equity index's economic sector exposure of Sharia-compliant companies. An early hint: the three of the largest sectors in today's global Islamic index are generally not present in Muslim countries.

The writer is Global Head, Islamic Finance and OIC Countries. Opinion expressed here is the writer's own and does not reflect that of his own organisation or that of Gulf News.

http://gulfnews.com

Islamic banking shines

Islamic banking assets in the UAE are predicted to grow to 20 per cent of the total banking sector in 2012 from an estimated 18 per cent this year, Standard Chartered Saadiq, the Islamic arm of the bank, said on Sunday.

The bank said it expects Islamic assets to constitute 38 per cent of total consumer banking assets in the UAE in 2012, compared to about 35 per cent in 2010. It didn’t provide a 2011 estimate. According to the Dubai Chamber of Commerce and Industry, the collective assets of the eight Islamic banks in the UAE  were Dh269 billion at the end of 2010, accounting for around 16.2 per cent of the overall banking assets of Dh1.66 trillion.

Globally,  the Islamic banking industry is estimated to be worth $1 trillion, the bank said as it unveiled its new customer offerings for UAE customers, in response to growing interest in and customer demand for Islamic finance in the country and across the region.

Ernst & Young said in a report that Islamic banking assets with commercial banks globally would reach $1.1 trillion in 2012, a jump of 33 per cent from the 2010 level of $826 billion. In the Middle East and North Africa, Islamic banking assets increased to $416 billion in 2010, representing a five year compound annual growth rate of 20 per cent compared to less than nine per cent for conventional banks, Ernst & Young said in a report. “As new geographies open up to Islamic banking, the Mena Islamic banking industry is expected to more than double to $990 billion by 2015,” it said.

In the backdrop of the fast growing demand for Islamic banking, a group of Islamic financial institutions launched the world’s first benchmark for Islamic interbank lending a few weeks ago as an alternative to LIBOR, or the London Interbank Offered Rate.

The LIBOR alternative, known as Islamic Interbank Benchmark Rate, or IIBR, uses the contributed rates of 16 Islamic banks and the Islamic sections of conventional banks to provide a reliable alternative for pricing Islamic instruments to the conventional interest-based benchmarks used for mainstream finance.

Standard Chartered Saadiq said it plans to start Islamic banking operations in Nigeria and Oman next year, as it looks to grow its Shariah-compliant business in the Middle East, Africa and southeast Asia.

The bank said it enhanced Islamic banking offering has been designed specifically for individuals and small and medium enterprises providing them with Shariah-compliant banking products and services.

http://www.khaleejtimes.com

Islamic Banking: Developed by Indians, flourishing in other countries

A professional researcher on India-centric socio economic and political databases Shafeeq Rahman while stating that the core system of the interest-free banking, widely termed as the Islamic Banking System, is developed by economists of the Indian subcontinent expressed surprise over the fact that the region has gained nothing from it.

"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", Shafeeque Rahman wrote in a recent article published in Tehelka.

Mohammad Nejatullah Siddiqui is a leading Indian Islamic scholar, whose specialisation is Islamic Economics. Author of numerous books and a recipient of the King Faisal Award for Islamic Studies, he has taught at the Aligarh Muslim University (AMU) and the King Abdul Aziz University, Jeddah. He was a Fellow at the University of California, Los Angeles and Vesting Scholar at the Islamic Development Bank (IDB) Jeddah.

Stating that Islamic Banking is now fast spreading its wings to other parts of the world, Shafeeque Rahman wrote, "The client network is now expanding beyond the conventional Muslim countries to European and other non-Muslim territories. In 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", he wrote.

Shafeeque Rahman further wrote, "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."

"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", he wrote.

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.

http://www.ummid.com/

UAE businesswomen look at opportunities in Islamic finance and halal food Read more: UAE businesswomen look at opportunities in Islamic finance and halal food

United Arab Emirates (UAE)'s leading businesswomen are looking into investment opportunities to work with Malaysians in two areas - Islamic finance and halal food.

President of the Abu Dhabi Business Women Council and chief operating officer of Al Jaber Group Fatima Al Jaber said Islamic finance and halal food were the two mutual areas that Malaysia and UAE could work together.

"Islamic finance is a very important sector that Malaysia is pioneering and I chair an investment bank (in the UAE). We are looking into investment opportunities in Malaysia," she told Bernama after the UAE - Malaysia Power Ladies Roundtable 2011 here today.

Al Jaber is among ten influential UAE businesswomen who are in Malaysia for the Power Ladies UAE-Malaysia Roundtable 2011 tour. The Power Ladies tour, organised by Inside Investor, runs from December 5-9 and is aimed at providing the UAE guests with a greater understanding of the business opportunities available in Malaysia.

She said UAE offered huge opportunities for Malaysians in many areas included leisure, hotel, sports, property, healthcare and education.

"UAE is a consumer market. The sports and healthcare industry are growing. Education is another area. We have all types of school and universities in the UAE. There is also a great demand for certain types of properties there," she said.

She also said that financial services were another area Malaysians could tap  as foreigners were currently involved in the business in the Emirates.

"The should be two-way (business ties)...Malaysians should come to UAE and venture into these areas," she added.

The Power Ladies group also mentioned that three important areas that they would look into before venturing into businesses in Malaysia were government rules regulations, taxation and the business environment.

The group, over the previous two days, met Bank Negara Malaysia Governor Tan Sri Zeti Akhtar Aziz, Malaysia External Trade Development Corporation chief executive officer Dr Wong Lai Sum, chief executive officer of the Malaysian Investment Development Authority Datuk Noharuddin Nordin, SME Corp Chief Operating Officer Datuk Hafsah Hashim.

Today, they are scheduled to meet the Prime Minister's wife Datin Seri Rosmah Mansor and Duli Yang Maha Mulia Raja Permaisuri Agong Tuanku Nur Zahirah. -- BERNAMA

http://www.nst.com.my

ICIF pitches for Islamic banking to fund India's infra

Indian Centre for Islamic Finance(ICIF) today made a strong pitch for Islamic banking in the country to meet India's huge need for funds for infrastructure development.


India needs one trillion dollar to upgrade its infrastructure in order to achieve the target of annual growth of 9 per cent and hence Islamic banking can be an alternative to meet this requirement, said Mr Muddassir Siddiqui, an international expert on Islamic finance.

Speaking at an ICIF conference here, he claimed Islamic financing has emerged as a viable alternative the world over after the financial meltdown in the West in 2008. It is growing at the rate of more than 15 per cent.

Islamic finance, he said, is a business, not a charity but it is an ethical way of financing and investing, he told the media on the margins of the conference.

Mr Siddiqui claimed that Kerala government is open to Islamic funding for infrastructure, while Andhra Pradesh government has decided to launch an interest-free loan scheme to finance self-help groups and microfinance institutions.

He said, "A democratic country like India should think of her citizens first than anything else. Islamic finance can be an alternative as it is an asset-backed system fully based on Sharia(Islamic law)". As a big and emerging economy with the second highest population of Muslims after Indonesia, India can use this alternate mode to help its nationals.

Asked why it is named Islamic banking when its basic objective is business and development, Mr Siddiqui told UNI, " It is not a religious issue. It is a financial alternative for the whole country but yes, the main focus remains on Muslims".


http://www.newkerala.com

Amrahbank signs next agreement with Islamic Trade Finance Corporation

Baku, Fineko/abc.az. Azerbaijan’s Amrahbank has cemented its relationship with the International Islamic Trade Finance Corporation (ITFC), a member of the Islamic Development Bank (IDB) Group, with the second $1.5 million trade finance agreement.

Speaking on the occasion, ITFC Chief Executive Officer Waleed Al-Wohaib stated that as a recognized provider of trade solutions for its member countries’ needs the ITFC announced its second cooperation experience with AmrahBank.

“This cooperation fulfills ITFC’s primary goal of catering for the needs of SMEs which have reflected AmrahBank’s commitment to this end. AmrahBank exhibited sound financial discipline and proved itself to be efficient in the utilization of our line of financing. With this in mind, we have taken the decision to reinforce our cooperation with AmrahBank, increasing our financing by 50% to reach $1.5 million," he said.

Amrahbank Chairman of the Management Board Emil Mammadov said that the agreement opens the doors of new opportunities and collaboration between our two institutions in finding new trade finance solutions for the benefit of Small and Medium Enterprises (SMEs).

“That will enhance the productive and active role that SMEs play in a domestic business market and help them grow into larger and more significant businesses, and hereby contribute in the development of Azerbaijan economy,” he added.

The ITFC commenced operations on 10 January 2008 with an authorized capital of $3 billion.

As a member of the Islamic Development Bank (IDB) Group, the ITFC inherited the pioneering mantle of its trade finance expertise and its application of innovative Islamic finance products developed over a period of more than 30 years to develop markets and trading capacities to help the member countries of the Organization of the Islamic Conference (OIC) do business more effectively amongst themselves and with the rest of the world.

Amrahbank is one of the oldest (est. in 1993) and leading commercial banks of Azerbaijan. It offers wide range of retail and corporate banking products and services such as the opening of current accounts, plastic card services, documentary operations, retail and business loans, currency exchanges, local and international money transfers, utility bills and mobile operator subscription payment services, interbank deposits and loans, business consultations and other banking services. Recent strategic partnership with the Bahrain based International Investment Bank (through 49% shareholding), has played a key role in further development of various spheres of Amrahbank’s activity such as corporate governance, international cooperation, array and quality of products & services, etc.

http://abc.az

Interview with a Sukuk Expert

Samer Mardini - Vice President - Fixed Income & Islamic Financial Products Trader Middle East & North Africa - SJS Markets
How do you view the recent surge in sukuk issues and what are the main reasons behind this?Sukuk market continues to grow despite the uncertainty of the global financial markets. We continue to see a lot of appetite from many issuers in different countries. Primary sukuk market surged up significantly in 2011 especially in the second half attracting local and foreign investors.

Do you think issuers were able to sell their sukuk cheaper this year than earlier years?Issuers are trying to accelerate the deals given that the debt crisis in USA & Europe will push yields higher next year. Currently, the borrowing costs in the region fell to the lowest after the global financial crisis in 2008. There are some new issue coming up into the market from many issuers such as Emirates NBD, Albaraka Turk, Dubai Islamic bank.

Given your role in GCC and the region, do you see improved liquidity?At the beginning of this year we have seen a flood of liquidity from many Arab countries shifted to this region, and that was because of the Arab spring.
What are the most attractive sukuk lately?In my opinion the safest sukuk are Abu Dhabi and Malaysian Names such as: TDIC Sukuk,ADIB Sukuk, FGB Sukuk, Malaysia Global Sukuks, and Islamic Development Bank Sukuks. The most attractive sukuk in terms of yield are Dubai and Saudi names such as Jafza Sukuk, Difc Sukuk , Dana Gas Sukuk,  Dubai Global Sukuk, Emaar Sukuk, DP World Sukuk, and DAAR Sukuks.

What are your expectations for 2012?The MENA region could also get impacted from the ongoing Euro crisis. However, AbuDhabi, Qatar and Saudi Arabia, backed by their solid oil and gas assets should continue to trade tighter than the rest of the region. The Arab spring has brought democratic change,as well as uncertainties, to the region and Egypt and Syria are still in a state of flux. We are of the opinion that the Qatar, UAE, Saudi Arabia, Jordan, Oman and even Bahrain should remain peaceful, the first two being the most stable.

What measures should regional governments take to deepen the market?Dubai still faces challenges. Despite its successful restructuring a year ago, Dubai still has a significant amount of debt maturing in 2012. While Dubai could find it challenging to come to markets again after its successful issuance June earlier this year, we take comfort from Abu Dhabi's backstop.

Also, top officials from the Emirate have said that they shall stand behind their strategic assets which could face difficulty in refinancing - which in our opinion refers to DIFCDU and JAFZA.

Regional Governments should create regulated retail sukuk market similar of Stock markets where everybody can buy and sell sukuk easily; nowadays we are receiving huge demand from many individuals who are looking to invest in sukuk.


http://www.zawya.com

New bank rules attract Standard Chartered

Lawmakers in Bangladesh are urging the central bank to draft Islamic banking regulations

 Lawmakers in Bangladesh are urging the central bank to draft Islamic banking regulations, spurring Standard Chartered Plc to increase investment in the nation's $10 billion (Dh36.7 billion) Sharia-compliant finance industry.

Bangladesh Bank will consider proposals from parliament's finance committee to issue more Sharia banking licences and start an Islamic money market, Jahangir Alam, a central bank spokesman, said in a November 24 interview from the capital Dhaka. The country's seven Islamic lenders, whose assets are growing at 28 per cent a year, now operate under the Bank Company Act and there is only one outstanding Islamic bond, Alam said.

A low profile and the lack of clear rules has deterred global Islamic banks including Kuala Lumpur-based OCBC Al-Amin Bank Bhd from entering Bangladesh, home to the world's fourth-largest Muslim population. Standard Chartered Saadiq plans to start project and trade financing in Bangladesh next year after offering consumer banking in the nation of 159 million people for the past five years.

"As the regulations become clear and transparent, the market will develop faster," Afaq Khan, the Dubai-based chief executive officer of Standard Chartered Saadiq, the Islamic unit which makes most of its profit in Asia, said recently that separate laws "mean there will be more of a focus from the government in expanding the industry and a standardisation of products," he said.

http://gulfnews.com/

Islamic bank rules by month-end: CBO

A new set of rules and regulations for Islamic banks will be ready by the end of this month, said a top-level official of the Central Bank of Oman (CBO) here on Sunday. 

The banking regulator in September appointed an international audit firm, Ernst & Young, to advise the apex bank on formulating a separate set of rules for Islamic banking in the country. 

“We are in the process of preparing a rule book for Islamic banks. This is expected to be completed by the end of this year,” Hamoud bin Sangour Al Zadjali, executive president of the Central Bank of Oman told Times of Oman on the sidelines of a seminar on accounting and auditing in the Gulf region. 

Ernst & Young is looking into aspects like fixing of lending limits, single borrower limit, writing of rule books, procedures for reporting structure for Islamic banks and formation of Sharia board. “I don’t think there will be a national Sharia board. 

However, we will be asking each institution intending to offer Islamic banking products to have its own Sharia board to ensure that the transactions of Islamic banks are in line with Sharia requirements,” the CBO chief added, when asked whether there will be a common nation-wide board to regulate Sharia compliant institutions. 

Since Islamic banks do not offer interest, the consultant is also studying issues like how to compensate depositors, and how to ensure a clear demarcation between traditional banking and Islamic banking for those institutions that offer Sharia compliant products throughwindow operation. 

Sangour said the banking regulator will try to take the best aspects of Islamic banking rules followed by different countries across the world. The consultant is looking into the experiences and drawbacks of certain regulations in other countries. “We will ensure that the banks will follow Sharia rules in letter and spirit.” 

Islamic banking windows 
Responding to a question on the interest among commercial banks in starting window operations, the central bank chief said; “We expect that most of the banks will go for Islamic banking windows.” 

He ruled out the possibility of allowing a third Islamic bank, which was reported by a section of the media. “We are not allowing more than two dedicated Islamic banks for the time being. We expect these banks to commence operation either by the first quarter or by mid-2012.” 

The proposed two Islamic banks and conventional financial institutions that plan to offer Islamic products through window operation may capture 8 per cent to 10 per cent of the market share of the country’s $40-$42 billion banking assets in four to five years time. 

Unlike traditional banking, Islamic banks provide the entrepreneur with funds for his business venture and get a return based on a pre-determined profit sharing ratio. 

In fact, Islamic finance in the Gulf region is thriving in recent years. PricewaterhouseCoopers, in a recent report, said the $1 trillion Islamic finance industry was expected to grow by between 15 to 20 per cent per year going forward. 

Referring to the liquidity position within the financial system, he said banks are flush with funds and are waiting for feasible projects to extend lending. 

Sangour also expects Omani banks to maintain its profit at last year’s level. “Banks may achieve a five per cent to 10 per cent growth in net profit this year.” 


http://www.timesofoman.com

Basel III doesn’t work for Islamic banking’

Independent and robust business models are the need of the hour for the Islamic financial sector and the proposed Basel III norms have widened the faults between the conventional and Islamic banking, according to Eversheds conference.

Moreover, Islamic banks’ balance sheet size is limited and there are limited interactions between Shariah-principled lenders and their conventional counterparts while engaging in syndications, Abdulkader Thomas, an adviser with Shape Financial, told the 7th Banking and Islamic Finance Forum, organised by Eversheds.

Eversheds is an international law firm registered with the Qatar Financial Centre.

“The Basel III framework does not work for Islamic banking,” he said, adding austerity measures in the Western world would impact upon hydrocarbon prices and would have a knock on effect on the Islamic finance sector.

Aasim Qureshi of QNB Capital provided an overview of Qatari economy and the likely trends that would emerge in the future.

Expecting Qatar’s economy to register a 26% growth to $158bn this year, he said Qatar has outlined more than $200bn worth of projects, of which more than $88bn is directly associated with the 2022 FIFA World Cup.

Of the $88bn projects, Metro Railway share is $25bn, followed by road and bridges ($20bn), hotels and tourism infrastructure ($17bn), New Doha International Airport ($13bn), New Doha Seaport ($5bn), stadiums and training ($5bn) and electricity and water ($3bn).

Jaime Oon, solicitor at Eversheds, examined the implications of the Qatar Central Bank (QCB) circular on prohibiting conventional banks from undertaking new Islamic financing and deposits.

She said the market expectations are that the deadline (for the closure of Islamic windows) might be extended (from December 31, 2011) since there are many areas that lack clarity.

Amjad Hussain, partner and head of Islamic finance at Eversheds, held that the QCB’s circular had created opportunities for Islamic banks both in the short term (through potential customer acquisition) and in the longer term (by reducing competition).

“With the World Cup 2022 spending expected to start, Islamic banks in Qatar are likely to remain busy for the coming years. This will provide them with an opportunity to take the leadership role in the development of Islamic finance industry,” he said.

French keen on learning from Saudi experience in Islamic banking: Envoy

JEDDAH: French academics have shown their keenness to make use of Saudi expertise and experience in Islamic banking and finance, said Saudi Ambassador to Paris, Muhammad bin Ismail Al-Asheikh.

The ambassador made this comment while holding a reception in Paris on the occasion of the launch of an academic chair titled "Financial morals and principles: Islamic banking as a model."

The chair is established in Sorbonne University as a joint research project of King Abdulaziz University (KAU) in Jeddah and the French university.

"Saudi Arabia is a good reference for Islamic banking and finance," the ambassador said, expressing hope that the chair would support French economy with new researches in Islamic finance.

He commended the role of Saudi businessmen in supporting such research projects in Saudi and foreign universities. The new chair is financed by Muhammad Hussein Al-Amoudi, a prominent Saudi businessman.

A large number of Saudi and French academics, economists and Islamic banking experts attended the ceremony in Paris, including Osama Tayeb, president of KAU and Professor Christine Mengin, vice chancellor of Sorbonne University.

http://arabnews.com

Worldwide business students turn to Islamic finance

It is no secret that conventional financial systems are not working and the sector is looking for alternative and responsible ways of doing business.

Islamic finance poses an ethical and non-conventional model and is currently the only area with strong growth, said Professor Ignacio dela Torre, Academic Director of the Master in Finance Programmes at Spain’s Instituto de Empressa (IE) Business School last week.

Dela Torre was speaking at the relaunch of the Saudi-Spanish Centre for Islamic Economics and Finance, a partnership between IE Business School and Saudi Arabia’s King Abdul Aziz University.

The relaunch coincided with a conference on “Islamic Finance in the 21st century”. He said when employment levels are high in the West, it makes sense for finance students to familiarise themselves with alternative finance models that also include eco-finance and micro-finance. “From a macroeconomic point of view it makes sense that European governments and financial markets set up Islamic windows so excess liquidity can be channelled through some European financing markets with these structures.”

Expertise needed

“There is already $1 trillion (Dh3.67 trillion) of Islamic money and it is growing at 20 percent with $200 million of additional Islamic money coming in every year,” said Dela Torre.

Students are showing interest in this area of finance and universities in the United Kingdom and France have responded to the demand early on. Over the past five years, IE has been offering Islamic finance programmes.

“When you travel to the Gulf, where 50 percent of banking is Islamised, there are not enough people with skills and understanding of Islamic finance,” he said. He added that from a career perspective it is wise to have knowledge of this area because those who work in conventional finance will sooner or later be faced with Islamic finance.

Dela Torre says the field is not difficult to understand once the basics are covered in the curriculum illustrated by the fact most expatriate professionals in the GCC’s Islamic banking sector are Americans and Indians.

Dr. Ahmad Mohammad Ali Al Madani, Head of Islamic Development Bank, said since the financial crisis, people have become more concerned with where their money ends up once invested and not just profit margins.

Celia de Anca, professor of Islamic Finance at IE Business School, added that students are increasingly interested in financial sustainability and ethics.

http://www.albawaba.com