Unveiling the importance of Islamic agro-banking in Sri Lanka by Muath Mubarak

The global financial system is progressively moving from conventional banking to pure Sharia compliant and ethical banking practices since modern Islamic banking was invented three decades ago. Currently, the Islamic banking and finance has grown tremendously leaving its legacy in each and every region.

The emergence of Islamic finance has not only brought in Islamic banking activities, but rather it contains various industry segments such as takaful (Islamic Insurance), investment banking, mutual funds, trusts,  project financing, Islamic indices, capital markets, insurance, wealth management, micro finance and many more.

Islamic finance is also keen on agriculture related financing and encourages growth in the provision of this source of financing for this purpose. There are some initiatives have been taken in Gulf Cooperation Council (GCC) countries including the Islamic Development Bank Group for agriculture sector financing but mainstream Islamic finance institutions have no direct involvement yet.

There is an increasing demand for agriculture financing globally and Islamic finance cannot escape from this market demand. Most of the big Islamic banks also consider agro-financing as one of the vital product for its portfolio.

This largely untapped market can be catered to by different Islamic finance techniques. These Islamic finance techniques will facilitate Sharia compliant transactions for the agriculture sector in any country irrespective of the race and religion. Agricultural financing could be performed under the following models (as in the diagram) of Islamic Finance principle.

• Trade based Islamic financing techniques provides financing through goods and commodities with some basic classical concepts such as Murabaha, Musawamma and Salam
• Rental-based Islamic finance products for the agriculture sector are products where the bank or financial institution will purchase assets or required equipment and offer those to customers / farmers on a rental basis via the Islamic finance concept called Ijara
• The ideal mode of financing for the agriculture sector is participatory mode of financing. This is where both the parties get involved based on participation in profit and loss. The main products are Musharaka, Mudaraba, Musaqaha, Muzara’a and Mugharasa

The ideal participatory mode of financing for the agriculture sectors can be described as follows:

Musaqaha (irrigation): This is a partnership that depends on one party presenting designated plants/trees that produce usable goods to another in order to work on their irrigation in exchange for an agreed share in fruits. This mode of financing is very effective for the agriculture (orchards / trees) sector where a specified share of output will go to the labor and the other portion will go to the institution / enterprise. The Accounting and Auditing Organisation for Islamic Financial Institutes (AAOIFI) has approved the Musaqaha related Sukuk (Islamic bond) for trading.

Muzara’a (share cropping): This partnership is in crops where primarily two or three parties are involved. One party presents land to another for cultivation and maintenance in exchange for an agreed share in the crop. In the case of three parties being involved in Muzara’a, one party will provide the land, second party will provide the input (seeds, chemicals, etc) and the third party may provide the labour for production. AAOIFI has permitted Sukuk for this and it is tradable. This can be used for a relatively short period time when financing agricultural products.

Mugharasa (Agricultural): This is a legally viable option for financing of tree cultivation. This is a partnership in which one party presents a plot of land without trees to another to plant trees on it on the condition that they share the trees and fruits in accordance to a defined percentage. Mugharasa Sukuk also can be traded and this is used for longer time period of financing where farmers need the highest duration for repayment based on the harvest.

The agriculture sector is a vast area with different sub-sectors.  This sector can be divided in to two namely, the agricultural farm sector (crops, horticulture, floriculture, etc) and agricultural-off farm sector (dairy development, livestock, poultry, water management, etc). This agriculture sector has got issues such as finance institutions being very reluctant to offer facilities due to various reasons.  One of the main issues is collateral where small farmers and business people will not have any acceptable collateral and they are not educated or illiterate in terms of financials and banking transactions.

There are many other reasons why a financial institution is not ready to deal with the agriculture sector and these are the main weakness of the agriculture sector:

• very limited access to farmers and non-availability of the right information about the financing facilities 
• collateral or security which is not acceptable
• formal financing is more expensive than the informal methods such as getting a loan from a wealthy person from villages
• lack of awareness and education about banking among village farmers
• farmers being unskilled, and the absence of usage of modern technology in production
• difficulty of obtaining basic requirements such as water, crops, proper soil, fertilizer, etc
• no market-focused approach, no communication and preference to over- produce 
• storing of the seeds, chemicals, fertilizers, harvested items  and transportation issues to areas where demand arises
• disorganised and non-documented sector. Needs / Requirements and production values not registered.
• lack of insurance policies for uncertainties and  hazards.

The end of three decades of civil conflict has resulted in new hope and incredible opportunities dawning for Sri Lanka to realize its development potential and to build a strong foundation for long term peace and prosperity.

Sri Lanka is a tiny beautiful island of 65,610 square km’s located in the Indian ocean with a population of approximately 20 million in 2010. Over 70% of the rural population in Sri Lanka is dependent on cultivation, livestock raring or fishing for food and their livelihood. Sri Lanka’s economy is dominated by agriculture (approximately 13% of GDP in 2010) where it produces plantation crops like tea, rubber, coconut, cocoa and spices for the export market.

The Sri Lankan budget for 2012 has highlighted many incentives and tax benefits for the agriculture sector (KPMG, 2011). These include the following:

• having a vision towards becoming a self sufficient economy by improving agriculture productivity in terms of rice, coconut, tea, rubber and spices
• depreciation of the currency by 3% in order to increase the price competitiveness in the global market
• tax removed for rice mills using modern technology and for production of coconut, palmyrah and Kithul
• developing four rice exporting centres (South, East, Rajarata and North).

It is clear there is an untapped demand for agricultural financing and the government is also very optimistic in this regard, so it is highly advisable that Islamic Finance Institutions (IFIs) in Sri Lanka concentrate in this area rather than depending only on basic transactions and products.

The policy makers and finance service providers must create an opportunity for farmers throughout the country by active participation of IFIs for agricultural financing. This will definitely create some success stories and bring changes in the farmer’s lives whilst enhancing cultivation.

http://www.cimaglobal.com/Thought-leadership/Newsletters/Regional/The-CIMA-Edge-South-Asia-and-Middle-East/January--February-2012/Unveiling-the-importance-of-Islamic-Agro-banking-in-/

A closer look at Islamic finance in Sri Lanka by MM (Published by CIMA-UK)

The buzzphrase in today’s business world is ‘Islamic banking and finance (IB&F)'.

Background

Islamic finance takes its principles and rules mainly from primary and secondary sources. The primary sources include the Quran (text of god) and Sunnah (Words or Acts of the Prophet [SAW]).

Secondary sources include Ijma - consensus, Qiyas - Analogy and Ijthihad – interpretation of learned jurists and scholars. Other authorities of interpretation such as Sharia supervisory boards (SSB) and ‘The Islamic Fiqh Academy’ – KSA are also important elements in Sharia.

Sharia has been translated as ‘Islamic Law’ but comprises not only Islamic law, but also moralities, ethics and guidelines for a complete way of human life. In the field of Islamic Banking and Finance Sharia plays a vital role.

Islamic finance in Sri Lanka

Sri Lanka is not well known for this niche market, but Sri Lanka's recent resolution of its civil armed conflict has given new hope and positive views about the future of Sri Lankans.

Sri Lankan Sharia conscious investors and other interested groups were pleased to see the country's first fully fledged Islamic commercial bank inaugurated by the central bank governor in August 2011.

This was a remarkable event in the history of Islamic banking and finance in Sri Lanka. It took more than a decade to achieve, due to issues like double taxation, separate banking rules and regulations, corporate governance and other issues that needed to be addressed to cater to this new market.

The Sri Lankan financial market consists of a number of Islamic financial service providers in the form of investment companies, leasing companies and subsidiaries of finance companies.

Additionally, the government owned Bank of Ceylon has started its own Islamic windows model operating under the brand name of Al-Noor a year ago.

These market needs were witnessed by the current retail banking market leader in conventional banking - Commercial Bank, which kickstarted its operation as a specialised branch and a delivery channel for Islamic banking customers under the name of Al-Fadhla two months ago.

As per the estimates and research studies, there is an Islamic banking asset base within the country of more than approximately USD 1,000 million in 2010.

Global Islamic fund assets under management grew by 7.6% to $58 billion in 2010, up from $53.9 billion in 2009, according to Ernst & Young Islamic funds and investments report (2011). 

According to the figures released by research firm - Cerulli Associates (2011), global Islamic finance assets will reach USD 5 trillion by 2015.

Creating an infrastructure

To create the infrastructure for the Islamic banking and finance market, other components play a major part - the insurance industry.

The Islamic insurance (Takaful) industry was started in Sri Lanka with a very few players catering to Sharia conscious insurance holders. The current players are winning the trust of the whole Sri Lankan community in terms of Islamic insurance by highlighting its unique features of rewarding the policy holders, where Takaful scheme payments will be pooled and invested in acceptable Islamic investment opportunities and the return shared with customers.

The Sharia conscious investors have more options in terms of Islamic Finance in Sri Lanka. They have a golden opportunity to invest in Colombo Stock Exchange (CSE), by way of participating in the Islamic funds (Eg: Amana-Namal Equity Funds) and unit trust (‘Crescent I-fund’  is an open ended Shariah compliant fund).

The myth that Islamic finance caters only to the high end market and does not consider the needs of lower income earners is not entirely accurate. In fact, there are institutions in Sri Lanka striving to alleviate Sri Lankans by providing Islamic Micro Finance facilities throughout the island in order to make difference in their lives.

Change and local implications

Although Islamic Finance has proved groundbreaking, with far reaching impacts worldwide while flourishing as a young market, there are issues and critical challenges to be addressed locally.

The Islamic banking and finance industry is facing challenges around the globe - a lack of Sharia scholars with in depth knowledge of finance products (in a recent press release for The Star news media, Dr Zambry said statistics by the International Islamic University of Malaysia (IIUM) showed that two million Islamic finance professionals were required to fill positions in IFIs worldwide by the year 2020), modern technology (the current software systems and other technologies have been developed based on interest bearing tools and products which Islamic banks cannot use without customisation).

This has been addressed by some Islamic finance education institutes in Sri Lanka through classroom education, public awareness and events enhancing knowledge in the field. This has helped Sri Lanka shine globally with well educated, qualified and experienced industry professionals who work outside Sri Lanka as top executives in Islamic banks.

Islamic finance as a solution

It can be argued that Islamic finance is a solution provider for many current local and global economic ills, since Islamic finance functions without interest/usury (Riba), uncertainty (Gharar), gambling (Qimar) and speculation (Mysir).

To safeguard global financial markets, Islamic finance industry experts should have a global view and take actions to develop Sharia, accounting, auditing, ethics and corporate governance standards for banking, insurance, leasing, capital market and money market sectors.

As a value addition, the Bahrain based Accounting and Auditing Organisation for Islamic Financial Institute (AAOFI) and Malaysian based Islamic Financial Services Board (IFSB) is working closely with other international standard setting bodies to integrate global norms, standards and best practices of Islamic and conventional banking and finance.

Islamic finance and information technology

Islamic finance's growth has been fuelled by many factors, including rapidly changing information communication technology.

Even though Sharia compliance is the key for Islamic banking, competitive technological advancement facilitates fully automated branches - a touch screen for banking transactions with no human resources, advanced mobile applications for smart phones, hightech security ATM machines, SMS and GPRS banking services and so on.

These drive the industry forward with rapid changes in the modern business environment. Modern world customers are smarter and more knowledgeable and can easily switch to other banks just by a click of mouse. And information systems strategy is the heart of the banking sector and will determine the success of the business.

Customising software for Islamic finance

We need to customise conventional core banking software to be used as ready made products since there is no standalone core banking software system for Islamic banks.

The customisation should be done to Islamic banking principles, accounting, cash management, credit facilities and other operational requirements as per Islamic finance regulations.

Standalone software

Because of the customisation of conventional banking software for Islamic banks, the urgency or need for the stand alone Islamic banking software has been shadowed.

One of the important issues is the change in legal and tax systems for Islamic finance. The banking act of 2005 brought in some changes to accommodate a profit and loss sharing banking system and is a proactive action of the government.

There are some tax modifications such as double taxation, stamp taxes (for Islamic banking transactions) that have been proposed by Islamic Finance Focus Group (IFFG) which includes experts of the industry from Sri Lanka. These are positive signs which accommodate this niche market by making amendments to the current legal and tax system which has been developed over period of time to suit conventional banking products.

Other countries - especially the UK - are aspiring to become Islamic finance hubs by making changes in legal framewors through their budgets.

The UK has five Islamic banks regulated under FSA.

The following list of the countries shows the global appetite for the fast growing Islamic banking industry: 

Thailand	Thailand already has the Islamic Bank of Thailand, backed by the government to attract Foreign Direct Investments through Islamic finance, which is to be used for economic development
Singapore	The first regional bank launched, which is the Asian Islamic Bank with a $100Mn investment
India	An emerging market for Islamic finance, deliberations going on with the Reserve Bank of India (RBI) with Islamic finance propositions
Canada	Canada is seriously looking into regulatory issues in accommodating Islamic banking and finance institutions
Germany	Appetite portrayed through their debut in the industry: Saxony Sukuk worth USD 100 million
Oman	Already given approval for the second full-fledged Islamic Bank
Malawi	Very recently created an Islamic Pension Fund
Mauritius	They have launched the first Islamic bank in the country in the middle of this year
Kazakhstan	Banking and financial institutions are looking at different options for investments because the world sees this country as the hub for Commonwealth (CIS) countries
Australia	Pushing through legislation to remove tax barriers on Sharia-compliant products that would pave the way for issuing of Islamic bonds
Nigeria	Stanbic IBTC Bank, a unit of South Africa's Standard Bank Group, has been issued with a preliminary licence to offer Islamic banking services in Nigeria
Gabon	Changing its financial laws to accommodate Islamic Finance and attract FDI as a part or their economic reform
Hungary	Magyar Iszam bank will be the first Islamic bank to be launched very soon
Afghanistan	Expects to enact an Islamic Banking law before end of 2011

A new future

Sri Lanka is a conflict affected middle income country with high national achievements in social indicators like literacy rates, doctors per patient, medical expenditure per patient and more.

The country’s economic performance improved vastly in 2010, reflecting the post war era optimism and reduced negative impact of the global financial crisis.

GDP growth is estimated at around 8% for this year based on the positive expectations of healthy growth in investments and business opportunities.

Islamic finance can contribute to the development of infrastructure of the Sri Lankan economy, especially by attracting foreign direct investments from oil rich nations for upcoming development projects in the country.

The global banking and finance system market is shifting from conventional systems to Islamic finance systems by understanding benefits from it.

Well articulated and effective government policies, an appropriate Sharia compliance framework, efficient, effective and market based regulations and tax and legal frameworks accelerate institutional infrastructure. Comprehensive Islamic finance market products and service offerings will drive this local niche and young market segment the next level.

http://www.cimaglobal.com/en-gb/Thought-leadership/Newsletters/Regional/The-CIMA-Edge-South-Asia-and-Middle-East/September--October-2011/A-closer-look-at-Islamic-finance-in-Sri-Lanka-/

Beyond Traditional Accounting By Muath Mubarak

Islamic fi nance began as a tiny component in the world’s financial market and has now grown into a strong and steady financial alternative for all who want to escape from the burden of Riba (interest). Having weathered the recent economic crisis, many Muslim and non-Muslim investors now look at Islamic fi nance positively, as an attractive pathway to achieve the optimum balance between yield and liquidity within the boundary of Shariah. As such, the Islamic finance industry is gaining wider market share and entering into a new territory day by day. Some countries are even contemplating becoming a hub for Islamic finance, as they now consider it a golden opportunity to build their own economies.

“...Never get bored with recording it, however small or large, up to its maturity date, for this is seen by Allah closer to justice, more supportive to testimony, and more resolving to doubt...” (Al Quran)

The above verse emphasizes the recording of all fi nancial transactions not only for individuals, rather for all institutions too. There are several Quranic verses which are related to accounting, even on the method of dealing with debtors and creditors, which appeared 1400 years ago. Accounting itself can be described in simple terms as the science of recording, measuring and reporting of economic events or activities for interested parties (internal or external).

Over a period of time, radical changes in the business environment and more complex business transactions have led international bodies to develop various standards. These standards will improve the comparability and understandability of financial statements as it will facilitate the ease of interpretation and comparison of financial accounts from different jurisdictions. It will also facilitate the credibility of fi nancial institutions.

But Islamic fi nancial institutions (IFIs) cannot adopt International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) as their sole accounting standards to follow and implement since these standards have been developed based on conventional fi nancial products which involves Riba (interest), Gharar (uncertainty), Maysir (speculation) and other prohibited activities such as dealing or investing in alcohol, pork, pornography linked business and transactions. Moreover, the term ‘bottom line’ in a conventional financial institution is to maximize fi nancial returns and minimize loss. 

In contrast, IFIs aim to maximize the performance of the underlying asset or project of the Islamic contract in order to ‘share’ the profit  and loss between equity holders and investors. There was an era where IFIs were compelled to prepare two sets of accounts. One was to satisfy country’s law (regulatory requirement) and the other one was as per Shariah principles. This requisite has been replaced with the existence of Accounting &

Auditing Organization for Islamic Financial Institutions (AAOIFI) standards for accounting, auditing, Shariah, governance and ethics for IFIs.

Currently AAOIFI standards are mandatory in more than 10 jurisdictions, and it also has been adopted as guidelines or basis for national standards in some other jurisdictions. This clearly indicates the increasing acceptance and recognition by countries of global standard setting bodies.

IFIs require separate accounting standards because theirs are different in the following manner:

• Islamic banking is trade based while conventional banking is based on the loan contract
• The main Islamic income base is profi t and conventional income is based on interest
• Determines the rights and obligations of all interested parties in accordance with the principles of Shariah
• Reports useful information to users, thus enabling them to make legitimate decisions in their dealings with Islamic banks
• Additional ethical dimensions
• Honesty and transparency (not merely based on business ethics rather based on the religion)
• Adopt social responsible business policies and practices as per Islam
• Separate reporting required on Shariah compliance from Shariah supervisory boards

Although Islamic finance has proven to be ground breaking, with worldwide impact, there are issues and critical challenges to be sought which go beyond traditional accounting. For example, there is a dearth of Shariah scholars with in-depth knowledge of fi nancial products, technology, banking and fi nance. In order to prove that Islamic fi nance is a solutions provider for economic ills, some we have recently experienced during the global financial crisis, the entire industry should look beyond accounting and recording for solutions. But, from a global fi nancial market perspective, integration with the global norms, standards, and best practices of conventional fi nance can still be Shariah compliant to follow and adopt.

Muath Mubarak

Coordinator - Financial Control & Strategic Planning

Barwa Bank, Qatar

Email: muath2015@gmail.com

Muath lectures on various Islamic banking and fi nance topics at First

Global Knowledge Centre, Colombo, Sri Lanka.

This article was published by Red Money in IFN on 4-Aug-2010

Sri Lanka lawyers, accountants promote Islamic finance

Mar 19, 2011 (LBO) - Top organizations representing Sri Lanka's lawyers and accountants have brought together experts in Islamic finance to broaden understanding of one of the faster growing niches in the financial sector.

The Chartered Institute of Management Accountants (CIMA) Sri Lanka Division and the Bar Association of Sri Lanka (BASL) said they are hosting program on Islamic Finance and Banking on March 28.

"Islamic finance has become one of the world's fastest growing financial sectors as investors show an increasing appetite for a variety of Islamic financial instruments," organizers said in a statement.

"The growth in Islamic finance in recent years has been driven by renewed awareness of faith based concepts and the internationalisation of the financial markets."

Islamic finance is compliant with Shariah or Islamic law which prohibits charging of interest, speculating with derivatives or options or investing in firms that produce pork or pornography.

The program will introduce the concept deal with equity investments, accounting for Islamic finance, corporate governance, the regulatory framework, legal and tax issues.

Among the speakers would be, M A M Shukri, director, Naleemiah Institute of Islamic Studies; Faizal Salieh, managing director, Amana Investments Limiteda and Ishrat Rauff, managing director, Adl Capital Limited.

Also in the program are Reyaz Mihular, Partner, KPMG Ford RhodesThornton & Co.; Suresh R I Perera, principal -tax and regulatory, KPMG Ford Rhodes Thornton & Co; Yvette Fernando, director bank supervision, Central Bank and Javed Mansoor, Attorney-at-Law.

source : lbo sri lanka

Partnering to create a stronger Islamic financial sector

UK Trade and Investment is leading an 18 strong delegation of UK Islamic finance organisations to the 16th Annual The World Islamic Banking Conference. While financial markets have been tested this year UK Islamic financial organisations remain positive that business continues and they remain committed to strengthening their partnerships with the Gulf region more than ever.

The UK's relationship with the Gulf is well regarded, given its historical trade relationship and the depth of experience found in its financial centre. In 2009, a Lord Mayor of London's visit to the United Arab Emirates discussed the pressing topic of regulation during the financial crisis, in addition to public-private partnerships.

At a time when the Islamic finance world is working towards global co-operation in establishing frameworks for regulation and dialogue on harmonising Islamic rules and structures, UK firms are deeply involved.

UK-based lawyers are playing a valuable role in helping to re-establish the legal frameworks for some Gulf sukuk bond structures, for example, following the frailties revealed by the economic crisis. English Common Law's flexibility has made it more suited to use in Islamic finance than some more prescriptive forms of law. Such work is reinforcing sukuks' legal and regulatory foundations.

"Modern-day sukuk are based on traditional Islamic principles and they have re-emerged as financial instruments only relatively recently. It is still a young industry and therefore it is all the more important that those structuring sukuk properly consider the legal consequences of what happens when things go wrong,"

says Muneer Khan, Head of Islamic finance at international law firm Simmons & Simmons.

The UK is also at the forefront of education when it comes to Islamic finance. Since the London-based Chartered Institute for Securities & Investment (CISI) launched its Islamic Finance Qualification two years ago, more than 700 students have achieved this global benchmark qualification.

The Chartered Institute of Management Accountants (CIMA) have also recently completed a groundbreaking education initiative by signing a contract with the Jordan-based organisation TAGI Training to translate and deliver the CIMA Certificate in Islamic Finance in Arabic and English throughout the Arab speaking world.

"There is a lot of enthusiasm for more of these sorts of partnerships," says Richard Thomas, Chief Executive of Gatehouse Bank. "Quite a lot of new institutions in the Gulf are looking to do more business with Western markets. Their domestic markets are relatively small and it is through strategic partnerships that their next stage of growth will be reached."

Link: http://www.ameinfo.com/217927.html

TAG-Org and CIMA to Launch First Global Arabic Certificate in Islamic Finance

The Talal Abu-Ghazaleh Chartered Institute of Management Accountants (CIMA) Academy will host the global launch of the CIMA Certificate in Islamic Finance in Arabic in Dubai on October 12, 2009 at the Emirates Towers.

The launch of the Arabic certificate, with HSBC Amanah as its global supporting partner, marks a major step forward for the Islamic Finance industry – it is the first global qualification of its kind to be offered by a professional chartered accountancy body.

Robert Jelly, director of Education at CIMA, will explain how the certificate has been developed to help meet a global shortfall of skilled Islamic finance professionals, by offering an internationally recognized qualification as an alternative to regional qualifications available in isolated geographies.

He will stress how the move to offer the certificate in Arabic - the language of one of most important Islamic Finance regions in the world – the Middle East, is core to CIMA’s strategy to ensure this global qualification is accessible to all.

Dr. Mohd Daud Bakar, international Shari’ah expert from the International Institute of Islamic Finance Inc. (IIIF) and consultant on the Certificate syllabus, will outline the impressive growth of Islamic Finance around the world, against the backdrop of the global economic crisis.

Bakar will discuss the important role Islamic Finance has to play in the modern world, and touch on Dubai’s crucial role in the industry.

Meanwhile, Salah Abu-Osbeh, regional director at Talal Abu-Ghazaleh Academies, will go on to outline the need for an Arabic translation of the CIMA Certificate in Islamic Finance.

Abu-Osbeh will tackle the importance of this cooperation to create the opportunity for Arab professionals to be specialized and internationally qualified in Islamic finance; the fastest growing financial services sector, in order to diminish the shortage of qualified professionals in this field in the Middle East.

The event will close with a speech from Ammar Shamsuddin, HSBC’s Head of Human Resources for the UAE, who will outline HSBC Amanah’s collaboration with CIMA to promote the Certificate in Islamic Finance.

Link: http://www.ag-ip-news.com/GetArticle.asp?Art_ID=7639

Islamic finance is now the buzz

While the financial meltdown may have painted a universal picture of gloom and doom in the conventional banking arena, on the fast growing Islamic finance (IF) front the mood is one of cautious optimism.

It is generally felt that Islamic banks adhering to the sharia banking code have weathered the financial crisis with commendable fortitude because of its practice of staying away from investing in toxic assets that have taken such a heavy toll on the global banking system.

While Islamic banks have emerged from the crisis virtually unscathed, conventional banks in the US, UK and Europe are bleeding losses of more than US$500 billion with some predicting losses to reach US$2 trillion from the financial market collapse.

The prudence practiced by Islamic banks is believed to have placed IF in good stead with investors looking for safe havens, while at the same time highlighting the strength of Islamic banking and financial methods.

A good indicator of the optimism garnered by the IF sector is the fact that Malaysia is wooing foreign players to create mega Islamic banks capitalized at US$1 billion each, while Kuwait has declared itself keen to be a major player in the IF arena by launching a global expansion drive.

Elsewhere, Singapore and Indonesia are expected to issue about US$900 million of sovereign Sukuk (the Islamic equivalent of bonds) in the first half of this year, while the Standard Chartered Bank—one of the world’s leading banking institutions with a significant presence in Asia and the Middle East—is predicting sales of Sukuk to reach US$10 billion by the end of 2009.

In the Philippines, our banking sources tell us their is gathering interest in Islamic banking, with at least two major banks looking seriously into IF ventures.

So while advocates of IF are not making it out that it is an alternative to conventional banking, it is nonetheless gaining ground as a model for financial institutions, especially in the field of risk management.

However, one concern, which remains a pressing issue and a challenge facing the industry is the lack of critical mass of professionals and expertise with in-dept knowledge and experience in Islamic finance.

The shortage of experienced accounting and finance professionals continues to beleaguer both corporate employers and those in the Islamic finance and banking industry around the world including those who are now aggressively seeking to secure Islamic fund management licenses. This includes experts to interpret shariah law and legal issues in the Islamic finance field.

Filling this breech admirably is the UK based Chartered Institute of Management Accountants (CIMA)—an organization with a reputation for being at the leading edge of business developments—which is the first chartered accountancy body to offer a global qualification in Islamic finance.

Making as pitch for this innovative offering in Manila recently was CIMA President Glynn Lowth who pointed out that the self-study qualification, leading to a “CIMA Certificate in Islamic finance” has been developed in collaboration with the International Institute of Islamic Finance (IIIF) and including input from selected world scholars, advisors and other industry practitioners who have developed and authored the study modules and learning material.

With interest in, and recognition of, Islamic banking fast gathering pace, CIMA (which recently set up a Middle East office in Dubai) is also teaming up with the Monetary Authority of Singapore (MAS) to forge a relationship toward developing the human capital training and development required to tap the Islamic finance global phenomenon.

With the rising demand for shariah-compliant products globally, Singapore is already strategically positioned with existing advantages to capitalize and leverage its financial and banking sectors to a prominent position in Islamic finance.

In another regional tie-up following a successful first year of partnership, CIMA and global banking giant HSBC have agreed to continue their worldwide partnership to promote CIMA’s Certificate in Islamic finance which is available in both English and Arabic.

Link: http://www.manilatimes.net/national/2009/may/21/yehey/opinion/20090521opi5.html

CIMA extends Islamic finance agreement

HSBC Amanh and the Chartered Institute of Management Accountants (CIMA) have extended their partnership aimed at promoting CIMA's Certificate in Islamic Finance.

Under the scheme, more staff from the bank will be able to take the qualfiication.

Charles Tilley, CIMA's chief executive, said: "Our partnership highlights the growing importance of Islamic Finance to the international banking community – particularly in light of the current economic crisis."

It also shows that businesses are more aware that the area needs specialist knowledge.

CIMA's Certificate in Islamic Finance is the first global qualifiaction on the matter to be offered by a professional chartered accountancy body.

Recently, Ahmad Mohamed Ali, president of the Islamic Development Bank, called for a change in the way sharia finance is regulated.

Link: http://www.gaapweb.com/news/1611-CIMA-extends-Islamic-finance-agreement.html