HNB launches Al-Najah Islamic banking unit

Hatton National Bank PLC, the premier private sector commercial bank in the country, entered into Islamic banking with the introduction of an Islamic banking unit to cater to the rapidly-growing Islamic banking market.

Al Najah, the first Islamic banking unit launched by HNB, will serve its Islamic banking clients with a special banking unit located at its head office at HNB Towers. The unit is fully equipped with trained staff and systems and well-structured products to serve its customers.

The unit will operate under the overall supervision of HNB and will offer a broad spectrum of Shariah compliant products and services to its entire clientele.

In addition to the current accounts, the bank’s Islamic Banking Unit (IBU) will provide depositors with profit sharing Mudaraba savings and Mudaraba investment options which will provide depositors with a Shariah based return on their investments.

For business and personal customers seeking financing, the bank would offer a range of trade related services, leasing for vehicles/equipment and machinery, home financing, working capital requirements and other personal financial services.

All operations of the Islamic Banking Unit will be in accordance with the CBSL guidelines and shall also be in conformity with the Shariah principles. This will also ensure that the fund management operations and earnings of the IBU will be segregated and distinct from the conventional banking activity.

The bank has already appointed a Shariah advisory panel headed by Ash-Shaikh Mufti Yoosuf Haniffa comprising of extremely knowledgeable and experienced well-known Shariah scholars who would supervise and advise on Shariah-related aspects of the IBU business.

Commenting at the official launch, the Head of the Islamic Banking Unit L.A.M. Hisham opined that HNB’s range of Shariah based services provide customers with the option of choosing a product or service in harmony with their individual ethical considerations.

Speaking at the inauguration, HNB MD/CEO Rajendra Theagarajah stated that HNB, a bank with a longstanding history of 123 years, saw its initiation in the hill capital with the objective of serving the nation at a grass root level. “HNB, which ranks amongst one of the largest private sector commercial banks in the country with an asset base of over Rs. 380 billion, is delighted to venture in to the domain of Islamic banking and finance.”

He went on to state that Islamic banking caters to the ever-growing demand of customers. Theagarajah stated that it was a great pleasure to have obtained the fullest support and cooperation of the HNB Board of Directors and corporate management for this venture. This, he stated, was a true testimony of HNB’s far-sighted vision in going the extra mile.

Speaking at the occasion ADL Capital Chairman A.I. Marikkar, the former Managing Director of Amana Investments Ltd. (presently known as Amana Bank), stressed that HNB with its widespread islandwide coverage and the cooperation of its management had ventured out to provide an efficient customer service to its Islamic banking customers. He also stated that the HNB Shariah Board comprises well-known eminent Shariah scholars and that the Islamic banking unit of HNB would be well received by customers due to HNB’s strong brand affiliation.

The first deposits of the Islamic banking unit were accepted by HNB Chairperson Dr. Ranee Jayamaha. The vote of thanks was delivered by HNB Islamic Banking Unit Manager Fariz Fuad.

The event was graced by members of the Shariah Board Ash-Sheikh M.M. Mubarak, Ash-Shaikh Fazil Farook and Ash-Shaikh Mohamed Mashood Muhamed Insaf. ADL Capital Limited Chairman A.I. Marikkar, ADL Capital Managing Director Ishrath Rauf and members of ADL Capital Ltd. Azad Zaheed, Shabri Abdul Cader and Ishrath Mohideen were also present.

HNB Chairperson Dr. Jayamaha, MD/CEO Theagarajah, HNB Deputy CEO Jonathan Alles and members of HNB’s corporate management, senior management, customers and staff of HNB were also among the distinguished gathering.

http://www.ft.lk/2012/02/29/hnb-launches-al-najah-islamic-banking-unit/

Amana starts first Sri Lankan commercial bank under Islamic law

(Reuters) - Sri Lanka's Amana Bank on Friday said it will next week start the operations of the island nation's first sharia-compliant commercial bank with the opening of 14 branches across the country.

The bank in a statement said it from Monday will offer a range of products including trade and treasury services.

Over the last 10 years, Amana developed its insurance and investment divisions as it prepared to become a bank.

Analysts estimate the island nation's Islamic finance industry has the potential to become a $1.5 billion business, given appropriate tax and other laws approved by Sri Lankan government based on sharia, the Islamic legal system.

Muslims make up about 8 percent of Sri Lanka's 21 million people, but Islamic financial products are also popular among non-Muslims due to their interest-free nature.

Amana's insurance arm, Amana Takaful has already been listed on the island nation's stock exchange .

In February, the bank's shareholding amounted to 3.4 billion Sri Lanka rupees ($31.1 million).

Bank Islam Malaysia Berhad accounts for 20 percent of Amana's strategic investments, while AB Bank, Bangladesh, has a stake of 15 percent and Saudi Arabia'a Islamic Development Bank has 10 percent. ($1 = 109.450 Sri Lanka Rupees) (Reporting by Shihar Aneez; Editing by Bryson Hull)

The next milestone: Islamic banking and finance in Sri Lanka by Muath Mubarak

With a civil war behind Sri Lanka, MUATH MUBARAK highlights the mechanisms needed by the Islamic finance industry to facilitate the country’s economic development.

Today, Islamic fi nance is a thriving industry partly because the benefit derived from the Islamic economic system is more beneficial to society than that offered by prevailing conventional banking practices.

Some developing and developed countries; namely, Australia, Canada, France, Hong Kong, India, Malta, Singapore and Thailand, are actively engaged in building this young and niche market by making amendments to their regulations and legal frameworks.

The miracle of Asia Following the end of Sri Lanka’s civil war, the government is committed to ensuring the country’s long-term economic development. It has already achieved several successes, including establishing the fi rst fully fl edged Islamic bank.

There was a period where Islamic banking and finance (IB&F) was unlikely to respond to the changes needed to meet the aspirations of IB&F in the country. These include providing the basic and more innovative products.

Over the last decade, there have since been many efforts put forward to develop the local industry, such as the establishment of the country’s first Islamic bank.

There is a pivotal need to review and assess all underlying legal and tax systems to nurture, direct and protect

the industry. Otherwise this emerging industry will not facilitate economic development in the country.

This understanding has led countries with complicated tax regimes, such as the UK and US, to the process of reforming and restructuring their tax laws and other relevant regulatory requirements to attract Islamic investors. It is a longterm plan involving constant review to overcome disputes with more workable

solutions.

It is only by ensuring Sri Lanka’s legal and tax systems are aligned with Islamicprinciples that healthy competition among Islamic fi nancial institutions (IFIs) with more innovative business strategy can grow and in turn, develop the economy. This is a strategic investment issue for foreigners from the GCC and other interested parties to invest in Sri Lanka.

The Islamic Finance Focus Group was formed of industry experts in the fi eld of IB&F to work with regulators and other authorities. Following this, law and tax suggestions were proposed in the country’s budget 2011 in order to eliminate the tax barriers and help IFIs to compete and strategically position themselves on a level playing fi eld in the global fi nance sector.

This proposal of tax reformation must consider stamp duty, value added tax, nation-building tax, tax returns and withholding tax. It will be a wide open and unique banking segment to experience the true Islamic banking. There is room to make certain concrete and visible changes in order to allow Islamic finance to prevail in the country.

Corporate governance, compliance and risk management of Islamic banks are also very important to fuel the

industry’s healthy growth. The relevant authorities must make the required changes to mitigate future risks such as corporate failures, scams and collapse of the banks which can occur in the absence of sufficient corporate governance codes.

Once the system is in place it will be easy to monitor the banks’ operations and issue guidelines to direct the financial institutions and banks. This can be done by implementing prudential regulations ratios such as capital adequacy, liquidity and risk management and other financial measurements.

Even though the Islamic capital market in Sri Lanka has a long way to go,some initiatives have given birth to

new ventures aimed at identifying and assisting Islamic fi nance investors to invest in the country. The absence of capital and money market regulations for Islamic fi nance institutions will hinder the growth of this market segment.

Continuous lobbying with the relevant authorities will help address these issues. Recent IPOs in the country have illustrated the expansion of listed companies and can encourage foreign direct investments, particularly from GCC investors. These investors can also invest more eff ectively if the current system is reformed.

A strong foundation for the growth of this industry has yet to be laid down. Lack of research in Islamic banking in Sri Lanka has prevented the market from identifying the industry’s precise growth rate or asset size. Another issue is the lack of human capital in the industry in Sri Lanka.

There are more than fi ve institutions which have been educating the public about the industry while creating some public awareness and promoting the industry by inviting world renowned speakers, scholars and experts.

Yet there is a huge gap between knowledgeable and experienced industry professionals in the market and the

demands of the industry. This is a global issue and needs to be addressed to take this industry to the next level.

With Sri Lanka at peace and making an effort to be the ‘Miracle of Asia’, this will pave the way for the country to grow in leaps and bounds. Rapid infrastructure developments will require significant capital funding. The country can easily attract investors, particularly Islamic finance investors, to these lucrative projects.

Muath Mubarak works in the fi nance control department at Barwa Bank in Qatar and he can be contacted at muath.2009@gmail.com or muath@fi rstglobal-group.com.

This was published by Red Money Group in IFN on 8-Jun-2011

Sri Lanka: Uncovering the Islamic Finance Framework By Muath Mubarak

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

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

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

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

• Regulation

• Taxation

• Standardization

• Awareness

• Skill

The Islamic fi nance framework

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

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

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

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

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

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

Today’s Challenges to regulators:

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

Conclusion

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

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

This was published by Red Money Group in IFN on 27-Nov-2009

NURTURING ISLAMIC FINANCE IN SRI LANKA by Muath Mubarak

– A post war view of the Sri Lankan economy and the role of Islamic Finance in it-

Amana gets banking license - Sri Lanka

Amana Bank Limited, which obtained the provisional approval license from the Central Bank last year to become a bank have been granted the go-ahead of the Minister of Finance to operate as a commercial bank in the country. According to the senior officials of Amana, the new bank will start operations in the near future as Sri Lanka's first commercial Islamic Bank following the Shari code of ethics. Amana Bank last year raised 3,159 million rupees by selling 631.9 million 5.00 rupee shares in a private placement deal. The new bank will be backed by the Bank Islam Malaysia Berhard which currently holds a 10 percent stake in Amana Investment Limited, which is the parent company of Amana Bank.With the liberalization of the Eastern Province of the country, where a Muslim majority resides, analysts predict 'good business' for the newly set up bank.The minimum capital requirements needed to start operations as a commercial bank is Rs. 3.0 billion according to Central Bank Guidelines Amana Group has established itself as the pioneer in providing Islamic financial services, from merchant banking to insurance, to Muslims and non-Muslims alike. Incorporated in 1997, Amana Investments Limited (AIL), being the investment and financing arm of the Group, offers a range of Sharia-compliant financial solutions to its customers.

Dailymirror.lk

Soon - First Islamic Bank in Sri Lanka

The Amana Group was recently given a Letter of Provisional Approval by the Central Bank (CB) to establish a licensed commercial bank named Amana Bank Ltd, and is taking steps to set up the ‘first truly’ Islamic commercial bank in the country, the group said in a press statement.

It said upon achieving certain conditions listed in the Letter of Provisional Approval such as the raising of a minimum capital requirement of Rs. 2.5 billion, Amana Bank expects to receive a banking licence from the CB that will enable it to begin commercial banking operations.

The group said Amana Bank plans to use its position as the first Islamic bank in the country to attract Sharia-compliant investment flows from the Middle East and the Far East. Subject to Malaysian and Sri Lankan regulatory clearances, Amana Bank hopes to utilize the technical expertise and specialized Islamic banking know-how of Bank Islam Malaysia Berhad (BIMB), which currently holds a 10% stake in AIL, to design and deliver a new range of Islamic banking services, which includes current accounts, foreign exchange transactions, inward and outward remittances, export financing, guarantees, performance bonds, bid bonds, Corporate Treasury placements, private banking, wealth management, long term housing finance, infrastructure financing, agricultural finance, and leasing.

The statement said Amana Bank also plans to actively participate in the government’s ‘Re-awakening of the East’ programme by expanding its branch network in the Eastern Province beyond the currently existing five and offering appropriate Islamic banking solutions to facilitate the resurgence of the Eastern Province’s infrastructure and economy.

The Amana Group has established itself as the pioneer in providing Islamic financial services, from merchant banking to insurance, to Muslims and non-Muslims alike. Incorporated in 1997, Amana Investments Limited (AIL), being the investment and financing arm of the Group, offers a range of Sharia-compliant financial solutions to its customers.

Link:
http://www.sundaytimes.lk/090329/FinancialTimes/ft325.html