GROWTH CHALLENGES: Lack of a strong legal platform may hinder growth of the industry Read more: COVER STORY: “Strong legal framework needed for Islamic financing”

Despite the recent global economic crisis, the Islamic finance industry has continued pushing forward strongly. Entering 2012, the industry increased its total assets by 23.8 per cent by the end of 2011— comprising a hefty 22.4 per cent of the total assets of the banking system.

Global recognition has not been in short supply either as evidenced by The Banker Magazine’s 2011 rankings of top Islamic financial institutions which saw 21 Malaysian institutions listed.

 

By all appearances, Malaysia’s Islamic finance industry is well on its way to fulfilling its aspirations to becoming an international Islamic financial centre.

Is it all hunky dory?

 

Missing element: “The government should look into establishing a special court for Islamic banking,” says Datuk Ahmad Zaini Othman, Chief Executive Officer of the Malaysian Building Society Berhad (MBSB). “This is something I think is still missing in this country.”

“If they want Islamic financing in Malaysia to be recognised internationally, they need to do this,” the CEO stresses.

 

Zaini points out that at present the legal aspects such as legal settlements still go through conventional courts. While the conventional judiciary may be familiar with Islamic financing law, Zaini stresses that we need judges who not only know the Islamic financing law but who also possess deep understanding of the religious aspects that go beyond laymen comprehension.

 

“It is all there in the Quran and Sunnah, but we need people who can correctly interpret them,” says Zaini, emphasising that “interpretation is important.”

 

“For example, riba is not right and forbidden; however excessive profit, such as selling a property for 150 per cent profit, is wrong too.”

 

Mismatched avenue: Zaini believes that continuing to rely on conventional courts for Islamic financing’s legal matters would be detrimental in the long run.

 

“Conventional court in itself is a mismatch,” says Zaini, clarifying that the word ‘conventional’ does not match with ‘Islamic’.

 

“Because it is religion-based, at the end of the day we need to return to that essence and adhere to it,” says Zaini. “That means having the necessary infrastructure to uphold it in a dedicated manner.”

 

What might happen if conventional courts continue to be used to deal with legal matters pertaining to Islamic financing?

 

“For one, you will continue looking at it through a secular way of thinking,” replies Zaini, adding that it may lead to oversight of some aspects based on Islamic principles. According to Zaini, another effect would be the stagnation of Islamic financing expertise in the country.

 

“One example is the musharakah mutanaqisah product — this product is not feasible for properties under construction as some aspects of the law do not recognise certain parts of the transaction,” highlights Zaini. “So if a developer goes ahead with the product, there is no protection for the developer under any law.”

 

The CEO further points out how the lack of protection in certain scenarios is limiting the industry. “If you want to attract foreign Islamic investment in a big way, you need to have a strong Islamic legislative framework in place.”

 

“Foreigners would not come here and invest hundreds of millions if they are not protected,” Zaini emphasises. “With a proper legal framework, we can do much bigger business.”

 

In addition, Zaini also points out that such a framework would also mean that the country would be more attractive to top talents in the industry.

 

“If you do not have a very strong framework, you may not have a strong image of the Islamic platform,” says Zaini, asking rhetorically, “why would an Islamic financing talent from the GCC (Gulf Co-operation Council) come to work in Malaysia if we don’t even have a court for Islamic banking?”

 

“He would probably much rather go to GCC countries where the legislation is more developed in this respect.”

 

Challenging: However, Zaini admits that putting in place a legal framework for Islamic financing would be challenging. Differing opinions and interpretations worldwide pose a daunting obstacle — Zaini cites the introduction of Profit Equalisation Reserve (PER) by Bank Negara as an example.

 

“The Islamic deposit programme is based on profit and loss whereby banks pay dividends based on the allocated profits,” says Zaini, explaining that this means the dividends are higher if the Islamic banks make good profit and vice versa. “In comparison, conventional banks pay based on a fixed amount of interest.”

 

“So when Islamic banks report good profits and subsequently pay more dividends than conventional banks, there would be a flow of customers from the conventional banking market to the Islamic financing market.”

 

Zaini explains further that PER was introduced to avoid the mass movement between markets by fixing the percentage of profit shared as dividends by the Islamic banks.

 

“Say they make profit and are able to pay 9 per cent, PER means they can only pay for example 4 per cent while 5 per cent would be kept in reserve.”

 

“There might come a time when the profit margin is smaller, in such an event, the reserve would be used to top up the dividends to be paid out,” says Zaini. “The GCC is against this and do not recognise the practice because it is not in line with shariah.”

 

However, Zaini feels the way forward would be to ignore the differences and focus on what can actually be done.

 

“Malaysia is heading towards a two-system financial system and for the Islamic part of it, we need a strong legal platform,” says Zaini. “I think we have a sufficient pool of shariah legal expertise, and our universities are also producing enough experts in the area of Islamic financing.”

 

“But I think we also need to bring in scholars from abroad with a different perspective of the international market so that when we formulate the legal framework, it will be more comprehensive,” adds Zaini, explaining that doing so would enable Islamic financing in the country to reach greater heights.

 

“Like the English law, this will not happen overnight but instead through years of practice and experience.”

Read more: COVER STORY: “Strong legal framework needed for Islamic financing” - RED - New Straits Times http://www.nst.com.my/red/cover-story-strong-legal-framework-needed-for-islamic-financing-1.149172#ixzz281b5brlA

Challenges to growth of Islamic banking

Although Islamic banking has grown rapidly over the last three decades, the volume of transactions touched $1.086 trillion (Dh3.98 trillion) in 2011

Although Islamic banking has grown rapidly over the last three decades, the volume of transactions touched $1.086 trillion (Dh3.98 trillion) in 2011, accounting for only one per cent of the world's total.

This point was made at a seminar organised last week by the Emirates Centre for Strategic Studies and Research in Abu Dhabi in cooperation with the Paris Institute of Geo-Political Studies.

The seminar also highlighted global interest in Islamic banking, motivated by the growing economic importance of Islamic countries and the increasing number of Muslims in places such as Europe. Even China is entering the market, recently approving a licence to set up the first Islamic bank in the country.

More than 310 Islamic financial institutions currently operate in more than 75 countries, and in the GCC the sector continues to flourish. The recent announcement that the world's largest Islamic bank, with a capital of $100 billion, would be headquartered in Bahrain, will boost this trend.But despite the global interest and new trends, Islamic banking still faces many challenges. Many of these challenges have complicated Sharia and professional characteristics.

Wide variation

Regarding Sharia, there is a wide variation in fatwas in each Islamic bank. Some of these fatwas contradict each other, thus creating hurdles in the progress of the sector.

This disparity reflects conflicts of interest and competition among Islamic banks on the one hand, and among scholars on the other. Some financial instruments adopted by some Islamic banks are prohibited or treated as undesirable in other lenders, which may hinder their adoption and the mission of the banking business in general.

On the professional side, although one of the most basic fundamentals of Islamic banking is based on the profit-and-loss sharing principle, the interest rate in Islamic banks mirrors interest rates in traditional banks, in that it moves up and down in accordance with the interest rate of the London Interbank Offered Rate (Libor) on the London Stock Exchange. This is the average interest rate that leading banks in London charge when lending to other banks.

Even though fatwa departments in Islamic banks are currently considering a substitute for this interest rate mechanism, in reality, Islamic banking is part of the global banking system and will remain so due to the integration of the economies of Islamic countries with the global economy.

This is because economic globalisation does not allow for such a separation between Islamic banks and traditional banks.

The impact of the global financial crisis on Islamic banking stand as evidence of strong association between Islamic banking and global banking, despite the fact that the effects on Islamic banks were less serious than those suffered by traditional banks. Let us not forget that one reason for this is that Islamic finance prohibits overestimating assets without sound financial foundations, and financial derivatives — two major causes of the crisis.

The efforts of Islamic banking to go global are important, particularly if they want to achieve the stature of French banks, for example, but it also requires finding a solution to the currently existing Sharia and professionalism-related problems.

Dealing with global fin-ancial markets is different from dealing with local and regional markets, especially given that there are complicated financial instruments and derivatives that are difficult to deal with in terms of Sharia only.

There are also major stock exchanges for commodities, gold and oil that deal with billions of dollars daily, thus putting big burdens on financial institutions because of the size and speed of transactions.

But if these issues can be resolved, it would be possible for Islamic banking to constitute an important part of the world banking system.

Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.

http://gulfnews.com/business/opinion/challenges-to-growth-of-islamic-banking-1.971299?flv=1

Why is Islamic finance important for MBAs?

There are a number of business schools now introducing Islamic Finance in their curriculums. For some, the reasoning is to open MBA students up to different cultural realities, but for many schools, it just makes business sense.

We can identify three main reasons why it is important to include Islamic Finance in the curricula of an MBA student.

Islamic finance has a niche hold on the market, and it is growing at a tremendous rate

Islamic finance has developed into a solid industry that complements conventional banking, only a fraction of the available liquidity is actually invested in the sector, (2 per cent of global banking assets) though it does offer great potential and further growth prospects (is growing more than 20 per cent annually.) Some of the most active countries in Islamic finance (Saudi Arabia and the UAE for example) represent the highest level of liquidity in today’s global market, a market hungry for liquidity.

On the other hand, out of the 1.6 billion Muslims in the world, only 14 per cent use traditional banks, compared to 92 per cent of US households and 95 per cent UK, and a large number might find Islamic finance as an attractive option for their savings and/or financial needs.

The Islamic market demands a specific expertise that combines solid financial knowledge with that of Islamic finance market. MBAs can fill that role

The origins of the Islamic modern banking movement first developed in the 1950s and 60s, but its full development occurred in mid 70s after the oil crises of 1973, coinciding with the emergence of Islamic movements.

During the 90s, Islamic financial institutions became increasingly innovative and developed more complex instruments and structures to meet the demands of modern day business. Today they cover a wide product range, from corporate finance to asset management; and future development is likely to be in the area of derivatives liquidity management.

In recent years, driven by the oil financial liquidity and an increase demand, the industry witnessed a large expansion, both in terms of its side, as well as in the financial innovation of the new developed products. Today, most conventional players are active, like Deutsche Bank, HSBC, BNP, Citi, UBS, or Barclays in the offer side but also companies like general electric in the demand side. Therefore, it is becoming a global industry that needs global expertise.

Because the industry is so new, there is still much room for people willing and capable of providing the needed innovations to move the industry further. Thus, MBAs not only need to learn about the Islamic finance world because it can shed light on other finance markets, but because it invites innovation and offers job growth.

MBA students have a solid training in finance and finance innovation, that can be easily transfer to the Islamic finance sector, provided that they understand enough the Islamic finance market. Therefore, for MBA students looking into new career possibilities, Islamic Finance Industry can definitely be something for them to explore.

A deeper understanding of Islamic finance will help MBAs shape the debate on the new financial order

There is a popular saying: There is nothing like a good crisis to reassess your options and look for new alternatives.

Islamic finance can offer some food for thought in the financial crisis. For example, the industry was less effected by the crisis because its intrinsic features help the stabilization of credit growth, promote an asset-based investment, foster economic productive transactions and thus a reduction of systemic risk, and for the most part help to have a balanced leverage.

In general, the principles of avoiding speculation and fostering instead the real economy provide interesting insight on how to avoid some of the causes of financial crisis.

In short, the market for Islamic finance has developed itself as a serious alternative for conventional banking and covers a wide product range, experiencing state of the art education- and research regarding the Islamic Finance Industry is interesting for international students.

A deeper knowledge of Islamic finance can improve the competitiveness of MBA students on the international financial market stage – for their personal career possibilities and also in shaping a new financial order that is in the coming.

Celia de Anca is the professor of Islamic Finance and director of Scief at IE Business School.

http://www.independent.co.uk/student/postgraduate/mbas-guide/why-is-islamic-finance-important-for-mbas-8009567.html

Islamic finance: Fitting In & Standing Out

A Sharia-compliant equivalent of the popular UK and US reality show The Apprentice has recently been announced by a UK-based organisation.

This follows the news of an ‘Islamic Facebook’ and ‘Halal-Tube.’ The Muslim world also has superheroes, like The 99, Muslim dolls (Dara and Sara), Muslim Cola (Mecca Cola), Islamic car, and so on.

It seems the criticism labelled against Islamic fin-ance products, form over substance, also has application in the ‘info-tainment,’ and social media area. Yes, imitation is the best form of flattery, but we (the Muslim world) also need to be flattered.

So where are the authentic innovations and inventions? Surely there must be ideas that can be financed in a compliant manner from, say, 10 per cent of the 1.8 billion Muslims living in the 57 Muslim countries and outside the Muslim world.

Here is an opportunity for Islamic finance to fund something beyond the traditional areas such as real estate, and actually show the way to conventional finance in the Muslim countries. No, it is not for deposit-accepting Islamic banks to lead, they will not, but Islamic funds, like venture capital, small to medium enterprise (SME) funds, and private equity.

The two most common questions I was asked in my travels, especially by students, are: What is the difference between Islamic and conventional finance? And what has Islamic finance financed?

The implicit point in the second question is the role of the financial sector, typically the largest economic sector in the Muslim countries, as a ‘lubricant for greasing’ the country’s gross development product, econ-omic diversification, and development. It is well accepted that Islamic banks finance permissible activities linked to the real economy, like real estate. However, there are also nine other economic sectors.

An important element of prudent risk management is reducing concentration risk. The credit crisis impacted the financial economy, and, thereafter, impacted the real economy, hence, Islamic and conventional banks in the GCC region have seen a rise in non-performing loans and increased provisioning. Thus the industry as a whole needs to reduce the exposure risk to the vertical stakeholders in real estate.

Strategy

The issue for Islamic finance is, what is the diversification and development strategy for staying relevant? For example, the pursuit of establishing an Islamic mega-bank, capitalised at, say, $5 billion paid up capital, is not a strategy, it is just another bank, albeit much larger. However, challenges still remain on standardisation, managing liquidity, meaningful cross-border presence, qualified personnel and scholars, regulations, accounting, customer service, and so on.

A strategy for Islamic finance, much like creating industry organisations AAOIFI (Accounting and Auditing Organisation for Islamic Financial Institutions or IFSB (Islamic Financial Services Board), would entail establishing the foundation for meaningful asset class build-out. The expansion of asset classes would include trade finance funds, leasing funds, Sharia-based (equity) funds, halal food fund, SME funds, venture capital funds, etc. The asset class build-out will not only answer the second question, ‘what has Islamic finance financed’, but, more importantly, contribute depth to the Islamic equity capital market.

Today, there is a bias towards debt capital market Islamic finance, and, as an institution or individual can be conventionally overleveraged with negative consequences, an Islamic financial institution can be Islamically over-leveraged, i.e., Arcapita, Gulf Finance House and Investment Dar among others. Thus, to reduce the present bias of more depositors, called investment account holders (IAH), over capital market investors, the industry needs to appeal to equity instruments to address the risk profile of the latter. Obviously, this will not happen overnight, as it is a process involving customer surveys, education, including that of Imams, regulations, products, accessibility, customer service and support.

Will there be resistance from the banks, as deposit amounts will be reduced resulting in possibly lesser loans and loan amounts? Most likely, but the present situation has resulted in the ‘man on street’ asking the two above-mentioned questions. For example, a public-listed Islamic financial institution, like Dubai Islamic Bank, has thousands of IAHs. Now, if a robust index is created of only publicly listed Sharia-based companies, it addresses the first question of the difference. A Sharia-based index would not need the screening as such companies have Sharia advisers, by-laws aligned to Sharia principles, and pay zakat.

Generating interest

The likelihood of a fund off a Sharia-based index, comprising only Islamic banks and leasing companies, Takaful operators, Islamic REITs, halal food companies, etc., may generate more interest from the same IAHs than a Sharia compliant fund comprising companies like Microsoft, IBM, Pfizer, ExxonMobil, etc. Thus a client of, say, Abu Dhabi Islamic Bank may be both an IAH and a fund investor.

For the Islamic equity capital market to develop, the Islamic asset management space has to not only develop, but also expand to other asset class offerings.

The development of asset classes means that compliant funds are available for venture capital, SME fin-ancing, private equity, etc. Then, a real possibility exists for compliant funding inventions and innovations from the Muslim world on par with YouTube, Facebook, etc.

To rise to the challenge of being conventionally efficient, Islamic finance has to first fit in, and then it will stand out. We can start in the Arab Spring countries.

Author: Rushdi Siddiqui

The writer is Global Head, Islamic Finance and OIC Countries, Thomson Reuters. Opinion expressed here is the writer’s own.

http://www.sohbetna.com/business/articles/islamicfinancifittinginandstandingout/

Sulaiman Al-Rajhi’s life a rags to riches story

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  Sulaiman Al-Rajhi with Muhammad Al-Harbi during the interview.

Saudi Arabia’s rags-to-riches billionaire Sulaiman Al-Rajhi is also a world-renowned philanthropist. He is the founder of Al-Rajhi Bank, the largest Islamic bank in the world, and one of the largest companies in Saudi Arabia. As of 2011, his wealth was estimated by Forbes to be $7.7 billion, making him the 120th richest person in the world. His flagship SAAR Foundation is a leading charity organization in the Kingdom. The Al-Rajhi family is considered as one of the Kingdom’s wealthiest non-royals, and among the world’s leading philanthropists.

Al-Rajhi is a billionaire who chose last year to become a poor man at his own will without having any cash or real estates or stocks that he owned earlier. He became penniless after transferring all his assets among his children and set aside the rest for endowments. In recognition of his outstanding work to serve Islam, including his role in establishing the world’s largest Islamic bank and his regular contribution toward humanitarian efforts to fight poverty, Al-Rajhi was chosen for this year’s prestigious King Faisal International Prize for Service to Islam.

In an interview with Muhammad Al-Harbi of Al-Eqtisadiah business daily, Al-Rajhi speaks about how he was able to succeed in convincing chiefs of the leading central banks in the world, including that of the Bank of England, nearly 30 years ago that interest is forbidden in both Islam and Christianity, and that the Islamic banking is the most effective solution to activate Islamic financing in the world and make it a real boost to the global economy.

The story of Al-Rajhi is that of a man who made his fortunes from scratch, relying on grit and determination. Al-Rajhi threw away his huge wealth through two windows — distributed a major part of his inheritance among his children and transferred another portion to endowments, which are regarded as the largest endowment in the history of the Islamic world. He had to fight poverty and suffering during his childhood before becoming a billionaire through hard work and relentless efforts, and then leaving all his fortunes to become penniless again.

Al-Rajhi is still very active and hardworking even in his 80s with youthful spirits. He begins his work daily after morning prayers and is active until Isha prayers before going to bed early. He is now fully concentrated on running the endowment project under his SAAR Foundation, and traveling various regions of the Kingdom managing activities related with it. He always carries a pocket diary containing his daily programs and activities and he is accustomed to stick on to the schedule he had prepared well in advance.

Al-Rajhi scored excellent performance results in almost all businesses in which he carved out a niche for himself. In addition to establishing the world’s largest Islamic bank, he founded the largest poultry farm in the Middle East. The credit of activating the organic farming experiment in the Kingdom mainly goes to him through launching a number of farming projects, including Al-Laith shrimp farming. He also established real estate and other investment projects.

Excerpts:

Sheikh Suleiman, have you become a poor man again?

Yes. Now I own only my dresses. I distributed my wealth among my children and set aside a portion for endowment to run charity projects. As far as I am concerned, this situation was not a strange one. My financial condition reached zero point two times in my life, and therefore I have had the feeling and understanding (about poverty) well. But now the feeling is accompanied by happiness, relaxation and the peace of mind. The zero phase in life this time is purely because of my own decision and choice.

Why did you choose this path?

All wealth belongs to Allah, and we are only those who are entrusted (by God) to take care of them. There were several reasons that prompted me to distribute the wealth and that resulted in performing this virtue. Most important among them is to foster brotherhood and love among my children and safeguard their harmonious relationship. This is more significant than any wealth in this life. I was also keen not to be instrumental in wasting the precious time of courts in case of any differences of opinion among them with regard to partition of inheritance. There are several examples that everybody could see when children entered in dispute over wealth and that led to the collapse of companies. Nation has lost many large companies and their wealth that we could have been saved if we tackled the matter in a right manner. Apart from this, every Muslim should work on some endowments that could benefit him in the life after death. Likewise, I prefer my children to work on developing wealth, which they inherit after my death, during my lifetime itself rather than I continue working to increase them.

Are you getting enough free time after the distribution of wealth?

As earlier I am still working on developing endowments. I will donate and give alms from it until Allah takes over this trusted deposit. I have worked out a meticulous scheme for this endowment and developed it with the support of specialist consultants and agencies. This idea struck me long before. Usually people in the Islamic world set aside one-third or one-fourth of their wealth for endowment and that will be effective only after their death. But in my case, I decided to implement this decision in my lifetime itself. So I invited my children to Makkah during the end of Ramadan and presented the idea in front of them. They readily agreed it and then I distributed my wealth among my children in addition to setting aside a part of it for endowment. I sought the help of consultants to facilitate the procedures for the distribution of all my assets including properties, real estates and stocks, and that was completed in a cordial atmosphere. All my children are now fully satisfied with my initiative and they are now working on these properties in my lifetime.

How much wealth you distributed among children and set aside for endowment?

He laughed without giving an answer.

How do you feel now about your projects?

I would like to point out that there were some factors that prompted me to make investments in certain specific areas. My experiment in money exchange was the temptation to set up a bank. The absence of any Islamic banking was also another factor in establishing Al-Rajhi Bank, which is now the world's biggest Islamic lender by market value. I began the experiment with opening an office in Britain where we introduced Islamic banking system at a greater level. The experiment was a success and it had received total backing of the Saudi Islamic scholars at that time. I still recall the application made for getting license for the bank was turned down in the beginning. This was because the concerned British officials did not have any idea about Islamic banking. Therefore, I went to London and met with the manager of the Bank of England and two of his deputies. I told them that Muslims and Christians see interest as forbidden (haram), and the Muslim and Christian religious people are unwilling to make transactions with banks based on interest and instead prefer to keep their cash and other valuables in boxes at their homes. I tried to convince them that (if we establish Islamic banks) this money would be helpful to strengthen the world economy. These talks were helpful in convincing them and they agreed to open Islamic banks. Then I traveled widely throughout the world in the West and East, and met with the chiefs of central banks in various countries and explained to them about the salient features of the Islamic economy. We started working and achieved success through launching it in the Kingdom and implementing it in London. When I returned to the Kingdom from London, I met the late Grand Mufti Sheikh Abdul Aziz bin Baz and Sheikh Abdullah bin Humaid, and informed them about the plan saying: 'We would reach, by the grace of Allah, the Islamic banking within a stipulated period of time.' They praised me for the initiative. We started aggressively implementing the project and that is in the form of Al-Rajhi Bank as you see now. Regarding Al-Watania Poultry, the idea of establishing such a venture struck me after my visit to a poultry project abroad. I saw that the way of slaughtering chicken was not proper. Then I decided to make investments in the field of poultry after considering it as a duty to my religion and nation. I started the project even though making investments in poultry involved high risks in those days. Now Al-Watania has become a mega Saudi project that is instrumental in achieving food security in many respects. The company enjoys a 40 percent market share in the Kingdom, and Al-Watania chickens are naturally fed and halal slaughtered in accordance with the Shariah principles.

What about your insistence on introducing organic farming through Al-Watania agricultural projects?

As you see, now I am 85 and still enjoy good health. If we pursue organic farming as our healthy food style, we can bring down cost of treatment to a great extent. We made several experiments in the field of organic farming. Our numerous experiments met with setbacks in the beginning. This prompted many engineers and workers to reach a conclusion that it is impossible to have organic farming and profit together. In the beginning, they were firm in their view that this would not at all be successful. But I insisted that it would work and continued compelling them to proceed with the venture. At one time, I took a firm position and told them either to do organic farming or quit. Now we are reaping the fruits of this lucrative business in line with my vision to provide only the healthiest, safest and most trustworthy food to consumers. Al-Watania Agricultural Company stopped using chemicals and artificial fertilizers and focused exclusively on organic methods such as the use of pest insect repellants and animal manure.

Your austerity and thriftiness on spending are well known. Please comment?

I am not a miser. But I am always vigilant against extravagance. I always try to impart this lesson to all those working with me whether it is in banking or poultry or other projects, and I am more concerned about it when it is coming to the case of my children. In the past, I never gave money to my children when they were young in return for nothing. When any one of them approached me to give them cash, I asked them to do some work in exchange for it. In our life, we practice some extravagance without being aware of it. But it affects our whole life, exhausting us and putting a burden on our country. For example, there is no logic in putting heavy curtain on our windows and then lighting lamps in daytime when we get sunlight free of cost while electric lamps are costly.

Despite all your wealth, why don't you still have a private aircraft?

Let me tell you that I have many planes but they belong to various airlines. I have ownership in all of them to the tune of the ticket fare that I pay for each travel. I always travel in economy class with the conviction that Allah bestowed us wealth not for showing arrogance or spend extravagantly but to deal with wealth as a trusted property.

What about the recreation and hobbies of Sheikh Al-Rajhi? How do you spend free time?

I have not any special recreations. However, I find happiness and enjoyment while making a trip to the desert. I never went out of the Kingdom on a tourism trip.

What about your will? What are its salient features?

Regarding my will related with wealth, I have already implemented it in my lifetime. As for the remaining aspect of my will, it is a public matter and also involves certain private matters, besides encouraging my children to maintain their kinship and always reminding them about the life after death.

How do you see your children's private investments? Are there any directives to them?

A number of them are doing an excellent work in accordance with their knowledge and experience. Most often, I try to guide them when I noticed anything undesirable even if it is in their private investments. Regarding my younger children, I always guide them, especially in the case of their investments. This is purely out of my keenness that they should be honest in their work as well as in spending wealth given by God as a trusted property. I am also eager to hear about my children that they are interacting with the society in the best possible manner, and that they are serving their religion and nation.

In what way you like to spend your time? What are the places that you like most?

I used to travel between Riyadh, Qassim, Al-Jouf, and Al-Laith to oversee my projects there. I always prefer to visit the farms in Qassim and Al-Jouf.

How could you preserve many old and precious things and antiques at Suleiman Al-Rajhi Museum?

A long time ago when I was in Jeddah, I was keen on preserving heritage pieces and gathered them together, especially those related with money exchange. There would be a history with every human being. The museum tells the story of money exchange. I particularly kept registers and cash boxes that were used when I started the money exchange business. The first cash box was made of wood, and there was a huge treasure box in which we kept our gold and silver. The artifacts kept at the museum tells the evolution of currency in the Kingdom through issuance of bank notes, as well as some currencies and coins that were in circulation among the Haj pilgrims. A major factor that prompted me to set up the museum was the visits made by a large number of officials from various countries to know more about these old coins and currencies. We have had to exhibit these rare collections in front of them to explain about our history and heritage, especially those related with money. I was keen to furnish the museum with historic and heritage pieces, especially with the same materials used for construction in the past. Hence, the roof of the museum was made of palm branches, and that was the case with the seating arrangements at the museum.

Al-Rajhi's punctuality

The interview also sheds light on many qualities of Al-Rajhi, including his punctuality. "In the beginning of my business career, I had appointments with several top European company executives and officials. I still remember that I reached late for such an appointment due to an unavoidable reason. My delay was only a few minutes but the official excused himself for the interview. Later, after expansion of the projects, the same official came late for an interview with me so I excused myself for the interview. I always carry a paper to note down the schedule of meetings and stick to the schedule at any cost."

Al-Rajhi continued: I am always keen to strictly adhere to the Islamic principles throughout my life. Once I received an invitation from an Arab government to attend an investment conference there. On the sidelines of the conference, I was invited to take part in a dinner reception. When I reached there, I found a recreational program, which is contrary to our religious customs and traditions, taking place. So I quit the place immediately and, Abdul Aziz Al-Ghorair from the UAE also joined me. Soon minister plenipotentiary rushed to us, and we explained to him that the function is against our Islamic tradition. So he informed us that the recreational party would be cancelled. When they canceled that party, we participated in the dinner.

Tackling crises

Al-Rajhi said: There was a huge fire that gutted down one of my factories managed by my son. When he came to inform me about it, I told him: Say praise be to God. I asked him not to submit any report about the losses to the authorities seeking compensation. In fact, the compensation is from Allah and it is essential for us to be satisfied with What Allah destined for us. Assam Al-Hodaithy, financial director of Al-Watania Poultry, said: "When the fire broke out at the factory, we decided not to hurt Sheikh Al-Rajhi by informing about it at that moment. Later, when we met him next morning, he told us to shift the factory to another place and remove the debris until completion of reconstruction." There was a similar fire at Al-Watania Poultry project in Egypt. The company incurred losses worth SR 10 million Egyptian pounds. When the concerned factory official contacted Al-Rajhi to inform about the fire, he was surprised to hear an instant reply from him: "AlHamdulillah."

http://www.arabnews.com/?q=sulaiman-al-rajhi%E2%80%99s-life-rags-riches-story

Islamic banks urged to be 'entrepreneur-friendly'

 Islamic banks should be more "entrepreneur-friendly", said His Royal Highness Prince Hj Al-Muhtadee Billah, the Crown Prince and Senior Minister at the Prime Minister's Office, by offering a variety of Syariah-compliant financing methods that will help Muslim businesses become successful.

"Such efforts support His Majesty's wishes to enhance the 'Ease of Doing Business' in the country," he said at the International Conference on Islamic Finance held at the Rizqun International Hotel yesterday.

In a sabda, the crown prince said while the industry must fulfil the tenets of Syariah law, it must still be able to compete with the conventional finance industry to offer customers benefits, particularly those that require financing facilities.

He also mooted the creation of a regulatory system for the Islamic finance industry with comprehensive legislation and guidelines to support it.

"Regulations and legislation in the conventional financial system still need to be improved and upgraded," he said.

"At the same time, we need to create a regulatory system with comprehensive rules and legislation (within the Islamic finance industry)."

HRH lauded Universiti Islam Sultan Sharif Ali (UNISSA) for organising the "timely" event, encouraging scholars and experts from the region to come up with sound solutions to further develop the Islamic finance system.

Quoting statistics, the crown prince noted that the industry is undergoing rapid growth with assets valued at US$1.1 trillion - at an annual growth rate of 15 to 20 per cent - and is predicted to reach US$2 trillion in three to five years.

With public confidence in conventional finance shaken after the global economic crisis, and many countries still in a fragile financial state, Islamic finance offers an alternative to investors, he said.

The three-day conference will host scholars and experts from Brunei, Malaysia, Singapore, Indonesia and Kenya and is jointly organised by UNISSA and the International Shari'ah Research Academy for Islamic Finance, Malaysia.

http://business.asiaone.com/Business/News/Story/A1Story20120516-346248.html

KPMG Survey Highlights Barriers To Islamic Finance Growth

A number of barriers remain to the expansion of the Islamic finance industry, including a lack of qualified Islamic bankers, weaknesses in financial reporting and transparency, and the issue of regulatory capital, according to a KPMG survey conducted by the Economic Intelligence Unit (EIU).

The EIU conducted interviews with a number of leading figures on behalf of KPMG, and the report entitled “Growth and Diversification in Islamic Finance” sought their views on the current and future development of Islamic finance. Included in the survey are case studies on HSBC Amanah and Unicorn Investment Bank which detail their experiences in this area.

Respondents highlighted the following issues that the Islamic finance industry faces: Lack of young qualified Islamic bankers across all regions; while training is available and specific countries such as Malaysia are making huge investments in this area, respondents observed that high turnover remains a problem. Lack of development in Islamic finance regulations was also cited - many Muslim countries have not put the legislation in place covering the authorisation of Islamic banks, or the issuance of Islamic finance products. Nor have they considered putting it on the agenda. The quality and transparency of financial reporting on Islamic finance also differs from one jurisdiction to another.

The survey additionally found that measuring the performance of Islamic financial products can be difficult. However, with the introduction of Basel II and the requirement that banks allocate risk by rating, there is greater likelihood of the ratings of Islamic financial products and instruments growing in importance over the next few years, it said. Respondents felt that a tailor-made rating agency would be the solution, as the major western ones have been slow to develop rating methods and specific criteria for Islamic financial products.

On a positive note, the report also highlighted the areas where product and market diversification are beginning to take hold in what, undoubtedly, remains a relatively young industry which has experienced a period of rapid expansion, to the point where it has an estimated US$500 billion under management. One respondent felt that takaful (insurance) is potentially the most lucrative area for development, because it remains under-developed, especially in conservative Gulf Co-Operation Council countries.

Paul Furneaux, Financial Services Partner with KPMG in the UK explained:

“Respondents were aware that they would have to be more creative in product innovation in areas such as derivatives, swaps and options, but recognised that the market is currently at the bottom of a steep learning curve. The role of Islamic scholars will be crucial in helping to determine the level of sophistication of the products themselves.”

A number of key areas for potential development were highlighted including:

• The issuance and trading of asset-backed securities or ‘sukuk’ where there is significant potential for the growth in Europe and the US. However, several respondents felt that there had not yet been enough issuances in the market to stimulate the growth in secondary market trading as a growth area.
• 
  
• Project infrastructure financing, which will include the development of markets in the West
• Structured finance derivatives
• 
  
• Private equity and retail banking which goes beyond Islamic mortgages.
• 
  

However, respondents also reported that there was a need for the market to consolidate and refine itself, as well as consider innovation and new product development.

Respondents acknowledge that while Islamic finance continues to be a male-dominated industry, several women have excelled in the sector, and have had a huge financial impact in Islamic countries. They suggested that the role of women in the sector will undoubtedly become stronger, as they can help tackle the human resources bottleneck that currently exists. For this to happen, however, many Muslim countries would have to introduce legislation guaranteeing gender equality and equal opportunities in the workplace.

For the future, convergence is the theme that unites many respondents and the point at which the ‘tipping point’ may be reached between Islamic finance and the global financial system to allow it to move from being a niche player into the mainstream. But there is also an issue around Muslim countries addressing their Islamic financial architecture by deciding which model they would prefer to follow – either a ‘dual’ banking system or the ‘Islamization’ of the banking system. Many bankers interviewed for the survey felt that adherence to the former model would be preferable.

Paul Furneaux concluded:

“Overall the future is bright for the Islamic finance market. As respondents commented, even if the oil price goes down, their collective view was that this would not have a material effect on its continued development.”

http://www.tax-news.com/news/KPMG_Survey_Highlights_Barriers_To_Islamic_Finance_Growth____27673.html

Interview with Sheikh Saleh Kamel, a pioneer of Islamic banking

Saleh Kamel is a leading Saudi businessman and philanthropist who is popular worldwide as a renowned pioneer of Islamic banking and finance. He is the founder of Dallah Albaraka Group, one of the Kingdom’s largest and most diversified conglomerates, spanning across 40 countries. He heads the Jeddah Chamber of Commerce and Industry (JCCI) as its chairman, Islamic Chamber of Commerce and Industry (ICCI) and a number of other organizations.

Kamel is a visionary business leader with a great mission to support the Islamic cause. The credit of establishing Islamic banks, and working out a system that governs the functioning of modern Islamic banking goes mainly to him. Nearly 35 years ago, Kamel established the first Islamic bank, together with prominent businessmen Prince Muhammad Al-Faisal of Saudi Arabia and Saeed Lota of Qatar. Since then, the Islamic banking sector has witnessed remarkable growth, and the number of banks shot up at present to over 300 with their total assets crossing $500 billion. Kamel made this pioneering initiative as per the will of his mother who persuaded him to focus on a banking system based on Islamic Shariah, which renounces interest. Well-known Egyptian Islamic preacher Sheikh Muhammad Mutawalli Al-Shaarawi and Bahjat Khalil, manager of Cairo Bank, lent him a helping hand in making the concept of Islamic banking a reality in the Muslim world.

Kamel had a simple beginning from where he rose to the position of a business magnate through personal endeavors, hard work, coupled with entrepreneurship and strong faith in God. He established his own business, Dallah Establishment, in the early sixties, and by early eighties he established the huge conglomerate company Dallah AlBaraka Investment & Development, a holding company for many Islamic banks and financial institutions operating according to Islamic teachings in various diversified business activities all over the world.

Apart from Islamic banking, his companies are known as pioneers in many business adventures throughout the region. As founder of Dallah Albaraka Group, Kamel took up the challenge of implementing major governmental plans and visions through the group participating in major national infrastructure projects. The group has expanded its business activities to several countries, and now it has become one of the leading business groups in the Arab world. He is also keen to generate as many employment opportunities as possible for young Saudi jobseekers.

In an exclusive interview with Arab News at his JCCI office, Saleh Kamel opened up his mind to share his candid and outspoken views on a number of issues, as well as his areas of concern. He had also shed light on his deep-rooted and longtime association with Arab News, describing it as the best Saudi English language newspaper. He praised Arab News for its professionalism as well as for its outspokenness on almost all local, regional and international issues.

Kamel spoke about his initiatives to launch the SR100 million endowment fund at JCCI, $11 billion Islamic bank based in Doha, and SR100 million company for generating employment for Saudis, in addition to a series of measures aimed at addressing the Kingdom’s unemployment problem. While noting that there are 1.2 million unemployed Saudis, he emphasized that effective utilization of Zakat revenues would do a lot in addressing the unemployment problem.

Replying to queries from Arab News about retirement from public life, Kamel said he wishes to be active in public life until his last breath. Excerpts:

Could you explain the special endowment project, the first of its kind in the Kingdom, launched by JCCI?

First of all, I would like to mention a few words about the importance of endowments in Islam. During the glorious period of Islam, proceeds from Zakat were utilized to set up schools and hospitals as well as to dig wells and construct hotels along highways. At present, we can see such endowments in America where endowment revenues were used for establishing and running Islamic research centers, universities and hospitals. However, if we look at the last century, we -the Arabs and Muslims – don’t see any properties set aside for endowments. We see only traditional endowments that were made in the past. The main reason why people pay little or no attention to endowments these days is apparently because of their apprehension about a government intervention to usurp endowments in almost all Muslim countries. The Prophet (peace be upon him) highlighted the significance of endowments by calling it a virtue of which the reward will continue to reach the person even after his death. “The best that a man can leave behind after his death are three things: A righteous child who makes prayer for him, an ongoing sadaqah whose rewards continue to reach him, and a knowledge that continues to be implemented after him.” Taking into account the paramount importance of endowments in Islam, we, the officials of the Islamic Chamber of Commerce and Industry (ICCI) worked out a plan to set up endowment organizations. Minister of Islamic Affairs, Endowments, Call and Guidance Sheikh Saleh Al-Asheikh was impressed with the idea when I spoke to him about this.

The minister encouraged us and extended his full support to set up the endowment project. His Egyptian counterpart Mahmoud Zagzoug also supported this initiative, and we are going to set up the project in Egypt soon. Three months ago, we had set up a separate department for endowments at JCCI. The department is tasked with looking after endowment properties especially their management and protection. We have established the first endowment fund at JCCI. The proceeds from the fund, with an initial capital of SR100 million, would be utilized for supporting productive families and small enterprises. After this, we also launched another endowment fund worth SR15 million for ICCI, which is also headquartered at JCCI.

Now we are making preparations to set up an endowment for those people with special needs. The JCCI endowment department would be a permanent one, and the proceeds from endowments will be utilized for hospitals, treatment of patients belonging to poor families, including foreigners, as well as for scientific research. We will also hold annual charity endowment events, in addition to setting up two or three funds to manage endowments at JCCI with the objective of expanding this pivotal part of charity work and Islamic heritage.

Your viewpoints about Zakat Al-Mal?

I have dealt in detail with this topic and delivered a number of lectures on it. You need to set aside a number of pages of your newspaper to give full coverage of it. Anyhow, let me sum up about it. It is unfortunate that most Muslims are not aware of the seriousness in fulfilling their religious obligation as regards Zakat, the third pillar of Islam. I do not say that they are renouncing it but are unaware of fulfilling this religious obligation. Zakat can be considered as a comprehensive divine scheme, introduced by God and not by any finance minister or economic minister or prime minister of a country. Zakat Al-Mal can be defined as the obligatory charity paid by an individual to the needy. It is obligatory on an individual who possesses wealth equal to or above a minimum amount called Nisab for an entire lunar year. For the purpose of calculating Zakat, different categories of wealth are defined. The Holy Qur’an mentions Zakat more than 34 times. It is a duty to Allah that obligates every wealthy individual to share with the needy a portion from his or her wealth. If you plan your work in accordance with the rules of Zakat, it will help create immense job opportunities. If you pay your Zakat in the specified time, you can see that it will help address the unemployment problem. Zakat will ease the burden on your work. The lowest rates of Zakat are for agricultural produce from cultivated land and industrial output by using machinery. Hence, if all people engage themselves in cultivation or industrial production by using machinery, then it would generate enormous employment opportunities and thus the workers would get salary and eventually would have a higher level of purchase power. In this process, there would be huge pumping of wealth to the market and increase in supply of goods thus creating an economic boom. This divine mechanism would eventually lead to eradication of poverty from the Islamic world.

You are planning to establish an Islamic banking entity. What are the steps taken in this respect?

When we started setting up Islamic banks together with Prince Muhammad Al-Faisal and Saeed Lota more than 35 years ago, we were three pioneers in this field. We established some of these banks independently while some others jointly. When we embarked on this mission, we never dreamed of such a robust growth for these banks that have now become as strong as commercial banks. At present there are more than 300 Islamic banks across the Muslim world and Europe with their total assets exceeding $500 billion. We have performed well with excellent results in a number of banks. As for the mode of their functioning, they differ from country to country. We know that there are some objectives, mechanism and outcome for the functioning of Islamic banking. If we accomplished these three components, we can say that it is Shariah-compliant. There are several banks that are keen only in their separate working mechanism, and the outcome would be the same for all. The new large Islamic bank, which is in the pipeline, would be similar to traditional banks but the difference would be only in the technical terms used. We want to change this concept. I hope that we could realize it when we establish this Islamic bank with a capital of $11 billion. Two weeks ago, a memorandum of understanding (MoU) was signed by the Qatari government, the Islamic Development Bank (IDB) and Dallah Albaraka Group in Sudan to establish the bank, which would solve a number of problems facing the Islamic banking sector. Through this, we would change the course of Islamic banking to the rank of development banking rather than banks for giving loans. As everybody knows, there are only soft loans in Islam. We want to return to the fundamental principles of Shariah while establishing the new bank. We have been planning and making preparations since nearly eight years to set up the bank, in cooperation with IDB and the General Council of Islamic Banking and Financial Organizations of which I am holding the presidentship. It was IDB that promoted the project and Qatar donated headquarters for the bank. I have decided to contribute $300 million, in addition to $100 million each from Dallah Albaraka Group and IDB. Apart from this $500 million, we will raise another $500 million from various Islamic banks from around the Muslim world. In addition to the shares of founders amounting to $1 billion, we will raise the remaining $10 billion capital through launching initial public offering (IPO). The bank would be in a position to launch investment funds to the tune of $100 billion at the time of its formation to make way for issuing Islamic bonds (sukuk). Through this, we can manage to raise the huge amount of money equal to those invested by the Islamic banks in the markets of London and New York for buying and selling copper. Here the mechanism is Islamic while the purpose is non-Islamic – buying and selling copper that will benefit Muslims.

Being the chairman of JCCI, what is your vision about Saudi businessmen?

Really speaking, the future of Saudi Arabia and Saudi businessmen is in a good position. Chambers of commerce and industry across the Kingdom, especially JCCI, are keen to undertake new projects, mainly those focusing on development. For example, JCCI established the Business Development Center, which is virtually a meeting place of wealth and ideas. Two months ago, the center established the Saudi Company for Opportunities with a capital investment of SR100 million. Formation of the company was under the supervision and auspices of JCCI, with its businessmen representing most of the shareholders. The company’s main purpose is to explore investment opportunities. The center consists of offices for consultants and lawyers who will carry out economic feasibility studies about the investment opportunities presented to it by businessmen, and give its endorsement to launch the project.

What about the future of sukuk in Saudi Arabia?

Sukuk is one of the major arms of Islamic financing. The planned new bank would issue fully Shariah-compliant sukuk. Now there are large numbers of Islamic bonds that do not have any legal basis and are defective as they were constituted in a non-Islamic way. Generally, Islamic bonds must be one of the major financing arms in the Muslim world both at the government and individual levels.

The Centenary Fund and the Federation of GCC Chambers recently signed an agreement under which the fund would expand its activities to support GCC young men. Do you think that this initiative would in any way be a direct support to Saudi youth?

Really, the fund was established to extend support to only Saudi youth and not the GCC youth. When its activities expand to GCC states, I hope this would not be at the expense of the Saudi youth. We have to start from ourselves and then to others, and in this context, our first responsibility is to Saudi youth and then only to the GCC youth. As for GCC youth, they have vast employment opportunities in addition to enough funding. Hence, why should I take a specialized means for the Saudi youth and invest it outside the Kingdom? Even though there are strong bilateral relations and cooperation existing among the GCC states, I am personally not supporting this agreement as it virtually involves taking support out of the Saudi youth and giving to the GCC youth. We are more in need of creating job opportunities for young men and women than those in other Gulf states.

The performance of Saudi economy shows excellent results at a time when the global economy faced an economic crisis, thanks to the wise policies of Custodian of the Two Holy Mosques King Abdullah. What about the position of the local economy in 2012?

Even though Saudi Arabia is blessed with its rich reserves of natural resources, including oil and gas, coupled with the wise policies of King Abdullah, it faces problems like unemployment. Our production and export of nonoil products are also very little. I don’t think that the ministries concerned with economic affairs as well as our business sector have performed their responsibilities in the best possible manner so as to enable the Kingdom to play its real role as the largest Arab economy.

There has been an upsurge in the Saudi stock market following a steep crash in 2008. But in a comment to a local newspaper you said that the bourse is similar to a balloon that may be exploded at any time. Do you believe that the stock market policies rest on strong foundations and the market value of stocks is on the right track?

I have spoken about this matter several times earlier. As you pointed out, I had warned about this situation while speaking to a local Arabic newspaper. After this warning, I had to come across with a volley of criticism and abuse from many quarters, including online. As is my custom, I did not respond to any one of them. As days passed, the criticism also began to subside. It was evident that those who abused me were none other than market speculators who either want to suck the blood of weak-minded people or have to realize some ulterior motives. I take this opportunity to respond to this people through Arab News for the first time. Regarding the question about the foundations of the capital market, I can say that the market value of stocks is in the right direction. Before everything else, we have to understand about the nature of the secondary market that it would not create any single job opportunity. This market was created for successful beginners who can offer their projects in the market in order to make investments in other projects. This enables those with limited income to buy them and earn their livelihood from the revenue, and their aim is not to make any speculations. We have so far not realized what is the real role of the secondary market, and have wasted a whopping sum of SR20 billion in the stock market.

The first company to create job opportunities for Saudis in the Makkah Region will be operational within the next few days. What about the role of the company, which has a capital of SR100 million?

Establishment of such companies is the outcome of the initiatives and continuous efforts being made by Minister of Labor Adel Fakeih. The company is expected to solve a number of problems faced by the employment market. Main priority of the company would be to address the problem of cover up (tasattur) and then unemployment. None of us want to hide the fact that we are suffering a lot from disguised unemployment represented by foreign workers who come over to the Kingdom. Under the labor contract, they are supposed to work for a period of one or two years but their actual requirement would be for one or two months. The new company would address the problem substantially by hiring Saudis in accordance with the actual requirements in the employment market. In this way, we can create more job opportunities for Saudis and address the problem of disguised unemployment. I am personally expect that this would fetch numerous advantages, in addition to ensuring prosperous future for young Saudi jobseekers.

Do you have plans to pump new investments either in the Kingdom or abroad in the near future?

Really speaking, I consider myself as a person who has already retired from the business life. Hence, I do not have any relations with investments either in the Kingdom or abroad. I handed over the flag to my sons in whom I see goodness and blessing. They are now managing all my businesses and investments both in the Kingdom and abroad. As for me, I have now turned to public work and is currently chairing the following bodies: JCCI, ICCI and the General Council of Islamic Banks and Financial Organizations. I think these posts are enough for me.

There are rumors that you have decided to retire from a long career in the business and financial fields. Your comment please?

If your question is about retirement from business activities, then the answer is that I have retired. But if your implication is about retirement from public life, I can say that I would continue to remain in the field until my death. As long as people live and enjoy good health what does prevent them from continuing work? By the grace of Allah, I will go on working until my last breath. Allah blessed me with sons who are capable of shouldering responsibilities and therefore I handed over the key of my business management to them. As for my retirement from work and sit at home without doing anything, it is impossible for me and that is not a lifestyle that I have been accustomed to ever in my life.

Do you have any intention to implement a program like the Bab Rizq Jameel (BRJ), an initiative of Abdul Latif Jameel Community Services Programs (ALJCSP), in your Group in the near future?

I don’t like to speak about such matters. However, let me inform you one thing that we had started such a program in Dallah Albaraka Group long before Abdul Latif Jameel Group started Bab Rizq Program. We introduced a social responsibility program called “Toward the best society” when we established Dallah Company 35 years ago. Like Bab Rizq Program, this program also involves in making aware of the society and creating job opportunities for young Saudi men and women. In addition to this, we also established Dallah Voluntary Academy. Our policy is that we work silently without giving any publicity, especially with regard to activities that have the hallmark of charity and voluntary works. Our real motive behind these activities is supporting the society and winning the pleasure of God.

What do you think are the special programs and procedures to create job opportunities for young Saudi women?

King Abdullah has given great care and concern for the Saudi women by opening up new horizons of job opportunities that we had never dreamed before. Each chamber has the responsibility to train Saudi women to take up jobs in ladies’ stores, especially lingerie and cosmetic shops in line with the Shariah rules and regulations, and not on the basis of customs and traditions. For example, Islam forbids only seclusion of woman with unrelated man and not their mixing. Men and women are normally mixing during performing Tawaf (circumambulation around the Holy Kaaba). We encourage women doing any job in compliance with the Shariah principles.

Unemployment in the Kingdom is one of the major concerns of the government, which in turn is vigorously implementing the Nitaqat Saudization program at present. Could you assume the expected number of job opportunities created through this program?

According to the latest figures, there are about 1.2 million unemployed Saudis whereas the number of foreigners working in the Kingdom exceeds eight million. This means that the real problem that we face now is not unemployment but making a minor replacement of foreigners by Saudis to accommodate some one million jobseekers. But unfortunately, we have some strange and surprising customs that made Saudis unwilling to take up jobs in certain trades not withstanding the fact that their parents and grandparents engaged in these trades with full pride. I used social networking sites such as Facebook and Twitter several times to encourage and persuade Saudi youth to shun their shyness and apathy toward some trades and take up jobs such as fruit and vegetables sales. But to my utter regret, they scorned and laughed at me and criticized my opinions. They observed that Saleh Kamel wants Saudis to engage in the sale of fruit and vegetables.

What prevents Saudi youth from taking up jobs in this field like the young men in other Arab countries and the rest of the world? Is there a feather on the head of Saudi young men? They are hesitant to take up a job, which was done proudly by their ancestors. There is a respectable rich Saudi family called Al-Khodari — a name attributed to their trade of greengrocers — spread all over the Kingdom. Similar is the case of Al-Jazzar family, whose name denotes their traditional trade of butchery. Why don’t Saudi youth take up such jobs that would help them earn huge amount of revenues that are many times higher than the salary of a Saudi graduate working in a private company? Moreover, they can enjoy much freedom in these trades. It is also noteworthy that Islam encourages Muslims to engage in such trades. When I speak about work, I don’t mean an office job but rather a job opportunity. I am inclined to create those job opportunities that give freedom to young Saudis more than any other jobs. Office jobs are destined for people who do not want to develop themselves and want to stick to their work hours.

After finishing duty, they don’t want to engage in any other job that would benefit them and their children in the future. In my view, a job that entails freedom to the person is the best job, and it is also highly suitable for the Saudi youth. When I speak about creating job opportunities, I see Nitaqat as the ideal program introduced by the Ministry of Labor to create job opportunities for young Saudi men and women. I expect that if the program implemented effectively in the right manner, it would contribute substantially in reducing the number of unemployed people in the Kingdom, through creating about half a million jobs. But my humble opinion is that launching a program to encourage young Saudi men and women to take advantage of all types of trades available in front of them in the society is better than the Nitaqat program. These trades have the potential to accommodate millions of jobseekers. If we implement such a program effectively in the right perspective, it could enable us to replace eight million foreigners with Saudis, in addition to creating jobs for 1.2 million unemployed people. We must also consider the case of tens of thousands of young men and women who study abroad. When they return home after completion of studies, we have to find out jobs for them in addition to those who presently doing their courses in various Saudi universities.

Do you think that the Hafiz Program would be helpful in addressing unemployment problem?

Really speaking, the program, which is being implemented by the Ministry of Labor, is in a sense part of the carrot and stick policy. If you have done well, you will have the carrot and if your performance is bad then you have to face the stick. Nitaqat program reminds you of a stick in the sense that you have to face penal action if failed to implement it. As for Hafiz, it gives you carrot (remuneration). However, there is no doubt that both programs would contribute substantially in short and long run in addressing the unemployment problem.

Saudi Arabia embarked on a great task of building economic cities in various regions of the Kingdom. Do you believe that such projects would produce positive impact on Saudi economy?

All these economic cities did not happen by chance but are the outcome of extensive economic feasibility studies carried out by leading international consultancy firms. Moreover, several businessmen have also come forward to make investments in these cities. I believe that these cities would play a major role in further strengthening the Saudi economy. These are long-term projects that cannot be realized in a month or a year and we should have patience to wait until reaching the time when we can reap their fruits.

There is a shortfall in the residential facilities in the Kingdom. Do you think that the contribution of private sector would help in finding a real solution to the problem?

The much-awaited mortgage law would be instrumental in solving this problem. At present, there are no laws to mortgage houses and real estates in the Kingdom. If somebody wants to sell a real estate in installments, how is it possible without mortgage the property? I don’t know what is the reason for delaying the law in the Kingdom whereas such a law governs the buying and sale transactions of real estates all over the world. As you know, the private sector needs a formal document to protect their rights while undertaking such transactions. If it is impossible for me to safeguard my rights, how can I sell a real estate to anybody in installments or on credit without any mortgage? I believe that issuance of the law would contribute substantially in solving the housing shortage problem in the Kingdom.

Small and medium enterprises (SMEs) play a key role in creating new job opportunities for Saudis. The government is also extending support to projects of these firms. Do you think that these projects would help create job opportunities for Saudis?

These projects are instrumental in creating immense job opportunities. I have mentioned earlier about setting up an endowment at JCCI with the objective of taking care of the projects of SMEs as well as that of the productive families in addition to supporting funds, such as the Centenary Fund and the Human Resources Fund. There were fabulous success stories scored by young Saudi men and women in this field. The number of young Saudis who enter the field is growing day by day. We have organized recently an exhibition for young men and women who are owners of SMEs as well as for productive families at the JCCI’s International Exhibition and Convention Center. More than 600 young men and women showcased their products at the fair.

Saudi Arabia’s Capital Market Authority (CMA) has taken a number of initiatives and decisions aimed at realizing transparency. Do you think that these initiatives would help in creating an ideal financial culture among young businessmen and small investors?

Transparency is a must in the capital market. But at the same time, I think that this was not enough. As for educating young men and small investors, it cannot be realized through enforcing the rules and regulations, but only through books, intellectuals and other sources.

The number of younger Saudi generation is rising rapidly and they make up about 60 percent of the Saudi population. What is your message to them?

First of all, they must show gratitude to God for the great blessing bestowed on this country and its people. Secondly, they should not be instrumental in changing this blessing to wrath of God. As everybody knows, work is worship and honor. Let the financial potential of the country not deter them from work. My advice to all young men and women is that they should not sit idle but instead find jobs and work.

JCCI has been organizing the Jeddah Economic Forum for several years. Do you think that these events were instrumental in creating a positive impact on the Kingdom’s economic boom?

It is a well-known fact that the annual event, with the presence of several prominent international figures, including political and business leaders and economists from around the world, has become a resounding success at the local, Arab and global levels. I am proud to point out that the Council of Ministers, for the third time in a row, commended that the topics discussed at the forum and the outcome of the event held this year would boost the Saudi economy and serve its interests.

You are planning to establish an Islamic banking entity. What are the steps taken so far?

Truly speaking, we established big Islamic banking entities in the past. Al-Baraka Banking Group currently owns 17 Islamic banks in various Muslim countries. But now, we concentrate on the large Islamic banking project based in Qatar about which I mentioned earlier. We have so far not finalized the formal name of the bank. There are several names under consideration and we favor a name with a meaning of development or construction. A final decision in this respect will be made at the next meeting of the board of directors.

You are a pioneer in Islamic banking. Can you shed light on your long track record in this field?

I praise Allah for blessing me with the support of three great personalities who guided and directed me to the noble path of Islamic banking. Among them, my mother comes first, and then Sheikh Muhammad Mutawalli Al-Shaarawi and Bahjat Khalil who are no more now. As for my mother, she warned me against dealing with banks that lend on interest, and Sheikh Al-Shaarawi supported her position by advising me that giving or accepting bank interest is forbidden. I could not understand the meaning of what they said at that time, and this may be because of my younger age. Sheikh Al-Shaarawi guided me to the Islamic path of the interest-free Mudarabah, which is a special kind of partnership where one partner gives money to another for investing it in a commercial enterprise. On his part, Bahjat Khalil who was the manager of Cairo Bank during that time helped me in this respect at a time when no banks were dealing with Mudarabah in which there is no interest but only profit. This was my beginning in the field of Islamic banking. After dispensing with this disastrous disease of interest by the grace of Allah and with the support of the three persons, I started thinking and planning on how to help our Muslim brothers to follow suit. My thoughts focused on establishing interest-free banks, and after some time I met with Prince Muhammad Al-Faisal and Saeed Lota who had also similar plans. Eventually, we joined hands in establishing Faisal Islamic Bank in Egypt and Sudan, and Dubai Islamic Bank. After this, I founded Jordan Islamic Bank and then Al-Baraka Banking Group that has branches in 17 Muslim countries in various parts of the world.

As the founder of Dallah Al-Baraka Group, could you reveal the secrets of the group’s success stories as one of the leading business groups in the Kingdom?

Truly, there are no secrets but only the grace and bounty of Allah, the Almighty. My sincere endeavors to be pious and God-fearing as well as to do work earnestly and not to cheat others have been rewarded. There are several factors that contributed substantially in maintaining a track record of successes in work and the epitome of all these contain in the last part and first part of the following two Qur’anic verses. “And for those who fear God, He (ever) prepares a way out; And He provides for him from (sources) he never could imagine (Surah Al-Talaq -2 and 3). This is the divine path that was put by the Creator of mankind, and we are striving to follow this in our entire work.

The last meeting of the information ministers from the 57-member Organization of Islamic Cooperation (OIC), held last month in Libreville, Gabon, had proposed to explore the prospect of establishing a satellite channel for OIC. Are you supporting such a channel? What are your expectations if the proposal gets an endorsement from the member countries?

As far as I am concerned, I do not believe that such a channel would be successful. There is no possibility for the success of any collective work in this field. Launching such a channel involves huge funding in the initial stage like the furnace, which needs firewood until it gets heated. It is well known that some member countries are not committed to making their financial contributions to the general secretariat of the pan Islamic organization. All of us know about this chronic problem faced by the organization since its inception. Then, where from can the OIC get the funding to establish a channel. Suppose we assume that the channel kick-started, then should the channel be inclined to or promote the programs of the countries, which made bigger contributions to the organization compared to those countries with smaller contributions. In such cases, there is every possibility of the channel being politicized in favor of some member countries at the expense of others. Eventually, this would put OIC in a precarious situation. At present, there are several channels focusing on news, education, religion and entertainment in the member countries. And then what is the relevance of such a channel? From my experience in this field, I can say that such an initiative would be a total failure, like several other experiments that ended in failure. Take the case of the International Islamic News Agency (IINA), the specialized media organ of OIC. Since its inception, IINA remains inactive in addition to a host of administrative and financial problems. The proposed OIC channel may have the same fate of IINA. I can’t understand why we are repeating such mistakes.

Do you have anything more to add to this interview?

I wish every success to Arab News, the first and largest English language newspaper in the Kingdom. It should continue serving the Saudi society as a highly professional daily newspaper giving wide coverage to the vital issues that are of concern for both citizens and expatriates. (Courtesy:ARAB NEWS)

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