Islamic finance taps into mobile phone airtime

The use of mobile phone airtime as an underlying asset in structuring financial products is making a comeback especially in the Islamic finance space. Malaysia’s Axiata Group Berhad, one of Asia’s largest telecoms operators, is setting the pace in using mobile phone airtime as one of the underlying assets to back its sukuk issuances. 

The Group launched a $1.5 billion Sukuk Al-Wakalah Issuance Program a few weeks ago, followed by a RM5 billion Sukuk Al-Murabaha offering last week by its mobile phone subsidiary, Celcom Axiata Berhad, which was issued through its unit Celcom Transmission (M) Sdn Bhd. 

But it was the Saudi telecoms operator Etihad Etisalat (Mobily) which was the pioneer of using mobile phone airtime in their financing requirements.

In March 2008, Mobily raised a $2.875 billion syndicated Islamic financing facility, which was based on mobile phone airtime, whereby Mobily was able to sell minutes of airtime to the financiers involved, and then taking on the role of agent to these banks and selling the minutes for a profit. 

The facility, whose proceeds were used to refinance the Saudi telecoms operator’s short-term debt and to fund its operations and infrastructure expansion, was arranged by a consortium of banks which included Samba Financial Group, National Commercial Bank, Saudi French Bank, Calyon Bank, Saudi Hollandi Bank, ABNAMRO and National Bank of Abu Dhabi. 

Similarly, in August 2009, Malaysia’s RHB Islamic Bank, pioneered the first tawarruq (Islamic cash management) product based on the use of mobile phone airtime, which the bank claims was the first commodity murabaha type product based on mobile phone airtime.

Tawarruq is used as a cash management instrument by some Islamic banks which allows customers to raise funds. Normally in a tawarruq transaction, according to RHB Islamic Bank, the purchaser will buy a commodity from the bank on a deferred payment plan and thereafter, sells it to the market to raise instant funds. In the past, commodities such as precious metals and crude palm oil have been used as the intermediary asset for tawarruq. 

Under the airtime-based RHB Islamic Bank tawarruq offering, the minimum financing was RM3,000 and the maximum financing was RM150,000. The bank bought the mobile phone airtime from a broker at cost price and sold it to the customer at the mark up price depending on the rate of the facility at the point of application and the customer then chose the payment period between 2 years up to the maximum of 10 years. RHB Islamic Bank signed an agreement with Sedania Media Group and E-Pay for the introduction of telecommunication airtime in its tawarruq offerings, with Sedania being the ready buyer and E-Pay the ready seller for the commodity.

With Asia and the Middle East seen as two of the largest growth areas for mobile phone ownership, the prospects for using airtime as an asset class for structuring various types of financing structures are both exciting and potentially big. 

In a statement, Jamaludin Ibrahim, Axiata Group President and CEO, emphasized that “both programs are in line with Axiata Group’s on-going group-wide initiative to optimize its balance sheet and improve its financial flexibility, while supporting the government’s vision of developing Malaysia into a major Islamic financial hub and reaffirming Malaysia’s position as a leader in the global Islamic capital market.”

In July, Axiata Group Berhad, through its wholly owned subsidiary, Axiata SPV2 Berhad, launched a $1.5 billion Sukuk Al-Wakalah Issuance Program, which the issuer stresses is the Asia Pacific Region’s first internationally rated multi-currency sukuk program and whose underlying is based, inter alia, on mobile phone airtime. 

Axiata is one of Asia’s largest telecommunications companies with controlling operations in Malaysia, Indonesia, Sri Lanka, Bangladesh, Cambodia and Thailand and minority operations in India and Singapore, and joins a growing number of companies using mobile-phone airtime to back Islamic transactions. In fact, airtime joins other non-tangible asset classes as underlying for Islamic finance transactions including sukuk issuances, which has been introduced into the market over the last few years. These include intellectual property, tariffs due on electricity meters, and receivables due on petrochemical marketing contracts.

This indicates the growing innovation in structuring sukuk and the increasing flexibility by Shariah advisories especially in recognizing the legitimate use of assets, which would have been non-existent and thus inconceivable during the last 1,430 years following the advent of Islam. It also signifies an important Ijtihad (discourse among the Muslim jurists) albeit in the context of modern finance which perhaps has been absent in other areas or sectors of life in Muslim countries. 

Airtime as an asset is set to flourish in debt financing deals, given that Asia is projected to see a massive increase in mobile phone ownership in the world over the next few years. ROA Holdings Inc. in Tokyo, for instance, estimates that Asia will account for a staggering 65 percent of 7 billion mobile phone owners by 2015. 

In the Islamic finance space, its use in tawarruq deals may proliferate in the short-term but given the uneasiness due to Shariah concerns over the use of certain tawarruq structures, its use could be more increasingly used to form a component of the asset pool to back sukuk transactions. 

The $1.5 billion Axiata Sukuk Issuance Programme, which was lead arranged by CIMB Bank (L) Limited, HSBC Amanah Malaysia Berhad and Merrill Lynch (Singapore) Pte. Ltd., and which was approved by the Shariah advisory board of HSBC Amanah, has an innovative structure which provides for the issuance of sukuk under the principle of wakalah (agency arrangement), which allows the use of assets comprising airtime vouchers (representing an entitlement to a specified number of airtime minutes on the mobile telecommunications network of subsidiaries of Axiata for on-net calls), Shariah compliant shares, lease assets and murabaha receivables arising from the sale of commodities as the underlying assets. The three banks also acted as dealers and bookrunners for the transaction. 

According to Jeremy Stoupas, Partner at Allen & Overy, the international law firm which acted for Axiata, “this transaction represents a significant development in the fast evolving market for Shariah compliant products in Asia Pacific. It is particularly pleasing to see this program come to market as it meets the challenge of trying to accommodate Shariah requirements without compromising on the robustness of the structure from an English law perspective.”

Axiata, which is not in urgent need of funds, will not immediately issue a sukuk tranche under the program, which is more a part of a future funding and development strategy. The multi-currency structure is also intended to attract investors from various parts of the world.

Equally importantly, according to a statement from Axiata, the sukuk program, “is in line with Axiata’s commitment to support the government’s ongoing initiatives and efforts in positioning Malaysia as an international Islamic finance center.”

At the same time, in August, Celcom Axiata Bhd successfully priced its RM5 billion sukuk in nominal value, of which RM3 billion attracted orders of RM10 billion via a bookbuilding process from asset management companies, financial institutions, insurance companies and corporates, and the remaining RM2 billion was privately placed with strategic investors comprising 8-year, 9-year and 10-year tranches respectively. 

 

The sukuk, which was lead managed by CIMB, HSBC Amanah Malaysia and Maybank Investment Bank, which also acted as bookrunners, has been assigned a rating of AAAIS with a stable outlook (the highest credit rating available from the Malaysian rating agencies) by the Malaysian Rating Corp. Bhd (MARC), which stressed in a statement that the rating reflected the credit strength of the Axiata Group.

Proceeds from the sukuk, with tenors ranging from 3 to 10 years, will be used to refinance Celcom Transmission’s existing debt of RM4.2 billion and the company’s capital expenditure and working capital requirements.

http://www.saudigazette.com.sa/index.cfm?method=home.regcon&contentid=20120822133713

Saudi- Islamic finance must widen global links

Islamic Development Bank Group President Ahmad Muhammad Ali yesterday called for integrating Islamic finance with real economic activities of trade and industrial production. 

Through such integration, finance could be directed toward real activities rather than used for the build-up of unbearable debt or harmful speculation. 
"From this perspective, international connectivity will help nations build their economies and diversify their investments," Ali said at the 3rd Annual World Islamic Banking Conference (AWIBC) Asia Summit in Singapore.

The Jeddah-based IDB Group is a global multilateral development institution with 56-member countries from Asia, Africa, Europe and America.

The two-day event featured an inaugural address by Ravi Menon, governor of the Monetary Authority of Singapore, followed by a keynote session addressed by Ali and Halim Alamsyah, deputy governor, Bank Indonesia.

More than 450 key players and thought leaders in the international Islamic finance industry attended the summit including Jaseem Ahmed, secretary-general, Islamic Financial Services Board.

The AWIBC: Asia Summit is one of unique platforms which aim to foster greater connectivity between Asia and the Middle East thus providing an opportunity for key industry players in these high-growth markets to develop the capacity to structure large-scale multi-currency and cross-border Shariah-compliant transactions.

In his presentation on "Strengthening International Connectivity to Enable Further Growth of the Islamic Financial Industry," Ali said the conference organizers have chosen an important topic of "Strengthening International Connectivity; Islamic Finance: Capturing Cross-Border Opportunities."

The subject is relevant at a time when countries worldwide are facing the repercussions of the continuing global financial crisis. "I thank the organizers for this vital opportunity to discuss these critical issues at a global level," he said, adding: "I am confident that, with the prominent participants in this event, valuable contributions will be made that will guide the Islamic financial industry through the coming decade."

Menon said in his inaugural speech that Islamic finance had shown remarkable resilience during the last five years - perhaps the most challenging economic environment in the post-war era. 

The industry has grown by an estimated 20 percent annually in the last five years to reach $1.3 trillion in total assets in 2011. Islamic banks have grown both in number and scope. But the sustained growth of Islamic finance is in no way guaranteed. 

For Islamic finance to continue thriving, the industry has to overcome a few key challenges. But in every challenge, there is also opportunity.

Talking on Islamic finance in the era of deleveraging, Menon explained that the clear and present danger to all financial activity, including Islamic finance, is the risk of contagion from an escalation of the euro zone crisis. 

Islamic finance is closely intertwined with underlying economic activity and will be affected by the impact of slower global growth. Contagion from the euro zone has already curtailed economic growth and capital inflows to many emerging economies where Islamic finance has taken root.

But Islamic finance, he continued has a window of opportunity in the current climate of deleveraging in the global financial system. 

With its strict prohibition on excessive leverage, Islamic finance has been spared the worst of the financial crisis. Islamic banks are well positioned to reach out to new customers who are in need of financing as many global institutions pull back on their lending due to the need to repair their balance sheets, he said.

Islamic finance should diversify into growth areas such as trade and infrastructure financing, where demand is still strong, especially in emerging economies. 

With a focus on supporting real productive activities, Islamic finance is naturally compatible with trade and infrastructure development. 

Tapping these sectors also brings about greater diversification benefits, especially for Islamic institutions, which have been hurt by their significant lending exposure to the real estate sector, he added.


http://www.menafn.com/menafn/1093520451/Saudi-Islamic-finance-must-widen-global-links?src=RSS

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

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)

http://nvonews.com/2012/05/10/interview-with-sheikh-saleh-kamel-a-pioneer-of-islamic-banking/