Islamic Bank in Swiss


Banks and financial institutions play an important role in the Swiss economy. The Swiss franc is among the world’s most stable currencies. The Swiss capital market is one of the most important in the world. The two big banks – UBS and Credit Suisse – are among the leading banks.

Faizal Bank , the first islamic bank opend in swiss in 2006 for non-swiss residents.

Several Swiss banks have branches in Middle East with Islamic Windows.


images30The Saudi-based Islamic Development Bank (IDB) and the Kyrgyz government have launched a pilot project designed to introduce Islamic financing in Kyrgyzstan.

Kyrgyz President Kurmanbek Bakiev and IDB President Ahmad Muhammad Ali al-Madani on July 4 signed a deal to that effect at a ceremony in Bishkek. Under that deal, Kyrgyzstan’s private EkoBank will be the country’s first bank to offer financial products based on Islamic law, or Shari’a, to its clients.

Bakiev said after the signing ceremony that he thinks the development of Islamic banking will convince the IDB’s other 55 member countries to invest in his country’s economy. He also indicated that his government was considering pushing the experiment further and set up a regional Islamic banking center in Bishkek.

Regional Growth Of Islamic Banking

Islamic banking is widely viewed as having first appeared in Egypt in the 1960s. Owing to the oil boom of the 1970s, it then flourished on the Arabian Peninsula and, from there, expanded into the Middle East, Iran, and Southeast Asia. It is now rapidly developing in Pakistan and India, and is making inroads in Western countries that have large Muslim communities such as Britain and the United States.

But it has so far made little headway in Central Asia and the Maghreb region (western North Africa), a circumstance that some observers ascribe to historical, sociological, and psychological reasons.

When Kyrgyz authorities last year first floated the idea of introducing Islamic banking in the country, National Bank Chairman Marat Alapaev argued that it could only be done on an experimental basis; Alapaev cited what he called the “fundamentally secular character” of Kyrgyzstan’s financial system.

Proponents of Islamic banking, in turn, object that the standards that apply in the Shari’a-based system do not differ greatly from that of traditional banking. They also say a number of conventional Western banks are offering Islamic financial products to their clients. They say the main difference between Islamic and secular banking is that Islamic banking has a stronger ethical component that makes it more appealing to Muslim believers.

’Ethical’ Investing

Another common argument in favor of Islamic banks is that they inspire confidence because they assume a share of the risks in the ventures they fund.

One of the system’s basic principles is the sharing of loss and profit. Islamic banking traditionally prohibits usury and the collection or payment of fixed interest (“riba” in Arabic). Under Islamic mortgage rules, a bank generally purchases the property and resells it at a profit, allowing the final buyer to pay in installments. This system is known in Arabic as “murabaha,” or cost-plus financing.

Islamic banking also forbids trading in financial risk and bans investing in commercial activities that are considered unlawful (“haram” in Arabic) under Shari’a, such as the gambling and pornography businesses, or the tobacco and alcohol industries.

IDB In Central Asia

While Islamic banking is not widespread in Central Asia, the IDB — which is the bank of the Organization of the Islamic Conference (OIC) — has been present in the region for more than a decade.

The IDB was launched in 1975 with a view to promoting Islamic banking worldwide.

Most Central Asian countries joined the bank in the mid-1990s, shortly after gaining their independence from the Soviet Union and entering the OIC. Kyrgyzstan joined first in 1993, followed by Kazakhstan in 1995, Tajikistan in 1996, and Turkmenistan in 1997. Uzbekistan became an IDB member only in 2003, seven years after joining the OIC.

The IDB’s largest Central Asian stakeholder is Kazakhstan, with 0.12 percent of its capital. Kyrgyzstan, Tajikistan, and Turkmenistan have 0.06 percent each. Uzbekistan has 0.03 percent.

The IDB says its aim is to foster the economic development and social progress of member countries and Muslim communities in nonmember states in accordance with Shari’a principles.

French Islam expert Gilles Kepel argues in “Jihad,” his reference work on radical Islam, that if the IDB has contributed to reinforcing Islamic cohesiveness among member countries, it also has fostered a dependence between its poorest member countries and its main shareholders, oil-rich Saudi Arabia and Libya, among others.

In Central Asia, as in the rest of the Muslim world, the IDB has funded a number of industrial projects with a view to promoting regional trade and reducing poverty. It has also been providing technical assistance and training facilities for personnel engaged in development activities. The bank operates special assistance funds to help Muslim communities in non-Muslim countries.


Under a separate deal concluded in July, the IDB agreed to lend Bishkek $12 million to upgrade the power grid in southern Kyrgyzstan’s Batken region. Kyrgyzstan has borrowed nearly $61 million and received more than $3.5 million in grants from the IDB since 1993.

In neighboring Uzbekistan, the IDB has earmarked some $115 million since 2003 for energy, education, health, and infrastructure projects.

IDB President al-Madani announced during a visit to Tashkent on July 3 that the bank will offer an additional $15 million credit to three Uzbek banks (Ipoteka-Bank and the state-owned Uzpromstroibank and Asaka Bank) to fund private industrial and agricultural projects.

Addressing a seminar the same day of the Arab Coordination Group — which includes the IDB and a number of Middle East-based development institutions (the Saudi Fund for Development, the Kuwait Fund for Arab Economic Development, the OPEC Fund for International Development, and the Abu Dhabi Fund for Development) — Uzbek Foreign Trade Minister Elyor Ganiev said his country hoped to attract more than $1.6 billion in investments from Arab IDB members within the next three years.

The IDB is also involved in a number of industrial projects in Kazakhstan, Tajikistan, and Turkmenistan.

Kazakhstan As Regional Center

Some banks in Kazakhstan are already offering Islamic financial products to their clients. But those offerings are reportedly limited to cost-plus financing, while more sophisticated forms of Islamic banking like leasing (ijara) or bonds (sukuk) are still under study.

Addressing an international conference on Islamic finance in Almaty in May, the deputy head of the state agency that regulates and supervises Kazakhstan’s financial market, Gani Uzbekov, said he thinks his country “stands a good chance of becoming a regional center of Islamic banking.”

Uzbekov said the IDB might soon repeat a successful experiment it carried out in Malaysia five years ago and issue Islamic bonds denominated in tenges, the Kazakh national currency. Those bonds would primarily serve to fund energy projects in the northern city of Ust-Kamenogorsk.

On the sidelines of the Almaty conference, Kazakhstan’s Bank TuranAlem and the Emirates Bank Group announced that they were in talks for the creation of a 50-50 joint venture that would specialize in Islamic financial products. The deal could be finalized by the end of this year.

Meanwhile, Bank TuranAlem this week secured a $250 million syndicated Islamic loan from Arab, British, and Malaysian lenders. In a July 12 statement, the bank called that credit the biggest Islamic loan facility it has ever received.

The time appears to be over when Muslim bankers lamented that Central Asian governments did not even appear to know that Islamic banking existed. Regional decision-makers and private bankers are gradually opening up to Islamic financial products.

Whether Islamic banking will achieve widespread success among Central Asian publics is another question.

Islamic banking in Africa

photolibraryIslamic banking has become increasingly popular across the Middle East, as both local and international banks begin to offer banking products that comply with the main tenets of the Islamic faith.

It is also becoming increasingly popular in non-Islamic countries, such as the UK, as demand increases from Muslim residents and others who are attracted by what they perceive as a form of ethical banking.

Now, as a result of the creation of new specialist banks in several parts of the African continent, one of the biggest trends in international banks in recent years has finally hit African shores.

Kenya’s first sharia compliant bank opened in April. Gulf African Bank (GAB) is registered and headquartered in Kenya but is owned by a consortium that comprises Bank Muscat International (BMI) (55%); Istithmar, which is an investment organisation owned by the government of Dubai (30%); World Bank offshoot the International Finance Corporation (IFC) (10%); and PTA Bank (5%). The IFC’s participation is particularly interesting as it fits in with its aims of encouraging the creation of a modern financial system in all African states by 2015.

The chairman of BMI, Abdul Malik al Khalili, told journalists that the investors have provided $25m to get the bank off the ground. Apart from providing a new service, the institution will create many skilled jobs: it is expected to employ 150 staff by the end of this year and 250 within three years, most of whom will be Kenyans. BMI is to provide a training programme to assist with the recruitment and education of staff.

The bank also hopes to provide banking services to many of those that were previously denied access to such services and aims to promote trade and investment between the Gulf and Africa. Al Khalili commented: “Africa is an attractive emerging market for the growth of Islamic finance. There is a lot of liquidity in the Gulf and we are making a bridge between the two.” GAB’s shareholders have indicated that they hope to expand the bank’s operations to other parts of Africa where there is currently little provision of Islamic financial product.

East Africa could be about to host a second Islamic bank. In April, the managing director of Abu Dhabi Islamic Bank, Ahmed Darweesh Dagher, revealed that his bank plans to set up the Great Lakes Islamic Bank. It aims to provide services across East Africa but will be based in Kampala. Abu Dhabi Islamic Bank also plans to develop an airport and a hotel on an island in Lake Victoria, although the island in question has yet to be selected.

Nigerian developments

The reform of the Nigerian banking sector over the past three years has also created opportunities for Islamic banking in West Africa. The country’s main takaful provider, African Alliance Insurance (AAI), is set to merge with African Alliance Realty, Fire Equity and General Insurance. Takaful is a form of insurance that is sharia compliant. AAI began offering life and family takaful in 2003 and quickly attracted thousands of applications. This prompted a host of other Nigerian financial organisations to apply to the National Insurance Commission for licences to underwrite takaful products.

This year, however, should see the launch of Nigeria’s first Islamic bank. A holding company called Jaiz International, has been set up in the country to launch what will eventually be called Jaiz Bank International. It is being supported in its endeavours by the Islamic Development Bank (IDB), which is helping to ensure that the launch of Jaiz is a success and that the bank complies with international banking regulations and Nigerian laws. The products on offer will include ijara, istisna, musharaka, mudaraba, murabaha, micro credit finance, specified and joint investment accounts, savings deposit accounts and current accounts. Jaiz is currently working to ensure that it has sufficient capital to register as a Nigerian bank under the new regulatory system.

Following banking reforms introduced in 2004 by the governor of the Central Bank of Nigeria (CBN), Chukwuma Charles Soludo, a new minimum capital base of N25bn ($188m) was introduced for banks. This requirement led to the consolidation of the Nigerian banking sector from 89 registered institutions to just 25. Jaiz bank raised N2.5bn ($19m) through an initial public offering (IPO) in 2003 and is now raising a further N10.5bn ($79m) via a placement to institutional and private investors. The final N13bn ($98m) will be raised through a subscription.

There are currently few trained Islamic banking staff in Nigeria, so the IDB and its member banks are helping to provide training programmes for Jaiz employees.

Source : African News

A Good Company

sps0168What have Islamic economics, animal rights protesters, social justice activists and ethical investors got in common? M Iqbal Asaria highlights the links.


The social justice protesters who disrupted gatherings of leaders of the industrial world in Seattle, Genoa and Quebec have highlighted on the international stage a growing unease with the operations of unfettered markets. For protesters the present arrangement perpetuates gross global inequity, made worse by rampant globalization.

In Britain, and on a somewhat smaller scale, the drama of Huntingdon Life Sciences was unfolding. As a leading user of live animals for experiments, this scientific research company fell foul of animal rights activists. During a sustained campaign, protesters were able to cut off all sources of bank finance to the company. Huntingdon Life Sciences had to move its operational headquarters from Britain to the US and rely on funding from non-banking sources.

This was a dramatic illustration of banks bowing to pressure from the providers of their funds — the general public. Similarly, the Bank of Scotland was forced to withdraw from a deal with the US televangelist Pat Robertson because of his extreme right-wing views. The embarrassing about-turn was forced on the bank by its shareholders and depositors.

These developments, illustrating shifts in public perception about how economies and businesses operate, provide parallels with the ideals of Islamic economics and finance. Like the social justice protesters, Muslim economists see the dominant economic structure as intrinsically unjust and biased towards the industrialized countries of the North. Islamic economics challenges the prevailing dogma of free markets and seeks to introduce regulatory regimes to safeguard public interest. Moreover, it questions the absolute freedom of financial intermediaries to provide funding for operations with no regard for moral and ethical criteria and without taking into account the wishes of the providers of the funds.

The basic ideas of Islamic economics have emerged since its academic and intellectual foundations were developed in the 1970s and 1980s. Today, it is a global movement aiming to provide Muslims with alternative banking and financial arrangements where ethical considerations are paramount.

Economic teachings of Islam are simple but profound. Islam regards usury of all kind as anathema and thus forbids all transactions involving interest payments. Making money out of money is prohibited; as are monopoly and raising prices by artificial means such as hoarding. While ownership of private property is allowed, the accumulation of wealth in fewer and fewer hands is strictly forbidden. This is why the Islamic inheritance laws are designed to redistribute wealth; and ownership of land beyond an individual’s or family’s capacity to handle is discouraged.

In Muslim societies the injunction of Zakat provides a vital mechanism for addressing social welfare issues. Zakat is normally translated as ‘poor tax’ — but it is not charity that the rich give to the poor. It is the right of the poor and a duty of the rich. Thus, all Muslims are required to give away at least 2.5 per cent of their total annual income to the poor and the needy as Zakat. As the principle is well established, contemporary Muslim economists have argued for it to be institutionalized, with even higher rates of giving. A social welfare state is therefore not alien to Muslim economic thinking.

So Muslim societies should have a much more equitable ethos than they actually do. There are a number of reasons why they fall short. One reason is that Islamic economic injunctions have only existed in theory and have never actually been put into practice. Instead, Muslim countries have tended to embrace Western development policies uncritically. However, there are signs that the Islamic ethos is slowly gaining ground. We can see that most clearly in the area of banking and finance.

Ways of lending


Islamic banks can be compared with ethical investments which incorporate the desire of the providers of the funds to have a say in how their money is used. Some funds do not invest in companies which deal in tobacco or military hardware or which exploit their workforce. Others only invest in corporations that meet certain environmental criteria. Islamic finance has a similar rationale. Indeed, in some respects it goes further, being concerned not just with what kind of activities are being financed but also with the way in which they are funded. Muslims are encouraged to invest in ‘permissible’ (Halal) activities via ‘permissible’ means. This means that not only will they avoid corporations connected with, say, alcohol or gambling or exploitation, but they also will not deal with those involved in usury — which obviously includes conventional banks.

In practice this is less dramatic than it sounds. Muslims still make everyday transactions like investing their surplus funds, house-buying, and taking out loans and working capital for their businesses. And for investment purposes Islamic financial institutions employ criteria similar to those used by the ethical investment funds. The big difference comes in the way they lend, both for personal finance and business purposes. In simple terms, lenders enter into risk-sharing contracts with borrowers; return is based on the outcome of the venture or investment, rather than a predetermined rate.

The principle of risk sharing can have far-reaching implications. For risks to be shared borrowers have to be willing to provide much more information about their situation than conventional banks would normally seek. It will include confirmation that the funds are to be deployed in permissible activities, as well as transparency in reporting financial information about the progress of the business or project for which the money has been borrowed.

Equity and inequity


To ensure that their principles are not compromised many Islamic financial institutions have a Shari’ah (Islamic Law) Supervisory Board of Advisors. This is usually a body of qualified Muslim jurists well versed in commerce who vet all new transactions and structuring of deals. Over the last three decades Islamic banking and finance has grown manifold in Muslim communities. In Malaysia, for example, about five per cent of all banking transactions are conducted by Islamic Financial Institutions. This is set to rise to 10 per cent by 2005. A full range of banking products are available to customers from Bank Islam Malaysia or the ‘Islamic Banking’ counters of all the major banks. The set-up is fully regulated by the Central Bank of Malaysia and Islamic financial products seem to exist side by side with more conventional ones, without problems. Similar moves are afoot in countries such as Pakistan, Egypt and the Gulf States. Malaysian and Middle Eastern corporations have also begun to raise long- and medium-term finance by issuing shari’ah-compliant bonds.

In other parts of the Muslim world, Islamic equity investment funds have mushroomed. Very much like ethical funds, these restrict their portfolios to approved corporations, based on criteria devised by their Shari’ah Supervisory Boards. An increasing number of Muslim investors are channelling their savings through these funds. There is even a Dow Jones Islamic Index measuring their performance.

In Britain and the US, Muslim communities have started to experiment with saving and mortgage products which meet the stipulations of the shari’ah. In the US, the Islamic housing finance company Lariba has had its funding augmented by Freddy Mac, the leading mainstream provider of housing funds. In Britain, I-Hilal and Parsoli have started to market shari’ah-compliant Individual Savings Accounts or ISAs.

Indeed, as a recent survey by business information company Datamonitor concludes: ‘The market for Islamic (shari’ah-compliant) finance in Britain is set to grow hugely. A huge gap exists for shari’ah-compliant equity and mortgage products. Muslims have historically been underserved by financial institutions, but this is set to change.’

Like the ethical investment movement, Islamic economics will in time help ‘persuade’ the big financial players to pay far more heed to their customers’ views and it will become easier to incorporate social and ethical criteria.

Admittedly, there are a host of external and internal realities which impinge upon the way Islamic financial bodies are organized. But as the move towards more representative societies gathers pace, principles and instruments of Islamic economics will spread far and wide.

In this endeavour Muslims will be in good company. The escalation of protest against global inequity and the growth of the ethical investment movement will provide platforms for like-minded players from across faith and ideological boundaries to come together.


Source :

M Iqbal Asaria

is an economist, writer and internet service

Islamic bond market to hit $200bn

imagesby Amy Glass 

The Islamic bond market will hit $200 billion by 2010, and is predicted to grow by up to 35% this year, ratings agency Moody’s Investor Service said in a report on Tuesday.


UAE banking outlook negative – Moody’s

Moody’s said growth in the market was being driven by the Gulf’s oil wealth and sovereign debt sales, reported UAE daily Emirates Business 24-7.

Faisal Hijazi, author of the report, said the Islamic finance market has experienced annual growth of 15% for the past three years, with Islamic bonds, or sukuk, the fastest growing market segment.

“This year, overall sukuk issuance should continue to increase by approximately 30% to 35% per annum. Sovereign sukuk is likely to gain popularity, with new issuance of sukuk out of Japan, Thailand and the UK,” Hijazi said.

About $97 billion of sukuk have been sold to date, the report said, without specifying how much of that debt has matured.

Moody’s said a total of 50 sukuk transactions came to the market from the Gulf last year, with 28 in Bahrain, 12 in the UAE, five in Saudi Arabia, four in Kuwait and one in Qatar, exceeding $19 billion in issuance.

Three UAE sukuk, amounting to more than $1 billion each, were issued by JSL, DP World Sukuk and Dubai Investments.

The ratings agency said the UAE Islamic finance market experienced a record year of growth in sukuk transactions, with 12 transactions coming to the market last year compared to seven in 2006. Volume issuance of UAE sukuk rose by nearly 27% to reach $11.1 billion.

Islamic finance is estimated to be worth around $700 billion globally. At the end of 2007, global volumes had reached $97.3 billion, with the majority coming from Malaysia and the Gulf.




source : arabianbusiness