Islamic insurance out of reach of Indian Muslims


MuSaumya Roy and Gargi Banerjee

Mumbai: Sayeda Ansari wants to buy a life-insurance policy for her daughter. But she cannot do so unless her stock broker gives the nod. The daughter, the single-mother of a six-year-old boy, lives with Ansari. “Insurance will give her and her son some support,” says Ansari, a Mumbai-based sales tax officer.

But insurance, particularly life insurance, is prohibited by many Islamic scholars because insurance firms may invest the money in shares of firms that are in the business of alcohol, gambling or entertainment— this is not allowed by shariah or Islamic law. Besides, the insurance firm may also lend money and earn interest income, which is also not approved by shariah, a legal framework that regulates public and some private aspects of life based on Muslim principles of jurisprudence. Shariah deals with many aspects of day-to-day life including politics, economics, business and social issues.

Praying and worrying do not go together. If you believe in the power of prayer, you would not need insurance, says Zafar Sareshwala who runs Islamic brokerage Parsoli Corp.Shariah does not allow Muslims to buy insurance. Life insurance, in particular, is frowned upon because life is given or taken away by God and anyone taking out a policy is, in effect, hedging against God’s will. There are Islamic insurance products available—this market is valued at a few billion dollars—including policies for marine and airline insurance, but this phenomenon is restricted to countries such as Malaysia, Indonesia and those in West Asia. Although India is home to more than 150 million Muslims, insurance companies have largely stayed away from Islamic products here. Bajaj Allianz’s Star Select is currently the only Islamic, or ethical insurance product in India.

When Ansari approached Ashraf Mohamedy, who runs an Islamic stock brokerage calledIdafa Investments Pvt. Ltd, he advised her against getting her daughter insured because it is haram or forbidden in Islam. She is still waiting for an insurance product that will get Mohamedy’s nod. Ansari, now 56, hopes it will be soon.

There is no data indicating what percent of Muslims are insured but anecdotal evidence suggests it is less than the national average because of religious reasons.

The Rajinder Sachar Committee, a panel appointed by Prime Minister Manmohan Singh to prepare a report on the social, economic and educational status of the Muslim community, has found that since most Muslims are self-employed, their need to access bank credit is high. Despite this, “Muslims constitute about 12% of all account holders in banks,” according to the committee; this is well below the share of other minorities. And on average, the amount outstanding (an indicator of loans sanctioned) per account for Muslims is about half that for other minorities and only one-third of other communities. The committee presented its report in November 2006.

Rakesh Basant, one of the six members in the Sachar committee, says that the idea that Muslims are generally averse to participating in the formal financial system is a myth. The committee did establish that there is a need for savings accounts among Muslims but sometimes “Muslims themselves assume they will not qualify for credit, and do not approach banks,” Basant says. The committee did not touch upon the insurance sector. Muslim stockbrokers in India say that with the cost of health care rising, there is a growing need for insurance coverage among Muslims. The community’s informal safety net called zakat where wealthy Muslims are obliged to pay 2.5% of their wealth to underserved categories of the society when their annual wealth exceeds a minimum level, is increasingly proving inadequate.

After riot-related damages hit businesses run by Muslims, religious consensus in the community veered towards allowing general insurance. However, even as the cost of health care increases, health and life insurance products remain largely out of bounds.

Bajaj Allianz’s Star Select is currently the only Islamic, or ethical insurance product in India. When people of his community come to Mufti Abdul Qayoom, an Ahmedabad-based cleric, seeking his advise on insurance-related queries, he tells them to invest in a systematic investment plan (SIP) of a mutual fund. SIP is a method of investing a fixed sum, on a regular basis, in a mutual fund scheme. It is similar to regular saving schemes like a recurring deposit and it allows one to buy units on a given date each month.

Mohamed Irfan Dadani, an agent of Life Insurance Corp. of India (LIC) who operates in central Mumbai’s Muslim-dominated Mohamed Ali Road, says 90% of his 800 clients are Muslims but admits that at least 30% of them stay away from life insurance. Dadani and Mahesh Mangaonkar, another LIC agent in Mumbai’s Santa Cruz suburb, keep an assortment of religious opinions, articles and fatwas that say Muslims can buy insurance products and produce these when they meet prospective Muslim clients. The clients usually do not commit to buying any policy without taking religious opinion.

Even those who have bought policies are not particularly happy. “I took life insurance for myself and my family many years ago because I did not have the money to invest in property or gold then,” says Abdul Ral, a Mumbai-based timber trader. “Now I pay more than Rs1.20 lakh in insurance premiums a year. But I know this is haram and I will be thrashed by the powers above,” the 56-year-old said.

Haroon Efroze, a financial advisor with Metlife India Insurance Co. Pvt. Ltd, a private sector insurance firm, says that despite being a devout Muslim he sometimes feels the ire of his community members because he sells a forbidden product. He recalls having worked out a model portfolio for a high net worth Muslim individual who was ready to pay a premium of Rs1,000 daily to cover himself and his family, but backed out at the last moment, because his local cleric did not approve of the plan. Efroze, however, points out that instances of Muslims opting for unit linked insurance plans (Ulips) and general insurance products have been growing.

Zafar Sareshwala, who runs an Islamic brokerage called Parsoli Corp. Ltd, is in the process of creating an Islamic insurance product and he does advise clients to be insured. But personally, he and his family do not want life or health insurance. “Praying and worrying do not go together. If you believe in the power of prayer, you would not need insurance,” he says. “But when the choice is between getting insurance and staying sick because of the lack of insurance, I feel taking insurance is the lesser evil.”

source : livemint

Islamic banks demand Baitul Maal certificates

* Experts say non-availability of such instruments creates liquidity management issue for Islamic banksFinancial sector stakeholders have urged the ministry of finance to expedite efforts towards issuance of Islamic treasury bills in the shape of Baitul Maal certificates to provide the Islamic banks an opportunity to invest.


Speaking at the second day of 3rd World Asia Islamic Capital Conference here on Thursday, the stakeholders of Islamic banking sector said non-availability of instruments like Baitul Maal certificates has been creating a liquidity management issue for Islamic banks.

As a result of the unavailability of these investment opportunities, Islamic banks are at a disadvantage against conventional banks in terms of optimising returns on excess liquidity.

Pervez Said, Head of Islamic Banking, State bank of Pakistan said that Islamic banks must jointly work out a future plan of action with the regulators for issuance of Baitul Maal certificates.

The success factor behind Islamic banking growth is supportive regulatory framework of the central bank, he said adding that there is enormous potential in Pakistani market for Sukuk issues. A number of Sukuk issues are in the pipeline. He said Islamic banks need to have standardization of guideline documents so that the industry could work in harmony.

He said that in order to facilitate the operations of Islamic banking industry, State Bank has allowed the Islamic banks to execute any transaction only after the approval of their Shariah Boards without getting prior approval from SBP. “The regulators can review and approve the transactions later on,” he said.

Ashar Nazim, Managing Director, Islamic Capital Partners announced that his company would organize an Investors Forum in Dubai in May 2008. This forum would help bring gulf region’s investors and Pakistani corporate together to explore the investment opportunities in Pakistan. “We would organise this conference again in November 2008 in Karachi and we hope that it would also serve as a good platform for Pakistani financial sector,” he said.

Financial experts said that current 3 percent share of Islamic banking industry needs to grow to 25 percent in the next decade. Experts said that trained human resource is the biggest challenge being faced by Pakistani Islamic banking industry. They said Islamic banks need qualified human resource to keep the current pace of growth intact.

Speaking at a session on emergence of Takaful in Pakistan, experts said that they needed to move out of niche market syndrome and grab the maximum potential available in the market. They said that 63 percent Islamic banking and Takaful consumers in Malaysia are non-Muslims, which shows the benefits for consumers available in Islamic mode of finance.

Pervaiz Ahmad, CEO, Pak-Qatar Family Takaful, emphasised the need of synergy in Islamic banks and Takaful companies. “The Takaful products should be competitively priced and available with best services and being Halal should be an additional benefit,” he said.

Takaful operators needed to bring innovation in business process and product distribution. “We also need to focus on development of human resource for the Islamic financial sector,” he added.

Faizan Mitha, Senior Executive Vice President of Habib Bank; Anwer Sheikh, Chief Executive Access Finance; Irtiza Kazmi, Head of Capital Markets & Syndication, Dubai Islamic Bank Pakistan; Anthony Dutton of Norton Rose; Capt. Jamil Akhtar, Chief Executive, Takaful Pakistan; Abdul Rahim Abdul Wahab, Executive Director, Sidat Hyder Morshed Associates; Asif Kamal, Chairman, Trust Investment Bank; Zaigham Mahmood Rizvi, Chairman and Managing Director, HBFC; Akmal Jamil, CEO, Arif Habib Private Equity Fund also spoke on the occasion.

source dailytimes

Islamic Banking

Author : Mervyn K. Lewis
Mervyn K. Lewis, Professor of Banking and Finance, University of South Australia and Fellow, Academy of the Social Sciences, Australia and Latifa M. Algaoud, formerly Chief of Training and Development, Ministry of Finance and National Economy, Bahrain

About the book
This pathbreaking volume – the first to consider Islamic banking and finance from a global perspective – will be of great interest to scholars of money and banking, international finance and Middle Eastern studies.

Financial Transactions in Islamic Jurisprudence: v. 1 & 2

ISBN-10: 1592390722
Author : Dr. Wahbah Al-Zuhayli
Translation By Mahmoud A. El-Gamal (Rice University, Houston)

Revised by: Muhammad S Eissa Ph.D
Published by Dar al-Fikr Damascus, Syria, Dar al-Fikr al-Mouaser

Provides comprehensive Fiqh coverage including the views of all major schools of Thought (madhhab) in an easy to understand language. The thorough indexes make it easy to locate any topic within the set.

The goal in providing this translation was to give non-Arabic readers access to the rich Islamic juristic literature on financial transactions. A Translation of Volume 6 is forthcoming shortly, Allah willing.

Volume 1 Contents
Translator’s Preface
Abbreviations and Transliteration
I The Sales Contract (Aqd Al-Bay’)
1 Constituents ofSale
2 Conditions of Sale
3 Status, Object, and Price
4 Invalid and Defective Sales
5 Options
II Types of Sale (anwa’u al-buyu’)
6 The Forward Contract (salam)
7 Commission to Manufacture (istisna’)
8 Currency Exchange (sarf)
9 Gross-Sales (bay’ al-jizaf) 293
10 Riba
11 Trust Sales (murabaha, tawliya, wadi’a)
III The loan contract (aqd al-qard)
12 The loan contract (aqd al-qard)
IV The Lease Contract (aqd al-i?jar)
13 Legality, Cornerstones, and Essence
14 Lease Conditions
15 Characteristics and Legal Status
16 Two Types of Leasing 413
17 Guarantees In Leasing
18 Resolving Disagreements
19 Lease Termination
V Promise of reward (jialah)
20 Promise of Reward (jialah)
VI Partnerships (al-sharikat)
21 Introduction to Partnerships
22 Origination of Partnerships
23 Partnership Conditions
24 Partnership Status
25 Contract Characteristics
26 Invalid Partnerships
27 Defective Partnerships
VII Silent Partnership (mudarabah)
28 Definition and Legality
29 Silent Partnership Conditions
30 Legal Status
31 Capitalist-Entrepreneur Disagreements
32 Invalid Silent Partnerships
VIII Contemporary Partnerships
33 Juristic Analysis
IX The Gift Contract (al-hibah)
34 Definition and Legality
35 Cornerstones
36 Contract Conditions
37 Legal Status of Gifts
38 Prevention of Gift Rescinding
39 Gifts to Immediate Family
X The deposit contract (aqd al-ida’)
40 Definition and Legality
41 Deposit Cornerstones and Conditions
42 Status, and Methods of Safekeeping
43 Status of Deposit Possession
44 Deposit Guarantee
45 Termination of a deposit
XI Simple Loans (aqd al-I’arah)
46 Definition and Legality
47 Cornerstones and Conditions
48 Legal Status
49 Guarantees of Simple Loans
50 Lender-Borrower Disagreements
51 Termination of the contract
XII The Agency Contract (aqd al-wakalah)
52 Definition, Cornerstones, and Legality
53 Contract Conditions
54 Legal Status
55 Multiple agents
56 Agency termination
Volume 2 Contents
VIII Guaranty Al-Kafalah
57 Legality and Cornerstones
58 Guaranty Conditions
59 Contract Status
60 Guaranty Termination
61 Seeking compensation from the principal
62 Contemporary Guaranty for a Fee
63 Applications to Modern Guaranties
IX Transfer of debt (Al-Hawalah)
64 Definition, legality, and cornerstone
65 Transfer of debt Conditions
66 Legal Status
67 Contract Termination
68 Compensation of the Transferee
X Pawning/Mortgage (Al-Rahn)
69 Definition, Legality & Cornerstones
70 Pawning Conditions
71 Legal Status and Consequences
72 Growth of pawned property
73 Pawning Contract Termination
74 Debtor-Creditor Disputes
XI Settlement (Al-Sulh)
75 Definition, Legality, and Cornerstones
76 Settlement Conditions
77 Legal Status
78 Invalid Settlements
XII Absolution (Al-Ibra?)
79 Definition and Legality of Absolution
80 Absolution Cornerstones
81 Absolution Conditions
82 Objects of Absolution
83 Absolution Types
84 Legal Status
XIII Entitlement (Al-Istihqaq)
85 Definition and Consequences
86 Rulings for Specific Contracts
87 Entitlement to Sacrificial Animals
XIV Debt-Clearance (Al-Muq?as. s.ah)
88 Definition and Legality
89 The Object of Debt-Clearance
90 Types of Debt-Clearance
91 Consequences of Debt-Clearance
XV Coercion (Al-Ikrah)
92 Nature and types
93 Coercion Conditions
94 Coerced Physical Actions
95 Legal Actions
XVI Interdiction
96 Definition and Legality
97 Reasons for Interdiction
98 Ending Interdiction
99 Indebted Estates
XVII Ownership and its characteristics
100 Definition of Ownership
101 Eligibility for Ownership
102 Types of Ownership
103 Partial Ownership
104 Establishment of Total Ownership
105 Is Private Ownership Absolute?
XVIII Ownership-Related Topics
106 Land-Related Rulings
107 Land Reclamation
108 Inaccessible Land & Land Distribution
109 Easement Rights (Huquq Al-?Irtifaq)
XIX Share-cropping Arrangements
110 Muzara?a or Mukhabara
111 Musaqah or Mu?amalah
112 Legal Status
113 Mugharasa or Munasaba
XX Division Agreements (Al-Qisma)
114 Division of Physical Properties
115 Dividing Usufruct
XXI Usurpation and Destruction of Property
116 Usurpation and Its Status Rulings
117 Destruction of Property (Al-Itlaf)
XXII Fighting an Assailant
118 Legality, stages and legal status
119 Conditions for Fighting an Assailant
120 Is Fighting the Assailant Required?
121 Compensation for Fighting an Assailant
XXIII Lost and Found (Al-Luqat.ah & Al-Laqit.)
122 Nature and Rulings for Al-Laqit
123 Found Property (Luqatah)
XXIV Missing Persons
124 Missing Persons
XXV Racing and Athletic Competition
125 Racing & Competition (Al-Sabq)
126 Al-munadala
XXVI Preemption (Al-Shuf?a)
127 Basics of Preemption (al-shuf?a)
128 Object of Preemption
129 The Preemptor
130 Legal Status Rulings
131 Preemption Conditions
132 Preemption procedures
133 Changes in the Object of Preemption
134 Dropping Preemption Rights

Islamic Finance in Europe

New Book released

Authors: WILSON, Rodney
ISSN: 1830-1541
Abstract: Islam all too often resonates negatively in Europe, with a great part of non-Muslim public opinion uncomfortable with Islamic culture and values. Secular and Christian opinion is at best suspicious of shariah, Islamic law, and indeed often antagonistic. The notion of wanting to apply shariah principles to banking and finance is treated with scepticism if not outright hostility, especially as there is no concept of Christian or Jewish banking, even if there are some parallels between shariah financial principles and the teaching of the Old Testament. Yet Islamic finance is thriving in Europe, and many major European banks perceive it as a profitable opportunity to generate new business rather than as a threat to existing business. Although Islam is sometimes viewed as prescriptive and concerned with restricting choice, Islamic finance is about widening choice, and in particular about providing alternatives to interest based finance. The aim is to develop financial products that are seen as ethical and within the realm of socially responsible investment. The approach in this research is largely thematic and institutional rather than geographical, with the subject viewed from a European rather than an Islamic world perspective. It is perhaps appropriate to start by examining the role of Islamic finance in Euro-Arab banking relations. Much of the focus is on shariah compliant asset management, with a section on liquidity management without the use of conventional instruments such as treasury bills, and an extensive discussion of the structuring of Islamic sukuk securities. In the banking field the development of Islamic retail banking in Europe is reviewed, with a further section devoted to shariah compliant wealth management and private banking. Prospects for Islamic investment banking are also considered as well as the European experience of shariah compliant fund management. Finally future prospects for Islamic banking and finance in Europe are assessed, notably the provision of shariah compliant services for continental European Muslims, and the possible implications of Turkey’s accession to the European Union will be examined, although there the fortunes of Islamic finance have been rather mixed.

Tehran hosts Int’l Conference on Islamic Finance

TEHRAN — Sharif University of Technology, west of Tehran, played host to the International Conference on Islamic Finance Proceeding Monday.

Attended by a host of domestic and foreign officials and experts, the get-together aimed to explore avenues to use huge financial resources of Muslim states, to introduce policies on Islamic finance, to hold training courses for managers, and to share achievements and experiences of industrial organizations.

The conference kicked off with the welcome speech of Sharif University of Technology Chancellor Saeid Sohrabpur.

Ayatollah Mohammad-Ali Taskhiri, secretary general of World Assembly for Proximity of Islamic Schools of Thought (WAPIST), boasted that Islamic banking was initiated by Iran and Shia, however regretting that the plan sank into oblivion and Iran should have been the torchbearer.

The cleric named the Islamic Development Bank (IDB) as the first finance institute that was set up within the Islamic principles in Saudi Arabia in 1975, adding some 290 Islamic banks and finance institutes are now working at four corners of the world.

“Jurisprudents and economists play key roles in promotion of Islamic economics,” underlined the WAPIST head, adding theologians need to explore Islamic tenets and dictums, with experts putting the religious scholars’ research into practice.

Seyyed Hamid Purmohammadi, deputy minister of economic affairs and finance for banking and insurance affairs, for his part, said Iran was the first country that passed riba-free (usury-free) banking law in 1983 and established Islamic banking system.

He, however, cast a doubt on the law-abiding, ruing if the Islamic banking law had been enforced desirably, Iran would have overtaken other states like Bahrain.

“Hong Kong has voiced its determination to turn into an Islamic finance hub,” recalled the official.

Hong Kong’s chief executive said on Oct. 10 the city would look to emulate Malaysia and Singapore as a center for Islamic finance, in an effort to grab a slice of the thriving market.

Bank of Industry and Mine governor said the roots of Islamic financing should be traced at the advent of Islam.

Mehdi Razavi termed modern methods as necessary for financing, assuring that efforts without modern management will be futile.

Hossein Purzandi, Tehran Municipality’s financial and administrative affairs head, elaborated on ways to attract foreign funds for development projects.

Sami Ibrahim Al-Swailem, the senior research advisor in IRTI, IDB, Monzer Kahf, a professor of Islamic banking and finance in the U.S., Shamim Ahmad Siddiqui, a professor of University of Brunei, Darussalam, and Zohra Jabeen, an advisor of Institute of Management Sciences of Peshawar, Pakistan, delivered speech and offered articles.

The conference will be followed by two workshops entitled “Hedging in Islamic Finance” and “Sukuk: Principles, Structure & Performance” today and tomorrow

source : Tehran T