No Compromise On Syariah Principles

The principles of Syari’ah must not be compromised as Islamic banking has come of age, said Pehin Orang Kaya Laila Setia Dato Seri Setia Awg Hj Abd Rahman Hj Ibrahim, Second Minister of Finance, during the official opening of the First International Conference on Islamic Finance 2010 at the Rizqun Hotel, Gadong yesterday.

Based on the theme ‘Contemporary Challenges of Islamic Finance: Towards Realising the goals of Syariah’, the aim of the inaugural conference, which is organised by the University Sultan Sharif Ali (UNISSA), was commended by the second minister for its “aim of contributing towards the continued process of solution building in Islamic banking and finance, by consolidating the numerous views and principles, acting as a catalyst towards effective knowledge sharing, as well as exchanging views and experiences among all its stakeholders”.

“Our hope is not just to assist in the advancement of Islamic finance, but also bear witness to the industry’s ability in the development of the Muslim Ummah as a whole,” stated the second finance minister, but also emphasised the need to “remain humble and vigilant and that it is imperative that the principles of Syariah are not compromised”.

The second minister based his statement on the fact that since Islamic finance ventured into the market more than three decades ago, “the demand for Islamic finance has been estimated to grow between 15 and 20 per cent annually and the demand is continuing to outgrow supply, as the industry grows to exceed $1 trillion in assets”.

Furthermore, Pehin Dato Hj Abd Rahman also pointed out the encouraging indicator of the increasing number of conventional operators venturing into Islamic finance by “contributing towards innovation and assisting Islamic finance into many aspects of global trade and investment”.

The expanding appeal of Islamic finance can also be illustrated in the move by large international banks and other private sector financial institutions to provide Islamic financial services, which includes the establishment of exchange-traded funds that are vetted to ensure their conformity with Islamic investment principles, as well as offering `Takaful’ (Islamic insurance), said Pehin Dato Hj Abd Rahman.

The second finance minister was addressing the conference, attended by some 100 people, which include 24 Islamic finance scholars and practitioners from as far as the Middle East to countries closer in the region, as well as local academics.

Pehin Dato Hj Abd Rahman reminded that every growth story has its plentiful challenges. “In any fast growing industry, a healthy balance of regulatory supervision and self-regulation is critical. Many of the recent problems in financial institutions worldwide over the past 24 months are primarily due to poor corporate governance or inadequate risk management, or both.”

This was the reason why the minister called on the scholars and practitioners of “the present need to further strengthen corporate governance”, as well as “the need to build rigorous risk management systems”, which he added, “cannot be overstated”.

In reference to the industry’s relative infancy and limited product offering as compared to conventional markets, Pehin Dato Hj Abd Rahman noted the need for continuous product innovation. But he warned against “just imitating conventional financial products” and that whatever form future Islamic financial products offer, two criteria must be maintained:

“Islamic financial institutions must aim to be models of excellence in every respect and that innovation must not compromise Syariah principles”. As, in the second minister’s opinion, “it is only a matter of time that Islamic financial product innovations accelerate at a faster pace”, he emphasised on two other key areas of concern for the industry, which were the growing divergence of standards and Syariah principles between individual jurisdictions and the imperative of enhancing skill sets between Syariah scholars and the practitioners.

“We have no choice but to address these problems urgently,” noted Pehin Dato Hj Abd Rahman adding that it was only through “open collaboration between stakeholders that would greatly assist our goal of establishing a more progressive Islamic financial community”.

source : brudirect

Bank Asya retains customers’ trust amidst crisis

Bank Asya, the largest participation bank in Turkey and the 29th on the list of the world’s 500 largest financial institutions dealing in Islamic banking products, has managed to maintain the confidence of its customers despite global financial turmoil in 2009.

Operating in the Turkish market for over 13 years, Bank Asya seems to have no doubt about their continued future success under the management of its new board. Speaking to Sunday’s Zaman, the bank’s new general manager, Cemil Özdemir, who recently replaced Ünal Kabaca, said they maintain customer confidence in the market, having increased the amount of loans extended by the bank by 34 percent last year over 2008.

Özdemir said average loan growth in the sector stood at 6.9 percent in 2009 when compared to 2008. “We also experienced 56 percent growth in deposits in 2009 over the previous year,” he said, adding that this was a clear indicator of Bank Asya’s increasing credibility in the market. The bank is traded on the İstanbul Stock Exchange (İMKB) and has offered 51.2 percent of its shares to the public, the highest figure of all publicly traded banks on the exchange.

Recently released Banking Regulation and Supervision Agency (BDDK) figures show that Bank Asya, which operates transparently and shares its business operation records with the public more frequently than other banks, has been the most transparent among the 13 banks traded on the İMKB in terms of “partnership and corporate structure” since the end of 2006. Bank Asya enjoyed 22 percent growth in net profit in 2009 over 2008, Özdemir said, another indicator that the bank displayed a highly productive performance despite adversities affecting the markets. The manager argued that such a fact had above all benefited the non-financial sector, which had problems securing loans during the crisis.

While most banks in Turkey were criticized for remaining indifferent to the non-financial sector’s problems, Bank Asya continued its loan support to customers during the crisis. The bank extended 95 percent of its total deposits in loans in 2009, maintaining a high level of loans disbursed in the market. An exceptional 56 percent increase in deposits over the past year was the major factor for this. “We are committed to continuing our loan support to Turkey’s manufacturing and service industries,” he said.

Along with a successful performance in deposits, profits and loans, the bank also achieved remarkable success when it comes to credit cards. With its DIT card, a prepaid multi-application chip and PIN card combining the power of MasterCard EMV OneSmart features with an integrated municipal toll and transit application, Bank Asya attracted attention in the market. Noting that the number of DIT users is increasing with every passing day, Özdemir said they are working on studies to expand the card’s coverage area. AsyaCard DIT last year received the Best New Credit Card Product Launch award at the Cards & Payments Europe 2009 awards and received the “Best Credit Card Alternative to Cash” award at the Visa Europe Insights ‘09.

Introduced in May 2008, AsyaCard puts toll and transit functions onto no-contact smart cards that can be used at over 300 electronic toll collection system (KGS) points, including the two bridges over the Bosporus in İstanbul, as well as to complete transactions at 109,000 points of sale worldwide.

Bank Asya also participates in corporate social responsibility projects. The bank currently sponsors the Turkish First Division Soccer League, a sponsorship due to end at the end of this season. Özdemir said they expect to renew their sponsorship deal, recalling that the agreement has helped increase the bank’s popularity.

Noting that they expect 20 percent growth in 2010 over 2009, Özdemir said Bank Asya plans to open 25 new offices throughout Turkey and hire 400 new staff members. “We believe the Turkish banking industry still has huge growth potential,” he said, emphasizing that an İstanbul Finance Center (İFM) project, a government-backed strategy to turn the metropolis into a hub for financial activities in the region, would infuse new life into the Turkish banking industry. According to Özdemir, the project would introduce remarkable opportunities for banks.

“Most banks are planning to launch new investments this year that they had to suspend in 2009 due to the crisis. This will surely lead to an increase in the number of new bank offices and eventually contribute to employment,” he said. Addressing the view that banks are expected to see less profitability in business this year as compared to the past few years, he says this is pushing banks to adopt new policies to reduce costs as well as increase productivity.

Noting that the bank expects to increase its popularity with projected office openings in every single province, Özdemir said they will also concentrate more on expanding outside the country. The bank is currently operating in the interest-free banking sector throughout Africa following a strategic cooperation agreement with the Islamic Corporation for the Development of the Private Sector (ICD), a subsidiary of the Islamic Development Bank (IDB), signed in October of last year. Under the deal, Bank Asya acquired a 40 percent stake in Senegal-based Tamweel Africa Holding SA, owned by the ICD.

Political tension hits banking industry first

Making mention of recently increased political tension in Turkey, Bank Asya’s Özdemir asserted that further similar problems would first harm the banking sector. “Increased political tension, particularly a rumored closure case against the ruling Justice and Development Party [AK Party], would turn balances upside down in the economy,” he said. According to Özdemir, such an atmosphere would lead to unprecedented increases in interest rates, while banks would call in a large number of loans from the market. As regards anticipations for early general elections, he said the banking industry expects elections to be held on time.

The detention of retired and active duty generals and colonels in an investigation of the Cage and Sledgehammer coup plans along with rumors from the judiciary of another closure case against the AK Party recently led to fears in the market that political instability would spill into the economy. Hit by the aftereffects of political tension, markets entered a downward trend through the end of last month, with the İMKB losing a months-high 5.5 percent on investor reaction to news on Feb. 24. The Turkish lira also lost value against foreign currencies.

As regards recent increases in Turkey’s credit rating by some of the world’s leading agencies, he said they expect to see further upgrades, “provided the economy continues sailing in safe waters.”

source : todayszaman