Islamic banking seeks foothold

Islamic banking executives have a proposal for their bonus-addled Western counterparts: Take a look at our model.

Beyond interest-free banking — a prospect that would likely win few proponents in London or New York — executives from the world of Islamic finance argued at a conference yesterday that world markets weary of excessive risk and wealth imbalances should welcome ethical standards of investment based on religious tenets of fairness and transparency.

But they warned that the industry also needed to get its own house in order, by streamlining existing fragmented regulation and coming up with new products.

Some of the executives meeting for the ninth annual Islamic Finance Summit in London believe that the sector has already missed an opportunity in the current turmoil, by failing to seize the moment quicker to extol the benefits of investment that is based on the “real economy.”

Islamic banking, which conforms to Shariah, or Islamic law, forbids charging interest and requires deals to be based on tangible assets, providing some insulation from credit turbulence. Speculation is banned, as is dealing in futures, and risk is shared.

For many, that provides a contrast with the speculation and out-of-control risk-taking that contributed to the current global turmoil.

“In the midst of this global financial chaos and dangers, advantages lie between the real economy and the financial sector,” said Mohamad Nedal Al Chaar, secretary general of the Accounting and Auditing Organization for Islamic Financial Institutions. “A new financial system is emerging, it is the Islamic finance and banking system, because where we are today is a consequence of the compounded greed of individuals, institutions and nation states.”

That prospective hesitancy underscores a key problem facing the Islamic banking sector: a lack of understanding of its complex tenets, which is not aided by the diversity of rulings on what’s allowed by Muslim scholars across different jurisdictions.

“We still remain highly fragmented,” said Mukhtar Hussain, global chief executive officer of HSBC Amanah.

“The industry needs less discussion and more action, and more coherence with what it wants to achieve at a global level, not a local level,” he added.

Islamic finance currently represents around 2 percent of global financial assets, or $820 billion, but it is growing at an average of 28 percent annually.

The British government has supported the flourishing industry and there are now scores of Islamic banking institutions in London offering products including home loans and commercial investment structures to the country’s 2 million Muslims.

There is also an expectation that Britain will become the first Western government to issue a sovereign Islamic bond, or sukuk, which confers to investors a proportional ownership of an underlying physical asset as well as the income that it generates.

source : capcodetimes

A Islamic Banks agrees to fund the bulk of airport expansion

AN ISLAMIC bank will provide more than £19 million towards the expansion of Southend Airport.

The Bank of London and the Middle East announced yesterday it would loan £19.1million in development finance to the Stobart Group, which owns the airport.

It comes two days after the Government announced it had given final approval to the decisions made by Southend Council and Rochford District Council to allow the runway extension to go ahead.

The 300m runway extension is the key part of the £35million development of the airport, which was bought by Stobart in December 2008.

The loan – about two-thirds of the total cost of the transformation – will fund some of the work, including the diversion of East-woodbury Crescent, and the building of a new £12million rail station.

Alastair Welch, managing director of the airport, said: “This announcement is part of our plan to ensure the Stobart group is well funded and, more specifically for us, to ensure the airport’s potential is realised.”

The bank said its funding would help develop the airport as a distribution gateway as well as opening up new European routes to increase passenger numbers from 42,000 to 2 million by 2020.

Based in the City of London, the Bank of London and the Middle East describes itself as the biggest Islamic bank in Europe and London’s leading bank which is compliant with Islamic Sharia law.

Humphrey Percy, the bank’s chief executive, said: “Eddie Stobart is an iconic, well-established UK brand with a strong track record, and represents an ideal candidate for our corporate banking services, both now and in the future.

“The core objectives of Stobart group correspond with the principles of the bank – transparency, partnership and service.

“Stobart is growing and expanding, and the bank is looking for innovative market leaders such as the Stobart Group to develop with.”

Ben Whawell, chief finance officer of the Stobart group, said he was “delighted to partner with the bank for the further development of London Southend Airport, enhancing its position as the eastern gateway to London.”

He added: “We look forward to seeing the completion of this exciting project that, in addition to servicing the 2012 Olympics and Paralympics, will have a long-term beneficial impact.”

Stobart aims to open the runway and terminal in 2011 and the station, on the London Liverpool Street line, this summer.

source : southendstandard