Guidance note on shariah compliant funds issued – Malta

A guidance note for shariah compliant funds has been issued by the Malta Financial Services Authority.

The note explains how the legal and regulatory framework established under the Investment Services Act would apply to shariah-compliant funds established under Maltese law.

The MFSA stated that Malta’s principles-based regulatory regime lays emphasis on the disclosure of all information that the investor needed to know before taking the investment decision and on the transparency of investment management process itself.

This allowed a high degree of freedom on the choice of investment strategies and asset allocation policies adopted by investment funds, subject to conditions that varied according to the level of experience and investment expertise of the target investor.

On this basis, the note establishes that, whether set up as professional investor funds, undertakings for collective investment in transferable securities (Ucits) or non-Ucits retail funds, shariah funds may be regulated in the same manner as non-shariah funds.

The level of disclosure and the applicable conditions would be the same as those that were applicable to the respective category of retail or professional funds.

The guidance note requires that funds presenting themselves as shariah compliant were required to disclose all the relevant details in this respect in the fund prospectus or offering document as well as in their financial statements as part of their ongoing obligations.

The note explains the role of the shariah Advisory Board in relation to that of the fund manager to ensure that the financial soundness of the manager’s decisions was not conditioned by non-financial considerations.

It was, however, also the manager’s responsibility to ensure that the fund satisfied the relevant shariah principles and requirements as disclosed in the offering document.

The note may be downloaded from the MFSA website under securities/guide to regulation.

source : timesofmalta

Islamic Finance Possibilities in Macedonia

Discussion with Milan Adzievski

 Forum: Explain what the wider study “SUKUK – Muslim bonds free of interest?

 Shukarov: study “SUKUK – Muslim bonds free of interest” special attention paid to the differences between conventional and Islamic banking, but not putting the emphasis on the religious basis of Islam, but only to highlight the economic effects are obtained with these interesting financial structures.  Primary motive to start work on this project was the absurdity of the movements of financial markets in the world.  The traditional understanding that higher yields (about the same risk) do not increase demand for certain financial instruments becomes illogical when it is known that sukuk structures do not offer any guaranteed return (interest), and the world financial markets, the demand for them is becoming greater.  That was enough to interest them.  South East European University in Tetovo accept financing, formed a team that I led after two years, issued a final product – a project in which even suggest that it would be good in Macedonia to apply this approach to development financing.

What are the basic principles on which rests sherijatskoto understanding of economic life?

Sharia as a system of moral norms pays great attention to economic relations.  Particularly interesting is that the points allowed and illegal activities that must be followed.  For instance, implies the equivalence of the exchange.  Of course this is nothing new, it is based and the conventional economy.  However, interest has deformed the basic economic principle.  The difference is just in time.  Time no one owns and can not be charged.  Neistovremenata exchange causes and possible spatial displacement.  All this makes a problem when used bezvrednite, paper money as a universal tool razmensko.  Also, Sharia encourages business with the division of risk, entrepreneurship, respect for property rights, transparency and accountability, holiness of contractual obligations, discourages speculative behavior.  Particular attention is paid to the ethics of work, distribution of wealth, social and economic justice, responsibility towards community members, creating public goods.  But zagovara and a whole range of restrictions: unethical transactions with goods and services, ban on collection of interest (neekvivalentna exchanges), making debts, negotiate with some uncertainty of the outcome, deals based on gambling, trading, and any mediation with debt agreements , Forward foreign exchange contracts, etc..

From which sources its own Islamic banking revenues cover operating costs and revenues for salaries and benefits?

Islamic banking, as well as any other business should create earnings which cover their costs and profits.  Islamic banking does not create interest income, but because they create all other nekamatni income: commissions, differences in pricing, payment, and, most importantly, achieved sales revenues of deals.  Like any trader, Islamic banks invest in different business activities on its own behalf and for its own account.  Of them earn, but only if there is profit.  They do not earn profits from previously established, but the realized gains and monetizirana.  Therefore no impact inflatorno.  It is interesting that this currency is designed to be neinflatorno and that the Sharia years before 1400, when they were not known today risky financial innovations and speculations that have great influence on everything pozachestenite financial crises.

Several large banks in the U.S., Britain and Germany started using Islamic banking principles.  Is it possible tend to expand quickly in Macedonia?

Usually that Islamic finance is included in the Islamic countries, but has significant emissions of securities which are based on Islamic principles and Western countries (Britain, Germany, USA), even some of the major banks opened their specific banks that operate exclusively implementing the Islamic financial principles, even if each transaction check with AAOIFI, specialized accounting and financial organization of the Islamic financial organizations.  We study found that no legal obstacles to begin operation of the bank of this kind.  However, under our law, each bank must obtain consent for its established by the Governor NBRM.  Problems can arise because in our banking apply the principles of conventional banking Deposit and may appear and dilemmas and psychological barriers of nature.  Otherwise, it works with banking capital and deposits of citizens and companies holding payment, which means that subject to commercial risks and should be supervizirano like any other bank.  If, however, is organized as a kind of open investment fund, then apply another regulation and supervision.

Despite the differences, if there are similarities between the classical and Islamic banking, and who are they?

There are many similarities between conventional and Islamic banking.  The biggest difference is that no interest.  All other activities are similar.  Islamic banks in the basis function as investment banks that collect deposits, or a large part of the assets related to its own investment deals.  Partly deals Partnership (Mudarabah, Musharakah), leasing (idzhara), intermediate securities (sukuk), and even deals that are made to ensure future trade deals (price + expenses) which is largely just like interest agreements or dolgovno based structured arrangements.  If you follow the complex forms of derivative instruments that exist in conventional banking, you can find many similarities with many Islamic financial instruments.  That is why today largely pays attention to the similarities may be provided as soon as more liquidity to the Islamic, yet new financial markets.

 What are the known relevant data on the total profits of the banks in Macedonia in 2008  and commented that amounts, in particular factors that generate these numbers?

 In Macedonia, the latest information on the operations of the banks that they feel the adverse impacts of the financial crisis.  Banks reduce their profits.  Only a few banks, marking a loss of its operations in 2008  The crisis in Macedonia is mainly manifests in the real sector and the banks can not remain immune to it.  Deposits are reduced, hence the credit activity is reduced.  However, at a time when export activity dramatically decreases, while imports decline, but with less pace and doznakite abroad are broken, there is a problem of the large trade deficit and current account deficit and, as a result, international reserves of the country drastically reduced.  Trade deficit in first quarter amounts to 620 million euros, which speaks of the possibility of achieving a record deficit that would have exceeded two billion euros.  Unfortunately, now feel and razbranuvanja and market crude oil prices which, while it would complicate the problem of foreign currency liquidity in an even greater extent.  That’s why the National Bank pursued a policy of expensive money to reduce pressure on menuvachkiot market withdrawal and already smalenata foreign currency liquidity.  They use banks, so marking revenue and costly and bezrizichni treasury bills which emits National Bank to sterilized the excess liquidity denar.  Thus be extracted considerable financial potential of the real sector and the more complicated situation at him, he just should withdraw development and to mitigate the consequences of the crisis.  One reason for the complex financial situation in Macedonia is nekolkugodishnoto transfer credit activity to the household (consumption), rather than to the economy (supply).

Are they, and past bank statements, are the result of just a bank check or policy question for crack usury?

Additional problem of the banking sector in Macedonia is the high degree of existence monopoliziranost causing high prices for low quality of banking services.  I would not like to use the term “crack usury,” but the interest rates on loans are extremely high.  Especially high when considered zero inflation, which makes them extremely realistic high neprimerno for this time of financial crisis and the crisis of the real sector and the huge unemployment.  It is clear that this is partly a result of pressure that makes the offer of public financial instruments bezrizichni high rate of return (9%), but is also partly due to the economy’s inability to create new value in times of crisis that will alimentira significant public expenditure.  If public and private consumption is not reduced, will be reduced or interest rates, which is the main condition for reviving the economy, which would be necessary at least at the time when I noticed the first signs of the revitalization of the global economy, not only to the full landing planned budget.

Source  :  trsld

First Islamic exchange to be launched in London

The first electronic trading platform allowing Shariah-compliant companies to raise cash will launch in London in May, the venture capital firm behind the project said yesterday.

The Shariah Ummah Securities Information Exchange (Umex) is designed to provide a platform to companies with a capital value of at least £20mn ($31mn) and looking to raise the equivalent of at least 20% of their market value.

Mahesh Jayanarayan, chairman of Halal Industries, which will manage the exchange said it would operate as a Multilateral Trading Facility (MTF).

MTFs are low-cost electronic trading platforms created after the Markets in Financial Instruments Directive (MiFID) opened up exchanges to competition.

It would be the only MTF in Europe so far to help companies raise funds.

“Having been through its early days, it is now time for the Islamic banking and finance sector to strengthen and expand the industry infrastructure to ensure sustainable global operations,” said Sheikh Hussein Hamid Hassan, the scholar heading the exchange’s Shariah panel.

“Umex has lined up 10 Islamic Enterprises and over a 100 Shariah compliant securities to be traded when it goes live,” said Jayanarayan.

He said the exchange planned to bring “over a 100 global Islamic enterprise IPOs within a year from May.”

Shariah Umex will also offer the Islamic version of American and global depository receipts, the Islamic Shariah Depository Receipt (ISDR).

ISDRs represent ownership of a number of shares issued by a Shariah-complaint or Islamic firms traded on a foreign stock exchange.

A senior market practitioner, who declined to be named, said the MTF would need high trading volumes to succeed.

“Is it better for Islamic funds to trade among each other? If not, there is no real advantage to start a specific MTF, because any Islamic fund could buy or sell the same stocks on more liquid venues,” the source said.

The exchange will operate two platforms, one to be launched in May to list small caps, the second to be launched in the third quarter for established Islamic companies with a market in excess of £50mn.

source : the gulftimes