IFIBAF signs collaboration agreement with Dubai Dar Al Sharia

ubai based Dar Al Sharia which is the leading provider of Shariah services in the region has signed a collaboration agreement with the Frankfurt based Institute for Islamic Banking and Finance (IFIBAF).
The relationship between these two organizations originates from a highly success Islamic Finance Trade Mission to Europe conducted by Dubai Exports, an agency of the Dubai Department of Economic Development. The Islamic Finance Trade Mission sought to increase the awareness of Islamic financial service providers and institutions from the UAE in the European markets. (press Release)
source : opalesque

Islamic Accounting – An Introduction

“Corporation have emerged as the dominant governance institution on the planet, with the largest among them reaching into virtually every country in the world an exceeding most government in size and power, increasingly, it is the corporate interest more than the human interest that define the policy agendas of state and international body although the reality and its implication have gone largerly unnoticed and unaddressed”(Korten). The western models of accounting have contributed to this situation.

According to Hayashi, “The traditional Western double-entry based accounting technology is well-suited to an orthodox, positivist society of any kind. It is not surprising that it is proving inadequate, as people are returning to more integrated world views, whether Islamic or otherwise”. The main critics of western accounting states that it failed to consider the social interest, promote the exploitation of capitalist over labor and society and Promote the concentration of wealth and power o the hand of the rich.
Accounting is being developed based on religion and culture in many societies. Shinto for example has a potential drive to establish a Shinto based Accounting in Japan as the Japan is society with has strong commitment to traditions and culture. According to the research the culture and accounting are closely related. Different culture, different economic – socio-politico systems demand different accounting system. The researchers in Islamic accounting emphasis that “Islam is different from Occident (Capitalist ideology), so it must have its own accounting system”.

The western accounting is Individuality – oriented, focus on individuality aspect without consider any social aspect and secular. But the Islamic accounting has to be developed to address these issues Society – oriented and should be based on focus on society aspect, basically Al Qur’an & As Sunnah (Shariah),
religious (must responsibility to God at the Judgment Day).

Therefore, It is necessary to develop an accounting system based on Islamic values and guidelines to the will benefit the mankind. Sura Baqara V 282 clearly states about the recording of transactions and give divine guidance to the humanity in all the aspects of business and accounting.

The Islamic accounting practices will be able report accurate income determination, to promote efficiency and leadership, to comply with the shariah (Islamic principles), commitment to justice, to adapt to positive social change. The Islamic accounting should be based Al-Quran and As-Sunnah.
The key success in Islamic accounting practices is the formation of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). The AAOFI was found to report ethical dimensions in the Islamic financial institutions which was not addressed by the international accounting standards. The formation of AAOFI is the key stone for success in Islamic finance industry.
Islamic finance industry gave the real sprit to Islamic accounting. There are many researches going in this field. Some western educational institutions started to offer courses in Islamic accounting. These developments signify that Islamic accounting will also develop along with Islamic finance industry and will the benefit the humanity.

Dr. Jamaldeen M Faleel DBA
Assistant Professor – Finance and Accounting
Effat University – Jeddah, KSA

Russia to enter world of Islamic finance

KAZAN (Russia): Hoping to attract Arab capital, Russia will take its first step into the world of Islamic finance in June by issuing sukuk, bonds which comply with the syariah.

The bonds are to be issued by the majority Muslim Russian republic of Tatarstan in the Volga region, which has embarked on an ambitious drive to attract foreign investment.

“Russia will show that it can be interesting for Muslim countries,” one of the project’s backers, Linar Yakupov said.

“Right now Islamic banks cannot work in Russia, because our legislation does not take into account the Koran’s restrictions.”

Islam forbids borrowing or paying with interest, and sukuk (the plural of the Arabic word for a financial deed) are not based on debt like traditional bonds.

Instead, buying the bonds secures partial ownership in a concrete asset like land or a building, and investors are guaranteed a part of the profits generated by this asset.

The first sukuk to be issued in Tatarstan’s capital Kazan on June 20 will be going toward financing a major business centre in the city whose construction will cost US$200 million (RM600 million).

“Sukuk are guaranteed by the Tatarstan government, the operator will be based in Luxembourg, and we know that the international market is ready to buy,” Yakupov said.

Among the interested investors are the Jeddah-based Islamic Development Bank, and various banks in the Middle East, Malaysia, and Russia, he said.

Russia’s finance ministry said that it “supports Russia’s first emission of Islamic bonds in Tatarstan” but pointed out that “Arab capital is already present in Russia.”

Elnour Gurbanov, an analyst at Deloitte, said the initiative “can contribute to attracting Arab capital in Russia, but only in the long-term” since incorporating Islamic finance into Russia’s legislation will take time.

Tatarstan has maintained privileged relations with countries in the Middle East and Southeast Asia. It prides itself on maintaining a distinct identity within Russia although talk of secession that followed the collapse of the USSR has now died down.

For years it has urged Russia to adopt a legal framework to permit the work of Islamic banks in the manner of Britain, France, or Luxembourg.

Bringing Islamic banks to Russia is “possible and even necessary”, Tatarstan’s leader Rustam Minnikhanov told investors in Dubai in early May, according to the RIA Novosti agency.

In Moscow, however, federal authorities are showing greater caution.

“There is no existing law nor a draft law regulating Islamic finance. Given the lack of eagerness from the federal authorities to study this issue, we should not expect it for another two or three years,” said Oleg Ivanov, vice-president of the Regional Banks Association of Russia.

Ivanov’s association has tried without success to include Islamic finance into Russia’s strategy for developing its banking system to 2015, which was adopted by the government two months ago.

“The government and the Central Bank did not support us,” Ivanov told AFP.

Ivanov added, however, that the emergence of Islamic finance in the country “will definitely be positive for the development of the financial sector in Russia”, noting that the assets of Islamic banks are estimated at a trillion dollars. – AFP

source : bttimes.my

ACCA, KPMG undertake expert discussions on Islamic finance

The Association of Chartered Certified Accountants (ACCA) and KPMG are hosting the second in a series of high-level roundtable discussions in Dubai on May 5.

These discussions aim to answer critical questions on the growing issue of how the financial reporting of Islamic finance can be harmonised and made more consistent internationally.

The event will bring together experts from the fields of accounting standard-setting, auditing, regulation, Islamic banking and ratings agencies. The first event in the series was held in Malaysia last October and the next will be held in London, this demand reflects the growing international interest in the subject.

Aziz Tayyebi, the ACCA’s Head of International Development who is also an expert in Islamic finance, said: “Islamic Financial Institutions (IFIs) are being set up in various countries including South Korea and Ireland and conventional multinational firms are also increasingly offering Shariah-compliant products. This is why we need a platform such as this, with some of the leading stakeholders in international Islamic finance, to address some fundamental questions around the topic of Islamic finance.” Some of the questions that will be under consideration by the expert panel in Dubai will include

· Should the objectives of the financial reporting of Islamic financial transactions be different from those of mainstream financial reporting?

· Should Islamic Finance use distinct Islamic accounting principles to provide a faithful representation of the nature of these transactions?

· Do non-financial institutions that use Islamic finance products have different accounting issues to IFIs?

Samer Hijazi, KPMG Audit Director and an expert in Islamic finance, noted: “As the Islamic finance sector matures and becomes increasingly mainstream, greater synergy of practices and transparency of institutions that sell Shariah-compliant products will become critical.”

Muhammad Tariq, KPMG’s Head of Islamic Finance in the UAE, added:“It is timely to review the current financial reporting practices across the globe and to address the issues which might prevent a consistent internationalised approach, with all the benefits that we have seen in the development of IFRS”.

Guests for the roundtable which is to be held at the Emirates Tower Hotel in Dubai, will include Wayne Upton, director of international activities, IASB, MNCs, global and local banks.

Together these distinguished panellists will not only discuss the wider issues related to harmonising financial reporting practices for Islamic finance, there will also be some specific questions addressed at the forum, aimed at the compatibility of IFRS with Islamic Finance practices:

· Does the prohibition of taking part in interest-based transactions influence the increasing use of discount rates for measuring the market value of financial instruments?

· Are concepts such as ‘control’, ‘risks and rewards’ and ‘rights and obligations’ – essential in determining accounting treatment under IFRS?

· Are the treatments of various types of profit-sharing investment accounts under IFRS consistent with the Shari’a basis for those transactions?

The ACCA is the global body for professional accountants. It aims to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.

KPMG is one of the best-known names in business. Its global network of member firms provides audit, tax, and advisory services to local, national, and multinational organisations.

source : khaleej times

Algeria can achieve real development through Islamic finance: expert

The development of Islamic finance industry in Algeria passes through a clear political desire to go forward in diversifying financial products and solutions, according to vice- president of the International Islamic University of Malaysia.

Western studies show that non-Muslims tend the most to this industry. “A total of 55 percent of Islamic banks’ clients are non-Muslims. This is due to its varied and several privileges,” Younes Salhi told Echorouk.

He believes that the Algerian government should study successful examples in this field including the Malaysian and Bahraini experiences. “This would enable the Algerian economy to benefit from very important resources to achieve a real economic growth in the gross domestic product, increase social integration opportunities, creating real jobs and wealth.”

He also stressed the necessity of not neglecting any relating activity including Islamic cheques which constitute a very efficient means to fund infrastructure projects and economy.

The economy expert said the Islamic finance is not a threat to the traditional finance. “It is a complementary product which enables to satisfy the aspiration of large categories in society.

“The Islamic economy deals with real goods and not unreal ones. The Islamic finance is the most successful way to fund young people’s projects and contribute in their integration in an efficient and sustainable way in the economic life.”

“It is time to start building a real economy,” he added.

Professor Salhi said Islamic finance in Malaysia is bases on three main pillars: Islamic banks, Takaful companies, successful Halal industry and Hadj Fund.

He added that the second main step which cntribvuted in the Islamic finance industry success is the existence of a legal frame.

Civil courts are reinforced with competent judges to decided in Islamic financial cases.

In 1983, the government set up the first law followed by the law on Islamic insurance companies in 1948 and then the amendment of the commercial law.

The Algerian expert warned against the consequences of not having control over the high liquidity in the Algerian banks. “That liquidity may be a victim of inflation. The Bank of Algeria should protect the purchasing power of Algeria’s high monetary reserves.”

source : ecoroukonline

Oman well placed to tap Islamic funds, says expert

Oman is well positioned to attract Islamic funds for its economic development, if the country formulates the right regulatory environment and train human resources to work in Sharia-compliant institutions, says an expert.

“The major issue is regulatory environment. We also need to train people to work in Islamic banking institutions,” Dr Mabid Ali Al Jarhi, financial expert and head (Training) of Emirates Islamic Bank, told Times of Oman.

Addressing an Islamic banking conference here yesterday, Dr Al Jarhi, added that the Sultanate’s regulatory authorities should formulate an ideal model for the country. International Turnkey Solutions (ITS), a global leader in Islamic banking technology solutions, has organised the conference, which was attended by 75 banking executives and experts.

He said the prevailing two models of Islamic banking – Malaysian model and Gulf model – are not suitable for Oman. ”The Sultanate should avoid both and has to formulate its own model.”

An attractive model should be formulated keeping in mind a high degree of operational efficiency, avoiding products that lack reputation and allow innovative process.

The Central Bank of Oman, he said, should look into amending its existing laws, or prepare a new draft banking law to put Islamic banks on an equal footing with conventional banks. “(If these factors are in place), the Islamic finance market in Oman could operate at levels that could compete with regional institutions.

Funds, which have been flowing outwards, could be repatriated and foreign funds could be attracted to Oman,” added Dr Al Jarhi.

Dr Al Jarhi said the investors who have parked their funds outside Oman will repatriate their money, if the local institutions can offer best quality Islamic banking products.

Gulf countries
“The country will attract funds from neighbouring Gulf countries. These funds can be used to finance public projects.”

The Islamic finance industry is currently valued at $1 trillion worldwide, of which $210 billion is invested in the Middle East.

He also said the institutions should find out the customer needs through proper market research. New products should be structured under the supervision of Sharia board.

“Islamic banks need to mature operationally and make the technology investments required to be competitive on a global scale. For Oman, the future is very bright if banks here take the necessary steps required to build a solid foundation for Islamic banking,” said Dr Haroun Dharsey, senior vice-president of operational projects at Dubai Islamic Bank.

source : times of oman