Khartoum to Host Islamic Financial Products Forum Next April

Al Bayan Centre for Islamic Financial Engineering is to organize the 4th session of the Khartoum Forum on Islamic Financial Products next April.
The forum is to be held in collaboration with the Council for Islamic Banks and Financial Institutions (CIBAFI), Khartoum Stocks Exchange and Basant International Institution.
For his part, the General Coordinator of the Forum, Ayman Yasin El-Imam, told SUNA that the session will be held under the theme “Obstacle Facing Islamic Finance”.
More than 50 Islamic Financial Institutions from Kingdom of Saudi Arabia, Bahrain, United Arab Emirates, Jordan, Malaysia, France, Britain and Turkey as well as some African Countries will participate in the forum.
The Forum coincides with the meetings of the Jeddah-based Islamic Development Bank (IDB) as well as (CIBAFI).
The Forum will honour some distinguished pioneers in Islamic Financial Services and Institutions.
The forum comes at a time when finical institutions are working to boost Islamic financing services in Africa.
The forum will allocate a special session for exploring opportunities for Islamic financing in Africa, to be addressed by experts and researchers on the Islamic finance industry.

source : sudan vision daily

Dubai targets a green sukuk

April Yee

from The National

“Green sukuk” implies two sets of standards – environmental credentials and Sharia compliance – which helps explain why for now, it is merely a developers’ dream.

But industry executives plan to begin crafting guidelines next year to create the world’s first environmentally friendly Islamic finance, and calls are increasing for green-themed debt instruments to help raise the money needed to combat climate change – more than US$10 trillion (Dh36.73tn) over the next two decades, according to the International Energy Agency.

Dubai hopes to issue green sukuk to finance solar parks, biogas plants and energy efficiency devices for homes.

“I am trying to raise the appetite. We have the projects, so we just need to identify which one is best to basically lead the way,” said Ivano Iannelli, the chief executive of the emirate’s Carbon Centre of Excellence. “It would be a very interesting mode paving the way forward and a success story that investors are likely to follow.”

The call for green sukuk comes as other financing prospects look bleaker.

The biggest renewables project in the UAE, Masdar’s 100 megawatt Shams 1 solar thermal plant, was backed by $600m in loans from a consortium of international banks. But developers do not expect banks, particularly from Europe, to continue to be as free with project financing in the economic crisis.

Carbon credits, another source of funding for climate change abatement, have declined in the past year due to oversupply fears in Europe and a lack of confidence in the political policy underlying them. UN-issued carbon credits traded in Europe have fallen from €13.69 a tonne in May to below €5 given the lack of widespread commitment outside of the EU for renewing the Kyoto Protocol, the binding treaty to curb carbon emissions that backs the UN credits.

Another financing mechanism to arise from the international negotiating process that spawned Kyoto is the Green Climate Fund, which is meant to funnel $100bn a year by 2030 towards climate change abatement projects in developing nations. But nations have yet to agree on who will pay into the fund and who will run it.

That’s where green bonds come in, hopes Sean Kidney, the co-founder of Climate Bonds, a green bonds organisation.

“The world is shifting to these kinds of products in recent years,” says Mr Kidney. “The investors don’t want to take a haircut. The awareness of macro risks of climate change means that given the choice between a fossil fuel product and a green product where the risk-reward ratio is the same, they will choose the green product.”

Proponents say that green sukuk and bonds could provide as much as $300 billion for projects to combat climate change. Last year the value of the global bond market came to about $95tn.

Today the green bond market is only a hundredth of the way there, with about $3bn so far. Of the green bonds, most have ties to the development sector; the World Bank, European Investment Bank, African Development Bank and International Finance Corporation are among the entities that began green issuances starting in 2007.

Demand is strong for commercial banks to issue more green bonds of their own, according to a statement in which Allianz, Swiss Re and a coalition of other institutional investors outlined a desire for more low-carbon investment opportunities.

“As insurers and reinsurers we are conscious of the long-term risks that climate change poses to society and how it will affect pricing of weather risk transfer solutions long term,” read the statement this month. “We are also conscious of our role as large investors and see the importance of using our assets to mitigate this risk.”

Low liquidity in the low-carbon bond market and a need for more due diligence were holding them back, they said.

Climate Bonds and the Clean Energy Business Council, a UAE trade group, are expected to begin work next year on creating the standards for a green sukuk. Climate Bonds already has a set of standards for bonds that auditors such as KPMG and DNV can use. They submit their findings to Climate Bonds, which slaps its seal on the bond if it meets the criteria.

“It is marketing,” says Aaron Bielenberg, the director of the Clean Energy Business Council. “The difference is an issuer like the Government of Dubai can potentially access a different set of investors focused on sustainable investing and can also potentially raise money at lower cost.”

That is critical for Dubai given its target of drawing 1 per cent of its energy from the sun by the end of the decade. Next year the Supreme Council of Energy plans to hire a consultant to look at a framework for funding projects, and as soon as next month it could begin looking for the contractor to design and engineer a 10MW solar park that would cost about $30m, according to an industry benchmark of $3 a watt.

source : The national

Oman’s Islamic banking on growth path

Staff Reporter from Oman Tribune

MUSCAT Islamic banking services in the Sultanate will witness robust growth in the coming days as the central bank will develop general rules and regulations to ensure good governance in these banks, said HE Hamoud Bin Sangour Al Zadjali, Executive President of the Central Bank of Oman, while speaking at the Oman Islamic Economic Forum being held at Al Bustan Palace Hotel on Saturday.

However, Islamic banks should ensure that their banking transactions are sharia compliant, he added.

These banks need to follow assorted accounting standards in certain cases that are acceptable by the parties who are trading in the stock markets and are in line with international standards, he said.

The CBO will review regulatory issues at the legislations which came into force in the first quarter of 2011 and will revise the legislations from time to time based on the developments at the local and world markets.

While elaborating on the functioning of Islamic banking, he said these banks are not isolated from traditional banks and the central bank, the regulator of the banking sector, will keep a link between Islamic banks and other banks. However, it will be a real challenge now and in future.

While talking about the future of the Islamic banking, Prof. Humayan Dar, CEO, Edbiz Consulting and chairman of the Forum, said that the size of Islamic banking industry in the world is expected to touch around $1 trillion, a rise of 7 per cent, in near future. He said while traditional banks have been affected by the global financial crisis in the past two years, the Islamic banks managed to remain immune.

Dr Abdul Aziz Mohammed Al Hinai, deputy chairman of the Islamic Bank for Development, said Islamic banks, which have witnessed robust growth since their launch, are facing challenges in developing a relationship among them, the central bank and other regulatory bodies. Creating a proper supervisory system for the Islamic financial industry, diversification of Fatwas issued by Sharia Audit authorities, lack of standard criteria for contact, lack of efficiencies and talent crunch are also posing major challenges to these banks, he added.

HE Sheikh Dr Kahlan Bin Nabhan Al Kharousi, the Sultanate’s Grand Mufti, said that the Sultanate seeks to learn from other countries’ experience in Islamic banking to avoid shortcoming and help financial and Takaful insurance companies that provide sharia-compliant products.

While talking about the establishment of legislative centres that will grant approval to Islamic banks, Al Kharousi said that banks need to fulfil three guidelines such as a legal framework, managing operations that ensure the provision of Sharia-compliant services and products and efficient and qualified human resources.

The applications require three levels of audit and sharia advice, on top of which is the Central Sharia Authority that lay the general principles and bases for the different sharia compliant activities; this is equal to bonds in capital markets in the Sultanate, he added.

Sharia committee will be in charge of developing details of daily transactions and ensure that they are compatible with the main restrictions. The Ifta house provides advice to decision-makers to ensure that the products are genuinely Sharia complaint.

In response to a question about restructuring of debts in the Islamic way, he said that this may be offered by Islamic banks to help people get rid of usurious transactions. The Islamic windows which will be opened here seek profits, hence the services offered by these windows will be based on sharia contracts.

Tun Abudllah Bin Haji Ahmed Badawi, former prime minister of Malaysia, said that there is a need for global standards in Islamic banking and finance to help it emerge as an international alternative in the sector.

Various countries have their own standards of Islamic banking and financial system. But this creates lots of difficulty in its progress, he said.

Khalid Bin Hilal Al Yahmadi, chairman of Amjad Development Company, said that researches and studies conducted found that principles of transactions at the Islamic economy provide satisfactory and fair solutions for the society.

More than 2 billion rials (over $5 billion) are semi frozen money or interest free deposits. This amount accounts for one-third of the total deposits at local banks. He pointed out that one of the studies affirmed that two-third of the Omani society prefer to deal with financial solutions that are Sharia compliant.

The two-day forum, organised by Amjad Group, was held under the auspices of HH Sayyid Shihab Bin Tariq Al Said and was attended by ministers, honoruable members of the State Council and Shura Council, undersecretaries, executive presidents of banks operating in the Sultanate and Islamic banking institutions from outside the Sultanate.

source : Oman tribune

State Bank to develop liquidity framework for Islamic Banking Institutions

* Governor says most challenging aspect of this mechanism is the transformation of sovereign debt into Shariah-complaint debt

The central bank is currently at an advanced level of development of a comprehensive liquidity management solution for Islamic Banking Institutions (IBIs) following extensive efforts made both by the industry and the State Bank of Pakistan (SBP), the Governor, SBP, Yaseen Anwar has disclosed.

Delivering his keynote address at a two-day international conference, Oman Islamic Economic Forum, in Muscat, he said that this comprehensive liquidity management solution would include i) development of Islamic interbank money market, ii) development of Islamic Interbank Offered Rate (IIBOR) for use as a benchmark for pricing of Islamic finance products, iii) transformation of a sizeable portion of conventional sovereign debt in the books of central bank into Shariah-compliant debt, iv) allowing IBIs to place surplus liquidity with the central bank to be remunerated based on the central bank’s earnings on Shariah-complaint assets and investment portfolio, and v) lender of last resort facility for IBIs.

The most challenging and time consuming aspect of this mechanism is the transformation of sovereign debt into Shariah-complaint debt as it involves identification of the assets to be used for transformation, their valuation and documentation etc, he said. ‘However, I am confident that with the help and grace of God, we should be able to finalise this mechanism in the near future. This would be a major milestone and would give a big boost to the already buoyant Islamic finance industry in Pakistan,’ he added.

SBP Governor emphasised that innovation remains the corner stone of Islamic banking. ‘IBIs need to increase their product mix in order to meet the needs of their ever increasing client base. Research and development which has been long ignored in our part of the world should be the hallmark of IBIs,’ he said, adding that we need to change our perceptions and invest in research as a core ingredient of our strategic objectives.

Anwar said that there is huge potential for development of Shariah based agriculture financing in Pakistan being an agro-based economy. ‘The central bank is working with the industry to develop Shariah-compliant agriculture finance products to be offered by IBIs after necessary customisation. We have recently circulated a model Shariah-compliant agriculture finance product based on ‘Salam’ to facilitate IBIs’ entry in the country’s agri-finance markets, which so far have remained grossly un-served or under served,’ he added.

He said that the Islamic economic system is not just about prohibition of interest, it also promotes values such as accountability, transparency and social responsibility. ‘We in Pakistan adopted an evolutionary approach for establishing Islamic finance in the country in 2001 whereby both conventional and Islamic banks were allowed to operate in parallel. This enabled the masses to chose between the two systems that best serves their banking and financial services needs and is also in conformity with their faith,’ he said, adding that the approach has worked well since then and the industry starting from almost scratch in 2001, has gradually improved its share to more than 7.5 percent of the country’s banking system.

‘We have now 5 full-fledged Islamic banks and 13 conventional banks having stand-alone Islamic banking branches. Given the strong growth momentum, which is over 30 percent annually for the last 6 years, we are hopeful of more full-fledged Islamic banks in the country in the near future,’ he said and added that the State Bank of Pakistan has been at the forefront of all the major initiatives for development of the industry.

Anwar said: ‘we are one of the few regulators who have introduced a comprehensive legal, regulatory, and Shariah compliance framework for the Islamic Banking Industry. The framework allows three types of institutional models for offering Islamic banking services; (i) Full-fledged Islamic banks (2) Islamic banking subsidiaries of conventional banks and (3) Stand alone Islamic banking branches of conventional banks.’ Moreover, to encourage and facilitate conversion of conventional branches into Islamic banking branches, a detailed criterion has also been issued, he said, adding that presently the conventional banks’ Islamic banking portfolio constitutes about 40 percent of the industry.

He said that in order to enhance the breadth and depth of the industry, the framework also allowed establishment of full-fledged Islamic Microfinance banks, Islamic microfinance services by full-fledged Islamic banks and Islamic microfinance Divisions in conventional microfinance banks. Considering the growing awareness and acceptability of Islamic microfinance coupled with its inherent controls to ensure end use of the funds provided by Microfinance Institutions (MFIs), the outlook for growth and development of Islamic microfinance in Pakistan is highly positive and ‘we may see establishment and operations of new Islamic microfinance banks in very near future.’

Anwar said that a comprehensive and mutli-tiered Shariah-compliance framework is another very important feature of our Islamic banking framework, which comprises: (a) centralised Shariah Board at the central bank, which is the apex Shariah Body in the country for Islamic banking institutions, (b) the Shariah Advisor at bank’s level to be appointed in accordance with the State Bank of Pakistan’s Fit and Proper criteria with the responsibility to ensure that the bank’s operations are in conformity with Shariah principles, (c) mandatory internal Shariah audit; and (d) periodic Shariah inspections by the Central Bank along with routine annual inspection of IBIs.

He said that SBP is one of the very few central banks that have initiated Shariah inspections. ‘Before the formal launch of the Shariah inspection, a comprehensive Shariah inspection manual was developed by engaging a reputed Shariah consulting and auditing firm and comprehensive training was imparted to the Shariah inspectors,’ he said, adding that the central bank has also notified the essentials of major Islamic finance products and instruments along with their model agreements. ‘This arrangement not only allows necessary flexibility to IBIs to develop their own products but also helps in achieving much needed standardization and Shariah harmonization,’ he said, adding that to further strengthen the Shariah harmonization drive, we are in the process of adopting the AAOFI Shariah standards.

SBP Governor congratulated the Central Bank of Oman for initiating Islamic banking and wished them every success in their efforts to develop a vibrant Islamic banking industry.

source : daily times pakistan

UK Experts Eye Islamic Finance Solution

A decision by the UK government to put on hold earlier plans for the first Islamic sovereign bond from a western country was criticized as a setback for the initiative that could have provided more security to a shaking economy.

“It would certainly help the UK market if the government decided to go ahead with a benchmark sukuk,” Farmida Bi, partner at Norton Rose, the law firm, told the Financial Times.

“It could galvanize the market and would lead to more interest in Islamic finance in London and [continental] Europe.”

Affected by a financial crisis, the UK put the plans to issue the Islamic instrument on hold which would have been the first Islamic bond to be issued by a western government.

The government cited fears that a new instrument might struggle to attract demand in difficult market conditions that have been made worse by the troubles in the eurozone.

Yet, London still remains the main arena outside the Muslim world for Islamic finance.

In 2006, Britain’s fifth-biggest bank, Lloyds TSB, began to roll-out its Islamic financial services across the country.

The UK is the only country in the European Union to have Islamic banks. It is also developing its takaful market for Islamic insurance.

The UK also has a strong foothold in developing products such as commodity murabaha – Islam’s version of interbank short-term lending and syndicated loans.

Moreover, London has established the first secondary market in sukuk outside the Islamic world to help Islamic investors who seek to buy property and assets in the UK in a way that fits in with their religion, which bans earning interest, speculating or risk-taking.

London is also advanced in Islamic retail services, with institutions offering a range of Islamic banking products, such as mortgages and car loans.

The Islamic Bank of Britain, granted a license in August 2004, became the first Islamic bank in the UK and has continued to attract customers for mortgages.

Enhance Market

Admitting that the government made huge efforts to facilitate Islamic finance in the UK, there is a feeling among many bankers that the government must launch a sovereign sukuk to help the market move to the next stage.

“I think it has been a mistake by this government not to revive the idea of an Islamic government bond,” a banker at a big City institution told Financial Times.

“They worry about price and demand, but the UK gilts market is a haven.

“We are confident there would be strong demand for this product, as it is Islamic and would be denominated in sterling, which is what investors want, as there are so many problems in the eurozone.”

Despite the recent decision to hold the new instrument, the Islamic finance was gaining popularity in UK better than other European countries.

For example, though France has around 7 million Muslims, compared with UK 2 million Muslims, progress in Islamic finance in France was stalled due to problems over banning the face veil and burka in public places which put off investors.

Starting almost three decades ago, the Islamic banking industry has made substantial growth and attracted the attention of investors and bankers across the world.

A long list of international institutions, including Citigroup, HSBC and Deutsche Bank, are going into the Islamic banking business.

Currently, there are nearly 300 Islamic banks and financial institutions worldwide whose assets are predicted to grow to $1 trillion by 2013.

Islam forbids Muslims from usury, receiving or paying interest on loans.

Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.

Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.

Investors have a right to know how their funds are being used, and the sector is overseen by dedicated supervisory boards as well as the usual national regulatory authorities.

The Shari`ah-compliant system is now being practiced in 50 countries worldwide, making it one of the fastest growing sectors in the global financial industry.

source : onislam net

Business schools turn to Islamic finance

As unemployment levels remain high in the West, finance students are being encouraged to gain expertise in Islamic banking so that they will be able to work in the Gulf states and in the wider Islamic world.

Universities are also exposing students to other non-conventional and ethical finance models that include eco-finance and micro-finance.

While universities in the United Kingdom and France have offered Islamic finance programmes for some years because of their large Muslim populations, Spain is also increasingly looking into these programmes.

The Instituto de Empressa (IE) business school in Madrid has been offering Islamic finance programmes for five years and partnered with Saudi Arabia’s King Abdul Aziz University (KAU) to launch the Saudi-Spanish Center for Islamic Economics and Finance (SCIEF) earlier this month.

Speaking at the event, Dr Ahmad Mohamed Ali Al Madani, head of the Islamic Development Bank, said the financial crisis had raised people’s concerns beyond profit margins into where their money is invested. Al Madani was acting rector of KAU from 1967 to 1972 and was Saudi Arabia’s deputy minister of education in the 1970s.

Business schools needed to respond accordingly and Spain was in a good position to do this considering the country’s Arabic heritage, he said.

“You look around and find that Islamic institutions are in the hundreds. Amounts of the assets are in the billions. The system proved that it can support economic systems and respond to big demand from people in different parts of the world.”

full story :

source : university world news

Azerbaijan identified as a regional hub for Islamic banking introduction on CIS area

Baku, Fineko/ The IV Baku International Banking Conference under the aegis of the CIS Financial & Banking Council (FBC) has ended in Baku today. The last session was devoted to Islamic banking.

Following the event results the FBC Coordinating Council’s chairman Andrey Kazakov took the initiative to choose Azerbaijan the regional center on Islamic banking introduction on the CIS area.

“We’ll also ask the International Bank of Azerbaijan to form and lead a the FBC working group to prepare introduction of Islamic banking in the CIS banks. Today, the CIS banks are lacking liquidity, while the Islamic financial institutions have excess liquidity, and development of Islamic banking can be a tool for tackling liquidity problems,” Kazakov said.

In turn, the head of the IBA Islamic banking group Behnam Gurbanzade has said that the IBA has every opportunity to become a regional center for development of Islamic banking.

“Last week we completed with our consultants an analysis of tax and banking legislation and defined six Islamic instruments, introduction of which does not require legislative changes. If our initiative is backed by the Central Bank, we’ll continue initiating adoption of laws for development of Islamic banking,” he said.

The IBA established its working group in 2009.