Azerbaijan develops Islamic financing

Azerbaijan may soon become a regional Islamic financing centre and play a significant role in boosting cooperation in Islamic banking with Persian Gulf and Central Asian countries.
Islamic financing is one of the fastest growing segments of the global financial services industry worldwide. At the same time, interest in Islamic finance as a source of investment is high in the country, reported Azerbaijan’s news agency, Trend.

Many countries’ interest in Islamic finance was associated with different factors, the foremost of which was the desire to attract liquid resources from the Middle East and Southeast Asia and a certain demand for financial products in accordance with syariah law by local Muslims.
Today, Azerbaijan actively introduced Islamic financing. The independent authority of the International Bank of Azerbaijan (IBA) on Islamic banking would start its work in March, which planned to present six Islamic banking products to the market during the first phase, it stated.

Islamic financial tools could become the channel through which their assets could be involved in the economy. — Bernama

Read more: http://www.theborneopost.com/2012/01/27/azerbaijan-develops-islamic-financing/#ixzz1kjOFawTK

source : .theborneopost.com

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Ireland may be first EU state to sell Islamic bond

By Elffie Chew

IRELAND plans to become the first European nation to sell sovereign sukuk — Islam-approved financial certificates — as its equal tax treatment for Islamic-finance products attracts investors.

The Government has agreements with more than 60 countries to avoid double taxation on Islamic transactions, Micheál Smith, the south-east Asia director of IDA Ireland, said.

Islamic finance assets around the world may rise about 16% to €1,240 billion this year, Raj Mohamad, managing director at Five Pillars, a consulting firm based in Singapore, told Bloomberg Television yesterday.

While plans to sell sukuk by Britain, France and Luxembourg have stalled, Mr Smith said Ireland will push ahead with a sale.

“Ireland will be going back to the bond market and a sukuk is an option when conditions are right. We also hope to form more working groups with Muslim countries such as Malaysia to build up a critical mass of expertise as the objective is for Dublin to become a centre of excellence for Islamic finance.”

Ireland introduced tax legislation for products that comply with Islam’s ban on interest in 2010, Mr Smith, who is based in Singapore, said.

The Central Bank has a Shariah team overseeing its Islamic funds, which total about €390m under management.

The Irish Stock Exchange listed its first sukuk in 2005 and Ireland is a popular choice for sales because the nation offers a “relatively inexpensive” and timely listing process, he said.

The Government last sold bonds in September 2010, the year it had a deficit that was the highest as a percentage of gross domestic product in the developed world. The Department of Finance estimates the ratio dropped to 10.1% of GDP in 2011 from 31% the previous year.

CIMB Group Holdings, the world’s biggest sukuk arranger, said this week that it got approval to set up the first Shariah-compliant equity funds from Malaysia in Ireland.

Ireland’s bid to become an Islamic finance hub received a boost in October when Goldman Sachs Group got approval from the nation’s central bank to list its $2bn (€1.55bn) sukuk programme. The planned sale has attracted criticism among Islamic scholars, with some saying the proceeds may not be used according to Shariah law.

CIMB-Principal Islamic Asset Management, based in Kuala Lumpur, chose Ireland for its Islamic equity funds because there’s no double taxation and no withholding tax on interest payments, Jim McCaughan, chief executive of US-based venture partner Principal Global Investors, said on Monday.

An initial investment of $20m (€15.5m) will be put into three funds that will open for subscription next month, he said.

“We expect interest from Europe, Malaysia and more importantly the Persian Gulf and other Muslim countries,” Mr McCaughan said. “People are getting wealthier and want to diversify their funds.”

Global sales of sukuk, which pay asset returns instead of interest, total €4.7bn this year, compared with €500m in the same period in 2011, according to data compiled by Bloomberg. Offerings reached a record $36.3bn last year, surpassing the $31bn raised in 2007.

The difference between the average yield for sukuk and the London interbank offered rate, or Libor, narrowed two basis points to 299 basis points yesterday, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index.

The average yield has climbed nine basis points, or 0.09% point, this year to 4.08%.

Shariah-compliant bonds have dropped 0.1% in 2012, according to the HSBC/Nasdaq index, while debt in developing markets declined 0.2%, JPMorgan Chase & Co’s EMBI Global Composite Index shows.

The Bloomberg Malaysian Sukuk Ex-MYR Index of foreign currency Islamic debt sold by companies in Malaysia rose 0.5% this year to 104.919 yesterday. The gauge increased 5.9% in 2011.

Britain cancelled what would have been the first sukuk sale by a Western government last February, saying the debt didn’t offer value for money. Luxembourg ruled out a plan to sell Islamic bonds in 2011 because the government saw no need to raise additional funding. France has legislation in place to facilitate a sale and has yet to proceed with an issue.

Ireland has a Muslim population of 30,000, according to a Department of Finance document covering the nation’s Islamic industry issued in March 2010. Roman Catholics make up 87% of Ireland’s population.

The Islamic Cultural Centre for Ireland and the Immigrant Council of Ireland have all called for more Shariah-compliant initiatives, the report said.

“There’s been no objection to Islamic products being sold in Ireland,” said Mr Smith, who is also a director in charge of the 10-member Association of Southeast Asian Nations at the IDA.

The European debt crisis provides an opportunity for Islamic finance to grow given it is rooted in ethics and religion, according to Nik Norzrul Thani, the chairman of Malaysian law firm Zaid Ibrahim & Co.

“What Ireland is doing is a step in the right direction,” Nik Norzrul said in an interview in Kuala Lumpur.

“Ireland’s ambition to be a Shariah-compliant hub is a recognition that Islamic finance isn’t only for Muslims.”

Read more: http://www.irishexaminer.com/business/ireland-may-be-first-eu-state-to-sell-islamic-bond-180837.html#ixzz1k8GcROxQ

source : Irish Examinar

Bermuda to be first Western centre for Islamic finance in favourable tax domicile

By Marina Mello

Bermuda is set to become the first Western centre for Islamic finance in a favourable tax domicile, according to Bermuda executives in an article yesterday by Euromoney.

Executives from the Island have been actively wooing clients in Asia and the Middle East while working on reviewing existing laws to launch a Shariah-compliant platform for investors.

Apex Fund Services group director Peter Hughes told Euromoney: “We are looking at the Shariah side of Bermuda’s legislation to become the first Western centre for Islamic finance.

“We are looking to launch a Shariah platform that will allow us to have Shariah vehicles and products that would enable us to become the first one of its kind. We have made a real push into this niche area.”

Business Bermuda CEO Cheryl Packwood added: “We now have strong links in Bahrain and there is a commonality of wanting to create a niche jurisdiction for Shariah compliancy, that is closer to the US timezone,” she says. “We are also focusing on Kuala Lumpur in Malaysia, as it has an enormous sukuk market. The process for getting this off the ground may be slow but we have the Bermuda Monetary Authority and the Bermuda Stock Exchange behind us.”

Last November, Ms Packwood and Mr Hughes led a group at the 18th World Islamic Banking Conference in Bahrain to show the Island was open for their business and could handle Shariah-compliant financial structures.

Shariah law is the moral and religious code of Islam, within which financial industries in those markets must operate. It’s an emerging market that is being pursued by offshore jurisdictions all over the world.

Global Islamic banking assets with commercial banks will hit $1.1 trillion in 2012, a jump of 33 percent from their 2010 level of $826 billion, according to Ernst & Young’s inaugural World Islamic Banking Competitiveness Report 2011.

source : royal gazzatte.com

‘Islamic Finance in India can attract investments from Middle East’

Malegaon: Taking advantage of the situation arising out of the economic crisis in Eurozone and countries like United States, India should adopt the Islamic Finance System to pump-in investments from the Middle East. This interest-free and more inclusive system will in turn speed-up the financial inclusion of the Indian Muslims, an expert in Islamic Finance said in Malegaon Sunday.

“The Global Economic Crisis in the West is forcing investors to search for secure places of investment. Creating a situation which is suitable for such investors especially those from the Middle East can pump in huge investment in the country. Introduce the interest-free alternate financial system here and see how the funds start flowing from the oil-rich countries to India”, Dr. Shariq Nisar said while speaking to ummid.com.

Dr Shariq Nisar, Director of Research and Operations of India’s premier shariah advisory firm TASIS and one of the senior most professionals of Islamic Finance in India, was in Malegaon on Sunday to address a seminar on “Prospects of Islamic Finance in India”.

“China and the Middle East are the two areas in the world where surplus funds more than their requirements are generated. China will never like to invest in India for the obvious reasons. We do not have such problems with the Arab World. We can attract the investors from there by introducing the Islamic Finance in our country”, he said while pointing at the requirements in the country of reliable and committed investors in stock market, and banking and insurance sectors.

“And why not, the system is running successfully in more than 75 countries. It has also earned these countries rich dividends. Then why are we reluctant in taking a decision?”, he asked while listing the countries like United States, United Kingdom, France and others besides the Muslim countries where Islamic Banking System is successfully running.

“Almost all the top multinational banks including Standard Chartered Bank, HSBC, DBS, Barclay and others either have their full-fledged Islamic banks or have special windows in their branches – some located in the areas where Muslim population is negligible”, he said adding, “Singapore has in fact taken the lead to introduce the system in the Asian sub continent by opening The Islamic Bank of Asia”.

Linking the Islamic Finance with the empowerment of the Indian Muslims, he said, “The much sought after Muslim empowerment and their financial inclusion can also be achieved by bringing in the system here. For, a vast majority of the community keeps away from the existing banks merely because they are based on interest.”

“The Islamic finance will not only provide them an opportunity of getting financial assistance, it will also streamline the amount of funds lying with the Muslims that otherwise don’t flow in the existing system”, he said while giving the example of Kerala where efforts are on to utilize in a suitable way an estimated 14000 crore rupees belonging to the Non Resident Indians (NRIs) mostly of the Gulf.

Interestingly, at the time when Dr Shariq Nisar was discussing with ummid.com in Malegaon about the investment opportunities in India from the Middle East, thousands of kms away Chinese Premier Wen Jiabao on an official visit to Saudi Arabia was signing agreements related to trade and investments with Saudi crown prince Nayef bin Abdulaziz Al Saud.

source : ummid.com

Islamic Finance in Africa to take off in 2012

Islamic finance banking options are increasingly being seen as a viable alternative to traditional banking services in Africa and are growing to support not only the African Islamic community but all those looking for an interest-free banking alternative.
The Islamic Finance Africa Conference, due to take place on 21 – 24 FeBRuary 2012 in South Africa, is drawing together experts in the field from across the world. Key speakers from Nigeria, Malaysia and Saudi Arabia will join leading South African experts from ABSA, alBaraka Bank, KPMG and other financial institutions. They will be meeting to discuss the growth potential for Islamic finance products and services in Africa.

The event will explore the challenges of and opportunities for providing Islamic Finance offerings in Africa, the growth of the industry and what it means to the continent. Shariah law compliance is at the core of Islamic Finance services and products, for conventional financial institutions wanting to open an Islamic finance window this might pose a challenge and many institutions have faced difficulties. The Islamic Finance Africa Conferences will address these issues and others facing financial institutions in Africa.

source : kuwait observer

Islamic finance: paying for piety?

UM Financial’s troubles were a rocky start for sharia banking
by Erica Alini

For Canada’s 1.3 million Muslims, UM Financial arrived on the financial scene with a valuable service: mortgages that, in compliance with sharia principles, don’t charge interest. But its failure last year has sparked a fierce debate about whether Islamic banking should be banned, or whether it’s still a potentially lucrative industry in need of better regulation.

Mortgages with UM Financial were set up so that lender and borrower purchased the house together. The homebuyer pays rent to the mortgage issuer (rather than interest), while gradually buying off the outstanding share of the property. Ownership is transferred to the borrower only when the principal is paid in full. But when UM Financial failed, receivers were left with a legal can of worms. Who ultimately owns the houses—the bank or the borrower? And will 170 Muslim borrowers be forced to start paying interest in order to keep possession of their homes? Long-time critics of Islamic finance say these problems are inherent in the system and that it should be outlawed. Tarek Fatah, founder of the liberal-minded Muslim Canadian Congress, argues sharia-based banking amounts to calling interest by another name, and charging gullible, if devout, borrowers a premium for their piety.

Proponents of sharia-based finance maintain that the failure of UM Financial proves that Canada needs more, not less, Islamic finance. Had the country’s big banks opened up to the practice, borrowers would not have turned to a small, poorly regulated player such as UM Financial, says Walid Hejazi, a business professor at the University of Toronto’s Rotman School of Management. In retail banking, sharia-sanctioned models are examples of low-risk, back-to-basics finance, notes Hejazi. On the commercial side, a well-developed Canadian regulatory system for Islamic finance would make it easier for wealthy Gulf countries to invest in capital-intensive projects that need funding, such as the development of Alberta’s oil sands.

UM’s troubles were a rocky start for Islamic finance. But they likely won’t be the last word on a system that will remain in demand with a growing part of the population.

source : mcleans.ca

Mahathir urges countries to achieve 50% market share for Islamic banking

Even in retirement he remains the most popular politician to the Muslim “man-and-woman-in-the-street”. Now as an elder statesman, Mahathir Mohamed, the former Malaysian prime minister, continues to give advice whether on the global financial crisis, on the future of the Islamic banking industry, on the Islamic gold dinar, on the future of US dollar as an international trading currency, and on his celebrated spat with arch speculator and fund manager, George Soros, in the aftermath of the Asian financial crisis in 1998.

In an exclusive interview, Mahathir, albeit a bit more frail now, was his usual outspoken self, and he had a clear and present message for the Islamic banking industry – learn from the mistakes of conventional banking if the industry is to avoid the same fate. There definitely is a future for Islamic finance. It would not be spectacular; it would not be the cause of booms and busts.

Source : Arab News
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