Key Islamic standard for hedging launched

source : Gulf daily news

MANAMA: The International Islamic Financial Market (IIFM) and the International Swaps and Derivatives Association (ISDA) have launched the ISDA/IIFM Mubadalatul Arbaah (Profit Rate Swap) product standard to be used for Islamic hedging purposes.

The Mubadalatul Arbaah (MA) standard follows on from the ISDA/IIFM Tahawwut (Hedging) Master Agreement and provides the industry with a framework for Islamic risk mitigation.

The launch of the Tahawwut Master Agreement as the template for Sharia-compliant risk management was officially announced by Central Bank of Bahrain (CBB) in March 2010.

“Islamic Financial Institutions (IFIs) have largely shown resilience in the current difficult financial environment and some are even going through an expansion phase,” IIFM chairman and CBB executive director of banking supervision Khalid Hamad said.

“However, due to the inter-linkages with the global financial system, the balance sheet of IFIs are exposed to fluctuation in foreign currency rates and also cash flow mismatches due to fixed and floating reference rates.

“IIFM recognises the importance of this critical segment at an early stage and undertook the challenge of developing global Islamic hedging standards in collaboration with ISDA.

“I am confident that such joint efforts will continue in the future for the benefit of the industry,” he said.

“ISDA is pleased to continue its partnership with the IIFM as part of its own on-going efforts and commitment to building safe and efficient OTC hedging markets, across both global and Islamic financial markets” said ISDA chief executive Robert G Pickel.

“The ISDA/IIFM Tahawwut Master Agreement was a major milestone in the development of risk management in Islamic finance and the development of the ISDA/IIFM confirmation templates for Islamic Profit Rate Swaps is a natural step in the evolution and development of the market,” he said.

read more at : http://www.gulf-daily-news.com/NewsDetails.aspx?storyid=326736

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What Can We Learn from Islamic Finance?

From blogs.worldbank.org

In over 70 countries, from financial centers in Malaysia to the Middle East, Islamic finance has been growing rapidly around the world. In fact, Shariah-compliant financial assets have increased from about US$5 billion in the late 1980s to about US$1 trillion in 2010. Even more impressive is that this class of financial instruments appears to have avoided many of the worst effects of the recent crisis, making it an increasingly attractive investment vehicle.

Given its rapid growth and relative stability, are there lessons we can garner from Islamic finance? Three years after the onset of the global financial crisis—as regulators are still grappling with how to deal with predatory lending practices, opaque derivatives, and overly leveraged financial institutions—can Shariah-compliant finance challenge our notion of conventional banking?

Perhaps it can. By and large, Islamic finance relies on the core principles of Islam concerning property rights, social and economic justice, wealth distribution, and governance. Two of its main tenants are the prohibition of interest on debt in any form and the removal of ambiguous contracts to enhance disclosure and proscribe deception. Among its other key precepts is a commitment to back all financial contracts by assets and activities in the real economy, as well as an emphasis on the principles of morality and ethics in conducting business.

read more at

http://blogs.worldbank.org/growth/node/8810

source : blogs.worldbank

Islamic banking could be perfect fit for Scotland – Omar Shaikh, of the IFC

YOU cannot mask what has happened to the banking industry over recent years. Alongside the near collapse of our biggest banks, there has been a disintegration of trust.

It has spurred many of us from the worlds of business, the churches and academia to explore new models of financial institution that bring together Islamic and ethical banking for a more socially-focused view of lending.

Today the Tods Murray/Islamic Finance Council UK (IFC) ethical finance forum will look at the practical challenges relating to marketing and distribution and discuss methods for measuring social returns.

Over recent weeks, these discussions have become even more pertinent against the backdrop of constitutional reform. Scotland’s monetary system is being hotly debated.

We strongly believe the shared values between Islamic finance, the churches and broader ethical banking could provide the bedrock to a more stable and prudent banking sector whatever the outcome of a referendum, and no less so were Scotland to become independent.

We would not want to be in a similar situation to Ireland trying to bail out our banks. IMF studies have shown Islamic banks are more stable than their conventional counterparts and we need to see what we can learn from this to mitigate systemic risk.

Scotland has a tremendous heritage for ethical and prudent finance from the original mutual investment trusts to the Savings Bank movement. Indeed the Savings Bank structure inspired the first attempt at a modern Islamic bank in Egypt more than 40 years ago.

This is also a nation for innovation. In a brave, new world, the Scottish banking system has the opportunity to once again show moral leadership giving the people of Scotland a fair, socially responsible bank system that works for them and ensures Scotland can withstand any future financial crisis.

Many people are already basing their financial decisions on moral considerations, there is a growing appetite for ethical trading and there is an expanding sector of society who will choose social over purely financial returns. That is worth building on.

read more at http://www.scotsman.com/news/omar-shaikh-islamic-banking-could-be-perfect-fit-for-scotland-1-2172994/

Financing Cambodia’s Muslims

Don Weinland

Islamic finance could help to boost trade between Cambodia and the Middle East, as well as attract investment from Muslim-majority countries, experts said on Saturday.

Knowledge of Islamic finance and banking, which bars interest lending and discourages unfair trade advantages, is almost nonexistent among Cambodia’s Muslims, which comprise about 2 per cent of the country’s population.

But demand for halal business practices is increasing in Malaysia and Middle Eastern countries, according to insiders.

With more education on Islamic law, domestic Muslims could dominate trade with those countries and attract investment from Islamic banks in the region, experts and Muslim business owners said.

“Most investors in the Middle East are certainly looking for Islamic-compliant business in countries that aren’t majority Muslim,” Ashraf Bin Md Hashim, head of consultancy at the International Shari’ah Research Academy for Islamic Finance, said on Saturday on the sidelines of Cambodia’s first conference on halal finance.

“This could open an Islamic banking window here.”

Progress on Islamic finance in Malaysia has been slow, Ashraf Bin Md Hashim said.

read more at : http://www.phnompenhpost.com/index.php/2012031254976/Business/financing-cambodias-muslims.html/

source : phnompenhpost

GCC urged to follow unified Islamic finance regulations

The Gulf Co-operation Council (GCC) should have a unified rule under one regulator for Islamic investment products for ensuring lower cost of funds, according to Islamic Wealth Management (IWM) Report 2012.
“The GCC countries could take a leadership role by establishing standards for the registration of Islamic investment products with one regulator,” the Bank Sarasin report said.
The report was launched by Bank Sarasin managing director and head of Islamic Finance Fares Mourad and Monzer Kahf, a leading Islamic finance scholar.
Such unified rule would allow asset managers to market the product to clients across the region, it said.
Currently any offering needs to comply with different regulations in Bahrain, Kuwait, Saudi Arabia, Oman, Qatar and the UAE, resulting in a lengthy and expensive registration process, the report said. “Reducing expenses and increasing the availability would increase competition, benefiting local investors and further the GCC’s development as a centre of excellence for Islamic finance.”
Although unified rules could be done either a state, region or Arab league level, it would be better to have a centralised agency that could interpret the legislations regarding Shariah investments, Mourad said.
Asked whether there was a need for a separate entity for the regulation and supervision of Islamic investments and products, he said “I really would like to have this” but it was for the regulators in the respective jurisdictions to decide.
Kahf said the Islamic Financial Services Board could take the lead in the centralised agency as it consisted of central bankers in the Muslim countries. “Once you have such an agency, there is no need for separate Shariah boards as lawyers specialised in the field could suffix its role,” he added.
The report also took note of the constant criticism of certain Islamic finance structures such as the ‘Tawarruq’, which involves purchasing a commodity with deferred payment and selling it to a third party for cash, hence replicating the effect of a loan.
“Regulations need to be adjusted to allow financial institutions to engineer products that fit the spirit of Islam while meeting legal and regulatory requirement,” it said.
In this regard, the report cited an example of recent co-operation between the halal industry (mostly foodstuffs) and Islamic finance – two sectors with similar goals that have had little contacts.
With issues related to the environment and social practices as well as corporate governance getting more attention, it said there has been more reporting on corporate social responsibility, which is important to Islamic finance.
“There is still much room for improvement with higher standards and a more strategic approach required at the state, company and private level. The Muslim countries face the greatest challenges,” the report said.

source : gulf times

Crescent Wealth Partners with Islamic Fund Manager Saturna Capital

Crescent Wealth, Australia’s first Islamic wealth manager, announced on Thursday that it has entered into an agreement with Saturna Sdn Bhd (a wholly-owned subsidiary of U.S.-based Saturna Capital) to act as the portfolio manager to the Crescent International Equity Fund to be launched later this year.

Saturna’s strong fund performance in the U.S. underscored the potential of what can be achieved in the Australian market, said Managing Director of Crescent Wealth Talal Yassine.

“Our collaboration with Saturna Capital deepens our expertise in global Islamic finance and will give Australian investors the confidence to invest in our Crescent International Equity Fund,” Yassine said.

“Saturna has had tremendous success adhering to the principles of Islamic-based investing,” he said, “favouring companies with low debt-to-equity ratios and avoiding those with high price-to-earnings ratios.”

Saturna Capital, founded in 1989, manages funds and private accounts with total assets of more than $3.8 billion, including U.S.-based Amana Income and Amana Growth Funds, the world’s largest Islamic equity funds open to the public. Saturna has been recognized as a premier Islamic fund manager with multiple US and international awards. Saturna Sdn. Bhd. is licensed as an Islamic fund manager in Malaysia under the Malaysian International Islamic Finance Centre scheme.

Read more at
http://au.ibtimes.com/articles/303133/20120222/australia-crescent-wealth-partners-top-based-islamic.htm/

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