Why did the Vatican suggest Islamic finance? by İsmail Özsoy*

Professor İsmail Özsoy is an instructor at Fatih University’s department of economics.

Just after the 2008 global financial crisis hit, the Vatican suggested using the Islamic finance and banking system as a solution. So then what does Islamic finance offer? To answer this question we had better first lend an ear to the saying of the Prophet Muhammad: “You should sell gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt, like for like, equal for equal, and hand-to-hand; if the classes differ, then you may sell as you wish, provided that the exchange is hand-to-hand.”

With this concise saying, the Prophet Muhammad expresses exactly 80 kinds of exchanges, which are the exchange of a commodity for another commodity or a currency for another currency on credit or on the spot and for matching or different quantities of goods. According to that Prophetic saying, out of these 80 kinds of exchanges, 46 sales bear a religiously forbidden “interest.” Interest is a value that is transferred from one party to another without a matching value given back. Interest is sometimes “unearned income” in a zero sum game and sometimes “unequally distributed income” in a positive sum game. Thus, interest is, in any case, a wrong done to one of the two parties in loans or exchanges. That is why it is condemned by all religions and criticized by most philosophers.

Read more Todays Zaman
http://www.todayszaman.com/news-307052-why-did-the-vatican-suggest-islamic-financeby-ismail-ozsoy-.html

A closer look at Shariah ETFs

Despite thriving and affluent Islamic communities across Europe and North America, Muslims living in these regions have traditionally been underserved when it comes to investment. The reason for this is that managing investments according to Shariah principles (the moral code and religious law of Islam) can be incredibly time consuming since the vast majority of investment decisions need to be pre-approved by Islamic scholars.

Read more : http://www.etfstrategy.co.uk/a-closer-look-at-shariah-exchange-trade-funds-etfs-index-tracking-investment-solution-for-islamic-investors-45658/

Source :ETF strategy

Use of derivatives as hedging instruments in Islamic finance

This article was publised in Express Tribune by Humayon Dar. There are many aurgements going on regarding the use of derivatives for hedging in Islamic finance. Not all are very conclusive and this article introduced the readers how the hedging works;

LONDON: Given the increasing importance of Islamic banking and finance in Pakistan, it is important to deepen the Islamic financial market in the country. One way of doing so is by developing a market for Islamic hedging instruments, which are known as derivative contracts in conventional finance. It is, however, important to understand the difference between Islamic derivatives and their conventional counterparts.

Financial engineering in Islamic banking and finance has resulted in a number of Islamic options, forward and futures contracts that may be used for risk management and hedging. It must, however, be emphasised that trading in options (rights to buy and sell), forwards and futures contracts is not permissible under Shariah

Read more at : http://tribune.com.pk/story/493466/use-of-derivatives-as-hedging-instruments-in-islamic-finance/

Fitch rates Turkey’s USD Sukuk ‘BBB-‘

Fitch Ratings has assigned Hazine Mustesarligi Varlik Kiralama Anonim Sirketi’s (Hazine) USD1.5bn of global certificates (Sukuk), due 26 March 2018, a ‘BBB-‘ rating. The certificates have a profit rate of 2.803%.
Hazine, an asset leasing company incorporated solely for the purpose of participating in this transaction, is wholly owned by the Republic of Turkey, acting through the Undersecretariat of the Treasury.
The rating reflects Fitch’s judgement that the Sukuk can be considered an unconditional, unsubordinated and general obligation of the Republic of Turkey, ranking equally with Turkey’s other senior unsecured obligations. The rating is therefore in line with Turkey’s Long-term foreign currency Issuer Default Rating (IDR) of ‘BBB-‘ on which the Outlook is Stable.
The Sukuk follows an ijara’ (leasing) structure. The issuer has purchased publicly-owned real estate from the Republic of Turkey using the proceeds from the Sukuk. These assets have been leased back to the Republic for a period equal to the tenor of the Sukuk; in return the Republic makes semi-annual rental payments to the issuer at least equal to periodic distribution amounts made by the issuer to the Sukuk investors.
The transaction documents incorporate a purchase undertaking requiring the Republic to repurchase the assets on maturity (or earlier, in the event of dissolution/default), together with any outstanding distribution. Certificates are unsecured and certificate holders have no direct recourse to the lease assets.
While certain transaction documents relating to this issue, being governed by English law, may not be enforceable under applicable law, including Turkish law, Fitch’s rating for the certificates reflects the agency’s belief that the Republic of Turkey would stand behind its obligations under the transaction documents.
By assigning a rating to the certificates, Fitch does not express an opinion on the Sukuk structure’s compliance with Sharia principles.
Source: bne

How Islamic finance and a more ethical capitalism go hand-in-hand

Though wealth creation is the primary goal taught by top businessmen, social impact is considered to be a more fulfilling outcome for others. Money is not timeless, but what you do with that money can be. The light you instil in the uneducated, the medicine you provide to the ill, or the food and water you provide to the malnourished is far more enduring than the car you drive or the house you buy. Most advocates of social entrepreneurship believe that creating a business with a social impact leaves much more than just a humble footprint behind.

This article explores how both Islamic finance and ethical capitalism can go hand in hand. It will useful for those who do thier research in comparative and ethical. Please click the following link for to read more :

http://socialenterprise.guardian.co.uk/social-enterprise-network/2013/jan/24/islamic-finance-ethical-capitalism-social-enterprise

source : social Enterprise. Guardian.UK