Islamic portfolios attract ethical investors in US

source :

ethical investmentEthical investment which has similarities with Islamic based investments has reached US$32 trillion (RM105.6 trillion) in size in the US and the European Union, an expert in wealth management and ethical investment said.

Meanwhile, responsible investing such as Islamic finance is probably one of the most appreciated form of investment even in the US, a prominent global investment manager specialising in the issues of ethical and Islamic investment Nicholas Kaiser said.

“There are over 1,200 signatories with US$32 trillion of assets under management and that shows the tremendous growth of assets categorised under the principles of responsible investment,” Kaiser said.

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Islamic Banks Could Be The Answer To America’s Over-reliance On Credit And Risk

source : international business times
By Christopher Harress

If second quarter results are anything to go by, America’s banks are recovering nicely. Most made respectable gains and have improved investor and public confidence in America. However, many people who advocate for changes in the banking system feel that just recovering from the financial crisis is simply not enough, and that serious changes must be made to avoid future banking meltdowns.

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Filling a Niche for Islamic Banking


When Fabiola Nava Carrera told her friends that she was going to pursue a master of business administration degree in Islamic finance at a Malaysian university, they were taken aback.

“I was very interested in going there to see what was going on, because I knew nothing about Asian and Islamic culture,” said Ms. Carrera, a 27-year-old Mexican who had previously worked in international trade. “But my friends in Mexico couldn’t believe that I wanted to go to Malaysia, because they thought that it would be too dangerous or that the culture would be too different.”

Ms. Carrera went anyway. Last year, she was one of four students, three of whom were non-Muslim, who graduated from the inaugural class of the Universiti Tun Abdul Razak’s Global Islamic Finance M.B.A. program in Kuala Lumpur.

Read more at New York Times

A Detailed Look at the Fast-Growing Islamic Banking and Finance Sector

Press release
September 26, 2012
Hoboken, NJ
A Detailed Look at the Fast-Growing Islamic Banking and Finance Sector

The severity of the global financial crisis that followed the years 2008 and 2009 has been described as second only to the Great Depression. Yet, during those two years, the assets of the 500 top Islamic financial institutions grew — from $639 billion to $820 billion.

What sets apart the Islamic finance industry from the rest of the financial world? And how have its differences helped this sector thrive when the rest of the global financial market struggles to regain its balance?

Faleel Jamaldeen, author of Islamic Finance For Dummies, says: “I’m bullish on Islamic finance: I’m a firm believer in the market potential of this industry. I’m also a firm believer in the benefits of Westerners understanding the concepts that lie behind the Islamic financial products — knowing why a separate industry exists and why many conventional products don’t work for Muslims.”

“In the West, the general public and even many financial professionals know absolutely nothing about Islamic finance. Those who’ve at least heard of it may assume that they can’t understand or participate in it because they aren’t Muslim and don’t speak Arabic.) Western women may assume that they aren’t allowed to participate in the Islamic finance industry because of misconceptions about Islamic law. (Women can and do fully participate in Islamic finance — as professionals and as investors.)”

“Islamophobia is a prejudice against Islam or Muslims that has unfortunately become more commonplace and more intense in the West since the attacks on the United States on September 11, 2001. Some people simply don’t want anything to do with an industry that’s affiliated with Islam. Until now, searching for a book to help you navigate the subject of Islamic finance wasn’t very rewarding. That’s because Islamic finance has been the topic of textbooks but not many nonacademic titles.”

Jamaldeen goes on to say, “I wrote this book to bridge the gap between people who need and want to know about Islamic finance and an industry that needs and wants their participation. You’ll find that you don’t need to learn a new language, change your personal religious views, and that job prospects are strong for both men and women with conventional banking and finance skills who are open to learning about new products and a new way of conducting business.”

“I wrote this book assuming that you have a strong interest in the financial industry already. Maybe you’re a banker, a mutual fund manager, an investment consultant, or an insurance agent. Perhaps you have Muslim clients asking you to consider adding sharia-compliant products to your roster of offerings, or your boss mentioned in passing that Islamic finance has been growing like crazy and your company should find out how to tap into the market. Maybe you’re a college student focusing your studies in finance, and you’ve read that job prospects are good for people with specific knowledge about Islamic finance.”

Whatever the scenario, you’ll find clear and easy-to-understand information on how the Islamic finance industry works.

source :

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

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 :

Islamic Finance Student Group Questions Fundamentals of Current Financial System

— By Brevy Cannon and Mary Summers Whittle

Islamic law prohibits the charging of interest by lenders, requiring banks to directly invest in actual assets or services. This leads to the sharing of both risk and reward, profit and loss between the borrower and lender, which would have prevented the recent global financial meltdown.

That’s one major idea prompting a new interest in Islamic finance, including among University of Virginia students who this semester created the U.Va. Islamic Finance Association.

“Everyone is suddenly becoming more aware that we should question our current financial system, and there should be other ways to better serve people,” explained Alejandro Alcala, a second-year anthropology major in the College of Arts & Sciences and a leader of the association.

Islamic finance provides an alternative view of what a financial system can and should be, which encourages students to question whether the conventional Western financial system is providing certain social goods and how the system could be improved, explained the group’s founder and president, Haroon Masood, who lived most of life in Saudi Arabia and whose father spent 20 years working for Citibank in the Middle East.

“There are very few places where students get to question fundamental assumptions and come up with new ideas and solutions,” said Masood, a second-year student who hopes to attend U.Va.’s McIntire School of Commerce.

A handful of universities, including Harvard and the University of Pennsylvania, offer courses on Islamic finance, “but none of them have student organizations that aim to place students at the forefront of this field,” Masood said. “We want our organization to become the hub for learning and innovation in Islamic finance in North America.”

The association recently took its first major step toward that end, hosting U.Va.’s first Islamic Finance Forum Nov. 21 at the McIntire School. The forum, sponsored by the McIntire Center for Financial Innovation, was headlined by two leading experts in Islamic finance: Zamir Iqbal, the lead investment officer in the Quantitative Strategies, Risk, and Analytics Department in the Treasury of the World Bank; and Michael J.T. McMillen, a managing director at the private equity firm Riverstone Capital, who twice has received Euromoney Magazine’s award as the best legal adviser in Islamic finance.

“If you pick up a popular journal or magazine article on Islamic finance, the primary message you’ll come away with is ‘no charging interest,'” Iqbal said during the forum. “But there’s more to it than that.”

Indeed, he explained, the rules governing Islamic financial practices are rooted in the Quran’s values, designed to promote economic justice, community unity and social harmony.

Flowing from those values, Islamic financial transactions are characterized by profit- and risk-sharing instead of usury; investments tied to tangible assets; and a ban on speculative contracts like conventional derivatives. Islamic banking also must comply with Islamic law, which precludes transactions supporting the production of alcohol, tobacco, pornography and the like.

The prohibition on charging interest, Iqbal said, seems to most flummox Westerners. In the early 1970s, as an Islamic financial sector began to emerge, “people laughed” at the notion of creating a debt-free financial system, he told the audience of about 60 people. “They said, ‘How can a financial system be designed without the use of interest?'”

The solution is actually extremely simple, Iqbal explained: risk- and reward-sharing, and the presence of tangible assets throughout the investment process.

McMillen, who has helped design scores of Islamic financial deals in such industries as electricity, petrochemicals and mining, gave a simple hypothetical example. An aspiring but undercapitalized merchant seeking to buy $100 worth of sesame seeds would get a $100 loan, at some interest rate, from a Western bank. In contrast, an Islamic bank might buy the seeds for the merchant, who would gradually repay the bank through a series of payments. With each payment, the merchant would gain an equity share of ownership of the seeds.

The prohibition on interest leaves Islamic financiers free to use a number of financial structures – including partnerships and leveraged leases – that are familiar to Westerners, Iqbal noted. “It’s not a matter of Islamic versus non-Islamic,” he told listeners. “It’s a matter of financial engineering.”

McMillen, too, stressed the deep commonalities between Islamic and Western methods of finance. In many ways, he said, Islamic financial practices are little different from those espoused by the West’s increasingly popular “ethical” investment funds.

“You know more about Islamic finance than you think you do,” he said. “There are more similarities to Western finance than there are differences.”

Student Alcala concurred.

“I don’t get caught up with the label of ‘Islamic finance,'” he said. “I think of everything as financial engineering, and we need some new financial engineering to address the problems of the global economic downturn.

“Today in finance we accept so many things as truth or just how things are. But Islamic finance presents some different solutions to some of these problems.”

source :UVA Today

Canada bankruptcy may hurt Islamic finance in North America

By Shaheen Pasha and Cameron French

DUBAI/TORONTO (Reuters) – The insolvency of an Islamic mortgage lender in Canada may hinder the growth of sharia-compliant finance in North America, where the industry has struggled to gain traction in the absence of a supportive regulatory framework.

UM Financial Inc was ordered into receivership in October, leaving about $32 million worth of mortgages in the hands of Toronto’s legal system. Accounting and business advisory firm Grant Thornton was appointed receiver by the Ontario Superior Court of Justice.

The case has exposed uncertainty over the legal treatment of sharia-compliant mortgages in default, and questions over the transparency and oversight of smaller Islamic lenders. Industry experts said this could make investors in Canada and the United States more wary of considering Islamic finance in future.

Full story : Reutuers Canada

Centennial College launches Islamic finance course

Toronto’s Centennial College is offering a groundbreaking course in Islamic finance for the first time this fall. The UK-based Chartered Institute for Securities & Investment has accredited the college as its first Canadian training provider delivering the Institute’s Islamic Finance Qualification (IFQ) – the first international benchmark in the area of Islamic finance.

Islamic Finance and Investment is an online college course that teaches the fundamentals of Islamic banking. The course content draws from the sources of Islamic Law, including the Quran and Hadith.

“We’re absolutely delighted to bring this course to Toronto,” says David Johnson, Dean of Centennial’s School of Business. “There is tremendous interest in Islamic finance within the Canadian banking community. It’s a concept that has become very popular globally beyond the borders of Islamic nations.”

Among other stipulations, Islamic banking does not recognize the charging of interest, and instead requires transactions to be based on strict collateral. Loan products such as home mortgages can comply with Islamic principles by being structured like lease-to-own arrangements or other means that require a repayment structure in lieu of interest.

“Islam does not allow one to make money from lending money but certainly allows the person to conduct business for profit. It promotes the concept of risk and reward sharing,” says Rehan Saeed, a Centennial instructor and a member of the Islamic Finance Advisory Board. “The economic outcome of a transaction from an interest-bearing loan or a simple trade-based transaction can be exactly the same, but the underlying mechanics are different.”

“There is no doubt that Canada, and Toronto in particular, are engaged fully with the increasing role for Islamic finance,” says Ruth Martin, Managing Director of the Chartered Institute for Securities & Investment. “We are very pleased that the IFQ will contribute to the development of the skill base in this dynamic field.”

The Chartered Institute for Securities & Investment is the largest professional body for those who work in the securities and investment industry in the UK and in a growing number of global financial centres. Evolved from the London Stock Exchange, it has more than 40,000 members in 89 countries. In the past year it has set almost 40,000 exams in 49 nations, covering a range of vocational qualifications.

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