Australia Islamic Finance Forum

Address to Amanie Australia Islamic Finance Forum
Tuesday, 16 April 2013

This speech is very helpful for those who are interested in developing and get involved in Islamic finance industry in Australia. Australia is still untapped market for Islamic finance products.

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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 :

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.



Australia’s Islamic stock index launched

MARK COLVIN: A new Australian share index has joined the likes of the ASX 200 and All Ordinaries. It’s the Islamic Australia Index.

The index’s creators are the global financial information company Thomson Reuters and Islamic investment manager Crescent Wealth.

Thomson Reuters’ global head of Islamic capital markets Dr Sayd Farook and Crescent Wealth’s Talal Yassine spoke to Michael Janda.

SAYD FAROOK: We avoid investments predominantly in leverage, in what we call morally hazardous industries; armaments, pornography, alcohol etc and then we have some quantitative methods of screening out companies that have particular amounts of debt, or have particular percentages of investment in prohibited activities.

MICHAEL JANDA: So as a concrete example what Australian companies would be eligible and what Australian companies are ineligible for this index?

SAYD FAROOK: So you think about companies such as CSL, Woodside Petroleum, these kinds of resource energy stocks, such as AGL Energy, these would be eligible stocks. On the other hand stocks such as Amalgamated Holdings and the like that are in cinema and broadcasting, or …

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source : ABC.NET.AU

Islamic finance gets the nod

THE Rudd government is pressing ahead with plans to develop Islamic finance in Australia to help position the nation as a leading global financial services hub.

Assistant Treasurer Nick Sherry told funds managers yesterday he would travel to the United Arab Emirates, Qatar and Bahrain at the end of next month for talks on the regulation, promotion and export of Islamic finance, banking and insurance.

Estimated at $US729 billion at the end of 2007, the Islamic financial services sector has been growing rapidly, and the government sees it as an alternative source of capital for Australian business and consumers.

“Australia sits as one of the closest neighbours to Indonesia, a rapidly growing developing economy and the largest Muslim nation in the world,” Mr Sherry said at a function hosted by the Investment and Financial Services Association and Deloitte.

“We have close and growing business ties to the Gulf region and beyond. We must do more.”

Charging interest is prohibited in Islamic financial services, as is speculation, and financial transactions must be underpinned by a tangible asset and require both parties to share the risk.

The government-appointed Australian Financial Centre Forum has recommended equal access for such products be introduce by removing regulatory and tax barriers.

Mr Sherry said the government was also considering ways to improve the tax treatment of managed investment trusts to attract foreign investment.

“In 2008, we asked the Board of Taxation to review these tax arrangements, and now we are considering the board’s final report,” he said.

He said the government strongly supported foreign investment in Australia.

source : the australian

Westpac claims Australian first for Islamic finance

Australia’s Westpac Banking Corp has launched what it believes to be the country’s first Islamic financing tool for institutions, designed to facilitate commodities trade for Middle Eastern and Malaysian investors.

Westpac’s institutional bankers have developed an instrument allowing Islamic investors to buy iron ore and other commodities forward, using Westpac’s strong balance sheet, without the counterparty risks of a doing a direct deal with a supplier.

“We believe it is the first in Australia,” Westpac’s head of financial institutions and trade, Emmanuel Alfieris, told Reuters on Tuesday.

Australia’s banks are only just beginning to enter the global $1trn Islamic finance industry, which forbids charging interest and favours profit-sharing arrangements or structures that resemble rental agreements.

Recently, Australia’s largest investment bank, Macquarie Group, revealed it planned to set up an Islamic finance joint venture with Bahrain-based Gulf Finance House to target markets in the Middle East and North Africa.

Under Westpac’s new Islamic product, the bank buys commodities on behalf of investors, holds them on its books for a short time and then, once they are sold, splits the profit with the investor. The time period and profit share are pre-agreed.

“Depending on the success of this one, we are looking at other asset classes,” Alfieris told Reuters. He declined to elaborate.

Australia’s affinity for commodities – it is the world’s largest iron ore and coal exporter and a major producer of gold, copper and nickel – gives it a natural platform to enter Islamic finance, which relies heavily on commodities-based transactions.

Sharia law dictates that transactions involve physical assets, so commodities are often the asset of choice because they are more liquid than other real assets, such as property.

The Australian government is keen for the local financial sector to play a larger role in Islamic finance and is considering reforms to assist its development.

“Islamic financing is a crucial plank in the government’s strategy to make Australia a financial hub in the Asia Pacific,” Trade Minister Simon Crean said in a statement last week.

A recent study recommends the removal of regulatory barriers and some tax reforms.

source : alrroya

Dubai’s Islamic Financial Services Firms to Support the Development of Islamic Finance in Australia

The second Islamic Financial Services Mission, organised by Dubai Export Development Corporation, ended in a high note with further dialogues already in progress with state and federal regulators to make legislative changes to support the growth in Australia’s Islamic financial sector.

The recently concluded mission, which aims to strengthen the exports of Dubai’s Islamic Financial products and services, was the largest focused sector outward trade mission planned by EDC, an agency of the Dubai Department of Economic Development (DED), Government of Dubai.

The Mission delegates, headed by Engineer Saed Al Awadi, EDC Chief Executive Officer, participated in various seminars in Sydney and Melbourne that raised awareness about Islamic finance and Dubai’s capabilities in this sector.

On the sidelines of the mission, the representatives attended a ceremony launching the Australian Government’s publication on Islamic finance along with Westpac Institutional Bank’s first Shariah compliant product. Launched by the Hon Simon Crean MP, Australian Trade Minister, Westpac’s Shariah compliant product’s Special Interbank Placement for Islamic institutions is a solution specifically developed for Islamic investors.

Minister Crean applauded EDC and the Australian Trade Commission’s (Austrade) initiative of promoting Islamic finance in Australia. “We believe that there are almost 400,000 Australian Muslims who may use Islamic financial services if they are made more accessible. Islamic finance offers a very sophisticated range of financial products which cater to a growing proportion of the world’s population and is one of the world’s fastest growing financial practices and is spreading globally,” Minister Crean said.

“I am pleased that Australia’s interest in Islamic finance has been growing in recent years, with a number of Australian firms developing and launching Islamic finance products for both domestic and international markets. Westpac’s Special Interbank Placement for Islamic institutions is another example of Australian innovation in collaboration with offshore Islamic institutional investors to create solutions specifically for investment by Islamic customers. As Government, we want to get the policy framework right so the commercial aspects, such as the Westpac solution, follow.  I hope this is the first of many Islamic banking products, including for our superannuation and funds management industries,” he added.

The meetings conducted during the mission were organised by the Australian, New South Wales and Victorian governments. Industry associations and three of Australia’s largest commercial banks were among the organisations met by the delegates.

Dr. Mohd Daud Bakar, Managing Director, Amanie Islamic Finance Consultancy and Education LLC, Dubai International Financial Centre (DIFC) stated, “Australia is rich in natural resources, has a competitive and innovative financial services industry and enjoys strong business relationships with the Middle East. Having Shariah compliant finance in Australia would lead to significant business for those looking for Shariah compliant opportunities.  We are proud to be engaged in supporting the growth of the Islamic finance industry in Australia.”

Furthermore, Majid Dawood, Chief Executive Officer, Yasaar Limited said that, “This was a very successful and beneficial mission for our organization.  We have been able to identify new opportunities and would be continuing the dialogue with the government agencies and financial institutions we met to support the growth of Islamic finance in Australia.”

Among the companies which participated in the mission were Noor Islamic Bank; Noor Takaful and Export Credit Insurance Company of the Emirates; Noor Investment Group; Yasaar Media; Amanie Islamic Finance and Yasaar Limited;; NASDAQ Dubai as well as the Dubai International Financial Centre.

source : Al Bawaba

Crean pushes for Islamic banking in Australia

Malaysia was trying to position itself as an Islamic financial hub, he said.

“We can be at that game,” he told ABC Television on Friday, adding that Australia was home to more than 300,000 Muslims.

Mr Crean is launching a study outlining opportunities for the financial services sector to tap into Islamic investment and banking markets.

Islamic law does not allow for a financial instrument to pay interest.

Mr Crean said that might require products that offered an exchange or profit-share arrangement.

The government wanted to create an environment in which Australia was more innovative.

“The big opportunity is in Islamic finance because there is a whole

population out there that is based on Islamic law.”

source : sbs

Push for Islamic financial rescue

australia islamic financeTHE newest federal cabinet minister, Chris Bowen, has set out an ambitious plan for Sydney to lure Islamic finance in a quest to beat the global recession and attract wealth and jobs.

In an interview with the Herald, the big winner from Kevin Rudd’s ministerial reshuffle at the weekend also expressed concern about the conflicts of interest surrounding commission-based superannuation advice. He said that in an ideal world the compulsory employer super levy should rise from 9 to 15 per cent.

NSW MPs were the big winners from the shake-up caused by the forced resignation of Joel Fitzgibbon as defence minister and the snap retirement of Bob Debus as minister for home affairs.

Mr Bowen, 36, becomes the youngest member of the 20-strong cabinet, winning the dual post of Minister for Financial Services, Superannuation and Corporate Law, and Minister for Human Services.

After less than a year in Parliament, the NSW Senator Mark Arbib becomes the Minister for Employment Participation and Minister Assisting the Prime Minister on Government Service Delivery, while Greg Combet becomes a minister with the odd combination of junior defence and climate change.

The new ministry will be sworn in tomorrow and the new Defence Minister, NSW Senator John Faulkner, will immediately head overseas for three days of NATO talks in Brussels about Australia’s role in Afghanistan.

Mr Bowen said Sydney was under-selling itself as a financial services hub for Asia. “I think there’s great opportunities such as Islamic finance,” he said. “The majority of the world’s Islamic population lives in Asia, and Singapore and Kuala Lumpur are trying to corner this market for themselves and I think Australia can play a role. Even if we only take a small percentage of the market it could generate a lot of wealth and a lot of jobs in Australia.”

Mr Bowen said Islamic finance investors were not allowed to earn interest but could make a profit. They also did not invest in alcohol, gambling or weapons.

“You couldn’t put your money into a normal interest-bearing account but there are plenty of products designed in such a way to make those investments.

“This is just one example of the untapped opportunities out there for Australia. We are very good at managing money, and in superannuation we have the fourth-largest pool of funds under management in the world. We’ve developed really good skills but we don’t export those skills.”

Mr Bowen, who was formerly the assistant treasurer, said he had concerns about the commission-based system where financial advisers earn their money from the products they recommend to customers.

“Where you have the issue of commissions you are always going to bring into question the genuineness of the advice. There’s always going to be a perceived conflict, if not a real conflict,” he said. “I think either way it’s better to avoid that conflict. I do think commissions are problematic.”

Asked whether the 9 per cent compulsory superannuation payment by employers should rise to 15 per cent, Mr Bowen said it might not be enough to give people an adequate retirement income.

“In an ideal world, yes, of course, 15 would be more attractive than nine but it is a very difficult environment to raise it to 15 now,” he said.

source : smh

Islamic banking course: a first for Australia

life-bundooraLa Trobe University is planning to introduce the first course in Australia dedicated to Islamic banking and finance, joining a handful of universities in the West embracing this fast-growing segment of global finance.

The Master of Islamic Banking and Finance will provide students with postgraduate training in the technical skills demanded by Global Islamic capital markets and institutions.

Associate Professor Dr Ishaq Bhatti, of La Trobe’s Department of Economics and Finance, says the Masters program will appeal to international students from Asia wanting Islamic financial training in English and to local graduates keen to enter the growing sector in Australia. Several local banks – NAB, Kuwait Finance House, HSBC and Muslim Community Cooperative of Australia are active in the field.

The International Centre of Education in Islamic Finance, a training subsidiary of Bank Negara Malaysia, the equivalent to Australia’s Reserve Bank, will provide industry-based certification for graduates of the La Trobe course, opening up employment opportunities throughout the international banking and finance sector.

‘The Islamic banking and finance market has experienced substantial and unexpected growth in recent years, growing at a rate of ten to fifteen percent per year,’ Dr Bhatti says.

‘Today, more than 260 Islamic financial institutions are operating worldwide, which are claimed to manage assets worth no less than A$500 billion, while the assets held by Islamic financial institutions were only A$8.5 billion in 1985.

‘Such immense growth has brought Islamic finance to the attention of the international banking community, prompting the major banks to set up Islamic financial windows to take advantage of demand for Shariah compliant finance.’

Islamic banking has grown from Shariah law which traditionally bans usury – the charging of interest on loans, Dr Bhatti says. ‘Islamic banking is a community activity. It offers equity and security between lender and borrower. If a borrower runs into financial difficulty, it is the responsibility of the lender to help sort out his problems.’

The bank will reduce payments, offer moratoriums, give free financial planning advice and in some cases pay out the loan through the zakah, a fund set up out of the 2.5 per cent annual contribution from accumulated assets required by Shariah law which seeks to encourage the distribution of wealth.

In his recently-published book, Developments in Islamic Banking, Dr Bhatti calls this approach ‘a paradigm of fairness and equity’, contrasting it with conventional economics which has little interest in promoting benevolent behaviour in the market. The lender in Western financial systems enjoys an exclusive right to get back his rented capital with a predetermined interest income, whereas a borrower may bear interest risks out of all proportion to his abilities.

Islamic banking seeks to redress this imbalance by dividing the risk between lender and borrower. In the more intimate setting of the community, the lender will accompany the borrower and purchase the new car or computer on his or her behalf.

Repayments are set according to a formula which includes the purchase price of the item, the rate of inflation, bank costs and a profit margin. This margin is set at the time of the loan and is not subject to variation.

Similarly, in the case of the residential housing market, the bank will buy a house for the customer and rent it back at market value. Any additional repayments will come off the value of the loan. Western financial institutions have acknowledged the stability of the Islamic banking system and invested heavily in its bonds.

Dr Bhatti makes the point that maximising profit is not the major objective of this system.

‘In the conventional system the bank can lend more than their assets. They then issue bonds which are debit-based products to attract investors.’

Islamic banks are not debt-based but asset-based, he says. This makes their bonds attractive to low-risk investors. Western financial institutions such as Citibank have acknowledged the inherent economic stability of the Islamic banking system and invested heavily in their bonds, Dr Bhatti says.

Rhonda Dredge