The Kochi-based Alternative Investments and Credits Ltd. (AICL), an Islamic finance company, started its operation in Kannur on Dec. 21. AICL officials said that it was the only Reserve Bank of India-approved non-banking finance company operating on Islamic finance principles. AICL’s operation in Kannur was formally inaugurated by H. Abdur Raqeeb, General Secretary, Indian Centre for Islamic Finance, New Delhi. AICL director T. Arifali presided over the function. Earlier, Kannur University Vice Chancellor P.K. Michael Tharakan inaugurated a seminar on ‘Understanding Islamic finance’.

source : Radiance weeekly

Kerala to recast Shariah-compliant firm

By John Mary

Thiruvananthapuram: Faced with the criticism that the State Government is “favouring” a particular religion by initiating a Shariah-compliant investment firm, the ruling Left Front Government in Kerala has decided to recast it as an interest-free financial venture.

Industry Minister Elamaram Kareem said in a written reply to Muslim League member C T Ahmed Ali in the State Assembly yesterday that the proposed financial venture had already received Rs42m as contributions from 14 promoters.

The plan was to raise funds from individuals, non-resident Indians, foreign investors and foreign institutional investors (FIIs). Individuals would be eligible for up to 9 percent cent stake and foreign investor 24 percent. Oman-based businessman P Mohammed Ali had chaired the first meeting of the 17-member board of the company a few months back. Doha-based Behzad group Chairman C K Menon is the board vice-chairman. Barring three government officials, 12 directors belong to the Muslim community.

Al Barakah Financial Services Limited was conceived as India’s premier financial institution dealing in Shariah-compliant financial products. “The way we see it it’s another form of venture capital,” Finance Minister Thomas Isaac had said in an interview. “We need long-gestation funds to build airports, high-speed trains and expressways. Islamic finance promises unexplored potential in that context”.

Isaac had said Al Barakah Financial Services Ltd would sell rupee-denominated bonds and create investment funds that complied with Shariah law’s ban on interest. The venture would tap Indian Muslims and money sent home by workers living in Gulf countries.

However, Kerala High Court stayed the proposal for the investment company on a petition filed by former Federal Minister and Janata Party leader Subramanian Swamy. Swamy contended that the government had sanctioned the registration of an Islamic Finance company by Kerala State Industrial Development Corporation (KSIDC) to provide financial services in accordance with Shariah law.

Swamy pointed out that Shariah was the Muslim Personal Law and the functioning of financial company set up with government participation in compliance with Shariah norms was an instance of the state government favoring a particular religion.

“KSIDC is a government organisation and it is clear that it would act under the overall control of the state government. KSIDC has invited applications to fill the top post in the proposed company. The CEO of the proposed Islamic financial company is required to report to the Shariah Advisory Board. This makes it clear that the Board will have some measure of supervision over the proposed company,’’ he said.

Kerala government had set its eyes the Rs370bn NRI deposits with commercial banks in the State, after Ernst & Young, in its feasibility study report, proposed the formation of a non-banking financial company (NBFC) with more funding from Federal and state government agencies.

The firm, through its dedicated arm, would procure capital equipment or property and lease it out under installment plans to clients. The company would be entitled to a share in profits through the mechanism of rent, fixed or variable.

Shariah prohibits investments in companies dealing in alcohol, conventional financial services (banking and insurance), entertainment (cinemas and hotels), tobacco, pork, defence and weapons.

Source : the penisula

Islamic banking concept in Kerala is backed by Union minority affairs minister Salman Khurshid

The Centre has offered a helping hand to Kerala in revoking a stay order by the state high court against setting up of an Islamic bank; Noting that the court order could hamper investment opportunities in the country, Union minority affairs minister Salman Khurshid said the Centre would coordinate with the state government in dealing with the issue legally.

Speaking at the editors’ conference on social sector issues on Monday, Khurshid backed the concept of Islamic banking.

“A lot of other countries are snatching investment from Islamic countries,” he said. The country is being deprived of such funds for the lack of an Islamic banking system, Khurshid added.

He said the high court would be informed of the Centre’s stand on the matter. “I think the finance ministry will deal with the matter,” he told the gathering. He said, if needed, the banking norms should be amended to comply with the Islamic banking system.

Two weeks ago, a division bench of the Kerala High Court had stayed “all further moves” by the state government-owned Kerala State Industrial Development Corporation (KSIDC) to set up an Islamic bank in the state. Former union minister Subramanian Swamy had approached the high court complaining that the proposed Islamic bank was against India’s secular credentials and its banking norms.

The Kerala government cleared the project after a feasibility study found that Islamic bank was a viable proposition in Kerala. A company was also registered to take the process forward. The share capital of the proposed bank had been fixed at Rs 1,000 crore.

According to the Islamic banking concept, the bank will not pay any interest to customers. A Sharia board can decide what sort of investments the bank can make. The bank will also have Sharia-compliant banking products.

Profits made out of the investments will be distributed to shareholders.

Convener of National Committee on Islamic Banking H. Abdur Raqeeb had met Khurshid last June on the feasibility of interest- free Islamic banking in India.

“Islamic banking will be beneficial for the marginalised and the minorities in terms of microfinance. Major investment from the Gulf countries could also be attracted,” Raqeeb said.

He said if London, Singapore, Tokyo and Hong Kong can become “hub and house of Islamic Finance & Banking”, Mumbai and Kochi can also follow suit.

Khurshid also said the Centre preferred a cautious approach on the issue of reservation for minorities. “Our manifesto is clear on this. We will apply Karnataka- Tamil Nadu model, which says backward among Muslims should get reservation, according to their population,” he said.

source : india 2day