In Dubai, Minnikhanov Courts Islamic Investors

President of Tatarstan Rustam Minnikhanov was in Dubai at the beginning of May to participate in the city’s Annual Investment Meeting, a three-day conference designed to promote bilateral trade and foreign direct investment.

 

During the conference, Deputy Ruler of Dubai Sheikh Maktoum Bin Mohammad Bin Rashid Al Maktoum and President Minnikhanov cut a red ribbon, signaling the beginning of a new working relationship between the two governments.

 

Residency in the Alabuga Special Economic Zone, big business in Tatarstan, and other investment opportunities were showcased during the conference, including Tatarstan goods that are available for export.

 

While in Dubai, Minnikhanov met with UAE Minister of Foreign Trade Sheikh Lubna bid Khalid Al Qasimi. In the meeting, Minnikhanov made it clear that the republic is interested in doing more business with the UAE and other Arab countries.

 

The Tatarstan President also met with Ahmed Salim al Koshli, Minister of Economic Affairs of Libya’s transitional government. Both sides expressed interest in resuming business relations, which were cut off during the civil war. Before the war, Tatneft was doing 5.4 billion rubles of business in Libya exploring the country’s oil reserves.

 

In an interview with TV outlet Russia Today, Minnikhanov declared that Tatarstan is interested in attracting more investment from the Middle East. “We have been working in this direction for about two to three years, and I hope that there will be positive results soon,” Minnikhanov said. “Traditionally, we have worked mainly with Europe, but haven’t worked enough with the Arab world and southeast Asia…Our republic is Muslim, and we need to use this factor.”

 

According to Minnikhaov, Tatarstan is interested in having Tecom Investments help with the integrated development of Smart City, an initiative to build a world-class conference and business center near Kazan International Airport. The company is currently involved in implementing similar projects in Malta and India.

 

In Dubai, Tatarstan also discussed the possibility of cooperating with Kele Contracting in construction and construction management of major sports facilities, as the company has experience working on Olympic facilities in Sydney.


UAE-Tatarstan-minnikhanovdubai

 

Minnikhanov’s participation in the AIM conference in Dubai is the latest in a string of recent signs that point to Tatarstan’s commitment to actively seeking out foreign direct investment (FDI).

 

In 2011, Minnikhanov created the Tatarstan Investment Development Agency (TIDA), a body designed specifically to both encourage the growth of Small and Medium business and increase the level of FDI in the republic. TIDA’s Chief Executive is Linar Yakupov, one of the founders of Kazan Summit, an international Islamic banking and finance conference that was first held in 2009.

 

Since his agency was created, Yakupov has been aggressively pursuing foreign investment. In March, the agency used its first-ever collegium as an opportunity to host Kazan Invest, an international investment forum billed as a precursor to Kazan Summit, which will be held in May 2012.

 

Co-hosted by the World Association of Investment Promotion Agencies (WAIPA), Kazan Invest was a day packed full with discussion of how to increase FDI in Russia and Tatarstan. During the forum, TIDA had a Dubai-based architect present a proposal for Smart City, the same exhibition and business center that Minnikhanov wants Tecom Investments to help develop. Overseen by TIDA, Smart City is being developed to make Kazan an even more attractive destination for foreign businessmen.

 

Since Kazan Invest, Yakupov and his team have logged thousands of frequent flier miles traveling to international FDI and business forums, spreading the word that Tatarstan is ready to do business.

 

In March, Yakupov visited Malyasia and Indonesia to promote Tatarstan’s investment potential.

 

In April, he visited Luxembourg and the World Investment Forum in Doha, Qatar. “Republic of Tatarstan is the only region of Russian Federation represented at World Investment Forum in Doha, Qatar,” Yakupov tweeted on his English-language Twitter account, @LinarYakup. At the end of the month, he was in Europe, attending an industrial park seminar in Metz, France. That same month, TIDA First Deputy Robert Galiullin was in Latvia as part of a delegation.

 

And of course, Yakupov and his team were in Dubai with President Minnikhanov at the AIM conference, where they met with the directors of Masdar City, Dubai Internet City, Dubai Media City, and the Mubadala Investment Company, according to TIDA’s website.

 

This promotional work was officially branded “Invest in Tatarstan” and launched as a global campaign during the AIM summit in Dubai. The campaign has also recently started working through its new Twitter account, @InvestTatarstan.

 

“Invest in Tatarstan” is a global campaign, but as Minnikhanov’s visit to Dubai indicates, one of its strategic focuses is deepening links within the Islamic world.

 

This year’s IV Annual Kazan Summit, now hosted by TIDA, will focus on economic cooperation between Russia and the Organization of Islamic Countries (OIC), which has more 57 member countries.

 

“Russia has a dialogue with the European Union, Russia has a dialogue with the United States, and we similarly want Russia to have a dialogue with the OIC,” Linar Yakpuov explained in an interview with The Kazan Herald. Yakupov is confident that there is tremendous, untapped economic potential in such a dialogue.

 

To be held on 18 and 19 May in Kazan “under the patronage” of President Minnikhanov, Kazan Summit will feature a strategic forum, a trade and investment forum, a conference on Islamic economics and finance, bilateral meetings, and roundtables on the role of Islamic finance in the world financial system, dialogue of civilizations, and the role of the press in foreign investment.

 

Over the past few months, TIDA has gathered a database of more than 79 different investment projects put forward by Tatarstan entrepreneurs. This database of business plans which will be available for Kazan Summit participants to peruse and follow up on during the summit.

 

URL: http://iina.me/wp_en/?p=1008156

Bahrain banks 'on solid economic fundamentals'

Solid fundamentals will support a resumption of strong long-term economic growth and secure Bahrain’s long-term future as a wealth management centre of excellence, said a top government official.

‘Bahrain remains committed to ensuring that the same core business fundamentals remain in place,’ remarked Economic Development Board (EDB) chief executive Shaikh Mohammed bin Essa Al Khalifa ahead of the Euromoney GCC Private Banking Conference at the Ritz-Carlton Bahrain Hotel and Spa on March 7, which will put wealth management and private banking in the spotlight.

Euromoney, the specialist financial publisher and conference organiser, is returning to Bahrain for the first time in a decade to host a major financial event, which is supported by the EDB and the Central Cank of Bahrain.

‘These are stable and transparent regulation, an open business environment and sustainable growth, exploiting our location between East and West and offering a base from which to access the GCC’s trillion-dollar market.

‘Clearly this event will provide a strong platform to engage with the private banking and wealth management business community and highlight the benefits and opportunities presented by establishing operations in Bahrain.

‘More broadly, the EDB has an extremely active business development programme to attract businesses to Bahrain, including international road shows and hosting events in Bahrain to allow people to see the kingdom for themselves.’

The quality of growth depends more than anything else on the sustainability of the workforce and quality of people and Bahrain’s business sector is supported by the most productive, highly-skilled bilingual national work force in the GCC, he argued.

‘Bahrain is home to a well-educated, able local financial services workforce and of the total workforce of more than 14,300 in the financial services sector 67 per cent are Bahraini, of which 37pc are Bahraini women.

‘In addition to the strength of the regulatory framework and the skilled workforce, we also have a track record of more than 40 years of managing wealth in our financial system,’ he said.

‘We also offer platforms for investment through our thriving funds industry, with more than 2,800 registered funds in Bahrain,’ he said and added we are global leaders in Islamic finance, and this means we can support a broader range of private wealth management needs in the kingdom.

‘We felt that now was the right time and Bahrain the right venue to attract an international audience and we already have around 250 delegates signed up,’ said Euromoney Conferences director of private banking Richard Banks.

‘This is not a big conference but it is an event which will attract quality people and we have representation from as far away as Malaysia, Singapore and Switzerland.

‘We chose Bahrain for this event as the kingdom remains a centre of excellence for wealth management in the Middle East,’ he added.-TradeArabia News Service

http://www.tradearabia.com/news/BANK_213297.html

Public Bank Bhd posts 3.6% increase in net profit

PETALING JAYA: Public Bank Bhd posted a 3.6% year-on-year increase in net profit to RM877mil for its fourth quarter ended Dec 31, 2011, and cited the improved performance as mainly due to higher net interest and net income from its Islamic banking business.

 

However, the bank told Bursa Malaysia that that this was partially offset by higher other operating expenses and higher loan impairment allowance on higher loan growth achieved.

Revenue for the quarter under review grew 11.8% year-on-year to RM3.3bil.For its full financial year (FY11), the bank recorded a 14.3% year-on-year increase in net profit to RM3.48bil.Revenue grew 15.6% year-on-year to RM12.76bil in FY11.

The bank said during FY11, it recorded improved earnings mainly due to higher net interest and net income from Islamic banking business by RM464.6mil (8.6%) and higher net fee and commission income by RM87.1mil (8.4%).This was driven by continued strong loans and customer deposits growth.

http://biz.thestar.com.my/news/story.asp?file=/2012/1/30/business/20120130145017&sec=business

Laws 'key to Makkah, Madinah real estate growth'

New regulatory, immigration, business and finance legislations are crucial for the real estate sector in Makkah and Madinah to achieve its true potential, according to Alpha1Estates International, a leading Islamic real estate advisory firm.

Alpha1Estates International, which was set up in 2006, became the first company to market Saudi Arabian property globally and also the first to market property in both Makkah and Madinah.

In subsequent years, it launched the world’s first bespoke real estate consultancy programme and joint-investment fund focused on the holy cities.

Alpha1Estates has proposed five critical pieces of legislation which focus on globalising the sector to non-Saudi Muslims, which will lead to greater investments, prosperity and quality of life in the holy cities.

“The focus on investing and building hard infrastructure, such as air, land and rail transport, in these cities is being enhanced but it is the focus on soft infrastructure which is critical for the future,” said Malik Al-Alawi, chairman of Alpha1Estates International.

‘Our five main proposals for new legislation include: easing of immigration and travel for non-Saudi Muslims; setting up a real estate regulatory authority to monitor buying and selling of real estate and prevent monopolies; empowering non-Saudi Muslim ownership, leasing and investment of real estate; easing non-Saudi Muslims setting up a company, working or studying in the Kingdom, and introducing and scaling Islamic mortgage financing in the Kingdom,’ stated Al-Alawi.

According to him, th real estate investment in Makkah and Madinah accounts for 40 per cent of total real estate investments in the Kingdom, standing at over $120 billion over the next decade.

‘Introducing these news laws will not only allow the sector to develop to world-class standards, but also generate unprecedented revenue for the Kingdom and its citizens,’ he added.

As forecast by Alpha1Estates exactly one year ago, 2011 has been a much better year for the real estate sector in the holy cities than 2010.

The land prices in these cities are the most expensive in the world at between $70,000 and $110,000 per square metre, and hitting as high as $133,000 per square metre in Makkah.

Over ten million pilgrims from 140 countries visit these cities annually for Hajj and Umrah, contributing SR30 billion ($8 billion) per year, the second-most lucrative source of the Kingdom’s revenue after oil.

Expatriates form 40 per cent of the Makkah’s population, and the city currently accounts for 11 per cent of the Kingdom’s GDP.

The Ihsan al-Haramain Index, the first index to solely track Saudi-listed companies involved in real estate development in Makkah and Madinah, has also been published, said Alpha1Estates.

‘The index jumped by more than 13 per cent – compared to a fall of 21 per cent in 2010 – and bucked the trend of Tadawul (Saudi Stock Exchange) Real Estate Development Index which fell by over 1.6 per cent this year,’ said Al-Alawi.

According to him, Madinah is the best investment in real estate in the region with real estate stock focused on Madinah outperforming Makkah at nearly 17 per cent compared to over 9 per cent.

‘Two major Madinah-focused real estate stocks have reaped 26 per cent and 39 per cent returns this year,’ he added.

http://www.tradearabia.com/news/REAL_210419.html

Al Hilal Bank using digital pen solution

Al Hilal Bank has deployed new digital pen technology, to help cut document processing costs, improve authentication and speed up workflow.

The Abu Dhabi-headquartered Islamic bank is using the pen technology to digitize documents and record data using handwriting, then back up digital copies of the documents online.

The system, which was provided by BSTechnologies,is being used by Al Hilal’s direct sales team, and staff in Credit Finance, Finance Operations, and Sales Coordination. The device includes a camera and a GPS that digitize written documents to Al Hilal’s systems.

Al Hilal personnel simply write on a specially-printed copy of a particular document with the digital pen, which automatically records the handwriting in its memory. The recorded ink is then downloaded and matched with the image of the original document.

It also creates a new, exact copy of the handwritten document in PDF format, just as if it had been scanned or photocopied. The digital copy can then be easily saved, sent, archived, copied, deleted or retrieved depending on the bank’s requirements.

“Our digital pen -based system reflects our commitment to using technology to increase services and convenience for our customers.

Al Hilal Bank intends to adopt more digital systems offered by industry leaders such as BSTechnologies in line with our efforts to tap modern tools for the convenience of our mutual customers. We shall continue to redefine and raise the standards of modern, Shariah-compliant banking,” said Mohamed Zaqout, Head of Personal Banking, Al Hilal Bank.

“We are thrilled to bring to Al Hilal Bank a cutting-edge technology that reduces client waiting time, improves the management of business workflow queues, and drives down the costs involved in forms processing.

The technology is so simple and natural so it can be instantly and effortlessly used by young and old alike. Knowing how to write with a pen on a paper is enough to be able to use this technology,” added Abdullah Al Kaabi, CEO, BSTechnologies.

http://www.itp.net/587497-al-hilal-bank-using-digital-pen-solution

ITS ETHIX – Financial Solutions Awarded 'Best Technology Provider of the Year' by Islamic Business and Finance Award

Dubai – The International Turnkey Systems Group (ITS) has realized a new regional achievement by obtaining the “Best Technology Provider of the Year” award at the Islamic Business and Finance Awards ceremony.

This award was presented in recognition of ITS for providing the latest technological solutions and services that would meet banks present and future needs. ITS solutions also enabled Islamic banks to face growing challenges of competition in the local and regional financial markets.

ITS has provided banks with a number of ETHIX main banking services and solutions, including Islamic banking, automation of branches management, online banking services, and technological services related to treasury and management of Islamic in-vestments and documentary credits.

Khaled Jasim Al Amiri, Assistant General Manager of ITS, received the award at a prestigious ceremony at Emirates Towers Hotel, Dubai.

Al-Amiri commented on being selected for this award: “Once again, ITS confirms its superiority by the testimony of others through obtaining one of the top regional awards and is highly recognized by companies and institutions in various sectors.”

He added: “For more than 30 years (the lifetime of the company), our human resources have played a prominent and important role in realizing these achievements. They have helped position the company to enable it to compete strongly within the market and most importantly, to distinguish itself through groups of solutions, products and services, which have ultimately become the hallmark of ITS.”

Subsequently, ITS also has been awarded “Systems Integrator of the Year” at the Ara-bian Business awards which is considered among the most notable and important awards presented to the business sector in the region.

Banking and Investment Sector

The ITS ETHIX financial solution is a recognized solution in meeting the requirements of Islamic and traditional banking and Islamic finance. ETHIX has assisted many banks and financial institutions to minimize their operational costs in responding to the increased demand of customers for both traditional and Islamic products and services.

In addition, through the use of the most advanced and developed technological solutions in the world, ETHIX Financial solutions is ranked globally as the premier total banking solution, fully compliant with Islamic Shari’a catering to Tier1 banks.

The successful strategy of the ITS Group has enabled the company to double the ceiling of its returns and achieve significant company growth. By increasing total returns and the company’s equivalent in profits, ITS have been able to make both regional and strategic expansions, highlighting the role of HR in ITS.

http://www.virtual-strategy.com/2012/01/03/its-ethix-financial-solutions-awarded-best-technology-provider-year-islamic-business-and-

Noor Takaful named Best Takaful Operator

Noor Takaful, the Islamic insurance arm of Noor Investment Group was named Best Takaful Operator in the GCC region, at the CPI Islamic Business and Finance Awards, held recently in Dubai.

It is the second time in three years that Noor Takaful has won the award. Noor Takaful has now won seven industry awards since it was launched in 2009.

Dr Ahmed Al Janahi, Managing Director, Noor Takaful said: “Despite the turmoil in the global financial system, Noor Takaful has achieved sustained growth over the past three years and it has consistently out-performed its takaful peers in terms of gross written premiums.

Awards, such as this, remind us of the importance of continuing to deliver on our brand promise of excellence in everything we do, which has been and remains the cornerstone of our success.”

Parvaiz Siddiq, CEO, Noor Takaful, who received the award from Abdulla Al Mansouri, Chairman of financial publisher CPI said: “We are honoured to have won this prestigious award, for the second time in three years.

The region’s insurance landscape is extremely competitive and this award is a testament to our commitment to the highest service levels and providing the most effective and innovative insurance solutions to our current and prospective customers.”

Noor Takaful has committed itself to being at the forefront of the Takaful sector in the Middle East. Its contemporary approach to Islamic insurance has seen it provide a series of innovative products and services for its customers, including the GCC’s first e-Takaful service providing instant quotes and online payment facilities.

GLOBAL: Business schools turn to Islamic finance

As unemployment levels remain high in the West, finance students are being encouraged to gain expertise in Islamic banking so that they will be able to work in the Gulf states and in the wider Islamic world.

Universities are also exposing students to other non-conventional and ethical finance models that include eco-finance and micro-finance.

While universities in the United Kingdom and France have offered Islamic finance programmes for some years because of their large Muslim populations, Spain is also increasingly looking into these programmes.

The Instituto de Empressa (IE) business school in Madrid has been offering Islamic finance programmes for five years and partnered with Saudi Arabia’s King Abdul Aziz University (KAU) to launch the Saudi-Spanish Center for Islamic Economics and Finance (SCIEF) earlier this month.

Speaking at the event, Dr Ahmad Mohamed Ali Al Madani, head of the Islamic Development Bank, said the financial crisis had raised people’s concerns beyond profit margins into where their money is invested. Al Madani was acting rector of KAU from 1967 to 1972 and was Saudi Arabia’s deputy minister of education in the 1970s.

Business schools needed to respond accordingly and Spain was in a good position to do this considering the country’s Arabic heritage, he said.

“You look around and find that Islamic institutions are in the hundreds. Amounts of the assets are in the billions. The system proved that it can support economic systems and respond to big demand from people in different parts of the world.”

Professor Ignacio de la Torre, IE’s academic director of the masters in finance programmes, said at the SCIEF launch that there is already US$1 trillion of Islamic money, and that it is growing at 20% with US$200 million of additional Islamic money coming in every year.

“When you travel to the Gulf, where 50% of banking has been Islamised, there are not enough people with skills and understanding of Islamic finance,” he said.

He added that, from a career perspective, students would be wise to have knowledge of this area because those who work in conventional finance will sooner or later be faced with Islamic finance.

Due to the increasing focus on Islamic finance globally, the subject is now mandatory for masters in finance students, said Dr Celia de Anca, director of the centre for diversity at IE business school.

“We’ve been teaching it as an elective for five years and now it is mandatory because we realise the world of finance is changing so much that students and future financial managers should know more about what’s going on,” she said.

Students were showing an interest in sustainability in finance, ethics in finance and ecological finance and the school is looking into developing specialisations in alternative finance, de Anca said.

A number of UK universities have a strong tradition in Middle East studies and more recently in Islamic finance. At Durham University, Islamic finance programmes have been offered for more than 25 years, Durham Centre for Islamic Economics and Finance director Dr Mehmet Asutay said at the Madrid launch.

The university has the largest PhD programme in Islamic finance as well as masters degrees in arts and in science in the field.

“In addition to Muslims coming from all over the world to the centre, we have English German, Italian and Spanish students,” he said.

The field is not without its challenges. Professor Simon Archer of the Henley University of Reading’s International Capital Market Association said the area was relatively new and “there is not a wealth of excellent textbooks”.

Archer added: “Research literature is sparse and spread over a number of different journals and not tremendously accessible.”

In addition, there were “opportunistic” universities in the UK that have responded to the need for programmes with varying levels of quality.

http://www.universityworldnews.com/article.php?story=20111216131700252

Lack of liquidity among risks facing Islamic financing

By Santhosh V Perumal
Business Reporter



Lack of liquidity, questionable Shariah-compliance by some sukuks and replenishment of capital remain risks to Islamic financing, according to Qatar First Investment Bank (QFIB).

Lack of liquidity among risks facing Islamic financing

Lack of liquidity among risks facing Islamic financing - Graffenried: positive outlook

“A tipping point has been reached in the finance across the GCC markets which could lead to accelerated growth.

All the main economies in the GCC have a positive outlook and it is important that Islamic Finance links into this growth,” QFIB CEO Mike de Graffenried said ahead of his keynote address on ‘Future of Islamic Investment Banking Industry’ at the Arab Investment Summit, which will begin today in Abu Dhabi.

Finding risks to this growth, he said many Islamic banks have been hit by the lack of liquidity with the less conservative having large real estate and private equity exposures and have had to adapt their business focus to emphasise liquidity.

The Shariah-compliant basis of some sukuks was being questioned as there was no direct link to assets and therefore they were being seen as straight debt issuance, according to Graffenried.

“Banks now need to replenish capital to substantially higher levels than before, and this needs to be ‘tangible money’ not debt disguised as equity,” he said.

He said private wealth in the GCC remained strong and the intergenerational transfer of wealth would spur the need for corporate advisory work.
“Much family wealth is tied up in the form of illiquid business assets, the passage of these assets from generation to generation would be facilitated and familial disputes reduced through the incorporation and provision of liquidity of family shareholdings,” he said, adding this would release investment capital and may well be vital for the continued development and strengthening of Islamic finance in the region.

http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=358928&version=1&template_id=48&parent_id=28

Shariah Compliance for PE Funds

Shariah Compliance for PE Funds

There has been a growing demand from investors domiciled in the Gulf Co-operative Council region for investment portfolios to include Shariah compliant instruments.

With growing credit crunch, LP defaults in other jurisdictions and other factors that have emerged from the global financial turmoil, the fund managers are evaluating options to tap investors in Gulf, which amongst other things require the fund to comply with the tenets of Islamic laws. This note briefly identifies some basic considerations whilst establishing a Shariah compliant fund.

Introduction

Many Muslim investors conduct their commercial activities in accordance with an Islamic body of law called Shariah. Shariah, or literally “the way”, is based on the Quran (the religious text in Islam), Hadith (the sayings and actions of Prophet Mohammed), Isma (the consensus of Shariah scholars), Qiyas (reasoning by anology) and centuries of interpretation and precedents. Shariah law does not have uniform set of standards and interpretations.

While some institutions, such as the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institution, work to unify the various interpretations and opinions of scholars, but they are only recommendatory in nature. Whether an investor views a particular private equity fund and its investments as “Shariah-compliant” will depend upon the review and approval by a Shariah consultant or supervisory board engaged by the fund manager and/or the investors’ own consultant or supervisory board.

Investment Restrictions

In order to qualify as Shariah-compliant fund, a fund’s investment policy must contain restrictions that prohibit investment in industries considered haraam.

These restrictions usually prohibit investments in companies involved in the following industries and activities:

• Conventional financial services (including conventional banks and insurance companies);

• Gambling and casinos;

• Alcohol and pork products;

• Certain entertainment, such as gossip columns or pornography (but often including cinemas, music and publications);

• Weapons or military equipments; and

• Any other immoral or unethical activities identified by Shariah consultant or supervisory board.

What are considerations for fund managers?

An investment fund may be structured based on the Mudaraba contract under which an investor provides capital to another person/body (a fund manager), who uses their expertise to devise a suitable investment strategy. Any profits generated by the joint enterprise are divided between the manager and the investor in accordance with a predetermined formula. The financial losses are borne by the investor to a maximum of his capital investment. As indicated above, although there are several restrictions on investments that could be made by the fund, over a period of time there have been certain favorable interpretations by Shariah scholars which permit structuring of the investments and be within the four corners of the permitted activities. Some of the possible avenues include:

• Shariah prohibits usury, which may be defined as exploitation by the owner of a product which another requires. The payment of receipt of interest is usury and therefore investment in entities involved in lending (or borrowing) are prohibited. This restricts ability for most companies to have interest-based debt finance and invest surplus cash in interest bearing bank accounts and other investments. However, some Islamic jurisprudence accepts a debt to equity ratio of 1:3.

• Similarly, there is a school of thought that investors are not partners in a fund but are merely investors. Since no one investor has the power to veto, it would be wrong to ascribe responsibility to an individual for a particular transaction. This may allow some headroom to invest in entities which have merely incidental non-halal features, since investors will not be deemed under Shariah to have authorized the investment. In some instances any company engaged predominantly in halal business, but earns interest on account, an equivalent portion of any dividend paid to a Shariah compliant fund must be given to charity, be it at the fund or the investor level.

• An Ijara fund is usually established for the purpose of purchasing assets (property, machinery, etc) and then leasing those assets to third parties in return for rental income. This may be relevant for real estate funds. Legal ownership of assets remains with the fund as does responsibilities for the management of such asset. A management fee will normally be paid to the manager. It is important that the assets that are leased out must be used in a halal manner and the leasing arrangement is compliant of Shariah.

It is evident from above that there are number of interpretations whilst ensuring whether a particular activity or investment by the fund would be Shariah compliant. Therefore, funds appoint a Shariah consultant or supervisory board that reviews proposed investments and operations and issues opinions as to their compliance with Shariah. There are also certain service providers with their own Shariah boards, which may be engaged on a contractual basis to advice a fund.

Some investors may insist on establishment of Shariah Committee in relation to the fund, which would consist of Islamic scholars and which would advice the General Partners in relation to Shariah compliance. Compliance will be an ongoing obligation and the Shariah committee will be responsible for conducting annual audits to ensure that the fund and portfolio companies continue to operate in accordance with Shariah. One other option that is looked at is that a Shariah compliant parallel vehicle could be established with the main fund.

It is important whilst structuring the fund and preparing investments strategies, private placement memorandum and other fund documents that above restrictions are appropriately addressed for the fund to be able to attract investors for a Shariah compliant fund. With demand for providing opportunities to Gulf investors, the Shariah-compliant funds are growing in numbers and present opportunities to General Partners to tap wider investor base.

http://www.ventureintelligence.in/blog/2009/07/shariah-compliance-for-pe-funds.html