BSE and TASIS train business executives for Islamic banking & finance

Mumbai: Corporate executives and finance professionals learning and discussing financial business market issues in conference rooms at Bombay Stock Exchange (BSE), is a normal scene but what happened last week was unprecedented.

This time they were learning and discussing Islamic banking and finance at a program jointly organized by Taqwaa Advisory and Shariah Investment Solutions Pvt Ltd (TASIS) and BSE.

Training program on Islamic banking and finance held at BSE, Mumbai

TASIS and BSE organized the two-day program “Islamic banking, finance and capital market” (16-17 Dec.) for market professionals, fiancé and banking executives. The push might have come from growing Islamic banking and finance sector across continents.

Islamic banking and finance has reached the boundaries of more than 75 nations of the world, and many developed and secular nations including UK, USA, France, Germany, and Singapore are promoting this concept.

The robust performance of Islamic banking and finance sector during the recent financial downturn has added to its magnetism.

Western nations such as UK, are promoting Islamic finance with the slogan of “no favor but no discrimination”. Same way in India many institutions including some owned by government have showed interest to capitalize on this growing niche opportunity.

For example Kerala government owned KSIDC has started Al-Barakah Financial Services Ltd; GIC of India has started Islamic re-assurance scheme, SEBI has permeated several schemes explicitly adhering to the Islamic rules of investment, and Bombay Stock Exchange has started a Shariah index for share marketing.

The two-day program by TASIS and BSE was organized for finance professionals, fund managers, merchant bankers, corporate financial advisors, portfolios managers, and product development managers, finance marketing professionals, chartered accountants, stock brokers, wealth managers & AMCs. The program mainly focused on the following:

•        The basic concepts of tenets of Islamic banking and finance

•        The working of an Islamic bank

•        Islamic law relating to investment in the stock market

•        Screening processes of selecting shariah compliant stock

•        Islamic insurance

Program to train professionals for coming Islamic finance market

TCN spoke to Dr. Shariq Nisar, Director of TASIS, on the program and its purpose. The reason to organize this programme was that many business professionals were interested in knowing about Islamic finance, so by the way of this programme professionals will get aware of the Islamic finance, and also when Islamic banking is going to start in India and if the people are not aware of it then the chances of exploitation is very high. So to avert that kind of situation this programme is conducted, said Dr Nisar.

He says it is first kind of programme organized by the BSE for the professionals who want to learn about Islamic finance. He further says that majority of the professionals attending this programme are non-Muslims, and non-Muslims professionals are showing curiosity and interest in learning about Islamic finance, and how Islamic banking and insurance can function and also the Muslims who are attending this programme are seeing it from business operational point of view, and not in a religious way.

India needs Islamic finance for growth: Dr Shariq Nisar

Dr. Nisar says Islamic finance in India depends on two important aspects: First is the domestic demand; and the second is India’s position in the globalization of the financial sector, because domestically India is unable to generate enough capital largely because its major Muslim population is being discouraged to enter into the Indian market because of the perception of Haram, and globally the large number of global capital is getting generated from middle east or many other Islamic countries.

So if India wants to satisfy the demand of investment and capital it has to have an Islamic financial market both domestically and globally, and India will definitely be going to have a Islamic financial market very soon. The sooner India does it, the better for the nation and the whole economy, he ascertains.

Dr Shariq Nisar, Director, TASIS, giving market executives tips about Islamic banking and finance

He said the shariah index started by the BSE is just a one step. It is not the end. There is going to be much more research by the BSE and TASIS to certify many more shariah compliant products and the Islamic banking. He says Islamic finance is not just for the minority Muslim population in this country, but it is for the money.

The nations which have allowed Islamic finance were not lovers of Islam. For example France allowed Islamic finance but in the same month it banned hijab. Different countries and people are attracted towards Islamic finance for the need of money.

He said Islamic finance is all about the real economic activity, it doesn’t allow gambling with the money, in this way it can restrain economic downturn by promoting real economic activity and deterring people to gamble with money so it will be in the larger interest and welfare of the citizens of this country.

He says India is a country with huge Muslim population but still it is far behind in implementation of Islamic finance. Muslims in this country have money but they don’t know how to invest it financially, nor even banking professionals know as to how to guide their Muslim customers to invest in the commodity market.

So this type of programme is conducted by the BSE and TASIS to train the banking officials in the Islamic finance.

Young market executives on Islamic Finance

TCN also spoke to some of the finance professionals who were attending the programme.

Varsha Jalan is an employee of a law firm giving legal assistance in the finance related matters. She said reason for joining this programme is to develop her expertise in the growing Islamic financial market, and because it could be a good mode of finance in India.

Sumit Jalan and Yasmeen both belong to the banking profession. They said that Islamic finance has a good potential in India because of the large number of Muslim population which India possess, but at the same time they ascertain it should not be limited to a particular community because it is very viable and economical than other services, so every person should get avail of this service.

Finance executives Yasmeen, Sumit and Varsha attending the workshop on Islamic banking and finance held at BSE, Mumbai

Varsha says that the programme was informative, and she learned new and surprising things about the Islamic finance and about the tenets of Islam. She thinks Islamic finance is a good way for India to attract FDI because India is in need of money and for Middle East India is good alternative to the west.

Sumit and Yasmeen said that they learned many things about how the markets and MNCs work in Islamic countries and it was useful for them as they come from the banking sector, and it was good experience for them to learn about the core principles of Islamic finance.

Sumit says that to attract FDI in the banking sector you need to have knowledge of the environment which investors are looking forward for their investment, so the knowledge he gained will be useful for him in the future. Yasmeen said being a banker learning something new regarding to their profession was a pleasant experience for her.

Muslim countries do not manage wealth properly – Mahathir Mohammed


Published: May 10, 2010 01:20 Updated: May 10, 2010 01:20

Former Malaysian Prime Minister Mahathir Mohammed is arguably the most popular politician in the Muslim street. Even in retirement he still exudes that “street cred” and “wow” factor because he speaks his mind. Not surprisingly, when he delivered the keynote speech at the Malaysia Islamic finance showcase dinner in Manama on the eve of the 7th Islamic Financial Services Board (IFSB) annual summit, he did not disappoint, albeit privately, his aides did suggest that he toned down some of his remarks.

The theme of his speech, “Islamic Finance – New Hope for the Future of the Muslim World,” may sound aspirational or even idealistic, but the former Malaysian leader was not bereft of any ideas or suggestions.

He rued the fact that Muslims and Muslim countries do not value or manage their wealth properly, which has created a culture on dependency and a lack of capacity building. “The very rich Muslims and Muslim countries,” he explained, “appear not to value their wealth or to care about the management of wealth. This has been taken advantage of by others. We may have unlimited sources of wealth but we can never assume that the resources will always yield wealth forever. Depending on others to extract and market our resources is dangerous. The Muslim economy are of course a part of the world’s economy but whether the Muslims get their fair share of the wealth of their countries depends on their ability to extract it themselves.”

For instance, in the West great businesses have failed because the companies and their executives failed to see the changes taking place around them. The same can apply to commodities or products. Rubber used to be the cash cow for Malaysia. But then came the synthetic variety and the bottom fell out of the rubber market. It is entirely possible that one day the same would happen to the oil market, when renewables and alternatives are developed.

It is only if the Islamic financial institutions (IFIs) are aware of the full extent of the role they can play and they are willing to look beyond merely making money available to those who need it will they be able to represent hope for a better future for the Muslim World.

Mahathir, who is responsible for developing and introducing Malaysia’s Islamic finance model and policy in the early 1980s, is also a pragmatist. Islamic finance, he agrees, in itself will not ensure a better future for the Muslim World. “But it will certainly help,” he advised, “if Muslims learn how to use these institutions to manage the wealth of Muslims to aggressively promote the services they can offer, to have a sense of responsibility for strengthening the Muslim community, and to make the government of Muslim countries aware of the potential contribution of banking and other financial institutions.”

Muslims and their countries have taken a long time to appreciate the role of banks in wealth creation, partly because of the injunction against usury, which prevents Muslims from simply adopting the Western banking system. Nevertheless, as their dealings with Western countries grew they were forced to use the usury-based banks of the West. In fact, many Muslim countries decided to set up their own usury-based banks despite the injunctions of Islam. This means that they were increasing profits and helping the growth of the usury-based banking.

Despite the fact that Islamic finance has grown tremendously with total Islamic assets worldwide exceeding $1 trillion and overall growth rate totaling 15-20 percent per annum, it has not impacted in the same positive way on development and economic progress as the conventional banks have had on industrialized economies. There is today not a single Muslim country that can be classified as developed.

However, Islamic finance is still very tiny compared to the conventional system. This is even more remarkable considering that so many Muslim countries have become extremely rich from the proceeds of the sale of their huge reserves of petroleum. “Can we say that it is the prohibition of usury which is stifling the growth of Islamic finance and prosperity and development in the Muslim world? I don’t think anyone can blame the teachings of Islam,” he asserted.

Mahathir, who used to attend Islamic finance promotion weeks in Malaysia during his watch as prime minister, berated ordinary Muslims too for not using Islamic finance fully. Furthermore, he attacked wealthy Muslim countries for their unwillingness to invest their money in a way that could improve the situation in the Muslim world.

“For many, all that had been done is to buy bonds, which – apart from being un-Islamic as the earnings are through interest – give only minute returns. Investing in this way denies the investor any say in the management of the money. In fact, as pointed out earlier the funds invested can be used by the borrowers for things totally forbidden by Islam. The funds could actually be earning interest for the borrower. It is bad enough to invest in interest-bearing bonds, but it is worse when the money lent through bonds go toward financing loans, which bear interest. Of course, there can be other uses for the money such as investment in non-Shariah compliant businesses and for the production of weapons to be used against Muslims.”

Mahathir called for a greater connect between Islamic finance and the real economy, especially in helping Muslim countries to industrialize; to create honest wealth not based on speculative activities but on products and services that create employment and wealth and that remain compatible with the teachings of Islam.

He warned Islamic banks of wantonly aping conventional Islamic financial products. Admittedly, it is not the Western system that has gone wrong. It is the abuses perpetrated by the market players, the speculators and the gamblers who have done this.

“We cannot ensure there are no rogues in the Islamic financial market or in the Islamic world. We hope that Islamic injunctions will restrain them. But we cannot be sure. Greed assails us all. When opportunities appear for making quick money, the rogues would not be deterred by mere religious prohibition,” he added.

In this respect, he called on Muslim countries to adopt the best practices in banking regulation and supervision to protect savers and customers “even if this stifles the performance and the role of the banks in ensuring a better future for the Muslim World.”