Global Islamic finance torn between competition and consolidation

Motivations of centres and participants may need alignment to deliver critical mass.

Global Islamic finance torn between competition and consolidation

Global Islamic finance torn between competition and consolidation

A ‘compare and contrast’ exercise was possible last week for those who had attended Dubai’s Global Islamic Economy Summit and previously London’s counterpart event a few weeks ago.

An even greater number of delegates was apparently present, over three thousand, in the rather more salubrious setting of Madinat Jumeirah, which, it’s probably fair to say, beats a reclaimed industrial dockland anytime, but especially in late autumn.

Dubai was seeking to lend weight to its claim as the putative centre of the Islamic economy, extending its reach beyond the familiar field of Sharia-compliant finance, although this correspondent’s focus remained on this key element, which attracts such attention, given the business potential still to be had.

One statistic delivered in a side session illustrated that point even more starkly than before. It’s often noted that Islamic financial assets make up only 1 per cent of the global total, just to keep a degree of perspective amid the hype.

In respect of assets under management, though, that ratio, so we were told, is $60 billion versus some $60 trillion overall, making it a miniscule percentage and a sitting target for rapid evolution if this segment of activity can be cultivated.

There were so many so-called takeaways from the event — informational sustenance rather than alimentary — that it would not do the subject justice to sweep through them. It’s a topic to be tracked with due discretion and consideration, and to be filtered through the prism of time.

That said, as an exception, the publication of the Thomson Reuters Islamic Financial Development report was of special note in analytical terms, as is the rubric of this space. It carries a multi-category analysis showing Malaysia leading the pack in the rounded advancement of the industry, followed interestingly by Bahrain, then UAE, but not featuring Saudi Arabia in the top ten, despite its size.

That prompted thoughts here on the global process of the sector’s development, and whether that predominantly will feature on the one hand competition between the various locations that want to secure market share, or collaboration on the other hand, by the various centres and regimes to get the job done. A harmonization of standards, documentation and regulation is believed by so many involved in the industry to be necessary.

While we hear a lot about the Gulf and Malaysia in their dominance of Islamic finance, their motivating forces and realization seem distinct, and internationally the sector appears fragmented.

Even basic research yields that, whereas Malaysia has embraced the sector in a focused way, as part of developing financial services within a national economic strategy, the Gulf’s approach till now, for all its longevity and natural affiliation, has been sporadic.

Malaysia has stolen a march, with a concerted agglomeration of support from the government, central bank, securities regulator and participating institutions. That well-coordinated process continues today. With a new financial district in view, Malaysia wants to compete with Singapore and Hong Kong, in keeping with its programmed vision to 2020.

Most especially, as an underlying philosophy, Malaysia seems devoted to meeting the requirements of the market, rather than imposing a specifically ethical or religious predestination.

In spite of its obvious alignment with Islamic finance historically, in the GCC the sector’s growth has been organic rather than systematised, to date. Of course, the region has had enviable energy resources to rely on, often argued to have curtailed other avenues to growth.

In a globally competitive sense Malaysia is ahead in the game, practically speaking, particularly in trained staff. Meanwhile, a unified, consolidated outlook is actually not on the agenda in the Gulf, although, clearly and by definition, not every centre in the region can be a hub.
Indeed, the recent signing of a Memorandum of Understanding between the central banks of Malaysia and the UAE, aiming to foster closer economic ties, indicates that co-operating externally could actually be easier than bonding internally.

In some sense, it is not surprising that the GCC states, as sovereign nations, should have ploughed their own furrows. The absence so far of Gulf monetary union is evidence of this disjuncture. Europe’s dysfunctional condition as a template can only have warded off collectivist sentiments.

At the same time, the Gulf’s deeper association with Sharia-compliance is a profundity that even its rival Malaysia is known to respect.

The different schools of thought might prove an enduring schism. That’s not fatal for the industry, but might remain a disadvantage for those who want an Islamic market, but need it to be streamlined.

Perhaps Dubai has a chance to find a way between the two pillars: of cultural authenticity alongside the pragmatism necessary for significant success in the real, competitive world.

As far as comparing and contrasting is concerned, while the UK may have a ‘can-do’ attitude, it’s as if Dubai goes the critical step further, with a ‘will-do’ resolution.

Comparative measures:

In terms of the Islamic finance industry’s international profile and cross-border flows, Malaysia and the GCC are most prominent, accounting for roughly 12 per cent and 40 per cent of business booked respectively, with Saudi Arabia representing the largest of the Gulf states in this respect with around 14 per cent of the overall sum. Malaysia, though, is the leader (with a 60 per cent share) in global sukuk issuance, perceptibly the cutting edge of the sector, with its tailored welcome to emerging-market and Sharia-compliant investors. Just over a fifth of the country’s banking system by assets is Islamic; the average for Muslim countries is more like 12 per cent.

http://gulfnews.com/business/markets/global-islamic-finance-torn-between-competition-and-consolidation-1.1261501

Islamic finance in the global era

by Daniele Atzori
The Islamic World Forum held recently in London consecrates Britain as a world centre of Islamic finance. Suspicions of links with Islamist movements linger as the field is criticised for its “moral failure” vis-à-vis the economic advantages of materialism. Islamic economics and the social doctrine of the Church can lead to dialogue.

Islamic finance in the global era

Islamic finance in the global era

Rome (AsiaNews) – With the ninth World Islamic Economic Forum, held in London between 29 and 31 October, Islamic finance has come into its own and gone mainstream. Until a few years ago, Islamic finance was unknown to most people. Some even equated it to the financing of Islamic terrorism. In fact, in the years right after 9/11, anything about Islam was viewed with concern. Now things are different.

British Prime Minister David Cameron, who spoke at the forum, said that London is no longer happy to be the main Islamic financial centre outside Muslim countries; it now wants to compete directly with Dubai and Kuala Lumpur. In 2006, Gordon Brown, then Chancellor of the Exchequer, expressed similar views. Yet, if they seemed unrealistic to most people at the time, the international situation is now quite different.

With Europe reeling from the economic crisis, the prospect of attracting capital from cash-rich regions, such as the oil-producing countries, is a very attractive idea. In fact, Cameron has announced his government’s intentions to issue a sukuk bond compatible with Sharia in order to raise 200 million pounds.

But what is exactly Islamic finance? For Charles Tripp, professor at the School of Oriental and African Studies in London and author of Islam and the Moral Economy: The Challenge of Capitalism, Islamic finance is rooted in the reactions by Islamic societies and cultures to the penetration of Western capitalism in the nineteenth and twentieth centuries.

At that time, there was a widespread perception that the market economy was a danger to the religious and moral values ​​embodied by the Islamic tradition. Islamic economics developed against this background as a discipline whose aim was to achieve a comprehensive reform of the economic system in accordance with the principles of Islam.

Islamic economists saw socialism and capitalism as failures, since both were based on a conception of human beings that ignored the spiritual dimension. And Pakistani Islamist thinker Abu Ala Mawdudi identified the foundation of Islamic economics in the Qur’anic ban on ‘riba’, usury, defined as interest.

If Islamic economics developed a theoretical basis to critique Western economic theories, Islamic finance, which emerged in the 1970s, represents a practical attempt to create an alternative system.

Thanks to the huge liquidity made available by the oil shock of 1973, Islamic finance saw rapid growth. The first modern commercial Islamic bank, the Dubai Islamic Bank, was founded in 1975. That same year, the Islamic Development Bank – set up by the finance ministers of the members of the Organisation of the Islamic Conference – began its operations.

The early phase of the expansion of Islamic banking reflected Saudi Arabia’s desire to act as the hegemon in the Islamic world. However, as already indicated, when Islamic banks came under suspicion after 2001, their expansion in the West slowed down.

Critics and apologists have tended to treat the relationship between Islamic finance and political Islam with superficiality. The notion that Islamic finance is as an extension of jihadism is in fact flawed and biased. And the relationship between ‘political’ and ‘economic’ Islam is much more complex than it seems.

As Clement Henry and Rodney Wilson point out in their well-researched book The Politics of Islamic Finance, published in 2004, Islamic banks and Islamic movements are often interrelated.

Now, as suspicions wane in public opinion, Islamic finance is increasingly seen as a way to attract capital. Undoubtedly, Islamic finance is a large and constantly growing industry.

The fact that the United Kingdom plays a leading country today in this area should come as no surprise. London is not only one of the main centres of global finance, but is also home to a large Muslim minority.

Great Britain also hosts important centres dedicated to the study of Islamic finance. The Islamic Foundation, based in Markfield, Leicestershire, since 1973, has played a pioneering role in the field.

Inspired by Islamist thinker Abu Ala Mawdudi, intellectuals from the Indian subcontinent are among the founding fathers of Islamic economics who built the theoretical platform upon which it stands.

Thanks to the close relationship between the subcontinent, on the one hand, and Britain, on the other hand, the latter has become one of the leading centres of contemporary Islamic thought. In particular, the Pakistani diaspora in Britain has come to play an important role in the genesis and development of Islamic economics and finance. This is truly a global phenomenon.

There is a widespread misconception that Arab and Islamic are the same thing. However, places like Pakistan and Malaysia, which are not on the margins of the Islamic world, have played a key role in the history of Islamic finance.

This great worldwide expansion has led to new challenges. As noted, Islamic economics developed from a desire to reform the economic system in accordance with the principles of Islam. However, Islamic finance, emerging as the ‘operational arm’ of Islamic economics, has often been accused of neglecting Islam’s original ethical inspiration. Indeed, is the development of Islamic finance a step towards the Islamisation of the economy or is it the victory of homo economicus over homo islamicus?

The debate over this issue has been intense, and has led some Islamic intellectuals to criticise the very foundations of this type of finance. Mawdudi’s approach, which was very influential with the so-called ‘founding fathers’ of the field, focused disproportionately on the legal aspects of Sharia, at the expense of its ethical basis.

Rapid growth of Islamic finance has been paralleled by the growing difficulty of dealing with socio-economic problems that challenge Islamic economics. This has led to a debate that intellectual Mehmet Asutay has called the “socio-ethical failure” of Islamic finance. In his view, Islamic banks that abide by the rules of Sharia have however ignored its spirit, its ethical basis. In short, Homo islamicus has submitted to the power of homo economicus.

The critique by Islamic economists of our economic and social model has led them, in many ways, to reflections that are parallel to those that have come out of other great religious traditions of humanity, above all the social doctrine of the Church.

From Rerum Novarum in 1891 to Caritas in Veritate in 2009, the Catholic Church has been deeply involved in thinking about the same issues addressed by Islamic economics. An ecumenical debate on these issues would thus be an additional source of hope for humanity.

http://www.asianews.it/news-en/Islamic-finance-in-the-global-era-29449.html

Bringing Islamic Finance to Africa: How one Training Company Does it

DUBAI, UAE, March 6, 2012 /PRNewswire via COMTEX/ — How do you bring training in interest-free finance to a vast continent historically crippled by interest-based lending? Ethica Institute of Dubai may have solved the problem.

Already in 11 African countries, Ethica is now the most heavily enrolled Islamic finance training and certification institute in the world with over 20,000 paying users in 44 countries and over 100 institutions.

But what makes Ethica different? Part of its success comes from a 100% online platform accessible from any corner of the globe, requiring only 4 months to go from newcomer to advanced. And part of it comes from being fully AAOIFI-compliant, the Islamic finance industry’s leading standard-setting body.

What makes Ethica quite different from other training institutes is its readiness to go on the ground in Africa. Ethica has licensed resellers in North Africa and West Africa and has delivered face-to-face sessions to African bankers in both Africa and the Middle East.

Dr. Binta Jibril of the International Institute for Islamic Banking and Finance in Nigeria said about her recent Ethica training, “I really enjoyed every hour of the training. It has added immensely to my little knowledge about Islamic finance and increased my interest in it.” She was trained by one of Ethica’s AAOIFI-certified scholars Sheikh Ashraf Muneeb.

Ethica’s spokesperson said, “We are very fortunate that our recent growth across the continent coincides with Ethica’s plans to launch specially discounted pricing for African countries.

Africa has too long been on the receiving end of failed interest-based lending programs and we are delighted to be part of a new Africa based on sustainability and self-sufficiency.” Ethica’s core product is their 4-month Certified Islamic Finance Executive (CIFE) program, the only 100% AAOIFI-compliant, 100% online Islamic finance certificate in the market today.

AAOIFI stands for the Accounting and Auditing Organization for Islamic Financial Institutions, the leading Islamic finance standard in the world and the de facto standard for over 90% of the world’s jurisdictions.

About Ethica Institute of Islamic Finance

Winner of “Best Islamic Finance Qualification” at the 2011 Global Islamic Finance Awards, Ethica ( http://www.EthicaInstitute.com ) is chosen by more professionals and students for Islamic finance training and certification than any other organization in the world. With over 20,000 paying users in 44 countries, the Dubai-based institute is accredited by leading scholars and serves banks, universities, and professionals across over 100 organizations.

To watch an Ethica training video click here http://bit.ly/FCWhyIF . For more information about this article, or to schedule an interview with Ethica Institute of Islamic Finance

http://www.marketwatch.com/story/bringing-islamic-finance-to-africa-how-one-training-company-does-it-2012-03-05

Oman’s Zadjali Says Islamic Banks’ Guidelines Draft Almost Ready

Oman, whose banking industry more than doubled in five years, is close to finishing a draft rulebook for Islamic banking in the Gulf Arab country, said central bank governor Hamud al-Zadjali.

“We are preparing a rulebook for Islamic banking, and the first draft is almost complete,” al-Zadjali said in a phone interview today. The central bank met with local lenders on Jan. 25 to discuss the regulations, he said.

The guidelines won’t be completed before the banking law is amended by mid-year to incorporate lenders that comply with the religion’s ban on interest, al-Zadjali said. Oman approved the creation of two Islamic banks last year, Al Izz International Bank in October and Bank Nizwa in May.

Shariah-compliant banking will allow lenders in the country, home to almost three million people, the chance to tap growth in the global Islamic finance industry. Shariah financing is expanding as much as 16 percent a year and the industry may be valued at $1.5 trillion by the end of 2012, Raj Mohamed, managing director at Singapore-based consulting firm Five Pillars Pte, said Jan. 18.

Islamic banking assets may account for a 10th of Oman’s industry total within 12 months of starting services, Hilal Al Barwani, vice president of banking supervision at the central bank said Jan. 18. Oman’s banking assets jumped to 17.9 billion rials ($46.6 billion) in November from 7.02 billion rials the same month in 2006, according to central bank data.

To contact the reporter on this story: Dana El Baltaji in Dubai at [email protected]

To contact the editor responsible for this story: Claudia Maedler at [email protected]

 

http://www.bloomberg.com/news/2012-02-08/oman-s-zadjali-says-islamic-banks-guidelines-draft-almost-ready.html

Agha & Co/Agha & Shamsi Win “Best Islamic Law Firm of 2011” Award

UAE based law firms; Agha & Co/Agha & Shamsi (the “Firms”) were awarded “Best Islamic Law Firms of 2011” by the Global Islamic Finance Awards (GIFA).

The awards, which were presented at the Oman Islamic Economic Forum (OIEF) by his Excellencies the Ex-Prime Minister of Malaysia Tun Abdullah bin Haji Ahmad Badawi and H.E Yaseen Anwar, Governor of the State Bank of Pakistan, recognize and honor institutions and individuals for their commitment to excellence as well as contribution to the development of the Islamic finance industry.

The awards were made based on an objective proprietary methodology. Candidates were nominated in the first quarter of 2011, and after deliberation over the following six months, the winner was picked from among the nominees.

Professor Humayon Dar, the CEO of Edbiz Consulting and the Chairman of the Conference noted “The awards reflect the dual recognition of excellence in practice of the winner’s respective field and a demonstrable commitment to the cause of strengthening the Islamic finance industry.

Agha & Co/Agha & Shamsi were distinguished as being the first ever Shari’ah compliant firms that, simultaneously, demonstrates excellence in the practice of law.”Oliver Agha, Founding Partner of the Firms, accepted the award and stated,

“What we value most is that the award, apart from recognizing excellence in the practice of law, focuses on those entities that evince a genuine commitment to Islamic finance. We are very serious about promoting genuine Islamic finance as reflected in our circumscribed mandate.”

“We hope that more stakeholders in the industry focus on the growth of the Industry along ethical lines rather than just growth for the sake of only monetary gain (Islamic law/Shari’ah dictates that principles come before profit).”

About the Agha & Co/Agha & Shamsi

Agha & Co/Agha & Shamsi (the “Firms”), the world’s first Shari’ah-compliant firms, have been founded to develop a premier law practice that combines honed international transactional skills and deep Shari’ah knowledge with the response time of a top New York or London firm.

With its own Shari’ah Board of scholars including Sheikh Abdul Sattar Abu Ghuddah, Sheikh Mohamed El Gari, Sheikh Esam Ishaq and Professor Azeemuddin Subhani , the Firms work to develop the cause of “genuine” Islamic finance, as well as to provide a one-stop shop world-class level Islamic dispute resolution and transactional counsel on modern complex matters, seamlessly harmonized with and weaved into Shari’ah principles.

The Firms have a blue-chip clientele and are on the panels of the leading Islamic/regional/international corporate institutions including, for e.g., Al Baraka Islamic Bank, Al Hilal Bank, First Gulf Bank, Deutsche Gulf Finance (joint venture between Deutsche Bank and the Al Rajhi Group), Tamweel PJSC and Amlak Finance, as well as leading Saudi corporate and general manufacturing entities Agha & Co/Agha & Shamsi are members of the International Society of Primerus Law Firms.

http://www.prweb.com/releases/Top-Law-Firm-UAE/Best-Islamic-Law-Firm/prweb9081018.htm

BFH backs Islamic finance conference

MANAMA: Bahrain Financial Harbour Holding Company backed the 18th annual World Islamic Banking Conference (WIBC), the world’s largest and most influential annual gathering of international industry leaders in the global Islamic finance industry.

The three-day event was held under the patronage of the Central Bank of Bahrain at the Gulf Convention Centre, Gulf Hotel, from November 21 to 23.

Commenting on the company’s participation, managing director Dr Omar Al Mardi said: “Bahrain Financial Harbour Holding Company has played a pioneering role in the development of an iconic financial hub in the region.

“We have also long recognised the importance of working towards the development of the community in which we live in, by being part of Bahrain’s most prestigious events such as the 18th annual World Islamic Banking Conference,” he said.

“Our own experience with Islamic financing has been more than a success.

“At BFH we are committed to support thriving initiatives. Hence, we are pleased to be able to support this important annual gathering, particularly as it will most certainly prepare the Islamic finance industry to compete for global growth,” Dr Al Mardi said.

“This year, WIBC welcomed more than 1,200 industry leaders and professionals from round the globe, who gathered for discussions that will further enhance the Islamic finance industry. In this contest, BFH is proud to be part of this global platform, and we continue to pursue similar initiatives to add to the prosperity of our beloved Bahrain.”

http://www.gulf-daily-news.com/NewsDetails.aspx?storyid=318566