MMU To Explore Islamic Banking In Kashmir

Srinagar, Dec 27: Islamic scholars and clerics of Jammu and Kashmir Tuesday decided to organize a united and collective response to the problems facing the community in the Muslim majority state. Decision to the effect was taken at an extraordinary meeting of the newly formed Muttahida Majlis-e-Ulema (United Council of Scholars) presided over by Mirwaiz Umar Farooq at Mirwaiz Manzil here.

As a first major step towards protection of faith against various onslaughts, a website, was launched by the Mirwaiz. Making use of modern technology, the website will boost the efforts to counter anti-Islamic activities, particularly those aimed at induced conversions.

Speaking at the meeting, Mirwaiz underscored the need to utilize technology and modern means of communication to “counter conversion attempts”. However, he made it clear that the movement for protection of faith was not against any minority community.

It may be recalled that a pastor was arrested recently on charges of converting seven Kashmiri youths to Christianity after its video clip went viral on social networking sites.

Mirwaiz said while the Islamic system of Baitul Maal (community financial institution) needed to be strengthened, earnest efforts were urgently required to be made to introduce Islamic banking in Kashmir. He urged the Reserve Bank of India and those associated with the banking system to play a positive role in removing various impediments in having the Islamic banking system here.

He said committees of financial experts would be formed to explore the possibilities of introducing Islamic banking in Muslim majority Jammu and Kashmir.

“The economic crisis in the United States and several European countries are because of the unbridled spending which has increased their debt liabilities. This has led economists all over the world revisit their financing systems and they have realized that Islamic system was the best for mankind,” Mirwaiz said.

Mirwaiz, who is also the chairman of his faction of Hurriyat Conference, expressed concern over the activities of Christian missionaries. “We should strive for creating Baitul Maal, to help the needy among us,” he said,

Expressing serious concern over the conspiracies to promote liquor sale in the valley, Mirwaiz demanded immediate cancellation of the licenses issued to some vendors either openly or clandestinely. “We will initiate steps under the Right to Information Act to identity such elements and liquor dealers,” he said.

He also appealed to religious scholars and preachers to play part in religious teachings and creating awareness about the fundamental tenets of Islam based on the Qur’an and the sayings of holy Prophet Muhammad (pbuh).

Darul Uloom Raheemiah proctor, Maulana Rahmatullah, urged the entire Muslim community to make a joint effort to counter the anti-Islamic and anti-Muslim activities of various elements. He voiced concern over the statement of a Minority Commission team after its visit to the valley recently, adding the MMU efforts were not against any minority community in the state.

Speakers at the meeting were unanimous in their resolve to unite the Muslim community on the basis of the commonality of faith. All the religious, social, charitable, educational and welfare organizations would pool their energies for the purpose.

Those present in the meeting included Sheikh-ul-Hadees, Darul Uloom Raheemiah, Mufti Nazir Ahmad Qasmi, Ittehadul Muslimeen patron, Maulana Muhammad Abbas Ansari, Jama’at-e-Islami’s advocate Zahid Ali, Jami’at-e-Ahli Hadees general-secretary, Abdur Rahman Bhat, Karvani Islami chief, Ghulam Rasool Hami, besides scholars, clerics and delegates from Jammu, Doda, Poonch, Rajouri, Banihal, and other areas of the region, and from all the valley districts.

Sharia Boards in Islamic Banking and Finance: Opportunity for the youth and something India seems to have overlooked

India is all set to embrace Islamic Banking and Finance as reforming the current banking law to allow sharia compliant banking is on top of Finance Minister Pranav Mukherjee’s to-do list. Banking Laws Amendment Bill, 2010 proposes to bring about the necessary changes in Indian Banking Law to open doors for Islamic Banking and Finance in India – which has done extremely well even in non-Islamic countries like UK and Sri Lanka.

Apart from providing finance of their preference to one of the largest Muslim population in the world, it will enable Indian projects to receive finance from Middle East and other countries where lenders prefer Islamic finance to other conventional methods of financial transactions. However, is India ready to take on the opportunity?

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One of the key factor that will determine India’s success at Islamic finance is availability of trained personnel. For the youth in India, this brings fresh opportunity. Those who learn the intricacies of Islamic finance can look forward to meteoric growth as demand for experts will exceed supply right from the beginning. On the other hand, it will be a challenge before banks and financial institutions to find experts for various roles. One of the most difficult task may prove to be creation of a Sharia board which is required to govern and audit compliance of all the products and services with Islamic principles. Continue reading

What are the reasons India should legalize and encourage Islamic Banking and Finance?

Apart from all the ethical and theoretical reasons one may cite, the top three reasons are, according to me:

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  • It will enable India to bring in much needed investment from middle-eastern countries at very reasonable terms
  •   A large portion of the unbanked Muslim population will hopefully be successfully targeted by banks who focus on Islamic banking. Hopefully the RBI will manage to make the banks look into the banking and finance needs of small retail customers in India
  •  If what happened in non-Muslim countries like UK or Sri Lanka is any indication, this can flourish into a significant economy, which means creation of a lot of new jobs – most of them well paid skilled jobs

According to some sources, with 150 million Muslim population, and a rapidly growing economy despite economic slow-down everywhere else, India will be a hot destination for Islamic investments and finance companies. These sources say that the potential of the Indian market is no less than 1 trillion in Islamic banking and finance. Continue reading

India has enormous opportunity for Sharia-compliant investments – Gulf News

With nearly 200m Muslims, the country could expand sector

By Rushdi Siddiqui, Special to Gulf NewsPublished: 00:00 June 19, 2011

When you consider that there are nearly 200 million Muslims in India, it is surprising that one of the world’s fastest growing economies has little or no facilities for them to invest their money in a Sharia-compliant manner.

Indeed, the total size of 100 per cent Islamic funds registered for sale in India was a miniscule $3.1 million (Dh11.4 million) as of March 2011, according to Lipper, a Thomson Reuters company.

India has enormous opportunity for Sharia-compliant investments

India has enormous opportunity for Sharia-compliant investments

Not that India’s reluctance to embrace Islamic finance is unusual in non-Muslim countries, like so many other places, there is a hostility to the practice based on the incorrect belief that it is a political or religious movement, or that it propagates an ideology that is inconsistent with democratic values.


It is fair to say that the Islamic finance industry also shares some of the blame for this perception, it is not yet savvy or sophisticated enough in the realm of public relations and marketing.

But, actually, India is important for the growth of Islamic finance. The country has historical ties to the Gulf, and is not only part of the Bric group of nations (Brazil, Russia, India and China), but it is also categorised as a rapidly developing economy (RDE).

So India presents an obvious opportunity, but the question remains: is India ready for Islamic finance?

Key effect

The recent establishment of an Islamic finance institution in Kerala, with the backing of the local government, has at least gone some way to suggesting that it is. One of the key effects of this has been the revelation that Islamic finance is about business and not religion, it does not favour one religion over another. Islamic finance is “user agnostic”; its door is open to all.

In recognition of this, the local proponents and Indian stakeholders should perhaps think about rebranding Islamic finance.

Turkey has achieved this by renaming Islamic banking “participation banking”. This is an initiative that India could certainly consider.
Soon, as it happens, India will have “participation banking” at its doorstep — Turkey’s Bank Asya, an Islamic bank, announced in March its interest in establishing a representative office in India.

Fourteen of the countries that make up the G20 have some form of Islamic fin-ance, including India. The UK, for example, has been involved in Islamic finance since the early 1980s and it is still a well-functioning inclusive secular democracy.

A more technical question is: if India was to expand its level of Islamic banking, should this be a retail or wholesale approach?

A deposit-taking Islamic commercial bank, that is, retail, will present more challenges, as legislation, regulations, and mindset issues still need to addressed. Second, what is the number of bankable Muslims in India?

How many Islamic funds, with small minimum amounts, have been launched and available to the onshore “man on the street” since the BSE launched their Sharia index in 2010?

It is also worth mentioning that a number of financial scams have been perpetrated on this generally financially illiterate Muslim community, hence, new offerings are viewed with scepticism.

A wholesale approach implies fewer signs-offs from regulatory bodies, because it is not dealing with the public’s money. For example, in 2006, Bahrain-based Islamic investment bank, Gulf Finance House, embarked on the ambitious Energy City India, a $2 billion project in Maharashtra.

Other areas for consideration for India include Islamic trade finance funds (major bilateral trade with GCC) and Islamic venture capital (VC) funds working with technology parks in, say, the UAE for areas like alternative energy, health care, water and others.

But it does not mean non-bankable Indians would be excluded from Islamic fin-ance. Indeed, some of the recent developments with micro-finance in Andra Pradesh have not left the best impression with recipients and regulators.

I have said elsewhere, unlike micro-finance, which creates a creditor-debtor relationship and interest rates often becomes usurious, we should look at Islamic micro-funding, as an equity approach aligns the interests of the parties and prevents the debt trap.

The amounts to be disbursed would be the same, and the areas for funding will be Sharia-compliant, as micro-finance doesn’t typically involve financing the “sin” sector.

The funding would be for Muslims and non-Muslims, therefore building future customers. Obviously, vetting and monitoring costs are higher, but it should result in more focused investments.

Finally, if Islamic finance is involved in developing local infrastructure, financial enfranchisement and contributing to employment – as it no doubt would be – I imagine that the opposition to it on the part of chief ministers of Indian states would eventually fade away.

The writer is global head of Islamic Finance at Thomson Reuters. Opinions expressed are in his personal capacity.

India to be third largest domestic banking sector by 2050: PwC

According to a PriceWaterhouseCoopers report titled Banking In 2050, India could become the third largest banking sector by 2050 after China and US, leaving Japan, UK and Germany behind.

According to the report, “India has particularly strong long-term growth potential.”

Indian banking sector in general and the Reserve Bank of India were applauded post financial crisis for fiscal prudence.


Harsh Bisht, leader (Banking and Capital Markets), PwC India said, “Post downturn, Indian banks have become more efficient due to tighter credit assessment and disbursals, cost efficient model, weeded out non profitable and highly risky portfolios and increased the CASA substantially resulting in lower cost of funds for the bank.”


Indian banks have improved their cost to income ratio by 6 per cent on an average, he added.


India’s largest private sector bank, ICICI Bank improved its cost to income ratio from 53 per cent in 2007 to 38 per cent in 2010, owing to shift in strategy from aggressive growth to cost rationalisation. Continue reading

Tata Targets Gulf in India Shariah Stock Fund: Islamic Finance

Nov. 3 (Bloomberg) — Tata Group’s investment unit is seeking to attract about $100 million within three years to India’s first Shariah-compliant fund aimed at global investors, targeting equities in a country that lacks regulations for establishing an Islamic debt market.

The Tata Indian Shariah Equity Fund has $3 million after being set up in June to tap investment mainly from the Middle East, said Mumbai-based Tata Asset Management Ltd., which oversees $5 billion in stocks and bonds, in an e-mailed reply to questions yesterday.

Tata Targets Gulf in India Shariah Stock Fund: Islamic Finance

Tata Targets Gulf in India Shariah Stock Fund: Islamic Finance

India has no Islamic finance policies, restricting sales of Shariah-compliant bonds in a nation with 157 million Muslims, according to Paris-based BNP Paribas SA and Standard Chartered Plc. The nation’s benchmark Sensex stock index rallied 16.5 percent this year, compared with a 13.6 percent advance for MSCI Inc.’s emerging-market share index. Overseas investment in Indian equities climbed 86 percent this year to a record $26.1 billion as of Nov. 1.

“India remains a great story for most institutional investors globally,” Rohit Chawdhry, who helps manage $350 million of assets at Bahrain Islamic Bank, the Persian Gulf country’s second-largest Shariah-compliant lender, said in an e- mail Nov. 1. “An Indian sukuk would likely see a blow-out response if there is one, given that there is almost nothing in terms of external sovereign issuance from India.”

Malaysia’s Example

A 13-member panel of experts headed by Raghuram Rajan, a finance professor at the University of Chicago and former chief economist at the International Monetary Fund, recommended in April 2008 that India introduce banking that complies with the religion’s ban on interest to attract capital.

Prime Minister Manmohan Singh said last week during an official visit to Kuala Lumpur that he would ask the central bank to learn more about Islamic finance from Malaysia, the world’s biggest market for sukuk. “There have been, from time to time, demands that we should experiment with Islamic banking,” he said.

The Reserve Bank of India will conduct a study when the need arises, Deputy Governor Subir Gokarn told reporters in Mumbai yesterday. Gokarn said the central bank hasn’t received a formal request from the government on the proposal.

India’s southern state of Kerala’s plan to set up an Islamic investment company to sell India’s first sukuk was blocked by a provincial court in January after a petition was filed against it by Subramanian Swamy, whose Janata Party opposes the national Congress Party-led government, according to a Jan. 6 report on The Hindu newspaper’s website. The Kerala high court heard arguments from Swamy, a former member of the national parliament, against the plan yesterday, Press Trust of India reported.

Non-Bank Institutions

Several non-banking institutions in India offer financial products that adhere to Muslim tenets, Kuwait Finance House Research Ltd., owned by Kuwait Finance House KSC, said in an Oct. 26 report without specifying the services.

Funds are able to tailor products to comply with Shariah law by excluding investments in businesses involved in tobacco, liquor, pork and gambling that are prohibited. Islamic debt markets require changes in tax rules because they often base payments on the exchange of assets, given the religion’s ban on interest.

The Dow Jones Islamic Market World Index, a global gauge that tracks shares which meet Shariah law and has a market value of $12.7 trillion, rose 7.2 percent this year. The Dow Jones Global Index of stocks worldwide gained 7.8 percent.

Islamic Bond Sales

Global sales of sukuk fell 29 percent to $13.5 billion so far this year, from $19.1 billion in the same period of 2009, according to data compiled by Bloomberg.

Islamic bonds, which use asset returns instead of interest, returned 12.2 percent this year, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. Bonds in developing markets gained 16.9 percent, JPMorgan Chase & Co.’s EMBI Global Diversified Index shows.

The difference between the average yield for emerging- market sukuk and the London interbank offered rate has narrowed 22 basis points, or 0.22 percentage point, in the fourth quarter to 351 yesterday, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index.

The extra yield investors demand to hold Dubai’s government sukuk rather than Malaysia’s widened 21 basis points since Sept. 30 to 392, according to data compiled by Bloomberg. The yield on Malaysia’s 3.928 percent Islamic note due in June 2015 was little changed at 2.46 percent today, prices from Royal Bank of Scotland Group Plc show.

Similar Product

The Tata Select Equity Fund, a similar stock-investment product that’s restricted to domestic investors, returned 19.5 percent annually over the past 14 years, beating the Sensex’s 13 percent gain, according to the statement from Tata Asset. Tata Group is India’s largest industrial company.

Not all Shariah-compliant funds in India received a positive response from the market. HSBC Asset Management (India) Pvt. discontinued its HSBC Amanah India Shariah Fund in November 2009 because it didn’t attract sufficient demand a year after it was introduced, Vikramaditya, chief executive officer of the Indian investment unit of HSBC Holdings Plc who uses only one name, said in an e-mailed response to questions yesterday.

Pakistan, Thailand

Pakistan, which has the world’s second-biggest Muslim population totaling 175 million, plans to sell 80 billion rupees ($933 million) of sukuk this month and next, the central bank said on Oct. 29.

Hindus account for 80.5 percent of India’s 1.2 billion population, while Muslims make up 13.4 percent, according to the U.S. Central Intelligence Agency’s World Factbook.

Countries with smaller Muslim populations are taking steps to develop Islamic finance. Australia plans to amend laws to ensure products are taxed fairly, the national taxation board said on Oct. 13. South Africa, whose 737,000 Muslims account for 1.5 percent of its population, will forgo charging tax on three Islamic structures to allow home loans that meet Shariah principles, the country’s Treasury department said in August.

Thailand is considering issuing as much as 50 billion baht ($1.7 billion) in 2011, Dheerasak Suwannayos, president of the state-run Islamic Bank of Thailand, said in an interview in Kuala Lumpur on Oct. 25.

“The intentions are there, but you need the political will to do it,” Singapore-based Rafael Martinez Dalmau, head of portfolio management for BNP Paribas, said in an interview in Kuala Lumpur on Oct. 26. “I think each country will have to evolve at its own pace.”

–With assistance from Anurag Joshi and Anil Varma in Mumbai. Editors: Simon Harvey, Garfield Reynolds.

To contact the reporter on this story: Soraya Permatasari in Kuala Lumpur at [email protected]

To contact the editor responsible for this story: Sandy Hendry at [email protected]

Is Islamic Finance the new challenge to Wall Street?

I was in Kuala Lumpur in October attending the Global Islamic Finance Forum, organized by Bank Negara Malaysia and the Malaysian International Islamic Finance Centre. The whole glitterati of the Islamic world was here, and coincidentally, the HSBC Asia Board also held their meeting here, so it was also good time to catch up with all the Hong Kong good and great, including the incoming taipans at the Bank.

In the 1990s, Islamic finance was a fledgling fringe industry. But today, its size has grown from roughly US$150 billion to about US$1 trillion in size. This is of course still small relative to some of the largest global fund managers and universal banks, who manage more than US$1 trillion each. But the double-digit growth and potential size of the market cannot be ignored. Some pundits think that the market size will reach US$2 trillion within the next five years.

There are roughly 1.3 billion Muslims in the world, with 138 million in India and roughly 30 million in China. These are growing markets in terms of income and wealth. As the Muslim community seeks to invest in interest-free banking, Islamic funds have been growing in leaps and bounds. Today, there are roughly US$800 billion in Islamic banking funds, US$100 billion in the sukuk (or Islamic bond) market and another US$100 billion in takaful (Islamic insurance) and fund management business. Hong Kong, of course, introduced the Hang Seng Shariah Compliant China Index Fund in 2008 to attract Muslim investors. Continue reading

HSBC Amanah's Deputy CEO Says to Offer Islamic Finance in India, China

HSBC Holdings Plc, the largest bank in Europe, plans to offer Shariah-compliant services in India and China to tap economic growth after the countries issue regulations to develop their Islamic financial markets.

HSBC Amanah also plans to expand in Egypt and Oman, said Razi Fakih, the deputy chief executive officer of the bank’s Islamic unit. The lender, which has operations in 10 nations including Malaysia and Saudi Arabia, is seeking to increase bank branches globally to about 125 over the next two years from 100 at the end of 2010, he said.

“Our ability to expand in these markets depends on how the regulatory environment changes in those countries,” Fakih said in a telephone interview from London today. “Licensing to foreign banks is restrictive in certain markets. We would certainly like to see ourselves in the entire Middle East.”

HSBC is trying to strengthen its brand in a market that has attracted competitors such as Barclays Plc, Citigroup Inc. and Standard Chartered Plc to tap wealth from the world’s 1.6 billion Muslims. Global assets held by Shariah-compliant financial institutions may climb to $1.6 trillion in 2012 from about $1 trillion, the Kuala Lumpur-based Islamic Financial Services Board said in April.

Continue reading

HSBC Targets Branches: Mid East Roundup

HSBC’s Islamic Arm Targets 125 Branches by 2012.

HSBC Amanah, the Islamic arm of HSBC(HBC), plans to open 125 branches across the Middle East and Asia by the end of 2012, eyeing the rapid expansion in the Islamic finance industry which is worth $1 trillion, Dailystar reports.

Razi Fakih, HSBC Amanah’s deputy CEO said Islamic banking will grow at a 6% CAGR in the Middle East and Asia over the next five years. He further added that the next attractive markets will be China and India and HSBC is seeking to extend presence in countries like Egypt, Turkey, and Oman.

However, the lack of liquidity management tools and standardization in Asia and the Gulf pose challenges.

China and India to Get Qatar’s Additional LNG

Qatar, the world’s largest LNG exporter has identified two buyers for its additional capacity, Gulfbase reports, citing Qatar’s oil minister. The minister indicated that Qatar could export 7 million tonnes of LNG annually to China and about 5 million to India, from the originally planned exports of 5 million tonnes to China and 7.5 million to India. Continue reading

‘Interest-free finance has high investment opportunity in India’

Kochi: India can attract good investment from middle-eastern countries once the country accepts interest-free finance system, said Dr Mudassir Siddiqui, noted interest-free banking expert. He was speaking to media persons in Kochi, where he had come to attend the international seminar on Islamic economy.

Dr Siddiqui said that several institutions and individuals in the West Asian countries were in high hopes of getting investment opportunities in India which is moving forward as one of the biggest economic powers. India’s traditional relations with the Arab countries would help in choosing the country as a major centre of investments.

According to major international consultancies such as the McKenzie, investment surplus in the West Asian region is expected to be around $ 9 trillion by 2020. The investment surplus at present is around $ 1.5 trillion. The country can attract a considerable portion this huge investment potential by developing an appropriate policy and regulatory network. The regulations for an interest-free economic system can be formulated in such a way as not adversary to the current system. Continue reading