ADCB Islamic Banking named "Most Improved Islamic Bank in the UAE" at the Global Islamic Finance Awards 2011

Abu Dhabi, 27 December 2011: ADCB Islamic Banking was named the “Most Improved Islamic Bank in the UAE” by the Global Islamic Finance Awards (GIFA) committee at a highly prestigious ceremony held on 17 December 2011 in Muscat.

Awards were presented at the Oman Islamic Economic Forum (OIEF) bringing together leaders from around the globe, including keynote speaker Tun Abdullah Badawi, the former Prime Minister of Malaysia.

The award was presented to ADCB Islamic Banking by Tun Abdullah Badawi.Amr Al Menhali, Head of ADCB Islamic Banking, said: “We are honoured and delighted to receive “The most improved Islamic bank in the UAE” award for 2011.

This prominent award rightly recognises the leading position of ADCB and its success in raising the benchmark for Islamic banking in the region. ADCB Islamic Banking offers a complete suite of Shariah compliant products specifically designed to cater to the needs of consumers that are key to the health of the UAE economy.

This recognition is subsequent to the milestone ADCB Islamic Banking has achieved, which was acknowledged by the reputed worldwide Shariah governing body in an appreciation letter positioning ADCB Islamic Banking as a role model for Islamic Banks worldwide.”

The OIEF proudly assembles a diverse number of financial practitioners, academicians, business leaders and policy makers in the industry with the Ex-Prime Minister of Malaysia Tun Abdullah Haji Ahmad Badawi as the key note speaker.

The forum addressed issues including the regulatory challenges facing Islamic banking, the practice of socially responsible Islamic Finance, and the need for utilization of Islamic Banking as a tool for global economic reform.

The forum, endorsed by the Fatwa office of the Ministry of Awqaf and Religious Affairs has received support from an array of leading financial institutions from the GCC, Canada, UK, Luxembourg and Malaysia.

Benchmark a major step for Islamic finance

Last month, the world’s first Islamic interbank benchmark rate (IIBR) was launched. It was the result of a collaborative approach taken by many Islamic financial institutions, industry associations and Sharia scholars over the course of 24 months to address a decades-old industry challenge:

how to decouple Islamic finance from a conventional western pricing benchmark (Libor) when an “Islamic” alternative was not available. The objective was to support and preserve Islamic finance authenticity.

The IIBR is an interbank benchmark that offers a reliable and realistic standard to better measure the cost of funding for Islamic financial institutions. As contributed pricing for Sharia-compliant funding, it represents the DNA of an Islamic banking industry that is today focused on commercial banking over investment banking.

IIBR brought together more than 20 Islamic finance institutions to create a proprietary Islamic pricing benchmark. It is a major indication to the world that Islamic finance has come of age and can be seen as a sustainable and rapidly developing feature of global financial markets.

The benchmark is designed to be used to price a number of Islamic instruments including common overnight to short-term treasury investment and financing instruments such as murabaha, wakala and mudaraba, retail financing instruments such as property and car finance, and sukuk and other Sharia-compliant fixed-income instruments. It can also be used for the pricing and benchmarking of corporate finance and investment assets.

We expect the benchmark to grow organically as industry use and acceptance increase. As the industry gets used to the idea of its own proprietary benchmark and its scope becomes more global, we expect to see banks use the rate to price their interbank liquidity placements.

As that gains traction, banks will start to use it for their corporate and retail banking facilities. The rate has reached its full potential when we see investment banks providing syndicated Islamic financing (loans) and debt (sukuk) issuance using the rate.

Since the launch of IIBR, it has received much attention around the world for the positive step that it is.

Understandably though, the significance of IIBR and what it means for the Islamic finance industry, indeed the very position of Sharia-finance in Islam and the wider world, means that it provokes strong opinion and debate.

And we must address the critics if we are to achieve the full potential of this initiative. After all, these commentators are important additional stakeholders.

All collaborations start with open minds and transparent dialogue, and so here I hope to address some of the key points raised.

What is the difference between IIBR and Libor – the London interbank offered rate? Put simply, IIBR measures expected profit while conventional benchmarks such as Libor measure interest rates.

The IIBR question for contributors explicitly refers to the cost of raising Sharia-compliant funding and is therefore based on returns generated by Islamic assets.

The IIBR rates represent the aggregate risk profile of Islamic financial institutions, by way of their assets on the balance sheet, and the geographies in which they operate. This is important for two reasons.


On an economic level, now more than ever, conditions in Europe or the US do not necessarily reflect the conditions in the Middle East funding market, although there will inevitably be a connection as global financial markets are always intertwined.

How is IIBR representative and reflective of global Islamic finance treasury funding costs?

This is only a beginning. At present, we have a strong base in GCC countries, we have three major Malaysian banks and are in conversations with others, and we have started conversations with banks in Turkey, Pakistan and other jurisdictions.

How will IIBR address cross-border funding costs?

The precondition for cross-border funding is establishing local rates, and we are starting a dialogue with more countries with established Islamic banking industries. The more important point is that a transparent process or methodology is in place for price contributions, and its integrity is overseen by our benchmark committee with rules that will punish banks, including expulsion, that violate the agreement they have signed.

Why are only murabaha contribution rates used?

Murabaha is the predominant form of funding for Islamic banks. However, the IIBR is instrument-neutral as decided by the Islamic benchmark committee, and in the future, when other instruments such as wakala or mudaraba become more widespread, a higher proportion of contributions could be derived from other rates.

Is IIBR only for Islamic financial institutions?

IIBR, like Islamic finance, is for all people and institutions for all times. As an accurate and transparent measure of market activity, it is suitable for a variety of uses in the modern financial markets of the world. With IIBR, conventional banks will now have more confidence in their counterparty Islamic banks because their rates will be benchmarked and publicly available.

Treasury considers Islamic bonds

The National Treasury has asked banks for proposals about a government Islamic bond — known as Sukuk — in the local and international markets.

“There is a great interest in the Sukuk market and this is the first step towards meeting the growing appetite for government-backed Shariah compliant investments,” Lungisa Fuzile, director-general of the National Treasury, said in a statement on Tuesday.

The Treasury invited banking institutions to submit proposals for providing advisory services for the structuring and issuing of Sukuk.

This was in line with its intention to diversify its funding and investor base.Sukuk refers to a financial certificate that conforms to Muslim strictures on the charging or paying of interest.

Interested service providers should submit proposals by the close of business on December 21 2011.Shortlisted bidders would be informed by January 20 2012, the Treasury said.

Islamic banking in the United States

Now a flash back: Once upon a time in this land, there was this bank fancifully named Bank of the North. To be honest, I do not know nor have I researched the philosophy behind its establishment. All I can glean looking at existing or previous patterns in this land is that, it may have been founded to check-mate the burgeoning economic tentacles of another bank, named African Continental Bank (ACB) or of that other one known as Wema.

It was the days of healthy regional economic rivalry amongst the regions that made up Nigeria. ACB was for the east while Wema was and is still for the west. I do not know if present day Unity Bank replaced Bank of the North.


I know that Unity bank was the product of a tryst involving many fledgling banks of similar socio-political-cum economic hue – banks which could on their own, not meet the stringent recapitalization requirements of the banking reform days. I also know that the Bank of the North (BON) was for the north. BON had a beautiful logo ornamented with cowries and cereal, and some hard to decipher Arabic scribbling.

I have researched to confirm that it practiced a form of Islamic banking. At its apogee and great heights, Bank of the North ruled the financial landscape of northern Nigeria and beyond. And like everything that symbolized northern Nigeria or Hausa/Fulani/Islamic hegemony over the rest of the land, it used to be headquartered in Kaduna. It was from Kaduna, that it stretched its operational tentacles even into Onitsha and Port Harcourt where, as was foretold by its founders, it met the Niger at the Atlantic Ocean.

And that it was heavily patronized by the government of the north and most notable government and quasi government (state and federal) institutions including universities located in the north. At its peak, it gave out loans and financial assistance to those institutions and persons that patronized it. It charged interests, appropriately and handsomely with or without Islamic considerations. Continue reading

Gulf Islamic finance eyes single Sharia board

The Islamic finance industry in the Gulf is moving towards a centralized Sharia board as scholars from leading countries join a common United Arab Emirates entity, a leading Islamic scholar said.

The United Sharia Board, which began drawing scholars from local Islamic institutions two years ago, now has two members from Saudi Arabia and one scholar each from Kuwait and Qatar, Scholar Hussein Hamid Hassan said at the launch of a policy briefing on corporate governance in Islamic finance.

“We have almost one united sharia board for the Gulf,” he said. “I think within five to 10 years we will have one sharia board for everyone.”

Sharia scholars serving the United Sharia Board also represent individual bank Sharia boards, thereby transferring the Islamic rulings, or fatwas, issued by the centralized board to their individual institutions across borders.

While progress has been made, there are still differences in interpretations of Islamic law that is preventing a quicker adoption of a centralized Gulf board.

A unified Gulf-wide entity would boost corporate governance within the growing industry, said Nassar Saidi, executive director of Hawkamah, which issued 55 recommendations to Islamic financial institutions in its policy paper.

Mr. Saidi added that creating a centralized board is a first step but would need support from regulators to give enforce its fatwas.

The policy report, which was based on a survey of 22 Islamic institutions across the Middle East and North Africa, also determined that more should be done to limit the number of the same Sharia scholars serving on multiple boards.

“You shouldn’t have multiplicity which can create a conflict of interest,” he told reporters. “If you have well recognized scholars on one central board, that would help.”

Steps MFIs need to take for the poor in India

Fariduddin Chaudhari, Advisor to a Kuwait-based consultancy

Today, microfinance institutions (MFIs) finds itself on a sticky wicket when faced with the charge of levying high and opaque interest rates from borrowers, employment of goons to recover money from defaulters and of being responsible driving some borrowers to suicide. It appears that their latest strategy is to ask to just be allowed to coexist along with self-help groups (SHGs) and even moneylenders.

But this attitude misses the main point: that MFIs needs to reinvent itself to be able to stay as a hope for the poor. This article discusses a few important steps that need to be taken in this direction.
Banks must reduce their rates drastically: Banks lend to MFIs at around 12% while MFIs lent to borrowers at around 30% before the Andhra Pradesh ordinance and at about 24% after it.

As for administrative costs, these are much lower for banks and much higher for MFIs. For example, a bank may lend 100 crore to an MFI while the MFI will lend an average of 50,000 to no less than 20,000 borrowers; or 2,000 borrower groups if each group consists of 10 persons. It is, therefore, clear that the MFI has to work very hard to administer 20,000 or even 2,000 contracts.  Continue reading