Islamic finance – the lowdown on sharia-compliant money

Islamic products are available to regular savers, investors and homebuyers, but unlike stThe Islamic Bank of Britain is wholly operated in accordance with Islamic Sharia principles. Photograph: Dan Chung for the Guardian

Islamic finance – the lowdown on sharia-compliant money

Islamic finance – the lowdown on sharia-compliant money

The government has announced plans for Britain to issue a £ 200m Islamic bond in a bid to attract new money to London. The bond will be aimed at institutions, but there are Islamic finance products available to regular savers, investors and home buyers. Here us a guide to how sharia-compliant funds and mortgages work.

Why aren’t regular accounts sharia-compliant?

Central to Islamic finance is the fact that money itself has no intrinsic value; it is simply a medium of exchange. Each unit is 100% equal in value to another unit of the same denomination and you are not allowed to make a profit by exchanging cash with another person. A Muslim is not allowed to benefit from lending money or receiving money from someone.

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This means that earning interest (riba) is not allowed – whether you are an individual or a bank. To comply with these rules, interest is not paid on Islamic savings or current accounts, or charged on Islamic mortgages.

How do sharia-complaint banking products work?

There are several ways that banks can structure accounts so that they are sharia-compliant.

Ijara : works as a leasing arrangement: the bank buys something for a customer and then leases it back to them. Different forms of leasing are permissible, including those where part of the instalment payment goes toward the final purchase. This might be used to help you buy a car or other item, or to help a business buy equipment.

Murabaha : works by the bank supplying goods for resale to the customer at a price that includes a margin above the costs, and allows them to repay in installments. This might be used to provide a mortgage on a property. The property is registered to the buyer from the start.

Musharaka : is a joint venture in which the customer and bank contribute funding to an investment or purchase and agree to share the returns (as well as the risks) in proportions agreed in advance.

Wakala : is an agreement that the bank will work as the individual’s agent. If a saver enters into this type of agreement, the bank can use their cash to invest in sharia-compliant trading activities to generate a target profit for them.

How do the banks make money?

Banks can profit from the buying and selling of approved goods and services. The principal means of Islamic finance are based on trading, and it is essential that risk be involved in any trading activity, so banks and financial institutions will trade in sharia-compliant investments with the money deposited by customers, sharing the risks and the profits between them.

Islamic banks are structured so that they retain a clearly differentiated status between shareholders’ capital and clients’ deposits in order to make sure profits are shared correctly.

Although they cannot charge interest, the banks can profit from helping customers to purchase a property using a ijara or murabaha scheme. With an ijara scheme the bank makes money by charging the customer rent; with a murabaha scheme, a price is agreed at the outset which is more than the market value. This profit is deemed to be a reward for the risk that is assumed by the bank.

There are firm laws governing the types of businesses with which the banks can trade. There should be absolutely no investment in unsuitable businesses, including those involved with armaments, pork, tobacco, drugs, alcohol or pornography.

It’s similar to ethical banking, then?

There is some common ground. Some of the tenets of Islamic banking will appeal to anyone, Muslim or otherwise, who agrees with the underlying principles of equitable distribution for everyone, the ideals of fair trading, spending of wealth judiciously, and the well-being of the community as a whole. In the wake of the banking crisis, savers may also be drawn by Islamic banking’s approach to investment: they can only invest in real assets, not financial instruments that are based on speculation.

The Move Your Money campaign rates one bank, the Islamic Bank of Britain, highly for ethics and customer service, but its overall score is diminished by a lack of women on its board and high directors’ pay, among other things.

How does it work if I take out a mortgage?

Islamic mortgages, or house purchase plans (HPPs) can involve ijara, where you are technically leasing the property from the bank, or diminishing Musharaka, where you buy in partnership with the bank and your monthly repayments gradually buy it out. As with a standard mortgage you will usually need a deposit, and you will need to have the house valued before you enter into the arrangement.

You will also be able to fix the amount you pay each month if you wish – for example, the Islamic Bank of Britain offers a fixed rental rate of 3.79% to home buyers with at least 35% to put down as a deposit, and 4.19% for those with a 20% deposit – both rates are fixed until 31 December 2015.

The bank also offers a buy-to-let house purchase plan.

How does it work if I open a savings account?

Instead of being offered an interest rate you will be offered a target profit, which the bank will try and make for you by investing your money in complaints investments (this might include homes bought through the bank’s Islamic mortgage scheme). The profit is subject to tax, just like interest on standard savings and current accounts. Because there is an element of risk you need to agree that you are happy to make a loss.

As with standard savings accounts, you can choose for a fixed-term deal or an easy-access account. The target rates on offer are along the lines of those elsewhere in the savings market, and sometimes better – currently, the Islamic Bank of Britain is offering a table-topping 2.32% on a two-year savings bond, according to Money facts.

Is my money safe?

If the bank is covered by the Financial Services Compensation Scheme (FSCS), up to £85,000 held on deposit with it will be protected if things go wrong. Check that it is before you hand over any money. And deals they don’t charge interest.

The Global Islamic Economy Summit announces title sponsors

Thomson Reuters and the Dubai Chamber of Commerce & Industry, the organisers of the upcoming ‘Global Islamic Economy Summit’ (GIES), announced their partnership with ADIB and Dubai Islamic Bank, who are taking on the role of Title Sponsors of the event.

The Global Islamic Economy Summit announces title sponsors

The Global Islamic Economy Summit announces title sponsors

In addition, the leading Nutrition, Health and Wellness company, Nestlé Middle East, signs up as Diamond Sponsor, while Emirates NBD, Qatar First Bank and the Global University of Islamic Finance (INCEIF) have also signed on as Gold Sponsors, while the Dubai Multi Commodities Centre (DMCC), Afridi & Angell Legal Consultants, Société Générale and MasterCard have signed on as Silver Sponsors.
GIES is held under the patronage of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai. While in line with Dubai’s Islamic Economy Strategy announced by His Highness on October 5, the conference also seeks to addresses the challenges and opportunities the industry faces and its contribution to the global economy.
Russell Haworth, Managing Director – Middle East & North Africa, Thomson Reuters, said, “The calibre of sponsors supporting GIES is testament to the local and international interest in the opportunities that the Islamic Economy presents. From leading local, regional and Islamic banks that aspire to become international players, to a European bank that sees a huge opportunity in this sector, to a global food producer, education, consumer credit and legal services providers and the largest free zone in the UAE, our sponsors will be invaluable to the success of GIES.”
Tirad Al Mahmoud, CEO at A DIB said, “At A DIB, we hold an unwavering commitment to playing a role in the development of the Islamic finance industry. We are very excited to be lead supporters for The Global Islamic Economy Summit – an ideal platform to share our core values as an expanding Islamic financial services institution with the wider community in the UAE, region and beyond.”
GIES, Dr Adnan Chilwan, Chief Executive Officer of DIB said. “Being the first Islamic bank in the world, Dubai Islamic Bank is proud to play its role in the Global Islamic Economy Summit. As pioneers of Islamic banking, DIB has been at the forefront of developments in the Islamic financial sector over the past four decades. We have consistently added value to the franchise and contributed to the growth and development of all sectors of the UAE economy. Our vision of becoming the most progressive financial institution in the world is fully in line with the vision of the leadership of this great country. Today, with our rich heritage, unrivalled expertise and tradition of innovation, we are perfectly positioned to play a key role in Dubai becoming the global capital of Islamic economy.”
GIES aims to initiate critical dialogue on the development of the integrated sectors of the Islamic Economy, covering Islamic financial services, Halal food, Halal Lifestyle, Halal Travel, SME Development and Islamic Economy Infrastructure such as standardization and research.
Yves Manghardt, Chairman and CEO Nestle Middle East FZE, commented on the company’s role as a sponsor: “As the leading Nutrition Health and Wellness company, Nestlé is proud to be a partner of the Global Islamic Economy Summit. We have been pioneers in providing a wide range of Halal food options for Muslim consumers around the world, and we are delighted to be part of Dubai’s initiatives to highlight the importance of the Halal sector as a key component of the Islamic economy and culture.”
The Summit will also feature ground-breaking market studies and other announcements such as the winners of the ‘Islamic Economy Award’ which recognises a mix of regional and global leaders from 14 Islamic economy sectors.
GIES will take place on 25th – 26th November, 2013 at Madinat Jumeirah in Dubai. GIES will gather leading thinkers, policy makers and stakeholders from around the world to lead a discussion on the future of the Islamic economy.

Islamic, Asian Banks Agree To Funding For Pakistan Wind Power

The Islamic Development Bank and the Asian Development Bank agreed to a $133 million financing plan to develop two wind projects in Pakistan as the nation seeks new renewable sources to overcome power shortages.

Pakistan’s Fauji Foundation, set up as a charitable trust for former servicemen, and the nation’s Tapal Group are backing the projects totaling 100 megawatts, according to a statement on the Islamic Development Bank website.

Pakistani Prime Minister Yousuf Raza Gilani said March 6 the nation has “enormous potential” for wind farms, solar power, geothermal and biofuel energy. Pakistan needs to diversify power sources away from oil and gas to overcome blackouts that beset the country restricting its growth and triggering protests in some cities this month. The gap between power demand and supply surged to a record 7,500 megawatts on May 10, the Geo television channel reported.

Islamic, Asian banks agree to funding for Pakistan wind power


National Bank of Pakistan, Faysal Bank Ltd., United Bank Ltd., Allied Bank Ltd. (ABL) and Meezan Bank Ltd. also participated in the long-term lease financing for the parks in Sindh province, southeastern Pakistan, according to the statement. The finance is an Ijara facility, an Islamic finance structure, according to the statement.

Pakistan received private sector offers to build 1,500 megawatts of renewable power, according the country’s Alternative Energy Development Board. A 150-megawatt project in Jhampir in Sindh is already under construction and about 400 megawatts of projects will start this year, according to the government agency website. The nation has about 900 megawatts of wind under construction or with financing agreed upon and 6 megawatts operating, according to Bloomberg New Energy Finance, the London-based industry analyst.


Kuwait Emir Sponsors the Celebration Of The Official Launch of Warba Bank

Under the patronage and attendance of His Highness the Emir Sheikh Sabah Al Ahmed Al Jaber Al Sabah, Warba Bank celebrated yesterday its official launch in a grand ceremony that took place at Salwa Sabah Al Ahmed Ballroom. The bank started its operations during the first quarter of 2012, with the opening of four branches.


Under the patronage and attendance of His Highness the Emir Sheikh Sabah Al Ahmed Al Jaber Al Sabah, Warba Bank celebrated yesterday its official launch in a grand ceremony that took place at Salwa Sabah Al Ahmed Ballroom. The bank started its operations during the first quarter of 2012, with the opening of four branches.


The ceremony also witnessed the attendance of His Highness the Crown Prince Sheikh Nawaf Al-Ahmed Al Jaber Al-Sabah, Parliament Speaker Ahmed Abdulaziz Al Saadoun, Prime Minister Jaber Al Mubarak Al Hamad Al Sabah, as well as several Ministers, Sheikhs and VIP guests.

Kuwait Emir Sponsors the Celebration Of The Official Launch of Warba Bank


The ceremony commenced with the National Anthem, followed by a recitation of the Holy Quran. Warba Bank came into existence with the issuance of an Emiri decree and is registered in the Islamic Banks’ register of the Central Bank of Kuwait since April 5, 2010. The government, represented by the Kuwait Investment Authority (KIA), owns 24% of the bank’s total capital. The remaining 76% has been granted to the entire Kuwaiti population, with 684 shares per individual, subscribed and paid by the government. The authorized share capital of Warba Bank is KD 100 million.


The idea of launching the bank reflects the cooperation between the legislative and executive authorities, as the decision of establishing the bank came by a Parliament initiative that was endorsed by the government. Such a national project of economic significance serves the target of turning Kuwait into a financial and commercial hub, and accomplishes several national goals towards pursuing continuous development in Kuwait.


During the event, narrator and actor Jassim Al Nabhan introduced the audience to the story of the bank’s formation and the stages of its establishment as a Kuwaiti shareholding company. The bank is marked to be the first of its kind on a worldwide scale since the Kuwaiti government pioneered in establishing a bank for the nationals to meet their economic and financial needs while providing financial stability for the coming generations.


Concluding the event, His Highness the Amir received a memorial shield presented by the Chairman and Managing Director of Warba Bank, Jassar Dakheel Al Jassar.


In the first quarter of 2012, Warba Bank successfully opened four branches in Hawalli, Al Qibla, Salmiya, and Sharq, in addition to special segregated branch facilities for ladies, given the importance of this segment. The openings came in line with the ambitious strategy of the banking group to reach the biggest segment of clients in different areas in Kuwait. The bank also plans to open one more branch before the end of 2012.


Warba Bank commits to offering the best e-services and the latest technological solutions given its cooperation with specialized global technological companies. At the retail segment, the bank offers the opening of several types of accounts, financing, and presents various banking cards including the ATM, credit cards and prepaid cards, in addition to offering financial solutions for its clients. At the wholesale segment, the bank leads a fully operational corporate and investment banking solution service for its clients. Warba Bank offers Sharia-compliant banking products and services.


About Warba Bank


Warba Bank is an Islamic bank established by virtue of an Amiri Decree, and was officially registered in the Central Bank of Kuwait’s list of Islamic banks on April 5th, 2010. The State of Kuwait, represented by Kuwait Investment Authority (KIA), owns 24% of the bank’s shares while the remaining 76% of shares, fully subscribed by the government, have been equally allocated to all Kuwaiti nationals.





Islamic banks advised to distribute profit

Islamic banks to distribute the profit among shareholders and depositors alike and on the basis of Islamic principle of justice.

Speakers at the 1st Islamic Finance Expo and Conference said depositors hand over their savings to Islamic banks and it was their duty to give a fair return to depositors on their saving.

They advised Islamic banks to simplify housing loans to attract people who want to buy houses on the basis of Shariah financing. They warned the banks to avoid using ‘haram funds’ (forbidden money) for Islamic banking transactions. Forbidden funds cannot be converted into halal (permissible) funds through Islamic banking, they observed. Publicity Channel, State Bank of Pakistan (SBP) and Ernst and Young organized the event at Karachi Expo Centre on Saturday.

Islamic banking expert and Shariah advisor Mufti Rafi Usmaninoted said rate of return by the Islamic banks should be equal to inflation rate so that the value of their savings should not eroded.

He asked Islamic banks to simplify the procedures for housing loans, as the current process was very complicated. We are receiving scores of complaints as people are facing hardship in obtaining housing loans, he added.

Mufti Usmani said government should take steps to eliminate interest bearing banking system in the country and also advised business community to come towards Islamic banking. He lauded the role of SBP for the growth of Islamic banking in Pakistan.

Islamic banks advised to distribute profit

Vice Chancellor Ripha International University Islamabad, Dr Anis Ahmad suggested Islamic banks to give equal return to shareholders and depositors. It should be based on the principle of justice, he noted. He warned Islamic banks not to use illegal funds in Shariah banking as this money could not be used in the Additional director Islamic Banking Department, SBP Zulfiqar Ali Khokhhar said Islamic banking industry was growing an average rate of 30 percent since last 12 years. He said the share of Islamic banking in overall banking industry in Pakistan would rise from 8 percent to 12 percent in next two years.

CEO of Bank Islami, Hasan A Bilgrami said at least one Islamic bank would make its position among top five in Pakistan in next 5 to 10 years. My bank would double its branch network from 100 in next two years, he noted.

Chairman NBFI and Modaraba Association of Pakistan, Basheer Chowdhry said modarabas have maintained their profitability, assets and equity base despite liquidity crunch after global economic meltdown. He said 11 out of 26 modarabas have declared cash dividends last year ranging between 2 to 73 percent.


Islamic Bank of Britain's Sharia Supervisory Committee host UK's first 'Islamic Finance Question Time'

Islamic Bank of Britain plc ( IBB ), ( last week held an exclusive event, entitled Islamic Finance Question Time. The event, held on 23rdApril 2012, was an open, public Q&A session hosted by the Bank’s Sharia Scholars. Islamic Finance Question Time is the first event of its kind, and the only time a UK Islamic bank has given public access to the Sharia Scholars that form its Sharia Supervisory Committee (SSC).


Nizam Muhammed Saleh Yaqoobi, and Mufti Abdul Qadir Barkatulla. The SSC welcomed questions from the public about Islamic Finance in order to facilitate a lively debate. The aim of the event was to demystify Islamic finance and provide an insight into how it offers a faith-based alternative to conventional finance and banking.

Commenting on the event, Chairman of the IBB SSC, Sheikh Dr Abdul Sattar Abu Ghuddah said, “Islamic finance is as old as the religion of Islam itself. However, there is still a lot of misunderstanding around how it works and the need for Muslims to manage their finances in Sharia compliant manner. The IBB SSC hopes the Islamic Finance Question Time event has shed some light on the matter and gone some way to encouraging the further take-up of Sharia Finance amongst the Muslim community.”

Samir Alamad, Senior Manager, Sharia Compliance at IBB who works closely with the IBB SSC on a day to day basis, also commented, “The feedback from attendees of Islamic Finance Question Time has been very positive. The public welcomed the opportunity to engage with the IBB SSC so openly. The event is the first time a UK Islamic bank has given open access to its SSC, and this reflects the open and transparent way the Bank works with its customers.”

Over 150 guests attended the event, held at the Bloomsbury Hotel in London. Over 10 questions were put to the panel leading to a debate lasting over 1.5 hours. Of these questions, the following generated a lively and informed discussion amongst the panel and their guests:

Q1 Why don’t you use the rental market rate for your Home Purchase Plan product?

Islamic banks use BBR or LIBOR to price their products as these are the most accurate, widely accepted and consistent benchmarks for financing. This allows Islamic banks to meet the important Sharia criteria of avoiding uncertainty. If rental rates were to be used as a benchmark instead, there would be too much variation. Not only would this go against the Sharia it would also be more costly for the customer. Rental rates fluctuate across a wide spectrum depending on location, condition of the property and other aspects, e.g. rent charged for a property in London would be three or four times more expensive than a similar property in the North. Hence, the Islamic bank would end up offering many various rental rates which would not be practical. The customer would also be disadvantaged by having to pay more if the rental rate was to be used as a benchmark.

Importantly, basing the rental rates of HPPs on benchmarks such as LIBOR or BBR does not affect the actual contracts that the product is based on. The rent or lease agreement are not rendered Haram, or not compliant with Sharia. Established benchmarks such as BBR and LIBOR therefore play an important role. They allow the Bank to meet the Sharia requirements for a benchmark that is widely accepted, consistent, transparent and reliable which in turns eliminates any uncertainty around pricing.

An Islamic benchmark is currently being developed and this is a great step forward for the industry. Once established it will eliminate the confusion that exists over the use of BBR or LIBOR, as explained above.




Q2 Is it permissible under the Sharia to quote a profit rate for Fixed Term Deposit savings accounts?

It is important to clarify that this Sharia compliant savings product(s) is called ‘Fixed Term’ and not ‘fixed return’. It is usually offered under the Islamic principle of Wakala (an agency agreement). With this product, the Islamic bank provides an expected profit rate over a set period of time as a ‘target’ based on the investment activity it will undertake with the deposits. The ‘Fixed’ element relates to the length of time the bank will undertake the investment activity for the customer. For example, two years for the Two Year Fixed Term Deposit Account.

These savings products do not offer a fixed return, in the same way that conventional banks that pay interest, do. Under Sharia, the bank cannot guarantee a rate of return, because with investment there is always an element of risk.

However, Islamic banks mitigate this risk for the customer in many ways, so that the customer’s deposits and return do not suffer. Essentially, the bank monitors the investment activity, and its performance, very closely. If, at any time, it looks likely that the customer’s return may be less than the expected profit rate the bank will contact the client and offer them the option to close the account and take back the full deposit amount and the profit accrued up to that date. Alternatively, the customer can choose to carry on till the end of the term on the lower expected profit rate from that point.

This process is all in accordance with Sharia which encourages trade, and forbids Riba. Sharia also mandates that risk is part of all transactions and that these risks are managed responsibly to ensure the best possible outcome for all parties.

IBB is the UK’s only wholly Sharia compliant retail bank in the UK. It was formed in 2004 and has attracted over 50, 000 customers. The Bank offers the largest range of Sharia compliant retail financial products in the UK and these include current, savings and business banking accounts, Home Purchase Plans and Buy to Let Purchase Plans. IBB also works with carefully selected partners to offer Sharia compliant wealth management products and services.

In order to guarantee that the products and services from IBB are genuinely Sharia compliant, IBB has in place a panel of respected Sharia Scholars, called the Sharia Supervisory Committee (SSC). Their work is supported by a dedicated a Sharia Compliance Officer (SCO). Both the SCO and the SSC are trained experts in the interpretation of Islamic law and its application within modern day Islamic financial institutions. They both review every product and aspect of IBB ‘s business operations to ensure that Sharia compliance is always maintained.

About Islamic Bank of Britain
Islamic Bank of Britain plc (Bank) has pioneered Sharia compliant retail banking in the UK and has launched a wide range of products, including the Home Purchase Plan (the halal mortgage alternative) Current Accounts and Savings Accounts. The Bank was also the first to introduce Sharia compliant business banking to the UK, and now offers a wide range of institutional and business banking products and services, including Commercial Property Finance.

Several of the Bank’s products remain unique in the UK retail market.

The Bank is authorised and regulated by the Financial Services Authority and is a member of Financial Services Compensation Scheme. All products offered by the Bank are fully approved by the Bank’s Sharia Supervisory Committee (SSC).

Sharia compliant banking operates without the use of interest. The products that are offered are structured in a different way to those provided by conventional banks

Whilst the Bank offers products and services that are designed in accordance with Sharia principles, it is an inclusive Bank and welcomes customers of all faiths.

Interviews with Islamic Bank of Britain are available on request.


Jordan Islamic Bank Co PLC : Distributing cash Dividends by 15 % and 25%bonus shares

Jordan Islamic bank (JIB) achieved net profits before tax reached JD 39.7 million at end of financial year 2011 compared to JD 40.7 million for the year 2010 whereas its net profits after tax reached  JD28.3 million at end of 2011 .

H.E. Mr. Adnan Ahmad Yousif,  Chairman of the Board of Directors of Jordan Islamic Bank stated that the Board approved the financial statements and recommended to be presented in the General Assembly  ordinary meeting that will be held on 25/4/2012 by distributing cash dividends to shareholders by15 % of the bank’s capital. The Extraordinary General Assembly recommended to increase the bank’s capital from  JD100 million / share to JD 125 million / share by distributing bonus shares by 25%  after amending the articles of association , the company’s internal system and completing the official  approvals from Ministry of Industry and Trade and Financial Securities Commission.

Yousif added that despite the crises that global economy and surrounding area witness and their negative impacts on the national economy , Jordan Islamic Bank continued its mission in Islamic banking, achieving pleasing successes by  getting many credit ratings and global prizes which indicate Jordan Islamic bank’s strength, flexibility and its ability to confront the difficult and fluctuated political, financial situations worldwide. In addition, they show the management’s ability to implement a package of banking policies and Islamic financial solutions that keep abreast of the developments that Islamic banking industry witnesses in accordance with sharia principles.

Concerning the most prominent financial indicators of JIB ,Mr. Musa Shihadeh,  Vice Chairman& General Manager of JIB, said the bank was able to strengthen its position in the Jordanian banking sector through the obvious growth reflected in its financial indicators till 31/12/2011. The total clients’ deposits reached at end 2011 JD 2.635 billion compared to JD 2.344 billion in 2010  with an increase of JD 291 million by a growth of 12.4%. Thus, this indicates the extent to which clients are confident of Jordan Islamic bank in various activities offered in accordance with the provisions of Islamic Sharia.

The bank runs money in specified investment, investment portfolio and investment by proxy that reach around  JD 252 million. Shihadeh added that clients’ deposits with the managed accounts added to (specified investment accounts, Muqarada Bonds, investment by proxy accounts) reached at end 2011about JD 2.86 billion compared to JD 2.59 billion at end 2010 .

Shihadeh indicated that the increase in finance and investment at end 2011 reached about JD 87 million to become about JD 1.550 billion compared to JD 1.463 billion as at end of 2010 and with a growth of 6%,  asserting  the development of  the bank’s activities in the various investment and financing activities.

The total assets at the end of 2011 reached about  JD 2.898 billion compared to JD 2.604 billion as at the end of 2010 with an increase reaching JD 294 million and with a growth of 11.3 %.

The total of the bank’s balance sheet including the managed accounts ( specified investment accounts, Muqarada bonds, investment by proxy accounts) reached as at the end of 2011 about JD 3.150 billion compared to JD 2.881 billion.

Shihadeh added that Joint investment profits before distribution reached about JD 110 million, the general percentage for distributing profits to JD accounts reached 3.35% and in foreign currencies 0.69% .

Capital adequacy ratio (CAR) reached at the end of 2011 about 24. 48% compared to about 21.57% at the end of 2010,according to  capital adequacy standard of Islamic banks issued by Central Bank of Jordan(CBJ)  based on the standard issued by Islamic Financial Services Board ( IFSB)

Shihadeh stated that Shareholders’ equity at end 2011 reached about JD206.9 million compared to JD193.6 million at end of 2010 and with a growth of 6.9%. The rate of return on average shareholders’ equity before tax reached 19.8% and after tax 14.2%. The rate of return on paid up capital reached 28.3%.

Shihadeh added that the Bank continues to accomplish further development and updating in the field of banking techniques, most notably: Implementation of the new banking system in more branches and cash offices in parallel with the banking system being used by the Bank . However, the new banking system has been applied in 33 branches and 7 cash offices up till now , in addition to Install and operate newAutomated Teller Machines (ATM) whose numbers  reached 108 and  expand in providing Short Messages Services (SMS) and the banking services provided via internet (I-Banking).

It is worth mentioning that the share of our bank to the total assets of banks working in Jordan at the end of 2011 reached 8.4%, to the total of  other banks’ saving schemes 11.6%, and to the balances of finance and investment for other banks reached 11.2%.

Meezan Bank to provide financing for `Dell' laptop computers

KARACHI: Meezan Bank, Pakistan’s first and largest Islamic bank, has joined hands with M/s. Unique Technologies for financing of `Dell’ brand of laptop computers.

A statement here on Monday said that this will be through Meezan Bank’s Laptop financing product- Laptop Ease.

It said that in this regard an MOU was signed by Arif ul Islam, COO of Meezan Bank and Asif Bukhari, CEO of Unique Technology here at Meezan Bank Head Office.

Shahzad Aslam Khan, Country Head Dell and Naveed Siraj, Country Head Intel was also present on the occasion.

The statement pointed out that Laptop Ease is a Riba Free financing product based on the concept of `Musawamah’ whereby Meezan Bank provides financing for purchase of laptops at easy instalments payable over 3 to 24 months.

After signing of this agreement, Meezan Bank will also provide financing for Dell laptops.

Muhammad Raza, Head of Consumer Banking and Marketing at Meezan Bank said that the Laptop Ease product was launched in April last year.

Turkey to overcome secular qualms with Islamic bond

Turkey’s government plans its first-ever issue of Islamic bonds this year, overcoming sensitivities about Islamic finance in the secular republic as it seeks to tap a rich pool of investors flush with oil money.

A sovereign sukuk issue from an economy regarded as one of the most progressive and successful in the Muslim world would signal intent on Turkey’s part to play a bigger role in Islamic finance. The size of the global sukuk market is estimated at more than $100 billion.

“It will be like ringing a bell and attracting all the attention,” said Murat Cetinkaya, deputy chief executive for treasury at Kuveyt Turk, an Islamic bank that has been a trend-setter for corporate sukuk issues in Turkey.

“Other issuances will follow the sovereign and Turkey will be on the agenda in this market constantly…as a frequent issuer.”

Despite espousing Islamic values, Prime Minister Tayyip Erdogan’s government shied away from taking the plunge with a sukuk issue during its first decade in power, out of fear of giving ammunition to critics who accuse the ruling AK Party of seeking to roll back state secularism by stealth.

“For a few billion dollars of funding there could be negative results in domestic politics,” said a deputy chief executive at a leading Turkish bank, who declined to be named because of the political sensitivity of the subject.

In 2008, the Supreme Court came close to shutting down Erdogan’s AK Party after ruling it was a centre of Islamist activity. But since then, the government has won the upper hand over old foes in the military and judiciary.

Few Turks question the AK Party’s economic management, and having overseen a near tripling in per capita income, the party was re-elected for a third term in office last June.

Moreover, even borrowers outside the Islamic world have entered the sukuk market in the last few years, giving less reason for Turkey to hold back.

“Now the sukuk has become an instrument that even Germany and France are using,” the banker said. “And in domestic politics, Erdogan is much stronger.”

So there was hardly a murmur of dissent when Deputy Prime Minister Ali Babacan, who oversees the economy, announced last month that the government planned to issue a sovereign sukuk this year, using legislation already in place.

“Turkey could very easily issue a couple of billion dollars worth of sukuk. It will probably issue $500 million or $1 billion at first and see how it goes,” said Osman Akyuz, secretary general of the Participation Banks’ Association of Turkey.

“An issuance by the Treasury would provide depth to the instrument and it will be sold with confidence.”

Royal Bank of Scotland economist Timothy Ash, a Turkey watcher, was also upbeat. “The market is potentially big – guess the sovereign could easily raise several billion.”

Islamic finance bans the use of interest, so theoretically, investors in a sukuk acquire partial ownership of an asset and share in its returns rather than receiving a stream of coupon payments.

By any other name

Although the sukuk market is tiny compared to the trillions of dollars of conventional international bond issuance, sukuk have been a relatively stable source of funding during the global financial crisis because of their conservative Islamic investor base.

Because of secular sensitivities, Islamic banks are called “participation banks” in Turkey and sukuk are referred to as “participation certificates”.

The country has used Islamic finance methods since the late 1980s through private financial institutions that were recognized as participation banks in 2006. There are four participation banks now operating in Turkey: Albaraka Turk , Bank Asya, Kuveyt Turk and Turkiye Finans. Kuveyt Turk, a unit of Kuwait Finance House, issued the country’s first sukuk in 2010.

Last October, following legislative changes to accommodate sharia-compliant transactions, Kuveyt Turk issued another sukuk for $350 million, and the strong demand demonstrated Turkey’s potential to become a major fresh source of Islamic bonds for investors keen to diversify their portfolios.

Albaraka Turk, the Turkish unit of Bahrain’s Albaraka Banking Group, and Bank Asya have formulated plans for sukuk issues of as much as $500 million, but have so far held back because of weak market sentiment globally due to the European debt crisis.

Despite that, the Turkish economy’s buoyancy, which produced growth of over 8 percent last year, and high yields compared to other emerging markets have increased investor appetite for Turkish assets, including sovereign debt issues.

Possible prop for bridge project

Ratings agency Fitch said last month that plans by sovereign borrowers outside the Middle East and other largely Islamic regions to tap the sukuk market could meet pent-up demand from Islamic institutional investors and banks to diversify their bond holdings.

That is good news for Turkey as it needs backing for huge infrastructure projects, having run into difficulties due to an international financing crunch. The government was forced to cancel a tender in January for the North Marmara Motorway Project, which involves a highway looping north of Istanbul and includes construction of a third bridge across the Bosphorus strait dividing Turkey’s European and Asian sides.

In April, the government will launch a fresh tender, and some bankers see the sukuk market providing a possible solution to the financing problem.

“Turkey needs investments and the sovereign sukuk could be used for financing of some projects, especially the third Bosphorus Bridge and highway projects,” said Akyuz of the Participation Banks’ Association.

Not only could a sukuk be specifically designed for the project, according to Is Investment Strategist Ugur Kucuk, it would also pull in investors who want to avoid international capital market volatility.

“A sovereign sukuk issue which is indexed to revenues to one of the Bosphorus bridges, or to some highway revenues, could be both attractive for investors and for the Turkish Treasury doing its first issue,” said Kucuk.



Sharjah Islamic Bank's website wins Best Structure Award

Sharjah Islamic Bank has won recently the ‘Best Structure Award’ under the Islamic banks category and received a Certificate of Excellence by Pan Arab Web Awards 2012.

Pan Arab Web Awards was created to recognize excellence in web design, development and web ownership skills to showcase their creativity in a competition for the best website in the Pan Arab Region.

Sharjah Islamic Bank had been entered into the competition with many prominent banks from the region including Kuwait, Egypt, Jordan, Bahrain, Lebanon and Oman. The banks hope their participation will open up a gateway to the global banking community, and allow them to market their services globally and thus foster cooperation with international banks, increase employees’ knowledge and work capacity as well as build greater liaison with customers

Head of Retail Banking Group Jassem Al Bloushi said: “We are honoured to receive this award, which reflects the banks positive approach of keeping abreast of developments in technology aimed to project and promote our services to our clients, and ensuring we reach a wider audience. Development through technology is the future and businesses today are mainly conducted through computers and websites. Therefore we take our website very seriously continually updating it with latest information of our services and have structured it so it’s easy to access”.

He also said that winning the award has many benefits, the main one being that it will enhance the reputation of the bank and enable it to market its services to a more international arena.

The Competition is part of Pan Arab Web Awards Academy which is in association with AYNA, MICROSOFT, BSA and MSN and their aim is to promote banks and financial institution’s websites along with improving creativity in web design and web development in constructing a banking e-world that is easily accessible and delivers banking and financial services.

The competition aims to create a global proactive banking community that encourages communication and interaction in the banking finance sectors as well as providing advanced and latest data along with services to meet customers’ needs.

Sharjah Islamic Bank has been going from strength to strength; it was awarded the Sharjah Economic Excellence Award 2008 for the finance sector of large enterprises. In the same year it was awarded the Mohammed bin Rashid Al Maktoum Business Award organized by the Dubai Chamber of Commerce and Industry and also the Dubai Quality Award organized by Dubai Economic Development Department.

The bank’s most recent awards include being named “Best Islamic Bank in UAE” for the fifth consecutive year by Islamic Finance News; “Best Islamic Bank” in the UAE for 2010 by NY-based Global Finance magazine; “Best Islamic Bank in the UAE” by Asiamoney Magazine, and being named winner of the first-ever Pan-Arab EMEA Finance award for corporate social responsibility.