Why Islamic banks escaped crisis: Capital FM

BY CHARITY KATAGO
Updated 20days 23 hours 6 minutes ago

NAIROBI, Kenya, Apr 28 - The current global economic downturn would never have happened if the banking sector had pegged its business on the Islamic banking, an industry player said on Tuesday.

Gulf African Bank CEO Najmul Hassan says none of the 375 banks that practice Islamic banking globally has been affected by the crisis so far.

“The reason for this is that Islamic banking does not go into the products that got these banks into this downfall. Look at Societe Generale, it lost billions in speculative transactions; Somitu Corporation lost because it was speculating on prices of copper,” Mr Hassan explained.

“These are the very things that Sharia banking disallows.”

Mr Hassan noted that Islamic banking is based on neither speculation nor interest but real growth.

“All the trading that happens in this world is not interest-based; there is real trading taking place. Some assets are purchased, you add value, and you sell them out. That is what Islamic banks do,” he said.

Mr Hassan explained that Islamic banks buy assets, add value and sell them on deferred payment and make their profit from taking part on real economic activity in a society as opposed to conventional banks which makes money on fractional lending which he described as ‘paper business’.

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Alkhaliji opens Islamic bank branch; plans more products: Gulf Times

Alkhaliji yesterday launched its Islamic banking branch to cater to the wholesale business, including small and medium enterprises.
The move comes as part of efforts to cash in on the growing appetite for Islamic banking, which has 20% share in Qatar’s total banking assets and loans, and about 17% in deposits in third quarter of 2008.
The new branch ‘Alkhaliji al Islami’ at Al Jazi Tower in West Bay, offers a range of products and services of Islamic current account, foreign currency exchange, domestic and international funds transfers in eight foreign currencies and commodity Murabaha.
“Islamic banking and finance is no longer a niche market in the international arena. It has reached the status of mainstream banking as more and more countries across the continents have established players in their own markets,” Alkhaliji chairman Sheikh Hamad bin Faisal bin Thani al-Thani said.

For more on this article, please click on the following link: Alkhaliji opens Islamic bank branch; plans more products: Gulf Times

Milestones in rise of Islamic finance: Reuters

Islamic finance has grown to a $1 trillion industry, after taking off in the private sector in Gulf states such as Dubai in the 1970s.

The sharia-law-compliant system, which prohibits interest, is the national norm in Sudan and Iran, and in a parallel banking system in Malaysia, Bahrain and a few other Gulf States.

Here are some key moments in the modern sector's development:

1950s-1960s: First experimental Islamic banks develop interest-free savings and loans societies in Pakistan and the Indian subcontinent. Egypt and Malaysia see pioneering ventures in 1960s. New banks develop during the 1970s as oil money pours into Gulf states.

1975: First commercial Islamic bank opens, the Dubai Islamic Bank (www.dib.ae). Close to 30 such banks set up over the next decade.

In October 1975, the umbrella Islamic financing institution, the Islamic Development Bank (www.isdb.org) opens in Jeddah, Saudi Arabia. Between 1975 and 2005 it funds more than $50 billion worth of projects in Organization of the Islamic Conference (OIC) member countries.

1979: Pakistan becomes first nation to "Islamize" banking practices at state level. Process continues until 1985.

July 1983: Malaysia opens its first official sharia-compliant bank, Bank Islam Malaysia. Other banks also offer Islamic products and are supervised by the central bank, which is advised by a board of sharia scholars.

For more on this article, please click on the following link: Milestones in rise of Islamic finance: Reuters

RBS sees big growth in Islamic finance: Reuters

DUBAI (Reuters) - Royal Bank of Scotland sees big growth opportunities in Islamic investment banking, expecting asset growth rates to remain 15-20 percent annually and profitability levels to increase, a leading executive said.

Navid Goraya, RBS' global head of Islamic banking, said margins have increased as financing costs have fallen, putting the Islamic sector on a solid footing this year.

"Profitability has not been hurt," he told the Reuters Islamic Banking and Finance Summit on Monday. "You could see profitability go up."

In the six countries of the Gulf Cooperation Council -- the world's biggest market for Islamic financial services -- asset growth will remain at 15-20 percent annually, despite the global wealth destruction caused by the financial crisis, he said.

For more on this article, please click on the following link: RBS sees big growth in Islamic finance: Reuters

A Tale of Two Shari'a Finance Articles: Europe News

By David J. Rusin

Journalistic skepticism is rare when it comes to Shari'a banking. In January this blog highlighted an Associated Press puff piece on the subject, deeming it an early "contender for the most one-sided story of 2009." However, a new frontrunner has emerged: another Shari'a banking article.

Stephen Magagnini's March 30 piece in the Sacramento Bee presents Islamic finance as a panacea, a "socially responsible" way of doing business which has ensured that "the recession gripping the nation has taken less of a toll on American Muslims who follow age-old Islamic laws." The money quote can be found in the third paragraph:

"If everybody was Shari'a-compliant, there would be no recession," said Farouk Fakira, a Yemeni immigrant who moderated a discussion on Islamic finance [in Sacramento].

The next eighteen paragraphs feature not a single voice to scrutinize this stunningly saccharine assessment and not a single hint of Islamic banking's many troublesome aspects: that unaccountable clerics determine which arrangements are Shari'a-compliant; that charitable donations required to "purify" proceeds have been used to fund terror in the past and could leave investors legally liable for attacks in the future; or that Shari'a banking is a modern invention designed by Islamist thinkers to propagate their radical, separatist ideology.

For more on this article, please click on the following link: A Tale of Two Shari'a Finance Articles: Europe News

Islamic insurance to grow up to 40 percent: Reuters

By Jason Benham

DUBAI (Reuters) - The emerging Islamic insurance or takaful industry could grow at 30-40 percent annually in the next three to five years as more people switch from conventional to Islamic insurance, a senior executive said.

"I think the takaful industry is in a growth mood for two reasons," Noor Takaful's managing director Ahmed al-Janahi told the Reuters Islamic Banking and Finance Summit in Dubai on Tuesday.

"Every day, people need to insure and there is a departure from conventional insurance. A lot of people are switching," he said. "Growth is expected at 30-40 percent going forward as people in Muslim countries are switching from conventional to takaful."

For more on this article, please click on the following link: Islamic insurance to grow up to 40 percent: Reuters

Islamic banking attracts rising number of non-Muslims: Expert: Peninsula

Source ::: THE PENINSULA / BY MOBIN PANDIT

DOHA: An increasing number of non-Muslim expatriates here are getting attracted to Islamic banking, says a senior Doha-based banker.

R Seetharaman (pictured), CEO of Doha Bank, told world leaders of Islamic banking at a key convention here yesterday that Islamic banking windows of commercial banks in Doha had grown at an impressive 18 percent annually over the past three years.

Qatar, unlike some other countries in the region, allowed hybrid banking and a significant development had been that a lot of non-Muslim customers were ‘deflecting’ from commercial to Islamic banking, he said.

“I can clearly see that more and more expatriates are trying to open accounts in Doha Islamic (the Islamic banking arm of Doha Bank).”

For more on this article, please click on the following link: Islamic banking attracts rising number of non-Muslims: Expert: Peninsula

Islamic mortgages for all faiths: Scotsman

By GRAHAM BURNSIDE

THE need to return to traditional banking values is a debate that has been well and truly reignited by the economic crisis.

Ethics and responsible lending are high on the agenda as we come to terms with the fallout from the crises that have hit some of the world's leading banks. It is therefore not surprising that attention is turning increasingly to Islamic finance as a stable alternative.

While "toxic" debts have swamped conventional banks across the world, Sharia'a compliant financial products have continued to expand. Islamic institutions have avoided massive writedowns in their assets because they carried no exposure to complex financial instruments or derivatives.

Following its ethical principles, all financial transactions within an Islamic finance system must be connected to a tangible asset. Islamic banks use their own funds and will not issue interest-bearing instruments to finance loans; they avoid transactions which are essentially speculative and trading in unowned assets (such as short selling) is prohibited.

But it would be a mistake to think that Islamic finance is only for the Muslim community. It is open to all faiths and Scotland's new Islamic mortgage could, for instance, provide a novel stimulus to support Scotland's property market.

For more on this article, please click on the following link: Islamic mortgages for all faiths: Scotsman

Islamic banking gains ground in Pakistan: Dawn

LAHORE: Islamic banking is fast gaining ground in Pakistan because it is risk free as compared to conventional modes of banking.

This was stated by chief executive officer AlBaraka Islamic Bank Mohamed Isa Al Mutaweh while talking to Lahore Chamber of Commerce and Industry president Mian Muzaffar Ali here on Thursday.

He said that Islamic financing products such as Murabaha, Ijara, Musharaka and Islamic Export Refinance were catering to a diverse cross-section of the economy, including the corporate, SMEs and consumer sectors.

Speaking on the occasion the LCCI president said that more than two hundred and fifty Islamic financial institutions were operating worldwide from China to US. Western banks through their Islamic units in UK Germany, Switzerland, and Luxembourg were also practicing Islamic banking.

For more on this article, please click on the following link: Islamic banking gains ground in Pakistan: Dawn

Islamic banks ‘doing well’: Daily Nation

By NATION Correspondent Posted Wednesday, April 29 2009 at 18:38

The Central Bank of Kenya on Wednesday said Islamic banking had managed to bring more of the unbanked population into banking halls. Speaking at the first East African Islamic banking conference at a Nairobi hotel, Ms Rose Detho, who is in charge of bank supervision at the CBK said the concept had largely succeeded.

The first two fully-fledged Islamic banks, Gulf African Bank and First Community Bank were licensed mid last year. Five other conventional banks have introduced Islamic banking products. “The Central Bank is impressed that the Islamic banks that have operated for hardly a year have made milestones,” she said.

For more on this article, please click on the following link: Islamic banks ‘doing well’: Daily Nation

New $10 billion Islamic bank planned for Bahrain: Market Watch

By Tahani Karrar

Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones) -- Persian Gulf investors plan to launch a new $10 billion Islamic bank by year-end in Bahrain, Adnan Ahmed Yousif, Chairman of Union of Arab Banks said Sunday.

The institution will be called "Istikhlaf Bank" and its shares will be listed on the Bahrain Stock Exchange and Nasdaq Dubai via an initial public offering, he said.

"We call it the godfather of Islamic banks," Yousif told reporters on the sidelines of a banking conference in Dubai, United Arab Emirates.

The creation of the new bank comes amid a severe downturn in Islamic banking in the region. Global issuance of Islamic bonds, or sukuks, tumbled 37% in the first quarter of the year to $1.8 billion, according to the latest data compiled by the Zawya Sukuk Monitor.

It may also struggle to compete with larger more established rivals such as Saudi Arabia's Al Rajhi

the Middle East's largest-traded Islamic bank with a market value of $25.2 billion, according to Zawya.com.

Still, Islamic banks, which comply with Sharia laws that prohibit the charging of interest, are on the rise in the Middle East where conventional banking practices are being held partly responsible for the global economic downturn.

The bank "will be established with a $10 billion capital and right now we are at a stage of forming the shareholders, there will be a private placement of $6.5 billion and we plan a $3.5 billion initial public offering for the bank," he added.

For more on this article, please click on the following link: New $10 billion Islamic bank planned for Bahrain: Market Watch

INTERVIEW: Islamic finance comes to Kazakhstan: BNE

Clare Nuttall in Almaty
May 6, 2009

Fattah Finance was launched in March, immediately after Kazakhstan's law on Islamic finance came into force. By moving quickly, the firm hopes to carve out a large share of the market for Sharia-compliant financial services.

A subsidiary of Almaty-based financial services provider Almaty Financial Centre, Fattah currently offers only brokerage services, but plans to expand its range of activities later this year as it grows its team. It offers its clients shares that are listed both in Kazakhstan and in other markets. "It doesn't matter where the shares are listed, only whether they are Sharia compliant or not," says Ussenzhan Turdiev, head of Fattah's information and analysis department.

The firm works in accordance with internationally accepted standards to determine whether a product is suitable to invest in. Key criteria include that the company isn't active in areas such as alcohol, cigarette production or gambling, that the debt-equity ratio does not exceed 33%, and that accounts receivable are no more than 45% of the company's capital.

According to Turdiev, Fattah can't yet provide any bonds from the Kazakh market where only conventional bonds are available, but it will offer Islamic bonds - sukuks - from other countries. The company hopes to see revisions to the law on Islamic that would make it easier to issue sukuks in Kazakhstan. Currently, only Islamic banks and national holdings, or companies 100% owned by national holdings, can issue sukuks. "It would be a great opportunity for us if the situation concerning sukuk issues was changed in Kazakhstan. If we issued some sukuks here, we could easily sell them," says Turdiev. "For example, Indonesia, which has a lower sovereign rating than Kazakhstan, carried out a $650m sukuk offering, and demand was seven times higher than supply."

For more on this article, please click on the following link: INTERVIEW: Islamic finance comes to Kazakhstan: BNE

Islamic banks take position to reap from crisis: Business Daily

Written by James Makau

May 4, 2009: Islamic banks are stepping up their foray into Sub -Saharan Africa, riding on the confidence crisis facing conventional banking models.

This comes as cash laden Islamic states increase trade ties with the continent while African countries turn towards the Middle East for financing deals.

Islamic banks and financing institutions are now positioning themselves in the region while mooting the idea that the way out for global financiers is to embrace the Islamic financing and banking.

“In hindsight, Islamic banks are looking quite attractive,” says Najmul Hassan, the chief executive officer of Gulf African Bank, an Islamic bank operating in Kenya.

During the first Islamic Banking conference for East and Central Africa, Mr Hassan argued that the conventional financial sector has become too far removed from the real economy.

Islamic Financing, Mr Hassan said, has a sound general practice and a detachment for conventional banking procedures that place an emphasis on debt rather than equity.

For more on this article, please click on the following link: Islamic banks take position to reap from crisis: Business Daily

Islamic banks have weathered sub-prime crisis well: Regulators: Asia One

By Gabriel Chen

ISLAMIC banks and financial institutions managed to avoid the fallout from the sub-prime crisis, largely because they refrained from investing in toxic assets that were deemed 'un-Islamic'.

And this prudence has put Islamic finance in good stead with investors looking for safe havens, said Professor Rifaat Ahmed Abdel Karim, secretary-general of the Kuala Lumpur-based Islamic Financial Services Board (IFSB).

The IFSB is an umbrella group of Islamic financial regulators. It was formed in 2002 and counts Saudi Arabia, Qatar, Indonesia, Bahrain, Sudan, Pakistan and Singapore as members.

Prof Rifaat, who is in Singapore for the IFSB summit this week, told The Straits Times yesterday that a lot of lessons could be learnt from the financial crisis.

For more on this article, please click on the following link: Islamic banks have weathered sub-prime crisis well: Regulators: Asia One

Mauritius launches first Islamic banking window: African Manager

The Hong-Kong and Shanghai Bank (HSBC) Ltd. launc hed Tuesday the first Islamic banking services window in the island, PANA learnt from banking sources.

"Today is a historic date as we launch HSBC Amanah islamic banking services that respond to the principles of the Sharia," Sandeep Uppal, CEO of the bank said.

Uppal emphasised that the new service is being offered to global business client s "as there are many opportunities in the offshore sector."

Uppal estimated that Mauritius can offer value to eventual clients in the Middle -East.

For more on this article, please click on the following link: Mauritius launches first Islamic banking window: African Manager

Much Interest In Malaysia's Financial Sector Liberalisation: Bernama

KUALA LUMPUR, May 6 (Bernama) -- There has been much interest in the financial sector liberalisation announced recently, said Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz here, today.

"There have been a lot enquiries in all the areas announced under the liberalisation, such as new licences and an increased foreign stake in domestic financial institutions," she said, when asked about the response to the liberalisation.

"Some institutions are already in preliminary discussions," Zeti said, after the opening of the Asia Regional Forum on Policy and Regulation of Financial Inclusion here, Wednesday.

Last week, Prime Minister Datuk Seri Najib Tun Razak announced a significant package of measures to liberalise the financial sector.

For more on this article, please click on the following link: Much Interest In Malaysia's Financial Sector Liberalisation: Bernama

'Pak-Qatar' to provide Takaful to Meezan customers: The Nation

KARACHI - Meezan Bank Ltd and Pak-Qatar Family Takaful Ltd have signed an agreement whereby all customers of Meezan Bank’s Housing Finance (Easy Home) will be provided with Shari’ah-Compliant Life Takaful Coverage. Irfan Siddiqui President and CEO Meezan Bank Ltd and P. Ahmed CEO Pak-Qatar Family Takaful Ltd. signed the Takaful (Islamic insurance) Agreement at a ceremony on Tuesday.
According to the agreement, all housing finance customers of Meezan Bank will be provided comprehensive Takaful that will cover not only life but also accidental and natural disability. Moreover, the premium for the first year will be paid by the bank which is to be adjusted later.
The insurance penetration in Pakistan is only 0.3 per cent of its total GDP, which means just 10 to 15pc families are opting out this facility, while in developing countries 60 to 70pc families go for this.
Speaking on the occasion, President and CEO Meezan Bank Ltd. Irfan Siddiqui said that Meezan Bank has always focused on coming up with Halal Riba-free products and innovative facilities for its customers and the Takaful arrangement with PQFTL is another step in the direction of making Islamic Banking the banking of first choice.

For more on this article, please click on the following link: 'Pak-Qatar' to provide Takaful to Meezan customers: The Nation

Islamic Bank of Asia 'excited' by bank rule changes in Malaysia: Asia One

By CONRAD TAN

SINGAPORE'S Islamic Bank of Asia (IB Asia) is 'very excited' by the news that Malaysia is opening up its banking sector further to foreign players and will consider taking a stake in an Islamic bank there or applying for a local banking licence in future, chief executive Vince Cook said yesterday.

'That's something we'd definitely be considering,' he told reporters here in a conference call to announce a new product for the bank.

'We've said consistently from the beginning that having some business and some representation in Malaysia is part of being a credible regional player in the Islamic banking space.'

Last Monday, Malaysian Prime Minister Najib Razak said the government would issue up to six new licences to foreign financial institutions this year, including two to foreign Islamic banks, as part of broader, long-term changes to the country's financial services sector.

He also said that foreigners would be allowed to own majority equity stakes of up to 70 per cent in some local financial institutions, including Islamic banks, compared with 49 per cent previously.

'Obviously, it's a bit early to see how those rule changes will be implemented and what it'll actually mean for us, but we're very excited by the prospect,' Mr Cook said.

For more on this article, please click on the following link: Islamic Bank of Asia 'excited' by bank rule changes in Malaysia: Asia One