June 2009 Issue

Canadian index allows investors to follow Shariah law

CTV Canada, 27-05-09

Standard & Poor's is launching a Shariah compliant version of the S&P/TSX 60 that will exclude companies that don't meet criteria outlined within Islamic law. Shariah law, based on the teachings of the Koran, does not allow for investment into companies that deal in pork, alcohol, gambling or pornography. Banks are also excluded because investors are not allowed to earn profit from interest. "Companies which have high levels of debt or high levels of interest earnings are also screened out," Alka Banerjee, Vice President of Standard & Poor's Index Services, told CTV.ca in an interview from New York on Wednesday. At present, companies which have debt less than 33 per cent of their market capitalization are allowed within the index. A Shariah Supervisory Board, comprised of Islamic scholars, determines if a company qualifies.

In USA, Interest grows in Islamic mortgages

The National, Dubai - 01-06-09

NEW YORK - Daoud Hawa bought a home worth US$550,000 four years ago with a Sharia-compliant mortgage because he wanted to go on the haj in a state of purity and without any debt. “I did my research on the finance company and consulted my imam before I went ahead with this mortgage,” said Mr Hawa, who is 35, married with two children, and runs a marketing company. Guidance Residential, an Islamic mortgage company, undertook stringent checks of Mr Hawa’s finances, including income, savings and liabilities to make sure he could afford the mortgage. By contrast, during the property boom years up until two years ago, other companies issued loans to low-income residents who relied on rising real estate values as collateral in what became the “sub-prime” crisis. Millions of US residents are now struggling with loans worth far more than their homes are worth, or are being foreclosed on after non-payment.

S&P sees Islamic finance market rebounding

Business Week, 12-05-09

MThe roughly $700 billion Islamic finance market is expected to "resume its rapid growth" after taking a drubbing last year because of the global financial meltdown, a leading international credit rating agency said Tuesday. Standard & Poor's said while global sukuk issuances fell by over 50 percent in 2008, to $14.9 billion, compared to the previous year because of the global financial crisis, the outlook for Islamic finance remains strong and the market is expected to rebound. Sukuk are bonds structured to avoid paying interest, in line with Islamic law. The report offers another indication of broader expectations that the Middle East, as a whole, is better positioned to withstand the strains of the global recession. While growth rates in the region are projected to fall sharply, oil exporters -- despite the current slump in crude prices -- are tapping into an earlier oil-revenue cushion to boost spending and support local financial institutions hit by the meltdown.

How Islamic Banks Profit Without Charging Interest

Somaliland Press, 13-05-09

Gone of the basic principles of Islamic banking is the prohibition of usury or interest. Up until the 1980s interest was generally interpreted to only apply to usury but it is now accepted practice to refer to all interest. Other principles are based on simple morality and common sense, which are by no means unique to Islam. For example, usury was also prohibited by the Old as well as the New Testament. Even literary heavyweights such as Shakespeare weighed in against the practice. Islamic banking is also by no means a recent phenomenon. The basic practices can be traced back to the early parts of the seventh century. Some experts even claim that many of the concepts and techniques so familiar to us today were later adopted by European bankers. Its fairly recent reemergence coincided with rising oil prices in the mid 1970s thus providing parts of the Muslim world with significant financial resources.
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The Western countries are now looking into how the Islamic banking System will be introduced in their countries, such as Britain who already implemented an Islamic banks and others. This will help many Muslim immigrants who up to this moment doesn’t have any banking alternatives other than using Interest commercial banks which is against their Islamic religion principles of not using usury or interest.

UAE has recovered quickly from the global financial crisis : Hamdan

WAM Emirates 31-05-09

The UAE has managed under its prudent leadership to recover from the world financial crisis rapidly, said H. H. Sheikh Hamdan Bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai, at a keynote address to the Islamic banks conference. 'The conference seeks to devise a sound concept to deal with the choking economic crunch the governments, firms and individual are passing through,
'Sheikh Hamdan told the meeting which was opened by H.H. Sheikh Majed bin Mohammed bin Rashid Al Maktoum, Chairman of Dubai Culture and Arts Authority. The Four-day banking forum is being organised by the Department of Islamic Affairs and Charitable Activities (DICD). ''Dubai has the honour as the leader of the Islamic banking industry when Dubai modern maker the late Sheikh Rashid bin Saeed Al Maktoum launched the Dubai Islamic Bank,' Sheikh Hamdan said

Islamic banks find alternative to KIBOR

Daily Times, Pakistan 31-05-09

Islamic banks have recently achieved a major milestone towards development of an interbank market for Islamic banks. Meezan Bank recently hosted a meeting of Shariah advisors and product development experts of all full-fledged Islamic banks to decide upon the mechanism for inter-bank placement amongst Islamic banks and to move towards the development of an Islamic inter-bank market.
After careful deliberation, standardized agreements – namely Interbank Musharaka and Interbank Wakala Agreements – were finalized and it was agreed that henceforth only these standard contracts would be used by the Islamic banking industry. This achievement is an important milestone towards development of inter-bank market for Islamic banks and will pave the way for the long awaited Islamic benchmark rate as an alternative to KIBOR. The meeting was attended by Shariah advisors / product development heads of Meezan Bank, BankIslami, Dubai Islamic Bank, Emirates Global Islamic Bank and First Dawood Islamic Bank.

Financial crisis offers Islamic banks a chance to flourish

Al-Arabia News Channel, 29-05-09

The rules are simple, no dealing in alchohol, pornography or anything deemed morally harmful coupled with no interest and you have the foundation for an Islamic financial system, which has been able to withstand the current economic meltdown, presenting Islamic banks with a unique opportunity to flourish. Unlike banks in Western economies, Islamic banks have been delt less of a blow by the financial crisis and experts believe it is because the laws followed are based on those set out in Islam's Holy book, the Quran, which for Muslims is the word of God.

Islamic banks’ deposits grow 18 percent in Q2

Daily Times, Pakistan 12-05-09

At a time when deposit growth of conventional banks has almost stagnated, Islamic banks are enjoying handsome growth in deposits, indicating increasing preference to Islamic banking in the country. According to latest data, deposits of Islamic banks rose by Rs 31 billion or 18 percent to Rs 202 billion at the end of second quarter of current fiscal year (Oct-Dec 2008) from Rs 171 billion at the end of first quarter (Jul-Sep 2008). It is pertinent to mention here that deposits of overall banking industry rose by Rs 20 billion or 0.52 percent to Rs 3.801 trillion from Rs 3.781 trillion during the quarter under review. This means that there was negative growth in deposits of conventional banks during the quarter and the growth in overall banking industry's deposit base came only from Islamic banks.

Islamic finance provides way out of economic crisis

Sunday's Zaman, Turkey 02-06-09

The last few months witnessed the most remarkable period of global financial market turmoil followed by the most astounding government intervention in the world since the Great Depression. There were unprecedented coordinated actions by central banks around the world to cut interest rates, guarantee bank deposits and raise guarantee limits in a bid to address the financial market turmoil.
What began in the mortgage financing sector in the US has rapidly spread globally. While financial crises are not uncommon in today's world, their frequency and the extent of their damage is growing, from the savings and loans crisis in the mid-1980s, the Mexican currency crisis in 1994, the Asian currency crisis in 1997, the Russian sovereign default in 1998, the LTCM bailout in 1998, the dot-com bubble burst in 2000 and the housing bubble burst in 2006 to the commodity bubble burst in 2008. The early financial turmoil was an early sign of the bigger problems ahead.

Middle East leading region for Islamic Banking & Finance

Albawaba, 14-05-09

A recent research conducted by Shariah-Fortune screened around 810 companies in 50 countries worldwide offering Shariah compliant financial services. The Middle East covers more than half (around 56 %) of the Islamic Finance market. Around 450 companies are located in this region. Leading countries are the UAE, Bahrain, Kuwait, Iran and Saudi Arabia.
Asian companies compound to a market share of about 20 %. In particular. Malaysia is one of the key players, not only in Asia, but also globally. 114 companies have been screened in Europe, which accounts for around 14 % of the global market share. On top position in Europe is the UK, boosted by the FSA´s regulatory initiatives.

Financial crisis presents opportunity for Islamic banks

Zawya 28-05-09

The financial crisis presents an opportunity for Islamic banks based in some of the Gulf States according to a new report from the London School of Economics and Political Science (LSE) released today (Thursday 28 May). The report The development of Islamic finance in the GCC, authored by Professor Rodney Wilson, points out that the Islamic banks have been less adversely affected than the major international banks by the 2008-9 crisis, making them more attractive to investors.
Gulf Cooperation Council based investors in conventional banks have seen the value of their investments plummet. These include Prince Waleed's Kingdom Holdings in Saudi Arabia, which holds five per cent of Citibank, and the Abu Dhabi and Qatar Investment Authorities, which hold significant stakes in Barclays. In contrast, the value of the Saudi Al Rajhi Bank and Kuwait Finance House (KFH) investments in retail Islamic banking affiliates in Asia has been much more resilient. Professor Wilson, who wrote the report for LSE's Kuwait Programme on Development, Governance and Globalisation in the Gulf States, said: 'There has been much questioning of the values underpinning the conventional financial system, and the search for alternatives means that Islamic banks are likely to receive more attention.

HSBC plans more Islamic banking branches

The Star Online, 13-05-09

HSBC Bank Malaysia Bhd plans to open more Islamic banking branches under its unit HSBC Amanah Malaysia Bhd this year after carrying out a post-implementation review on its four branches. “There are plans to increase our branches this year but, more importantly, we have to review our existing four branches so that we can avoid any possible hiccups and improve our future undertakings. “We are in the midst of identifying the location for our future branches,” HSBC Amanah executive director Musa Abdul Malek said after the official opening of the company’s latest branch in Shah Alam yesterday.

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