High Islamic banking fees irk customers in South Africa

High Islamic banking fees irk customers in S. Africa

By MUSHTAK PARKER | ARAB NEWS Available at: http://arabnews.com/economy/islamicfinance/article86412.ece

CAPE TOWN: It is not only some South African government officials, cadres of the ruling African National Congress (ANC) and high ranking officers of state utilities, that are on the gravy train. Perhaps the biggest greed culture is amongst South African banks whose banking charges and fees are the highest in developed countries. Unfortunately, Islamic banks and windows in South Africa are no exceptions, fueling further cynicism about Islamic banking in the country.

For the ANC government, who refused to go to the International Monetary Fund (IMF) for financial loans on the grounds of revolutionary ideology when Nelson Mandela became the first black president of the new South Africa in the early 1990s, it is the ultimate irony that successive administrations have failed to rein in the banks who even charge people to deposit and withdraw cash from their current accounts. Investec, for instance will charge customers 11 rands for withdrawing every 1,000 rands. Banks have a litany of fees and service charges, and some so-called free banking services are either highly conditional or peripheral – charges which many customers take for granted as free in the UK and European Union. For instance, First National Bank (FNB’s) Islamic check account must have a minimum of 3,500 rands before qualifying for free banking.

With both retail and business customers complaining bitterly about the ever-rising fees and customers, the government of President Jacob Zuma has started to put pressure on the banks to lower their charges and fees. ANC stalwarts such as Seddick Isaacs, who spent 13 years on Robben Island with Nelson Mandela and the other ANC hierarchy as a fellow “prisoner of apartheid” and who taught President Zuma, a fellow inmate, regret what they call the emergence of a “corporatocracy” in South Africa.

The big corporates including the banks, they suggest, are still controlling the South African economy and financial system, and effectively riding roughshod over the government. They remain powerful and exert strong influence over government policy. In many respects social and economic apartheid is very much alive in South Africa, almost 17 years after the ANC was first elected to power.

Muslim members of the ANC, including some high-ranking ones, agree that the situation is unsustainable, and is exacting a heavy cost for ordinary South Africans, especially at a time of economic and financial uncertainty. Only last week, Gill Marcus, the governor of the Reserve Bank of South Africa, the central bank, warned that the global economy, especially the US and the European union, may be heading for double-digit recession, which would inevitably impact upon the South African economy.

Islamic banks such as Albaraka Bank (South Africa) and the Islamic banking windows of FNB, ABSA, Nedbank and Standard Bank have come under heavy criticism from Muslim customers from following the greed culture of conventional banking and in some cases actually charging higher fees and service charges than their conventional counterparts.

FNB, for instance, in its Shariah-compliant business check account, says it offers similar features and pricing to the (mainstream conventional) business check account. “The main differences,” according to the FNB, are that “juristic entities must have a minimum balance of 1,000 rands. Sole proprietors must have a minimum balance of 750 rands. There is no debit or credit interest, and there is no overdraft facility.”

It is Albaraka Bank, which is part of the Bahrain-incorporated Albaraka Banking Group (ABG), which in turn is a subsidiary of the Dallah Albaraka Group, headed by Saleh Kamel, that has come under a fair bit of criticism, especially from its Muslim customers and organizations.

They point to a litany of charges by Albaraka Bank including the increase of a monthly penalty from 3 rands to 75 rands if an account remains inactive; a 10 rands fee for cash withdrawals up to 2,500 rands; 45 rands for each check withdrawal; a fee of 0.75 rand for each 100 rands cash deposit or part thereof; 20 rands for a post-dated check deposited; to 100 rands for an unpaid check and a host of other fee categories and charges.

South African bankers privately concede that their charges are the most expensive in developed economies, but they blame the Reserve Bank of South Africa for lack of clarity in terms of policy and a lack of political will to deal with the situation.

The government of President Thabo Mbeki did set up a few years ago a commission to look at the high fee structures that banks were charging. But the half-hearted approach to the issue meant that the commission dragged its feet and any policy change was effectively still-born because of this political inertia.

Not only are customers of banks at the receiving end of this greed culture, but also bank employees. For instance, in the past bank employees used to get free banking services on credit cards or ATM withdrawals. But last year Nedbank for instance introduced a 50 percent charge of the usual tariff for Bank employees for the above products.

The South African economy has had less of an impact as a result of the global financial crisis and the credit crunch. But local banks as elsewhere have clamped down on lines of credit that has made it difficult for especially small-and-medium-sized-enterprises (SMEs) who are faced with severe cashflow and liquidity problems.

Islamic banking could have filled this void to a certain extent, but the providers of Islamic banking in South Africa not surprisingly are over-cautious and taking their cue from counterparts in other countries in the developed world.

South Africa has a Muslim population of over two million and many of them are well established in business and in the professions. In Durban, they even have a Muslim millionaires club. Private wealth amongst South African Muslims – largely of Indian and Malayan origin – has increased substantially especially since the collapse of apartheid.

But the uptake of Islamic financial products by these Muslim-owned businesses is at best ordinary. Local experience of ownership of Islamic banks is not good following the collapse of Islam Bank Ltd. in the 1990s.

There is still much naivety about Islamic banking amongst the Ulema and the ordinary Muslims, with basic assumptions such as “cost of capital” and “development costs” conveniently ignored by those critical of Islamic banks per se.

The absence of the big global Islamic banks is also a factor because competition amongst the local windows and the sole Islamic bank, Albaraka Bank, is not as healthy as in other markets.

HSBC is reported to be considering a bid for Nedbank. If the deal goes through HSBC Amanah may well be set to become South Africa’s “local Islamic bank” given the latent demand for Islamic bank in South Africa and the surrounding southern African countries. After all, HSBC Amanah is a dominant player in markets in the GCC and Malaysia.

Best Regards
ZULKIFLI HASAN
DURHAM, UK

  • Cape of Good Hope, Cape Town, South Africa

    The $1 Trillion Islamic Finance Market

    Gulf and Asian Centers Battle Over Islamic Finance

    By Mark Townsend Available at: http://www.institutionalinvestor.com/asset_management/Articles/2629757/Gulf-and-Asian-Centers-Battle-Over-Islamic-Finance.html

    In the aftermath of the global financial crisis, the prospects for Islamic finance appear brighter than ever. The industry boasts an estimated $1 trillion in assets, and Islamic banking — untouched by subprime-mortgage-backed securities and other toxic assets that devastated many Western institutions — continues to grow at a rate of about 20 percent a year. Financial centers from Bahrain and Dubai in the Persian Gulf to Malaysia and Singapore in Asia are moving to improve their regulatory frameworks in a bid to win a bigger piece of the pie.

    Yet much of the industry’s potential remains untapped. And the competition itself may be part of the reason, bankers and analysts say.

    A lack of consistency in the interpretation of Islamic law by scholars who decide if a product complies with shari’a principles is holding back the development of a vibrant capital market and asset management business. The industry must resolve differences between the secular element of contracts frequently based on English common law and a shari’a board’s interpretation of the same contract if conventional money managers are to see long-term value in Islamic finance, an essential element for future growth. Among other things, shari’a bans the charging of interest and requires that loans be structured on a profit-sharing basis.

    “There is a need for standardization and uniformity,” says Arul Kandasamy, head of investment banking at Abu Dhabi Commercial Bank. “We cannot rely on shari’a scholars, as they have a vested interest in retaining the status quo. Governments and regulators have primary responsibility for resolving this situation.” Similar concerns temper the optimism of Mohieddine Kronfol, managing director of Algebra Capital in Dubai. “Shari’a-compliant assets are more than $1 trillion, but legal and market infrastructure as well as corporate governance standards are current and very relevant challenges facing Islamic finance,” he says.

    The Islamic fund management business has total assets of just $52 billion, a fraction of the $22 trillion handled by conventional money managers, according to a recent report by accountants Ernst & Young. Most of the funds have less than $100 million under management, the threshold needed to achieve profitability, the firm says. The small size of the funds also limits their ability to match the variety and quality of conventional investment funds, it adds.

    The market for sukuk, or Islamic bonds, shows signs of recovering from the blow dealt by Dubai’s near default last year, but the market remains a fraction of the size of the conventional fixed-income market. Sukuk issuance totaled $5.6 billion in the first five months of this year, up slightly from $5.3 billion in the same period of 2009.

    The Dubai property developer Nakheel came close to defaulting on its $3.52 billion sukuk — the largest ever — before Abu Dhabi stepped in to bail out Dubai. The company’s debt problems raised doubts among investors about the ability of sukuk holders to seize control of assets backing the bonds in the event of a default — doubts that have yet to be resolved, bankers and analysts say. The region’s credit problems continue to weigh on the sukuk market. Gulf corporations are facing a wall of debt coming due, with $145 billion outstanding and $28 billion scheduled to mature in 2012, the bulk of it for companies in the United Arab Emirates, according to Moody’s Investors Service. It’s little surprise, then, that Malaysian entities are dominating the sukuk market, accounting for slightly more than half of global issuance this year through May.

    “The cost of structuring and issuing sukuk remain high relative to conventional” bonds, says Nasser Saidi, chief economist of the Dubai International Financial Centre. “The lack of uniformity and certainty is also curbing and inhibiting innovation.”

    Notwithstanding the problems, countries across the Gulf region and Southeast Asia are targeting the industry for growth and hoping to establish themselves as major centers for Islamic finance. “From our perspective, the exciting thing is, so many countries are focused on Islamic finance,” says Afaq Khan, the Dubai-based CEO of Standard Chartered Saadiq, the Islamic banking subsidiary of Standard Chartered Bank. “That can only be positive for industry growth.”

    For many years, Bahrain has led the Gulf region by devising supportive Islamic and tax regulations that have boosted its reputation as a leading banking center. Bahrain has 28 Islamic financial institutions, the largest such concentration of any country, according to Kamal Ahmed, chief operating officer of the Bahrain Economic Development Board. Total assets in Bahrain’s Islamic banking sector jumped by nearly 50 percent last year, to $24.5 billion. As recently as 2000, assets totaled just $1.9 billion. Bahrain is also home to 47 Islamic investment funds with total assets of $2.15 billion, according to Ernst & Young.

    The country regards a strong regulatory environment as a competitive advantage. The highly regarded Central Bank of Bahrain regulates the sector; its forerunner, the Bahrain Monetary Agency, was the first central bank in the world to develop and issue sukuk. The central bank has also moved to address the shortage of trained professionals in the industry by establishing the Waqf Fund for Research, Education and Training in 2006. The Bahrain Institute for Banking and Finance recently launched a master’s program in Islamic finance in conjunction with DePaul University.

    “Bahrain is an important regional financial center and offers a well-established legal and regulatory framework and good ancillary services to support the financial services sector,” says Ikbal Daredia, who heads capital markets, institutional banking and the Malaysian arm of Unicorn Investment Bank in Bahrain.

    Bahrain officials say they are eager to work with other financial centers to establish common standards and help overcome the fragmentation that is holding back the growth of Islamic finance. Fund managers in particular identify the lack of connectivity and a transparent screen-based trading platform as significant barriers to the growth of the Islamic fund business.

    “We need to work with other countries to get appropriate regulatory structures for Islamic finance in place,” says the Economic Development Board’s Ahmed. “We are working with others, of which Malaysia is a big player, to develop the Islamic banking equivalent of Basel II.”

    Dubai had sought to challenge Bahrain’s leadership in the Gulf with a raft of sukuk issues in 2006 and 2007. Nasdaq Dubai is one of the world’s largest exchanges by listed value of sukuk, with 20 issues worth a total $16.3 billion. The emirate faces an uphill climb to regain momentum, however, following the recent debt crisis and the restructuring of Dubai World’s $23.5 billion in borrowings.

    Giambattista Atzeni, corporate trust business manager for the Middle East and North Africa at Bank of New York Mellon Corp., notes that Dubai has focused on international sukuk issues, many dollar-denominated, while Bahrain has concentrated on local currency offerings “and has a great track record in government deals.”

    The emirate still has some ways to go if it is to become a serious regional contender, says ADCB’s Kandasamy. Most of Dubai’s sukuk offerings have been real estate plays, and the emirate’s regulatory framework lags behind that of Bahrain, he says. “Bahrain has taken the right steps to close the gap with Malaysia, but its small domestic market will constrain further growth,” says Kandasamy.

    There are 12 Islamic funds domiciled at the Dubai International Financial Centre, with combined assets of $580 million. High costs are one key barrier to growth, officials acknowledge. Late last year the Dubai Financial Services Authority issued a report on collective investment funds that raised eyebrows when it stated that the DIFC was the most expensive financial center in the world.

    By many measures, Saudi Arabia is rapidly becoming the biggest Islamic financial center in the Middle East, although its market is almost entirely domestic in focus. The kingdom boasts 174 Islamic funds with a total of $22.7 billion in assets, according to Ernst & Young. There has been a major trend toward Islamic banking, which was virtually unheard-of in the country a decade ago, notes Paul Gamble, head of research at Jadwa Investment in Riyadh. “New banks launched in recent years are 100 percent Islamic, as are virtually all the local investment companies,” he says. Saudi entities are also beginning to wade into sukuk in a big way, a potentially significant development for that market. Saudi Electricity Co. raised $1.9 billion in May with a sukuk priced to yield 95 basis points over the Saudi interbank offered rate.

    Notwithstanding the efforts of the Gulf countries, Malaysia continues to claim the world’s largest Islamic capital market. The country has integrated the Islamic sector into its broader financial system, providing institutions as well as intermediaries a deep market in shari’a-compliant equities, sukuk, exchange-traded funds, real estate investment trusts and derivatives. At the end of 2008 (the most recent figures available), Malaysia’s Islamic banking assets had reached $72.5 billion, according to the Malaysia International Islamic Financial Centre. The country boasts 184 Islamic funds with assets totaling $5.1 billion, according to Ernst & Young. Shari’a-compliant companies make up 63 percent of the Bursa Malaysia’s 1.06 trillion-ringgit market capitalization.

    Malaysian entities accounted for 53.4 percent of global sukuk issuance in the first five months of this year, according to Dealogic. The government itself has led the way by issuing a $1.25 billion sukuk, the largest ever by a Malaysian borrower, in May.

    “Local investors’ demand and established market infrastructure has supported issuance, while local players such as Petronas and Khazanah have successfully issued large cross-border sukuk, raising capital abroad,” says BNY Mellon’s Atzeni. Kandasamy of ADCB agrees that Malaysia’s depth and sophistication give it a firm lead over the Gulf centers. “Malaysia has the best capability due to its advanced regulatory environment, strong government support and large pool of educated professionals to support growth,” he says.
    For the Gulf to match the depth of the Malaysian market, it will need to establish more common standards to increase trading activity and attract new investors, industry experts say. Adopting a benchmark index like LIBOR would immediately improve transparency and liquidity and create clarity for conventional investors. “There is a consensus among scholars and market practitioners that a conventional benchmark index such as LIBOR can be applied to Islamic finance operations,” says Mohamad Nedal Alchaar, secretary general of the Accounting and Auditing Organization for Islamic Financial Institutions, in Bahrain. “Nevertheless, in the long term it will benefit the Islamic finance sector to have its own benchmark index.”

    Malaysia’s success is spurring imitation in Asia, most notably by neighboring Singapore. The city-state is targeting Islamic finance in a bid to expand its financial center. The Monetary Authority of Singapore is extending its existing regulatory framework to the shari’a-compliant sector. “Our approach is to treat conventional and Islamic financial products similarly, as long as they share similar risk characteristics,” a spokesperson for the central bank says.

    Recent regulations by the MAS allow Singapore-based banks to enter into Istisna financing transactions, a shari’a-compliant method of financing construction projects. The move appears designed to allow the country’s banks to participate in an expected surge of financing for major infrastructure work in the Gulf Cooperation Council, a bloc that encompasses Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. “The GCC are heavily investing in infrastructure, with $2 trillion of infrastructure investment over the coming five to seven years,” notes the DIFC’s Saidi.
    Although Islamic finance is growing at an annual pace of about 20 percent, it remains a very small part of the overall market. Singapore has 13 Islamic funds managing a total of $760 million in assets, compared with $610 billion in assets run by conventional fund managers.

    Elsewhere in Asia, Hong Kong has begun to look at Islamic finance with greater seriousness. It could be a shrewd move. The growing trade relationship between China and the GCC, particularly in energy, offers a rich possibility for Islamic finance projects. “Hong Kong has talked about strengthening its credentials as an Islamic financial center,” says Ben Simpfendorfer, chief China economist at Royal Bank of Scotland in Hong Kong. “This shouldn’t be interpreted as competing with Malaysia and Singapore. Hong Kong is hoping to profit from Islamic bond issuance by mainland Chinese corporates.”

    With so much competition for leadership in Islamic finance, will there be enough business to go around? A little more cooperation to address some of the industry’s shortcomings could help grow the market for everyone.

    Best Regards
    ZULKIFLI HASAN
    DURHAM, UK

  • Osaka Castle (1583), Japan

    Thomas Cook fails in USD50 million Islamic bond bid

    Thomas Cook fails in $50 mln Islamic bond bid

    By Frederik Richter Available at: http://business.maktoob.com/20090000488854/Thomas_Cook_fails_in_$50_mln_Islamic_bond_bid/Article.htm

    MANAMA – Travel firm Thomas Cook has failed to place a $50 million aircraft finance Islamic bond with Gulf region investors, three bankers said, marking the failure of what would have been the first European corporate sukuk. Three bankers said the five-year sukuk, called the Golden Age sukuk, was marketed to Saudi investors by lead arranger Wasatah Capital, a Saudi investment company, but was called off last month after it failed to gain interest in the kingdom partly because the yield offered of 7 percent was seen as too low.

    The private placement was also unrated and seen as too illiquid to be attractive to Islamic banks’ treasuries in the kingdom and elsewhere in the Gulf where it was marketed after it fell through in Saudi Arabia.

    “There was limited access, it was a small issue and they didn’t pay enough,” said a Bahrain-based banker familiar with the planned sale who did not wish to be named. While small in size, a successful placement of the issue could have attracted more European corporates to tap funds in the world’s top oil exporting region through Islamic finance, bankers said. “They were going to great length outside Saudi Arabia to find a solution. They looked everywhere, really,” the banker said.

    Bankers said the issue was also hit by a freeze of emerging bond markets triggered by the European debt crisis in May, with other bond issues in the Gulf Arab region being postponed as well. An official at Wasatah declined to comment, citing regulations by Saudi Arabia’s Capital Markets Authority (CMA). Wasatah, partially owned by Malaysian investment bank Kenanga, is an investment company licensed by CMA.

    INVESTMENT RESTRICTIONS

    The market for sukuk is expected to reach more than $26 billion in new issuance this year. Sukuk are structured around underlying assets that generate the cash-flows needed to pay investors. The Golden Age sukuk was structured as an ijara sukuk, a leasing structure. Its purpose was to finance two aircrafts used by Condor, a German unit of Thomas Cook, according to an offering circular. A spokesman for Condor, to which Thomas Cook referred Reuters queries, could not immediately comment.

    Best Regards
    ZULKIFLI HASAN
    DURHAM, UK

  • Kyoto, Japan

    Demystifying the Myth of Shortage of Shari’ah Scholars

    Assalamualaikum,

    Dear readers,

    I am very delighted to share with you my recent article in the Global Islamic Finance Magazine (GIFM) July Issue pp66-67. The GIFM is a London-based leading magazine that provides news, knowledge and information on Islamic finance. This article attempts to demystify the mundane assumption or myth about shortage of Shari’ah scholars that available in the market. For full article, click here:

    http://content.yudu.com/Library/A1o6ii/ComplimentaryGlobalI/resources/66.htm

    “The ink of the scholar is more sacred than the blood of the martyr”

    Best Regards
    ZULKIFLI HASAN
    DURHAM, UK

  • Cordoba, Spain

    10 Great British brands No longer British

    10 great British brands no longer ‘British’

    By Donna Werbner Available at: http://uk.biz.yahoo.com/02072010/389/10-great-british-brands-sold-foreigners.html

    Tate & Lyle was bought this week by American Sugar Refining. Donna Werbner takes a look at other iconic British brands that no longer have the right to call themselves ‘British’.

    If you are reading this while enjoying a Kitkat and a cup of Tetley’s tea with a teaspoon of Tate & Lyle sugar in a Wedgwood teacup that you bought from Harrods, you might think you are doing something quintessentially British.

    You’d be wrong.
    ADVERTISEMENT

    The fact is, Kitkat is owned by the Swiss company Nestle, Tetley’s tea is owned by India’s Tata Group, Wedgwood was sold to an American private equity firm last year, Harrods was bought by the State of Qatar for £1.5bn in May, and Tate & Lyle was sold this week to American Sugar Refining for £211m.

    Here, we take a look at some of the other great British brands who can no longer call the Queen their own:

    1) Boots

    Established in Nottingham in 1849 by John Boot, Boots was first sold to a foreign company in 1920 when Jesse Boot flogged it to the American United Drug Company. Part of Alliance Boots since 2006, it is now owned the Italian tycoon Stefano Pessina and the American private equity firm KKR.

    2) Rolls Royce cars

    Charles Rolls and Henry Royce started manufacturing cars in Derby in 1906, selling cars that are worth £71,100 today for just £890. In 1973, Rolls Royce Motors was bought by Sheffield engineering firm Vickers and 1998, it was sold to German company BMW.

    3) Cadbury

    John Cadbury began producing and selling tea, coffee and drinking chocolate in Birmingham in 1824, and in 1854 he and his brother received the Royal Warrant as manufacturers of chocolate and cocoa to Queen Victoria. Cadbury merged with drinks company Schweppes in 1960 and was bought by America firm Kraft this year for £11.5bn.

    4) Bentley cars

    In 1919, Walter Owen Bentley, a World War One captain in the Royal Naval Air Service, started manufacturing Bentley automobiles in Cricklewood, North West London. It was sold to Rolls Royce during the Great Depression in 1931 in a deal so secretive not even Bentley himself knew the true identity of the purchaser until the transaction was completed. Since 1998, the firm has been owned by German carmakers Volkswagen.

    5) Jaguar

    Motorcycle enthusiasts Sir William Lyons and William Walmsley manufactured the first Jaguar 2.5 litre saloon in 1935 in Coventry. In the early 1950s, Lyons invested heavily in motor racing in a bid to increase Jaguar’s appeal to ordinary motorists, resulting in historic victories for Jaguar at Le Mans in 1951 and 1953. In 1999, American conglomerate Ford Motors bought the company and then sold it during the recession to Indian firm Tata motors for £1.7bn in 2008.

    6) Walkers crisps

    Henry Walker started off as a pork butcher in Leicester – but after World War Two rationing of meat forced him to turn to another, additional form of revenue: the un-rationed potato. The company was so successful at making Walkers crisps that it kept its focus on potato chips when meat was de-rationed in 1954. Walkers was bought by Fortune 500 American firm PepsiCo in 1989 and is now worth around £436million. It still sells 10 million packets a day in the UK.

    7) Smarties/Aero/Rolo/Fruit Pastilles

    In York in 1863, Henry Rowntree and his brother Joseph founded Rowntree’s and began manufacturing chocolates. Rowntree’s was responsible for iconic British Empire favourites like Smarties, Aero, Fruit Pastilles, Yorkie and Black Magic. In 1988, Swiss confectionary giant Nestle bought the company for $4.55bn and has dropped the Rowntree name from all packaging except Rowntree’s Cocoa and its famous Fruit Pastilles.

    8) Mini

    In the wake of the fuel shortage caused by the 1958 Suez crisis, the British Motor Corporation decided to design a new car to meet growing demand for small ‘German bubble’ cars. The Mini launched in 1959 and featured heavily in the iconic British film The Italian Job in 1969. It was sold along with Rover to German carmaker BMW in 1994.

    9) Harry Ramsden

    Harry Ramsden set up his first fish and chip shop in a wooden hut in West Yorkshire in 1928 and was so successful that, three years later, he was able to move into a ‘fish and chip palace’, complete with oak panelled walls and chandeliers. In 1999, the firm began expanding into motorway locations and in 2006 was sold to Swedish firm EQT Partners as part of a deal worth £1,822 million.

    10) HP Sauce

    Nottingham grocer Frederick Gibson Garton invented HP sauce in 1895. He called it HP because he’d heard a rumour that a restaurant in the Houses of Parliament was serving it to MPs – hence the label on the bottle (which shows a picture of the Houses of Parliament). Despite this continued emphasis on the British origins on the brand, HP sauce has actually been owned by the American food giant Heinz since 2005.

    Regards
    ZULKIFLI HASAN
    DURHAM, UK

  • Dubai International Financial Centre

    Islamic Co-operative Bank

    Angkasa proposes Islamic co-op bank

    Written by Chua Sue-Ann Available at: http://www.theedgemalaysia.com/index.php?option=com_content&task=view&id=168969&Itemid=79

    KUALA LUMPUR: The National Cooperative Organisation of Malaysia (Angkasa) has submitted its proposal to the government for the establishment of an Islamic cooperative bank and plans to turn some 560 existing credit cooperatives nationwide into sub-branches. Angkasa president Datuk Dr Mohd Ali Baharum handed the proposal to Domestic Trade, Cooperative and Consumerism Minister Datuk Seri Ismail Sabri Yaakob after a meeting in parliament on Wednesday, June 30.

    Speaking about the proposed cooperative bank at a press conference afterwards, Mohd Ali said Angkasa aimed to set up at least one bank branch in every state and transform existing credit cooperatives into “sub-branches”. “Angkasa does not want to compete with existing banks but wants to strengthen credit cooperatives,” Mohd Ali said. Angkasa had suggested that the bank be named Islamic Cooperatives Bank of Malaysia, he said. The proposed Islamic cooperative bank would have a paid-up capital of RM400 million, above the RM300 million minimum, Mohd Ali added.

    He said Angkasa would prefer the cooperative bank to be established under the Cooperative Commission of Malaysia (CCM), but would leave the final decision to the government and Bank Negara Malaysia (BNM). At the same press conference, Ismail said the government would study Angkasa’s proposals but noted that the establishment of the bank would be subject to the central bank’s regulations.

    “We welcome the proposal… the cooperative bank would focus on serving smaller towns and rural areas, currently without banking services, for example, Sarawak’s interior,” Ismail said. “If all goes well, we expect to finalise the details of the proposed Islamic cooperative bank by April 2011 and it should be operational by the middle of next year, subject to BNM regulations.”

    Ismail brushed off allegations of mismanagement and malpractices in Angkasa that were raised in the run-up to the cooperative body’s annual general meeting as “internal politicking”. On Jan 8, 2009, Royal Prof Ungku Abdul Aziz stepped down as Angkasa president after helming the body for 37 years, citing disappointment that investigations into alleged misappropriation of funds in the organisation had borne no fruit.

    Angkasa (Angkatan Koperasi Kebangsaan Malaysia Bhd in Bahasa Malaysia) was established in 1971 to coordinate the numerous cooperatives in Malaysia. Ismail said the Islamic cooperative bank, if it comes to be, would be the country’s third cooperative bank, joining the country’s largest cooperative bank Bank Kerjasama Rakyat Malaysia Bhd (Bank Rakyat) and the Cooperative Union Bank (Koperasi Bank Persatuan Malaysia Bhd, formerly Province Wellesley Cooperative Banking Union Ltd). The minister however declined to elaborate on the union-based bank, saying more details would be announced at a later date.

    Best Regards
    ZULKIFLI HASAN
    DURHAM

  • University of Glasgow, Scotland