Islamic finance and banking report 2010

Islamic Finance and Banking Report 2010 published by the Global Islamic Finance Magazine is out today.

Islamic Finance and Banking Report 2010: Contents

Islamic Finance

12 2010 A Year of Innovation – Islamic Finance and Banking Report

The Islamic finance and banking industry has steadily progressed into a major financial branch which utilises the highly ethical Shariah compliant principles which many investors prefer to use in comparison to conventional banking. The year of 2010 has seen an array of innovation in the Islamic finance sector with latest developments affecting the financial industry on a global scale. Global Islamic Finance Magazine will take you through the highs and lows of the major industry events and developments which have spurred success in Islamic Finance and banking

Equity Finance

22 Microcredit using Equity Financing: an Alternate Approach to Equity Financing in an Interest Free Financing

Interest is prohibited in all monotheist religions; however, it features as an essential element in practiced capitalism. Interest based financial system has created two major havocs in last two decades i.e. in East Asia in 90s and in the Great Recession since 2007. This paper highlights the extent of development problems faced by the world. With interest at zero bound in U.S since 2008 and with unemployment at 11% level, scarcity of capital cannot solely explain this. However, interest based Microfinance has had mixed results. Interest based lending at Micro level is usually carried out at very high interest rates, more so when the lending takes place informally without institutional intermediation.

Sukuk

32 Common Structures of Sukuk, part 2

In the previous issue of Global Islamic Finance Magazine, I discussed the main uses of Sukuk funds, and started to outline the structures of the most practiced Sukuk. Last issue, I explained the operations of Ijarah Sukuk and Musharaka Sukuk; this time, we will focus on Mudaraba Sukuk, Murabaha Sukuk, Salam Sukuk, Sukuk al-Istisna and Hybrid Sukuk of Shariah-compliant instruments for investment which do not involve either interest, or excessive risk or uncertainty (Gharar). The Sukuk market has been a primary area of growth, providing an avenue for the short and medium-term placement of funds by investors. This development has been fuelled not only by the desire of institutions to raise funds in a Shariah-compliant manner, but also by investor demand for such products. Sukuk issuances consist of entitlement to certain rights relating to assets, including some degree of asset ownership. These Sukuk are more commonly based on the principles of Ijarah, Salam, Mudaraba, Musharaka, and Murabaha; the Istisna mode of finance…

37 Interview – Exclusive Interview with Andrew C Broadley

World Islamic Finance Review

42 World Islamic Finance Review: The Islamic Republic of Iran

Islamic banks have been established in many countries with the co-operation with gov-ernments, often with the aim either of competing with an existing, conventional, interest-based banking system. However, in some cases the aim is the complete replacement of the conventional system, and this is the case with the Islamic Republic of Iran. The worth of Shari’ah-compliant assets has reached about US $400 billion throughout the world, according to Standard and Poor’s Ratings Services, and the potential market is estimated at $4 trillion. Iran, Saudi Arabia and Malaysia are at the top with the largest volume of Shari’ah-compliant assets. Alone of all Islamic banking countries, Iran has completely transformed its banking activities. A law demanding usury-free banking was passed in Iran in 1983, a few years after the 1979 revolution.

Islamic banking

28 Inside the Meltdown from the Perspective of an Islamic Financier

In the middle the heat of one of the greatest recorded financial meltdowns, and the breakdown of toxic assets, some small niche practitioners deliberated an important question: could this financial crisis have been averted, had the savvy Wall Street investment banks used the principles at the heart of Islamic finance. In this article, I will investigate from micro-level to macro-level – using both solid supporting evidence, and knowledge gained from experience – the rationale behind implementation of Islamic finance within the environment of conventional finance.

48 Should Islamic Banks Adopt a Unified Global Regulatory Body?

The Islamic banking and finance industry of today is unprecedented in its global ability to provide Shariah compliant services to meet the demands of clients. Despite the success of the growing Islamic banking and finance sector, there is a prominent need to establish and implement a unified global regulatory body. This need for unification has come about through a new public interest in the jurisdiction under which Islamic banks operate. When analysing the regulatory system of Islamic banking, it becomes apparent that, at some points, conventional Western regulations come into conflict with the principles of Shariah.

Ethical Investment

52 Ethical Investing Guide: The Practice

Ethical investors in the UK are growing in number, especially in the light of the global financial crisis, which exposed some aspects of the world’s traditional finance system as irresponsible at best, corrupt at worst. Global Islamic Finance magazine shows the way how to in practice make an ethical investment.

Case Study

56 Key Issues from Research Study into Shari’ah Governance Systems

Context for Shari’ah Corporate Governance in 2010 Following the global financial crisis, which showed its first signs of stress during 2007 in the USA and was particularly highlighted with the collapse of Lehman Brothers in October 2008, the global financial system continues in a state of flux and is not without further threats and stresses. Infrastructural changes to the way such a system works, and should work, have been, and remain, a source of major debate. An alternative, or parallel, financial system based on Islamic economic principles is one option.

Leadership

60 Islamic Banking Part 1: Making a Strategic Decision & Setting the Way Forward For Your Business

The Islamic Banking sector holds many opportunities not only for investments but for key lucrative business deals which can pave the way forward for success in your business or financial institution. Islamic Banking inevitably follows the principles set out by the Shariah and all transactions and investments are ensured to be Shariah compliant. If you are an individual, business or corporate professional considering setting your business or department in a Shariah compliant manner than Global Islamic Finance Magazine can help you create the perfect strategy for your business. The Global Islamic financial industry is already estimated to soar to over $2 trillion dollars by 2012 and many successful commodities have spearheaded the financial world such as the successful Sukuk (Islamic Bonds) and Takaful Insurance. In order to firstly plan a strategic plan of action it is important to be familiarised and accustomed with the Islamic financial commodities and Shariah compliant financing options.

Market Review

65 Developing Capital Markets In Islamic Finance
66 Malaysia Aiming For Islamic Finance Legal Framework
74 Islamic Banking Rise in Assets Decline in Profits
75 Singapore Eyes Important Role In Islamic finance

Despite the steady and consistent global growth, Islamic finance in 2010 had faced significant challenges that may shape its future prospects and direction. The inherent effect of Nakheel Sukuk default in 2009, several legal conundrums such as in the case of the Investment Dar, the unresolved issue of Shari’ah non-compliance risk as in the declaration of impermissibility of Tawarruq by the Islamic Fiqh Academy last year are considered as a real test for Islamic finance. I believe that Islamic finance is now going beyond its infancy stage and moving towards maturity and sophistication.

At this transformation stage, it is expected that Islamic finance will face enormous challenges in various areas and aspects. In order to ensure Islamic finance will continue to progress and sustain, I am of the view that it really needs a strong market penetration, active government backing, appropriate regulatory frameworks, sound corporate governance and integrated cooperation from all stakeholders.

On the face of it, I strongly emphasize on the importance of knowledge-based culture and research and development in Islamic finance. I consider these elements as the prerequisites for the success of future Islamic finance as they play an important role to eradicate illiteracy, to educate the players and the consumers, to impart skills and innovation and to ensure the authenticity of Islamic finance practice. Zulkifli Hasan, (2011, January). Islamic Finance and Banking Report 2010, Global Islamic Finance Magazine, page 18.

Regards
ZULKIFLI HASAN

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