Global Islamic finance assets reached $1.3 trillion in 2011 – report

Global Islamic finance assets reached $1.3 trillion in 2011 – report

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A new report from The CityUK’s UK Islamic Finance Secretariat (UKIFS) indicates that Islamic finance assets worldwide continued a long run of growth to reach an estimated $1.3 trillion in 2011, 150 per cent up over the previous five years. Despite political unrest in some countries the industry has continued to expand, not only in its core markets of the Middle East but also in South East Asia and offshore jurisdictions such as Bermuda.

Islamic funds, for example, reached a new high of $58 billion in 2010, with the available pool about ten times larger at over $500 billion. Even so, competition is fierce, with average management fees worldwide down from 1.5 per cent in 2006 to 1.0 per cent in 2011.

Keith Phillips, Executive Director, UKIFS, comments, “Our report once again shows that the UK continues to maintain its position as the leading Western provider of Islamic finance with assets of $19 billion.
“The UK also benefited from a globally buoyant sukuk market in 2011, with issuance up 60 per cent to $84 billionn. This was reflected in ten new sukuk listings on the London Stock Exchange’s markets in 2011 and two in early 2012. There are now 37 sukuk with a combined value of $20 billion listed on the London Stock Exchange’s markets. Additionally, seven exchange traded funds and two exchange traded products are also listed on these markets.”

In the UK, banks, sukuk issuance and exchange traded products are buttressed by the strong infrastructure of professional support for Islamic finance deals and transactions. This includes over 25 major law firms and the largest four professional services’ firms, and this has yet to be seriously rivalled by any other European financial centre.

The UK is also making an increasing contribution to the development of Islamic finance education and skills with four professional institutions and 10 universities and business schools offering qualifications. These include the Chartered Institute of Management Accountants, CassBusinessSchool, the University of East London and DurhamUniversity. With shari’ah-compliant finance utilised for the redevelopment of Chelsea Barracks and the construction of the Shard of Glass in London, Islamic finance also has a crucial role to play in infrastructure development in the UK.

Considerable potential exists for expansion of the industry worldwide, although appropriate legal and regulatory structures are crucial for its development in individual countries. The work that is now being undertaken through UKIFS with its six practitioner-led workstreams covering topics from wholesale banking to skills is looking to address these issues by creating more efficient structures and processes and applying greater innovation to drive market development.


Dubai Desert, with my good friends from South Africa and Singapore

Morocco eyes first Islamic bank launch in 2013

Morocco eyes first Islamic bank launch in 2013

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Foreign Islamic banks will be allowed to take up to 49 percent of Morocco’s first fully-fledged Islamic bank in 2013, as the country aims to become a regional financial hub, a government minister said on Monday.

The government will submit to parliament a draft bill with a set of regulations for the introduction of Islamic finance products in the country within the next few weeks, General Affairs and Governance minister, Najib Boulif, told Reuters.

“We expect parliament to approve the bill before the end of this year.

The current plan is to allow a gradual introduction of Islamic banks to preserve the competitiveness of existing (conventional) banks,” said Boulif.

The draft bill will be added as a chapter to the country’s Banking Law, providing a set of regulations on all Islamic finance products which specialised lenders will be able to offer from Morocco, Boulif said.
It is the first time that the Moroccan government, led since December by the moderate Islamist Justice and Development Party (PJD) has detailed how it intends to develop Islamic finance in the country of 34 million.

Morocco does not allow fully-fledged Islamic institutions but started in 2010 allowing conventional banks to offer a limited set of Islamic financial services products although customers complain they are subject to higher fees than conventional banking products.
So far only AttijariWafa, the country’s biggest bank which is indirectly controlled by a holding company owned by Morocco’s ruling monarchy, offers four such services based on Murabaha financing but only for personal finance.

Immediately after parliament approves the law, Moroccan authorities will allow local banks and foreign Islamic banks to set up the first Morocco-based Islamic lender, Boulif said.
“Local banks will be allowed to take at least 51 percent of its capital and as much as 49 percent will go to foreign Islamic lenders.

There is a very strong demand from abroad for such a project,” said Boulif, himself a member of the PJD.

Traders in Casablanca cite Qatar’s International Islamic Bank as one of the likeliest foreign Islamic banks to want a foothold in Morocco.
“We thought it is best to start with one Islamic finance institution as we wish to assess closely the experience to ensure its success.

If it proves to be a success within six months, then nothing should stop us from authorising more Islamic lenders,” added Boulif.

In allowing fully-fledged Islamic finance institutions to operate in Morocco, Rabat aims to overcome what has become a chronic shortage of liquidity, speed up economic growth and help its ambitions to develop a regional finance hub in Casablanca.
“Our economy is in desperate need for a push to help it jump to an economic growth pattern above the (annual) 4 percent we have had in recent years,” said Boulif.

When in opposition PJD legislators had said the development of a fully-fledged Islamic finance system in Morocco would add 2 percentage points to annual GDP growth.

“Morocco is struggling with liquidity shortage that forces the central bank to inject between 30 and 35 billion dirhams each week (into the banking system).

This shortage hurts the financing of investment and impacts lending growth,” Boulif said.
Morocco is also working on a developing a regional financial hub known as the Casablanca Finance City with a view to winning business with other countries in the north and west of Africa.

“We are keen to capitalise on the stability we enjoy here to turn Morocco into a regional Islamic finance platform,” Boulif said, adding however that Tunisia and Libya may also harbour similar ambitions.


University of Wales, Lamperter

Islamophobia: Myth or Reality

Islamophobia: Myth or Reality

I would like to share my recent presentation on the issue of Islamophobia at Pusat Islam, Kuala Lumpur to staff of Islamic Religious Council of Federal Territories and representatives of the non-governmental organizations. It is important to note that the OIC has already initiated the establishment of the OIC Islamophobia Observatory Report to specifically monitor, promote and create awareness on the issue of Islamophobia. The First Annual Report on Islamophobia by the OIC Observatory was issued in May 2007 to May 2008 followed by the Second Annual Report in June 2008 to April 2009, the Third Annual Report in May 2009 to April 2010 and the Fourth Annual Report in June 2008 to April 2009 May 2010 to April 2011.

For further reading, click here: Islamophobia: Myth or Reality

Islamophobia as a world view involving an unfounded dread or hatred of Islam and the subsequent fear and dislike of all Muslims. It also refers to the phenomenon as practice of discriminating against Muslims by excluding them from social, political and economic life.(The Runnymede Trust)

The effects of Islamophobia can be several and it impinges on micro, meso and macro levels of the society. Consequently, these effects inflict economical as well as social difficulties against people and nations. Foremost, The Runnymede Trust accentuate a systemi disadvantage where this could stand in relation to everyday attacks on Muslims as they can be spat on, mental and physically harassed, molested, abused and so forth based on a Islamophobic motives


With Yvonne Ridley, a British journalist and human right activist, former Taliban captive and finally reverted to Islam.

What Can We Learn From Islamic Finance?

What Can We Learn From Islamic Finance?

Otaviano Canuto Vice President, Poverty Reduction, World Bank
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In over 70 countries, from financial centers in Malaysia to the Middle East, Islamic finance has been growing rapidly around the world. In fact, Shariah-compliant financial assets have increased from about US$5 billion in the late 1980s to about US$1 trillion in 2010. Even more impressive is that this class of financial instruments appears to have avoided many of the worst effects of the recent crisis, making it an increasingly attractive investment vehicle.

Given its rapid growth and relative stability, are there lessons we can garner from Islamic finance? Three years after the onset of the global financial crisis as regulators are still grappling with how to deal with predatory lending practices, opaque derivatives, and overly leveraged financial institutions can Shariah-compliant finance challenge our notion of conventional banking?

Perhaps it can. By and large, Islamic finance relies on the core principles of Islam concerning property rights, social and economic justice, wealth distribution, and governance. Two of its main tenants are the prohibition of interest on debt in any form and the removal of ambiguous contracts to enhance disclosure and proscribe deception. Among its other key precepts is a commitment to back all financial contracts by assets and activities in the real economy, as well as an emphasis on the principles of morality and ethics in conducting business.

According to the most recent Economic Premise, authored by World Bank Managing Director Mahmoud Mohieldin, these underpinnings have generally helped Islamic banks escape some of the worst effects of the 2008 financial crisis. To be sure, Mohieldin notes that “The recent financial crisis affected the asset quality of conventional banks adversely. In contrast, as shown in recent research, Islamic banks had higher asset quality, were better capitalized, and more likely to continue their financial intermediation role during crises than their conventional counterparts.” As they were not exposed to subprime and toxic assets and had instead maintained a close connection to the real sector, only when the real economy contracted and real estate prices dropped did Islamic financial institutions begin to feel the second round effects of the crisis.

Yet as Islamic finance continues to grow, some challenges still need to be met. For example, the Economic Premise notes that many aspects of Islamic finance suffer from emulation and reengineering of conventional instruments, which result in inefficiencies and higher transaction costs. In addition, challenges associated with Basel III core capital requirements — which place Islamic financial institutions at a disadvantage need to be addressed. By dealing with these and other issues, Islamic finance could increasingly meet the preferences of local cultures, augment financial inclusion and intermediation, and contribute to financial stability and development in the years ahead.


Sultan Qaboos Mosque, Muscat, Oman

Arab Spring leaves fertile ground for growth of Islamic finance

Arab Spring leaves fertile ground for growth of Islamic finance

By Charlotte Kan Available at:

In the countries swept by the Arab Spring, recent elections were dominated by Islamist parties. This will further encourage the development of the Islamic finance market, experts believe.

“The recent free elections in a number of the affected countries have shown a desire by the people to organise their financial affairs in a manner that reflects their religious beliefs,” notes Tariq Hameed, managing associate at Simmons & Simmons in Dubai.

In a report entitled “Blue Print for Islamic Finance Following the Arab Spring” published in February 2012, Hameed notes that the parties winning the most seats in the recent elections in Tunisia, Morocco, Egypt and Libya have all stated their support for Islamic finance.

“The countries affected by the Arab Spring will be expected to deliver economic solutions that directly affect the people that recently voted for them,” he argues.

Apart from the desire of the population to move towards a more religious society, there are several reasons why Islamic finance should proliferate in the countries that witnessed the protests of the Arab Spring.

First: the current lack of banking facilities.

A 2010 study by Dr Dhafer Saidane for the United Nations notes the proportion of people with access to banking services in some North African countries is extremely low – approximately 25% in Morocco and 33% in Tunisia.

Hameed notes only 10% of Egyptians have access to a bank. “There was a lack of offerings,” he says. “Many didn’t engage with the conventional banking system.”

For the new governments ready to introduce their people into the financial system, Islamic banking therefore represents an attractive alternative to the ‘conventional’, distrusted Western banking system.

“Introducing Shariah-compliant current and savings accounts would therefore be important to draw people into the financial system,” Hameed says.

In Tunisia, the country where the Arab Spring movement allegedly started in December 2010 in the wake of Mohamed Bouazizi’s self-immolation in protest of police corruption and ill treatment, steps have already been taken to develop Islamic banking and finance.

In its Finance Act 2012, Nahda, the Islamist party which has claimed victory in Tunisia’s October 2011 elections, has incorporated several changes to facilitate the spread of Islamic finance practices, including a special taxation framework for Islamic banking and the introduction of a regulatory framework for Islamic bonds.

The Tunisian government not only supports the development of Islamic finance, but also sees it as a tool to turn the country into a finance hub in North Africa.

In reality, the industry in the region is up for grabs. Islamic finance has so far failed to take off in North Africa, which currently has less than a 1% share of global Islamic banking assets, according to a report by consultancy McKinsey.

“There are three factors that account for the relative underdevelopment of Islamic banking in North Africa; first the limited development of retail banking generally; second the lack of knowledge of Islamic banking amongst potential clients; and third the absence of (the former) government support,” said the African Development Bank in a report on Islamic Banking and Finance in North Africa published late last year.

So with governments across North Africa now openly supporting Islamic Finance, this is likely to change.

Away from retail and commercial banking, one opportunity could come from the development in Islamic microfinance offerings, Hameed notes, as institutions will have to serve demand from rural communities and micro-enterprises.

“The same institution could also provide the community with Islamic micro-insurance (micro-Takaful) to help low-income families to protect against health risks and micro enterprises to protect against property risks,” Hameed adds.

Islamic finance could also provide an answer to the need for infrastructure projects, with successful Islamic financing of infrastructure projects already in existence in Bahrain, Saudi Arabia and Bangladesh, Hameed notes.

“Islamic finance can play a prime role in financing big projects in North Africa that require large investments and significant borrowing volumes,” said Tunisia’s former finance minister, Jalloul Ayed, during a July 2011 summit on Islamic finance opportunities in North Africa.

Tunisia itself has financing needs of around USD 40 billion over the next five years, Ayed said, and could soon create a sovereign fund called “Fund for the Generations”.

There is a substantial need for project finance in North Africa given the poor state of much of the region’s infrastructure. Existing Islamic project financing covering 24 schemes in North Africa worth over USD 2.4 billion has already been approved, according to the African Bank for Development.

The newly elected governments of Arab Spring countries know too well that investing in infrastructure and real estate – in particular, affordable housing, of which there is a severe shortage in North Africa, thus fueling growth and creating jobs – is the only to stabilize the region politically and enhance social cohesion.

Many experts believe Egypt will pave the way for the industry’s expansion in the region.

“Egypt will be a great force in steering Islamic finance in a different direction. We will see the development of new products as the market which Islamic finance will serve is a different clientele, and will be needed to solve different problems. Al Azhar University in Cairo should play a role in developing Islamic finance in the country,” argues Sahar Ata, a senior lecturer in Islamic finance at the London School of Business and Finance.

Egypt, the most populous state in the region, already has the highest proportion of Shariah-compliant assets in relation to total bank assets (around 5%). The country is “where Islamic finance has the greatest potential”, the African Development Bank said.

However, despite promising prospects, there remain challenges for the Islamic finance industry before the potential of these markets can be reaped, Hameed believes. Strengthening of consumer protection laws, clarifying governance, and establishing central Shariah boards for finance will have to be addressed, he argues.


Trafalgar Square, London