Australian Centre for Islamic Finance sets up sharia advisory board

Australian Centre for Islamic Finance sets up sharia advisory board


(Reuters) – The Australian Centre for Islamic Finance has set up an advisory board to help local businesses conduct sharia-compliant transactions, including developing financing options such as Islamic bonds, the centre’s director told Reuters.

The three-member board is the latest sign the industry is making headway despite Australia’s lack of regulation catering to Islamic finance, which follows religious principles such as bans on interest and pure monetary speculation.

The centre’s sharia board members might not have the global name recognition as some of their Gulf-based peers, but familiarity with Australian law would appeal to local firms, said Almir Colan, director of the centre, an education and training body.

“We need people who will be able to apply classical fiqh (Islamic jurisprudence) principles within a modern context – the increased complexity of financial products and commercial transactions needs specialists.”

The scholars have backgrounds in Islamic law and hold Islamic finance degrees from Melbourne’s La Trobe University, while the board also aims to guide local Muslims on commercial matters.

“Their work will not be limited to corporate finance and auditing for sharia compliance but will also serve the wider community in Australia with regards to all issues regarding finance and commercial transactions,” Colan said.

Last month, Melbourne-based First Guardian launched an Islamic pension fund in collaboration with local Muslim organisations to tap the country’s private pension system, the world’s fourth largest.

Sydney-based fund manager Crescent Wealth plans to launch an Islamic fund investing in commercial property this year as it continues to expand its range of products. (Editing by Eric Meijer)

Melbourne, Australia

Islamic Finance in the Land of Pope

Gulf ties could aid Islamic finance in Italy, supporters hope


Feb 18 (Reuters) – Bankers and academics in Italy are stepping up efforts to develop Islamic finance in the country, a campaign which could benefit from growing economic links between Gulf countries and the euro zone’s third largest economy.

Islamic finance has so far made only marginal progress in continental Europe, mainly in France and Germany. But Italy is seeking trade and investment with wealthy Gulf Arab states as a way to grow out of its debt problems.

Kuwait’s sovereign wealth fund announced this month that it would invest 500 million euros ($685 million) in Italian companies in coordination with the Italian government’s own strategic investment fund. Italy made a similar deal with Qatar last year.

Italy’s trade ties with the Gulf are booming; its exports to the United Arab Emirates hit 5.5 billion euros in 2012, a 16.7 percent rise from 2011, government data shows.

Only about 2 percent of Italy’s population of 61 million are Muslim. But the hope is that as Gulf companies and investors increase their activities in Italy, Islamic finance – which follows religious principles such as bans on interest payments and pure monetary speculation – will follow.

Italian firms raising loans could use Islamic structures to attract sharia-compliant banks from the Gulf, for example. Italian bonds and equities could become attractive to Islamic funds if they were certified as sharia-compliant.

“I think the development of sharia-compliant products is an important opportunity for Italy – it might become one of the drivers to get finally out of the economic crisis,” said Enrico Giustiniani, analyst at Banca Finnat Euramerica in Rome.

“There is quite a big interest from Islamic funds and Islamic institutional investors to invest in Italy, especially in this period with many companies on sale.”


Banca Finnat has gone as far as designing a hypothetical index of sharia-compliant stocks, which features some of the country’s best-known luxury brands, Giustiniani said.

“A specific index still does not exist, but the interest is very high. The luxury sector is a brand required by foreign institutional investors and it is a very important growth driver for our country.”

Gulf investors have already shown considerable interest in Italy’s luxury good firms; in 2012, for example, Italian fashion brand Valentino was bought by Qatar’s royal family.

Fondazione Istud, a Milan-based business school, plans to establish an Islamic finance position this year, intended as a venue for industry research and to develop proposals aimed at Italian decision makers.

This would be the first structured attempt to provide industry information and influence legislation, Marella Caramazza, director-general of Fondazione Istud, told Reuters.

“Certainly regulators and practitioners seem to demonstrate a general interest on this subject in our nation, but at the same time tend to have a very conservative approach.

“At this stage, we are trying to involve stakeholders and gather funds at different levels, in order to begin with the activities,” Caramazza added.


These activities should include a review of existing regulations, mainly those covering real estate registration taxes, said Hatem Abou Said, representative in Italy of Bahrain’s Al Baraka Banking Group (ABG).

Tax rules are particularly important for Islamic finance because many of its asset-based transactions are vulnerable to double taxation under conventional accounting methods; addressing such barriers could lure Islamic banks to the market.

Currently, however, only broad discussions are taking place with Italian policy makers and no specific agenda is in place, said Francesca Brigandi, president of COMEDIT, the Italian-Mediterranean and Gulf Countries Chamber of Commerce.

While political and legislative hurdles remain, Italy’s central bank is no stranger to Islamic finance as it monitors the sector on a regular basis, though it does not have a specific group studying Islamic finance, said a central bank spokesman.

Its research department has conducted formal studies, held seminars on Islamic finance as far back as 2009, and last year co-hosted a forum with the Malaysian-based Islamic Financial Services Board, one of the industry’s standard setting bodies.

Rony Hamaui, chief executive of Milan-based Mediofactoring, a fully owned subsidiary of Intesa Sanpaolo, Italy’s biggest retail bank, said his and other Italian companies had explored Islamic financing options in the past but did not do deals, partly because of a lack of regulatory support in Italy.

However, deals could start to materialise – perhaps involving Italian firms overseas – even without government support, as companies increasingly seek to broaden their funding sources, Hamaui said. “Liquidity is becoming a more and more important problem in Europe.” (Editing by Andrew Torchia)

Duomo, Milan, Italy

Islamic Finance Isn’t Just About Religion – Sometimes It’s Just Good Business

Islamic Finance Isn’t Just About Religion — Sometimes It’s Just Good Business
By International Business Times

By Kathleen Caulderwood Available at:’t-just-about-religion—-sometimes-it’s-just-good-business-265197

Eric Meyer, a hedge fund manager, finds himself flying from Connecticut to the Persian Gulf at least once every four to six weeks.
Islamic Finance Isn’t Just About Religion — Sometimes It’s Just Good Business

His favorite city there is Dubai, where he’s had an office in the Jumeirah Lakes district for the past five years. It’s a long way from his native Missouri, where he grew up with no idea that his future career in finance would depend upon the Gulf States, a few sheiks and Shariah law.
“When I started out in finance, the Middle East to me was just a very interesting place to read about,” Meyer said.
Today, he’s the president, CEO and chairman of Shariah Capital, a U.S.-based company that creates and customizes Islamic finance products.

A bank staffer speaks on the phone inside the Bank Islam branch office in Shah Alam, outside Kuala Lumpur, Nov. 6, 2013. Reuters
Meyer got into the business after visiting a portfolio-manager friend in Kuwait more than a decade ago who happened to be related to the president of one of the country’s largest banks.
“So his uncle said, ‘I wish one of you guys would take Islamic finance seriously, because the guy who takes it seriously can really add tremendous benefits,’” Meyer recalled.

That’s how it started.

This year will be Meyer’s 15th in Islamic finance, and it’s going to be a good one.
On Thursday he and two partners (one American, one Saudi) announced their new wealth management firm, Mahal Thqa Financial Advisors. They’ll offer independent advice to Islamic investors on ventures that follow Shariah rules.

Meyer is one among many in the industry who expect big things for Islamic finance in the next few years. “There’s not that many people trying to build out Islamic finance, but there should be,” he said. “It’s just hard work and common sense.”
Though the concepts are hundreds of years old, a modern version of Islamic finance has evolved in recent generations to satisfy the needs of people looking to invest without going against their religious beliefs. Besides the moral incentives, there’s real money to be made. The Shariah-compliant sector has grown to $1.6 trillion in assets over the past three decades, according to the Global Islamic Financial Review. It’s becoming hard to ignore – even for the West.

As the markets of the Gulf countries and Malaysia – two of the largest for Islamic finance – begin to recover, Muslim and non-Muslim financiers from around the globe have noticed the growing investor pool with enough cash to make a serious impact.
“We’ve just come through a very difficult period for the financial sectors,” said Toby O’Connor, CEO of the Islamic Bank of Asia, at the Bloomberg Link Doha Conference in April. “We’ve seen enormous change within the big banks – in some cases they’ve pulled out their lending limits to emerging markets.”

In Africa, a handful of countries have already laid the groundwork to enable Islamic banking, and some of London’s newest landmarks were built thanks to Shariah-compliant bonds. Even America’s Goldman Sachs has made forays into the sector, albeit with mixed results. This year also marks the very first Islamic finance program for beef exports in Brazil.

“What you are seeing is an opportunity for Islamic finance to fill some of the voids created by pullback in the conventional markets,” O’Connor said, and he cited the sukuk market as an example. “Sukuk” is an Arabic word that translates literally to “certificates” (it’s always plural) but is understood to represent a bond-like product, though the comparison is not precise.
“As interest-bearing transactions are prohibited under Islamic commercial law, sukuk are used to raise funds using various permissible contracts,” said Habib Ahmed, a professor of Islamic finance at the Durham University Business School, and Sharjah chair in Islamic Law and Finance at the School of Government and International Affairs.

Basically, Islamic investors can’t make money from money. There must be real assets involved that can be easily identified. A sukuk holder can receive rental payments from the leasing of a specific property but cannot lend money to a leasing company.
There are also many places where the money should not be spent. Funds cannot be spent in ordinary banking activities, or fund projects like tobacco or alcohol production. To ensure compliance, Shariah scholars regularly audit financial activities.
It’s generally understood that money will be used to finance projects that are socially responsible. That way, even if someone purchased a sovereign sukuk, they know the money will be spent on activities that promote social good.

Ahmed listed 14 types of sukuk that can be debt-based, asset-based, equity-based and agency-based. The most popular kind are leasing-based (also called ijarah), which is raising sukuk for real estate. Sorting through the products can be complicated, but that hasn’t stopped sukuk issuances from increasing globally as non-Muslim investors have become more interested.
“On the demand side, most purchases are pious Muslims who believe that, for all their imperfections, the sukuk are morally superior to regular bonds,” said Timur Kuran, professor of social science and economics at Duke University.

But religion isn’t the only reason.

“A second source is people looking for diversification,” Kuran said, adding that the social-responsibility aspect is appealing in the same way that an environmentally conscious investor will put money into “green” funds.
Standard & Poor’s released a report on Feb. 5 predicting that sukuk issuances worldwide will top $100 billion in 2014 thanks to higher demand from the Middle East and growth in Malaysia – the world’s largest market.
It’s this combination that makes Africa a burgeoning destination for Islamic finance.

“We believe that for investors looking to buy Islamic bonds outside of traditional markets like Asia and the GCC region, Africa may soon offer a fresh alternative,” the S&P report predicts.
In October, a Nigerian state issued a Shariah-compliant bond, a seven-year instrument that raised about $62 million from domestic pension funds and international investors. Senegal has also announced plans to issue a $200 million sukuk in the first quarter of the year.

Governments that issue sukuk benefit from a new and broad investor base, and the possibility to build up their reserves.
“Sukuk offer an opportunity to tap the large pool of funds from the Middle East and East Asia,” said Anadou Sy, an Africa economist at the Brookings Institute.

Beyond the fact that Africa has a sizeable Muslim population, non-Muslims are also looking for ways to diversify their holdings, Sy said. Also making sukuk more attractive is that they lend themselves to infrastructure projects, which are desperately needed in sub-Saharan Africa. “Domestic revenues will not be enough to finance the large infrastructure projects that governments plan to undertake,” Sy pointed out.

The top 20 Islamic banks in the world have been growing by about 16 percent annually for the past three years, according to Ernst & Young, which has attracted the attention of investors in the developed world as well. The 2013 World Islamic Economic Forum in November was held in London, where Prime Minister David Cameron announced an ambitious plan. “I want London to stand alongside Dubai and Kuala Lumpur as one of the great capitals of Islamic finance anywhere in the world,” he said in a speech.
The U.K., where Musims are 5 percent of the population, already has more Shariah-compliant banks that any other Western country. Shariah-compliant finance is responsible for building the London Gateway and the Shard – the tallest building in Europe – as well as significant investments in a soccer stadium in Manchester and even parts of the Olympic Village.

“There are some countries whose instincts sometimes incline toward pulling up the drawbridge. But if they do so, they fail to recognize that the way the world is changing affects their future success,” Cameron said. “Britain will not make that mistake.”
Islamic finance is becoming more common in the United States as well, though there are more challenges than in Britain.
“When you look at the U.S., there are a few key challenges to growth in the sukuk market – the first is political will,” observed Kavilash Chawla, managing director of Nur Global Strategies, a Chicago-based Islamic finance advisory firm.

Chawla cited Cameron’s speech in London, and noted, “It’s very unlikely we would ever see any sort of similar language out of the U.S.”
He also referred to problems Goldman Sachs had when it attempted to issue sukuk. In 2011, the bank announced that it would issue $2 billion worth, but just over a year later, scholars from Abu Dhabi Islamic Bank determined that their program was not compliant with Islamic law, since the funds would go to the bank’s non-Shariah business.

Despite that setback, many Americans are still looking to get involved.

“Retail consumers are looking for financial products that are aligned to their value base,” Chawla said, adding that corporate non-Muslim consumers are also interested. “From a pricing perspective, it’s attractive,” he said.

Part of what Chawla’s firm does is facilitate connections between American companies and Islamic investors. He gave an example of one Midwestern company he’s advising on Shariah-compliant financing to help appeal to investors from the Middle East. The management didn’t know much about Islamic finance, but it is interested in making the process work. The main problem with his American customers is that they think the process is more complicated than it is. But this will improve with time and familiarity, he said.
Shariah, after all, is a particularly freighted term in the U.S., where it carries negative political connotations. That’s partly due to a general lack of understanding of what Shariah entails, particularly relative to the financial world. In August, for example, North Carolina became the country’s seventh state to sign into law a bill that officially prohibits its judges from “considering” Islamic law.

But on the corporate side, politics aren’t the problem.
“The clients don’t understand how you access some of the Shariah-compliant capital that’s out there,” Chawla said. “They don’t have a deep understanding of how to structure sukuk or how it affects costs.” Explaining those things is part of his firm’s role.
Many of the companies Chawla works with are non-Muslim and are simply trying to tap into a market with major potential. He said he’s working with a large U.S.-based project in the Midwest that’s making forays into the halal food industry and wants their finances to align with Islamic law.

Though many of these ideas are new to American companies, they’re more familiar farther south. According to the CIA World Fact Book, Muslims represent less than 1 percent of Brazil’s population, but more than 40 percent of the country’s farmers are well-versed in the nuances of halal – the process of slaughtering animals according to Islamic law, which only takes an extra two or three seconds, according to Juan Fernando Valdivieso and Muneef Tarmoom, co-founders of Abu Dhabi Equity Partners, an investment firm that recently initiated Brazil’s first Shariah-compliant livestock finance program. They’ve been working in Brazil for years, and said that many Islamic practices are well-known to farmers there. “They’re extremely accustomed to it because it’s an emerging market for them,” Valdivieso said, adding that almost all exports of halal beef will go to countries in the Gulf.

The pair has also organized Shariah-compliant financing for ethanol, sugar and soy exports. To them, Brazil represents an ideal place to work. “Given the significant trade between the Middle East and Brazil, it was certainly an area we were looking at from a macro perspective,” Tarmoom said, citing Brazil’s high favorable interest rates, among other factors.
“It allows us to extract a larger profit rate, while keeping the risks contained,” he said, adding that now is the time to move in these markets as European and global banks begin to scale back their exposure.

To Tarmoom and Valdivieso, it’s a bet on South-South trade – trade between emerging markets – that they feel is only going to keep growing. And given the fact that a large proportion of the populations in developing countries in the Middle East, South Asia and Africa will be looking for Shariah-friendly ways to finance their projects, they and others promoting these products should be well-placed for the future.

Zulkifli HasanIMG-20120127-00347
With late Ashgar Ali Engineer in Bangkok

Islamic finance ‘relevant to all faiths’

Islamic finance ‘relevant to all faiths’

Available at:

A majority of non-Muslim UK consumers believe that Islamic finance is relevant to all faiths, said a recent survey.

The first national survey by UK-based sharia-compliant retail bank Islamic Bank of Britain pointed out that about 66 per cent of those surveyed felt that sharia finance is appropriate in a modern western society.

The survey, which was conducted by 2Europe, an independent research company, questioned 300 British Muslim and non-Muslim consumers across the UK.

It was aimed at finding the British consumers’ understanding of and attitudes towards Islamic finance.

The survey said that about 60 per cent of the consumers agreed that Islamic banking works different to the way conventional banking works, and it pays profits rather than interest on savings products and charges rent not interest on their home finance products.

About 58 per cent of those surveyed considered Islamic finance to be an ethical system of finance and one which considers the impact of its activities on society

A specific focus on the 200 Muslim customers and prospective customers surveyed showed that about 36 per cent of Muslims currently use sharia-compliant finance, of which nine per cent use it exclusively.

A further 45 per cent of Muslims, who don’t currently use sharia-compliant finance, are very likely to consider doing so in the future, it said.

Sultan Choudhury, managing director of IBB, said: “IBB has long been considered the pioneer of sharia-compliant retail banking. It’s therefore fitting for the bank to mark its 10-year anniversary by revealing findings from the UK’s first survey into British consumers’ attitudes of Islamic finance.

“The insights also come at a time when the UK Islamic finance sector as a whole is set to embark on several important developments, including the launch of a Sovereign Sukuk, due later this year.” – TradeArabia News Service


Innovate with Shariah entrepreneurship

Innovate with Shariah entrepreneurship–innovate-with-shariah-entrepreneurship

The development of the concept of Shariah entrepreneurship is salient to harness the business potential of Shariah educated personnel, in a bid to turn Malaysia into a centre of excellence for Shariah-compliance.

Shariah entrepreneurship will see many Shariah educated young people enter into the business arena, and will altogether create the need for global brands to seek Malaysia’s advisory services in certifying their product as Shariah-compliant, Amanie Group chairman Dr Mohd Daud Bakar said.

“We need to engage the various stakeholders in the industry to bring about innovative solutions. “These solutions are needed to get the industry to move forward.

One such solution is the brand new concept that will encourage Shariah entrepreneurship.” Dr Mohd Daud said in an exclusive interview with The Malaysian Reserve.

Dr Mohd Daud, who recently won the “Anugerah Tokoh Perdana” for his contribution to the Shariah advisory in Malaysia, said a growing number of Muslims are inquiring about whether mainstream or even exclusive product brands are acceptable for them, and this is where Malaysia’s advisory expertise will be needed.

The award, handed over by His Majesty Tuanku Abdul Halim Mu’adzam Shah, the 14th and current Yang diPertuan Agong of Malaysia, is one of the highest awards rewarding Malaysians for their contributions to society.

Nevertheless, Dr Mohd Daud said the Malaysian Shariah entrepreneurs would be able to tie up deals with global or regional brands by providing Shariah advisory to the brand owners.

“Overall, Shariah scholars will not be advisors only, but will own companies that will own brands, rebrand products and altogether become agents or producers and exporters of high end products,” said Dr Mohd Daud.

While admitting the future of Islamic finance and banking rests on the strict application of Shariah principles, Dr Mohd Daud said it was time for Malaysia to move an edge further to ensure greater inclusiveness in the Islamic economic framework.

“To be inclusive is for Malaysia to create opportunities for the Shariah scholars to be involved in entrepreneurship, that will help them set up businesses in order to advise potential new and international clients on the Shariah framework,” Dr Mohd Daud said.

Expanding on the subject, Dr Mohd Daud said the success of educating the current generation, which has resulted in steady growth in the number of Shariah educated students, will be wasted if nothing is done to increase the job portfolios in the marketplace.

Dr Mohd Daud, who is also the Bank Negara Malaysia chairman of the Shariah advisory council also said Shariah entrepreneurship will open Malaysia to a whole new level of economic dynamism.

“Malaysia will become the source for product origination as it will be turned into a centre where branding, re-branding and reproduction will generate new opportunities,” Dr Mohd Daud said.

This will bring a boom in global exportation and trade, positioning Malaysia as a top provider of halal certified international brands in information technology, fashion, cosmetics and consumer goods.

Zulkifli Hasan
With Dr Mohd Daud Bakar in Dubai