5 Interactive Distance Learning Programs on Islamic Banking and Finance

Saturday, February 28, 2009

Rated Gulf Islamic Banks And Takaful Companies Resilient In Global Market Dislocation But Facing Risks

PARIS, Gulf Islamic financial institutions and takaful companies are feeling the repercussions of the current global financial market disruption less than most of their conventional counterparts because Sharia law prohibits interest-based financial products, according to a new report by Standard & Poor's Ratings Services. "IFIs didn't invest in the structured products that have hampered many conventional banks' financial profiles and performance," said Standard & Poor's credit analyst Mohamed Damak in the report, titled Rated Gulf Islamic Financial Institutions And Takaful Companies Have Shown Resilience To Global Market Dislocation, But They Are Not Risk Immune. "And most IFIs should be equipped to weather the financial downturn and keep the effects on their financial profiles at manageable levels." We expect takaful and retakaful insurers to continue to resist the toughening market environment. We attribute their resilience to sufficient liquidity flows--in part due to reportedly higher new business--to service normal claims levels, and to capital adequacy, which, despite being affected in the current climate, remains supportive of the ratings across the sector.Still, Standard & Poor's notes the squeeze that market conditions are putting on many Islamic banks and takaful insurance companies. "We see the liquidity dry-up, mounting pressure on the real estate sector in the Gulf Cooperation Council countries, the sharp correction in regional stock markets, and certain investments made by IFIs--mainly investment banks--in European or U.S companies and real estate as the main sources of stress," said Mr. Damak. Like their conventional peers, IFIs stand to post weaker financial performance and asset quality indicators, in our view, in the coming quarters. We believe that rated IFIs' financial performance will deteriorate because we expect them to book some market-related provisions covering their exposure to the dropping values of stock markets and to Sharia-compliant investment products (mainly sukuk notes and funds). The anticipated slowdown in loan growth, the inflated cost of funding because of tight liquidity, and the increased cost of risk in the Gulf region also stand to test IFIs' performance and constrain their growth. Liquidity management is challenging for IFIs due to the lack of liquid Sharia-compliant asset classes. We understand that IFIs' instruments for managing liquidity are scarce compared with those of conventional counterparts. "In our view, IFIs could take advantage of the current challenging times to innovate and broaden the offering of acceptable instruments for liquidity management," said Mr. Damak.Following the liquidity crunch, total sukuk issuance worldwide reportedly declined to $14.9 billion in 2008, compared with more than $34.3 billion a year earlier. Still, we continue to foresee long-term positive prospects for the sukuk market, with sustainable growth poised to come from the increasing popularity of Sharia-compliant financial instruments, governments' increasing openness to Islamic finance around the world, substantial investment and financing needs in the Gulf, and issuers' desire to tap investors from the Middle East and Muslim Asia.


Friday, February 27, 2009

Syarikat Takaful, Jaycorp reprimanded

BURSA Malaysia Securities Bhd yesterday publicly reprimanded two public listed companies for a deviation of more than 10 per cent between their unaudited and audited results for the fourth quarter.

Insurer Syarikat Takaful Malaysia Bhd reported an 18.2 per cent higher profit after tax and minority interest compared with its unaudited results for the quarter ended June 30 2008, while furniture- based Jaycorp Bhd announced a 37.9 per cent drop in audited profit compared to the unaudited numbers.

The exchange said both companies must carry out a limited review on their quarterly report submission. This must be performed by the companies’ external auditors for four quarterly reports.

Business Times

TIBBB, Youths & Sports Dept sign deal for Project Brunei Gold team

Exchange of documents between Hjh Lily (L) of Takaful IBB Berhad and Hajah Norlah of the Youth and Sports Department. - P MARILYN
A Memorandum of Understanding (MoU) was signed yesterday between Takaful IBB Berhad (TIBBB) and the Youth and Sports Department at the Ministry of Culture, Youth and Sports at Takaful IBB Berhad's headquarters, Dar Takaful IBB Utama in the capital.

Under the agreement, TIBBB will be providing the Group Personal Accident Takaful Scheme coverage package for Project Brunei Gold athletes and coaches for 12 months, throughout the duration of the 2009 Project Brunei Gold.

The insurance covers a total of 34 athletes and coaches/assistant coaches in three sports: karatedo (11 athletes and two coaches/assistant coaches), pencak silat (11 athletes and four coaches/assistant coaches), and cycling (four athletes and two coaches/assistant coaches).

The coverage will protect all athletes in the event of death and permanent total disablement due to accident or illness occurred within 12 months following the accident or illness.

It will also be extended to temporary disablement, where weekly benefits will be payable.

The tailor-made scheme is designed to provide 24-hour coverage worldwide during or after tournaments and trainings, including daily risk exposure.

Meanwhile, signing on behalf of TIBBB was its acting managing director, Hjh Lily binti Haji Kula, while the Youth and Sports Department was represented by its acting director, Hajah Norlah binti Haji Yaakob.

On hand to witness the signing were Syariah High Court judge and Takaful IBB Berhad Director Dato Seri Setia Ustaz Awang Haji Metussin bin Haji Baki and Permanent Secretary at the Ministry of Culture, Youth and Sports Dato Paduka Awang Haji Jemat bin Ampal.

Hjh Lily, in her welcoming address, said the development of the scheme was made possible by technical underwriting expertise and vast experience of TIBBB being 15 years in operation, as well as being the first takaful service provider in the country.


Pak Qatar Family Takaful assigned ‘A-’ rating

KARACHI: Pak-Qatar Family Takaful Limited (PQFTL) has been assigned an initial Insurer Financial Strength (IFS) rating of ‘A-‘ (Single A Minus) by JCR-VIS Credit Rating Co. Ltd. Outlook on the rating is ‘Stable’. The rating incorporates strong sponsor support from Qatar-based financial institutions having sound credentials, said the JCR-VIS report. The rating takes into consideration the focus of the company on establishing a strong control environment, development of manuals and standard operating procedures (SOPs) and implementation of MIS, which has also been deployed and tested in International Islamic Financial Institutions.

-- Daily Times

Etiqa Takaful On Track To Achieve RM1.4 Billion Premium

Etiqa Takaful Bhd is on track to achieve RM1.4 billion premium target for financial year ending June 30 as the life segment is showing continuous growth, Chief Executive Officer Mohd Tarmidzi Ahmad Nordin said today.

For the financial year ended June 30 last year, the company recorded a premium of RM1.044 billion, he said.

"We are the takaful company in Malaysia to cross the one billion mark. In fact, we are the biggest takaful company in the world. We are quite positive to realise the target," he told reporters after handing RM70,000 from Etiqa Takaful to the Fisabilillah Trust Fund.

Mohd Tarmidzi said the life segment contributes about 70 percent to the company's growth while 30 percent by non-life segment.

Currently, the company has about a million policy holders.

On the RM70,000 contribution, the International Centre for Education in Islamic Finance (INCEIF) chief academic officer and dean Prof Datuk Dr Syed Othman Alhabshi said the fund is to assist deserving students to pursue INCEIF's flagship company programme -- Chartered Islamic Finance Professional (CIFP) -- masters and doctorate programmes.

The fund, established by INCEIF in 2007, is the zakat (tithe) payables received from organisations and individuals that will be kept under the custody of an external trust body.

He said funds would be disbursed only with the instruction of the management trustee comprising five members, with two from INCEIF and three external parties.

As of today, 101 students from 21 countries have benefited from the fund to pursue their studies under the CIFP programme.

Ten students from six countries have been awarded financial aid for PhD programme and three students from three countries for the masters programme.


Thursday, February 26, 2009

SALAMA Restructures Top Management

SALAMA-Islamic Arab Insurance, one of the region’s leading Islamic insurance (Takaful) companies has announced that it has made some key reorganization in its top level management. The reorganization is part of a major shake-up of the business as it registers increase in customer base and premium collection. The reform will offer intellectual advantage by focusing more on attracting new investors in the wake of the global economic crisis. It is also aimed at improving the management structure to enhance focus on its existing and potential customers. Mr. Rafiq Halani has been elevated as General Manager – General & Health Takaful while Mr. Noel D’Mello has been appointed as General Manager – Family Takaful.

“This change is part of SALAMA’s growth strategy of becoming a major player in the UAE market and its efforts to becoming a customer focused organization. SALAMA is the largest Takaful and Re-Takaful operator in the world. This would provide us with a bigger part of a market that’s still growing despite the shortfall of liquidity in the markets. Following the increase in awareness about the benefits of Shari’ah compliant insurance SALAMA UAE has recorded an increase of 74% growth in the premium revenue in 2008 (over 2007) while the Group’s overall revenues were increased by 42% during the same period. This revamp of leadership at SALAMA will mark a new chapter in growth and prosperity for the company. The new talent will bring fresh perspective into the boardroom”, says Dr. Saleh Malaikah, Vice Chairman & CEO of SALAMA.

On his new role, Mr. Noel D’Mello commented, “The Family Takaful products designed by SALAMA has received a good response in the UAE market in 2008 and we aim to be the preferred Takaful insurer for the residents of the UAE. I am fortunate to have a professional and enthusiastic team supporting me and in my new role I plan to take the business to greater heights. My sincere thanks go out to the excellent Distribution Partners who support us in distributing the Family Takaful products across the UAE and I look forward to supporting them even more in my new role”. Meanwhile Mr. Rafiq Halani on this occasion said “we are determined to achieve the strategic objective of SALAMA, i.e., making quality takaful solutions accessible and affordable to the people of the UAE. He further stated that , “Takaful is growing around in the Muslim world, especially the Middle East; our insurance schemes meet all the requirements of Shari’ah besides offering features and benefits of conventional insurance policies – this will ensure that our customers get the best of both worlds.”

The company was nominated for Best Takaful Operator and Best BancaTakaful Operator at the ‘Islamic Business & Finance Awards 2008 by CPI Financial. It has a paid-up capital of US $300 million and is listed at the Dubai Financial Market.

(Eye of Dubai)

Tuesday, February 24, 2009

Foreign insurance firms are still welcome

Mohammed Elsidafy: The Ministry of Economy approved recently to licence four new foreign firms, including three Takaful insurance companies and one health insurance firm, said Abdul Muttalib Mustafa, Chief Executive of Oman Insurance Company.

Despite the market not needing new insurance companies, Mustafa called not to close the door on the foreign firms wishing to work in the UAE, provided that they operate via their capitals, not through capitals obtained from inside the market.

Meanwhile, a report issued by Dubai Chamber of Commerce and Industry's (DCCI) Economic Research Department on the future of insurance sector in the UAE is positive due to government measures and individual's high share in the Gross Domestic Product (GDP), according to Mustafa.

Depending on low demand for life insurance and car insurance's acquisition of the biggest share of non-life insurance, there are good opportunities to launch new attractive insurance products, like property insurance and health insurance, he said.

The DCCI's Economic Research Department had issued a report on the future of insurance sector in the country during international financial crisis as a reply to another report issued by Business Monitor International (BMI). The DCCI's report said the long-term prospects for the country's insurance sector look bright despite the short-term adverse impact of the economic slowdown.

The UAE had come third in the insurance business environment ratings (IBER) publishing by BMI in December. The IBER covered 10 countries in the Middle East, which took the following positions; South Africa, Israel, UAE, Bahrain, Saudi Arabia, Morocco, Oman, Qatar, Kuwait and Egypt.

According to the BMI's report, the UAE did not occupy a higher position due to the smallness of life and non-life insurance segments, situation of financial infrastructure and openness of each segment to new entrants.

However, Mustafa refuted what the report stated that the UAE obtained 5/10 in the rating of openness to foreign firms wishing to enter into the UAE market.

He said this is different from reality, as 28 foreign firms out of 53 are working in the sector. This means the foreign firms have a share of 53 per cent of the market.

The BMI's report called for more flexibility in legal legislations related to the insurance sector in the country and to improve the sector's financial infrastructure. It also called to draw up more policies related to transparency in the sector. Mustafa said: "Though the individual's spending on insurance in the UAE is low compared to developed countries, there are important government measures indicating promising future horizons in the field of the sector's financial infrastructure through the spread-our of health insurance in Abu Dhabi and other emirates.

In addition, a federal decree was issued recently, stipulating that any health services provider should not practice its work without having a profession risk insurance document."

Meanwhile, insurance expert Salah Al Halyan said the insurance sector has been affected by the fallout of the global financial crisis. He asked insurance firms to focus on profits of insurance activities rather than those of other investment sectors.

They should concentrate on profitable products and should review their assets to get rid of costly assets that might bring about new losses. Al Halyan expected the insurance sector to face big challenges as a result of a number of elements, primarily lack of liquidity which hit many projects, especially real estate, and which might lead to a retreat in insurance premiums.

Second is the likelihood of a drop in demand for insurance since some firms have cut down on part of their business. Also life insurance premiums have been affected by the departure of part of the labour because some projects have been stopped.

Another element within the challenges facing the sector is represented in investment by some insurance companies in the financial and realty markets, the two most affected by the crisis.

Also reinsurance companies have asked insurance firms to make reductions in insurance premiums and commissions. And world financial classification companies have reviewed the financial classification of local insurance companies as a result of the market situation.

Takaful market

Mithaq Takaful Insurance, a public joint stock UAE company with a capital of Dh150 million and listed on Abu Dhabi Exchange, has announced it will offer services to the public, bodies and companies through branches in Abu Dhabi and Dubai. It also announced it has signed a number of pacts with big world highly-classified firms in the field of Takaful reinsurance.

Through reinsurance agreements with world companies, Mithaq aims to avoid all potential risks and to achieve the highest security degrees.

Board Chairman Abdullatif Al Shamsi said that Mithaq has actually started operations through products compatible with the Islamic insurance market.

(Business 24-7)

Emirates NBD awards winners of the umrah promotion

Emirates NBD the region’s largest bank in terms of assets, is pleased to announce the winners of the Umrah promotion for the Takaful & Savings Programme as Mr. Khalifa Khamis Naid Bakhit Al Kaabi, whose mother was handed the prize on his behalf; and Ms. Kristine Manalo Sanjuan.

The Takaful & Savings Programme is a Shari’ah compliant financial planning solution established to help achieve financial goals in life and financially secure the future of loved ones. Customers who signed up for the Takaful & Savings Programme during the promotional period were entitled the chance to win a very special, tailor made Umrah package or AED 15,000 in Dnata travel vouchers. This is another successful initiative derived by Emirates NBD to promote financial growth and development within the community.

Saif Al Mansoori, Head of Marketing for Consumer Banking and Wealth Management at Emirates NBD stated, “We are delighted to award the winners of this promotion. Emirates NBD is very proud of the progress that the Takaful & Savings Programme is making and how popular it is becoming. People have become more aware of the importance of financial security and are eager to achieve it. Emirates NBD is pleased to provide them with the means to secure their futures and give that security to their families.”

Emirates NBD is a pioneering financial solutions provider within the UAE. The bank is fully committed to offering the best banking products and services to its valued customer base and to continuing to develop and facilitate the latest, most beneficial and innovative banking methods.


Thursday, February 19, 2009

Aslam Omar and Javed Mansoor on Amana Takaful Insurance Board

Two eminent personalities, Mr. Aslam Omar, an eminent businessman, entrepreneur and industrialist from the apparel, food and plastic manufacturing sectors and Mr. Javed Mansoor, leading legal personality joined the board of Amana Takaful Insurance PLC recently.

Mr. Omar is presently the Chairman of Kuruwita Textile Mills Ltd., Managing Director of Phoenix Industries Ltd. and Phoenix Ventures Ltd. He also sits on the Board of Directors of Brandix Lanka Limited and is the Director-in-Charge of the Brandix Accessories Division.

Mr. Omar also has experience and competence in setting up international operations, example of which is his efforts to expand the sewing thread manufacturing facility and also setting up an overseas sewing thread manufacturing plant in Bangladesh. He is also well reputed for his versatility in the industries he has ventured into by successful backward and forward integration strategies.

He is a Fellow Member of the Institute of Chartered Accountants and an Associate Member of the Certified Management Accountants of Australia.

Mr. Javed Mansoor is a renowned practitioner of law in Sri Lanka and is currently engaged in the private practice of commercial, finance, tax and employment law. Mr. Mansoor has solid experience in the field of financial law and has throughout the years given legal opinions on Islamic finance, leasing, debt factoring, import loans and taxation to name a few.

As a lecturer of financial law and his vast amount of knowledge is shared amongst budding legal professionals. In addition to this he also lectures CIMA and ACCA students.

Mr. Mansoor is the current Chairman of the IT committee of the BASL in which he has held several important positions in the past. He is an Attorney at Law of the Supreme Court of Sri Lanka. He holds an LL.M in Commercial Law from King's College, University of London. He is also an Associate Member of the Chartered Institute of Management Accountants.

Mr. Omar and Mr. Mansoor will be part of Amana Takaful Insurance's Board of Directors along with Tyeab Akbarally (Chairman), Ehsan Zaheed (CEO), Osman Kassim, Faizal Salieh, M.H.M. Rafiq, Faisz Musthapha, Dr.A.A.M. Haroon and Dato' Mohd Fadzli Yusof.

(Lankaweb News)

Wednesday, February 18, 2009

Maybank not in talks with Dubai on Bank Islam stake

KUALA LUMPUR/DUBAI, Malaysia's top lender, Maybank, said it was not in talks to buy a Dubai investor's stake in Bank Islam, a deal that would have created the largest sharia bank in the Asia-Pacific region.

Earlier on Tuesday, several Islamic bankers in Malaysia had said that Maybank's (MBBM.KL) Islamic subsidiary wanted to acquire a stake in Bank Islam, the country's second-largest sharia lender.

Dubai Islamic Investment Group, which is part of Dubai Group, was interested in selling its 40 percent stake in unlisted Bank Islam to Maybank Islamic, the banking sources added.

However, when asked to comment on the possible acquisition, a Maybank spokesman told Reuters the group was "currently not in talks with Dubai Group, as speculated".

Approached to comment on whether it was selling its stake, Dubai Group said that it "is a long-term strategic investor" in Bank Islam.

"We are proud to be associated with the bank's impressive turnaround over the past two years and are confident of its potential to grow further," the group said in a statement.

"We believe that Bank Islam is well positioned to capitalise on the opportunities presented by the rapid growth of Islamic finance."

Maybank Islamic is the biggest Islamic bank in Malaysia, which has one of the world's most developed Islamic financial industries, thanks to a vast sharia bond market and a well established regulatory framework.

Talk of a Maybank Islamic-Bank Islam merger came as several other banks in the rapidly growing sector are also seeking acquisition opportunities to boost their size -- although a sharply slowing global economy could put a brake on expansion plans.

Kuwait Finance House Malaysia, a subsidiary of Kuwait's top Islamic bank, and Islamic Bank of Asia, which is backed by Singapore's DBS (DBSM.SI), have said they are on the lookout for acquisition opportunities in the region.

"This matter comes under the purview of the shareholders, and in view of this, I am in no position to give you any response," Bank Islam Managing Director Zukri Samat said in a statement when asked to comment on talk of the shareholding change.

Zukri had said in January that the lender, a subsidiary of Malaysian financial group BIMB Holdings Bhd (BIMB.KL), had identified a potential domestic merger or acquisition partner although it needed regulatory approval for talks.

Maybank Islamic acting chief executive Ibrahim Hassan declined to comment.


Tuesday, February 17, 2009

Saudi body pushes for Islamic finance norms.

DUBAI: A Saudi Arabian Islamic finance body aims to set up a committee of senior Islamic scholars in the kingdom by 2010 to help standardise Islamic banking edicts in the Gulf oil producer, an official said yesterday.

The Islamic International Foundation for Economics & Finance is in the early talks with Sharia scholars and hoped to “institutionalise” Islamic rulings within a year, said Yousef Abdullah al-Zamil, the foundation’s assitant secretary general.
“The problem is that in Saudi Arabia there is not a system in place for banks, the banks have different views and there is not even a division for Islamic finance at the central bank,” he said.
Saudi Arabia, the largest Arab economy, is home to Al-Rajhi Bank, the Gulf region’s biggest bank complying with Islamic law, or Shariah.
Islamic law bans usury, usually understood to cover all forms of lending at fixed interest, and imposes restrictions on various other forms of lending.
A select group of Islamic scholars oversee the fast-growing niche market, but a lack of standardisation on what financial contracts are acceptable is one of the biggest complaints among bankers in the $1tn industry.
Islamic law is open to diverse interpretations, resulting in some financing structures that are gaining widespread approval. For instance, Islamic bonds, the industry’s hottest product, came under the spotlight last year after a top standards body said almost all do not comply with Islamic law.


UAE- Brighter Outlook Ahead for Islamic Bond Market

GCC financial institutions and industrial companies are soon set to issue Islamic bonds worth US $30 billion dollars according to Moody’s Investor Services, the ratings agency.

Companies had delayed bond issues due to general economic conditions but should move forward by mid-June this year if there is prudent govenment involvement and an increase in oil prices, said Faisal Hijazi, Business Development Manager and Finance Analyst for Moody’s, during an interview with CNBC Arabiya.

Hijazi confirmed that Islamic bond issues fell by more than 50% in 2008 compared to 2007. He pointed out that the value of bonds issued in 2008 was just over 15 billion dollars, while in 2007 it amounted to more than 32 billion dollars.

“Factors behind the bond issue decline were based on the global financial crisis and the lack of investor confidence in the financial markets,” Hijazi said. He added that new standards by accounting and auditing bodies of Islamic financial institutions also raised doubts on the legality of some Islamic bonds.

As the region’s first and premier 24-hour live Arabic Business TV channel, CNBC Arabiya recently re-launched to include 12 new programmes. Along with a new programming schedule, the CNBC Arabiya re-launch reveals a brand new studio layout with more capacity for live links.


Why Islamic Banking Is Successful? Islamic Banks Are Unscathed Despite of Financial Crisis

By Prof. Rodney Wilson

Professor-Durham University

The collapse of leading Wall Street institutions, notably Lehman Brothers, and the subsequent global financial crisis and economic recession, are encouraging economists world-wide to consider alternative financial solutions.

Attention has been focused on Islamic banking and finance as an alternative model. What lessons can be learnt, and how resilient have Islamic banks been during the current crisis?

Islamic Banking Principles And Sub-prime Lending

The religious teaching underpinning Islamic finance is concerned with justice in financial contracts to ensure that none of the parties is being exploited.

The bank may advance the clients an interest-free loan to enable them to continue their payments during the recession in anticipation that they will pay in full when the economy rebounds.

Riba( interest or usury) is one source of exploitation, especially, as in the case of sub-prime lending, the highest rates were charged to lower earners. Such discriminatory charging by conventional banks was justified as being a reflection of the risks involved.

Those on lower incomes, with poorer prospects of finding new employment in the event of redundancy, were less likely to be able to service their interest payments.

Islamic housing finance involves risk sharing between the bank and the client, rather than transferring all the risk to the latter.

Under the most commonly used diminishing musharaka (partnership) contract, the bank and the client form a partnership, with the bank providing up to 90 percent of the purchase price, and the client at least 10 percent.

Over a period of usually 10 to 25 years, the client buys out the ownership share of the bank which makes its profit from the rent paid by the client for the share the bank owns.

In the event of a rental or repayments default, the bank may advance the clients an interest-free loan (qard hassan in Arabic) to enable them to continue their payments during the recession in anticipation that they will pay in full when the economy rebounds.

The client retains their home rather than being faced with eviction— like the victims of the sub-prime crisis.

Of course Islamic banks have to appraise credit risk, and indeed are more cautious about who they should finance than conventional banks.

The banks in the United States charged high arrangement fees for sub-prime borrowers which were used to pay bonuses for those signing up new clients.

As the mortgages were sold on to Freddie Mac and Fanny Mae, the arrangers were unconcerned that the sub-prime borrowers might be unable to meet their financial obligations.

Indeed, gifts were provided to entice the feckless to sign up, and the mortgages often exceeded the value of the property.

The banks in other words became mere booking agents, with no long term commitment to their clients.

The Islamic Banking Record

Consequently when the credit crunch came and borrowing from wholesale markets was halted, Islamic banks were not exposed.

In contrast to conventional banks, no Islamic bank has failed and has needed government recapitalization which ultimately becomes a burden on hard pressed taxpayers.

All Islamic banks comply with the Basel II capital adequacy requirements and the Islamic Financial Services Board (IFSB)- the body which advises regulators with respect to Islamic finance- has produced detailed guidelines on compliance. The IFSB has an on-going relationship with the Bank for International Settlements-the institution which developed the Basel standards- and is certain to be consulted as Basel III guidelines are drafted for capital adequacy which are likely to be implemented globally in the coming decade.

The soundness of Islamic banks is accounted for by the fact that they use a classical banking model, with financing derived from deposits, rather than being funded by borrowings from wholesale markets.

Consequently when the credit crunch came and borrowing from wholesale markets was halted, Islamic banks were not exposed. However, Islamic banks are not immune from the effects of the global recession, and the fall in oil prices will inevitably have a negative impact on 2008 results of Gulf-based Islamic banks. The situation will become clearer from February once the audited financial statements start to appear.

Two Islamic housing financial institutions, Amlak and Tamweel are being merged, as both have faced problems given their exposure to the Dubai property market.

In Iran where all financial operations have been shariah-based since the Law on Usury Free Banking was introduced in 1983, banks have been relatively insulated from the financial crisis, ironically because United States sanctions meant they could not deal with institutions such as Lehman Brothers which were trying to place large amounts of toxic debt with Middle Eastern banks.

The sanctions therefore proved to be a blessing in disguise for Iran— although the Islamic banks there have been adversely affected recently by the fall in gas prices.

Nevertheless being state owned, institutions such as Bank Melli, the largest Islamic bank in the world, are well placed to ride out the global financial storm. With assets of over $50 billion, and 2007 profits exceeding $540 million, it has more than adequate resources to cope.

Islamic Financial Stability
Investors seeking shariah compliance have portfolios which are more heavily weighted in sectors such as healthcare or utilities.

Islamic banks enjoy a built-in stabilizer to help them cope with economic downturns, as instead of paying interest to depositors, those with investment mudaraba accounts share in the banks profits.

Thus, if profitability declines in an economic downturn, depositors receive lower returns, but if profits rise they enjoy higher returns.

This profit sharing reduces risk for the banks and means they are less likely to become insolvent. However as the banks build up a profit equalization reserve, which can be used to finance pay-outs during difficult years, depositors benefit from some protection of their returns during economic downturns.

The last year has been difficult, if not disastrous, for equity investors, given the fall in stock market prices globally.

Investors in equities screened for shariah compliance have also suffered, but less than their conventional counterparts, because they have not invested in the shares of riba-based banks which have fared especially badly during the global financial turmoil.

Investors seeking Shariah compliance have portfolios which are more heavily weighted in sectors such as healthcare or utilities where revenue streams are maintained even during cyclical down-turns.

Prospects for Islamic Finance

There are already five wholly Islamic banks in London, and the first Islamic bank will open in France in 2009.

Islamic banking provides a viable alternative to conventional banking and is less cycle prone. The spread of Islamic finance into western markets demonstrates that it now being treated seriously by regulators and finance ministries.

There are already five wholly Islamic banks in London, and the first Islamic bank will open in France in 2009. According to the conservative estimates of the Banker in October 2008, Islamic financial assets globally exceed $500 billion, a figure that could easily double over the coming decade.

The experience of Islamic banking in the United Kingdom has been extremely positive. Islamic Bank of Britain has been operating as a retail bank for over four years, and has attracted over 40,000 customers. HSBC Amanah, the Islamic finance subsidiary of HSBC, has been operating for ten years in London, focusing mainly on institutional clients and business finance.

Alburaq, the Islamic finance subsidiary of Arab Banking Corporation, has become the market leader for shariah compliant home finance in the United Kingdom.

None of these institutions has been affected by the global financial crisis, and their resilience bodes well for the future.

Sukuk Are Real Assets
The United Kingdom authorities promoting London as a international centre for sukuk issuance to rival Bahrain, Dubai and Kuala Lumpur.

In addition to banking, Islamic sukuk security issuance has enormous potential. Unlike conventional bonds and notes, sukuk are backed by real assets, which provides assurance to investors.

Although global sukuk markets were adversely affected by the global recession in 2008, longer term prospects look promising, with the United Kingdom authorities promoting London as an international centre for sukuk issuance to rival Bahrain, Dubai and Kuala Lumpur.

The Malaysian ringgit sukuk market has been largely unaffected by the global turmoil in securities markets, and issuers such as the Saudi Arabia Basic Industries Corporation, one of the world’s largest petrochemical producers, view sukuk as a desirable instruments to raise funding for plant expansion.

There can be no doubt that Islamic finance has an exciting future, and the quest for a financial system based on moral values rather than greed and fear, is bound to enhance its position in the global system.


Monday, February 16, 2009

Britain's First Islamic Motor Insurance

CAIRO — A London-based Islamic insurance firm has hit UK roads with a Shari`ah-compliant car insurance product that immediately attracted Muslim and non-Muslims for its ethical nature.

"There has been a lot of interest," Kaye Pimblett, motor insurance manager at the price-comparison Moneysupermarket.com site, told The Independent on Sunday, February 15. "During its first seven days on Moneysupermarket.com, Salaam Halal returned more than 37,000 quotes," she added.

"And when they returned a quote, they appeared in the top three positions on over a third of occasions."

Salaam Halal Insurance has launched the new motor policies through Moneysupermarket.com and its own website.

The new product is based on the Takaful principle, which requires all participants to share risk equally and addresses key features associated with conventional insurance that is incompatible with Shari`ah.

Instead of premiums, people taking out a policy with Salaam Halal pay contributions into a pool and that money is then put into Shari`ah-compliant investments.

The central pool of funds is used to pay any claims that arise, and at the end of the year, if the pool is over-funded, the surplus will be redistributed to policyholders through a discount on their next premium.

But if claims outweigh contributions, shareholders pay excess claims and they recover their money in times of profit.

Islam forbids Muslims from usury, receiving or paying interest on loans.

Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.


The new product has been a great welcome to British Muslims, who were longing for insurance product that complies with their faith.

"Salaam Halal car insurance appealed to me as it is competitively priced, but most importantly, it's compliant with the Muslim faith, something a have never had before," said Hassan Ahmed, a Muslim client.

Britain is home to a sizable Muslim minority of nearly two millions.

Salaam Halal Insurance, Britain's first Shari`ah-compliant insurer, was launched last July to offer policies in line with the Muslim faith.

The nascent firm also plans to launch home insurance policies shortly.

The ethical nature of the Salaam Halal product has proved appealing to non-Muslims as well.

"What is unique is the ethical nature of what we do," Bradley Brandon-Cross, the chief executive of Salaam Halal Insurance, told The Independent.

"It's a transparent process and the opportunity to get something back is attractive to customers, both Muslims and non-Muslims alike."

Emile Abu-Shakra, a spokesman for Lloyds Banking, said the new product attraction is part of the popularity of Islamic finance services.

"Although as a market UK Islamic finance is in its infancy, it's still set to become big business," notes Abu-Shakra, whose bank has pioneered Islamic finance in the UK.

"We offer Islamic current and business accounts, mortgages and investment funds," she added.

"We piloted these in just five branches in 2005 but that quickly expanded to all 2,000 the following year."

In recent years, London has established itself as a hub of Islamic finance.

There are four licensed wholesale Islamic banks - the only ones in the European Union - in Britain.

There are also 21 conventional banks offering Islamic banking products, the newest of which is Gatehouse, which has received its license in April.


CIMA discussion on Islamic Finance Perspective of the global economic crisis

CIMA Sri Lanka Division announces an evening discussion on "The Global Economic Crisis: an Islamic Finance Perspective" on February 18, 2009.

Is the current global crisis an economic crisis or a financial crisis? Do the causes lie only in the greed of human beings, the greed of investors and in the breed of investment bankers and their exotic investment banking product structures as believed by some; or do they also lie in the core economic theory that provided the framework upon which the world's economic and banking system has been designed, built and driven?

The presentation by Faizal Salieh, Managing Director and Chief Executive Officer of Amana Investments Limited will attempt to answer these questions by viewing the current global crisis from an Islamic finance perspective; examining the core conventional economic and banking theory framework and analysing the fundamental causes of the problem in the context of that framework. It will also assess whether the core principles of Islamic finance and banking could help in the formulation of a sustainable future solution?


Takaful Ikhlas Awarded The Best Takaful-Retakaful Provider 2008

KUALA LUMPUR, Takaful Ikhlas Sdn Bhd (Takaful IKHLAS) has been named the Best Takaful/Retakaful Provider 2008 by readers of the Islamic Finance News (IFN).

Takaful IKHLAS was chosen in a poll held in conjunction with the Islamic Finance News Awards 2008 recently.

IFN focuses on the international finance market and industry.

Takaful IKHLAS president and chief executive officer, Syed Moheeb Syed Kamarulzaman said the award was the benchmark of the company's excellence to date.

"The award proves that even though Takaful IKHLAS is a just new company, our products have gained acceptance by the public," he said in a statement here Monday.

He said the award would provide the best platform to highlight the Takaful IKHLAS brand not only in the country but also at the international level.

Takaful IKHLAS, a wholly owned subsidiary of MNRB Holdings Bhd, began operations in July 2003.

To date, it has more than 5,000 agents nationwide. Its branches are located in Kuala Lumpur, Kota Bharu, Sungai Petani, Johor Bharu, Kuching, Melaka, Kota Kinabalu, Kuantan, Ipoh and Putrajaya.


Saturday, February 14, 2009

KFH Wins Best Overall Islamic Bank Award

KUALA LUMPUR, - The Kuwait Finance House Group has clinched the "Best Overall Islamic Bank" and "Most Innovative Islamic Bank" awards.

The declaration was made at the annual Islamic Finance News Awards 2008 last night. Kuwait Finance House K.S.C. was accorded the country award for "Best Islamic Bank in Kuwait" while in a new category, KFH Research Limited, was voted "Best Islamic Research Firm".

"The accolades are testament that Islamic finance models of Kuwait Finance House are widely accepted and acknowledged globally," KFH chief executive officer Mohammed Sulaiman Al-Omar said in a statement today.


Friday, February 13, 2009

Al Khaleej insurer to pick up stake in Al Jisr Takaful

DOHA: Al Khaleej Insurance and Reinsurance (AKHI) yesterday said it was picking up 2% stake in Al Jisr Takaful Insurance Company for a total of QR5.05mn.Already, Qatar Islamic Insurance Company and Gulf International Services’ subsidiary Al Koot have announced that they were picking 2% stake each in Al Jisr, which is being established among the national insurers in Qatar and Bahrain with an initial capital of QR250mn.Al Jisr, which is formed under the aegis of Qatar and Bahrain Chambers of Commerce and Industry, will be operating as a Shariah-principled entity writing all types of insurance.AKHI also said it was divesting its 25% stake in Bahrain’s National Life Assurance Company to Doha Bank Assurance Company (DBAC) for QR5mn.AKHI accorded approval for the stake sale to Doha Bank’s subsidiary after getting nod from its board as well as from the competent authorities in Bahrain, said its spokesman in a communiqué to the Doha Securities Market.In July last year, AKHI had picked up 25% stake in National Life Assurance Company, a subsidiary of Bahrain’s National Holdings, and it was planned that the joint venture would open a branch in the Qatar Financial Centre to provide life and medical insurance.DBAC, a 100% subsidiary of Qatar’s third largest lender, had reported more than 21-fold jump in net premium income to QR16.72mn in 2008.

" Gulf Time "


( by : Zubair Mughal )
Takaful is an Islamic alternative to the conventional Insurance. The words ‘Takaful’ has been derived from the Arabic verb ‘Kafala’ which is also referred to as ‘Kafalat’ in urdu language, its means to guarantee, to help, to take care of one another’s needs. The Takaful system has been structured keeping in view the Islamic system of Dait (Blood Money) which is the philosophy behind mutual assistance/Kafalat. Before going into further details about Takaful, we shall have a look at the conventional insurance system and the factors that led to it being considered Haram or illegal in the society. If the importance of insurance is observed in detailed, the following aspects emerge;
1-To bear the risk/threat
2-To protect others
3-To share the loss

Keeping in view the basic elements of insurance, it is evident that nowhere in Islam the above mentioned aspects are prohibited and that there is no reason to be considered haram or illegal since Islam itself encourages to help others. Narrated by Hazrat Abu Huraira (R.A.) that the Prophet Muhammad (PBUH) said: “Whosoever removes a worldly hardship from a believer, Allah will remove from him one of the hardships on the Day of Judgment.”(Sahih Muslim, Hadith. 59)

Islam teaches us not only to have total dependence on Allah but also emphasizes on self protection against risks and threats. Narrates by Hazrat Anas Bin Malik (R.A.), one day Prophet Muhammad (PBUH) noticed a Bedouin leaving his camel without tying it. He (PBUH) asked the Bedouin, “Why don’t you tie down your camel?” The Bedouin answered, “I put my trust in Allah.” The Prophet (PBUH) then said, “Tie your camel first, and then put your trust in Allah.” (Sunan At-Tirmidhi,.1981). Islam infact even goes to the length of ensuring that incase of one’s death, there should be enough to support the widow for at least a year. Therefore, it is decided that the philosophy of Insurance does not contain any flaws from the Shariah perspective and it can not be considered Haram or illegal. Research has shown that the fault lies not in the philosophy itself, but in the methodology carried out by the insurance companies due to which it is looked upon narrow mindedly.
1-Riba (Interest/Usury)
2-Gharrar (uncertainty)
Conventional insurance contains both direct and indirect forms of Riba. The direct Riba is in the of Premium and indirect Riba in the shape of interest earned on interest based
Investments e.g. by giving loans to financial institutes and banks on interest or by investing in interest based activity at stock exchange etc. thus promoting interest.
Second factor is Gharrar, where the person being insured does not know when he would bear the loss and to what amount, or the insurer can ascertain the amount and time with respect to profitability. Third element is Maysir, which involves a chance of total loss to one party in the contract, where profit to one person is directly related to another person’s loss. While the relationship of claim between the insurance company and its client is related to each others profit and loss. Thus, by removing these three harmful elements of Riba, Gharrar and Maysir from the conventional insurance, we can call it ‘Takaful’. Now, we shall examine how these elements have been removed in the Takaful system.

The first ever Takaful Company in the world was established 27 years ago in Sudan in 1979 by the name of Sudan Islamic Insurance. It would be interesting to know that the founder of the company was a Pakistani. Following suite, in the same year another company by the name of Islamic Arab Insurance company (IAIC) was formed in United Arab Emirates but it took sometime for the company to establish.

There are approximately more than 155 Takaful and 8 Re-Takaful companies operating globally with an approximate sum of $ 3 Billions Takaful contribution. Out of these companies 60% are General Insurance Companies while the remaining 40% are working as Life and Family Insurance Companies. Geographically, 46% of them are located in South East Asia, 32% in Middle East, 17% in Africa and 5% in Europe and America. For the 23% of the Muslim population of the world, the existence of 260 Billion US dollars worth of Islamic Financial Market is a very encouraging factor for the Takaful Companies.

The systems used by Takaful companies in the world can be divided into three models;
1) Mudarba Model (Sudan, African states)
2) Wakalah Model (Malaysia and other countries)
3) Wakalah Waqf Model (Pakistan)

SECP is the regulatory authority for Takaful companies in Pakistan and has formulated rules and regulations for the companies by making amendments in the Insurance ordinance 2000 while keeping in view the Islamic perspective/principles of Wakalah and Waqf.
Pak Kuwait Takaful was the first Takaful Company in Pakistan and soon after

Another company by the name of Takaful Pakistan came into existence formed by Capt. Jamil Akhtar with the mutual collaboration of House Building Finance Corporation (
HBFC, Emirates Global Islamic Bank, Arif Habib, Sitara Chemical, Emirates Investments Group (U.A.E.) and Al-Buhaira National U.A.E. Pak Qatar Takaful also started their operation in General & Life Takaful Business in Pakistan.

All the Takaful companies operating in Pakistan are based on the Wakalah Waqf model.
The operational methodology/system of the model can be explained through the following example; Some individuals form a Fund on the basis of Waqf and subsequently donate/contribute in the fund, hence giving it the name Participation Takaful Fund ( P.T.F ) with an understanding that if any calamity/risk befalls any of the participants of the fund, a decided amount would be donated (Tabbaru) to the effected. The fund would be monitored by an organization (Takaful Company) on the pattern of Waqf, to safeguard the deposits and to increase the profitability of the fund. Subsequently, the company would be paid its Wakalah agency fee. The example of a Waqf is similar to that of a Mosque Waqf Committee which receives its contributions from people for the maintenance of the Mosque. Likewise, Takaful Company also acts as a Waqf operator. It will receive donations from the people and strengthen the fund. Incase of a calamity to either of the members of the Fund, the company would pay the compensation. Furthermore, it would do its level best to make the Waqf Fund/Takaful contribution more profitable and for that, it would receive its Wakalah fees which would be its profit.
The element of Riba (Interest) is removed from the whole system in such a manner that the Takaful company would invest in interest free institutions to make the fund more profitable while adhering to the rules and regulations of the Shariah and instead of premium, it would receive Tabbaru. As far as Gharrar is concerned, Takaful company is a Waqf and it does not have any direct relationship with the profit and loss of the person insured, instead the Takaful participants would share the risk from their given donations through mutual consent. Thus, the non compliant elements of the Shariah are removed along with the objections on Islamic banking that if Islamic banking defies interest then how come it practices conventional insurance which contains the elements of interest.

Now a new market will emerge in Pakistan, which would support the Islamic Financial system. Those who abstained from Conventional Insurance by calling it un-Islamic, also their savings will increase due to Takaful. With the increase in Takaful funds, the funding resources of Islamic Banks and Islamic Financial institutions will also increase alongside.
since Takaful companies have to invest without interest, their best choice would be the Islamic Banks or Financial institutions or they would opt for Sukuk (Islamic Bond), which would help in promoting the Sukuk market in Pakistan. Actually, the promotion of ‘Takaf’ is related to the expansion of Sukuk market because whenever the issues of
underwriting hedge, Insurance of underlying assets etc. will arise, only Takaful will cover them due to which both will be promoted dually. Thus the Sukuk would be more easily available as compared to the shares to the general public in the market and they would be assets backed. Consequently, the creative evolution of money in the country will come to
a halt because of the asset base which would definitely be helpful in the stability and positive economic growth of the monetary system and short term Sukuk would be the cause of formation of Inter bank market between Islamic Banks and Financial Institutes.
We can compare Takaful with a social organization where the Micro Takaful Ideology should be kept in view and used as a weapon to eliminate poverty in Pakistan.
To eliminate the poverty from the country, while keeping in view the economic, social and geographical conditions of Pakistan, if Zakat, Waqf and the ideology of Micro Takaful are brought forward together, then it would be no less than a revolution.

If Dr. Younas persists that the interest based micro finance system is the only solution for the elimination of poverty, then was the same existent at the time when there was no Zakat receiver. If we try and find solutions to our social and economic problems in the light of the Holy Quran and Sunnah, then there is success both in the world and hereafter.
With the Shariah compliant combination of Micro Takaful, Zakat and Waqf and with both positive and constructive thinking, beneficial results with regards to poverty elimination can be achieved. The question remains, who would think in a positive and broad minded manner when there is no Nobel Prize given on Islamic economics and finance, but only a question.

( The writer is Chief Executive Officer, AlHuda Centre of Islamic Banking & Economics www.alhudacibe.com )

Thursday, February 12, 2009

Pak-Qatar Takaful Group First to Implement SAP

Pak-Qatar Takaful Group has signed a MoU with SAP Pakistan for the implementation of SAP modules in its Pakistan operations.

By signing this agreement Pak-Qatar Takaful becomes the first company in the Takaful/insurance sector and the second in the whole of financial services industry in Pakistan to implement SAP, achieving yet another pioneering feat.

Speaking on the occasion, CEO Pak-Qatar Family Takaful Limited, P. Ahmed said: “This sizeable investment in SAP is the continuation of our commitment to the people of Pakistan to provide need-based Takaful solutions and exemplary customer-service.” Pak-Qatar Takaful Group also invested in the procurement of state-of-the-art PentaTakaful systems from Malaysia, in 2008.

Asim Haque, Director, Financial Services Business, SAP Pakistan said: “We are delighted to be associated with Pak-Qatar Takaful, along with our Partner SHMA, in this project. It is very encouraging that financial services companies like Pak-Qatar Takaful are realizing the value that SAP has to offer to the financial industry in Pakistan.”

SAP is the world’s leading provider of ERP solutions with a global turnover of over US$12 billion. Today, more than 38,000 companies in more than 120 countries run SAP applications with 12 million users, from distinct solutions addressing the needs of small businesses and midsize companies to suite offerings for global organizations. SAP currently employs more than 51,400 people in more than 50 countries worldwide.

Mr. Omer Morshed, CEO, SHMA, commented: “SHMA has been at the forefront for introducing the concept of Takaful in Pakistan. SHMA is proud and privileged to be associated with Pak-Qatar Takaful Group’s pioneering initiative of implementing SAP.”

Sidat Hyder Morshed Associates (SHMA), established in 1986, is regarded as a renowned professional services firm in Pakistan providing management consulting and systems support services to clients locally and overseas.

Pak-Qatar Takaful Group is sponsored by leading financial institutions in the State of Qatar. The group has a wide geographic reach in the country and is quickly growing in its corporate and individual customer base.