Dubai’s push for key role in Islamic economy requires players to raise the game.

Islamic banks face a moment of reckoning

Dubai is preparing to become the capital of the Islamic economy. Experts estimate global Islamic capital amounts to $1 trillion (Dh3.6 trillion), according to a statement by Dr Ajeel Al Nashmi, head of the organising committee for the Islamic Jurisprudence Conference.

Dubai’s objective is in line with its historic endeavours as it set up Dubai Islamic Bank in the 1970s, making it a pioneer in the Arab world in the field of Islamic banking and the second after Malaysia, which experimented with Islamic banking in the 1940s.

Dubai’s goal tasks it with the responsibility of “re-Islamicising” banks in the region or restructuring them to become sound banks. This means Dubai has to focus on preparing a regulatory framework for these banks’ operations, and secondly touching on noticeable weaknesses or shortcomings in Islamic banking services, most notably obsolete ones, and the decline in quality of customer services.

It also has to look into bank advisory bodies, currently undergoing a state of disguised unemployment, bank regulatory bodies, strengthening governance systems, stanch decline in the usage of advanced technology, and intensifying training programmes for technical cadres.

Perhaps a little light should be shed on some aspects of Islamic banking. Often we hear people say that Islamic banks are good, meaning that they offer services that are not provided by conventional banks, despite having come into existence only 40 years ago. Islamic banks portray themselves as “non-conventional banks”.

The word “good” here also suggests that Islamic banks have created new products and non-conventional methods to serve customers, therefore “surpassing” other banks and financial institutions in the Arab world. On the other hand, Islamic banks are not very common in the global market, as most foreign banks are content with setting up Islamic banking solutions to attract Islamic capital.

There are two different services that a customer seeks in banks. The first is when a customer makes a deposit for a period of time for a set profit. The customer has the right to choose the area of investment which they feel is profitable.

The second form of service is when a person opens an account in which their monthly salary is deposited, and in return they receive other services such as a cheque book, credit card, bank statement and other services.

Some banks choose to operate in specialised fields. For example, there are banks that focus on agriculture and others on real estate and industrial projects.

There are two types of non-specialised banks.

The first has massive capital and its operations depend on financing huge projects and providing loans to countries. They have no interest in serving small customers, and they have a limited number of branches.

Banks with a small capital, on the other hand, prioritise customer services, are in regular contact with their customers and always inform them about new products.

Conventional banks operate with interest rates. They invest the money of a customer for profit over a period of time. For example, depositing Dh100,000 in a bank that operates with a 4 per cent interest rate would mean that the customer would make Dh4,000 in profit on their savings.

The perspective of Islamic banks on these is that they are Riba-based, because they set the rate of profit over a predetermined period of time. Therefore, stemming from Sharia, it is prohibited for Muslims to deal with these banks.

Then how do Islamic banks operate? Islamic banks are not any different from conventional banks. They are financial institutions that collect shareholder and customer money, invest them for a profit, which is later distributed to shareholders and customers at the end of each year. These investments are based on ‘murabaha’ against interest.

Murabaha after all is halal (permitted), while interest is riba and prohibited. It is best to quote in this case the Quran, in Surat Al Baqarah (verse 275): “Allah has permitted trade and has forbidden interest”.

Therefore, Islamic banks never set the “interest” for money saved for a certain period, instead the rate of profit is not specified. The reason behind such an approach is that the money of a customer, placed in the bank’s trust, is invested in commercial operation — if the bank makes a profit, so does the customer. If the trade results in a loss, then the customer’s capital remains unchanged.

This means that a customer would get a share of the profit, but their money remains protected against any losses. In face value, this kind of trade feels almost ideal.

This is despite the fact that a loss is liable to occur in any trade as a predetermined factor, but this trading operation is not subject to the profit and loss equation.

On close review, a predetermination might be incompatible with the philosophy behind the referenced Quran verses, as a person committing riba is gambling on the interest rate period for guaranteed profit, while Islamic banks do not specify a time period.

In Islamic banks, for example, if a customer deposits Dh100,000 for a year, they might make a profit of Dh4,000, Dh6,000, or nothing at all. In conventional banks, including non-conventional Islamic banks, the funds deposited by customers and shareholders are invested for profit for investors and customers, and some of this profit will be used by the bank to pay the salaries of its employees, bonuses for members of the board, and operational expenses.

The question is: Where do Islamic banks invest the funds of customers and shareholders? Unfortunately, some Islamic banks invest in areas that are not compliant with Islamic principles that they promote to their customers. Some, for example, invest in local and foreign riba-based banks.

And how do the advisory and regulatory bodies deal with these banks? That is a sad and funny tale best kept for another time.

— The writer is a columnist and journalist.

Source: gulfnews.com

Jordan is promoting Islamic Tourism

Jordan has launched a campaign to attract tourists from Muslim countries to boost the domestic tourism sector, reported the al-Hayat newspaper.

“The board launched a campaign to promote Islamic tourism in Jordan and attract tourists from Muslim countries, especially from Malaysia and Indonesia, given that Jordan is a base and a gateway for holy Muslim and Christian shrines,” said Abdul Razaq Arabiyat, the managing director of the Jordan Tourism Board, in a released statement.

The campaign aims to boost the profile of religious sites in Jordan as an attraction for foreign tourists and seeks to promote religious tourism as “a main source of tourism revenues in the kingdom,” added Arabiyat.

A number of promotional programs have been adopted by the board to attract those Muslim tourists intending to travel to Saudi Arabia to perform the annual hajj pilgrimage, who then continue on with their religious tour by traveling to Jordan and Palestine.

“We’ve signed a number of agreements with tourism companies in Indonesia and Malaysia on visiting religious shrines in Jordan and Palestine… such as the site of the battles of Islamic conquests,” said Arabiyat.


Source: CMM-News Blogspot

Islamic Finance On the Verge of a Tipping Point

Will the year 2014 be a tipping point for Islamic finance? It’s a question on the minds of many inside the rapidly growing industry, as a confluence of factors came together in 2013 that could portend a structural shift in how the world views Islamic banking products and the Islamic consumer. In order for the tipping point to be achieved, the industry must move beyond its traditional hubs of Malaysia and the Gulf states and expand across emerging markets, Europe and the United States.

In October 2013, British Prime Minister David Cameron noted that the UK will issue a sukuk, an Islamic bond, making the United Kingdom the first non-Muslim sovereign to do so. He said the UK intends to issue the sukuk in early 2014. Though small in size—the talk was of a 200 million British pound offering—the bond would represent a symbolic breakthrough and pave the way for more substantive offerings.

David Cameron’s government has assembled a team of Islamic finance and industry experts to fashion a strategy for London to compete with Kuala Lumpur, Bahrain and Dubai as an Islamic finance capital. Competition would be good for the industry as a whole, and London’s “stamp of approval” could also serve as a catalyst for growth in other European capitals.

Meanwhile, in the United States, a Washington-based investment bank, Taylor-DeJongh, is leading an effort to package Islamic financing in the form of a security for a major US rail car operator. Continental Rail, a carrier of freight along the east coast, would be among the first major US businesses to receive such financing. That the story was reported in the influential DealBook section of theNew York Times’ business pages should be considered a sign in and of itself. Entitled “Islamic Banks, Stuffed With Cash, Explore Partnerships With the West,” the story ran on the front page of the business section: a wake-up call to all of New York’s investment-banking community.

Taylor-DeJongh has assembled a team of five bankers with experience in Islamic finance who will seek to create innovative products for US companies looking to tap Islamic funds. No doubt others will follow TaylorDeJongh’s lead.

Muslim country sovereign wealth funds and banks based in Muslim countries have long invested in the United States’ equity markets, real estate, and other products, but investors who adhere to Islamic principles of finance are relatively new to the market. The key to the success of Islamic finance in the United States will be its roll-out and messaging. Unfortunately, the term “Islamic” could still be seen as threatening to US consumers. Even those who do not find the idea of “Islamic” finance threatening would view it as exotic and niche.

Thus, a strategy that aligns Islamic finance with the ethical investing movement in the United States would serve the industry well. Second, it should also be presented as a more secure, less risky model of finance. One of America’s most famous economists, Nouriel Roubini, recently said: “There is a need for a more resilient system, and that’s where there is potential for the Islamic system. It is less volatile and potentially more stable than conventional financial systems. The advanced economies can learn from the Islamic system in this respect,” he says.

But perhaps the most consequential factor fueling the tipping point argument might be the aggressive effort by Dubai, announced in 2013, to become the Islamic economy capital of the world. Dubai has a history of spotting a trend in its high growth phase and both riding that trend and reinforcing it. A good example is the rise of Emirates Airline, founded in 1985, and now on track to become the largest carrier in the world and a global brand icon. Emirates Airline both rode the trend of rising mass air travel and also fed the trend by creating more supply.

Dubai was already an important Islamic finance center, but the Emirate sees the story as larger than one of just banking. It has identified seven areas of growth, from halal food to Islamic consumer products to tourism and travel and cosmetics and pharmaceuticals. By growing the pie beyond finance, Dubai has demonstrated the enormous untapped potential of the Islamic economy. Indeed, a report issued by Thomson Reuters estimates the total value of Islamic business at 6.7 trillion dollars. IN GDP terms, this is only surpassed by China and the United States.

Malcolm Gladwell’s famous “tipping point” theory suggested that there is a “Law of the Few,” which posits that a few key types of people must champion an idea before it reaches its tipping point. He calls them “Connectors” and “Salesmen.” Dubai has been playing these roles for the past two decades, even for more than a century, and the emirate’s recent win to host Expo2020 cements its reputation as a global city.

Finally, Dubai’s push is not a passing fad. It is backed at the highest levels of the government. The fact that UAE Prime Minister and Ruler of Dubai Sheikh Mohammed Bin Rashid Al Maktoum appointed his trusted son and heir apparent, Sheikh Hamdan Bin Mohammed, to lead this effort and brought in one of the Arab world’s most capable government advisors, Mohammed Gergawi, to chair the Board, suggests a seriousness of purpose and longevity in implementing the plan.

From rail cars in the US to a British Prime Minister’s promised sukuk to the full weight of Dubai, Inc., pushing forward a strategy of growing Islamic business, the signs of a tipping point abound.

Source

Afshin Molavi

Afshin Molavi is a senior fellow at The New America Foundation, a non-partisan think tank, whose work has been published in dozens of publications, from Foreign Affairs to the New York Timesand the Financial Times.

International Trade can be enhanced through Halal Certification : Muhammad Zubair Mughal

The Global Halal Market size of 1.8 billion Muslim population is $ 3.2 trillion.

Zubair Mughal (CEO - Halal Research Council) Speaking about “Halal Certification Process” at “International Halal Accreditation Forum 2013” which was held on 25th – 26th October, 2013 at Istanbul by the Govt. of Turkey. This forum was inaugurated and chaired by H.E Tayyip Erdoğan, Prime Minister, Republic of Turkey. — at İstanbul Congress Center / İstanbul Kongre Merkezi

(Istanbul) The importance of Halal Certification is being well-known because of rising awareness with Halal in Muslim societies which is increasing the Halal Certified products and services rapidly and finally international trade can be enhanced in the Halal marker having a size of $ 3.2 trillion of 1.8 billion Muslim population, these views were expressed by Muhammad Zubair Mughal CEO – Halal Research Council (HRC) during the speech at International Halal Accreditation Forum (IHAF) jointly organized by Turk AK, Ministry of European Union Affairs and SMIIC under the supervision of Turkish government on 25th and 26th October, 2013 at Istanbul in which delegates from more than 60 countries participated.

He also said that there are more than 300 Halal Certification bodies working in more than 125 countries while Halal certification is not only the name of business rather a big religious responsibility and on its basis, millions of people use these products discriminating the Halal and haram but a minor ignorance can cause a damage to the Shariah. In Islam Halal and haram is not only confined to the Food industry rather its scope covers the Services (Islamic Banking, Halal Tourism and Halal Business etc), Cosmetics and Physical (Touchable) items. He also pointed out that non-Muslims have 82% control over Halal industry which is the unsafe phenomenon for the Muslims having only 18% share in the Halal industry. He, presenting Pakistan as a Case Study, said that there is viable environment in Pakistan for Halal Industry in which Halal Laboratories, Halal Meat Complex, Halal Accreditation Scheme, Government facilitations and well known Educational Institutes and schools for Food Industry are included that is why the majority people, having more than 50% control on Halal Certification belong to Pakistan and also facilitating in Halal Certification in America, UK, Germany, Australia, Canada, Norway, Switzerland, Belgium and Spain which is an authentic source of availability of Halal Products for Muslims.

Tayyip Erdoğan – Prime Minister of Turkey, addressing to inaugural ceremony of International Halal Accreditation Forum (IHAF), welcomed all the international experts of Halal Industry came from different parts of the world and expressed his well wishes for the success of Forum. Remember, IHAF itself was the first initiative on Halal Accreditation of Halal Certification Industry.     

Certified Islamic Fund Manager

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In our continuing development and professional excellence, we are pleased to offer “Certified Islamic Fund Manager” designed by industry specialists and renewed Islamic scholars. This program ensures the balance between the subjective and practical knowledge on Islamic Funds and Asset management. It also offers comprehensive knowledge that will strategically prepare candidates in building their skills, competencies and experience as they enter into the Islamic funds and asset management being Shariah compliant.

Profile of this program is attached for your kind perusal. For further information about the program, please visit: www.alhudacibe.com/dlp/islamicfund.php

اسلامی مالیات کے لیے 2014 بہترین سال ہو گا

2014 will be promising for Islamic Finance Industry

Islamic finance volume will be reaching at US $ 2 trillion with having 78% share of Islamic banking, 16% Sukuk, 1% Takaful, 4% Islamic funds and 1% Islamic Microfinance: Zubair Mughal

31-12-2013

(Lahore) Islamic finance will grow with rapid pace in the year 2014 and its volume will pass through US $ 2 trillion where Islamic banking keeps 78%, Sukuk 16%, Takaful 1%, Islamic Funds 4% and Islamic Microfinance has 1% share in the Islamic Finance industry. In the year 2014, Dubai and London will be in competition to be the global hub of Islamic Banking and Finance while Kuala Lumpur will also attempt to be in this contest but the Islamic finance industry can be grown more through synergizing approach and alliance with industry stakeholders rather than setting any competition. These views were expressed by Islamic Finance expert, Mr. Muhammad Zubair Mughal, CEO - AlHuda Centre of Islamic Banking and Economics (CIBE) during an analysis on Islamic finance industry in the beginning of year 2014.        

He said that the Islamic finance industry growth will go on double digit in 2014 which will turn the US $ 1.6 trillion volume of Islamic finance industry in December 2013 to US $ 2 trillion by the end of 2014 including North African countries (Tunisia, Libya, Morocco, Senegal and Mauritania etc), rising trends of Islamic finance in Europe and UK, also the rising and substantial share of international market of Sukuk shall contribute to it. It is anticipated that India and China may step towards the Islamic finance in 2014 where more than 200 million Muslim populations are in search of a compatible financial system with their religious beliefs and thoughts. He said there is no doubt that international financial crisis will not hit the Islamic finance industry but due to the Arab Spring, Islamic finance industry has faced recession in some countries of MENA but there are chances of  their revival in 2014.

He, giving an analysis, said that Sukuk will grow rapidly in 2014 and Muslim countries including non-Muslim countries e.g UK, China, South Africa and Europe etc will also get benefit from it which will enhance the growth in Islamic finance industry but Takaful Industry is not supposed to have any substantial breakthrough. It is being hoped that 2014 will prove better period for Islamic Microfinance industry as different international institutions including Islamic Development Bank (IDB) have declared it a potential tool for poverty alleviation around the globe. He also added that Islamic finance industry may face recession in certain countries including Indonesia while in Nigeria and Tunisia it may face some problems on religious and political grounds. He said that the Islamic finance initiatives in America and Canada including Latin American countries (Brazil, Argentina and others) have been taken and it is hoped that Islamic Funds market will come into existence in these regions by the year 2014.

Turkey and World Bank Group Reinforce Cooperation on Improving Islamic Finance and the Country’s Investment Climate

The world bank will open its first center on Islamic Finance

ISTANBUL — World Bank Group President Jim Yong Kim today opened the Global Center for Islamic Finance, together with Turkish Deputy Prime Minister Ali Babacan, as part of a two-day visit to Turkey that focused on enhancing the partnership between the Bank Group and Turkey – the second largest World Bank Group client and a growing key regional player.

The Global Center is envisaged as a knowledge hub for developing Islamic finance globally, conducting research and training, and providing technical assistance and advisory services to World Bank Group client countries interested in developing Islamic financial institutions and markets.

On the occasion of the opening, Kim stated that the Center is a symbol of the Bank Group’s shared objectives of developing Islamic finance and maximizing its contribution to poverty alleviation and shared prosperity in client countries.

“It is my hope that this Center will become the cornerstone for these efforts, serving as a knowledge hub,” emphasized World Bank Group President Jim Yong Kim, “with Turkey taking a leading role in designing and delivering cutting-edge technical assistance, advisory services, as well as generating and disseminating practical knowledge on how to make Islamic finance more relevant for growth and development.”

Earlier in his trip, Kim attended the 5th Izmir Economic Congress, a national economic forum that helps shape the economic policy agenda of the country for the coming years. In his opening remarks, Kim underlined the twin goals of the World Bank Group to end extreme poverty by 2030 and boost shared prosperity for the bottom 40 percent in developing countries.

“Turkey’s economic achievements are an inspiration for many other developing countries,”said Kim.  He added “We look forward to continuing our productive partnership with Turkey to help sustain your impressive achievements, to overcome your remaining challenges, and to share your remarkable experience with countries around the globe.”

Subsequently, Kim took part in a moderated panel discussion on current global economic developments with Deputy Prime Minister Ali Babacan.

In earlier meetings with Turkish President Abdullah Gül, Kim informed the Turkish leader of the new World Bank Group Strategy, how the Bank can share its global experience and knowledge, and the scope for increasing the Bank Group’s financial capacity and, hence, its relevance in middle-income countries. The two leaders also exchanged views on Turkey’s growing regional and global role.

Kim met with Turkish Prime Minister Recep Tayyip Erdoğan. Their discussion covered a range of issues, including Turkey’s broader development agenda, developments in the neighboring region, and how to evolve the Bank’s longstanding partnership with Turkey to cover cooperation and knowledge sharing in other countries. “Turkey has the history, capacity, and accumulated knowledge from experience to play a large and responsible role as a development partner and emerging donor,” stressed Kim.

Prior to concluding his visit to Turkey, President Kim will attend the 8th Investment Advisory Council (IAC) of Turkey at the invitation of Prime Minister Erdoğan.  The IAC is an annual gathering of top national and international private sector representatives to share their views on Turkey's competitive position in the world economy and advise on how to improve the flow of foreign investment. The IAC gathering came two days after the release of the 2014 Doing Business rankings, which saw Turkey marginally improve its position to 69th place among 189 countries.

Turkey joined the World Bank in 1947. Today, the Bank’s portfolio is concentrated and strategically focused, with 11 investment projects and US$4.6 billion net commitments. Over the last decade, the Bank has worked with Turkey on maintaining prudent macroeconomic policies, restructuring the country’s banking system, making public administration more efficient, restructuring the health sector, reforming the energy sector, and supporting disaster risk management.  The International Finance Corporation’s (IFC) strategy in Turkey is to support private sector development. Currently, the outstanding portfolio for IFC’s own account is US$2.4 billion. Fiscal year 2013 was a record year for the IFC in Turkey with US$985 million of investments in 20 projects. Turkey is MIGA’s 8th largest country by gross exposure, representing about 4.2 percent of MIGA’s gross portfolio. MIGA’s portfolio consists of 6 projects with a gross exposure of US$454 million.

About the World Bank Group

The World Bank Group is comprised of five institutions: the World Bank, which is made up of the International Bank for Reconstruction and Development (IBRD), which provides financing, risk management products, and other financial services to middle-income countries; the International Development Association (IDA), which provides interest-free loans and grants to the poorest countries; the International Finance Corporation (IFC), which makes equity investments, and provides loans, guarantees, and advisory services to private-sector business in developing countries; the Bank Group’s political risk insurance agency, the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID), which provides international facilities for conciliation and arbitration of investment disputes.

Source: World Bank