Pakistan to host an International Conference on Islamic Funds

Islamic Finance and Funds gaining popularity in the backdrop of current global financial crisis: Zubair Mughal

23 February 2012 (Lahore) The Financial world is banking upon the Islamic Finance and Shariah Compliant Investment Funds, in the backdrop of the current global financial crisis, which in turn is bringing a boost to the Islamic Funds and Sukuks. Considering the healthy global growth in this sector, an International Conference is being organized on April 23, 2012 in Karachi in order to strengthen the Islamic finance sector in Pakistan. Research papers will be presented and productive discussions will be undertaken to highlight the role of Pakistan in the global Islamic finance market. Islamic finance is making healthy growth in Pakistan which now stands over 1000 Islamic banking branches from 05 Islamic Banks and 13 Conventional Banks with Islamic finance operations. In addition, we have good support from 05 Takaful Companies, Mudarabah Companies, 20 Islamic Microfinance Institutions, over 30 Sukuk issues and 15 fund managers have launched their Islamic Funds, which have made prominent role of Pakistan in the global Islamic finance canvas.

The organizer of this International Conference and Chief Executive Officer, AlHUda-Centre of Islamic Banking and Economics, Mr Zubair Mughal while declaring the objectives behind this conference, highlighted the valuable contribution by Pakistanis in research, shariah and skilled professionals bringing strong alternative in a difficult financial situation faced by the world.

Mr Zubair added that Islamic funds are rapidly gaining popularity in US$1.3 Trillion worth of global Islamic finance market gaining 6.1% share from over 650 funds spread all over the world, of which the highest 230 is in Saudi Arabia while Malaysia has 172, Cayman Island 59, Bahrain 46, Luxemburg 29, Dubai 16, Singapore 11 are the prominent players in the world.

Zubair Mughl further informed the media that a healthy number of participants from different countries will be attending in this conference which will be followed by a Two Days Specialized Workshop on the Shariah and Regulatory Framework for Islamic Funds on 24^th and 25^th of April, 2012 to be conducted in Karachi, Pakistan.

In 2011, shall we see the emergence of Islamic Banking?

Recent reports have indicated that the central bank will soon move to regulate an Islamic commercial bank. What exactly is involved in Islamic banking?

Globally, the assets of Islamic banks have been expanding at double-digit rates for a decade and Islamic banking is increasingly becoming a visible alternative to conventional banks in Islamic countries and countries with many muslims.
Islamic banks serve muslim customers, but are not religious institutions. They are profit-maximising intermediaries between savers and investors and offer custodial and other traditional banking services. The constraints they face are, however, different and are based on Shariah law. There are four main features that differentiate Islamic banking from the conventional banks.

Prohibition against interest (Riba) is the major difference between Islamic and traditional banking. Islam prohibits Riba on the grounds that interest is a form of exploitation and is inconsistent with the notion of fairness. This implies that fixing in advance a positive return on a loan as a reward for the use of one’s money is not allowed.

Prohibition against games of chance (Maysir) and chance (gharar): Islamic banking bars speculation - increasing wealth by chance rather than productive effort. Maysir refers to avoidable uncertainty; for example, gambling at a casino. An example of gharar is undertaking a business venture without sufficient information.

Prohibition against forbidden (Haram) activities: Islamic banks may finance only permissible (Halal) activities. Banks are not supposed to lend to companies or individuals involved in activities deemed to harm society (for example, gambling) or prohibited under Islamic law (for example, financing construction of a plant to make alcoholic beverages).

Payment of some of the bank’s profits to benefit society (Zakat): Muslims believe in justice and equality in opportunity (not outcome). One way they do this is to redistribute income to provide a minimum standard of living for the poor. Zakat is one of the five tenets of Islam. Where Zakat is not collected by the state; Islamic banks donate directly to Islamic religious institutions.
In countries with significant muslim communities like Uganda, many large segments of muslims do not have access to adequate banking services-often because devout muslims are unwilling to put their savings into a traditional financial system that runs counter to their religious principles. Islamic banks seek to provide financial services in a way that is compatible with Islamic teaching, and if Islamic banks can tap that potential clientele, that could hasten economic development in these countries.

There is evidence of close correlation between financial sector development and growth. Countries whose financial systems offer a variety of services tend to grow faster. Banks, whether Islamic or traditional, play a fundamental economic role as financial intermediaries and as facilitators of payments.
The rise of Islamic banking has contributed to economic development in two main ways. One key benefit is increased financial intermediation. In Islamic countries and regions, large segments of the population do not use banks. The Islamic world, as a whole, has a lower level of financial development than other regions—in part because conventional banks do not satisfy the needs of devout Muslims.

Moreover, because Islamic banking requires borrowers and lenders to share the risk of failure, it provides a shock-absorbing mechanism that is essential in developing economies. A mechanism that allows the sharing of business risk in return for a stake in the profits encourages investment in such an uncertain environment and satisfies Islam’s core tenet of social justice. If Islamic banking can emerge, Muslim businesses stand to benefit.

Insurers can end sukuk compliance woes, experts say

Islamic insurers can help rid the Islamic bonds market of crippling concerns over the compliance of structures with Islamic law, or sharia, industry experts and executives said.

Global issuance of sukuk fell 56 percent year-on-year to $14.9 billion in 2008, according to Standard & Poor's, as the market was caught up in the global liquidity freeze but also due to a debate on whether the majority of Islamic bonds, or sukuk, were sharia-compliant.

Prominent scholar Sheikh Muhammad Tariq Usmani said in late 2007 that most Islamic bonds were not compliant with sharia as their guarantee to pay out bondholders at maturity contradicts the principle of sharing risk and returns.

Peter Hodgins, a lawyer specialising in Islamic insurance at law firm Clyde & Co said Islamic insurance, or takaful, products could help reconcile the need for sukuk to comply with these requirements and investors' need to insure against risks.

"Takaful can be a solution to help out the sukuk market."

Takaful firms could provide insurance for sukuk investors that takes over notional annual payments to bondholders if they fall below an agreed amount, he said, adding that there were discussions in the industry on such a product.

In Islamic insurance, customers contribute to a pool of funds which is used to indemnify participants who suffer a loss, while in conventional insurance the insurer takes on the risk for a premium.

"As the sukuk market evolves, there could be room for such a product," said Nick Frei, chief executive of Bahrain-based Islamic insurer t'azur.

But he said pricing these products could be a challenge for takaful companies as the risk of sukuk was difficult to assess.

-- Reuters

BIMB will retain stake in Bank Islam, says MD

BIMB Holdings Bhd does not intend to sell its 51% stake in Bank Islam (M) Bhd, says group managing director Datuk Johan Abdullah.

“It is a major core subsidiary and in terms of revenue and net profit contribution, we had about 80% as at last year. This is a strategic investment for us,” he said after the company EGM yesterday.

Bank Islam is currently controlled by BIMB with a 51% stake while Dubai Islamic Investment Group owns 40% and Lembaga Tabung Haji 9% .Talk was rife earlier in the year of a possible merger between Maybank Islamic and Bank Islam.

BIMB has since said it was not in talks to merge Bank Islam with Maybank Islamic but would continue to look for potential partnerships that would be strategic to its business.

Bank Islam managing director Datuk Zukri Samat also said yesterday that the bank was still looking for merger and acquisition opportunities. The RM540mil that it would raise by selling preference shares to shareholders would “give a bit more leeway” for this purpose, he said without elaborating.

On another matter, Johan said talks between its subsidiary Syarikat Takaful Malaysia Bhd and Abu Dhabi-Kuwait-Malaysia Strategic Investment Corp to dispose the takaful operations to the latter were still “ongoing”.

“Due the market conditions, some parameters have changed. We are revisiting a whole wide spectrum of new issues,” he said.

--thestaronline

Mena IPO stocks surge 38% in a year

The average appreciation witnessed by IPO stocks in the Mena in the past 12 months is 38.04 per cent, reveals exclusive research by Emirates Business.

This paper tracked 42 IPOs floated since June 2008 on 10 stock exchanges in the Middle East and North Africa (Mena) and found that Dar Al Takaful, listed on the Dubai Financial Market, has seen a 198 per cent appreciation since flotation (August 4, 2008) and is the best-performing IPO so far in the past 12 months.

Others among the top five are the Saudi Stock Exchange-listed United Co-operative Assurance Company (appreciation since flotation: 193 per cent), Damascus Stock Exchange-listed International Bank for Trade and Finance (165.2 per cent) and Arab Bank - Syria (152.4 per cent), and Kuwait-listed Al Soor Fuel marketing Company (147.62 per cent).

The Nasdaq Dubai-listed Damas International brings up the bottom of the rankings, having witnessed a decline of 72 per cent since its flotation on July 8, 2008.

Amman-listed Jordan Masaken for Land and Industrial Development Projects (-31 per cent), Sura for Development and Investment (-30 per cent), United Group Holdings - Jordan (-28 per cent) and Sabaek for Investments (-27 per cent) are the rest of the bottom five.

Dar Al Takaful also saw the most appreciation on the first day of its getting listed (437.5 per cent), while Jordan Masaken for Land and Industrial Development Projects saw its share price plummet 42 per cent on the first day of its listing.

Of the 42 stocks that this paper tracked, 26 have appreciated since their flotation, while 16 have lost in value since flotation. IPOs in the GCC (including Nasdaq Dubai) have performed even better, with 19 IPOs witnessing an average appreciation of 53.57 per cent.

GCC-wide, Saudi Arabia witnessed the most number of IPOs (nine), while the UAE witnessed five IPOs – four on the DFM and one on Abu Dhabi Exchange. Kuwait and Muscat exchanges saw two companies getting listed while Nasdaq Dubai saw one. Mena-wide, the Amman Stock Exchange saw 13 IPOs listed in the past year, while six companies listed their shares on the Damascus Stock Exchange, followed by three on the Casablanca Stock Exchange and one on Tunis Stock Exchange.

The IPO of Drake and Scull International was the most oversubscribed at 101.50 times, while the Alentkaeya for Investment and Real Estate Development was the most undersubscribed at 0.06 times.

--Business 24/7

DFM makes gains to break 2,000 barrier

Dubai Financial Market broke through the "psychologically important" 2,000-point barrier yesterday, sustaining a bull-run for the eighth consecutive session.

In what experts termed a great relief for anxious investors and financial institutions, the DFM general index closed at 2,025.55 points and showed a net gain of 1.82 per cent, or 36.17 points, compared to its previous close of 1,989.39 points.

"The DFM index broke the important psychological mark of 2,000 points yesterday. Going by the encouraging and positive trading, a 2,200-level is possible soon. We will see some profit taking also," said Sherif Abdul Khalek, trading manager at Beltone Financial Institution.

The DFM general index opened lower at 1,960.56 points and immediately eased to 1,955.91 points before rising towards the key 2,000 mark at 11am.

The buying support in Deyaar, DSI, Arabtec, DIB, Gulf Navigation, Mazaya, Takaful-Emarat, Dar Takaful and Emaar stocks took the index to its higher levels. The closing level of 2,025.55 remained the day's highest and this indicates the positive buying support throughout the session.

Trading value remained on the higher side, with a turnover of Dh1.7 billion and more than 1,235 billion shares traded in 16,696 transactions. The main volume pushers were Emaar, DFM, Deyaar, DSI and Arabtec.The list of losers includes Ekttitab, Shuaa, Al Salaam-Sudan and ACICO.

In the capital, the Abu Dhabi Securities Exchange, after witnessing significant gains on Wednesday, closed flat yesterday on the back of profit taking. Showing a mixed trend, the ADX index eased 6.90 points, or 0.25 per cent, at 2,803.16 points. The turnover was recorded at Dh711m with 417 million shares changing hands in 6,086 transactions. Sixteen stocks closed higher with an equal number moving down, while eight scrips remained unchanged in value. The shares of Aldar, Sorouh, Dana Gas, Abu Dhabi National Energy Company (Taqa), RAK Bank, Emirates Driving and Asmak fell.

--Business24-7

ADIB reaffirms plans to expand and invest in its UAE workforce

Abu Dhabi Islamic Bank (ADIB), one of the world’s leading Islamic financial institutions, has reaffirmed its commitment to expanding and investing in its workforce in the UAE, while recognizing 70 existing employees who have been with the bank since its inception in 1998.
While the bank acknowledges the changed economic conditions in 2008, ADIB has not slowed down its ambitious plans to extend its business footprint in 2009. It is continuing with its strategy to attract and retain the best talent in the Islamic banking industry, and to continually invest in its workforce. Standing as testament to this strategy, the bank recently recognized the 70 employees still working at ADIB, out of the original 1500 who started with the bank 10 years ago, with a celebratory gala dinner held in their honour at the Emirates Palace in Abu Dhabi.
In the UAE, the bank is consolidating its workforce via a number of appointments across different divisions, strengthening its people-base in line with the organisation’s vision to become a top tier Islamic financial services group. Over the past few months ADIB has significantly bolstered its senior management team with hires from around the region and beyond, including in the Retail, Risk Management Finance and Branches divisions. This team building has reinforced ADIB’s position as one of the fastest growing Islamic finance institutions.
In Egypt, ADIB is currently building up its new management team, spearheaded by the recent appointment of Nevine Loutfy as market Chief Executive Officer.
ADIB, which marked its 10th anniversary in November, maintains a staff of 1500 in the UAE. The gala dinner recognising the 70 employees who have been with the bank since its inception was attended by the Chairman, H.E. Jawaan Awaidha Suhail Al Khaili, Managing Director, Mr Khamis Bu Haroon, and CEO, Mr Tirad Mahmoud, who presented a number of awards and certificates of appreciation to the employees.
AME