5 Interactive Distance Learning Programs on Islamic Banking and Finance

Friday, December 31, 2010

Is Egypt going takaful?

Islamic insurance has been steadily growing as a "Halal" alternative for commercial insurance that some believe to be illegal and risky

"If you want to invest in Halal items, with fair interest. If you want to insure your home without opposing God, come and let’s all cooperate and invest in Halal."

So reads a statement on the facebook group page of Saudi Egyptian Insurance House, one of Egypt’s takaful insurance companies, in Latin letters.

Takaful, literally "joint guarantee", is to invest the halal (permitted in Islam) way.

Recent as it is in the Egyptian liberal market, the Islamic laws-compliant version of insurance seems to be slowly but surely growing.

"Facebook is one of our innovative ways to marketing," says Gamal Shehata, the company’s branches and production general manager, from his office in the company's five floor silver building in the Cairo suburb of Dokki.

Egypt has had a bad experience with Islamic finance.

Back in the mid 1980s, Islamic fund management tycoons like Rayan and Al-Saad were accused by the government of investing millions of pounds of Egyptians' savings in a ponzi scheme. Any dividends paid to investors were from their own money or that of other investors rather than from any actual earned profit

Although the government confiscated their local assets, hundreds of millions of Egyptians lost their money.

"One way to attract customers and regain their trust is by combining state-of-the-art marketing tools with word-of-mouth traditional ways," says Shehata, surrounded by decorative Quranic frames, before being interrupted by an attractive veiled young lady, one of the company’s marketers, wearing modern jeans and high heeled boots.

"Our main target is that growing category of Egyptians who are wary of investment and other financial dealings because they think its haram (forbidden in Islam)," added Shehata.

Established back in 2003, with an authorized capital of LE100 million ($17,220,595), as the first Takaful insurance company in Egypt, the Egyptian Saudi House operates according to sharia (Islamic law) whereby the insured is a partner in the end of the year's surplus.

As a corporate insurance entity, the company provides insurance against all manner of risks.

The company’s total assets have grown from LE79.6 million ($13.7 million) in 2007-2008 to LE95.9 million ($16.5 million) in 2008-2009.

The company has been followed into the sector by eight others companies that all started operating in mid 2008, with fifty percent of the capital coming from the Gulf countries.

The new comers quickly prospered to claim, in 2009, a 5 percent stake of the LE8 billion ($1.45 billion) Egyptian insurance market, according to figures released by the Egyptian Financial Surveillance Authority (EFSA).

According to the World Business Institute's International Review of Business 2009 (Islamic Banking Theories, Practices and Insights), the first modern experiment with Islamic banking and financing took place in Egypt back in the 1963. Ahmad El Najjar, an Islamic economist, set up a savings bank based on profit-sharing in the Egyptian town of Mit Ghamr.

The bank proved to be popular and prosperous until it closed in 1967.

The bank, which neither charged nor paid interest, invested mostly by engaging in trade and industry, directly or in partnership with others, and shared the profits with their depositors.

In 1972, Mit Ghamr Savings was revived when it became part of Nasr Social Bank which is still in business in Egypt.

In modern times, takaful was revived in 1979 with new companies emerging first in Sudan and Saudi Arabia.

From the mid 1980s the idea spread to the Far East, before gaining momentum among other Arab countries in the last five years.

Abdul Raouf Qutb, chairman and managing director of the Union of Egyptian Insurance Company, told Ahram Online he expects the growth of the takaful insurance sector in Egypt to reach "between 15 and 20 percent by the end of 2013."

Such expectations, say insurance executives, are optimistic.

"I think one main reason for our quick jump in sales is that we have targeted that sector of Muslims who fear halal and haram investment," explains Shehata.

In a nutshell, takaful pools a community's resources with an investment manager or company. Contributors to the fund are then given financial support when they need it.

In essence, there are two kinds of investment tools: Equity-based and fixed income-based, explains Mahmoud Abdallah, chairman of Insurance Public Holding which holds 55 percent of the Egyptian insurance market.

Islamic companies invest only in the first kind of tools, which means sharing risks and variable premiums.

The idea, spiritual as it is, has proved a success worldwide, with cooperative insurance coming as a hostile yet parallel body to the illicit conventional insurance, in which companies deposit premiums in interest-bearing, but risky, investments.

Internationally, total takaful premiums topped $2 billion in 2006 and are estimated to reach US$7.4 billion by 2015, according to a 2008 study entitled ‘The Viability of Islamic Banking and Finance in a Capitalist Economy: A South African Case Study’ in the Journal of Muslim Minority Affairs.

"Clients view their contribution as a “donation” which is transferred to the ownership of the Takaful Waqf Fund and placed in interest-free sharia-approved investment projects including Faisal Islamic Bank, and Egyptian Saudi Finance Bank," adds Shehata.

Each takaful company has a governing body (Sharia Board) that consists of ulamaa (Islamic scholars) to judge if the company’s transactions are consistent with Islamic practice or not.

"Nasr Fareed Wassel (Egypt’s former Mufti) keeps the upper hand in our company when it comes to issues of halal and haram," elaborates Shehata.

But because business is business, the company didn’t miss the chance of taking on a big cigarette company last year, though the item is considered forbidden by Islam.

"The compromise we reached with the board is to sign a medical insurance contract, while avoiding insurance on the company’s assets that are considered haram."

For Islamic life insurance companies, the issue of halal and haram is a constant one, to the point of whether it is even consistent with the fatalistic religion to insure your life.

"We're not preachers, we're doing business," says Saleh Eid, CEO of Egyptians for Takaful Life Insurance Company. "We don’t care who says this is improper as we have our sharia board that says what's ok and what's not."

The company has seen its revenue surge to LE12 million in 2009, from LE1.8 million the previous year.

By the end of 2008, Islamic finance gained a new reputation for stability with the credit crunch and subsequent global recession seeing many lose faith in the capitalist system and its vulnerable financial institutions.

"I think the 2008 financial crisis has caused clients shift from investing in commercial banks and institutions to Islamic companies," adds Shehata. "We have customers who don’t give much attention to issues of halal and haram. We also have Christian clients."

In Islamic finance, derivatives, hedge funds, short-selling and speculation are illicit, haram.

Furthermore, the risk-sharing concept of murabaha, where entrepreneurs are granted capital and share the profits with the bank, brings Islamic companies closer in step with the real economy.

Advocates say that Islamic banks are untouched by the current crisis due to the nature of Islamic banking, especially its avoidance of the debt trading and market speculation that takes place in European and American banks, according to the Saudi Al-Sharq Al-Awsat daily.

The less risky and more stable practices of takaful companies might go some way to changing Egyptians' suspicion of religious institutions.

At the moment, however, there are twice as many traditional insurance companies, with far larger investments and assets.

ourtesy by:Ahram Online

Wednesday, December 29, 2010

Distance Learning Programs on Islamic Banking and Takaful

Tunisia / Islamic Finance: Zitouna Takaful is born

Zitouna Takaful is born. It is a limited company whose future subscribed capital is 15,000,000 dinars.

The company's purpose in Tunisia and abroad is to operate in accordance with the principles and values that it has adopted and for which it was established, particularly those relating to Takaful and Re-Takaful:

Among its activities, the execution and management of contracts or agreements for insurance and reinsurance of any kind and any other transactions or agreements that may be legally made by insurance companies except for life insurance and reinsurance.
More generally, its vocation is to carry out or participate in any industrial, commercial, financial, agricultural, or real estate operations, related directly or indirectly to any objects defined above.

Courtesy by:Zitouna bank

Tuesday, December 28, 2010

Malaysia's Great Eastern Takaful plans regional growth

KUALA LUMPUR | Mon Dec 20, 2010 3:09am EST

KUALA LUMPUR Dec 20 (Reuters) - Malaysian Islamic insurer Great Eastern Takaful will expand to Indonesia and Brunei to tap the Muslim market for sharia-compliant products, its chief executive officer said on Monday.

The company, which is owned by a subsidiary of Singapore's Great Eastern Holdings Limited and Malaysia's armed forces cooperative, also has Singapore and China on its radar for expansion.

It plans to go to Indonesia in 2011 and Singapore and China in 2014 or 2015.

"Both (Indonesia and Brunei) are majority Muslim population and this sharia-compliant insurance will definitely attract the population," Great Eastern Takaful chief executive Mohamad Salihuddin Ahmad told reporters.

"Beyond that we are also looking into Singapore and China because these are the two countries where Great Eastern has a presence."

Indonesia is regarded as the next Asian growth market for Islamic finance. Its Islamic bank assets were 66 trillion rupiah as of December 2009, compared with 2,534 trillion rupiah for the banking industry as a whole, central bank figures show.

In Malaysia, Islamic banking assets totalled about $95 billion, or 19.6 percent of the total, as of December 2009, the central bank has estimated.

(Reporting by Liau Y-Sing, Editing by Saumyadeb Chakrabarty)

Courtesy by:Reuters

Monday, December 27, 2010

Takaful International in medical services deal

MANAMA: Takaful International Company has signed a mutual co-operation agreement with Anadolu Medical Centre in Turkey to provide a wide range of medical services for its customers.

Anadolu Medical Centre has a specialised medical team in all disciplines including oncology, cardiac care, women's health and IVF, neurological sciences, surgical sciences and orthopedics.

It is also considered among the top hospitals in the world that uses the 'cyberknife radiosurgery' technology in the field of oncology, which is currently one of the most secured ways to treat tumours without any surgical intervention.

It is designed to destroy tumours with minimal damage to the tissues surrounding it.

"Signing this agreement enhances Takaful services, especially coverage of health insurance," Takaful International chief executive Younis Jamal Al Sayed said.

"We are pleased with this co-operation with such a large medical centre that works in strategic partnership with John Hopkins Medicine, which is consistently ranked amongst the best hospitals in the US.

"The agreement includes many features such as assistance in travel and transportation, as once a person has decided to be treated at Anadolu Centre, Takaful International will make arrangements for the travel, hotel reservation and other trip requirements deemed necessary," he said.

"Moreover, the agreement entitles all Takaful International customers and non-customers to have access to all medical services," he added.

In addition, Takaful International will provide all its customers and non-customers the Remote Second Medical Opinion service with specialised doctors in their fields, to ensure diagnosis accuracy and the treatment to be received by the patient.

It is now possible for the executive managers to have a full medical examination at special comprehensive rates, which include the cost of medical examinations and travel tickets, accommodation and transportation.

"The company continues to develop its insurance products and health insurance in particular, due to the growing demand and increased importance of health awareness, as the company seeks to attract more major medical hospitals regionally and globally," Mr Al Sayed added.

"We are delighted to sign this agreement with Takaful International, which is one of the leading insurance companies that provides innovative products, safe and special services in addition to its association with the major international re-insurance companies," Anadolu Medical Centre chief executive Hasan Kus said.

He also added that Anadolu Medical Centre offers wide range of high quality products and services that meet the international standards. The agreement was signed in Turkey at the Anadolu Medical Centre Hospital by Mr Al Sayed and Mr Kus.

Courtesy by: Gulf Daily News

Thursday, December 9, 2010

Top Islamic Finance Scholars Oppose Reform

Two of the Gulf's top Islamic finance scholars spoke out against efforts to reduce the number of boards they and their peers are allowed to sit on, challenging industry attempts to improve corporate governance.

Bankers in the emerging $1 trillion Islamic finance industry say the concentration of hundreds of board positions in the hands of a few sharia scholars leads to conflicts of interest and hampers appropriate supervision.

Bahrain based industry body AAOIFI is drafting rules to regulate scholars' shareholdings and the number of Shariah supervisory boards a single scholar can sit on. "There is no need to limit the number of boards," Sheikh Nizam Yaquby, one of the most revered Islamic finance scholars in the Gulf Arab region, told a conference in Manama. He sits on several dozen sharia supervisory boards.

He said there was no similar criticism of other groups such as lawyers or accounting firms working for several banks: "Why should (sharia scholars) not be treated like other professionals in the field?"

Only the Malaysian central bank limits the number of boards scholars can sit on, while the United Arab Emirates this year introduced caps in the insurance sector.A second top scholar in the Gulf, Mohamed Al Qari, also dismissed efforts to limit the number of board seats that scholars are able to hold.

"I don't think it will be very helpful if we restrict the membership of sharia boards to only one, if the member himself is not qualified," he told the conference.He said that simply graduating from an academic sharia program alone was not sufficient to be qualified to sit on a bank's sharia supervisory board and that junior scholars needed to learn from senior colleagues until formal training programs are established.

He said: "This knowledge that has been accumulated by a small number of people can go from the first to
the second generation through apprenticeship."

Both Yaquby and Al Qari are members of the AAOIFI sharia board that develops accounting and auditing standards for Islamic banks.

Bankers say reforms launched by AAOIFI will likely fall short of expectations as scholars governing themselves are unlikely to cut into their own source of income, unless central banks force them to do so.

"This has to come from a body that can regulate, that can impose the rules," Muddassir Siddiqui, an Islamic finance scholar and partner at law firm SNR Denton.

He said that the industry needed to strike the right balance between improving transparency and ensuring scholars develop the know how needed in Shariah supervision.

Saturday, December 4, 2010

Non-Muslim demand seen boosting family takaful-FWU

The family takaful industry will grow five folds to account for about a 10th of the overall life insurance sector within the next decade, as Islamic insurance attracts more non-Muslim demand, sharia insurer FWU said on Tuesday.
Family takaful now has a market share of about 2.5 percent of the overall life insurance industry, and this was expected to rise to as high as 10 percent over the next 10 years.
"The Muslim population is more than a billion now but I don't think that this is really the market," Manfred Dirrheimer, managing director of FWU Global Takaful Dubai, said on the sidelines of a conference in the Malaysian capital.
"There is a trend for these products but equally shared between Muslims and non-Muslims."
Dirrheimer said the target was reachable although some bankers have been less optimistic about the industry, citing the shortage of sharia-compliant instruments that insurers can invest in and doubts about whether takaful really complies with the sharia's guidelines.
Takaful premiums are expected to grow to around $8.8 billion globally by the end of 2010, compared with $3.4 billion in 2007, according to Ernst & Young.
Islamic insurance has struggled to take off in some Muslim countries. It has a penetration rate of 10.5 percent compared with 42.3 percent for conventional insurance in Malaysia, which has the world's largest Islamic bond market.

FITCH affirms HSBC Amanah Takaful's IFS at A-

Fitch Ratings has today affirmed the Insurer Financial Strength (IFS) Rating of Malaysia-based HSBC Amanah Takaful (Malaysia) Sdn Bhd (HSBCAT) at 'A-'. The Outlook is Stable.

HSBCAT is considered an important member of HSBC Group under Fitch's "Approach to Rating Insurance Groups", and its rating is underpinned by the group's ability and willingness to provide on-going support. The rating agency recognizes the support and benefits HSBCAT enjoys from the group's strong branding, product and distribution capabilities, and other management resources. The rating also incorporates HSBCAT's conservative investment mix, healthy capitalisation, and prudent management. On the other hand, it is constrained by the takaful operator's limited track record, modest size, amidst intensive market competition. Additionally, the company is challenged to manage its expenses appropriately as it builds up its business portfolio.

Since its inception, HSBCAT's asset allocation has been conservative. At the fund and operator level, investments reside mostly in fixed income instruments, as well as cash and fixed deposits. Fitch views the investment strategy, which places principal protection before return maximisation, as prudent. However, the agency notes that HSBCAT is somewhat constrained by the limited depth and breadth of Malaysia's Islamic bond market. Although HSBCAT's current capital level is healthy, the agency cautions that it is important for the operator to maintain its capital level commensurate with its portfolio, as it grows its business

HSBCAT follows a modified Wakala (agency) model, whereby the takaful operator receives a Wakala fee for the management services it provides to the participants, as well as an incentive fee, expressed as a percentage of surplus from the risk funds. Under this model, HSBCAT's profitability is determined, to a large extent, by its Wakala fee income and expense level. In Fitch's opinion, the execution risks inherent in HSBCAT's business plan are mitigated by the group's management support.

The key rating driver that could result in a one-notch upgrade for HSBCAT would be improvement in the credit profile of the HSBC Group, as reflected by an upgrade of HSBC Holdings Plc ('AA'/Stable) and/or the group's core operating entities such as the Hongkong and Shanghai Banking Corporation ('AA'/Stable). Conversely, should the credit profile of HSBC Group deteriorate, this could put downward pressure on HSBCAT's rating. Additionally, an unexpected significant deterioration in the standalone credit profile of HSBCAT in terms of market franchise, premium sustainability, operating performance and capital level relative to its business profile, could also affect its rating. HSBCAT's rating is assigned with less than five years of audited information available.

HSBCAT was incorporated in 2006 as a composite takaful operator. At present, the company is 49%-owned by HSBC Insurance (Asia-Pacific) Holdings Ltd, 31% by Jerneh Asia Bhd and 20% by the Employees Provident Fund Board. HSBCAT's key products include retirement protection, homeowner takaful, mortgage life and investment-linked plans

Courtesy by : Reuter

Tuesday, November 23, 2010

PQFTL and NAFA Funds Sign Agreement

Pak-Qatar Family Takaful Limited (PQFTL) and NBP Fullerton Asset Management Ltd. (formerly National Fullerton Asset Management Ltd.) signed an agreement for Family (Life) Takaful coverage to the investors of NAFA Riba-free Savings Plans.

MoU was signed by P. Ahmed , Director and CEO PQFTL and Dr. Amjad Waheed, CEO, NAFA Funds.

According to the agreement and subject to the terms of the Group Family Takaful Scheme issued by PQFTL, NAFA Riba-free Savings Plan’s investors will be provided free Family (life) Takaful coverage equal to the amount of investment and subject to a maximum of PKR 2,000,000 per covered person.

Takaful is a Halal risk mitigation tool which serves as an alternative to conventional insurance."

Wednesday, November 10, 2010

Takaful signs key deal with Generali

MANAMA: Generali International has selected Takaful International as their representative in Bahrain after the signing of an exclusive co-operation agreement between them which covers all health insurance for the clientele of Generali in the kingdom.

Under the agreement, all clients and customers of Generali International in Bahrain will benefit from the services offered by Takaful International in health insurance and in turn Takaful family plans to utilise the services of Generali in the field of insurance and reinsurance, in laying the foundation for a successful global partnership in the field of Takaful insurance.

"We are pleased to work together with Generali International through the provision of effective insurance coverage in line with the requirements of all institutions to ensure success and keep pace with the rapid growth in changing times," said Takaful International chief executive officer Younis Alsayed.

"Generali's decision to select us a partner is a testament to our reputation and capability to be distinctive in the local Bahraini market and on the international platform.

"The company continues to develop all health insurance products especially given the growing demand and increasing awareness of its importance, as the company seeks to create more partnerships in the Middle East," he said.

Generali International holds a Rating (AA-) from Standard & Poor's and is one of the largest global insurance companies with branches in more than 68 countries.

PQFTL Board Decides to issue 33% right shares!

The Board of Directors of Pak-Qatar Family Takaful has decided to further invest in the company by issuing right shares upto 33% of the base capital. This was decided in the Board of Directors meeting of Pak-Qatar Family Takaful held in Doha recently.

The meeting was chaired by H.E. Shaikh Ali bin Abdullah Al-Thani chairman board of director and was also attend by all the members.

CEO, PQFTL Mr. P. Ahmed apprised the Board on the state-of-affairs of the Company and presented the progress report; Shaikh Thani and other members of the board expressed their satisfaction and appreciated the performance so far despite the difficult socio-economic conditions of the country.

Shaikh Ali bin Abdullah Al-Thani assured his full support to PQFTL. He said that PQFTL "has the institutional capacity to cater to the protection and long-term investment needs of the people of Pakistan." The sponsors of Pak-Qatar, who are leading financial institutions from the state of Qatar including QNB, Masraf Al-Rayan, QIIB, QIB, QIIC, The Amwal group and German base FWU group, showed their long term commitment to the country and pledged to provide assistance to support the cause of Takaful in Pakistan.

Pak-Qatar Family Takaful Limited, the pioneers of family Takaful (Islamic life insurance) in Pakistan, started its operations in October 2007 and achieved rapid growth in a span of 3 years.

Sharia-compliant insurance firm launched in Kenya

The first Sharia-compliant insurance company in Kenya has been formed as the race for Islamic cash intensifies.
The firm, which will operate as Gulf Takaful Company Ltd, is being fronted by GulfCap Investments — the principal shareholder in Gulf African Bank.
Under the model, people seeking insurance cover will pay premiums to a collective fund from which payments will be made to members who suffer from the risks covered.
“People will find it a prudent model. Normally, when one insures their house or car, they don’t get their money back. We are offering a possibility to the insured to get back some of their money,” said Mr Suleiman Shahbal, the chairman of GulfCap Investments.
The bank’s chief executive, Mr Najmul Hassan, said introduction of the insurance company is a significant step towards offering and exploiting Islamic financial services.

Five new firms set to join UAE takaful market

About five new companies offering Islamic insurance, or takaful, are expected to launch in the UAE by mid 2011, boosting competition, industry executives said last week of October, 2010.
"At least four to five companies have applied for licences and they could launch initial public offerings (IPOs)," Ezzeldin Elmassry, chief operating officer of Abu Dhabi National Islamic Finance (ADNIF), told a round table.
"There is fierce competition between takaful and conventional insurance companies," he said, adding that there are 54 insurance firms in the UAE.
ADNIF, the Islamic finance unit of National Bank of Abu Dhabi, plans to launch a takaful company in the first quarter of 2011 in a joint venture with three Abu Dhabi government backed firms.
Insurance penetration rates in the Middle East are among the lowest in the world at about 1 percent of per capita expenditure compared to 9 or 10 percent in Western countries, said Osama Abdeen, CEO of Abu Dhabi National Takaful Company.
The new takaful firms are mostly backed by strong existing entities, said ADNIF's Elmassry.
An official of the UAE regulator Securities & Commodities Authority said several applications for insurance licences are pending and some would be approved shortly, declining to provide any names.