Africa

THE CONCEPT AND OPERATIONS OF SWAP AS A HEDGING MECHANISM FOR ISLAMIC FINANCIAL INSTITUTIONS

"THE CONCEPT AND OPERATIONS OF SWAP AS A HEDGING MECHANISM FOR ISLAMIC FINANCIAL INSTITUTIONS"

The main objective of this paper is to give a clearer picture of the swap mechanism as offered by the international Islamic financial institutions and how its operations are structured in accordance with Shariah principles and contracts. In preparing this paper, ISRA has held a series of internal discussions as well as with outside parties, including Shariah experts and operating officers from international banks directly involved in the structuring of Shariah-compliant swap products. Documents related to the products and related academic materials were also referred to, giving a wider and thorough perspective on the issue.

by

Assoc. Prof. Dr. Asyraf Wajdi Dusuki
Head of Research Affairs Department
International Shari’ah Research Academy for Islamic Finance (ISRA)

Shabnam Mokhtar
Researcher
International Shari’ah Research Academy for Islamic Finance (ISRA)

Download: http://www.isra.my/media-centre/downloads/summary/29/216.html

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S&P: European Finance House Offshore Sharia Fund Assigned 'AAf/S1+' Fund Credit Quality And Volatility Ratings

Press Release

European Finance House Offshore Sharia Fund Assigned 'AAf/S1+' Fund Credit Quality
And Volatility Ratings

LONDON, May 4, 2010--Standard & Poor's Ratings Services said today that it assigned
its 'AAf' fund credit quality and its 'S1+' fund volatility ratings to EFH Funds SCA
SICAV-SIF - Liquidity Subfund (the "subfund"), a Luxembourg-domiciled U.S
dollar-denominated liquidity fund, managed by European Finance House (EFH). This is
the first Standard & Poor's fund credit quality and fund volatility rating assigned
to an offshore Islamic fund.

Fund credit quality ratings generally reflect our assessment of the level of
protection against losses from credit defaults and are based on an analysis of the
credit quality of the portfolio investments and the likelihood of counterparty
defaults.

Fund volatility ratings generally reflect Standard & Poor's view of the fund's
sensitivity to interest rate movements, credit risk, investment diversification or
concentration, liquidity, leverage, and other factors.

The ratings reflect Standard & Poor's analysis of the subfund's credit quality and

S&P: Islamic Investors' Risk Tolerance Will Determine Demand For Sharia Fund Ratings

Press Release

Islamic Investors' Risk Tolerance Will Determine Demand For Sharia Fund Ratings,
Report Says

LONDON, May 4, 2010--The economic boom in the Gulf Cooperation Council (GCC) region
has fueled the emergence of Islamic finance in the international market in the past
decade. Revenue growth in this region has particularly benefited the asset
management sector, as Standard & Poor's noted in a report published today (see "Using Fund Ratings To Assess Credit And Market Risks In Sharia Funds").

The Middle East is by far the largest market for Sharia-compliant funds, but
conventional players in Europe, South Africa, and the U.S. have also launched a
number of funds that comply with Sharia law during past years, enhancing their
product range to meet the specific requirements of Islamic investors seeking to
invest in this asset class.

The number of product types remains limited, which Standard & Poor's Ratings
Services believes is largely due to the nascent nature of Sharia funds. Funds also
have to be invested in ways that are permitted under Islamic law. Sharia funds,
unlike traditional bond funds, do not invest in conventional rated fixed-income

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Nigeria’s Islamic banking dilemmas

Islamic banking and finance (IBF) is about to become part of the banking and finance landscape of Nigeria.

The IFSB-IRTI-IDB publishes report on Islamic Finance: Global Financial Stability

A report on Global Financial Stability was launched at the Inaugural Financial Stability Forum organised by the Islamic Financial Services Board (IFSB) on Tuesday, 6th April in Khartoum. The report examines the intrinsic strength of the Islamic finance model, the state of the Islamic financial services industry and challenges and strategies for strengthening financial stability in the Islamic financial services industry.

New updated Sharia scholar network analysis by Funds at Work

The 4th executive summmary now focusses on over 220 Shariah scholars with exposure to the Gulf Cooperation
Council (GCC), including their international board memberships with 1050+ board positions in almost 300
institutions and 24 countries.

It is the single most detailed analysis on Sharia Boards and their scholars published.

CGAP, Deutsche Bank, Grameen-Jameel and IDB partner to launch ‘Islamic Microfinance Challenge 2010'

For Immediate Release

March 8, 2010–CGAP, Deutsche Bank, Grameen-Jameel and Islamic Development Bank have joined forces to challenge the Islamic microfinance industry to develop new ideas for business models in the Islamic Microfinance Challenge 2010: Innovating Sustainable, Scalable, and Market-Driven Models. Islamic microfinance has gained some traction over the past few years, with a swift rise in the number of institutions offering microfinance products in compliance with Islamic principles. But the fundamental challenge for the Islamic microfinance industry remains meeting client demand with affordable, authentic, profitable, and market-driven products.

Cagamas, Lebanon, Waha Capital Plan Sales: Islamic Bond Alert

The following borrowers are expected to sell Islamic bonds, which use asset returns to pay investors to comply with the religion’s ban on paying interest:

CAGAMAS BHD
LEBANON
WAHA CAPITAL PJSC
KUVEYT TURK KATILIM BANKASI AS
SAUDI ARABIAN OIL CO
LAFARGE MALAYAN CEMENT BHD
QATAR ISLAMIC BANK SAQ
PAKISTAN
TAIBA HOLDING CO
THAILAND
DEVELOPMENT BANK OF KAZAKHSTAN
KHAZANAH NASIONAL BHD

Islamic Finance must turn to its roots, by Muhammad Ayub

The global economy is facing a deep downturn as a result of the crisis. It was due to excessive
ability to create money and credit for earning increasing profits without creating anything of
value for use by the mankind. The system needs radical change in the approach, principles and
the operation of economic and financial systems. Creation of money, and lending it on interest –
interest based debts and financial obligations leading to undue receivables for the lenders, is
the biggest and primary problem of the conventional system. Islamic principles of finance
provide checks for the factors that have distorted the system. Enhanced supply of risk-related
capital, restricted risk taking, balanced return rate structure based on the real sector economic
activities, and supply of money commensurate with prospects of growth in an economy, provide
a sound basis for sustainable development. Hence, Islamic financial institutions and markets
have better ability to sustain in the hard times. Islamic banking industry should not only have
escaped unharmed during the crisis, it should also have availed the opportunity of developing

Barclays launches sharia-compliant financing facility

But about 10 per cent of the Dubai’s US$80 billion debt load is estimated to comply with Shariah, casting the spot light on the credibility pedestal Islamic financing has ridden on over the years. Islamic banking experts at IIBI say that Islamic finance as a viable solution to get rid of the weaknesses of conventional finance is mainly limited to theoretical debate.

Islamic Microfinance - Business Proposal Competition

CGAP, Deutsche Bank, Islamic Development Bank, and Grameen-Jameel announced the Islamic Microfinance Challenge 2010: Innovating Sustainable, Scalable, and Market-Driven Models. The contest is a joint initiative to promote the innovative design of Shariah-compliant products for Islamic microfinance clients.

The organizers are seeking original Islamic microfinance business proposals which are profitable, sustainable, scalable, and Shariah-compliant. Finalists of this competition will be awarded with grant funds as well as need-based technical support to launch a pilot project of their proposed business idea.

It offers a unique opportunity to showcase innovative business ideas, gain industry-wide recognition, and benefit from the funds and technical expertise of leading institutions in the microfinance and Islamic finance sectors.

The World's Sukuk Markets are good medium-term growth prospects, says S&P

Medium-term growth prospects for the world's sukuk market are good, said Standard & Poor's Ratings Services in a report published today. In addition, we understand from unofficial market sources that about US$10 billion more could potentially enter the pipeline. If that comes to market, total sukuk issuance in 2010 could approach the current 2007 record of US$34.3 billion. The main uncertainty this year is market conditions.

Report on Social Responsibility Trends at Islamic Financial Institutions

The report on Social Responsibility Trends at Islamic Financial Institutions presents the results of an extensive survey on Social Responsibility at Islamic Financial Institutions (IFIs) carried out during summer and fall of 2009 by DinarStandard and Dar Al Istithmar with the support of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI).

Some key findings of the survey were:

Clients: 100% of respondents answered yes to having a policy to screen prospective clients which is actively implemented. Similarly 97% have an organizational policy that deals with client responsibly.

Employees: 83% of respondents’ state having policies that provide equal opportunity to all their employees, 93% have policies that ensures merit-based salary and promotion, and 86% having policies that specifically prohibits any kind of discrimination. However, when it comes to having policy to monitor employees from different backgrounds and gender, the response was mix with only 52% admitting to having such a monitoring policy and 48% not having any such policy.

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