Islamic Banking

empty Description of term "Islamic Banking"

IDB Group and World Bank launch second edition of Global #Report on Islamic Finance

The Islamic Development Bank (IDB) Group and the World Bank Group launched the second edition of the Global Report on Islamic Finance. The report is entitled "The Role of Islamic Finance in Financing Long-Term Investments". It presents a global perspective on the need for long-term investments in the Sustainable Development Goals (SDGs) and proposes the use of Islamic finance. Despite the huge potential in Islamic finance, the report notes that the Islamic financial sector is a small player in the global financial markets and requires a concerted push for the regulatory and legal changes to take root. It therefore recommends strengthening the Islamic financial system by developing a supportive legal, administrative, and regulatory environment. The biennial Global Report on Islamic Finance is a joint initiative of the Islamic Research and Training Institute (IRTI) of the IDB Group and the World Bank.

Spreading Islamic Banking in #Uganda, One Sermon at a Time

Ugandan investors are set to start a fully fledged Islamic institute called Midsoc Bank. Its promoter, Haruna Sebaggala, says it may start operations in six months, depending on licensing and funds. Midsoc Bank aims to target the unbanked population of the country, including both Muslims and non-Muslims. Currently, only 40% of 19 million potential customers have bank accounts. About 14% of Uganda’s 41.5 million population are Muslim. The nation’s largest banks such as Stanbic Bank Uganda and Standard Chartered Bank Uganda haven’t committed to Islamic banking. So far only Tropical Bank has confirmed it will offer Islamic products. Tropical Bank plans to initially run a dedicated department before establishing a subsidiary.

Financial Inclusion Strategy For Marginalized Zimbabwean Muslims: Islamic Finance

In 2016 The Reserve Bank of Zimbabwe (RBZ) introduced the Financial Inclusion Strategy to increase the banking population from 30% at the time it was implemented to at least 90% by 2020. The action targets groups such as Micro, Small and Medium-sized Enterprises (MSMEs), women, youth, rural population and the small-scale agricultural sector. While the strategy seems overarching, it forgot to include Muslims. RBZ should initiate the introduction of Islamic Finance through setting up an Islamic financial institution and through "Islamic windows" at conventional banks. Also, banks as a whole could set up an Islamic Bank that models ZimSwitch’s structure, in which all the banks have a stake.

Islamic trade finance has much more potential

The main precondition for Islamic trade finance to increase its presence in Islamic finance is a closer co-operation between banks and businesses. Experts say Islamic trade finance needs to be developed with instruments that allow better control of risks related to trade partners or countries. The Bahrain-based International Islamic Financial Market (IIFM) started a cooperation with the Washington-based Bankers Association for Finance and Trade to create an industry standard, a so-called master risk participation agreement. This standard is expected to create transparent market practices and contribute to an increase of the trade finance business on a Shariah-compliant basis. Bank Negara Malaysia is also pushing for Islamic trade financing to support 10% of the country’s total trade up to 2020. The bank is currently consulting initiatives which could include blockchain-based trade finance solutions, e-commerce and providing trade credit takaful to mitigate trade risks.

Govt plans ministry’s division for Islamic finance industry

The Pakistani government is mulling a dedicated division at the finance ministry to deal with Islamic finance. The Prime Minister's Finance adviser, Miftah Ismail said the committee would be set up for the promotion of Islamic banking in Pakistan. He also said that the country is set to achieve a six percent economic growth in the current fiscal year. Deputy Governor Jameel Ahmad at State Bank of Pakistan (SBP) said Islamic finance industry needs to expand its product menu with special focus to reach out to the unserved sectors and regions. Ahmad said development of all components of Islamic finance industry is imperative to achieve inclusive economic development.

Spearheading innovation in Islamic banking

In this interview, Zahid Parekh, General Manager of Habib Bank Limited (HBL), speaks about the evolution and future of Islamic banking. In his view, Islamic banking has evolved as a natural phenomenon in Pakistan. HBL's initial focus was to bring in the faith-based customers and as a second step, to target the sceptics through personalised awareness campaigns. These initiatives have made a difference in changing mindsets and expanding the customer base. HBL has a wide banking portfolio and is looking to introduce a new Shariah-compliant mortgage solution in the forthcoming months. HBL has been a frontrunner in FinTech, it established the Innovation and Financial Inclusion Department almost two years ago, with the sole purpose of digitising banking processes. The concept of FinTech is still new in Pakistan, but Parekh believes it will be a game-changer not only for the Islamic banking sector, but for the overall banking sector as well.

Venture capital in Islamic finance: A crucial concept

Venture capital was of limited significance in the Muslim world until the recent past. Things came into gear when Malaysia in 2016 launched the world’s first Islamic venture capital fund endowed with $100mn to provide seed financing for startup companies and entrepreneurs. A company financed by Islamic venture capital cannot have conventional debt on its books or use debt in any way for expansion. In a first step, a startup seeking Islamic venture capital needs to be checked very thoroughly. Next, suitable Shariah-compliant financing models need to be chosen. The three common structures used in Islamic venture capital are mudaraba, musharaka and wakala. A fourth concept is shirka, where two or more partners invest a certain amount of capital in a start-up and share the benefits on a pre-agreed basis. The investing parties are equally involved in any decision to change the strategy of the company, even after the disbursement of funds.

'#Turkey can play a leading role in Islamic finance'

According to Abdelilah Belatik, secretary-general of the General Council for Islamic Banks and Financial Institutions (CIBAFI), Turkey can play a leading role in Islamic finance. Belatik sees Turkey as a bridge between the Muslim world and the West. He said through Turkey's support Islamic finance was discussed among G20 countries, which was a milestone. Belatik added that Turkey had a key role to play in raising awareness about Islamic finance. CIBAFI expects the volume of the sector to reach $4 trillion by the end of 2020.

#Nigeria: Muslim Scholars Highlight Benefits of Islamic Financing to Economic Growth

Reputable Muslim scholars participated at Forum For Islamic Education & Welfare in Nigeria. The President of MUSWEN, Alhaji Sakariyau Babalola said the adoption of the Islamic financial system was growing in the country. Central Bank of Nigeria expert Dr. Bashir Umar said that Islamic finance was the way to finance infrastructure projects and had an integrated cooperative model which can eradicate poverty and enhance economic empowerment. He noted that financial inclusion was the key element to achieve inclusive development needed for sustainable growth in the country. Umar added that the presence of Islamic banking in the country has brought the unserved and undeserved members of the society into the formal financial sector.

Shariah compliant finance is now nearly half of GCC banking market: Moody's

According to Moody’s, Islamic banking has grown in a decade from less than a third of the GCC banking market to account for 45% of the sector. Moody's senior analyst Nitish Bhojnagarwala said that growth in the Islamic finance sector would continue to outstrip that of conventional assets in coming years. In his view, growth will be supported by governments looking for diversification, as well as by continued demand for Islamic products from individuals. Another growth factor will be Islamic insurers' penetration into Southeast Asia and North Africa. Annual sukuk issuances have more than doubled to $100 billion from $42 billion from 2008 until September 2017. Moody's expects a similar level of activity in 2018.

Baft to create industry #benchmark for Islamic trade finance

The Bankers Association for Finance and Trade (Baft) and International Islamic Financial Market (IIFM) are creating an industry standard for buying and selling Islamic trade-related risk. The two parties have announced they have signed a memorandum of understanding to create a so-called master risk participation agreement. The industry already has such a standard, which was introduced 10 years ago and became the industry benchmark for such trade finance transactions. Baft president Tod Burwell said the association aims to repeat that success in the Islamic trade finance space, where standardisation is much needed. The Islamic risk participation agreement will incorporate considerations for funded and unfunded risk participations in trade assets within a Sharia-compliant framework. IIFM chairman Khalid Hamad said the cooperation with Baft would contribute to increasing the trade finance business on a Sharia-compliant basis.

Islamic finance set to extend growth, says Moody’s

According to Moody's Investors Service, the growth of the Islamic finance sector will continue to outstrip that of conventional assets across core Islamic finance markets. Islamic banking penetration in the Gulf Cooperation Council (GCC) increased to 45% of the total banking market, as of September 2017 from 31% in 2008. Moody's Senior Analyst Nitish Bhojnagarwala, said the Islamic finance sector would be supported by governments, as well as by continued demand for Islamic products from individuals. Another growth factor will be Islamic insurers' penetration into Southeast Asia and North Africa. Sukuk issuances grew 17% in 2017 to $100 billion, driven largely by GCC sovereigns. A similar level of issuance is expected in 2018, although the recent recovery in oil prices could lower financing needs for some sovereigns. Corporate and asset-backed sukuk activity was muted in 2017 because of more attractive conventional market opportunities and Moody's expects the same for 2018.

Toward A Global Islamic Finance Standard

The Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) is working to establish standards and norms for Shariah-compliant banking practices worldwide. The AAOIFI has hundreds of member institutions from over 45 countries. In October 2017, Saudi Arabia’s central bank, the Saudi Arabian Monetary Agency, joined AAOIFI. Its standards are widely used in the industry and are compulsory in some countries such as Bahrain and Oman. To homogenize industry practices, in 2017 the AAOIFI adopted guidelines for centralised Shariah boards and new standards for gold-based products. In 2018, the AAOIFI is developing new draft rules on Shariah compliance and fiduciary ratings.

IIFM, BAFT to create MRPA for Islamic trade finance

BAFT (Bankers Association for Finance & Trade) and IIFM (International Islamic Financial Market) announced a memorandum of understanding to jointly create a master risk participation agreement to support Islamic Trade Finance. The Islamic Risk Participation Agreement (IMRPA) will incorporate the practical considerations for funded and unfunded risk participations in trade assets within a Shari’ah-compliant framework. BAFT President Tod Burwell said BAFT was proud to partner with IIFM to introduce some much-needed standardization to the market in support of Islamic trade. IIFM Chairman Khalid Hamad said this collaboration would contribute to increasing the trade finance business on a Shari’ah-compliant basis.

#UK Islamic bonds to be worth GBP58 billion by 2028

UK’s Gatehouse Bank has calculated that the value of Sukuk assets listed on the London Stock Exchange (LSE) would double to GBP57.8 billion in the next decade, if issues continue at their current rate of growth. Sukuk only began life in the UK in 2007, but their numbers have been swelling at an annual rate of around 5%, though they are still little understood. Gatehouse Bank CEO Charles Haresnape sees this growth as a huge opportunity for Britain. He urges the Government to capitalise on this week's summit on Islamic finance and make it more than just a single effort for one large oil company to list on the LSE. He believes an on-going trade mission is needed to make London the world centre for all Islamic finance.

#Kenyan firm tapped to train Islamic Finance #professionals

The Bahrain-based General Council for Islamic Banks and Financial Institutions (CIBAFI) has accredited Kenyan firm Aqeel Consulting to offer its professional development courses in Islamic finance. Aqeel Consulting's Managing Director Jaafar Abdulkadir said this partnership would develop a critical mass of professionals to support the growth of Islamic finance in the region. Aqeel will be conducting professional development courses on behalf of CIBAFI, which will be the certification body. The courses will be customised to suit the local scenario. Abdulkadir added that the collaboration with CIBAFI would reduce reliance on expertise from other countries. The professional development courses will meet global standards, but with local relevance.

#Saudi Arabia expands $10b loan #refinancing to $16b, adds Islamic tranche

Saudi Arabia is expanding the refinancing of a $10 billion international loan to raise $16 billion. The kingdom is introducing a significant Islamic tranche to the transaction, supporting Saudi Arabia’s goal of becoming the leading centre for Islamic finance. A $16 billion facility would be one of the largest syndicated loans ever extended in emerging markets. The kingdom raised the original $10 billion loan from 14 core banks in 2016, in what was its first jumbo transaction after a slump in international oil prices. A further dollar debt issuance is also planned, which could be marketed over the next few weeks.

Draft Sharia rules for companies notified

The Securi­ties and Exchange Commission of Pakistan (SECP) has notified draft Sharia Governance Regulations 2018. The regulations concern Sharia-compliant companies and entities including the Sharia-compliant securities and Islamic financial institutions. The regulations are the first-ever holistic Sharia governance framework introduced by the corporate sector regulator. Considering the need for an extensive framework, IFD conducted consultation sessions with Sharia advisors, State Bank, Pakistan Stock Exchange, Institute of Chartered Accountants Pakistan, takaful companies, modaraba and NBFI Association. The regulations are now open to public consultation and stakeholders have the opportunity to share their comments and suggestions within two weeks.

#Russia’s Sberbank inks MoU with ICD to offer Islamic finance products

Sberbank of Russia (SBR) has signed a Memorandum of Understanding (MOU) with the Islamic Corporation for the Development of the Private Sector (ICD) to help the bank’s clients access Islamic finance products. ICD senior regional manager Samir Taghiyev said the MoU would reinforce SBR efforts to develop Russia as a strong hub. He added that the ICD would help share its knowledge to develop the corporate, retail and private banking as well as the training needed. The MoU was signed by Okan Altasli, the Director of Regional offices at ICD and Oleg V Ganeev, Deputy Chairman of SBR. The document was signed on the sidelines of the 1st Russian Islamic Economy Forum co-organized by ICD, IAIB, Sberbank, KPMG and Thiqah in Moscow.

#Kazakhstan getting closer to implementing Islamic finance

Kazakhstan will host a meeting on the implementation of Islamic finance on March 5. The Islamic Corporation for the Development of the Private Sector (ICD) is organizing the event to discuss the development of Islamic finance with the further release of sukuk in Kazakhstan. The list of participants includes the regional manager of the ICD Samir Tagiyev, the representative of the Entrepreneurship Development Fund "Damu" Rustem Ismailov, the chairman of the Islamic Finance Development Association (ARIF) Timur Rustemov, along issuers and investors of the Kazakhstan Stock Exchange. The parties will also consider the ARIF projects on Islamic financing in Kazakhstan, as well as the possibility of the Kazakhstan Stock Exchange functioning as a platform for the development of Islamic finance.

Syndicate content