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New rules for Islamic banking in Qatar released by the Central Bank in late August will change the way conventional banks offer sharia-compliant services and likely boost the performance of banks that focus solely on such services, reports Global Arab Network according to OBG.
The new regulations, made public on August 29, prohibit conventional banks from allocating more than 10% of issued capital to Islamic banking operations and from opening additional branches for Islamic banking. There is also a limit on mudaraba (profit-sharing) and musharaka (joint ventures) to 5% of a bank’s total Islamic operations.
The message seems to be that banks can either focus on conventional or sharia-compliant banking, but not both. The new rules come into effect immediately but banks have until the end of 2011 to fully comply.
While that may be true in the short term, the limits on conventional banks may spur them to increase product offerings in other areas and will likely increase competition among institutions that offer only sharia-compliant services.

Muhammad Raza, Head of Commercial Banking at Meezan Bank, outlines the difference succinctly by using an often-quoted reference from the Quran that allows trade but forbids ‘riba’ or usury. He explains that riba is a form of a transaction that is impermissible in Islam.
The transaction is straightforward: the lender extends a certain amount of money to the borrower and the two enter a contract that obligates the borrower to return the principal amount and additional interest payments.
In the Islamic version of a loan, the lender can only claim the amount extended to the borrower and not more, while a gift, or donation, is a unilateral transfer or irreversible promise of transfer of asset.
Furthermore, he emphasises that the sale of an asset or claiming periodic payments for renting an asset is within the boundaries prescribed by Islamic law.
By using combinations of sale contracts, rental contracts, unilateral promises and equity contracts, Islamic finance has managed to mirror the cash flows of most conventional banking products. To stay competitive, Raza acknowledges that rental payments are linked to the more conventional interbank interest rate.

Asian Finance is conducting a due diligence and aims for the acquisition by Qatar Islamic to be completed by April next year.
Qatar Islamic, the Persian Gulf country’s biggest lender that complies with the religion’s ban on interest, is seeking to expand its services to take advantage of growth in the $1 trillion industry. Asian Finance also held meetings with Australian government officials to advise them on Islamic products, as the nation plans to change laws to attract investors from the Middle East and Asia.
Indonesia, the world’s most populous Muslim country, is studying ways to make tax laws more conducive to developing Islamic finance.

The Islamic Banking and Finance Institute Malaysia (IBFIM) and the Maldives Islamic Bank will sign a Memorandum of Agreement (MoA) to set up the first Islamic bank in Maldives and to develop Maldives Islamic Bank Shariah-compliant banking products. The MoA, among others, will bind both parties to co-develop Islamic finance in Maldives through extensive study of Maldives legal and banking framework to create a harmonise environment for the growth of Islamic finance.
The MoA will be sign by Maldives Islamic Bank s Chairman, Mr. Khalid Khaled Al-Aboodi and IBFIM s Chief Executive Officer, YBhg. Dato Dr. Adnan Alias and witnessed by YBhg. Dato Mohd Razif Abd Kadir, Deputy Governor of Bank Negara Malaysia and YBhg. Dato Sri Zukri Samat, Chairman of IBFIM during the Global Islamic Finance Forum (GIFF) in Kuala Lumpur.

Banks in the Persian Gulf are settling for lower fees as competition for bond sales intensifies.
Bond transactions in the six-member Gulf Cooperation Council are recovering after concerns Dubai World, the state- owned holding company, would default on $24.9 billion in debt raised loan costs for businesses, deterring borrowing. Banks led by HSBC Holdings Plc and Standard Chartered Plc advised on $9.4 billion of Gulf bond sales in the third quarter, the most since the last three months of 2009, according to data compiled by Bloomberg.
The fees for bond sales in emerging markets can often be lower than those in the U.S. The weighted average of disclosed fees banks charge for emerging market bond mandates is 28 basis points this year, compared with 37 basis points in the U.S.

HSBC Amanah, the Islamic banking window of banking giant HSBC, is planning to launch its Islamic banking services in full scale in Bangladesh, a visiting top official of HSBC said Tuesday.
With the re-launch, HSBC Amanah in Bangladesh will be the largest presence in South East Asia, the deputy CEO said. Currently HSBC Amanah is operating in the UK, Malaysia, Middle East countries, Indonesia and other countries.
HSBC Amanah products are rigorously audited and approved by HSBC central Shariah committee.

Capinnova Investment Bank, the Shari'a compliant investment banking arm of BBK offered a $16.5m bridge financing facility to support the financing of a religious hospitality project in Mecca. The project consists of a hotel located 1.3 km away from the Haram.
The development is in the final stages of completion and will be the first of its kind providing Muslims worldwide an opportunity to have an interest in Mecca project. The creative structure enables foreign investors return from a hotel asset in the holy city of Mecca through investing in a Cayman Island.

Abu Dhabi Islamic Bank (ADIB.AD) will kick off a non-equity investor roadshow in Asia, Europe and the Middle East on Oct. 20, it said on Monday, amid talks that the lender is planning to issue an Islamic bond, or sukuk.
Last week, sources said ADIB, the second largest Islamic lender in the United Arab Emirates, had mandated three banks to arrange a sale.

Islamic banking is a system of banking that avoids receipt and payment of interest in its transactions and conducts its operations in accordance with Shariah principles to achieve the objectives of Islamic economy. Growth of Islamic banking over the last decade in general and after the recent global financial crisis in particular has been tremendous.
Besides growth, there have been some dimensional developments in the field of Islamic banking in Bangladesh. Apart from first generation established Islamic banks, which have been operating under Islamic Shariah, most of the leading conventional banks have opened Islamic banking windows to deliver service according to Shariah principles. This trend indicates that Islamic banking will keep flourishing and increase its share in the banking industry of the country. In spite of the vigorous growth, many bankers are yet to be familiar with the process by which Islamic banking can be conducted side by side the conventional system.

Although efforts have been made over the past twenty years to bring Islamic banking into India — a country that has more Muslims than Pakistan — as yet the Reserve Bank of India and its master, the Union Finance Ministry, has not given permission for the same. The reason is simple. Across the financial establishment in India, the influence of US and EU financial interests is overpowering.
Several senior civil servants have their close relatives working in such institutions, and therefore accept the advice given by them. Certainly, banks in foreign countries will not want the Indian government to clear the way for the establishment of Islamic banking centres, for that may result in funds flowing from Zurich, London, Frankfurt and New York (all major “Islamic” banking locations) to Mumbai or Kochi. Acting on cue, the monetary and finance authorities in India have continued to block access to Islamic banking avenues, thereby denying millions of observant Muslims in India a chance to keep their assets in safety.

Just as conventional finance, Islamic finance has been vulnerable to fits and starts, to severe and disquieting hiccups whenever sound economic rules are being ignored. Last year showed how intertwined its future and health is with what happens to the global economy, and for that reason, the performance of an economy will significantly affect the growth of Islamic finance, says CIMB Islamic CEO Badlisyah Abdul Ghani. He considers the Islamic finance industry lucky not to have been involved in subprime credit and not to have been heavily engaged in highly leveraged activities.
Badlisyah contends that whichever financial or fiscal problems that the GCC countries have been facing of late do not have a significant bearing on the stability of Islamic finance in this part of the world.
Considering the clear restrictions placed on the use of derivatives on Islamic transactions, Badlisyah does not believe that the ability of Islamic banks to manage their risk has been constrained or compromise

Kingdom-based Arcapita Bank said global private equity firm, HarbourVest Partners would invest approximately $300 million in five companies controlled by it.
The bank said United States based HarbourVest acquired minority interests in five of its portfolio companies and has committed follow-on capital in support of their growth strategies.
Both the entities created a new fund to effect the transaction while Arcapita will continue to manage the portfolio.

India should open interest free banking windows in conventional banks as a pilot project, Muddassir Siddqui, a leading authority on interest-free banking, said.
On issues relating to recovery in cases of loan defaults, he said it is done the same way as convetnional banking. The adoption of interest free banking system in the country offers a great opportunity to attract substantial investments from countries in the West Asian region to India.
A two day conference on Islamic Finance in India is being held from tomorrow to create awareness about the banking system.
The Kerala High court had in April this year directed the state government and its institutions not to participate financially or otherwise in the financial company modelled on the lines of Islamic bank.

Fozia Amanulla has grown accustomed to the pressures of negotiating multi-million-ringgit deals during her career in Islamic finance.
At a meeting with a client in Saudi Arabia, where men and women are commonly segregated in public life, she was the only woman in the building -- a fact reinforced by the absence of any toilets for women.
Fozia, one of the first women to lead an Islamic bank in Malaysia, has had no shortage of reminders that her industry -- in which investments are made according to Islamic principles -- is a male-dominated one.
But the number of female faces is multiplying.
Jamelah was appointed managing director of RHB Islamic Bank in Malaysia in 2007 and is believed to have been the first woman in the world to head an Islamic bank.
Linda Eagle, president of the Edcomm Group Banker's Academy, a consulting firm based in New York, said that while branches for women only had existed in Saudi Arabia for decades, such branches had opened in Dubai and Iraq in recent years.

Islamic finance is struggling to streamline regulations as it moves into the mainstream, but seems overwhelmed by scholar reforms.
Islamic finance is toughening supervision of its powerful religious advisers as shareholders worldwide demand increasing accountability from directors, but key reforms may do little to boost independence and transparency.
Islamic banking is overhauling rules that govern the conduct of its influential sharia advisers, with competition for investor dollars and a growing market putting pressure on the once-arcane industry to adopt clearer, more uniform guidelines.
Key to these challenges is the small number of scholars advising a growing number of banks on increasingly complex financing structures, raising issues such as transparency of rulings, independence of advisers and how to groom new scholars.
The International Sharia Research Academy for Islamic Finance, which is backed by Malaysia's central bank, is planning a global regulatory body for sharia advisers.
Others point out that uniformity is hardly attainable, as markets range from Saudi Arabia's established sector to South Korea's infant industry.

The leading global Islamic Finance accounting regulator is introducing conditions for contracts that comply with religious laws, seeking to standardize an industry with $1 trillion in assets under management.
The Bahrain-based Accounting & Auditing Organization for Islamic Financial Institutions will for the first time provide a “Shariah-compliant way” for parties to enter and exit contracts, Mohamad Nedal Alchaar, secretary-general of the agency, in Manama.
While civil law already offers legal cover in disputes, counterparties want protection based on Shariah principles, according to Dawood Islamic Bank Ltd. in Karachi, Pakistan. Establishing a global standard would bolster confidence for sukuk investors, said Madzlan Mohamad Hussain, a partner at Zaid Ibrahim & Co., Malaysia’s biggest law firm.

Emirates Islamic Bank is in talks to acquire Dubai Bank and possibly Islamic mortgage lender, Amlak, Arabic Al-Ittihad has reported, citing unnamed sources. The move is in line with Dubai's efforts to integrate small and medium-sized banks into larger more competitive banking entities. Talks are in the initial stages for the acquisitions.

The current size of the Islamic finance of $1 trillion could be doubled by 2020. This potential can only be exploited through innovation, diversification and consolidation which will create sustained growth patterns, a top official at the Central Bank of Bahrain told.
The seminar titled Business Models in Islamic Finance: Challenges and Opportunities, was organised by the Islamic Financial Services Board (IFSB) and was sponsored by the Kuwait Finance House (KFH).
As a result, the Governor added, projections of spectacular future growth of the industry which rely on extrapolating the growth trends of the last five or ten years may not be the best guide to the future.

Africa’s reputation as a viable and profitable investment destination has grown in leaps and bounds and, importantly, its population presents a new market for many products and services.
Although it is sometimes narrow minded and naïve to consider the African economy as one entity or one whole, it can also be useful to consider the continent as an evolving organism, with many lessons learnt in one country, providing useful information for evaluating and doing business in another country. The ability to learn these lessons and adapt new strategies to new markets has been one of the greatest strengths of the major South African Banks in expanding their operations into other African countries.
Africa’s growth prospects are very positive. With the exception of 2009, the African economy has grown at about 5% or more every year for the last decade.

Recent Western debate about the role of women in Islam may have centered on the veil, but from its early years, Islam was receptive to women in business and finance. And today, Malaysia is an example of how making money has little to do with gender in Islam.
Not only does Malaysia boast a female central bank governor devoted to helping Islamic finance grow, but Malaysia's Islamic institutions also boast women executives in top positions.
More surprising perhaps, Malaysia is also home to several woman scholars of Islamic law, or sharia, who provide companies with the approval they need to brand their business as compliant with Muslim principles that include a ban on interest.