IslamicFinance.de

Inaugural issue reporting about the work and new strategic plan of CIBAFI, the General Council for Islamic banks and financial institutions.

Islamic Economic Journal of King Abdulaziz Journal online: http://iei.kau.edu.sa/Pages-CVOL28.aspx

JKAU: Islamic Econ., Vol. 28 No. 1, 230 Pages (2015 A.D./1436 A.H.)
DOI: 10.4197/Islec. 28-1

Contents
Glossary

Articles
- Islam?c Wealth Management in History and at Present
Murat Çizakça ............................................................................................. 3
- Loan Loss Provisioning in OIC Countries: Evidence from Conventional vs. Islamic Banks
Ali Ashraf, M. Kabir Hassan, and Syed Abul Basher .......................... ..... 23
Discussion Paper
Factors Influencing the Behavioral Intentions of Muslim Employees to Contribute to
Cash-Waqf Through Salary Deductions
Anwar Allah Pitchay, Ahamed Kameel Mydin Meera and
Muhammad Yusuf Saleem …………………… ……….................. 63
Discussion Forum
- Severe Financial Crises and Fundamental Reforms: The Benefits of Risk-Sharing
Hossein Askari ....................................................................................... 101
- Why Economists (and Economies) Should Love Islamic Finance

This report is an annual barometer of the health and development of the Islamic Finance industry worldwide, based on the ICD Thomson Reuters Islamic Finance Development Indicator.

Reselling, giving, swapping, short-term renting and lending are all models that can help to increase the usage duration of resource-consuming goods. They are part of a real sharing economy that is undergoing regeneration due to the development of digital technologies. Public authorities should build an economic and regulatory framework that is favourable to virtuous models. Sharing economy entrepreneurs should analyse and improve their environmental performance. Users have a particularly important role in the case of peer-to-peer models. Environmental impact depends heavily on user behaviour and on the values that drive their actions.

Jan - June 2014 issue of the Malaysian ICM bulletin published by the Securities Commission Malaysia (SC) is now available online.

Islamic fund and wealth management is an integral component of Islamic financial system. This is attributed to the significant rise in income and wealth of certain Islamic countries over the last four decades as well as the emergence of Islamic finance as a viable alternative to conventional finance. The benefits of Islamic fund and wealth management cut across racial and religious boundaries as it not only benefit Muslims who wish to see their wealth preserved and enhanced within the Shariah framework, but also to non-Muslims who may view this from an ethical perspective of managing wealth.

Dear Reader,

On the occasion of the 10th anniversary of IslamicFinance.de please find at the hyperlink below the relaunch of the newsletter.

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All the best,

Michael Saleh Gassner

Contents
Revised Shariah Screening Methodology: 1
Expands ICM’s Global Reach
SHARIAH
New Shariah Advisory Council Resolutions 3
DEVELOPMENT
Region’s First Structured Covered Sukuk 7
Royal Award for Islamic Finance Calls for Global 9
Nominations
SC and Autoriti Monetari Brunei to Strengthen 9
Efforts in Greater Cross-border Activities
SC Leads Islamic Finance Taskforce to Publish a 10
Report on Enhancing Infrastructure for ICM
REGULATORY
IFSB-IOSCO-SC Collaborate on Disclosure 11
Requirements for ICM Products
SC Revises Equity Guidelines for SPACS 12
Technical Note on the Application of SC’s 13
Guidelines In Relation to Non-Tradable and
Non-Transferable PDS and Sukuk
FEATURES
2013: Another Resilient Year for the Global 14
Islamic Finance Industry
Global Islamic Funds Industry: Achieving 18
Growth Under Challenging Times
Harmonisation of Shariah Rulings 22
in Islamic Finance
News Round-up 29
STATISTICAL UPDATES
Malaysian ICM – Facts and Figures 32
Free download below at source:

For many years we see in the media experts believing in inflation and even hyper inflation. However, in the same time we face proponents warning against deflation. So far we all noticed.

Only a about a week ago I read an article by Myret Zaki clarifying that unfortunately inflation and deflation co-exists.

Myret Zaki's thesis is that we face inflation on financial markets, and deflation in the real economy (in French):

http://www.bilan.ch/myret-zaki/redaction-bilan/inflation-et-deflation-co...

In my view there is a general major shift in the price matrix and I still try to figure the magnitude and implications thereof. It is a bit irritating as at University we learned about neutrality of money:

http://en.wikipedia.org/wiki/Neutrality_of_money

This means any extra supply will increase prices equally, 5 % more money, all prices going up 5 %. Pretty plausible at first hand. However, it seems it does not work in reality any more (or never did).

Dear Reader,

IslamicFinance.de is still edited by myself, Michael Saleh Gassner. In the same time the website became part of the family's publishing house, Al Kitab.

Myself I moved to Geneva for professional reasons, working as Islamic private banker. IslamicFinance.de remains to be a private passion.

Best regards,

Michael Gassner

Following the introduction of the Islamic Banking Regulatory Framework (IBRF) in December 2012, Omani banks are now allowed to offer Islamic banking services. Moody's views this as credit positive for the banks as expansion into Islamic banking has the potential to strengthen their franchises and diversify revenue generation, particularly for the largest banks in the system, which will be able to leverage their existing infrastructure and networks.

On 4 June 2013, Rüdiger von Hülst and Matthias Grund of the Berlin and Frankfurt offices of international law firm K&L Gates hosted a roundtable in relation to the future role of Islamic finance in the German economy. Represented at the roundtable were representatives from the investment management, banking, legal, academic and diplomatic communities. One of the general findings was that there has been an increasing depth and breadth of experience in the UK from which Germany could benefit. However, current activity in Islamic finance in Germany is still nascent. There are several possible areas for the expansion of Islamic finance in Germany, such as investments in the healthcare sector and municipal owned real estate. Islamic finance would offer various advantages like diversification of financing sources, or attracting foreign direct investments. For more information on the roundtable, please see the attachment.

European Central Bank, Occasional Paper No 146, June 2013

ABSTRACT

Islamic finance is based on ethical principles in line with Islamic religious law. Despite its low
share of the global financial market, Islamic fi nance has been one of this sector’s fastest growing
components over the last decades and has gained further momentum in the wake of the financial
crisis.

The paper examines the development of and possible prospects for Islamic finance, with a special
focus on Europe. It compares Islamic and conventional finance, particularly as concerns risks
associated with the operations of respective institutions, as well as corporate governance. The paper
also analyses empirical evidence comparing Islamic and conventional financial institutions with
regard to their: (i) efficiency and profitability; and (ii) stability and resilience. Finally, the paper
considers the conduct of monetary policy in an Islamic banking context. This is not uncomplicated
given the fact that interest rates – normally a cornerstone of monetary policy – are prohibited under
Islamic finance. Liquidity management issues are thus discussed here, with particular reference to
the euro area.

Speaking at the Middle East Investment Conference in Dubai, Ibrahim Warde, adjunct professor at Tufts University in the United States and a noted author on Islamic finance, argued that since the 1990s Islamic finance has gained much more international acceptability but that it continues to grapple with the fundamental form-versus-substance debate. With the current size of the Islamic finance market at over $1.3 trillion, Warde believes that it is not an exaggeration to say that in the world of finance, the fastest growing segment is Islamic finance.

Issues raised and discussed at length during “International Workshop on Zakat, Waqf and Islamic Microfinance” and the idea of “Strengthening Islamic Social Finance Sector” were presented by Arshad Ajmal, Vice President of Sahulat Microfinance Society, at a programme organised by Forum for Discussion on Economic Issues. The event is a joint forum of Sahulat and Radiance Viewsweekly which was held in the national capital on 26 May. Mr. Ajmal, who was the only person invited from India as a resource person on Islamic Microfinance, shared his experience which he gathered and the points he raised during the workshop. Another notable point discussed was whether an Islamic Microfinance institution should and can be treated as a banking institution. Moreover, it was pointed out that Islamic finance places itself heavily on debt instruments and less on equity instruments.

At the 4th Annual World Islamic Banking Conference: Asia Summit (WIBC Asia 2013) in Singapore, Bahrain based international standard-setting body the International Islamic Financial Market (IIFM) announced the launch of IIFM Inter-Bank Unrestricted Master Investment Wakalah Agreement. This global standard document is supplemented with an Operational Guidance Memorandum. It is developed to be used in the Islamic inter-bank market between financial institutions in order to manage their liquidity requirements. It is also aimed to minimise the over reliance on the use of the Commodity Murabaha in the inter-bank market transactions. The key main features of this Agreement is that the Investor, the Muwakkil, will appoint the Wakil as its Agent to invest its funds in a Shari’ah compliant manner in exchange for a fee.

Dubai World has sold one of its UK assets as part of its efforts to repay creditors. A unit of Toronto-based investment company Brookfield Asset Management has bought logistics warehouse developer Gazeley from Dubai World subsidiary Economic Zones World (EZW). However, they did not disclose the value of the transaction. Proceeds from the sale of Gazeley are expected to go towards the repayment of a $1.2 billion loan secured by associate firm JAFZA in June last year. EZW had pledged up to US$300 million for JAFZA from the proceeds raised by the Gazeley sale, and should the sale be completed, funds will be used to part-repay the bank facility. The sale is the first major divestments of a foreign asset by Dubai World since it agreed on a debt deal with creditors in 2011. The restructuring agreement promised full repayment to creditors through a series of disposals of overseas assets.

The initiative to transform Dubai into the world’s capital of the Islamic economy is progressing steadily towards the goals as scheduled, said Mohammed Abdullah Al Gergawi, Chairman of Dubai’s Islamic Economy Higher Committee. During its meeting, the committee viewed the work of its major teams tasked with implementing the initiative. The meetings provide an opportunity to discuss the role of these sectors in the implementation of the initiative, he added. All strategic partners and experts are included in these meetings and workshops so as to exchange views and ideas on the initiative, and reach a form of fruitful and constructive cooperation. Dubai’s Islamic economy platform includes finance instruments, insurance, contracts arbitration, Islamic food industry and trade standards (halal food), and quality management standards.

The Islamic Corporation for the Development of the Private Sector ( ICD ) and Chad's Ministry of Finance and Budget have signed a partnership agreement aiming at the creation of a local leasing company (ijara) and a local Islamic bank compliant to the principles of Islamic finance. The two future entities -- leasing company and Islamic bank -- will provide Shariah-compliant financial services and products with a special focus on the SME sector. Through this agreement, ICD will contribute to promote the development of Islamic finance and support SMEs. Minister of Finance and Budget of Chad Atteib Doutoum thanked the ICD and reaffirmed his full support to make the private sector a key player in the economic development of the country. He then promised to provide the necessary support of his Ministry to implement the two financial institutions.

Ten executives from six banking organisations in Korea recently participated in a training course on Islamic finance in collaboration with Qatar Central Bank (QCB). It was intended to enhance the understanding of Islamic finance so that it could be applied in Korea. The trainees had a deeper look at the financial industry in the Middle East, including Qatar, licensing systems, main principles of Islamic finance, basic contracts and case studies on Islamic financial products. They visited Qatar Islamic Bank, Qatar Financial Centre, Qatar Islamic Insurance Company, Barwa Bank, Masraf Al Rayan and others. The training was part of an agreement signed by the Middle East-Korea Financial Co-operation delegation and QCB last January.

Bahrain-based Venture Capital Bank reported a fifth consecutive quarter of profitable performance. The Islamic investment bank posted a net profit of $20.2 million on total revenue of $39.6m for the 15 months ended March 2013. For the quarter ended March this year, the profit was $1.7m and the revenue $5.08m. Total revenue increased 472 per cent on annualised basis to $39.6m for the 15-month period. Concurrently, total expenses decreased by 26pc on an annualised basis to $13.5m for the 15-month period as a result of cost reduction and organisational improvements. Shareholders' equity has grown by 9pc on an annualised basis to $199.2m as of March this year. The results affirm the bank's strategic focus on key sectors, such as healthcare, agribusiness, oil and gas and shipping and in the more economically and politically stable markets in the Mena region.