IslamicFinance.de

Until now, rules and procedures Islamic Banking Institutions (IBIs) in Pakistan have been following were too general and occasionally not sufficiently specific. In fact, they were not much different from the conventional banking in terms of rate of return on deposits. However, on 19th November a landmark was set by the issuance of detailed instructions by the State Bank.

The instructions will serve to improve transparency and disclosures and bring standardisation in the IBIs' profit and loss distribution policies and practices. As the instructions determine, each pool of deposits established by IBIs would play the role of a virtual enterprise. It will have explicitly demarcated sources of funds, ownership of specific assets and income and expenses.

The practitioners report “Believers in the Boardroom. Religious Organisations and their Shareholder Engagement Practices” by 3IG is online. Please access the practitioners report by clicking on the following link :

http://issuu.com/3ignet.org/docs/3ig_rse_practitioners_report_final_2012...

The report also remains available as hard copy: http://www.3ignet.org/documents/OrderRSEresearchnow.pdf

According to the Managing Director if Bank of Khyber (BoK) - Bilal Mustafa - the bank is committed to cater the banking requirements of all segments of society. He further added that, for the purpose of encouraging the economic developmental activities in the region, the bank is providing Islamic as well as conventional banking & financial requirements. Bilal Mustafa made a statement at the formal inauguration of BoK Raast Islamic Banking branch at Main Bazzar Topi District Swabi. Other notable people in the areas of Islamic banking and the business community attended the inauguration ceremony. Some of the bank's plans revealed at the event are increasing branch net-work by establishing more branches by December 2012 as well as further enhancement next year.

Dear Reader,

The issue of debt vs. equity is now going to be increasingly recognised - in microfinance - as I found out today on the cfi blog:

"Debt to Equity. The demand for equity and subordinated debt is huge and continuing to grow, mainly coming from mature MFIs. More MIVs are moving away from debt toward equity, being driven in part by a desire to be more involved in governance, to play a larger role in risk management, and because the regulators are requiring more capital. Also, fund investors increasingly want to know how much of a fund’s return is coming from debt versus equity. Some of the larger DFIs need to disburse large amount of funds, so they have to make debt investments, leaving an unmet demand for equity."

http://cfi-blog.org/2012/11/19/microfinances-new-normal/

An important food for thought beyond microfinance itself in my opinion.

Best regards,

Michael Saleh Gassner

According to Neil Miller - Global Head of Islamic Finance at KPMG - despite the global financial crisis, Islamic banking has demonstrated rapid development and lossless operation reaching an average growth rate of 10%. He further adds that the most significant development is observed in Malaysia. Azerbaijan should learn from Malaysia as well as from Kazakhstan. Azerbaijan should first take care of the lack of legislation in the area of Islamic finance in order to work on development in the spheres of Islamic banking and Islamic insurance.

The Islamic banking industry has been expecting the issuance of a standardised framework concerning the distribution of profit and pool management mechanism for the Islamic banking institutions. This framework is necessary for the procedure of financial reporting and general disclosure could be streamlined. According to a report by The State Bank of Pakistan’s (SBP) authorities, the bank has developed a comprehensive profit distribution and pool management framework. The development was conducted with consultation with the industry so that transparency could be increased and standardisation could be brought to the Islamic banking institutions’ practices in terms of profit distribution and pool management.

According to the Development Commission of Almaty Regional Financial Center of Kazakhstan's National Bank, the Islamic Development Bank (IDB) has allocated $25 million for Kazakhstan farmers. In 11 regions of the country, a series of training seminars aiming to teach Islamic financing methods for personnel of branches and representative offices have started. Professor Adalet Dzhabiyev, Director of Badr Finance & Investment, conducts the training.

The second National Islamic Microfinance Conference, which was jointly organized by the State Bank of Pakistan, University of Veterinary and Animal Sciences (UVAS) and Farz Foundation, was recently held. At the conference, it was discussed that it was necessary for State Bank of Pakistan to develop a new policy instrument to deal with the financial needs of the small businesses. It was further noted that skilled people in the Islamic micro-finance industry were needed. A suggestion was made for Wafaqul-Madaris to introduce Islamic microfinance as a subject in order to be of help in guiding the banks who are working in this sector after studying.

The half yearly results of Burj Bank Limited (Burj) for the period until the end of June 2012 were made public. The bank registered profit before tax as high as Rs 147 million. The announcement is a reflection of the bank's turnaround in terms of continuous earning for the first two quarters of this year. Furthermore, the growth of the total deposits is 57% reaching Rs 32 billion in the first half of the year. The profits are seen as remarkable progress, especially having in mind the significant challenges the bank has faced in the period.

Well, repeatedly we read and hear about the lack of profit/loss sharing (equity finance) in Islamic finance. Here my five cents about it:

1) Islamic commercial law, Fiqh Muamalat, per se has no preference of either permissible mode of finance, be it musharaka, ijara or murabaha whatsoever. All is halal. However, the call for modesty of debt in many hadith and the seriousness of being indebted upon death (withholding of death prayer) shows a call for a solid equity portion in business; let's call it a technical preference.

2) If we look up all debt financing modes (e.g.Murabaha, Ijara) there are remaining difficulties to finance wages, rents and installments on fresh debt. This is a true indicator for a required minimum amount of equity in a company.

3) Point 1) and 2) leads us to demand a sound debt/equity ratio.

IslamicFinance.de offers an overview about new job openings of October 2012 herewith - firms aiming to be included please send a job profile/hyperlink to newsdesk@islamicfinance.de - the full details of the advert has to be accessed by the hyperlink below the brief description:

Product Manager, Islamic Banking

Standard Chartered Bank - United Arab Emirates-SCB (United Arab Emirates)
Job Description
?Development of Islamic wealth products across CBMS, insurance and investment streams to create customer value proposition.
?Ensure successful implementation of the Islamic banking strategy across high value segment.
?Concentrated responsibility to work with the Priority/Wealth/Private/SME product/frontline teams and support functions to build on the current Islamic banking capabilities and to create seamless customer experience
?Act as a product specialist for RMs on client meetings to introduce and explain the Saadiq solutions to meet their needs
?Financial budgeting and business forecast. Evaluation of financial performance.

Adnan Ahmad Yousif, CEO of Al-Baraka Bank, had a meeting with Deputy Prime Minister Ch Parvez Elahi on Tuesday. At the meeting, high appreciation for the steps taken by noted religious scholar Mufti Taqi Usmani for interest free working in the banks was shown.

Read more on: http://www.dailytimes.com.pk/default.asp?page=2012\10\31\story_31-10-2012_pg10_1

THE NINTH INTERNATIONAL CONFERENCE ON
ISLAMIC ECONOMICS AND FINANCE (ICIEF)
Growth, Equity and Stability: An Islamic Perspective
10-12 September 2013, Istanbul, TURKEY

The Ninth ICIEF at a Glance

Recovery from the global financial crisis and subsequent economic downturn remains fragile. Persistent risks to financial and economic development include sluggish growth in developed countries – which is now spilling over into developing economies as well; increasing income and wealth inequalities; and still-unrestored financial, economic and political stability in many regions. High poverty and unemployment rates, large macroeconomic imbalances, deteriorations in sovereign credibility, increasing food price volatility and food shortages, and lack of access to basic infrastructure further intensify and magnify these risks – particularly for the underprivileged segments of the world population. As a result, for many countries it has become even more challenging to achieve the Millennium Development Goals (MDGs) set by the United Nations.

Conventional microfinance has proven ineffective in alleviating poverty. Islamic finance is suggested as a better alternative. Relevant to the World Poverty Day, a seminar concerning the global issues of poverty and its solutions was held in Lahore. The event was organised by AlHuda Centre of Islamic Banking and Economics. Participants came from different financial areas such as Microfinance, Islamic Microfinance and the Banking sector. Leading topics of the seminar were issues related to poverty, current situation of poverty, socio-economic issues due to poverty and the strategies for the solution.

Read more on: http://www.cpifinancial.net/news/post/16341/islamic-microfinance-good-al...

In Lahore, a seminar for the worldwide poverty day is organised. Global topics around the issue of poverty and its solution possibilities were discussed. Experts from microfinance, Islamic microfinance and the banking sector took part.

Read more on: http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/bu...

Until recently, sharia-compliant deals in Azerbaijan had to be conducted secretly, hidden under the appearance of conventional banking. Now, on the other hand, there are a couple of banks which openly offer a limited range of services compliant with Islamic principles. These include bans on interest and pure monetary speculation. However, the government still has not created a law in order to regulate the Islamic financial industry in the country. Such a law would enable expansion of operations of commercial banks and allow sukuk issuance.

The Islamic Development Bank (IDB) has given its approval for a loan worth $710-million to implement four projects in Iran. The agreement was reached in the sidelines of the IMF annual meeting in Tokyo. The money will be used for the establishment of treatment plants at upstream areas around dams and rural regions, thus assuring prevention from environment pollution.

Read more on: http://www.zawya.com/story/IDB_allocates_USD710m_to_4_projects_in_Iran-Z...

Turkey is well on its way to become the next hub for Islamic banking and finance. It only needs its government to show its commitment to Islamic finance so that other participants in the industry join Turkey in building a vibrant Islamic banking and finance industry. The recent successful $1.5 billion sovereign Sukuk issue denominated in dollar as well as the lira-denominated $900 million sovereign Sukuk have lead the county's way to the global platform of Islamic banking and finance. Since Pakistan has the most Shariah authentic model of Islamic banking, a Turkey-Pakistan alliance will contribute to the promotion of Islamic banking in Turkey, and, furthermore, it is expected to bring a new juristic approach to product development and structuring.

Read more on: http://tribune.com.pk/story/451643/rising-partner-a-turkey-pakistan-alli...

A new $50 million fund - the Central Asia Renewable Energy Fund - was launched by the Islamic Corporation for Development of Private Sector (ICD). According to the CEO of the corporation, Mr. Khaled Al-Aboodi, the money will be used to benefit countries of the Caucasus and Central Asia Regions, most important of which will be Kazakhstan, Azerbaijan and Turkey. Further target countries of the fund include Kyrgyzstan, Turkmenistan, Tajikistan, Uzbekistan, Bosnia, Albania and Kosovo. Factors like growing environmental awareness, evidence of climate change, scarcity of fossil fuels, and an increasing commitment by governments to support new sources of energy lead to growing interest in renewable energy in these countries.

Read more on: http://www.abc.az/eng/news_12_10_2012_68763.html

Bank Burj's results for the first half of 2012 (until June 30th) are out. The bank registeres a profit before tax as high as Rs147 million. The results are a reflection of a turnaround of Burj Bank which caused continuous earning for the first two quarters of the year. The growth of the bank's total deposits lies at 57% reaching Rs 32b for the period. In spite of political and economical problems, the bank demonstrated excellent half yearly performance.

Read more on: http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/bu...