TAKAFUL INDUSTRY TAKES STOCK IN LONDON

London—The tenth International Takaful Summit was held in London from 22nd to 24th February 2016. The theme of this year’s Summit was Pathways for Matching Islamic Finance Assets to Takaful. The disconnect between the fast-growing pool of Islamic finance assets and their relatively sparse use of Takaful, formed the background to the discussions over the three days. This leading thought forum for the global Takaful industry had over 400 participants from all over the world for its tenth annual gathering. The Summit started with the Norton Rose Fulbright Masterclass on 22nd February. In the Masterclass, discussions centred on the re-emerging opportunities in Pakistan and Iran where the requirement for Islamic insurance is strong and the potential for growth of Takaful was judged to be immense.

The first day of the main Summit on 23rd February brought together a number of renowned experts to discuss various areas of interest for Takaful providers. The success story of Shyarikat Takaful Malaysia was appreciated by all delegates. The presentation of a survey done by Norton Rose Fulbright on attitudes of potential users of Takaful was also eye-opening. The morning also saw a number of informative presentations on the development of Takaful in Africa, with discussions centred on the potential for growth of Takaful using the pure mutual model. Some interesting opportunities were highlighted using discretionary mutuals and the new potential deferred share capital raising possibilities for mutuals in the UK.

In the afternoon, key stakeholders made presentations on leveraging the expertise in the London market to enhance global Takaful provision. They highlighted the fact London would be receptive to working with Takaful Operators to create a win-win strategy. This was further reinforced in the closing keynote address by Inga Beale, CEO, of Lloyd’s of London who reiterated the commitment of the leading insurance market to welcome Takaful providers. The first day came to a close with the International Takaful Awards where 200 industry leaders celebrated the achievements of the global Takaful operators and service providers in the only standalone ceremony to recognise the significant achievements of this market.

There were 22 awards presented on the night with notable mentions for Al Ahli Takaful who walked away with 2 awards and Shyarikat Takaful Malaysia that were awarded the best Takaful Company in Malaysia for the 4th successive year. Pak-Qatar Family & General Takaful received the Best Takaful operator in Pakistan due to their extensive branch network and innovative use of technology to increase their reach and improve accessibility to their clients. One of the top awards for CEO of the year was presented to Ali Ibrahim Abdulghani for steering Qatar Islamic Insurance Company to incredible results in 2015. The lifetime achievement award was presented to Hannover Retakaful’s Mahomed Akoob who has contributed so much to the industry including the formation of the first Takaful Company in South Africa as well as overseeing the formation of Hannover Retakaful into the premier Retakaful institution in the world. Mahomed accepted the award with great humility giving credit to his colleagues that he had worked with in a 4 decade career as well as the clients that he has served so diligently.

(Pakistan Observer / 03 March 2016)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

London stakes claim to be the global capital of Islamic finance

SINGAPORE: Which city, or nation, will be the global leader in Islamic finance over the next decade?

The favourites at the moment are Kuala Lumpur and Dubai. But a lot of people are now beginning to bet on London.

On Oct 29, the British government created a stir that reverberated across the financial capitals of the Islamic world. On that day, Prime Minister David Cameron announced that the UK Treasury would soon issue a £200 million (S$401 million) "sukuk" or Islamic bond. This will be the first sovereign sukuk issued by a Western country (a sukuk differs from a traditional bond in that it pays no interest; investors get a share of profits from an underlying syariah-compliant asset).

Moreover, the UK sovereign sukuk could serve as a global benchmark for Islamic bonds, which at the moment have none.

Mr Cameron was speaking at the 9th World Islamic Economic Forum (WIEF) in London at the end of October - the first time this annual convention - known as "the Davos of the Islamic world" - has ever been held in a non-Islamic nation. He was expansive about his country's ambitions in the realm of syariah-compliant finance.

"London is already the biggest centre for Islamic finance outside the Islamic world," he said. "I want London to stand alongside Dubai and Kuala Lumpur as one of the greatest capitals of Islamic finance anywhere in the world."

There's a lot to play for. According to a report by PwC, Islamic finance assets (including banking assets) total US$1.6 trillion globally. Between 2008 and 2012, they grew at close to 20 per cent per year and, by 2020, the market is expected to cross US$6 trillion. While Islamic finance assets are barely one per cent of all global financial assets, the number of players is also small.

Nearly all of the Western world does not participate in this market - London being the significant exception. Nine countries hold about 90 per cent of Islamic finance assets and just three (Iran, Malaysia and Saudi Arabia) account for more than 50 per cent.

Moreover, in certain areas of Islamic finance, demand exceeds supply - and this is particularly true of bonds. Sukuks outstanding at the end of 2012 totalled US$240 billion, with Malaysia being the biggest issuer, followed by Saudi Arabia.

Last year, Ernst & Young forecast that sukuk demand is likely to jump to US$900 billion by 2017, partly driven by rising risk aversion following the global financial crisis. Sukuks are popular because they are backed by real assets or real projects. Significantly, they are also favoured by investors from the non-Islamic world.

At the WIEF, Musaffar Hisham, CEO of Maybank Group Islamic Banking, pointed out that about half of the group's customers for Islamic products in Malaysia are non-Muslim. In Singapore, the figure is around 70 per cent.

The wider world's interest in Islamic finance products also derives from the growing interest in "ethical finance". During a session on Internationalising Islamic Finance at the WIEF, Hasan Al Jabri, CEO of Sedco Capital, an asset manager in Saudi Arabia, said: "Syariah-compliant finance intersects 90 per cent with ethical finance, which is a US$6 trillion market."

He added that common features include investments in sustainable development and avoiding investments in companies associated with gambling, alcohol, tobacco and weapons. A growing number of pension funds - such as Calpers, the California public employees retirement system, the biggest in the United States - and several foundations have strict guidelines mandating that they invest ethically. Many have Islamic finance products in their portfolio.

However, even its promoters and practitioners acknowledge that Islamic Finance has some way to go before it becomes truly mainstream. Sajid Javid, a British MP and Financial Secretary to the UK Treasury, who is one of the key personalities driving the development of Islamic finance in Britain pointed out: "Islamic scholars don't always agree on what constitutes Islamic finance; they come from different schools of thought."

Amr Al Menhali, head of Islamic Banking at the Abu Dhabi Commercial Bank in the UAE called for more simplicity in Islamic finance, including in the use of terminology.

Maybank's Mr Hisham called for clearer global regulation to ensure more uniformity of syariah-compliant products.

But the UK is undeterred by these obstacles. It is pulling out all the stops to promote itself as the centre for Islamic finance. It has set up an Islamic Finance Task Force. Its infrastructure is already relatively advanced: more Islamic products are listed on London exchanges than anywhere else. London has 25 law firms that provide services in Islamic finance and more syariah-compliant banks than anywhere in the Western world. And 16 British universities offer courses in Islamic finance.

Even London's mayor Boris Johnson (who spoke at the WIEF) is on board.

The mayor's office co-finances a corporation called London & Partners, which is the official promotional organisation for London, including for business, tourism, education, and conventions. Its director for International Business, David Slater told BT that London has seen what Islamic finance can do and likes what it sees.

On the proposed British sovereign sukuk, he said: "Investors are demanding more Islamic finance products, so it's about following the market, responding to what the market wants.

(Bt.Premium / 18 Nov 2013)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

London, Dubai, Kuala Lumpur in three-way fight for Islamic finance crown

(Reuters) - When the British government said last month it would issue its first Islamic bond, the implications went far beyond the debt market: it was a signal that London will not back down in an escalating tussle among cities for Islamic financial business.

London has long been the default center for international firms to issue sharia-compliant bonds, part of a fast-growing Islamic finance sector that will be worth $2 trillion globally next year, according to consultants Ernst and Young.

But it faces a mounting challenge from two centres: Dubai and Kuala Lumpur.

Dubai, at the heart of the wealthy Gulf, announced a push into Islamic finance this year. It has an entrepreneurial culture which has already made it the Middle East's top conventional banking center, and big state-run firms which can be expected to support the government's strategy.

The Malaysian capital has a reputation for efficient regulation of Islamic finance and a huge domestic market for local-currency Islamic bonds, which is now starting to attract foreign issuers.

The final result of the three cities' rivalry may not be known for years, but thousands of jobs and large amounts of direct investment in companies and real estate are likely to depend on the outcome.

"You need a critical mass of borrowers and investors," said Khalid Howladar, senior credit officer at Moody's Investors Service. "You have multiple centres that are looking to establish their pre-eminence in the Islamic space."

GROWTH

Islamic banking, which obeys religious principles such as bans on interest and pure monetary speculation, is still dwarfed by conventional banking with over $100 trillion of assets.

But the top 20 Islamic banks have been growing 16 percent annually in the last three years, far outpacing their conventional rivals, according to Ernst and Young. That makes Islamic finance tempting for many non-Muslim institutions.

In an unstable global market environment, the conservatism of Islamic financial structures may be helping the industry. Its access to big pools of Islamic investment funds in the Gulf oil-producing states and southeast Asia is certainly a factor.

Over the past year, the industry has been expanding from its traditional bases in those two regions across many nations with significant Muslim populations, from North Africa and Kazakhstan to Nigeria and Djibouti. European financial firms have tapped Islamic funds by issuing sharia-compliant bonds, known as sukuk.

That promises big rewards for the financial centres which arrange issues of sukuk and other Islamic products, employ the experts who structure them, and host the scholars who vet them for religious permissibility.

"The pent-up demand for short-term papers to manage liquidity in Islamic finance is huge, and to meet this will require other market players to come in," Malaysia's central bank governor Zeti Akhtar Aziz told Reuters.

Dubai laid claim to such business in January this year when its ruler, Sheikh Mohammed bin Rashid al-Maktoum, announced a drive to develop the emirate as an Islamic financial center.

Its main competitors responded. In March, Britain launched a publicity campaign involving government junior ministers and private sector executives to burnish London's Islamic credentials.

In May and June, Malaysia took steps to strengthen its regulation of the industry while making it easier for its Islamic insurers to invest their money overseas.

SUKUK

The most high-profile - and most cut-throat - area of competition between the three centres is arranging sukuk. London has led in attracting issues by big international companies because of the massive size of its conventional financial markets and its globally respected legal system.

Malaysia, however, has the advantage of a vibrant market in local-currency sukuk, thanks to a Muslim-majority population; Kuala Lumpur has accounted for about two-thirds of all sukuk issued globally this year. That is persuading some foreign firms, from as far afield as Kazakhstan, to issue in Malaysia.

Dubai lists relatively few sukuk on its exchanges; traditionally its state-owned companies have gone to London to issue. But a determined campaign by Dubai's government is now convincing its companies to issue at home, and could attract business from firms in neighboring Gulf states.

British Prime Minister David Cameron appeared to be trying to head off that threat last month with his plan for Britain to become the first Western country to issue a sovereign sukuk.

"The UK sukuk announcement has really helped to galvanize the market," said Farmida Bi, European head of Islamic finance at law firm Norton Rose Fulbright in London, predicting the sovereign issue would help to trigger corporate issues.

However, Dubai won a victory this month when the Jeddah-based Islamic Development Bank, which has long operated sukuk issuance programs in London and Kuala Lumpur, said it would set up a $10 billion program on the Nasdaq Dubai exchange.

"I do believe Dubai can reach a leadership position, although progress has been slow and it will take a few years to reach the level of Malaysia," said Apostolos Bantis, emerging markets credit analyst at Commerzbank in London.

Because London is not located within a natural pool of sukuk issuers and European customers will remain a limited group, its position looks weakest among the three centres from a long-term perspective, Bantis added.

TAKAFUL

Other areas of competition include Islamic insurance, known as takaful, and asset management. Once again, London's sheer size gives it an advantage, while Kuala Lumpur benefits from its location in a vast, predominantly Muslim area of southeast Asia.

British-based firm Cobalt struck a blow for London earlier this year by developing a novel syndication model for takaful. The model offers A-rated capacity which most carriers in the Gulf lack, said chief executive Richard Bishop.

This could clash with Dubai's plans to expand in takaful. Abdulaziz al-Ghurair, head of the authority overseeing Dubai's financial center, said last month that since there were only 19 Islamic re-insurance firms globally, takaful firms were forced to transfer some of their risk to conventional re-insurers.

That creates a window for Dubai to set up Islamic re-insurers, he said without detailing how this would be done.

Ultimately, much will depend on which financial center can establish "thought leadership" in Islamic business, creating standards and structures which come to be accepted across regions and, ideally, across the global industry.

Traditionally, Malaysia has been influential because of its centralized model of regulation, which minimizes disputes among different boards of Islamic scholars. But some Gulf scholars view Malaysian regulation as too liberal, arguing that it permits structures which too closely mimic conventional finance.

Dubai has a chance to chart a path between these two camps; it has said that after consulting the industry, it will issue sukuk standards that are more detailed and comprehensive than others, hopefully resolving conflicts between the regions.

"This is very important. We think it's a basic requirement but it doesn't exist as we speak. But this will not come from the sharia scholars - it has to come from the industry," said Hamed Buamim, director-general of the Dubai Chamber of Commerce & Industry, which is promoting the emirate's Islamic push.

(Reuters / 12 Nov 2013)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

A centre for sukuk

“I WANT London to stand alongside Dubai as one of the great capitals of Islamic finance anywhere in the world,” David Cameron, the British prime minister, told 1,000 delegates at the ninth annual World Islamic Economic Forum in London on October 29th, where he announced plans to issue sovereign sukuk, or Islamic bonds, as early as next year. Not so long ago, such a declaration would have been seen as a bold political stroke. These days, it represents little more than the logical next step in Britain’s embrace of Islamic finance. A host of London landmarks, including the Shard (the skyscraper pictured above), the Olympic village and Harrods, have been financed by so-called sharia-compliant investments in recent years.

The convention this week—attended by heads of state from Jordan, Afghanistan, Pakistan and Malaysia—marks the first time the event has been held outside the Muslim world. That is a testament to the rising global clout of Islamic finance, which adheres to sharia principles such as a ban on interest, offering depositors a stake in investments instead. It is growing 50% faster than conventional banking and weathered the financial crisis far better than its traditional counterparts. Islamic finance is a $1.2 trillion market; this is expected to rise to $2.6 trillion by 2017 as more people in the Muslim world obtain bank accounts. 

In the Middle East, the Gulf states have been at the forefront of the boom. What was for years a sleepy industry has been jolted to life by economic growth in the region, coupled with the demand for sharia-compliant banking. Islamic-banking assets in Saudi Arabia account for more than half the market. Roughly $21 billion in sukuk were issued in Gulf Co-operation Council (GCC) states in 2012, three times as much as 2011. Investors in these countries are increasingly looking to put their money to work overseas. Fahed Faisal Boodai, the chairman of Gatehouse Bank, one of five sharia-compliant banks in Britain, reckons that the GCC accounts for 60-70% of investment in Gatehouse. Other countries are emulating the Gulf model. Recep Tayyip Erdogan, Turkey’s prime minister, has emerged as a leading champion of Islamic finance.

The prospects in the wider Middle East, however, are less clear. Plans by the Muslim Brotherhood when it was briefly in power in Egypt to raise desperately needed cash by selling sukuk foundered in the face of political opposition. In Libya, post-revolution pressure on banks to issue only sharia-complaint loans has stalled conventional lending. Mr Boodai thinks the Arab spring has been a godsend for business. Spooked by the turmoil in large swathes of the region, investors have diverted assets from those places to safer shores. Despite Islamic finance’s being the toast of the town in the City of London this week, the struggle to make it work in the heart of the Muslim world continues.

(The Economist / 01 Nov 2013)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

London: Harmonise Islamic finance standards: World Islamic Economic Forum

London:  The Islamic financial institutions across the world need to reduce cost of financing, harmonise standards and develop a range of new products to achieve a rapid growth of the industry, according to central bank governors who gathered here for the World Islamic Economic Forum.

"Given the lead and nimble footedness of standard banks, Islamic banks need to be equipped with a range of products and services. This can come only through user-friendly approaches," said Hamoud Sangour Al Zadjali, executive president of Central Bank of Oman.

"It is not sufficient for markets to focus on sukuk only, but we must focus on small and medium enterprises (SMEs). Greater consensus is required before the system can mature," added Al Zadjali, while talking at a panel discussion on harmonising global standards on Islamic finance, along with several other central bank governors.

Echoing a similar view, Sultan bin Nasser Al Suwaidi, governor of Central Bank of the United Arab Emirates, said: "We need to reduce the cost of financing. Prior to the growth of the industry, there was a feeling that Islamic finance would be provided at a lower rate to conventional banking and what we see is the opposite. Our practice has been to look at the product."

"The United Arab Emirates has always been open so there is no set of written rules for products. It is done on a case-by-case basis. We look at all products," added Sultan bin Nasser Al Suwaidi.

"In order for Islamic finance to become a force, it has to develop deep and liquid markets. But if you have markets based on buy-and hold investors, they are not normally liquid. We need higher frequency traders — I think this is acceptable — but we need to think about a wider participation for sharia products," opined Dr Paul Fisher, executive director for Markets, Bank of England. 

"There is a need to standardise not just regulations but accreditations for Islamic scholars involved in banking."

He said products do not have to be identical; but the legal basis underlying all of those must the same, so people don't have to worry. Getting consistency over what is sharia complaint would reduce basis risks. People also want to see benchmark rates.

Sharia rulings

Dr Zeti Akhtar Aziz, governor of Bank Negara Malaysia, noted that there has been an exponential growth in the Islamic financial system. "We are also more significantly seeing cross-border transactions. Harmonisation of global standards is key. We must distinguish between market practices and global standards. Sharia rulings in transparency and rationale will remain important," she added.

"I don't think harmonisation is about one-size fits all policy. I think there are structures that have been put in place that have broken down some of the barriers that are mostly communication and understanding based," added Mallam Sanusi Lamido, governor, Central Bank of Nigeria.

"For us in Nigeria, we take the position that we want to move the market forward… The conversation has to move beyond scholars but to populations – we must get out of this mindset. Each year there are circumstances without exact precedent. As long as we accept a need for pragmatism and balanced rules, we'll find a way forward," noted Lambido.

The World Islamic Economic Forum entitled 'Changing the world', which was organised by WIEF and the governments of Malaysia and the United Kingdom, was attended by over 2,700 delegates from over 128 countries across the world.

(Times Of Oman / 03 Nov 2013)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

London: Islamic finance for beginners

London is hosting a meeting of the World Islamic Economic Forum - the first city in a non-Muslim country to do so. David Cameron will use the opportunity to boast British credentials when it comes to Islamic finance, announcing plans to create a £200m Islamic bond by early next year.

Finance is described as Islamic when it complies with sharia, a set of moral laws laid out in the Qur'an and writings about the prophet. Sharia forbids making money from money which begs the immediate question; how can banks that don't charge interest survive? It's a question worth answering, not least because academics have argued that the financial crisis wouldn't have happened if the global economy was regulated by Islamic finance.

How It Works

Islamic finance is all about sharing risk between financial institutions and the individuals that use them. To do that, the two parties are tied into a longer-term relationship with each other that is supposed to shift incentives and avoid cut and run financial deals.

So, for example, sharia-compliant mortgages mean that the bank and the borrower share the risks of repayment rather than charging any form of interest. Similarly, Islamic bonds like the one announced by David Cameron today involve both parties owning the debt, rather than a simple promise to repay a loan.

Since it's Islamic, that also means that financial trading is off-limits for things that are forbidden even if no interest is charged - so investments can't be made in alcohol, tobacco, non-halal meat products such as pork, pornography or gambling companies. So if there's no interest and gambling on high-risk ventures is a no-no, how can Islamic banks be profitable? Hilary Osborne explains:

banks can profit from helping customers to purchase a property using a ijara or murabaha scheme. With an ijara scheme the bank makes money by charging the customer rent; with a murabaha scheme, a price is agreed at the outset which is more than the market value. This profit is deemed to be a reward for the risk that is assumed by the bank

You don't have to be Muslim to use Islamic financial services - a fact which has stimulated further interest in the sector. The Islamic Bank of Britain reported a 55% increase in applications for its savings accounts by non-Muslims last year after the Barclays rate-fixing scandal.

(The Guardian / 29 Oct 2013)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Cameron: London can be a world capital for Islamic finance

London is not content with its status as the leading capital of Islamic finance in the West and wants to compete with powerhouses in the Muslim world, British Prime Minister David Cameron declared at the World Islamic Economic Forum (WIEF) Tuesday in London, where he announced the launch of a new British Islamic Market Index and the first ever Islamic bond, or sukuk, issued by a non-Muslim country.

Calling London "the biggest center for Islamic finance outside the Islamic world," Cameron said Tuesday that the U.K.'s ambition is to boost its reputation among Islamic investors with these forays into Islamic finance, unprecedented for a non-Muslim country like Britain.

"I want London to stand alongside Dubai and Kuala Lumpur as one of the great capitals of Islamic finance anywhere in the world," he told an audience of international political and business leaders — including King Abdullah of Jordan, Afghan President Hamid Karzai and Pakistani Prime Minister Nawaz Sharif — gathered in London for the first ever WIEF summit held outside the Muslim world.

Though still a fraction of the global investment market, Islamic investments, which mandate stringent rules in accordance with Islamic law, are projected to constitute $2 trillion by 2014, a 150 percent increase from their 2006 value, according to consultancy Ernst & Young.

Malaysia's capital, Kuala Lumpur, has long been considered the stalwart of Islamic finance but London counts among a rising number of cities vying to overtake it.

London is the European headquarters for several major Middle East banks and a base of operations for the continent's Middle Eastern investors, whose assets include London's iconic Harrod's department store and the Manchester City soccer team. Islamic investment has financed London's Shard skyscraper — the tallest building in the European Union — and the 2012 Olympic Village.

The British government has encouraged a diverse range of capital, especially from China and the Middle East, to diversify Britain's investment landscape. Cameron has said that Islamic finance is expanding at a 50 percent faster rate than conventional banking, and analysts say these latest steps are designed to spur Islamic finance even further.

Jamie Durham, a partner in International Capital Markets at the law firm Allen and Overy in London, said the steps Cameron announced on Tuesday were a long time in the making.

"Britain has been looking to do this for some time now to showcase its Islamic finance industry," Durham told Al Jazeera. "I would see these moves as a symbolic way of highlighting the quantitative steps the U.K. has taken to support Islamic finance in the U.K. more generally."

The burgeoning field of Islamic finance has largely been fueled by Gulf investors who hope to tap into oil revenue, much of which is controlled by pious Muslims. Growing demand across the globe for retail Islamic banking services has similarly propelled Islamic investment.

In keeping with Islamic law, or Sharia, Islamic finance forbids charging interest and requires that deals be based on tangible assets. Gambling is prohibited by Islam, and so dealing in futures, which Islamic scholars say is akin to speculation, is not permitted.

Unlike conventional bonds, sukuk are described as investments rather than loans, with the initial payment made from an Islamic investor in the form of a tangible asset such as land. The lender of a sukuk earns money as profit from rent, in the case of real estate, rather than traditional interest.

Britain's $200 million sukuk is one-fifth the size first announced five years ago but is nonetheless expected to boost London's reputation as a center of Islamic finance — if not draw new investors into the market. Though Britain has established itself as a minor sukuk marketplace, bonds have rarely been issued from local firms — and never from the government.

"For years people have been talking about creating an Islamic bond, or sukuk, outside the Islamic world. But it's never quite happened," Cameron said on Tuesday. "Changing that is a question of pragmatism and political will. And here in Britain we've got both."

The investment-grade sukuk has been welcomed by local lenders who could use it as a liquidity instrument, said Richard Williams, finance director at Bank of London and the Middle East, the U.K.'s largest standalone Islamic bank.

"This challenge will now be resolved and is one of the final measures in creating a truly level playing field for the U.K. Islamic banks," Williams told Reuters on Tuesday.

Cameron also announced at the Forum that the London Stock Exchange will launch an Islamic index that filters companies by their adherence to Islamic principles, much in the same way that social responsibility indices classify companies to guide potential investors.

The prime minister cited mutual benefits for Islamic investors and Britain in launching these two initiatives, framing them as consistent with Britain's historical commitment to free trade.

"Investing in London is good for you, and opening London up to your investment is good for us," he told the Forum.

(Al Jazeera America / 29 Oct 2013)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

London: David Cameron wants UK to become centre of Islamic finance

LONDON: Prime Minister David Cameron says he wants to turn Britain into the world centre of Islamic finance and is proud that UK is helping Pakistan with its taxpayers’ money to send hundreds of thousands of children to school.

Speaking to guests at his annual Eidul-Azha reception in Downing Street, the prime minister said that Britain was helping Islamic countries, including Pakistan and Afghanistan, to stand on their feet and had increased the development aid budget to show solidarity with these struggling countries. Over a hundred leading members of the British Pakistani and Muslim community were present at the reception.

They were joined by senior government ministers, including Baroness Sayeeda Warsi, Imams, community and business leaders, charities and public servants from across the diverse range of Muslim communities in the UK.

PM Cameron announced plans to make government finance schemes available to Islamic students and entrepreneurs. He said student loans, start-up loans and the enterprise allowance would be made compatible with the religion’s strict rules on finance.

The prime minister said he wanted the UK to be a world centre for Islamic finance and it was in this spirit that a historic conference on Islamic global finance will be held in London in few days. Prime Minister Nawaz Sharif, besides several other government dignitaries from Islamic countries, will speak at the conference.

Cameron said: “I want Britain to be one of the world’s centres of Islamic finance - from the highest and mightiest financial institutions all the way to start-ups. The prime minister said: “I’m proud of the that fact that even in difficult economic times this country is one of the few countries in the world that has kept its promise on aid and development - meeting that 0.7% target of our gross national income. A lot of that money goes to some of the most challenged Islamic countries in the world. It is something that we can all be proud that every two seconds a child is vaccinated somewhere in the world because of aid that British tax payers have provided.”

“We’ve got tens of thousands of young people starting their own businesses and tonight I can announce that we will make sure that there is a type of start-up loan that is totally consistent with all the principles of Islamic finance. We must do that for start-up loans, we must do that for student loans and we must do it for the enterprise allowance. That’s what a welcoming, tolerant, multi-racial country does.”

Praising the Muslim community for their contribution to Britain, the prime minister said: “Tonight is about celebrating the contribution that British Muslims make to our country. It is a huge contribution. But tonight is also an opportunity to talk about the issues of integration, of how we help Muslims around the world and the importance of faith in our country and in our communities and the Muslim faith is so strong in that.”

Prime Minister Cameron spoke about the strength of the faith, especially the Abrahamic faiths who have “so much in common”. He shared his experience of helping to prepare Iftari this year on Eidul Fiter in Manchester. The PM said lightly that he was scared when he was asked to cut onions to prepare pakoras and samosas. That could have become the “worst television moment” because there was a danger of “cutting my finger” or “start crying”. But, he said, opening up to all communities to see how Muslim celebrate Ramazan was a brilliant idea.

Dr Waqar Azmi OBE introduced the prime minister to the guests and called him a “friend of the Muslim community” who led from the front after the Woolwich killing and said that terrorists have nothing to do with Islam.

Addressing PM Cameron, Dr Azmi said: “You showed true leadership when you said on the steps of Downing Street that the Woolwich attack was a ‘betrayal of Islam’. This resonated with everyone in the Muslim community. We value your support for the British Muslim community.

Your statement on the Mosque being built in your constituency in Chipping Norton is a good example. It is moments like this that we know that the British Muslim community has a friend in you. Thank you.”Prior to PM Cameron’s speech, a dua was offered and verses from the Holy Book of Quran were read.

(The International News / 23 Oct 2013)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

London now a key Islamic finance centre

London has emerged as the key Western centre for Islamic finance, acting as the leading financial centre with specific provisions made to spearhead the sector with the British government support, UK minister Greg Clark said.

During his recent visit to Malaysia, Clark who is also the financial secretary to the Treasury of the UK, said it could not be denied that Islamic finance played a role Malaysia’s changing skyline, saying London will also see the same.

“We have seen how the skyline of Kuala Lumpur has changed in recent years, and Islamic finance played a role in this but what is little known by travellers to London is how the recent developments there were also touched by the sector,” Clark said.

“It is important for us to learn from this country in terms of what’s being done here in the Islamic finance sector,” he said.

Clark said Islamic finance assets in London is today estimated at £19 billion (RM96.9 billion), and that is why the UK is willing to develop the sector even further.

UK also offers a secondary sukuk market which is today valued at US$5 billion (RM16 billion).

We have taken some efforts as the UK government to remove, for example, some of the dual taxation policies and extend tax reliefs to the Islamic finance sector, Clark said in an interview during the recent Kuala Lumpur Islamic Finance Forum.

“London has 20 international banks and they are offering Islamic financial services. Six of these are fully Shariah-compliant,” the minister said, adding that the UK’s largest accountancy firms have a Shariah expert providing advice to UK and international financiers on Islamic finance.

London’s interest in Islamic finance dates from the days of the HSBC’s push to serve its Muslim customers with Islamic finance products in 2003.

However, 10 years later in 2013, the UK government launched its first Islamic finance task force, co-chaired by Clark and Baroness Warsi, a senior Minister of State at the Foreign and Commonwealth Office.

The task force will help to cement London’s status as the western hub for Islamic finance by showcasing the UK as the preferred choice for the Muslim world to invest in and do business with, a statement from the www.gov.uk website said.

It also indicated that the task force will support development of the UK’s Islamic finance sector, increasing inward investment and strengthening the economy.

“The task force will include major industry figures to ensure that the UK’s offer is promoted at home and abroad by both the public and private sector,” the statement said.

UK intend to use Islamic finance to facilitate inward investment and strengthen the UK economy, including through our ongoing support for Sovereign Wealth Funds looking to invest in UK infrastructure.

In this respect, London is hosting the 9th World Islamic Economic Forum from Oct 29- 31, 2013, offering an excellent opportunity to showcase London and the UK to 1,500 key Islamic decision makers and to increase awareness here of key economic issues affecting the Islamic world.

(F.M.T News / 14 Oct 2013)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic Finance: London Can Grab £1tn of Global Market Claims Ethical Asset Management's Saadat Khan

London could capture a trillion pounds' worth of the burgeoning global Islamic finance market, according to a Shariah-compliant asset management firm in the city.

Ethical Asset Management Chief Executive Saadat Khan said the UK could lure the lucrative Islamic investment by encouraging a market with truly Shariah-compliant financial products, because much of what is on offer at the moment does not suit Muslim investors' strict requirements.

Under Shariah finance rules, the charging of interest on lending is regarded as usury and forbidden. Investors must also avoid investments linked to certain things, such as pork and alcohol, which Muslims are barred by their faith from consuming.

"There are tens of billions of dollars looking for a suitable home that are doing nothing at present due to the structured nature of many Shariah-products currently available on the market," said Khan, whose firm was the UK's first Shariah-based asset manager when it was created in 2010.

"Several of these are described as Shariah-compliant or even Shariah-inspired. However, a significant number of investors are not interested in them because they are very similar to conventional products in all but name.

"Some of these are effectively conventional bonds, which are basically a promise to pay. An investment (loan) is made based on the strength of the balance sheet of borrowers who make huge profits and share a disproportionate amount of these profits with the investor.

"This model is against the true principles of Shariah Law, which encourages wealth distribution and that risk and reward is divided fairly."

London Deputy Mayor Sir Edward Lister has already been touting the city around the world as the western hub for Islamic finance.

A task force on building the UK's Islamic finance industry has been at work since early 2013 and London will host the World Islamic Economic Forum in October.

"The task force has just started and its aim is to make it easier for banks in London to have Islamic products, which is still quite a new concept to any of them," Lister told a press conference in Kuala Lumpur, Malaysia.

"Only now people are beginning to understand what the products actually mean and how they comply ... What you will see is a lot of companies introducing those products."

Globally, the Islamic finance industry is forecast to be worth $2.6tn (€1.9bn, £1.6bn) by 2017. It has grown by around 30% each year since the millennium and consultancy firm Oliver Wyman predicts that there will need to be at least 150 Islamic finance institutions by 2020 to meet the ever-growing demand.

There are more than 20 UK banks offering Sharia-compliant products, such as HSBC and RBS. There are also three Sharia-only institutions, including the Islamic Bank of Britain (IBB).

By increasing the number of Sharia-compliant financial services in London it will be easier to facilitate investment in the UK from Islamic investors.

Ethical AM's Khan, who has given evidence to the task force, argues that for a financial product to be Shariah-compliant there can be no guaranteed return on investment, such as coupon payments on bonds.

Instead, any investment should be based on risk-sharing through shared ownership of the asset, with profits or losses split between the parties.

"The purpose of the Shariah system is the same as all the Abrahamic faiths, which is not to benefit onesself only but to ensure the betterment of all," he said.

"We can make a huge positive contribution to society by operating in this manner and make a good return ethically on investments without any loss of profit. We must consider people before profit."

(International Business Times / 01 Oct 2013)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

London steps up Islamic finance ambitions

Aiming to build on London's status as a leading exporter of financial services, Britain hopes to step up the challenge to Islamic finance centres such as Dubai and Kuala Lumpur.

"We want to be the leading (Islamic) finance sector outside of the Muslim world," deputy mayor of London Edward Lister said in a press conference in Kuala Lumpur on Wednesday.

Islamic finance follows religious principles such as bans on interest and gambling, and is playing an increasingly prominent role internationally as often oil and gas-rich investors from Islamic countries put more of their money to work overseas.

Britain's Islamic finance task force, established in March, is led by several ministers and industry figures as well as top executives from Gatehouse Bank and Oakstone Merchant Bank Ltd.

It was launched ahead of London hosting the World Islamic Economic Forum in October and its mandate is to facilitate Islamic financial business, including investment in British infrastructure by Islamic sovereign wealth funds.

The forum, which saw 28 billion ringgit ($8.6 billion) worth of deals inked last year, is being held outside an Islamic city for the first time.

Islamic finance has already played a role in several major deals in London, with Qatari investors taking part in funding the city's Shard tower, Harrod's department store and the athletes' village used for last year's summer Olympics.

A Malaysian consortium is also spearheading the redevelopment of London's Battersea power station, after acquiring the site for 400 million pounds last year. Malaysia is the second largest investor in London's real estate market behind the United States.

"The task force has just started and its aim is to make it easier for banks in London to have Islamic products, which is still quite a new concept to any of them," Lister said.

"Only now people are beginning to understand what the products actually mean and how they comply ... What you will see is a lot of companies introducing those products."

Maybank Islamic, an arm of Malaysia's largest bank Malayan Banking Bhd, has launched a sterling-denominated and sharia-compliant mortgage product for high net-worth Malaysians looking to invest in London's real estate market.

Britain currently has 22 financial institutions, including five fully sharia-compliant banks, offering Islamic finance products. They are supported by 30 London law firms offering expertise on the sector.

(Reuters / 18 Sept 2013)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic Finance: London Eyes Becoming Western Capital of Sharia-Compliant Banking

London is vying to be the capital of Islamic finance outside of the Muslim world, says the city's Deputy Mayor Sir Edward Lister.

A task force on building the UK's Islamic finance industry has been at work since early 2013 and London will host the World Islamic Economic Forum in October.

"The task force has just started and its aim is to make it easier for banks in London to have Islamic products, which is still quite a new concept to any of them," Lister told a press conference, reported Reuters.

"Only now people are beginning to understand what the products actually mean and how they comply ... What you will see is a lot of companies introducing those products."

Globally, the Islamic finance industry is forecast to be worth $2.6tn (€1.9bn, £1.6bn) by 2017. It has grown by around 30% each year since the millennium and consultancy firm Oliver Wyman predicts that there will need to be at least 150 Islamic finance institutions by 2020 to meet the ever-growing demand.

There are more than 20 UK banks offering Sharia-compliant products, such as HSBC and RBS. There are also three Sharia-only institutions, including the Islamic Bank of Britain (IBB).

By increasing the number of Sharia-compliant financial services in London it will be easier to facilitate investment in the UK from Islamic investors.

What is Islamic banking?

According to IBB's website: "Islamic banking operates without interest which is not permitted in Islam, as money in itself is not considered to have intrinsic value.

"As interest is income generated from money, it is seen as effortless return. Instead money must be used in a productive way and wealth can only be generated through legitimate trade and investment, which involves an element of risk.

"Islamic banking therefore uses various principles recognised as Sharia compliant such as Ijara (leasing), Musharaka (partnership) and Wakala (agency agreement). Islamic banks use these principles to develop Sharia compliant financial products, such as savings accounts and home finance, which allow Muslims to conduct their finances in an Islamic way."

(International Business Times / 19 Sept 2013)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

'Islamic Finance is as British as Fish and Chips and the FA Cup Final' says Lord Mayor of London

Friday 5th July 2013, 12:04 London, United Kingdom: Beyond the talk of proliferating market size, volume of issuances outstanding and innovative new structures and underlying assets, the global Sukuk market is poised to take that great leap forward to a new higher level.

The various components and manifestations of this vital progression were indeed high on the agenda of the keynote speakers at the 2013 London Sukuk Summit, which was held on the 12th -13th June 2013 at the Jumeirah Carlton Hotel, and hosted by the organiser, ICG-Events.

Emerging Sukuk models, such as that of the International Islamic Liquidity Management Corporation (IILM), for instance, serve not only to enhance financial stability by facilitating liquidity management for international Islamic financial services, but also to cater for economic development and debt management.

The 2013 London Sukuk Summit, judging by the feedback from speakers and participants, indeed raised the bar of the Sukuk discourse and at the same time managed to engage newcomers to the industry. "It was my first time at such an outstanding event as I have only recently been involved in Islamic Finance," emphasised Robert Fresco, Director, Legendre Patrimoine.

"I was in charge of launching the first French Sukuk in green energy. The Sukuk Summit was incredible for me and my company, because of the high quality of the speakers and delegates that were present from around the world. Their expertise and insight over the two days of the conference was invaluable. I am now better informed about the Sukuk market and the key players in the industry. The event highlighted how important the Sukuk market is and its importance to the future of Islamic Finance. I hope to be a part of next year's Sukuk Summit and to further establish the business relationships which I had initiated at this year's event," he added.

The opening session indeed attracted the participation of a premier division of key figures in the global Sukuk architecture. The Lord Mayor of London, Alderman Roger Gifford, in his welcome address, reminded that London as a centre for business and finance has always thrived on openness - openness to the movement of capital and ideas, openness to talented people, and an openness to global business. As such, London's evolution as a Centre for Islamic Finance, complementing the role of centres in North Africa, the Gulf and Asia, reflects that same global approach.

The Lord Mayor gave the delegates much food for thought when he declared that "in the 21st Century, Islamic Finance is as British as fish and chips and the FA Cup Final. It is an integral part of London's competitive offer. I look forward to seeing this market thrive and grow in the years to come."

An international outlook on and clear domestic demand for Islamic Finance - need to be supported by sound regulatory structures, suggested the Lord Mayor. "The Islamic Finance sector is a much valued component in the cluster of services offered by London and the UK, subject to the same regulatory requirements - whether that is in capital adequacy, governance, fairness to clients, the ability and integrity of staff at all levels. This is a strength of London as a centre for Islamic Finance - especially when allied to the strong ethical culture that is at the core and heart of the sector - and should be at the heart of all business," he added.

Alderman Gifford reminded delegates that the UK's National Infrastructure Plan provides fantastic opportunities for investors - as the country looks for new capacity and the renewal of the old, across power, water, housing, transport and waste disposal. "All of these offer opportunities which can be met

though Sukuk issuance or other Shariah-compliant means, by sovereign wealth funds and other pools of assets in state, corporate or individual hands" he added.

The Baroness Morris of Bolton, the UK Prime Minister David Cameron's Trade Envoy for Kuwait, Jordan and the Palestinian Territories, representing Baroness Warsi, the Co-Chair of the UK Government Task Force on Islamic Finance and a Senior Minister of State at the Foreign & Commonwealth Office and the Minister for Faith & Communities, conveyed a considered message to the delegates about the "golden opportunity' presented by Islamic Finance in the UK.

The UK Government in fact also hosted a lunchtime reception for the Sukuk Summit delegates at the historical Lancaster House, where Alan Duncan, Minister of State for International Development and a member of the ministerial team on the UK Islamic Finance Task Force, echoed the historical connections between the contemporary Islamic Finance industry and the City of London and why the Government is committed to working with the industry to further promote London as a premier and preferred hub for Islamic finance. The Co-Chair of the Task Force is Greg Clark, Financial Secretary to the Treasury and the fourth Minister is Lord Green, Minister of Trade.

"It was on a visit to Malaysia and Indonesia," explained Baroness Warsi, "that I became acutely aware of the power and potential of Islamic finance. Globally the market has grown 50% faster than the traditional banking sector. Britain and British businesses of all sizes can no longer afford to ignore new and emerging markets. We need to demonstrate to the world that the UK is a first class destination for foreign investment and commerce - to show that Britain is open for business. We must constantly be striving for more, and Islamic Finance provides one area where development is possible. It's not a silver bullet, but it is a golden opportunity. Not least because ten of the world's 25 rapid growth markets are Muslim majority countries."

Islamic Finance, continued Baroness Warsi, is not merely for Muslims but for anyone interested in ethical and socially-responsible financial intermediation. The sector is now a global mainstream one which is projected to grow five-fold by the end of this decade. "In the wake of the financial crisis, the principles upon which Islamic finance are based seem more important, more attractive, than ever before. Principles of balance; shared risk; fairness; due diligence; oversight and transparency. Principles that prevent you from selling what you don't own or attaching a value to assets that do not exist. Islamic Finance could be a sensible, measured banking option, at a time when confidence remains low and the Government is working with the G8 to improve the transparency of financial institutions. This is the right time, right place for Islamic Finance. I am proud to say that the Coalition Government agrees," she maintained.

She urged the City of London to respond to the challenge and opportunity presented by the global Islamic Finance industry. Given that London is already a major centre for Islamic Finance education, Baroness Warsi, confirmed that the UK Government is looking "at the introduction of accreditation for Islamic Finance education as well as a regulatory body for training providers."

The UK Government, she added, will support the Islamic Finance industry "in its aim to broaden the range of products and services, reducing the risk of over-exposure and ensuring that high quality Islamic (product) alternatives are available to (British) customers. The Government's role is to create the regulatory and tax frameworks to allow the market to thrive, and, ultimately, help to produce the growth that Britain needs. By championing Islamic Finance, I believe we are doing just that."

One way of doing this is the mobilization of Islamic funding and investment for infrastructure projects in the UK. "We are looking at ways the Task Force can mobilise funding, for example in to the top 40 priority infrastructure projects indentified in the National Infrastructure Plan. This is a huge opportunity for the UK, and is a cross-Government effort. The Financial Secretary of Treasury, the Commercial Secretary to the Treasury and I are looking at this in great detail. We will be engaging with private investors, Sovereign Wealth Investors, and major stakeholders including the Islamic Development Bank, in order to realise this vision," explained Minister Warsi.

The Keynote Speaker, Sheikh Abdullah Saoud Al-Thani, Governor of the Qatar Central Bank (QCB) and current Chairman of the Governing Councils of both the Islamic Financial Services Board (IFSB) and the IILM, laid out a roadmap of the exciting potential and implicit challenges for the global Sukuk market going forward.

In Islamic banking and finance, explained Sheikh Abdullah, the Fractional Reserve banking system does not exist but instead, a 100% reserve banking system exists. "An Islamic bank," he emphasised, "cannot lend what it does not have, and this you may say, is unfortunate, as this will always cause a disadvantage compared to its conventional competitor, and a level playing field can never exist. This disadvantage though, may become Islamic Finances greatest strength."

Islamic Finance's essence lies in the concept of risk sharing, which provides a great deal of motivation to develop the Islamic Capital Markets, as these instruments, such as Sukuk, are built on this essence. In most Muslim countries, market share for Islamic banks is well below 20%. "I can only think of the possibilities of what can happen with the Sukuk industry if the momentum of growth for Islamic Finance continues at that 40% compounded rate from 2004 to 2011 that it experienced," suggested Governor Abdullah.

The mobilisation of investments from Islamic funds especially retail unit trusts into Sukuk issuances that allow for a wider investor base given that the estimated 1,000 such funds lack sophistication, since Islamic equity and fixed income markets do not have sufficient volumes, represents a major opportunity. Savings rates in many Muslim countries too are among the highest rates in the world, which alone presents a large inherent potential for Sukuk and the Islamic Capital Markets, including the promotion of financing and direct investment into Shariah-compliant SMEs.

However, several challenges exist that can limit this potential.

For institutions offering Islamic Financial Services, the limited availability of Shariah-compliant instruments in several jurisdictions continues to pose substantial challenges. The combination of supply and cost considerations has resulted in unnecessarily large holdings of cash by most Islamic Financial Service providers to meet their short-term liquidity needs.

"Addressing the limitations that constrain effective liquidity management practices will be critical not only to support the further development of Islamic Finance, but, more importantly, to promote global financial stability," stressed Sheikh Abdullah.

Sheikh Abdullah warned that the existing mechanism of Shariah scholars' involvement in product development, harmonisation and approval may not be adequate for a rapidly growing market that needs to expand according to international standards.

A basic requirement for Shariah compliance of any Sukuk structure is that it shall be backed by real (tangible) assets. Some concern, however, has been raised regarding the limited number of such assets available with Islamic financial institutions. Moreover, according to some reports, the cost of issuing Sukuk can be as much as 60% higher than conventional bonds. These factors could slow down the growth of the Sukuk market.

The strong performance of Sukuk has been largely on the back of sovereign and quasi-sovereign issuances, with corporate issues lagging behind despite the strong growth. Regulation is also a key issue for Sukuk especially creating a level playing field in terms of tax neutrality for both conventional and equivalent Islamic products. The increased use of credit ratings in Sukuk, with the three international credit rating agencies using conventional methodologies to rate Islamic financial instruments including Sukuk despite the fact that Islamic financial institutions and instruments have their own characteristics, also needs to be reconsidered.

Professor Rifaat Abdel Karim, CEO of IILM, in his Special Address, presented a unique vision of the IILM Sukuk Golden Triangle connecting financial stability, economic development and debt management.

The multilateral Corporation was established by central banks, monetary authorities and multilaterals and is mandated to develop and issue short-term Shari'ah-compliant financial instruments to facilitate effective cross-border liquidity management for institutions that offer Islamic financial services. The IILM endeavours to enhance cross-border liquidity flows, international synergies between institutions and more importantly to facilitate financial stability within the Islamic financial systems.

It is no secret that the dearth of Shariah-compliant high-quality, liquid assets (HQLA) is a key risk to which Islamic financial institutions are exposed. According to Professor Rifaat, Sukuk can play a vital role in funding the real economy by ensuring that the funds are used only to finance real assets and that excessive leveraging cannot take place. This contributes to enhancing financial stability. Sukuk can also be tradable and offer a return that can be predictable at a relatively commensurate low risk. As such, they can be Shariah-compliant substitutes for conventional fixed-income securities. As such the IILM short-term Sukuk issuance programme, launched in April, indeed aims at enhancing the ability of Islamic financial institutions to manage their liquidity both nationally and on a cross border basis by creating and issuing Shariah-compliant HQLA.

These instruments, maintained Professor Rifaat, will over time have the characteristics to meet market requirements and recently promulgated international guidelines for liquidity requirements such as Liquidity Coverage Ratio (LCR) Standard adopted by the Basle Committee in January.

The Committee in fact gave national regulators of Islamic financial institutions significant discretions to determine what instruments may be treated as eligible for their liquidity requirements. Not surprisingly, the IILM is focused on obtaining appropriate regulatory treatment for its Sukuk consistent with the requirements of the Basel Committee, and according to Professor Rifaat, "the IILM has started to work closely with its member central banks and relevant regulatory bodies to obtain clear regulatory treatment for the IILM Sukuk and it is likely that this treatment will be favourable for the international Islamic Financial Services industry.

In terms of economic development, the IILM has developed a unique value proposition in supplementing the sovereigns' current sources of funding (especially raising longer-term funding) that would allow them to finance development projects in their countries.

Multilateral developments banks (MDBs), stressed Professor Rifaat, are a natural partner for the IILM, and can act as credit enhancement providers for their member countries' obligations to the IILM. This will increase the ability of their member countries to raise funds by selling assets to the IILM on a "temporary separation of ownership" basis. This would provide the member countries with an opportunity to access an alternative source of funding that could be available during market stress periods.

In terms of debt management, the development of the IILM Sukuk market, said Professor Rifaat, will also allow sovereigns to access funding with varying maturities, thereby avoiding funding mismatches. It will also allow for diversification of risks by issuers and investors. As such, the IILM Sukuk may assist sovereigns in their debt management by enabling them to benefit from either sovereign debt re-profiling or from flexibility in funding arrangements.

Another interesting Special Address was that by Dr Nik Ramlah Mahmood, Deputy Chief Executive, Securities Commission Malaysia, who spoke on 'Facilitating Retail Participation in the Sukuk Market, thus closing the stakeholder spectrum from high finance to ultra retail.

Dr Ramlah, one of the most proactive regulators in the world involved in the Islamic Capital Market (ICM), passionately argued for "the democratization of financial capital" through the broadening of access to the capital market. Sukuk likes bonds, continue to be the domain of the "big boys", both on the demand and supply sides. Issues like rating requirements, cost of issuance and complexity of documentation meant that capital raising through Sukuk is predominantly by larger corporations and entities. As such, to Dr Ramlah "widening access to the Islamic Capital Market is critical to the development of a successful and inclusive Islamic Finance industry. In supporting this, key stakeholders such as the policymakers, supervisory authorities, Islamic financial institutions and scholars have to explore innovative and inclusive financial solutions that serve the needs of both high finance and high street."

Indeed, the first Islamic Principles of Commercial Law asserts that wealth (and property) should be circulated among the general public and actively transferred from one hand to another in the form of investment (and expenditure). "It is for this reason that ensuring investment access to the masses has and continues to be a key driver for the development of Islamic markets in Malaysia. It is for this reason too that Malaysia's Islamic Capital Market has been systematically designed to ensure accessibility and inclusiveness whilst ensuring the protection of investors, efficiency in intermediation, fair and orderly markets and risk mitigation," she explained.

With a view to facilitating greater direct retail participation in the corporate bonds and Sukuk market, the Securities Commission Malaysia in 2012 developed the framework for retail bonds and Sukuk as envisaged under the Capital Market Masterplan 2. Retail Sukuk is part of the agenda to extend ICM offerings to the masses, enabling retail investors' access to a wider range of investment products. Under the Exchange Traded Bonds and Sukuk (ETBS) framework, retail investors have direct access to Sukuk thereby broadening the range of low-risk investment products available to them and facilitating diversification for risk management purposes.

Pursuant to the release of the framework, Malaysia's first retail (exchange-traded) Sukuk was issued by a government-owned entity, Danainfra Nasional Berhad, a company tasked to undertake the development of the country's first mass rapid transit (MRT) project at a cost of GBP7.9 billion (RM36.6 billion). The retail Sukuk tranche was part of a GBP323 million (RM1.5 billion) government-guaranteed issuance, of which GBP 65 million or 20% was allotted to retail investors and was listed on the Malaysian Stock Exchange (Bursa Malaysia) in February 2013. Proceeds were to be used to part finance the project's capital expenditure and operating expenses.

"Among the key decisions we had to make prior to the introduction of the framework," revealed Dr Ramlah, "was to determine whether retail bonds and Sukuk should be offered OTC or on the Exchange platform. The higher cost of trading retail bonds and Sukuk is also a key issue and may also act as dampener to the broader efforts to encourage secondary market liquidity. In this regard, several incentives were introduced in order to ensure that trading fees for exchange traded bonds and Sukuk are competitive. Another area that requires considerable effort is investor education."

However, she warned against viewing the development of retail Sukuk in isolation because in Malaysia at least it does not do justice to the many other efforts that have and continue to be pursued to extend the reach and relevance of Islamic capital market products and services to a wider spectrum of issuers and investors.

-Ends-

ICG-Events focuses on delivering specialized services designed to promote the development of Islamic banking and finance. ICG-Events provides complete turnkey solutions to those organizations wishing to; promote their services, expand their product range, launch new products, organise academic and industry related events, such as; conferences, workshops, seminars, forums, product launches and training programmes. Islamic finance has reached an important juncture in its development where theoretical discourse is being translated into practical solutions to the complexity of issues faced by this rapidly expanding sector.

Islamic Finance is increasingly recognised as commanding a growing and knowledgeable audience comprised of seasoned practitioners, accomplished academics, interested new entrants and an aware and desirous clientele. This situation has necessitated the adoption of leading technology to facilitate the delivery of focused solutions that better serve the market. We have combined a range of tools, marketing and organizational skills that provide a comprehensive range of services, which enhance the process of attaining success.

In the area of event organisation, our events have been distinguished through our ability to gather the most accomplished experts from both within and outside of the industry to ensure that constructive discourse is achieved. We have also made a conscious departure from generic events that tend to mainly offer networking and marketing platforms. By providing only focused theme based events in a value added environment, we have been able to facilitate meaningful discourse and interaction and greater scrutiny of products and services, which in turn has helped ensure the success of all our events to date.

(Zawya / 05 July 2013)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com