David Cameron to unveil plans for £200m Islamic bond

October 28, 2013

 

David Cameron will pledge to make London one of the world’s “great capitals of Islamic finance” when he unveils Treasury plans to create a £200m Islamic bond by early next year. The prime minister will also unveil plans by the London Stock Exchange to launch the first Islamic Market Index.

The government moved on Monday night to offer assurances that the Islamic bond, or Sukuk, and the Islamic index would not encourage investments that discriminate against Israel. Boris Johnson was forced to order Transport for London to rewrite the contract for the Emirates Thames cable car in the summer amid fears that Israeli companies could have been blocked from involvement in the project as the United Arab Emirates does not recognise the state of Israel.

A government spokesman said: “The government’s decision to issue a Sukuk compliant bond is about making sure Britain is open for business – we will not open one door at the expense of another. While the Treasury is still working on the practicalities, we can confirm that the government would never exclude a supplier on nationality grounds.”

The Sukuk bond will comply with Islamic law and investment principles that prohibit lenders from charging interest.

On the Islamic index he will say: “The growth of Islamic finance means that there is an increasing demand for new ways of identifying Islamic compliant business activities. Again the City of London is leading the way – this time not just in Europe, but right across the world.

 

The Guardian: http://www.theguardian.com/money/2013/oct/29/islamic-bond-david-cameron-treasury-plans

Could principles of Islamic finance feed into a sustainable economic system?

October 18, 2013

 

Islamic finance has been a significant global force for the past few decades, but in recent years sharia-compliant saving and investing have become more common. For example, in June, Goldman Sachs provided a loan to Arcapita Bank, an Islamic investment company, that in compliance with sharia law did not charge interest. In July, a US-based trade association, the World Council of Credit Unions, published a manual explaining to would-be community financiers in developing countries how to operate sharia-compliant credit unions.

Western discussions of sharia law often focus on extremist groups imposing brutal interpretations of these legal codes on unwilling populations. But sharia law, which derives from the Qur’an and the religious teaching of Islam, can also be applied to the finance sector. Importantly, Islamic finance can be seen as part of a wider movement towards the promotion of sustainability as a key element of economic life.

The basic premise under sharia law that no one should profit purely from money leads to a shift in both parties’ perspective away from the short-term transaction and towards the longer-term relationship and its consequences.

In short, the structures that have evolved do away with classic debt – and the banks that provide such financing – in exchange for direct participations in risk and reward. For example, an ijara can be used to purchase real estate for the purpose of leasing it out to tenants and the rental income is distributed pro rata to subscribers. A sukuk is a fully negotiable certificate that can be bought and sold on the secondary market, and allows the new owner to “step into the shoes” of the original holder, taking all the rights, obligations and liabilities relating to the underlying assets that accompany the certificate.

Importantly, participants in an ijara and holders of a sukuk have no guaranteed return and are all economically aligned in the long-term success of the project. If the project fails, they cannot simply take their profits to date and sell of the loan collateral to make themselves whole. As a result, Islamic finance encourages the creation of social value alongside economic value.

But Islamic finance is a legitimate expression of an economic philosophy of the use of money. This shouldn’t be stigmatised or criminalised – especially in light of the excesses and abuses that preceded the recent global financial crisis.

Islamic finance is becoming an important part of important emerging economies in the Middle East and Asia – high-growth markets where businesses will want to compete and succeed. And the Muslim population is continuing to grow and can be an engine for further growth.

 

The Guardian:

http://www.theguardian.com/sustainable-business/islamic-finance-sustainable-economic-system

Paris seeks to become Islamic finance hub in Europe

News Agencies – April 23, 2012

 

A report prepared by KFH-Research states that new global markets are seeking to join the main players in the Islamic financing industry and services, such as France. France is working relentlessly to make numerous legal and organizational reformations to facilitate the offering of Islamic financial services and products.

 

The report added that there is great potential for growth in the field of Islamic financial services in France, since France seeks to become a hub for Islamic banking in Europe. It noted that 1.5 million clients are willing to use Islamic banking tools and products, which equals USD 18.2 billion. In addition, French authorities have offered strong support to develop Islamic banking services, not to mention the high number of Muslims living there who seek Islamic banking services. However, the report mentioned that some legislations need to be amended.

Debate about the acceptability of Islamic finance in Canada

Macleans – January 16, 2012

Canada, with its 1.3 million Muslims, has lagged behind countries like the U.K. and the U.S. in embracing sharia-compliant financial products. None of the country’s big banks currently offer sharia-compliant services, though some smaller players do. Toronto-based UM Financial Inc., which issued home mortgages conforming to Islamic law, filed for bankruptcy last year, leaving 170 Muslim borrowers in limbo. Is the firm’s failure evidence that Canada should steer clear of Islamic finance; or proof that the country needs more of it–i.e. that the banks and policymakers need to bring the practice into the mainstream, with tighter rules and better oversight? This article features a debate with Tarek Fatah is the founder of the Muslim Canadian Congress, and Walid Hejazi is associate professor of international business at the University of Toronto’s Rotman School of Management, where he is currently teaching an MBA course on Islamic finance.

Interest-Free credit card available for Canadian Muslims

A new interest-free credit card, the first of its kind in North America, aims to reconcile Islamic canonical law and Western consumer culture. Until now, observant Muslims have been precluded from owning credit cards on which they pay interest, a violation of shariah law.

The iFreedom Plus Master-Card, set to be available in the coming days, promises no bills, no interest and no credit card debt. With the iFreedom Plus MasterCard, holders load up their card with cash in advance, up to $6,000. Each purchase draws down on the account without accruing interest.
Because the new product doesn’t actually involve credit, applicants are approved without a credit check. The card, which is primarily aimed at younger newcomers, was launched at the inaugural conference of the Usury-Free Association of North America in Toronto.

Islamic banking enters the Austrian market

After several years of success in the UK and first attempts in continental Europe, Islamic banking is now about to enter the Austrian market. Islamic financing is said to be highly profitable: growth rates of 30 percent are predicted. So far, the roughly 400, 000 Austrian Muslims have no opportunity to invest their money in a “halal” way, but now the Austrian Standards Organisation has started to develop common standards for Islamic banking on behalf of the Islamic Information and Documentation Centre (IIDZ).

The process should be completed by summer 2010, when the first Islamic financial products are supposed to be available at Austrian banks.

New resistance to Islamic finance in France

PCF (French Communist Party) member André Gerin has addressed a letter to François Fillon against changing laws to allow “Shari’a compatible” Islamic banking in France, claiming that accommodation is not appropriate and that this new banking calls into question “democratic and republican values.”

Le Monde reports that two laws which would have allowed for greater facility of Islamic banking have been censured in parliament. Two French banks, BNP Paribas and Calyon Crédit Agricole are already open in the Gulf States.

Debate sparked on Islamic finance in France

Islamic finance is sparking a heated debate in France. “We must not allow principles of Shari`ah law, or the ethics of the Qur`an to be introduced into French law,” said Socialist MP Henri Emmanuelli.

The parliament recently approved a number of adjustments to the banking laws to allow sukuk [Islamic bonds] to be issued for the first time. The Qatar Islamic Bank has applied for a license to operate in France as the first Islamic bank.

Emmanuelli’s Socialist Party has tried to block the law amendments but has failed. It is now challenging them before the Constitutional Council. The far-right National Front has also denounced Islamic finance as a “community-based peril” resulting from immigration.

In a report presented to the government last year, economist Elyes Jouini estimated France could tap into 120 billion euros in capital from Islamic finance if it made some adjustments to its tax and banking laws.

University Paris IX Launches Sharia-Compliant Islamic Finance Master’s Degree

University Paris IX Dauphine will launch a sharia-complaint Islamic Finance program beginning in October 2009 – a topic deemed unknown and promising. Elyès Jouini, the director of Dauphine’s Institute of Finance (IFD) claims that “the demand from non-Islamic financial institutions who wants to train their collaborators in these methods for their Muslim clients is growing.”