Opinion

How to Attain a Robust Islamic Financial System in Kenya?

Jun 10, 2017 By admin Leave a Comment

NAIROBI, KENYA: Although Islamic Banking is at nascent stage in the country, the faith-based lending model is becoming a fast growing trend in the Kenyan financial sector and showing indicators of exponential growth. The concomitant expansion of Islamic finance activities in the region and the huge Muslim population can be largely attributed to reforms in regulatory and taxation frameworks. These two strictures have remarkably redefined Islamic Financing in the country necessitating innovation and creativity to meet the growing and diverse needs of the customers. Acceptance of Shariah laws by the general public, has catalysed the adoption of this alternative financing option within mainstream banking
KCB Bank Kenya SAHL proposition boasts of growth in terms of breadth of products with varying degrees of sophistication. The lender institution has developed regulations anchored on safeguarding depositors’ interests while ensuring the stability of its financial systems in achieving efficiency and reliability to customers in line with Kenya’s monetary policies. This determination has greatly contributed to the indicative growth in demand of KCB SAHL Banking Shariah Compliant products. The industry has previously weathered a series of economic challenges ranging from taxation reforms, interest rate capping that have consequently resulted in implementation gaps and resources constraints in launching new products. Introduction of new products can no longer be without a definitive plan based on resources available and return on investment.

To accelerate uptake of Shariah Compliant products, robust feedback mechanisms have to be put in place to gauge the impact from all the stakeholders in the markets. There is need therefore, that consolidation of gains made are aligned with customer value created, human capital efficiencies achieved, and resources mobilized while working closely with the regulator to spur positive Islamic finance growth. The strides made so far are indicative of the growing support for Shariah Compliant products occasioned by concrete mechanisms and better value proposition. In our view, there is need to offer a rich range of products dedicated to individuals and economic institutions in Kenya emphasizing keenly on functional benefits derived by customers from using such products.
We need to invest more in IT Infrastructure and deepen the use of mobile platforms in addressing customer needs. The country requires a robust legal framework and this calls for passing into law of a variety of new laws and regulations surrounding Sharia Compliant Products. KCB Bank has developed an array of modalities and financial instruments towards market expansion and integration with existing products. There is need to accelerate Sukuk issuing to offer an opportunity for diversification.
The current Finance Act does not allow the creation of debt through direct lending yet. Islamic finance advocates for the seller or lessor should have real ownership of the asset been sold or leased before a transaction. The debt created from such sale or lease transactions cannot be sold to a third party to avoid the risk associated with it. These requirements makes the lender take responsibility for risk or debt financing, thus helping prevent excessive risk and debt accumulation. Further work is needed to ensure compliance, including a transparent and credible assessment process for evaluating compliance with standards. Kenya’s Islamic finance growth has a huge potential given the region’s demographic structure and potential for financial deepening.

If we are to realise gains from creation of new Shariah compliant financial instruments and incorporation into tax codes, all stakeholders must develop supportive tax and legal environment, which will provide the impetus to the development of Shariah-compliant products. Perhaps Parliament should allow compensation in Sukuk to be treated as interest paid on any bond offering, deductible from taxable income and exempt from withholding tax. We need to tailor Islamic finance models to the needs of Kenyans. There is need to strengthen capacity for domestic supervision, liquidity monitoring, and crisis management. It is also vital to constantly evaluate our financial stability, appropriate legal, regulatory, and supervisory frameworks.
Developing Islamic finance could complement Kenya’s efforts to deepen its conventional financial systems. In addition, Islamic financing can also contribute to the development of small and medium enterprises and microfinance activities that are key toward the realisation of vision 2030. As matters stand in Kenya, we are operating Shariah Banking under waivers from existing Acts of Parliament.
We should consider borrowing a leaf from our neighbours Uganda who are already a step ahead in implementing necessary legal reforms in Islamic finance. The country’s law makers passed the Financial Institutions Amendment Bill 2015 paving way for introduction of Islamic Banking in the country under its own statute.

Originally published on www.standardmedia.co.ke

Is Islamic Banking Ready To Embrace Fintech?

Dec 22, 2016 By admin 1 Comment

JEDDAH: Over the past decade, financial technology — widely referred to as FinTech — has grown primarily due to growing Internet access worldwide and the emergence of smartphones and apps. According to the Ericsson Mobility Report published last year, 70 percent of the world’s population is expected to be using smartphones by 2020. As smart devices are increasingly becoming part of everyday life for most people in the digital age, it is essential for the banking sector to become more innovative to enhance its productivity as well as include more and more unbanked people into the fold.
“We’re transitioning toward a situation where growth for companies and economies will have to depend more on productivity than before,” said Jarmo Kotilaine, chief economist at the Bahrain Economic Development Board (EDB).
“To achieve that, you will need better management, better innovations, new distribution channels and new capital.”
Increasing the efficiency of digital banking will particularly serve customers in Saudi Arabia, where banks’ working hours overlap with those of most employees. Comprehensive digital banking can save them a journey to the branch.

Moreover, Saudi Arabia is a pioneer when it comes to technology penetration in the region. “The usage of technology in Saudi Arabia is advanced, whether in retail banking, cash management or corporate,” said Talat Hafiz, secretary-general of Saudi banks’ Media and Banking Awareness Committee.
“When it comes to technology, what applies in conventional banking also applies in Islamic banking.” He added: “Using financial technology improves the quality of the banking experience among clients. It influences the speed and accuracy of the experience. Technology makes products more reachable to clients.”

The change in behavior patterns among clients in the banking sector requires banks to respond to new customer needs and rethink how they deliver services to their clients, taking them to the next phase of digital banking whereby they can easily handle most of their banking related tasks online instead of physically visiting their banks to do so.
“As a matter of policy, we in SAMA (the Saudi Arabian Monetary Authority) encourage all regulated institutions to be responsive to the needs of their customers, and have always supported the development of products that meet those needs,” said SAMA Gov. Ahmed Al-Kholifey.
A report published this month by Ernst & Young (EY) said the adoption of financial technology is not an option anymore, but an essential requirement for Islamic banks to gain more market share. As customer technology penetration in the Gulf Cooperation Council (GCC) increases, users are expected to become more familiar with using digital tools in their banking transactions, retail investments and peer-to-peer (p2p) lending and crowdfunding.
According to the EY report, Saudi Arabia, the United Arab Emirates (UAE) and Malaysia are the three largest Islamic banking markets in terms of assets. Saudi Arabia takes the lead with 34 percent market share, followed by 17 percent and 13 percent in the UAE and Malaysia, respectively.
Ashar Nazim, partner in EY’s Global Islamic Banking Center, said the “FinTech revolution” — in terms of data, analytics, robotics and artificial intelligence — has the ability to bring scattered data together and help decision-makers make better decisions. “We believe the last 20 years of Islamic banking have been about innovation in Shariah contracts and Shariah-compliant products,” said Nazim.
“The next 20 years will be about combining smart technology with Islamic banking in order to grow further.”
The size of the Islamic finance industry is now close to $2 trillion. “We believe there’s an additional trillion dollars in the industry which isn’t formally captured,” Nazim added.
He further said this additional trillion dollars is primarily from endowments (waqf), high net worth and institutional investing done in a number of infrastructure projects in the conventional and Islamic markets. “Bringing the additional $1 trillion into the Islamic finance industry is where FinTech can be very important,” Nazim said.

FinTech: A threat?

As financial technology is deemed to better facilitate banking services, it can also be seen as a disruption to the banking sector.
Looking at the history of Islamic finance, it was seen as a disruption to conventional finance.
“FinTech is now disrupting the overall finance world. The big banks are slower in adopting technology because they have a legacy to protect, but start-ups are more welcoming in adopting change,” Nazim said.
The EY report showed that in FinTech space in the GCC, Islamic finance is still in “dismissive mode,” thinking it is not going to impact the industry.
Nazim said the mindset has to change: “We have to start thinking as a start-up, and that requires a complete change in behavioral economics, in terms of how organizations are run.”
He added: “Bringing smart technology by itself is of no use unless the organization’s culture changes. Islamic banks are in better positions because they’re smaller than conventional and more local. It’s easier for them to change.”
FinTech can open doors for further national and international collaboration in the banking industry.
There is a growing realization within banks that they cannot afford to do everything by themselves.
“There has to be collaboration within the industry. At the moment collaboration is at a national level, and in future it will be at cross-country level. The next 20 years will be collaborating in terms of smart technology,” said Nazim.
“FinTech shouldn’t be seen as a threat or as competition. There is tremendous potential for collaboration between the GCC and Malaysia in FinTech.”
He added: “These smart technologies increase levels of trust and the speed with which you do these transactions.”
Speaking at the recent World Islamic Banking Conference (WIBC) in Bahrain, Rasheed Mohammed Al-Maraj, governor of the Central Bank of Bahrain (CBB), said the smart use of technology is a game-changer in banking, just as in other aspects of daily life.
“Technology has made it possible to access more customers, in a more comprehensive way, at a lower cost, than in the past,” he said.
“Islamic banks must make full use of these technological enhancements and invest more in this space.”
Al-Maraj added: “The CBB believes in embracing new technology, and will soon be issuing regulations to facilitate FinTech solutions. We’d like to see Islamic banks come forward and take the lead in this area. FinTech is leading the way.”
According to SAMA’s Al-Kholifey, all the 12 banks operating in Saudi Arabia offer Shariah-compliant finance, as do several branches of foreign banks that are licensed to operate in the Kingdom.
“Saudi retail banking is overwhelmingly comprised of Shariah-compliant products, and we note significant growth of Shariah-compliant growth in the corporate sector as well, growth that we expect to see continue in the next decade,” he said.
EY says the introduction of FinTech will increase the Islamic finance customer base, which is roughly 100 million today, to 250 million by 2020.
“So more than twice the growth in customers can be achieved with the adoption of FinTech,” Nazim said.

Originally published on www.arabnews.com

Ethanol & Its Halal Status In Food Industries

Dec 3, 2016 By Jawad Alzeer AB Khaled Abou Hadeed Leave a Comment

Halal Status of Ethanol

The word Khamr (alcoholic beverage), fermented fruits, was described in Quran 6 times; Alkhamr refers to the solution, which is produced from fruits or any natural sugar source by anaerobic fermentation and potentially could be used or lead to intoxication. The main ingredient of Alkhamer is ethanol, which is the chemical substance responsible for intoxication, the physiological state induced by the ingestion of ethanol where a person usually becomes pleasantly relaxed, with an easing of tension and anxieties. The control centre in the brain becomes less active, and inhibitory centre is less efficient and may lead to mild euphoria, talkativeness, decreased attention, and impaired judgment.

Complete intoxication is achieved when blood alcohol content (BAC) is ranging between 0.08-0.10% depending on gender, weight and age. Utilizing Widmark’s formula (Widmark 1981), a female with 55 kg weight, if consumed 10% (w/v) ethanol (e.g. Wine), intoxication is achieved within 1 hour after ingestion 500 ml volume, equivalent to 50 g of absolute ethanol, this ratio may slightly decreased or increased depending on the individual sensitivity. If ethanol content is increased by physical and or chemical means to 27% (w/v), and 500 ml volume is ingested by a 55kg weight female, this is the fatal dose (BAC= 0.30%) and consumption of this large amount of alcohol, 135 g, within a short span of time may affect different systems of the body, namely respiration, heart rate that ultimately may lead to death of the person, this ratio may slightly decreased or increased depending on the individual sensitivity. Similar fatal dose (BAC= 0.30%) can be achieved after ingesting 900 ml of 15 % (w/v) ethanol. From this analysis, we may conclude that when ethanol content is 15% (maximum concentration obtained by fermentation) or less, it is treated as fermented alcohol, its status is forbidden (non-Halal) and need to be avoided; preparing, carrying and drinking it is forbidden as mentioned in the Holy Quran. If ethanol content is higher than 15%, usually it is inaccessible via fermentation, alternative method is needed to achieve the desired high concentration, it is obtained either by distillation or addition of absolute ethanol, for effective distillation toxic additives are added. The Halal status of alcohol higher than 15% (w/v) is toxic, therefore it is strongly prohibited to drink, attempts to drink toxic substance is considered suicide attempt in Islam, which is hardened sanctity than drinking fermented alcohol. On the other hand, toxic ethanol solution is allowed to prepare, hold, transfer and use for disinfection and other industrial use.

With regard to ethanol less than 1% (w/v), obtained by natural fermentation process under oxygen (air) atmosphere. The process goes through two steps: first the oxidation of sugar via fermentation into ethanol, followed by the oxidation of ethanol via acetaldehyde into acetic acid, air flow is not prevented during the process. The transformation of ethanol into acetic acid, carbon dioxide and ethyl acetate, is controlled by ethanol concentration. If ethanol is < 0.2%, acetic acid undergoes over oxidation and generate carbon dioxide (Lea 1989), whereas higher than 1%, ethyl acetate formation is observed, as a result of ethanol and acetic acid condensation (Joshi and Sharma 2009). In both transformations, acetic acid concentration is reduced, thus pH value is increased (> 4.7, acidity decreased). Acidity is the most important factor affecting microbial spoilage of fruits and vinegar (Agular et al. 2005). To reduce microbial growth rate, optimum value of pH ≤4 (increase acidity) is maintained by keeping ethanol concentration between 1.0-0.2%. Therefore, ethanol Halal status at concentration less than 1% is allowed, and called Mubah (neither forbidden nor recommended) in Islam, and essential to maintain acidic condition and prevent growth of harmful microbes. Prophet Mohammad (PBUH) said that whatever intoxicates in large quantities, a little of it is also forbidden (Tirmidhi). If a 55 kg weight female, consumed 1% ethanol within 1 hour, intoxication limit will be reached (BAC= 0.09%) after ingesting 4000 ml volume. Medically, drinking 4 litres of water within one hour will lead to rapid and severe hyponatremia (Sahay and Sahay 2014), a condition that occurs when the level of sodium ion in blood is abnormally low. Blood dilution disable kidneys to flush water out of the body fast enough thus blood becomes waterlogged, causes entry of water into brain cells and lead to brain swelling, which manifests as coma and death. As drinking 4 litres of 1% of alcohol to reach intoxication is practically impossible, therefore one may conclude that alcohol less than 1% should be treated as a preserving agents rather than forbidden for reasons described above.

With regard to vinegar’s halal status, in general it is halal and recommended by the prophet, In a hadith narrated by Ayesha, Muslim and Ibn Maja, Prophet Muhammad (PBUH) said “Allah has put blessing in vinegar, for truly it was used by the prophets before me”. When vinegar’s ethanol content reach 1% (Heikefelt 2011), which is rare with exception of wine vinegar, it is halal as long as there is no deliberate treatment to induce the conversion of ethanol into acetic acid.

In Islam, human deeds are judged on the bases of intentions (Niyyah), Prophet Mohammad PBUH said “Verily, deeds are only with intentions” (Sahih Bukhari 54). Therefore, any ethanolic beverage or vinegar made with intention to achieve partial or complete intoxication, it is prohibited, no matter if ethanol content is <1% or >15%. In case of ethanol <1%, it is lower than the limited value for reaching intoxication, but placebo effect will dominate and intoxication may easily be reached with minute amount of alcohol. With regards to spirit drinks, alcohol content is higher than 15%, usually prepared by fermentation followed by distillation, Halal status is forbidden and toxic, prohibited to drink and not to be used in industries. Ethanol prepared by fermentation and distillation to achieve concentration above than 95%, chemically it is identical to synthetic ethanol, thus 95%, absolute and denatured ethanol are considered as toxic substance and could be used for perfumes and other industrial applications as long as the initial intention was not made as beverage drink.

Since 15% is the limit where yeast is toxified and fermentation process is stopped, more detail studies are needed to determine the consequence of this concentration on our gut microbiota which play important role in digestion, immune system, production of some vitamins, combat aggressions from other microorganisms, and maintain the wholeness of intestinal mucosa.

Digitization Of Islamic Banks A Must For The Growth Of Islamic Finance

Oct 14, 2016 By admin Leave a Comment

Dubai: Digitization of Islamic banks is a must for the growth of the Islamic finance industry. Although, the industry is quite young, the fintech disruption is already changing the way Islamic banks are spending money on technology to transform the way they do business to attract Internet-savy customers. However, most of these banks are still a long way from becoming truly digital as currently, many of them offer only the basic services online.

Experts speaking at a plenary session at the Global Islamic Economy Summit 2016 said like their conventional peers, Islamic banks too have no choice but to embrace the next generation of technologies and leverage on new generation digital technologies as brand loyalties dwindle especially among younger consumers.

Research shows that there is not much of a difference between the preferences of Muslims and non-Muslims regarding digital financial services and direct banking channels. According to the World Islamic Banking Competitiveness Report 2016 by EY, Islamic banks still have a lower customer penetration in mobile banking compared to conventional banks. Their digitization efforts need to catch up fast.

Unbanked Population

The Middle East’s banking sector has been lagging behind in adopting deep and transformative digitization compared to its global peers, according to a recent survey of corporate banking customers worldwide by the Boston Consulting Group (BCG).

According to a recent World Bank statistics, more than 2 billion people around the world are unbanked and about half of them are in the Muslim world. “It is embarrassing that such large numbers of Muslims do not have any access to banking services. Fintech may the answer to more inclusive banking. The new generation of technologies break down economic and social barriers,” said Abdul Haseeb Basit, chief financial officer of Innovate Finance, UK.

High cost and low yields have kept away banks from serving some segments of the unbanked population. With the arrival of cost-effective mobile and other technologies, it is easier for Islamic banks to serve greater number of customers at lower costs.

For example, in Indonesia, only 30% of the population has a bank account. However, there is a 100% mobile penetration in the country. Similar is the case with populations in different parts of the Middle East and Pakistan etc. The Islamic finance industry should offer mobile banking services to ever-larger populations in the Islamic world.

Technology Tools

Participants at the panel discussion shared the view that the digital solutions will improve the quality of services offered by both Islamic and conventional banks. “Fintech can help customers do financial planning with the help of technology tools enabling them to forecast and plan ahead. Technology is a great enabler. Fintech can enable small businesses in making and receiving payments,” said Abdullah Al Najran, Deputy CEO of Boubyan Bank Kuwait.

Globally, a growing number of banks are expanding their digital offerings well beyond a basic web presence. A recent BCG study showed that over the next five years, corporate banks that remain digital laggards could see profits drop by as much as 15-30 per cent relative to their digitally fast-moving competitors.

Market Share

Panelists said as a number of banks in the region allocate significant resources to adapt their business models to the fintech revolution, we could see incumbent banks losing market share to early adopters, at least in some segments of business in the near future.

When it comes to fintech adoption, panelists agreed that banks’ approach to fintech innovators need not be one of the confrontational nature. “There is a huge scope for collaboration. All that is needed is a change in the conventional mind-set,” said David Martine de Lecea, Specialist Consultant — Fintech, Roland Berger.

Islamic banking and Islamic finance are expected to hugely benefit from fintech and block chain technologies that will help simplify transactions involving complex structures.

“Islamic finance is based on tangible commodity transactions involving a number of contracts. With block chain technology, the trading processes leading to financial transactions can be simplified,” said Al Najran.

Originally published on www.gulfnews.com

How Is Islamic Finance Failing The Real Test?

Aug 19, 2016 By admin Leave a Comment

Islamic Finance is booming around the globe. Currently, there are around 500 Islamic banks operating in 75 countries around the world. Islamic finance is growing at 10-15% per year with GCC Islamic banks constituting 70% of the global total. In fact, non-Muslim countries are also tapping into the growing Islamic finance market by issuing sukuk or Islamic bonds. This growing field of ours was supposed to help lift up the masses from the pangs of poverty and give them access to basic financial services. However, so far, the growing clout of Islamic financial assets around the world has failed to mitigate income inequality so widespread in the Muslim countries.

In the sixties, economists like Mehbub-ul-Haq, Simon Kunets and other proponents of Capitalism thought that “the balancing forces of growth, competition, and technological progress lead in later stages of development to reduced inequality and greater harmony among the classes” However, that has proved to be wrong in most parts of the world.

The exponential growth in Islamic financial assets in the past two decades has raised incomes for corporations, their top managers substantially in many Muslim countries. However, income levels for workers at the bottom did not grow that much.

Same is the case with the Islamic finance of today. It seems to be following the footsteps of conventional finance (or Capitalism as we know it today) in every sense of the word, from product structuring to marketing and every thing in between. Despite all the fanfare in the growing field of Islamic finance, no significant data suggests that any Muslim country was able to reduce income inequality by utilizing excess liquidity in Islamic financial assets. Islamic economists as well as practitioners, so far, have failed to suggest and implement ways to reduce income inequality among the masses in Muslims countries.

The other day, we published a story on how much assets Muslim individuals, governments, institutions and other stakeholders have while tens of millions of people are suffering from abject poverty in most of the Muslim countries. The policymakers as well as Islamic finance practitioners have to give a serious thought on how the poorest of the poor could also benefit from the growing assets of the Islamic finance industry. If it is not done so, the industry is doomed to failure and will be considered as yet another face of conventional finance which infamously takes care of the haves but utterly ignores the plight of the have-nots.

If we are to reduce income inequality among people of a country, the best way to do so might be to slow down the income growth of the highest paid workers in any firm operating in the Islamic finance industry or any other sector. Higher taxes could be levied on high income individuals in the Muslim world while transferring those resources to the middle and low income groups of the societies.

We, as Islamic finance practitioners, policy makers, researchers and other stakeholders need to think about this issue seriously as we can not just continue with the growth of Islamic finance the way we have been doing for the past several years if we have large number of masses whose lives have not been changed despite the significant inroads the Islamic finance industry has made in some of the Muslim countries during the last couple of decades.

Dubai Silicon Oasis Authority and Thomson Reuters to Host Second ‘Innovation 4 Impact’ Pitch Competition

Aug 2, 2016 By admin Leave a Comment

DUBAI, UNITED ARAB EMIRATES, 26 July 2016 – The second edition of the Innovation 4 Impact Competition will take centre-stage at the Global Islamic Economy Summit 2016 (GIES 2016) to be held under the theme ‘Inspiring Change’, at the Madinat Jumeirah in Dubai, from October 11-12. Islamic digital economy entrepreneurs from around the world will compete for a chance to win cash, gain global publicity, and attractive in-kind prizes.

Organised by the Dubai Silicon Oasis Authority (DSOA), the regulatory body for Dubai Silicon Oasis (DSO), the integrated free zone technology park and Thomson Reuters, the Innovation 4 Impact Competition is designed to support emerging Islamic digital economy entrepreneurs from around the world in showcasing their businesses, as well as connecting with investors and customers, gaining access to expert mentoring, and competing to win cash prizes and in-kind benefits. During GIES 2016, the emerging entrepreneurs from the Islamic economy space will engage in pitch sessions with leading entrepreneurs and investors from UAE and from across the region.

The winner of the competition will also receive free office space for one year at the Dubai Technology Entrepreneur Centre, DSOA’s wholly owned technology incubation center and the largest of its kind in the region.

The upcoming edition of GIES will explore the social impact of diverse sectors within the Islamic economy. Digital economy represents a key driver of change and social development given its capacity to transcend geographical boundaries and drive economic activities with ethical dimensions in line with the principles of Islamic economy.

Dr Mohammed Alzarooni, Vice Chairman and CEO of DSOA, said: “Innovation 4 Impact signifies our commitment towards supporting start-ups and entrepreneurs in the field of Islamic digital and Arabic content. The annual event strengthens DSOA’s proposition in supporting Dubai’s vision to emerge as the Capital of Islamic Economy. Innovation 4 Impact aims to empower Islamic digital economy entrepreneurs globally and to serve as a platform for aspiring entrepreneurs to showcase their business ventures to a distinguished panel of experts, prospective investors, as well as prominent professionals in the Islamic economy domain.”

Supported by the Dubai Islamic Economy Development Centre (DIEDC), Innovation 4 Impact provides value-added services for the selected entrepreneur including exclusive mentoring, access to leading investors in the region, as well as support to fine-tune their ideas. Innovation 4 Impact effectively nurtures start-ups and enables them to contribute to the further development of Islamic digital economy.

In 2015, Innovation 4 Impact received 170 applicants from over 35 countries. Five entrepreneurs received the opportunity to attend and present their ideas at GIES 2015, while also gaining global media coverage, and benefiting from their participation in the sessions that helped them continue to grow and scale-up even after the Summit.

Abdulla Mohammed Al Awar, CEO of the Dubai Islamic Economy Development Centre, said: “It is our privilege to support this competition for the second consecutive year. The digital infrastructure is an important pillar of positioning Dubai as the Capital of Islamic Economy and this competition stands as a platform for digital economy entrepreneurs. We believe that digital economy is an important driver of innovation, competitiveness, and growth. The Innovation 4 Impact competition is aligned with our aim of creating a generation of leading experts who are capable of accelerating the growth of digital Islamic economy.”

Nadim Najjar, Managing Director of Thomson Reuters, Middle East and North Africa, reiterated the shared commitment among Thomson Reuters, DSOA and DIEDC to develop the Islamic digital entrepreneurial ecosystem in the MENA region. He said: “With the rapid development in the digital economy sector, new digital trends such as mobile computing, cloud computing, hyper-converged platforms and big data have emerged to reshape the business landscape. The development of digital Islamic economy is highly dependent on leveraging these growing trends to create successful businesses with significant economic and social impact.”

Innovation 4 Impact Qualifications:

Managed and hosted in collaboration with the American Muslim Consumer Consortium, the Innovation 4 Impact Competition is open to any startup, business venture, and digital entrepreneurs of all faiths. Only business ventures which have an economic and social impact on the Islamic digital economy will be considered. The businesses should belong to one of the following sectors:

1. E-commerce

2. Mobile computing

3. Cloud computing

4. Big data

5. Hyper-converged platforms

6. New media and social media

Application submissions will close on August 15, 2016 and selected applicants will be notified by the second week of September 2016. Selected applicants will also receive coaching and feedback from investors and experts in the entrepreneurial community throughout the process. They will pitch their businesses to a renowned panel of judges and a professional audience on the first day GIES on October 11 and the winner will be announced on the closing day of the Summit on October 12.

For further information on the Innovation 4 Impact Competition and details on participation, please visit www.innovation4impact.com/.

Originally published on www.zawya.com

Islamic Finance Needs To Be Relevant, Responsive

Apr 18, 2016 By admin Leave a Comment

Dubai: The past is no guarantee for the future — so we have to prepare ourselves for the unprecedented and the unexpected. Islamic finance needs to be relevant and respond to its external operating environment.

There are some paradigms that are shifting before us, which we need to understand and be prepared for as practitioners, institutions and jurisdictions. Here I would like to call out three global mega trends that are shaping the world as we know it.

First, this century will be about emerging markets. We are seeing a sustained rebalancing of the world economy as well as the eastward shift of both trade and global GDP growth.

A group of 25 emerging markets will constitute 50 per cent of the world GDP, 38 per cent of global consumer spending, and 55 per cent of fixed capital investment by 2020. Now 10 of these 25 emerging economies are high-value Islamic finance markets with a sizeable Muslim population.

As this eastward shift accelerates, Islamic finance will be a strong beneficiary. To stay relevant, our institutions need to build connectivity to win this new trade route.

Younger population

Second, we need to understand the context of the demographic dividend and its implications on financial institutions, investors and businesses. This determines the size of the work force, the lifestyle, the pattern of consumption and therefore the demand for products and services.

Specifically across the Muslim-majority countries, the youngsters under the age of 30 make up about 60 per cent of the total population, or more than 1 billion

young people. In contrast, the developed regions of Europe and North America have only one third of their population under the age of 30.

A lift-and-shift approach of the banking industry from the developed to emerging markets will therefore become less and less relevant in future. The youths in the Muslim world can be a big asset, and equally, a liability.

For the Islamic finance industry, we need to make an explicit statement regarding our role to provide entrepreneurial and employment opportunities to them, through responsible innovation and creation of knowledge communities. Our business focus has to have a positive focus towards this.

Emerging markets

The third mega-trend is the digital disruption that promises to change the way we live, interact and will do banking in the future. This has dramatic implications for the operating model of the banks in general, and Islamic banks in particular. In fact, there are more people with mobile phones than bank accounts in emerging markets today.

Payment technologies, small savings, peer to peer financing, and crowdfunding for SMEs are some early indication of this disruption and how our customers will engage with us in future.

How should Islamic banks respond? To start with, we as an industry have a strong platform in place that we can build on. We have the critical mass of financial capital and knowledge communities within our banking circle. Consumer awareness

The growth engine of the industry are the nine core markets — Bahrain, Saudi Arabia, Malaysia, UAE, Kuwait, Qatar, Pakistan, Turkey and Indonesia — that are providing the intellectual and financial capital for the internationalisation of the industry. There are more than 40 financial institutions in the Islamic banking space that are systemically important and carry a greater burden of shaping the industry’s direction. We see strong demand for Sharia compliant solutions at the grass-roots level. There is reasonably good level of consumer awareness and acceptability at global forums. And regulatory basics are in place that provide Islamic financial institutions a level playing field across a growing number of emerging and developed jurisdictions.

On the same note we cannot underestimate the challenges we have ahead. Let me explain what I mean here.

Bigger target market

Today, the Islamic banking industry has less than 90 million consumers. In contrast, the quick-wins Muslim consumers are more than 1.7 billion and the total GDP of OIC markets is now in excess of $7 trillion (Dh25.7 trillion). And of course, since Islamic finance is not for Muslims only … so our target market is even bigger.

I imagine a tomorrow where we, as an industry, will be serving 250 million customers, or even more. I imagine a tomorrow where we would be at least 5 per cent of the world’s financial economy.

I imagine a tomorrow where we would be employing two million professionals and bankers, almost twice of what we have today.

Originally published on www.gulfnews.com

Demistifying The Difference Between The Burka, Niqab, Hijab, Other Islamic Headwear

Mar 11, 2016 By admin Leave a Comment

The word Hijab has gained popularity in the international media lately. It seems to symoblise the Muslim women covering their heads. However, it is not just one form of the head covering Muslim women use to cover their heads. There are some other head coverings as well being used by Muslim women all over the world.

There is often confusion over the difference between a burka, niqab and other head scarves. Here is a complete guide to the different types of Muslim dress.

What is the burka?

The burka is a full face and body covering, which is the most concealing form of Islamic dress.

A woman wearing the burka has her face completely covered but she can still see through a mesh cloth over her eyes.

The burka is often associated with Afghanistan and the Taliban forced women to wear it at all times in public during their rule.

What is a niqab?

The niqab is a head covering and scarf that conceals the face but leaves the eyes uncovered.

It is mainly worn in Arab countries but some Muslim women from Western countries such as Britain also choose to wear it.

What is a hijab?

Hijab is a general term for modest Muslim dress but it also applies to scarves that cover the hair.

The type of scarf most commonly worn in the West covers the head and neck but leaves the face exposed.

What is a chador?

The chador is a full-body cloak worn by women when they leave their home. The outer garment is usually black and is most commonly worn in Iran.

The wearer must hold the chador closed at the front because it does not have any buttons or clasps there.

What is a khimar?

The khimar is a long veil that fall to just above the waist. It covers the hair, neck and shoulders but leaves the face clear.

Originally published on www.express.co.uk

Why Islamic Finance Booming Around The Globe?

Mar 9, 2016 By admin Leave a Comment

There is no doubt that Islamic finance is growing around the world – actually sector expert Camille Paldi says it is “booming”, but it needs proper regulatory, reporting and resolution framework and tailored standards to continue its rapid expansion.

There are current around 500 Islamic banks operating in 75 countries around the world and Islamic finance is growing at 10-15% per year with GCC Islamic banks constituting 70% of the global total.

Camille Paldi explains, “Islamic finance is booming around the world and is an alternative source of financing. With proper regulation, financial reporting, and dispute resolution, Islamic finance has a healthy and vibrant home alongside and in cooperation with the conventional banking system.”

A two-day Islamic Finance and Banking Workshop, organised by the Franco-American Alliance for Islamic Finance (FAAIF), of which Camille Paldi is Chief Executive Officer, has just taken place in Philadelphia and Chicago, USA. Other workshops are being held in Seoul, Korea, Kanawaza and Tokyo, Japan and Beijing, China, later in the year.

Ms Paldi says, “It has been suggested that Islamic finance is as common now in the UK as conventional finance and soon it may be as American as apple pie.”

Non-Muslim countries are also tapping into the sukuk market, she says, For example, Germany issued US$123million sukuk ijarah in 2004 and in 2006, in the USA, East Cameron Gas, a Louisiana-based oil and gas company, issued $167million sukuk musharakah. General Electric (GE) issued $500million sukuk ijarah in November 2009 and Goldman-Sachs in New York issued the same in September, 2014.

“In 2014, Luxembourg was the first AAA-rated government to issue a euro-denominated sukuk in a €200million five-year Islamic Bond. Also in 2014, the UK was the first Western nation to issue a £200million sovereign sukuk, maturing on 19 July 2019. In 2015, Australia’s SGI-Mitabu issued the first Islamic finance offering by an Australian Corporate, an AU$150million sukuk in Labuan to fund its Indonesian 250 megawatt solar project.”

The sector is also expanding in:

France
The first French sukuk of €5million was launched in 2011 in the French fast food sector. In 2012, two more sukuk were issued in France for both individual and institutional investors.

Africa
The Seychelles and Ghana became the first countries in Africa to issue Islamic bonds in 2006 and 2007. In 2013, Nigeria issued a $62million sukuk. Senegal raised $200million through a sukuk issuance in 2014. South Africa issued a $500million sukuk in September, 2014, which was more than four times subscribed, with an order book of $2.2billion. Even Gambia and Sudan have issued sukuk, however, for small amounts and on a short-term basis.

Japan
The first sukuk was issued in Japan by Aeon Credit Services in Malaysia in 2007. Next, in 2010, Nomura Investment Company issued sukuk in US do. In 2012, Toyota Motor Corp. sold $88million of sukuk in two offers via its unit Toyota Capital Malaysia Sdn. due for maturity in May 2015. In 2014, Bank of Tokyo-Mitsubishi UFJ (Malaysia) Bhd set up a $500million multi-currency sukuk program and is also considering the world’s first yen denominated sukuk.

South Korea
South Korea has taken steps towards entering the global Islamic finance market including tabling legislation, joining various Islamic financial regulatory bodies, preparing for sukuk issuance, and tapping into the London Murabahah Exchange. Several Korean companies including GS Caltex, Korean Air, Hyundai, Samsung and others are exploring the possibility of raising funds from the sukuk market. South Korean Chaebols including Lucky Goldstar, Samsung, Korea Shipping and several others have accessed Islamic commodity Murabahah facilities structured through London.

China
The People’s Republic of China has been taking the steps necessary to facilitate Islamic finance transactions in China and Hong Kong to prepare China for competition in the sukuk, Islamic funds, and Islamic finance industries. As of January 2015, the government has approved plans to accelerate 300 infrastructure projects valued at 7trillion Yuan. Since 2006, seven sukuk with a value of $5.8billion have been listed on the Hong Kong Stock and two renminbi-denominated sukuk by Khazanah National and Axiata. Riding on the sukuk momentum, after Hong Kong’s debut $1billion sukuk, the government of Hong Kong announced another $1billion sukuk offering. In addition, Ninxia Province plans a $1.5billion Debut Sukuk sale in 2015/2016.

However, the Islamic finance boom simply cannot sustain itself without a proper regulatory, accounting, financial reporting, and dispute resolution framework including an Islamic finance dispute resolution centre and Islamic finance bankruptcy court, says Camille Paldi.

“Banks across the industry use different accounting methods and reporting techniques and this leads to confusion, inconsistency, non-transparency, and possibly a misleading representation of the true financial health of the IFI. The special nature of Islamic banking requires tailored standards in order to promote full disclosure and transparency of the IFI.

“It is recommended that the industry adopt the KFH (Bahrain) B.S.C.(c) Public Disclosure Report as a template for financial reporting to be used industry wide and that regulations including those for capital adequacy and accounting are tailored to and harmonized across the industry.”

Camille Paldi is a United States citizen and has qualified as a lawyer in four countries including the UK in addition to earning seven university degrees including an MA in Islamic finance from Durham University in the UK in 2014. She is the only US citizen to graduate from the Durham University Islamic Finance Program as well as receive training in Islamic finance and Shari’ah in the UAE, Bahrain, Qatar, Pakistan, and Malaysia.

Originally published on www.opp.today

Where Is All The Islamic Wealth Going?

Feb 29, 2016 By admin Leave a Comment

London: Islamic banking and finance (IBF) is swiftly growing in countries outside the Organisation of Islamic Cooperation (OIC) block, especially in the United Kingdom that houses six fully-fledged Islamic banks (one retail and five wholesale), making it the most important centre of Islamic finance outside the Muslim world.

The global Islamic financial services industry attained the size of $2 trillion by the end of 2015. Islamic banking segment, which accounts for 75%, dominates the industry. Sukuk, although much talked about, is only 15% of the total Islamic financial assets.

Questioning the economic value of current Islamic banks

Islamic fund management segment, albeit a small component, is slowly developing. Takaful and microfinance, on the other hand, have yet to attain any significant level of development.

Financial breakdown

Islamic wealth management, which is technically part of the Islamic asset management sector, is at present highly under-developed. Islamic wealth estimated to be $11.3 trillion is, on the other hand, steadily growing.

Muslim high-net-worth individual hold an estimated $3.35 trillion, which is less than 30% of the total Islamic wealth. The remaining 70% is held by Muslim businesses, Islamic financial institutions, the mass affluent, and by governments in the OIC countries.

In terms of geographical incidence of Islamic wealth, the Gulf Cooperation Council region tops the list, with $2,337 billion. In the wider Middle East and North Africa region (including Iran and Turkey) there is an estimated Islamic wealth of $3,895 billion. Other important regions are the Association of Southeast Asian Nations ($1,747 billion) and Africa ($1,000 billion).

Prospects of Islamic banking in Pakistan

The volume of $11.3 trillion of Islamic wealth therefore poses a question. While the global Islamic financial industry is merely $2 trillion, where is over $9 trillion of Islamic wealth located and invested? This is the so-called missing dollar puzzle.

The missing dollar puzzle

The missing dollar puzzle is not necessarily a puzzle. It can be explained with the help of the gap between the potential and actual size of the global Islamic financial services industry.

Potential size of the global Islamic financial services industry can be defined as the assets under management of the institutions offering Islamic financial services to all those who would like to have access to such services, and to all those who would like to use Islamic financial services but have excluded themselves voluntarily because they are not available.

The gap between the potential and actual size of the Islamic financial services industry exists because the suppliers of financial services do not meet the full demand – purely unmet demand.

On the demand side, not all those who require Islamic financial services actually have access – involuntary financial exclusion; and there are certain people who otherwise have access to Islamic financial services but are not entirely satisfied.

Supply-side limitations

The gap between potential and actual size is primarily because of inadequacy of supply of Islamic financial services. In particular, there are three reasons for this gap, financial institutions, including banks, regulator and other stakeholders have faced challenges to adjust their businesses to develop a comprehensive framework for the development of Islamic banking.

Pakistan ranks third in Islamic finance awards

As tapping the financially excluded has been challenging even for conventional banks and financial institutions, Islamic banks and financial institutions (IBFIs) have found it even more difficult to reach out to this segment of the market.

Originally published on www.tribune.com.pk

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