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Al-Cordoby  
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Rating: 0 of 0 votes Quote Al-Cordoby Replybullet Posted: 14 July 2009 at 1:14pm
Islamic Finance Panacea for Global Crisis

The Islamic finance system, which introduces greater discipline into the economy and links credit expansion to the growth of the real economy, is capable of minimizing the severity and frequency of financial crises, says Umer Chapra, a well-known Saudi economist and winner of the King Faisal International Prize for Islamic Studies.

“Islamic finance can also reduce the problem of subprime borrowers by providing them loans at affordable terms. This will save billions of dollars that are spent to bail out the rich bankers,” said Chapra, who at present works as adviser at the Islamic Research and Training Institute of the Islamic Development Bank.

Chapra estimated the derivatives market at $600 trillion, more than 10 times the size of the world economy.

“No wonder George Soros described derivatives as hydrogen bombs while Warren Buffett called them financial weapons of mass destruction,” he pointed out. The derivatives include credit default swaps (CDS) worth $54.6 trillion.

The Islamic economist described the present global financial crisis as the worst in four decades.

“There is a lurking fear that this might be only the tip of the iceberg. A lot more may come if the crisis spreads further and leads to a failure of credit card institutions, corporations, and derivatives dealers,” he warned.

Chapra urged Muslims to establish a genuine Islamic finance system with proper checks and controls, adding that such a move would encourage others to embrace it.

The Islamic system does not allow the creation of debt through direct lending and borrowing. It rather requires the creation of debt through the sale or lease of real assets by means of its sales and lease-based modes of financing such as murabaha, ijara, salam, istisna and sukuk.

http://www.iaie.net/Portal/Public/Home/default.aspx?PageID=15 

 

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Rating: 0 of 0 votes Quote Al-Cordoby Replybullet Posted: 15 July 2009 at 2:23am

Objectives of Shari`ah in the Prohibition of Riba (Usury)

Implications for Modern Islamic Finance

.... riba-based financing does not provide for a say about the moral criteria or ethical screening of the finance. It is also assumptive as it attributes a growth to debts while debts are a kind of asset that is not able to grow because of its abstract nature.

 The assumptive nature of riba -based financing applies not only to assuming an increment but also to assuming a rate of increment that is attributed to the non-able-to-grow asset. Finally, riba-based financing allows for the creation of multiple layers of pure financing on a small base of real market. This means, because of its nature that permits attributing increment to a non-growing asset, it goes even farther from reality to permit pure debt exchanges and transactions so that the size or amount of financing in any society exceeds by many folds the size of real market transactions.

 Of course, one may argue that some of these problems can be tackled by additional means, regulations, and laws. But this is incorrect as any regulations that violate the nature of a transaction are bound to die out because of the market pressure. Additionally, no regulations can cover all potential outcomes of the market forces once one founds the market on unrealistic assumptions. ....

http://www.islamonline.net/servlet/Satellite?c=Article_C&cid=1203758907675&pagename=Zone-English-Living_Shariah%2FLSELayout

 

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Rating: 0 of 0 votes Quote Al-Cordoby Replybullet Posted: 16 July 2009 at 10:34am
Economic System Cannot Do Without Ethics

 ECFR Concluding Communiqué

The European Council for Fatwa and Research (ECFR) concluded, yesterday evening, its 19th ordinary session in Istanbul, Turkey. Attended by a host of prominent Muslim scholars from various countries, the 5-day session focused on the economic problems faced by Muslim minorities in the West. It also discussed the real causes and future solutions for the global economic crisis the whole world is facing today.

The seminar, which was held in Grand Cevahir Hotel between June 30 and July 4, 2009 in the presence of top officials from the Turkish government, had answered a great number of questions sent to the Secretariat of the ECFR by European Muslims in two sessions. Usually, these questions touch upon the daily life of Muslims living in countries of non-Muslim majority.

The current session was Part Two of a series that started last year in Paris on modern economic transactions, especially for Muslim minorities in the West. The Paris session represented the foundation in conducting Shari`ah researches on modern economic transactions. Furthermore, the current session paid more attention to the potential impact of the global financial crisis on Muslim minorities search for the Shari`ah-based solutions for the crisis .........

The session concluded the following recommendations:

1. The council believes that the principles of Islamic economy and finance can provide effective solutions for the financial, economic crisis. It affirmed that economy and financial relations should not be separated from ethics.

2. The council demanded the Muslim citizens in Europe to establish financial institutions according to the principles and rulings of Islamic Shari`ah in the fields of insurance, money exchange, rental, investment and suchlike. .....

http://www.islamonline.net/servlet/Satellite?c=Article_C&cid=1246346104918&pagename=Zone-English-Living_Shariah%2FLSELayout

 

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Rating: 0 of 0 votes Quote Al-Cordoby Replybullet Posted: 29 July 2009 at 2:19pm

Islamic finance gives universities a bonus

One area of banking is still booming despite the recession, and business schools are cashing in

With global finance on its knees, this summer's business graduates face an even trickier jobs market than most. But there is one area of banking still experiencing boom time – Islamic finance – and universities have been quick to grasp its possibilities.

This September will see new courses and postgraduate qualifications in Islamic finance springing up throughout the UK and elsewhere in Europe, reflecting the fact that it has become one of the fastest-growing sectors of the global banking industry, expanding by between 15% and 20% a year. Assets held by institutions adhering to Islamic finance principles now amount to nearly 1 trillion dollars.

In the UK, interest in the sector also reflects the government's commitment to promoting Britain as an Islamic finance centre. The UK already leads Europe in the number of Islamic finance training courses it offers, from entry to postgraduate level, and in 2006 saw the launch of the Islamic Finance Qualification, a joint initiative between a Lebanese business school and the Securities and Investment Institute.

London gateway

Last December, the Treasury published a paper setting out the government's aim for London to be "Europe's gateway to international Islamic finance". This acknowledged that the industry was still young and therefore not yet experiencing skills shortages, but predicted that it soon would be. It stated: "The pool of potential applicants in the UK will have to keep up with the rapid growth of the market."

Universities have responded enthusiastically. Newcastle University is offering an MSc in finance and law with Islamic finance from next academic year. Henley Business School at the University of Reading has been offering an MSc in investment banking and Islamic finance since last year, with students spending the second part of the year in Kuala Lumpur. The University of Bangor in Wales has also been running its Islamic finance MA and MSc for a year and is considering introducing a new MBA in the subject, while the first students to take an Islamic finance option as part of an executive MBA offered in Dubai by Cass Business School will graduate this summer. Durham, which has been offering postgraduate research degrees in Islamic finance for some time, is now introducing a taught MA and MSc (the MSc is more quantitative), to respond to demand. Elsewhere in Europe, Reims Management School is offering a new specialist course in Islamic banking and finance for students on its masters in management programme, taught in English.

Student demand is driving the subject as much as any urging from governments. According to Rodney Wilson, founder and director of the Islamic finance programme at Durham, it is coming mainly from south-east Asia, particularly Malaysia, and the Middle East, although there is plenty of interest from the UK as well.

Joanna Gray, professor of financial regulation at Newcastle Law School, says she is keen that their new degree course is not just seen as something for Muslims. "It's for anyone interested in a fast-developing industry that in the UK has been quite busy in the past few years to accommodate forms of investment in finance that are sharia-compliant."

http://www.guardian.co.uk/education/2009/jul/28/business-schools-islamic-finance

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Rating: 0 of 0 votes Quote Al-Cordoby Replybullet Posted: 13 August 2009 at 10:38pm
Parallels Between Islamic and Ethical Banking
 
This article, (by Professor Rodney Wilson of Durham University, UK), critically discusses the ‘ethical' discourse of the Islamic Banks and examines the ‘ethical' approach of a mainstream bank.
 
Islamic banks often describe themselves as being providers of ethical financial services, but they do not attempt to make the link between what is ethical and the specific methods of conducting their financial transactions according to Islamic tenants.
 
Although Islamic banks and Western ethical institutions such as the Co-operative Bank have dissimilar values and aspirations and they are operating in different environments, there are numerous lessons that each can gain from the other's experience. Therefore, this paper examines the ‘ethical' aspect of the Co-operative bank, and attempts to establish similarities in the objectives of a conventional bank and the Islamic Banks, and identifies potential areas of learning from each other's experience.

http://www.islamonline.net/servlet/Satellite?c=Article_C&cid=1159951467330&pagename=Zone-English-Living_Shariah%2FLSELayout 

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Rating: 0 of 0 votes Quote Al-Cordoby Replybullet Posted: 18 August 2009 at 10:48pm

I was reading this research paper yesterday titled Innovation and Authenticity in Islamic Finance, and found this quote which gives an important pillar for understanding Islamic Finance:

To fulfill the first condition of justice, Islam requires both the financier and the entrepreneur to equitably share the profit as well as the loss. For this purpose, one of the basic principles of Islamic finance is: “No risk, no gain”. If we wish to have a gain we must also be prepared to share the risk.

Introduction of risk/reward sharing in the financial system should help induce the financial institutions to assess the risks more carefully and to monitor more effectively the use of funds by the borrowers. The double assessment of risks by both the financier and the entrepreneur should help inject greater discipline into the financial system, and go a long way in reducing excessive lending and making the financial system healthier.

However, making just the banks share in the risk may not be enough because the desire to maximize profits may still induce the banks to indulge in excessive lending. It is, therefore, necessary to also motivate the depositors to play a more active role in the enforcement of this discipline. This will be possible if the depositors also share in the profit or loss.

http://www.iiibf.org/elibrary/muchapra/B4.47%20Innovation%20and%20Authenticity%20in%20Islamic%20Finance.pdf

(Extract from Dr. Umer Chapra's paper titled "Innovation and Authenticity in Islamic Finance")

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Rating: 0 of 0 votes Quote Al-Cordoby Replybullet Posted: 13 September 2009 at 3:00am

Kuwaiti Turkish Islamic bank gets German go-ahead for Mannheim branch

ANKARA -- Kuwait Turkish participation Bank said on Wednesday that authorities in Germany have agreed for it to transform its commercial office in the country, into a money lender providing Islamic financial services.

The Turkey-based bank added in a statement that Germany's Federal Financial Supervisory Authority has given the bank the go-ahead to change its office in the southwest German city of Mannheim into a banking institution providing Islamic banking services that forbid usury.

The statement read that the panch will cater to a large base of Muslims in Germany which account for around four million, who intend to comply with Islamic teachings on financial acquisitions.

The panch will begin operating at the end of the year, to be available to customers by the beginning of 2010, according to the bank's General Manager Ufuk Uyan.

Uyan added that the bank according to the Mannheim panch's performance, will look to open further panches in the country and possibly in the rest of Europe.

Kuwait Turkish participation Bank is one of the oldest banks in Turkey, and has been operating for 19 years with 113 panches in Turkey.

The bank's net profits for the first half of this year have exceeded 28 percent in spite of the global financial downturn.

Kuwaiti Islamic lender, Kuwait Finance House owns a 62 percent stake of the bank worth USD 150 million, while Kuwait's government-owned public Institution for Social Security owns nine percent, with the rest belonging to Turkish investors

http://islamonline.com/news/articles/28/Kuwaiti_Turkish_Islamic_bank_gets_German_goahead_.html

 

 


Edited by Al-Cordoby - 13 September 2009 at 3:01am
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Rating: 0 of 0 votes Quote Al-Cordoby Replybullet Posted: 06 October 2009 at 3:09am

The Five Foundations of a Sound Islamic Financial System:

1- Prohibition of Usury in all its forms. Money is not a commodity to be traded for a profit, but a store of value and a means for facilitating trade and transactions.

2- Prohibition of Gambling and Cheating. All types of gambling are harmful activities for society which do not have a value-added impact on the economy, as they only lead to the increase of wealth of some people at the expense of others without productive benefit, but rather with adiction to gambling and many other related social problems.

3- Prohibition of Unlawful Transactions and Activities. All transactions and activities prohibited by God should not be made permissible in a sound Islamic economy. This includes the trade of alcohol, drugs and all types of intoxicants, the prohibition of pornography and related business, ..... etc. It also includes the contracts and transactions where people sell future commodities which they don't have: you can't sell what you don't possess.

4- Profit and Loss Sharing Finance. Real partnership between investors and business is the basis of a long-term sound financial system. Investors should accept that their investments may make profits, and that they may also make a loss. This principle leads to a more equitable distribution of wealth, as the rich are not guaranteed to become richer, which means that the poor are not bound to become poorer. Both have an equal chance for success, and a good business plan with good management and quality production becomes the main key for the success of the poor and the rich.

5- Each Business Activity and its Funding Must be from a Real (not fictitious) Asset. This principle guarantees that the financial system always remains a true reflection of the real economy.

(Arabic Source: http://mdarik.islamonline.net/servlet/Satellite?c=ArticleA_C&cid=1252188361015&pagename=Zone-Arabic-MDarik%2FMDALayout)

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Rating: 0 of 0 votes Quote a well wisher Replybullet Posted: 06 October 2009 at 5:32pm
Jazakh Allah Khair Brother Tarek for translating it and putting it so simply for laymen to understand the basic principles...
 
I have always been too weary of banks....whenever I try understanding the technical terms i literally see those stars on top of my head with mudarabah and musharakah and ijarah and what not....I sometimes even feel that the islamic banks offer some non islamic concepts in hidden guise...I am wrong to assume things but I wish I could understand these principles in their true form ....I am sure if they are implemented correctly it could go a long way in resolving the current economic crisis...I have even tried reading the introduction to Islamic finance by Mufti Taqi Usmani....a very esteemed Islamic scholar in Pakistan today who has  written extensively on the principles of Islamic finance but although i do get the basic concept....sometimes what people keep arguing against is overwhelming...
 
Thank you so much for posting on this topic particularly....
 
 
 
 
La ilaha ill-Allah, Muhammadur Rasulullah
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Rating: 0 of 0 votes Quote Al-Cordoby Replybullet Posted: 14 November 2009 at 1:35am

Switzerland Joins Islamic Banking World

Switzerland became the latest Western country to join the booming Islamic finance system, offering a full range of Shari`ah-compliant banking products and services, reported Qatari daily The Peninsula on Friday, November 13.

“We are proud to be the first Swiss private bank to offer such a holistic range of opportunities in Islamic finance to the (Middle East) region and on a global scale,” Fidelis M Goetz, Head of Banking Division at Bank Sarasin, told a press conference in the Museum of Islamic Art in Doha.

The bank would offer a full spectrum of Shari`ah-compliant banking products and services for clients.

This includes Murabaha “sale on profit”, Wakala “fiduciary agreement between two parties” and Maraya “an Islamic structured product that is based on Murabaha or a series of Murabaha transactions”. .......

http://www.islamonline.net/servlet/Satellite?c=Article_C&cid=1256909957694&pagename=Zone-English-News/NWELayout

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Rating: 0 of 0 votes Quote Al-Cordoby Replybullet Posted: 22 November 2009 at 1:57am
 

Sukuk Comes to America

DUBAI – Eying a share of the booming Islamic banking, General Electric, a multinational technology and services conglomerate, became the first major American corporation to issue Islamic bonds (sukuk), reported the Business-Intelligence Middle East website Saturday, November 21.

“We have been focused on diversifying our alternative funding sources to include global deposits and covered bonds,” said Kathy Cassidy, GE’s Senior Vice President and Treasurer.

“Transactions such as the sukuk allow us to make progress in meeting our objectives.”

GE Capital Corporation, the company’s finance arm, sold last Thursday a five-year, $500m sukuk.

“This transaction is strategically important for GE as it establishes yet another way of raising funds from an important investor base,” Cassidy said

http://www.islamonline.net/servlet/Satellite?c=Article_C&cid=1258711854472&pagename=Zone-English-News/NWELayout

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Rating: 0 of 0 votes Quote Al-Cordoby Replybullet Posted: 01 December 2009 at 12:56pm

How Practical is Islamic Finance?

In this episode of (Islam & Life), Dr. Tariq Ramadan discusses with his guest from The Islamic Bank of Britain the practicability and concept of Islamic Banking

http://www.tariqramadan.com/spip.php?article10872

(24 minutes)

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Rating: 0 of 0 votes Quote Al-Cordoby Replybullet Posted: 06 December 2009 at 1:34am

Q: Why Is Usury Prohibited in Islam?

A: The Quran warned those who get into usury that their life will be void of any blessing, but why is that? It is definitely due to the many dangers usury has upon economy, society, and individuals. In the coming few lines, I will be touching upon some of these dangers.

Psychological and Moral Dangers

 

Usury inculcates man with corruption and takes him from the main objective of his existence and makes him a slave of money. It turns him from a human being into a money seeker who is blinded by money and for whom money is the most important thing in life. .......

 

Effects of Usury on Societies

 

A successful society is a balanced society which, in addition to establishing economic and material advancement it should provide a sphere of spiritual and moral development as well.

 

In societies where morality and values are not cherished, people will become wild in their behavior, inhuman in their inclinations and tendencies. Terms and concepts like brotherhood, mercy, solidarity, and charity will disappear; and there will a place only for materialism, greed, and manipulation.

 

In a society where people are dominated by greed for money and manipulating others' needs and wants and charging them interest and putting them in the bondage of usury, the tears of orphans and cries of the needy will mean nothing. To a usury-dealer, the basic needs of these people and their sufferings are good opportunities to make profit .........

 

Economic Dangers of Usury

 

Usury stops human beings from being productive, and allows them to abandon work and lose the value of being beneficial and realize their own ambitions.

 

This will mean that production and construction and all other activities will be heavily affected.

 

Usury also leads to stagnation in capitals itself, as money will not be circulated in the society as it should. Being a means to develop society, money should be circulated to produce the desired effect, or otherwise, it will become a goal rather than a means, and this will lead to stagnation, which will lead to inflation in the economy .......

 

http://www.readingislam.com/servlet/Satellite?cid=1254573408597&pagename=IslamOnline-English-AAbout_Islam%2FAskAboutIslamE%2FAskAboutIslamE

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Rating: 0 of 0 votes Quote Al-Cordoby Replybullet Posted: 16 December 2009 at 12:56pm

Reuters Plans Islamic Finance Portal

Realizing its importance and potentials, the international financial services information company Thompson Reuters is planning to launch a news portal covering information about the Islamic financial industry in early 2010.

"At present there is no global connectivity for the industry and this platform will be able to connect up players from across the globe," Rushdi Siddiqui, Thomson Reuters global head of Islamic finance, told Gulf Daily News on Wednesday, December 16.

"It will help to increase work flow in the industry with real time news across developments in all asset classes as well as provide data and analytical tools."

Siddiqui says the portal has been developed to address three major issues facing the Islamic finance industry.

"Firstly it will reduce information search costs by posting data and indices in real time for a variety of product and developments."

He also expects it will draw more players from the Far East and Western countries who will enjoy the authenticated access to information offered by Reuters Thompson.

"At present the western financial system tends to be a bit wary of Islamic finance which it sees as lacking openness in reporting.

"The Islamic Finance Gateway will overcome this problem by robust, clear and crisp information about the global industry," Siddiqui contends.

Reuters believes this would help bring about a sharp rise in the Islamic finance market, already one of the fastest growing sectors in the global financial industry.

Starting almost three decades ago, the Islamic banking industry has made substantial growth and attracted the attention of investors and bankers across the world.

Currently, there are nearly 300 Islamic banks and financial institutions worldwide whose assets are predicted to grow to $1 trillion by 2013

http://www.islamonline.net/servlet/Satellite?c=Article_C&cid=1260258051205&pagename=Zone-English-News/NWELayout

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