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Islamic Economics: An Alternative

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Topic: Islamic Economics: An Alternative
Posted By: Al-Cordoby
Subject: Islamic Economics: An Alternative
Date Posted: 22 December 2008 at 11:12pm
This article by an expert in Islamic transactions was posted a few days ago on IOL, titled (Islamic Economics: An Alternative):
Islamic Economics: An Alternative

Signs of the collapse of the world financial system have emerged, causing great panic to people all over the world. Many governments called upon economists and experts to find a way out. Financial institutions and their agents began to think about rescue plans. ...

Islamic Economics

The current financial crisis debunks the myths of Capitalism, opening the way for alternative economic systems to emerge, among which is the Islamic finance and economy.

The Islamic economic and financial system is based on a set of values, ideals, and morals, such as honesty, credibility, transparency, clear evidence, facilitation, co-operation, complementarily ,and solidarity.

These morals and ideals are fundamental because they ensure stability, security, and safety for all those involved in financial transactions. Furthermore, the Islamic Shariah prohibits the economic and financial transactions that involve lying, gambling, cheating, gharar (risk-taking), gahalah (unawareness), monopoly, exploitation, greed, unfairness, and taking people’s money unjustly.

In addition, Islamic economy promotes participation in profit, loss, and actual exchanges of money and assets. In fact, there should be real interaction between the wealthy, employers, the employees, and financial experts. 

There is no party who is a constant winner or a constant loser; yet profit and loss is mutually shared ... -

What do you think?

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 24 December 2008 at 10:35pm
Does today's global economy need change?
Does it need more ethics and social responsibility?
What do you think?

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 26 December 2008 at 11:20pm

What is important to understand in the current world financial crisis is that we are all on the same boat: if it sinks we will all sink, and if it survives we will all (or at least most of us) escape this massive storm.

It is therefore in the world's collective best interest to find a coherent sound solution which all countries agree to so that we don't all drown

What should the world do to get out of this crisis? is therefore (imo) the right question to ask and try to answer answer ...

- Is Venture Capital the right alternative for funding real business, and should all countries restructure their stock-markets?

- Should gold be considered to restore confidence in savings?

- Can we end unjust wars and reduce public deficits?

- Should we end gambling and future speculative-types of transactions in stock markets and financial and commodity markets?

- What can be done to minimize panic and financial worries among people?

Each problem has a solution, and ships can be rescued if we try

In order not to see the global economy sink as a global titanic in 2009, a clear vision and leadership based on mutual consultation among all people on the ship is the way forward

Let's hope that 2009 is a better year than what most people expect

We should take all precautions, but at the same time there is always hope

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 02 January 2009 at 10:57pm

Reading material on this topic from Dr. Umar Chapra:

Towards a Just Monetary System:
The book is mainly concerned with the goals, nature and operations of the monetary system of Islam, which has justice as one of its most indispensable objectives.

For most people, including some Muslims, an interest-free economy is a mystery. Hence a number of questions are asked. Has Islam really prohibited interest and, if so, what is the purpose behind this? Can an economy run without interest? What will be the impact on resource allocation, savings and capital formation, economic stability and growth?

Dr. Chapra takes the mystery out of the subject by answering these and a number of other questions by means of a thorough economic analysis. While he shows the rationale behind the prohibition of interest and the strengths of a purely equity-based Islamic economy, he also indicates the problem and gives realistic proposals for solving them -

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 27 January 2009 at 11:25pm

The guiding principle in Islamic financing

The principle of justice is essential in all forms of Islamic financing. In profit sharing, when al Islamic bank provides means of payment to the producers, both parties share the real actual results or net profit/loss of a productive project. It is not just to throw the risk burden on one side, the entrepreneur, by guaranteeing a given return to the provider of money regardless of whether the project makes money or looses money. The fair play of market forces determines the rates of distribution of profit of the operation among the financier and beneficiary.

When financing is done on the basis of sale or lease principles, the Islamic bank carries the kind of risk associated with buying and owning a good and then providing it to its user. In both the cases, the fair play of market forces determines the profit/rent of the goods provided by the financier to the beneficiary. -

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Nura
Date Posted: 29 January 2009 at 10:04am
You posted very good articles brother, but they are all written by Muslim and somebody may think we are partial.
See this video please: -
This is confirmed by  a "neutral" voice!

Spare me the political events and power struggles, as the whole earth is my homeland and all men are my fellow countrymen. K.Gibran

Posted By: Al-Cordoby
Date Posted: 29 January 2009 at 12:28pm
Very interesting
Thank you sister

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 29 January 2009 at 1:29pm
Two new articles:
One from Islamicity titled:
Can Islam Save The Economy? -
The author is Nathan Schneider, a writer who lives in Brooklyn, New York. He holds a master's degree in religious studies from the University of California, Santa Barbara, and a bachelor's in the same subject from Brown University
The second is the opinion of Malaysia's ex-Prime Minister:
Mahathir calls for rebuilding of global financial system -  

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 06 February 2009 at 12:47pm
Boom, Bust, Crunch ... an Islamic Solution? -

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 08 February 2009 at 11:35pm
A Debate on Money
A debate on money and gold with Tarek El-Diwany (UK) -

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: The_Seeker
Date Posted: 09 February 2009 at 7:38pm
Asalaam Alaikum!

I just came across this article today from a CAIR email I received. Good article: - Muslim investors profit by adhering to faith

Here's my favorite part of the article:

Bay Area residents who bought homes through an Islamically compliant lender in San Jose, the Ameen Housing Cooperative, don't have to worry whether their lender will work with them if they lose their jobs. Islamic lenders are required to work in good faith with distressed borrowers to figure out ways to make payments manageable - and co-op leaders say they will.

I just wish there were more Islamic lenders and banks. Until there are, I guess I'm stuck with the same old corrupt system that got us into this mess to begin with.


The Prophet Muhammad (peace be upon him) said: "The strong person is not the one who knocks others down, but the one who controls himself when angry."

Posted By: Al-Cordoby
Date Posted: 15 February 2009 at 11:21pm

An interesting analysis by Prof. Rodney Wilson who is the Director of Postgraduate Studies, School of Government and International Affairs of Durham University (UK):

Why Islamic Banking Is Successful?

Islamic Banks Are Unscathed Despite of Financial Crisis

The soundness of Islamic banks is accounted for by the fact that they use a classical banking model, with financing derived from deposits, rather than being funded by borrowings from wholesale markets.

Consequently when the credit crunch came and borrowing from wholesale markets was halted, Islamic banks were not exposed. However, Islamic banks are not immune from the effects of the global recession, and the fall in oil prices will inevitably have a negative impact on 2008 results of Gulf-based Islamic banks. -


Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 17 February 2009 at 11:14pm

To reform global finance, we need to acknowledge the very obvious fact that the current practice of Globalization is not sustainable, and that on the long run, for most countries, it leads to more serious problems than its short-term benefits

Real reform must be based on the clear conclusion reached from the current crisis that the national politics and best interests of each country, which is based on the free will of the people, must be in the driving seat, not global investors

When this is the case, each country will be able to design and implement the regulations needed for bringing banks and financial institutions under control, with proper regulations which protect the best interests of its citizens

The current system would never respond to reform without this basic foundation

Free politicians should control investors, in a fair and sustainable partnership, not the other way round, as in the current global mess

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 20 February 2009 at 10:49pm
One of the important areas where the socio-economical principles of Islam help improve the economy is the high priority given to helping those who need help
In addition to the obligatory Zakah (2.5% of yearly savings) which a Muslim must pay to the poor, Islam opens many doors to help the poor escape from poverty
One of these doors is by encouraging partnerships between owners of capital and entrepreneurs, and prohibiting usury and interest-based finance
If a person with a good business idea and a good business plan goes to a traditional bank to ask for finance and he happens to be poor, the bank will in 99.9% of cases refuse to support him, as he has no guarantees to offer in return for the fund he requests
On the other hand, when the concept of partnerships prevail in an interest-free banking system, this same person would have a much better chance of getting funding for his project, and eventually succeeding in business, which means that a larger percent of the poor have a way out of the poverty trap
If you take this concept to the macro and global level, it may actually be the way out from the current global financial and eonomical crisis you see today ....

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 26 February 2009 at 9:46am

Q&A on Financial Issues

Financial issues — such as finance, taxes, investment, shares, etc. — are among the topics that preoccupy most, if not all, people's minds. Muslims, like everyone else, care about their financial situations and well-being. What is different with Muslims is that they seek what is Islamically permissible and avoid what is not in this regard.

This folder presents a huge number of fatwas related to financial issues. It covers different aspects of this important topic such as zakah, taxes, charity, finance, banks, interest, transactions, contracts, partnership, and the like.

In so doing, it will help Muslims, and even non-Muslims, get themselves well-acquainted with Islam's stance on such serious issues. -

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 01 March 2009 at 11:02pm

Another core issue in the current practice of Capitalism which we have all seen especially in the last decade or so is the problem of over-production

Does Capitalism suffer from this disease which eventually leads to its decline?

(Pay now and pay next year) was a famous marketing slogan in recent years, and the number of cars, TV sets, washing machines ... etc which are to be sold always seem to exceed market demand

With Asian Tiggers, then China flooding markets with consumer good of good quality and reduced costs, this problem seems to have increased with time

Have a look at this analysis when you have time:

Dynamics of Overproduction

... there are too many goods chasing too few buyers, too much money chasing too few profitable investment outlays, too many workers chasing too few jobs; too many banks chasing too few impoverished savers and depositors. etc. This is true not only of capitalism’s current cyclical slump but applies to all facets of the crisis. The essence of the crisis of capitalism is overproduction. Or over-accumulation.

What is overproduction? What are its properties? At what stage in the cycle of capital-accumulation does it emerge? What is its cyclical duration? What is its role in capitalism’s business cycle? Milton Friedman , one of the major propagandists of free market fundamentalism and a vulgar apologist of capitalism , put this succinctly when he shoved aside the nostrum of social responsibility on the part of the capitalist: “ a company’s only responsibility is to increase profits for shareholders”. Capitalism defines the relationship between a possessing / exploiting class whose incomes are profits, dividends and rents, and an exploited propertyless class whose income is wages.

It defines the relationship between the oppressor and the oppressed. Hence capitalism’s overriding objective, its alpha and omega, and the masters of capital is not the provision of goods and services to the workers it exploits. That is a surface phenomenon. That is a fetishism. The goal of capital accumulation is to expand and ensure an ever rising mass of profits for a class of propertied owners. The overriding goal is profit and profit maximization. Overproduction is thus not an aberration of the system but inherent in its operation. And this goes back to the beginnings of capitalism’s first Great Depression of 1873 ... -


Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 07 March 2009 at 11:03am

Fulfilling US Muslims Home Dream

A US bank has been awarded for offering Shari`ah-compliant banking products to help American Muslims fulfill their cherished dream of owning a house.

"I never thought I'd be involved in Islamic banking because I'd never even heard of it," Stephen L. Ranzini, President of the Michigan-based University Islamic Financial Corporation, told The New York Times on Saturday, March 7.

"And it's been a stretch to learn it, succeed at it and make it work."

The bank has received the American Bankers Association's 2009 Community Bank Award largely for helping raise homeownership category among US Muslims.

"But you feel best about the things that were hardest to do," said Ranzini, 43.

Muslims are much less likely to be homeowners partially due to the fact that they do not benefit from the conventional bank's mortgage loans as Islam forbids followers from usury, receiving or paying interest on loans.

In December 2005, the University Bank launched an entire subsidiary to help Muslim customers through Shari`ah-compliant products to help them own houses.

So far, it has done nearly $80 million in "mortgage-alternative" financing for residential and commercial real estate in 15 states.

While many conventional banks went bankrupt over the worsening global financial crisis, the University Bank this week recorded one of its best periods ever.

It completed 11 home sales, more than twice the weekly average, to observant Muslim customers, and pushed four more closings into next week.

Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.

Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.


For many observers, the University Bank’s booming Shari`ah-compliant products are only part of a national trend.

"It's part of this religious revival, this return to roots, you see taking place not only in Islam but in many faiths," said Isam Salah, an expert in Islamic financing at the international law firm King & Spalding.

"And as people began to see the feasibility of Islamic financing, you had smart bankers saying: 'There are seven million Muslims in the US There’s a niche market no one is serving, and I can do it.' "

Following the suit of the University Bank, Devon Bank in Chicago and Guidance Residential in Reston, Virginia, are also offering Islamically-accepted mortgage alternatives. -

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 10 March 2009 at 11:07pm

Thoughts on the Financial Crisis

The entire world is threatened by the recent financial crisis, even those countries that never enjoyed the direct benefits of credit

Structured finance, by definition, is vulnerable to asset-bubbles because it explicitly provides credit based on the perceived value of the collateral. If collateral is overvalued because of a bubble, then too much credit will be provided against that collateral, whether in the conventional system or the Islamic one. This is not the time for finger-pointing, or worse, some kind of schadenfreude (glee at another’s misfortune).

The entire world is threatened by this crisis, even those countries that never enjoyed the direct benefits on the upside of the US housing/credit/consumption bubble. Hopefully Muslim countries, along with all other countries of the world, can cooperate in fixing the global weaknesses that led to this crisis. While no one can know for sure what changes will be made in the global financial system, there can be little doubt that by the time of the next US presidential election in 2012, the global economic system will have undergone substantial changes, hopefully for the better -

* by Muhamad Fadel, Assistant Professor of Law at the University of Toronto Faculty of Law, Canada

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 11 March 2009 at 11:18pm

Islamic Finance: A Growing Industry

The Proliferation of Interest-free Finance

Despite slowing down, the top ten Islamic banks continued to show encouraging performance by recording an average annual growth of around 30 percent for 2008.

While conventional banks consolidate and retrench workers, Islamic banks particularly in the Gulf Coopeartion Council countries continue to expand and recruit new workers.

The resilience of the Islamic financial institutions to the current financial shocks, as well as their robust growth have led many quarters to conclude that Islamic banking could provide a solution to the current financial ills and be a viable alternative to the current financial system.

The current crisis seems to highlight the weaknesses of the conventional banking and finance philosophy on which the global financial system is built upon.

The conventional system allows multiple debt creation on a particular asset without a real underlying transaction made possible by credit default swap.

Quite the contrary, Islamic finance requires that financial dealings must be backed by real assets and be in line with the Islamic law, Shariah.

Generally, the principles upon which Islamic banking system is built on ensure the element of certainty and stability in financial dealings.

In particular, the requirements that the financial dealings must be free from Riba (interest), gharar (uncertainty), and maysir (gambling) ensure that the elements of exploitation and excessive speculation are avoided.

To ensure fairness and justice, financial dealings in the Islamic context must observe the concept of iwad (equal counter-value, which comprises of work effort, risk assumption, and product liability).

There are various supervisory authorities that are committed to oversee the overall compliancy of the financial instruments offered by the Islamic financial institutions, such as the Shariah supervisory board, as well as national regulatory authorities.

More importantly, financial dealings in Islamic banking and finance are guided by the ultimate objective of achieving the ideals of equitable justice where priority is given to equity-based financing rather than debt-based financing.

The conventional financial system which focuses largely on debt-based financing has resulted in concentration of wealth circulated largely among the deemed credit-worthy corporations and individuals.

In the Islamic economy, priority should be given to transactions that can benefit the society at large, rather than just the already wealthy corporations, so that wealth can be more widely circulated.

As such, the concept of equity-based financing along with its profit-sharing element is again another built-in stability aspect of the Islamic financial system.

The joint-venture nature in most equity based financing such as musharakah ( equal sharing) requires active participation from both the financier and the borrower to achieve the best outcome of a business venture.

Equity-based financing distributes risk and liability to both the lenders and borrowers so as to justify the return to both sides of the transacting parties.

In the end, this would influence the allocation of wealth and resources in the economy.

While conventional banks worldwide are nursing losses of more than $400 billion from the credit crisis, Islamic banks are virtually unscathed -

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: muslimdude89
Date Posted: 22 March 2009 at 9:55pm
Asalamu Alaikum,

I recently listened to a lecture called "Lets Buy a House Islamically" by Ghassan Barqawi (

He spoke a great deal about how most of these Islamic Banks offer Islamic Mortgages which actually involve interest, but only use different names for it. He showed how this was present in Lariba and guidance residential.

Does anyone know of any legit banks that dont use these tricks?

Posted By: Al-Cordoby
Date Posted: 26 March 2009 at 12:59pm
I have not dealt with them personally, and as long as they have a trustworthy committe of Shari'a scholars who supervise the validity of their contracts, it's their own responsibility if something is not 100% compatible with Islamic Law.
These principles are from the web site of Lariba:
1- We do not Rent Money. We approach each transaction as an investment (using the Lease-to-purchase Model) instead of Lending. We advise you as to whether the transaction is a good investment or it is better to rent.
2- We never start from an interest rate to calculate your payment. Your payment is based on the market rental value of the property you are seeking to finance. The rental value is determined by mutual agreement between you and us.

3- We work with clients in a humane and fair way (Tarahum) in times of trouble. -

There is a very thin line between lawful finance and riba-based finance in trade, and the main difference is that there should be a real product being exchanged, not just money lent and later money returned with interest
Allah (SWT) says in The Qur'an:
That is because they say, "Trade is [just] like interest." But Allah has permitted trade and has forbidden interest
What Islam does is makes the financial system a reflection of the real economy, and this can only be done by financing real business transactions, where real products or assets are being exchanged, not interest-based "virtual" and "future" speculative transactions
There is a big difference between the two systems: one is sustainable, while the other is not, as we have witnessed in the current global financial crisis

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 30 March 2009 at 1:49pm

Objectives of the Islamic Economic System

(By Dr. Umar Chapra - Part 1)

Islam is not an ascetic religion and does not aim at depriving Muslims of the good things that God has provided. It takes a positive view of life considering humans not as born sinners eternally condemned for their original sin, but as vicegerents of God for whom everything on earth has been created.

Virtue in Islam, therefore lies not in shunning the bounties of God, but in enjoying them within the framework of the values for "righteous living" through which Islam seeks to promote human welfare.


The values for righteous living that Islam propagates permeate all sectors of human activity. There is no strictly mundane sector of life according to Islam. Action in every field of human activity, including the economic, is spiritual provided it is in harmony with the goals and values of Islam.


It is really these goals and values that determine the nature of the economic system of Islam. A proper understanding of these is therefore essential for a better perspective of the economic system of Islam. These goals and values are:


a. Economic well-being and the moral norms of Islam;

b. Universal brotherhood and justice;

c. Equitable distribution of income; and

d. Freedom of the individual within the context of social welfare.


This list of goals is by no means complete but should provide a sufficient framework for discussing and elaborating the Islamic economic system and highlighting those characteristics which distinguish the Islamic system from the two prevalent systems, capitalism and socialism -

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Eetaq
Date Posted: 30 March 2009 at 5:44pm
Al-Cordoby you're a pro at debating yourself lol.

Anyways, a close friend of mine is going to University of Chicago to study both economics and mathematics. For those of you unfamiliar with University of Chicago, they are one of the most significant developers of economic theory, with the Chicagoan economics being one of the three major philosophical viewpoints.

I've told him many times how much I'd love it if he can, after becoming a big-shot in Western economics, be able to examine Islamic economics and see how it would change the equation.

The major differences would stem from the laws of being unable to sell what you don't own (so, no short-sales of stock, no prospecting, etc.) and being unable to work with interest (which would of course totally change the entire nature of the economy, since Capitalism is based around banks lending capital for businesses to invest).

Regardless, Islamic economics, is (of course) perfect; but I truly believe that with advanced understanding that will become apparent. Islam essentially offers a laissez-faire system in which economic crimes are met with harsh punishments (preventing fraud, theft, scams, political corruption, encouraging honesty, trust, and competition), taxation is extremely low (with Islam only mandating the voluntary 2% tax), and markets are regulated against only the most fundamental problem causers (like, interest and prospecting). Sounds to me like an economist's dream.

Sign on the dotted line

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Posted By: Al-Cordoby
Date Posted: 12 April 2009 at 5:09am


This recent PBS documentary on Islamic Financing and its impact on Muslims in America may be of interest -

It was recorded in Virginia, and includes interviews with Ibrahim Warde, a Muslim professor of Islamic Finance, and a number of users of Islamic banking services

(Around 10 minutes)

Aspects of both theory and practice are presented in brief

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 16 April 2009 at 9:06am

This recent article includes ideas formulated by an expert in Islamic finance, Dr. Monzer Kahf, to help overcome the current financial crisis:

The Global Financial Crisis

Ideas for Long Term Solutions: Short Notes

Short-Term Solutions

These are by all means usurious solutions. Rather, they cannot be but usurious, as they stem from the capitalist milieu and mentality.

They are as follows:

  1. Rescuing the failing banks that can be rescued, with particular focus on retail banks, so that they can resume giving short-term loans to companies, in an attempt to alleviate the financial crisis in the production sector. 
  2. Applying income-increasing programs, particularly for the middle class, so as to enable debtors to overcome the crisis of bought houses and also to solve the problem of the diminishing demand for long-lived consumer goods, thus sending necessary indications to the production institutions that they should not decrease their productivity or continue to lay off workers. Furthermore, part of the solution focuses on increasing the spending on service sectors, including education and health sectors, which have large numbers of workers. 
  3. Stopping the increase in installments and interest rates for buyers of houses with changing interest rates. Interests should be decreased or canceled, even if for a short period of time, and respite should be granted to the debtors who took house loans. This has to be done through government decisions enabling the owners to continue their payments and preventing their loans from turning into bad debts. Accordingly, the house-market prices would enjoy stability and cease declining, and the process of restoring markets of real production to health would soon begin. 
  4. Avoiding resorting to an increase in public debt in a way that would aggravate the exhaustion of the market liquidity. Instead, taxes imposed on the wealthy — especially those who benefited from the immense military spending — should be increased. 
  5. Dealing in derivatives should be stopped, and what remains of them have to be gradually dissolved, particularly credit derivatives

Long-Term Solutions

These have to be based on reorganizing the financial markets for the rectification of their deficiency. The solutions include:

  1. Laying down new rules aimed at curbing the expansion in finance beyond the capacity of the receivers of funds, particularly in the real estate market and with regard to the use of credit cards. These rules should curb the greed of retail finance banks and companies, in an attempt to force them to abide by strict standards. These later would hold these banks and companies responsible for the results of their leniency in alluring consumers to contracts whose burdens go beyond the consumers' capacity, and would prevent them from achieving gains at the expense of consumers and semi-wholesale institutions. 
  2. Reconsidering the systems of money markets with the aim of banning orminimizing the deals based on mere speculations, given the fact that they produce no added value. Such deals are known as the "deals whose total equals zero." These include the following deals:
  3. Limiting securitization (even through successive stages) until securitization of debts is completely banned and only taskik (financial documentation) is used. In taskik, the sukuk (financial documents) represent real assets excepting debts and money.
  4. Reconsidering the laws that permit circulation of and trade in debts, given that these processes do not create an added value. Strict restrictions should be in place for banning the discounting and rediscounting of debts.
  5. Developing institutional funding from banks and non institutional funding from the market. This is to be bound by two main constraints:
  1. Establishing a direct connection with the real market of services and goods, so that funding in society does not go down the drain or transform into financial accumulations that go beyond the real market and turn away from it. 
  1. Giving precedence to moral criteria in funding over the criteria of mere gains; that is, funding has to be withheld from goods and services that are unwanted by society or harmful to its environment and future. 
  1. And finally, respect ought to be shown to individual ownership as a fundamental right that is granted to humans by the Creator of the heavens and the earth. It is not proper for any individual to cede this right or any of its requirements, such as the right to free benefiting from one's own possessions in all ways of benefiting , as well as the right to entitlement and so on, except if the individual wants to give voluntarily and consciously. It should also be stressed that contractual increase in debts and loans for deferred payment is an unjust increase that is wrongfully taken from the debtor's money whilst there should be no increase in the creditor's possessions that justifies it. Hence, contractual increase in debts and loans is not compatible with the requirements of the rights to property and entitlement. Debts should not be susceptible to increase, because no added value is generated from them

This is the article in full: -


Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 02 June 2009 at 9:07pm

Suggestions in a recent article by non-Muslim writer for ending the current global financial crisis:

Ending Today's Economic Crisis Simply and Easily, in America and Globally

by Stephen Lendman

If done at state and federal levels, it can save the economy from Wall Street's predation - by removing the debt overhang through debt write-downs as well as funding sustainable, inflation-free prosperity. It's not a pipe dream. It's real. It happened before and can again. Short of that, according to Hudson:

"debt service will (keep) crowd(ing) out spending on goods and services and there will be no recovery. Debt deflation will drag the economy down while assets are transferred further into the hands of the wealthiest 10% of the population (mainly the top 1%), operating via the financial sector."

Eventually the economy will collapse, but Wall Street will profit hugely - aided and abetted by corrupted public officials allied with the private parasitic Federal Reserve turning America into what Hudson calls a "zombie economy" and banana republic.

What Works for North Dakota Can Work for the Other States, America, and Everywhere -

Strangely enough, ending debt service is the exact cure mentioned in The Qur'an when a severe depression is mentioned to resemble war, as the cure in verse (2:278-280) is to only maintain the principal of the loan as a liability, and to abolish interest payments

O you who have believed, fear Allah and give up what remains [due to you] of interest, if you should be believers.
And if you do not, then be informed of a war [against you] from Allah and His Messenger. But if you repent, you may have your principal – [thus] you do no wrong, nor are you wronged
And if someone is in hardship, then [let there be] postponement until [a time of] ease. But if you give [from your right as] charity, then it is better for you, if you only knew

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 12 July 2009 at 8:27am



The current global financial crisis has called the attention of world leaders and financial decision makers to seriously consider building a new world financial system. We believe that Islamic economics has much to offer for building a more just and stable market system that encourages real wealth creation and contains market fluctuations.
The current crisis stemmed from excessive indebtedness resting on a relatively small base of equity and real wealth, “the inverted debt pyramid”. A significant chunk of finance became merely the selling present for future money.  Besides, poor regulations have encouraged over indebtedness.
To build a sustainable system, debt must grow in tandem with real (as opposed to financial) wealth; leverage must be capped by productivity potentials. This allows for real wealth to grow without being hurdled with too heavy debt.
Heavy reliance on debt intensifies economic instability, hence human insecurity, and generates significant negative economy-wide externalities, as painfully exemplified by the present crisis.  The collapse of financial institutions inflicts harm upon shareholders, employees, and a host of innocent bystanders. 
Common economic sense suggests discouraging debt financing and encouraging benign alternatives.  However, the exact opposite (e.g. preferential tax treatment of personal and corporate debt) is still the rule. -

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Posted By: Al-Cordoby
Date Posted: 12 July 2009 at 9:05am

Islamic Finance Eases Scots' Home Crisis

The government in Scotland is contemplating an innovative scheme on using Shari`ah-compliant investments to address the housing dilemmas Scots are  facing in the ongoing severe recession.

"I would be happy to sit down and talk to them about their ideas," Housing Minister Alex Neil told the Sunday Times on July 12.

Officials from the Islamic Finance Council (IFC), a Scotland-based body representing Islamic financial interests worldwide, will discuss with Neil how Islamic finance could be used to help plug the funding gap for new social housing in the European country.

Under an IFC plan, Shari`ah-compliant finance can fund new shared-ownership homes with backing from the government.

But unlike those with conventional mortgages, householders would be largely insulated from negative equity ............... -


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Posted By: Al-Cordoby
Date Posted: 14 July 2009 at 12:14pm
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. -  


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Posted By: Al-Cordoby
Date Posted: 15 July 2009 at 1:23am

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. .... -


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Posted By: Al-Cordoby
Date Posted: 16 July 2009 at 9:34am
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. ..... -


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Posted By: Al-Cordoby
Date Posted: 29 July 2009 at 1:19pm

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." -

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Posted By: Al-Cordoby
Date Posted: 13 August 2009 at 9:38pm
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.
  • - Islamic Banking and Ethical Banking
  • - The Co-operative Bank's Ethical Policy
  • - Widening the Co-operative Bank's Client Base
  • - The dissemination of Islamic financial ideals
  • - Improvement in communication, governance and participation -  

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Posted By: Al-Cordoby
Date Posted: 18 August 2009 at 9:48pm

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. -

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

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Posted By: Al-Cordoby
Date Posted: 13 September 2009 at 2:00am

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 - -



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Posted By: Al-Cordoby
Date Posted: 06 October 2009 at 2:09am

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: - )

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Posted By: a well wisher
Date Posted: 06 October 2009 at 4:32pm
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

Posted By: Al-Cordoby
Date Posted: 14 November 2009 at 12:35am

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”. ....... -

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Posted By: Al-Cordoby
Date Posted: 22 November 2009 at 12:57am

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 -

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Posted By: Al-Cordoby
Date Posted: 01 December 2009 at 11:56am

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 -

(24 minutes)

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Posted By: Al-Cordoby
Date Posted: 06 December 2009 at 12:34am

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 ....... -

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Posted By: Al-Cordoby
Date Posted: 16 December 2009 at 11:56am

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 -

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Posted By: Al-Cordoby
Date Posted: 21 December 2009 at 12:47am

Swiss banks should step up Islamic wealth drive

Switzerland faces a bigger threat from the developing private banking system in the Middle East than reaction to the minaret ban, according to one finance expert.

However, the controversial vote and subsequent condemnation should serve as a warning for the Swiss finance industry to better serve the needs of Islamic clients, observers believe.

Switzerland is waiting to see how far November’s referendum decision to ban the future construction of minarets will damage the country’s image and business interests.

So far, only Turkey has reacted with concrete retaliatory proposals by suggesting that its citizens withdraw assets held in Swiss banks. But the Swiss Bankers Association (SBA) is not expecting outflows of the estimated $200 billion (SFr208 billion) held by mainly Arabic clients in Switzerland.

“Muslim clients are very canny investors and appreciate the competence, quality of service, good advice and good performance they get from Swiss banks. Money knows no religion,” SBA spokesman James Nason told

John Sandwick, head of Geneva-based group Islamic Wealth and Asset Management, told that the vote had stirred up resentment in the Middle East, but not enough to spark organised financial reprisals from wealthy Muslims.

“Switzerland did something really offensive against people who could really hurt us, but on this occasion it looks like it will not have a big impact on Swiss private banking in the long run,” he said.

Local competition

Having suffered setbacks in the United States and Europe in a bruising battle over tax evasion, Swiss banks are increasingly turning their attention to the Middle East, Asia and developing markets.

Switzerland is not the only European country to have identified lucrative prospects in the region and has long faced stiff competition from London, and to a lesser degree, from Paris to attract petro-dollars.

However the main threat in future may come from local banks setting up their own wealth management services, with a much wider array of Sharia compliant services.

“Lots of local private banks [in the Middle East] are starting up their own private banking businesses,” Sandwick told “The domestic wealth management programme is already in the process of destroying the Swiss private banking model. It is not there yet, but it will not take too long.”

Sandwick believes the Swiss are taking too long to offer Middle Eastern clients a full range of private banking services that are compliant with Islamic legislation known as Sharia.

Sharia law, for example, prohibits the charging or payment of interest and investments associated with gambling, alcohol, tobacco, pornography or pork production.

Time is ripe

Despite Swiss banks being present in the oil rich region for many years and producing a steady trickle of Sharia compliant services – such as the recent wealth management offering by Bank Sarasin – Sandwick thinks they have barely scratched the surface of Islamic finance.

“All the locals are saying that they want Islamic financial products, but Swiss banks do not appear interested in doing anything,” he said. “These clients do not have access to plain vanilla [standard] wealth management with Fatwa [approval from Islamic clerics].”

Sandwick insisted that the time is ripe for Swiss private banking to make serious inroads into one of the few global regions to come out of the financial crisis with a steady supply of new wealth.

And he believes that Muslim clients would in future seek safe, conservative refuges for their assets after taking a battering with the recent fad for investing in complicated products. Switzerland’s reputation for solid, safe banking has lost some of its sheen after becoming entangled in the subprime crisis, but it still retains much of its private banking credibility.

“Right now is the time to penetrate further into this market because others have lost credibility,” he said.

Matthew Allen, -  

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Posted By: Al-Cordoby
Date Posted: 28 December 2009 at 12:22pm

IDB approves $11.5b funding for 3-year plan

27 December 2009

JEDDAH - The Board of Executive Directors of Islamic Development Bank Group has endorsed a medium-term program for 1431-1433H (2010-2012G) in which $11.5 billion from its ordinary capital resources will be allocated to finance development projects, IDB president Dr. Ahmad Mohamed Ali said.

"Under this three year program, the bank will extend some $11.5 billion from its ordinary capital resources to finance development projects," he said.

"The approval of this program is a part of a 9- year transformation roadmap toward realizing Vision 1440H (2020G) which was developed by a high commission composed of a number of dignitaries in Islamic world. The commission chaired by Dr. Mahathir Mohamed the former prime minister of Malaysia, aimed, through the strategy, to transform IDB into an international-scale development institution," he added.$115b-funding-for-3-year-plan.html -$115b-funding-for-3-year-plan.html

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Posted By: Al-Cordoby
Date Posted: 02 January 2010 at 1:04am

Risk Management in an Islamic Framework

Expansion of the real economy by larger production of goods and services requires expansion of the financial sector through greater mobilization of society's savings and innovative methods of financing productive enterprises, exchange and distribution. With the expansion of the financial sector come more risks.

If each economic agent were left to bear the risks involved in his/her economic activity alone, economic activity would be severely constrained. It is socially advantageous to allow economic agents to distribute the burden of risk bearing among themselves. The more widespread the dispersal of risks, the larger the volume of risks that can be borne by the society as a whole, hence the more efficient the system. But this must be done equitably. Fairness requires that those who bear potential losses also have a chance to share in the profits, as these losses/profits are uncertain .....

Justice in Risk Sharing

The two methods of risk management, sharing or transferring, have different impacts on the economy and society. Despite their predominance in the world today, risk management based on transferring the risk, or risk shifting, is less efficient, as well as unjust and inequitable. A system of production and finance based on risk sharing will be more efficient and equitable.

The risk-sharing arrangements are more efficient for two main reasons. First, allocation of investible funds is based on expected profitability (i.e., productivity) of the projects concerned, whereas in the interest-based system, allocation is heavily biased towards the creditworthiness of the project-sponsors, which depends on their wealth holding rather than on the expected profitability of the relevant projects. Second, a system of risk sharing encourages entrepreneurs and innovators, the dynamic people whose ideas take the economy forward. In contrast, a system that allows all risks to be transferred to entrepreneurs, guaranteeing the capital and a positive return to suppliers of investible funds, protects and promotes the renter class.

Financiers should not be allowed to transfer all the risks attending upon profit seeking on to producers/entrepreneurs, as this creates a pressure for accelerated growth that is deleterious for the environment.

Risk sharing results in a more equitable distribution of income and wealth. ........ -

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Posted By: Al-Cordoby
Date Posted: 03 January 2010 at 12:20pm

Basics of Islamic finance

The conceptual difference between an - Islamic finance and a conventional finance transaction lies in the fact that in conventional finance, the financial institution generally lends cash for a length of time, often direct to the client or borrower, of course based on a credit rating or evaluation, on the basis that the borrower would return the borrowed amount plus an interest amount. The interest amount and the original borrowed amount is required to be repaid to the lender over the loan period or by the end of the loan period. Thus the transaction in essence is the lending of cash against the return of a higher amount of cash, and not necessarily for a specific purpose. One of the basic ideas behind the interest rate is the time value of the money lent. The excess cash returned to the lender over and above the borrowed amount is considered “riba” in - Islamic finance .

In - Islamic finance , there is no direct lending of cash against return of a higher amount of cash, unless the transaction is asset backed implying that the transaction has to involve the sale and purchase of an asset. In a typical financing transaction, the Islamic financial institution will purchase assets required to be financed by a borrower at a price and sell them to the borrower at an agreed (higher) price allowing the financial institution to make a profit. This purchase and sale of an asset basically renders the financing as “Shariah-compliant.” Islamic Shariah laws allow cash to be lent, but generally only as “Qard Hassan” where only the same amount of cash is required to be returned, if returned at all.

The point to note is that in an - Islamic finance transaction, the financier takes an element of risk, that of ownership of an asset and consequent non-payment by the client of the asset’s sale price. Any default penalties imposed to encourage payment on time do not accrue for the benefit of the lender but get paid to charity. There are other inherent risks in the transaction but the idea is that this risk-taking is what allows the Islamic financial institution to make a profit on the financing transaction. Therefore, even though the payment terms in a conventional and Islamic financing contract may look alike, there are differences in the conceptual structure of the transaction. Usually the profit margins charged by Islamic financial institutions are about the same as interest rates of conventional financial institutions, but this is largely due to competition, the required profits of shareholders of such institutions, and also quite possibly driven by higher legal and administrative costs pertaining to the financing transactions.

It can be logically derived that Islamic financiers would need a deeper understanding of a borrower and his business to allow minimizing risks of borrowers defaulting on purchase of the asset underlying a finance transaction. This effectively results in lending to real businesses and not speculative and high risk businesses, quite a relevant topic these days. Even Qard Hassan generally implies money moving into productive activities since lenders would not in general fund leisure or speculative activities of any borrower.

In conclusion, using - Islamic finance or even regulating it, requires an understanding of concepts that underlie the industry — in this case the Islamic code of law — the Shariah. An understanding of Shariah and its goals or maqasid will greatly enhance one’s perception of - Islamic finance and economics. -

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Posted By: Al-Cordoby
Date Posted: 04 January 2010 at 1:35pm

Islamic home finance offers new solutions in this economy

The business model and growth of the Islamic finance sector – the only financial system in the world today that is based on the teachings of a major religion – may present new opportunities for American households – Muslims and non-Muslims alike.

The Islamic home financing sector is active in nearly 40 states in the United States. While operating on an interest-free business model, Islamic home financial institutions are compatible in every way with modern capitalism, just like conventional financial institutions.

There are differences, however.

Read the rest … -

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Posted By: Al-Cordoby
Date Posted: 05 January 2010 at 2:05pm

Rationale for the Prohibition of Usury (Riba)

The following question and answer by - Sheikh Yusuf Talal DeLorenzo attendees of the - Dow Jones University Courses on Islamic Investement .

Question: (South America) While I understand that the shariah is strongly opposed to riba in all its forms, I was wondering what the rationale for this is. The Quranic text and prophetictradition are clear in prohibiting it but I haven't yet seen a clear explanation of why it is problematic. I also fail to see WHY asset-backed ownership is the only permissible type in Islam and exactly what the problem is with other purely financial instruments. Are there any other readings you could recommend to help answer these questions?

Answer: Please keep in mind that the prohibition is very much a moral issue, and that it is closely related to the concept of khilafah or stewardship. The Islamic concept of monotheism views the Almighty as the Fashioner and Possessor of all creation.

His is all that is in the heavens and on earth. Everything submits to Him (2:116).

When the earth and everything in it belong to the Almighty, the role of humankind is no more than that of caretakers. Even so, humankind has been granted an awesome responsibility, one which, in the poetic language of the Qur'an, even the mountains dared not accept. The terms of this stewardship are that the Almighty allows humankind the use of the physical universe, hopefully for good (though possibly for evil? because humans have the ability to choose), and in return humankind agrees to be accountable for how the physical universe is used.

This agreement is the foundation of all worldly justice, and this leads to the Shariah or religious law which includes guidelines for using the Almighty's property for profit and acceptable gain. Unjust enrichment, according to the Shariah, may take many forms; but the most iniquitous of all is enrichment at the expense of others, and this includes lending for profit.

Money lending and financing belong to two entirely different spheres; one is charity, pure and simple, and the other is business. The repercussions of this bifurcation range far and wide, and shape much of what is unique about Islamic notions concerning economy and society. Equity investing offers Muslims the opportunity to profit, not by lending at a guaranteed rate of return, but by sharing in ownership, and thus commiting to share in the risks associated with ownership. Such a commitment is clearly in consonance with the concept of stewardship, and this, more than anything else, explains how the Islamic prohibition against interest is as much a moral matter as it is a legal one. -

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Posted By: Al-Cordoby
Date Posted: 07 January 2010 at 1:37am

Global Financial Crisis: Could Islamic Finance Solve the Problem?

This paper by Dr. Umer Chapra, a leading expert of Islamic Economics, tries to determine the primary cause or causes of the financial crises that have plagued almost every country around the world over the last three decades. Of particular significance are the 1998 LTCM breakdown and the prevailing subprime mortgage crisis in the United States which is more severe than any in the past and has had devastating spillover effects worldwide.

It argues that one of the major causes of these crises is the lack of adequate market discipline in the financial system. This leads to excessive lending, high leverage and ultimately the crisis. Unwinding gives rise to a vicious cycle of selling that feeds on itself and leads to a steep decline in asset prices accompanied by bank failures and economic slowdown. Risk-sharing along with the availability of credit for primarily the purchase of real goods and services and restrictions on the sale of debt, short sales, excessive uncertainty (gharar), and gambling (qimar ), which Islamic finance stands for, can help inject greater discipline into the system and, thereby, substantially reduce financial instability -

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Posted By: Al-Cordoby
Date Posted: 12 January 2010 at 1:23am
Report: North America next big growth market for Islamic Finance

As world economies struggle to move from recession to recovery, Islamic finance is being hailed as a possible alternative to risk-prone conventional financial services – even in the capitalist heartlands of the USA and Canada. Extensive evidence of this shift in action is presented in a new report called Islamic Finance in North America 2009 published tomorrow by Yasaar Media and co-published by Codexa Capital, UM Financial Group, King & Spalding, and Doha Islamic.

The report explores for the first time the true depth of penetration of Islamic finance in both the USA and Canada and concludes that both core North American markets could be set for a boom.

According to the report Islamic finance in North America has developed along two quite separate paths. The first path focuses on retail Islamic finance and centres mostly on home financing products and credit cards. The second path involves a number of high profile GCC-based Islamic investment banks and their deployment of hundreds of millions of dollars in private equity and real estate developments in North America.

With many global markets showing the first signs of emerging from the worst of the financial crisis, North America could be set to witness a surge in Islamic finance activity along both paths as institutions and individuals look for alternative financing propositions that shun the use of excessive risk. The significant inroads that Islamic finance has made in both the USA and Canada look set to be expanded upon in the years ahead.

Paul McNamara, editorial director of Yasaar Media, says, ‘Investors and businesses alike are still smarting from the worst ravages of the global recession and they are looking for a lower-risk alternative. Islamic financing structures are inherently more risk averse than their conventional counterparts and as a result such structures are now being studied closely in all sorts of markets – including highly sophisticated markets like those of North America’.

These important markets are examined for the first time as growth areas for Islamic finance. ‘Both the USA and Canada are home to some very experienced Islamic finance firms – both on the financial and the legal side – and many market observers are now watching closely to see how they will help accelerate development of Shariah financing in North America. These are lucrative markets and it makes sense that GCC- and Malaysia-based Islamic finance houses are watching them with great interest’, according to Mr. McNamara.,industry/254003 -,industry/254003

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Posted By: Al-Cordoby
Date Posted: 16 January 2010 at 12:34pm
The Question of Interest

The word “interest” refers to the fixed increase demanded over and above a sum of loan.

At first sight, there does not seem to be any difference between it and rent. However, a deep deliberation reveals the stark difference between the two: rented out items can be used while keeping them intact; however, money cannot be used in this way; it is in fact used up and after expending it, it is needed to be produced again.

Therefore, if something in addition is demanded over it, this in fact becomes an oppression. Since this difference between interest and rent is subtle, and human intellect can falter in understanding this difference, the Almighty has delineated the truth in this matter: In the sharī‘ah he has given mankind through his prophets, He has informed them that demanding a fixed increase over the lent amount is unjust and hence not allowed. It is for this very reason that interest has remained prohibited at all times and in all the sharī‘ahs revealed by the Almighty. The Qur’ān has explicitly forbidden it. There is no difference of opinion in this matter.

However, the religious legality of the system of banking which prevails in our societies has recently come under discussion. It is contended that since the bank only receives a portion from the profit of a commercial venture it had financed on the basis of a loan hence the very reason for which interest was regarded as prohibited does not exist in the banking system. This view has been put forth by some scholars of Egypt and Syria. Mawlānā Wahīd al-Dīn Khān (b. 1926 AD), a celebrated scholar and preacher from India too, has corroborated it to some extent in his book Fikr Islāmī. In my opinion, this view of the scholars can be considered intellectually convincing; however, it is essential for this that the following remedial measures be introduced in the banking system.

Firstly, if a commercial venture financed by a bank loan runs into losses or needs to be discontinued for some reason, the demand for profit by the bank should cease that very day. It should only demand the principal amount.

Secondly, if things are being sold on installments, then until these installments are complete, the bank should remain a partner in the ownership of the sold item, fulfill the rights of ownership and receive rent on it.

Thirdly, in a loan given for non-commercial purposes except for inflationary adjustments, no interest should be demanded on it.

An important issue relates to paying interest on loans acquired for personal and commercial needs. In other words, there are people who do not devour interest but are forced to pay it on such loans. It is generally thought that paying interest too is prohibited in the same manner as consuming interest is. Our scholars also hold this view. In reality, there is no basis of this opinion in the Qur’ān and Hadīth.

Not at one place has the Qur’ān condemned people who pay interest; it has, in fact, regarded them to be the oppressed; it has also urged the lenders to give respite to such borrowers if they are facing some financial constraint. No doubt, in a narrative, those who make others devour interest are also regarded to be equal criminals;1 however, people have failed to understand the real meaning of this narrative. It refers to people who are the agents of professional lenders and in this capacity hunt for potential customers for their masters. As such, they are guilty of co-operating with them in this sin. In other words, this narrative does not relate to people who borrow on interest. -

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Posted By: Al-Cordoby
Date Posted: 18 January 2010 at 12:49am

France seeks Islamic financial system

PARIS -- A strictly secular European heavyweight, France is seeking to adopt the Islamic financial system just as a prelude to becoming a European center for Islamic economy.

Although no tangible moves have been made in this respect, the French government is determined to enact laws giving - Islamic finance access to France. This has been already confirmed by several senior French officials.

Speaking to KUNA, several economists said France is now in pursuit of all political, media, legal, legislative and banking tracks that could lead to relevant practical moves.

This strategic project is part of France's plan to find alternative and complementary alternatives to conventional capitalist finance, which can shape the country's official financial policies in the event of global cash shortage.

At the beginning, France came across with a methodological problem that lies in how to handle the Islamic financial system, having been left with a couple of options; either through finding French legal and legislative items that are similar to Islamic ones or through the enactment of fresh laws in this respect.

Following serious deliberations with all parties concerned, the first option was handpicked.

According to recent studies, Islamic financial investments in France are estimated at roughly USD 120 billion.

Although a relevant draft law was turned down by the Constitutional Council in form, but not in content, French Minister of Economy, Industry and Employment Christine Lagrade made it certain that the government would not backpedal on its plan to adopt the Islamic financial system.

The French minister's advisor Thierry Dissaux told KUNA that the government would introduce amendments to French legal and tax systems in order to match Islamic financial principles.

Mohamed Nouri, chairman of the French council of Islamic finance, told KUNA that France was still in the stage of preparations for adopting the Islamic financial system.

But, he expected that paris would take the first step in this respect this year by issuing Islamic - sukuk (bonds) for leading Islamic investment banks.

For his part, secretary-general of the - Arab -French commercial chamber, Saleh al-Tayar, also speaking to KUNA, said several French banks were currently operating in Arabian Gulf countries in line with Islamic Sharia'.

But the French drive to open up to Islamic finance is upsetting some politicians in the country Islamic Sharia' forbids - Muslims from usury, receiving or paying interest on loans - Source

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Posted By: Al-Cordoby
Date Posted: 23 January 2010 at 12:20pm

French economy to be main pillar of Islamic system - official

Secretary General of the Franco Arabe Chamber of Commerce Dr. Saleh Al-Tayyar said here Friday that the French economy would be a major pillar of the - Islamic finance system.

Speaking to KUNA, Al-Tayyar said senior French officials were convinced that Islamic finance was a successful way to finance and attract foreign investments.

France had all the abilities and tools to enter the Islamic finance field, he stressed, adding that the European country's political relations with the - Arab world were excellent.

He noted that USD 650 billion around the world are managed by Islamic financial portfolios.

He said that the chamber was leading in marketing Islamic finance, as it held the first forum on Islamic finance in France in 2006.

The chamber established, in cooperation with the Islamic Development Bank (IDB ), the French Institute for Islamic Finance (FIIF) to stress the concept of Islamic finance in France, adding that the institute held more than 10 training courses in one year, he pointed out.

Al-Tayyar said that France could implement the Islamic financial system on its investments in African countries.

He noted that Islamic investors could benefit from the large number of - Muslims in France, which reached five million, through providing loans that are compatible with the Islamic finance, He emphasized that French fears of the Islamic financial system were a result of relating the system to Islamophobia and to fearing it would threaten the sectarian system of the European country.

The concerns are baseless as a sectarian country would not be an obstacle to the system which is based on partnership, he highlighted.

He said he expects that the system would be implemented in France during the first half of 2010, pointing out that there will be three licenses for opening panches of Islamic banks in France. - Source ...

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Posted By: Al-Cordoby
Date Posted: 26 January 2010 at 12:45am

Luxembourg Aims to Become Hub for Islamic Finance

25 January 2010

Luxembourg took an important first step toward developing the Duchy into the latest European hub for - Islamic finance , especially Islamic capital markets, when it published last week a new tax circular on the treatment of a whole range of Islamic finance products including murabaha, musharaka, mudarabah, istisna, ijarah, ijarah wa Iktina and - sukuk (Islamic bonds).

A circular from the Director of Contributions, the Luxembourg tax authority, describes the major principles and contracts of Islamic finance and their respective tax treatment. According to the preamble of the Circular, "Islamic finance involves financial instruments used by investors who wish to manage their investments observing the values of Islam. The objective of Islamic finance is to share profits and losses between those who provide the capital and those who use it."

The Director of Contributions identifies two Shariah principles that merit particular attention: "Third party" capital providers (such as banks for instance) cannot in principle play a passive role, but must in contrast act as true "partners"; and the prohibition on lending money (with interest) to third parties. The development and listing of these products must rely on real physical assets (real estate, infrastructure projects or even commodities, like oil, aluminum or wheat). They may not rely on other financial products. Any profit from other financial products, particularly interest, would be considered usury (riba), and as a consequence should be purified in accordance with a criteria generally applicable in Islamic finance. ... - More details ...

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Posted By: Al-Cordoby
Date Posted: 29 January 2010 at 8:43am

Prominent Scholars Discuss Islamic Finance Solutions

Kingdom of - Bahrain , Manama, 29 January 2010, On 25 January 2010, the Bahrain Financial Exchange (BFX ) and Bursa Malaysia, organised a forum to discuss matters related to Islamic liquidity management and financing and in particular contemporary issues relating to commodity Murabaha transactions and Tawarruq practices. This forum was part of a two-day event marking the inauguration of a commercial relationship between the two exchanges. The underpinning for this relationship is to provide financial products to Islamic market participants and strengthen bilateral ties between both organisations.

The event, held at the BFX offices, attracted over 50 key players from the Islamic financial markets and was graced with the attendance of three of the most eminent Shari'ah scholars within the industry. Dr. Mohd Ali Elgari, Sheikh Nizam Yaqubi and Dr. Aznan Hasan participated with the objective of providing insights and expert opinion on the concept of Tawarruq and its application and practices to facilitate Islamic liquidity management and financing.

Raja Teh Maimunah Raja Abdul Aziz, the Global Head of Islamic Markets, Bursa Malaysia, who was also the moderator for the panel discussion ed, "The use of Tawarruq and its role in money markets and risk management is important in further developing the industry and through discourses such as this, we hope to provide industry participants with greater understanding of the concept from a Shari'ah perspective as well as its commercial importance."

The event also introduced a newly developed regulated Islamic commodity trading platform to industry participants specifically designed to facilitate Islamic financing and liquidity management aimed at tightening the application and enhancing integrity of Tawarruq practices.

Tawarruq is a sale of an asset to a purchaser on deferred payment with an onward sale by the purchaser to a third party on cash.

Arshad Khan, Board Director of the BFX , highlighted the importance of this event, "It gives me great pleasure to host such a high profile panel and audience from the - Islamic finance community. I am confident I can say from all involved, that this was an extremely informative and thought provoking discussion with the practitioner community. I thank Dr Elgari, Sheikh Nizam and Dr Hasan for all their efforts and contributions in making this event a great success." - More details ...

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Posted By: Al-Cordoby
Date Posted: 30 January 2010 at 11:00am

India Banking Reforms Focus In Islamic Finance

28 January 2010

India is planning to overhaul regulation of its financial system to attract investments from the Gulf and to encourage its largely unbanked Muslim population to save money in a way compliant with their religion, a senior government adviser has said.

K Rahman Khan, deputy chairman of India's upper house of parliament, told the Financial Times that the ruling Congress party is proposing reforms to the finance ministry, the Reserve Bank of India and Securities and Exchange Board of India to allow for the introduction of Islamic financial services.

" - Islamic finance has been growing at a steady pace and it is the most attractive form of alternative [banking] system in the financial sector, it makes no sense for India to exclude itself from this success story," said Mr Khan.

India, with more than 150m - Muslims , has the world's largest Muslim minority. Many Muslims are discouraged from banking with commercial banks by religious proscriptions against interest. Some are wary of investing to avoid financial involvement with gambling or alcohol companies, according to the Institute of Objective Studies, a research group focusing on the Muslim community.

The southern state of Kerala, which has a large Muslim population and many workers overseas in the Gulf, is backing the launch of a company that would offer Islamic banking services, but its opening has been held up by a legal challenge from a former government official who argues the venture would violate constitutional provisions on religious neutrality.

The Congress party's report, which Mr Khan said had been endorsed by Manmohan Singh, the prime minister, falls short of supporting the creation of a full-fledged Islamic banking sector at a time when regulators are shy of liberalisation.

Mr Khan said that the "main goal at the moment is to help set up non-banking institutions that will allow Indian citizens to save and invest in a sharia-compliant manner and to attract foreign direct investment from the Gulf...At a later stage we will be looking into setting up Islamic banking."

Some western and emerging economies are taking steps to facilitate Islamic investment. China, with 80m Muslims, recently awarded its first licence for Islamic banking to Bank of Ningxia, a move that could pave the way for sharia-compliant financing in the rest of the country.

India is keen to attract a greater share of Gulf investment. The United - Arab Emirates is already one of India's largest trading partners, while about 4.5m Indians work in the Gulf. political and - business leaders in the region have expressed their enthusiasm for larger investments in the Indian economy.

Sheikh Nahyan bin Mubarak Al Nahyan, the UAE's minister of education and a leading Arab investor, said: "While countries around the world continue to feel the pinch of the economic downturn, India's economy is buoyant and in relatively good condition. Investment opportunities abound in this vast, innovation-driven country."

By James Fontanella-Khan in Mumbai and James Lamont in New Delhi&

© Financial Times 2010 - Source

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Posted By: Al-Cordoby
Date Posted: 02 February 2010 at 12:30am

Ready to Grow: Potential of the German Market for Islamic Finance
Last October, the German Federal Financial Supervisory Authority (BaFin) hosted a conference on Islamic finance in Frankfurt which was attended by Islamic finance experts from countries all over the world as well as interested German stakeholders. The president of BaFin, Jochen Sanio, welcomed the Islamic finance sector to Germany. He explained that Germany is ready for this market to grow and to become a permanent part of the versatile German financial landscape.

Market Potential

The potential of the German retail market can be estimated at -1.2 billion per year, a figure which is hard to ignore. Muslims in Germany alone account for approximately 4 million potential customers, according to a survey funded by the German Interior Ministry in 2009. The German market provides significant growth potential for the Islamic finance sector. -

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Posted By: Al-Cordoby
Date Posted: 03 February 2010 at 12:35am

First Steps: Islamic Finance in Russia
Despite the fact that Russia is one of the non-Muslim countries with the largest share of Muslim population (currently about 26 million people), the Islamic finance market is still new in Russia. Certain isolated attempts to promote Islamic finance in Russia in the past have not been successful or widely supported by the government or business.

The situation may be starting to change. Recent events on the topic, such as the first international conference on Islamic Banking: specifics and prospects, held in Moscow in March 2009 and the first International Islamic Business and Finance Summit held in Kazan in June 2009, attracted the attention of Russian and foreign business circles as well as government officials. Several top government officials have voiced their support for Islamic finance initiatives.

Despite all the interest, however, few practical steps have been taken in this direction so far. In practice, any plans to introduce Islamic finance models in Russia will encounter serious obstacles, one of the most important being legislative limitations. ... -

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Posted By: Al-Cordoby
Date Posted: 04 February 2010 at 1:01am

Islamic finance to grow in 2010 as geographical reach widens 

Islamic finance is likely to advance in 2010 on firm growth and a widening geographic reach, according to a new report by Standard & Poor's.

"In our view, Islamic finance is poised to make further inroads in developed Western markets while Southeast Asian countries will likely fuel the Islamic finance advance in Asia during the coming year," say S&P analysts.

Even in 2009, a year when many of the world's financial systems found themselves deleveraging amid the capital market dislocation and its spread to economies around the world, growth of Islamic finance stayed more or less intact.

According to the S&P report, assets of the top 500 Islamic banks expanded 28.6 per cent to total $822 billion (Dh3,019bn) in 2009, compared with $639bn in 2008. - More details ...

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Posted By: Al-Cordoby
Date Posted: 05 February 2010 at 1:42am

Jordan to hold First Islamic Finance and Investment Forum next month

03 Fepuary 2010

Amman -- Jordan will host next month the First - Islamic Finance and Investment Forum for the - Middle East IFIF to discuss the role, functions and responsibilities of central banks in Islamic banking, Islamic funds & alternative investments, the situation of Islamic finance in the Middle East.

The event which will take place on the 2nd and 3rd of March at The King Hussein Bin Talal Convention Center on the Dead Sea shores, will shed light on current trends and critical issues in Islamic finance and investment, particularly in the Middle East, according to an organizers' statement released on Wednesday.

The two-day gathering will also tackle identifying the driving forces of global Islamic banking, - Sukuk , challenges facing Islamic finance in light of the global financial crunch.

The forum will be coupled with an exhibition that will feature products and services related to Islamic finance.

The event is in co-ordination with Ministry of Finance, Ministry of planning and International Cooperation, Islamic Development Bank, International Islamic Financial Market, Islamic International Foundation for Economics & Finance, - Bahrain . - Source ...

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Posted By: Al-Cordoby
Date Posted: 06 February 2010 at 12:37am

Ireland on Islamic Finance Track

Seeking to get a share in the growing Islamic finance industry, the Irish government has presented a new bill allowing Shari`ah-compliant financial transactions, reported the Irish Times on Friday, February 5.

“(The measure is) one of the most significant boosts for the IFSC [International Financial Services Center] in the last decade,” said director Brendan Kelly.

Minister for Finance Brian Lenihan on Thursday proposed amending tax laws to allow Shari`ah-compliant transactions.

The changes would help to “make Ireland the location of choice as firms rebuild in the aftermath of the global economic crisis,” Kelly said.

The new provisions will treat returns on Shari`ah-compliant products as interest for taxations purposes.

The proposed amendments were included in the Finance Bill presented to the Irish parliament on Thursday.

Though the amendments are confined to wholesale financial markets for the time being, they are expected to be expanded to include retail banking in the near future.

The measure covers a range of credit transactions and allows for the creation of investment securities similar to sukuks (Islamic bonds).

Islam forbids Muslims from usury, receiving or paying interest on loans.

Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.

Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.

Investment Magnet

The government hopes the move will boost the Republic’s attractiveness to Islamic financial services.

"Permitting and then encouraging different, non-Anglo Saxon or non-Western, forms of financing and investing is a most welcome announcement," Aidan Walsh, Corporate Tax partner with Ernest & Young, said.

"(This measure) will help further enhance our international attractiveness."

A report by Ernst & Young showed last week that Ireland has the world’s third most globalized economy.

"Ireland has benefited tremendously from globalization with over 80% of our goods and services exported internationally," Walsh said.

The Islamic banking system is being practiced in 50 countries worldwide, making it one of the fastest growing sectors in the global financial industry. ... - Read more ...

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Posted By: Al-Cordoby
Date Posted: 07 February 2010 at 12:52am

Treasury backs Islamic finance sukuk bonds

The Treasury has introduced measures in Parliament to support - Islamic finance and the issuance of corporate - sukuk - Islamic investment bonds - in the UK.

The Financial Services and Markets Act 2000, Order 2010, introduced last week, provides clarity on the regulatory treatment of corporate sukuk, reduces the legal costs for the investment and removes unnecessary obstacles to their issuance.

Sukuk is a broad class of financial instruments designed to replicate the economic function of bonds, but with a structure which complies with Islamic principles.

Sarah McCarthy-Fry, exchequer secretary to the Treasury, said: "The government's objective on Islamic finance is to enhance the UK's competitiveness in financial services by maintaining the UK's position as a Western leader for international Islamic finance and to ensure that everyone, irrespective of their religious beliefs, has access to competitively priced products.

"This measure is another important step in the development of the Islamic finance sector in the UK and will help to provide a level playing field for Islamic financial products in this country."

The FSMA 2000, Order 2010, helps level the playing field for issuers of sukuk by explicitly exempting alternative finance investment bonds, a class of debt-like security which includes sukuk from collective investment scheme regulations.

There are currently 22 banks in the UK which deal in Islamic finance including HSBC which has an arm dedicated to it.

David Black, banking analyst for research company Defaqto, said: "Anything which assists liquidity and creates greater availability is good for the market. If it encourages more providers into the market, that has to be good for competition." - Source

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Posted By: Al-Cordoby
Date Posted: 09 February 2010 at 2:46pm

Islamic finance and social responsibility

LONDON: Corporate social responsibility (CSR) and Islamic financial institutions should have an obvious fit given the faith-based ethos of - Islamic finance , which also gives prominence not only to wealth creation and economic development but also to the promotion of social justice and concepts based on hard work, thrift and low or no indebtedness.

While the contemporary Islamic banking movement is now in its fourth decade, CSR and corporate governance has been slow to take off in the industry and has started to come to the fore only in the last few years. Several Islamic financial institutions and those conventional institutions offering Islamic financial products and services through windows have had sizeable CSR initiatives partly channeled through Zakat funds or through other concepts such as Sadaqah and Waqf (endowments). - Kuwait Finance House, Jordan Islamic Bank, Bank Islam Malaysia, CIMB Islamic Bank and other Malaysian Islamic banks have had active CRS programs for years ranging from financing drub rehabilitation programs in Kuwait, to clinics and girls' colleges in Malaysia ... -

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Posted By: Al-Cordoby
Date Posted: 11 February 2010 at 12:53am

UAB To Start Islamic Banking Services This Year

When majority of the banks are struggling to retain their last year's profit levels and some even finding it difficult to stay in the black, there have been a few banks that have been successful in improving their performance year after year. United - Arab Bank (UAB ) did it for the last year (2009) as well when the bank announced a 12 per cent growth in its net profit. UAB 's Chief Executive Officer paul Trowpidge told Emirates Business that the bank has put in enormous effort in reining in the cost and thus to ping down the cost to income ratio ...

When will you launch Islamic banking?

We will launch Islamic banking this year itself. UAB believes that this is a local bank with a 35-year history strongly tied to the founding of the UAE and I think we are turning to our history more as an inspiration for the future. Offering Islamic banking is a natural extension of that. We want people to have the choice. ... -


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Posted By: Al-Cordoby
Date Posted: 12 February 2010 at 1:13am

UAE Strengthens Exports of Islamic Financial Products to Australia

The UAE strengthens the exports of Islamic financial products and services to Australia through the second Islamic Financial Services Trade Mission hosted by Dubai Export Development Corporation (EDC) - an agency of the Dubai Department of Economic Development (DED) .

The Islamic Financial Services Trade Mission, which was first introduced last June 2009, was supported by the Australian government particularly by state governments of New South Wales and Victoria.

Organised in partnership with the Australian Trade Commission (Austrade), the mission will conclude on Fepuary 12, 2010 in Sydney and Melbourne. "DED supports the UAE government particularly Dubai's efforts in introducing Islamic financial products across the world," DED Director General Sami Al Qamzi said. EDC's first successful Islamic Financial Trade Mission to Australia has pought changes in Australia's financial services sector particularly in the State of Canberra where UAE Islamic Financial firms have had discussion with the Treasury officials in Canberra about the rules governing its financial services.

"The second mission hopes to reach other states in Australia to examine possible ways of incorporating Islamic financial products into their current financial system," Al Qamzi said. The second mission not only aims to ping the Islamic financial products available in the UAE but also to take part in the modification within Australia's financial system ... -

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Posted By: Al-Cordoby
Date Posted: 14 February 2010 at 4:12pm

HSBC Amanah named Best International Islamic Bank by Euromoney

HSBC Amanah has been named Best International Islamic Bank by Euromoney magazine, in its - Islamic Finance Awards 2010.

The Euromoney awards are widely considered to be the most high profile accolades in the Islamic Finance calendar and annually recognise outstanding performance, quality, service, and innovation in the sector.

In addition to being awarded the title of Best International Islamic Bank, Euromoney also named HSBC Amanah Best - Sukuk House for the leading role it continues to play in Islamic debt capital markets.

During 2009 HSBC Amanah grew its operations in - Saudi Arabia , UAE, and Malaysia, while expanding in the key growth territories of Indonesia, - Qatar and - Bahrain . The - business launched HSBC Amanah premier, the world's first international Islamic premium banking service and led activity in the Islamic debt capital markets, structuring and lead managing many of 2009's landmark transactions .... -

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Posted By: Al-Cordoby
Date Posted: 16 February 2010 at 2:18pm

Islamic Finance Reaches Australia

SYDNEY – Australia’s largest bank has launched the country’s first Islamic financing tool for commodity trade, joining a booming global industry.

"We believe it is the first in Australia," Emmanuel Alfieris, head of Westpac Banking Corp’s financial institution and trade, told Reuters on Tuesday, February 16.

Under the new tool, the bank buys commodities on behalf of investors, holds them on its books for a short time and then, once they are sold, splits the profit with them.

The time period and profit share are pre-agreed.

Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.

Investors have a right to know how their funds are being used, and the sector is overseen by dedicated supervisory boards as well as the usual national regulatory authorities.

"Depending on the success of this one, we are looking at other asset classes," said Alfieris whose bank is the largest in Australia.

Westpac was recognized by the Dow Jones Sustainability Index as the most sustainable bank in the world for five consecutive years.

Government surveys show that Australia is home to 365,000 Muslims, who would use Islamic financial services if they were more accessible.

Islam forbids Muslims from usury, receiving or paying interest on loans.

Booming Sector

The launch is part of Australian efforts to join the increasingly-growing Islamic finance industry.

"Islamic financing is a booming sector and Australia should be part of the action," Trade Minister Simon Crean told the Financial Standard.

He said the expanding Islamic banking would help turn Australia into a dominant player in regional financing.

"The continued growth in major Asian economies will create a need for resources-related services and infrastructure, which are ideal assets for forms of Islamic financing." ... - More details ...

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Posted By: Al-Cordoby
Date Posted: 20 February 2010 at 12:55am
Islamic finance more than a blip on West's radar 

As the world's financial systems found themselves struggling through another challenging year in 2009, - Islamic finance reached a new landmark. By year end, the steadily growing sector saw a cumulative total - sukuk issuance reaching $100 billion (Dh367.3bn). In 2009, assets of the top 500 Islamic banks grew by 28.6 per cent to $822bn, up from $639bn in 2008.

Many Islamic financial institutions appear to have been insulated from the global financial crisis, largely due to the Islamic finance principles that prohibit interest. Consequently, Islamic finance institutions refrained from investing in structured products that played a significant role in the downfall of major global financial institutions.

Our analysis at Standard & poor's, where we currently rate 26 sukuk, indicates that Islamic finance will continue on its positive growth trajectory as it begins to evolve from its niche position in the financial sector to a more mainstream and globally-recognised compartment of the financial system. Geographic expansion and the influence of major international financial institutions in particular will play a significant role in the development of Islamic finance over the medium and long term.

Considerable interest in developing the sector has been noted in non-traditional centres of Islamic finance, specifically in Europe. The UK leads this effort, with major conventional financial institutions playing an instrumental role in developing local Sharia-compliant offerings ... - More details ...

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Posted By: Al-Cordoby
Date Posted: 22 February 2010 at 12:18am

A discussion last week between Dr. Tariq Ramadan and Ahmad Thomson in the UK which gives some solutions to the current global financial crisis (for those looking for solutions):

Reforming the Global Financial System: An Islamic Perspective -

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Posted By: Al-Cordoby
Date Posted: 23 February 2010 at 12:30am

Swiss urged to grab Islamic banking chance

GENEVA (Reuters) - For a Swiss private banking industry that is under fire and could see traditional sources of asset inflows dry up, Islamic banking is a unique opportunity that should be grabbed with both hands, one expert said on Thursday ...

"One totally untapped market is Islamic wealth management, where literally no bank offers anything but the most basic services, it's a huge opportunity for the industry," Sandwick said.

Sandwick is highly critical of the widespread reliance on real estate and private equity as cornerstones of Islamic wealth and asset management, because it creates a wide deviation from what would be considered prudent asset allocation.

"Money that should have gone to sharia-compliant mutual funds and sukuk funds went to private equity. The market for sukuk funds is $75 billion, but today the actual amount is about $120 million," he said, referring to recent IFSL data.

Swiss private bankers would do well, then, to broaden out their sharia-compliant product portfolios, he said.

"The low-hanging fruit in Swiss private banking is Islamic Finance. We must start now to ensure global predominance in this fast-growing sector, the stakes are high and the potential market is measured in the hundreds of billions of dollars." -

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Posted By: Al-Cordoby
Date Posted: 24 February 2010 at 12:48pm
 World's biggest Islamic bank planned

Bahrain will establish the world's biggest Islamic bank within the next 6 to 12 months.

The creation of a planned Islamic investment megabank is in "fairly advanced stages" and it will likely be launched in the next 6 to 12 months, an executive at a firm advising on the project said this week, Barcelona News wrote.

A plan to form the world's largest Sharia-compliant lender, which is being promoted by Chairman of Al Baraka Banking Group Sheikh Saleh Abdullah Kamel, has been in the works for some years.

Sheikh Saleh said last April the global financial crisis had delayed the project, but they hoped to launch it by the fourth quarter of 2009.

"The key shareholders are on board and we are looking for an imminent launch, within six months to a year," Sameer Abdi, head of - Islamic finance at Ernst & Young, told the Reuters Islamic Banking and Finance Summit in Bahrain.

Sheikh Saleh said in April the new institution so far had about 10 shareholders, including the Islamic Development Bank, Saudi Investment bank and the - Kuwait Real Estate Bank.

Bigger Islamic banks are crucial for the industry to realize its growth potential and to compete with Islamic windows or subsidiaries of western conventional banks that have large market shares in wholesale banking services.

Abdi said the bank's "capital aspirations" were between $3 billion and $4 billion. -

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Posted By: Al-Cordoby
Date Posted: 02 March 2010 at 12:44am
 'Islamic finance has big potential in Russia'

Maxim Osintsev is a Russian banker with a difference. He is a fluent Arabic speaker and has a passion for - Islamic finance , which he says comes from the heart.

As managing director, Oil & Gas Department at Sberbank, the largest commercial bank in Russia, he is on a mission to convince his colleagues and senior management that purely as a - business proposition Islamic banking makes sense because there is a ready made potential market of 20 million - Muslims in the federation.

Sberbank (the National Savings Bank of Russia) is 60 percent owned by the Russian government through the Central Bank of Russia and 40 percent by the private sector including 24 percent by foreign investors and its shares are publicly listed and traded on various stock exchanges including the London Stock Exchange. Not surprisingly, the chairman of Sberbank's supervisory committee is Sergey Ignatiev, who is also the chairman of the Central Bank of Russia. Sberbank has a 50 percent share of retail deposits and 31 percent share of the total Russian loan market. Its total assets at end January 2010 were 6.99 trillion rubles.

At the same time Sberbank is also expanding overseas and is set to enter the GCC (Gulf Cooperation Council) market, which is another reason why it should also have Islamic financial products in its portfolio. Here Osintsev discusses with - Arab News why Islamic finance has big potential in Russia and the CIS countries, and outlines a potential roadmap for the future implementation of Islamic finance in the country. ... -

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Posted By: Al-Cordoby
Date Posted: 03 March 2010 at 11:30am

'Banks poised for growth in aftermath of financial crisis'

Bankers and experts on Tuesday said making use of the still largely untapped resources of - Islamic finance and banking is an optimal solution in light of the global economic downturn.

Islamic banking and finance proved to be the least vulnerable to losses and the least affected by the negative impact of the global financial crisis and promises major opportunities for growth, they said at the inauguration of the first Islamic Finance and Investment Forum for the - Middle East , held on the eastern shores of the Dead Sea.

"In this challenging global economic and financial environment, Islamic finance has remained dynamic with a steady pace of innovation and growth," Central Bank of Jordan (CBJ) Governor Umayya Toukan said at the inauguration of the two-day forum.

"The accelerated development of the Islamic financial markets and the supporting international Islamic financial architecture as well as the trend towards greater liberalisation have enhanced the integration of Islamic finance into the international financial system," he added -

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Posted By: Al-Cordoby
Date Posted: 04 March 2010 at 2:04pm
 BNP Paribas Investment aims to double Islamic assets

KUALA LUMPUR -- BNP Paribas Investment aims to double its Islamic assets under management this year as the global economy recovers but higher borrowing costs worldwide could dampen market sentiment, a senior official said on Wednesday.

BNP’s Islamic assets of $500 million would be boosted by demand from sharia insurers and private banks, with investors expected to favor equities as they embrace riskier assets, the fund manager’s Southeast Asia head said.

“This first quarter, it seems like all the pipeline that was slightly delayed now is coming on stream both in terms of distribution partners who are looking to launch Islamic funds and on the institutional side where investors are putting money into this market,” Cheng Tan Feng said in an interview.

“A lot of the new assets that we see will be coming from Southeast Asia this year. We are working on deals that would double our assets under management this year.”

Islamic investors are expected to prefer open-ended funds and emerging markets such as India and China, BNP Paribas Investment’s executive director Hisham Abdul Rahim said.

“We’ve seen pockets of interest in - Islamic finance emerging from places like Australia, Hong Kong, Japan, Korea, France and Britain,” Cheng said. ... -

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Posted By: Al-Cordoby
Date Posted: 08 March 2010 at 12:44am

Brunei to launch online Islamic banking and finance courses

A - Brunei company announced plans to offer the region's first online master's degree programme in Islamic banking and finance, media reports said Wednesday, - dpa reported.

Crescent Sdn Bhd said the course would "take advantage of the untapped market of Islamic finance studies, especially in countries such as China, - Japan , - South Korea and - Australia ," the Brunei Times reported.

   Islamic banking and finance is complicated by the Koran's prohibitions against earning interest from savings and loans.

   The website for the degree course was expected to be online by July or August, the newspaper said.

   Brunei Darussalam, a predominantly Muslim sultanate located at the northern tip of Borneo island, is heavily dependent on oil and gas production for its income.

   The government recently began promoting Islam-related services and products in an effort to carve out new market niches for the tiny nation

Source: -

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Posted By: Al-Cordoby
Date Posted: 09 March 2010 at 1:00am

Board of Jordan Islamic Bank proposes dividends at a rate of 12%

AMMAN (petra) - The Jordan Islamic Bank posted JD39 million in pre-tax net profit and JD28 million in after tax profit for the 2009 fiscal year.

The board endorsed the bank's financial statement for last year and recommended the distribution of dividends at a rate of 12 per cent.

In 2009, the bank raised its capital to JD100 million and shareholders' rights reached around JD176.8 million compared to around JD161 million at the end of 2008, at a growth by 10 per cent, Board Chairman Adnan Yousef indicated.

Yousef commended the bank's results, stressing the success of Islamic banking despite the challenges facing the world as a result of the repercussions of the financial crisis -

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Posted By: Al-Cordoby
Date Posted: 11 March 2010 at 12:53am

IDB to launch roadshow for Istikhlaf bank soon - Dubai The Islamic Development Bank will soon launch a roadshow to attract investment for Istikhlaf, an Islamic bank, a top banking official said here yesterday.

Adnan Ahmad Yousuf, Chairman of the Union of - Arab Banks and CEO of Al Baraka Banking Group told Gulf News: "Istikhlaf will be launched with $2 billion [Dh7.34 billion] paid-up capital and $10 billion authorised capital and is being sponsored by the IDB."

Istikhlaf Bank is a project of the Islamic Chamber of Commerce and Industry (ICCI) announced by Shaikh Saleh Kamel, president of the ICCI.

Yousuf added: "IDB finished the feasibility study on the bank and it is in the final stage of launching prospectus for investors."

He said a roadshow is planned to attract investors from both public and private sectors.

Main target

On the sidelines of a major banking conference organised by the - Emirates Banks Association, Yousuf said, there are two main concerns in developing such a huge financial project. One is to provide the full range of Islamic banking services and the other to avoid competition with other local Islamic banks. "The main target that Istikhlaf will seek is to invest and participate in mega projects and to share it later with other Islamic banks."  ... -

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Posted By: Al-Cordoby
Date Posted: 13 March 2010 at 2:15am

Malaysia offers closer engagement as Islamic finance gains new ground

Malaysia is inviting investors and institutions from the - Middle East to use its comprehensive services platform to tap the growing interest in Islamic finance and target the burgeoning Asiap-acific markets.

Major Malaysian banks and investment companies specialising in Islamic finance products will attend the third Malaysia Services Exhibition (MSE 2010), to be held in Dubai this year to showcase their expertise and network with potential - business partners.

The three-day exhibition, organised by the Malaysia External Trade Development Corporation (MATRADE) will be held from the 13 th to the 15 th of April 2010 at the Dubai International Conventions & Exhibitions Centre.

Islamic finance has been growing at 15-20% annually and Moody's says the industry is worth $700 billion. Malaysia has over 30 years of experience in this sector, increasingly being seen as a sustainable alternative to conventional banking after emerging largely unscathed from the global economic meltdown.

"Islamic finance in Malaysia is characterised by a high level of flexibility and diversity as well as a world-class infrastructure, regulations and human resources. It is the best environment capable of leading the anticipated industry growth," said Dato Yahaya Abdul Jabar, the Ambassador of Malaysia to UAE.  ... -

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Posted By: Al-Cordoby
Date Posted: 18 March 2010 at 1:45am

Bank of London and the Middle East launches Sharia'a Compliant Premier Deposit Account

London, 16 March, 2010 - Bank of London and The - Middle East plc (BLME), London's leading wholesale Sharia'a compliant bank, announced today the launch of its premier Deposit Account (pDA), the first online Sharia'a compliant pDA in the UK. With a minimum investment of £50,000 this account is ideal for investors looking for a competitive rate of return on an ethical, alternative investment.

BLME's pDA allows the investor competitive returns on their investment deposited with BLME when compared with other UK high street institutions' deposit products. BLME pay profit upon maturity of the original agreement or on the anniversary of the investment - based on which comes first. BLME is covered by the FSCS £50,000 deposit guarantee scheme.

Humphrey Percy, CEO of BLME, said:

"The launch of the pDA highlights London's leading role in the development of Sharia'a compliant products in Europe. Since its establishment in 2007, BLME has witnessed a growing demand among medium to high net worth individuals for a banking option that incorporates the transparent and ethical principles inherent in - Islamic finance with competitive returns. -

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Posted By: Al-Cordoby
Date Posted: 20 March 2010 at 1:16am

680 Islamic funds run $70 billion in assets

As many as 680 Islamic funds, 45 percent of which are concentrating in the GCC member states, are running assets in the neighborhood of USD 70 billion, according to a recent economic report.

There are 306 Islamic funds in the GCC member states alone, witnessing fast-track growth as a result of increasing wealth in the Arabian Gulf region thanks to edging oil prices, indicated the monthly report released by Kuwait-based Saba'ek Company.

There is a steady link between oil prices and the number of recently launched investment funds, which reflects the flow of capital into this industry, the report showed.$70-billion-in-assets.html -$70-billion-in-assets.html

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Posted By: Al-Cordoby
Date Posted: 22 March 2010 at 1:04am
Islamic Development Bank (IDB) approves a grant of US$ 5 million for schools reconstruction in Haiti
Tuesday, 02 March 2010

The President of the Islamic Development Bank (IDB) Group, H.E. Dr. Ahmad Mohamed Ali, announced that the Bank approved a grant amounting to US$5 million, from the resources of the “Waqf Fund”, an affiliate of the Bank in favor of the earthquake victims in Haiti. The grant represents the Bank’s contribution to the international efforts aiming at reconstructing schools & educational facilities hit by the devastating earthquake in Haiti last January.

IDB Group’s President had previously addressed a letter to H.E. the UN Secretary General, Mr. Ban Ki-moon, reiterating the will and readiness of the Group to participate in the reconstruction efforts in the devastated areas in Haiti. The action came in response to the urgent call made by the UN Secretary General to international organizations / institutions worldwide, including the IDB Group, to contribute to the international efforts aiming at reconstructing Haiti. -

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Posted By: Al-Cordoby
Date Posted: 23 March 2010 at 1:55am

Al Hilal Bank Set To Open Islamic Unit In Kazakhstan

Abu Dhabi Al Hilal Bank yesterday said it had received a licence from the Kazakhstan Financial Markets Supervisory Authority to open the country's first Islamic bank under the name Al Hilal Islamic Bank.

"The new bank is fully owned by Al Hilal Bank with a capital of $36 million (Dh132.1 million). The headquarters is [to be] established in the city of Almaty with a panch in the city of Astana," Al Hilal Bank said in a statement.

The headquarters and the Astana branch will start operations on Thursday.

The bank also aims to open two new branches by the end of this year.

"Abu Dhabi companies like Mubadala Development Company and Aldar properties are having a lot of tie-ups in Kazakhstan and we are looking at financing their projects," a spokeswoman for Al Hilal Bank told Gulf News.

The spokeswoman said Kazakhstan is predominantly a Muslim country and Islamic banking is fast gaining popularity -

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Posted By: Al-Cordoby
Date Posted: 24 March 2010 at 3:55am

IDB Approves US$ 334 Million for New Development Projects

Jeddah, 15.03.2010: The Board of Executive Directors of the Islamic Development Bank (BED) which concluded its 266th session at IDB Headquarters in Jeddah, under the chairmanship of President, IDB Dr. Ahmad Mohamed Ali, approved (US$ 333.9) million for financing new development projects.

The Board approvals included new project financing in Pakistan, Bahrain, Yemen, Benin, sierra Leone, and Saudi Arabia.

The Board also approved a T.A. Grant for the Syria-Turkey Inter-Regional Cooperation Program (STICP), a program that the Bank is seeking to generalize in similar boarder areas in member countries. In addition, T.A. Grants were approved for Muslim communities in non-member countries including India, Fiji Islands, Kenya, Nepal, Thailand and USA. ... -

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Posted By: Al-Cordoby
Date Posted: 25 March 2010 at 1:47am

Space Value of Money and Islamic Finance

Islamic finance requires projects and instruments to have a space value of money.

Indeed, existing products achieve this on a variety of levels. Some involve real activity in the legal sense, and the impact on real people. ... -

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Posted By: Al-Cordoby
Date Posted: 27 March 2010 at 2:15pm

QIB set to enter retail insurance market in France - Qatar Islamic Bank (QIB) is all set to enter into the retail insurance market of France in a big way. QIB and the French insurance giant BpCE have signed a Memorandum of Understanding (MoU), setting up the framework of a common reflection in the field of - Islamic finance .

The MoU is designed to promote cooperation between the two banks in France, and try to build a lasting partnership.

Islamic finance is a segment of world's finance experiencing a strong and sustained growth over the last decade. It can be considered as an alternative or ethical finance, taking into account extra-financial criteria, while offering competitive financing or investment solutions structured upon specific financial schemes, differing from those used in conventional finance,Salah Mohammed Al Jaida, CEO of QIB said. BpCE and QIB believe that they could take advantage of working together in this field by pooling their respective experiences and expertises.

QIB has more than 25 years experience in the provision of Islamic banking and finance services and is the first global Islamic bank, one of the 5 largest Islamic banks in the world and the leading Islamic bank in Qatar in all markets segments. QIB group is ideally equipped to provide superior quality and innovation in Islamic banking services to its growing customer base around the world. With a presence in the - Middle East , Europe and Asia, QIB is constantly searching for opportunities to work in partnership with leading institutions to facilitate expanding its Islamic banking operations into new markets -  

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Posted By: Al-Cordoby
Date Posted: 31 March 2010 at 1:41am

Comparison of Islamic and Conventional Finance

Islamic Finance
Conventional Finance
Equity partnership (profit and loss sharing)
Profit is the chief motivation
Inherently micro-financing-friendly
Not inherently micro-financing-friendly
Checks and balances to maintain ethics and justice
Not enough checks and balances which can lead to excess, causing economic meltdowns

Indeed, while Islam prohibits dealing in interest, this does not mean that the system is not based on profit. In his book, An Introduction to Islamic Finance, Muhammad Taqi Usmani explains that commercial banking under Islam is based on the concept of profit and loss sharing. It is an equity partnership in which both parties not only benefit from the profit, but also share in the losses. Other features have been added to Islamic banking in view of contemporary needs, such as leasing, cost plus financing, delayed payment sale, etc. Yet, these are not substitutes for interest. “They have their own set of principles, philosophy and conditions without which it is not allowed in Islamic law to use them as modes of financing,” adds Usmani.

“Islam does not deny the market forces and the market economy. Even the profit motive is acceptable to a reasonable extent. Private ownership is not totally negated,” writes Usmani. “Yet, the basic difference between capitalist and Islamic economy is that in secular capitalism, the profit motive or private ownership are given unbridled power to make economic decisions. Their liberty is not controlled by any divine injunctions. … This attitude has allowed a number of practices which cause imbalances in the society.”

In fact, today’s severe economic downturn was triggered by banks excessively dealing in mortgage-backed securities and credit-default swaps, two of the practices which Islamic banks on principle do not transact.

“The global financial crisis and the credit crunch were inter alia the result of greed and avarice – since financial institutions advanced loans to people who did not have repayment capacity. If the aforesaid financial institutions were practicing Islamic finance, the problem might probably not have arisen,” stated Aftab Ahmad, an
economic writer from Islamabad, Pakistan.
“The present interest-based system is of an exploitative nature as capital earns profit under this system without taking any responsibility and running any risk,” he commented. “Besides, smaller sectors of the economy such as the small enterprises and small farmers can not often avail themselves of credit facilities under this system because they are unable to pay interest at the higher rate.”

However, under a profit and loss sharing system, not only is micro-financing easier, the finance system forces the financiers to ensure that their businesses remain profitable. In this way, there would be more “employment generation and national income would increase manifold. Thus, the society, at large, would be the gainer in this system,” Ahmad observed. ... -

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Posted By: Al-Cordoby
Date Posted: 07 April 2010 at 4:24am

Islamic finance assets grow to $950bn

The industry's assets grew in 2009 despite the global crisis

Islamic finance industry saw its total assets grow to $950 billion (Dh3.48 trillion) in 2009 in spite of the global economic crisis. The market's potential is worth at least $5trn, Moody's said in its latest report.

Rapid growth in Islamic finance continues globally but the industry needs to be more innovative instead of being influenced by conventional derivative instruments, it said.

Islamic finance in this region would also grow more if it looks into opportunities of co-operation with Asian economies, many of which are under-banked markets ... -

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Posted By: Al-Cordoby
Date Posted: 10 April 2010 at 4:46am

Islamic Funds Attract Conventional Players

Market share of Islamic financial products is on the rise and Islamic funds have been attracting players who operate as conventional financial institutions, a new report has said.

Bank Sarasin-Alpen (ME) said in its Islamic Wealth Management Report 2010 that the importance of Islamic funds is expected to grow.

In spite of the setback faced by the global economic crisis across economies and sectors, considerable opportunities exist for - Islamic finance industry.

"Despite the setback, the fundamentals of Islamic fund industry remain very strong. With almost $50 billion (Dh183.63bn) in fund assets under management and a large, expanding and untapped Muslim population, there are likely to be considerable opportunities in the future. This is a time when strategic choices have to be made and market participants have to adapt to survive," it said quoting an Ernst & Young report.

According to estimates by Asian Development Bank, Islamic assets which are almost $1 trillion are expected to rise 10-15 per cent annually ... -

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Posted By: Al-Cordoby
Date Posted: 13 April 2010 at 1:35am

Qatar Islamic Bank (QIB) Launches PrePaid VISA Card

QIB, Qatar's first and largest Islamic bank, has announced the introduction of the QIB Hadiyati VISA prepaid card as the newest product in its line of innovative banking solutions. QIB is the first Islamic financial institution to offer the prepaid card which is both Sharia'-compliant and issued according to the high standards of VISA cards worldwide. The cards are currently available for purchase.

The QIB Hadiyati prepaid VISA card is available in six value categories ranging from QR 100 to QR 5,000, and allows the card holder ease of use through point of Sale (pOS) anywhere VISA is accepted around the world. VISA is the most widely-recognized global payment pand with over 29 million merchants and 805,000 ATMs.

The QIB Hadiyati prepaid VISA card looks like a credit card and can be purchased by anyone at QIB bank locations or six authorized mall booths located throughout Doha such as at City Center, Landmark, Hyatt plaza and Villaggio, as well as at Lulu stores. The cards are fully-loaded at purchase and activated by the salesperson. There are no credit checks or debt risks with the prepaid card. The cards have the added benefits of safety, as the card prevents the user from the hazzards involved in carrying cash, and capability to make easy electronic or on-line payments. The card limits the user's spending by only allowing the amount of money previously deposited on the card to be used, giving the cardholder full control over his or her expenses.

The card is the smart option for spending control and travel, and perfect for gift occasions such as graduations, as well as weddings and baby showers, so the happy couple may purchase exactly what they need ... -

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Posted By: Al-Cordoby
Date Posted: 14 April 2010 at 12:48pm

Global takaful market forecast to surpass $8.8 billion this year 

The third edition of Ernst & Young's World Takaful Report 2010: Managing performance in a recovery, unveiled at the 5 th Annual World Takaful Conference of 2010, confirms that global Takaful industry is well on course to surpass US$8.8 billion in contributions in 2010. Contributions grew by 29% in 2008 to reach US$5.3 billion. Takaful refers to Shari'a-compliant cooperative insurance. - Saudi Arabia and Malaysia are biggest markets

Saudi Arabia, with contributions totalling US$2.9 billion in 2008, and Malaysia with US$900 million are the top two takaful markets in the world. Sudan is the most significant market outside of the GCC and SE Asia, with contributions totalling US$280 million in 2008.

UAE and Indonesia are fastest growing markets ...$88-bil.html -$88-bil.html

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Posted By: Al-Cordoby
Date Posted: 18 April 2010 at 5:30pm
Islamic Development Bank (IsDB) and IFAD Signed Landmark Co-financing Agreement of US$1.5 Billion to help the Poorest People in Africa and Asia\ -\

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Posted By: Al-Cordoby
Date Posted: 22 April 2010 at 1:13am

A recent TV interview conducted by Dr. Tariq Ramadan with Dr. Tarek El-Diwany titled (How Can Muslims Conduct Business Ethically in Today's World) which is a very interesting program - -

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Posted By: Al-Cordoby
Date Posted: 26 April 2010 at 4:16pm
 Deutsche Bank forms Shariah-compliant home financing firm

JEDDAH - Deutsche Bank AG announced on Monday the formation of Deutsche Gulf Finance, a joint venture Shariah-compliant home financing company owned 40 percent by the bank's Riyadh panch and 60 percent by a group of prominent Saudi-based investors, led by Fahad Abdullah Abdulaziz Al Rajhi.

The launch of Deutsche Gulf Finance comes at a pivotal time for consumer finance in - .

According to Deutsche Bank Research, the total outstanding home finance provided by the private sector in Saudi Arabia aggregates to less than 1 percent of GDp compared with well over 50 percent in most developed countries, and approximately 6 percent in - and 7 percent in the UAE.

Deutsche Bank Research projects Saudi Arabia will need 1.2 million additional housing units by 2015.

"We are excited to partner with Deutsche Bank and benefit from its global experience in housing finance. Deutsche Gulf Finance will benchmark itself against international best practices and looks forward to contributing to the growth of home ownership in Saudi Arabia," Fahad Abdullah Al Rajhi said.

The company has an initial capitalization of approximately $110 million, and at first will provide Shariah-compliant home financing for properties located in Saudi Arabia, with plans to expand its operations into - , - and Kuwait over time. Deutsche Gulf Finance has commenced financing completed units as well as those under construction on individual lots or at real estate developments.

Jamal Al-Kishi, Deutsche Bank's chief country officer in the Kingdom, added: "The establishment of Deutsche Gulf Finance signifies our commitment to poaden and deepen our presence in Saudi Arabia." -

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Posted By: Al-Cordoby
Date Posted: 27 April 2010 at 2:33pm
A moral economy: interest, usury and Islam, by Ann Pettifor
The Qu’ran lays down clear ethical boundaries for lending and borrowing, and for trade.

These boundaries have been vital in the maintenance of great civilisations. As  Karl Polanyi, the great economic historian argued (in his 1944 book “The Great Transformation”) – the regulation of the conduct of human affairs by law  is vital to the maintenance of civilised society, and to the market, because

“robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as the victims of acute social dislocation through vice, perversion, crime and starvation…. neighbourhoods and landscapes defiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed”.

So one of the great contradictions we in the West face today is this: law – or regulation –  needs boundaries, in particular ethical boundaries; but also geographical and political boundaries.

However markets, in particular financial markets, abhor boundaries.

How do we reconcile therefore, the ethical boundaries/regulation advocated by the world’s great religions with the resistance of, in particular financial markets, to these boundaries?
That is the great challenge faced today by  those who would promote the notion of a moral economy.

One of the most important ethical boundaries set by the Prophet in the Qu’ran has to do with the ‘price’ paid for a loan: the rate of interest. While many would regard the Qu’ran’s strictures on interest rates as antiquated, I would like to argue that they are acutely relevant to today’s financial crisis. ... -

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Posted By: Al-Cordoby
Date Posted: 29 April 2010 at 1:35am

Paving the Way for the Post-Banking Economy

This 2-day conference will take place this weekend (1 & 2 May 2010) in Norwich, UK, to analyze the current breakdown of the world's financial system and to discuss economic strategies for the future and the move to a post-banking economy -

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Posted By: Al-Cordoby
Date Posted: 30 April 2010 at 1:57am
Bank Negara Malaysia Hosts Global Islamic Finance Forum 2010

Bank Negara Malaysia is pleased to host the second Global Islamic Finance Forum (GIFF). Themed "Islamic Finance: Opportunities for Tomorrow", GIFF 2010 will be held in Kuala Lumpur from 25 th to 28 th October 2010. GIFF 2010 is a key international event in the calendar of Islamic finance following the success of the inaugural GIFF in March 2007.

GIFF 2010 is a high-level multi-track event that brings together regulators, scholars and financial industry players who are key drivers in shaping Islamic finance globally. This event is organised in collaboration with the Association of Islamic Banking Institutions Malaysia (AIBIM), Malaysian Takaful Association (MTA), the International Shari'ah Research Academy for Islamic Finance (ISRA) and the REDmoney Group.

GIFF 2010 is organised in support of the Malaysia International Islamic Financial Centre (MIFC) initiative to develop Malaysia as a hub for international Islamic finance. ... -

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: a well wisher
Date Posted: 30 April 2010 at 11:40pm
Post-Crisis Reforms: Some Points to Ponder by Mufti Muhammad Taqi Usmani

Mufti Taqi Usmani writes: In modern economics, we are used to a purely materialistic and secular approach that does not allow religious concepts to interfere with its theories and concepts, on the premise that economy is outside the domain of religion. It is, however, an interesting irony that every dollar note has the admission: “In God we trust”, but when it comes to develop theories to earn dollars or to distribute or spend them, trust is placed only on human ideas based on personal assessments; God is held totally out of picture, as being irrelevant to economic activities!

It is perhaps for the first time that, as an aftermath of the present financial crisis, when different quarters are coming up with different suggestions to solve the problem, the ‘World Economic Forum’ has invited representatives of religion to give their input to the initiative of reshaping the economic set-up on the basis of values, principles and fresh thoughts. This commendable initiative deserves full support from religious circles. As a humble student of Islamic disciplines, and particularly of Islamic economic principles, I would like to highlight some basic points, derived from Islamic economic precepts, that I believe, are essential for independent and fresh consideration while seeking solutions to our economic problems…. - Read entire paper… Mufti Taqi Usmani: Post-Crisis Reforms -

La ilaha ill-Allah, Muhammadur Rasulullah

Posted By: Al-Cordoby
Date Posted: 02 May 2010 at 12:43am

Equity-focused Islamic market will reap long-term gains

At the micro level, the economics of using equity or debt are still the same. Companies will choose whichever tool suits them best as a means of raising funds. 

What hurt the market was the excessive leveraging and speculation via debt instruments. As with most things in life, anything that is excessive in nature will usually lead to trouble. 

Islamic finance fundamentally prohibits the activities of pure speculation and excessive leveraging, which is why Islamic finance is perceived to be the right answer to the problem. 

If a company raises funds through a Shariah-compliant debt instrument excessively and uses it to speculate in Shariah-compliant equity instruments, the risk is huge regardless of whether the instruments are Shariah-compliant or not. Therefore, the problem lies in the ethics and principles, not the instruments.

A debt instrument, however, is generally frowned upon in Islamic finance because the risk is lopsided. Islamic finance hence favoors the use of - mudaraba (profit sharing) and - musharaka (joint venture) because it is supposedly more just in the allocation of risk amongst the participants. 

In the absence of ethics and principles, both mudaraba and musharaka are also instruments that can be abused. At the macro level, however, the benefits of mudaraba and musharaka are very clear. They promote risk-sharing and spread the impact of an adverse condition amongst participants, thereby increasing the sustainability factor of a market ... -

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 05 May 2010 at 12:06am

Islamic banking not profit driven but ethics, morals-entrenched

KUALA LUMpUR -- "The Islamic banking and finance model is not one based on profitability alone but one in which ethics and morals play a key and defining part, Executive Chairman of Asian Finance Bank Mohamed Azhari Kamil berkata told KUNA on Monday.

"The Islamic value system as a whole is at the heart of all our products and services," he said, "and this goes hand in hand with and aids efforts to establish trust and belief in the Islamic banking model." The expert noted that "the basic principles of good relations with clients and entrenching the overall spirituality of the Islamic way of life was somewhat neglected in the Islamic banking field in favor of technical and structural aspects of the workings of the system.

"We should be more interested to see individuals succeed than to see a financial institution make profits," he said.

"Putting both components at work (technical and ethics-related aspects) would provide the international community with the feasible alternative for the traditional banking system it is seeking as the pressure of the global financial crisis persists." "We can not deny the importance of the traditional system, with its great expertise and proven efficiency in many areas ... But the Islamic system has the added advantage of a solid ethical basis," the expert remarked. "As a budding market, the Islamic system still needs to focus on entrenching its code of ethics and mode of action before leaning more heavily towards actual innovation in products and services," he also stressed.

The expert also addressed the issue of manpower and expertise. He said it is vital to train and create manpower which includes scientists, researchers, academicians, as well as traders and bankers to bolster the Islamic banking system globally and to promote it ... -

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

Posted By: Al-Cordoby
Date Posted: 05 May 2010 at 11:55pm

Australia gearing to expand Islamic finance

Australia will review its tax laws to ensure - Islamic finance , banking and insurance products can expand, a top official said.

Australia's Assistant Treasurer and the Minister for Financial Services, Corporate Law and Superannuation, Chris Bowen, said the Board of Taxation would undertake a comprehensive review of Australia's tax laws "to ensure that, wherever possible, they do not inhibit the expansion of Islamic finance, banking and insurance products".

The Assistant Treasurer, made the announcement at a major - business event in the UAE jointly organised by the Australian Business Group of Abu Dhabi and the Australian Business Council of - Dubai , with the support of the Abu Dhabi Chamber of Commerce and Industry.

The event was attended by key figures from business, finance and banking across the Gulf region.

The Islamic finance, banking and insurance market is worth almost $1 trillion (Dh3.67 billion) and could reach as much as $5 trillion, according to Moody's Investor Services.

"Islamic finance is a rapidly growing part of the global financial system and Australia is in an excellent position capitalise on that growth, but we have to identify if our tax system doesn't unnecessarily prevent that from happening," said the Assistant Treasurer, who was on a two-day visit to the UAE ... -

Think Win-Win for a better world for all... - My Blog - Muslim Heritage

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