Category Archives: Bahrain

Bahrain to share its Islamic finance expertise with Ireland

Bahrain to share its Islamic finance expertise with Ireland

A senior Irish delegation headed by Matthew Elderfield, the country’s top regulator, and former Prime Minister John Bruton, was in Bahrain on Wednesday for the signing of a memorandum of understanding between the two countries.

The agreement is set to pave the way for increased cooperation between the Central Bank of Bahrain and the Central Bank of Ireland, including on the supervision of financial institutions, investment and insurance businesses and collective investment schemes.

The signing ceremony – just a day after the European Council released emergency funds to Ireland and its government unveiled a swinging €6bn emergency Budget – followed a seminar hosted by the visitors entitled "Ireland – the financial services gateway to Europe".

In a statement, the Central Bank of Bahrain said it offered the Irish delegation its expertise in the field of Islamic finance.

It said: "This event aimed to identify investment opportunities in the Republic of Ireland and exchange Bahrain’s experiences and knowledge in the fields of Islamic finance and financial services in general."

The memorandum was signed by Elderfield and Abdul Rahman Al Baker, executive director for financial institutions supervision at the CBB.

Al Baker said: "We look forward to working with the Central Bank Of Ireland in order to further enhance the cooperation in the field of financial services.
"This MOU represents the mutual understanding which will surely initiate further opportunities between the two countries."

Bruton is chairman of Ireland’s International Financial Services Centre.


Annual AAOIFI conference in December 2010

Annual AAOIFI conference in December 2010


The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) has announced that it would hold its annual conference on Islamic banking and finance next month.

The event, from December 1 to 2, will be held at the Crowne Plaza.

It is being organised in co-operation with the World Bank and participation of the National Commercial Bank under the auspices of the Central Bank of Bahrain.

It further emphasises Bahrain’s world leadership in the Islamic finance industry on the final day of the WIBC.

"AAOIFI is proud to organise such a high-level annual conference which addresses important topics and issues related to accounting and Sharia audit," said secretary general Dr Mohamad Nedal Alchaar.

"The conference is a key source of knowledge and information for businessmen, financiers and Sharia scholars.

"This year, we will discuss a number of topics, including corporate governance requirements for Sharia supervisory boards, conflicts between fatwas issued by different boards, addressing insolvencies in Islamic financial institutions, challenges in the capital markets, non-compatibility of certain international standards with Islamic financial transactions as well as applying Wa’ad "promise" and Irboon "earnest money" in Islamic financial transactions.

"These topics will be addressed by distinguished professionals," he added.

The conference will be followed from December 3 to 6 by intensive training courses under the Certified Sharia Adviser and Auditor programme, which includes Sharia compliance and review of processes in Islamic financial institutions, Sharia standards issued by AAOIFI on Islamic financial instruments and practices.

The main sponsors of the conference are Bahrain Islamic Bank, Al Baraka Banking Group, Jordan Islamic bank, Kuwait Finance House, Ithmar Bank, Gulf Commercial Bank, Path Solutions and ITS.

The AAOIFI is a Bahrain-based international autonomous not-for-profit organisation whose role is to develop accounting, auditing, ethics, governance and Sharia standards for Islamic financial institutions.


AAOIFI May Limit Shariah scholars’ role

Business Week: AAOIFI May Limit Shariah scholars’ role


A Bahrain-based agency is proposing new rules for religious scholars involved in the $1 trillion Islamic finance market, aiming to reduce the risk of conflicts of interest or improper disclosure.

The guidelines may address whether Shariah scholars can own shares in the institutions they serve and how many advisory boards they join, said Mohamad Nedal Alchaar, secretary-general of the Accounting & Auditing Organization for Islamic Financial Institutions, whose standards have been adopted in countries including the United Arab Emirates and Qatar.

“There’s a potential case for conflict of interest, and a case of information leakage or perhaps competition impact,” Alchaar said in an Aug. 5 telephone interview in Kuala Lumpur. “We wanted to address the concerns in an unbiased manner. When the guideline is published it will be a bold move and it may cause a stir.”

The proposals underline concern that Islamic financial products, designed to comply with Shariah law to be acceptable to devout Muslims, may be overseen by scholars who have a financial interest in their issuance. Global standards are still developing in the industry, whose assets are forecast by the Kuala Lumpur-based Islamic Financial Services Board to almost triple to $2.8 trillion by 2015.

AAOIFI, which has 200 members, sets accounting and auditing standards that are used in Bahrain, the Dubai International Financial Centre, Jordan, Lebanon, Qatar, Sudan and Syria, according to its website. The agency said its guidelines have also been used to help frame policy in Australia, Indonesia, Malaysia, Pakistan, Saudi Arabia and South Africa.

Financial Fatwas

Fatwas, the judgment of a scholar based on his interpretation of Shariah law, are essential for products to be vetted and offered by financial institutions to Muslims. Islamic law restricts investors to transactions based on the exchange of assets rather than money alone because interest payments are banned.

Chicago-based Failaka Advisors LLC, an advisory company which monitors and publishes data on Islamic funds, lists 253 practicing scholars worldwide in its 2008 report. The top 10 include Sheikh Nizam Yaquby of Bahrain, Mohammad Daud Bakar of Malaysia, Pakistan’s Muhammad Taqi Usmani, Abdul Sattar Abu Ghuddah of Syria, and Saudi Arabia’s Mohammed Elgari, it said.

Yaquby serves on the Islamic boards of 52 institutions including New York-based Citigroup Inc. and London-based HSBC Holdings Plc. Bakar advises firms such as Paris-based BNP Paribas SA, according to the data. Credit Suisse Group AG of Zurich and Standard & Poor’s are among 31 firms that seek advice from Elgari, the report shows. Yaquby didn’t respond to an e- mail request for an interview and Mohammad Daud Bakar said he couldn’t respond to questions immediately.

Scholar Shortage

The Bahrain-based agency also plans to address concerns that scholars’ private companies receive preferential treatment from banks they advise, Alchaar said.

The Islamic finance industry is “increasingly scrutinizing the role of scholars, and questioning what the best practice should be,” Omar Shaikh, a board member of the Glasgow-based Islamic Finance Council U.K., said in May. “As the industry is beginning to work toward critical mass, scholars may need to tweak their roles at financial institutions.”

Financial institutions can’t find enough scholars to accommodate the demand for new Shariah-compliant products, Khalid Howladar, a Dubai-based senior analyst at Moody’s Investors Service, wrote in a report in May.

“The shortage of top Islamic finance scholars means that a small group of reputable individuals are a key factor in the Shariah compliance process,” he wrote. “This concentration creates a bottleneck when demand is high, and puts them and their offices under considerable pressure to deliver their approvals quickly.”

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Bahrain sukuk attracts $4 billion

Bahrain sukuk attracts $4 billion


Bahrain’s $750 million sovereign sukuk issue attracted an order book of about $4 billion with strong demand from the Middle East, a lead manager said, giving a promising sign to cash-stripped corporates to tap markets.

Bahrain, the first sovereign to issue a sukuk in the Arab region this year and only the second globally.

The initial size of the sukuk offering was $500 million, but the issue was oversubscribed by almost eight times. As a result, the value of the sukuk was raised to $750 million, a Central Bank of Bahrain statement said.

“One of the major reasons behind this issue was to establish a yield curve benchmark for longer-term Islamic securities,” said Shaikh Salman bin Isa Al Khalifa,  executive director, banking operations, CBB.

“This is a testament to Bahrain’s strong credit and the confidence which International markets place on the kingdom’s financial sector,” added Shaikh Salman.

The sukuk was priced at the low end of expectations at 340 basis points over US Treasuries.

Islamic bonds, or sukuk, are underpinned by physical assets whose returns are used to pay bond-holders, to account for Islam’s prohibition of interest.

Some 55 percent of the issue went to Middle Eastern investors, with Europe accounting for 26 percent and Asia for 15 percent of the investor base of almost 200 accounts, Dawood said.

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Kuwait Finance House appoints ITS to provide integrated ‘Ethical Banking’ solution

Kuwait Finance House appoints ITS to provide integrated ‘Ethical Banking’ solution


Kuwait Finance House – Bahrain (KFH-Bahrain) announced today that it has appointed the computer group International Turnkey Systems (ITS) to provide an integrated ‘Ethical Banking’ solution to support the Bank’s expansion plans.

The one year contract includes upgrading the Bank’s core banking system, integrating the branch automation system, trade finance, Islamic finance, internet banking, in addition to services related to human resources and treasury. The combined solutions will benefit the customer by providing greatly enhanced services from the Bank.

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