Category Archives: Current trends and news

Naymet Islamic Microfinance to launch Islamic microfinance product in Pakistan

Naymet Islamic Microfinance to launch Islamic microfinance product in Pakistan

<strong>Location: </strong> Hyderabad, India
<strong>Industry: </strong>Financial Services
<strong>2007 Sales: </strong> NA

Grameen Bank, the organization founded by Nobel Prize winner Muhammad Yunus, may be the best-known practitioner of microfinance, which provides small loans and other financial services to the poor. But advisory board member Tarun Khanna, a professor at Harvard Business School, believes Hyderabad, India-based SKS Microfinance (privcapId=26522095) could have even more impact. (Khanna is on the board of the organization.) For one, it's "unabashedly for profit," Khanna says, which means it's growing fast and plowing those profits back into building new systems and greater scale. Already, SKS has 14,000 employees and 3.5 million customers throughout India, and is adding 300,000 new customers each month.

Pakistan’s AlHuda-Centre of Islamic Banking (CIBE) and Economics has signed a Memorandum of Understanding with Naymet Islamic Microfinance to develop Islamic Microfinance Products for Naymet Microfinance.

AlHuda CIBE will operate manuals of Islamic financial products. It will provide accounting and auditing measures, Shariah supervision, and help in training staff members. It will also facilitate Naymet Islamic Microfinance in advisory for Shariah complaint I.T solutions.

Mr. Muhammad Zubair Mughal, Chief Executive Officer, AlHuda CIBE said that Alhuda Centre of Islamic Banking and Economics is very eager to develop Islamic Microfinance products. He added that Islamic microfinance is not only developing within Pakistan but Bangladesh, Lebanon, Syria, Malaysia, Indonesia South Africa and other countries are also benefiting from the products of Islamic microfinance.

President, Naymet Islamic Microfinance, Mr. Shahid I. Mohammad said, "It’s our privilege to establish a working relation with AlHuda CIBE. Islamic microfinance products will be very beneficial in developing Shariah complaints industry. It will be a step forward to flourish a web of Islamic microfinance products network in Pakistan that will be very poverty alleviation and uplifting the economy of the country".


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.


Mahathir Mohamad hails Islamic banking as "superior" to conventional banking

Mahathir Mohamad hails Islamic banking as "superior" to conventional banking

Malaysia’s outspoken ex-prime minister Mahathir Mohamad has blamed Western lending practices for the world’s financial problems and hailed Islamic banking as a "superior" model.

On Tuesday, Mahathir told a conference on Islamic finance in Singapore that the 2008 global financial crisis was sparked by excessive lending by western banks.

Islamic banks, in contrast, are constrained because every deal needs to be backed by a real asset under the principles of sharia law, he said.

"So if you make a comparison, the Islamic system is in many ways superior to the conventional banking system," said Mahathir, who steered Malaysia through the 1997-98 Asian financial crisis and stepped down as prime minister in 2003.

"The conventional banking system is much more open to abuse than the Islamic banking system.

"So far, the Islamic banks have not been involved in the present crisis except those perhaps who dabble in the money markets in the West.

"Islamic banking is almost immune to these kinds of crook deals."

Islamic banking fuses principles of sharia and modern banking methods. Islamic funds are banned from investing in companies associated with tobacco, alcohol or gambling.

Sharia-based finance also bans interest, which is seen as usury, and risks are shared between the creditor and borrower.

"The conventional bank lends 30 times the amount of money that they have but the Islamic bank, because they have to participate in taking the risk, will have to be much more careful," Mahathir said.

Mahathir, 85, attacked the US Federal Reserve’s controversial decision to pump an extra $US600 billion into the American economy.

"Do you think that they have this money with them that they have it in their vault kept there, $US600 billion to be issued whenever someone needs money?" he said.

"No, they don’t have but they can give the money, $US600 billion dollars, simply because they can create money."

On the prospects of Islamic finance, Mahathir said the industry can grow further, especially in South-East Asia.

He urged Muslims there to tap into business opportunities offered by Islamic finance.

"With Islamic banks being available, there is capital which is now accessible to conscientious Muslims who do not want to be involved with interest.

"Whether Islamic banking prospers or not depends very much on the ability of the Muslims firstly to do business, to understand business."

Assets of Islamic financial institutions increased five-fold to about $US1 trillion between 2003 and 2009, according to credit ratings agency Moody’s.

It estimates the full potential of the industry at $US5 trillion or more.


Palestinians Lure Banks With First Sukuk Bills

Palestinians Lure Banks With First Sukuk Bills

The Palestinian central bank is attracting local banks to its first sale of Islamic bills, part of a plan to jumpstart the Shariah-compliant finance industry.

Palestine Islamic Bank, the largest Shariah-compliant bank in the territories with $364 million of assets, will submit a bid for as much as $10 million, and Arab Islamic Bank said it probably will participate. The Palestine Monetary Authority is seeking to sell as much as $50 million of sukuk maturing in about 18 months to local banks next year in what would be the central bank’s first debt offering, Governor Jihad al-Wazir said in an interview in Ramallah on Nov. 25.

“There is strong demand for such an instrument because Palestine is a mainly Muslim area and many individuals hesitate to deal with conventional banking,” Mahmoud Al-Ram’ah, general manager of Palestine Islamic Bank, said in a telephone interview from Ramallah on Dec. 2. “Our liquidity is high. We have been pushing to invest in a government sukuk.”

Palestinian Authority Prime Minister Salam Fayyad is seeking to expand Islamic finance to reduce reliance on aid from the U.S., Europe, Saudi Arabia and others as the territory starts building institutions for a future state. These contributions have kept the $7 billion Palestinian economy afloat since the Oslo peace accords introduced limited self-rule to the West Bank and Gaza Strip in 1993.

The plan is to use as much as $20 million from the sale for the construction of a new headquarters, al-Wazir said.

Dependence on Aid

The economies of the West Bank and Gaza are heading for 8 percent growth this year, Oussama Kanaan, the head of the International Monetary Fund’s mission to the area, said on Sept. 14. That’s up from 7.2 percent in the West Bank in 2009 and 5.4 percent in Gaza, he said. While some of the growth in the territories, which have a population of 4.1 million, stems from improved investor confidence and the partial easing of restrictions by Israel, the main driver remains foreign donations, the World Bank said in a report to donor countries on Sept. 16.

The Palestinian Authority received $525 million of international aid to support its budget in the first half of 2010, following $1.4 billion last year and $1.8 billion in 2008, according to World Bank estimates.

Peace Talks

The U.S. has been trying to coax Israel and the Palestinian Authority back to peace talks that stalled in September when a 10-month partial Israeli freeze on West Bank settlement building expired. Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas agreed in early September to try to reach an agreement on the framework for a comprehensive peace accord within a year.

The economy has the potential for annual growth of at least 10 percent for several years, provided Israel eases access restrictions, Palestinian Authority National Economy Minister Hasan Abu-Libdeh said in an Oct. 27 interview on Bloomberg Television in Marrakesh, Morocco.

“We are restructuring our economy,” al-Wazir said. “We are creating the instruments that will allow us to develop monetary policy, to build a yield curve and to stabilize the banking sector.”

Global sales of sukuk, which pay returns based on asset flows to comply with the religion’s ban on interest, fell 31 percent this year to $13.8 billion, Bloomberg data show. Issuance reached a record $31 billion in 2007.

‘Charitable Aspect’

The Islamic notes will probably be dollar-denominated because the territories don’t have a single currency, the monetary authority’s al-Wazir said. The Palestinian pound last circulated as legal tender in 1948, when the U.K. gave up its mandate over the territory.

“There could be a charitable aspect attached to investors’ interest” in a possible issue from the territories but it would be “very limited,” Ahmed Talhaoui, the Abu Dhabi-based head of investment at Royal Capital, which is 44 percent-owned by United Gulf Bank BSC, an investment bank in Bahrain, said in an interview Dec. 6. “The issue will have to be very competitive. A lot of political uncertainty which we are seeing in Palestine should be reflected in spreads.”

The difference between the average yield for emerging- market sukuk and the London interbank offered rate shrank 13 basis points, or 0.13 percentage point, to 334 points yesterday and has narrowed 39 basis points since Sept. 30, the HSBC/NASDAQ Dubai US Dollar Sukuk Index shows.

Local Banks

The yield on Malaysia’s 3.928 percent Islamic note due in June 2015 was little changed at 3.05 percent today, according to prices provided by Royal Bank of Scotland Group Plc. The extra yield investors demand to hold Dubai’s government sukuk rather than Malaysia’s widened 8 basis points to 364, according to data compiled by Bloomberg.

Shariah-compliant bonds returned 12 percent this year, the HSBC/NASDAQ Dubai US Dollar Sukuk Index shows. Debt in emerging markets gained 14 percent, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index shows.

The Palestinian Authority owes local banks about $880 million, according to al-Wazir. There are 17 commercial banks in the territories.

The sukuk “will just be a more secure way to make our investments because it will be backed by a performing asset which makes it less risky,” Ibrahim Abu Raidah, manager of the syndicated finance department at Arab Islamic Bank, with about $360 million in assets, said in a telephone interview from Ramallah Dec. 1. “Most of the local banks are already lending to the government.”

The Palestinian territories don’t have a credit rating and any such rating won’t be favorable because of the political risk, al-Wazir said. “The thing that investors should look at is that we were able to make so many achievements in overhauling the economy and financial system despite the political overhang.”

–With assistance from Haris Anwar in Dubai Editors: Shanthy Nambiar, Claudia Maedler

To contact the reporter on this story: David Wainer in Tel Aviv at

To contact the editor responsible for this story: Claudia Maedler in Dubai at


Qatar, the World Cup and Islamic finance

Qatar, the World Cup and Islamic finance


"WE go to new lands!" exclaimed Sepp Blatter, president of Fifa in unveiling Qatar, over the US, for hosting the 2022 Fifa World Cup. Now, how does Islamic finance and Malaysia "ride on the coat-tails" of this incredible opportunity, having missed many opportunities over the years?

The opportunity to build awareness of Islamic finance and have it reach the shores of the 200 plus countries which tune into the world’s only true global event.

The two weeks of exposure in the World Cup event is comparable to two decades of marketing and promotion.

Bold victory

Qatar’s "brash" (as in confident) bid, sleek (as in PR) and bold (as in investments) victory should send a message to many of the economically established Muslim countries, like Malaysia and Turkey, that they can compete on the world stage.

Fifa bought into the vision of new markets, notwithstanding the oppressive heat of the summer (when the world cup games are played), big vision of small sized Qatar (population of about one million and one major city), and the perceived instability of the region.

Obviously, its helps that Qatar is an extremely wealthy country, led by an exceptional leader, the Emir, Sh. Hamad Khalifa Al Thani, who has embarked upon a 21st century vision of a Muslim nation-state that is an integrated responsible global citizen.

The World Cup should be seen as a new beginning for (economically established) Muslim countries, and the Olympics, once considered a distant dream in hosting, may now be within reach for potential host like countries Turkey and Kazakhstan.

Industry body

Islamic finance needs to establish an industry body dedicated to real and professional marketing and public relations of the industry.

The present way and manner of promoting Islamic finance is inefficient, redundant and varying messages, and, at times, self serving (misleading) cheerleading.

Although, 2022 is 12 years away, it is imperative the industry start the process in establishing this industry body today.

The egos must be left at the door, and it must be comprised of the savvy stakeholders of Islamic finance that establish working committees that create a blue-print for the future beyond screening, structuring, and products.

Fifa sukuk

A number of stadiums need to be built, infrastructure to connect, and accommodations to house participants, hence, an ideal situation for financing via ‘FIFA World Cup sukuk’ programme series.

The initial cost estimates of the public works is estimated to be nearly US$50 billion (RM157.15 billion), and some of this will be financed Islamically, adding to Sukuk supply and (hopefully) secondary market liquidity.

Islamic institutions in Qatar, like Qatar Islamic Bank or Mashraf Al Rayan, will naturally be considered early leaders in financing for the 2022 World Cup, and, now, Malaysia, as part of national agenda, should encourage its Islamic banks to be active financing participants.

There is an unsaid and unwritten rivalry amongst the Gulf Cooperation Council (GCC) countries, notwithstanding the recent Wiki-Leaks, and Malaysia has an open doorway to do more on many fronts.

Gulf-based entities have tapped the Malaysian market for (Islamic) financing, and, now Malaysia should expand the financing pipeline. Malaysia, having proved itself domestically and regionally, and, now, needs to think larger and globally, and should be encouraged and inspired by Qatar’s victory.

Beyond the bidding for financing for the stadiums, infrastructure and accommodations, Malaysian Islamic banks should look into merits of naming rights for the stadium, and it should be viewed as an investment, not a cost, in the Malaysian brand.

This builds the brand awareness for not only the fans attending, but, more importantly, the international community viewing the games on television.

The World Cup will have not only hundred of thousands of Muslims fans attending, but a number of Muslim country participants (in 2010), like Nigeria, and Muslim players who are conscious of the quality of foods. Additionally, many non-Muslims will also be attending and enjoying the games, hence, an incredible opportunity to showcase the US$640 billion (RM2.01 trillion) halal Industry.

The state of halal certification in the GCC is fragmented, hence, a captive opportunity to raise the overall profile of the halal industry, show Malaysia’s leadership in the space, encourage Malaysian certification standards and companies, and so on.

It is not too early for halal Industry Development Corporation to start thinking about a game plan here, or else, say, Brunei halal may just beat them to the cup, and "eat" their lunch!

WiIl Malaysia, having sent an astronaut, Muszaphar Shukor Sheikh Mustapha, into space, will it be able to put together and train a team that qualifies for the 2022 World Cup? This is the needed inward investment that produces a return on investment beyond the usual numbers.

Qatar’s award for the 2022 World Cup is a Goliath victory for all emerging markets and people, and, now, the ball in Malaysia’s pitch! Do something!