Category Archives: Islamic Banks

Are more and more Islamic banks shunning Tawarruq?

Are more and more Islamic banks shunning Tawarruq?


The Islamic finance market has welcomed the recent resolution passed by the International Council of Fiqh Academy, which is an organ of the Organization of the Islamic Conference (OIC), on the contentious contract of Tawarruq, which is used as a cash management instrument by some Islamic banks. Some Islamic bankers and others providing such services, especially in Europe and Asia, are keen for further clarification as to whether the resolution merely applies to Tawarruq per se or also to commodity Murabaha contracts as they are currently practiced.

According to the International Council of Fiqh Academy ruling "technically, according to the Fiqh jurists, Tawarruq can be defined as: A person (mustawriq) who buys a merchandise at a deferred price, in order to sell it in cash at a lower price. Usually, he sells the merchandise to a third party, with the aim to obtain cash. This is the classical tawarruq, which is permissible, provided that it complies with the Shariah requirements on sale."

However, in recent years the practice of organized Tawarruq has emerged. This is defined — "when a person (mustawriq) buys merchandise (commodity) from a local or international market on a deferred price basis. The financier arranges the sale agreement either himself or through his agent. Simultaneously, the mustawriq and the financier execute the transactions, usually at a lower spot price. Reverse Tawarruq, is similar to organized Tawarruq, but in this case, the (mustawriq) is the financial institution, and it acts as a client."

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HSBC Amanah to launch first sukuk fund

HSBC Amanah to launch first sukuk fund


HSBC Amanah, the financial group’s Islamic division, said it will start marketing its first Islamic bond fund on Monday as it bids to tap into investors’ appetite for the asset class.

The HSBC Amanah Sukuk Fund, domiciled in Saudi Arabia, will comprise Islamic bonds, or sukuk, issued by 12 to 14 companies, mostly in the real estate, commercial banking and utilities sectors based in the Gulf Cooperation Council (GCC) area.

An HSBC spokeswoman said on Friday it would seek to raise $100 million for the fund, which has a four-year maturity and will target mid- to high-single-digit annual returns.

Three quarters of the bonds will be issued by corporates with the balance issued by GCC governments.

The sukuk market boomed in 2007, reaching $33.1 billion, but slowed down in 2008. The market is expected to pick up in the second part of the year and last month Indonesia raised $650 million through a sovereign sukuk and the issuance was subscribed seven times over.

Unlike a mainstream bond, sukuks generate income for its holders without paying interest. Most of the sukuks included in the HSBC fund will be lease and buy back structures, known as Ijara.

The fund will use private banks in Saudi Arabia and the rest of the GCC as sales intermediaries and will invite investments in dollars, Saudi riyals, Qatari riyals and the Emirati dirhams.

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Pakistan: Islamic banks’ deposits grow by 18% amidst recession in conventional banks

Pakistan: Islamic banks’ deposits grow by 18% amidst recession in conventional banks


At a time when deposit growth of conventional banks has almost stagnated, Islamic banks are enjoying handsome growth in deposits, indicating increasing preference to Islamic banking in the country.

According to latest data, deposits of Islamic banks rose by Rs 31 billion or 18 percent to Rs 202 billion at the end of second quarter of current fiscal year (Oct-Dec 2008) from Rs 171 billion at the end of first quarter (Jul-Sep 2008).

It is pertinent to mention here that deposits of overall banking industry rose by Rs 20 billion or 0.52 percent to Rs 3.801 trillion from Rs 3.781 trillion during the quarter under review. This means that there was negative growth in deposits of conventional banks during the quarter and the growth in overall banking industry’s deposit base came only from Islamic banks.

There was a phenomenal growth of 40 percent in the number of branches of Islamic banks during the quarter. Islamic banks had 514 branches at the end of December 2008, an increase of 147 branches from 367 branches at the end of September 2008. Five years ago-at the end of 2003-Islamic banks had only 17 branches.

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Standard Chartered Islamic to Expand in Pakistan

Standard Chartered Islamic to Expand in Pakistan


Pakistan, which faces slowing economic growth and a Taliban insurgency, will remain a “core market” for Standard Chartered Plc’s Islamic banking unit, a bank official said.

“Pakistan is a core market for us,” Afaq Khan, the Dubai- based chief executive officer of Standard Chartered’s Saadiq Islamic unit said in an interview in Singapore. “We take a very long term view of the economy. These are very small aberrations, if you will. Investors who take a strategic view on Pakistan see it as an opportunity.”

Standard Chartered has eight Islamic bank branches in the country and “a plan for expansion,” he said last night on the sidelines of the Islamic Financial Services Board summit, without providing details.

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Pak-Qatar Family Takaful Ltd. to provide Takaful to Meezan Bank housing finance customers

Pak-Qatar Family Takaful Ltd. to provide Takaful to Meezan Bank housing finance customers


Meezan Bank Ltd and Pak-Qatar Family Takaful Ltd have signed an agreement whereby all customers of Meezan Bank’s Housing Finance (Easy Home) will be provided with Shari’ah-Compliant Life Takaful Coverage. Irfan Siddiqui President and CEO Meezan Bank Ltd and P. Ahmed CEO Pak-Qatar Family Takaful Ltd. signed the Takaful (Islamic insurance) Agreement at a ceremony on Tuesday.

According to the agreement, all housing finance customers of Meezan Bank will be provided comprehensive Takaful that will cover not only life but also accidental and natural disability. Moreover, the premium for the first year will be paid by the bank which is to be adjusted later.

The insurance penetration in Pakistan is only 0.3 per cent of its total GDP, which means just 10 to 15pc families are opting out this facility, while in developing countries 60 to 70pc families go for this.

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