| Published 15/01/2011 |
| With assets reaching the US$ 1 trillion, the growth of Islamic finance can no longer be ignored. It has outperformed conventional finance, expanding fourfold over the past three years. Many experts have even wondered whether the global financial crisis could have been averted by a financial system based on Shari’a principles.
This is an interesting scenario to consider: had the Islamic principles of full transparency and disclosure, fairness towards the customer and profit-sharing amongst investors been applied, there is a chance the financial crisis would not have had the same magnitude. The growth of Islamic finance as an alternative financial management model in the post-financial crisis era continues to flourish even in new regions. One such world opening up vigorously to Islamic finance is Africa. With a predominant Muslim population of about 495 million, the continent holds promising growth opportunities for Islamic finance. Even though a number of countries mainly in the northern part of the continent already have some Islamic banking activities, the appetite for financial products that comply with Sharia is rising in a number of other countries mostly in the sub-Saharan region as the continent awakens to the ideological and practical richness and relevance of this form of alternative banking. East Africa Kenya was the first country in East and Central Africa to allow the operation of Islamic Banking when the Central Bank of Kenya approved First Community Bank (FCB) on May 29, 2007, to operate as a full-fledged Sharia-compliant commercial bank. The Bank kicked off with an initial paid-up capital base of $15 million which, however, is expected to be increased as business grows and balance sheet expands. FCB has branches in six out of Kenya’s eight provinces. Gulf African Bank, which got CBK approval later in 2007, is the second full-fledged Sharia compliant bank in Kenya. In neighbouring Tanzania, private investors have received an in-principle approval from the Bank of Tanzania to establish their own Islamic bank to be called Islamic Bank of Tanzania. Perhaps more importantly, the Jeddah-based Islamic Corporation for the Development of the Private Sector (ICD), the private sector funding arm of the Islamic Development Bank (IDB) Group, is in the process of applying for an Islamic banking licence in Uganda, a member country of the IDB. The rationale, according to general manager and CEO of ICD Khaled Al-Aboodi, is to establish the bank in a member country, which could then enter into the other countries of the region and to finance or do business in these countries, irrespective of whether they are IDB member countries or not. Ethiopia In Ethiopia, the government of Prime Minister Meles Zernawi is treading cautiously by promoting the establishment of a home-grown Islamic banking industry. The idea is to authorise the first local Islamic bank on the basis of only Ethiopian shareholders. As such, no foreign investors or Islamic banks would be allowed to have shares. The Bank of Ethiopia published the 2008 banking business proclamation, effectively a draft consultation document outlining the introduction of interest-free banks in Ethiopia. The Bank of Ethiopia in June 2010 published guidelines for conducting interest-free banking, which once adopted would pave the way for the launch of the country’s first Islamic bank. In 2008, Ethiopian Muslim investors set up the ZamZam Bank Share Company and is set to become the first Islamic bank in Ethiopia. Nigeria Nigeria with a population of 140 million people is not only the most populous country in Africa, but it is also the largest economy in West Africa. Sixty percent of Nigerians are Muslims and in response to their demands to have a bank that meets their religious, moral and ethical aspirations, efforts are in progress by a number of corporate bodies, individuals and Islamic organisations to achieve this goal. And with the release of the regulatory frame work of Islamic banking by the Central Bank of Nigeria in February 2009, all is now set for JAIZ, the first Islamic bank in Nigeria to commence full commercial operation. Mauritius Mauritius has been amending its banking and tax laws to become a preferred destination for Islamic banking and finance operations. The country has largely done away with double taxation aspects of the law as a prelude to meeting the requirements of Islamic finance contracts. On August 7, 2007, amendments were made to the Banking Act that allowed Islamic banks. Conventional banks also showed interest in setting up Islamic windows. According to the Governor of the Bank of Mauritius Rundheersingh Bheenick, there are over 20 commercial banks in Mauritius that may opt to offer Islamic banking through a special window, or by launching a fully-fledged Islamic banks. HSBC Amanah was the first to launch an Islamic banking window in Mauritius in May 2009, offering a current account and long-term investment account. South Africa The Muslim population in South Africa is relatively small, but both affluent and influential. Islamic banking was introduced in South Africa in 1989 by Albaraka, a niche bank operating with a limited branch footprint. This was the only Islamic offering until 2002, when First National Bank (FNB), one of the four major national banks in the country, launched an Islamic vehicle finance product followed by an Islamic cheque account. Most recently FNB started offering its Sharia-compliant products through its branch in Botswana. In 2006 Absa, the largest retail banking group in South Africa, launched the first comprehensive Islamic offering. This included a cheque account, vehicle finance, transactional savings account, contractual savings account and Islamic wills. This offering was supported by the full range of access support from the largest ATM and branch network in the country, as well as cell phone and Internet banking. About Islamic banking A fact little known to many people is that it is Africa that paved the way for Islamic banking as an industry. The first modern experiment with Islamic banking was undertaken in Egypt under cover, without projecting an Islamic image, for fear of being seen as a manifestation of Islamic fundamentalism. The pioneering effort, led by Ahmad El Najjar, took the form of a savings bank based on profit-sharing in the Egyptian town of Mit Ghamr in 1963. This experiment lasted until 1967 by which time there were nine such banks in the country. These banks, which neither charged nor paid interest, invested mostly by engaging in trade and industry, directly or in partnership with others and shared the profits with their depositors. Thus, they functioned essentially as saving-investment institutions. Thus, even though Egypt has not maintained its lead as pioneer of Islamic banking, Africa has not been left behind and initiatives towards Islamic finance continue in many parts of the continent. Similarly, the principles that drive the system are expected to appeal to many in the continent irrespective of their religious background. The avoidance of unethical investments (“haram” products), discouraging of exorbitant interest rates and prohibition of speculative structures are all virtues that should hold appeal beyond the Muslim populations. The system should equally be a powerful tool for enhancing access to development finance and empowering the poor and vulnerable groups, particularly if Islamic banks extend to rural areas which are currently not effectively served by conventional banking. The prospects for Islamic banking in Africa overshadow the challenges, and the terrain seems conducive since there is high demand for Islamic financial services. The writer is the Managing Director of First Community Bank Ltd |
Islamic finance revolution gains steam in Africa
February 13, 2011Zambia Taps into Islamic Finance
February 3, 2010| By Danstan Asif Kaunda, IOL Correspondent |
| “The guidelines are intended to provide a broader framework for conducting Islamic banking services in the country,” Fundanga told IOL. |
LUSAKA – Zambia is tapping into the thriving Islamic finance industry by formulating guidelines for Shari`ah-compliant banking services for the first time, with bankers expecting the move to accommodate Muslim clients and help the economy of the Southern African country.”The guidelines are intended to provide a broader framework for conducting Islamic banking services in the country,” Bank of Zambia Governor Dr. Caleb Fundanga told IslamOnline.net.
BoZ has finalized regulatory and banking framework for banks that will be offering Islamic financial services in the country.
Dr. Fundanga says the new regulations will enable people to have access to credits for capital investment from the financial institutions according to Islamic principles and without paying interest.
“In Zambia, Muslims are excluded from the banking system on account that Shari`ah prohibits interest.”
Islam forbids Muslims from usury, receiving or paying interest on loans.
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.
Fundanga says one challenge that would face the industry in Zambia is the lack of adequate guidance from Islamic scholars.
“The availability of these Shari`ah scholars in Zambia may pose a challenge given the small proportion of Muslims in Zambia.”
According to the Islamic Council of Zambia (ICZ), Muslims constitute over 12 percent of the country’s 12.5 million people.
Benefits
Experts believe that Islamic finance concept would be very beneficial to the national economy.
Chama Mwanya, a member of Zambian think-tank the Economic Association of Zambia (EAZ), says Islamic finance would help on the issue of borrowing, one factor that the Zambian financial sector has been grappling with for a long-time now.
“Lending rate is still high in Zambia making borrowing for capital investments prohibitive.”
Dr. Fundanga, the Bank of Zambia Governor, hopes by introducing Islamic finance to the market and encouraging Muslims to use the system, Zambia will get a crucial push for its development.
“Islamic banking should be viewed in light of its potential to inject liquidity in the financial markets and its ultimate impact on the cost of funds as well as its ability to capture those who would otherwise be excluded from the banking system on religious grounds.”
This is the first time Zambia looks into developing its Islamic finance industry.
It is taking the cue from several African and would countries which begun developing Islamic finance services to attract wealth and create jobs.
The Islamic banking system is being practiced in 50 countries worldwide, making it 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.
A long list of international institutions, including Citigroup, HSBC and Deutsche Bank, are going into the Islamic banking business.
Currently, there are nearly 300 Islamic banks and financial institutions worldwide whose assets are predicted to grow to $1 trillion by 2013.
what is this?
Affordable Books
May 12, 2009There are a lot of books written on this subject both by muslim and non-muslim scholars who studied the subject. Most of the books are very expensive, though.
I found this book which is cheap and covers the basics. It was written for training bank professional in Pakistan. Check @ http://www.al-rashad.com/index.php?main_page=product_info&products_id=161
Based on lecture notes and handouts prepared for a comprehensive training course for the staff of Meezan Bank. Topics include Islamic contract, modes of financing, and investments. Today the world economic system that is based on interest has resulted in concentrating the wealth in the hands of selected few creating monopolies and widening the gap between the rich and the poor. In contrast Islam encourages circulation of wealth and regards its role as important to an economy as the flow of blood to our human body. Just as clotting of blood paralyzes human body, concentration of wealth paralyzes economy. By Dr Muhammad Imran Ashraf Uthmani. 259 pages HB.
Paperback, 430 pp.
Success Story of Our Brothers
May 4, 2009Abdi Seid
Ethiopia has approximately 22 times more muslim population than South Africa and five times more than Kenya muslim population. Until now we don’t have an Islamic banking service. Though, there is one on the process-Zamzam Bank. In South Africa with a muslim population of 1.5% there is one independent Islamic bank Albaraka operational since 1989. In addition there is a conventional bank ABSA through its Islamic division provide service to the muslims since 2006. There are other investment firms too.
Kenya has two Islamic banks: Gulf Africa and First Community Bank. The Insurance industry in Kenya also is in the process of developing Sharia compliant products and services.
As we see the success story of these two countries which has by far has less muslim population than Ethiopia, it can be said that what matters isn’t the number of population but how organized and dedicated the society is to promote and live up to its Islamic values and principles. We Ethiopians have to learn from this example of success story and work hard to promote and establish Islamic banking services in our country.
Gulf African Bank banking hall. Islamic banks are stepping up their foray into Sub- Saharan Africa.
Vatican backs Islamic finance
May 4, 200901 April, 2009
L’Osservatore Romano, a daily newspaper in the Vatican regarded as the mouthpiece of the Pope, has endorsed the values of Shari’ah-compliant finance as a solution to the problems in the world of conventional, interest-based finance. The paper suggested that the ethical foundations of Islamic finance should be adopted by conventional banks as a way of restoring the trust of their depositors and shareholders. It also stated the belief of the Vatican that the Islamic financial system could help the global financial system overcome the crisis.
‘The ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service,’ said L’Osservatore Romano. The article also quoted a fixed income specialist from Abaxbank Spa, the Italian investment bank of Credem Group, as saying: ‘Western banks could use tools such as the Islamic bonds, known as sukuk, as collateral’. Sukuk, the Shari’ah-compliant alternative to conventional bonds, could finance the ‘car industry or the next Olympic Games in London’. The Vatican has previously been critical of the destructive excesses of the interest-based conventional financial system during the ongoing crisis. The Pope, Benedict XVI, alluded late last year to the illusory nature of fiat money, and the Vatican has also recently been critical of the free market system.
http://www.newhorizon-islamicbanking.com/index.cfm?section=news&id=10751&action=view&return=home
Technical and Financial Assistance
May 4, 2009International fiance corporation is a part of world Bank group which provides financing and technical assistance to those who wants to set up Islamic Banks. They have assisted the second Islamic bank ( Gulf African Bank) in Kenya with 10% equity. According to the current regulation foreign investment isn’t allowed in banking business in our country. I don’t know how the financial investment of this organization is treated in the current regulation. However, at least new start-up Islamic bank can get the technical assistance and advisory services. Ethiopia is a member of this organization.
Contact address:
Kenya, Nairobi
(also serves: Burundi, Djibouti, Eritrea, Ethiopia, Rwanda, Somalia, Sudan, Tanzania and Uganda)
Jean Philippe Prosper
Director
International Finance Corporation
Commercial Bank of Africa (CBA) Building
Mara/Ragati Road
Upper Hill
Tel: (254 20) 275-9000
Fax: (254 20) 275-9210
http://www.ifc.org/ifcext/africa.nsf/Content/Home
Islamic development Bank Jeddah also provides similar assistance. I am not sure this assistance is extended to non-member countries or not. Information can be otained at the Saudi embassy in Addis Ababa or contact directly. According to New Horizon, IDB has contributed over $200 million worth of technical assistance to around 70 Shari’ah-compliant financial institutions worldwide, including banks, finance houses, investment, insurance and leasing companies. http://www.isdb.org
Scholarship
May 1, 2009
Qatar Faculty of Islamic Studies
QFIS offers a number of prestigious scholarships for international students including:
- His Highness Sheikh Hamad Bin Khalifa Al Thani Scholarships
- Her Highness Sheikha Mozah Bint Nasser Al Missned Scholarships
- Sheikh Yusuf Al-Qaradawi Scholarships
- Scholarships endowed by honourable supporters of QFIS
http://www.qfis.edu.qa/files/pdf/QFIS_Scholarships%202009-2010.pdf
Bank Negara Malaysia
Shariah Scholarship Award
The Shariah Scholarship Award is part of the Fund for Shariah Scholars in Islamic Finance, which was established to enhance knowledge, research, talents, and intellectual discourse in the field of Shariah. The Fund represents Bank Negara Malaysia’s commitment to strengthen the development of the Islamic financial industry. [See also: Shariah Research Grant]
The Scholarship is aimed at enlarging the pool of Shariah scholars who are well-equipped with the necessary knowledge and competencies in both Shariah and Islamic finance.
The Scholarship is available to qualified candidates pursuing the following:
- Post-graduate (Masters or Doctorate) study at recognised institutions of higher learning in the field of Shariah, specializing in fiqh muamalat; OR
- Certified Islamic Finance Professional (CIFP) programme conducted by the International Centre for Education is Islamic Finance (INCEIF). [More information about CIFP at INCEIF.org]
Eligibility
Award Package
Application Process & Deadlines
Contact Information
Eligibility
- The Scholarship is open to citizens of all countries.
- Applicants are required to have a bachelor’s degree in Shariah studies from a recognised institution of higher learning, achieving at least a Second Class Upper or its equivalent.
For the CIFP Scholarship, a special consideration will be accorded to those with a diploma (or its equivalent) in Shariah studies, but they must have at least 5 years working experience in the financial industry.
- Applicants are also expected to have secured admission to EITHER a Masters or Doctorate programme in Shariah, specializing in fiqh muamalat, at a recognised institution of higher learning, in a full-time programme, OR the CIFP programme conducted by INCEIF.
- Current students enrolling in the specified programmes at recognised institutions of higher learning may also apply for the scholarship.
- Applicants should not be in receipt of any other scholarship awards.
Award Package
Post-Graduate Scholarship
The Post-Graduate Scholarship will cover the approved tuition and examination fees, and the recipient will be provided a quarterly subsistence allowance.
Where and when applicable, other allowances such as for books and equipment, approved return air fare, warm clothing, relocation, end of study and thesis/dissertation completion, will also be provided.
CIFP Scholarship
The CIFP Scholarship will cover the registration and approved examination fees. In addition, the recipient will also be paid a study allowance.
Special Note: There is no employment bond attached to either scholarships.
Application Process & Deadlines
Application for the scholarship must be submitted with the following documents which must be in English:
- Application Form [Word, 208K].
- Certified copies of academic certificates and transcripts (with English translation if the original copy is not in English)
- Letter of Offer from the institution of higher learning or INCEIF
- Photocopy of personal identification document (passport / birth certificate / identity card)
- An essay of not more than 300 words on why you should be awarded the scholarship and how you plan to contribute to the Islamic financial services industry.
- Two (2) letters of recommendation written by individuals under whom you have studied or worked, and who are able to comment on your qualifications for the award (only for post-graduate scholarship application). Please use the following template [PDF, 14K]
- Thesis proposal (only for post-graduate scholarship application)
- Other relevant materials to support the application.
Please mail the completed application to:
Shariah Scholarship Award
Islamic Banking and Takaful Department
Bank Negara Malaysia
Jalan Dato Onn
50480 Kuala Lumpur
Malaysia
Application Timeline: Applications are invited and accepted throughout the year. However, application received will be evaluated twice a year (31st December and 30th June every year or as advertised).
Only short-listed applicants will be notified, and may be required to attend an interview.
http://www.bnm.gov.my/index.php?ch=200&pg=618&ac=529
Educational Institutions
May 1, 2009Malaysia is leading both in the number of Islamic financial Institutions and educational institutions.
Turning towards Mecca
April 30, 2009
From The Economist print edition
Islamic banks join in the race for Africa
CHINA is not the only financial powerhouse with its hungry eye on Africa. Flush with oil wealth, the Gulf states, too, are spying profitable opportunities among the hundreds of millions of Muslims who live just a hop across the Red Sea. Africa’s economies are growing fast, thanks in large part to the commodities boom. Although many people on the continent do not have a bank account, the banking systems in some countries are growing increasingly sophisticated. Bankers from the Gulf hope that the middle class, particularly in the Muslim north, will turn to Islamic finance, and that firms will raise money through Islamic bonds, known as sukuk. Moody’s, a credit-rating agency, reckons that although Islamic finance was worth a puny $18 billion at the end of last year, its potential is close to $235 billion—about half what it estimates as the GDP of Africa’s Muslim population.
So far, forays from the Gulf into Africa have been limited to a few countries. Sudan—where only sharia-compliant finance is allowed in the north—dominates, holding over half of Africa’s Islamic-banking assets. A number of Gulf banks, familiar with the country’s language and oil resources, have joined forces with Sudanese investors to open Islamic banks. Last year the first sukuk from Africa was issued by a Sudanese cement firm. Reportedly, the government also tapped the market in January—selling bonds to Gulf investors to sidestep American economic sanctions over the massacres in Darfur.
But Sudan’s banking industry remains embryonic and few African countries combine the strong desire to promote Islamic banking with heavy demand from Muslim customers. “Islamic banking is a luxury product,” admits Anouar Hassoune of Moody’s: it tends to do better in places with established banking systems, such as South Africa and Kenya. South Africa’s only Islamic bank, Albaraka, was set up in 1989. Last year the Kenyan authorities licensed two Islamic banks, Gulf African Bank and First Community Bank, both backed by Gulf investment.
Western banks are also dipping their toes in. In Kenya Barclays was the first to offer an Islamic bank account appropriately named La Riba, meaning “no interest”. South Africa’s ABSA opened an Islamic banking division in 2006. It offers phone, internet and branch banking. Its head, Ahmed Moola, says the division was profitable last year, though he declines to discuss numbers.
Some of the keenest African custom for Islamic products is in countries where Muslims are a small minority; it provides a way of affirming their cultural heritage. Hamza Farooqi, who heads South Africa’s CII Holdings, a diversified business group, has gradually been moving his own and his company’s finances from conventional banks to ABSA‘s Islamic division. It has asked ABSA to help finance the first “dry” five-star hotel in Cape Town.
Islamic finance in Africa is a niche market, and probably will remain so. Islamic scholars are few and far between; few countries’ laws are suitable for Islamic banking; the margins tend to be thinner than in the conventional Western model. Some countries, such as Nigeria, with almost 70m Muslims and a booming banking sector, should be fertile ground. The authorities’ hands are full, however, sorting out its existing banks.
One of the most promising areas of growth may be in project finance and bonds. The continent’s vast need for infrastructure is matched only by the shortage of investment funds: Gulf investors could help bridge the gap. Project finance is well suited for Islamic financial instruments, which need to be backed by physical assets. Gulf Finance House, an Islamic investment bank based in Bahrain, signed a $1.4 billion deal in Morocco to fund two tourism projects in 2006. Senegal is said to be contemplating issuing a sovereign sukuk. It could be a 21st-century version of “the scramble for Africa”. But this time the Gulf is moving in alongside China.
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| Copyright © 2009 The Economist Newspaper and The Economist Group. All rights reserved. |
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Links
April 30, 2009The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) is an Islamic international autonomous non-for-profit corporate body that prepares accounting, auditing, governance, ethics and Shari’a standards for Islamic financial institutions and the industry. Professional qualification programs (notably CIPA, the Shari’a Adviser and Auditor “CSAA”, and the corporate compliance program) are presented now by AAOIFI in its efforts to enhance the industry’s human resources base and governance structures.
AAOIFI was established in accordance with the Agreement of Association which was signed by Islamic financial institutions on 1 Safar, 1410H corresponding to 26 February, 1990 in Algiers. Then, it was registered on 11 Ramadan 1411 corresponding to 27 March, 1991 in the State of Bahrain.
As an independent international organization, AAOIFI is supported by institutional members (155 members from 40 countries, so far) including central banks, Islamic financial institutions, and other participants from the international Islamic banking and finance industry, worldwide.
AAOIFI has gained assuring support for the implementation of its standards, which are now adopted in the Kingdom of Bahrain, Dubai International Financial Centre, Jordan, Lebanon, Qatar, Sudan and Syria. The relevant authorities in Australia, Indonesia, Malaysia, Pakistan, Kingdom of Saudi Arabia, and South Africa have issued guidelines that are based on AAOIFI’s standards and pronouncements. http://www.aaoifi.com. Head office Bahrain.
