Tuesday, March 27, 2007

Shari'ah Capital, Islamic finance education and the development of the Islamic financial industry

Shair'ah Capital Inc. unveils hedge fund platform

There is an article (sub. rqd.) in the Wall Street Journal (an also a freely available press release from Shari'ah Capital) about the launch. The new products will be based on al-arboon, an advance payment similar to a down payment towards the purchase price that gives the buyer the right to purchase a good at a given price. GRT Capital Partners, an alternative investment manager in Boston, will use the platform. Al-arboon is an alternative to the more controversial salam (forward) method of replicating options and shorts.

Islamic finance lacks depth

While Islamic finance has grown rapidly and continues to grow, it has not developed the depth of conventional financial markets, Reuters reports. Much of the growth has been in sukuk and private equity, as well as other financial services for high net worth individuals yet the secondary market for sukuk is almost non-existent. One of the most interesting parts of the article is the comment from the head of Arcapita, the Bahraini Islamic private equity firm which owns Church's Chicken, Caribou Coffee and Yakima in the U.S., suggesting that Islamic finance has been successfully marketed in the U.S. based on its similarities with ethical investing.

Western educational institutions offer courses in Islamic finance

Educational institutions like Harvard University, Tufts University, the Cass Business School and Rice University offer courses or programs in Islamic finance. Programs mentioned include:
• Harvard Law School's Islamic Finance Project
Dr. Mahmoud El-Gamal (Rice University)
Ibrahim Warde (Tufts University)
Cass Business School Islamic Executive MBA


Cooperation is key to developing new Islamic finance products

The head of International Centre for Education in Islamic Finance (INCEIF), Professor Dr. Malik Muhammad Mahmud Al-Awan believes that countries should cooperate in research on new Islamic financial products. This approach should take a non-confrontational approach to conventional finance, as Malaysia has done, in order to spur the acceptance of Islamic finance. He stressed that "the 21st century is seeing so much political conflict between Islam and the West, yet in the field of Islamic finance, the West has embraced it with open arms".

Other News

The world's oldest Islamic bank, Dubai Islamic Bank issued its first sukuk on the Dubai International Financial Exchange (DIFX).

Minority shareholders of Rashid Hussain Bhd (RHB) want it to remain listed. Employees Provident Fund, the Malaysian state-run pension fund which will control RHB has said it will delist RHB but RHB Capital will remain listed.

ABN Amro Bank Bhd, the Malaysian branch of the Dutch banking group, plans to seek approval from Bank Negara Malaysia, the central bank, to open an Islamic subsidiary in the country.

AmIslamic Bank will offer takaful in Malaysia in partnership with Takaful IKHLAS Sdn Bhd and FWU AG. FWU designed the plan, Takaful IKHLAS will be the trustee and AmIslamic Bank will administer the takaful plan.

Hong Leong Bhd subsidiary Hong Leong Islamic Bank will team up with UBS to offer non-ringgit structured financial products which are Shari'ah compliant.

CIMB Group Bhd will open an Islamic private banking service in Malaysia.

Foreign banks will be able to buy Malaysian Islamic banks, but will not be allowed to operate transactions in ringgit.

Bank Negara Malaysia (BNM) signed a Memorandum of Understanding with Qatar Financial Center Regulatory Authority (QFCRA) and the Dubai Financial Services Authority (DFSA) to cooperate on capacity building and human capital development.

Malaysia will offer commodity-based murabaha as a way for banks to manage liquidity in the Islamic interbank money market (IIMM). The murabaha will be based on palm oil-based contracts.

Indonesia should follow Malaysia's example and reduce double taxation to spur the development of Islamic finance in the world's most populous Muslim country.

KPJ Healthcare Bhd plans to expand its healthcare REIT

Finance professionals applaud tax changes in the U.K. dealing with sukuk.

1 comment:

ilanit said...

In September I would have speculated that MS would not be treating a first-tier Orange Country business investment like Blackstone this way. But as the Fall has progressed and the potential liability increased it is clear that banks are willing to risk even their largest clients to wriggle away from some of these deals.