The Economist on the mega-Islamic bank, regulatory changes to accomodate Islamic finance being abused in the UK, lessons from the crisis

The Economist has an article about the launch of a mega-Islamic bank called Istikhlaf that the founders Sheikh Saleh Kamel and Adnan Yousif envisage to be an "Islamic Goldman Sachs".

The rule introduced to avoid double taxation in Islamic home finance purchases in the UK is being abused by high-net worth (conventional mortgage) clients. This should serve as a reminder that regulations introduced to facilitate Islamic finance should be carefully designed so that they are not abused in other settings to avoid taxation.

Islamic finance: can it provide lessons for conventional finance to avoid future crashes and can Islamic finance learn things from the crisis? The head of Islamic finance proposes a way for central banks to create money (monetization) in a way that is Shari'ah-compliant, in a similar thought process to an article I wrote in 2007 for Clear Profit on GDP-linked bonds ("Debt alternative for Islamic states should be explored," Clear Profit, Issue 44, May 27, 2007, page 5).

In an interview with Emirates Business 24/7, Rushdi Siddiqui, the head of Islamic finance for Thomson Reuters, discusses the lessons that Islamic finance can provide the conventional financial industry as well as the direction it is likely to take in the next decade.

Another Malaysian Shari'ah scholar, Engku Rabiah Adawiah Engku Ali, weighs in on the debate over tawarruq saying they are premissible but "The fact is more on how it's being done rather than what it is. It is more on whether the asset is available, whether it can be delivered".

Other News

• The London Stock Exchange saw its first sukuk listing of 2009 with the listing of the Central Bank of Bahrain sukuk which was increased from $500 million to $750 million after $4 billion in subscriptions were received.
  
• Al Salam Bank-Bahrain which recently bought a property in London's financial district is focused on finding private equity opportunities in Europe.
  
• Brunei issued another short-term sukuk al-ijara, its 32nd, for B$20 million ($13.7 million) with a 91 day maturity and a return of 0.30%.
  
• The FT reports that the new bond and sukuk market in Tadawul has only four sukuk available so far for trading, 3 from the Saudi Arabia Basic Industries Corp (SABIC) and one from the Saudi Electric Corporation.
  
• HSBC Amanah credits the $650 million Indonesian sovereign sukuk for sparing a rally in new issuance of sukuk after the market ground to a halt in March 2009.
  
• Islamic banking continues to develop slowly in India as the Minister for State for Minority & Corporate Affairs met with the head of the National Committee on Islamic Banking. The development of the industry continues at nearly the same slow pace in another BRIC country, Russia.