When Islamic finance less fair than conventional finance

One of the things that Islamic finance touts when comparing it to conventional finance is an emphasis on fairness, yet the industry's practices do not always lead to outcomes that most people would consider fair.  One example is when the buyer in a murabaha defaults and the payment schedule for the principal plus profit is spread over a number of years.  An article describes how two brothers in Malaysia received RM200,000 in financing from an Islamic bank with repayment spread over 30 years.  After a year, they defaulted on the financing, and the bank claims that they owed RM642,263, amounting to the principal plus profit over the entire 30 year financing period. 

The reason that this could occur is that the property is being purchased and resold with a profit to the customer, with deferred repayment spread over 30 years.  The profit is determined so that the bank makes a similar profit as it would be paid in interest.  However, since the transaction is a sale with only the payments deferred and not a loan with interest, the customers have agreed to buy the asset for the full amount (principal plus profit).  When they default, the bank would say "you agreed to buy this from us for the full amount, even though we agreed to let you make monthly payments over a 30 year period.  Since you have defaulted, you owe us the difference between the purchase price and the amount you paid us."

While the structure of the contract most likely supports the bank's view (I am just guessing, I have not seen the contract), it puts the customer of the bank in a decidedly worse situation than if they had taken a conventional loan from a bank.  In a conventional loan, they would owe the bank the principal (less any amortized principal) plus the accrued interest for the time since they took the loan (less the portion of their payments that went to pay interest).  With the borrower defaulting a few years into a 30-year loan, they would owe far less than they do in a murabaha (probably a bai bithamin ajil, since it was in Malaysia where BBA is permitted). 

This issue has been heard in Malaysian courts before when a lower court ruled that BIMB could not force a customer in default to pay the entire amount of the purchase price (including future profit payments).  However, this decision was overturned by a Court of Appeal decision.

There are probably good reasons why the bank cannot specify in the contract that they will agree to waive the future profit payments in the case of a default, but it does end up making Islamic look unfair to customers who default (compared with conventional banks), which is in contrast to the principles at the root of Islamic finance of fairness and compassion towards people who cannot pay their debts.   This should be an issue at the forefront of Shari'ah scholars minds because this contract is used widely in Malaysia, and similar murabaha contracts are used in other countries where BBA is not permissible. 

Can Islamic finance return to the basics?

There was a very good opinion piece by Dhafer Alqatani that looked at the potential for standardization of the Islamic finance industry.  The key paragraph in the article was:

Shari’ah-compliant products and services have to be repositioned, where those products and services should be revisited, reviewed and consolidated as well as documented, thus establishing stronger foundations by going back to the basics which will pave the way to standardization and eventually the globalization of uniform structures and formats that are Shari’ah-compliant and acceptable to the critical mass, both Muslims and non-Muslims, without compromising the industry’s authenticity and integrity. 

The important point is that Islamic financial institutions should go "back to the basics".  Last week, I spoke at the Financial Management Association's Annual Meeting in Denver and one of my fellow panelists (from the World Bank) addressed the question of whether Islamic finance is more resilient and lower risk than conventional finance.  His conclusion was that it is not a foregone conclusion that the Islamic finance industry was lower risk because when you look at the structure of sukuk, for example (he showed the Nakheel sukuk), they are incredibly complicated financial instruments and that complexity is itself a risk (just as the complexity of the mortgage-based products that triggered the crisis posed a risk). 

The underlying reason I think that this complexity has arisen is because the Islamic finance industry has focused on creating financial products in a way that they are Shari'ah-compliant, rather than starting from 'first principles' of finance (i.e. what need are they addressing) and looking at how Islamic finance can meet these needs.  To some degree it was unavoidable that financial engineering to create "Islamized" versions of conventional financial products became the standard practice for Islamic finance because the institutions doing it operate in conventionally-dominated financial markets with regulations designed around the conventional finance industry.

However, it does not necessarily have to always be this way.  Where my views differ, however, is that I think a top-down approach will take too long and involve too many conflicted parties to be workable.  I think the better approach is more bottom-up.  It is much easier for one financial institution to change the way it thinks about offering Islamic financial services than to change the entire industry in one fell swoop.  After some controversy around the bai bithamin ajil (BBA) in Malaysia, there was a divide with some banks deciding to curtail their BBA activities, while others said they would continue to use BBA.  The difficulty in the bottom-up approach is about how it gets started, and I don't have a solution to that problem. Ultimately, it will be driven by market demands for alternatives to the products being offered today.

See the index of Islamic Finance Complexity posts: http://investhalal.blogspot.com/2011/11/islamic-finance-complexity.html

Gulf sukuk market recovering, Asia leads; asset-based vs. asset-backed sukuk

The Gulf sukuk market may begin to open up as yield spreads fall with the issuance of sukuk from highly-rated issuers. This is one step in the process of recovering following the effect of the financial crisis which was most noticeably manifested by the Dubai debt crisis. Since the Dubai debt standstill, most of the few GCC-based issuers have been investment grade with the exception of Dar Al Arkan. GCC-based sukuk represented 30% of the Q2 and previous four quarters total global sukuk issuance value according to data from Zawya's Sukuk Quarterly Bulletin. HSBC expects to see a recovery in sukuk led by Asia as it has during the past year. [UPDATE: Bloomberg released an article about the shrinking yield spreads on Asian sukuk]

As the GCC market opens up and high-grade corporate and multilateral institutions like the Islamic Development Bank issue sukuk, it will provide somewhat of a benchmark for pricing other sukuk, particularly those from lower rated issuers. However, the benchmark from new issues will only become meaningful for encouraging new sukuk if there is liquidity in the secondary markets. In contrast to Malaysia, secondary market liquidity in sukuk is low. However, the new issuance is a start. Bloomberg provides a list of forthcoming or planned sukuk. One of those issuers is Abu Dhabi Islamic Bank, which filed a base prospectus for up to $5 billion in sukuk with the London Stock Exchange on July 8th.

Sheikh Yusuf DeLorenzo is quoted in an article in Bloomberg that suggests investors are more likely to demand asset-backed rather than asset-based sukuk based on the recent defaults. The difference is similar to the difference between a secured and unsecured debt and would also tackle the criticism that using an asset-based structure is fitting the round peg of Islamic finance into the square hole of conventional debt structures.

The European travel firm Thomas Cook failed to place $50 million in sukuk in the GCC because of its small size and investor's belief that the coupon of 7% was too low. It would have been the first European corporate sukuk. Based on its small size, I would tend to minimize the impact of the failure on future European corporate sukuk. If a larger European issuer fails to issue a sukuk, particularly if it is of benchmark size, then it may dissuade other European companies from issuing sukuk.

Indonesia auctioned only Rp246 billion ($27 million) in 15 year (Rp7 billion) and 20 year (Rp 239 billion) sukuk compared to the target of Rp1 trillion. As in previous failed acutions, investors submitted enough bids to cover (Rp 1.18 trillion) but the yields were higher than the Finance Ministry was willing to accept. The higher yields have been attributed to the lack of liquidity in secondary markets.

Other News

• Cagamas, the national mortgage company in Malaysia is expected to issue the first tranche of its sukuk which it developed with Al Rajhi Bank to be in compliance with AAOIFI standards. Many Malaysian sukuk are not accepted in the GCC. The sukuk is an al-Amanah Li al-Istithmar (ALIm). It will be backed by a mixed asset pool, but contain enough ijara assets to be tradable. The remainder of the assets will be based on bai, wakala and bai' bithaman ajil (BBA).
  
• A blog post notices the growth of Islamic banking and wonders if it could take a bigger role than it has. I think it can if Islamic banks decide that supporting and financing Islamic microfinance is a good way for Islamic banks to engage in corporate social responsibility.
  
• Malaysian bank Agrobank announced it plans to go fully Islamic by 2015. It has offered Islamic banking products since 2008. The bank reported that 60% of its non-Muslim clients choose Islamic banking products.
  
• Barwa Bank is close to completing its acquisition of First Finance Company.
  
• Gatehouse Bank acquired One Sovereign Street, a building in Leeds, for GBP40.175 ($60.9 million).
  
• Malaysian property developer LBS Bina is issuing a RM135 million ($42.1 million) sukuk to finance a housing project.
  

Islamic pricing benchmark, Khazanah sukuk

The International Shariah Research Academy for Islamic Finance (ISRA) in Malaysia is planning to release a study on a proposed Islamic benchmark pricing rate in 2011. The proposal received criticism about the practicality of having two different pricing benchmarks within Malaysia. The criticism has merits and the development of a separate Islamic yield curve would provide limited benefit compared to other areas that the effort required could be directed towards like strengthening Islamic financial institutions' liquidity management. However, if Islamic financial products move beyond replication of conventional financial products and take on different risk characteristics than conventional products, a separate pricing benchmark could be useful for new issuers because the pricing would reflect the balance between supply and demand for Islamic financial products in the secondary markets.

Malaysian state-owned Khazanah Holdings may issue S$500 million ($354 million) in sukuk to finance its purchase of Parkway Holdings, a hospital operator. The sukuk would be the largest issued in Singaporean dollars passing a S$200 million issue from the Islamic Development Bank.

Other News

• The final decision on Tamweel and Amlak, two troubled Dubai-based Islamic mortgage companies could come this month. It is reported that Dubai Islamic Bank is seeking to increase its share of Tamweel to over 50%. Tamweel's statement on its restructuring did not confirm or deny Dubai Islamic Bank's reported plans.
  
• Saturna Capital, the fund manager of the Amana Funds received a fund license in Malaysia.
  
• A credit union in the US is offering Islamic financial services.
  
• Gulf African Bank, one of the first Islamic banks in Kenya, reported a profit in the first quarter of 2010 and expects its first full-year profit this year.
  
• Pakistan hopes to double the share of Islamic banks in the country over the next 3 years, to 12% of total assets. For comparison, Malaysia is set to reach the 20% mark this year.
  
• An article discusses the idea that Dubai World attracted more attention than its overall impact in the financial markets and points out that the reason for the near-default was the financial and economic conditions as well as company-specific factors that were not related to Nakheel using a sukuk rather than a conventional bond to raise financing.
  
• Nakheel has begun paying contractors and may resume construction on some projects "within weeks".
  
• A Malaysian bai bithaman ajil (BBA) sukuk was placed on negative ratings watch. The BBA structure is used extensively in Malaysia, but not accepted in most other countries.
  
• The government of Kazakhstan is supporting Islamic finance in the country with the assistance of Abu Dhabi, whose government owned bank Al Hilal opened an Islamic bank in Kazakhstan.
  

Tahawwut derivative contract, Islamic finance and Nakheel, BBA, Publications on Sukuk

The Tahawwut master agreement that establishes a Shari'ah-compliant derivative framework was released today. An article in Risk magazine does the best job of describing the process in detail. One of the sticking points that delayed the release was the inclusion of the murabaha contract in the agreement as well as the procedures for close-out netting of derivatives exposure. This allows parties to close out derivatives positions with offsetting contracts between counterparties. The result is that the close-out netting is allowed in jurisdictions where national law allows it, which excludes many Muslim-majority countries that do not have laws governing this. There was also probably a discussion among Shari'ah scholars about the permissibility of offsetting debts (like murabaha). In general, there are restrictions on this because it is viewed as trading in debt (bai' al-dayn), which is restricted outside of Malaysia. However, it is generally allowed where the debts are equal (i.e. exchanged at par). The standard was backed by other banks including Standard Chartered, which recently announced its own Shari'ah-compliant derivatives products. In an earlier post, I wondered whether Standard Chartered's product would be able to be competitive with an ISDA-IIFM tahawwut product based on a master agreement that could spread costs across many financial institutions.

Westlaw Business has a few quotes from a roundtable discussion they held of Islamic finance recently that mostly focus on the Dubai World/Nakheel situation. It highlights that the investor base was sophisticated and should have (and probably did) know that the sukuk were not legally backed by the government. One omission I see in the discussion (and the quotes are just selective, so it may have been raised in the discussion) is the inclusion of fully perfected mortgages over the properties backing the sukuk. While the structure was a transfer of beneficial interests in a long-term lease to the SPV, there were also mortgages granted to the SPV over the underlying properties. This should have provided investors with recourse to the land if the sukuk was not redeemed using funds provided by the government of Abu Dhabi and two government-owned banks in Abu Dhabi. There are all kinds of potential problems investors would have faced to turn those mortgages into actual ownership in the underlying lands (in part because the land was in Dubai and the sukuk used a trust structure based on English law and the concept of a trust is not recognized in the local jurisdiction). In discussing sukuk generally, this point is not necessarily relevant because most ijara sukuk do not contain mortgages on the underlying asset and the investors are generally provided with just an unsubordinated, unsecured claim against the issuer if the issuer can not or does not repurchase the asset in case of a default. An article summarizing a discussion at the recent Reuters Summit on Islamic finance looks at the Dubai World/Nakheel situation in a different light, with participants suggesting that the problems with the Nakheel sukuk highlight the need for greater product diversification in Islamic finance to allow portfolio managers to have greater opportunity for diversification.

Affin Islamic Bank, a Malaysian Islamic subsidiary of Affin Bank, says it will continue to use the bai bithamin ajil (BBA) contract, despite criticism. RHB Islamic said earlier it stopped using the BBA contract to adopt global Shari'ah standards reflecting the more stringent requirements, particularly in the Gulf. The primary difference between a BBA and murabaha contract is that in a BBA, the client makes a deposit to the seller and then transfers the rights to acquire the property to the bank which then sells it back to the client on a cost-plus basis in installments. In a murabaha, the bank buys the property and then sells it to the client on a cost-plus basis with repayment in installments. The criticism of BBA is its reliance on bai' al-inah (sale and buy-back). In contrast to the murabaha contract the transaction is executed between only two parties and therefore is viewed as a hidden (conventional) loan. The murabaha, in contrast, separates the purchase (from the third-party seller) from the sale (to the client) and is more widely viewed as legitimate.

Islamic Finance Resources has four links to recent reports on sukuk. The links are to the Zawya Collaborative Sukuk Report, the Guide to Issuing Sukuk in the DIFC, a guide to issuing sukuk from Bank Negara Malaysia and the Malaysian Securities Commission, and the description of several types of sukuk from the Malaysia International Islamic Financial Centre.


Other News

• Deutsche Bank received an international Islamic banking license from the Malaysian central bank, Bank Negara, that allows it to provide services in foreign currencies.
  
• The Central Bank of Bahrain's Sukuk al-Salam sukuk was oversubscribed with a bid-to-cover of more than 4 times with BD56.8 million in subscriptions for the BD12 million issue.
  
• An experiment in Islamic microfinance in Pakistan described in brief.
  
• Israeli fund managers are offering investment products that comply with the prohibition of interest (ribbit) as well as other prohibitions, which shows how the prohibition of riba in Islam is mirrored in other Abrahamic faiths.
  

FSA rules on Islamic finance, France law struck down, 10-20% growth in 3 years in Islamic finance, other news

The Financial Services Authority has released the suggestions received on its regulatory proposal for sukuk (Alternative Finance Investment Bonds) that was initially released late last year. The comments are incorporated into a revised proposed law that is open for comment until November 6, 2009.

France's new law on Islamic finance was struck down by the country's high court on procedural grounds although the opposition Socialists who asked for the review by the Constitutional Council who oppose it as a violation of the secular principles of France.

A study by BDO based on a poll of 173 financial services executives involved in Islamic finance puts the growth prospects for the industry at 10-20% over the next 3 years. A substantial percentage, 23%, said the industry could grow quicker and an equal percentage believed there would be little growth, between 0% and 10%, in the next 3 years. The industry continues to enjoy unsaturated markets and growing recognition by companies not necessarily considering Islamic finance based on a need for Shari'ah-compliant funding sources. However, there has been a severe economic downturn that has hurt the industry, a shortage of experienced practitioners and there are a number of issues remaining to be resolved, particularly how sukuk are treated if the issuer defaults on periodic payments. This is not necessarily going to be a quick process and it could be one of the reasons for the large percentage of sukuk this year coming from high-grade companies and sovereign issuers where the probability of default is far lower than some of the issuers in previous years.

The World Bank's International Finance Corporation is planning a $100 million sukuk to show its commitment to the Middle East and Islamic finance. The Reuters article notes that "they [the IFC] have only a few ijara contracts, that's really the limiting factor". This suggests that the structure they are considering would be similar to the Islamic Development Bank sukuk, which is based on a pool of financing provided to other parties by the Bank which can include murabaha and istisna'a, but must have at least 51% in ijara because they represent an underlying asset and not just a debt receivable.

Indonesia rejected all of the bids in its first monthly sukuk auction because investors were asking for higher yields than the Ministry of Finance was willing to accept. The decision is not seemed to be a significant setback because there is an expectation that the Indonesian central bank may raise interest rates. If the Ministry of Finance accepted higher yielding bids from investors in sukuk, it could increase the cost of raising conventional debt.

Investors in the Golden Belt 1 sukuk issued by the Saad Group do not know whether the next periodic payment will be made according to Citigroup, the sukuk trustee.

There is continues to be controversy about whether there need to be more safeguards for borrowers in Malaysia who default on bai' bithaman ajil (BBA) sales contracts. In some cases, a defaulting borrower can end up owing more than the amount of the financing originally taken. There has been controversy before around the BBA contract. A lower court said that the sale was not genuine and there was no difference between the profit charged and interest, although this was reversed by a higher court.

Other News

• The Dubai Financial Services Authority (DFSA) issued proposals for changes to how it regulates Islamic financial services.
  
• Shariah Capital, based in the US, is considering offering a Shari'ah-compliant ETF in the US and the UK, although no timeline for its launch is provided.
  
• Etisalat plans a bond and sukuk raise that would begin with a $500 million tranche.
  
• Bursa Suq Al-Sila', the Malaysian-based commodity murabaha exchange is expanding into the GCC.
  
• The CIMA Certificate in Islamic Finance was launched recently. SHAPE Financial has launched its own certified Islamic financial analyst program.
  
• Despite a downgrade to the Originator, a Tamweel Residential ABS sukuk did not have its rating changed by Moody's.
  
• Sorooh is planning a Shari'ah-compliant fund to invest in European commercial property. ING is planning its own Shari'ah-compliant real estate fund with Amiri Capital that will invest in UK commercial property.
  
• An opthamologist in Dubai proposes an Islamic economic system that I cannot even comprehend, but there is a $1 million reward to anyone who can prove that it wouldn't work.
  

Comments from a scholar and legal rulings in Malaysia on Islamic finance products wa'ad and BBA

A Malaysian Shari'ah scholar says that a promise (waad) made in an Islamic financial transaction is not legally enforceable but said that the other party may be entitled to compensation for the unfulfilled promise. Waad are used in the context of several different products like murabaha and istisnaa. The scholar, Abdulazeem Abozaid, also criticised the Malaysian stock exchange plans to allow Shari'ah-compliant short selling. He said, "First of all, you are selling things that you don't own. Secondly, you're borrowing shares and in return for borrowing, you will be charged some money so it's a conventional loan." A Malaysian appeals court also ruled that the controversial financing product bai bithaman ajil (BBA) is valid. The contract is widely used in Malaysia but is viewed as a disguised loan in many other regions.

Badlisyah Abdul Ghani, CEO of CIMB Islamic Bank, continues his call for increased regulation of the Islamic finance industry to protect it against further problems and deal with 'internal contradictions' caused by standards that vary widely across jurisdictions.

Other News

• The Sacramento Bee has an article about Islamic finance that is interesting although some of the claims that Islamic finance could prevent the recession are questionable, as I have described in previous posts.
  
• HSBC Amanah received approval from the Hong Kong Monetary Authority to issue sukuk.
  
• University Bank in Michigan received a cease-and-desist order from the FDIC relating to compliance issues at the bank that the bank says have already been addressed. None specifically mentioned the bank holding company's Islamic banking subsidiary.
  
• The Islamic Bank of Britain is attempting to broaden its client base outside of the group of clients who will be drawn by their faith by describing their product's price competitiveness. The commercial director at the IBB describes: "The bank is open to customers of all faiths, so my call to UK homebuyers and homeowners is to put any misapprehensions to one side and come and find out how a Home Purchase Plan from IBB can really make a difference to your pocket."
  
• Fitch cut its rating on Kuwait Finance House due to its exposure to other GCC investment banks. Other investment banks, including a few Islamic banks, have run into trouble in the economic crisis.
  
• The latest Central Bank of Bahrain al-salam sukuk was significantly oversubscribed.
  

Islamic finance affected by credit crisis, should improve resiliency, takaful asset management problems, BBA on the way out, WIEF concludes

Shari'ah scholars say that the bai bithaman ajil (BBA) type of sale with deferred repayment that synthesizes an interest-bearing loan is losing favor and will eventually disappear. The contract is widely used in Malaysia, but is considered to not be Shari'ah-compliant in the GCC. Several courts in Malaysia have criticized the contract's validity. This demonstrates the growing maturity of the industry and its ability to gradually move away from contracts that were developed out of necessity, but which are not substantively different from interest-based financing. As the industry develops, there should be further movement away from the replication of conventional financial products in favor of financial products which are distinct from interest-based products.

An article in Asian Investor magazine discusses another consequence of the shortage of sukuk: takaful asset management. Most takaful companies face significant problem in investing the premiums they receive in Shari'ah compliant ways and in many cases end up overexposed to equities compared with sukuk, in stark contrast with the investment profiles of conventional insurers. This creates an additional risk for takaful companies because equity values are more volatile than traditional fixed income products that comprise the bulk of conventional insurers' investment portfolios.

Zeti Akhtar Aziz, the governor of Bank Negara, Malaysia's central bank, describes the risks facing the Islamic financial system with greater clarity than I have seen elsewhere:

"the global financial crisis has highlighted several structural weaknesses and imbalances in the international financial system. Whilst Islamic finance is not insulated from the effects of the current environment, the Shariah principles and values that underlie Islamic finance provide an important underlying foundation. [...] As it becomes part of the financial globalization process, Islamic finance has however become increasingly exposed to the systemic implications of external developments...its potential for sustaining financial stability and... how robust is the industry to external shocks."

The solutions she proposes are very straightforward to describe, but far more difficult to implement: global regulatory coordination, the development of an international interbank liquidity management market (a 'lender of last resort'). Finally, she describes the strengths of Islamic finance in a way that eschews the simplistic "Islamic finance is based on real economic activity" explanation that abounds from other sources. She elaborates that Islamic finance is seen as a facilitator of the real economy and the links between financial and productive flows acts as a check that limits excessive leverage, imprudent risk taking and speculative activities.

However, even Islamic finance is not immune from global economic shocks nor dumb lending decisions, although the risk profile of many Islamic financial products like mudaraba, musharaka and ijara, provide banks with greater incentive to do more extensive due diligence into the use of funds they provide. They will bear a greater risk of loss in many of these financing structures than they would as a conventional senior secured creditor. Her explanation should provide the beginning of a discussion that should not degenerate back into unsupported declarations that 'Islamic finance is immune from crisis' or 'Islamic finance is inherently more stable than conventional finance'. Even if they were true, they would be unhelpful in progressing the discourse into areas where improvements in the Islamic financial industry could benefit practitioners, regulators and consumers.

Another article talks with a few people about the exposure of Islamic finance to the credit crisis. A Netherlands-based author, Abdul Gafoor, describes something that I have been saying as well: "Islamic banks] go mostly for real estate and that kind of thing. And when real estate prices go down, [their portfolios] also go down. It depends on whether they invested directly in real estate or through securities. Here, you cannot make a general claim [about the strength of Islamic banking]. It depends on each individual bank -- how they behaved." Neil Miller, a lawyer with Norton Rose also observes that "The thing about Islamic banking, at the end of the day, in some respects, it is going back to banking the way it used to be done. So it is very much based on relationships, on analyzing risks, and understanding the risk and the relationships in the specific projects or company that you are looking to finance and getting comfortable with that." It is another example of what I think should be the focus in journalism about Islamic finance: avoid denials of problems and work to improve the resiliency of the Islamic finance industry in the future.

Although this is not a new announcement, the Financial Times reports on the possibility that The Investment Dar, the troubled Islamic investment bank in Kuwait, will sell at least part of its stake in Aston Martin which it acquired in a Shari'ah-compliant leveraged buyout in 2007.

The lack of secondary market liquidity in sukuk markets may affect or delay the issue of new sukuk. If pricing in the secondary markets are distorted by illiquidity, new issues may be priced less favorably for issuers.

World Islamic Economic Forum

The WIEF concluded with the issuing of the Jakarta declaration which includes a section on Islamic finance:

OVERCOMING GLOBAL FINANCIAL CRISIS:

• Support the efforts of the OIC to accelerate greater regional economic cooperation through the effective implementation of its 10 year Plan of Action.
  
• Support the Islamic Development Bank (IDB) Task Force for Islamic Finance and Global Financial Stability to promote Islamic Finance and Banking as a viable alternative to the conventional financial system.
  
• Call upon Governments and Islamic banks to expand Shariah compliant micro-credits.
  
• Support the call for effective regulations in the global financial industry to mitigate risk and failure.
  
• Support the establishment of Islamic Banking Training centres with harmonised standards.

An editorial in the Jakarta Post says the country could benefit from Islamic finance through attracting funds from the oil-rich GCC, although the same conditions apply as with attracting conventional funds: Legal certainty and reasonable returns The Philippines Stock Exchange may launch a Shari'ah-compliant equity index while Thailand is planning the launch of its own next month.