Islamic structured products...and more

Since posting has been light due to other commitments, there are a few things I haven't had a chance to write about. So I'm going to step outside the normal form and combine a few posts into one.

ADIB soft commodity note

An article describing the Abu Dhabi Islamic Bank soft commodity note struck my attention because I think it offers an example of a product that I view as problematic. This product is not problematic on its own--it offers exposure to an investment class that is otherwise hard to find in the Islamic space--but the complex structure these products use (and the high potential upside with capital protection) suggests hidden risks. Given the risk-return profile of the note, there has to be something else (which is present in most Islamic structured notes) that makes the product worth the bank's time (probably the high fees).

The structure is described as "provide[ing] an opportunity for investors to invest in this Murabaha based note, the profit of which is determined by the prices performance of cotton, corn and sugar." This structure is common for structured notes. The investor puts money with the bank which is invested in a murabaha (to provide the capital protection). The returns, which the bank says have a "maximum upside return of up to 18 per cent over 2 years with an annual payout", are usually generated using the wa'ad total return swap with an external counterparty (swapping the returns on the murabaha with the returns on an index of the commodity price). The investor is paid either the return on the index or their invested capital (likely less a fee).

There are plenty of products that offer returns and on which the institution offering the product earns a fee. That is how investing works. But the capital protected notes offer something that is too good to be true. Either you get your money back if the commodity prices fall or you get a return up to 18% according to the bank offering the product.

The key point with these types of products is to look at how the bank makes its money (and mitigates the risk of paying the return which is not generated by any profit-making activity, but by the behavior of an index). If the product were as simple as possible, you would appoint the bank as your agent under a wakala contract and they would buy the commodities on your behalf and you would profit if prices increased and face losses if they fell. However, this product offers the upside in prices (up to 18%) with no downside. If this structure were used, the bank would expect the prices to rise more than 18% in 2 years and would capture the upside where you would be on the hook for the downside.

But the product is structured to take away the downside risk from your investment. That means the bank is either able to hedge its downside risk on the commodity prices or foolishly expects that prices will keep rising (so it can capture the upside if it is greater than 18%). Banks are not in the business of speculating on commodity prices; they profit on the difference between their cost of funds and the returns on what they invest in (i.e. loans). That is where the wa'ad-murabaha structure comes in, which both adds risk to the investor and somewhat subverts the Shari'ah-compliance of these types of products (in my layman's opinion).

From the bank's perspective, they are borrowing funds with no guaranteed return (i.e. no direct cost to them) and receiving the fee charged for the product. They are paying the murabaha profits to another institution that takes the risk of rising prices (most likely a conventional bank). As long as the fee is larger than the murabaha profits (plus the profits that can be made using the funds in the interim, less the structuring fees), they make money on the transaction. The counterparty will hedge itself against the commodity price risk. For the counterparty, as long as the cost of hedging is lower than the murabaha profit, they make money.

The impact this has on the investor is that there are likely to be relatively high fees for these products and it adds a risk that is not apparent in its brief description. Specifically, the risk is counterparty risk with the bank and (for the bank) with its counterparty in the wa'ad total return swap. This risk is not unique to Islamic finance. For example, Exchange Traded Notes (ETNs) carry the same risk. They usually offer a return based on an underlying commodity index, but legally they are unsecured debt of the issuing institution.

Besides the hidden risks in these products (admittedly, these risks are minimal in normal times), they also raise questions about whether the structures are designed to work within the framework of Shari'ah-compliance or to avoid the restrictions of Shari'ah-compliance. I have moved further into the viewpoint that the replication of conventional products is fine because they serve real needs of the Muslim consumers of the product, but there is a limit and structured products are on the border between serving a need and creating the solution to a problem that is not apparent.

Exposure to commodity markets is difficult within the bounds of Shari'ah-compliance, but a structured product to offer that exposure seems unnecessarily complicated (although profitable for banks offering the product). Offering exposure to commodity markets through non-bank financial institutions seems like it would offer a simpler way to offer this type of exposure because bank regulation is not really suited towards taking or facilitating commodity risk so a bank-based product will try to turn it into a credit risk.

Dubai comeback

There are two pieces of news out of Dubai, both of which support an idea that rumors of its death have been greatly exaggerated. First, Nakheel is coming to a resolution on $11 billion in debts which need to be restructured. These debts include a $1.85 syndicated Islamic loan that will be extended seven years according to Reuters. The new development that I see in this is that Reuters reports that Nakheel "will eventually be separated from Dubai World to become a full government subsidiary". The main problem with Nakheel's sukuk was that (besides being subject to a standstill), they were viewed as being guaranteed by Dubai's government, despite only being guaranteed by Dubai World, a government-related entity.

With the support from Abu Dhabi through the Dubai Financial Stability Fund (which was used to pay off the 3 Nakheel sukuk), the Dubai government has returned from its pariah status in the credit markets and has been considering issuing a bond or sukuk in Malaysia.

In more positive developments (rather than news about fixing old problems), Dubai Ports World's sukuk reached record low yields after it was upgraded to the lowest investment-grade rating. DP World has always appeared to be on more stable footing than Dubai, Inc. because of its role in global trade (where recovery from the severe recession was less in doubt than Dubai's recovery from its property boom and bust).

The combines effect of Nakheel restructuring and the DP World upgrade (and Bahrain's continuing turmoil) should support Dubai's ambitions to expand its prominence as a center of Islamic finance in the GCC region. This point will be contested in Saudi Arabia (which has a larger economy but which offers less availability to international investors) and Qatar (which is still working through the central bank's decision to prohibit conventional banks from offering Islamic banking products). Compared to the sentiment towards the end of 2009 when the Dubai World standstill was announced, the competitive situation facing Dubai is far more favorable.

Indonesia sukuk

Indonesia just sold $2.5 billion in 10-year dollar-denominated bonds at a yield of 4.875%, reflecting international interest in the country's debt. 49% of the debt was sold to US-based investors. The strong issuance reflects interest in strong emerging markets and the strengthening of the Indonesian Rupiah. The Indonesian Finance Ministry director of Islamic finance, Dahlan Siamat, told Bloomberg that the country is considering issuing dollar-denominated sukuk in the second half of 2011. While the growth in external debt issuances is positive (the total for 2010 as a whole was $3 billion), the issuance presents risks if the currency depreciates significantly like in 1997/1998.

Live blogging the Gulf News article about Gatehouse Bank

"competition has to be fair in the context of pricing and taxation [...] taxation rules [...] favoured financing through debt compared to equity, but in the aftermath of the financial crisis that exposed the weaknesses of excessive leverage there is a move to create a level playing field for equity funding and asset-backed financing which lies at the core of Islamic finance."

There is not really a market for equity finance within the Islamic finance industry (except for the equity finance that most of us know--common stock). Most banks including investment banks use debt-alternatives, which should be competitive with conventional debt, but for added structuring costs. The main obstacles are double-taxation of the ownership transfer in Islamic financial structures, which have been legislated in most Western countries (e.g. the UK).

"[Richard] Thomas [CEO of Gatehouse] said the recent decision by the Central Bank of Qatar not to allow conventional banks to offer Islamic financial services is a move in the right direction to create a level playing field for pure Islamic institutions to compete with conventional institutions."

I agree with some of the concerns of the central bank in terms of leakages between Islamic and conventional arms of banks that offer both. However, requiring conventional banks to close their Islamic windows creates a bad precedent that will discourage conventional banks from offering Islamic windows, which could offer competition. The commingling of assets cited by the central bank are Shari'ah issues and should be addressed by the Shari'ah boards. The central bank should, at most, force these units to be spun off into stand-alone subsidiaries with Islamic banking licenses from the central bank. Otherwise it just looks like a move to protect the banks in the local market.

"Thomas believes that Islamic banks will continue to have good growth prospects in the UK as long as their offerings do not imitate those of their conventional peers."

The replication of conventional products offers an alternative to consumers, but the financial needs remain the same. Trying to fit a square peg of equity-based products into the round hole of current regulations is impracticable. The Islamic Bank of Britain's problem (from my review of their financial statements) was that they could not find enough people to offer financing. This may be a reflection of rejection of products that replicate conventional products, but those types of products are relatively well accepted in other parts of the world (including the US). Perhaps it is a failure in its marketing strategy or the ability to offer a cost-competitive product.

Thomas: "We are now taking business from conventional banks because we have a different business model and are not part of that mega-debt culture. We have seen a pick-up in business mainly in corporate asset finance, real estate, also the trade-related business."

I hope they are able to take business from conventional banks, but it is not because Islamic finance as it operates now gives a non-debt alternative. There are plenty of non-debt (i.e. equity) alternatives available. Hopefully it is the case that the Shari'ah restrictions on the financing provides a more equitable relationship between financier and those receiving financing.

In the end, I do want to see Islamic finance thrive in the UK, but the signs so far are not great. The Islamic finance institutions there--not just Gatehouse, but all of them--need to recognize their limitations in terms of size and not try to compete with the established conventional banks. The Shari'ah-compliance requirements can be a part of the appeal if they give a superior product at a competitive price. However, just appealing to Islamic finance as the opposite of conventional debt won't do it. Most of the Islamic financial products replicate debt nearly perfectly in economic outcome and there are conventional alternatives to debt (e.g. equity financing). Islamic finance has to come up with some reason that it is better that doesn't rely upon mis-informing about how the industry actually works. Otherwise it won't succeed except in providing Shari'ah-compliant alternatives to conventional financial products to Muslims.

DIB fraud case

I don't know enough about the DIB fraud case that has been ongoing for several years, so I will present the link to an FT article with no other comment than it is likely to reflect badly on Dubai's judicial system for its unwillingness to offer bail to the defendants, one of whom was acquitted after serving 3 years in jail.

DIFC Investments, Other News

JP Morgan said the government of Dubai may have to convert its $1 billion loan to DIFC Investments into equity, as well as make an equity investment in the company. The report also upgraded DIFC Investments' $1.2 billion mudaraba sukuk maturing in 2012 from "underweight" to "neutral" based on "improved asset coverage". Other analysts believe the rally--the sukuk rose in price to 79.15 (yielding more than 13%) --has gone to far in DIFC sukuk, as well as other Dubai-related sukuk.

Other News

• Gulf Finance House was able to roll over $100 million in debts for two years, with an option to extend it by another year.
  
• Standard Chartered is expanding its Islamic finance business. The bank recently launched a product that will allow for hedging against fluctuations in commodity prices.
  
• Bloomberg has a list of upcoming sukuk. Many new sukuk are coming from Asia including Hong Kong and Singapore, although regulatory challenges remain.
  
• The Houston Chronicle interviews Monem Salam on the Amana Funds.
  
• Moody's placed Dar Al-Arkan's credit rating (and the rating on its sukuk) on review for possible downgrade.
  
• Islamic finance has become as closely watched as celebrities, according to Lahem Al-Nasser.
  

More commentary on TID's wakala

The Investment Dar's defense in a lawsuit filed by Blom Bank over a wakala agreement is receiving significant attention throughout the industry. The contract, in which TID acted as the investment agent for Blom Bank and was responsible for returning principal plus an agreed profit margin if the investments were profitable, was signed off by its Shari'ah board three years ago. In court case, TID argued that the contract was not Shari'ah-compliant and therefore is void. The court sided with TID and ordered that TID repay only the principal. This has attracted attention to the impact the ruling could have on Islamic finance as a whole by increasing Shari'ah risk. One unnamed lawwyer suggested that TID "is clearly in financial difficulties and clutching at straws to get out of paying but [this] may cause concern for conventional institutions considering entering into a sharia transaction."

Other News

• Reuters sums up a recent Islamic finance conference in Jordan.
  
• Belgium is marketing itself to Brunei (in addition to countries in the GCC) as a destination for Islamic venture capital funds.
  
• A Malaysian company Binariang GSM has partially redeemed $1.1 billion of its senior sukuk.
  
• The recent debt exchange by Gulf Finance House led Standard & Poor's to raise the rating from selective default to CCC- with outlook negative.
  
• Bullion Management Group, a Canadian company offering two bullion funds, received Shari'ah approval from the Islamic Finance Advisory Board.
  
• France is still expected to make changes to its legal and regulatory framework to accommodate Islamic finance.
  
• The establishment of an Islamic finance company in Kerala, India is still uncertain because of the involvement of the government and the limits of government involvement with a religiously-based financial institution. It may be changed to be an 'interest-free', rather than Islamic institution.
  
• New tax changes that would implement a goods and services tax in Malaysia will be done so that it has an equal impact on conventional and Islamic financial services.
  
• Business Week provides a list of the upcoming sukuk issues.
  

AAOIFI to investigate breaches of Shari'ah-compliance, S&P predicts $20bn in sukuk pipeline in 2010

Arabian Business is reporting that AAOIFI will begin to investigate breaches of Shari'ah-compliance by Islamic financial institutions. They will work with companies with violations and only will approach authorities if the institutions refuse to comply. The secretary general of AAOIFI, Dr. Mohamad Nedal Alchaar, says that "It will be amicable, as we are the gatekeepers of this industry and we want to work through negotiation" adding that "Only if that does not work, will we go through the authorities". One important thing that is not clear from this article is what specifically will be reviewed. Will AAOIFI review the transaction documents of any institution that claims to be Shari'ah-compliance and pass judgement on the compliance of each product or will it instead focus on ensuring that Islamic financial institutions have the necessary safeguards in place (e.g. a Shari'ah board that reviews the products and audits the activities of the bank on a regular basis)? The AAOIFI guidelines are not universally required and there could be disagreement about whether they apply to Islamic financial institutions in jurisdictions where they are not mandatory.

In general, this is useful to prevent institutions from offering products that are described as Shari'ah-compliant without actually ensuring that they are approved as Shari'ah-compliant. However, if it is done poorly, it could hamper the growth of Islamic finance by restricting Islamic financial institutions from offering new products which may receive approval by the institution's Shari'ah board, but not be approved yet by AAOIFI. I will provide more comments when the scope of the AAOIFI committee is released with more specifics.

Standard & Poor's says that the pipeline for sukuk in 2010 is $20 billion, which would be roughly equal to the total issuance in 2009 ($23.3 billion). This estimate is calculated using those sukuk "publicly announced that is likely to come to market if conditions permit", according to analyst Mohamed Damak. In January 2010, $1.1 billion of sukuk have been issued according to Dealogic, which is up significantly from one year ago when only $77 million were issued as the global financial crisis was still limiting access to capital.

An article describe the CMHC report on Islamic home finance in Canada which I wrote about earlier this week. The public/private initiative Toronto Financial Services Alliance welcomed the CMHC report and said it had established a working group to look at the challenges and opportunities for Toronto in the Islamic finance industry.

The UK-based International Financial Services London released their latest annual report on the Islamic finance industry. The UK remains the largest Western center for Islamic finance with 22 Islamic financial institutions. The U.S. has 9 and this includes the two largest Islamic mutual funds in the world, the Amana Income and Growth funds.

Without going into too much detail, I agree with the Chief Executive of Qatar Financial Centre Regulatory Authority who said it was a "myth" that Islamic financial products are safer than conventional products. Islamic finance can alter the relationship between parties in a financial contract and can encourage equitable dealing and transparency, but it cannot remove risk from investments when they are structured to mirror conventional debt products. The close look that Nakheel's sukuk received when it was at risk of defaulting highlighted some of the areas where the idea that it was asset-based (and thus more secure than conventional debt) were exposed as false because the structure meant that in case of default, it would be treated as an unsecured obligation of Nakheel.

Other News

• The lord mayor of London said that oil companies could turn to the U.K. for Shari'ah-compliant loans.
  
• India is planning to change its regulations to allow non-banking Islamic financial institutions to attract investments from the Gulf and encourage the underbanked Muslim majoirty to participate in the financial system.
  
• Tamweel's chairman said it may still be merged with Amlak in the first quarter of 2010.
  
• DSAM Kauthar commodity funds released its performance results for 2009.
  
• The Central Bank of Bahrain's short-term Sukuk Al-Salam securities were oversubscribed and provide a return of 1.05%.
  
• The Islamic Corporation for the Development of the Private Sector, a part of the Islamic Development Bank said it would work with the government of the Maldives to establish an Islamic bank in the island country.
  
• Bank Islam, a Malaysian Islamic bank, is looking to acquire Islamic banks in Southeast Asia, including in Indonesia.
  
• The Malta regulators are close to being able to publish guidelines on an Islamic securities market, which could be released during the first half of 2010. There are still some legal and technical problems according to the Finance Minister.
  
• Dar Al-Arkan, the Saudi real estate developer is on an international roadshow for a sukuk that could be up to $1 billion.
  

Sukuk issuance falls 66% in 2008, lowest since 2005

The issuance of new sukuk fell to $15.77 billion in 2008 compared with $46.65 in 2007 according to data collected by the Islamic Finance Information Service (IFIS), a drop of 66.2% year-over-year. The last time issuance was lower than the 2008 total was 2005 when $10.76 of sukuk were issued. The global credit crisis and difficult economic conditions were blamed for the fall which demonstrate that, although Islamic finance does not have exposure to the direct causes of the crisis (subprime-backed mortgages and derivatives), it is affected by the health of the conventional credit market and global economic conditions.

Cerulli Associates estimates that Shari'ah-compliant funds have $65 billion in assets under management and are expected to grow at an annualized 12% rate. The article describes this total as "a figure that’s more modest than the hundreds of billions of dollars often cited by regulators and industry players". Although there is fair criticism to the $300-$500 billion number often cited as the size of the Islamic finance industry (reliable statistics are largely unavailable), the $65 billion in the fund management industry should not be compared with the "hundreds of billions of dollars". Usually the $300-$500 billion figure is cited to account for the entire size of the Islamic finance industry worldwide which includes assets management, retail banking, sukuk and the other areas of Islamic finance like private equity.

The Dubai Shariah Hedge Fund Index was launched containing four Shari'ah-compliant hedge funds using Shariah Capital's long/short trading platform, most of which focus on commodities. Because conventional short selling is not Shari'ah-compliant because of prohibitions of selling things one does not own, the hedge fund platform has raised some criticism that the idea of an 'Islamic hedge fund' is not possible nor desirable.

The growth rate of the Islamic finance industry is expected to exceed the general economic growth rate in Malaysia. The second finance minister of Malaysia Nor Mohamed Yakcop believes the Anglo-Saxon capitalist system has failed and "If the Islamic banking system had made an impact earlier, then it may have been possible to avoid the economic disorder as the system will not bring such problems". I believe this is further expression of naivete that the Islamic financial system will not be accompanied by any of the problems of its conventional counterpart such as greed.

A real estate company in the UK used Islamic finance to refinance the debt on its property holdings in London.

Indonesia will issue a sovereign sukuk aimed at retail investors in February.

One of the conventional banks in Kuwait, the Global Investment House, has defaulted on its debt. Global Investment House along with Islamic bank The Investment Dar announced that they needed up to $1 billion in loans from the government. The Investment Dar has been reported to be selling assets including part of its stake in Aston Martin which it acquired in a Shari'ah-compliant LBO in 2007.

UAE law on Islamic finance, Singapore, Indonesia, South Korea moving into Islamic finance

The United Arab Emirates (UAE) has a new law regulating Islamic financial institutions, replacing a law passed in 1985. The country has seen the ratio of assets in Islamic financial instituions grow rapidly to 13.5 percent, which exceeds Malaysia's 12%. The announcement described the new law as creating a Shari'ah Council to supervise Islamic finance activities, but was unclear about whether this would replace the individual Shari'ah boards at Islamic financial institutions.

At the launch of the Chartered Institute for Management Accountants (CIMA) Islamic finance qualification, the Deputy Finance Minister of Malaysia pushed for standardization in Islamic financial products. Bahrain-based International Islamic Financial Market (IIFM) is nearing completion of a standardized commodity murabaha contract that will be acceptable in many jurisdictions. The commodity murabaha transaction has recently been criticized, but still represents a large share of the transactions occuring in Islamic finance. The IHI newsletter in February (PDF version) provided a discussion about this criticism.

Despite lacking significant local demand for Islamic financial products, Singapore is moving ahead in its goal of attracting Islamic finance to the city-state with the creation of a level-playing field for Islamic finance including in taxation. Because Islamic financial transactions currently use transfers of assets between issuers and special purpose vehicles (SPVs) used in the financing process, they are often tax-disadvantaged compared to conventional financial products.

Indonesia's parliament is expected to pass a law to allow the government to issue sukuk. Despite having the largest number of Muslims, Indonesia has lagged behind in Islamic finance.

The Yemen Times has an interesting article describing the basics of Islamic finance. Shari'ah-compliant investment in gold has been launched on the Dubai exchange. Pakistan will issue a domestic, rupee-denominated sukuk for $318 million soon. South Korean banks are preparing to enter the Islamic financial industry.

Last week's news

Apologies for the delay in posting since last week, but I have been furiously working on our 501(c)(3) application. I will hopefully resume regular blogging by later this week. --Blake

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In response to the credit crunch, Dubai Ports World is planning an IPO to avoid the higher yield promised to the sukuk holders of the $3.5 billion convertible sukuk if a share floatation was cancelled. The sukuk was issued to fund the purchase of Peninsular & Oriental Steam Navigation, a U.K. ports group.

Rs. 55 billion ($906 million) in direct investments, mostly from GCC investors has flowed to the Pakistani Islamic banking industry this year as of the end of September.

Sukuk continue to be issued at a furious pace.

GCC-Asian links in Islamic finance grow as the Central Bank of Bahrain licensed the Islamic Bank of Asia to open an office in the country. The Islamic Bank of Asia became the first Islamic bank to receive a license in Singapore earlier this year.

The International Finance Corporation, the private lending arm of the World Bank, will finance investors setting up Islamic banks in Kenya.

Islamic home financing takes another leap forward in the U.K.

Shari'ah Capital will work with the Dubai Multi Commondities Centre to develop Shari'ah-compliant investment products "based on hard assets such as commodities and precious metals".

A letter in the Financial Times last week addressed the potential for soverign wealth funds particularly in the GCC region to move their assets towards Islamic finance.

IIFM, Malaysia-Indonesia IF Cooperation

The International Islamic Financial Market Conference (IIFM) begins today in Bahrain. The conference is listed on the IHI site with information on the subjects covered.

A mInister in the Malaysian government, speaking at a recent conference, believes that Malaysia and Indonesia should increase cooperation on Islamic finance and halal products.

Details of the Gulf Finance House Global Depository Receipts, expected to raise between $250 and $300 million.

The sukuk conference coming soon in London will work on tightening the rules on commodity murabaha, particularly ensuring that the funds are used in a Shari'ah-compliant manner.

The Arab American News provides a summary of the two-day conference before the Canadian convention of ISNA.

Pakistani Islamic finance growing rapidly, Al Salam expanding to Europe & international commodity murabaha

Pakistan's Islamic financial services industry started later than in other countries but has been able to grow rapidly and will continue to grow over the near term. This is the message from Dr. Shamshad Akhtar, the governor of the State Bank of Pakistan and the deputy chairperson of the Islamic Financial Services Board, speaking with the Khaleej Times. Islamic financing currently makes up 3 percent of assets and deposits of the country's banking system and Dr. Akhtar expects that it could grow to 10 or 15 percent in relatively few years if the sector continues to grow at its current rapid pace. Currently there are six stand-alone Islamic banks and ten Islamic 'windows' at conventional banks. Dr. Akhtar also emphasized the ability to bring more people into the financial system who currently abstain because of their religious beliefs and, if microfinancing is used, could play an important role in the empowerment of women who make up the majority of microfinancing loans.

Al Salam Bank, headquartered in Bahrain with licenses to operate in Sudan and Algeria is eying Asia and Europe for expansion. Speaking to Reuters, Yousif Taqi, Al Salam's cheif executive, predicted that the bank would enter the European market, possibly Britain, in the next two years.

Short term funds using palm-oil murabaha will be exchanged between the Saudi Hollandi Bank and Malaysia's central bank, Bank Negara Malaysia.

Islamic finance leakages and EPF seeks partners for RHB

Islamic finance has significant leakages into conventional finance - CIMB CEO

CIMB Group CEO Nazir Razak believes the Islamic financial system has significant leakage into non-Shari'ah-compliant assets. He was speaking at the Global Islamic Finance Forum in Kuala Lumpur, Malaysia. He was critical of the usage of proceeds from investment of deposits in commodity murabaha and the overpricing of sukuk in the Middle East when cheaper sukuk financing is available in Malaysia. The Malaysian Islamic interbank money market announced a new commodity murabaha product for liquidity management yesterday.

EPF seeks 2 strategic partners for RHB

Employees Provident Fund (EPF), the Malaysian state-run pension fund, is seeking two strategic partners for Rashid Hussain Bhd (RHB), the company in which it holds a 75 percent stake. One of the firms vying for a role in running the Islamic banking operations is Kuwait Finance House (KFH) which operates in Malaysia as Kuwait Finance House (Malaysia) Bhd

Other News

The Guardian Islamophonic podcast focuses on Islamic finance and speaks with Junaid Bhatti from the Islamic Bank of Britain, critic of Islamic finance Dr. Muhammad Saleem and the Economic Secretary of HM Treasury Ed Balls.

IFSB approves 10 year framework for Islamic finance.

Comments from Islamic finance professionals.

International Centre for Education in Islamic Finance (INCEIF) appoints Emirates Institute of Banking and Financial Studies (EIBFS) to offer its Certified Islamic Finance Professional (CIFP) course.

Khazanah Nasional Bhd, the investment holding arm of the Malaysian government, plans to reduce its holdings in government-linked companies (GLCs) by issuing sukuk.

Innovative new sukuk structures are needed to increase the size and appeal of the market.

The Malaysian Prime Minister Abdullah Badawi wants Malaysia to be a hub for Islamic finance.

Asian Finance Bank officially opens as the third foreign-owned Islamic bank in Malaysia.

Islamic funds are now easier to offer in both Malaysia and Dubai

Warehouse receipt finance & Saudi Electric sukuk

Commodity trade finance

The collateral management services manager Jeyaharan Thurairatnarasah of C&P Asia Sdn Bhd said Islamic banks in Malaysia can use warehouse receipt finance. "Jeyaharan said Islamic banks can introduce warehouse receipt financing as commodity finance is possible within Islamic banking structures and is not against syariah principle." Warehouse receipt finance is valuable for companies with large commodity inventories. The firm pledges the warehoused commodities as collateral for the loan.

Saudi Electric to issue sukuk

Saudi Electric Co. plans to issue up to $2.9 billion in sukuk over the next 15 years.