Lessons of Cyprus and Depositor Liability in Islamic Banks

There is a common explanation that Islamic banking can alleviate the European debt crisis, or could have prevented the financial crisis. Normally, these claims are not thought through enough to provide specific policy recommendations, and they instead just form the normal cheerleading heard at many Islamic finance conferences.

However, with the ‘bail-in’ of depositors in Cyprus, Islamic banking may have a specific recommendation for conventional banks based on the products used by Islamic banks. Rather than just lump creditors together an encourage complacency around the potential losses, make these explicit by dividing them into ‘safekeeping’ deposits and ‘profit-sharing and loss-absorbing’ deposits, and connect them with the specific pools of assets within the bank to provide increased transparency.

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Oman gov't to consider sovereign sukuk

According to Reuters, Oman's government may be planning to issue sukuk to function as liquidity management instruments, which is especially needed for the new Islamic banks because the banking laws (PDF) specifically--and quite forcefully--prohibit any use of tawarruq by Islamic banks.  

Commodity Murabaha or Tawarruq, by whatever name called, is not allowed for the Licensees in the Sultanate as a general rule.  

It is not entirely unexpected to me that the government appears to be relenting and realizing that it needs to offer an alternative.  A government sukuk (issued either by the Central Bank or the Ministry of Finance) would give Islamic banks a place to park a share of their assets that would be viewed under capital rules as safe, and potentially serve as a liquidity buffer that still generates a return for the bank. 

While the development of a government sukuk is definitely a positive, it is up to the Central Bank to designate alternatives to interbank financing (wakala is permitted and is used elsewhere alongside tawarruq).  One key need is a way to provide lender of last resort financing, and a system of Shari'ah-compliant deposit insurance. 

The former could be addressed through Islamic repurchase agreements; however, the structure in use currently is essentially a secured commodity murabaha financing agreement.  In cases where the bank's survival is threatened, there are exceptions that allow for its use for no more than three months:

The only exception may be a real emergency situation defined as follows: If a Licensee's survival is genuinely threatened, or in case of a conventional bank's conversion into Islamic where no alternative mechanism exists to convert part or all of its portfolio, as determined by the bank's SSB.  In such situations and on a case to case basis the Central Bank may allow the use of CMT after the approval of the respective Shari'a Supervisory Board on a one-off basis for a specified time period no longer than three months.  Roll over in such CMTs or changing the price is not allowed under any circumstances.  

On the second issue of deposit insurance, I was not able to find specific reference in the banking rules, but presumably there is only conventional deposit insurance available, though it is not clear whether Islamic banks would be required to participate in the deposit insurance fund (this is generally allowed where the laws mandate participation in the deposit insurance funds).  However, this is not likely to be an immediate concern, though it should remain as a future issue to be dealt with. 

Bahrain changing its deposit insurance fund

The Central Bank of Bahrain held its first meeting to revise its deposit insurance for both conventional and Shari'ah-compliant financial institutions.  Bahrain has had a deposit insurance program in place since 1994, but it was a post-paid system (if a bank failed, the funds needed to repay depositors for their insured deposits would be collected ex post).  In a speech at the BIS in November 2008, Central Bank of Bahrain governor Rasheed Al Maraj acknowledged that "one of the lessons of the recent financial crisis is that it is important that depositors should be compensated promptly after their bank fails".  As a result, the CBB planned a new deposit insurance program:

Reflecting the lessons of the financial crisis, and also the recent development of international best practice standards on deposit insurance, the Central Bank is in the process of finalizing a new regulation on reform of the existing deposit protection arrangements. The purpose of this reform will be to establish a pre-funded scheme. This will be a scheme in which a fund of money is accumulated in advance of the scheme needing to make any payouts to depositors. The fund will be accumulated by regular contributions from the banks that are members of the scheme.

While it has taken a while from when Al Maraj acknowledged the need for a new deposit insurance fund (including coverage for Islamic bank deposits), it is good to see the wheels beginning to turn.  I wrote about Islamic deposit insurance--including the post-funded version used in Bahrain several months ago.

One additional point that is not directly connected to deposit insurance, but is also important to recognize from Al Maraj's speech at the BIS.  He was not naive about the spillover of the financial and subprime crisis to the GCC:

Even in the GCC the crisis has begun to have an impact. Although the GCC countries enjoy strong fundamentals, this has not shielded them from the crisis. Several have experienced significant stock market corrections. Some GCC members have needed to provide support to their banking sectors, either in the form of recapitalization funds, or by providing blanket guarantees of deposits, or by a combination of both. There is plenty of anecdotal evidence that investment projects are being delayed or scaled back.

There was some acknowledgement at the time that Islamic finance and the economies where it is most prevalent (the GCC and Malaysia) were not going to escape the credit crisis, there remained an ostrich-like obstinacy among many commentators who believed that Islamic finance could emerge from the financial crisis unscathed (it was able to weather the crisis fairly well, but was still significantly impacted).  And Governor Maraj acknowledged that likelihood, without distinguishing between conventional and Islamic banks.  So, kudos to him. 

Should the Indonesian hajj funds invest in project-based sukuk or deposit the funds with Islamic banks?

The Indonesian hajj fund, which currently places its funds in bank deposits, is planning to invest at least some of the IDR44 trillion ($4.7 billion) into government project-based sukuk.  There are some merits to this decision: it will generate Shari'ah-compliant returns for the hajj fund (as Mohammed Obaidullah held up as a model for handling waqf funds in India), and so long as the funds are guaranteed by the government no different from the funds being held currently, it should not be to the detriment of the depositors to the hajj fund. 

However, it is not clear whether it would be the best use of these funds to encourage development (specifically of Islamic finance in the country).  An alternative which could benefit the industry would be to deposit the funds in Islamic banks, rather than conventional banks to allow those banks to expand the asset side of their business.  This would help the Islamic banking industry with an added boost to their growth.

This idea is not without pitfalls.  For one, the funds would have to be protected for the depositors into the hajj fund, which could be lost if the bank failed, although Indonesia does have a deposit insurance fund.  The fund covers Islamic banks as well as conventional banks but does so without distinction for the bank type, which could raise some Shari'ah issues (pdf).  There are also risks that the funds would be allocated by political preference, rather than to the Islamic banks that perform the best. 

Despite the challenges to implementing the deposits of hajj funds into Islamic banks to spur their growth (which is already growing rapidly), there are costs and benefits to investing them in project based sukuk and it would be worth taking a look at the relative costs and benefits of each. 

Islamic finance complexity (Part IIc)

Wakala and murabaha deposits

Reading through the previous posts, I realized that I focused on only two of the four types of Islamic deposit products (qard and mudarba).  The other two--wakala and murabaha--should also receive a quick discussion. The wakala deposit product is very similar to the mudaraba, except that the profit accruing to the bank is determined differently.  In mudaraba, the bank receives a share of profit as mudarib, while in a wakala, the bank charges a fee for serving as the wakil (agent).  In both cases, the losses are supposed to be borne exclusively by the provider of funds (rabb ul-maal under mudaraba and muwakkil under wakala) but in most Islamic banks, there are reserve funds to preserve depositors principal to remain competitive with conventional banks and also to limit the likelihood of a run on the bank.

The other product, murabaha, is a more recent development and is often a commodity murabaha.  On the one hand, a murabaha is a useful product because it is not ambiguous like a mudaraba or wakala, in that the deposit is directly exposed only to the credit risk of being a creditor of the bank, rather than existing in a middle ground of being exposed to the risk of the investments made by the bank, but in practice, relying on the bank prudently creating a reserve fund to protect depositors funds.  On the other hand, the use of murabaha in deposit accounts further entrenches the product which is seen by many as less than desirable because it further enforces the idea that Islamic banks develop products that replicate conventional bank products.

Islamic Deposit Insurance

However, the main issue I have not yet addressed is Islamic deposit insurance.  The idea of deposit insurance is at first glance anathema to an Islamic banking system that is based (at least in rhetoric) on profit-and-loss sharing.  There are benefits to making rewards related to the risks, but in a bank, putting risks on depositors shoulders when those banks are competing with conventional banks is likely to hurt their competitiveness when there are no protections to depositors like deposit insurance (or to a lesser degree reserve accounts).

Depositors are generally focused on safety of their deposits and immediate access to their funds on demand, with returns (to keep pace with inflation) being secondary for most depositors with current (demand) deposit accounts.  Time depositors sacrifice immediate access to their deposits for some return to offset inflation, but  generally are not focused on high returns, especially if those returns put their principal at risk.  For both demand and time depositors, the safety of their principal is important and without some form of Islamic deposit insurance, a proportion of these depositors would move to conventional banks that can offer deposit insurance.

Without deposit insurance, the security of depositors' money is reliant on their faith in the solvency of the bank and its ability to properly accumulate enough reserves to offset the losses of funds that are invested on behalf of the depositors.  However, the confidence in the bank and its reserve accounts are likely to be highly correlated with depositors' faith in the solvency of the bank and if one is put at risk, there is a possibility for a bank run to start, which will turn doubts of confidence into a self-fulfilling prophecy (in some, but not all, cases).  Thus the need for deposit insurance.

There is limited experience with Islamic deposit insurance.  Most of the Islamic deposit insurance programs (detailed in a survey by the International Association of Deposit Insurer's (IADI) Islamic Deposit Insurance Group (IDIG) conducted in 2009) are either part of a conventional deposit insurance program entirely or are done with small changes to be Shari'ah-compliant.  The only fully Islamic deposit insurance program is Sudan because the banking system is (or was at the time) fully Islamic.

Two deposit insurance programs which I looked at were Bahrain's (run by the Central Bank of Bahrain) and Malaysia's (run by the country's deposit insurance agency PIDM).  The deposit insurance systems are different.  Bahrain's covers deposits, not including mudaraba deposits or other deposits not involving safekeeping or custodianship where the depositor would be entitled to share in profits and losses.  It is post-funded (i.e. deposit insurance assessments are only collected from banks when there is a failure) so there are no issues with how the deposit insurance premiums are invested (although the CBB website does indicate that a new deposit insurance program is under construction that would shift it to being pre-funded raising the issue of investing the premiums collected by the Central Bank).

PIDM, in contrast, does both collect premiums (it is pre-funded) and does cover mudaraba depositors in addition to deposit contracts based on custodianship or safekeeping (e.g. wadiah).  The deposit assessments are calculated in a similar way to conventional banks, but the premiums are held in a separate fund from those collected from conventional banks and are invested only in Shari'ah-compliant government investments (e.g. bonds, notes, bills issued by the Government or Bank Negara Malaysia, the central bank).

Since PIDM's deposit insurance program does cover mudaraba, it would be natural to assume that it limits the profit-and-loss nature of mudaraba deposits, but the deposit insurance program does not cover regular losses that would accrue to mudaraba depositors.  It only comes into play when a bank that is a member of the deposit insurance fund fails.  In order to not place return-generating accounts above those that do not generate a return for depositors, the wadiah and qard depositors are placed ahead of mudaraba depositors in the seniority of creditors of a failed bank.

The deposit insurance issue should be more aggressively developed now that the Islamic finance industry has the experience of surviving a global financial crisis.  It is probably luck more than just about anything that there were no bank runs on Islamic banks during the crisis, and in part also due to the ad hoc interventions by governments.  A deposit insurance program (operating under kafala bil ujr, a guarantee provided for a fee, like Malaysia's) is essential if Islamic banks want to compete with conventional banks while also avoiding being covered by conventional deposit insurance programs (which may lessen perception of their Shari'ah-compliance).

As the Malaysian program shows, deposit insurance programs do not offset any profit-and-loss sharing of mudaraba deposit accounts, except if the bank fails.  This is probably prudent because while depositors are likely willing to risk small fluctuations of their deposits in rare occasions (where the reserve accounts are not large enough), they are unlikely to accept the total loss of their deposits, and will move to conventional banks if that possibility is shown to be real by the failure of an Islamic bank somewhere in the world.

The existence of Shari'ah-compliant deposit insurance (deposit takaful?) will, I think, increase, rather than decrease, the profit-sharing nature of Islamic banks by taking the 'tail risk' away from mudaraba depositors. They will still have to have faith in the bank adequately maintaining a reserve account (something that the bank regulators should focus on), but it will make the returns generated from a mudaraba account seem worthwhile, even if small, because the unlikely event that they suffer a large loss has been removed.  For proponents of a profit-and-loss sharing bank system, this should be a priority, especially before murabaha deposits become the norm rather than qard, wakala or mudaraba that prevail today.

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

Commodity murabaha spreads to deposits

The Indonesian subsidiary of CIMB, CIMB Niaga, is planning on launching a commodity murabaha deposit account, according to Bernama.  A commodity murabaha is a product mostly used between banks to manage liquidity where one bank buys a commodity (like palm oil) in the spot market, sells it to the counterparty with deferred repayment, and the counterparty then sells the commodity in the spot market.  It is as close as you can get to a conventional interest-based loan in Islamic finance.  Its use has been controversial (commodity murabaha is the same thing as tawarruq) but deemed necessary to keep the Islamic finance industry running (and I accept its use where there are no or very few suitable alternatives, like in inter-bank money markets).

However, when it is introduced as a deposit account product, it is an unequivocal statement that 1) Islamic banking is not any different from conventional banking; and, 2) Islamic banking cannot offer anything new to consumers that will fulfill the role of deposits (liquid, safe places to store money and earn a return).

On the first point, the ideal structure (at least from early theoretical models) is that Islamic banks operate as financial intermediaries between depositors and borrowers (as in conventional banks), but introduce a profit-sharing mechanism that somewhat insulates the bank from the maturity mismatch in conventional banking because depositors are theoretically required to bear loss from their deposits.  They provide the bank with capital under mudaraba and the bank provides financing under mudaraba.

The mudaraba model of banking on the asset side is not common.  The asset side of banks balance sheets has always been more debt-based using ijara or murabaha (including tawarruq) to create a predictable stream of income and a financial statement that bank analysts can easily identify with (and which fits into regulations designed for conventional banks).  On the liability side of the balance sheet, Islamic banks have mostly left the mudaraba model intact.  Depositors are typically required to accept the possibility of loss, although in practice, they are protected from losses by surplus profit or profit-equalization reserve accounts, which shift the first loss position to equity holders and also hold the profits that would accrue to depositors in excess of conventional banks' interest payments on deposits.

In addition to the reserve accounts that protect depositors, there are other forms of deposit accounts like amanah, where the bank guarantees the principal of the account but does not pay a return.  There are other deposit structures like wadiah and wakala that are also used that also require the depositors to (mostly theoretically accept losses).  In the UK, the Islamic Bank of Britain was allowed to give customers the option to refuse deposit insurance if a loss in their deposits would occur due to bank insolvency (as far as I know this is not allowed in the US, although consumers could theoretically refuse to withdraw any deposits held in bank accounts of failed institutions which offer Islamic banking, if the FDIC got involved).

The striking thing about the use of commodity murabaha is that it acknowledges that any model where there is a possibility of loss (mudaraba, etc.) or where there is guaranteed principal but no return (amanah) is not enough to attract depositors.  Instead, the conventional deposit account with principal protection and a return on deposits has to be (re-)created.

There is one other alternative that I can think of and that this product is being used to create Islamic certificates of deposit for retail consumers where funds are locked up for a certain period of time with principal guarantee and a fixed profit.  If this were the case with this product, it would make some sense, but it still amounts to the bank managing its balance sheet into a form that is familiar to conventional bankers (and consumers!).

I would imagine that this type of deposit account is used by other Islamic banks, so I don't want to single out CIMB Niaga, but the implications of bringing commodity murabaha into the equation with depositors when so many near-equivalents are possible and already in use are not positive.  It adds one area of the balance sheet to the list of "things the industry does to make it as close as possible to conventional finance".  As much as I support using replicated products to offer new services to consumers in Islamic banking, I try to limit my support to areas where Islamic finance has not yet found a different way to do these things.  Besides equity, deposits stand alone as the area of an Islamic bank's balance sheet where other, less cynical products are available and already in use.

Pakistan central bank explores interbank money markets, Indonesia to issue global sukuk in October

Pakistan's central bank is developing Shari'ah-compliant interbank money market products. This follows the announcement that the UAE central bank is also developing inter-bank liquidity management Islamic certificates of deposit. This is a welcome trend to allow Islamic banks to manage their surplus liquidity and will help to provide greater stability to Islamic banks.

Global sukuk issuance is expected to rebound in 2011 as infrastructure projects begin in Asia and the Middle East following a significant slump since the credit crisis affected Islamic finance in 2008 and 2009. Indonesia is planning a global sukuk in October that could be as large as $500 million to $600 million, less than its $650 million sukuk issued in 2009. The government may issue 5-year sukuk, but would prefer 7-10 year sukuk, which would be beneficial as a benchmark for domestic corporate sukuk. This would be complementary to the possible tax holiday for sukuk to boost the domestic Islamic finance industry.

Other News

• Islamic finance is gaining popularity among bankers looking to "change some terms here and there" according to Andrew White, the director of the International Islamic Law and Finance Center in Singapore.
  
• Lahem Al-Nasser of Asharq Al-Awsat believes that an Islamic central bank is needed and that Islamic banks should have their reserves linked to gold. I disagree: bringing the gold standard to Islamic finance would be no more successful than it was in conventional banking and would limit greatly the growth potential of the industry while offering limited benefits as the price of gold fluctuates significantly.
  
• Ithmaar Bank, which recently converted to be an Islamic bank says it is fully Shari'ah-compliant and denied reports about disagreements with its Shari'ah board over conventional assets being converted to be Shari'ah-compliant.
  
• The governor of the Central Bank of Afghanistan is working with Pakistani experts to implement regulations for Islamic banks within the next two months.
  
• Indonesian bank Bank Permata launched an Islamic mortgage product based on ijara mutahiyah bittamlik (lease ending in ownership).
  
• Malaysian Prime Minister wants Bank Islam to expand the Islamic pawnbroking system Ar-Rahnu from urban areas to rural areas.
  
• A Bahraini investment house, Tharawat, plans to launch a $50-$60 million private equity fund investing in Saudi Arabian real estate in the third quarter.
  
• After delaying a planned bond issue, SABIC received $1 billion in Shari'ah-compliant credit from Alinma Bank.
  
• CNBC Europe has an interview with a professor of Islamic finance in Spain, Celia De Anca of IE Business School in Spain.
  
• The Nigerian Deposit Insurance Corporation is introducing Islamic deposit insurance using Malaysia as an example.
  

S&P report summary (part 2)

In an earlier post, I began a summary of the Standard & Poor's Islamic Finance Outlook 2009 and I want to continue the analysis with a more in depth look at one of the main liquidity risks that is particular to Islamic banks: the use of profit-sharing investment accounts. The idea of profit-sharing deposit accounts instead of traditional interest-bearing deposit accounts goes back to the early conceptions of Islamic banks where they operated raising funds from depositors under a mudaraba arrangement (acting as the mudarib, the manager of the funds). In this arrangement, deposits would be invested on behalf of depositors and profits would be shared between the Islamic bank and the depositors but losses would be borne exclusively by depositors (as the rabb ul-mal, the provider of capital).

This ran into two primary problems. First, there was an informational (and incentive) asymmetry causing a principal-agent problem between the depositors. The depositors prefer greater stability over higher returns because they bear any losses whereas the bank benefits from the sharing of any profits but are not on the hook for losses. Second, absent a solution to the principal-agent problem, Islamic banks have a competitive disadvantage vis-a-vis conventional banks who are more than willing to accept deposits from clients who refuse to accept any interest.

In order to be competitive with conventional banks while still adhering to the mudaraba style deposit, Islamic banks developed several safeguards to protect depositors against losses of principal. Standard & Poor's describes these:

• "Profit equalization reserves (PERs): These reserves constituted by IFIs can be used to smooth returns offered to PSIA holders in cases of reduced distributable cash flows. For instance, if an Islamic bank realizes an effective profit that is not sufficient to offer its PSIA holders a satisfactory return, it could use part or all of its PER to boost the return and maintain its deposit base. PERs are deducted from a bank’s gross profit before allocating the mudarib fee.
  
• "Mudarib fee: This is the remuneration of the bank for acting as a manager (mudarib) of PSIAs. The mudarib fee is not fixed and differs from one bank to another, but is typically between 20% and 40% of the distributable cash flows. This can provide a bank with some room for maneuver in case of unexpected profitability deterioration; it could simply decide to waive its fee, allowing a higher remuneration to PSIA holders.
  
• "Investment risk reserves: These are reserves constituted by IFIs in order to curb the risk of future unexpected losses and enable them to be in a position to support PSIA holders should such losses occur. IRRs are set aside by IFIs after allocating the mudarib fee.
  
• "Liquidity: IFIs offering PSIAs are in general more liquid than conventional banks as they are aware that their reliance on PSIAs could trigger liquidity stress. The average liquid-to-total assets ratio for GCC-based IFIs rated by Standard & Poor’s was 30% at midyear 2007, compared with 18.1% for GCC-based conventional peers. This extra liquidity has a negative impact on profitability, however. Some leading Islamic banks have a portfolio of assets that can be repoed with their central bank.
  

Profit equalization reserves. Profit equalization reserves offer the first cushion between an Islamic bank's asset performance (funded by deposits) and depositor returns. When returns are above the level needed to meet the competitive rate, additional profits are put aside into the PERs. If the bank's investments returns falls below the level needed to offer a competitive rate for depositors, the PER can be tapped to make up the shortfall.

Investment risk reserves: These are essentially an additional buffer for depositors that are set aside from depositor returns (e.g. after the mudarib fee is taken) out of profits that would otherwise flow to depositors. Their presence adds protection to depositors, but at the same time, because they are taken from the depositor share of profits, lower returns for depositors. This smoothing of paid-out returns to depositors is used to make the deposit base more stable. Without the smoothing, depositors could move their deposits between banks in search of the current highest return. If this happened, it would undermine all Islamic banks' returns because they would either face liquidity shortages (forcing them into sales of assets at fire sale prices) or more likely, they would hold additional assets in low- or no-yielding assets which would reduce their overall profitability and therefore limit their ability to generate returns for depositors.

Mudararib fee: In exchange for managing mudaraba deposit accounts, Islamic banks receive a share of any profits. In cases where the investment risk reserves and PERs are depleted or are in danger of being depleted, Islamic banks reduce the share of profits they take in order to preserve the other buffers. This functions the same way for depositors as the PERs and the investment risk reserves but the funds come from a different source. This helps Islamic banks maintain their deposit base but come at the expense of shareholders instead of out of depositors' retained profits in the investment risk reserves and PERs.

Liquidity: This is the most similar to conventional banking (especially in situations where deposit insurance is absent). In order to meet depositor withdrawals and stem any potential runs on the bank, all banks are required to hold liquid assets. However, because the mudaraba deposits are not insured and because there are limited sources of external liquidity for Islamic banks because they cannot turn to conventional inter-bank money markets, this liquidity buffer is significantly larger for Islamic banks than for conventional banks (30% versus 18% in the GCC).

Overall, the goal of all four buffers is to attract and retain depositors at competitive rates. Another way to think about it is in terms of the flows of money within a bank as it collects deposits, invests them and pays out profits to depositors and shareholders.

Depositor funds are invested by the bank and expect a return that is equal to the rate of return they could receive from a conventional bank. The bank takes the deposit and invests it in assets that have a higher average return than the market rate paid on depositor accounts, but this return can fluctuate. In the good times, the deposited money generates profits that exceed the return expected by depositors by more than the mudarib fee. Some of these profits are placed into the profit equalization reserve account. The remainder is divided between the depositors and the bank (through its mudarib fee). The expected return is paid to depositors and the remainder is placed into the investment risk reserve account. This happens every month (or year) while profits are healthy enough to afford it. If in one month or year, profits leftover for depositors fall short of the expected depositor return, the difference is made up from the investment risk reserve account (depositors' retained profits). If this is not sufficient, it is supplemented out of the PERs (retained profits, some of which is depositors', some is the bank's retained mudarib fee). If the PER is not sufficient, then mudarib fees are cut in order to make up the difference (shareholders' retained profits). If all sources of retained depositor investment profits are exhausted, the bank has run into trouble and depositors will receive less than their expected rate of return. If depositors remove their funds en masse, the bank will have to draw from its liquid assets to meet withdrawals to avoid selling assets at distressed prices. Without a sufficient liquidity buffer, the bank could be forced into distressed asset sales which would constitute a crisis and could, depending on the price at which they can sell assets, precipitate insolvency.

Islamic finance and the credit crunch

Islamic financial institutions are realizing that they're exposed to the credit crisis through their investments in the GCC real estate market which has begun to slow. The primary effect now is reduced profitability, but the lack of depositor insurance could allow falling real estate prices to feed through to depositors. In a few countries like Malaysia, the government has guaranteed all deposits even those at Islamic banks for two years. Islamic banks in Europe are also expected to see growth slow due to the credit crisis, according to the CEO of the European Islamic Investment Bank.

The editorial manager of Oxford Business Group in Abu Dhabi discusses the fallout from the AAOIFI ruling on sukuk and highlights the new, innovative products that are being developed.

Depositors in the UK have several alternatives to conventional banks, one of which is Islamic banks. A BBC news article discusses some of the opportunities and risks of Islamic finance.

In the U.S., Habitat for Humanity, a Christian charity, has built and refurbished many homes for Muslims and Muslims are now becoming involved in the organization.

Indonesia may delay its dollar-denominated sukuk because of credit market conditions.