Hong Kong, U.K., Dubai all want to become the leaders in Islamic finance

Sheikh Yusuf DeLorenzo, the prominent American Shari'ah scholar recently wrote a paper criticizing the recent approval of financial products which have been approved by Shari'ah boards and pay returns that are linked to non-Shari'ah-compliant products. The editors at Dinar Standard, sat down with Sheikh DeLorenzo who provided further comments about the products, as well as presenting his hope that the products will be rejected in the market by investors. The decision, he argues, follow from a focus on a literalistic interpretation and lose focus of the maqasid (purpose, intent) of the Shari'ah. Sheikh DeLorenzo's paper, "The Total Return Swap and the 'Shari'ah Conversion Technology' Stratagem" is available in pdf form.

The leader of Hong Kong Donald Tsang is on a tour of GCC countries, in part to try to attract funds to Hong Kong as it begins to develop a Shari'ah-compliant finance industry.

Standard and Poor's has launched three new Shari'ah-compliant equity indices, large-cap, small cap and U.K.

The U.K. now has an option for money transfer that is Shari'ah-compliant through Lloyd's TSB.

The DIFC wants to be the center of Islamic finance worldwide, while London is making its own try at that position, being the leading Western country in the industry. The International Financial Services London, an organization promoting London's financial services industry worldwide, issued an 8 page report (pdf)on making London a center for Islamic finance.

Interesting notes from the IFSL report:

• "the customer base [for Islamic finance] in Western countries is not necessarily restricted to Moslems: other customers may be attracted by the ethical and environmental basis of Islamic finance"
• Top 5 sectors where sukuk are used: infrastructure (39%), finance (18%), energy (16%), real estate (11%), manufacturing (9%)
• U.S. is fourth in number of Shari'ah-compliant equity funds, trailing Saudi Arabia, Malaysia and the U.K.
• The U.S. is second in the number of Islamic banks among Western countries with 20, trailing the U.K. with 23

HSBC Amanah argues that Shari'ah-compliant insurance (takaful) needs to become more widely available.

Sri Lanka Islamic microfinance & Opposition to UK Islamic gilts

Sri Lankan Islamic microfinance

Islamic financier Amana Investments introduced an Islamic microfinance program on a limited scale (20 entrepreneurs will be selected out of 1,000 applicants). The initial capital for the program will be Rs. 1.5 million (US$13,639). The bank will work with Muslim Aid, an aid organization with significant capacity building in Islamic microfinance, and initially offer murabaha (cost-plus asset sale) but as the program develops they plan on offering mudabara (investment with a profit-sharing agreement with the entrepreneur). The program will not limit the program by religion or ethnicity and will begin in Slave Island, a suburb of Colombo, Sri Lanka.

Plans for U.K. Islamic gilts encounter first resistance

In an editorial in the Financial Times, Andrea Minichiello Williams of the Lawyers' Christian Fellowship, an evangelical Christian organization whose self-stated mission is to "is to influence lawyers and the law for Christ" complains about the proposed U.K. Islamic government bond. She argues that issuing sukuk would hamper the ability of the British government to use the funds received and, while it would, Ms. Williams goes to great length to make the requirements made by Shari'ah scholars seem unreasonable by adding to the commonly used ethical guidelines and suggesting that sukuk funds could not be used for "animal welfare (which promotes the welfare of non-halal animals)[, the] furtherance of many individual freedoms, or in the promotion of any idealistic or political worldview other than Islam (including secular democracy)." While the complaints are unlikely to influence the government's decision on their own, they demonstrate some of the potential hurdles Islamic finance needs to overcome in the West in spreading knowledge about how Islamic finance works, the role of Shari'ah scholars and the ethical screens used to decide Shari'ah-compliance.

Other News

Dubai Islamic Bank will offer a new product to high net worth individuals incorporating the principles of Socially Responsible Investing with the ethical screens of Islamic investing. The product, a Shari'ah-compliant four-year principal protected note with a 'minimum guaranteed annual return' of 2% and a 'maximum potential annual return' of 11%, would be based on a basket of 10 stocks involved in purification, desalinization and waste management.

Another discussion of the new S&P and MSCI Shari'ah indices.

Hong Kong-based Bank of East Asia will raise its stake in Malaysian bank, Affin Bank, in part to avail itself of the Bank's participation in the thriving Malaysian Islamic banking market.

Plans for Dubai Islamic Bank to issue sukuk to fund a Jakarta monorail project have been disrupted by the lack of a proper regulatory environment. Two bills on Islamic banking are under consideration by the Indonesian House of Representatives; one would set the regulatory environment for Islamic banking and one would do the same for sukuk.

The agreement between al Rajhi Bank and e-Kencana Sdn Bhd (a company involved in the MEPS Cash system in Malaysia) was signed which will create a Shari'ah-compliant fund transfer system between Saudi Arabia and Malaysia with future plans to expand to other countries.

IIFF Europe to be held in Switzerland, new Islamic funds transfer system

IIFF Europe to be held in Switzerland

The International Islamic Finance Forum (IIFF) Europe will held in Switzerland from November 12-15, 2007. There are two cities, Geneva and Zurich, in one of which the IIFF will be held. The conference will focus on Shari'ah-compliant wealth management and private banking. The conference will be added to the IHI conference listings.

Funds transfer system begins between Saudi Arabia and Malaysia

Saudi-based Al Rajhi Bank which also operates in Malaysia has developed a funds transfer system between Malaysia and Saudi Arabia where a card would be purchased in Malaysia allowing withdrawals from Al Rajhi banks in Saudi Arabia. The system will be rolled out to other countries although Malaysia will remain as a hub.

Other news

Derivative technology is now being used with contracts like mudaraba and arboun to replicate swaps and options.

Maybank issues $300 million sukuk.