Interest in Islamic finance is growing beyond the American-Muslim community because the recession has forced more people to question the nature of conventional debt and interest, said Hussam Qutub, a spokesman for Guidance Residential, an Islamic mortgage company based in Virginia, USA.

Guidance Residential, undertakes stringent checks of loan applicants’ finances, including income, savings and liabilities to make sure they can afford the mortgage. “Our conservatism has kept us out of the current financial mess,” says Hussam Qutub. By contrast, during the property boom years up until two years ago, other companies issued loans to low-income residents who relied on rising real estate values as collateral in what became the “sub-prime” crisis. Millions of US residents are now struggling with loans worth far more than their homes are worth, or are being foreclosed on after non-payment.

Guidance Residential has provided more than $1.5 billion in home financing to at least 6,000 customers in 23 states since it launched seven years ago. The company accounts for around half of the US market share of Islamic mortgages. Competitors include Lariba American Finance House in California and University Bank in Michigan.

Delinquencies, where borrowers fall behind on payments, accounted for less than half the national rate of 7.8 per cent at the end of last year. The company has only served about five foreclosure notices because the majority of its clients only took on liabilities that they could afford. By comparison, a record number of foreclosure actions started nationally in the first three months of this year, up 27 per cent from the same quarter last year, the Mortgage Bankers Association said last week.

“We have to give credit to the American Muslim community, who are conservative in the way they handle money and make sure to have savings for times of financial hardship,” Mr Qutub said. “We really take our hat off to the community.”

Under Islamic law, Muslims are prohibited from riba, often translated as interest, and are encouraged to make financial transactions tied to concrete goods or services rather than make money out of money. Guidance Residential’s mortgage model requires the company to take an ownership stake in the home along with the customer, who pays a rental fee as well as monthly payments to buy the company’s share in the home.

If a customer falls behind on payments, the company charges a $50 fee, rather than the compound interest usually imposed by traditional companies. If a home is foreclosed, losses are borne according to the ownership stakes of the customer and company, which does not then pursue the customer to regain its financial stake.

Some critics say a rental fee is akin to interest on a mortgage loan. But according to a customer, it was the joint ownership contract that made him feel religiously comfortable with the product, just as a legal contract distinguishes and defines marriage from other partnerships.

New York, Sharmila Devi Foreign Correspondent, The National, June 01. 2009
Syndication : RIBH

Real Estate Financing Company (REFC), a new residential mortgage company based in Riyadh, Saudi Arabia, is expected to launch operations in 2009 to provide Sharia-compliant, third-party financing for home purchase in Saudi Arabia. Future plans call for additional branches in Saudi Arabia as well as on-line development.

Currently, there is little third-party residential financing available in Saudi Arabia. The founding investor group of REFC has experience in the Saudi housing industry, having led construction projects in that market and sees synergies between their construction businesses and potential growth with the inauguration of a third-party, home-finance institution.

Clayton Holdings, Inc., a US based due diligence, surveillance, and specialty consulting provider, has been engaged as the lead consultant in the formation of REFC. For Clayton, the consulting contract marks a telling shift in the company’s business model — once among the largest pre-issuance due diligence providers in the private party residential mortgage securitization market, the firm has had to rely on avenues to build revenue as the subprime and related mortgage markets literally disappeared during the last 12 months.

Clayton will work with REFC to size the Saudi housing market and creating the firm’s strategic business plan, as well as conducting an IT/vendor systems assessment, creating necessary operational documentation and performing ongoing implementation assistance. In addition, Clayton will work with the institution to create exit strategies for the loans, including securitization in a Sharia-compliant environment.

“Knowing the broad benefits of home ownership and being part of making it more accessible to a whole new market makes this project very exciting,” said Bruce Legan, president of Clayton Consulting. “The challenge is to balance the efficiencies of proven best practices with the strictures of Sharia and the cultural nuances of the modern Saudi life.”

By Paul Jackson, Housing Wire Magazine (USA) July 21, 2008

After a few years of strong growth focused largely in the Middle East, a new generation of Islamic bank startups is setting its sights on the West. And as the wealth of Gulf countries swells with skyrocketing oil prices, more Western banks, including some Canadian banks, are looking to those pools of capital. Banks such as Citigroup Inc., Lloyds TSB Group PLC, Deutsche Bank AG and Barclays PLC are now offering services along Islamic finance lines. In the Muslim world, some have partnered with local sharia banks to form joint funds. In the West, London ranks as the leading Islamic banking centre, with conventional banks, such as HSBC Holdings PLC, opening Islamic banking units.

“Islamic banking is growing faster than any other sector of the banking industry and the West is just starting to wake up to its potential,” says Anouar Hassoune, a Paris-based senior analyst with Moody’s Investors Service who specializes in sharia banking.

In February 2008, Royal Bank of Canada hired Zaher Barakat, who teaches Islamic banking and finance at Cass Business School in London, as head of financial products for the Middle East. RBC is targeting a variety of clients in the region, including sovereign wealth funds, private banking arms of local banks and government pension funds. While the priority is to market the bank’s existing services and products into the Middle East, RBC is planning to enter the Islamic finance market, Mr. Barakat said. “We are working now on one fund to transform it to be sharia-compliant,” he said.

Bank of Montreal, through its London institutional management group Pyrford International, manages sharia-compliant products for Middle Eastern clients and is expanding the offering, said BMO spokesman Paul Gammal.

Islamic banking forbids interest and obliges deals to be based on physical assets, not on speculation. Sharia-compliant products seek to replicate the structure of interest through cost-plus transactions, leasing arrangements, or by linking payments to returns on assets.

In Canada, sharia-based banking is available, but on a limited basis. The issue sparked controversy earlier this year when the Canada Mortgage and Housing Corp. launched a study on Islamic banking, as Ottawa considered its first applications to start up Canadian banks operating within Islamic law.

The proposals drew fire from the secular Muslim Canadian Congress, which argued that faith-based banking had no place in Canada, and the presence of Islamic banks would pressure Canadian Muslims to subscribe to costlier products.

Walied Soliman, a Toronto-based lawyer at Ogilvy Renault, said “Canadian banks haven’t been as quick either on raising money from the Middle East for financial institutions in Canada or in terms of offering up structured products or issuers for investment in the Middle East.”

But that may be changing, he said. “Canada is very quickly getting onto the radar of [sharia] investors and other issuers looking to engage in M&A transactions with Canadian issuers, and as a result we’re going to see growing interest in Canada and the bankers will adapt to that and learn more about the sector as the demand grows.”

Source: ReportOnBusiness.com

The Edcomm Group Banker’s Academy has now supported several financial institutions in establishing an Islamic Banking presence in the United States. Whether the banks are new (de novo) entities providing only Islamic Banking, or existing banks that wish to establish an Islamic Banking Division, Edcomm Banker’s Academy is now the place to go for advice and assistance.

In order for Islamic Banks to be competitive with conventional banks and attractive to customers, Islamic financial products must meet the risk/reward profiles of depositors, investors and issuers, while at the same time following the laws of Sharia. Additionally, Islamic Banks must educate their personnel to understand the tenets of Islamic law that pertain to banking. Edcomm Banker’s Academy has created Islamic Banking Compliance to address these vital needs with Consulting, Documentation and Training.

The Edcomm Group Banker’s Academy is a 21-year-old multimedia education and communication consulting firm specializing in the development of creative business solutions that improve productivity, customer service and market share – providing bottom-line results. The Edcomm Group Banker’s Academy has had the privilege of assisting many distinguished clients with business solutions in the form of eLearning programs, classroom instruction, multimedia production and online and print based documentation. Edcomm Banker’s Academy offers many off-the-shelf and customized courses such as Teller Training, Compliance Training and Systems Training specifically designed for Banks, Credit Unions and Money Services Businesses (MSBs).

The Edcomm Group Banker’s Academy is headquartered in New York City with an Advanced Design Center located in Fort Washington, Pennsylvania.

Press Release

Edcomm Banker’s Academy met with Path Solutions, the leading provider of software for Islamic Banking to discuss the training needs of Islamic Banks. Path Solutions is a leader in the delivery of integrated solutions and services to the financial marketplace. They offer a comprehensive range of software products, outsourcing and consulting services that address the whole spectrum of the global finance industry and specifically, the Islamic Finance Industry.

As house foreclosures are on the rise, the gov-T is working on a bill to let the government back loans for at-risk borrowers. This has been born out of the subprime lending crisis. If you’re not sure what that means, basically, its when mortgage companies target people who do not have good credit for loans. It sounds strange, but in fact this is where many of them make the most profits as they gain the most interest revenue from it.

Read the complete article: Muslimmatters.org

Until a few years ago Islamic finance was considered to be relatively niche. Worth more than $500 billion today, Islamic finance is a significant financial market offering varied financial products that are attracting interest from Muslims and non-Muslim investors on a global scale.

Terrapinn’s Islamic Finance World North America 2008 is more than just a conference. It is a year long marketing campaign. It is a cost effective sales and marketing solution that works throughout the year, providing you with new contacts and great exposure, culminating in an event which will bring you face-to-face with your key customers and prospects. It is an integral part of a global brand that has a proven track record of excellence.

This event will be the most comprehensive and action-oriented conference on Islamic Finance in North America – offering tools, tips, techniques and key industry contacts. The focus will be on wholesale banking but the event will include two sessions on the fast growing area of Islamic retail banking.

Banks, law firms and service providers

• Identify retail banking opportunities in the North American market
• Generate ideas on how to create Shariah compliant products
• Showcase your innovation in serving Islamic investors to potential partners
• Gain insight on leading banks accessing the
  North American Islamic window
• Hear case studies from the pioneers of North American Islamic finance

Investors and issuers

• Compare Shariah compliant financing options for private equity and real estate
• Learn different viewpoints on the parameters of Shariah compliant fund
• Access fund managers, banks and advisors to create new investment products
• Hear how peers realize return potential from Shariah compliant investments
• Discuss how sukuk investments offer diversification in a fixed income portfolio

Programme

For more information, please visit www.terrapinn.com/2008/ifwna.

Business is up at Islamic finance firms, which don’t charge interest and weren’t part of the mortgage debacle.

The mortgage industry may be in meltdown, but at least one class of lender appears to be flourishing: Islamic finance companies that offer Muslim home buyers alternative arrangements such as lease-to-own deals so they can avoid making the sort of interest payments that many believe their religion forbids.

Officials at Guidance Residential, a Reston company that has financed more than 5,000 home purchases since it began in 2002, said the company is having its best year yet, with business up 7 percent in the first quarter of 2008 from the first quarter of 2007.

At University Islamic Financial, which began in Ann Arbor, Mich., and expanded its operations to Maryland, Virginia and five other states last year, officials said the number of home-financing applications quadrupled from last March to this March.

Representatives of the four major Islamic home-finance institutions in the United States said they do not track the reasons customers choose them over conventional mortgage brokers. Several speculated that it was due to the natural growth of what is still a fledgling retail industry, as well as two side effects of the mortgage crisis: The drop in prices in many regions has brought homes back within reach of first-time buyers, who make up a sizable chunk of Islamic financiers’ customers. And the drumbeat of negative publicity about the practices of subprime mortgage lenders has amplified the distrust and discomfort the conventional mortgage industry already inspired in many Muslims.

“Folks have to be questioning the methods used by conventional mortgage companies over the last three or four years based on what’s happening today,” said Hussam A. Qutub, a spokesman for Guidance. “And I think that makes more people think, ‘Well what about the emergence of this [Islamic-] compliant financing industry? Let me give it a look and educate myself about it to see if it could perhaps be more beneficial to me.’ “

That was the prevailing sentiment among potential customers who approached an advertising booth staffed by Guidance representatives at the annual spring fair held by the All Dulles Area Muslim Society in Sterling on a recent weekend.

Nabila Zerrarka, an Algerian-born woman wearing a white-and-green headscarf and pushing a stroller, wanted to find out if Guidance’s home-finance options were more straightforward than those offered by traditional mortgage brokers.

“Deep down, I don’t feel comfortable paying interest because it is against my beliefs,” said Zerrarka, 29, who is searching for her first home and has already obtained a prequalification letter for a conventional loan from Bank of America. “But I also feel it’s against my financial interests to pay interest. . . . What we’ve seen is that with interest-bearing loans, there are all these gimmicks and hidden costs and tricks that they can surprise you with. . . . If there is a possibility of doing it the Islamic way, we’d like to explore it.”

Mounir Elhaj, 45, a native of Sudan who works at a moving company, wanted to know how Guidance deals with customers who fall behind on their payments. He said he recently helped move a woman whose house was foreclosed on after she missed payments.

“She had been paying her mortgage for 17 years, and the bank still took her house,” Elhaj said to the Guidance sales representative. “So I want to know if I bought a house and then fail to pay, can you help me?”

The representative, Amr Mohamed, smiled magnanimously. “Yes, we can,” he said, adding that Islamic law, known as sharia, forbids businesses from profiting from a customer’s financial hardship. So if a customer is late on payments, Guidance charges him or her a flat administrative fee to cover processing costs but none of the percentage-based penalties and additional fees that conventional mortgage companies can pile on.

Islamic home financing aims to offer Muslim buyers the same opportunities as conventional lenders but with a twist that gets around sharia’s prohibition against the payment of riba. Generally defined as excessive gain, riba has over the years come to be considered the equivalent of making money by renting money — in other words, charging interest — because the borrower shoulders risk while the lender is guaranteed a return.

In one of the alternative arrangements offered by Islamic finance companies, the company buys the house, then sells it to the home buyer in fixed monthly installments at an agreed-upon marked-up price. The markup rate is kept competitive with the prevailing interest rate on a conventional mortgage. So apart from a few additional transaction costs from the atypical nature of the arrangement, the buyer’s monthly payment is roughly equivalent to what it would be with a conventional mortgage.

A second option is for the financier and the home buyer to enter a lease-to-own contract similar to those used to buy cars. Once again, the rental portion of the monthly payment is kept equivalent to prevailing interest payments. The third model, which is favored by Guidance, is also based on a lease-to-own arrangement, except that the buyer and the finance company form a limited-liability entity to own shares of the property.

All three arrangements got a major boost in 2001 when Freddie Mac agreed to begin buying them on the secondary market, ultimately including not just Guidance and University Islamic, but also Devon Bank in Chicago and American Finance House Lariba of Pasadena, Calif. Last year, Freddie Mac bought more than $250 million in Islamic home loans — a tiny fraction of the corporation’s $1.77 trillion business but nonetheless a slight increase over previous years, according to spokesman Brad German.

While Islamic finance companies have convened boards of prominent scholars to certify that their finance arrangements comply with sharia, not all Muslim thinkers are convinced that they are necessary.

Mahmoud Amin el-Gamal, an economics professor at Rice University specializing in Islamic finance, noted that even in Muslim countries, sharia-based financing was developed in only the past several decades. And he argued that because conventional mortgages are secured by a physical good, namely the home, that is usually the only asset the lender can repossess if the borrower fails to repay, such loans should not be considered the equivalent of making money by renting money.

In any case, el-Gamal maintained, Islamic home-finance products are so closely modeled on conventional mortgages as to constitute a distinction without a difference.

“This is an industry that preys on people’s religious insecurities by selling them a product that they claim is different when it’s not. It’s false advertising, and it’s a case of supply creating demand,” El-Gamal said.

But Hirsi Dirir, a Somali-born technology analyst who recently obtained financing from Lariba to buy a townhouse in Annandale, said such objections pale in comparison with the peace of mind he has gained from making the extra effort to adhere to his faith.

“I wish I could avoid everything that Islam doesn’t allow, but I can’t,” said Dirir, 32. “So if I have the opportunity and the choice to avoid interest, then it’s very important to me not to mess with it.”

Rizwan Jaka, 35, president of the All Dulles Area Muslim Society and one of the first to buy a home with Islamic financing in the Washington area, also said the emergence of such arrangements constitutes an important milestone in the integration of Muslims in the American mainstream.

“It definitely marks a coming of age for us. . . . It’s part of the whole process of being a part of this country while being able to have our faith accommodated,” he said. “The American dream is to purchase a house, and the American Muslim dream is to be able to do so in an Islamic manner.”

By N.C. Aizenman, Washington Post – May 13, 2008

University Islamic Financial Corporation

Bank of Whittier

Guidance Residential

American Finance House Lariba

Devon Bank

A customer showed up at little Devon Bank on Chicago’s North Side, asking for a loan to open a neighbourhood shop. But there was a hitch, the would-be borrower explained: “We can’t pay any interest. Can you help?” At the time, seven years ago, the answer was: “Nope,” recalls David Loundy, Devon’s vice president and legal counsel.

That was then. Since fielding that first request, Devon Bank has transformed itself into a specialist in the kind of no-interest Islamic financing the customer was seeking. Islamic financing now accounts for more than 75% of the bank’s mortgage portfolio, and Devon has made mortgages compliant with Islam’s sharia law in 36 U.S. states, Loundy says.

Devon Bank, responding to local customers in a neighbourhood filled with Pakistani and Middle Eastern immigrants, stumbled onto something big: Islamic finance is booming worldwide, fuelled by the windfall from sky-high oil prices and a return to a more strict interpretation of the holy Quran across the Islamic world. Once Devon Bank introduced sharia-compliant mortgages and other loans, “People started coming out of the woodwork,” Loundy says.

In a report last month, credit-rating agency Moody’s Investors Service said that the global Islamic finance market has grown about 15% in each of the past three years and is now worth about $700 billion worldwide. The heavyweights of global finance have taken notice: Citigroup, HSBC, Deutsche Bank and others have affiliates devoted to Islamic finance.

Giant mortgage investor Freddie Mac began buying sharia-compliant mortgages in 2001. Freddie Mac today continues to buy from four banks that together originate mortgages nationwide. In addition to Devon, Freddie Mac buys mortgages from Guidance Residential in Reston, Va.; University Bank in Ann Arbor, Mich.; and American Finance House Lariba in Pasadena, Calif.

Freddie Mac spokesman Brad German says the company bought more than $250 million in Islamic mortgages in 2007, but volume is slipping as the housing market declines. The mortgages are “a steady, if modest, niche,” German says.

An Islamic mortgage looks like a lease-to-own deal. The bank, not the borrower, buys the house. The borrower makes instalment payments to the bank for a period of years, at the end of which he or she gets the title to the house. The bank’s profit technically comes from renting the house, not lending the money. Loundy notes that Islamic mortgages are more costly than traditional mortgages because they involve paperwork for two home sales: the first by the bank, the second by the borrower after the instalment payments are finished.

By Paul Wiseman, USA Today

University Islamic Financial Corporation (UIFC)

UIFC, currently with over $35 million in assets, has the largest balance sheet of any retail Islamic banking enterprise in the U.S. and holds both Islamic financings and Islamic deposits offering the Islamic community the opportunity to support a virtuous cycle of investment in compliance with the Sharia’a. UIFC offers the only Islamic Sharia’a FDIC-insured Deposits (offered through University Bank) and originates Islamic Sharia’a home financings as agent for University Bank. UIFC’s products have received favorable legal rulings (fatawa) from some of the leading Islamic legal scholars in the U.S. and the world. University Bank also has a master commitment with one of the Government Sponsored Enterprises to create a secondary market for UIFC’s Sharia’a compliant home financings nationwide.

Ann Arbor-based University Bancorp owns 100% of University Bank whose subsidiaries service a total of over $4.4 billion in financings. University Bank is an FDIC-insured, locally owned and managed community bank, and is the only financial institution headquartered in Washtenaw County rated “Outstanding” by the FDIC for Community Service and Community Reinvestment. University Bank also engages in Islamic Banking through 80%-owned University Islamic Financial Corporation, the first and only Islamic Banking subsidiary of a bank in the U.S. University Islamic Financial offers home mortgage alternative financing, the only FDIC-insured Islamic deposits (offered through University Bank) and Islamic equity mutual funds (offered through University Insurance & Investments). University Bank also specializes in mortgage subservicing and mortgage origination primarily serving over 250 credit unions (representing 2.6% of all credit unions in the U.S.) through its Houghton-based 80%-owned subsidiary, Midwest Loan Services, Inc. In 2007, University Bank was selected as the “Community Bankers of the Year” by U.S. Banker magazine.

Stephen Lange Ranzini, President and Chairman of Ann Arbor’s University Bank^®
Source: University Bank

According to Sharia law, business activity must be grounded in moral and ethical principles. Trading in tangible assets or services is permitted, but simply making money from money is considered usury and is forbidden. So lending transactions cannot involve paying or earning explicit interest. Investments also can’t be in prohibited areas such as gambling, alcohol, pornography, or arms dealing. Transactions cannot be considered high-risk, because gambling or mere speculation is not allowed.

Because Sharia law-compliant mortgages are not widely available in Canada, many Muslims wait until they can plunk down a pile of cold, hard cash before purchasing a house. “Some people wait to do that, since there was no other option,” says Omar Kalair, founder and president of UM Financial Inc. (UM is short for United Muslim). “But, as a general point, all the Sharia scholars and imams state that if there is an Islamic alternative, they should avail to that.”

“But if there isn’t, and someone is trying to raise a family, some scholars allow it.” Kalair bought his first home in 2002 after raising enough capital through interest-free family loans. Hoping to provide members of his community with the financial support to buy homes, Kalair quantified the market, and approached 70 mainstream financial institutions.

UM Financial eventually began negotiations with the Credit Union Central of Ontario, and it agreed to provide $4 million in financing as part of a pilot project. “We were able to work with the credit union product development team and our own lawyers in designing a mortgage product that complied with the Bank Act and Credit Union Act, and was also Sharia-compliant, to our own Sharia advisory board for us to sell it within our community,” says Kalair. In May 2005, UM Financial launched its first mortgage product, based on a successful U.S. model. Demand for the product was high, and the credit union quickly increased financing.

However, due to a concentration limit, the credit union could not lend more than $20 million dollars to any one entity, says lawyer Talal Chehab of Chehab & Khan Barristers and Solicitors, who developed the product for UM Financial. “After we got to that limit, they found other credit unions within their organization to buy off parcels of mortgages. So from $4 million, we’ve grown to $200 million.”

Originally, UM Financial’s mortgages adhered to a “Murabaha” agreement, in which a financial institution purchases a home for the client and sells it back to him or her at a markup. But for the last year-and-a-half, it has almost exclusively used a “Musharaka” model, a risk-and-reward sharing partnership arrangement, because it’s easier to facilitate and it’s the model that Sharia scholars recommend.

The standard UM Financial mortgage product is structured as an equity partnership in the home. UM Financial and the homebuyer purchase the home together, while the buyer supplies the down payment. Purchasers pay a proportional rent, which is equivalent to a mortgage fee.

The rent is calculated on a declining basis over time. By making monthly payments, the client buys out the company’s shares of the property. Clients sign a legally-enforceable Musharaka contract, stating they will have title and that UM Financial will register a mortgage security against the house, but no interest is applied.

The financing agreement with the credit union is Sharia-compliant, according to a “Mudaraba” model. Profits generated from monthly rental payments are shared between UM Financial and the supplier of funds. The bulk of the profits generated go back to the credit union, and UM keeps a small management fee.

UM Financial is also working with one of the Big Five banks in Canada to launch a full-suite of Sharia-compliant financial products, including mortgages. Currently, UM’s mortgages are 60 basis points more expensive than conventional mortgages, but the hope is that the cost of these mortgage products will eventually fall in line with conventional mortgages once the financing available matches existing demand.

UM financial has provided financing for roughly 500 mortgage transactions so far. “We have a list of about 5,000 families that either want to re-finance existing conventional mortgages into Sharia-compliant [mortgages] or are in the process of buying a home and want to get a commitment for financing,” says Chehab.

Another organization, the Islamic Co-operative Housing Corporation Ltd., has offered Islamic-compliant housing for 26 years based on a similar decreasing Musharaka partnership. In this agreement, the members and the co-op purchase the house and members pay a proportional rent to the co-op. Members are required to increase their shares and ownership of the house over a period of time. They sign an occupancy agreement, and are not tied into a long-term contract.

And as they accumulate more shares, the rent decreases. When the unit holder purchases all of the required shares, they surrender the shares to the co-operative, and title is transferred from the co-op to the unit holder.

But first, the house is evaluated and any appreciation or loss in the value of the house is shared between the co-op and the member, says president Pervez Nasim. “That’s the partnership concept,” he says. “You share the risk. You share the profit and loss.” Over the years, the co-operative has purchased almost 600 homes in Canada and has transferred title of almost 200 homes to unit holders.

Source : Law Times

Business modèle

UM Financial Inc., une firme pionnière dans le financement immobilier conforme à la Shariah au Canada ne pratique pas un mécanisme de prêt, mais bien un mécanisme de partenariat d’affaires. L’un de ces modèles est le contrat Mudarabah, un partenariat d’investissement en vertu duquel le partage des profits est expliqué de façon précise et l’investisseur absorbe d’ordinaire toute perte. Il existe aussi le modèle Musharakah, un accord en vertu duquel on partage les pertes en proportion des investissements.

Selon son président-directeur général M. Omar Kalair, UM Financial gère actuellement un portefeuille immobilier de type Musharakah de près de 200 millions de $, et utilise un mécanisme de 150 millions de $ obtenu de la Credit Union Central of Ontario (CUCO), de même qu’un mécanisme de 12 millions de $ obtenu d’une banque dans le Golfe en vue du financement de propriétés commerciales au Canada.

En Amérique du Nord, les institutions financières américaines ont vraiment pris les devants. Aux Etats-Unis, une société telle que Guidance Financial qui a lancé un produit conforme à la Sharia vient de franchir le cap des 1 milliard de $ en financement », déclare M. Kalair.

« L’usure est interdite dans les trois religions abrahamiques », souligne M. Kalair (en faisant allusion au judaïsme, à la christianité et à l’islam). En fait, bien que le financement conforme à la Shariah ait été conçu en gardant le client musulman à l’esprit, des clients de toute croyance religieuse pourraient très bien s’en prévaloir. La clientèle est même fort hétéroclite au sein de la communauté musulmane. La clientèle de M. Kalair se compose de gens dont les origines familiales sont au Pakistan, en Inde, en Afghanistan, en Somalie, au Moyen-Orient, en Bosnie, en Malaisie et en Turquie.

UM Financial, qui a mis sur le marché son premier produit hypothécaire en 2005, exerce maintenant ses activités à l’extérieur de Toronto et compte huit bureaux en Ontario. « Même si nous avons seulement une présence en Ontario, nous comptons ouvrir cinq autres bureaux au Canada », déclare M. Kalair.

Si UM utilisait à l’origine le contrat de style Mudarabah, la société utilise maintenant surtout le modèle Musharakah, une entente qui repose essentiellement sur le principe de location en vue de l’achat. « Nous versons les fonds, et il y a un investisseur passif et un investisseur directeur. Avant de toucher à cet argent, nous nous entendons sur un ratio de partage des profits. Par d’exemple, à l’heure actuelle, 97 % de l’argent que nous percevons sur une maison est versé à la CUCO et les 3 % restants servent à couvrir les activités de gestion », explique M. Kalair. « Ce qui importe, c’est que cette entente consiste en une participation à l’avoir propre et tous les profi ts sont partagés conformément à un ratio convenu. »

Pour le moment, UM Financial Inc. est la principale source de financement halal au Canada. Bien qu’il existe de petits partenariats tels que l’Islamic Co-operative Housing Corporation Ltd., « ils ne conviennent qu’à un petit marché à créneaux où on est prêt à payer des frais supplémentaires », soutient M. Kalair. « Notre objectif consiste à attirer environ 5 000 ménages avec notre produit d’ici un an ou deux. Nous en avons presque 500. »

Selon M. Kalair, « les banques et les sociétés d’épargne et de crédit n’ont d’ordinaire pas le droit de conclure des partenariats avec participation à l’avoir propre foncier. Au Royaume-Uni, HSBC compte principalement un produit location-achat selon lequel la banque est en fait le propriétaire de la maison », mais il ne s’agit pas d’un accord valide en vertu des règlements au Canada. Néanmoins, « il n’y a rien qui les empêche d’accorder directement du financement à notre société, financement que nous pouvons investir dans des propriétés. Nous ne sommes qu’une société spécialisée dans les partenariats avec participation à l’avoir propre foncier et qui perçoit les loyers, soit les profits de la société. »

Et les incitatifs sont nombreux, puisque les clients musulmans sont typiquement prêts à débourser un peu plus pour un produit halal. « À l’heure actuelle, notre produit est d’environ 60 points de base supérieurs aux prêts conventionnels. Par contre, nous voulons à long terme ramener cela à parité », soutient M. Kalair, qui souligne que les compagnies américaines, telles que la Devon Bank à Chicago et la University Bank à Detroit, offrent maintenant du financement halal « au même coût que les autres hypothèques. » Entre-temps, dit M. Kalair, « Nous tenons actuellement des pourparlers pour reprendre le même genre de contrat que nous avons créé avec la CUCO de concert avec trois des dix plus grandes banques. Nous envisageons par ailleurs de commercialiser notre produit sur le marché du courtage hypothécaire auprès d’une de ces banques d’ici la fin de l’année. » L’annonce officielle de M. Kalair marquera peut-être le début d’un élargissement de la gamme de produits de financement halal au Canada. Qu’à cela ne tienne, il est clair pour le Canada que cette idée est depuis longtemps attendue.

Source : Mortgage Journal – Journal Hypothécaire
Syndication : RIBH

Islamic Finance brings new model of banking

There is no shortage of banks in the Tysons Corner area, but the branch that recently opened in an office building on Spring Hill Road does business a bit differently than the rest. In accordance with Islamic law, none of the interactions conducted by University Islamic Financial Corporation involve interest, the primary source of income for any traditional bank.

“A few money lenders can gain tremendous power with interest,” said Sami Ahmad, the branch’s business development officer. “If you keep giving people money and putting all the risk on them … they’ll get in a bad situation.” The Islamic style of banking, he said, promotes “a certain social justice in the community” by shifting risks and returns across the strata of society.

Islamic law, called Sharia, prohibits interest because it perpetuates economic inequality, said Ahmad. “Just because you have capital doesn’t mean you should be able to make money. You have to employ that capital, and you should share that risk.” Otherwise, he said, the result can be a situation wherein “the masses owe their entire lives to a few people just because they had money.”

Instead of charging or paying interest, he said, University Islamic enters into partnership with its clients. Bank accounts offer profit sharing, rather than fixed interest rates. “We’ll give you whatever we earn on our investments,” said Ahmad. “Right now, most of our funds are going into mortgages. Whatever we get back, we’ll share with depositors. It could be 3 percent one month and 5 percent the next month.”

The mortgages the bank invests in, however, are not of the traditional sort. Rather than issuing a loan and charging interest on it, University Islamic buys the house and then might sell it to the homebuyer at a marked-up price, with the money to be paid back over a period of time. Other arrangements could include co-ownership of the house or a rent-to-own agreement. “The consumer would be paying the same. It’s just that we’ve removed interest out of it,” said Ahmad.

However, the client is not faced with interest rate hikes if a payment is late. “We try to be as lenient as we can,” said Ahmad. Because the bank may be a co-owner of the client’s house or, in the case of a business loan, a partner in the client’s business, it is in the bank’s interest that the business succeeds or that the house is not foreclosed upon, he said. “We don’t look for ways to squeeze them any more. We look for ways to help them.”

The partnership model also discourages the Islamic banker from allowing clients to get in over their heads. This is one reason the bank is doing well at a time when many lenders are suffering, said Ahmad.

“We never did any of the funny mortgages,” said Amjad Quadri, University Islamic’s assistant vice president of business development, noting that the bank had stuck with fixed, 30-year payment plans while some others were issuing high-interest loans with adjustable rates to risky clients. “We made sure people could afford the homes they were going into.”

Ahmad said the bank had seen only one foreclosure since the housing crunch set in.

Also, said Quadri, the bank’s profit-sharing model for its depositors means it pays out less when it makes less. However, he said, “Islamic CDs, rate-wise, are doing better than the market,” although he noted that they were previously paying out at lower rates than the market average.

Jared Rubin, a post-doctoral fellow at George Mason University’s Mercatus Center in Arlington, said he thought the major distinctions between Islamic banking and traditional banking are that the Islamic system circumvents the practice of paying and collecting interest and that Islamic banks do not invest in certain companies, such as those that trade in alcohol. Rubin is also an organizer for the university’s Center for the Economic Study of Religion and a professor of economics at California State University, and he recently finished his dissertation on interest restrictions in Islam and Christianity.

“A lot of scholars would say there’s very little difference,” said Rubin. However, he said the system of partnerships does put “a little more of the risks” on the banker and give “a little more power” to the client. “There are certainly arguments that could be made that it’s a more equitable system,” he said.

As for the bank’s continued health during the current economic downturn, he said there was little inherent in the Islamic banking system that would necessarily cause a bank to fare better during a slump, although the careful screening of clients and investments that can result from the bank being a partner in the transactions would help it to survive tough times. He said the bank might also not reap profits as large as its competitors during times of economic growth. “I think it’s a good thing, to kind of soften the blows,” he said.

He added that it had been argued that Islamic banks had a level of immunity to competition because many of their clients are willing to pay a “small premium” in order to bring their banking in line with their religion.

University Islamic Financial was started by University Bank, a community bank in Ann Arbor, Mich. that was looking for a way to attract business from Muslims in the area, said Ahmad. The bank began offering Islamic banking four years ago, he said, and it has since opened an office in New Jersey, as well as the new Tysons Corner office.

“We’ve got a lot of Muslims in this area,” he said, noting that many keep their money in a checking account to avoid being paid interest and do not own a house in order to not pay interest.

He said Islamic banking is booming in the Middle East and that the industry as a whole is growing by about 20 percent per year, with several major banks beginning to offer services. However, he said, there is only one other bank in the U.S. – Devon Bank in Chicago – that offers Islamic services as extensive as those provided by University Islamic. That bank now deals primarily in home financing but is developing auto financing and insurance programs.

Systems similar to present-day Islamic banking were used in the Middle East in the early days of Islam but died out with the decline of the Islamic empire, said Ahmad, noting that usury was also once frowned upon by all of the Abrahamic religions — Judaism, Christianity and Islam.

The Old Testament prohibited Jews from collecting interest from other Jews, said Rubin. Later, he said, the Catholic Church forbade any usury, particularly during the Medieval centuries. However, the prohibition was of less and less concern, until the early 19th century, when the Church officially gave acceptance to modern banking. For all practical purposes, “it hasn’t been a moral concern in the Christian world for four or five centuries,” he said.

However, said Ahmad, in recent years, “non-Muslims are starting to see the benefit of banking this way as well.”

By Mike DiCicco, Connectionnewspapers.com – April 22, 2008

 
Rushdi Siddiqui, global director of Dow Jones Islamic Market Indexes 

Major global index provider Dow Jones Indexes said on Monday it had opened its first Middle East office in Dubai in a bid to boost its coverage of the region and Islamic finance sector.

Major global index provider Dow Jones Indexes said on Monday it had opened its first Middle East office in Dubai in a bid to boost its coverage of the region and Islamic finance sector. The Middle East office will offer and promote all the major Dow Jones Indexes, including the Dow Jones Islamic Market, to its clients in the region, Dow Jones told ArabianBusiness.com at the International Islamic Finance Forum (IIFF) in Dubai.

“Dow Jones Indexes pioneered the Islamic index space by launching the Dow Jones Islamic Market Indexes (DJIM) in 1999,” said Michael A. Petronella, president of Dow Jones on Monday. “Dubai is the premier gateway to the Middle East and is well-recognised for its role in Islamic finance and our new office confirms our commitment to clients in the region.”

Owned by Rupert Murdoch’s News Corp., Dow Jones Indexes develop and license over 130,00 indexes across 58 countries, with its best known being the Dow Jones Industrial Average.

Sumeet Nihalani, Dow Jones’ senior director of sales for the region, said that the new office will be headed by Imran Vohra but will also come under the command of Rushdi Siddiqui, global director of Islamic market indexes. “The Middle East office is our way of getting closer to our customers and to address their needs in an effective manner,” said Nihalani to ArabianBusiness.com at IIFF. “Our present clients in the region include all the major international banks and Islamic banks.”

Dow Jones Indexes, which currently have total annual revenues of $80 million, launched the Dow Jones Islamic Market (DJIM) Indexes as the first ever index family to measure equities that pass industry and financial ratio screens for Sharia-compliance. The index family includes more than 70 regional, country and industry indexes derived fromt the flagship Dow Jones Islamic Market World Index, and is supervised by a six-member Sharia-board.

Dow Jones’ main index provider competitors FTSE and Standard & Poor’s both have Islamic finance sector indexes, including the FTSE Shariah Global Equity Index Series launched in 2008 and Standard & Poor’s (S&P’s) smaller suite of Islamic indexes launced in 2007. “We’ve had first-move advantage in the Islamic finance sector and as a result don’t have much competition,” Nihalani told ArabianBusiness.com.

New Islamic indexes covering different asset classes and across different regions are currently being developed by Dow Jones, he added.

By Talal Malik, Arabianbusiness.com 14 April 2008

When it comes to Sharia-compliant banking, few Western countries can compete with Britain. One of the world’s prime financial centers, the City of London is also the key Western hub for Islamic banking. With 23 banks, nine fund managers and a number of international law firms offering Islamic finance in the City, by 2006 British Sharia-compliant assets were thought to be in the region of $22 billion. The global industry has trebled in the past decade and is now worth around $531 billion.

Britain is also in the vanguard when it comes to Sharia-compliant retail banking, catering for its population of approximately three million Muslims. In 2004, the Islamic Bank of Britain (IBB) opened its doors for the first time, becoming the UK’s first and only standalone Islamic high street bank. A number of Britain’s “big five” high street banks are getting in on the act. Lloyds TSB and HSBC offer Islamic banking, including mortgages, current accounts and trust funds for children. In the retail market, Britain is the only European country that offers government-authorized Islamic banking products.

The Sharia system also says individuals and businesses can only invest in certain companies, prohibiting dealings with alcohol, tobacco, gambling or the arms trade.

Junaid Bhatti, who was involved with the setup of the IBB, told CNN: “Government is a firm supporter of the industry down to amending legislation to create a level playing field for Islamic banking.” The British sector is currently experiencing phenomenal growth of around 20 percent per year compared with global growth of around 15 percent. Industry insiders feel there is still scope for continued growth. Aktar Ahmed of Lloyds TSB Islamic finance told CNN: “Islamic finance is still in its infancy at the moment. We’re seeing a fantastic rate of growth both globally and here in the UK.” Lloyds TSB now offers Sharia-compliant banking at all of its 2,000 UK branches. Services include an Islamic current account, mortgage and child trust fund. Islamic mortgages have proved particularly successful in Britain, with the market growing from barely a trickle in 2003 to a value of $1.7 billion in 2007.

In the United States, only regional banks like University Bank, Michigan offer Sharia-compliant products. Islamic law states that businesses and individuals should not pay or receive interest. Islamic banking in the United States is suffering from an image problem. Many Americans are felt to be hostile to the concept after the 9/11 attacks, equating it with “terrorist finance.” “There seems to be this misperception out there that the U.S. is perhaps Islamophobic,” said Abdi Shayesteh, an attorney at law firm King and Spalding, which has had a practice dedicated to Islamic banking and finance since the 1980s.

“The U.S. regulators have been supportive and they’ve accommodated Islamic banking and finance since the mid 80s,” Shayesteh told CNN. With a best-guess figure of six million Muslims in the United States of whom around 60 percent are devout (and therefore likely to use Islamic banking services), Shayesteh considers domestic Sharia-compliant banking an untapped market. “We have at least 3.6 million potential customers at the very base level market opportunity for banks from abroad and here to tap into,” he explained.

Even so, with constitutional limits on promoting any one religion over another, which keeps legislators quiet about the opportunities, and no sign that any major American banks will be rolling out Islamic products, the market remains unexploited for now.

By CNN’s Mairi Mackay, London, England – March 31, 2008

• Listen : Islamic Finance in the UK

By Riazat Butt, Guardian Unlimited Islamophonic March 28, 2008

• Watch : CNN Islamic banking

CNN’s Jim Boulden reports that Wall Street lags behind in banking options that comply with Islamic Sharia law.

$10 Million Initial Investment Part of Comprehensive Strategy to Enrich Public Dialogue

Carnegie Corporation of New York today announced an initial $10 million investment to enrich the quality of America’s public dialogue on Islam and Muslim societies. Many of the foundation’s long-term programmatic priorities–from international security and immigrant integration to journalism and support for individual scholars–have integrated a focus on Islam into their grantmaking. The Corporation’s comprehensive strategy focuses on increasing public knowledge about the diversity of thought, cultures and history of Islam and Muslim communities, including those in the U.S.

Grants and allocations announced today, as well as investments made over the past six months, constitute the largest commitment by a U.S. foundation toward the development of a more complex understanding among Americans about Muslim communities here and throughout the world–revealing Islam’s rich diversity.

“There is a disconnection between many of our public conversations about Islam and our knowledge of it,” said Carnegie Corporation President Vartan Gregorian. “Carnegie Corporation has worked to help remedy this disconnect by contributing to a more fundamental comprehension about a religion of diverse expressions and cultures with 1.3 billion practitioners worldwide. We hope that our work will better equip Americans to make informed decisions about, and engage with, various Muslim communities in our midst as well as those abroad.”

Gregorian continued, “Our Islam-related grantmaking is, in part, a response to an increased demand since September 11, 2001 by cultural institutions, thinks tanks, elected officials, policymakers and journalists for more and better information about Islam as a religion, about Islamic civilizations, and about Muslim states and societies.”

Gregorian added that Carnegie Corporation’s thoroughly integrated program structure–which prioritizes the sharing of knowledge and experiences across disciplines–has helped to maximize the impact of the Islam work.

“Understanding both Islam as a world religion and Islamic civilizations is one facet of the Corporation’s integrated grantmaking, but so is gaining greater understanding of the role of Muslim communities in America’s national life: today, the U.S. Census Bureau estimates that there are approximately 2.5 million Muslims living in the United Sates, and those numbers are on the rise. Muslims comprise new streams in the multiplicity of ethnic, racial, linguistic and religious groups that for more than two centuries have come to the United States and contributed to the rich cultural and social tapestry that is our nation. And like others before them, they too must be integrated into our society and engage positively with our democracy and our democratic institutions.”

Carnegie Corporation will support innovative, publicly accessible research by individual scholars; assist media to address the entire spectrum of Islamic religious and political thought; and outreach efforts by universities to connect their research to the broader public. The Corporation is also supporting efforts to inform specific audiences, including members of Congress, about the complex, diverse and rapidly changing landscape of contemporary Islam.

Several of the new grants focus on developing professional and leadership skills including cultivating the new generation of American Muslim leaders, and improving the depth of media coverage by helping journalists develop a more complex understanding of Islam and Muslim societies.

Specific grants awarded today to expand the American public’s understanding of Islam and Muslim societies originate from many of the Corporation’s program areas and include:

The Carnegie Scholars program is supporting 20 scholars, analysts and writers to pursue original projects oriented toward catalyzing intellectual discourse as well as guiding more focused and pragmatic policy discussions on Islam and Muslim societies. The 2008 awardees are the fourth consecutive annual class to focus on Islam, bringing to 91 the number of Carnegie Scholars devoted to the topic since the program began in 2000. The Corporation has also allocated funds for a fifth class in 2009. ($4,000,000)

The Educational Broadcasting Corporation will produce, promote and distribute a series of 12 one-hour episodes with the working title of “Charlie Rose: Conversations in Islam,” presenting an array of viewpoints on contemporary Islam from political and religious leaders, scholars and cultural figures. ($1,000,000)

The Aspen Institute will produce a series of seminars on contemporary Islam for members of the United States Congress. ($800,000)

The America University in Cairo will convene an intensive training program for students from journalism schools supported by the Carnegie-Knight Initiative on the Future of Journalism Education focusing on the history and societies of the Middle East. ($199,800)

TheNewshour on PBS will expand the activities of the program’s Overseas Reporting Unit to address the complexity and diversity of Islam in the context of global peace and security. ($500,000)

National Public Radio will report on the state of Islam in the U.S. and internationally, including profiles of prominent Muslim leaders and experts on Islam. ($400,000)

The International Center for Journalists will link American journalists with journalists from the Muslim world to improve coverage of the diversity of Muslim-majority states. ($228,200)

The University of Southern California will help strengthen emerging leaders in the Muslim American community with the goal of increasing civic and political engagement. ($50,000) American University of Beirut will convene a series of seminars in the Middle East addressing contemporary political Islam and intended for journalists from small-to-medium-sized U.S. media markets ($50,000)

The Religion News Writers Association will create online resources to help facilitate accurate and insightful reporting on Islam and a training seminar for journalists. ($50,000)

InterNews will produce a series of radio programs for broadcast in the Pakistan-Afghanistan border region aimed at raising the voices of ordinary citizens against violence and conflict. ($50,000)

Johns Hopkins University will provide training to U.S. news editors on issues facing Turkey, including the role of political Islam. ($50,000)

The Glocal Forum will bring best practices in interfaith dialogue and mediation to its international network of cities ($50,000)

The Washington National Cathedral is convening an international meeting of religious leaders to facilitate dialogue and reconciliation. ($50,000)

The Institute for Advanced Study will convene top scholars on the topic of Islamic texts and thinkers that played a role in the European Enlightenment. ($50,000)

The American Society for Muslim Advancement will increase its communication and media outreach capacity, including the provision of training to diverse, emerging voices and leaders in the many Muslim communities across the U.S. ($300,000)

The ADC Research Institute will disseminate information on civil rights and civil liberties violations affecting Arab and Muslim Americans post- September 11, 2001. ($50,000)

Over the past six months Carnegie Corporation made an initial set of investments leading to today’s grants:

The Social Science Research Council is supporting outreach to connect the wealth of university-based knowledge on the history and culture of Islam to students, media, the business community and the broader public. ($2,000,000)

Harvard University is creating an interactive, web-based tool to access a spectrum of scholarly and religious debates and viewpoints in contemporary Islamic thought. ($200,000)

The Chicago Council on Global Affairs has examined and disseminated a report on the civic integration of American Muslims. ($150,000)

Women’s eNews is producing a series of news stories examining American Muslim women challenging the stereotypes associated with them and Islam in general. ($48,000)

The Women’s Foreign Policy Group in conjunction with the Woodrow Wilson International Center for Scholars will convene a conference for policymakers and diplomats in which Carnegie Scholars and other experts will engage in a dialogue on Islam in a cultural, historic, and political context. ($45,000)

The Interfaith Youth Core is promoting religious tolerance on college campuses. ($50,000)

The Aspen Institute is educating the public about Muslim American philanthropy. ($50,000)

The Aspen Institute held a seminar of specialists on the radicalization process ($50,000)

The Carnegie Council for Ethics in International Affairs is producing a seminar series on Islam. ($25,000)

New York University is producing a series of public conferences on Western and Islamic theories of law. ($49,100)

The Consensus Building Institute is building dialogue among Americans on the subject of constructive interaction with Muslim states. ($50,000)

The Woodrow Wilson International Center for Scholars is sharing best practices in government-Muslim community relationships among the United States, Germany, France and the United Kingdom. ($49,000)

About Carnegie Corporation of New York

Carnegie Corporation of New York was created by Andrew Carnegie in 1911 to promote “the advancement and diffusion of knowledge and understanding.” For more than 95 years the Corporation has carried out Carnegie’s vision of philanthropy by building on his two major concerns: international peace and advancing education and knowledge. As a private grantmaking foundation, the Corporation will invest more than $100 million this year in nonprofits to fulfill Mr. Carnegie’s mission, “to do real and permanent good in this world.” The Corporation’s capital fund, originally donated at a value of about $135 million, had a market value of $3.07 billion on September 30, 2007.

New York, New York, April 7, 2008

For further information contact:

Carnegie Corporation of New York

Public Affairs 212-207-6273

La Société canadienne d’hypothèques et de logement (SCHL) va dépenser jusqu’à 100.000 $ pour mener une étude évaluant comment accommoder les musulmans qui désirent s’acheter une maison tout en respectant la charia. La société d’État a en effet lancé un appel d’offres le 18 décembre 2007 pour la réalisation d’une étude sur les prêts hypothécaires respectueux de l’islam. «Le crédit hypothécaire conforme à la charia gagne en intérêt à l’échelle internationale. Il y a aussi un intérêt grandissant au Canada», confirme au Journal Stéphanie Rubec, porte- parole de la SCHL.

L’idée est de savoir de quelle façon les Canadiens de religion islamique peuvent être accommodés. En effet, les prêts hypothécaires posent problème car la loi coranique interdit le paiement d’intérêts. Or, si le nombre de clients musulmans désirant accéder à la propriété augmente depuis plusieurs années au Canada, les banques ignorent comment les servir. «On a donc décidé de mener une étude pour savoir ce qu’est le crédit conforme à la charia, comment il est pratiqué à l’étranger et comment on peut l’appliquer au pays», explique Mme Rubec.La SCHL emboîte ainsi le pas au Bureau du surintendant des institutions financières. L’organisme a déjà annoncé qu’il examinait des questions réglementaires relatives aux services financiers islamiques.

Jusqu’ici, seule la coopérative d’habitation Qurbuta, basée à Montréal, permet aux musulmans d’ici d’acheter une demeure conformément à leur foi (voir l’article ci-dessous). Ses moyens limités ne suffisent toutefois pas à la demande.

Et malgré la fatwa lancée par le fondamentaliste égyptien Youssef al- Qaradawi, prédicateur vedette de la chaîne de télévision al-Jazira, invitant les fidèles à faire affaires avec les banques, les musulmans sont réticents. «Ça va à l’encontre de leurs convictions, explique l’iman Mohamed Aziz Chraibi du Forum musulman canadien. Les banques auraient pourtant intérêt à offrir ce service. Les besoins sont grands.» La SCHL refuse de se prononcer sur l’impact d’un tel accommodement sur l’opinion québécoise. «L’étude nous éclairera là-dessus», dit Mme Rubec. «Les gens n’ont rien à craindre, explique pour sa part Rachid Antonius, professeur de sociologie et spécialiste des questions islamiques à l’UQAM. Ce n’est pas un privilège discriminatoire. C’est simplement une autre façon de faire des affaires.»

L’appel d’offres prend fin le 24 janvier 2007. La firme qui remportera la mise devra livrer son étude d’ici la fin de l’année 2008. Elle sera rendue publique ultérieurement et servira de document de consultation pour les institutions financières et les Canadiens.

Louis Mathieu Gagné, Le Journal de Montréal 21/01/2008

Lire aussi :

L’Etat canadien commande une étude pour faciliter l’achat d’une maison

Yahya Zidani a beau être l’heureux propriétaire d’une jolie demeure à Laval, il n’a pas la conscience tranquille car il a dû contracter pour ce faire un prêt hypothécaire, ce qui est interdit par sa religion. «J’ai toujours une arrière-pensée. Je n’ai pas la conscience tranquille, mais je n’ai pas le choix», affirme ce Lavallois. Afin d’offrir un toit à sa femme et ses trois enfants, M. Zidani a dû contracter un prêt auprès d’une banque canadienne, qui implique le paiement d’intérêts. Une situation «déplaisante» qui doit changer, dit-il. «Le but des banques est de faire de l’argent. Or, elles ont beaucoup d’argent à gagner car la communauté musulmane augmente au Canada. Je crois que les choses vont bouger», dit l’homme sur un ton plus optimiste.

L’iman Mohamed Aziz Chraibi, lui, a pu bénéficier des services offerts à la coopérative d’habitation Qurtuba. L’organisme, unique en son genre au Québec, respecte l’islam, qui proscrit les prêts à intérêts. L’emprunteur et le prêteur sont partenaires – ou actionnaires – des lieux. Il n’y a pas de créancier à proprement parler. De façon générale, l’acheteur paie un loyer à la coopérative jusqu’à ce que la demeure soit entièrement payée. Tous n’ont toutefois pas cette chance. «Tu dois avoir un acompte d’au moins 40 000 $. La coopérative peut te fournir jusqu’à 150 000 $, affirme l’iman Chraibi. Ce n’est pas possible pour tout le monde compte tenu de l’acompte demandé et du prix des maisons.»

MM. Zidani et Chraibi espèrent que cette étude commandée par la SCHL favorisera la création de services hypothécaires islamiques au Québec, tels qu’ils sont pratiqués par les grandes banques ailleurs dans le monde, comme au Royaume-Uni. Les musulmans étaient près de 600 000 au Canada en 2001, ce qui représentait 2% de la population canadienne.

Louis Mathieu Gagné, Le Journal de Montréal 21/01/2008

Salamou alikoum,

Je suis musulmane et j’habite Montréal au Canada ; je voulais savoir est ce qu’il a un moyen d’acheter une maison pour habitation sans passer par erriba bancaire que je ne m’aventurerai jamais à essayer ; ça résoudrait beaucoup de mes problèmes. Je suis dans l’attente de votre réponse et salamou alikoum.

Fadela

La Bourse, la banque et le Coran  

Toujours à l’affût de nouveaux clients, les banques américaines ciblent depuis peu les musulmans. Tâche délicate, car la charia interdit de recevoir ou de payer de l’intérêt, considéré comme une forme d’injustice et d’exploitation. 

Un musulman orthodoxe ne peut investir dans des obligations d’épargne, obtenir un prêt hypothécaire ou même ouvrir un simple compte d’épargne. Et s’il récolte quelques sous d’intérêt d’un compte chèques — il faut bien déposer l’argent quelque part —, il doit les donner aux pauvres.  La University Bank, au Michigan, contourne la difficulté avec un modèle financier appelé murabaha, qui permet l’achat d’une maison sans intérêt. C’est simple: la banque achète la propriété, et la revend avec profit à son client musulman, qui la paie en petits versements.  Pour accéder au marché de la finance islamique, estimé à au moins 200 milliards de dollars américains, Wall Street s’est aussi mis à lire le Coran. Certains courtiers offrent des fonds communs validés par de grands théologiens de l’islam et le Dow Jones a son indice islamique depuis 1999. L’islam n’interdit pas l’achat d’actions, pour autant que l’on évite les sociétés vendant de l’alcool, des produits du porc, des armes, du tabac, du divertissement.  

Le Canada n’est pas en reste. La Banque Royale offre depuis deux ans un billet à capital protégé respectant les principes de la charia. Le billet, dont le rendement est lié à celui d’un panier d’actions, a été approuvé par une fatwa (opinion juridique), issue de trois experts musulmans. «C’est un outil de placement offert dans une trentaine de pays et qui s’adresse à une clientèle ayant des actifs personnels importants», dit le porte-parole de la banque, Raymond Chouinard. Il ajoute que ce produit n’a pas suscité une demande importante au Canada.  

par François Guérard – L’actualité du 1er septembre 2006

William L. Rutledge, Executive Vice President of the Federal Reserve Bank of New York

Remarks at the 2005 Arab Bankers Association of North America (ABANA) Conference on Islamic Finance: Players, Products & Innovations in New York City

Good morning. I am very pleased to be here today, and I thank ABANA for inviting me. From my perspective as a bank supervisor, conferences that promote greater awareness of important developments within international banking are essential. Islamic finance certainly qualifies as such an area, and I expect that today’s conference will provide an excellent opportunity to exchange information and ideas on current issues relating to this important sector.

My remarks this morning will focus on the regulation of Islamic banking services in the United States, and I preface them by noting that they are my own and do not necessarily reflect the views of the Federal Reserve. My approach will be to describe some of the most important domestic developments in the industry and to review how we, as U.S. bank regulators, have approached these developments so far. I will also offer some thoughts on the regulatory and supervisory challenges that accompany introducing Islamic financial services into the U.S. framework.

At the outset, I would like to emphasize that we—and here I am referring broadly to U.S. regulators—are open to Islamic financial products. Our mindset is to try to accommodate a variety of approaches to finance, focusing to the extent possible on the underlying substance—that is, focusing on what the implications for safety and soundness and consumer protection would be of a given product. Consistent with that approach, while we are committed to accommodating Islamic finance within the U.S. structure, we will hold Islamic financial institutions to the same high licensing and supervision standards to which we hold conventional ones. Although we are certainly in no position to take a stance on issues of shari’a interpretation, it is important that we become more familiar with the principles and practices unique to Islamic finance in order to make our supervisory and regulatory judgments.

Let me highlight that U.S. regulators have already started to make efforts to more fully understand and better foster Islamic finance. I have participated, along with a number of my colleagues at other regulatory agencies, in several conferences such as this one, both in New York and elsewhere, in an effort to stay abreast of developments in this market and to emphasize our continuing interest in this industry. Just last month, the Federal Reserve Bank of New York cosponsored a seminar on Legal Issues in the Islamic Financial Services Industry in Kuwait City. In addition, several of my colleagues from the New York Fed recently participated in a workshop hosted by Harvard Law School’s Islamic Finance Project to explore regulatory challenges to the growth of the Islamic finance industry in the United States. Those colleagues are also with me today, and will help me respond to any comments or questions that you may have after my prepared remarks.

At present, the approach of United States regulators to Islamic banking has been fairly ad hoc—with individual regulators dealing with specific issues as they are presented. This has been the case because the industry is still relatively new in this country. Despite the industry’s impressive growth in recent years, there are only a small number of providers and a relatively limited array of services available. At the retail level, Islamic banking has been mostly concentrated in home financing activities; not surprisingly then, a number of the issues raised with U.S. regulators have involved this specific business line.

The first major milestones for the provision of Islamic retail banking services in the United States were two interpretive letters issued by the Office of the Comptroller of the Currency — both letters were issued in the late 1990s in response to proposals submitted by the United Bank of Kuwait. The first approval letter which came out in 1997, involved a residential net lease-to-own home finance product. According to the proposed structure, the bank would purchase the property and hold legal title to it over the course of the agreement. Upon payment of the final lease installment, legal ownership would be transferred to the home buyer. The second OCC interpretive letter was issued in 1999 in response to a proposal to offer certain murabaha-based financing products. The proposal was designed to permit the bank to acquire assets (such as commercial inventory, equipment or real estate) and then resell those assets to its customers, on an installment basis, at cost plus a markup. The OCC’s analysis was that, because the purchase and sale transactions occurred simultaneously, the bank would be acting as a “riskless principal” in such transactions, and they were therefore permitted.

I think in each of these interpretive letters, the OCC demonstrated its flexibility by looking beyond the form of the transaction to determine that these structures were the economic equivalent of products already being offered by conventional institutions, and thus were permissible under existing banking law. For example, the OCC was able to look beyond the restrictions on bank ownership of real estate to conclude that, in these cases, the risks that drove the general restrictions were not present, because the transactions were equivalent to secured loans or riskless principal transactions. The New York State Banking Department followed much the same logic in issuing similar approvals for HSBC.

My purpose in describing these actions is to demonstrate how a regulatory framework can ensure compliance with the clear substance of general objectives, while still allowing for significant flexibility in how they are met.

This flexible approach has fostered notable development of Islamic banking services in the United States. Although estimates of the potential size of this market vary widely, it is clear from the recent domestic growth of these services that significant demand exists for these products. HSBC, University Bank in Ann Arbor, Michigan, and Devon Bank of Chicago all now offer Islamic banking products in the United States. There are also several non-bank mortgage and finance companies offering these services. Freddie Mac and Fannie Mae have purchased shari’a-compliant mortgages from a number of these providers, supplying crucial liquidity that has enabled these Islamic financial institutions to originate additional mortgages.

Clearly, Islamic financial institutions have identified a real and substantial market need. The financial institutions of this country continually adapt to changing demographics and growing populations, be they Muslim, Hispanic or any other ethnically or religiously defined groups. When a customer base is growing, it is likely to receive attention from companies seeking to serve those expanding markets—either from specialized firms or from broad gauged companies looking to add a targeted set of services to their broader platform.

Despite the progress that has been made in the provision of Islamic financial services here in the United States, not all of the regulatory challenges raised by these institutions have been resolved—challenges that arise from looking to introduce Islamic financial principles into a regulatory framework that was structured without these principles in mind. In the United States, these issues are made even more difficult by our complex system of financial services regulation, which divides responsibility for supervision among a number of federal and state agencies.

Now, what are some of those challenges? One example is that banking organizations in the U.S. and the U.K. have recently sought approval to offer profit-and-loss sharing deposits; not surprisingly, regulatory complications have arisen. Profit-and-loss sharing deposits are typically structured so that the bank has something akin to a joint investment with the depositor, with returns based on a portion of the profits earned and not on a set rate. Most important, in contrast to a conventional deposit, if the bank loses money, so does the account holder. For this reason, offering a profit-and-loss sharing deposit is a particularly difficult proposition under a Western framework, which takes the certainty of deposit principal as a given.

In the United States, this has meant that deposits fully structured according to profit-and-loss sharing have not been permitted. SHAPE Financial Corporation has publicly described having to modify the deposit product it proposed to offer through University Bank, so that principal is guaranteed, and the deposit-holders share only in bank profits, not losses. Somewhat similarly, in the UK, I understand that the Islamic Bank of Britain has made various adjustments to fit its deposit product within the UK strictures. Even so, because its deposit products are covered by the U.K.’s deposit insurance system, customers are advised that their acceptance of full repayment in the case of a loss may not be in compliance with the shari’a.

There are several other features of U.S. banking law that could potentially hold back Islamic finance. One example is the set of restrictions placed on the range of permissible investments that commercial banks may hold. To ensure that banks do not assume unnecessary risk, their investments are generally limited to fixed-income, interest-bearing securities, which are prohibited by the shari’a. In addition, commercial banks must meet numerous disclosure requirements in order to comply with regulatory policy such as the Truth in Lending Act. These requirements typically mandate advance disclosure of APR and other terms that do not fit the principles on which Islamic finance is structured. On top of these issues, an Islamic financial institution that intends to finance the purchase of a home or a car according to murabaha or ijara structures may need to consider whether state law requires the institution to qualify as a licensed leasing company or auto lender.

The difficulty for Muslim consumers in obtaining shari’a-compliant insurance presents another hurdle to the accessibility of Islamic finance in Western markets. As I mentioned earlier, both Fannie Mae and Freddie Mac have purchased Islamically structured mortgages. However, both entities require property insurance and private mortgage insurance to be held on the securitized mortgages they purchase. This requirement forces customers of Islamic financial institutions to purchase traditional insurance for these mortgages that I understand is not compliant with the shari’a.

Beyond the legal issues regarding the activities a bank is permitted to conduct, bank supervisors have issues to confront in how to assess the safety and soundness of individual Islamic banks. A flexible approach to these issues corresponds with a larger trend toward a more adaptable, risk-oriented strategy in which supervisors are evaluating the specific risks and risk management practices of individual institutions. This manner of supervision can allow for an accommodative approach to Islamic banking that is based on its unique structure and related risks.

Let me elaborate on our supervisory approach. A key starting point in the process of supervising financial institutions is the design of a framework that sets out our supervisory expectations around such key areas as risk management, compliance and control, corporate governance and capital policy. Each country may do that a little differently. Some may be very rules-based in setting out how objectives are to be met, spelling out in considerable detail how a bank must operate.

In the United States, we do have extensive legal and regulatory requirements as I have discussed, and we do incorporate into our supervisory regime some very specific financial requirements (such as those around capital adequacy). But much of our regime is based on examiners making informed judgments on how individual institutions are managing and controlling the risks that result from their specific business strategies. We seek to understand each individual institution – what is its business strategy; what risks arise from that strategy (cutting across such categories as credit risk, market or investment risk, operational risk, and legal risks). We then ask such questions as: how well does management understand, measure, and manage those risks? and how sound is the overall governance and control structure of the firm? We look to train and develop our examiners so that they can make the necessary case by case judgments in a rigorous and fair way.

What we include in our broad framework of approach and how we train and develop our examiners to make those individual judgments is, of course, strongly influenced by supervisory practices developing around the world. I was a member of the Basel Committee for five years and found the sharing of information, and coordinated efforts to address areas of common concern, extremely useful in understanding how we can continue to improve our supervisory processes in the United States.

The opportunity for us to learn from others on supervisory approaches to Islamic banking is particularly great. Bank supervisors from other parts of the world are clearly ahead of us in confronting the challenges in understanding the risks facing Islamic financial institutions, and how they can be most effectively managed and controlled. The Islamic financial community is in the process of developing international supervisory standards and practices that reflect the specific needs of shari’a-compliant finance.

To this end, institutions like the Accounting and Auditing Organization for Islamic Financial Institutions and the Islamic Financial Services Board are serving a critical function. In fact, the IFSB recently released exposure drafts of capital adequacy and risk management standards for Islamic financial institutions. These standards will help regulators both in countries that already have well-developed Islamic financial systems and in Western countries, to understand and supervise Islamic finance.

The IFSB is also working to strengthen the corporate governance framework for the Islamic financial services industry, and the Federal Reserve Bank of New York will be contributing to this process through its participation in an upcoming IFSB-sponsored summit on this topic in Doha, Qatar. Of course, corporate governance issues have become particularly important to us here in the United States over the past few years, and some of the approaches we are taking to address this issue already have much in common with the practices of Islamic finance.

In the same way that shari’a supervisory boards of Islamic financial institutions were established in order to review the appropriateness of proposed investments, conventional institutions now too see the wisdom of this process. Thus, many of them have begun instituting “appropriateness” reviews that look beyond legal compliance and toward even more difficult issues of trust, transparency and the ethical nature of their transactions.

Some of the features of shari’a-compliant investing may also hold an appeal for Western investors. Islamic funds and investors screen out companies to exclude those that take part in activities that are not considered to be shari’a-compliant. In addition, companies that are overleveraged or that rely too heavily on accounts receivable are screened out. Although based on Islamic principles, these filters may serve a broader purpose of excluding firms that may present particular risk. These practices may also be attractive to many non-Muslim investors who are not only interested in the risk/reward relationship of their investment, but who are also concerned with issues of accountability and social responsibility.

In closing, let me emphasize that, as U.S. bank regulators, we have an open mind on how to approach the issues raised by Islamic finance. These issues may not always be easy to resolve, but we are prepared to rise to the challenge. In this regard, it is essential that we not adopt the mindset that the relationship between banks and supervisors is one of action and reaction. Instead, we ought to think collectively through the issues and work together to address them successfully. We recognize that the basic objectives of bank managers and bank supervisors are very similar to one another—we all want to ensure the safe and sound operations of a banking system. But to achieve that objective over time, we need a system that is dynamic – one that can adapt to changing customer needs. Meeting the customer demand for Islamic banking services will require that the industry and the supervisors have a particularly strong dialogue going forward.

Thank you very much.

Thomas C. Baxter, Jr., Executive Vice President and General Counsel of the Federal Reserve Bank of New York

Good morning, ladies and gentlemen. My name is Thomas Baxter, and I am privileged to serve as General Counsel and Executive Vice President of the Federal Reserve Bank of New York. I am especially honored to join Professor Rifaat and His Excellency Sheikh Salem in welcoming you to this Seminar on Legal Issues in the Islamic Financial Services Industry. My New York Fed colleagues and I are delighted to be cosponsoring this event with such distinguished company, the Islamic Financial Services Board and the Central Bank of Kuwait.

For this seminar, we have assembled a distinguished array of lawyers and other experts in the field. At the outset, ladies and gentlemen, I must make a confession to you. While I have 25 years of experience as a central bank legal advisor and official, my knowledge of Islamic finance is more that of a novice than that of an expert. This should not surprise the Islamic scholars in the audience or my friends and colleagues from countries with significant Muslim populations. In fact, my situation is quite typical for a lawyer from a Western market economy and an official from a Western central bank. I begin this morning by essentially marking myself as an exhibit of a condition that ought to change and to speak to you as to why I personally believe we in the West need to change. Please understand that what I speak of are very much my personal beliefs, and I am not here to communicate an official position on behalf of the Federal Reserve.

Nowadays, lawyers and officials in the United States and Europe speak frequently of ethics and integrity, a phenomenon driven largely by our ugly and recent experience with corporate scandal. The word “integrity” literally means adherence to values, and it is the touchstone for my personal belief that we in the West need to understand Islamic finance. We need to understand Islamic finance because such an understanding is necessary to implement one of our core values. The core value is freedom of religion. Consider, for example, Article 18 of the Universal Declaration of Human Rights, which proclaims, in words which I think are beautiful:

Everyone has the right to freedom of thought, conscience and religion; this right includes freedom to change his religion or belief, and freedom, either alone or in community with others and in public or private, to manifest his religion or belief in teaching, practice, worship and observance.¹

Another example is seen in the words of one of my heroes, President Franklin Delano Roosevelt, who spoke about the “Four Freedoms,” one of which is the “freedom of every person to worship God in his own way—everywhere in the world.”² It is the same freedom that is enshrined in the French Declaration of the Rights of Man³ and in the First Amendment to the American Constitution.⁴ You see, we in the West celebrate as a core value the free exercise of religion.

Yet, these are just pretty words describing a laudatory concept unless we also practice what we preach. The Western market economies grew out of cultures that were, and are, largely non-Muslim. There is no conflict between our secular law and the law of the religions that the bulk of our populations practice. But is a secular law based upon interest as the time value of money sufficiently tolerant of the practitioner of Islam? The question answers itself. Accordingly, we must ask whether some of the customary practices in our market economies permit Muslims to follow the precepts of their faith—to abide by the shari‘a. If our secular practices do not accommodate the shari‘a, then perhaps our secular practices are not consistent with one of our core values. To foster integrity, which I define as adherence to such core values, we need to see whether our practices may be changed to accommodate Muslims who seek to freely practice their religion.

Now, part of the difficulty emerges from lack of knowledge, both with respect to the specific religious practices that are hindered by secular law and also by ignorance of the number of people who might be adversely affected. For example, in the United States, we do not even have a reliable estimate of the number of practicing Muslims. Published figures range from approximately 1 million to 7 million, or roughly three tenths of 1 percent to 3.4 percent of the population. The lack of this kind of basic demographic data makes it difficult to assess the size of any potential problem. And even though reliable data is not available, there are indicators that the Muslim population in the United States is not only significant but growing. In 1999, for example, a White House report said that Islam is the “fastest growing faith in the United States.”⁵ But, in a certain respect, the numbers should not matter: if we believe in freedom of religion, and we do, we should seek a secular law that is as accommodative as possible.

The discussion of the Muslim communities in the West leads me to another factor motivating the West (and this is a factor that Sheik Salem mentioned in his opening remarks): our economies are market economies, and growing populations are likely to receive attention from entities seeking to provide services to those populations, including banking services. U.S. financial institutions now offer shari‘a-compliant products, including University Bank in Ann Arbor, Michigan, Devon Bank in Chicago, Illinois, and HSBC Bank USA in my hometown, New York City. Both Freddie Mac and Fannie Mae, two major players in the U.S. mortgage industry, have purchased Islamic-styled mortgages, thereby freeing up capital to permit originators to make additional Islamic home finance investments. In 1998, Dow Jones debuted its Islamic market indices, which track shari‘a-compliant stocks from around the world. Currently, Dow Jones maintains nearly 50 Islamic market indices. This is happening, I suspect, predominantly because these commercial firms see a market to be served; they do not consider themselves to be in business purely for altruistic reasons.

To accommodate and to serve the Muslim community, we in the West need to understand the basic religious principles that must be satisfied. Because our secular commercial and regulatory laws developed in an environment where those principles were unknown, or at least not well known, we need understanding, analysis, and an action plan. While the challenges are real, they are not insurmountable. First, American banking law, though conceived in an interest-based economy, is neutral on its face with respect to religion. This is not enough, to be sure, but it is a good start. Second, as my remarks tomorrow will elaborate, U.S. regulators have shown that they are more interested in substance than in form. Religious law, perhaps more than secular law as it has evolved in common law jurisdictions like the United Kingdom and the United States, tends to focus on form as well as substance. There is probably sufficient common ground to harmonize the needs of both.

So far, I have been focused on the need for learning so that we in the West can be true to one of our core values and can “market” services to a new and growing population. Of course, there are other things that the West may learn from Islamic finance. By requiring Muslims to take part only in activities or ventures that are considered halal, the shari‘a represents an early form of socially responsible investing. Investments in certain industries or products are forbidden, including investments in alcohol or pork-related products, riba-based financial services, and the entertainment industry (including companies engaged in gaming or pornography). Shari‘a scholars often advise against investments in tobacco manufacturers and defense or weapons contractors as well. Once these unacceptable business activities have been excluded, Islamic funds and indices apply a set of financial filters to exclude companies that are highly leveraged or have a high proportion of accounts receivable on their balance sheets. Although based on Islamic principles, these filters also serve a broader purpose of excluding unhealthy companies that may be susceptible to future problems. Undoubtedly, we will hear more about these guiding principles in the first session of the seminar. Some of the conditions that create problems of law and policy in the West may be considered in light of these principles of Islamic finance.

After numerous scandals in the United States and Europe, business has turned its attention once more to issues of corporate governance and disclosure. Here, too, Islamic finance can offer practical lessons. In the wake of the Enron collapse, some of our financial institutions have created special senior management committees to consider whether certain complex structured financial products are “appropriate.” The “appropriateness” review is broader than whether the transaction is in compliance with the governing secular law, and includes topics like reputational risk and whether the transaction is consistent with the ethical tone at the top of the organization. While not directly analogous, the shari‘a supervisory boards of Islamic financial institutions have long been engaged in similar conduct. They review the appropriateness of proposed investments from the perspective of Islamic law. When necessary, the scholars on such boards issue fatawa, formal legal opinions, concerning issues of Islamic law. Typically, they also oversee compliance with the institutions’ responsibilities under the shari‘a. This may include audits to ensure that investors’ funds are being handled appropriately. Such corporate governance issues are the subject of our second session today, and we in Western market economies might learn some things that might avoid future Enrons.

The seminar’s third session will cover legal risks involved in Islamic financial contracts and the regulatory issues raised by the practice of Islamic finance. As I will be discussing regulation of Islamic financial services in the United States tomorrow, I will not spend any time on that now. I will say, though, that I am looking forward to hearing what issues other jurisdictions have encountered and how they have dealt with those issues.

Our last session is a practical one. It involves three different case studies presented by three different practitioners. Case studies are always useful insofar as they represent a synthesis of all the issues that we otherwise examine on an isolated basis. That is, successful practitioners must not only understand the principles of the shari‘a, but they must be able to comport their transactions to those principles. They must analyze and act with respect to the issues of disclosure and corporate governance to which I have already alluded. They must address the legal risks inherent in whatever transactions they have undertaken. Last, but by no means least, they must deal with the regulators, some of whom may be from a central bank like the Federal Reserve or the Central Bank of Kuwait.

The goals of secular law (like American banking law) and religious law (like the shari‘a) are different, but they can be complementary. In focusing on “appropriateness,” whether to comply with a regulatory directive or a religious principle, a corporate body will be less likely to engage in a transaction that may be legally right but reputationally wrong. Morality and ethics have a place in business, and trust, which is a key ingredient in any market economy, is the child of both.

To conclude, let me summarize why a Western lawyer and central bank official like me should pay attention to Islamic finance. The first reason is to be true to my own set of values and beliefs. Because the free exercise of religion is one of those values and beliefs, this Western lawyer needs to understand Islamic finance principles or I cannot hope to break down the barriers that may exist in our secular law and may well fetter Muslims who seek to freely practice their faith. The second reason is even simpler: given that we in the West operate within market economies and that Muslims are a growing population within those economies, we need to understand the needs to be served. The third reason is that Islamic finance principles may be imported by us in the West because they may well lead to an improvement in our own institutions, especially in the areas of ethics and appropriateness, where we have been challenged lately.

Ladies and gentlemen, thank you again for the opportunity to share these personal remarks with you. As the novice among all the experts, I have much to learn, and I look forward to the sessions ahead. Thank you.

1. G.A. Res. 217, U.N. GAOR, 3d Sess., Supp. No. 3, at 74, U.N. Doc. A/810 (1948). The European Convention on Human Rights contains an identical provision. See Convention for the Protection of Human Rights and Fundamental Freedoms, opened for signature Nov. 4, 1950, art. 9(1), 213 U.N.T.S. 221 (entered into force Sept. 3, 1953).

2. Franklin D. Roosevelt, Annual Message to Congress (Jan. 6, 1941) (“The second [essential human freedom] is freedom of every person to worship God in his own way—everywhere in the world.”).

3. Declaration of the Rights of Man and of the Citizen art. 10 (France 1789) (“No one shall be disquieted on account of his opinions, including his religious views, provided their manifestation does not disturb the public order established by law.”).

4. U.S. Const. amend. I (“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof….”).

5. White House, A National Security Strategy for a New Century (Dec. 1999), available at 2000 WL 10447, at *72.

March 1, 2005