The Shariah Scholarship Award is part of the Fund for Shariah Scholars in Islamic Finance, which was established to enhance knowledge, research, talents, and intellectual discourse in the field of Shariah. The Fund represents Bank Negara Malaysia’s commitment to strengthen the development of the Islamic financial industry. [See also: Shariah Research Grant]

The Scholarship is aimed at enlarging the pool of Shariah scholars who are well-equipped with the necessary knowledge and competencies in both Shariah and Islamic finance.

The Scholarship is available to qualified candidates pursuing the following:

• Post-graduate (Masters or Doctorate) study at recognised institutions of higher learning in the field of Shariah, specializing in fiqh muamalat; OR
• Certified Islamic Finance Professional (CIFP) programme conducted by the International Centre for Education is Islamic Finance (INCEIF). [More information about CIFP at INCEIF.org]

Eligibility

• The Scholarship is open to citizens of all countries.
• Applicants are required to have a bachelor’s degree in Shariah studies from a recognised institution of higher learning, achieving at least a Second Class Upper or its equivalent.

For the CIFP Scholarship, a special consideration will be accorded to those with a diploma (or its equivalent) in Shariah studies, but they must have at least 5 years working experience in the financial industry.

• Applicants are also expected to have secured admission to EITHER a Masters or Doctorate programme in Shariah, specializing in fiqh muamalat, at a recognised institution of higher learning, in a full-time programme, OR the CIFP programme conducted by INCEIF.
• Current students enrolling in the specified programmes at recognised institutions of higher learning may also apply for the scholarship.
• Applicants should not be in receipt of any other scholarship awards.

Award Package

Post-Graduate Scholarship

The Post-Graduate Scholarship will cover the approved tuition and examination fees, and the recipient will be provided a quarterly subsistence allowance.

Where and when applicable, other allowances such as for books and equipment, approved return air fare, warm clothing, relocation, end of study and thesis/dissertation completion, will also be provided.

CIFP Scholarship

The CIFP Scholarship will cover the registration and approved examination fees. In addition, the recipient will also be paid a study allowance.

Special Note: There is no employment bond attached to either scholarships.

Application Process & Deadlines

Application for the scholarship must be submitted with the following documents which must be in English:

• Application Form [Word, 208K].
• Certified copies of academic certificates and transcripts (with English translation if the original copy is not in English)
• Letter of Offer from the institution of higher learning or INCEIF
• Photocopy of personal identification document (passport / birth certificate / identity card)
• An essay of not more than 300 words on why you should be awarded the scholarship and how you plan to contribute to the Islamic financial services industry.
• Two (2) letters of recommendation written by individuals under whom you have studied or worked, and who are able to comment on your qualifications for the award (only for post-graduate scholarship application). Please use the following template [PDF, 14K]
• Thesis proposal (only for post-graduate scholarship application)
• Other relevant materials to support the application.

Correspondence address

Please mail the completed application to:

Shariah Scholarship Award
International Shariah Research Academy
2nd Floor, Annexe Block, Menara Tun Razak
Jalan Raja Laut, 50350 Kuala Lumpur
Malaysia

Application Timeline: Applications are invited and accepted throughout the year. However, application received will be evaluated twice a year (31st December and 30th June every year or as advertised).

Only short-listed applicants will be notified, and may be required to attend an interview.

Contact Information

For any enquiry regarding the Scholarship, please contact:

Shariah Scholarship Award
International Shariah Research Academy
2nd Floor, Annexe Block, Menara Tun Razak
Jalan Raja Laut, 50350 Kuala Lumpur
Malaysia

General Line: +603-2781 4000
Fax: +603-2691 1940

Email: info@isra.my

See also: Shariah Research Grant

Source : Bank Negara Malaysia

Last Updated  November 7, 2009

The ICMA Centre has launched a new MSc in Investment Banking and Islamic Finance. This degree is a first in the UK and is taught jointly with INCEIF (International Centre for Education is Islamic Finance) in Kuala Lumpur. The degree aims to respond to the growing interest in Islamic Finance, and also the increase in Islamic Banking services, Islamic Investment and other financial services that are based on Islamic principles.

The full-time (12 months) MSc is the first in the UK to use Islamic material taught by Islamic specialists and aims to capture the increasing demand for the subject with an academic base and practical orientated views on issues such as Islamic Finance, Economics and Law. Students will benefit from having the opportunity to spend three months studying in Kuala Lumpur and study alongside Islamic Finance professionals. The MSc will not require any previous knowledge of Islamic Law or concepts but will explain the current issues within their overall Islamic economic and legal context.

INCEIF – The Global University in Islamic Finance was established in 2006, with significant funding and support from a number of key Islamic agencies and the Bank Negara (Malaysian Central Bank). Agil Natt, President & Chief Executive Officer of INCEIF said “Our unique mission is to elevate and advance the practice of Islamic finance globally. We aim to do this by being the knowledge leader in Islamic finance not only from the religious aspect but also from the ethical perspective to everyone, from KL to Dubai, Tokyo, London and the rest of the world, irrespective of faith and creed.”

Tune Money Sdn Bhd, which sells financial products online, has launched a motor protection plan that allows users to buy or renew their motor takaful over the Internet. The company has already started selling the personal accident, motorcyclist personal accident and home protection plans. All these plans are underwritten by CIMB Aviva Takaful Bhd.

Next, the company is expected to launch the much-anticipated hospital and surgical protection plan within the next four months. Motor, as well as the hospital and surgical plans are among the most popular insurance products in Malaysia.

Read: Business Times Online Malaysia

Islamic banking in East Asia is slowly developing, but needs more action by regulators to establish legal and regulatory frameworks in order to emerge as a significant segment across the region, according to an analyst.

Aside from Malaysia, where the industry’s assets now account for 15.4 percent or about US$62 billion of the country’s banking system assets, its market penetration across the region has been somewhat patchy, said Christine Kuo, vice president and senior analyst of Moody’s Investors Service.

For instance, she said, while Islamic banking has achieved relatively high market penetration in Brunei and asset growth in Indonesia has been rapid (though off a low base), Islamic banking services available in the Philippines, Singapore and Thailand remained very small in terms of asset size.

“In Malaysia, there exists a natural business potential for Islamic banking services as approximately 60 percent of its population is Muslim, but it is government reforms during the past 20 to 30 years which have really helped develop the necessary legal and regulatory framework and institutions for the industry to flourish,” Kuo said in a report.

“The adoption of various incentives, including tax breaks, has also proven critical to nourishing the business,” she said. “In fact, the Malaysian experience over the last three decades demonstrates how instrumental regulators can and need to be in order to grow the Islamic banking sector,” she added.

This compares to Indonesia, where the industry’s market share is still less than two percent (about US$3 billion) despite rapid growth in recent years, Kuo said. “The low penetration in Moody’s opinion can largely be attributed to the slow pace of change to related regulations and institutions, although a few important changes seem to be gathering momentum,” she said. However, over the long term, Indonesia has huge potential as it is home to more than 200 million Muslims, the largest Muslim population in the world, Kuo said.

“The growing acceptance of Islamic banking even among non-Muslims, combined with announcements from Singapore, Tokyo and Hong Kong that they are to increase their participation in Islamic finance, have also underlined the industry’s potential,” she said.

However, as Islamic banks expand they will need to deal with the twin challenges of managing their rapid growth while competing against conventional banks, Kuo said. “The former includes addressing risk issues specific to Islamic financial institutions, such as concentration risk due to a limited scope of eligible asset classes, higher costs for managing liquidity and concentration of liabilities,” she said. “These can best be dealt with if the banks are not under undue pressure to grow assets too quickly,” she added.

At the same time, the average bank financial strength ratings (BFSRs) of Islamic banks in East Asia are likely to be lower than their conventional banking peers in the same country because of higher Syariah law-related compliance costs and lack of economies of scale, according to Kuo. “Nonetheless, the deposit and debt ratings of Islamic banks could be significantly higher than the levels indicated by their BFSRs, thanks to support from parents and regulators,” she said.

Source: Bernama – Kualal Lumpur (Malaysia)

HSBC Amanah Takaful Sdn Bhd, the Islamic insurance unit of HSBC Bank Malaysia Bhd, aims to double its new business premiums to about RM350mil this year from RM185mil last year, backed by a range of new products.

“We are on track in achieving our target as we have introduced a few innovative products early this year. We have four new products in the pipeline that would offer exciting prospects for our clients,” acting deputy chief executive officer Mohammed Muqeem said after the launch of its latest product, LifeSelect Single, yesterday.

He said the takaful industry was experiencing rapid growth and positive transformation with more than 133 takaful operators globally and about 10 locally.

However, the market penetration was still low and largely untapped, Mohammed added.

HSBC Amanah Takaful hoped to leverage on HSBC Bank’s customer base to reach a premium of RM100mil by year-end for LifeSelect Single, he said. The two-in-one investment-linked plan covers investment and protection needs as well as 36 critical illnesses, such as kidney failure and paralysis, on top of natural death and total and permanent disability.

LifeSelect Single also allows participants the flexibility to switch between fixed income and equity funds to suit their needs and topup their investments to take advantage of market fluctuations.

The Star (Malaysia) May 13, 2008

Asian Finance Bank, one of three foreign Islamic lenders in Malaysia, plans to set up an Islamic property fund of up to $500 million in 2009 to tap what it considers an undervalued market. The bank, owned by Qatar Islamic Bank, RUSD Investment Bank Inc of Saudi Arabia and Global Investment House of Kuwait, also plans to set up a fully-fledged Islamic bank in Indonesia by 2010 as part of its effort to build in-roads into Asia.

Faisal Alshowaikh, chief executive of Asian Finance Bank, told Reuters in an interview the property market was relatively subdued following the global credit crisis, but he saw potential for a property fund in Malaysia. “Right now the property market has suffered from sub-prime, so it is not something I would pursue aggressively,” he said, referring to defaults on low-end mortgages in the United States that have rattled markets worldwide. “But this is something we have in our minds to set up. When you look at Indochina and other countries like Korea, Singapore, Hong Kong, I think the property market is very much undervalued in Malaysia.”

The global Islamic finance market is one of the fastest growing in the world. Islamic assets are growing at an annual pace of 20 percent and are set to hit $2 trillion in 2010 from the current $900 billion, largely thanks to a flood of petrodollars, Ernst & Young said in February.

Asian Finance Bank currently has a representative office in Indonesia, a country analysts say has the potential to become a major player in global Islamic finance because around 85 percent of its population is Muslim. “It is a big market for Islamic banking which needs to be aggressively explored,” Alshowaikh said on the sidelines of an Islamic banking conference in Jakarta. “We have plans to make this representative office into a fully-fledged Islamic bank in Indonesia. In this part of the world, with a population at 229 million — and a relatively small percentage of the market here is Islamic — I believe we can do more on the retail side and do more on wealth management.”

Indonesia’s Islamic finance market lags neighbouring countries Malaysia and Singapore because of tax and accounting framework issues. But analysts expect sharia financing to take off after Indonesia’s parliament passed a long-awaited sharia finance law last month. Indonesia’s central bank says the Islamic banking industry in the world’s most populous Muslim nation is set to meet its target of a 10-15 percent share of national banking assets by 2015 from less than 5 percent now.

Asian Finance Bank was incorporated in Malaysia in 2005 and aims to develop a regional banking network providing a wide range of services. The chief executive said the bank would like to establish representative offices in Singapore and Brunei, with its Kuala Lumpur office servicing China, South Korea, Vietnam, Myanmar, Laos and Cambodia as it moved to expand its Asian presence. The bank’s website says Qatar Islamic Bank is its biggest investor with a 70 percent share in the company. RUSD Investment Bank Inc has 20 percent and Global Investment House has 10 percent.

The Guardian (Reuters) May 9 2008 – Reporting by Liau Y-Sing; Writing by Clarence Fernandez; Editing by Neil Fullick

Malaysia’s top lender, Malayan Banking Berhad, said MondayMay 5, 2008 it plans to buy up to 20 percent of Pakistan’s MCB Bank Ltd. for $933 million as part of an aggressive regional expansion. It marks the third regional acquisition in two months for Malayan Banking, widely known as Maybank, as it seeks to counter slowing economic growth in Malaysia and increased competition in the domestic financial market.

In a statement, Maybank said it has agreed to buy 15 percent of MCB Bank, Pakistan’s fourth largest bank in terms of assets, for $686 million. In addition, it said it has the rights to buy an additional five percent equity in MCB Bank for a maximum $247 million to bring its stake to 20 percent.

“It is an attractive opportunity for us to enter a high growth and profitable market. It is extending Maybank’s reach in South Asia” in line with its plan to become a key regional player, Maybank Chief Executive Abdul Wahid Omar told reporters. Despite volatility in the global market, Pakistan’s economic outlook remains steady and there is “limited execution risk,” he said. Maybank expects the deal to be completed by the end of June 2008, he said.

Islamic banking, retail services, credit cards and small medium enterprise banking will be key partnership areas with MCB Bank, the Maybank statement said. MCB Bank has 1,026 branches and employs 17,000 workers.

In March 2008, Maybank announced plans to acquire Indonesia’s sixth largest bank, Bank Internasional Indonesia, as well as a 15 percent stake in Vietnam’s An Binh Bank.

The Associated Press, May 5, 2008

About Maybank

Maybank was incorporated on 31 May 1960 and commenced operations on 12 September 1960. On 17 February 1962, Maybank was listed on the then Kuala Lumpur Stock Exchange (now known as Bursa Malaysia and today is one of the largest company by market capitalization in Malaysia. Maybank is the largest financial services group in Malaysia and the Group offers a comprehensive range of financial services and products ranging from commercial banking, investment banking, Islamic banking, offshore banking, leasing and hire purchase, insurance, factoring, trustee services, asset management, stock broking, nominee services, venture capital and Internet banking. The Group has over 450 offices in the 14 countries namely, Malaysia, Singapore, Philippines, Brunei Darussalam, Indonesia, Vietnam, Cambodia, Papua New Guinea, Hong Kong SAR, People’s Republic of China, Bahrain, Uzbekistan, Pakistan, Great Britain and United States of America.

About MCB Bank Limited

MCB is a leading private sector bank in Pakistan, offering a wide range of products and services to corporate and retail customers through a variety of delivery channels. It has a network of nearly 1,020 branches, including eight Islamic banking branches within Pakistan and six overseas.

About Bank Internasional Indonesia

PT Bank Internasional Indonesia Tbk is one of the largest banks in Indonesia, with over 230 branches and 700 ATMs across Indonesia, as well as a banking presence in Mauritius, Mumbai, and the Cayman Islands.

The vision of The International Centre for Education in Islamic Finance (INCEIF) is to be recognised as leading University in Islamic Finance.

Established in March 2006, The Chartered Islamic Finance Professional (CIFP) delivers a holistic and comprehensive syllabus specifically driven by the industry. It combines both practical and theoretical aspects of Islamic finance, resulting in a holistic learning experience of exceptional quality.

One of the contributing factors to the absence of awareness in Islamic finance and banking is the lack of understanding in the area. The CIFP programme provides a unique learning experience in three parts, blending theory and practice to enhance your knowledge and understanding of Islamic finance and banking. With specialisations in either banking or takaful, the CIFP offers a professional niche for yourself, as you further enhance your expertise in the area.

Mission – INCEIF is committed to:

Elevate and advance Islamic financial knowledge to develop the Islamic finance industry.

Develop future industry leaders by providing prestigious learning programmes and experiences to the professional and post-graduate candidates.

Serve as a nucleus for collaboration with other Islamic financial education centres.

Partner with the academia to jointly develop the Islamic financial knowledge.

Attract and retain best talents for its faculty members and key staff.

Continuously supply competent Islamic financial services talents to the industry to serve the regulators.

Provide relevant Islamic finance advice and input to support the government and public sector.

Create awareness on Islamic finance and encourage the uptake of corporate responsibility towards the community.

Source: The International Centre for Education in Islamic Finance (INCEIF)

Student testimonials

“Today’s level of return and the attendant risk correlation across asset classes in conventional finance is being challenged by easy money and abundant global liquidity. Modern Islamic finance has many aspects that can offer a creative alternative to deal with this phenomenon. The general Shariah objectives that deal with resources allocation for the benefit of the community is also very much in sync with the repeated G-7 call for rich nations to do more to help their poor counterparts. I thank INCEIF for sharing the knowledge of Islamic finance and banking with me. ” Ooi Lay Leng, Singapore

“There is great demand for Islamic finance practitioners the world over. Currently, there is a great deal of misunderstanding about Islamic banking and finance, therefore it is even more urgent for Muslims to convey to the world what Islamic finance really is, its philosophical background, its mission and objectives. Now, the more I read, the more I understand the need for an alternative economic system in general, and alternative financial instruments in particular, which are based on moral principles rather than profit maximisation. ” Ildous Rafikov, Russia

The Islamic Venture Capital and Private Equity Conference with the theme of “Fostering Alternative Investment — Emerging Trends and Key Opportunities” will be held in Kuala Lumpur, Malaysia on May 7 and 8, 2008.

Jointly organised by Islamic Banking and Finance Institute Malaysia (IBFIM) and Malaysian Venture Capital and Private Equity Association (MVCA), the conference is the first of its kind to be organised for professionals in the industry.

It was mooted in response to positive remarks by prominent figures from the Islamic finance industry at the Global Islamic Finance Forum organised by Bank Negara Malaysia in march 2007, the institute said.

The two-day conference on May 7 and 8, 2008 will provide opportunities for high-growth companies to participate in the venture capital process as investors meet with the companies seeking capital, IBFIM said.

It also aimed to provide participants with a platform for discussing issues, exchanging ideas and experience, and promoting a better understanding on Islamic venture capital.

The two-day conference on May 7 and 8, 2008 will provide opportunities for high-growth companies to participate in the venture capital process as investors meet with the companies seeking capital, IBFIM said.

It also aimed to provide participants with a platform for discussing issues, exchanging ideas and experience, and promoting a better understanding on Islamic venture capital.

The two-day conference aims to attract foreign and local participants to discuss issues, exchange ideas, experience and promote better understanding of Islamic Venture Capital (VC) and Private Equity (PE) to boost Islamic VC and PE industry not only in this region, but also to its natural market in the Middle East. Among the key information that will be discussed at the conference include:

• Discovering the potential of Islamic VC/PE in developing vibrant and high growth companies.
• Understanding and appreciating various technical and operational mechanisms of Islamic VC/PE (i.e: entry and exit strategies)
• Developing new skills for competitive analysis necessary for the Islamic financial institutions worldwide
• Enhancing cooperation and coordination in various activities among the Islamic finance related industries and government agencies.

Speakers include international and local venture capital and private equity professionals as well renowned Islamic scholars.

Malaysian National News Agency – April 02, 2008

HSBC Amanah Malaysia has been formally incorporated by its parent bank as a fully-fledged Islamic bank in the country. HSBC has been an active player in the Malaysian market on both the conventional and Islamic sides (NewHorizon, July–September 2007), and was the first locally incorporated foreign bank to receive a licence from the country’s regulator, Bank Negara Malaysia (NewHorizon online, 9th November 2007).

The bank will have a universal banking scope, which it hopes will give it better access to Malaysia’s growing Islamic finance industry. The banking giant hopes that its new subsidiary will make the country the regional hub for its Amanah brand.

HSBC Amanah Malaysia will be launched in the second half of 2008. It will offer a full suite of Shari’ah-compliant products and services to both retail and corporate clients.

NewHorizon 01 April, 2008

Asia-focused Standard Chartered Bank has applied for a license to set up a separate Islamic banking unit in Malaysia, aiming to capture growth in a business that has escaped global credit turmoil.

Julian Wynter, managing director of the bank’s Malaysian arm, told a news conference the credit crisis has not infected its Islamic finance business despite the uncertainty in global financial markets. “We haven’t seen any stress in our Islamic portfolio. Hard to make a judgement about the future,” he said.

Standard Chartered had $1.4 billion (699 million pounds) of Islamic banking assets in Malaysia at the end of 2007, more than double the year ago period, he said.

“We look forward to the banking license from Bank Negara to expand our scale and breath of our Islamic financing capabilities,” Wynter said.

HSBC and Singapore’s third-biggest lender, Oversea-Chinese Banking Corp have already received regulatory approval to set up Islamic banking units in Malaysia.

Malaysia, home to the world’s largest Islamic bond market, aims to become an international centre for Islamic finance and has been luring local and foreign banks to put their Islamic banking businesses under standalone subsidiaries. Islamic financial institutions operate in compliance with sharia, or Islamic law, which calls for a ban on charging interest and investing in prohibited industries such as alcohol, pornography and gambling.

Reporting by Saeed Azhar; editing by Kim Coghill – Reuters, March 18, 2008

By Paul Wouters

Worldwide, the Islamic finance industry is developing rapidly. While it makes sense for the Islamic financial institutions to foster growth and to regularly compare themselves against the financial market as a whole, sometimes it is also worthwhile to keep an eye on developments in different countries.

It is easy to talk about “market shares” and “deposits”, but what do these terms really mean? And what can be expected in the near future? For a better idea, we will examine the Islamic banking system in some countries: Turkey, Indonesia and Pakistan.

Turkey and Indonesia are secular republics where Muslims form the majority of the population, but Islamic finance developed differently in the two nations. With a population that is roughly slightly over half that of both countries combined; the Islamic Republic of Pakistan is used as an outside comparator. To put all that into better perspective, the writer has included some data from Malaysia as benchmark.

Turkey

From the very start in 1985 with Albaraka Türk, the Turkish participation banks (before called Special Finance Houses) were poised to aim at the Turkish market as a whole. Therefore they did not really target the small niche of the “convinced” Muslim population in particular. This of course influenced marketing and product development.

Partly as a consequence of this strategy (and compared to Indonesia), the Turkish participation banks were able to flourish, and now they hold roughly 3.5 % of total assets in the country’s banking industry. It has outperformed its conventional counterpart for eight consecutive years now.

The collapse of Ihlas Finance House (2001 – alleged fraudulent insolvency) meant the loss of 40 % of the deposits held by the sector at that time and the subsequent stampede on the other Special Finance Houses (now participation banks) meant another 35 % loss.

Because of their ties to the “real economy”, the Special Finance Houses were not hit by the big financial crisis that hit Turkey in 2001 and they recovered fast. Their deposits now have been taken into the guarantee fund of the banks (to avoid other shock withdrawals) and the sector has acquired bank status.

Other differences to note: There is no specific government aid to the sector and nor is there (government or corporate) Islamic bond, although th eissuance of a government sukuk could be in the making, so it has been rumored for some time now. The talks on the projected rent (Ijarah) certificate are progressing slowly, due to inactive local financial markets, cheap conventional international funding and political factors.

Neither is there access to money markets, so we can hardly talk about a level playing field, as compared to conventional banking.

As there are no Islamic windows, foreign players can only enter the market via shareholdings in existing participation banks (or have to start their own participation bank from scratch.) A well thought off strategy of decentralization – for instance using techno / tax incentives and privatizations – created upcoming of several bigger conglomerates throughout the country.

Indonesia

In the world’s most populous Muslim nation, with its first established Bank Muamalat Indonesia (together with Bank Syariah Mandiri still today front runner), the situation differs profoundly. From the start, products and marketing were targeted at that very same group of “convinced” Muslim (market share of roughly 1.5 %).

Whilst the current impressive government initiatives aim to broaden that base (a potential “floating market” of approx. 75 % of the population would be within reach), Bank Muamalat confirms to adhere to its strict policies and target market. This means the other Islamic finance market players could see greater potential for growth.

The need to mobilize internal capital and attract foreign investments require special measures, and so Bank Indonesia announced in July 2007 that, subject to full implementation of the “blue print for development of the Indonesian Shari’ah Banking system”, total assets of the Islamic banks (and Islamic business units) are expected to triple by the end of 2008 (growth of approx. USD 6 billion) to reach an overall volume of 5% on the total Indonesian banking assets. When deposits/ loans follow same development, it will be clear that opportunities are at hand (growth potential of approx. USD 5 billion).

Foreign banks have yet to make their presence felt in the Indonesian Islamic finance market. HSBC was the first big international institution to establish a Shariah head office in Jakarta. The projected growth potential is enormous: HSBC calculated that roughly half of their clients would be willing to use the products if priced competitive. Recently, Albaraka Group announced the intention of expanding its a branch there.

The first government Sukuk (plans to raise up to USD 1 billion have been announced) is in the pipeline. Actual issuance could however be postponed till the fourth quarter of 2007 or even the first quarter of 2008, pending parliamentary approval. Indonesia alreday recognizes corporate Ijarah and Mudharabah Shari’ah Bonds.

Conventional banks that want a piece of the “Islamic pie” need to dedicate 5% of their assets to such venture. This commitment, together with other incentives, will be instrumental to the rapid growth over the next two years.

Pakistan

From the late 70s onwards, Pakistan has had a protracted history of Islamic banking. Beginning 1st July, 1985 all commercial banking in Pakistani rupees became interest free. The sudden conversion (and lack of preparedness) posed difficulties for the implementation of this practice.

However, from 2001 an evolutionary process was in place in order to nurture acceptability and development in a more structural approach. The first “Islamic bank license” was awarded to Meezan Bank back in 2002 (founded 1997). Most note worthy is the present Islamic Banking Policy (December 2001), under which Islamic banking is promoted parallel to conventional banking. Implementation of set by the Accounting and Auditing Organization of Islamic Financial Institutions (AAOIFI) and Islamic Financial Services Board (IFSB) is under way.

Image: Meezan Bank ‘07 Annual Report

Besides a draft for the new Government Securities Bill, Draft Risk Management and Draft Shari’ah Compliance guidelines have been published.

A growth of 40% per annum is expected and a % 15 market share is targeted. Conventional banks are allowed to operate Islamic bank subsidiaries or even “standalone Islamic banking branches” along-side full-fledged Islamic bank. A vast concentration of Islamic banking in the cities (Karachi and Lahore) is evident. There are government and corporate Sukuk on the market.

In 2007 ABN AMRO opened an Islamic branch, Emirates Global Islamic Bank has started a dedicated Islamic commercial bank and QATAR Islamic bank has confirmed plans to setup a Shari’ah compliant banking unit soon. Citibank was another big foreign entry.

Malaysia

Starting off with Bank Islam Malaysia in 1983, Malaysia now has separate Islamic legislation and banking regulations that co-exist with those for the conventional banking system.

In order to create an efficient, progressive and comprehensive Islamic financial system, Bank Negara Malaysia recognized the need to attract a large number of global players; develop a variety of instruments and, install comprehensive financial infrastructure.

Image: Bank Islam ‘07 Annual Report

Malaysian banks currently offer more than 100 of Islamic financial products and services that use various Islamic concepts – such as Mudharabah, Musharakah, Murabahah, Bai’ Bithaman Ajil (Bai’ Muajjal), Ijarah, Qard, Istisna’ and Ijarah Thumma Bai’ — alongside the Islamic Interbank Money Market.

Probably subject to pressure from the Dubai International Financial Center, Malaysia recently opened up regulations to allow sukuk issuance in foreign currencies and is competing with Singapore to be the prime Islamic finance hub in the Asian region. Hong Kong has decided to join the race as well.

Observations

First of all, it has to be noted that real entrance of foreign investments in Turkey, Indonesia and Pakistan still bounces on inadequate tax regimes.

Though it is difficult to distract far-reaching conclusions from the accompanying table, at first glance, it is clear that both Malaysia and Turkey share the following characteristics: relative big concentration of the population in bigger cities, lower portion of population working in agriculture and a lower weight of that sector in the overall economy. The GDP per capita (calculated in relative purchase power – not in hard dollars) in Malaysia and Turkey also is two to four times higher then in Indonesia and Pakistan.

Also in Indonesia and Pakistan, Islamic finance flourishes first in the big cities and then branches out to smaller concentrations of the population while the rural areas (probably due to lack of cash) appear to be dependent on micro finance.

In both countries, the agriculture sector appears to attract socially important (statistically less so for the total economy) “rural Islamic banks” targeting micro finance. There is no such sector in Turkey (neither conventional or Islamic.) Only recently, initiatives from the United Nations Development Program have been undertaken to introduce microfinance on a sustainable basis there.

Neither the percentage of the Muslim population (in Indonesia, Turkey, or Pakistan), nor the respective governments’ zeal to promote Islamic banking (in Indonesia, Pakistan) appears to be a determinant for success so far.

A marketing strategy of the Indonesian Islamic banks proved to be successful for the loyal but small niche of the “convinced” Muslim population, but did not succeed to appeal to the “public at large.

Admittedly, Turkish participation banks are at a serious disadvantage because of the above mentioned differences from the conventional system (lack of sukuk and money markets, limited products, no government incentives and no Islamic windows.) Nevertheless, they prospered thanks to the neutral banking approach focusing on financial advantages, with slight emphasis on ethical merits.

Looking at the mix of relevant measures applicable to the different countries, perhaps the following can serve as guidelines in contributing to the success of Islamic banking:

• dedicate sufficient means to Islamic rural banking / micro finance for agricultural areas
• create a level playing field in order for Islamic banks to compete with conventional banks (for instance, access to Sukuk and the money markets), without any specific need to issue prime conditions (that also distort the market)
• open up markets for international institutions (this attracts financial power and innovation)
• ensure possibilities for all financial institutions to create Islamic windows and/or branches (better product awareness and overall acceptance of Islamic banking would benefit the dedicated Islamic banks)
• ensure conventional banks that want access to the market commit sufficient means from the start (the need to dedicate assets enhances market growth)
• promote diversification of products (diversity is one of the handicaps of Islamic finance vis-à-vis the very mature conventional counterpart)
• try to spread wealth from existing bigger cities to smaller ones but do not focus on the existing metropolises
• try to create sufficient liquid financial markets and stock exchanges, if necessary through strategic alliances
• give sufficient attention to international accounting standards, (corporate) governance, transparency and accountability
• build strong prudential controls
• give bank status and deposit protection
• without loosing sight on the underlying Islamic principals, focus on market competition, quality of products and pricing thereof.

Source : Dinar Standard

“The wide range of tax exemptions across the Islamic finance spectrum would further establish Malaysia as a key Islamic finance centre.”

Islamic banking and finance has become a force to be reckoned with in the global economic scenario. It often forms part of the equation in international finance, whether at a government-to-government or the private sector levels. Its significance has grown over the years and is now present in over 60 countries.

The Malaysian Islamic financial sector is seen as one of the most progressive and attractive in the world given the numerous incentives planned and further liberation in the coming years.

Malaysia is the Largest Islamic Banking and Financial Market

- Islamic banking assets: RM113.5 billion (US$30.9 billion).

- Takaful assets: RM6.2 billion (US$1.7 billion).

- Largest Islamic private debt securities (IPDS) market: 45.5% (RM125 billion or US$34 billion) of domestic corporate bonds.

- Active Islamic money market channelling about RM30 billion – RM40 billion monthly.

- Critical mass of diversified players – Islamic banks, investment banks, takaful companies, development financial institutions, savings institution, fund management companies, stock brokers and unit trusts.

Progressive industry developments

The international financial community has taken note of Malaysia’s strategic direction in developing and nurturing Islamic banking and finance. With this, they have acknowledged Malaysia as the leading Islamic financial centre. The strategies are being implemented through clear and deliberate policies spelt out in both the Financial Sector Master Plan as well as the Capital Market Master Plan. Its progressive industry developments include:

- Pioneering many Global Islamic Banking and Finance initiatives

- Robust regulatory framework

Malaysia has a comprehensive regulatory and supervisory framework that caters to the unique characteristics of Islamic finance. Stronger standards have been set for corporate governance, transparency, disclosure, accountability, market discipline, risk management and customer protection.

- Shariah Framework

Operate in an environment that offers conducive and effective legal and Shariah framework. The Islamic Banking Act 1983 and Takaful Act 1984 were enacted to govern the conduct of Islamic banking institutions and takaful operators respectively.

Liberal Foreign Exchange Regime

- Resources

This includes the establishment of the:

- Institute of Islamic Banking and Finance Malaysia (IBFIM)

- International Centre for Leadership in Finance (ICLlF)

- International Centre for Education in Islamic Finance (INCEIF)

- A wide range of tax exemptions across the Islamic finance spectrum

Dato’ Johan Raslan, Executive Chairman, PricewaterhouseCoopers Malaysia

Les règles du jeu ont été fixées il y a environ 1 500 ans, mais ce n’est qu’aujourd’hui que la tendance commence à faire rage : le FMI estime que la croissance du secteur de la finance islamique a été en moyenne de 10 % sur les dix dernières années. « C’est dû en partie à une forte demande, dans les pays arabes, de la part d’une jeune génération qui désire adapter son mode de vie aux principes de l’islam », estime Abdulkader Thomas, président de Shape, une entreprise de consultants sur le secteur basé à Dubaï. « Mais on ne peut pas non plus sous-estimer l’importance des pétrodollars qui arrivent en masse sur le marché financier. »

Les principes islamiques se déclinent sur toute la palette des services financiers des banques traditionnelles, des services aux particuliers à l’émission de titres boursiers. Ils sont basés sur les préceptes du Coran et de la Sunna : interdiction de l’usure ou riba, assimilée à l’intérêt pratiqué par les banques ; partage des profits et des pertes entre l’entrepreneur qui emprunte et son prêteur ; prohibition de financement d’activités taboues telles que le jeu… « C’est juste une manière différente d’aborder le métier : plutôt que de vous prêter de l’argent pour que vous achetiez une voiture, je peux vous louer une voiture que j’aurais acheté », simplifie Abdulkader Thomas.

« L’année dernière, quelque 70 % des 50 milliards de dollars de bonds islamiques échangés dans le monde l’ont été en Malaisie », se félicite le vice-ministre des Finances, Awang Adek. Atout clé du pays : le volontarisme gouvernemental. Les politiques en faveur de la finance islamique ont été lancées il y a plus de 40 ans, et le pays surfe sur la vague actuelle, surtout depuis la crise asiatique de 1997, qui lui a appris la nécessité de diversifier son offre en matière financière.

« Branche d’avenir »

Aujourd’hui, les fonds islamiques constituent 12 % de la totalité des fonds bancaires dans le pays. « La Malaisie est le seul pays au monde qui a établi un cadre légal clair concernant la finance islamique. Tout établissement basé ici jouit donc d’une crédibilité inégalée ailleurs dans le monde », soutient Badlisyah Abdul Ghani, président de la branche islamique de la banque malaisienne CIMB.

Dernière innovation : l’ouverture, il y a moins d’un an, d’une école délivrant un diplôme de finance religieuse. Ici, le costume-cravate a détrôné la calotte musulmane, d’autant plus que tous les étudiants ne sont pas musulmans. « Vu à quel point notre gouvernement met l’accent sur ce secteur, c’est la branche d’avenir en Malaisie », résume Kee Wah Soong, un financier quadragénaire d’origine chinoise qui y suit des cours. Pour ce bouddhiste dévoué, cela n’a rien d’un engagement de foi. Simple question de business.

Le Figaro – 1 septembre 2007