IFP Feb and Mar 2013

Islamic Finance Pakistan Islamic Finance Industry Newsletter

Volume 4, Issue 2, February and March 2013

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Editorial The 2008 financial crisis made regulator more concern about the safety measures and compliance on the financial institutions. There is a need to strengthen the corporate governance in financial industry and especially the infant Islamic finance industry, as it has to gain customer confidence for its survival. Islamic banks and financial institutions hold immense fiduciary responsibility towards their depositors and clients. Customers provide their deposits to the Islamic banks on the faith that their money will be invested in Shariah compliant avenues and the returns will be Riba free. Similarly the clients expect their financing solutions to be in line with Shariah rules and principles. The banks in Pakistan are in compliance with the governance requirements set by COSO and BASEL, however the Islamic banks, should, in order to fulfill their fiduciary responsibility of Shariah compliance must ensure that they stream line their governance structure as per the requirements of State Bank of Pakistan’s - Islamic Banking Division and provisions of AAOIFI and IFSB standards which elaborates that the companies shall be directed and controlled, in the interest of shareholders and other stakeholders, to sustain and enhance value. The concept of Islamic finance is established on the basis of Islamic teaching. The basis for the corporate governance framework emanates from the concept of Tawhid. In Pakistan, SBP gives more attention towards corporate governance for the Islamic financial and banking industry. Currently banks are reluctant in deployment of full corporate governance mechanism due to cost, as returns are low. We would like to draw the attention of the readers that senior management should decide the tradeoff between cost saving and the integrity of the whole system. Happy Reading!

Ayat of Month:

“And give full measure when you measure, and weigh with a straight balance. That is

fair, and better at the end. And do not follow a thing about which you have no knowledge. Surely, the ear, the eye and

the heart - each one of them shall be interrogated about. “

Bani Isra’il: 35, 36

Hadith of Month: “The Messenger of Allah, may Allah bless

him and grant him peace, said, ‘Every deen has an innate character. The character of

Islam is modesty.’

Al-Muwatta – Hadith 47.2.9

IFP is an initiative of IFP Forum and Hidaya Islamic Business Support Services (IBSS)

Advisory Board

Mufti Irshad Ahmed Aijaz Mufti Najeeb Khan Anwar Ahmed Meenai Mohammad Aslam Mujeeb Baig Faizan Memon Syed Abdul Rafay Ather

Associate Editors

Shakil Khan Muhammad Shahzad Hussain Arshad Hussain Zubairi Rima Farooq

Editor-in-Chief

Nusrat Ullah Khan

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Ernst & Young’s “World Islamic Banking Competitiveness Report 2013” Compiled by Ms. Rima Farooq and Mr. Adnan Farooq

World Islamic banking competitiveness report 2013 has been issued by Ernst & Young Bahrain. The report gives a good insight on Islamic financial industry growth estimation and future prospects of Islamic banking industry. As per the analysis in the report, there is a huge potential for growth for the Islamic finance industry and the number indicates a very optimistic view about the growth and suggests the need to be more professional in controlling and executing the business. Islamic banking assets with commercial banks globally grew to $1.3 trillion in 2011, with an average annual growth of 19% over the past four years. It was highlighted in the report that the top four markets account for 84% of the total industry assets. High potential international markets each in different stages of development include Saudi Arabia, Qatar, Turkey, Malaysia and Indonesia. It is however a different story when it comes to profitability. The industry’s average ROE was 12% compared to 15% for conventional banks in 2011. As per the report, the Islamic banks continue to face multiple challenges

The report forecast globally Islamic banking assets will be $1.8 trillion in 2013 as compared to $1.3 trillion in 2011 and is expected to grow beyond the milestone of $2 trillion in 2014.

relating to sub-scale operation, asset quality, negative operating income from core activities and a weak risk culture. Beyond the numbers, Shariah governance and innovations require the attention of the industry leaders. According to the World Islamic Banking Competitiveness Report, there still needs a lot to be done to demonstrate the impact of Shariah compliant system on the Islamic finance industry.

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Ernst & Young’s “World Islamic Banking Competitiveness Report 2013”

Sukuk and its demand As per the forecast in the report, Islamic financial institutions will require at least US$ 400 billion of short term securities for liquidity management purposes by 2015 and the global Sukuk demand could ne in excess of US$ 600 billion by 2015. It is expected based on the analysis that the market opportunity will drive Islamic banks to set up international platforms to offer Islamic fixed income advisory services.

3 R’s The severity of performance challenge demands wide-ranging transformation of business practices round the 3 R’s which are:

Regulatory transformation; Risk transformation; and Retail banking transformation.

Faced with the mounting pressures to improve the low ROE, many institutions are tempted to delay or cut down the much needed transformation mentioned above. The report also pointed out the danger, that banks will miss the limited window they have to implement their future blueprint. Regulatory transformation—involving compliance risk, capital optimization, i n t e g r a t e d b a l a n c e s h e e t manage me nt and l iqu id i ty management. Risk transformation—around Shariah governance, single data management framework, segment specific risk models and fund transfer pricing capabilities.

Retail banking transformation—strengthening customer centric operating model, channel integration and technology enablement. Risk transformation agenda as concluded by the report is given below:

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News Story

In order to streamline and standardize the disclosures of Islamic Banks / Islamic Banking Branches, SBP vide its BSD

Circular No. 03 of 2013, dated January 22, 2013 has introduced certain changes to be made in the ‘Statement of

Financial Position’ and the relevant notes thereof as follows:

1. Islamic Banks

a) The head ‘Financing’ used by Islamic Banks in their ‘Statement of Financial Position’ and the related note should

be renamed as ‘Islamic Financing and Related Assets’.

b) All Financings, Advances (against Murabaha etc.), Inventories and any other related item (s) pertaining to Islamic

modes of financing, presently being reported under ‘Other Assets’ or any other head, shall become part of the

‘Islamic Financing and Related Assets’.

c) The break-up of ‘Islamic Financing and Related Assets’ into Islamic modes of financings and their sub division into

Financings, Advances, Inventories and any other related item (s) shall be reported in the notes to the financial

statements.

2. Islamic Banking Branches

The disclosure format of Islamic Banking Branches as illustrated in Annexure-2 of the BSD Circular No. 04 dated

February 17, 2006 titled ‘Revised Forms of Annual Financial Statements’ also stands amended on the above lines.

All Islamic Banks/ Islamic Banking Branches have been advised to comply with the above disclosure requirements

while reporting their annual, half-yearly and quarterly financial statements. These disclosure requirements are

effective from December 31, 2012.

The format for the above mentioned changes is given in the ensuing pages of this newsletter.

SBP revises the forms of annual financial statements applicable to Islamic Banks / Islamic Banking Branches.

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News Story

The bank is operating XXX Islamic banking branches at the end of current year / half-year/ quarter as compared to XXX Islamic banking branches at the end of prior year / half-year /quarter.

(Current Period) (Prior Period)

Rupees in ‘000

ASSETS

Cash and balances with treasury banks xxxxxx xxxxxx

Balances with other banks

Due from financial institutions xxxxxx xxxxxx

Investments xxxxxx xxxxxx

Islamic Financing and Related Assets A-2.1 xxxxxx xxxxxx

Operating fixed assets xxxxxx xxxxxx

Deferred tax assets xxxxxx xxxxxx

Other assets xxxxxx xxxxxx

Total Assets xxxxxx xxxxxx

LIABILITIES

Bills payable xxxxxx xxxxxx

Due to financial institution xxxxxx xxxxxx

Deposits and other accounts xxxxxx xxxxxx

Current accounts xxxxxx xxxxxx

Saving accounts xxxxxx xxxxxx

Term deposits xxxxxx xxxxxx

Others xxxxxx xxxxxx

Deposit from financial institutions—remunerative xxxxxx xxxxxx

Deposits from financial institutions—non-remunerative xxxxxx xxxxxx

Due to head office xxxxxx xxxxxx

Other liabilities xxxxxx xxxxxx

(xxxxxx) (xxxxxx)

NET ASSETS xxxxxx xxxxxx

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News Story (Current Period) (Prior Period)

Rupees in ‘000

REPRESENTED BY xxxxxx xxxxxx

Islamic Banking Fund xxxxxx xxxxxx

Reserves xxxxxx xxxxxx

Unappropriated/ Unremitted profit xxxxxx xxxxxx

Surplus/ (Deficit) on revaluation of assets xxxxxx xxxxxx

xxxxxx xxxxxx

Remuneration to Shariah Advisor / Board xxxxxx xxxxxx

CHARITY FUND

Opening balance xxxxxx xxxxxx

Additions during the period xxxxxx xxxxxx

Payments / Utilization during the period (xxxxxx) (xxxxxx)

Closing balance xxxxxx xxxxxx

A-2.1 Islamic Financing and Related Assets

Please provide the information for each of the Islamic

modes of Financing along with break-up of Financings,

Advances, Inventories and another related item.

The break-up shall be provided on the following lines

A-2.1.1 Islamic Mode of Financing

Financings / Investments / Receivables xxxxxx xxxxxx

Advances xxxxxx xxxxxx

Assets / Inventories xxxxxx xxxxxx

Others (please specify) xxxxxx xxxxxx

xxxxxx xxxxxx

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Islamic finance hopes for plugging deficit

Dubai launches Sukuk initiative

His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, rang the opening bell kicking off the next phase of Dubai’s Islamic economy initiative. Eissa Kazim, chief executive of Dubai Financial Market and secretary -gener al of the committee, governing Dubai’s Islamic economy initiative, said the goal of the initiative is to promote Shariah-compliant activities, with one of those activities being Sukuk.

Global Financial Markets Forum opens

The 2013 Global Financial Markets Forum (GFMF) was held on February 27, 2013, at Abu Dhabi’s Emirates Palace, with speeches from renowned policymakers and continued with critical discussions on the most pressing issues impacting world economy. GFMF, organized by the National Bank of Abu Dhabi (NBAD), highlighted Abu Dhabi’s rising influence in global financial affairs.

HSBC’s closure of Islamic finance exposes problems in profit-making

Decision by HSBC to halt offering Islamic products in many of its markets has not only raised question marks on the global progress of Islamic finance in 2013 but also exposed problems being faced by even larger lenders in making profits. The decision has also sent jittery in the gulf region which is considered one of the global hubs for Islamic finance.

Saudi Mortgages, Libor Panel, Black Rock, ITT

Saudi Arabia issued final regulations on real estate financing, leasing and the supervision of financial companies as the kingdom tries to ease a housing shortage by opening up its mortgage market and enacting the first home-loans law. The regulations outlining three of the five laws that make up the package of changes, were posted on February 24 on the website of the Saudi Arabian Monetary Agency.

HSBC says Gulf surge to drive 2013 Sukuk record

Global Islamic bond sales are set to surpass the 2012 record as Persian Gulf issuers take the lead to tap borrowing costs that tumbled in the past year, according to HSBC Holdings Plc. Sales in the six-nation Gulf Cooperation Council will surge to between $30 billion and $35 billion in 2013, Mohammed Dawood, Dubai-based managing director of debt capital markets at HSBC Amanah, said in an interview.

Disclaimer: The news included here is on the basis of information obtained from local and international print and electronic media sources. IFP and Hidaya IBSS team does not accept any responsibility about their bona-fide.

It had been reported that analysts say Egypt’s Sukuk issuance is unlikely to be a cure-all for the country’s current economic plight. Egypt’s passing of a draft law to allow the issuance of Sukuk (Islamic bonds) has been touted by many as a solution to the North African country’s economic woes. Plans for any Sukuk issuance, including the government’s expected $1bn sovereign Sukuk later this year, are unlikely to effectively plug the hole.

Global News

Best Indonesia Funds buy retailers on spending

Indonesia’s best-performing Islamic bond funds are buying Sukuk of construction and retail companies to take advantage of the government’s $300 billion development program, after sovereign yields dropped to a record. PT Samuel Asset Management's SAM Sukuk Syariah Sejahtera (SASUSYS) fund, which posted the biggest returns at 12 percent last year, plans to more than double corporate holdings to 50 percent of total investments in 2013.

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Nigeria: experts meet on Islamic finance

Barwa Bank wins Islamic Finance News 'Qatar deal of the year' and 'Turkey deal of the year' Awards

Barwa Bank Group, Qatar's fastest growing Shariah compliant banking service provider, announced that it has won the Islamic Finance News "Qatar Deal of the Year" for the State of Qatar $4bn Dual Tranche Sukuk as Joint Lead Manager and "Turkey Deal of the Year" for the Republic of Turkey $1.5bn Debut Sukuk as Co-Lead Manager. Islamic Finance News, the leading provider of news and commentary on the global Islamic finance sector, presented Steve Troop, CEO, Barwa Bank with the prestigious award.

American University of Sharjah to host its first symposium on Islamic banking

Under the patronage Sheikh Dr. Sultan Bin Mohammad Al Qassimi, Supreme Council Member, Ruler of Sharjah and Founder and President of American University of Sharjah (AUS), the School of Business and Management hosted its first AUS Symposium on Islamic Banking and Finance on February 20-21, 2013. The symposium provided a platform for academics and practitioners to discuss the challenges faced by Islamic finance in the aftermath of the economic crisis.

Islamic finance to land UAE among top economies in the world: Sheikh Mohammed

Dubai’s Sheikh Mohammed bin Rashid al-Maktoum aims to position the UAE in the world’s top economies by promoting the country as a hub for Islamic finance, reported local newspaper Khaleej Times. Sheikh Mohammed spoke about the initiative to encourage Sukuk, entitled ‘Transforming Dubai into a Global Centre for Islamic Bonds,’ at the Dubai Financial Market.

Al Baraka Islamic Bank wins best Islamic bank award in Bahrain from 'Euro money' magazine

Al Baraka Islamic Bank won the 'Best Islamic Bank in Bahrain for 2012' Award from the 'Euro money' magazine, the world's leading financial and banking magazine as a part of its annual prizes for Islamic Finance in February 2013. It is noteworthy that the 'Euro money' Islamic Finance Awards are considered the most important and highest awards in the banking sector.

Linklaters recognized for innovative Islamic finance practice

Linklaters has won three awards at the prestigious Islamic Finance News (IFN) Awards 2013 in Dubai - further market recognition of the firm’s innovative and market-leading Islamic finance practice. The IFN awards are considered one of the most prestigious awards in the global Islamic capital markets and recognizes participants of the industry’s most ground-breaking transactions each year.


Financial regulators, experts, jurists, academics and stakeholders across the world would meet to brainstorm on how to strategically promote growth and realign the practices of Islamic finance and economics with a view to opening new frontiers for the growth of the industry. They will meet at the 4th Langkawi Islamic Finance and Economics (LIFE-4) Global Forum being organized by the INSANIAH University College in collaboration with Deloitte, Islamic Development Bank, IBFIM-Malaysia and Rayyan Ventures Limited.

Global News

ADIB shines at the Islamic Finance news awards ceremony in Dubai:

Abu Dhabi Islamic Bank (ADIB), a top-tier Islamic financial services institution group, has been named the "Best Overall Islamic Bank in the World" by Islamic Finance News (IFN). The bank also won the "Best Islamic Bank in the UAE" for the third consecutive year, and "Best Global Islamic Retail Bank". In addition, it was awarded the 'Mudaraba Deal of the Year' and 'UAE's Deal of the Year' after the issuance of the world's first perpetual Sukuk, "CFD" for its role as a lead manager and book runner on the Majid Al Futtaim $400 M Sukuk Transaction.

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Emirates airline picks banks for potential Islamic bond sale leads

Gulf’s mixed Takaful rules hurting margins

Inconsistent regulation across the Gulf's Takaful (Islamic insurance) industry is hurting profit margins and credit ratings, while leaving the door open to regulatory arbitrage, according to global insurance rating agency A.M. Best. New rules in Oman and updated ones in Bahrain are expected this year, but lack of coordination among regulators is making life difficult for Takaful operators, said Vasilis Katsipis, Dubai-based general manager for market development at the firm.

Dubai Islamic Bank to boost capital through Sukuk sale

Dubai Islamic Bank, the largest Shariah-compliant lender in the UAE, plans to boost its capital through a Shariah-compliant debt instrument. The bank will hold investor meetings in Asia, Middle East and Europe starting March 7 ahead of issuing the dollar-denominated, benchmark-sized hybrid Sukuk, subject to market conditions. Benchmark-size is understood to be at least $500 million.

Dubai Utility and Water Authority (DEWA) marks debt market return with $1 billion Sukuk

DEWA returned to global debt markets after an absence of more than two years with a $1 billion on Islamic bond, or Sukuk, which drew very strong demand. The fully government-owned monopoly printed the five-year paper at par at a profit rate of 3 percent. The final profit rate was at the tighter end of guidance released earlier indicating healthy investor appetite.

Egypt government approves law allowing Islamic bond issues

The Egyptian government approved a draft law that will allow the State to issue Islamic bonds, or Sukuk, a move that could help narrow a gaping budget deficit and boost foreign currency reserves that have fallen to critically low levels. Finance Minister Al-Mursi Al-Sayed Hegazy said Egypt could raise around $10 billion a year from the Sukuk market.

Islamic bonds go mainstream - at a price

In April last year, Dubai's government issued an Islamic bond and sold nearly two-thirds to investors in the Middle East. When it issued another Sukuk last month, just 50 percent went to buyers within the region. The difference illustrated a historic shift in the market for Middle Eastern Sukuk, which are structured to obey religious principles such as a ban on the payment of interest.


Emirates airline, Dubai's flagship carrier, has hired six banks to arrange a potential dollar denominated, benchmark Sukuk sale as lead arrangers. Emirates picked Citigroup Inc, Standard Chartered , Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Dubai Islamic Bank and ENBD capital for the planned sale. The airline will hold investor meetings in the UAE and Europe commencing March 7, according to the lead arrangers.

Global News

Dubai plans central Islamic finance regulatory board

Dubai plans to set up a central Sharia board to oversee all Islamic financial products used in the Emirate, and will encourage government-linked entities to issue and list Sukuk on the local bourse. The government announced last month that it wanted to become a global centre for Islamic finance and other businesses based on Islamic principles but it will face tough competition from established centres such as London and Malaysia, where trading of Sukuk (Islamic bonds) is much more active.

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Profit shortfall slows Shariah bank expansion

Islamic banks say their small scale and a lack of risk-management products makes it harder for them to compete, after Ernst & Young LLP warned lower profitability threatens to slow expansion of the $1.8 trillion industry. The average return on equity at Shariah-compliant lenders was 11.6 percent in 2011, compared with 15.3 percent at their non-Islamic counterparts, according to a December report by Ernst & Young that covered 12 countries. The use of hedging and treasury solutions is

lagging behind as reported by Hong Leong Islamic Bank Bhd. (HLBK), a unit of Malaysia’s fourth-biggest lender. Financial holdings that comply with the religion’s ban on interest will grow at least 11 percent in 2013 to more than $2 trillion, compared with average annual expansion of 19 percent over the past four years. Shariah banks had an average $17 billion of assets in 2011, less than the $65 billion for non-Islamic lenders, resulting in operating costs as a proportion of holdings that were 50 percent higher, said Ashar Nazim, the company’s global head of Islamic banking.

Emirates NBD PJSC’s (EMIRATES) Islamic banking unit expects to double profit in 2013 as individuals and small businesses take out more loans amid Dubai’s economic revival. Emirates Islamic Bank PJSC, wholly owned by the biggest United Arab Emirates lender by assets, will seek to boost net income to 150 million dirhams ($41 million) this year from about 80 million in 2012. The lender said last month it would raise capital by 63 percent to 3.9 billion dirhams through a rights issue.

Cars to Mom and Pop Shop Loans Drive Dubai Bank

Upward trend in Qatar's Sukuk issuance

Sukuk is becoming more important in the Gulf Cooperation Council's fixed-income market, including Qatar, representing almost half of the regional banks' issuance in 2011 and 2012. Market analysts see an upward trend in issuance from banks in Qatar on the back of strong domestic credit growth, which they anticipate will continue. There was a sharp rebound in the Gulf banks' activity in debt capital markets in 2012 as they took the opportunity to issue long-term debt at healthy prices under favorable market conditions.

Turkey's Agaoglu to launch $2 billion Sukuk

Agaoglu Group, one of Turkey's largest construction and real estate companies, plans to issue US$2bn in Sukuk to help with the f i n a n c i n g o f I s t a n b u l ' s International Financial Centre. The Sukuk will be issued For Istanbul Financial Centre on a gradual basis in tranches with the first one for $250m, Agaoglu, who is ranked as Turkey's tenth richest man by Forbes magazine with a fortune of $2.1 billion.

Malaysia’s claims to fame, leadership in financial services is not an obvious one. Yet in some ways the country is the world’s most important Islamic-finance centre. Just over a fifth of the country’s banking system, by assets, is Shariah-compliant; the average for Muslim countries is more like 12%, and often a lot less. Malaysia dominates the global market for Sukuk, or Islamic bonds. The country issued the world’s first sovereign Sukuk in 2002; in the first three quarters of 2012.

Malaysia leads the charge in Islamic finance

The year 2012 marked a turning point for Islamic banking as new markets and new regulations in the Mideast helped the sector to flourish. According to Ernst and Young, globally assets managed in line with Shariah will reach in 2013 an all-time high, amounting to 1. 8 trillion U.S. dollars, up from 1.2 trillion U.S. dollars in 2012. Neither the ongoing turmoil in the Middle East nor the Euro zone debt crisis could prevent Islamic banks in the Middle East from reaching out to new markets and more business.

Islamic finance industry enters 2013 with new strength

Global News


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National Savings Organization will launch a Shariah compliant paper by the end of 2013

The National Savings Organization will launch a Shariah-compliant paper, an Islamic equivalent bond, by the end of this year. The new Islamic product, now being finalized, will be in compliance with Sukuk. Director General , C e n t r a l Directorate of National Savings, Zafar M Shaikh, told that the savings organization will hire at least 1500 experts before the end of current fiscal year for full automation of saving centers.

Shariah compliant dollar bonds to be launched for Hujjaj soon

Minister for Finance and Economic Affairs Senator Saleem H. Mandviwalla vowed to strengthen the national economy by introducing prudent and transparent economic policies besides adopting austerity measures in the country. Addressing the press conference after assuming the charge of the Finance Minister, Senator Mandviwalla said that government was planning to introduce "Shariah compliant bonds for Hujjaj" shortly and in this regard details of the product would be discussed with the Ministry of religious Affairs.

Islamic finance in Pakistan has come a long way and with a Muslim population of almost 200 million and increasing demand for Shariah compliant banking products from the grassroots level, there is no doubt that the republic's Islamic finance sector could prove to be a sound contender. The 4th IFN Pakistan Road show will again be held under the auspices of the Central Bank of Pakistan on 27 August 2013. This not only ensures the central banks' full support and participation, but also that of all leaders locally and many key players from the surrounding region.

COMSATS Institute of Information Technology (Lahore) invites banks, researchers and relevant stakeholders to join Global forum of Islamic Finance (GFIF) held in March 2013 in Lahore . The event is being sponsored by State Bank of Pakistan. This forum was held in collaboration with the Lancaster University UK to provide an opportunity to share latest developments among scholars from around the globe in Islamic finance. The theme of the conference is “Islamic Finance: New Realities New Challenges”.

COMSATS Global Forum on Islamic Finance 2013

SECP fines Pak Qatar Family Takaful for deceptive marketing

The SECP directed the Pak-Qatar Family Takaful and its CEO to pay R s8 00,00 0 and R s200 ,000 , respectively, in fines to the regulator within 30 days for running advertisements containing “deceptive and / or misleading information” through one of its agents. BankIslami Pakistan published an advertisement in Dawn on October 27 last year that promoted three Takaful products of Pak-Qatar Family Takaful. However, the name of Pak-Qatar Family Takaful was not printed anywhere in the advertisement. According to the SECP order passed in February, the advertisement did not suggest any involvement of Pak-Qatar Family Takaful with the products; and therefore, it was “deceptive / misleading for the public at large.”

BankIslami acted as a corporate agent of Pak-Qatar Family Takaful and, according to Bancassurance Guidelines, 2010, any sales-related material must be approved by both the insurer and the bank. Insurance Ordinance, 2000, holds the insurer liable for every act and / or omission of the agent of that particular insurer.

Local News

4th IFN Road show Pakistan to be held in August 2013


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SBP to launch media campaign for promotion of Islamic Banking

The Deputy Governor, State Bank of Pakistan, has said that a comprehensive media campaign for promoting inherent strengths of Islamic finance and clearing common apprehensions, confusions and misconceptions about Islamic banking and finance is being launched shortly. “This campaign is to be led by the Islamic Banking Industry with support of SBP”, he said in his opening remarks at a meeting for initiating media awareness campaign to increase public trust and confidence in Islamic Banking.

Standard Chartered inaugurates new Islamic Banking Branch in Karachi

As part of Standard Chartered’s commitment to provide high quality Shariah-compliant banking products and services to its customers, the Bank inaugurated its Islamic Banking (Saadiq) branch at Khayaban-e-Hafiz, DHA, Karachi. This branch provides a comprehensive value added Islamic Banking customer value proposition recently launched. This key proposition offers its customers a similar range of products, quality of service, and access to the same, extensive distribution channels that the conventional customers are accustomed to.

The share of Islamic banking in Pakistan has increased to 8.2 percent. It now has 1,000 branches, 650 of which are operated by dedicated Shariah compliant Islamic banks. According to Global Islamic Finance Report 2012, the size of the Islamic banking industry has grown to $1.35 trillion with the annual growth rate of more than 20 percent. Globally the Islamic financial industry now comprises 430 Islamic banks and financial institutions and around 191 conventional banks with Islamic banking windows operating in more than 75 countries.

Turkey is on track to becoming the next hub for Islamic banking and finance. Given the Ottoman legacy, the last seat of the Islamic vice regency, the government of Turkey was only required to show its commitment to Islamic finance before other players in the industry were going to join them in building a vibrant Islamic banking and finance industry. The recent successful dollar-denominated $1.5 billion sovereign Sukuk issue, followed by a lira-denominated $900 million sovereign Sukuk have put the country on the global platform of Islamic banking and finance.

Rising partner: A Turkey-Pakistan alliance for Islamic banking

Meezan Bank and Mashreq Bank sign Accord

Meezan Bank, the first and largest Islamic Commercial Bank, has entered into an agreement with Mashreq Bank PSC, UAE, under which Meezan Bank will earn Shariah-compliant profit on its US Dollar clearing account balance held with Mashreq Bank. The innovative arrangement utilizes a Shariah-compliant principle of Wakala. Aimed at facilitating the growing market of Islamic financial institutions, this innovative product was initially developed to cater to Meezan Bank's requirement of earning Shariah-compliant profits on its US Dollar clearing account. This product was developed and launched by Mashreq Bank in a record time and was later commercialized and made available to clients globally across Mashreq’s network. The product is approved by the Shariah divisions of both the Banks.

Local News

Islamic banking share rises to 8.2 percent


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Book in the Spotlight

This sixth volume of ‘Islam aur Jadeed Maashi Masaail’ is titled ‘Sood aur uska mutabadil’. This volume is divided in 7 sections where each section is related to the impermissibility of Interest, whether its usury or anything else it is obtained for commercial purpose or domestic. It very well defines and discusses in detail what really interest is, as many people belonging to this era have a very different kind of an opinion about its nature. First section is actually a lecture delivered by Mufti Muhammad Taqi Usmani at Jamia Masjid Orlando – Florida, U.S. which was then compiled by Molana Abdullah Memon. This lecture was a concise overview about the introduction of our interest based economies, drawbacks of these kind of economies, logical consequences which may arise if not discontinued and remedies for this system that how to transform our current system with one that is more likely compliant with Shariah principles and liberated from Interest prohibited by the same. On some instances he also brings forward examples from the glorious era of the companions of the Prophet Muhammad (S.A.W) to ascertain the practicality of an Interest free economic system. Rests of the sections (after the very first one) are not repetition of the former section rather more detailed and extended interpretation of what the author began with in the first one and they also include sources of extraction of his research. These later sections include verses from Quran and the saying of the Prophet Muhammad (S.A.W). One of the most prominent topics of these sections is the ‘Sood par tareekhi faisla’ which was a case proceeded in Supreme Court of Pakistan’s Shariah Appellate Bench and under this topic all the detailed proceeding of the case are mentioned followed by the verdict.

About the Author

Mufti Muhammad Taqi Usmani is one of the leading Islamic scholars living today. He is an expert in the fields of Islamic Jurisprudence, Economics, Hadith and Tasawwuf. Born in Deoband in 1362H (1943 CE), he graduated par excellence from Dars-e-Nizami at Darul Uloom, Karachi, Pakistan. Then he specialized in Islamic Jurisprudence under the guidance of his eminent father, Mufti Muhammad Shafi, the late Grand Mufti of Pakistan. Since then, he has been teaching hadith and Fiqh at the Darul-Uloom, Karachi. He also holds a degree in law and was a Judge at the Shariah Appellate Bench of the Supreme Court of Pakistan. He has been writing on various Islamic topics and is author of more than 60 books and numerous articles. Presently he is the Vice-president of Darul-Uloom, Karachi, Pakistan, where he teaches Sahih Bukhari, Fiqh and Islamic economics.

Islam Aur Jadeed Ma’ashi Masa’il (Sixth Volume)

By Mufti Muhammad Taqi Usmani

Publisher: Idara-e-Islamiat, Lahore

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Ask Us

Question In the case of Ijarah, is it permissible that the lessee hold back a specific amount of rent as expected expenses of leased asset (major maintenance and cost of Takaful etc.)

Answer The lessor may delegate to the lessee the task of carrying out such maintenance at the lessor's cost. It may be agreed that the rental should consist of two specified parts: one to be paid or transferred to the lessor and the other to be held by the lessee to cover any expenses or costs approved by the lessor, such, as the cost of major maintenance, insurance, etc. The second part of the rental is treated as an advance by the lessor to the lessee on account.

Question Is it permissible for institution (as lessor) to sell the leased asset to a third person other than lessee without the prior permission of lessee. Is it necessary to inform the purchaser about the running lease transaction?

Answer The lessor may sell the leased asset to a third party other than the lessee, and the title to the asset together with the rights and obligations of the lessor under the Ijarah contract is thereby transferred to the new owner, because the asset and the rights and obligations attached to it become the right of the third party. The lessee's consent is not necessary when the lessor decides to sell the asset to a third party. If the purchaser does not know about the Ijarah contract, he may terminate the sale contract, but if he knows about it and consents to it, he takes the place of the previous owner in his entitlement to the rental for the remaining period.

Questions / Answers

Feed Back Corner

Please provide us with your feedback on the following email addresses [email protected]

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Upcoming Events

KL Conference on Islamic Finance 2013, 19-20 March, 2013

An international gathering of practitioners, scholars and experts to discuss and share their knowledge, expertise and experience on the principles, instruments and issues related to Islamic finance, to be held at the world’s leading Islamic financial centre, Kuala Lumpur.

Key focus / Topics:

Product development and Implementation of Islamic financial products. Ensuring Shariah compliance in Islamic financial

instruments.

Sukuk: development, issues and challenges.

Islamic gold account: a golden opportunity.

Islamic mutual funds (unit trusts): factors to consider

in making an investment.

The rise of Islamic wealth management in Islamic

finance industry.

Islamic financial planning: success in both worlds.

Takaful: innovation and solutions.

Enterprise risk management for Islamic banks.

Enterprise risk management for Takaful operators.

Accounting and auditing.

Human capital development in Islamic finance

industry.

Legal issues and challenges in Islamic finance.

Dispute settlement in Islamic finance: issue and

solutions.

Islamic ethics in financial services industry.

Corporate governance for Islamic finance industry.

IFN – EVENTS DAIRY (IFN ROAD SHOWS) Islamic Finance news Road show continue to educate and update the developing Islamic financial markets by organizing key Islamic finance events with the focus heavily on education and development.

Bangladesh 5th February 2013

Singapore 22nd March 2013

Australia 7th May 2013

Morocco 29th March 2013

Japan 12th June 2013

Pakistan 27th August 2013

Hong Kong 25th June 2013

Turkey 3rd September 2013

Sri Lanka 29th August 2013

Egypt 5th September 2013

International Islamic Finance Conference 2013 Abu Dhabi, April 14-16, 2013

The aim of the conference is to investigate current political and socio-economic developments through leading thinkers in their field, the likely effects of those developments on the performance and future position of Islamic financial institutions, the regulatory set-ups, and popularity of Islamic products offered to the public, governments and businesses.

In association with Emerald Group Publishing, the organizers will now work with all those involved in the programme to build on this platform for the exchange of invaluable research and ideas.

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World Islamic Banking Competitiveness Report Rima Farooq and Adnan Farooq (Courtesy of Ernst & Young Bahrain) Ask Us: Mufti Ibrahim Essa and Mufti Javed Ahmed Book in the Spotlight: Islam Aur Jadeed Ma’ashi Masa’il (Edition 6) News: Local and Global news

Let us know, if you know friends or colleagues who, in your view, may benefit from this newsletter. Send us their email

addresses at [email protected]

Documents

IFP Feb and Mar 2013