ifp - april 2012

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Managing Shariah ConformingBusinesses: Prospects, Practices andPersonnel

REPORT ON ICIB 2012

The First International Conference on Islamic Business held in February 2011 (ICIB-

2011) aimed at discussing the state of Islamic business and finance and how and in

what way the same could contribute to the stability of and provide opportunities to

the national and global economies. The Conference was organized with support

from the institutions like IDB-IRTI, SBP, NIBAF, EYFRSH, etc.

The second Conference (ICIB-2012) was

planned to discuss the prospects,

practices of Shariah conforming

businesses and personnel required for the

same. It also provided a platform for

dialogue and discussions between

researchers, academics, policymakers,

corporate leaders, business managers,

practitioners of Islamic banking and

finance and the research scholars. The

conference held nine working sessions on

various topics to address the problems,

challenges and potential for managing

the modern day businesses in Shariah conforming way and its possible impacts on

the national and global economies and the human being at large.

Alhamdolillah, the ICIB-2012 concluded successfully on February 29, 2012. RIU

and the RCIB really appreciate the cooperation The conference was a result of the

rich academic contributions from the scholars from almost all areas of the world andthe untiring efforts of different committee members involved in its organization.

Inside Story 1

Editors Message 2

International andLocal NewsGet a glimpse of

what is happening in

the world of Islamic

finance

5

In the Spotlight

Find our read of themonth

7

Ask USBy Mufti Ibrahim Essa

and Mufti Javed

8

ISLAMIC FINANCE INDUSTRY NEWSLETTER

ISLAMIC FINANCE PAKISTAN

VOLUME 3 ISSUE 4 APRIL 2012

Ayat of the month:

Did they not travel in the land

and see how was the end of

those before them? They were

stronger than these in power.

Allah is not such that somethingin the heavens or the earth can

frustrate Him. Surely He is All-

Knowing, All-Powerful.

(AlFatir: 44 )

Inside this issue

The International Conference on Islamic

Business held in February 2012 (ICIB-2012)

aimed at discussing the prospects, practices of

Shariah conforming businesses and personnel

r e q u i r e d f o r t h e s a m e .

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Editorial

Page 2 An initiative of IFP forum

Advisory Board

Mufti Irshad Ahmed Aijaz

Mufti Najeeb Khan

Anwar Ahmed Meenai

Mohammad Aslam

Mujeeb Baig

Syed Shahjahan Salahuddin

Faizan Ahmed Memon

NusratUllah Khan

Muhammad Shahzad

Hussain

Arshad Hussain Zubairi

Ammar Khalid

Rima Farooq

Regulatory challenges in Islamic finance

Today a number of Islamic Financial Institutions are in place, claiming to be

Sharia-compliant. These include Islamic Banks, Takaful Operators, Funds

etc. There can be a number of variants for different segments that can be

identified between regions and countries, or even amongst the players within

the same market depending upon the regulatory environment they operate

in. Flexibility at times can be considered a benefit, however on certain

occasions it may make other tasks difficult. For the purpose of global

acceptability and comparability there is a growing need of uniformity on

various counts whether it be regulatory or accounting and financial reporting

or governance or solvency requirement.

The regulators across the globe need to converge on a common set of

framework / standards. However as of today standardization is not being

given its due importance.

Accordingly, it is now becoming a severe challenge for the regulators to

standardize the models and practices within their markets, as well as, across

various jurisdictions for global acceptability.

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]

Editor-in-Chief

Associate Editors

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Dr. Abdelkader Chachi, Economist

Researcher at IRTI (IDB), Prof. Dr.

Anis Ahmad, Vice Chancellor RIU,

Mr. Hassan M. Khan Pro. ChancellorRIU, and Mr. Amer Azia, Managing

Director, NIBAF (SBP) delivered

welcome addresses. The Governor of

State Bank of Pakistan Mr. Yaseen

Anwar was the Chief Guest at the

inaugural session held on Tuesday

(February 28, 2012). Dato' Seri Anwar

Ibrahim, Former Deputy

Prime Minister, Malaysia and

Prof. Khurshid Ahmad,

Chairman, Institute of PolicyStudies Islamabad were the

keynote speakers on the

occasion. The Director RCIB

Mr. Khurram Khan thanked

the participants and scholars

from the world over for

attending the conference as

keynote speakers. He lauded

the efforts of the secretary of the

conference Mr. Muhammad Ayub and

other organizers for their hard work to

make the event a success. The Journal

of Islamic Business and Management

of the RCIB was launched in the

inaugural session.

In addition to keynote addresses made

in the inaug ra l s e s s ion , 30

presentations were made on almost all

areas of Islamic business, banking and

finance. It covered, financial regimes,

financial inclusion, money andmonetary policy, the crises and fallacies

of capitalistic economic model and

potential of Islamic risk-sharing and

value based models, Takaful models

and procedures, policy issues in

transforming the systems to the Shariah

compliant structures, Islamic banking

principles and practices with case

studies, liquidity and risk management

by Islamic banks, strengthening Shariah

compliance in Islamic FinanceInstitutions (IFIs), business and work

ethics for various disciplines, product

development, Awqaf as a Key to Socio-

Economic Development of the Muslim

Ummah, application of Islamic HijriCalendar Monthly Time Series, and

Halal food business and sustainable

Halal food supply chain. Questions /

answers session were followed by a few

presentations. A number of speakers /

authors from Italy, Malaysia and

Indonesia could not reach due to some

logistics and allied problems. Two

presentations were made via Skype

from Sidney and Amsterdam.

The speakers strongly recommended

promoting business and finance based

on Islamic teachings and Shariah. They

congratulated Riphah International

University and the Riphah Center of

Islamic Business (RCIB) for taking

initiative in organizing such a big event

and bringing together highly reputed

Islamic scholars and economists to

discuss the strategies to boost banking,finance and business based on Shariah.

It facilitated researchers and scholars to

debate national and global economic

problems and suggest their solution in

the light of teachings of Quran and

Sunnah. They also appreciated IRTI-

IDB and SBP- NIBAF for providing

support for organizing the mega event.

Around 450 delegates participated in

the inaugural session to listen the

keynote addresses by Governor, State

Bank of Pakistan Mr. Yaseen Anwar

and Dato' Seri Anwar Ibrahim, Former

Deputy Prime Minister, Malaysia.

Afterwards, regular sessions were

attended by over 300 delegates on firstand second days of the conference.

Out of about 300 evaluation forms that

were distributed in the last session, we

got 157 filled in forms. Results shown

in terms of numbers are given in the

attachment (Evaluation form-overall

results in percentage).

Prior to the conference, two parallel pre

-conference workshops were held on

February 27, 2012 on the topics of

Islamic Finance for the Managers of

Finance and Managing Family

Takaful in Shariah Compliant Way.

Around forty delegates from financial

institutions and University Faculties

participated in each of the workshops.

Both the workshops were interactive

and detailed discussions took place

during presentations on the related

issues and procedures.

The Conference concluded with Voteof Thanks by Mr. Muhammad Ayub,

Conference Secretary General who

expressed deep gratitude for the

supporters, sponsors, speakers and the

delegates and announced that the next

ICIB would Insha'Allah be held in

February, 2013.

Page 3

Continued Managing Shariah Conforming Businesses: Prospects, Practices and Personnel

An initiative of IFP forum

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It has been reported that the United

Nations Development Program

(UNDP) in collaboration with

USAID and CGAP jointly organised

"Iraq Microfinance Policy Forum"

on 10 and 11 April 2012 in Erbil-

Iraq.

It has been reported that there have

been plans by UAE lender Emirates

Islamic Bank (EIB) to offer 100

percent mortgages will have

"minimal" impact on the Gulf States

home finance market as they will

not be available to expatriate buyers,

who make up 85 percent of themarket .

The lender announced that UAE

citizens would be offered full home

financing through a new Shariah

compliant mortgage scheme, with

rates starting at 4.99 percent.

It has been reported that globalT a k a f u l I s l a m i c i n s u r a n c e

contributions have increased from

19 per cent to a staggering $8.3

billion dollars. Most of the global

Islamic insurance contributions have

been from the leading oil exporter

Saudi Arabia which have made upthe most percentage of the industry.

The participating Gulf Corporationcountries of UAE, Qatar, Oman,

Bahrain and Kuwait have also

recorded a significant amount of

Takaful contributions which

plummeted to $5.68 billion in 2010

in addition to the South East of Asia

which recorded $2 billion according

to World Takaful Report 2012.

Kuwait Finance House - Bahrain (

KFH-Bahrain ) Data Centre has

been awarded the prestigious

information security certification

ISO 27001, following a stringent

aud i t by an in t e rna t iona l

certification body. It is the firstIslamic bank in the Kingdom to

achieve this milestone. The ISO

certificate was presented to Mr.

Ab du lh ak ee m Al kh ayy at , th e

Managing Director and CEO of

KFH Bahrain .

It has been reported that the

A c c o u n t i n g a n d A u d i t i n g

Organization for Islamic Financial

Institutions (AAOIFI) has proposed

more detailed accounting standards

for real estate while increasing

disclosure for Islamic banks

investment accounts. The move by

the Bahrain-based AAOIFI, one ofthe main standard-setting bodies in

Islamic finance, suggests it is

responding to the same kind of

pressure to tighten standards that

has been seen in the conventional

finance industry since the global

financial crisis erupted in 2008.

Both proposals were discussed at a

public hearing for industry

participants in Manama and there

will be another hearing in Doha on

April 12. They could becomeeffective as early as July this year and

would be applied retroactively.


Disclaimer:

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

Ernst & Young ReportTakaful Premium Jumpof 19% to $8.3 Billion

KFH-Bahrain AwardedISO 27001 Certification

Islamic Microfinance theAnswer to Poverty inArab World

EIB to Offer 100% UAEMortgages to CustomerBase

Islamic Bank Rates Nigerian Economy Third Fastest

It has been reported that The Islamic Development Bank has rated the Nige-

rian economy as the third fastest economy in the world with the GDP of

7.68 per cent. The two countries ahead of Nigeria according to IDB rating,are Mongolia (14.9 per cent) and China (8.4 per cent).

Minister of State, Finance, Yerima Ngama disclosed this at the weekly Fed-

eral Executive Council (FEC) meeting during his presentation on the out-

come of the last (37th) meeting of the Islamic Development Bank (IDB).

AAOIFI Islamic FinanceAccounting Changes

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Al Baraka Banking Group (ABG)

will be taking part as a platinum

sponsor in the Annual Islamic

Banking and Finance Conference.

Ac c o u n t i n g a n d A u d i t i n g

Organisation for Islamic Financial

Institutions is organising the event

in Bahrain on May 7 and 8.

It has been reported that Al Hilal

Banking Services, the Islamic

finance arm of ahlibank, will open

five new branches across Oman in

order to provide easy banking

services to the consumers.

It has been reported that the Islamic

Financial Services Board (IFSB) has

published new guidelines on

liquidity and stress-testing, seeking

to reduce the balance sheet risk of

Islamic financial institutions in line

with a tightening of standards in

conventional banking.

Malayan Banking Bhd (Maybank)

said it is keeping its options open in

bidding for Al Amanah Islamic

Investment Bank of the Philippines,

the countrys only Islam-oriented

commercial bank, a Philippines

based newspaper reported.Al Amanah Islamic Bank is looking

for a strategic partner through the

sale of a 49% stake or the entire

bank to a foreign entity with

expertise in Islamic banks.

Maybank told the Philippines based

newspaper that it wanted to expand

further in the Asian region while

strengthening its hold in the Asia-

Pacific region.

It has been reported that earnings

from QIB's core business have

helped Qatar Islamic bank (QIB)

post a net profit of QR388mn in the

first quarter of 2012, up 20.9% on

the result for the same period last

year.

The successful UAE Islamic banks,

Emirates Islamic Bank, or EIB, and

Dubai Bank are expected to merge

in April 2012 that will create one of

the leading Shariah-compliant

banking units in the UAE.

The expected merger will create

fourth top Islamic bank in the

country after Dubai Islamic Bank,Abu Dhabi Islamic Bank and Al

Hilal Bank. Emirates NBD, which

acquired Dubai Bank in last

October, is looking for approval

from authorities concerned in the

UAE for the landmark merger,

revealed a source quoted by Reuters

on Tuesday.


Disclaimer:


Nahed Taher, CEO and co-founder of Gulf One Investment Bank (Gulf

One), was listed amongst the 20 most influential people in Islamic Finance

as per Global Islamic Finance (GIF) magazine.

Taher is the only Arab woman to receive such recognition along with her

only female counterpart, Tan Sri Dato Sri Zeti Akhtar Aziz, governor of the

Central bank of Malaysia.

New IFSB guidelinesf o c u s o n R i s k Management

Al Baraka Backs AnnualIslamic Banking Forum

Kuwait ready to becomehub for Islamic finance

Nahed Taher honored for Islamic finance role

EIB, Dubai Bank mergeron cards

Maybank may be biddingfor Philippines Islamicbank

GFH Project in Crucial Deal with Banks

Royal Ranches Marrakech (RRM), one of the flagship projects of Bahrain-

based Islamic investment bank Gulf Finance House (GFH), has signed a

memorandum of understanding (MoU) with a consortium of banks, led byBanque Marocaine de Commerce Exteriur to receive the second tranche of a

facility to resume work on the development.

The MoU sees the consortium release the remainder of the facility's amount

as progress continues on RRM gradually. Infrastructure work on RRM began

earlier, with 45 per cent already completed.

The project will now focus on a revised time schedule for the completion of

necessary infrastructure work, which will be submitted to the consortium,

while working on attracting investors and developers to complete it.

Qatar Islamic Bank Spurs

Significant Growth

Ahlibank to Launch FiveNew Branches in Oman

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In a press conference held on

February 20, 2012 the Chairman of

the Board, H. E. Sheikh Ebrahim Bin

Khalifa Al Khalifa said that Meezan

Bank will be completing ten years of

I s lamic commercia l banking

operations this year The Bank has

achieved growth in all businesssegments and maintained its position

as the leading Islamic Bank in

Pakistan. The Banks total assets

crossed the landmark figure of Rs.

200 billion at December 2011 while

Deposits increased by 30% over the

last year to Rs. 170 billion.

The Bank recorded 106 % growth inits Profit-after-tax which increased to

Rs 3.4 billion for the year ended

December 31, 2011 as compared to

Rs 1.650 billion in 2010. Earning pershare (EPS) increased to Rs 4.22 from

Rs. 2.05 recorded last year.

Dubai Islamic Bank (DIB) won three

awards at the recent Islamic Finance

News Awards in the categories of

C o r p o r a t e F i n a n c e ,

Restructuring and Structured

Finance Deal of the Year categories.

In recognition of long association of

its employees, Al Baraka held long

service award giving ceremonies in

March 2012 at Regional Offices in

Lahore, Islamabad and Karachi.

Employees who were associated with

the bank for 5, 10, 15 and 20 years

were awarded certificates by CEO

and Senior Management.

A Memorandum of Understanding

was signed today between Burj Bank

Limited and TPL Trakker Ltd for

the provision of vehicle tracking

services on Burj Carsaaz Islamic

Auto Finance product. The MoU

was signed by Mr. Ahmed Khizer

Khan, President & CEO, Burj BankLimited and Mr. Ali Jameel, CEO,

TPL Trakker Limited. Speaking at

the occasion, Mr. Khizer said that

Burj Carsaaz is the fastest growing

Islamic auto financing product in

the market.

In order to further facilitate its customers, Burj Bank has announced the

launch of its Evening Banking Services from March 01,2012. From now on

the bank will offer nonstop banking services from 9am to 8pm at selected

branches.


Disclaimer:


DIB wins 3 IslamicFinance News awards

Meezan Banks Assets crossRs 200 billion andprofitability doubles to Rs3.4 billion, announces

Burj Bank launches 9 to 8 banking in selected branches

C e l e b r a t i n g L o n g

association with AlBaraka Pakistan

Minimum rate of return on saving deposits

State Bank of Pakistan vide its BPRD Circular No. 01 dated April 13, 2012

has decided that the minimum profit rate would be 6.0% p.a. on all Pak

Rupee saving deposits with effect from May 01, 2012. It is further clarified

that this rate of profit will be applicable on all existing and new saving

deposits including term deposits. Other instructions on the subject shall

remain the same.

B u r j B a n k s i g n sagreement with TPLTrakker for Burj Karsaaz

Regulatory framework formodaraba strengthened

The joint session of the Parliament

has unanimously approved the 2009

Modaraba companies and Modaraba

(Flotation and Control) Ordinance,

(Amendment) Bill. The Bill seeks to

empower the SECP to make

regulations and issue circulars, code

and guidelines so as to strengthen

regulatory framework for theModaraba sector and to enable the

SECP to safeguard the interest of

stakeholders.

Through the bill, following three

sections have been added to the

1980 Modaraba Companies and

Modaraba (Flotation and Control)

Ordinance:

Section 18A: Power to issue

directions;

Section 41A: Power to make

regulations; andSection 41B: Power to issue

direct ions , c i rculars , codes

guidelines, etc.

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second part discusses briefly the

important theories of Islamic law.

The first part covers the definition

of Fiqh, kinds of its rules, theperiod through which Islamic law

has passed and the sources of

Islamic law.

This book An Introduction to the

study of Islamic law by Dr. Hussain

Hamid Hassan is a comprehensive

introduction to Islamic law. It hasproved itself the favorite on the

topic in the eyes of law students,

practicing lawyers, judges and other

people among those who care to

learn about Islamic legal philosophy.

The book is about the study of

Islamic law as the greatness of Islam,

sublimity of its Shariah and the

ability of Islamic legal system to

meet political, administrative and

social needs of the people have been

proven beyond doubt. Adhering to

the injunction of Islam became

indispensable according to the

constitution. If the law includes any

passage which conflicts with the

principles of the Shariah, it would

be unconstitutional

This comprises two major parts; the

first one is about the history of

sources of Islamic law where as the

The second part is mostly about the

Islamic law of contract, which

explains in detail; the theory of

contract and its categories.

This book is actually the English

translation of the writers Arabic

work Al-Madkhal Li-Dirasat Al-Fiqh

al islami. The translation was

undertaken by the late professor Dr.

Ahmed Hassan who was an

insightful professor and researcher

of Islamic law and jurisprudence.

It is hoped that this edition of the

book will continue making a very

good contribution in the promotionof Islamic legal knowledge.

Page 7An initiative of IFP forum

Book in the Spotlight

An Introduction to the study of Islamic law

By Dr. Hussain Hamid Hassan

Reviewed by

Rima Farooq

Printed by: Islamic Research

Institute Press

Available at: Urdu Bazar,

Karachi

About the Author

Dr. Hussain Hamid Hassan, the former president of International Islamic University Islamabad ranks amongst

the most influential Shariah scholars in the world particularly in the field of Islamic finance and banking. He

also holds two degrees in Law from the International Institute of Comparative. He taught law and economics at

Cairo university and chaired some important organizations. Currently he is a member of Shariah supervisory

committee of various Islamic financial institutions including Emirates Islamic bank, Dubai Islamic bank,

National bank of Sharjah, Islamic Development Bank and Dubai Islamic insurance and Reinsurance, Tamweel,

Amlak, The Liquidity Management Centre and the AAOIFI. He is a prolific author of 21 books on Islamic law,

finance, economics, social studies and art, that is in addition to 400 research articles on these subjects.

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Ask USBy Mufti Ibrahim Essa and Mufti Javed Ahmed

specified in the contract is not itself

vital.

If the quality of delivered goods is

inferior to that required by the

contractual specifications, the bank

and eventual customer is entitled

either to reject or to accept the goods

in that condition. If he accepts the

goods, his action is considered as

ethical acceptance. It is also

permissible for the two parties to

agree to a settlement on terms foracceptance of the goods even at a

discounted price.

Question:

Is it permissible to charge a fixed

remuneration for providing letter of

guarantee? Is there any restriction in

Shariah about the beneficiary of

Letter of guarantee?

Question:

What are the rights of bank in salam

transaction if the goods provided by

the customer are inferior or superior

in quality, and the eventual customer

in the parallel salam denies to accept

that goods?

Answer:

If the customer of the bank (seller)

offers delivered goods of a quality that

is superior to that required by the

contractual specifications, the bank

and eventual customer in parallel

salam must accept the goods, unless

the seller seeks a higher price for

better quality. This may be considered

one of the way in which a contract is

ethically fulfilled. However, this will

apply only if the inferior description

Answer:

It is not permissible to take

remuneration for issuing a letter of

guarantee, whether is with cover or

without cover, if the remuneration is

intended as consideration for

guarantee per se, since the amount

guaranteed and the duration of the

guarantee are usually taken into

cons ide ra t ion in comput ing

remuneration.

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