First Shariah compliant money market fund in Europe launched

First Shariah compliant money market fund in Europe launched

Bank of London and the Middle East (BLME) has launched the first Shariah compliant money market fund in Europe. Using Luxembourg’s specialised investment funds law, BLME has appointed European Fund Administration (EFA) and Banque et Caisse d’Epargne de l’Etat (BCEE) for fund servicing and custody.

 BLME Umbrella Fund SICAV-SIF, worth over $50 million, invests in a diversified portfolio of high quality Islamic money market instruments, such as commodity murabaha (exchange contract trade), sukuk (Islamic bonds) and ijara (assets leasing).

To respond to the significant market growth in Islamic investments, EFA has tailored the fund to its open fund accounting architecture and transfer agency platform while offering specific training to a dedicated team.

BLME is an independent UK wholesale Shariah compliant bank based in London authorised by the Financial Services Authority. It offers innovative Islamic investment and financing products to businesses and high net-worth individuals in the European, the US, South-East Asian and Middle East and North Africa regions.

EFA is an independent company specialised in administrating investment vehicles. It manages 2,700 funds units worth over €100 billion for more than 215 clients.

Pakistan Islamic banking industry registers 12% growth:SBP IB Bulletin for Q2 2009

Pakistan Islamic banking industry registers 12% growth:SBP IB Bulletin for Q2 2009

Despite slow economic activities and global financial crisis, growth rate of Islamic banking industry remained higher than the conventional banking industry, culminating in continuously rising share of Islamic finance in the local and global financial markets.

The State Bank of Pakistan on Tuesday revealed that the Islamic banking industry has posted a growth of 12.4 percent during the quarter ended June 2009 and total assets of Islamic banking in Pakistan reached Rs 313 billion in June 2009 compared with Rs 278 billion in March 2009.

The data for quarter ended June 2009, shows that asset financing activities of Islamic banks have revived besides substantially higher assets and deposits growth. The profitability indicators have also shown marked improvement as compared to the preceding quarter. The financing and investment portfolio of Islamic banks reached Rs 195.0 billion in June 2009 compared with Rs 185 billion in March 2009, depicting an increase of 5.1 percent during the last quarter.

In terms of market share, total assets, financing & investment and deposits reached 5.1 percent and 4.2 percent and 5.2 percent, respectively, at end June 2009. The branch network of 6 full-fledged Islamic banks and 12 conventional banks (with dedicated Islamic banking branches-IBBs) increased to 528 branches in June 2009.

The State Bank of Pakistan issuing "Islamic Banking Bulletin" for the second quarter ended on June 30, 3009 said that current growth rate of Islamic banking industry has envisioned to achieve a share of 12 percent by 2012 as per Islamic banking strategy plan.

The growing depositors’ confidence is well reflected in last quarter, which shows an increase of 15.5 percent in the deposits. The deposit base of Islamic banks stood at Rs 238 billion at end-June 2009 compared to Rs 206 billion in the previous quarter-end.

Total liabilities of Islamic banks have increased by 13.3 percent to Rs 274 billion from Rs 242 billion during the quarter. While the net assets and equity increased by around 7 percent each. There is an increase of 6 percent in the reserves to one billion rupees and then appropriated profits increased by 79 percent to Rs 900 million in last quarter.

The highlight of quarter June 2009 was that most of the indicators of the Islamic banking in Pakistan showed reversion towards the usual high growth trend. It may be recalled that the Islamic banks also witnessed some slowdown as a result of the financial stress of recent times.

The financing portfolio has increased by 3 percent quarter on quarter basis (QoQ). This is encouraging, as during the last quarter (January-March 2009) the financing had actually declined by Rs 10 billion. The resurgence in financing is accompanied by a QoQ 9.3 percent increase in investment. The increased financing may be reflecting the improving economic outlook of the country.

While, the investment has largely increased due to 3rd issuance of GoP Ijara Sukuk. Nonetheless, there is a welcome increase of Rs 2.4 billion in Musharika financing, though Modaraba financing declined by almost 50 percent. Nonetheless, the net mark-up income increased from Rs 7.8 billion to Rs 15.4 billion-a healthy 94.0 percent growth. Non-mark up income increased by a hefty 213.2 percent from Rs 0.5 billion in March 2009 to Rs 1.6 billion in June 2009.

The bulletin can be downloaded HERE

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Technorati Tags: Islamic Finance,Islamic Banking,Sukuk

Islamic finance takes root in Australia: Plans in motion for first Islamic retail bank

Islamic finance takes root in Australia: Plans in motion for first Islamic retail bank

The pioneers of Islamic finance in Australia have predicted that strong demand for their services can help prevent further global economic meltdowns.
Sharia-compliant banking is a multibillion-dollar worldwide industry, and while commonplace in Indonesia and Malaysia, it remains on the fringes of Australia’s financial sector. Its proponents believe that an ethical system that eschews the payment of interest in adherence to Islamic principles can help conventional banks steer a more stable and less greedy course.

"There have been many studies done to prove that Islamic banking could have avoided the global financial crisis. The Islamic banks have fared much, much better in this recession. There is a lot that the conventional world is now studying to see how it could do things better or differently to potentially avoid another global crisis," explained Nail Aykan, from the Muslim Community Co-operative in Melbourne, which has helped hundreds of Muslim families in Australia buy a home.

"As the Muslim world is rediscovering its faith, people are coming to the realisation that they must make every possible effort to avoid interest and, hence, in the last decade there has been an incredible demand from the Muslim world for an alternative banking model," he said.

The Muslim Community Co-operative was founded in the early 1990s. It was initially funded by shareholders but now borrows from non-banking lenders and has lofty ambitions.

"Our aim is to be the first Islamic bank in Australia," Mr Aykan asserted. "We have been around for 18 years and we hope the next step in our evolution will be to become a fully fledged retail bank."

"It will be a great opportunity because the demand is so huge. There are 400,000 Muslims living in Australia, which equates to about 80,000 families. It is estimated that around 80 per cent of those families own a home either outright or have a loan, so the market to refinance those conventional mortgages to Sharia-compliant finance is huge. The numbers speak for themselves," he added.

The community’s growing enthusiasm for religiously sensitive banking has been recognised by Melbourne’s La Trobe University, which has set up Australia’s first master’s programme in Islamic finance.

The curriculum has been devised by the associate professor Ishaq Bhatti, who will school his students in the rigorous disciplines of both Islamic and conventional economics, accounting, financial management and analysis.
"Islamic banking is, in fact, ethical banking when people get sick of mortgages and interest rates and so they look for an alternative and Islamic banking can do that," Mr Bhatti explained.

The aim of the postgraduate course is to train a generation of thinkers capable of developing and exploiting a fusion of different banking cultures.
"I argue that marrying or integrating conventional finance with Islamic finance would be better for the future of the [world's] banking system. It has the potential to absorb such a financial shock we are facing now," Mr Bhatti said.

The capacity of a new banking structure to avoid succumbing to bad debt or toxic loans could depend on the renegotiation of contracts, which gives the Islamic model crucial flexibility, especially when times are hard.

"In a crisis when households are unable to pay their mortgages and businesses are unable to pay their interest, there is a possibility in Islamic finance to renegotiate the terms and conditions of the loan. It takes care of borrowers’ circumstances especially in the financial crisis we are currently facing," said Nauman Ejaz from Pakistan, a PhD student at La Trobe University who specialises in experimental economics.

"Since Islamic economics and banking both are based on some moral codes, in the current financial crisis we have felt that one of the major problems with the [conventional] system is that it is not ethically grounded and it does not have any humanist approach," Mr Ejaz said.

"When a system fails, people start looking for alternatives and Islamic banking has been there for more than three decades. As an alternative system it has a chance to succeed. Obviously it is not at that level where it can make enormous contributions right away, but in the next decade or so Islamic banking practices could contribute to the banking system of the world," he added.

The big international banks are exploring the opportunities that the Sharia system offers and in early July Australia hosted its largest ever seminar on Islamic finance, with more than 200 delegates and speakers from a range of countries, including the UAE and Saudi Arabia.

The government in Canberra has also expressed an interest in the development of Islamic banking as its popularity continues to grow in Australia.

"The symposium was outstanding. It was a great success," said Mr Aykan, who was one of the organisers. "There were many industry players who can see the potential to attract large funds to Australia from the Gulf states and the Asia-Pacific area. They are promoting and actively supporting the possibility of an Islamic bank opening up in Australia."

Source: Zawya.com

Islamic finance courses and postgraduate qualifications booming in the UK and Europe

The Guardian: Islamic finance courses and postgraduate qualifications booming in the UK and Europe

With global finance on its knees, this summer’s business graduates face an even trickier jobs market than most. But there is one area of banking still experiencing boom time – Islamic finance – and universities have been quick to grasp its possibilities.

This September will see new courses and postgraduate qualifications in Islamic finance springing up throughout the UK and elsewhere in Europe, reflecting the fact that it has become one of the fastest-growing sectors of the global banking industry, expanding by between 15% and 20% a year. Assets held by institutions adhering to Islamic finance principles now amount to nearly 1 trillion dollars.

In the UK, interest in the sector also reflects the government’s commitment to promoting Britain as an Islamic finance centre. The UK already leads Europe in the number of Islamic finance training courses it offers, from entry to postgraduate level, and in 2006 saw the launch of the Islamic Finance Qualification, a joint initiative between a Lebanese business school and the Securities and Investment Institute.

London gateway

Last December, the Treasury published a paper setting out the government’s aim for London to be "Europe’s gateway to international Islamic finance". This acknowledged that the industry was still young and therefore not yet experiencing skills shortages, but predicted that it soon would be. It stated: "The pool of potential applicants in the UK will have to keep up with the rapid growth of the market."

Universities have responded enthusiastically. Newcastle University is offering an MSc in finance and law with Islamic finance from next academic year. Henley Business School at the University of Reading has been offering an MSc in investment banking and Islamic finance since last year, with students spending the second part of the year in Kuala Lumpur. The University of Bangor in Wales has also been running its Islamic finance MA and MSc for a year and is considering introducing a new MBA in the subject, while the first students to take an Islamic finance option as part of an executive MBA offered in Dubai by Cass Business School will graduate this summer. Durham, which has been offering postgraduate research degrees in Islamic finance for some time, is now introducing a taught MA and MSc (the MSc is more quantitative), to respond to demand. Elsewhere in Europe, Reims Management School is offering a new specialist course in Islamic banking and finance for students on its masters in management programme, taught in English.

Student demand is driving the subject as much as any urging from governments. According to Rodney Wilson, founder and director of the Islamic finance programme at Durham, it is coming mainly from south-east Asia, particularly Malaysia, and the Middle East, although there is plenty of interest from the UK as well.

Joanna Gray, professor of financial regulation at Newcastle Law School, says she is keen that their new degree course is not just seen as something for Muslims. "It’s for anyone interested in a fast-developing industry that in the UK has been quite busy in the past few years to accommodate forms of investment in finance that are sharia-compliant."

Sharia principles

Islamic finance really dates from the mid-1970s, with attempts to make products available through conventional banking, such as loans and mortgages, compatible with sharia principles. Sharia law prohibits any transaction that involves paying interest or investing in certain economic sectors such as gambling or pornography. It demands that both the investor and recipient of the investment must share any risk, and transactions have to be underpinned by tangible assets.

In the years immediately after 9/11, anything involving money and Muslims was viewed with suspicion by many in the west because of fears about terrorism, and Islamic finance is still taking off faster in the UK and France than in the US. But in the current global financial climate the principles it is based on have struck a chord.

"There is an extent to which, to a westerner, Islamic finance products look very similar to ethical finance products," says Stefan Szymanski, professor of economics at Cass. "There is a demand for morally upright investment vehicles, and Islamic finance is the Islamic version of that."

Philip Molyneux, head of the business school at Bangor, suggests that even if western banks do not want to introduce specific Islamic finance products – and an increasing number do – they still want to know how it is that many Islamic institutions escaped the worst effects of the credit crunch.

He has been surprised that demand for the MA and MSc has come not just from recent graduates and bankers wanting to improve their career prospects, but also from sharia scholars, who play a key role in Islamic finance. Any new financial product must be passed by them as sharia-compliant, so many financial institutions must now have scholars standing by ready to give their verdict. These scholars often disagree, and can even change their minds, but this offers plenty of scope for the kind of intellectual arguments that universities relish, not to mention graduate jobs.

On the whole, most of the new Islamic finance courses steer well clear of religious issues in favour of legal and financial questions because these are what most interest students. Khalid El Sheik applied for Bangor’s Islamic finance MA because, having taken a first degree in computer science in Sudan before switching to a career in marketing, he felt his CV needed a business boost. He saw it as a chance to mark himself out from other students and to have a headstart in an area that was likely to offer plenty of future employment opportunities. "I had read about Islamic banking and how it was going to increase in future, and how most of the banking sector is now looking to it," he says. His fellow students at the university, including one from China, had the same idea, he says.

Szymanski agrees that it is the idea of the moment in many universities, and while Cass is still waiting to see how the market develops before introducing any similar courses, it is certainly considering the possibility.

"You just have to measure how many billions of dollars Islamic finance already handles in a year," he says. "If that grows over the years, it will become a universal part of every business school."

Branding an Islamic Bank: Absa Islamic Banking

Branding an Islamic Bank: Absa Islamic Banking

Building a brand is a complex and multi-faceted process. Even when a range of brand-building tasks are completed, it’s rare that one knows for sure which of them contributes the most to building a trusted and sustainable brand. There are numerous pressures, including the urgency to launch and budget constraints. There is no magic formula for branding an Islamic bank, but this is our story and I hope there are lessons in what we did or did not do and even in the things we wished we’d done better.

I am writing this from the perspective of a bank based in South Africa, where Muslims are the minority and the country is not governed under Shari’ah law.

In the Beginning
The first big decision is naming your bank. In making this decision, you have a choice of whether to include the word "Islamic" in the name of the bank or to go with an indicative word such as "Al Riba" or "Amanah". Absa Islamic Banking chose the former route. The advantage has been absolute clarity to the primary target audience of Muslims in South Africa, but the disadvantage is that the secondary audience of non-Muslims feel excluded, even though Islamic banking is available to anyone who chooses an alternative to conventional banking. This means that a great deal of effort must go into ensuring that all of the bank’s staff members and the general public are clearly informed that Islamic banking is a choice available to everyone and not exclusively to Muslims.

Once we had the name and, being a division of an established bank, a colour that we were required to use in our branding, we set out in search of a company with Islamic marketing experience. None existed in South Africa, so we settled for a small agency that was willing to learn with us. We chose a typical Islamic picture and built it into a brand image that we could live with, as we were under pressure to get our first products to market. We decided on the slogan, "Your trusted partner in Shari’ah compliant banking," and added some text about our products and the Shari’ah approval process. We included a call to action and how to access the products. And with that we had our first advertisement.

The brand extensions of this included posters and Shari’ah certificates for our branches, advertisements for special times such as Ramadan and Eid and a modest range of branded goods. The most ambitious and memorable of these was a Hajj pack for our customers who were going on Hajj in the year that we launched. This was a sturdy backpack that included a branded water bottle, prayer mat and shoe bag.

Relationships in Support of the Brand
No matter how impactful we believed they were, we knew that branding elements on their own would be of little value. Relationships are a vital part of Islamic banking. So the small start-up team put enormous effort into getting out into Muslim communities all over the country. The team spoke about the concept of Islamic banking and answered questions from those who wanted more information and those who doubted the Shari’ah compliance of an Islamic banking division of a conventional bank.

We held presentations in community halls, luxurious venues and in tents where we shared Iftaar with rural communities. We addressed women’s organisations, schools and Shari’ah scholars. Anyone who was interested became our audience and the number of people we reached was only limited by the amount of time we had in each day and the modest size of our team.

Educating the Bank Staff
Absa agreed that Islamic banking would be available at any of its approximately 800 branches nationally, but the staff of most of those branches were non – Muslim.

Islamic banking was completely foreign to them and counterintuitive to the rules of conventional banking which they knew so well.

This required intensive education and internal communication. This process continues to this day, as we aim for a consistent and positive brand experience whenever someone walks into a branch and asks for an Islamic product. We could not employ mystery shoppers, so we had to perform that function ourselves. The worst experience was walking into a branch, asking to open an Islamic banking account and being told to go to a branch in a Muslim area. The best is always finding non-Muslim branch staff who are excellent at selling our products. Today, we’re proud of the fact that our top 10 branch sales people are all non-Muslim.

This year we have launched a new training programme and a DVD for use in branch staff meetings. It shows how simple it is to open an Islamic banking account and how to cross-sell Islamic banking products to a customer.

Taking the Brand to a New Level
After our first year in business, we realised that the design of our initial brand identity was no at the level we wanted. We decided to work with a large through-the-line agency and put in the time required to help them develop a brand identity we would feel proud of.

After much deliberation, we finally all agreed on a strong and relevant brand identity image of the door of the Mosque of Prophet Mohammed, which is on the Prophets Dome in Madinah. This door is a very symbolic icon of the Muslim faith which is inscribed in Arabic.

We rewrote the Arabic inscription on the door to read "Islamic Banking from Absa" in Arabic.

We shortened our tagline to "Banking the Shari’ah Way." We also created a typically Islamic pattern around the centre of the door.

We developed our own logo, which will become a synonymous symbol of our Islamic Banking brand. The logo features a red seal with "Islamic Banking from Absa" on it in Arabic.

The Arabic translation is placed under our name in English.

It’s important to build brand identity strength.

We set out to do this by incorporating our new design and logo onto posters, in our branches and on cheque books and debit cards.

Not stopping there, we also developed a range of new corporate gifts with the logo on them, complete with the Arabic translation. The wonderful red and gold images that we used for the new branding and logo were met with great positivity and were quickly adopted by Absa staff and customers. To reinforce the Islamic banking brand, we have gone out of our way to use the red and gold colours, as well as our logo, on everything we do, including wrapping gifts.
We have found that by doing this we have been able to entrench the new Islamic Banking brand within the Muslim and other markets.

Publicising Our Differentiator
Currently, we have the broadest offering by a bank, with a full range of access channels. We publicised this differentiator using billboards, radio and print advertisements which drew attention to our ability to offer "Islamic Banking anywhere, anytime."

Doing More With Less
During 2008, marketing budgets came under pressure from the global financial crisis. We had to find low-cost ways of continuing our quest to build brand awareness. These included marketing messages printed on ATM slips, ATM screen images, direct mail letters and SMSs to customers and marketing messages on personalised cheque statements. We also made use of the television screens in branches, targeting people in branch queues with a 45-second insert which revolved as part of the TV schedule in every branch throughout banking hours.

The most successful exercise in this category was our Ramadan promotion. Absa produces branded bottled water which is available in branches for people standing in the queue. We designed Islamic Banking neck tags to go with these bottles. During Ramadan, we encouraged our sales consultants to adopt a mosque and to provide water with our branded neck tag for people to break their fast. This "Absa Islamic Banking water" has become very popular and we regularly receive requests for it from mosques, charity events and schools. It has even been supplied to people waiting in the sun for animals to be slaughtered for Eid.

The Way Forward
Our approach continues to be a combination of brand awareness, connecting with communities and educating Absa staff members to enhance the brand experience. We’ve embarked on some exciting initiatives lately, such as entertaining clients at the DFL Indian Premier League cricket matches and hosting exclusively female events.

We have done this in recognition of the important role women play in financial decisions. We also believe strongly in the importance of educating young people about Islamic banking, as they will have choices that their parents did not.

As Islamic banking attracts attention all over the world, even receiving endorsement from the Vatican newspaper, the pressure on branding and differentiation will grow and we look forward to continued innovation in this field.

By Ahmed Moola

© Business Islamica 2009

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