ISLAMIC FINANCE PAKISTAN

I S L A MI C FIN A N CE IN D US T RY N E WS L ETT E R V O L UM E 3 IS S U E 4 A P RIL 2 01 2

Managing Shariah Conforming Businesses: Prospects, Practices and Personnel

REPORT ON ICIB 2012
The First International Conference on Islamic Business held in February 2011 (ICIB2011) 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 and the untiring efforts of different committee members involved in its organization.

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 something in the heavens or the earth can frustrate Him. Surely He is AllKnowing, All-Powerful. (AlFatir: 44 )

Inside this issue

Inside Story Editors Message International and Local News Get a glimpse of what is happening in the world of Islamic finance In the Spotlight Find our read of the month 1 2 5

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 .

Ask US 8 By Mufti Ibrahim Essa and Mufti Javed

Editorial
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.

Advisory Board
Mufti Irshad Ahmed Aijaz Mufti Najeeb Khan Anwar Ahmed Meenai Mohammad Aslam Mujeeb Baig Syed Shahjahan Salahuddin Faizan Ahmed Memon

Editor-in-Chief
NusratUllah Khan

Associate Editors
Muhammad Shahzad Hussain Arshad Hussain Zubairi Ammar Khalid Rima Farooq

Let us know, if you know friends or colleagues who, in your view, may benefit from this newsletter. Send us their email addresses at newsletter.ifp@gmail.com

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Continued Managing Shariah Conforming Businesses: Prospects, Practices and Personnel

Dr. Abdelkader Chachi, Economist Researcher at IRTI (IDB), Prof. Dr. Anis Ahmad, Vice Chancellor RIU, Mr. Hassan M. Khan Pro. Chancellor RIU, 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 Policy Studies 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 inaugral session, 30 presentations were made on almost all areas of Islamic business, banking and finance. It covered, financial regimes, financial inclusion, money and monetary 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 Finance Institutions (IFIs), business and work
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ethics for various disciplines, product development, Awqaf as a Key to SocioEconomic Development of the Muslim Ummah, application of Islamic Hijri Calendar 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

and Dato' Seri Anwar Ibrahim, Former Deputy Prime Minister, Malaysia. Afterwards, regular sessions were attended by over 300 delegates on first and 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 Vote of 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.

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 IRTIIDB 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

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Ernst & Young Report Takaful Premium Jump of 19% to $8.3 Billion
Tak It has a f ubeen l I s reported l a m i c ithat n s u rglobal ance 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 up the most percentage of the industry. countries The participating of UAE, Gulf Qatar, Corporation 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.

Islamic Microfinance the Answer to Poverty in Arab World

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 ErbilIraq.

AAOIFI Islamic Finance Accounting Changes

It has been reported that the Accounting and Auditing 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 of the 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 become effective as early as July this year and would be applied retroactively.

EIB to Offer 100% UAE Mortgages to Customer Base

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 the market . 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.

KFH-Bahrain Awarded ISO 27001 Certification

Kuwait Finance House - Bahrain ( KFH-Bahrain ) Data Centre has been awarded the prestigious information security certification ISO 27001, following a stringent audit by an international certification body. It is the first Islamic bank in the Kingdom to achieve this milestone. The ISO certificate was presented to Mr. Abdulhakeem Alkhayyat, the Managing Director and CEO of KFH Bahrain .

Islamic Bank Rates Nigerian Economy Third Fastest

It has been reported that The Islamic Development Bank has rated the Nigerian 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 Federal Executive Council (FEC) meeting during his presentation on the outcome of the last (37th) meeting of the Islamic Development Bank (IDB).

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

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.

Al Baraka Backs Annual Islamic Banking Forum

Al Baraka Banking Group (ABG) will be taking part as a platinum sponsor in the Annual Islamic Banking and Finance Conference. Accounting and Auditing Organisation for Islamic Financial Institutions is organising the event in Bahrain on May 7 and 8.

Kuwait ready to become EIB, Dubai Bank merger hub for Islamic finance on cards
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.

Maybank may be bidding for Philippines Islamic bank

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 AsiaPacific region.

Ahlibank to Launch Five New Branches in Oman

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.

Nahed Taher honored for Islamic finance role

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.

GFH Project in Crucial Deal with Banks

Royal Ranches Marrakech (RRM), one of the flagship projects of Bahrainbased Islamic investment bank Gulf Finance House (GFH), has signed a memorandum of understanding (MoU) with a consortium of banks, led by Banque 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

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.

Disclaimer:
The news included here is on the basis of information obtained from local and international print and electronic media sources. IFP team does not accept any responsibility about their bona-fide.
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DIB wins 3 Islamic Finance News awards

Dubai Islamic Bank (DIB) won three awards at the recent Islamic Finance News Awards in the categories of Corporate Finance, Restructuring and Structured Finance Deal of the Year categories.

Meezan Banks Assets cross Rs 200 billion and profitability doubles to Rs 3.4 billion, announces
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 Islamic commercial banking operations this year The Bank has achieved growth in all business segments 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. its Profit-after-tax The Bank recorded which 106 % increased growth in to Rs 3.4 billion for the year ended December 31, 2011 as compared to Rs 1.650 billion in 2010. Earning per share (EPS) increased to Rs 4.22 from Rs. 2.05 recorded last year.

Regulatory framework for modaraba 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 the Modaraba 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; and Section 41B: Power to issue directions, circulars, codes guidelines, etc.

Celebrating Long association with Al Baraka Pakistan

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.

Burj Bank signs agreement with TPL Trakker for Burj Karsaaz
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 Bank Limited 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.

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.

Burj Bank launches 9 to 8 banking in selected branches

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

An Introduction to the study of Islamic law

By Dr. Hussain Hamid Hassan Reviewed by

Rima Farooq

This book An Introduction to the study of Islamic law by Dr. Hussain Hamid Hassan is a comprehensive introduction to Islamic law. It has proved 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

second part discusses briefly the important theories of Islamic law. The first part covers the definition of Fiqh, kinds of its rules, the period through which Islamic law has passed and the sources of Islamic law.

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 promotion of Islamic legal knowledge.

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 US
By Mufti Ibrahim Essa and Mufti Javed Ahmed
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 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 for acceptance 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? 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 consideration in computing remuneration.

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