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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 Pakistans - 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.
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.
Advisory Board
Mufti Irshad Ahmed Aijaz Mufti Najeeb Khan Anwar Ahmed Meenai Mohammad Aslam Mujeeb Baig Faizan Memon Syed Abdul Rafay Ather
Editor-in-Chief
Nusrat Ullah Khan
Associate Editors
Shakil Khan Muhammad Shahzad Hussain Arshad Hussain Zubairi Rima Farooq
IFP is an initiative of IFP Forum and Hidaya Islamic Business Support Services (IBSS)
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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.
3 Rs
The severity of performance challenge demands wide-ranging transformation of business practices round the 3 Rs 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 transformationinvolving compliance risk, capital optimization, integrated balance sheet m a n a ge me n t and liquidity management. Risk transformationaround Shariah governance, single data management framework, segment specific risk models and fund transfer pricing capabilities.
Retail banking transformationstrengthening customer centric operating model, channel integration and technology enablement. Risk transformation agenda as concluded by the report is given below:
News Story
SBP revises the forms of annual financial statements applicable to Islamic Banks / Islamic Banking Branches.
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.
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 Balances with other banks Due from financial institutions Investments Islamic Financing and Related Assets Operating fixed assets Deferred tax assets Other assets Total Assets A-2.1 xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx
LIABILITIES Bills payable Due to financial institution Deposits and other accounts Current accounts Saving accounts Term deposits Others Deposit from financial institutionsremunerative Deposits from financial institutionsnon-remunerative Due to head office Other liabilities xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx (xxxxxx) NET ASSETS xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx (xxxxxx) xxxxxx
News Story
(Current Period) (Prior Period) Rupees in 000 REPRESENTED BY Islamic Banking Fund Reserves Unappropriated/ Unremitted profit Surplus/ (Deficit) on revaluation of assets xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx
xxxxxx
xxxxxx
CHARITY FUND Opening balance Additions during the period Payments / Utilization during the period Closing balance xxxxxx xxxxxx (xxxxxx) xxxxxx xxxxxx xxxxxx (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 Advances Assets / Inventories Others (please specify) xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx
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Global News
Islamic finance hopes for plugging deficit
It had been reported that analysts say Egypts Sukuk issuance is unlikely to be a cure-all for the countrys current economic plight. Egypts 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 countrys economic woes. Plans for any Sukuk issuance, including the governments expected $1bn sovereign Sukuk later this year, are unlikely to effectively plug the hole.
His Highness Shaikh Mohammad Bin Rashid Al Maktoum, VicePresident and Prime Minister of the UAE and Ruler of Dubai, rang the opening bell kicking off the next phase of Dubais Islamic economy initiative. Eissa Kazim, chief executive of Dubai Financial Market and se cr e t ar y - ge ne r al of the committee, governing Dubais Islamic economy initiative, said the goal of the initiative is to promote Shariah-compliant activities, with one of those activities being Sukuk.
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.
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Global News
Nigeria: experts meet on Islamic finance
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.
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.
Islamic finance to land UAE among top economies in the world: Sheikh Mohammed
Dubais Sheikh Mohammed bin Rashid al-Maktoum aims to position the UAE in the worlds 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.
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.
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Global News
Emirates airline picks banks for potential Islamic bond sale leads
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.
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.
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.
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Global News
Cars to Mom and Pop Shop Loans Drive Dubai Bank
Emirates NBD PJSCs (EMIRATES) Islamic banking unit expects to double profit in 2013 as individuals and small businesses take out more loans amid Dubais 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.
lagging behind as reported by Hong Leong Islamic Bank Bhd. (HLBK), a unit of Malaysias fourthbiggest lender. Financial holdings that comply with the religions 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 companys global head of Islamic banking.
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.
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Local News
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 , Centra 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.
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.
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Local News
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.
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.
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Ask Us
Questions / Answers
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.
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Upcoming Events
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 Morocco 29th March 2013 Australia 7th May 2013 Japan 12th June 2013 Hong Kong 25th June 2013 Pakistan 27th August 2013 Sri Lanka 29th August 2013 Turkey 3rd September 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 Maashi Masail (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 newsletter.ifp@gmail.com
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