CPA Australia – Accommodating Islamic finance critical to Australia’s economic future


Logo_CPA

Australian tax laws should be amended to attract Islamic finance and other forms of alternative finance to benefit the economy, says CPA Australia.

In a submission to the Board of Taxation, CPA Australia says Islamic Finance will ultimately boost the Australian economy and help establish Australia as a financial services hub in the Asia-Pacific region.

Paul Drum, head of business and investment policy, CPA Australia, said attracting capital and investment through Islamic finance is a huge opportunity for Australia and would ultimately be good for economic growth.

‘Australia has emerged from the global financial crisis with strong economic position and a good regulatory regime. With our geographic position we are well placed to attract this increasingly significant component of global finance, and we need to take advantage of that,’ he said.

‘As a net importer of capital it is essential that we establish the right framework to attract and maintain a wide range of capital and financial products. Achieving this will be key to addressing many of our key economic issues including the funding of major infrastructure projects.’

Islamic finance is based on the principles of Islamic law (Shariah) which prohibits earning interest and instead focuses on profit sharing based on the buying and selling of tangible assets such as property.

‘Islamic finance offers huge potential for Australia’s financial services sector, but tax laws will need to be amended to accommodate other forms of alternative finance.

‘Some of Australia’s tax laws have a very specific legal based application which can exclude forms of alternative finance. Taking a broader economic and macro approach to policy in this area will be more beneficial and provide better long term benefits for Australia. It’s also more consistent with how tax law has developed in other areas such as taxation of financial arrangements.’

The CPA Australia submission also suggests Australia could adopt a similar approach to the United Kingdom, where only minor legal and regulatory reforms were required.

‘To achieve all of this will require significant work to align the accounting and tax treatment of Islamic and other alternative financial products. This must be a priority and CPA Australia looks forward to contributing to this process.’

Banking on the ummah – Malaysia leads the charge in Islamic finance


Default template

OF 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 sharia-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 it was responsible for almost three-quarters of total global issuance (see chart). Malaysia is also home to the Islamic Financial Services Board, an international standard-setting body.

These are big achievements for a relatively small country of just 30m people, of whom only about 60% are Muslim. In neighbouring Indonesia, which is home to the largest Muslim population in the world, only about 4% of the financial sector is sharia-compliant. Although the much richer Gulf states and Saudi Arabia have bigger Islamic banks, it is Malaysia, argues Iqbal Khan of Dubai’s Fajr Capital investment fund, that is the centre “for thought leadership in Islamic finance”.

How did the country carve out this niche? Malaysia’s Muslim heritage, outward-looking nature and links with financial hubs like Britain and Singapore made the place a natural candidate to bridge the worlds of religion and capitalism. The central bank, the Bank Negara Malaysia, is also supportive.

Two institutions in particular, both set up by the central bank, have contributed to Malaysia’s pre-eminence in the field. The first is the International Centre for Education in Islamic Finance (INCEIF). Established in 2005 and boasting about 2,000 students, INCEIF is the world’s leading university for the study of Islamic finance. The International Sharia Research Academy, housed within INCEIF, brings together scholars to produce an internationally acceptable rule-book for Islamic finance.

The second institution is the Islamic Banking and Finance Institute of Malaysia (IBFIM). It concentrates on vocational training, offering a variety of certificates in Islamic finance. IBFIM also acts as a consultancy to banks and firms that want to become sharia-compliant.

Zeti Akhtar Aziz, the head of the central bank, says that these bodies are the “pipeline to provide the banks with talent”. And not just in Malaysia. There are currently students from 80 countries at INCEIF; and IBFIM has taught people from Afghanistan, Nigeria, Palestine and elsewhere.

All of which gives Malaysia greater status within the ummah, the global Islamic community, important to a country that often feels on the periphery of the Muslim world. There are more tangible benefits, too. The Islamic subsidiary of Maybank, a big local lender, already accounts for about half of the group’s customers and is expanding abroad: it set up a subsidiary in Singapore 18 months ago and has also moved into Indonesia.

Ms Zeti argues that sharia-compliant banks are inherently more stable than conventional peers. Speculation is forbidden, and because charging interest is prohibited under sharia law, returns are based on profit-sharing. Perhaps. Islamic finance is hardly foolproof: Dubai’s debt crisis in 2009 showed that sukuk can help to inflate debt to unsustainable levels. But whatever its pros and cons, Malaysia will provide much of the evidence either way.

Source : http://www.economist.com/news/finance-and-economics/21569050-malaysia-leads-charge-islamic-finance-banking-ummah

Malaysia hailed as most vital Islamic-finance hub


Islamic Finance

KUALA LUMPUR: Malaysia is the world’s most important Islamic-finance centre, although the richer Gulf states and Saudi Arabia have bigger Islamic banks and Indonesia the largest Muslim population, influential financial news magazine The Economist says.

Malaysia also dominates the global market for sukuk, or Islamic bonds, the magazine said in an article headlined Banking on the ummah:Malaysia leads the charge in Islamic finance, in its latest issue on Jan 5.

“Leadership in financial services is not an obvious one. Yet, in some ways the country is the world’s most important Islamic-finance centre,” said the magazine.

“Just over a fifth of the country’s banking system, by assets, is Syariah-compliant; the average for Muslim countries is more like 12%, and often a lot less,” it added.

On the Islamic bonds, the magazine said the country issued the world’s first sovereign sukuk in 2002 and in the first three quarters of 2012, it was responsible for almost three-quarter of total global issuance.

It said Malaysia was home to the Islamic Financial Services Board, an international standard-setting body.

“These are big achievements for a relatively small country of just 30 million people, of whom only about 60% are Muslims.

“In neighbouring Indonesia, which is home to the largest Muslim population in the world, only about 4% of the financial sector is Syariah-compliant.

“Although the much richer Gulf states and Saudi Arabia have bigger Islamic banks, it is Malaysia that is the centre for thought leadership in Islamic finance,” said the magazine, quoting Dubai’s Fajr Capital investment fund founder and CEO Iqbal Khan.

The magazine said Malaysia’s Muslim heritage, outward-looking nature and links with financial hubs like Britain and Singapore made the place a natural candidate to bridge the worlds of religion and capitalism. The central bank, Bank Negara Malaysia, is also supportive.

It said two institutions in particular the International Centre for Education in Islamic Finance (INCEIF) and the Islamic Banking and Finance Institute of Malaysia (IBFIM), both set up by the central bank have contributed to Malaysia’s pre-eminence in the field.

INCEIF, set up in 2005 and boasting about 2,000 students, is the world’s leading university for the study of Islamic finance.

The International Syariah Research Academy, housed within INCEIF, brings together scholars to produce an internationally acceptable rule-book for Islamic finance.

The IBFIM concentrates on vocational training, offering a variety of certificates in Islamic finance as well as acts as a consultancy to banks and firms that want to become syariah-compliant.

Bank Negara head Tan Sri Dr Zeti Akhtar Ungku Aziz was quoted by the magazine as saying that these bodies were the “pipeline to provide the banks with talent” and not just in Malaysia.

“All these give Malaysia greater status within the ummah and the global Islamic community,” she said, adding that they were important to a country that often felt on the periphery of the Muslim world.

Dr Zeti argues that Syariah-compliant banks are inherently more stable than conventional peers.

“Speculation is forbidden and, because charging interest is prohibited under syariah law, returns are based on profit-sharing,” she said.

Source : The Star

Islamic Banking Knocks Germany’s Doors


banking

CAIRO – Turkey’s Kuveyt Turk investment fund plans to open the first Islamic bank in Germany in October, amid hopes of overcoming the bad effects of the ongoing euro crisis and get a share of the successful Islamic banking pie.

“The idea of an Islamic bank is that it adheres to Islamic investment guidelines and principles,” Zaid el-Mogaddedi, founder and director of the Institute for Islamic Banking and Finance (IFIBAF) in Frankfurt, told Deutsche Welle on Saturday, September 1.

Istanbul-based financial institute Kuveyt Turk would open the first Islamic bank of its kind in Germany next October.

Germany Tastes Islamic Finance

The bank was introduced as many Europeans hope to sign on to a banking institute that offers only transactions backed by tangible assets rather than highly speculative financial management which caused the ongoing euro crisis.

“You have to see that it in the Islamic financial system are also mechanisms that mimic the interest rate effect – though it is not the same,” said Martin Schulte, an Islamic banking expert at the Association of Foreign Banks in Germany.

“Money is fruitless, that is to say that simply transferring money does not create economic value,” he said.

“It is a medium of exchange, which itself has no economic power.”

Conventional banking, however, is partly based on the concept that lending money is a service in itself that is worthy of compensation.

“But in the Islamic understanding it is possible to develop products that are economically useful and complement the conventional banking business from a macro perspective very well.”

Islam forbids Muslims from usury, receiving or paying interest on loans.

Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.

Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.

Investors have a right to know how their funds are being used, and the sector is overseen by dedicated supervisory boards as well as the usual national regulatory authorities.

Failing?

Introduced years ago in different European countries, experts hope German new Islamic funds to be more successful than that of UK and France.

“The decisive point will be whether the Islamic banks offer an attractive product portfolio and good services,” El-Mogaddedi from the Institute for Islamic Banking and Finance, said.

Also “whether the communication is clear enough to bring Muslims and non-Muslims to the bank as an attractive alternative,” he added.

A study published in 2012 by the Stresemann Institute found that “Islamic finance” had failed in European countries because Muslim customers had lower income levels and thus little investment potential.

But El-Mogaddedi said the failure of Islamic financial products in Europe came down to bad marketing.

Staying reluctant for years to taste the booming industry, an Islam-conform investment fund was established in Germany in May 2012 by the Malaysian asset manager CIMB Principal.

The fund was approved by the German Financial Supervisory Authority (BaFin).

Germany has between 3.8 and 4.3 million Muslims, making up some 5 percent of the total 82 million population, according to government-commissioned studies.

The new Islamic finance targets Germany’s roughly 4 million Muslim residents, along non-Muslims.

Islamic banking is one of the fastest growing financial sectors in the world.

Islamic financial products got their first major boost after the 9/11 attacks on the United States.

Many Arabs withdrew their money from the US at the time, and some of those funds, according to Abdullah, ended up in Malaysia and the Gulf states.

A second boost came during the international financial crisis, when Islamic financial products actually showed profits.

The Dow Jones Islamic Market Titans Index, which tracks the 100 biggest Islam-compliant businesses in Europe, the US and Asia, has nearly doubled over the last five years.

The Shari`ah-compliant system is now being practiced in 50 countries worldwide, making it one of the fastest growing sectors in the global financial industry.

Currently, there are nearly 300 Islamic banks and financial institutions worldwide whose assets amounting to $1.6 trillion (1.2 trillion euros).

India’s Halal Hospital


CHENNAI – Hoping to boost medical tourism from Muslim countries, c, in the eastern Indian state of Tamil Nadu, has acquired a halal certificate for its hospital services to assure Muslim patients on the quality of the services offered to them, Two Circles website reported.

“With about two billion Muslims worldwide and a major number of international health travelers coming to Global Health City from the Islamic nations, we see Halal Certification as a form of approval that boosts our patients’ trust and confidence in our range of hospital services,” said Dr. K. Ravindranath, Chairman & MD, Global Hospitals Group.

“To earn the certification, Global Health City had to meet strict Islamic guidelines dealing with hygiene & dietary regulations of global standards.”

Global Health City, Chennai is a 500-bed super specialty tertiary care facility, with a capacity to expand to 1000 beds.

Being a world class hospital, the Global Health City has been keen on assuring its patients on the standard of services offered to them.

Applying for the halal certificate, it received the Halal certification for its hospital services by Halal India – an independent Halal certification body registered with government of India.

The certificate was recognized by IHIA (International Halal Integrity Alliance, Malaysia); a partner of the Islamic Chamber of Commerce and Industry (Kingdom of Saudi Arabia).

It requires offering halal food and other services as well, including medicines and other treatment, Mohammad Noman, General Manager (operations), said.

Halal friendly medical tourism services include Food, Prayer Hall, Qibla Direction mark, Payer mate, copies of Quran, for woman patients woman doctor’s appointments.

Noman added that the hospital follows the Malaysian Standards and Practice in offering halal slaughter.

“We do the site audit and ensure that meat supplier must follow the Shari`ah Compliance based on Malaysian Standards,” he said.

“Also Butcher must be practicing Muslim and undergo Halal India’s one day training and obtain the name batch and certifications.”

Promising Market

Being the first hospital in India to acquire a halal certification, the health city’s managers said that the new market was in its first steps.

“Still this market is not matured in India unlike other countries like Malaysia, Singapore,” Noman, the operations general manager, added.

“We need to educate Muslims to seek Halal Certified medicines in future (Lot of capsules in India made with gluten (Pig or Beef).”

Mohamed Jinna, CEO, Halal India, agreed.

Yet, he confirmed that they had a unique opportunity to lead the new halal medical market in India.

“We have great heritage for service and hospitality in India which also signifies that we can take good care of patients,” Jinna said.

“The state of art technologies available in medical care is just perfect for overseas patients. All we need to do is understand their culture and custom so that we accommodate them well and make them feel truly at home”

“This way we can respect their values and belief and at the same time cater to this niche market in India,” he further added.

Muslims account for 160 million of India’s 1.1 billion people, the world’s third-largest Muslim population after those of Indonesia and Pakistan.

The concept of halal, — meaning permissible in Arabic — has traditionally been applied to food.

Muslims should only eat meat from livestock slaughtered by a sharp knife from their necks, and the name of Allah, the Arabic word for God, must be mentioned.

Now other goods and services can also be certified as halal, including cosmetics, clothing, pharmaceuticals and financial services.a

Halal tourism on the rise in Egypt


While Egypt’s tourism sector continues to suffer losses as a result of the country’s fluctuating security and political situation, the latest Ministry of Tourism data show the decline in foreign tourist arrivals is being offset to a certain extent by Arab tourism.

These Arab visitors, from Saudi Arabia in particular, are coming to Egypt after some hotels and cafés started offering halal service.

Mahmoud al-Muhammad, a board member at the Chamber of Travel Agencies at the Ministry of Tourism, told Al-Shorfa, “The number of Arab tourists saw a remarkable increase, from 160,000 last year to 258,000 this year, including 110,000 from Saudi Arabia alone, representing over 40 percent of the total number of Arab tourists.”

“Foreign tourists continue to refrain from coming to Egypt, as the figures show that only 875,000 Western tourist entered Egypt compared to 1.3 million in the same period last year,” al-Mohammad said.

Dr. Hala Hakeem, a Lecturing Professor at Faculty of Tourism at Cairo University, said the numbers reflect what is happening on the ground.

“Westerners have grown wary and apprehensive about the [security] situation, and the kidnappings and lawless acts that occur from time to time,” she said, adding that tours of Egypt have essentially been excluded from many 2012 tourism programmes and that many foreign companies have refrained from contracting for tours with their Egyptian counterparts.

Hakeem said the high number of Arab tourists, especially the Saudis, is not surprising in light of the election of Islamists to power in Egypt and frequent talk of sharia law being implemented in a number of hotels, cafés, restaurants, and tourist resorts.

“All this does is indicate the potential for halal tourism called for by Islamist parties,” she said, adding that the call for halal tourism is bolstered by its success in a number of countries, Malaysia and Turkey in particular.

Success of halal tourism facilities

Khaled Abdul-Hamid, director of “Cairo Khan” hotel in downtown Cairo said the hotel committed some time ago to abide by Islamic standards. It does not serve alcoholic drinks and permits free mixing between genders only within families.

“Very few hotels offer similar services,” he said, adding that these standards have had no adverse effect on the number of customers. “On the contrary, our customers, who are of various European and Arab nationalities, do not complain about the lack of services other hotels offer.”

During a tour of Cairo, Al-Shorfa noted a number of other hotels that do not serve alcohol, such as Al-Qaoud hotel in the Manial, and the Grand Hyatt in Garden City, in addition to numerous cafés that have stopped serving alcohol in order to attract Arab tourists.

Islam Abdel Aziz, a shareholder in Muslim Café, which opened units in Alexandria and al-Banha three months ago, said, “The halal service concept was born some time ago and is premised on providing service in a manner that does not conflict with religious standards.”

Shisha tobacco products of all kinds, and mixing between genders are banned in Muslim Café. Certain areas of the café are designated for young people and others for families, separated by curtains to offer each family a measure of privacy. Popular music is also missing, replaced with Islamic prayers, invocations and music.

“The café provides a smoke-free environment and does not allow overstepping the bounds of morality or religion,” Abdul Aziz said.

Demand for halal tourism ‘contrary to the truth’

However Mohammed Sharif, a restaurant manager in Sharm El-Sheikh, told Al-Shorfa, “Islamist parties are trying to convey to the local and Western media the impression that halal tourism is in demand by patrons and tourists, which is contrary to the truth.”

“Promoting halal tourism in the media and creating the impression the Egyptian people demand it will significantly damage the Egyptian tourism sector and add to the losses it is currently incurring,” he added, ruling out the possibility halal tourism will be adopted in seaside tourist resorts.

Sharif said that he expects the implementation of halal tourism will be limited to certain areas.

“I think that is the most appropriate solution, as it would satisfy all parties,” he said.

Source : al-shorfa.com By Waleed Abu al-Khair in Cairo

After Islamic food and banking: halal travel


In his days as a jet-setting telecom executive, ready-to-eat meals were a regular part of Fazal Bahardeen’s luggage. Many of the hotels he stayed in did not have halal-certified restaurants for Muslim travellers like the 47-year-old Sri Lankan-born Singaporean. Rooms lacked markers pointing to Mecca for prayers and staff were unable to answer questions from Muslim guests about their particular needs.

“Half of my life was spent in hotels and airplanes,” Fazal told AFP.

“But being a Muslim, I was getting frustrated by the travel industry or the hotels not being able to provide the right services. You don’t know what the prayer time is, where the prayer direction is, and you can’t find halal food.”

But halal travel is now gaining popularity as demand for products and services permitted by Islam extends beyond food and interest-free financial instruments, and affluent Muslim travellers make their influence felt.

Halal travel is expected to be worth 100 billion US dollars annually within two years, said Fazal, who resigned from a senior management job at a major telecom firm in 2006 and set up his own company to tap into the expected boom.

Fazal’s Crescentrating Pte Ltd is believed to be the only company in the world that rates hotels globally for their friendliness to Muslim travellers.

Its online booking portal www.crescentrating.com also promotes halal tours.

Travel commentator Yeoh Siew Hoon told AFP there is a real demand for halal travel, led by tourists from Southeast Asia and the Middle East.

“Take Indonesia — it is one of the fastest growing outbound markets in Asia, and is the number one source of visitors to Singapore,” said Yeoh, who operates an industry website www.webintravel.com.

“Tourism Australia also produces a guide to halal restaurants due to the growing numbers of travellers from Muslim countries,” she added.

Greg Duffell, chief executive of the Bangkok-based Pacific Asia Travel Association (PATA), said China’s sizeable Muslim population is another potential source of outbound travel.

“A lot of suppliers are now amending their products to meet halal standards,” Duffell told AFP.

“It is a trend that started a few years ago. Since then, restaurants and resorts in Singapore, Thailand and Vietnam too have begun adapting their standards, so it’s beginning to branch out,” he said.

“There are more designated halal restaurants in hotels now, and prayer facilities on the premises, especially at the airports.”

Crescentrating’s hotel grading system ranges from one to seven and is based on the availability of halal food as well as prayer rooms and mats — and the non-availability of forbidden items like alcohol and adult TV channels.

A rating of one is given to a hotel with no such facilities but whose employees are trained to answer questions from Muslim guests.

This can be raised a notch if the hotel has a list of halal-certified restaurants in its vicinity — even if it does not have one itself.

The company’s highest ratings, six and seven, require a hotel to be free of alcohol, discos and TV channels showing movies unsuitable for families and children. In addition, all food and beverages must be halal.

Globally, only Dubai’s Al Jawhara Garden Hotel has a rating of seven, while three hotels in Saudi Arabia and one in South Africa are rated six.

The halal food industry is worth 600 billion to 650 billion dollars a year, according to Fazal and industry reports.

Islamic finance meanwhile boomed when Muslims began to look for investments approved by their religion, and the sector has attracted non-Muslims too after the global financial crisis.

“The halal consciousness is rapidly going beyond food and finance,” said Fazal, arguing that with 1.6 billion increasingly wealthy Muslims worldwide, halal-friendly travel is likely to be the next growth area.

Muslim travellers account for seven to eight per cent of global tourism expenditure, which totalled around 930 billion dollars in 2009, up from just three-four per cent 10 years ago, Fazal said.

This share is expected to expand to 10 per cent in the next two years.

Crescentrating also hopes to stamp halal-friendly ratings on theme parks, convention venues, cruise ships, shopping malls and hospitals used by medical tourists.