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A SAVE HAVEN IN TIMES OF CLAMOR AND STRIFE If there is to be anything positive to emerge from the (seemingly) never ending global credit crunch, it must surely be this -- the rise of Islamic banks. Folk around the world are flocking to them, rushing their savings into them, as fast as they can deposit them. Fear might be the dominant motivation, but disgust figures as well: disgust at the orgy of speculation which is 21st century western style banking, disgust at the lack of ethics and accountability. Islamic banks beckon as safe havens amidst the raging financial storm that is true, each one a harbor in this time of clamor and strife. But I like to think that Islamic banking represents something more than safety and stability, and in some ways offers a template for a whole new model of social life. The era of casino capitalism is imploding, that cannot be denied -- and between the cracks in the walls, if one is sensitive enough, one can discern the shape of what it is to come. Put another way: In the cataclysm which is breaking upon us, it might indeed be Islamic banks and their ilk which survive to dominate the post-Crunch world, while western institutions go the way of the dodo, and the dinosaurs. We could certainly do with some kind of alternative, in the more caring, sharing, community minded era which I hope is soon about to dawn. I am no Muslim by any means, but it took me only a heartbeat to recognise the wisdom of Islamic finance, which seems rooted in community (rather than the Baudrillardian hyperspace of speculation). I am not the only convert, not the only one by far. As The Birmingham Post from the United Kingdom reported on October 3, 2008: "Growing numbers of non-Muslims are turning to Islamic banking as customers spooked by turmoil in the Western banking system increasingly see the sector as a safe haven. "The Birmingham-headquartered Islamic Bank of Britain said it had seen significant growth in non-Muslim customers since the onset of turbulence on financial markets as Islamic banks, bound by strict religious principles, are largely seen as insulated from the credit crisis. "Islam's prohibition on the charging or paying of interest - riba - as well as rules on the kinds of investments they can make are among the reasons Islamic banks are coming through the crisis unscathed." At the Islamic Bank of Britain or IBB as it called you won't earn any interest on your savings account -- you will however earn a four percent "target profit rate". At Islamic banks in Malaysia too (and there are many of them) the going rate for savings accounts seems to be about four per cent. At no Islamic bank anywhere in the world, from the Persian Gulf to the gleaming towers of The Orient, will you find ridiculously overpaid bankers inventing products like derivatives which basically add nothing to the capital of the human race. Actually, that is not exactly true -- they do have derivatives in Islamic banking, read this article for confirmation of that. But the difference between Islamic finance institutions (IFI's) and Wall Street, for example, is that IFIs, in order to remain Shari'ah-compliant, must qualify their products and strategies through the scholars that provide supervisory authority. If only Wall Street had had this kind of spiritual oversight (or any oversight at all!) That is not to say that Islamic banks and finance institutions are dreary affairs, lacking any color or imagination. The Islamic banks in Malaysia over the full range of modern services including Internet banking, credit cards and the like. This is not like revolutionary Iran. In addition to Islamic loans, there are Islamic bonds, Islamic credit cards and even Islamic derivatives (I know, I said that before -- they have derivatives in Islamic banking!) Loans and bonds that conform to the Koran are already available in the United States. And Britain, Japan and Thailand are contemplating issuing Islamic bonds of their own. (Hong Kong is getting in on the act too -- read this article here for further enlightenment!) So how does an Islamic bond differ from a Wall Street bond, exatcly? Well, Islamic bonds, or sukuk, do away with coupons and replace them with payments backed by the performance of tangible assets. Islamic law prohibits the payment of interest (as I have stated before) and requires transactions to be linked to assets, thus deterring the kind of complexities prevalent in conventional financing operations. Some folks might think that that Islamic banking is not about making money, but this is not true -- under the concept of Al Ghunm bil Ghurm, earning profit is legitimized only by engaging in an economic venture, risk sharing and thereby contributing to the economy (source: Asian Finance Bank). The International Herald Tribune said: "Big banks, including Citigroup, HSBC and Deutsche Bank, as well as financial capitals like London, Tokyo and Hong Kong, are all going into the Islamic banking business. An estimated 300 Islamic financial institutions hold at least $500 billion in assets, an amount that is increasing more than 10 percent a year. "'This is an industry on its way from a niche industry to becoming a truly global industry,' said Khawaja Mohammad Salman Younis, the managing director for operations in Malaysia for Kuwait Finance House, the world's second-largest Islamic bank, after Al-Rajhi Bank. 'In the next three to five years you'll see Islamic banks coming out in Australia, China, Japan and other parts of the world...'"
The venerable Christian Science Monitor writes: "At a time of almost unprecedented financial volatility, Islamic banks are being hailed as bastions of stability. Growing numbers of individuals and companies are now embracing their workings, which are based on Koranic principles. "Using law changes and generous tax breaks, the British government is now attempting to transform London into the Western world's center for Islamic finance. Conventional banks and financial institutions are also rolling out a range of Islamic finance products. "Globally, the market for Islamic financial services is estimated to have grown more than threefold over the past decade ・from around $150 billion in the mid-1990s to $500 billion in 2006. "Keen to tap into this, Britain's authorities are planning to become the first Western government to issue an Islamic bond ・called a sukuk ・structured to comply with the sharia law principles of Islamic finance, which forbids all forms of interest payments..."
 A GLOSSARY OF ISLAMIC BANKING TERMS Islamic banking is based on Shariah law. Here is a glossary of terms you might expect to find in a contract at an Islamic bank in Malaysia or elsewhere in the world, borrowed from Alliance Islamic Bank, Asian Finance Bank, and myriad other sources:
Al-'Aariyah (Gratuitious loan of non-fungible objects)
Al-Kafalah (Suretyship)
Al-Rahn
Al-Sarf
Arbun
Bai Bithaman Ajil
Bai Dayn
Bai Ma'Dum
Bai'Muajjal
Bai Sarf
Fiqh Muamalat
Gharar
Haram
Ijarah
Ijarah Thumma Al-Bai
Istisna
Kafalah
Maisir
Mudharabah
Murabahah
Qardh
Qimar Usury, or interest earned from lending money to another party. Also known as riba an-nasiah (interest on delayed payment), riba al-fadl, and so on. Wadiah Yad Dhamanah A contract between 2 parties i.e. the owner of goods and the custodian of goods to ensure the safe custody of the goods. The goods are protected from being stolen, lost, destroyed, etc. 'Goods' can refer to anything of value.
Wakalah
Ujr
Wa'ad
Zakat
ABC OF ISLAMIC BANKS AND FINANCE INSTITUTIONS IN MALAYSIA ASSOCIATION OF ISLAMIC BANKING INSTITUTIONS MALAYSIA: Members include Affin Islamic Bank Berhad, Alliance Islamic Bank Bhd, Al Rajhi Banking & Investment Corpn. Bhd, AmIslamic Bank Berhad, Asian Finance Bank Berhad, Bank Islam Malaysia Berhad, Bank Kerjasama Rakyat Malaysia Berhad, Bank Muamalat Malaysia Berhad, CIMB Islamic Bank Berhad, EONCAP Islamic Bank Berhad, Hong Leong Islamic Bank Berhad, HSBC Amanah Malaysia Berhad, Kuwait Finance House (Malaysia) Berhad, the aforementioned Maybank Islamic Berhad, OCBC Bank (Malaysia) Berhad, Public Bank Berhad, RHB Islamic Bank Berhad, and the Standard Chartered Bank Malaysia Bhd.
Including part time jobs. The last time I checked in the part time jobs // entry level section, there were nine jobs listed (over the past two months). These the KL area), health advisors (promoters) in the Klang Valley, and payment manager for a US software company.
Umesh Desai from Reuters reported in August 2008: "The global credit crisis presents the $1 trillion Islamic finance industry with an opportunity to expand its appeal beyond Muslim investors, as a haven from speculative excess. While conventional banks worldwide are nursing losses of more than $400 billion from the credit crisis, Islamic banks are virtually unscathed. And they are playing up the contrast to scalded shareholders, bondholders and borrowers and fearful depositors. "It's very much a return to old-fashioned conservative lending," said David Testa, chief executive of Gatehouse Bank, which began operations in April as the fifth Islamic bank in Britain. "The current global market condition has given Islamic finance a great opportunity to show what it can do - help to fill the liquidity gap," he said. Testa said that Islamic finance practices were more fiscally conservative, with direct participation by investors in plans that do not involve parking assets in off-balance-sheet vehicles. The Asian Development Bank estimates that Islamic assets globally have a combined value of about $1 trillion, with annual growth of 10 percent to 15 percent a year. Al-Rajhi Bank of Saudi Arabia and Kuwait Finance House are the two biggest Islamic banks in the Gulf region. In Malaysia, the largest Islamic lender is Maybank Islamic, a subsidiary of Malayan Banking. The jump in popularity of Islamic finance is drawing the interest of companies outside the Middle East. City Developments, one of the largest developers in Southeast Asia, said last week that it could issue Islamic debt and sell hotels to enhance its ability to make acquisitions. Debashis Dey, the Dubai-based head of capital markets at the law firm Clifford Chance, said that although the Islamic finance industry was adapting conventional products to make them compliant with Shariah, it was a long way from sophisticated products like collateralized debt obligations. But while Islamic products are coming into favor, analysts say market commentators and intermediaries may be too zealous in promoting the merits of Islamic finance as a safe product. Mohamed Damak of Standard & Poor's cited the case of the boom in real estate financing in the Gulf mainly by Islamic banks in the past three years, amid soaring property prices. "A correction of the real estate sector would impact Islamic banks involved in this business line. Islamic finance is not immune from risk," he said. Even as experts are weighing the degree of insularity that Islamic financing provides, there are differences in the way accounts are prepared and in how Shariah law is interpreted. Banks in Britain differ in their accounting operations from banks in Bahrain, for example, which in turn differ from banks in Malaysia and Indonesia. Dey, at Clifford Chance, said the lack of standardization posed a hurdle to growth, but others said that a cookie-cutter approach was not desirable and that regional differences would remain.
"Complete standardization may not happen - there will always be variants," said Raj Maiden, managing director at Five Pillars in Singapore, who added that it was more important to tailor products according to the needs of each market.
PART TIME JOB, PART TIME BUSINESS, KERJA SAMBILAN MALAYSIA: The Sydney Morning Herald from Australia wrote: "Charging interest is immoral because it does not take into account how changes in the value of the loan's security can affect the borrower, sharia says. Home owners who bought near the peak are now experiencing this harsh reality: interest gives banks a steady payment from the borrower, regardless of the property market's state. "However, profit is fine, and Islamic banks have devised ways to make money from lending. Instead of demanding interest, they buy the asset outright on behalf of the borrower. The borrower pays off the loan (the principle) and a fee for using the asset (rent, for example) until the amount is repaid and ownership transfers to the borrower. "Just like mortgage-backed securities, the rights to loan repayments can be sold as an Islamic bond, or sukuk. But instead of a yield, the bondholder receives repayments on the loan, and some rent. As a result, Islamic lenders have not had to venture into money markets that have recently blown up. For depositors, putting your money with an Islamic bank is more like being a shareholder. Rather than interest, depositors get a cut of any profits. Understandably, Western governments are casting around for ideas on how to run a more robust financial system. But what could they possibly learn from such a different approach? Islamic finance's more prudent rules on debt look attractive in hindsight. But more fundamentally, proponents say it provides a better way to link the financial system to the "real" economy. Because Islamic banks keep ownership of the asset until the loan is repaid, they have a greater incentive to make sure borrowers do not bite off more than they can chew. The bank shares in the risks of the entrepreneur but also its failures, the argument goes. I am not suggesting we switch to a lending system without interest payments. But a big gripe emergi
There are three types of Islamic bonds issuers a. Government Government Investment Issues (GII) - Issued by the Government of Malaysia - Governed by the Government Investment Act 1983; provides the power for the government to borrow via Islamic principle for its general financing. - Currently only zero coupon bonds issued - Syariah principle: debt based (securitisation of government assets, but not a direct claim of assets as in an Asset-backed securities) - Total outstanding balance as at end of 2003 is RM7b, up to a limit of RM15b imposed by the Act. - Tradable since June 2001. - Issued on a pre-announced calendar. b. Quasi Government Khazanah Benchmark Bond - Khazanah Benchmark Bond was issued by Khazanah Nasional Berhad (fully owned by the government) - Issued mainly for long-term financing purposes - Zero coupon - Syariah principle: debt based - Total outstanding balance as at end of 2003 is RM10b (maximum limit) c. Corporate bonds - Known as Islamic Private Debt Securities(IPDS) - Issued by big corporations in Malaysia - Minimum period of 3 years and maximum of 20 years - Approval from Security Commission and Central Bank required | |
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