India, China may step towards Islamic finance

 India and China may step towards the Islamic finance in 2014 where more than 200 million Muslim populations are in compatible search of a financial system with their religious beliefs and thoughts. There is no doubt that international financial crisis will not hit the Islamic finance industry but due to the Arab Spring, Islamic finance industry has faced recession in some countries of MENA but there are chances of revival in 2014.

These views were expressed by Islamic Finance expert, Zubair Mughal who is also CEO of Al Huda Centre of Islamic Banking and Economics (CIBE) while commenting on Islamic finance industry in 2014. According to him, Islamic finance will grow with rapid pace in the year 2014 and its volume will pass through $ 2 trillion where Islamic banking keeps 78%, Sukuk 16%, Takaful 1%, Islamic Funds 4% and Islamic Microfinance has 1% share in the Islamic Finance industry.

In the year 2014, Dubai and London will be in competition to be the global hub of Islamic Banking and Finance while Kuala Lumpur will also attempt to be in this contest but the Islamic finance industry can be grown more through synergizing approach and alliance with industry stakeholders rather than setting any competition.

He said that the Islamic finance industry growth will go on double digit in 2014 which will turn the $ 1.6 trillion volume of Islamic finance industry in December 2013 to US $ 2 trillion by the end of 2014 including North African countries (Tunisia, Libya, Morocco, Senegal and Mauritania etc), rising trends of Islamic finance in Europe and UK, also the rising and substantial share of international market of Sukuk shall contribute to it.

He said that Sukuk will grow rapidly in 2014 and Muslim countries including non-Muslim countries e.g UK, China, South Africa and Europe etc will also get benefit from it which will enhance the growth in Islamic finance industry but Takaful Industry is not supposed to have any substantial breakthrough.

It is being hoped that 2014 will prove better period for Islamic Microfinance industry as different international institutions including Islamic Development Bank (IDB) have declared it a potential tool for poverty alleviation around the globe.

He also added that Islamic finance industry may face recession in certain countries including Indonesia while in Nigeria and Tunisia it may face some problems on religious and political grounds. He said that the Islamic finance initiatives in America and Canada including Latin American countries (Brazil, Argentina and others) have been taken and it is hoped that Islamic Funds market will come into existence in these regions by the year 2014.

To a question, Zubair Mughal said that there are multiple opportunities in Association of Southeast Asian Nations (ASEAN) countries to promote Islamic Finance, through which Halal Industry can be flourished rapidly in the region.

He stated that Islamic Finance and Halal Industry are complement to each other. Micro and Small Medium Enterprises (MSME’s) can be energized by utilizing Islamic Finance concept in the region which will be cause to reduce in poverty and ultimate socio-economic prosperity in the ASEAN member Countries. Presenting an analysis on ASEAN countries including Malaysia, Indonesia, Brunei Darussalam, Loa PDR, Myanmar, Singapore, Thailand and Vietnam, he stated that the approximate total population of ASEAN countries is 600 million including the Muslim Population more than 40% (240 million) which is a potential indicator for Islamic Finance growth whereas in Malaysia, Indonesia and Brunei Darussalam already have significant contributions in Islamic Banking, Takaful, Sukuk and Islamic Funds, while Philippines and Thailand are being considered as future potential markets for Islamic Banking and Finance in ASEAN countries.

He explained that Islamic Banking and Finance is the system not a religion which can be utilized by Muslim and Non-Muslims to get absolute benefits from the best services of Islamic Banking and Finance as its best example is the South Africa where Muslim population is less than 2% of the whole population but it has more than 5 Islamic Banks, 13 Islamic Funds and 2 Takaful companies working actively, which are equally famous among Muslims even non-Muslims communities because of their best practices and services.

He said that Philippines is an important country of the region with having 100 million populations, approximately, containing Muslim population by more than 7% which bears it out that there are momentous chances for the promotion of Islamic Finance and, apparently, government of Philippines found active in this concern and it will, definitely, energize Islamic Banking and Takaful in result.
http://www.4-traders.com/news/India-China-may-step-towards-Islamic-finance--17756332/

Islamic finance courses create a buzz in Malabar

KOZHIKODE: Islamic finance is yet to take roots in the financial landscape of the country, but several Muslim management-run educational institutions in Malabar have gone a step ahead and have started offering specialized courses anticipating huge requirements for qualified personnel to man the future Sharia-compliant finance sector.

Courses on Islamic finance and banking have found many takers in the region ever since the state government set in motion its plan to start an Islamic financing institution two years ago. The growing student interest has been fuelled by hopes that the niche sector would offer job opportunities for those well versed in Riba-free Islamic financial and economic system.

 The Sullamussalam Science College at Areekode, affiliated to the Calicut University, has become the first college in the state to offer a three year degree course in BA Islamic Finance from this academic year onwards.

"With the state government itself leading the state's foray into Islamic finance, the sector is bound to throw open numerous employment opportunities for people who can manage Islamic financial institutions," said Prof N V Abdurahiman, manager of Sullamussalam Science College, adding that the proposal submitted by the college for starting the BA course in Islamic Finance was accepted for funding by the UGC under 'innovative programmes for teaching and research in interdisciplinary and emerging areas'.

The course, which is the first formal degree level programme in the state, has seen over 100 applicants for the 25 seats on offer this year. The formal inauguration of the programme is expected soon.

Dr A I Rahmathullah, chairman of the board of studies in Arabic said that the university, in another first, has also approved the proposal for starting an MA Course in Islamic Economics and Finance.

"Already several institutions had approached the varsity to start PG course in the field that prompted the board to consider the programme. We will draft the syllabus and curriculum as soon as we get the nod from the academic council," he said.

Institutions like Al Jamia Al Islamiya, a religious college, at Santhapuram have also been seeing growing interest for its postgraduate diploma in Islamic economics and finance (PGDIEF) course. It also offers IGNOU diploma courses in Islamic banking, Islamic finance and Islamic insurance.

"Already many graduates in the state have got lucrative job offers at MNCs in the Gulf offering sharia-compliant mutual funds and venture capital funds. Now with the sector taking roots in the state, the students can look forward to opportunities at home," said Mohammed Pallath, coordinator of the course at the institution.

The Elijah Institute of Management Studies in Thrissur is also offering a postgraduate diploma course in Islamic banking and management as an add-on course for their MBA students. There are many other institutions in Malappuram and Kozhikode which have recently started offering similar courses sensing the growing interest in the field.

Kozhikode: Islamic finance is yet to take roots in the financial landscape of the country, but several Muslim management run educational institutions in Malabar have gone a step ahead and have started offering specialized courses anticipating huge requirements for qualified personnel to man the future Sharia compliant finance sector.

Courses on Islamic finance and banking have been finding many takers in the region ever since the state government set in motion its plan to start an Islamic financing institution two years back. The growing student interest has been fuelled by hopes that the niche sector would offer job opportunities for those well versed in Riba-free Islamic financial and economic system.

The Sullamussalam Science College at Areacode, affiliated to the Calicut University, has become the first college in the state to offer a three year degree course in BA Islamic Finance from this academic year onwards.
"With the state government itself leading the state's foray into Islamic finance, the sector is bound to throw open numerous employment opportunities for people who can manage Islamic financial institutions," Prof. N V Abdurahiman, Manager of the Sullamussalam Science College.
He said that the proposal submitted by the college for starting BA in Islamic Finance was accepted for funding by the UGC under the 'innovative programmes for teaching and research in interdisciplinary and emerging areas'.
The course, which is the first formal degree level programme in the state, has seen over 100 applicants for the 25 seats which were on offer this year. The formal inauguration of the programme is expected soon.
Dr. A I Rahmathullah, Chairman of the Board of Studies in Arabic at the Calicut University, said that the university, in another first, has also approved the proposal for starting a MA Course in Islamic Economics and Finance
http://articles.timesofindia.indiatimes.com/2013-08-19/news/41424287_1_islamic-economics-postgraduate-diploma-course-malabar

RBI allows non-bank Islamic finance firm

An estimated 177 million Muslims in India, the largest Muslim minority population in the world, are unable to use Islamic banks because laws covering the sector require banking to be based on interest, which is forbidden in Islam.

But some companies, especially in Kerala which has a large Muslim population and an overseas diaspora of workers who remit money back from the Gulf, are nevertheless trying to develop Islamic financial products outside the banking sector.

Cheraman Financial Services, based in Kochi, plans to offer leasing and equity-finance products under Islamic principles. It said it had obtained approval to operate from the RBI and would follow the Islamic ban on interest; it will not take deposits from customers.

"We propose to roll out the products by the end of August," a spokesman for Cheraman, formerly known as Al Barakah Financial Services, told Reuters.

He did not elaborate on the design of the products. Instead of interest, Islamic finance uses structures such as asset buy-backs and agency agreements to provide returns to investors.

The RBI did not respond to a request for comment on Cheraman's case. But its decision appears to open the door to the possibility of more NBFCs offering Islamic non-interest products in future, even though full-fledged Islamic banks are expected to remain banned.

RBI governor Duvvuri Subbarao, who will step down in September, has said Islamic banking is not possible in the country but sharia-compliant products could be delivered through alternative means.

LEGAL CHALLENGE

Last year, the RBI directed Kochi-based Alternative Investments and Credits Ltd (AICL) to stop its non-interest NBFC business almost a decade after the firm was launched. This prompted an ongoing legal challenge by AICL.

"The grant of an NBFC licence should have an impact on the AICL proceedings and there are good chances that the matter may get settled soon," said Suprio Bose, Mumbai-based lawyer at Juris Corp, a law firm which previously represented AICL.

"The event reflects a significant and welcome change in RBI's attitude towards sharia-based NBFCs and sets a precedent for others to follow suit."

However, many analysts think that unless and until full-fledged Islamic banks are permitted in India, an Islamic finance sector will find it hard to develop.

"I don't think there is going to be a rush for NBFC applications. RBI's attitude towards the sharia-compliance concept is yet to be tested," said Shariq Nisar, director of research and operations at Mumbai-based Taqwaa Advisory and Shariah Investment Solutions.

Running a sharia-compliant financial institution under Indian regulations is still difficult and other firms are likely to stay on the sidelines pending the success of existing schemes before deciding to join in, he added.

Islamic equity and venture capital products have attracted little demand in India and NBFCs could face the same fate, said Nisar. "NBFC business overall has been declining over the years."

The RBI issued guidelines for NBFCs in June, cracking down on debt issuance by an industry that relies heavily on capital markets to fund its business but has faced less regulatory oversight than banks.

According to central bank data, credit extended to NBFCs increased by 1.9 percent from a year earlier in June, compared with an increase of 43.9 percent in June last year. There are over 12,000 registered NBFCs in India.

A handful of politicians have been lobbying for years to start Islamic banking in India, but they have met strong opposition from bureaucrats in the finance ministry and banking circles. Some politicians, especially from the main opposition Bharatiya Janata Party, say they fear Islamic banking could be used by militants and might strengthen the hold of clergy over India's Muslim community. (Editing by Andrew Torchia)
http://in.reuters.com/article/2013/08/20/islamic-finance-india-idINDEE97J07L20130820

IT firm specialising in Islamic core banking opens in Kerala

Support and Development Centre at Infopark Cherthala in Alappuzha district.

Path Solutions India is a wholly-owned subsidiary of Path Solutions K.S.C.C, Kuwait, a recognised market leader specialising in providing Islamic and investment software solutions for banks and financial institutions

The company already has presence in the Middle East, GCC, Africa, South East Asia and Europe with over 90 financial institutions using its Islamic core banking system.

"We are determined to take advantage of local skilled resources to build on our heritage of delivering value-added software solutions and services to our esteemed clients," said Mohammed Kateeb, Path Solutions' group chairman and CEO.

Located in Pallipuram village, the Cherthala Infopark campus is housed in an area of 66 acres, of which 60 acres has been declared as special economic zone.
 http://www.newstrackindia.com/newsdetails/2013/07/29/254--IT-firm-specialising-in-Islamic-core-banking-opens-in-Kerala-.html

Islamic Banking in India

For almost 20 years, Haris Koyisseri invested in his business only from his own earnings. The dry fish merchant in Kerala's Kozhikode never took any bank loan to expand his operations. Why? Bank loans are against the tenets of his faith - Islam - as they charge interest. Four years ago, however, he took on a Rs 10-lakh  loan (16,000 USD) from Alternative Investments and Credits Ltd (AICL). The Kochi-based finance company adhered to the Koran's ban on interest and instead took a share in the profit or loss of a venture it funded. Business has grown 60 per cent since for Koyisseri. "I do not have to worry about repaying the money when business is lean," he says. "Whenever I need additional capital I will take it from a Shariah-compliant fund."

Koyisseri is one of scores of Muslims in the country who rely on Shariah-compliant products from companies such as AICL to meet their funding needs. The development is significant given that India has the world's third-largest Muslim population - after Indonesia and Pakistan - but does not allow Islamic banking. The trend is most visible in Kerala, where Muslims comprise a fourth of the population, but is also catching up in some other states such as Andhra Pradesh and Karnataka.

Most Muslim-majority countries, including Saudi Arabia, Iran and Pakistan, as well as the US and the UK allow Islamic banking (see Simplifying Islamic Banking). In 2005, the Reserve Bank of India formed a panel to look into the issue. Three years later, a committee led by Raghuram Rajan - currently the top economic adviser in the finance ministry - recommended allowing interest-free banking products. But there has been no progress thus far. In May 2012, the RBI revoked AICL's licence as a non-banking finance company (NBFC) citing non-compliance with its rules on interest rates. AICL, which says it financed about 200 businesses with capital ranging from Rs 10 lakh to Rs 1 crore before the ban, challenged the cancellation in the Bombay High Court. The case is pending.

The cancellation, industry observers say, was a fallout of another case. AICL had been offering Shariah-compliant products for nearly a decade. But it came into the limelight only after Janata Party President Subramanian Swamy in 2009 moved the Kerala High Court against Kerala State Industrial Development Corporation's investment in Al Barakah Financial Services Ltd, an NBFC floated to offer Islamic finance products. Swamy argued that a state-run company's involvement in a firm set up on religious lines was against India's constitution. The court threw out the plea in 2011.

AICL, meanwhile, has found an alternative - it plans to launch a Shariah-compliant venture capital (VC) fund. This fund, says Chief Operations Officer Thanveer Mohiyudheen, does not violate any law as capital markets regulator Securities and Exchange Board of India (SEBI) permits pooling of capital from investors. A VC fund is Shariah-compliant as it makes equity investments and shares the profit or loss in a venture, he adds.

AICL is not the only one which is setting up a so-called Alternative Investment Fund registered with SEBI. Cheraman Financial Services Ltd, the new avatar of Al Barakah, has received SEBI approval for a fund to raise up to Rs 300 crore. Kozhikode-based Secura Investment has a real estate VC fund that complies with the Shariah. Industry observers say the RBI's tough stand against NBFCs such as AICL is the main reason why Shariah-compliant VC funds are gaining importance. M. Thomas Isaac, former finance minister of Kerala, says many financial firms in the state work even without the RBI's permission. The idea behind Cheraman and other registered funds is to work under a legal framework, he says.

More such funds are in the offing. "Seven to eight Shariah-compliant funds are in the formalisation stage," says Shariq Nisar, Director of research and operations at Mumbai-based Taqwaa Advisory and Shariah Investment Solutions. The firm provides Shariah advisory and investment services. C.H. Abdul Raheem, AICL's founder MD, says four to five SEBI-registered VC funds that comply with the Shariah will likely come up in Kerala in the next few years.

Observers say Bangalore-based Bearys Properties and Developments, Mumbai's Pragmatic Wealth Management, and Chennai-based ETA Group are among those looking to launch Islamic finance products. Taurus Asset Management and Multigain Shariah Investments are also planning to join hands for a VC fund. Bearys Chairman and MD Syed Mohamed Beary confirmed the company's plans to launch a Shariah-compliant real estate fund in the first quarter of 2014. The company is looking at a corpus of Rs 100 crore to begin with and will target wealthy investors, he said. Email queries sent to Pragmatic and ETA went unanswered till the time of going to press.

These funds also provide an opportunity to investors. Muslims are generally averse to investing in stock markets as they perceive it as gambling. Shariah bans investment in companies that make alcohol, tobacco, pork products, and weapons. To attract Muslim investors, both the National Stock Exchange and Bombay Stock Exchange have launched indexes which comprise Shariah-compliant stocks. But the response to these indexes has been muted, says H. Abdur Raqeeb, General Secretary at advocacy body Indian Centre for Islamic Finance. Shariah-compliant VC funds are filling this gap. Raqeeb says these funds, including realty funds, can potentially raise about $1 billion in India.

Masoud Abdul Rahiman, a Kochi-based software engineer with Cognizant, is one such investor who prefers Shariah-compliant products. He invested Rs 6 lakh over two years in Secura's first fund. His first investment installment of Rs 1.2 lakh earned him a return of Rs 1.96 lakh in 2012. "While returns are not guaranteed, I can at least consume the earnings," says Rahiman, who gives the interest income he earns from his bank deposits to charity. Doctors are also investing in these funds, as Kerala develops into a hotspot for medical tourism.

In Kerala, these funds are targeting investors from overseas as well. Cheraman, for instance, is backed by NRIs including P. Mohamed Ali, Vice Chairman of Oman's Galfar Engineering and Contracting Company, and C.K. Menon, Chairman and MD of Doha-based Behzad Group. A.P.M. Mohammed Hanish, MD at Cheraman, says the company plans to hold road shows to attract Kerala's diaspora and sovereign funds from the Gulf countries that want to invest in Shariah-compliant products.

Kerala has a large diaspora, mainly in West Asia. Muslims comprise up to two-thirds of this segment. These workers send a large amount of money back home. Data from the Kerala Migration Survey 2011 show remittances to the state rose 15 per cent to Rs 49,695 crore that year from Rs 43,288 crore in 2008. M.A. Majeed Zubair, Dean at Hyderabad's Institute of Islamic Banking and Finance, says India is an emerging market for capital from West Asia. India has an advantage over China, where language and cultural constraints as well as political reasons discourage investors from West Asia, he adds.

While several companies are looking to launch Shariah-compliant VC funds, some experts are wary. Kerala, they say, has seen several instances of financial companies duping investors. The latest case grabbing the headlines is that of Lee Capital, which reportedly duped investors of as much as Rs 100 crore (16 million USD).

A recent change in SEBI rules is prompting companies to tweak their strategies. SEBI has fixed minimum capital commitment by each investor in such funds at Rs 1 crore (160,000 USD). Some industry observers say small investors may pool capital and set up a limited liability partnership that will invest in a VC fund. In its first two funds, Secura routed investment from wealthy investors directly into real estate projects while accepting money from smaller investors. This is because the two sets of investors have different expectations from the VC fund. Managing Director M.A. Mehaboob says Secura will adhere to the SEBI rule in the future and rope in wealthy investors who put in Rs 1 crore in its funds. "We may also come up with multiple funds clubbing investors according to their appetite."

P.C. Anwar, MD at AICL, says the venture capital industry in India may find it difficult to find enough professional managers with experience in Islamic finance. Mahendra Swarup, President of the Indian Private Equity and Venture Capital Association, says Shariah-compliant funds look promising considering they can also attract funding from charitable institutions such as the Wakf Boards. But he adds a note of caution. "We will have to gauge what kind of returns they can generate in the long run."

http://www.albawaba.com/business/growing-interest-state-islamic-banking-india-512088
http://www.greaterkashmir.com/news/2013/Jul/30/islamic-banking-in-india-37.asp

http://www.icif.in/
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