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Wednesday, November 21, 2007

Shari'ah-compliant short selling, HubDoha Bank, News from the Central Bank of Bahrain

The Central Bank of Bahrain executive director Abdul Rahman Al
from ihiBlog by Blake Goud, IHI Executive Director

  • The Central Bank of Bahrain executive director Abdul Rahman Al Baker discussed the possibility that the Arboon contract could be used to mimic a short sale for use by hedge fund managers.
  • He also suggested the possibility of using a Salam sale in a similar way. The Arboon contract is used by Shari'ah Capital's hedge fund platform.
  • The use of Shari'ah-compliant short selling is still controversial as many people have not been provided with more of a description of the Shari'ah principles which allow short-selling through the arboon contract.
  • Shari'ah Capital will release a Q&A on their technique shortly, according to Chief Shari'ah Officer Sheikh Yusuf DeLorenzo in response to a question at the recent Islamic Finance in North America conference in New York.
  • The Times newspaper discusses the slowdown of sukuk issuance during the subprime crisis.
  • The article contains two glaring errors. First, it describes Islamic finance as being based on the idea that there is no time value of money. There is still the recognition of a time value of money in Islamic economics, it is just that a fixed compensation for the time value of money loaned (typically included in an interest rate along with compensation for the opportunity cost of the money) is not present.

For example,

  • a sale on the spot market of a widget could occur at price $x (the cost of the good).
  • If the buyer wanted to defer payment for 1 month, the seller could require that the buyer pay in 1 month at price x*(1+m), where m is a markup (the profit rate).
  • This profit rate would reflect the time value of money, but would be profit on a sale, not interest on a monetary loan.
  • Second, the article disputes that sukuk are no different from conventional bonds, and instead draw Western interest only because "there is an element of fashion that is flirting with novelty".
  • As the working paper released by the IMF describes, sukuk do behave differently than sukuk.
  • A Swedish bank is operating an 'interest-free' loan program.....
  • .... Islamic finance research fuelling growth, sukuk & a seminar on Islamic banking in Malta- Dr. Nazim Ali, director of the Islamic Finance Project at Harvard University, discusses the growth of the Islamic finance industry, in particular the role that researchers play in its development. Ex
  • ING in Malaysia, IIFF on regulatory issues in conventional systems, Shari'ah constraints in the U.S.- ING Investment Management, an investment manager affiliated with ING Group, plans on making Malaysia the center of its Shari'ah-compliant fund business.
  • The International Islamic Finance Forum (IIFF)
  • Takaful, Saudi development funding, Dubai's growth- Takaful is growing rapidly in Malaysia and the chief executive officer of Takaful Nasional Sdn Bhd expects to have a 20 percent share of the insurance sector by 2010 (currently takaful has a 6.1 perce
    Sep 27, 2007
  • GCC surpasses Malaysia in sukuk, Islamic finance brain drain- The Wall Street Journal will team up with the Dubai International Financial Centre (DIFC) to have one day of DIFCweek devoted to Islamic finance called "Islamic and Ethical Finance".The Gulf region ha Sep 26, 2007
  • Islamic banking in the West- The Islamic Bank of Britain today announced a halal business loan program in Bolton. While the loans will all be halal, they will be available to entrepreneurs of all faiths.
  • External Shari'ah auditors licenced in Bahrain, Dutch Islamic banking- The Shariyah Review Bureau was granted a licence by the Central Bank of Bahrain. The organization is an external Shari'ah auditor.
  • Canadian Islamic banking applications- Two unidentified companies have applied to the Canadian banking regulators asking to be allowed to open Islamic banks in the country and four more groups may be contemplating applications.
  • The IMF Survey Magazine devotes the 'IMF Research' section to Islamic banking and finance. • Islamic Banking Makes Headway• Malaysia: An Islamic Capital Market HubDoha Bank, a Qatari bank

    Sukuk and Kenyan Islamic banking- Standard & Poor's estimates that there is $80 billion in sukuk outstanding worldwide as of June 30, 2007.
  • As the banking and finance industry grows in Kenya, so does the Islamic banking industr
  • New products, new IFSB members, new Islamic finance in Europe- CIMB Islamic will begin offering a new Shari'ah-compliant deposit account that provides the profit in advance using a commodity murabaha tawarruq.Bank Islamic Malaysia Bhd (BIMB) signed an agreement
  • Thailand sovereign sukuk, GCC financial centers and Islamic hedge funds- Thailand could issue its first sovereign sukuk in 2008.The Economist has a description of the growth of the GCC region financial centers in Bahrain, UAE and Qatar.Shari'ah Capital, a New Canaan, Conne

    African Development Center, Prospect editor on Islamic finance- The African Development Center receives positive press in African-focused paper Mshale: "One of ADC’s most notable achievements is the tailoring of loans to be Sharia-compliant to make them attractive
  • Offshoring beneficial or detrimental to Islamic finance image in the West?- Barclay's, with the assistance of Shariah Capital, is launching Islamic hedge funds, which provide investors with exposure to "six or seven long-short hedge funds". Given the Shari'ah problems likely
  • Islamic finance growing rapidly, other news- Islamic finance continues to grow rapidly. Thailand hosts conference to attract firms in the halal market to the country. This, and other conferences, are listed on the IHI conference listing page.
  • Christian business practices similar to Islamic business practices, Islamic finance can help with social development- Islamic microfinance could be very profitable, as well as successful in reducing poverty according to a speaker at a conference in Bahrain. The Islamic Development Bank wants to "standardise and regu
  • Thailand and Islamic microfinance in Sri Lanka- Islamic finance receiving attention in Thailand and the Islamic Bank of Thailand wants to lead the way in financing the halal food industry.Muslim Aid and Amana Investments launched their Islamic micr
  • Islamic banks in Indonesia- Although Indonesia has the largest number of Muslims of any country in the world, the Islamic finance industry is very underdeveloped, representing less than 5 percent of total deposits.

Ambitious growth projections, regulatory challenges and the domestic vs. global divide in Malaysia- As sukuk issuance breaks previous records, the Financial Times reporter Farhan Bokhari discusses the future prospects for growth of the Islamic finance industry as a whole. Islamic hedge funds, Malaysia & newspaper supplements in China- An interesting take on the possibility of Islamic hedge funds. One issue though is to determine whether hedge funds attaching the 'Islamic' label are "using markets wisely" and not "speculate, play p

Body's projects growth of Asian-originated sukuk, INCEIF conference- The issuance of sukuk originating in Asia should grow significantly over the next few years as sukuk begin to flow from India, Indonesia, Pakistan and Singapore, Moody's describes in a recent report.

Islamic banking in India- Standard Chartered Bank approached the Reserve Bank of India, India's central bank, to get approval to open an Islamic bank.Total sukuk issuance year to date is now $82.2 billion as of the end of July

Islamic banking enters Syria- The first Islamic bank recently opened in Syria. The Cham Islamic Bank opened in Damascus with $100 million in starting capital.

Shari'ah-compliant index in Doha, Islamic banking in Pakistan, Malaysia- The Doha (Qatar) Securities Market has a new index tracking the Shari'ah-compliant securities listed on the exchange. The index is created by the Doha Investment House and is called the 'Investment H

Indian Islamic finance, African retakaful & British Islamic home financing- India may see Islamic banks allowed soon.A the Cote D'Ivoire offices of Nigeria-based reinsurance company, Africa Reinsurance Corporation, is increasing its authorized share capital to fund a re-takaf

Islamic banking, sukuk tax changes hailed, IF education scholarship fund- A good article by the Assistant Editor of CFR.org, the website of the Council of Foreign Relations about the growth of Islamic banking.The British organization the Tax Incentivised Saving Association

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