Islamic Finance Pakistan The Islamic Finance Industry Newsletter

Transcription

1 Islamic Finance Pakistan The Islamic Finance Industry Newsletter Volume 1 Issue 3 September 2010 O ye who believe! Squander not your wealth among yourselves in vanity, except it be a trade by mutual consent, and kill not one another. Lo! Allah is ever Merciful unto you. (Surah An Nisa, Ayat 28) Inside... Editor s Message Shahjahan writes about the importance of training in Islamic finance industry. Islamic Finance Road Show 2010 Pakistan By Arshad Hussain Zubairi Introduction to Islamic Banking As a Business Case By Omar Mustafa Ansari Local and International News Get a glimpse of what has been happening in the world of Islamic finance Moves and Promotions Keep abreast of the latest appointments in town. In the Spotlight Meet Anwar Ahmed Meenai, take a look at Al-Muneeb Shariah Academy and find your read of the month. Upcoming Events 9 Ask Us Inaugural Speech by Acting Governor, State Bank of Pakistan at IFN Road Show 2010 Pakistan Acting Governor of the State Bank of Pakistan, Mr. Yaseen Anwar delivered the inaugural speech at the Islamic Financial News Roadshow on Islamic Banking, which was held in Karachi at the State Bank of Pakistan s Learning Resource Centre on 5th August In his speech at the occasion, Mr. Anwar said that the existing Islamic banking paradigm across the world is based on replication of conventional banking products with total reliance on debt based fixed income products and risk minimization identical to the conventional system. As a result the distinction between Islamic and conventional finance is getting blurred. Even though this replication of Islamic products to ensure Sharia-compliance passes the Sharia permissibility test, but it is not enough to accomplish the larger objectives of Islamic financial system, specifically the broad-based and equitable distribution of economic gains. He said that sixty seven per cent of Islamic banks financing in the country was concentrated in the corporate sector through Murabaha, Ijarah and Diminishing Musharaka. Majority of the corporates also have banking relationships with conventional banks, and therefore the Islamic banks have to offer significant price discounts for attracting them. This diminishes their profit margins and inhibits their ability to offer better returns to the depositors. This is in contradiction with the inherent business model of Islamic finance which promotes entrepreneurial culture by accepting risks and reward. Because of this, access to finance is also restricted to only the well-established businesses and corporate sector. Due to this narrow scope, it is a challenge for Islamic banks to compete with the comparatively giant conventional banks with high efficiency and flexibility in catering to such financing needs of the real economy. He also stated that the Islamic Financial System has the potential to provide better banking and financial services than the conventional system provided, it capitalizes on its own inherent strengths and avoids following the conventional system. He concluded by stating that Islamic banks would have to expand their scope to offer both commercial and investment banking services to be financed by different streams of deposits.

2 IFP The Islamic Finance Industry Newsletter PAGE 2 Editor s Message Dear Readers, Assalam-o-alaikum Alhumdulillah the 3rd edition of IFP Newsletter is in front of you. There was this proposition to establish a forum for the Islamic Banking and Finance Professionals to spur the growth of the industry and to create cohesion amongst all the stake holders. In this pursuit our newsletter is pretty much on course and building up on consistency. One of the dire needs of the Islamic Finance Industry is to build and enhance the professional capacity of each individual. In one of the forums Mufti Najeeb Khan has appropriately mentioned that the beauty of this industry is that we all are students, where the professional bankers do not know Shariah and the Shariah Advisors do not know banking. Sustainable growth of Islamic Finance cannot be achieved without adequate attention to the development of intellectual resources. Capacity building activities not only help to improve human and institutional capacities but also enhance communication and cooperation among concerned institutions. The human resource produced by the conventional academic and capacity-building programs cannot satisfy the demands and challenges of the Islamic financial institutions. We need highly competent, motivated and involved persons with required knowledge of conventional banking and finance as well as knowledge of Islamic Shariah. There are two types of customers; internal and external. Internal customers are our human resource whom we have to continuously invest upon by proper training for both professional and soft skills. When internal customers are happy and educationally/knowledgeably sound, they surely can bring happy external customers. I often put it this way, Islamic finance is like running on a railway track, if we don t run faster than the train, then the train will run over us. And the train is our competition. Happy Learning! Syed Shahjahan Salahuddin Let us know, if you know friends or colleagues who, in your view, may benefit from this newsletter. Send us their addresses at ifp@publicitas.com.pk Editorial Advisory Board Mufti Irshad Ahmed Aijaz Mufti Najeeb Khan Anwar Ahmed Meenai Editor-in-Chief Syed Shahjahan Salahuddin Mohammad Aslam Mujeeb Beig Nusratullah Khan Associate Editors Arshad Hussain Zubairi Ayesha Binte Nafees I s l a m i c Finance News Road Show 2010 Pakistan By Arshad Hussain Zubairi Islamic Finance Roadshow 2010 was organized in Karachi at State Bank of Pakistan s Learning Resource Centre on 05 August The program was arranged by IFN, but the success of the road show would not have been possible without the keen support and efforts of the Islamic Banking Division of State Bank of Pakistan (SBP). The presence of prominent professionals from the Islamic finance and banking industry marked the event. The introduction was given by Mr. Willieuddin Lim Johan Lim - Director, Global Markets, CIMB Islamic while the keynote address was delivered by Mr. Yaseen Anwar - Acting Governor, SBP. The lead story of this issue of IFP covers his address. Mr. Ebrahim Sidat Country Managing Partner/CEO, Ernst & Young Ford Rhodes Sidat Hyder (Member Shariah board SBP and Chairman of the Committee for Development of Islamic Accounting and Auditing Standards for Interest Free Modes of finance constituted by ICAP) expressed his expert views on the subject of Islamic finance in the current paradigm. He discussed in detail the current scenario of Pakistan Islamic finance industry and stressed on to develop more products based on participatory modes. He said that the time has come where we should look ahead and concentrate to develop innovative products which are more towards perfection and purity rather only towards mere permissibility by Shariah. He also stressed on the strong role of Shariah Advisors in making the Islamic banking more Shairah compliant. 02

3 Volume 1 Issue 3 September 2010 Mr. Pervez Said - Chief Executive Officer, Dawood Islamic Bank expressed his expert views on the subject of establishing and accelerating Pakistan's growth as an Islamic financial hub. The first session was referred as examining Islamic finance in the current paradigm in which the panelist discussed key industry developments and lessons learnt from local and international Islamic markets in a post-crisis environment. The session moderator was Dr. Zeeshan Ahmed Assistant Professor Finance and Accounting, Lahore University of Management Sciences (LUMS) which the panelists for the session included: Mr. Saleem Ullah Director Islamic Banking Division, SBP; Mufti Najeeb Khan Shariah Advisor, Habib Metropolitan Bank Limited - IBD; Mr. Ahmed Ali Siddiqui EVP Product Development and Shariah Compliance, Meezan Bank Limited; and Mr. Ebrahim Sidat. In this session, the panelists emphasized on the Islamic financial institutions to develop the financing products based on participatory modes and stressed the need of training at all levels of Islamic financial institutions and educating the customer of Islamic financial institutions regarding the Islamic finance. It is however, more noteworthy that one of the panelists was reluctant to accept that the time has come where Islamic financial institutions should get involve in Modaraba and Musharaka financing transactions. The panelists also discussed Islamic prudential and supervisory framework and future outlook of regulation. The next session was titled as issuing & investing in the Islamic financial markets in which the panelists discussed the development of Islamic instruments and investments in Pakistan and Southern Asia, and its potential in a new business environment. The session moderator was Mr. Omar Mustafa Ansari Partner / Head of Islamic Financial Services Group, Ernst & Young Ford Rhodes Sidat Hyder. The panelists for the session included: Mr. Farid Alam Chief Executive Officer, AKD Securities; Mr. Mujeeb Beig SVP and Head Product Development & Research, MCB Bank Limited IBD; Mr. Muhammad Imran Head Retail Banking, BankIslami Pakistan Limited; Mr. P. Ahmed Chief Executive Officer, Pak Qatar Family Takaful; and Muhammad Ayub Director Research and Training, Riphah Centre of Islamic Business, Riphah International University. During the discussion, the panelists discussed the possibility of issuance of Islamic securities in the current scenario and the technical aspects of the Islamic money market and its mechanism. They also discussed the current scenario of the Islamic financial market, specially the Islamic financial institutions involvement in Commodity Murabaha financing and emphasized that such practices are against the essence of Islamic finance and reducing the dearth for development of Islamic financial market, as well. The panelists also discussed various aspects of Islamic finance market, its need and practical issues and impediments. The third session was on the possibilities and opportunities for diversification of Islamic products, examining market trends in which the panelists discussed the assessment of the development of Islamic financial products in Pakistan. The session moderator for this session was Syed Amir Ali EVP and Head of Investment Banking, Meezan Bank Limited while the panelists included: Mr. Mohammad Shoaib Chief Executive Officer, Al Meezan Investment Management Company Limited; Mr. Rohail Ali Khan Chief Executive Officer, Pak Qatar General Takaful Limited; Mr. Fawad Butt Managing Partner, Zeus Capital Advisors; Mufti Irshad Ahmad Aijaz Shariah Advisor, BankIslami Pakistan Limited; and Mr. Razi R. Khan - Ex-Chairman, Securities and Exchange Commission of Pakistan. The certain points of discussion in the session were primarily on the Real Estate Investment Trusts, Private Equity and other new avenues for Islamic finance, outside the ambit of Islamic banking. The fourth session focused on examining market trends, challenges and further opportunities for Islamic financial markets in Pakistan. The discussions were directed towards recognizing Islamic finance trends in Pakistan, and capitalizing from opportunities. Mr. Mohammad Aslam Head Islamic Banking, Habib Bank Limited was the session moderator. The panelists for the session included: Mr. Irfan Siddique Chief Executive Officer, Meezan Bank Limited; Mr. Azeem I. Pirani Regional Manager Pakistan, FWU AG; Mr. Azhar Aslam Country Head Corporate and Investment Banking, Dubai Islamic Bank Pakistan Limited; Continued on Page

4 IFP The Islamic Finance Industry Newsletter PAGE 4 Continued from Page 3... Mr. Mahmood Shafqat Additional Director Banking Policy and Regulation Department, SBP; and Mr. Omar Mustafa Ansari. The discussions in the session were concentrated on the future of Islamic finance, various needs of product development including liquidity management and towards an ideal Islamic finance product supermarket in the future. The last session was designed on establishing and accelerating Pakistans' growth as an Islamic financial hub respectively in which the panelists discussed Pakistan s credentials to become an international financial center and the need of increasing financial cooperation with emerging markets to consolidate its position as an international financial center. The moderator for the final session was Ms. Lubna Farooq Director Banking Surveillance Department, SBP. The panelists for this session included: Mr. Abdul Jabbar Karimi Head Product, Research and Training, Habib Metropolitan Bank Limited - IBD; Mr. Muhammad Farhan ul Haq Usmani Vice President, Product Development, Shariah Compliance and Islamic Financial Advisory (PDSC), Meezan Bank Limited; Dr. Zeeshan Ahmed; Mr. Muhammad Faisal Shaikh Head Product and Business Development, BankIslami Pakistan Limited; and Mr. Pervez Said. The session discussion provided the participants insight into the available opportunities and the present state of affair of Pakistan s market and predetermination for going global. The program concluded with refreshment and provided excellent networking opportunities to the participants. Introduction to Islamic Banking As a Business Case By Omar Mustafa Ansari Introduction Islamic banking has been defined as banking in consonance with the ethos and value system of Islam and governed, in addition to the conventional good governance and risk management rules, by the principles laid down by Islamic Shariah. The objectives of Islamic banking are providing Shariah compliant and prudent banking services and achieving the goals and objectives of an Islamic economic system. First significant attempt to Islamize the economy of Pakistan was made in 1980s through converting the then existing banking system into an interest-free banking system, which is somehow still operating in Pakistan. The re-launch of Islamic Banking in Pakistan was initiated after the judgment made by the Federal Shariat Court, effectively from Significant efforts have been made in this area primarily by the State Bank of Pakistan, with reasonable support from the federal ministries of finance, commerce and law. The growth in Islamic banking has been phenomenal over a period of last 7/8 years. At present, there are more than 600 Islamic banking branches throughout Pakistan and 19 Islamic banking institutions are offering Islamic commercial banking services. Basic differences Riba, gharar and risk and rewards are the three basic differences between Islamic and conventional banking. Riba is earning returns from loans and debts, paying returns on borrowing or trading receivables and payables at other than par values, gharar is the absolute risk or excessive uncertainty in contracts, gambling and chance-based games, as well as, most of the speculative businesses while risks and rewards should go side by side i.e. you have to take risk to earn money. Islamic banking is not just a matter of belief. Islamic banking is competing with conventional banks, whom inter-se, are already facing a tough competition. So it cannot be said that it is just getting the benefit from the believes of masses at large. Instead, it is proving, and has to prove, that it has a successful business case. Is it expensive? Cost of being Muslim A very common argument is that Islamic banking is expensive on the financings side, and gives less return on the deposits side. But this is not true anymore due to competition and access to low-cost deposits and less opportunities for liquidity management. Rates are based on the same benchmark and their risks have been reduced comparatively. You can identify a few transactions by Islamic banks which are carried out at even lesser rates. Now generally they are providing similar rates of return for depositors also. Same facilities and services are provided as being provided by the conventional banks i.e. ATMs, Debit card and branch network, and these too at a comparable price. Islamic banking is offering a large range of transactions such as trade based transactions including Murabaha, Salam, Istisna and Musawwama; lease based transactions including Ijarah, and Diminishing Musharaka; profit and loss sharing based (participatory) transactions including Murabaha and Musharaka; services and non-remunerative contracts e.g. Wakala. So it can be safely said that Islamic banking caters to the requirements of the market and consumer s demand at comparable prices. In Islamic finance, we cannot replicate all conventional banking transactions, although we have solutions or alternatives for most of the products. For examples, it is not possible to offer clean lending and borrowing, personal loans (cash) etc but 04

5 Volume 1 Issue 3 September 2010 alternatives may be possible / or are being developed like running finances / overdrafts, credit cards, advance salary loans, bill discounting etc. It is worthwhile to note that purely from a commercial analysis perspective, to certain extent, if the Islamic banks charge higher, it may be justified that they face additional risks, they need additional human resources and so a minor additional charge is justifiable from commercial perspective. So it may also be said that if they charge equally, then the customer is at a benefit because they Comparative advantages/disadvantages carry additional risks peculiar to their transactions which are not carried by conventional banks. A few case studies Fayzan Modarba and Musharaka Term Finance Certificates (MTFCs) of Sitara Chemicals are examples of structured Islamic finance transactions wherein the business case will be identified here. Fayzan Modaraba was incorporated as a specific purpose Modaraba to construct, operate, manage and own a Polyester Transaction Advantages Disadvantages Murabaha Ijarah Diminishing Musharaka Replacement of short-term financing for material procurement Due date known - according to working capital cycle Genuine trading transaction - asset backed Off-balance sheet transaction Expenses incidental to ownership have to be borne by lessor No rental when asset is not available beginning repair loss In sale and lease back transaction, immediate positive effect on cash flows In case of medium term (e.g. 3 years) - tax benefits Possibility of issuing Sukuk Flexibility in payment plan Claim of initial tax depreciation allowance by the client In sale and lease back transaction - immediate positive effect on cash flows and natural grace period Repair and maintenance incidental to ownership to be borne proportionately Possibility of issuing Sukuk Client does not get cash Once decided price is not renegotiable Extra documentation and additional procedures are required Asset has to be covered by Takaful which may increase the financial cost while reducing overall risk Initial tax depreciation allowance cannot be claimed Early termination - risk of loss to lessee Reducing overall risk with Takaful may increase the financial cost Stable Fabric (PSF) spinning and processing plant at the premises of ICI Pakistan Limited under a License Agreement with ICI. The Modaraba produces products for ICI under a Toll Manufacturing Agreement. On the expiry or termination of the License Agreement and Toll Manufacturing Agreement, an option was there so that the plant may be sold to ICI at a price mutually agreed between ICI and Modaraba. Primary investors in the Modaraba were financial institutions. Some of the benefits offered by this product structure include off balance sheet financing, undisturbed ratios, cost became a part of operating costs and costs of goods sold and loaded on inventories and tax benefits. Sitara Chemicals issued MTFCs to meet the cost of expansion of its Caustic Soda Plant. These MTFCs were issued for total of Rs. 510 Million. These were issued for a fixed tenor with profit payment linked to the operating profit or loss of the chemical division of the company. The operating profit was divided into two broad tiers of Level -I Profit and Level-II profit. Profit sharing ratios for both the profit tiers were different making it a flexible model. The investors were genuinely sharing the risk of loss. However, in order to mitigate risk of loss, Takaful reserve fund was created. In the end, Sitara Chemical ended up paying more than the industry rate of return, applicable on similar interest bearing transactions. But at the same token, it cannot be ignored that it carried the benefit of sharing of losses by the investors, in any adverse consequences. Conclusion What we want to summarize here is that now Islamic banking is making a business case for customers. There are even a number of situations whereby it is offering even better rates and financing benefits against its conventional counterparts. However, it still has to go a long way for winning the people s hearts. ******** 05

6 IFP The Islamic Finance Industry Newsletter Bulletin Board Change of name of Arif Habib Bank Limited The name of Arif Habib Bank Limited has been changed to Summit Bank Limited after obtaining regulatory approval from the State Bank of Pakistan (SBP). Acquisition of RBS by Faysal Bank The State Bank of Pakistan (SBP) has granted No Objection Certificate (NOC) to Faysal Bank Limited for the purchase of Royal Bank of Scotland Pakistan operations. Faysal Bank Limited (FABL) has entered into an agreement to acquire percent interest in the Pakistan franchise of Royal Bank of Scotland (RBS Pakistan) for a cash consideration of EUR 41 million (equivalent to Rs Rs 2.52 per share). First Paramount Modaraba to issue Certificates of Musharaka Security and Exchange Commisison of Pakistan (SECP) has approved the Scheme of Musharaka for issuance of Certificates of Musharaka by First Paramount Modaraba (FPM). Ernst & Young Ford Rhodes Sidat Hyder are the financial advisors of FPM for such issue. Meezan Islamic Fund receives 5 Star ranking Meezan Islamic Fund (MIF) has received 5 STAR ranking from the JCR-VIS Credit Rating Company. MIF is an open-ended fund of Al Meezan Investment Management (Al Meezan Investments), the Asset Management subsidiary of Meezan Bank. Adaptation of Islamic economic system to alleviate poverty A conference on Islamic Economics and Finance was organized by IBA at State Bank Building a few months back. At the occasion, ex-governor State Bank, Mr. Ishrat Hussain, while delivering his speech said that the economy can be strengthened in the future by adopting and practicing Islamization of economic system in its true form. Leading Islamic finance experts and Shariah advisors speaking at the Conference said that the phenomenal growth in Islamic Financial sector worldwide is a testimony to its potential. Islamic finance and economics is now being recognized by IMF, World Bank and Basel Committee and establishment of bodies like IIFM, IFSB, CIBAFI etc and Islamic indices such as Dow Jones and FTSE are signs of its acceptance. Urdu translation of Understanding Islamic Finance Urdu translation of Understanding Islamic Finance one of the best available books on Islamic finance and banking has recently been published. The author, Mr. Muhammad Ayub himself has taken pains to translate the same. The Urdu version namely is published by Riphah Centre for اسلامی بینکاری : اصول اور تطبیق Islamic Business, Islamabad. You may recall that in the first issue of IFP we have published a book review on the English version. In one of the coming issues of IFP, we will Insha Allah publish a review of the urdu version as well. Second meeting of Islamic Finance Forum Second meeting of the Islamic finance forum was held on 30 August 2010 at the premises of Ersnt & Young Ford Rhodes Sidat Hyder. Scholars and experts from Islamic finance industry were present and provided their valuable input. Details will follow in the next issue of IFP, Insha Allah. Disclaimer: The news included here is on the basis of information obtained from local and international print and electronic media sources and it does not reflect the views of Publicitas (Pvt.) Ltd. Share with us! Send us the details of latest news, moves and events related to Islamic finance happening in your organization at : ifp@publicitas.com.pk 06

7 Volume 1 Issue 3 September 2010 Debit cards launched by Abu Dhabi Islamic Bank and Etihad Airways Malaysia issues first three-year Sukuk bond The national mortgage corporation of Malaysia called Cagamas Bhd has issued a one billion Malaysian ringgit three year Sukuk Al Amanah Li Al Istithmar this year. It is the first such Islamic bond of its kind to be issued in Malaysia. The Sukuk is a part of Cagamas five billion ringgit (Dh 5.8 billion) Islamic medium term note program and is priced at a yield of 3.48 percent. Al Rajhi Banking & Investment Corporation (Malaysia) Bhd, RHB Investment Bank Berhad and The Royal Bank of Scotland Berhad jointly managed the issuance while the Shariah advice was given by Al Rajhi and Amanie Business Solutions Sdn Bhd. Malaysian state launches Islamic currency The Malaysian state of Northern Kelantan has launched the Islamic dinar and dirham as an alternative currency. This will allow the golden and silver coins to be used as legal tender alongside conventional banknotes. According to Islamic law, the dinar measures 4.25 grams of gold, while the dirham is 3.0 grams of pure silver. A golden coin is equivalent to about 582 ringgit (183 dollars) while the silver coin is worth around 13 ringgit but their values fluctuate according to market prices. Abu Dhabi Islamic Bank (ADIB) and Etihad Airways have launched a range of co-branded debit card and covered cards as a Sharia-compliant alternative to credit cards for facilitating ADIB customers and members of Etihad Airways' loyalty program, Etihad Guest. Dubai Islamic Bank awarded 'Best Takaful Distributor in the UAE' The award for 'Best Takaful Distributor in the UAE' for the second quarter of 2010 has been given to Dubai Islamic Bank by Germany's FWU AG, a global leader in Takaful product development. The award has been given as a recognition of the sound performance of Al Islami Takaful Savings Programme launched in 2009 as part of Dubai Islamic Bank's range of Shariah compliant banking solutions. HSBC Amanah launches premium Shariah banking HSBC has launched the world's first Islamic banking service aimed at internationally mobile, affluent consumers. Premier, a cross-border Islamic banking and wealth management service, is an expansion of HSBC's market-leading premium banking proposition HSBC Premier, offering customers access to HSBC Premier benefits with Shariah compliant products. Premier is currently being offered in Qatar, UAE, Saudi Arabia, Bahrain, Malaysia and Indonesia, Brunei, Bangladesh, UK, and New York. Moves and Promotions Junaid Ahmed President / Chief Executive Officer Dubai Islamic Bank Pakistan Limited Murad Usmani Asif Amanullah Darvesh Seemin Shafi Mushtaq Riaz Mirza Ahsanullah Ahsan Taimur Afzal Saifuddin Shafi Group Head, Business Development MCB Bank Limited, IBD Vice President, Corporate South Askari Bank Limited, IBD Group Head, HRD Dawood Islamic Bank Limited Group Head, Corporate Banking Dawood Islamic Bank Limited Chief Risk Officer Dawood Islamic Bank Limited Group Head, Consumer Banking Dawood Islamic Bank Limited Group Head, Operations & IT Dawood Islamic Bank Limited 07

8 IFP The Islamic Finance Industry Newsletter PAGE 8 Book in the Spotlight Mashruu almuntajat val adwat al maliah fi fiqah (مشروع: المنتجات و الادوات المالیۃ فی الفقہ الاسلامی ( islami al A publication of Islamic Research and Training Institute (IRTI) You might have seen people arguing that Islamic finance just came in from nowhere. It was not present in the early days of Islam or even in the last few centuries. They start arguing that this is just a by-pass on Islamic fiqh to support the modern capitalism. This is a serious misunderstanding, even within the minds of certain people associated with Islamic banking and finance that for example Murabaha is an invention of modern day jurists to meet the modern day needs of the businesses. This month we have selected a unique book to be presented to you. Fortunately, or unfortunately, this is compiled in the language of Islam i.e. Arabic, and hence a vast majority of our readers would not be able to get benefit from it directly. The spread of Islamic banking has been accompanied by numerous benefits of which an important one is the re-emergence of knowledge about Shariah principles related to monetary matters that had been buried in books for decades. The book Mashruu almuntajat val adwat al maliah fi fiqah al islami meaning the project on monetary tools and products in Islamic jurisprudence is a part of this series, compiled by Islamic Research and Training Institute (IRTI), a body of Islamic Development Bank (IDB). This is a review of volume I of the book, and hopefully IRTI is working on further volumes. The fact of the matter is that the products which are currently used in Islamic banking and finance have actually been in effect since ages and Shariah scholars of those days have also elaborated upon their principles. Thereby, it was need of time that a comprehensive study of conventional books of Islamic jurisprudence be carried out. For the purpose of compiling this book a thorough study of various books of the initial authors of various schools of thought including Malki, Hanfi, Shafi and Hambli books was made. Through such study, a compilation has been made of whatever views are presented by the jurists of the initial times, including Imam Abu Hanifah, Imam Shafi, Imam Malik and Imam Ahmed Bin Hambal (Rahmatullahi Alaihim) regarding monetary matters duly including Murabaha, Salam, Istisna, Ijarah, Shirkah, Modaraba, etc. Another of its salient features is the compilation of quotes by Sahaba Karam (Razi Allah Taa la Anhum) and Taa baeen (Rahmatullahi Alaihim) from two famous books of similar quotes and Ahadith written by Abdur Razzaq and Ibn abe Sheba respectively. This task has been executed in a splendid way by IRTI and approximately 1350 excerpts from the ancient text have been taken in this book (volume I only). These quotes have been compiled on a book-wise basis. Every possible effort has been made to ensure the collection and publication of authentic quotes of the four Imams, particularly those pertinent to Islamic banking and finance products. This book discusses not only the primary issues of these products but it also explores the possible future problems in minute details. Even though the book primarily intends to present the evidence of Islamic banking and finance related products in light of the sayings of Taa baeen (Rahmatullahi Alaihim) and four Imams but it also includes quotes about other monetary issues like Zakaat, Meher etc. This book caters to an essential need of the time and its study verifies the origin and use of Islamic banking and finance products to centuries back. This book is beneficial for Shariah advisors, Shariah scholars and those bankers and professionals who know Arabic language due to its manifold benefits and thus deserves a tribute from them. Having said that, there is a dire need of sorting of such quotes in a scientific manner and its translations in English and other languages so that people who can t understand Arabic are able to get benefit out of it. This is an effort which needs to be appreciated and built upon. ***************** 08

9 Volume 1 Issue 3 September 2010 Personality in the Spotlight Anwar Ahmed Meenai Editor s Note: In this issue of our newsletter, we are introducing you to Mr. Anwar Ahmed Meenai, another professional from the Islamic finance and banking industry whose services for the sector deserve applause. Read on to know more about him and his vision for the Islamic banking industry of Pakistan. We truly appreciate him for providing us with his brief profile on request. Anwar Ahmed Meenai is a professional who has dedicated his career to the financial sector and has strived relentlessly since the introduction of Islamic banking in Pakistan for the establishment of this industry. He has served from time to time in various committees related to Islamic banking and finance including committees and commissions formed by IFSB, ICAP and SBP. He obtained the MBA degree in 1972 from the Institute of Business Administration, University of Karachi and started his career as an Investment Officer in May 1973, with Pakistan Industrial Credit & Investment Corporation (PICIC). In 1976, he moved to the Middle East and worked with American Express Bank, Bahrain and Saudi Industrial Development Fund, Riyadh. He relocated to Pakistan in early 1984 and worked with private & public sector entities as well as an investment bank. In August 1996, he joined Faysal Bank Limited as Shariah coordinator and auditor. In March 2000, he moved to Habib Bank Limited as Head of Islamic Banking, established the Islamic Banking Division and opened HBL s first Islamic Banking Branch in Karachi, in January He joined National Bank of Pakistan (NBP) in October 2005 as Head of Islamic Banking, set-up the Division and opened branches in various cities. He rejoined Faysal Bank in October 2008 as Head Product Development. While working as Acting Head of Islamic Banking, he established the division and opened six Islamic Banking branches in the year 2009, in various cities. His current responsibilities are product development and training of staff in Islamic Banking concepts and techniques. Mr. Meenai believes in promoting the concept of private equity. His vision of Islamic finance in Pakistan is that Islamic banks assume the role and responsibilities of traders and not confine themselves to the role of financial intermediaries. Also, Islamic banks which consider themselves on a sound footing must start to probe the possibilities of setting up joint ventures with reputable manufacturers and traders. Such arrangement should be integrated with equity participation to further the objective of exposing capital to all business risks thereby increasing the returns for themselves as well as the depositors. Upcoming Events Symposium on Is Islamic Banking really Islamic? The upcoming training course of Publicitas Islamic Financial Training (PIFT) has been designed as a symposium titled Is Islamic Banking really Islamic? It is scheduled to be held on 12 October 2010 at Sheraton Hotel, Karachi. The sessions will discuss: Introduction to Islamic banking and finance and Islamic modes of finance The final session will be Questions & Answers on Is Islamic banking really Islamic? The panelists and speakers for the event will be executives and scholars from the Islamic finance industry. National Conference on Islamic Business and Finance in Pakistan: The Present State and the Way Forward The Riphah Centre of Islamic Business has scheduled a National Conference on Islamic Business and Finance in Pakistan: The Present State and the Way Forward to be held on 8 & 9 November 2010 at The Marriott Hotel Islamabad. 09

10 IFP The Islamic Finance Industry Newsletter Institution in the Spotlight Al-Muneeb Shariah Academy The emergence of Islamic Banking, Takaful and other Islamic financial institutions in recent years is one of the most important trends not only locally but across the globe. There has always been a demand among Muslims for financial products and services that must have compliance with the principles of Islamic Shariah. With the development of viable Islamic alternatives to conventional banking, insurance and other investment products that are not compliant with Shariah, the Muslim Jurists and Shariah Scholars are more equipped to face and resolve the problems that are yet to come. Al-Muneeb Shariah Academy, a project of Global Shariah Foundation Trust, working under the supervision and patronage of Professor Mufti Munib-ur-Rehman, is an educational and research institution for Uloom-e-Shariah and Islamic Banking and Finance. The basic objective of this academy is to prepare such Shariah scholars, Islamic bankers and graduates who can contribute effectively in the promotion of Islamic banking; Takaful and other Shariah based financial institutions in Pakistan. The Academy is offering certificate courses on Islamic banking, Takaful, Islamic Law of Inheritance and Arabic language. The Academy will be offering PGD courses in Islamic banking and finance as well in the future for such students who are willing to get in depth understanding and comprehension of Islamic banking and finance. The faculty consists of learned professionals with expertise in various segments of Islamic financial services industry, Islamic Jurisprudence and comparative Islamic thoughts. The faculty members include Professor Mufti Munib-ur-Rehman, Mr. Mahmood Shafqat, Professor Muhammad Aamir Baig, Mufti Nadeem Iqbal, Mufti Abu Baker Siddique, Mufti Syed Sabir Hussain, Mufti Syed Zahid Siraj, Mufti Muhammad Ismail Noorani and Mr. Faizan Ahmed Memon. The Academy is capable of providing guidance with true spirit of Islam to the professionals of Islamic Banks, Takaful Companies, Sukuk and Islamic mutual funds, Mudarabah and Ijarah companies and all other Islamic financial institutions. The efforts of the Academy are thus contributing towards the improvement of the Shari ah Banking and Finance in the country by producing human resources conversant with the intricacies of the system. Ask Us! Got some question in mind? Ask us! Is it permissible for an Islamic bank to impose penalty on late payment? No, it is not permissible for an Islamic bank to impose penalty in case of late payment as it is an interest charged on a debt which is prohibited in Islam. This restriction is sometimes exploited by dishonest clients who deliberately avoid paying their debts at their due dates, because they know that they will not have to pay any additional amount on account of default. In order to solve this problem, contemporary scholars have suggested a solution under which the client, when entering into a Shariah compliant transaction, should undertake that in case he defaults in payment at the due date, he will pay a specified amount to a charitable fund maintained by the bank. This proposal is based on a ruling given by Maliki jurists who say that if a debtor is asked to pay an additional amount in case of default, it is not allowed by Shari'ah, because it amounts to charging interest. However, in order to assure the creditor of prompt payment, the debtor may undertake to give some amount in charity in case of default. This is, in fact, a sort of Yamin (vow) which is a self-imposed penalty to keep oneself away from default. Such 'vows' shall create a moral or religious obligation and can be enforceable through courts. But, while implementing this proposal, it must be ensured that no part of this amount shall form part of the income of the Islamic bank. However, the bank may establish a charitable fund for this purpose and all amounts credited therein shall be exclusively used for purely charitable purpose approved by the Shari ah. Feel free to write about your concerns and questions about Islamic finance at ifp@publicitas.com.pk. Our panel of experts from the field will reply your queries. Please note that the queries will only be replied through the newsletter. Our panelists include Mr. Omar Mustafa Ansari, Head of Islamic Financial Services Group, Ernst & Young Ford Rhodes Sidat Hyder and Mufti Ibrahim Essa. 10