Worth $1 trillion in assets, Islamic banking is being lauded by British Prime Minister David Cameron and supported by Canada’s Conservative government, major banks and credit unions, leading business schools and influential Muslims across the country.
Islamic banking — which bans interest payments, pure monetary speculation and investing in such things as alcohol, gambling, pornographic media and pork — is being sold as the next big thing in financing for Canada, which is home to over a million Muslims.
Celebrating a growing market of Shari`ah-compliant funds, Canadian Muslims are resorting to products that comply with Islamic principles for their retirement income and investments.
"The way I actually look at Shari`ah-compliant products is mainly as a subset of ethical, or socially responsible investing [such as avoiding the adult entertainment industry or any company that may negatively impact the environment]," Mohammad Khalid, a retired economist living in Oakville, Ontario, told CBC News on Monday, February 27.
The insolvency of an Islamic mortgage lender in Canada may hinder the growth of sharia-compliant finance in North America, where the industry has struggled to gain traction in the absence of a supportive regulatory framework.
UM Financial Inc was ordered into receivership in October, leaving about $32 million worth of mortgages in the hands of Toronto's legal system. Accounting and business advisory firm Grant Thornton was appointed receiver by the Ontario Superior Court of Justice.
The growing demand for securities that meet Islamic religious principles may lead Canadian governments and companies to start issuing Shariah bonds.
HSBC Bank Canada may offer $500 million and three government-related borrowers from one Canadian province may issue $1.5 billion of sukuk, Omar Kalair, chief executive officer of Toronto-based UM Financial, said in an Oct. 14 interview. A “handful” of Canadian companies may sell C$1 billion ($980 million) of Islamic debt by 2013, said Daud Vicary Abdullah, global Islamic finance leader at Deloitte Corporate Advisory Services Sdn. in Kuala Lumpur.
Walid Hejazi is fielding a lot of questions lately about Islamic finance. An associate professor with the University of Toronto's Rotman School of Management, Hejazi is developing a course on the subject for the University of Toronto. But he's discovered as much interest in the subject from the Canadian finance and development sectors as from prospective students. “They don't know very much about it, and they're all doing business in Abu Dhabi,” he says. “When clients start talking about it, they don't know what they're saying. But more importantly, you have Canadian business people who are forgoing deals because some investors in the Gulf insist on sharia compliance.”
A Canadian Islamic financial institution is launching Canada's first "halal-approved" credit card this month and will also offer it to US Muslims by year end, its president told AFP on Tuesday. The iFreedom Plus MasterCard meets the requirements of Sharia law, which prohibits usury, by being prepaid and therefore interest-free, said Omar Kalair, president of Toronto-based UM Financial.