As Dubai aspires to become the global hub for Islamic economy, Islamic banking and Islamic capital markets are expected to grow simultaneously, said Adnan Chilwan, CEO of Dubai Islamic Bank. Clearly Islamic capital markets are relatively new phenomena. Earlier it was much simpler that if someone needed finance they would go to a bank and the bank would leverage its balance sheet and give a loan. Then it started becoming a little more sophisticated by many banks joining in together to do a syndicated deals. Then a stage came where banks started to participate in cross border deals.
Goldman Sachs is reviving plans to raise at least $500 million (304 million pounds) with its first issue of Islamic bonds, a sign that Islamic finance is going mainstream as big conventional banks seek to tap Middle Eastern money.
The U.S. bank will meet investors in Qatar next Wednesday and the United Arab Emirates on the following day to discuss selling sukuk, a document from lead managers of the sale said on Thursday. The sukuk are expected to have a tenor of five years.
Given the increasing importance of Islamic banking and finance in Pakistan, it is important to deepen the Islamic financial market in the country.
One way of doing so is by developing a market for Islamic hedging instruments, which are known as derivative contracts in conventional finance. It is, however, important to understand the difference between Islamic derivatives and their conventional counterparts.
Indonesia will let Shariah-compliant banks hedge against exchange-rate movements to spur growth in Islamic financial assets and narrow the gap with Malaysia’s industry, which is seven times larger.
Bank Indonesia, the National Shariah Board and the Indonesia Institute of Accountants have approved the instruments, available in Malaysia since 2006, Adiwarman Azwar Karim, Jakarta-based vice chairman of the board’s Islamic capital market working committee, said in an Aug. 3 interview. The central bank said it is working on regulations, declining to say when they would be finished.
A Shariah-compliant forestry fund has been launched by Sustainable Capital which is based in Luxembourg in order to lure Islamic investors along with those interested in green investment.
Sydney: A Shariah-compliant forestry fund has been launched by Sustainable Capital which is based in Luxembourg in order to lure Islamic investors along with those interested in green investment.
As investors looked on in dismay at the 2009 default of Islamic bonds from Saudi Arabia to Kuwait, many critics forecast the demise of the Gulf’s sharia-compliant industry.
Islamic bond structures were seen as too complicated and too far removed from the real economy. While financial instruments appeared to be based on collateral, they turned out to be just like any other conventional product.
The concept of Islamic finance, banking and economics has gained tremendous popularity of late. It is appreciated and implemented not only in countries where Islam is the dominant religion, but also in non-Islamic nations. The basic premise of Islamic finance, banking and economics is based on ‘hygienic’ ways of doing business as prescribed by the Islamic Law or Shariah.
The International Islamic Financial Market (IIFM) and the International Swaps and Derivatives Association (ISDA) have launched the ISDA/IIFM Mubadalatul Arbaah (Profit Rate Swap) product standard to be used for Islamic hedging purposes.
The Mubadalatul Arbaah (MA) standard follows on from the ISDA/IIFM Tahawwut (Hedging) Master Agreement and provides the industry with a framework for Islamic risk mitigation.
Are derivatives acceptable in Islamic finance? Of course the answer is yes, but one must appreciate the difference between Islamic derivatives and their conventional counterparts.
Furthermore, while the use of derivative contracts is acceptable in Islamic finance, there are limits to trading in them. On a philosophical level, almost all Islamic financial products are in fact examples of derivative contracts. For example, a Sukuk (an Islamic equivalent of a bond) may link the returns of an asset (e.g., a property) to an interest rate mechanism such as LIBOR.
Standard Chartered Plc and Bank Islam Malaysia Bhd. plan to offer Shariah-compliant derivatives in Malaysia that will allow investors to hedge against interest rates and commodity prices.
Standard Chartered, the U.K. bank that earns most of its profit from emerging markets, will begin selling contracts in the first quarter that provide protection from fluctuations in the cost of items such as rice and oil, according to an e-mailed reply to questions yesterday. Bank Islam Malaysia, the country’s oldest Islamic lender, will offer swaps that allow two parties to exchange different forms of payments from an underlying asset.