Islamic finance is based in part on the notion that “the simple lending of money is not entitled to earn a profit,” according to University of Toronto law professor Mohammed Fadal. But if interest is proscribed, there are other basic instruments — such as credit sales, forward sales, and leases — which allow capital providers to earn a return on their investment.
The potential payoff for a Canadian business class versed in the tenets of Islamic finance is huge. An estimated $1 trillion in Persian Gulf development projects will be sharia financed in the next decade, and Hejazi believes Canada's comparative advantages in construction, energy, utilities and infrastructure should present major opportunities for advancement in the region. An understanding of Islamic finance could also help attract business from that part of the world.
Though still a tiny component of the global financial system — Islamic finance accounts for roughly 0.5% of the world's financial assets, representing some US$850 billion — its proponents claim it's the fastest-growing sector of that system. Cities like London and Kuala Lumpur are making concerted efforts to establish themselves as global sharia finance centres, and Hejazi warns that Canada has ground to make up on the U.K., the U.S. and Australia in the Anglo-Saxon world alone. “Maybe the Canadian banks haven't been as aggressive [in this sector] as they might have been,” he says.
Better late than never. Bankers from some of the Big Five are involved in the development of Rotman's new course, and they've enthusiastically taken up Centennial's offering as well. And there's a growing interest, too, in developing Islamic financial products for retail clients. Earlier this year Gowling Lafleur Henderson LLP prepared an emboldening report for the Canada Mortgage Housing Corporation that found that sharia-compliant housing loans could be accommodated under existing Canadian legal and accounting rules. As for the credit card market, Toronto-based Islamic financial institution UM Financial Group will start shipping its iFreedom Mastercard by Aug. 15. Charging no interest, and no monthly or transaction fees, iFreedom will be the country's first sharia-compliant credit card. “On the retail side, with the Muslim community doubling every 10 years, we see a sizable market,” says UM Financial CEO Omar Kalair. One thousand customers have already registered for the card, and UM Financial expects to sell out the first batch of 10,000 in their first year. In lieu of interest and consumer user fees, UM makes its end from the transaction fees MasterCard charges vendors every time they complete a credit card transaction. There are 70 million credit cards currently in circulation in Canada, and the average Canadian has two. “Through the marketing we've already done, we know there's a tangible interest in the card,” says Kalair. With a Muslim population estimated at just over 800,000 and growing quickly, he thinks his company is well-positioned to capitalize. At home and abroad, it's a market Canada can't afford to ignore.
Source: Canadian Business