FULL RESULTS OF ISLAMIC FINANCE NEWS AWARD - POLL 2008

The fourth annual Islamic Finance news Poll results are in after a record-breaking 2,491 unique votes were cast by the Islamic finance industry’s leading practitioners and participants.

In the financial sphere 2008 was deemed by many as an annus horribilis with the global markets plummeting due mainly to the US mortgage industry. The Islamic finance industry also succumbed to market forces but by and large fared better than its conventional counterparts.

What is clear, from the results of the 2008 Islamic Finance news Poll, is that the more focused and specialized Islamic financial institutions are favored to those of the larger global historically conventional institutions with Islamic operations.

With 2,491 votes cast, this is the industry’s most comprehensive and definitive survey.

In the Best Overall Islamic Bank category Kuwait Finance House again ran out easy favorite for the second year running. Malaysia’s CIMB Islamic climbed one place to second this year with Saudi Arabia’s Al Rajhi taking third spot. One notable absentee from this category is two-time winner and runner up in 2007, Dubai Islamic Bank.

As more of the world’s financial centers announce their interest in attracting Islamic finance to their shores one would assume the Best Central Bank in Promoting Islamic Finance category would be more competitive. Not so. For the fourth straight year Bank Negara Malaysia was voted number one with more than double the votes of its nearest rival, the State Bank of Pakistan, which itself leapfrogged the Central Bank of Bahrain into second place.

In new categories for the 2008 Poll, BMB Islamic won Best Islamic Shariah Advisory Firm and KFH Research was voted best Islamic Research Firm.

In a year when many banks collapsed or merged, the Islamic finance industry witnessed a number of new arrivals ensuring a hotly contested Best New Islamic Bank category, with the UK’s Gatehouse Bank scraping victory over Maybank Islamic, which was a close second.

In other categories Norton Rose climbed from second in 2007 to first in the Best Law Firm in Islamic Finance, Moody’s Investors Service was voted Best Islamic Rating Agency, Path Solutions won Best Islamic Technology Provider, Oasis Asset Management was named Best Islamic Fund Manager and Takaful Ikhlas the Best Takaful/reTakaful Provider for 2008.

In the Best Islamic Banks by Country category there were notable wins for MCCA (Australia), Faisal Islamic Bank (Egypt), Bank of London and The Middle East (UK) and Bank Muamalat Indonesia.

ISLAMIC FINANCE ASSETS TO GROW TO $1.6 TRILLION BY 2012

-Extracted from Reuters-

Assets of the global Islamic finance industry are estimated to grow to around $1.6 trillion by 2012, a report by consultancy Oliver Wyman said.

It said growth opportunities lie in underpenetrated markets with large Muslim populations awaiting better Islamic finance products in the Middle East, Pakistan and South East Asia.

Islamic finance has grown by over 20 percent annually over the past years and estimates of its current assets range from $700 billion to $1 trillion.

The report by Oliver Wyman said most institutions are far from taking full advantage of that growth as they lack both an understanding of the opportunities and the required operational capabilities.

It said Islamic wholesale banking, the industry's most important sector, needs to diversify from real estate loans and ordinary lending to include advanced treasury services, innovative asset management, balance sheet management and securitisation management.

"This will allow them to address the needs of underserved market segments such as Islamic financial institutions, corporates, sovereign wealth funds and private wealth clients," the report said.

Islamic finance is a nascent and diverse industry, in which many products well-established in conventional banking are still being developed.

It is based on shariah, or Islamic law, which is open to interpretation and caters to investors who want to avoid paying or earning interest, viewed as usury under Islamic law.

3-TIER SYSTEM FOR ISLAMIC BANKING

-Extracted from Bernama-

A three-tier system is needed in Islamic banking to further strengthen the industry, an economist suggested.

“The first tier is to be like the conventional bank, where people put their money in and where the bank gives money to meet their type of transactions,” said Professor Dr M. Kabir Hassan of New Orleans University.

He said the second tier was like a mudarabah type of institution or mudarabah company, where people put their money and combine it and try and develop different things.

“This model is very much applicable for SME financing, where a person has the idea but does not have the money and another person has the capital. They can combine using the Islamic principle,” he said.

Kabir said this after delivering a talk on Can Islamic Financial System Be A Cure To The Global Financial Crisis in Kuala Lumpur on 6 April 2009.

He added that the third tier was like venture capital or musyarakah, where big infrastructure project financing was involved.

For this, a regulation for Islamic finance could be created with the support of the Government and finance institutions, as the existing conventional banking regulations do not suit the needs of Islamic banking, Kabir said.

“We simply cannot copycat the regulations of conventional banking to help this industry. We need to have our own regulation that is more consistent with Islamic finance,” he said.

Kabir also said that it was time to correct any problems within the system.

In the past 30 years, about 80% of Islamic finance dealt with short-term murabahah while the remaining 20% was long-term partnerships or mudarabah musyarakah, he said.

However, in Islamic finance, mudarabah musyarakah-type of transactions should reach 80%, he said.

“To achieve this, there needs to be Government support and there have to be institutions, laws and regulations to help grow the industry,” he said.

According to Kabir, some big Islamic banking players were already practising the three-tier system

ECONOMIC POLICY IN ISLAM

The economic policy is the objective of the laws, which deal with the management of human basic needs (food, shelter, education, health, security). Prophet Mohammad (pbuh) is narrated to have said: “Whom who ends his day with security at home, with healthy body, and with food at home has acquired his needs in this life”. Also, he states: “Allah breaks covenant with any group of people living in a close vicinity, whereby one of them goes to bed while hungry”.

The economic policy in Islam aims at securing the complete satisfaction of all basic needs for every individual, and to enable each individual to satisfy his luxuries as much as he can, as a person living in a particular society, which has a certain way of life. So Islam looks at every individual by himself rather than the total of individuals who live in the country. It looks at him as a human being first, who needs to satisfy all of his basic needs completely, then it looks to him in his capacity as a particular individual, to enable him to satisfy his luxuries as much as possible. Islam looks to him at the same time, as a person living in a society with other people just like him who have similar needs.

The purpose of the economic policy in Islam is not to only raise the standard of living in the country without looking to secure the rights of life for every individual completely. Nor is it just to provide the means of satisfaction in the society, leaving people free to take from such means as much as they can, without securing the right of livelihood for each individual. This is achieved by obliging each capable person to work, so as to achieve the basic needs for himself and his dependants. Islam obliges the children or the heirs to support the parents if they are not able to work, or obliges the State Treasury (Bait ul-Mal) to do so, if there is nobody to support them. As such, Islam requires that the individual secures for himself and his dependants the satisfaction of the basic needs i.e. adequate foodstuffs, clothing, education, medication and housing. Islam then encourages the individual to secure the luxuries of life as much as he can.

Islam also prevents the government from taking property through the imposition of taxes, except in cases where it is obligatory upon all Muslims to care for e.g. famine. Tax then is taken only on the wealth which exceeds that which each individual normally uses to satisfy his basic needs and luxuries. In this way, it achieves the right of livelihood for everyone individually, and facilitates the securing of the luxuries. At the same time, Islam sets certain limits within which the individual can earn in order to satisfy his basic needs and luxuries. So Islam prohibits the production and consumption of wine by Muslims, and it does not consider it an economic material. Islam prohibits the taking of riba (usury, interest, etc.) and its usage in transactions for everyone who holds Islamic citizenship. It does not consider riba as an economic commodity, whether for Muslims or non-Muslims. So Islam considers what the society ought to be when utilizing any property as a fundamental basis for utilizing the economic commodity.

Islam did not detach the individual from being human, nor the human being from being a particular individual. Furthermore, Islam does not consider what the society ought to be separate from the issue of securing the satisfaction of the basic needs for every individual, and enabling him to satisfy his luxuries. Rather, Islam makes the satisfaction of the needs and what the society ought to be, as two inseparable matters from each other, but by making what the society ought to be as a basis for satisfying the needs. For the sake of satisfying all the basic needs completely, and to enable satisfaction of the luxuries, the economic commodity should be available to people, and it will not be available to them unless they strive to earn it. Therefore, Islam urges people to earn, seek the provision and strive. And it made striving to earn the provision compulsory upon Muslims.

Allah said:

“So walk in the paths of the earth and eat of His sustenance which He provides.”[Al-Mulk: 15]

Many Ahadith came to encourage the earning of property. In one Hadith, the Prophet Mohammad shook the hand of Sa’ad ibn Muadh (ra) and found his hands to be rough. When the Prophet asked about it, Sa’ad said: “I dig with the shovel to maintain my family.” The Prophet kissed Sa’ad’s hands and said: “(They are) two hands which Allah loves.” The Prophet said: “Nobody would ever eat food that is better than to eat of his own hand’s work.”

It was also narrated that Umar b. Al-Khattab (RA) passed by some people, who were known as readers of the Qur’an. He saw them sitting and bending their heads, and asked who they were. He was told: “They are those who depend (Al-Mutawwakiloon) upon Allah .” Umar replied: “No, they are the eaters who eat the people’s properties. Do you want me to describe those who really depend upon Allah (Al-Mutawwakiloon)?” He was answered in the affirmative, and then he said: “He is the person who throws the seeds in the earth and then depends on his Lord The Almighty, The Exalted (‘Azza wa jalla).”

Thus we find that the verses and the Ahadith encourage striving to seek provision, and working to earn property, just as they encourage the enjoyment of the property and eating of the good things.

Allah said:

“Say: who has forbidden the beautiful gifts of Allah, which He has provided for His servants, and the things, clean and pure, (that He has provided)?”[Al-A’raf: 32]

“And let not those who are niggardly, who withhold the gifts which Allah has given them from His Grace, think that it is good for them. Rather it is worse for them. That which they hoard will be their collar on the Day of Resurrection. To Allah belongs the heritage of the heavens and the earth, and Allah is informed of what you do.” [Al-Imran: 180]

“O you who believe! Spend of the good things which you have earned, and of that which We bring forth from the earth for you.” [Al-Baqarah: 267]

And:

“O you who believe! Do not prohibit the good things which Allah made halal for you.” [Al-Ma’idah: 87]

These verses, and the like, denote clearly that the divine rules (AhkamShari’ah) related to the economy, aim at acquiring property and enjoying good things. So Islam obliged individuals to earn, and ordered them to enjoy wealth that they earned, so as to achieve economic growth in the country, to satisfy the basic needs of every person, and to enable the satisfaction of his luxuries.

However, the economic progress through motivating every capable individual to work, assigning properties to the State and the investing of public property, all that is a means to satisfy the needs, not for the sake of having property for itself, nor for boasting, nor to spend it in sin, nor for arrogance and oppression.

The Messenger of Allah said: “Whosoever sought the life (matters) legitimately (halal) and decently he will meet Allah with his face as a full moon; and whosoever sought it arrogantly and excessively he will meet Allah while He is angry at him.”

The Prophet also said: “Do you have, son of Adam, of your property except that which you ate and consumed, that which you wore and exhausted, and that which you donated and kept (for yourself)?”

Allah the Supreme said:

“Don’t commit Israaf (spending or going beyond the limits imposed by Islam);surely He does not like those who condone Israaf.” [Al-A’raf: 31]

Islam made the aim of owning property a means towards satisfying the needs and not for the purpose of boasting. It also made managing the economy as a whole according to Allah’s orders obligatory. It ordered the Muslim to seek the Hereafter through what he earns and not to forget his share of this worldly life.

Allah said:

“But seek the abode of the Hereafter in that which Allah has given you, and do not neglect your portion of worldly life, and be kind as Allah has been kind to you, and seek not corruption in the earth.” [Al-Qasas: 77]

Islam secured the observance of the rules by motivating the Muslim to adhere to this economic policy through the fear of Allah (Taqwa), and the abiding of the people, in general, to it through the legislated laws which the State implements upon the people.

Allah said:

“O you who believe! observe your duty to Allah and give up what remains (due to you) from riba, if you are (in truth) believers.” [Al-Baqarah: 278]