UK - PUBLICATIONS - KL GATES : Recent Issues in UK Islamic Finance

2012 Lawrence Issues in Uk Islamic Finance

UK - PUBLICATIONS - Clifford Chance : New product documentation for Islamic Profit Rate Swaps 1 New product documentation for Mubadalatul Arbaah (Profit Rate Swaps)

2012 Clifford Chance New Product Documentation for Profit Rate Swaps

UK - PUBLICATIONS - Norton Rose :Takaful: An introduction

www.nortonrose.com / article here

Introduction

Takaful is the word used to describe Shariah compliant insurance.  It stems from the Arabic verb kafala, which means to guarantee.
A number of principles found in conventional contracts of insurance make them impermissible in Islam.
The most well known is that of interest (riba).  The presence of interest in both the contract of insurance and the investment of premiums renders the contract unlawful (haram).
Therefore in Takaful, the contract itself as well as any investment of the fund money would have to be Shariah compliant; investment of fund money should be transparent and monitored by a Shariah supervisory board and funds, banking and investments should be free of interest.
Aspects of gambling (qimar) and uncertainty (gharar) also pose problems in terms of the permissibility of insurance contracts.  Shariah law does allow uncertainty in certain circumstances, for instance in voluntary contracts; therefore the basis for the payment of a member’s contribution in Takaful is that of donation to fellow members.  In contrast to conventional insurance, the contract is one of donation rather than compensation.  (source)

RUSSIA - PUBLICATIONS - Islamic Private Equity Fund IPEF (All Equity Funds - March 2012)

2012 March All Equity Moscow Ipef

WORLD - PUBLICATIONS - Islamic Finance News GUIDE 2012

Country Reviews :

Czech Republic: Seeking Solutions
France: Seeking diversity
Germany: More talks, little action
Ireland: Will Islamic finance offer respite?
Italy: Friends in high places
Luxembourg: Gaining momentum
Malta: The Bahrain of the Mediterranean
Russia: Lukewarm reception
Turkey: A bumper year for Islamic finance
UK: Real estate to dominate


Full Guide

BOSNIA - HERZEGOVINA - ARTICLES - Efficiency of the Banking Sector Of Bosnia–Herzegovina with Special Reference to Relative Efficiency of the Existing Islamic Bank

8th International Conference on Islamic Economics and Finance

Efficiency of the Banking Sector Of Bosnia–Herzegovina with Special Reference to Relative Efficiency of the Existing Islamic Bank
Velid Efendić

The main aim of this research is to investigate how efficient is the only existing Islamic bank in Bosnia and Herzegovina (B-H) related to average efficiency of other banks from our sample. The analysis has been conducted on the sample of 18 conventional and one Islamic bank from data published by Banking Agency of Federation of B-H for 2009. The banking and economic environment of B-H as European, post-communist and transition country is of conventional type, and it has not been analyzed in this sense ever before. B-H has not made any regulatory or economic adoption in banking sector for developing of Islamic banking, so Islamic bank is treated as a conventional one. This research is conducted by using of nonparametric technique DEA (Data Envelopment Analysis) as a mostly used tool for analysis of efficiency in banking. We have used two output and three input analysis according to input oriented approach. According to majority of indicators, Islamic bank has lower efficiency comparing to their conventional counterparts. Also, we have done comparison and within the classes of banks that Islamic bank belongs to. In the class of foreign banks, and banks with assets up to quarter of billion of EUR, Islamic bank is again less efficient that their conventional counterparts. According to all efficiency indicators, there are a significant potential for efficiency improvements .(source)

IRELAND - ARTICLE - Sovereign sukuk a way to revive the Celtic tiger ?

download link

IRELAND - ARTICLE - Islamic finance in Ireland

Islamic Finance in Ireland

FRANCE - ARTICLE - Islamic banking finally starting in France

Islamic banking finally starting in France
Antoine Saillon

The past four weeks have been decisive in the French history of Islamic finance wi th two major pieces of news.
The first is that Chaabi Bank Europe, the European subsidiary of the Moroccan bank, announced the launch of the first French retail banking products on the 25th June.
Even though these products remain quite basic and the distribution network still needs to adapt to this new
product line, it is a significant leap forward for the French market.
Over the past three years, several non-French licensed banks have considered applying for a banking license in France to sell Islamic products. None ever succeeded in meeting the Prudential Supervisory Authority (ACP) requirements.
Chaabi Bank, however, is a long established bank in France, licensed and regulated by the ACP since 1972.
This has probably been a key factor in their ability to obtain a green light from the ACP for this launch. (full article)

CZECH - The opportunities for Islamic finance in the Czech Republic

The term Islamic finance has hitherto been a relatively unknown concept in the Czech Republic and many people have no idea about the industry. The economic situation in the Czech Republic has obviously been affected by the European and global economic crisis.
Nevertheless, the Czech Republic has been generally successful in comparison with other post-communist European countries. Financial institutions and banks have a long history in the Czech Republic, especially since the time of ‘The First Czech Republic’, the most developed and famous period of the republic, where businesses were founded by Bata, Skoda etc.
Recently however, lax financial principles have caused the failure of a number of entities. In addition, while European and international financial laws have been developed over the last two centuries. Czech financial laws have only developed within the last 20 years.
We are witnessing the failure of the capitalist economic system, which is based on interest and usury. However the capitalist economy has been as a dream for post-communist countries, which previously had to deal with the socialist economy. (full story)

BOSNIA - HERZEGOVINA - ARTICLES - Islamic Banking with a Closer Look at Bosnia and Herzegovina: Knowledge, Perceptions and Decisive Factors for Choosing Islamic Banking

Islamic Banking with a Closer Look at Bosnia and Herzegovina: Knowledge, Perceptions and Decisive Factors for Choosing Islamic Banking

Ugur Ergun and Irfan Djedovic

This study investigates the knowledge, perceptions and decisive factors for choosing Islamic banking in Bosnia and Herzegovina. In-depth and usual survey methods are used to identify the factors which influence the success of islamic banking applications based on the result from factor analysis. The sample is selected randomly among the users and non-users of the Islamic banking. The analysis' result indicates that general knowledge about Islamic banking is low. The perceptions of Islamic banking are not positive. Also, the results indicate that the religion is the most influential decisive factor for choosing the Islamic banking. (download link)

LUXEMBOURG - Structuring Islamic real estate investments through Luxembourg

www.kpmg.com - Real estate is the preferred asset class of many Islamic investors, and European located properties seem to be more and more in their focus.
For tax efficiency purposes, these investments are commonly structured through real estate investment vehicles established in a tax efficient jurisdiction such as Luxembourg. The present article provides an overview of real estate in Islamic asset management and the Luxembourg vehicles that may be used for such investments.

(rest of article in link)

FRANCE - France awaits Islamic finance

BELIEVING IN SHARIAH BANKING DID NOT YET TRANSLATE INTO A WORKABLE FRENCH SECTOR

For more than 20 years, French banks have offered their expertise in financing operations (BNP Paribas Najmah, Crdit Agricole) for top companies or government projects in the GCC region. They are although a major actor of the Takaful industry (AXA, SCOR). If French companies were able to provide solutions abroad, it nevertheless appears that the only country where there are not yet operating in is, of all places, France. But thats about to change.

FIRST FRENCH PRODUCTS IN ISLAMIC FINANCE In 2007, the French regulator, namely the AMF, was the first to move forward when it published a regulatory instruction concerning funds. At this time, Islamic finance was unknown in France but lead by the French banks, the AMF introduced a little revolution by authorizing funds to use non-financial criteria in their fund management constraints. In order to be fully Shari'ah compliant, it added to the rule the possibility for funds to distribute at most 10% of their annual benefits to a third party which would not be part of the fund shareholders but regulated under the French law. This allowed funds to give non-Shari'ah benefits to charity organisations at the end of each business year. Following the introduction of this new rule, 14 Islamic funds and trackers have been listed in Paris since then and many more are in the process of being listed.  (source)

RUSSIA - Project and infrastructure finance in Russia: Opportunities for Islamic finance

IFN - ROUSTAM VAKHITOV and SERIK ISKAKOV discuss whether it is possible to structure infrastructure projects in Russia in a simultaneously Shariah compliant and tax efficient manner?

Good infrastructure is vital for Russia’s development due to the vastness of its territories. This includes roads, railways and related machinery, industrial plants, airports and aircrafts, oil and gas pipelines power lines as well as power stations and other projects.

Most of these infrastructure projects in Russia were implemented 50 years ago and now the lifetime of these assets is approaching the end of their exploitable economic life. Therefore the replacement or renovation of a significant quantity of infrastructure assets in the future will be an important part of the Russian economic landscape. rest of story : IFN

EUROPE - Thesis - The rise of Islamic banking in Western Europe

Rise of Islamic Banking in Western Europe

FINLAND - PUBLICATIONS - Do markets perceive sukuk and conventional bonds as different financing instruments?

Author(s): Christophe J. Godlewski, Rima Turk-Ariss and Laurent Weill

2011. 37 pages / sivua.

Publisher: Suomen Pankki - Finlands Bank

ISBN: 978-952- 462-701-6 

(Web publication)

 

The last decade witnessed a proliferation in issues of sukuk, Islamic financial instruments structured to replicate the cash flows of conventional bonds. Using a market-based approach on Malaysian data, we consider whether investors react differently to the announcements of sukuk and conventional bond issues. Our findings suggest the stock market is neutral to announcements of conventional bond issues, but reacts negatively to announcements of sukuk issues. We attribute this finding to the excess demand for Islamic investment certificates and explain the difference in stock market reactions as an adverse selection mechanism that favors sukuk issuance by lower-quality debtor companies. Unlike previous studies, our findings indicate markets readily distinguish between sukuk and conventional bonds.

Download

UK - Article - Liquidity management at UK Islamic banks (IFN - Mohammed Amin)

The 13 April 2011 edition of Islamic Finance News contained several articles about Islamic finance in the UK. I contributed an article about liquidity management, which is reproduced here with the concurrence of the editor. This version uses hyperlinks unlike the printed version. 

Liquidity management is a challenge for British Islamic banks.

Balancing between too much and too little liquidity is one of the key challenges for anyone running a bank. After explaining the basic issue for conventional banks, this article outlines why liquidity management is even more challenging for Islamic banks, and then considers the situation of Islamic banks established in Britain.

 (full story)

FRANCE - ISLAMIC FINANCE - most prominent mover 2010

Going over part of the archives, it became clear that France has been the most prominent mover during the year 2010 in the field of Islamic finance.  The review covers the span of the blog.

In July 2010 (just before the initiation of the blog), Norton Rose and DTZ Asset Management did publish the White Paper / Livre Blanc "Finance Islamique et Immobilier en France - comprendre pour agir" (French only) and this after DTZ AM had assisted between 2003-2008 with in all more than 40 transactions for more than 3 billion EURO.

Then there was intense focus on regulatory issues.

1. the French Sukuk-tax regulation published back in August, 2010 : "La présente instruction a pour objet de préciser le régime fiscal applicable à l’un des principaux outils de la finance islamique : les sukuk d’investissement et autres instruments financiers assimilés.
Les sukuk d’investissement sont ici des titres financiers hybrides négociables dont, comme pour les produits financiers assimilés, la rémunération et, le cas échéant, le capital, sont indexés sur la performance d’un ou plusieurs actifs sous-jacents détenus directement ou indirectement par l’émetteur";

2. the French Murabaha/Tawarruq-tax regulation of the same date : "La présente instruction a pour objet de préciser le régime fiscal applicable à un des principaux outils de la finance islamique : l’opération de murabaha avec ordre d’achat, à laquelle s’ajoutent les opérations de tawarruq (opérations de financement réalisées au travers d’une opération de murabaha) et de dépôt rémunéré par une opération de murabaha.
La murabaha avec ordre d’achat est ici un contrat de financement aux termes duquel un client demande explicitement à un Financier de financer l’achat d’un actif déterminé ou d’un portefeuille d’actifs déterminés, en réalisant en particulier deux transferts successifs de propriété se présentant de la manière suivante : un vendeur vend l’actif à un Financier qui le revend à un Client moyennant un prix payable à tempérament, supérieur au prix d’acquisition à hauteur d’un Profit";

3. the French Ijara-tax regulation of the same date : "La présente instruction a pour objet de préciser le régime fiscal applicable à l’un des principaux outils de la finance islamique : le contrat d’ijara sur actif.
L’ijara considéré ici est un contrat aux termes duquel une entité met un bien à disposition d’un client pendant une durée déterminée, en contrepartie du versement de loyers. Ce contrat peut être assorti d’une promesse de vente ou d’une option d’achat"; and

4.the French Istisna-tax regulation of the same date : "La présente instruction a pour objet de préciser le régime fiscal applicable à l’un des principaux outils de la finance islamique : le contrat d’istisna.
L’istisna est un contrat de financement par lequel un Financier, finance pour son compte propre ou pour le compte de son Client, la construction d’un ouvrage mobilier ou immobilier auprès d’un tiers qui le construit (« le Fabricant »). Le Financier paie le Fabricant au comptant ou avec un échéancier durant la phase de construction."

As an interesting follow up on the Norton Rose / DTZ AM publication, there was the article in November 2010 of Wharton "Finding a Home for Islamic Finance in France : arabic" that not only gave a resume of the French position up to that time, but also placed the apparent tension between France and the UK in its' historical perspective from the 1980's onwards (original post) .

An MOU with Malaysian INCEIF aimed at the development for education in the field was entered into in October 2010 and the Guide and Position on the Issuance of Sukuk from the French Financial Markets Authority AMF was published in November 2010. (the English version can be dowloaded HERE).  In December 2010, the AAOIFI approved the "model" for French sukuk, which first French Sukuk in turn is supposed to be issued early 2011.

BNP Paribas was nominated the "Best Islamic Bank - France"by the IFN Islamic Finance News Poll 2010.

The perhaps most remarked academic contribution was "Diversification bancaire, performance, éthique : Alternative ou complémentarité ? Cas des banques islamiques." by Dr. Mohamed Ali CHATTI.

Stumbling upon these texts whilst reviewing part of the archive, I thought it was worthwhile to remind you.

For more details just click "FRANCE" in the country-list of the blog.

Hereunder is a short list of the most relevant tax regulations that changed in France in 2010 (original post) :

LUXEMBOURG - ARTICLE - Shipping Meets Islamic Finance in Luxembourg

Cédric Raths, Director, Pandomus, Member of the Luxembourg Maritime Cluster

01 January, 2011

Stormy Times

Shipping companies are facing difficulties in obtaining bank financing, because the credit crisis has drastically reduced the appetite of conventional banks for this type of business. Several ship owners have been forced to cancel or postpone their orders for new vessels and therefore to delay the upgrade of their fleets.

The world’s economy relies on the shipping industry to transport the world’s trade. Shipping remains the most economical and effective means to carry much of the world’s goods; it is crucial for the global economy, so the demand for shipping services will always be strong and consequently the demand for financing to facilitate the construction and purchase of vessels.

UK - ARTICLES - An Analysis of Islamic Banking and Finance in West: From Lagging to Leading

An Analysis of Islamic Banking and Finance in West: From Lagging to Leading

(www.ccsenet.org/ass Asian Social Science Vol. 7, No. 1; January 2011)

Ali Malik, Muhammad Shaukat Malik, Haider Shah

Abstract

The main purpose of this paper is to highlight the unprecedented growth of Islamic banking and finance in West with focus on United Kingdom. It captures the advancement of Islamic banking and finance in U.K over time It is observed that origin of Islamic finance in the UK can be traced back to early 1980s, however, real significant development was not made until the last decade of 20th century. The factors contributed to recent success of Islamic finance in UK include unprecedented Government support, fastest growing Muslim population, 9/11 factor, petro dollar wealth of Middle East etc. The future of Islamic finance in UK seems bright thought not without serious challenges. The potential size of industry suggests that Islamic finance will continue to be a darling of West for a long time to come.
2011an Analysis West