Islamic Banking Global Scenario – Final Part

Islamic Banking Global Scenario – Final Part

Previously we discussed the situation of Islamic banking and financial institutions in Bahrain and Malaysia.

Moreover, Islamic banks have also built a strong presence in Malaysia, where Standard & Poor’s assigned a BBB+ rating to the $600 million Sharia-compliant trust certificates (called sukuk) issued by Malaysia Global Sukuk Inc. Bank
Negara Malaysia (BNM) has announced to issue new Islamic Bank licences to foreign players.

The Financial Sector Master plan maps out the liberalisation of Malaysia’s banking and insurance industry in three phases during the next decade. It lists incentives to develop the Islamic financial sector and enlarge its market
share to 20 percent, from under 10 percent now. A dedicated high court has been set up to handle Islamic banking and finance cases.

In Sudan, a system of Islamic banking and finance is in operation at national level. Like other Islamic banks around the world the banks in Sudan have been relying in the past on Murabaha financing.

However, the share of Musharaka and Mudaraba operations is on increase and presently constitutes about 40 percent of total bank financing. Although the Islamic financial system has taken a good start in Sudan, significant problems
still remain to be addressed.

Like Sudan, Iran also switched over to Usury Free Banking at national level in March 1984. However, there are some conceptual differences between Islamic banking in Iran and the mainstream movement of
Islamic banking and finance.

Owing to the growing amount of capital availability with Islamic banks, the refining of Islamic financing techniques and the huge requirement of infrastructure development in Muslim countries there has been a large number of project
finance deals particularly in the Middle East region.

Islamic banks now participate in a wide financing domain stretching from simple Shariah-compliant retail products to highly complex structured finance and large-scale project lending.

These projects, inter alia, include power stations, water plants, roads, bridges and other infrastructure projects. Bahrain is the leading centre for Islamic finance in the Middle East region. The establishment of the Prudential
Information and Regulatory Framework for Islamic Banks (PIRI) by the BMA in conjunction with AAOIFI has gone a long way towards establishing a legal and regulatory framework to meet the specific risks inherent in Islamic financing structures. 

The BMA has quite recently signed MoU with the London Metal Exchange (LME) to pool assets to develop and promote Shariah compliant tradable instruments for Islamic banking industry.

The arrangement is seen as a major boost for industry’s integration in the global financial system and should set the pace for commodity-trading environment in Bahrain. BMA has also finalized draft guidelines for issuance of Islamic
bonds and securities from Bahrain. In May 03, the Liquidity Management Centre (LMC) launched its debut US$ 250 million Sukuk on behalf of the Government of Bahrain.

National Commercial Bank (NCB) of Saudi Arabia has introduced an Advance Card that has all the benefits of a regular credit card. The card does not have a credit line and instead has a prepaid line. As such, it does not incur any
interest (like a debit card). Added benefits are purchase protection, travel accident insurance, etc and no interest, no extra fees with no conditions applied, the card is fully Shariah compliant. It is more secure than cash, easy to load up and has worldwide
acceptance.

This prepaid card facility is especially attractive to women, youth, self employed and small establishment employees who sometimes do not meet the strict requirements of a regular credit card facility. Saudi Government has also
endorsed an Islamic-based law to regulate the kingdom’s lucrative Takaful sector and opened it for foreign investors.

In United Kingdom, the Financial Services Authority is in final stages of issuing its first ever Islamic banking license to the proposed Islamic Bank of Britain, which has been sponsored by Gulf and UK investors.

In addition, the United States of America has appointed Dr. Mahmoud El Gamal, an eminent economist/expert on Islamic banking to advise the US Treasury and Government departments on Islamic finance in June
2004.

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Posted by Momina Khan on Dec 7 2011. Filed under Middle East, Opinion. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry