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Get up to speed quickly on the world's fastest growing financial sector The Islamic Finance Handbook is the definitive report for the Islamic finance industry. Written by the industry's leading practitioners, the book provides a country-by-country breakdown of the current state of the Islamic market, including league tables by region and by country. Relevant case studies are used throughout to illustrate the practical aspect of the information presented. Organized for easy navigation, each chapter features sub-sections that allow instant comparison between countries in a specific area of interest.
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The Islamic Finance Handbook contains a country-by-country breakdown of the state of modern Islamic finance, detailing the information professionals need to effectively do business in these jurisdictions. Presented in a way that allows quick identification and location of topics of interest, each country report is organized into well- structured subsections that facilitate easy comparison of factors between countries.
Written by leading experts in the field, the book provides an overview of the sector as well as insights into the unique mechanisms that contribute to the growth and function of the Islamic finance industry, including current macro- and micro-economic conditions, regulations, and politics.
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978-1-118-81441-3 | Cloth | 592 pages
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Extracted from The Islamic Finance Handbook published in 2014 by John Wiley & Sons Singapore Pte. Ltd., 1 Fusionopolis Walk, #07-01, Solaris South Tower,
Singapore 138628. All rights reserved.
Copyright © 2014 by John Wiley and Sons Singapore Pte. Ltd.
No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise,
except as expressly permitted by law, without either the prior written permission of the Publisher, or authorization through payment of the appropriate photocopy fee to the Copyright Clearance Center. Requests for permission should be addressed to the Publisher, John Wiley & Sons Singapore Pte
Ltd., 1 Fusionopolis Walk, #07-01, Solaris South Tower, Singapore 138628, tel: 65-6643-8000, fax: 65- 6643- 8008, email: [email protected]
3GFTOC 03/24/2014 22:57:57 Page v
Contents
Foreword ix
Preface xiii
Introduction 1Daud Vicary Abdullah, President and Chief Executive Officer,
INCEIF—The Global University of Islamic Finance
Mohd-Pisal Zainal, Director of Research and Publication,INCEIF—The Global University of Islamic Finance
CHAPTER 1 Australia 11Michael T. Skully, Professor of Banking, Department of Banking
and Finance, Monash University
CHAPTER 2 Bahrain 23Hatim El-Tahir, Director, Islamic Finance Group, Deloitte & Touche
(Middle East)
CHAPTER 3 Bangladesh 43Mohammad Abdul Mannan, Managing Director and Chief Executive Officer,
Islami Bank Bangladesh Limited
CHAPTER 4 Brunei 59Muhd Jamil Abas bin Abdul ’Ali, Legal Advisor, Abrahams, Davidson & Co.
Tan Thiam Swee, Partner, Abrahams, Davidson & Co.
Lee Yun Chin, Partner, Lee & Raman
CHAPTER 5 Canada 77Jeffrey Graham, Partner, Borden Ladner Gervais LLP
CHAPTER 6 China 93Wang Yongbao Ahmed Musa, Associate Professor, Xi’an International
Studies University
CHAPTER 7 Egypt 119Walid S. Hegazy, Managing Partner, Hegazy & Associates in association with
Crowell & Moring
Hussein M. Azmy, Associate, Hegazy & Associates in association withCrowell & Moring
v
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CHAPTER 8 Hong Kong 129Anthony Chan, Chief Executive Officer, New Line Capital Investment, Ltd.
Jess Lee, Legal and Project Development Manager, New Line CapitalInvestment, Ltd.
CHAPTER 9 India 141H. Jayesh, Founder and Partner, Juris Corp
CHAPTER 10 Indonesia 155Rifki Ismal, Assistant Director, Islamic Banking, Bank Indonesia
CHAPTER 11 Iran 175Farhad Nili, Director, Monetary and Banking Research Institute,
Central Bank of Iran
CHAPTER 12 Japan 213Etsuaki Yoshida, Adjunct Research Fellow, Center for Finance Research and
Waseda Graduate School of Finance, Accounting and Law,Waseda University
CHAPTER 13 Jordan 227Khawla Al Nobani, Specialist in Islamic Financial Advisory Services
CHAPTER 14 Kazakhstan 239Yerlan Alimzhanuly Baidaulet, Member of Executive Directors Board,
Islamic Development Bank Group
CHAPTER 15 Kenya 251Rahma Hersi, Director and Founder, Awal Consulting Limited
CHAPTER 16 Kuwait 261Issam Al Tawari, Chairman and Managing Director, Rasameel Structured
Finance Company
CHAPTER 17 Luxembourg 287Bishr Shiblaq, Head, Dubai Representative Office, Arendt &Medernach
Florence Stainier, Partner, Arendt &Medernach
CHAPTER 18 Malaysia 303Wan Abdul Rahim Kamil, Consultant, Islamic Capital Market, Securities
Commission Malaysia
CHAPTER 19 Maldives 337Aishath Muneeza, Deputy Minister, Ministry of Islamic Affairs, Maldives
vi CONTENTS
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CHAPTER 20 Nigeria 355Auwalu Ado, Internal Shari’ah Auditor, Jaiz Bank
CHAPTER 21 Oman 369Azmat Rafique, Head, Islamic Banking, Al Yusr Arab Bank
CHAPTER 22 Pakistan 385Mohammad Shoaib, CFA, Chief Executive, Al Meezan Investment
Management Limited
CHAPTER 23 Qatar 413Steve Troop, Advisor to the Chairman and Board of Directors,
Barwa Bank
CHAPTER 24 Saudi Arabia 421Nabil Issa, Partner, King & Spalding
James Stull, Senior Associate, King & Spalding
CHAPTER 25 Singapore 433Lee Ka Sing, Head, Debt Capital Markets, Maybank Kim Eng Securities
Pte. Ltd.
Ian Yeo Tian Chiang, Senior Associate, Debt Capital Markets,Maybank Kim Eng Securities Pte. Ltd.
CHAPTER 26 South Africa 443Amman Muhammad, Chief Executive Officer, Islamic Banking Division,
First National Bank
CHAPTER 27 Sri Lanka 461Reyaz Mihular, Managing Partner, KPMG
CHAPTER 28 Tanzania 477Uwaiz Jassat, Acting Head, Absa Islamic Banking, and Head, Absa Takaful
CHAPTER 29 Thailand 485S. M. Aamir Shamim, Senior Vice President and IB Specialist,
Treasury and Investment Group, Islamic Bank of Thailand
CHAPTER 30 Turkey 505Eser Sagar, Expert, Capital Markets Board of Turkey
Atila Yanpar, Expert, Capital Markets Board of Turkey
Contents vii
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CHAPTER 31 United Arab Emirates 521Shaikh Dr. Hussain Hamed Hassan, Chairman, Sharia Board, Dubai Islamic
Bank, Managing Director, Dar Al Sharia Legal & Financial Consultancy
CHAPTER 32 United Kingdom 533Fara Mohammad, Legal Consultant
CHAPTER 33 United States 547Andrew M. Metcalf, Partner, Middle East and Islamic Finance Practice Group,
King & Spalding
Isam Salah, Senior Partner and Global Head, Middle East and IslamicFinance Practice Group, King & Spalding
About the Editors 559
List of Contributors 561
Index 563
viii CONTENTS
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Foreword
F our decades ago, it was a strange thought, but now it has emerged as a wonderfulreality. I am referring to Islamic finance.Indeed, it is a newly born but very fast growing industry in comparison to its
counterparts. Islamic banking does not have a history spread over centuries, but itscore principles were entrenched in seventh century AD. In fact, its roots are as deep asthe roots of humankind itself, because Islamic banking is based on divine values—the values of justice and fairness that the God Almighty has ordained no sooner thanhe created man.
Islamic finance has become a vital and growing reality and is based on divineguidance, which has no room for injustice, discrimination, nontransparency, andgreed among human beings; it is fully in synch with the laws of nature.
The journey of Islamic finance is quite fascinating, and is indeed very beneficial asit is about applying a viable alternative to the conventional banking and financeindustry, which is fast losing trust due to successive crises that are forcing people towrite off their lending to conventional financial institutions.
Throughout this book, you will see the shining present and promising future ofIslamic finance all over the world. Although there are regulatory issues (which wereraised by some of the authors), political and economic challenges (as also highlightedby the respected authors), and lack of awareness and misconceptions by the generalpublic, the future is bright and the opportunities outweigh the challenges as gatheredby almost all of the authors.
On one hand, Michael T. Skully discusses in detail the potential of the Islamicfinance industry in Australia, which has the fourth-largest fund management industryin the world and has recently started to offer Islamic products. On the other hand,Hatim El-Tahir presents Bahrain as a global leader in the cross-border internationalsukuk market.
With regard to Bangladesh, a Muslim-dominated country, Abdul Mannanestablishes that the Islamic finance industry is experiencing faster growth than itsconventional counterpart. He concludes that sukuk may constitute a strong andsustained capital market instrument for quickly transforming Bangladesh into amiddle-income country.
A write-up on Brunei explores a few areas in which Islamic financial instrumentscan work efficiently; the authors of that chapter see a fresh impetus to rekindle thespirit of Islamic finance in the Abode of Peace.
Wang Yongbao Ahmed Musa describes the efforts made to introduce Islamicfinance industry in China, and Jeffrey Graham establishes Islamic finance as one of themost rapidly growing segments in Canada, with Toronto possibly emerging as aNorth American center for Islamic finance.
Egypt had experienced some primitive form of Islamic banking in mid-1960s, butdue to political reasons it did not continue, and Hegazy and Azmy discuss in detail the
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reasons behind such deadlock and conclude that the challenges in Egypt are notinsurmountable.
The chapter on Hong Kong by Anthony Chan and Jee Lee suggests thatparticipants in the Islamic finance market not overlook role of Hong Kong as beingan excellent financial infrastructure and gateway to mainland China.
In India, the situation is different, as the potential for the industry to grow isimmense and the existence of Shari’ah-based funds is very limited. Jayesh exploresmany positive factors for the growth of Islamic finance in India. I personally believeIndia will be the next big place for Islamic finance, although it may not be calledas such.
In Indonesia, the Islamic banking industry is on a much higher growth trajectorythan that of the rest of the world’s Islamic banking industry, and Rifki Ismal discussesin detail the current situation of Islamic banking in that country.
Farhad Nili opines that Iran has been a pioneer in both the theoretical and theoperational aspects of Islamic banking, but it has not been well introduced abroad dueto the lack of constructive interaction of the country with the world’s largest Muslimpopulation.
Etsuaki Yoshida presents a comprehensive picture of Islamic finance in Japan.Islamic finance in Jordan started in 1978 with 2 million dinars, which has
increased to 125 million dinars. Khawla Al Nobani shares her analytical viewstoward this growing market.
While discussing the Islamic finance situation in Kazakhstan, Yerlan AlimzhanulyBaidaulet highlights the role of UAE as well as IDB Group in the empowerment of theIslamic finance industry in that country.
In Kenya, Islamic finance is a relatively new concept, but the country is looking tobe the Islamic financial hub of East Africa. Rahma Hersi discusses many practicalconcerns, which must be given due consideration.
Issam Al Tawari expects that Islamic finance will remain strong in Kuwait, basedon the country’s economic fundamentals and the existing strength of Islamic bankingin the country. Kuwait is home to Kuwait FinanceHouse, one of the first Islamic banksin the world.
The authors of the chapter on Luxembourg strongly hope that this leading andhighly diversified international financial center will continue to be at the forefront ofthe development of the still young Islamic finance industry.
In the chapter on Malaysia, Wan Abdul Rahim Kamil provides an analyticaloverview of the 30-year track record of building a successful domestic Islamic financialindustry. He recognizes the key role of the country’s regulators in instilling marketconfidence. Today,Malaysia is regarded as the most robust country in developing andimplementing the Islamic finance industry’s regulations.
Aishath Muneeze concludes that the Islamic finance industry is expected toflourish in the Maldives in the future and will exponentially increase.
Auwalu Ado highlights the great opportunity and potential that Nigeria has tobecome the Islamic finance hub in Africa.
In Oman, where Islamic banking was introduced very recently, the healthygrowth of the industry is highly promising; Azmat Rique highlights a few uniqueaspects of Islamic banking regulations in Oman.
Mohammad Shoaib discusses various regulatory issues and political and eco-nomic threats to the Islamic finance industry in Pakistan and concludes that despite all
x FOREWORD
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of the challenges with such a huge Muslim population, Pakistan is undeniably a landof untapped potential for Islamic finance.
As per Steve Troop’s analyses, Qatar’s growth rate for Islamic finance continuesto outstrip that of conventional finance. In fact, this is a trend I myself have observed inmost of the jurisdictions where Islamic finance is allowed to flourish.
Saudi Arabia has recently introduced a number of new regulations that opensadditional horizons for the growth of Islamic finance. This giant Arab country, whichis proud to be Islam’s birthplace, will soon show its true potential materialized.
The chapter on Singapore was fair to declare that Islamic finance will remain justone of many options and not the main driver of growth of Singapore’s financial sector.
The growth of the Islamic finance industry is visible in South Africa, andaccording to Amman Muhammad, it is becoming a more accessible alternative forminority Muslims.
In Sri Lanka, as described by ReyazMihular, the Islamic finance industry has seentremendous development, and increasing acceptance is evident in the small buteconomically powerful Muslim population besides the majority Singhalese.
The opportunity for Islamic banking in Tanzania has yet to be realized, eventhough it has a large Muslim population.
The Islamic finance industry in Thailand, as explained by Aamir Shamin, iscurrently more focused on SMEs and micro SME financing, but the intention andpotential are there to proceed.
The chapter on Turkey raises an interesting question on how easy it will be forTurkey to be an Islamic finance center. The authors conclude that the country requiresa paradigm shift to create a better environment for Islamic finance, which is currentlystrongly secular.
The chapter on the United Kingdom states an exciting fact that the Islamicbanking and finance system in that country operates in such a way that the marketplayers develop and expand their businesses globally while being based in London—true to that country’s reputation as being the world’s preferred financial center.
The chapter on the United States discusses the regulatory issues faced by Islamicfinance, which is proving to be a hindrance toward the penetration of Islamic financein the United States.
The author of this Foreword tries to appreciate the role of Dubai and UAE as anative land of Islamic banking, which is now preparing to take a global leadership rolein promoting Islamic economics and finance.
Shaikh Dr. Hussain Hamed Hassan,Chairman, Sharia Board,
Dubai Islamic Bank,Managing Director, Dar Al Sharia Legal &
Financial Consultancy
Foreword xi
About REDmoneyREDmoney is a publishing and events company focusing purely on the global Islamic finance market. The company was started in mid-2004 in Kuala Lumpur, Malaysia, by Andrew Morgan and Andrew Tebbutt, and initially rolled out two products: Islamic finance training and Islamic finance news. Since then, a range of other products have been introduced including conferences, print media, and consulting.
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