The First Gulf Conference on Halal Industry and its Services. 24-26 January 2011. Salmiyah ... London as a global gatewa
Role of Islamic Finance in Supporting the Halal Industry and its Services Dr. Asyraf Wajdi Dusuki Head of Research Affairs, International Shariah Research Academy for Islamic Finance (ISRA) Malaysia The First Gulf Conference on Halal Industry and its Services 24-26 January 2011 Holiday Inn Hotel, Al-Salmiyah, State of Kuwait
دور التمويل اإلسالمي في دعم صناعة الحالل وخدماته
د .أشرف وجدي الدسوقي رئيس شؤون البحث العلمي ،األكاديمية الدولية للبحوث الشرعية للتمويل اإلسالمي ،ماليزيا مؤتمر الخليج األول لصناعة الحالل وخدماته 26-24يناير 2011 فندق ھوليدي إن – السالمية – دولة الكويت
Global Outlook of Islamic Finance
The First Gulf Conference On Halal Industry and its Services
2
Why Islamic Finance?
3
Shariah Compliant Framework
4
Salient Features of Islamic Finance
5
Various Forms of Islamic Contracts
6
Islamic Asset Classes
7
Role of Islamic Finance in Halal Industry
8
Conclusion
Emerging interest on Islamic finance as viable alternative to the global financial system … Germany
UK
Gov’t sets an objective to ‘entrench London as a global gateway for Islamic finance
Saxony-Anhalt state issued government sukuk First Islamic bank to operate in 2010
Turkey Announced IFC Istanbul in Sep ’09 with focus includes interest-free Plans to issue sovereign sukuk, amend financial business tax law on IF Iran Bahrain Qatar Pakistan France Malta Saudi Arabia UAE Kuwait Thailand Passed rules/regulations to Plans to position Malaysia support Islamic finance as Islamic finance Sudan activities hub for the Mediterranean In process of licensing Indonesia Islamic banks Jordan Made fiscal & legal adjustment for IF Plans to tap sukuk market to transaction i.e. taxation finance its deficit Singapore guidelines on sukuk & Established first Islamic bank murabaha Introduced tax neutrality for Islamic finance
South Korea Parliament expected to pass the law related to offering of tax waiver on foreign investors’ interest income from sukuk issued
5 FSA-approved Islamic banks and Takaful operators
Aspiring to be centre for Islamic finance
Launched Islamic ETF
Japan Law passed allowing banks to do Islamic finance Hong Kong Aims to become Islamic finance gateway to China Plans to issue sovereign sukuk Hang Seng Islamic China Index Fund in 2007
Brunei Aim to become Islamic financial services hub for Asia
Muslim-majority countries offering Islamic finance (IF) Non-muslim countries starting to offer IF
Courtesy of Bank Negara Malaysia
Islamic finance… fastest growing segment in global financial system… Islamic Assets under Management
USD750 billion & expected to hit USD1 trillion by 2010 Average growth rate of 15-20% p.a.
Islamic Mutual Funds
USD300 billion Average growth rate of 23% p.a.
Takaful Contributions
USD7.2 billion Growth rate of 13% p.a.
Global Market Capitalization of Dow Jones Islamic Index
USD10 trillion
Shariah Compliant Global Funds
680 funds
Global Outstanding Sukuk
USD107 billion Average growth rate of 22% p.a.
Number of Islamic Financial Institutions (IFIs)
> 600 IFIs in the world
Enormous potential in Islamic Finance… Sources: McKinsey, The World Islamic Banking Competitiveness Report 2007-08, “Capturing the Trillion Dollar Opportunity”; PriceWaterHouseCoopers, Islamic Finance News, IFSB & National Authorities; Islamic Banker Research Group; Islamic Finance & Insurance & Investor Offshore Review
Demographically, Muslims population are huge.. research shows there are ample opportunities in Islamic finance remain untapped… Untapped Potential
Adapted from: PWC, Wikipedia
Potential customer base: world’s 1.5 billion Muslims Bulk of world’s Muslim population is young: 60% of global Muslim population is under 25 years Muslim high net worth individuals: USD1.5 – 1.8 trillion Takaful penetration rate: Below 2% in Middle East Region New petrodollar wealth – USD500 billion p.a. Adapted from: OliverWyman report
As the petrodollar money surge, GCC countries are looking for shariah compliant investments…. Top World Oil Net Exporters, 2008 (thousand barrels per day) Rank Country Exports 1 2 3 4 5 6 7 8 9
Saudi Arabia Russia United Arab Emirates Iran Kuwait Norway Angola Venezuela Nigeria
8,485 6,890 2,583 2,419 2,416 2,246 1,950 1,883 1,883 Source: www.wtrg.com
The Recent Financial Crisis presents opportunity to Islamic Finance… KEY ELEMENTS OF ISLAMIC FINANCE (IF)
Shariah values consistent with universal values
Source: Bank Negara Malaysia
'There has been much questioning of the values underpinning the conventional financial system & the search for alternatives means that Islamic banks are likely to receive more attention, especially as their raison d'être is morality in financial transactions, based on religious teachings” – Professor Rodney Wilson Source: LSE website Sources: Bloomberg, London School of Economics (LSE)
ENDS / الغاية
The Framework of Islamic Finance
Maqasid al-Shariah (The Objectives of Shariah)
1st Level of Compliant
Riba
Al-Zulm (Qimar)
Gharar MEANS/ الوسيلة
Uqud Musamma (Nominate Contracts)
Islamic Contract
Uqud Ghair Musamma (Non-Nominate Contracts)
Investment Activities Rectifying & Purifying 2nd Level of Compliant
Conversion Process Shariah-Compliant Operation
Hedging Instruments Monitoring & Supervision Social Responsibility
What’s The Difference Between Riba & Ribh الربا ِّ وح َّر َم َ البيع َ ُ & َّ واحل
الر َبا ِّ ُ قالوا ِا َّن َما ال َب ْي ُع مِثل ُ
“Allah permits trading but prohibits Riba” (2:275)
“They said that indeed trading is just like riba” (2:275)
RIBA NO COUNTER-VALUE
PROFITS What’s The Difference?
WITH COUNTER-VALUE (`IWAD)
Qaidah Fiqhiyyah: ِبالعمل وإِ َما َ الر ْب َح ِ◌ إ َّما ِبال َمال َوإِما ِّ ُي ْس َتح ُِّق الض َمان َ ِب (Jamharatul al-Qawaid alFiqhiyyah Vol.1 P.332)
9 Effort (Al-Kasb)
Risk (Al-Ghurm)
Liability (Al-Dhaman)
General Classification of Contract in Islam
Profit-making Contracts
Charitable Contracts ()تبرعات
Exchange Contracts ()معاوضات Cooperation Contracts ()معاوناات
10
Deposit-taking Contracts
Various forms of Islamic Contracts used in Banking
Sales-based Contracts
BBA – deferred sale; Murabahah – cost-plus sale; Bai al-Inah, Bai al-Tawarruq
Lease-based Contracts
Ijarah Wa Iqtina; Ijarah Thumma Al-Bai’, Ijarah Muntahia Bitamleek
Equity-based Contracts
Mudarabah, Musyarakah
Fee-based Contracts
Promise/Undertaking Wa`ad
Wadi’ah Yad Amanah; Wadiah Yad Dhamanah, Mudarabah; al-Qard
Hybrid Contracts
Kafalah/Dhaman (Guarantee); Wakalah (agency)
Musyarakah Mutanaqisah (Dimishing Partnership), AITAB etc.
11
Major Components of Islamic Financial Services ISLAMIC BANKING
ISLAMIC CAPITAL MARKET
Financing
Equity
Takaful
Deposit
Islamic Securities
Retakaful
Investment
Funds & Unit Trust I-REITs Venture Capital/ Private Equity Derivatives
TAKAFUL/ ISLAMIC INSURANCE
Sukuk Islamic Structured Instrument
Real Estates (IREITs)
Commodities
Islamic Financing Facilities
Islamic Asset Classes
Islamic Stock broking
Islamic Private Equity
FOREX
Islamic Hedge Funds
Unveil the potential of Islamic finance to Support Halal Industry… Potential areas in each value chain (e.g.)
Value Chain
Value Proposition
Secure deal to purchase stocks from Suppliers
Enter into equity partnership with Halal-based Companies
Joint venture may yield potential attractive Return
Financial muscle may enable IFI to enjoy economies of scale & bulk buying
Provide financing facility to Companies during growing & expansion stage
Various financing Tools in form of Equity/Debt may yield potential handsome return
• Islamic-based Instruments financing : Unique Features of each Islamic Financing and Investment tools offer various opportunities for innovation in business. Ensuring Halal processes from A-Z Provides opportunities for different business segments to grow and prosper
Provide financing facility to ready end-customers
Financing via Shariah contracts eg – sales-, lease-, Equity-, hybridBased Shariah Ct.
ّ َّ َوأَ َحل الر َبا ِّ & ُ ا ْل َب ْي َع َو َح َّر َم Allah has permitted trade & has prohibited riba’ -
Al Baqarah 275-
…Islamic finance offers value proposition that enable Halal industry to grow and escalate to another stage for the benefit the Ummah as a whole......
Assoc. Prof .Dr Asyraf Wajdi Dusuki Head of Research Affairs ISRA @ INCEIF 2nd Floor, Annexe Block Menara Tun Razak Jalan Raja Laut 50350 Kuala Lumpur MALAYSIA General Line : +603-2781 4000 Fax : +603-2691 1940 Email Website
:
[email protected] : www.isra.my
