KUALA LUMPUR: The lack of understanding of Islamic financing needs to be addressed so that people are not confused and misguided, says International Centre for Education in Islamic Finance (Inceif) chief academic officer/dean Prof Datuk Dr Syed Othman Alhabshi.

He said even some employees who worked at Islamic banks couldn’t fully understand the concept of syariah-compliance.

“We need to address this matter so that everyone will fully understand and have a clear picture of Islamic finance,” he told a press conference yesterday.

Syed Othman Alhabshi

Syed Othman said as the world was currently facing a financial crisis, Islamic banking could be an alternative for the conventional banks to regenerate their business.

“I’m not saying that Islamic banking is the only solution for the current problems faced by the conventional banks. However, if this system can be a vehicle or a better solution to help them, why not,” he said.

Inceif, in a joint partnership with Britain’s University of Reading, is offering a 12-month masters course on investment banking and Islamic finance. The first intake, which commenced in September, is one of the steps taken to produce more experts in the field.

At the event yesterday, University of Reading director of the ICMA Centre Professor John Board said whatever banking system being used by the banks, at the end of the day, it was all about the attitude of the people.

“If people are greedy, whatever system you use would surely collapse as what we can see now from the global financial crisis,” he said, adding that if the Islamic banking system could become a good vehicle to uplift the financial industry by raising more capital to run businesses, there should be no objection to implementing the system.

Board said as more conventional banks wanted to offer Islamic banking and finance, it was important to educate the professionals in the banking line to master the system.

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Non-Muslims now make up half of the OCBC Al-Amin Bank’s Islamic banking customers, says its chief executive

ISLAMIC banking is gaining ground with non-Muslims worldwide due to its strict lending principles, Singapore’s third-largest lender OCBC said today, reflecting industry efforts to transcend religious beliefs to gain market share.

Syariah finance is a blend of Islamic economics and modern lending principles and its products can be sold to Muslims and non-Muslims.

While it was previously a small market catering to Muslims who wanted to avoid interest-based conventional banking, Islamic finance has become popular in recent years due to cash-rich Gulf Muslim investors and rising demand for ethical investing.

Non-Muslim investors have also been looking for less risky alternatives since the onset of the global credit crisis over a year ago cast doubt on many Western risk management practices.

But the Islamic finance sector is still relatively small and the industry wants to grow its market share to become a global alternative to conventional banking.

Many banks including OCBC have set up Islamic banking businesses to tap opportunities in the US$1 trillion industry. OCBC’s Malaysian unit launched its Islamic banking subsidiary, OCBC Al-Amin, last month.

“Islamic banking is getting a firmer foothold in the market right now and it has attracted not just Muslims but also non-Muslims not just in Malaysia but in the other parts of the world as well,” OCBC Al-Amin Bank chief executive Syed Abdull Aziz Syed Kechik told reporters.

“(In) Islamic banking, there is a lot of other governance to be put in place to enhance the confidence and enhance the risk management through the syariah governance and framework.”

He said non-Muslims now make up half of the bank’s Islamic banking customers.

Islamic banking products such as home loans and insurance have drawn interest from Malaysia’s ethnic Chinese and Indian minorities.

Under Islamic insurance, or takaful, members contribute to a pool of funds which is used to indemnify participants who suffer a loss. Profits made from investing om the funds are distributed among members.

Globally, syariah bonds are among the fastest growing Islamic finance instruments, with recent issuers coming from non-traditional Muslim markets such as Japan.

There are more than 300 Islamic financial institutions worldwide and the sector is valued at about $1 trillion, just a fraction of the the conventional global banking industry.

OCBC Al-Amin will roll out more products to bolster its customer base, including four trade financing murabaha instruments this month, Syed Abdull said.

In a murabaha deal, a financier such as a bank buys a commodity and sells it to the customer at a higher price, complying with Islam’s ban on interest.

OCBC Malaysia’s overall loan growth, including conventional and Islamic, was expected to ease to a low-teen to high single-digit rate next year, OCBC Bank (Malaysia) Bhd chief executive Jeffrey Chew said.

“We’re looking at teens percentage in terms of growth for 2008,” Chew said. “Next year probably (there) will still be growth, possibly moderate a bit because the demand may have come down a bit from purchasing of capital items, large ticket items like houses and cars.” - Reuters

ISLAMIC finance is growing at an average of 15 per cent annually and gaining acceptance from the broader population in many countries, according to Institut Bank-Bank Malaysia chief executive officer Dr Mohd Kamal Khir.

"The total Islamic financial assets now exceed US$1 trillion (RM3.5 trillion), about fivefold its magnitude five years ago," Mohd Kamal said in conjunction with the Sixth International Islamic Finance Conference which opened in Kuala Lumpur last week.

According to him, the adoption of mainstream financial instruments by the Islamic finance community will see the sector playing a bigger role in global finance over the next decade.

"Such a development will not only further support the acceptance of Islamic finance, but also offer vast business opportunities made possible by the huge amount of Islamic funding available," he said.

"Players are quickly expanding their range of offerings by adopting some of the financial instruments available in the mainstream financial markets," said Monash University's Sunway campus chair of accounting and finance, Professor Bala Shanmugam.

He also said that the conference has emerged as an important international platform for the sharing of knowledge in Islamic finance. - Bernama

It plans three funds tied to sukuk and syariah equities

KUALA LUMPUR: Asian Islamic Investment Management Sdn Bhd (AIIMAN) targets to manage a fund size of US$300mil (RM1.09bil) in its first year of launch.

A 49:51 joint venture global Islamic investment management entity between Hwang-DBS Malaysia Bhd and DBS Asset Management Ltd of Singapore, AIIMAN intends to launch about three funds early next year, focusing on asset classes such as global sukuk and syariah-compliant Asian equities.

DBS Asset Management chief executive officer and AIIMAN director Deborah Ho said the market for Islamic investment products was growing at about 15% to 20% a year on demand for these products coming from the Middle East, Europe and Asia.

“Syariah equity fund assets alone are forecast to jump from US$15bil to US$53bil by 2010,” she said at the launch yesterday.

She added that under the current global economic climate, institutional investors were looking for less risky investments and Islamic investment by nature recognised the importance of avoiding investments in highly leveraged companies and complex derivatives.

AIIMAN is not DBS’s first initiative in global Islamic asset management.

“The first step was when DBS Bank set up the Islamic Bank of Asia (IB Asia) which offers commercial banking, corporate finance and capital market services. AIIMAN would be a valuable provider in our efforts to develop the Asian Islamic banking markets,” Ho said.

AIIMAN chief executive officer Nor Azamin Salleh said the company planned to leverage on the wide Asian networks of DBS Bank as well as IB Asia to gain a foothold in key markets for syariah products, specifically in most major cities in Asia and the Middle East.

Nor Azamin said most Asian countries had large current account surpluses and massive domestic liquidity.

“Asia accounts for more than 50% of the world’s population but controls less than 10% of the global wealth. It is catching up fast with the emergence of vibrant economies such as China and India,” he said.

He added that macro risks in Asia had reduced significantly since the last financial crisis while corporate governance had moved to a higher level across companies and sectors.

“Valuations are relatively cheap - Asian markets are trading at discounts to developed markets, but with vastly improved free cashflows and capital efficiency ratios,” he said.