South Africa's FNB to appoint new sharia board by year-end

* Sharia board resigned in July after disputes over role

* FNB Islamic division plans expansion in Africa, India

By Xola Potelwa

JOHANNESBURG, Aug 28 (Reuters) - South Africa's First National Bank (FNB) aims to appoint a new sharia board for its Islamic finance division by the end of 2012, after the previous board dealt a blow to the bank's effort in the sector by resigning a month ago.

"It's top priority for us. We are certainly aiming to have our final committee together towards the end of the year," Amman Muhammad, chief executive of FNB Islamic Finance, told Reuters late last week.

Muhammad joined FNB's Islamic finance division on July 1. The previous head, Ebrahim Patel, resigned after the bank conducted an investigation into "internal processes and practices of the businesses aligned to internal governance practice", according to Eric Enslin, head of client management at FNB Wealth, who declined to elaborate on the investigation.

FNB's sharia advisors quit after disagreements over the board's role when the new management took charge of the division, according to former board members.

A bank's sharia board supervises the institution's products and activities and certifies that they comply with Islamic principles.

FNB said its new sharia board would probably be made up of scholars from local and international Muslim communities, as its Islamic finance division would leverage the bank's presence in India and the rest of Africa to grow there.

A new sharia board for FNB, the retail arm of South Africa's second-biggest bank FirstRand, could help its business by increasing consumer confidence in its Islamic products.

"(When) members of the community have no method to get confirmation or comfort from the sharia board, that puts them on guard. They say, 'I'm not getting information from the sharia board, do I continue to deal with the bank?" said South African businessman and FNB client Abdur Moosa.

FNB says Islamic finance is currently not a "material contributor" to its bottom line, but that it intends the business to expand its contribution in future.

BOUNDARIES

Muslims make up only about 2 percent of South Africa's population but the country is looking to establish itself as a centre for Islamic finance in sub-Saharan Africa.

There are no national rules for Islamic finance in South Africa - banks are subject only to conventional banking laws - so the Islamic operations of institutions such as FNB, Al Baraka and Absa are under pressure to demonstrate to the public that their sharia boards are effective.

"Up until we get to a point where we start seeing a concerted regulatory change to the way Islamic banks operate in the country, and defined governance standards specifically around the functioning and the role of sharia boards, we ensure ourselves that through the boards we have, sharia compliance is always adhered to," Muhammad said.

The bank says it has learned a lesson from the recent incident and will draft clear rules and roles for its new sharia board, which will not include approving the appointments of senior personnel - a point of contention with the previous board, according to bank sources.

"In the absence of terms of reference, everybody (wonders) what's the role of the board," said Enslin.

"What is really key is to ensure that there's proper terms of reference and a constitution in place, which will (ensure) roles are quite clear, and their accountabilities."

Businessman Moosa, who has been a client of FNB Islamic Finance for nearly all eight years of the division's existence, said he had not entered new transactions with the bank since the last sharia board resigned.

( Reuters / 28 August 2012)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

UK: New legal set-up to pave way for syariah framework

Shying away from financial services that do not conform to their faith, British Muslims are now getting a new service to help them manage their finances in line with Islamic Shari`ah.

“Many of the traditional UK financial products involve receipt or payment of interest and as such are considered Haram (unlawful) for Muslims,” Shabab Gulfraz, financial consultant with Ummah Financial Planning, told Yorkshire Post on Tuesday, August 14.

“When looking at their financial arrangements, Muslims need also to consider how their money is invested and what drives the returns they are receiving.”

A new service financial service, called Ummah Financial Planning, has been launched by the accountants and business advisers Garbutt & Elliott in Yorkshire to help Muslims manage their finances in line with Shari`ah.

“There are very few specialist intermediaries in this market,” said Simon Holt, the managing director of Ummah Financial Planning.

“We want Ummah Financial Planning to go national, but initially the business will be based in Yorkshire.

“There are between two and three million Muslims in the UK, and around 25 to 30 percent of them live in West Yorkshire.”

Holt said the idea came after seeing that many Muslims could be steered away from financial services because of the absence of Shari`ah-compliant financial services.

“I worked alongside a Muslim scholar for nearly three years, supporting him in his work to bring more ethical financial products to Muslims in the UK and overseas,” Holt said.

“During this time, I realized that Muslims need specialist financial advice firms to be established which understand the culture, values and beliefs of the faith.

“This is where the idea for Ummah Financial Planning came from.”

Muslim Needs

The new financial service was issued after months of consultations with the Muslim community.

“The Ummah team have spent time consulting with the community to seek their advice on how best to engage with Muslims and brought in a specialist Muslim consultant to lead this work for them,” said Gulfraz, the financial consultant with Ummah Financial Planning.

“Many ISA, PEP, unit trusts and pension funds invest money in a mix of different assets including equities (shares), property, gilts (loans to the Government), corporate bonds (loans to companies) and cash (gilts, corporate bonds and cash are all interest bearing).

“Although these funds are professionally managed by teams of investment managers whose aim is to maximize the returns and create profit; they are often Haram (unlawful) for Muslims as they generate some of their profits from interest or investment into un-Islamic activities,” he said.

Islam forbids Muslims from usury, receiving or paying interest on loans.

Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.

Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.

Investors have a right to know how their funds are being used, and the sector is overseen by dedicated supervisory boards as well as the usual national regulatory authorities.

The launch of the new financial service in Britain was timed to coincide with the holy fasting month of Ramadan.

“Throughout this month, Muslims from all countries unite in a period of fasting and spiritual reflection,” Gulfraz said.

“All Muslims will spend time in this month reflecting on their individual faith and practices and reading from the Qur’an, with the aim of improving and strengthening themselves in accordance with the teachings of Islam.

“Ramadan is much more than just not eating and drinking. Muslims are called upon to use this month to re-evaluate their lives in light of Islamic guidance. Towards the end of this blessed month of Ramadan, Muslims are required to pay a fixed portion of their wealth to charity. When calculating the amount to pay, Muslims will take a detailed look at their financial arrangements.”

Britain is home to a Muslim minority of nearly 2.5 million.

Britain is the only country in the European Union to have Islamic banks. It is also developing its takaful market for Islamic insurance.

It also has a strong foothold in developing products such as commodity murabaha – Islam’s version of interbank short-term lending and syndicated loans.

(On Islam / 14 August 2012)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Malaysia: Shariah focus for new fund

Bullish on the country’s economic resilience, CIMB Principal Asset Management Bhd (CIMB-Principal) has launched the CIMB Islamic Al-Azzam Equity Fund, a syariah-compliant equity fund which aims to achieve consistent capital growth over the medium to longterm period.

The open-ended fund will invest 70-98% of its net asset value in syariah-compliant Malaysian equities listed on Bursa Malaysia, made suitable for those seeking to have a portfolio of investments that adhere to syariah principles.

Deputy chief executive Munirah Khairuddin yesterday said: “We believe if we continue to invest in stocks with strong fundamentals that includes healthy cash flow, quality company balance sheets and strong dividend yields, the fund should be able to deliver consistent long-term capital gain.”

The fund investment focus will be on companies mainly in oil and gas, plantations and consumer discretionary sectors, she added.

With a minimum investment of RM500, even individual retail investors can have access to established companies such as Axiata, Tenaga Nasional Berhad, IOI Group and Digi, among others, said Munirah.

She said the fund managers believed these companies would exhibit above-average growth potentials relative to the industry peers despite a global slowdown.

Syariah-compliant unit trust funds continue to gain popularity even among non-Muslims, because the equity component of such funds can be less volatile and more defensive in nature, she added, as these elements help boost investors confidence when investing in the country.

“In recent months, markets have been receiving more funding for the Economic Transformation Programme and national budget programmes focused on economic growth,” she said, the country has attracted a fair bit of foreign funds, which seek a safe haven amidst current volatile Asian markets that has lifted Malaysia’s Price Earning Ratio premium contribution to the region to a high of 38%.

Additionally, the premium is also partly justified by the 11% higher Malaysian earnings per share growth contribution to the region.

The fund, with an approved fund size of 600 million units, is priced at 25 sen per unit during the initial offer period. It is distributed by CIMB Bank, CIMB Private Banking, CIMB Investment Bank Bhd – Retail Equities and CIMB Islamic Bank, with the initial offer period ending on Aug 21.

(The Malay Mail / 02 August 2012)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com