China Turns To Islamic Finance To Drive Economic Initiative

In 2013, Chinese President Xi Jinping unveiled the Silk Road Economic Belt and the 21st-century Maritime Silk Road initiative now known as One Belt One Road, (OBOR) in order to actively develop connectivity and economic cooperation with countries mainly between China and Eurasia. The initiative aims to build a community of shared interests, destiny and responsibility with mutual political trust, economic integration and cultural inclusiveness. Initiating investment and developing economic trade communications with Islamic countries is one of important components of the OBOR strategy and this is detailed in the "Vision and Actions on jointly building the Silk Road Economic Belt and 21st-century Maritime Silk Road" published by the government on 28th March, 2015 ("Vision and Actions").

Compared to traditional financial products, Islamic finance has developed significantly due to its high flexibility of business, low risk, low debt requirements and the need to use real estate as collateral. In 2014, Sharia compliant financial institutions represented approximately 1% of total world assets, at around US$2 trillion. The latest study shows that, by 2020, the value of the global Islamic financial market will rise to US$3.25 trillion.

Financial integration is one of the key areas of cooperation set out in the Vision and Actions. The Chinese government emphasises that financial integration is a crucial element in the construction of the OBOR and has decided to speed up the incorporation and operation of the Silk Road fund. Proposals to strengthen the practical cooperation of China-ASEAN Interbank Association and to carry out multilateral financial cooperation in the form of syndicated loans and bank credit has also been completed. Qualified Chinese financial institutions and companies are encouraged to issue bonds in both Renminbi and foreign currencies outside China, and use the funds raised to invest in countries along the OBOR.

As background to the strategic execution of the OBOR, State Owned and private enterprises in China are also trying to make use of Islamic finance, as against traditional finance, to serve their own overseas development. Chinese banks are strengthening their cooperation with Muslim countries, and are busy developing their overseas business and outbound investment. Islamic finance is rapidly becoming an established channel for China to enlarge its overseas economic influence.

Issuing Islamic securities is an important mechanism for Chinese enterprises to raise funds and expand in Muslim countries. Although Islamic finance does not offer interest, there are still opportunities to ensure financial benefits and remuneration primarily through issuing Islamic securities (Sukuk). Investors who purchase such securities would not obtain interest as an income; however, they could be given remuneration in terms of investment gains.

It has been reported that a High Speed Rail project in China is considering using Islamic securities to raise a fund for almost 30 billion Chinese yuan (US$4.7billion). If successful, this would be one of the largest Islamic securities fund ever raised. 

In addition, Hainan Airlines Group is planning to raise US$150 million for ship purchasing, and this could be the first such deal to be approved by the Islamic finance authorities. Hainan is also planning to raise offshore Islamic securities. Some large banks in China have been raising their influence in the Gulf countries indeed, three of these banks issued traditional securities on NASDAQ Dubai, while others are in the planning stages. 

Country Garden, the Chinese mainland real estate agents announced their intention in October 2015 to issue Islamic medium-term notes with a nominal value of MYR1.5 billion (US$340million) through their wholly-owned subsidiary in Malaysia. This is the first case of the Chinese real estate sector raising funds offshore through Islamic finance mechanisms.

Apart from issuing Islamic securities, local Chinese government authorities and enterprises who need to raise funds will do so in Islamic countries with substantial oil capital, fundamental infrastructure and energy projects such as coal, chemicals, wind power and solar generation. These are in compliance with the investment preference of the Islamic finance system on projects with long term, low risk, steady income and the "Go Abroad" strategy of Islamic countries as part of their financial globalization. This has highlighted efforts through the promotion of local development of China to absorb foreign investment and maintain local stability.

However, we must also note that due to the characteristic of Islamic finance, and how it differs from traditional finance, there are numerous difficulties and challenges Chinese enterprises would have to face when using this structure. Unfamiliarity with the Islamic finance process is the prime issue for Chinese enterprises compared with traditional finance. Islamic finance, as a special financing system, has to follow the teachings of Islam, and as such certain areas are forbidden including the payment of interest, speculation, investments in alcohol and gambling, and both risk and interest share. In order to fully use Islamic finance, Chinese enterprises must learn the fundamental system and regulation that govern this financing mechanism and understand it business practices

Constraints on current policies and systems also have an impact on China's development of Islamic finance. In 2009, the Bank of Ningxia was approved as a trial centre for Islamic banking business, and is the first bank in China to do so. There was a further suggestion that Ningxia could be developed as a pilot region of financial cooperation between China and the Gulf states, becoming the Islamic finance centre of China, like Dubai in the Gulf and Kuala Lumpur in Malaysia, however, this has not yet been finalised by the government. One likely reason for this is the unique nature of Islamic finance which makes it very difficult to merge into the current financing management system in China. Under the OBOR, China is considering using Islamic finance as a breakthrough to initiate extensive business communication and project cooperation in many areas with Middle East and South East Asian countries. It is considering opening outbound Islamic financing institutions, and participating in the investment in these regions or developing enterprises which operate through Islamic financing products. This is not only safer for funds and better for comprehensive income, but also improves the long term benefits.

Following the initiation of the OBOR it is now developing the practical stages, and there will be a significant increase in the use of Islamic financing tools and investment in major construction projects. If the Chinese government could enhance its cooperation with Muslim countries through Islamic finance, that it will significantly progress the development of the Silk Road project.

About Mr Du, Baozhong

Mr. Du is a senior legal counsel in the Beijing office of Yingke Law Firm. After graduating from China University of Political Science and Law with a master degree, he had been working for the Department of Treaty and Law in China's Ministry of Commerce for 13 years, and was engaged in legal consulting work in a large-scaled state-owned enterprise. Mr. Du, as the delegation member of Chinese Government, has participated in the working group meetings held by the Commission on International Trade of the United Nations several times, and addressed as the Chinese representative on meetings of OECD and APEC. He is specialized in foreign direct investment, outbound investment, international trade, private equity, venture capital, mergers and acquisitions, foreign-related arbitration, labor law, etc.

About Ms. Li, Xuan

Ms. Li is working as a trainee in the International Legal Affairs Department of the Beijing office of Yingke Law Firm, and also acts as the coordinator of Yingke Brussels Office. After graduating from Dalian Maritime University with a bachelor degree in Maritime Law, and a LLM Maritime Law degree at Bentham House, Faculty of Laws, University College London. She used to work in-house in an international shipping company, responsible for marine insurance and admiralty laws. While working in the UK, she served as the assistant analyst for hedge funds at Thomson Reuters London. Her specialisations are maritime law, international trade law and international arbitration.

(Zawya / 09 June 2016)

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China turns to Islamic finance to expand economic clout

Islamic finance is gaining prominence as a channel for China to expand its economic influence abroad as banks strengthen ties with Muslim-majority countries and Chinese companies start to tap offshore pools of Islamic funds.

With a Muslim population of about 20 million, China has little reason to develop Islamic banking at home. But there are powerful reasons for it to get involved in the sector overseas.

China wants to build stronger trade ties with Asian countries under its "One Belt, One Road" strategy to rebuild Silk Road trade links with Asia and Europe.

The network will include the world's main centers of Islamic finance, the Middle East and Southeast Asia, where sharia-compliant assets account for as much as a quarter of total banking assets.

"With 'One Belt, One Road', (Chinese) state-owned enterprises and private companies are now more willing to explore Islamic finance," said Hong Kong-based Ben Ping Chung Cheung, Asia Pacific head of consultancy Shariah Advisory Group.

The firm is advising conglomerate HNA Group [HNAIRC.UL] on what could be the first Islamic financing by a mainland firm: a $150 million deal to buy ships. HNA also plans an offshore issue of sukuk (Islamic bonds), Cheung said.

A railway project in the eastern province of Shandong is also exploring issuing sukuk to raise as much as 30 billion yuan ($4.7 billion) for a high-speed rail link, said Cheung.

If successful, such a deal would rank among the largest sukuk ever issued. Hurdles remain, however, as discussions were still preliminary and any financing would face stiff competition from domestic banks, Cheung added.

In July, Singapore-based adviser Silk Routes Financials said it had been mandated by a unit of state-owned Sichuan Development Holding Co to advise on Islamic financing options.

"There is certainly some momentum, a consequence of the large and growing trade links between China and the Gulf," said Jonathan Fried, a partner at law firm Linklaters in Dubai.

Such plans are ambitious as Chinese firms face a steep learning curve in Islamic finance, which obeys rules such as a ban on paying interest and uses formats that can be morecomplex than conventional finance.

For their part, Islamic investors have plenty of money to buy into dollar-denominated sukuk, but historically have tended to invest in top-rated issuers.

"The attraction would be if sukuk is cheaper for issuers, and clearly there are a lot of companies in China within the right industries, the right structures for it," said Kalai Pillay, head of North Asia industrials at Fitch Ratings.

GOVERNMENT LEVEL

At a governmental level, Chinese participation in Islamic finance may be mainly via the Asian Infrastructure Investment Bank (AIIB), a new multilateral lender backed by Beijing.

The AIIB has discussed using Islamic finance with the Saudi Arabia-based IslamicDevelopment Bank (IDB), two lenders which have 20 member countries in common.

Islamic deals could help AIIB differentiate itself from rivals such as the World Bank and Asian Development Bank.

China's state-owned banks are already raising their profile in the Gulf. In the past year, Agricultural Bank of China, Bank of China and Industrial and Commercial Bank of China (ICBC) have issued conventional bonds listed on NASDAQ Dubai.

"The next stage will be sukuk issuance by Chinese entities, facilitated and co-managed by these banks," said Fried at Linklaters.

(Reuters / 22 September 2015)

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How Islamic finance could be about to take off in China

Islamic finance has been growing rapidly across the world in recent years. Today, the operation of Islamic banks and their associated financial institutions has created a trillion-dollar industry and is becoming a crucial mechanism for countries looking to increase their trade with Muslim nations in Asia and the Middle East especially.

Its popularity largely stems from operating under the principles of risk sharing and interest-free transaction. In contrast to conventional finance, transactions under Islamic finance operate under strict, risk-averse conditions.

Britain became the first non-Muslim country to issue an Islamic bond or sukuk in 2014. Hong Kong then raised US$1 billion from its inaugural issuance of sukuk in 2014. And recently, Goldman Sachs became the first conventional US bank to issue a sukuk, raising US$500m with its debut sale of one. And the Bank of Tokyo-Mitsubishi UFJ, Japan’s largest lender, has also got in on the game.

Despite this global spread, mainland China remains a major market that Islamic finance has not yet reached. But this could be set to change in the coming years – and one province in particular is leading the way. Ningxia, in the north-west of China, is an autonomous region where 35% of the population is Muslim and there has recently been talk of establishing an Islamic Financial Centre there in the next five to seven years.

Developing the Chinese market

The development of an Islamic capital market in Ningxia could be the start of a new financial relationship between China and the Islamic world. For this to flourish, however, Islamic finance must be open to and adopted by non-Muslims as well, so that it can gain a larger foothold in the country.

Perceived by many in China as being for Muslims only, Islamic finance has struggled to take off. Ningxia’s initial focus should therefore be on developing a wholesale Islamic capital market, including Islamic bonds, equities and funds and making sure it is seen as a real alternative to the conventional market.

Ningxia can learn from the best practice of its neighbours, where Islamic finance is the norm: Malaysia, Indonesia and Singapore. This includes establishing separate regulatory standards for Islamic finance and developing a well-functioning Islamic capital market. This way the region can immediately serve the international Islamic market.

There is also a need to change local laws so that Islamic finance is on an equal footing with conventional finance. Local laws and tax regulations need to be modified to permit shariah-compliant investments. This needs the central and local government to set up an administrative mechanism to push things through to make it happen.

Attracting outside interest

Ningxia is also spearheading the development of a halal market in China, which will play an important role in boosting the country’s ties with the Muslim world. In September 2014, Ningxia Halal Food International Trade Certification Centre that established in January 2008 became the first Halal certification body in China with government’s stamp of approval. This is an important signal that they are serious about shariah-compliance.

China must be careful that it comes across as sincere in this endeavour, however. The effort could be undermined by cultural insensitivities such as allowing Muslim restaurants to serve alcohol alongside halal food. This is commonly found in big cities such as Shanghai, Beijing and Guangzhou. Muslims outside China may conclude that these restaurants are not Halal and may lose confidence in China’s commitment to it – and by implication, Shariah law more generally.

In recent years, trade between China and the Middle East has considerably increased. For example, trade between the UAE and China has increased five-fold over the past ten years – a growth rate of 395%. This will only have a positive influence in developing Islamic finance in China.

The launch of the Shanghai Free Trade Zone in 2013 has generated a great deal of interest in the growth possibilities of financial services in general. Many of the big Islamic banks have stated their interest in opening branches in China and Bank Muamalat Malaysia has already teamed up with China’s Bank of Shizuishan to establish its first Islamic bank in Ningxia.

Banks from the Gulf are taking a greater interest in China too. Qatar International Islamic Bank and its compatriot QNB Capital recently signed an agreement with China-based Southwest Securities to develop Shariah-compliant finance products in the country.

These banks are no doubt attracted to the huge number of infrastructure projects that China has planned. With 9% of GDP per year spent on infrastructure projects and an expression of interest in Islamic finance for projects from hospitals to metro stations, according to London-based Dome Advisory, there is a huge market to tap.

The growth potential of Islamic finance in China is huge given the country’s 1.3 billion population. If we take on an optimistic approach, that Islamic finance is for everyone and is just an alternative to conventional finance, there is a tremendous pool to tap, given the huge banking and capital market opportunities in China. But even if you take the worst-case scenario and narrow the target to just the Muslim population, the prospects are still bright. At 2% of the Chinese population, there are still about 23m Muslims in China.

(Scroll.In / 10 May 2015)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
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How Islamic finance could be about to take off in China

Islamic finance has been growing rapidly across the world in recent years. Today, the operation of Islamic banks and their associated financial institutions has created a trillion-dollar industry and is becoming a crucial mechanism for countries looking to increase their trade with Muslim nations in Asia and the Middle East especially.

Its popularity largely stems from operating under the principles of risk sharing and interest-free transaction. In contrast to conventional finance, transactions under Islamic finance operate under strict, risk-averse conditions.

Britain became the first non-Muslim country to issue an Islamic bond or sukuk in 2014. Hong Kong then raised US$1 billion from its inaugural issuance of sukuk in 2014. And recently, Goldman Sachs became the first conventional US bankto issue a sukuk, raising US$500m with its debut sale of one. And the Bank of Tokyo-Mitsubishi UFJ, Japan’s largest lender, has also got in on the game.

Despite this global spread, mainland China remains a majormarket that Islamic finance has not yet reached. But this could be set to change in the coming years – and one province in particular is leading the way. Ningxia, in the north-west of China, is an autonomous region where 35% of the population is Muslim and there has recently been talk of establishing an Islamic Financial Centre there in the next five to seven years.

Developing the Chinese market

The development of an Islamic capital market in Ningxia could be the start of a new financial relationship between China and the Islamic world. For this to flourish, however, Islamic finance must be open to and adopted by non-Muslims as well, so that it can gain a larger foothold in the country.

Perceived by many in China as being for Muslims only, Islamic finance has struggled to take off. Ningxia’s initial focus should therefore be on developing a wholesale Islamic capital market, including Islamic bonds, equities and funds and making sure it is seen as a real alternative to the conventional market.

Ningxia can learn from the best practice of its neighbours, where Islamic finance is the norm: Malaysia, Indonesia and Singapore. This includes establishing separate regulatory standards for Islamic finance and developing a well-functioning Islamic capital market. This way the region can immediately serve the international Islamic market.

There is also a need to change local laws so that Islamic finance is on an equal footing with conventional finance. Local laws and tax regulations need to be modified to permit shariah-compliant investments. This needs the central and local government to set up an administrative mechanism to push things through to make it happen.

Attracting outside interest

Ningxia is also spearheading the development of a halal market in China, which will play an important role in boosting the country’s ties with the Muslim world. In September 2014, Ningxia Halal Food International Trade Certification Centre that established in January 2008 became the first Halal certification body in China with government’s stamp of approval. This is an important signal that they are serious about shariah-compliance.

China must be careful that it comes across as sincere in this endeavour, however. The effort could be undermined by cultural insensitivities such as allowing Muslim restaurants to serve alcohol alongside halal food. This is commonly found in big cities such as Shanghai, Beijing and Guangzhou. Muslims outside China may conclude that these restaurants are not Halal and may lose confidence in China’s commitment to it – and by implication, Shariah law more generally.

In recent years, trade between China and the Middle East has considerably increased. For example, trade between the UAE and China has increased five-fold over the past ten years – a growth rate of 395%. This will only have a positive influence in developing Islamic finance in China.

The launch of the Shanghai Free Trade Zone in 2013 has generated a great deal of interest in the growth possibilities of financial services in general. Many of the big Islamic banks have stated their interest in opening branches in China and Bank Muamalat Malaysia has already teamed up with China’s Bank of Shizuishan to establish its first Islamic bank in Ningxia.

Banks from the Gulf are taking a greater interest in China too. Qatar International Islamic Bank and its compatriot QNB Capital recently signed an agreement with China-based Southwest Securities to develop Shariah-compliant finance products in the country.

These banks are no doubt attracted to the huge number of infrastructure projects that China has planned. With 9% of GDP per year spent on infrastructure projects and an expression of interest in Islamic finance for projects from hospitals to metro stations, according to London-based Dome Advisory, there is a huge market to tap.

The growth potential of Islamic finance in China is huge given the country’s 1.3 billion population. If we take on an optimistic approach, that Islamic finance is for everyone and is just an alternative to conventional finance, there is a tremendous pool to tap, given the huge banking and capital market opportunities in China. But even if you take the worst-case scenario and narrow the target to just the Muslim population, the prospects are still bright. At 2% of the Chinese population, there are still about 23m Muslims in China.

(The Conversation / 06 May 2015)

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China Readies for Islamic Finance With a Little Help From Gulf

The most populous country in the world may be poised to get serious about Islamic finance, and banks in the Gulf Cooperation Council are taking note.

Qatar International Islamic Bank QSC and QNB Capital LLC last week signed an agreement with China-based Southwest Securities Co. to develop Shariah-compliant finance products in the country. Seven months after Hong Kong sold its debut sukuk, China is exploring Islamic finance for projects from hospitals to metro stations, according to London-based Dome Advisory Ltd., which is working with a government-owned fund in Shanghai to finance five projects.

“The Hong Kong sukuk has given more confidence to the Chinese market,” Sheikh Bilal Khan, a Shariah scholar and director of Dome, said by phone on April 16. “Having seen Hong Kong and the U.K. do this, and the fact Islamic finance is growing at a fast rate, in the next three to five years China will be a big player. It’s unavoidable.”

China’s growing interest in Shariah-compliant finance will add momentum to an industry that Ernst & Young LLP estimates will grow to $3.4 trillion by 2018, from $1.7 trillion two years ago. The world’s second-biggest economy in January approved plans to accelerate 300 infrastructure projects valued at 7 trillion yuan ($1.1 trillion), according to people with knowledge of the matter, in an effort to boost an economy expanding at the slowest pace since 1990.

Hong Kong Debut

Southwest Securities, based in Chongqing and majority-owned by the city’s state-owned enterprises, is seeking access to investors “primarily in Qatar and the Middle East,” according to an e-mailed statement from Qatar International Islamic Bank last week. The partnership is also intended to help the Qatari lenders access the Chinese market. The country is Qatar’s fourth-biggest trading partner, according to data compiled by Bloomberg.

Ningxia, an autonomous region in northwest China where a third of the 6.5 million population are Muslim, plans a $1.5 billion sukuk sale, according to a December exchange filing.

Hong Kong, the city that returned to Chinese rule from the British in 1997, sold $1 billion of five-year sukuk in 2014 and said it wants to become an Islamic finance hub. The notes yielded 1.74 percent on April 17, according to data compiled by Bloomberg. National Bank of Abu Dhabi PJSC, the United Arab Emirates’ biggest lender by assets, Abu Dhabi Islamic Bank PJSC, Dubai-based Emirates NBD PJSC and Qatar’s QInvest LLC all worked on the deal.

China Calling

While China in August allowed local governments to sell bonds directly to refinance debt following a two-decade ban, the country will need to make more regulatory changes to promote Islamic finance, according to Rizwan Kanji, a Dubai-based partner at law firm King & Spalding LLP, who helps structure Islamic deals.

“It’s the first step in the right direction, but there is work to be done before we see successful issuances,” he said by phone on April 16. Investors need a better understanding of the legal infrastructure and “enforceability issues,” he said.

China’s economy is forecast to expand 7 percent in 2015, according to median of 60 economists’ estimates compiled by Bloomberg, the slowest pace in about 25 years. The projects approved in January span industries including oil and gas pipelines, health, clean energy, transportation and mining, and will be funded by the central and local governments, state-owned firms, loans and the private sector, the people said.

“There’s a lot of appetite for GCC money,” Dome’s Khan said. “This agreement will hopefully pave the way for Islamic finance to pick up steam in mainland China.

(Bloomberg Business / 20 April 2015)

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QIIB and QNB Capital in deal to promote Islamic finance in China

QIIB and QNB Capital have joined hands with Southwest Securities (SWSC) to promote Islamic financing and investments in China.

Chinese brokerage Southwest Securities is based in Chongqing, one of the five “listed central cities” in China. Southwest Securities is also Chongqing’s first listed financial institution.

The agreement was signed yesterday in Doha on the sidelines of an event held to formally open the Middle East’s first centre for clearing transactions in the Chinese yuan. QIIB chief executive officer Abdulbasit A al-Shaibei told Gulf Times yesterday the “partnership would help create a framework for Islamic financing” in China. 

Besides helping Southwest Securities to access investor markets in Qatar and the Middle East, the agreement also aims to open the Chinese market for both QIIB and QNB Capital. 

“We are looking to access the Chinese market for financing and investments, either directly or indirectly,” al-Shaibei said. 

He said the agreement was the first one of its kind in both China and Qatar.

Al-Shaibei said there was a “clear appetite” for Islamic financial instruments in China. “Chongqing is among the five top Chinese cities and they are looking to promote Islamic banking not just in the other provinces in China, but beyond their borders to surrounding Asian countries,” he said.

Al-Shaibei said an agreement between the two countries called for Qatari banks’ presence in China.

“As HE the QCB Governor Sheikh Abdulla bin Saud al-Thani mentioned today (Tuesday), the agreement encouraged Qatari banks to have a presence in China.”

He said it was part of “QIIB’s vision to invest in China”.

“We have clearly seen from the Chinese side an interest for Islamic instruments. China is a huge economy and their neighbouring countries in Asia have a huge population of Muslims. Clearly, there are prospects for developing Islamic financing in China and the surrounding countries,” he said. 

“Through this agreement, QIIB and QNB Capital will work together with SWSC to reach the targeted goals and support Chongqing in the development of its economic blueprint to develop Islamic financial instruments,” al-Shaibei said. 

The agreement, the QIIB chief executive officer said, was “open and not time-bound.”

A Reuters dispatch said currently there was very little Islamic finance activity in China, but the country’s population of Muslims was estimated at more than 20mn. The agency said some bankers saw room for the Islamic finance industry to develop in China.

China’s AVIC Capital Co said in late December that its unit AVIC Securities had signed an agreement to advise the government of the country’s Ningxia Hui Autonomous Region, which has a large population of Muslims, on the global issue of up to $1.5bn worth of instruments such as Islamic bonds and US dollar bonds, with maturities of up to five years. Since then, no concrete progress towards an issue has been announced. 

(Gulf Times / 14 April 2015)

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Hong Kong to issue sukuk of up to $1 billion after summer

Hong Kong's government plans to issue as much as US$1 billion worth of Islamic bonds later this year, a spokesperson for its central bank said, suggesting the territory's debut sukuk issue might be larger than initially expected.

Lawmakers in Hong Kong passed a bill last month that will allow the AAA-rated government to issue sukuk for the first time. A report by the territory's Legislative Council indicated the size would be around $500 million.

But a spokesperson for the Hong Kong Monetary Authority, responding in an email on Tuesday to questions from Reuters, said the preliminary plan was for a U.S. dollar-denominated issue of at least $500 million and maybe as much as $1 billion.

"The sukuk is expected to be launched after the summer holidays," the spokesperson said; this would imply an issue as soon as September.

Details of the plan are subject to confirmation but the sukuk are expected to have a maturity of five years or below and use the ijara structure, a common sale and lease-back format in Islamic finance, the spokesperson added.

The sukuk, aimed at international institutional investors such as central banks, sovereign wealth funds, and pension and other funds, would use state-owned properties in commercial premises as their underlying assets. They would be listed in Hong Kong and some other major Islamic centers, the HKMA said.

A debut sukuk from Hong Kong would boost its Islamic finance credentials and help position the territory as a gateway between mainland China and investors in the Gulf and southeast Asia, the two main centers for Islamic finance.

Other conventional banking centers are also seeking to burnish their Islamic credentials with debut sovereign sukuk issues. Prime Minister David Cameron said last year that Britain intended to issue sukuk worth around 200 million pounds ($335 million), while Luxembourg envisages a roughly 200 million euro($275 million) issue.

(Reuters / 15 April 2014)

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India, China may step towards Islamic finance

LAHORE - India and China may step towards the Islamic finance in 2014 where more than 200 million Muslim populations are in compatible search of a financial system with their religious beliefs and thoughts. There is no doubt that international financial crisis will not hit the Islamic finance industry but due to the Arab Spring, Islamic finance industry has faced recession in some countries of MENA but there are chances of revival in 2014.

These views were expressed by Islamic Finance expert, Zubair Mughal who is also CEO of Al Huda Centre of Islamic Banking and Economics (CIBE) while commenting on Islamic finance industry in 2014. According to him, Islamic finance will grow with rapid pace in the year 2014 and its volume will pass through $ 2 trillion where Islamic banking keeps 78%, Sukuk 16%, Takaful 1%, Islamic Funds 4% and Islamic Microfinance has 1% share in the Islamic Finance industry. In the year 2014, Dubai and London will be in competition to be the global hub of Islamic Banking and Finance while Kuala Lumpur will also attempt to be in this contest but the Islamic finance industry can be grown more through synergizing approach and alliance with industry stakeholders rather than setting any competition.

He said that the Islamic finance industry growth will go on double digit in 2014 which will turn the $ 1.6 trillion volume of Islamic finance industry in December 2013 to US $ 2 trillion by the end of 2014 including North African countries (Tunisia, Libya, Morocco, Senegal and Mauritania etc), rising trends of Islamic finance in Europe and UK, also the rising and substantial share of international market of Sukuk shall contribute to it.

He said that Sukuk will grow rapidly in 2014 and Muslim countries including non-Muslim countries e.g UK, China, South Africa and Europe etc will also get benefit from it which will enhance the growth in Islamic finance industry but Takaful Industry is not supposed to have any substantial breakthrough.

It is being hoped that 2014 will prove better period for Islamic Microfinance industry as different international institutions including Islamic Development Bank (IDB) have declared it a potential tool for poverty alleviation around the globe. He also added that Islamic finance industry may face recession in certain countries including Indonesia while in Nigeria and Tunisia it may face some problems on religious and political grounds. He said that the Islamic finance initiatives in America and Canada including Latin American countries (Brazil, Argentina and others) have been taken and it is hoped that Islamic Funds market will come into existence in these regions by the year 2014.

To a question, Zubair Mughal said that there are multiple opportunities in Association of Southeast Asian Nations (ASEAN) countries to promote Islamic Finance, through which Halal Industry can be flourished rapidly in the region.

He stated that Islamic Finance and Halal Industry are complement to each other. Micro and Small Medium Enterprises (MSME’s) can be energized by utilizing Islamic Finance concept in the region which will be cause to reduce in poverty and ultimate socio-economic prosperity in the ASEAN member Countries. Presenting an analysis on ASEAN countries including Malaysia, Indonesia, Brunei Darussalam, Loa PDR, Myanmar, Singapore, Thailand and Vietnam, he stated that the approximate total population of ASEAN countries is 600 million including the Muslim Population more than 40% (240 million) which is a potential indicator for Islamic Finance growth whereas in Malaysia, Indonesia and Brunei Darussalam already have significant contributions in Islamic Banking, Takaful, Sukuk and Islamic Funds, while Philippines and Thailand are being considered as future potential markets for Islamic Banking and Finance in ASEAN countries.

He explained that Islamic Banking and Finance is the system not a religion which can be utilized by Muslim and Non-Muslims to get absolute benefits from the best services of Islamic Banking and Finance as its best example is the South Africa where Muslim population is less than 2% of the whole population but it has more than 5 Islamic Banks, 13 Islamic Funds and 2 Takaful companies working actively, which are equally famous among Muslims even non-Muslims communities because of their best practices and services.

He said that Philippines is an important country of the region with having 100 million populations, approximately, containing Muslim population by more than 7% which bears it out that there are momentous chances for the promotion of Islamic Finance and, apparently, government of Philippines found active in this concern and it will, definitely, energize Islamic Banking and Takaful in result.

(The Nation / 06 Jan 2014)

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