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Challenges and opportunities for Islamic finance; BMB Islamic UK

Humayan Dar, chief executive officer of BMB Islamic UK, discusses new developments in Shar’iah-compliant finance.

BMB Islamic was founded in 2007 in London to provide Shar’iah advisory and structuring services. It enlists Shar’iah scholars and Islamic financial consultants to guide investors, lawyers and other investment professionals.

What new developments are taking place in Islamic finance?
There is little in the world of conventional finance that Islamic finance cannot replicate – whether in terms of financial instruments or funds. Sukuk — similar to bonds — are of course very well established now, and going forward it will be interesting to see which jurisdiction, whether Malaysia or the Middle East, will evolve as the dominant one for issuance and trading. But even sophisticated fund structures, such as private equity, hedge funds or specialist funds, are being set up so they are Shar’iah-compliant. We, at The BMB Group, have recently formed a private equity joint venture with Emerging Markets Partnership (EMP) to invest in emerging markets. BMB Islamic is also helping an investment bank to set up a Middle East infrastructure.

What about regional cooperation?
On February 18, The BMB Group formed a partnership with the International Zakat Organisation (IZO) to set up and manage a 2 billion Malaysian ringgit Global Zakat and Charity Fund, which will manage zakat (the act of giving alms to the poor) and other charitable funds to alleviate poverty in the 57 states which are members of the Organisation of the Islamic Conference. It is a long-awaited initiative. There has been inevitably a huge emphasis on Shar’iah-compliance in Islamic banking and finance, but the announcement of a Global Zakat and Charity Fund is the beginning of a new Islamic financial trend, which favours social responsibility and community development.

Will there be a resolution of what seems to be conflicting jurisdictions and centres for Shar’iah interpretation, and also competing centres for Islamic business?
In Malaysia there is strong inherent demand for Islamic products and the country has rapidly developed as a centre for Islamic finance. Perhaps most importantly, the government has provided institutional support, particularly through Bank Negara Malaysia (the central bank) but also through favourable legislation and tax treatment, for Islamic products. Middle Eastern financial houses have recognised this, and hence have entered the Malaysian market either directly or through partnerships and joint ventures. Malaysia is also correctly perceived as a gateway to other Asian markets.

Significantly too, Shar’iah-compliant financial products are now seen as competitive alternatives for non-Islamic people, who will happily buy them if they prefer the returns or their risk profiles compared with conventional products. Islamic finance is in the mainstream in Malaysia and is likely to become so elsewhere in the world — even Europe. Product standardisation will come through time, not by edict but through a wide acceptance of a particular norm.

What about Indonesia?
Indonesia, with its vast Muslim population obviously has tremendous potential. Once the institutional framework is in place — and already the government has issued its first sukuk — then the market should develop quickly. Perhaps the authorities need to be more like Malaysia and be more proactive and encouraging. Islamic finance will expand to countries and regions where there is a friendly regulatory environment, supported by a clear legal framework.

How will this year pan out, and what will be your main role?
This year will be tough, as it will be for all financial markets. However, pressure on government budgets, especially in the Middle East due to the lower oil price, means that some significant sukuk issuance is likely.

But, actually, the current conditions also offer the potential to take advantage of new opportunities and provide new products. With so much uncertainty, investors are seeking alternative havens for their capital, while depressed asset values of all kinds means there is a chance to build portfolios from a reasonable cost base. For instance, Islamic art funds are becoming popular.

An essential role for us is to monitor the Shar’iah-compliance of funds which are advertising and marketing themselves to Islamic customers. Integrity and credibility is all important.

Source: FinanceAsia.com, Rupert Walker , 26.02.2009

Filed under: Banking, Islamic Finance, News, , , , , , , , , ,

BMB Group to partner with International Zakat Organization to establish and co-manage a Global Zakat & Charity Fund

International Zakat Organization (IZO) announced today its partnership with the prestigious BMB Group to establish and co-manage a multi-billion Global Zakat and Charity Fund. In his address at the signing ceremony, the Honourable Dato’ Seri Dr Ahmad Zahid Hamidi, Minister in the Malaysian Prime Minister’s Department and Chairman of the Board of Directors of IZO, said, “The purpose of IZO is to uphold Zakat as a tool for economic development, social Takaful, the enhancement of solidarity and the promotion of cooperation between Muslim communities and countries around the world, especially for the sake of Ummah.

The Global Zakat and Charity Fund will offer us the required transparency in operations and financial expertise for the management of funds.” He further added that “Every Muslim should take into consideration the fact that the whole Muslim nation, both individuals and governments, has the responsibility to solve the collective crises of poverty, corruption and inequality suffered by millions of Muslims throughout the Islamic World. The only way to solve these crises is through the duty of Zakat. The implementation of Zakat will be in accordance with the Quran and Sunnah. We will see how a properly implemented system can solve the current economic problems of not just Muslims, but of the whole world.”

The proposed Fund will manage Zakat and other charitable funds to alleviate poverty in the member committees of the Organisation of the Islamic Conference (“OIC”). “It is a long-awaited initiative,” said Dr Humayon Dar, CEO of BMB Islamic, a subsidiary of The BMB Group. “There has been inevitably a huge emphasis on Shari’a compliance in Islamic banking and finance, but the announcement of a Global Zakat and Charity Fund is the beginning of a new Islamic financial trend which favours social responsibility and community development.”

OIC has 57 member states of which some have already committed themselves to IZO and its various initiatives. In addition to co-managing the fund, The BMB Group will assist in involving the remaining governments in this special project. The expected size of the fund will be Two Billion Malaysian Ringgit in the current calendar year.  Mr. Mohammad Hassan Esa, Managing Director and CEO of IZO, who has played a pioneering role in establishing the IZO, was thrilled by the prospect of contributing to poverty alleviation among poor Muslim communities. He commented “Zakat is a tool that can single-handedly eradicate poverty not only from the Muslim world but from the entire world. The only condition is that we collect and manage the funds efficiently. The Global Zakat and Charity Fund is a step towards achieving that efficiency.”

The proposed fund will be co-managed by the IZO and The BMB Group, which benefits from Shari’a advisory and structuring capabilities of BMB Islamic. BMB Islamic was recently voted voted the Best Shari’a Advisory Firm for the year 2008 at the IFN Awards. The fund will invest in community development projects with an emphasis on sustainability. The three major areas to be targeted are: (1) income generation through the provision of affordable financing to small and medium enterprises; (2) development of social enterprise through the establishment of hospitals, educational institutions and housing associations; and (3) the provision of relief and emergency funding.

Rayo Salahadin Withanage, Chairman and CEO of The BMB Group commented, “The BMB Groups lead role in this initiative reinforces our heart found commitment to Islamic communities around the world. At this juncture in history where the world faces serious economic challenges, it is important for Muslims around the world to unite behind the common good of helping with the social, economic and environmental challenges that face our planet. We are delighted to be part of the IZO initiative.”

Source: BMB/UpStream Asia 24.02.2009

Filed under: Islamic Finance, News, , , , , , , , ,

BMB Islamic wins IFN award for best Shariah Advisory Firm

BMB Islamic, part of the Cayman Islands global alternative asset management firm BMB Group, was named as the Best Shariah Advisory Firm in Islamic Finance News (IFN) Poll conducted by Kuala Lumpur based Redmoney Group.

This award reiterates BMB Islamic’s leading role in the increasingly competitive global Islamic market. The Islamic Finance News (IFN) Awards are the most transparent and competitive awards in Islamic finance. They are based on a global poll in which nearly 2,500 votes were cast this year by leading practitioners and participants in the industry.

BMB Islamic will receive the prestigious award at two special Awards ceremonies: A ceremony for IFN Asia readers will take place on the evening of 12th February at the Mandarin Oriental Hotel in Kuala Lumpur followed by another at the Grand Hyatt Dubai on 3rd March 2009 for IFN Middle East readers.

Dr Humayon Dar, CEO of BMB Islamic UK Limited commented, “BMB Islamic are proud to be recognised by the global Islamic finance industry as the best team of Shariah technicians. We remain committed to Shariah-authentic innovation to offer ‘best of the best’ financial solutions to institutions offering Islamic financial services”.

Source: UpstreamAsia, 12.02.2009

Filed under: Banking, Islamic Finance, News, , , , , ,

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