Islamic Banking in Europe Britain's First Islamic Mortgage DMI Group: 1996 Sees Profitability Islamic Finance Conferences; Kuwait's new laws for Islamic banks; MNI Takaful expects higher income; Islamic accounting committee set up; IDB's support for research projects; Investors race to world's biggest Islamic bank. % A sound investment... In an economic environment of rapid change, high inflation and depreciating currency, keeping your funds in a secure place is a sound investment. Al Faysal Investment Bank'^ Foreign Exchange Certificates of Investment (Fx COI's) give you the flexibility of investing among four of the world's most stable currencies. Your investment is secure, and you also get good returns. We back it up with AFIBL's personalized brand of Service. Special Features of Fx COI's: • Higher returns than the International market • No Zakat, Withholding or Wealth tax • No restrictions on worldwide remittance • Financing facility in Pak. Rupee available against your investment • Maturities ranging from 3 months to 3 Years • Choice of investments in Pound Sterling, Yen, US Dollar and Deutsche Mark For more information, contact: Islamabad: Malik Muhammad Sajjad Sarwar/Nusrot Wafa 15 West Blue Area, Jinnah Avenue, Tel: (051) 272579 Fox: (051) 272578/272570/272569 Karachi: All H Askari 1st Floor, Block-A, Finance and Trade Centre, Shahrah-E-Faisal Tel: (021) 5660472-76 Fax: (021) S687130/S68761 7 Lahore: Ms Sara Khan Al-Faysal Investment Bank Ltd. 2nd Floor, Ajmal House, 27 Egerton Road Tel: (042) 6316000 Fax: (042) 6316500 Investing in the future Horizon MAY 1997. Issue No.63 ISSN 0955-095 Published by COMMENT Institute of Islamic Banking & Insurance ICIS House 2 Islamic Banking in Europe 144-146 King's Cross Road Only a decade and a half ago. Western bankers dismissed Islamic Banking as an unworkable dream. Today, thanks London WCIX 9DH largely to the efforts of Islamic scholars and economists, the Tel: 0171 833 8275 Fax: 0171 278 4797 Islamic sections of European and Western banks are man• E-mail: [email protected] aging Islamic funds worth billions of dollars. Remarkably, http://www.islamic-banking.com Islamic banking is successfully taking roots in an un- Islamic environment! EDITORIAL BOARD FEATURES Muazzam Ali 3 Britain's First Islamic Mortgage London From UBK Mukarram Ali The new Manzil programme, being offered by the United London Bank of Kuwait (UBK), finally gives British Muslims a way out of the home-owning trap - the facility to purchase a Dr Reza Shiva home without entering into an interest-laden mortgage. Tehran The advent of an Islamic loan to buy homes, could be a Godsend for Britain's 2 million plus Muslims, of which Prof. Dr Murat Cizacka 40,000 families are estimated to seek finance for home pur• Istanbul chases each year. New Horizon talks to Keith Leach, a man• ager of the Islamic Investment Banking Unit at the UBK in Dr. Shahid H. Siddiqui Karachi London. Al- Bagkir Youssef Mudawi 5 Islamic Project Financing Conference Khartoum Looking at the latest developments and rapid rate of evolu• EXECUTIVE EDITOR tion in this area, and marvelling at the diverse spectrum of S. Ghazanfar Ali activity. Professor Dr Murat Cizakca reports on the Project Financing Conference organised by the Asia Business Forum in Kuala Lumpur. EDITORIAL ADVISER Asma Siddiqui 9 DMI Group: 1996 Sees Profitability EDITOR According to Chairman, HRH Prince Mohamed Al-Faisal Shahzad Sheikh Al-Saud, Dar Al-Maal Al-Islami (DMI) Group's 1996 results: "show a welcome return to profitability and we RESEARCH ASSOCIATE continue to reshape the DMI Trust for further profit Daphne Buckmaster improvement. In 1996, we recorded a net profit of US$10.1 million compared to a net loss of US$8.0 million in 1995. BSN 0955-095X Gross income of US$148.5 million was US$17.3 million The views expressed in this higher than the corresponding figure the previous year." Magazine are not necessarily those of the Publishers or ofllBI. NEWS MONITOR Price Per Copy Islamic Finance Conferences; Kuwait's new laws for Islamic UK £ 3.00 banks; MNI Takaful expects higher income; Islamic accout- Europe £ 4.00 ing committee set up, IDB's support for research projects; Rest of the World £5.00 Investor's race to world's biggest Islamic bank. Islamic Banking in Europe I I Ihe concept of Islamic banking was raised at a studied and absorbed the philosophy of Islamic I meeting of Western bankers in London over a banking the Western bankers wasted no more time JL decade and a half ago, when it was in adopting the system. described, and dismissed, as "an unworkable Thus we have the present-day situation where dream". many major banks in the West have opened Islamic Western bankers expressed scepticism over the sections in their organisations. They operate Islamic system's merits, and were convinced that, according to the guidelines of Islamic Shariah, and like other Utopian projects, the dream would ulti• all of them have Shariah Advisers who supervise mately end as a nightmare. their activities. They are also constantly researching They simply refused to give the concept any and developing new products in keeping with the credence whatsoever, in their minds it was unfeasi• needs of the modern financial world. Furthermore, ble within the context of contemporary world-wide conversant as they are with the super-productive banking and finance systems. They ridiculed the modern marketing techniques, they are quick to notion of Islamic banking actually being introduced project their products and reach their clients effi• in parts of the Muslim world, and even considered ciently. withdrawing their operations from such countries. The overall popularity of Islamic banking can How things change. Within the relatively negli• be assessed by the sheer number of Islamic banking gible period of ten years the situation is all but seminars and conferences that are being organised reversed. This is thanks largely to the efforts of in many parts of Europe and USA, besides scores Islamic scholars and economists. Due to their dedi• more in the Middle and Far East. cation and un-wavering commitment to Islamic All these conferences are regularly attended, banking, what was once 'unworkable' is now a and participated in, by European bankers, econo• thriving reality, having made its mark in several mists and legal experts. countries, both Muslim and non-Muslim. Not surprisingly the Islamic sections of It was not easy to introduce the concept and European banks are managing Islamic funds worth practices in the absence of any forward planning, billions of dollars. research and training programmes. However, all A survey shows that there are many other rea• these short-comings were overcome by the commit• sons that prompt Islamic financers to place their ment of its operators. They spared no efforts to funds with European banks: develop Islamic banking in the light of the guide• a) They are convinced that their funds are used lines of Shariah. In the process they discovered the strictly in accordance with the Islamic Shariah, as superior qualities of the Islamic economic order - interpreted by Shariah scholars. an order which not only looked after the material b) They are impressed by what they term the needs of human beings, but also the moral needs. 'transparency' of the Islamic system of banking In effect it was a truly ethical system. And as the operations. caring 1990s approached, the world-wide mood c) Political instability in Islamic countries com• turned towards concern for the damage mankind pels them to keep their funds in what they regard has inflicted upon his environment and human as "secure" banks in Europe. society. d) They feel that the confidentiality of their Thus the same Western banks that were initially accounts through the Islamic windows of Western sceptical of Islamic banking, began to take a fresh banks is assured. look at the Islamic concept and its operations, slow• e) The rate of profit on their funds is also ly realising that the answers to many of the ethical attractive. dilemmas faced by financial institutions were to be All of which leads us to one remarkable conclu• found there. Several Islamic financial institutions sion: despite the initial hurdles. Islamic banking is operating in various parts of the world served as successfully taking roots in an un-Islamic environ• training grounds for them. Having thoroughly ment! New Horizon May 1997 2 HI- • * ¥ l-fci Britain's First Islamic Mortgage From UBK The new Manzil programme, being offered by tiie United Banic of Kuwait (UBK), finally gives British Muslims a way out of the home-owning trap - the facility to purchase a home without entering into an interest-laden mortgage. The advent of an islamic loan to buy homes, could be a Godsend for Britain's 2 million plus Muslims, of which 40,000 families are estimated to seek finance for home purchases each year. New Horizon talks to Keith Leach, a manager of the Islamic Investment Banking Unit at the UBK in London. Q. The new Manzil programme being offered by the duced. Islamic Investment Banking Unit of the London- Q. Has permission to set up this loan programme based United Bank of Kuwait, is being hailed as the been obtained from the Bank of England? first mortgage for Muslims in Britain. How does this The form of Manzil is such that it is a permitted activity so-called 'halal' mortgage operate? for the Bank under our banking licence. The Bank of A. The concept is simple. The purchaser locates the England has, however, been separately advised of our desired property and agrees a price with the vendor plans. (seller). The purchaser then approaches us for financial assistance of a certain sum (up to 75% of the purchase Q.