ISSUE NO. 164 APRIL–JUNE 2007 RABI AL THANI–JUMADA AL THANI 1428 PUBLISHED SINCE 1991 GLOBAL PERSPECTIVE ON ISLAMIC BANKING & INSURANCE UK: OPEN DOOR POLICY HALAL BANKING OR ISLAMIC BANKING? QARD HASAN MICROFINANCE PROFILE: LORD EDDIE GEORGE ISLAMIC BANKING COMES TO KYRGYZSTAN TAKAFUL: THE ETHICAL WAY TO INSURE ISLAMIC FUND MANAGEMENT NEWHORIZON Rabi Al Thani–Jumada Al Thani 1428 CONTENTS Features 14 14 Kyrgyzstan: moving towards Islamic finance With a Muslim population of over 5.1 million and rising, the Central Asian Republic of Kyrgyzstan is asserting its Muslim identity in finance. 21 Lord Eddie George: The steady hand behind Islamic finance in the UK A profile of the former Governor of the Bank of England, and the initiator of the introduction of Islamic mortgages to the UK’s financial services market. 21 24 Open Door Policy A country focus on the UK’s Islamic finance market, its evolution and current developments, and the roles of the Government, governmental organisations and the industry regulator in making the country the most Islamic finance- friendly economy in the West. 34 Halal banking or Islamic banking? Haider Ala Hamoudi of Columbia Law School and Rehan Jafri of 1st Ethical give their views on whether today’s Islamic banking is Shari’ah perfect. 36 The ethical way to insure Interview with Ajmal Bhatty, global head of takaful at Tokio Marine Europe, Dubai, about the ethical aspects and benefits of Islamic insurance. Regulars 05 NEWS 30 IIBI NEWS 43 APPOINTMENTS A round-up of the important stories from the last quarter around the globe. 32 IIBI LECTURES 44 QUESTIONS & ANSWERS April and June lectures reviewed; 18 ACADEMIC ARTICLE July lecture preview. 46 CALENDAR Qard hasan microfinance. 40 ACADEMIC ARTICLE 49 RATINGS AND INDICES 29 ANALYSIS Investment planning and process in The global Islamic funds market. Islamic fund management. 50 GLOSSARY www.islamic-banking.com IIBI 3 EDITORIAL NEWHORIZON April–June 2007 Executive Editor’s Note Another three months have gone by, bringing yet more developments in Shari’ah-compliant finance around the world. This second issue of NewHorizon in 2007 EXECUTIVE EDITOR Mohammad Ali Qayyum, contains a selection of the most interesting, influential Director General, IIBI and significant happenings in the industry across the EDITOR globe from the last quarter. The words ‘new’ and ‘first’ Tanya Andreasyan are frequently used on the pages of this issue. A new Islamic fund to be hosted in Dubai, a new Islamic CONTRIBUTING EDITORS Tom Alford company launched in Abu Dhabi, a new Islamic bank to Don Brownlow be established in Yemen, a new product introduced by James Ling First Gulf Bank. Creation of the world’s first Shari’ah- Martin Whybrow compliant electronic payment system, launch of the first IIBI EDITOR Islamic bank in Singapore, plans to introduce Islamic Mohammad Shafique banking in the Maldives for the first time. But not all IIBI EDITORIAL PANEL the news is positive with the recent announcement by Mohammed Amin Ajmal Bhatty Southern Sudan requiring Islamic banks to convert to Stella Cox conventional banking or leave, although no date is Dr Humayon Dar specified by when the banks must do so. Iqbal Khan Richard Thomas Dr Imran Ashraf Usmani Nevertheless, the outlook for the future of the industry DESIGN CONSULTANT is optimistic. Kyrgyzstan, the Central Asian country Becky Ellison (a former Soviet Union republic), is introducing Shari’ah- compliant principles to its finance market. Islamic PUBLISHED BY IBS Publishing Ltd banking has reached new heights in the United Kingdom, 8 Stade Street with the country’s government planning to issue sukuk Hythe, Kent, CT21 6BE United Kingdom (government bonds). Lord Eddie George, the former Tel: +44 (0) 1303 262 636 Governor of the Bank of England, who was at the Fax: +44 (0) 1303 262 646 forefront of the development of the industry in Britain, Email: [email protected] Web: www.ibspublishing.com talks to NewHorizon about the evolution of Islamic finance in the country. CONTACT Advertising IBS Publishing Ltd Also in this issue, NewHorizon continues its analysis of Paul Minister Advertising Manager takaful (Islamic insurance) and once again focuses on the Tel: +44 (0) 1303 263 527 question of ethics in Islamic banking. Shari’ah-compliant Fax: +44 (0) 1303 262 646 microfinance is the subject of scrutiny in the academic Email: [email protected] article written by two specialists from the International SUBSCRIPTION Monetary Fund and The World Bank. And, of course, Institute of Islamic Banking & Insurance (IIBI) amongst other things, the magazine publishes all the 12–14 Barkat House latest information on the Institute’s activities, including 116–118 Finchley Road lectures, collaboration with other educational and London NW3 5HT United Kingdom training organisations, new and ongoing projects, Tel: +44 (0) 207 245 0404 and recent appointments. Fax: +44 (0) 207 245 9769 Email: [email protected] Web: www.islamic-banking.com ©Institute of Islamic Banking and Insurance ISSN 0955-095X Views expressed in this magazine are not Mohammad Ali Qayyum necessarily those of the Publisher Director General IIBI 4 IIBI www.islamic-banking.com NEWHORIZON Rabi Al Thani–Jumada Al Thani 1428 NEWS Halal industry gets a boost The first Islamic bank in Singapore Malaysia-based CIMB Islamic Microsoft (Malaysia) to develop Bank is going to participate in and implement an information the development of the country’s and communication technology Singapore’s largest bank, understanding of the cultural halal sector and plans to provide system for the halal industry. DBS, together with a group of nuances in the Middle East, RM1 billion ($294 million) to investors from the Middle the Islamic Bank of Asia finance its corporate customers ‘We must broaden the horizon East, has launched the first will be at the forefront of in this field. of halal to go beyond just food- Islamic bank in Singapore, new market-based ideas related products and services,’ Islamic Bank of Asia (IB Asia). to structure and introduce ‘All our 55 business centres and he stated. ‘There also needs to DBS holds a 60 per cent stake opportunities in Asia that 383 branches nationwide have be a mindset change in order in the newly formed bank, uphold Islamic banking been galvanised to target this to exploit the business and while the rest is distributed principles.’ sector,’ said Badlisyah Abdul commercial potential of halal between 22 individuals and Ghani, the bank’s CEO, in a to maximise the delivery of industrial groups from the Singapore itself has a Muslim statement. He expressed the socioeconomic benefit to Gulf states, including Bahrain, population of nearly 500,000 hope that companies involved the people.’ Kuwait, Oman, Qatar, Saudi and is considered to be ‘a in the halal business would turn Arabia and the UAE. convenient stopover for to the bank to discuss their In its turn, CIMB Islamic has GCC [Gulf financial requirements. identified Shari’ah-compliant According to Cooperation finance as ‘the missing link’ in His Excellency Council] CIMB Islamic has teamed the development of the halal Abdullah Hasan investors and up with the Halal Industry industry as most of the market Saif, head of the capital flows Development Corporation participants use conventional bank’s board bound for Asia’, (HDC) to develop the industry interest-based financial of directors according to together. HDC was established instruments. According and economic Jackson Tai in the spring of 2006 to to Ghani, less that five per affairs advisor (left), CEO spearhead the development cent of the industry players to Bahrain’s at the bank’s of the halal segment of the apply Islamic mechanisms and prime minister, parental group, economy in Malaysia, and is avoid riba (interest). He added ‘IB Asia will DBS, and IB chaired by the country’s prime that, in the future, ‘the halal focus on Asia’s vice minister, Abdullah Ahmad certification might also include commercial chairman. Badawi. The corporation has the requirement for Shari’ah- banking, recently signed a Memorandum compliant funding and financing corporate finance, capital He went on to state that of Understanding (MOU) with of the halal business operation’. market and private banking IB Asia is ‘strategically well services’. With paid-up capital positioned not only at the of $418 million, which is financial crossroads of Asia, expected to rise to $500 but also in Singapore, an New Islamic bank in Yemen million, the bank will Asian capital markets centre develop and provide Shari’ah- renowned for its effective compliant wealth management regulatory and corporate Ten Saudi businessmen are the capital, with the remaining and capital market instruments governance framework’. reported to have agreed to 65 per cent offered for public to customers in Asia and the set up an international Islamic subscription. IIUB will be Middle East. However, in its endeavours bank in Yemen, according established by purchasing and to attract Islamic funds and to Arab News. merging a number of existing ‘Middle Eastern investors become Asia’s leading centre banks in the country. are seeking new markets and for Shari’ah-compliant finance, The bank, called the innovative ways to protect and Singapore has to face rivalry International Islamic Union Its activities will include grow their wealth,’ said Saif. from the neighbouring Bank (IIUB), will have a capital financing various commercial, ‘With our strong Shari’ah countries of Malaysia of $10 billion and its founders industrial and tourism projects credentials and good and Brunei. will subscribe to 35 per cent of and supporting businesswomen. www.islamic-banking.com IIBI 5 NEWS NEWHORIZON April–June 2007 Emirates Group and Dubai Islamic Bank to Bank TuranAlem to promote launch subsidiary in Syria Islamic banking in Kazakhstan The world’s first fully-fledged country. The new bank Islamic financial institution, will offer Shari’ah-compliant Dubai Islamic Bank, has products and services and is If the co-operation received approval from the expected to be launched after proves successful, pertinent authorities in Syria the relevant licensing procedures Emirates Islamic to establish a subsidiary in the are finalised.