Wednesday, October 29, 2008

SAC: BNM to review SAC’s role

By Halim Wahab & Habhajan Singh
PLANS are underway to compel the High Court to refer to the Shariah Advisory Council (SAC) of Bank Negara Malaysia (BNM) when presiding over Islamic banking and finance-related cases, unlike presently, where High Court judges are neither required to consult the Shariah experts or heed their advise.
It is learnt that the central bank is reviewing the necessary laws to make this possible. This follows the recent controversy over Islamic financing under the Al-Bai' Bithaman Ajil (BBA) concept and the confusion over the role of the SAC in determining the compliance status of Islamic finance products.
To date, BNM has not responded to queries from this newspaper on the implications of the judgment to the Islamic banking industry or if plans for changes to the SAC's role and powers are underway.
On July 18, High Court judge Justice Datuk Abdul Wahab Patail ruled that the application of the BBA contracts in 13 cases he presided over were contrary to the Islamic Banking Act 1983 (IBA), as the sale element in the BBA was deemed "not a bona fide sale". The judgment, which came to light following The Malaysian Reserve report on Sept 8, brings into question the profit portion of the facilities, as it suggests that defaulters need not pay more than the original financing amount obtained, thereby depriving banks of the profit they would otherwise have booked.
Consequently, confusion abounds over how such "profits" would now have to be treated in the accounts and why the BBA contracts are deemed not Islamic when the SAC had considered the concept as Shariah compliant in the first place. Questions also arise as to whether it is appropriate for non-Shariah specialists to decide on the Shariah compliance status of Islamic banking concepts and products, thus bypassing the SAC over such matters.
According to BNM, the SAC is an independent advisory body established under section 16B of the Central Bank of Malaysia Act 1958 and shall be the authoritative body for the ascertainment of Shariah law in Islamic banking, finance and takaful business. It stated that the Act provides that the SAC can be referred to by the court in its proceedings relating to Shariah matters in Islamic banking and financial business disputes. The council, which comprises experts in the disciplines of Shariah, banking, finance, economics and law, are appointed by the Minister of Finance on the recommendation of the BNM, pursuant to section 16B(2) of the Act.
In essence, Justice Abdul Wahab's ruling stated that the BBA contracts considered in Arab Malaysian Finance Berhad v Taman Ihsan Jaya & Others (2008) were contrary to the Islamic Banking Act 1983 (IBA).
An initial inspection suggests that the judgment, if affirmed by Malaysia's Court of Appeal, or adopted by other High Court judges, can have major repercussions on the local Islamic financial sector. To begin with, Islamic banks are heavily reliant on BBA-related contracts. Bankers fear the judgment because this could mean that current BBA financing clients would only need to pay the facility amount and would escape from paying the profit portion, if they default. (By Halim Wahab & Habhajan Singh; The Malaysian Reserve, Oct 29, 2008, Page 1)

SAC: ‘Regulations on Islamic finance should be amended’

A number of Shariah scholars who are involved in Islamic finance transactions have suggested that Bank Negara Malaysia (BNM) should effect an amendment to regulations to make it mandatory for judges to refer to the central bank's Shariah Advisory Council (SAC) when dealing with Islamic finance matters.
At the moment, High Court judges are not mandated to refer to the SAC, the anchor outfit in deciding the Shariah-compliance of banking and takaful products offered by Islamic financial institutions in Malaysia.
This issues came to light following remarks by High Court judge Justice Datuk Abdul Wahab Patail in a written ruling dated July 18 in Arab Malaysian Finance Bhd v Taman Ihsan Jaya & Others (2008).
In one of the two recent BBA judgment-related seminars, Dr Ashraf Md Hashim, Shariah adviser at ZI Shariah Advisory Sdn Bhd, said the court reference to the SAC must be made compulsory in determining the Shariah compliance status of any Islamic banking and finance product.
He said this might require amendments to the Act and therefore would take time to materialise. He believed the SAC was the best option available as far as Malaysia is concerned, and as such felt that what is allowed by the council should be accepted as Shariah-complaint by the courts.
"Shariah is a science by itself. Those who are not trained in the discipline should refer any issue in question to the expert in the field. It is the practice of the court to refer issues to relevant experts such as physicians and scientists. It will be a consistent practice if reference is made to the Shariah specialist for Shariah-related issues," he added.
Dr Ashraf was speaking at a seminar entitled Whither BBA in Malaysia? — Analysis of Recent Decisions, organised by legal firm Zaid Ibrahim & Co. ZI Shariah is a unit of Zaid Ibrahim.
However, another speaker at the same forum took a different view. Responding to the suggestion, former High Court judge Datuk Faiza Thamby Chik said there was no need for High Court judges to refer to the SAC on such matters. He contended that it was the duty of judges to interpret the law and if the ruling had created unhappiness, then the solution is to train the judges.
International Syariah Research Academy for Islamic Finance executive director Dr Mohd Akram Laldin, who also spoke at the half-day seminar, said there was a need to strengthen the role of the SAC to avoid confusion in the industry. He agreed that the SAC should be made the sole reference point on matters regarding Islamic finance, adding that the Islamic banking industry should depart from "controversial" contracts to other alternatives. (By Hablim Wahab & Habhajan Singh; The Malaysian Reserve, Oct 29, 2008, Page 4)

GIFC08: Sukuk issuers urged to be more care

By Habhajan Singh
Issuers of sukuk should re-examine the make-up of their product to ensure that it does not suffer the same fate as conventional bonds, an Islamic banker told a conference yesterday.
Parties involved in structuring sukuk, the closest cousin of conventional bonds, should be mindful to ensure that it does not go the way conventional bonds have gone in the ongoing global financial crisis, said OCBC Bank Malaysia Bhd's head of Islamic finance Alhami Mohd Abdan. He was one of the speakers at the Second Global Islamic Finance Conference (GIFC) 2008 in Kuala Lumpur.
Minister in the Prime Minister's Department Datuk Seri Dr Ahmad Zahid Hamidi officiated the two-day function which is organised by GlobalPro Consulting Sdn Bhd. In his presentation entitled 'Product development and implementation of Islamic finance', Alhami noted that the Western asset-backed securities (ABS) bubble-crashed primarily due to the questionable quality of the underlying assets, although the fundamental principles of securitisation are not without its merits. For the sukuk securitisation process, he said among the fundamental requirements for Shariah endorsement are that the nature of the assets securitised be tangible and economically viable.
New sukuk issues in 2007 reached a record high of about US$47 billion (RM168.28 billion) and the outstanding global sukuk market surpassed the US$100-billion mark, according to Bank Negara Malaysia (BNM). Up until August this year, BNM governor Tan Sri Zeti Ahtar Aziz, in a speech earlier this month, said sukuk had held its ground with a total global issuance now exceeding US$14 billion, and is expected to exceed US$200 billion in 2010.
Dr Aznan Hasan, a Shariah scholar from the International Islamic University Malaysia (IIUM) and a former member of the BNM Shariah Advisory Council, said that the demand for Shariah advisors is increasing, especially in auditing, product development and financial engineering. On the apparent divergence between Shariah views in Malaysia and the Middle East, he said that while efforts should continuously be made to narrow the gap in the divergence of opinion, "we should also approach these differences of opinion as a source of strength, rather than a source of weakness".
In his opening address, Ahmad Zahid praised BNM's role in ensuring the success of Islamic banking in Malaysia as the sector has continued to register significant growth since its introduction.
"Islamic finance has, thus far, remained positive, despite the current challenging global financial environment, thanks to rules that forbid the sort of risky business that is felling the mainstream institutions.
"The strength in Islamic finance is derived from Shariah principles, the key pillar of Islamic finance that has contributed towards its overall stability and resilience," he said.
Ahmad Zahid said Shariah injunctions require that financial transactions be accompanied by an underlying productive activity, thus giving rise to a close link between financial and productive flows. (By Habhajan Singh, The Malaysian Reserve, Oct 30, 2008, Page 8)

GIFC08: Lively debate on BBA ruling expected

By Habhajan Singh
Islamic bankers can expect a lively discussion on the recent High Court judgment on Al-Bai' Bithaman Ajil (BBA) at the Second Global Islamic Finance Conference (GIFC 2008) that begins today in Kuala Lumpur. Shariah and product development is one of the first sessions for the two-day forum.
In one session, Dr Aznan Hasan, an assistant professor at the International Islamic University Malaysia's (IIUM) Kulliyah of Law, will lead a discussion on ensuring Shariah-compliant Islamic financial instruments.
Recently, High Court judge Justice Datuk Abdul Wahab Patail ruled that since some BBA contracts in the cases heard were structurally faulty, defaulters need not pay more than the original financing amount that they received, depriving banks of the profit they would have otherwise booked from the transactions.
Bankers fear that this judgement could mean that current BBA financing clients would only need to pay the facility amount and escape from paying the profit portion. The forum will also look at sukuk and efforts in promoting its secondary market. It will also touch on Islamic venture capital and private equity.
Among the areas expected to be covered are the opportunities and limitations of Islamic private equity and venture capital investments and ways and means to meet the legal, regulatory and judicial requirements.
Participants will also discuss the limitations to the growth of Islamic private equity and venture capital Ahmad Sanusi Husain, CEO and chief consultant of event organiser GlobalPro Consulting Sdn Bhd, will lead the session on human resources, another area of interest for the Islamic finance sector, especially with the current exodus of talent to the Middle East and other jurisdictions also promoting the sector.
Azmi Mohd Ali, managing partner of legal firm Azmi & Associates, is scheduled to discuss issues related to Islamic venture capital and private equity, where he will touch on the scope for Islamic private equity in mergers and acquisitions. The session will also discuss the oportunities and limitations of Islamic private equity and venture capital investments and ways and means to meet the legal, regulatory and judicial requirements. It will also touch on limitations to growth of Islamic private equity and venture capital.
In another session, Takaful Ikhlas Sdn Bhd executive vice president and chief operating officer Wan Mohd Fadzlullah Wan Abdullah will present a paper on innovation and solutions in takaful. He will discuss the new growth and global market opportunities for takaful and assess recent developments in the global takaful landscape.
On the second day, GIFC 2008 will have a session on risk management and accounting led by Crescent Risk and Wealth Management Consultancy Sdn Bhd managing director Hassan Ahmad and Amanie Business Solutions Sdn Bhd principal consultant Dr Syed Musa Al Habshi.
In the first session, it will look at risk analysis for Islamic banking, concerns about risk and unique risks in Islamic financial services. Dealing with issues on accounting and auditing for Islamic financial institutions, the speakers will inspect the framework for the preparation and presentation of financial statements for Islamic financial institutions and standards locally and internationally.
Minister in the Prime Minister’s Department Datuk Seri Dr Ahmad Zahid bin Hamidi will present the forum's keynote address entitled "Evolution and opportunities in Islamic finance". (By Habhajan Singh, The Malaysian Reserve, Oct 29, 2008, Page 8)

Monday, October 27, 2008

Nizam Yaquby at KLIFF 2008

By Habhajan Singh
[Picture: Three scholars at KLIFF 2007, from left, Nizam , ISRA executive director Dr Mohamad Akram Laldin and Dr Daud]
Sheikh Nizam Yaquby, a Shariah scholar actively engaged with various financial institutions worldwide, will return to the Kuala Lumpur Islamic Finance Forum (KLIFF) 2008 forum in mid-November.
The forum kicks off with the Third KLIFF International Shariah Forum on Nov 17 will deliberate on Shariah issues affecting Islamic banking and finance. Another Shariah scholar that will lend his expertise is Malaysia's Dr Mohd Daud Bakar of the International Institute of Islamic Finance.
Nizam sits on the advisory panels of various international financial institutions, including HSBC Amanah, Abu Dhabi Islamic Bank and BNP Paribas. He is a graduate in Economics and Comparative Religion from McGill University has been a teacher of Tafsir since 1976.
In last year's KLIFF forum, the noted Islamic scholar said tht competition among Islamic financial hubs will be good for the growing industry and they should strive to excel in some particular area. Besides Kuala Lumpur and Dubai, London, Singapore and Hong Kong are making their moves to capture a piece of the fast growing Islamic finance industry.
Malaysia floated the idea of the Malaysia International Islamic Financial Centre (MIFC) initiative in August 2006 while the United Arab Emirates has its Dubai International Financial Centre (DIFC). Under MIFC Malaysia has stated that it intends to become an international centre for the following areas: origination, issuance, distribution and trading of international currency sukuk and Islamic treasury and money market instruments; fund and wealth management services; international currency Islamic financial services, which encompasses deposit and financing products and services, international takaful and re-takaful; and Islamic finance education, training, consultancy and research.
KLIFF's Shariah forum is followed by the two-day 5th KLIFF 2008 which begins on Nov 18, the key event organised by the Centre for Research and Training Events Sdn Bhd (CERT) together with the co-hosts, Labuan Offshore Financial Services Authority (LOFSA) and Halal Industry Development Corporation (HDC).
Takaful will also gets its airing for two days beginning Nov 20 at the 4th International Convention on Takaful and Retakaful, an event jointly organised by Malaysia Takaful Association (MTA) and CERT. It is noted that although takaful has been in the market for more than 20 years, it has yet to make significant inroads.
In Malaysia, it said the level of market penetration in terms of takaful certificates in force over the total population is only 3.8% compared to a market penetration for conventional insurance of 34.7%. (By Habhajan Singh, The Malaysian Reserve, Oct 28, 2008, Page 8)

Khazanah buys 10% Saudi's Jadwa for RM271m

By Lee Cherng Wee
Government investment holding arm Khazanah Nasional Bhd has acquired a 10% stake in Jadwa Investment, a leading Saudi Arabian Shariah-compliant investment firm, for RM270.85 million.
Khazanah said the Jadwa investment is to provide cross linkages between Malaysia and Saudi Arabian businesses, laying the foundation for a stronger economic co-operation between the two Muslim countries as well as supporting the aspirations of the Malaysian International Islamic Financial Centre (MIFC).
"During such times of a global economic crisis, one must look to strengthen alliances and friendships where we have mutually sound and beneficial business models and partners. This investment is an important milestone for Khazanah as it represents the continued strengthening of economic and bilateral relations between Malaysia and Saudi Arabia. We anticipate that, Insya-Allah, this signing is just the first step in a long and mutually supportive relationship," said Khazanah managing director Tan Sri Azman Mokhtar in a statement.
Azman was in Riyadh last Saturday to sign the agreement with Jadwa's chairman Prince Faisal Bin Salman Bin Abdul Aziz Al Saud. The signing was witnessed by Raja Dr Nazrin Shah Ibni Sultan Azlan Muhibbuddin Shah, Crown Prince of Perak Darul Ridzuan and the Financial Ambassador for the promotion of MIFC. Jadwa's services include investment banking and corporate finance asset management and brokerage.
Founded in 2005, Jadwa is a premier fully Shariah compliant investment company counting from among its shareholders the leading Saudi business families. In the year ended Dec 31, 2007, Jadwa recorded return on equity of 21% and return on assets of 13%. Azman said that as both Khazanah and Jadwa have a long term investment strategy, they would be able to ride out the current economic downturn and to capitalize on opportunities created.
"Coupled with Jadwa's strength of a sound and professional management team with the right experience in the business, Khazanah is confident that this investment will serve as an important bridge between the two countries to provide a twoway flow in capital, ideas and people for our mutual benefit," he said. (The Malaysian Reserve, Oct 28, 2008, Page 1,2)

MIFC: Liberalising Islamic finance system

Malaysia has been progressively liberalising its Islamic financial system to increase foreign participation, as it forms an integral and competitive component of the country's overall financial system.
The Islamic financial system operates on a parallel level in relation to the conventional banking system, servicing both the Muslim and non-Muslim communities.
Raja Muda of Perak, Raja Dr Nazrin Shah said last Saturday that the Shariah principles which underline Islamic finance have contributed towards its stability and resilience in facing issues such as the current global financial turmoil.
"Therefore, it comes as no surprise that during the current global financial turmoil, Islamic funds have seen less volatility, risk and as a result have performed better compared with conventional funds," he said.
He said this in his speech at a luncheon talk with investors in conjunction with the Malaysia International Islamic Financial Centre (MIFC) roadshow to Kuwait and Saudi Arabia, in Riyadh. Liberalisation of Malaysia's Islamic financial system has taken the form of the issuance of new licences and increasing foreign participation within Islamic banks and takaful companies, coupled with new licences issued to foreign fund managers and foreign stockbroking firms.
Raja Nazrin also cited Syariah injunctions like those prohibiting excessive leverage and speculative financial activities as having insulated Islamic funds from too much risk exposure, thus limiting their exposure to the meltdown of the financial system in the US and Europe.
"It therefore comes as no surprise that during the current global financial turmoil, Islamic funds have seen less volatility, risk and as a result have performed better compared with conventional funds," he said.
Raja Nazrin said Malaysia believes there is a tremendous upside potential for Islamic finance and that the current financial turmoil provides an opportunity for Islamic finance to position itself as a complementary, if not alternative, to conventional finance by providing investors with other asset classes and markets that provide stability.
He said over the last few years, there has been an increasing interest among the Middle Eastern investors in the Asian market with Saudi Arabian financial institutions already having made their presence felt in Malaysia including Al-Rajhi Bank and Rsud Bank's shareholding in the Asian Finance Bank. To date, one of the more prominent investments in Malaysia is Saudi Telecom's US$3 billion (RM10.74 billion) stake in local telco firm, Binariang.
"We welcome the continued participation of these Saudi financial institutions and investors in Malaysia, especially to take advantage of the numerous opportunities offered under the MIFC initiatives," he said.
Raja Nazrin also explained that Malaysia could be the perfect gateway for investors to take advantage of the Asean region which comprises a potential market of about 600 million people and a combined gross domestic product of US$1 trillion.
The MIFC was launched in 2006 as part of Malaysia's initiative to globally integrate within the international Islamic financial community and to position the country as an international Islamic financial centre. Since then, significant progress has been made as the Islamic financial system in Malaysia today comprises Islamic banking institutions, takaful (insurance) and re-takaful industries as well as Islamic money and capital markets. — Bernama (The Malaysian Reserve, Oct 28, 2008, Page 9)

BNM: No longer a domestic agenda

Islamic finance is no longer a domestic agenda for Malaysia as it was integrating globally and that the regulator was even offering various incentives to get the ball rolling for foreign investors and players in the country, says Bank Negara Malaysia (BMN) deputy governor Datuk Mohd Razif Abdul Kadir.
"We have to create awareness of the various opportunities available under the Malaysia International Islamic Financial Centre (MIFC)," he said on the sidelines of the MIFC road show to Kuwait and Saudi Arabia, in Riyadh, reports Bernama. Under MIFC, the central bank can issue new licenses for Islamic banking, takaful and fund managements to conduct international business in Malaysia. Another incentive for players was a ten-year corporate tax free business.
Bernama reports: According to Mohd Razif, sukuk or Islamic bonds are now also an important alternative for corporate fundings and Malaysia is a centre for sukuk origination and trading with a record of about 60% of issuance. He said despite the globl economic uncertainty since late last year which made it impossible to raise funds via conventional bonds in markets elsewhere, the issuance of sukuk was the opposite with some being oversubscribed.
"The US$4 billion (RM14.32 billion) sukuk raised for the Maxis buy-out last December was at the peak of the subprime crisis, where it was impossible to tap bond markets elsewhere.
"It was oversubscribed two times, eventhough it was the largest sukuk issuance in the world. This proves that Malaysia's sukuk market is large and very liquid for both local and foreign investors," he said.
Mohd Razif said another focus in the Islaimc financial sector was to encourage the Middle Eastern players to set up wealth management business in Malaysia to tap high networth investors who want to park their money within Islamic instruments.
"Malaysia has developed a very comprehensive Islamic banking system and a robust financial market with various products. The timing cannot be better where conventional financial instruments have had a depreciation while Islamic instruments remain steady," he said. — Bernama

Friday, October 24, 2008

Ismail: ‘Time for banks to study BBA further’

By Habhajan Singh
The recent High Court judgments on Al-Bai' Bithaman Ajil (BBA) will have serious implications if it is held by the higher courts as representing the correct view in law of the BBA transaction, says a local lawyer familiar with Islamic finance transactions.
Lawyer Mohamed Ismail Shariff, who recently joined as a partner at a local law firm, Skrine & Co, said that the effects of the July 18 written judgments by High Court judge Justice Datuk Abdul Wahab Patail will reverberate across the Islamic financing industry in Malaysia.
However, Mohamed Ismail, who has been appointed by Bank Islam Malaysia Bhd as lead the counsel for the appeal against the High Court judgment, is confident that the higher courts will decide otherwise.
"The goodness of the judgment that was discussed here is not in its actual decision but more in the terms of the alarm it has caused among the local Islamic banks.
"That alarm should serve as a wake-up call and propel Islamic banks towards a more dynamic and proactive approach aimed at the greater excellence in all aspects of Islamic banking and practice," he told participants at the Islamic Banking and Finance Institute Malaysia (Ibfim) seminar on Tuesday in relation to the impact of Justice Abdul Wahab's ruling.
This is the second seminar on the topic in weeks. Last week, Zaid Ibrahim & Co, Malaysia's largest law firm, had organised another session. In a 54-page judgement, in the Arab-Malaysian Finance Bhd vs Taman Ihsan Jaya Sdn Bhd and other cases, Justice Abdul Wahab ruled that the application of the BBA contracts before the court were contrary to the Islamic Banking Act 1983 (Iba).
He noted that the sale element in the BBA is "not a bona fide sale", bringing into question the profit portion of the facility.
In the written judgement, the judge ruled that since some BBA contracts were structurally faulty, defaulters need not pay more than the original financing amount that they received, depriving banks of the profit they would have otherwise booked from the transaction.
Bankers fear that this judgement could mean that current BBA financing clients would only need to pay the facility amount and would escape from paying the profit portion.
In relation to the BBA contract, Rafe said the contemporary BBA is based on the classical murabaha contract (which is a simple supplier's credit sale, for example, when a customer buys a radio on credit terms). Mohamed Ismail said this is an opportunity for the banks to study the BBA contract critically to determine its suitability as a home financing contract.
In his conclusion, Mohamed Ismail noted that there are earlier cases on BBA transactions that have recognised them as valid and therefore allowing banks to claim the outstanding balance of the sale price, subject, of course, to the granting of the ibra by the bank for an early recovery or settlement.
"With respect, the present judgment runs counter to those judgments," he said, adding that the present judgment, being a High Court judgment, is not binding on other High Court judges.
"There are still two tiers available in the appeal process, the Court of Appeal and the Federal Court. It is my respectful opinion that the judgment will be reversed on appeal," he said.
Ismail also took the opportunity to highlight that there are other modes of financing, such as the musharakah mutanaqqisah and the ijarah muntahiyyah bit tamleek, which can be explored, studied and modified as it may be necessary to cater to the housing market.
(By Habhajan Singh, The Malaysian Reserve, Oct 24, 2008, Page 9)

Loyens & Loeff sets up office in Dubai

Netherlands-based law firm Loyens & Loeff has announced that it has established an office at the Dubai International Financial Centre (DIFC). The firm has an an Islamic finance team, the first integrated civil and tax law-oriented team to target Islamic finance transactions from the point of view of customers in Belgium, Netherlands and Luxemburg (Benelux).
This makes Loyens & Loeff the firm the first continental-European legal and tax service provider to establish an office at the DIFC, according to a DIFC statement. With over 850 lawyers including over 350 tax specialists and 100 fund lawyers working in seven offices in the Netherlands, Belgium and Luxembourg and eleven offices in the world's major financial centres, it is one of the largest continental European law firms and has a strong international focus, it added.
The Dubai office advises on international tax efficiency, investment protection, private equity, the EU real estate funds and matters related to family offices. (By Habhajan Singh, The Malaysian Reserve, Oct 24, 2008, Page 9)

Wednesday, October 22, 2008

AFB to set up Islamic regional funds worth RM850m

By Isabelle Francis
Asian Finance Bank (AFB), which recently set up an asset management unit, expects to ink deals to establish a regional Islamic equity fund and a bio-technology fund totaling up to RM850 million soon. AFB CEO Datuk Mohamed Azahari Kamil said AFB will tie-up with a government agency to set up the country's first biotechnology fund by year-end with a total size of about RM350 million.
“This fund will be used for mezzanine bio-tech companies. The agency is not necessarily a venture capitalist,” he told The Malaysian Reserve recently.
Mezzanine companies are young companies that seek funding from more sophisticated investors, including private equity and venture capital firms.
Mohamed Azahari said the equity fund is slated for launch by the first quarter of next year, with an initial size of RM500 million. He said AFB's role is as a fund manager for the two funds and it will not take on any proprietary position.
AFB is scheduled to sign a distribution agreement for an Asean Shariah Corporate Governance Fund today. However, it is unsure as to whether the deal is part of the RM850 million plan.
Mohamed Azahari, who took over the helm at AFB just two months ago, said the setting up of the asset management unit adds value to the bank, which wants to provide funding to Malaysian government-linked and public listed companies' operations in the Middle East.
"AFB's target is to assist government-owned and public-listed companies and firms with operations in GCC (Gulf Cooperation Council) countries, not only in an advisory capacity but to establish partnerships and networks to take advantage of the robust growth in the Middle East.
"We are talking with many other government-linked companies and public-listed companies for possible funding and to establish joint venture projects with our network in Abu Dhabi and GCC in the areas of power, infrastructure and development," he said. Early this month, AFB provided Tenaga Nasional Bhd with a AED87.5 million (RM84.47 million) financing for a cooling project in Abu Dhabi.
Mohamed Azahari said AFB is also present in Indonesia, where it is already talking to companies on funding for coal-powered terminal and steel manufacturing plants. He said given the meltdown of the global financial market, it is timely for Islamic banks to play a more active role in developing and reconstructing the financial architecture. "Islamic banks do not design products that involve over-speculation and overleveraging. We are not dented by the financial meltdown," he added.
He said given AFB's small capital base, its lending capability is limited and hence, the collaboration with its shareholders and other counterparts is a vital strategy for the growth of the bank.
"These partners not only have the expertise and infrastructure, but also the strength in providing us funding towards a syndication process," Mohamed Azahari added.
AFB's shareholders include Qatar Islamic Bank with a 70% stake, RUSD Investment Bank Inc of Saudi Arabia with 20% and Global Investment House of Kuwait with 10%. AFB is the third foreign Islamic bank to be established here after Kuwait Finance House and Al Rajhi Bank.
Mohamed Azahari said AFB aims to make profits and double its assets from some RM1.5 billion now to RM3 billion by the fiscal year 2009.

Sunday, October 19, 2008

Redza to head Bank Muamalat

BANK Muamalat Malaysia Bhd, the second full-fledged Islamic bank to be established in Malaysia and now part of the diversified DRB Hicom Bhd, is set to get its new CEO early next month. Banking sources said Mohd Redza Shah Abdul Wahid, currently the DRB Hicom group chief operating officer (COO), is expected to take up the position, pending approval from Bank Negara Malaysia.
Mohd Redza, 45, is expected to lead Bank Muamalat in its transformation plan following the conglomerate’s acquisition of a 70% stake in the bank last year. The bank is currently managed by Acting CEO Syed Abdul Aziz Jailani Syed Kechik.
The Malaysian Reserve had reported that the bank saw a change in its top management beginning April this year after its former chairman and CEO vacated their positions in line with the take-over. The two, formerly from Malayan Banking Bhd, came on board Bank Muamalat in 2005.
The bank grabbed headlines late last year when DRB-Hicom got an offer from Bukhary Capital, owned by tycoon Tan Sri Syed Mokhtar Al-Bukhary, to sell its entire stake in the bank. The balance 30% stake is held by Khazanah Nasional Bhd.
Mohd Redza will join Bank Muamalat at a time when competition is heating up and the threat of higher non-performing financing looms in the Islamic banking sector, in light of the global financial crisis and anticipated global recession.
Late last year, HSBC Bank Malaysia Bhd became the first locally-incorporated foreign bank to be awarded a licence to set up an Islamic banking subsidiary. OCBC Bank (Malaysia) Bhd also received approval in-principle to set up such a subsidiary.
They will provide the full range of Shariah-compliant businesses and will compete with other foreign Islamic banks such as Kuwait Finance House (Malaysia) Bhd and Al-Rajhi Bank, further heightening the rivalry in the sector.
Prior to joining DRB Hicom in 2006, Mohd Redza was group CEO of Tradewinds Corp Bhd from 2002 to November 2005 and acting CEO of Tradewinds (M) Bhd from 2004 to 2005. He holds a Bachelor of Science in Economics in Industry and Trade and Master of Science of Economics in International Banking and Finance, and has also served several other companies such as Silterra Malaysia Sdn Bhd and Khazanah Nasional Bhd.
Last month, DRB-Hicom chairman Tan Sri Syed Anwar Jamalullail said the conglomerate was expected to complete the purchase by the end of this year and would spend the next two years building up the bank, adding that he hoped to see contributions to the group by then.
Historically, Bank Muamalat saw deterioration in its net profit of RM18 million in financial year (FY) 2001 to its first-ever net loss in 2004. However, it returned to the black in FY05 and registered a huge improvement in net profit to RM32 million. The strong showing continued in FY06, with its net profit increasing 130% to RM73.9 million.
Established in 1999, the bank absorbed the Islamic banking assets of Bank Bumiputra Malaysia Bhd and Bank of Commerce, following their merger. It was then, one of only two Islamic banks operating in the country, with the other being Bank Islam Malaysia Bhd.
(The Malaysian Reserve, Oct 20, 2008, Page 1)

BBA: Comments by Rafe Haneef

Stormy times ahead for Islamic banking
By Rafe Hanef - PART I

High Court judge Justice Datuk Abdul Wahab Patail’s judgment in Arab-Malaysian Finance Berhad vs Taman Ihsan Jaya Sdn Bhd & 2 Ors and 12 other cases has caught the attention of local Islamic finance players in Malaysia. The judgment dealt a blow to a concept much utilised by local Islamic bankers. In this first of a two-part series, Rafe Haneef, a former Islamic banker, shares his thoughts on the ruling.

The nascent Islamic banking industry appears to be yet again facing a storm. In a recent High Court judgement, Justice Datuk Abdul Wahab Patail has declared the ubiquitous Bai Bithaman Ajil (BBA) contracts as null and void and that the customers have to pay only the principal amount to the banks. It has undoubtedly created a lot of apprehension and confusion in the marketplace and the Islamic banks are scurrying to obtain legal opinions to get clarity on their BBA portfolios. This note is an attempt to briefly highlight the key elements of the judgement that relates only to the interpretation and application of the Shariah.
(The Malaysian Reserve, Oct 20, 2008, Page 30)

Amanie launches Islamic finance learning centre in Dubai

Amanie, an Islamic finance consulting company led a Malaysian Shariah expert, has launched its Islamic finance learning centre in Dubai on Oct 16.
Operating under the brand name of Amanie Islamic Finance Learning Centre (AIFLC), the Dubai International Financial Centre (DIFC) registered entity will offer a range of Islamic finance, banking and takaful training programmes and services, it said in a statement.
AIFLC will meet the significant demand for training and human development from the Islamic finance industry in the Gulf region, it added. Apart from the focus of practitioners in the Gulf region, Amanie said the centre aims to attract practitioners from countries with large Muslim populations, including the United States, United Kingdom, Germany, France and Holland.
Amongst the core strengths of AIFLC is its deep pool of very experienced trainers and facilitators, which include many of the renowned Shariah scholars and practitioners from the Gulf and also from other parts of the world.
"Our objective of setting up the AIFLC is to provide focused industry related training programmes that will further spur the growth of the Islamic finance industry," said AIFCL managing director Dr Mohd Daud Bakar, a Shariah scholar who heads the Shariah Advisory Council of Bank Negara Malaysia (BNM).
He felt that by making industry related knowledge available to more practitioners, it will help to encourage a healthy growth of the industry and set the platform for more innovations in Islamic finance products and services. AIFLC said it has already lined up its training programmes for the next calendar year.
These programmes will be a mix of introductory, intermediate and advanced level to cater to the needs of the industry. On top of the training programmes, AIFLC will also offer a tailor made in-house training programs to serve the specific need of any organisation and organise various conferences on special topics and issues that are related to the Islamic finance industry.
(The Malaysian Reserve, Oct 20, 2008, Page 32)

Aussie Maddock: Malaysia as bridge between Gulf, Australia

By Habhajan Singh
As an Islamic financial hub, Malaysia is best placed to act as a bridge between the capital in the Gulf and the financing opportunities in Australia, said Shahriar Mofakhami, a partner with Australian legal firm Maddocks. Shahriar, who was appointed a partner with the Maddocks Tax & Revenue team in July, was one of the members during a recent Australian trade delegation to Malaysia.
Australian minister for trade Simon Crean and his Malaysian counterpart, along with representatives of large domestic Australian banks and Malaysia's investment banks, Bank Negara Malaysia (BNM) and Malaysian Securities Commission (SC), met in Kuala Lumpur on Oct 7, to explore opportunities to expand Australia's financial services trade, the legal firm said in a statement.
It added that Shahriar and Tina Savona from Maddocks Tax & Revenue group were invited to attend the 14th Australia-Malaysia joint trade committee meeting as part of the Australian delegation. At the request of the Australian government, Shahriar presented on Shariah compliant investment and financing structures for investment in Australia alongside representatives of the Kuwait Finance House (Australia) and the Muslim Community Cooperative (Australia) Ltd, it said.
In a recent article, The Australian Financial Review reported that the combination of the crisis in credit markets and the vast oil-fuelled wealth being accumulated in the Middle East has Maddocks sensing an opportunity — creating investment structures compliant with rules of Islamic finance. In its statement, Maddocks said with a strong background in structuring crossborder (inbound and outbound) transactions, Shahriar has established a dedicated Islamic finance practice at the legal firm.
"In essence, Islamic finance is a trade-based mode of financing. In the course of advising on particular transactions, our views were sought in relation to structuring Shariah compliant investment platforms within the existing 'conventional' Australian financing and tax framework.
"This provided us with an opportunity for in depth consideration as to how Shariahcompliant financing structures can fit within the existing legal framework in Australia," said Shahriar.
Although still relatively uncommon in Australia, the firm said the global Islamic finance industry has recently shown significant growth and maturity in Europe, Asia and the Middle East.
In March 2008, it was reported that pure Islamic banks, along with Islamic subsidiaries and "windows"' of conventional banks, controlled close to US$400 billion (RM1.41 trillion) in assets globally compared with US$100 billion in assets in 2000.
With an estimated global worth in the hundreds of billions of dollars and an anticipated growth rate of 15%-25% per annum over the next five years, global assets managed according to Islamic (Shariah) principles are tipped to exceed US$1 trillion, according to Boston Consulting Group, April 2008 data.
A major factor in the Islamic financing boom has been the high price of oil leading to increased wealth in the Gulf Cooperation Council states and Iran, among others. This has in turn resulted in an increase in the number of Islamic institutions seeking specialist financial products.
Maddocks Islamic Finance advises both onshore and offshore Islamic financial institutions in relation to structured finance, institutional transactions as well as retail Shariah compliant financial products, it said.
(By Habhajan Singh, The Malaysian Reserve, Oct 20, 2008, Page 32)

SEB’s RM19.2b energy fund may be downsized

SARAWAK Energy Bhd's (SEB) proposed energy fund, meant for RM19.2 billion worth of projects, may be downsized and raised in other currencies than the US dollar given the current economic situation, said Asian Finance Bank Bhd's (AFB) top official.
AFB is one of the consortium members backing the proposed energy fund. Others are Kuwait Finance House Malaysia Bhd, RHB Islamic Bank Bhd and Unicorn International Islamic Bank Malaysia Bhd.
AFB CEO Datuk Mohamed Azahari Kamil told The Malaysian Reserve that the proposed fund is being brought back to the drawing board for a review. "It is being reviewed at this point of time. We may need to downsize the fund and do it by phases. The initial budget set may not be appropriate in the current situation.
"While the fund is something we want to push through, we also have to get real given the present scenario. One or two months down the road, when we get a clear direction, then we can determine a price.
"We may look at raising the fund in other currencies than the US dollar as it is expensive to source US dollars in the market now," he said in a recent interview.
(The Malaysian Reserve, Oct 20, 2008, Page 1)

Wednesday, October 15, 2008

‘BBA not meant for long-term’

By Habhajan Singh
Islamic financing under the concept of Al-Bai' Bithaman Ajil (BBA) was never intended to be for long-term contracts like home financing as is prevalent in Malaysia, an industry observer said. However, legal experts involved in Islamic finance say the banking industry, which has been forced to reevaluate the BBA following strong wording in a July judgement by High Court judge Justice Datuk Abdul Wahab Patail, should not adopt changes in a haphazard manner.
"The learned judge's decisions are, as yet, the most severe judicial indictment of the bona fides and propriety of the practice of Islamic banking in Malaysia. "The judge's comments in the judgments call into question the very integrity of Islamic banking practitioners here, including Shariah advisers.
"Not surprisingly, the affected banks are reported to be appealing the decisions," said lawyer Mohamad Illiayas Seyed Ibrahim who has been involved in structuring Islamic finance legal documents for years.
It is understood that Mohamed Ismail Mohamed Shariff, a lawyer with considerable experience in Islamic finance who recently joined one of the nation's largest law firm Skrine, has been entrusted with the task of taking the lead in the appeal to the Court of Appeal.
Managing director of Fajr Capital Bhd Rafe Haneef, who formerly oversaw Citibank's Islamic finance business in Asia, said the BBA has been significantly extended beyond its initial scope of facilitating short-term supplier's credit.
"It has now become apparent that the long-term BBA home financing products have caused some side effects to the users," he said in response to Abdul Wahab's judgement.
In a 54-page judgement dated July 18, in the Arab-Malaysian Finance Bhd vs Taman Ihsan Jaya Sdn Bhd and 12 other cases, Justice Abdul Wahab ruled that the application of the BBA contracts before the court were contrary to the Islamic Banking Act 1983 (IBA).
He noted that the sale element in the BBA is "not a bona fide sale", bringing into question the profit portion of the facility. In the written judgement, the judge ruled that since some BBA contracts were structurally faulty, defaulters need not pay more than the original financing amount that they received, depriving banks of the profit they would have otherwise booked from the transaction.
Bankers fear the judgement could mean that current BBA financing clients would only need to pay the facility amount and would escape from paying the profit portion. On the BBA contract, Rafe said the contemporary BBA is based on the classical murabaha contract (which is simply a supplier's credit sale, for example, when a customer buys a radio on credit terms).
"However, unlike the classical murabaha contract, the BBA combines a murabaha credit sale with a binding promise by the customer to buy the goods ordered by the bank.
"The BBA facilitates financial intermediaries like banks to buy assets 'ordered' by the customer who has given the 'binding promise' and to immediately sell the assets to the customer on a murabaha basis," he said.
Post-judgement, it is understood that some banks are considering including a novation agreement for future BBA contracts, cleared under Justice Abdul Wahab's ruling.
However, Mohamad Illiayas warned against rushing into a novation, an act of substituting an existing party or debt in a contract.
"Banks were to a great extent pushed to migrate from novation agreements to property purchase agreements (PPA) in the mid 1990s by the reluctance of vendors and developers to become parties to novation agreements.
"For people used to only the conventional financing model, requiring the vendors and developers to execute tripartite agreements with purchasers and their bankers was certainly an unusual and questionable condition.
"Despite the Taman Ihsan Jaya judgment, banks should be cautioned from rushing to re-embrace the novation setup. The novation agreement structure as adopted in BBA transactions in Malaysia is, arguably, beset with conceptual difficulties," he said.
Mohamad Illiayas' full arguments appear in a two-part series beginning in the Oct 13 (Monday) issue of The Malaysian Reserve and concluding today.
(The Malaysian Reserve, Oct 14, 2008, Page 1)

Opportunities in cross border business in Islamic banking

[PIX: I chaired a panel session at the Sixth International Islamic Finance Conference. I'm sitted extreme left. With me are (left-to-right) panelists PricewaterhouseCoopers Taxation Sdn Bhd senior executive director Jennifer Chang, Daud Vicary and Bond Pricing Agency Malaysia COO Meor Amri Meor Ayob] -- PIX BY IBBM's AHMAD ROSLAN JUMAAH

By Habhajan Singh
There is a huge opportunity waiting to be tapped in cross border business in Islamic banking and finance, a local Islamic banker said. Asian Finance Bank Bhd chief operating officer Daud Vicary Abdullah said local Islamic banks should be more proactive in tapping the potential cross border transactions, especially with the Middle East. "It will be difficult for a local Islamic bank in Malaysia to market their products in, say, the Middle East without having a local presence there. You can do a roadshow, but what happens after that?" he said at the Sixth International Islamic Finance Conference in Kuala Lumpur yesterday.
Daud was the keynote speaker at the two-day conference, which ended on Oct 14. The conference is jointly organised by Monash University, Institute Bank-Bank Malaysia (IBBM) and the Islamic Banking and Finance Institute Malaysia (IBFIM).
On cross border deals, PricewaterhouseCoopers Taxation Sdn Bhd senior executive director Jennifer Chang said the treatment of taxation varies from country to country. She noted that Midde Eastern businesses are used to having a tax-free regime, unlike countries such as Malaysia and Singapore. She said that Singapore and Hong Kong have effected various changes to their taxation regulation to achieve tax neutrality.
"Both Singapore and Hong Kong have replicated what Malaysia has done (on the taxation front) to be competitive.
"Indonesia, however, is a regime where you still have a high VAT (value added tax) and stamp duty," she said. This is an issue also faced by countries like Japan and China in implementing Islamic finance, Chang added.
"Until they come out with specific tax legislation for Islamic finance products, you may want to avoid dabbling in deals involving asset transfers," she told the conference.
According to Daud, for Islamic finance to grow, move forward and capitalise on the enormous growth potentials, there should be greater cooperation among the industry players and better coordination to address the issue of Shariah harmonisation.
At the same time, he added, local Islamic financial institutions also have to be proactive in analysing client demand, designing products to fit market needs, using a mix of marketing tools and media to inform their customer base and pushing to sell.
"There is also the need for more intense competition (and a) clearer message, with nuanced products having a distinguished USP (unique selling proposition)," he said.

(The Malaysian Reserve, Oct 15, 2008, Page 4)

Sunday, October 12, 2008

BNM asks banks to review over-reliance on BBA

By Habhajan Singh
Bank Negara Malaysia (BNM) has "strongly advised" Islamic banks to review their heavy reliance on Al-Bai' Bithaman Ajil (BBA) concept in their transactions.
The reminder from the central bank to Islamic banking institutions (IBIs) comes hot on the heel of a number of recent High Court judgements declaring a number of BBA-based home financing contracts to be contrary to Malaysia's Islamic Banking Act 1983 (IBA).
The concern on BBA was raised in the central bank's circular to to all chief executives of Islamic financial institutions, a copy of which was viewed by The Malaysian Reserve.
"IBIs are strongly advised to revisit the use of BBA as the underlying concept for providing Islamic financing particularly in financing of uncompleted properties," it told the chiefs of local Islamic banks and banks operating Islamic windows.
The BNM circular is dated Sept 8, the very day The Malaysian Reserve first reported on BAA judgement by High Court judge Justice Datuk Abdul Wahab Patail, sending the industry into a tailspin with regards to their heavy realiance on BBA.
BBA refers to the sale of goods on a deferred payment basis at a price which includes a profit margin agreed to by both parties. The concept, hugely popular in Islamic home financing from local banks, has been the lynchpin of billions of ringgit worth of home financing for some two decades now.
The BNM circular itself noted the industry's seeming over dependence on BBA, adding that BBA is a Shariah concept introduced more than 20 years ago to facililtate growth and development of the Islamic finance.
"Since then, the dynamism of Islamic finance over the years has seen a multitude of Shariah concepts that may be employed to better suit current environment," it said.
Signed by Bakarudin Ishak who heads BNM's department for Islamic banking and takaful, the circular was seen as an effort to get the industry to think beyond BBA, which is already happening with some banks introducing home financing via the concept of musharakah mutanaqisah (diminishing musharakah).
"Truth be told, local Islamic players have been overly reliant on BBA. The entire industry, in fact, is built around BBA," says one Shariah scholar.
In one 54-page judgement dated July 18, Justice Abdul Wahab ruled that the application of the BBA contracts before the court were contrary to the IBA, taking note that the sale element in the BBA is "not a bona fide sale" and bringing into question the profit portion of the facility.
The written judgement was a collective judgement for 11 separate cases involving Bank Islam Malaysia Bhd and one case involving Arab-Malaysian Finance Bhd, as the plantiffs.
At the heart of the written judgement by Justice Abdul Wahab is that since some BBA contracts were structurally faulty, defaulters need not pay more than the original financing amount that they received, depriving banks of the profit that they would have otherwise booked from the transaction.
Bankers also fear the judgement could mean that current BBA financing clients would only need to pay the facility amount and would escape from paying the profit portion.
Some of the players big into Islamic financing include CIMB Bank Bhd, Malayan Banking Bhd, Bank Islam Malaysia Bhd and Public Bank Bhd, all of whom have home financing facilities based on the BBA concept.
It is understood that the banks are appealing to the Court of Appeal to over turn the judgement, which has become a major point of discussion since this paper brought the judgement into the public domain.
BNM has yet to reply to queries from The Malaysian Reserve on the potential implication of the judgements.
(THE MALAYSIAN RESERVE, Oct 13, 2008, Page 1)

BNM: Beef up legal docs

By Habhajan Singh
Bank Negara Malaysia (BNM) has urged local Islamic banking outfits to beef up their legal documentation, an area that makes or break a contract when taken to the courts.
In a recent circular to Islamic ourfits, the central bank has urged them to appreciate the importance of proper drafting of Islamic financing legal documentation and cause papers in litigation.
It called on Islamic banks to ensure they employ law firms with the right set of expertise to prepare their legal documentation and handle litigation work.
It also required Islamic banking institutions to ensure that proper internal controls are in place to "preserve the quality and consistency of such legal documentation and cause papers".
The reminder to chiefs of local Islamic banks and financial institutions with Islamic banking activities came in view of the issues that cropped up following a number of judgements on Al-Bai' Bithaman Ajil (BBA) by High Court judge Datuk Justice Abdul Wahab Patail.
In the circular, BNM which supervises the Islamic banks and takaful operators operating in Malaysia, had also "strongly advised" Islamic banks to review their heavy reliance on the BBA concept in a huge number of their transactions.
Justic Abdul Wahab's judgement on the appplication of BBA, a concept popular at home but much criticised abroad, is set to be another widely discussed judgement after his earlier ruling in the case of Affin Bank Bhd vs Zulkifli Abdullah.
In that 2006 case, he passed a ruling on the calculation of the amount to be paid in the event of a foreclosure.
It attracted much attention, and is still the subject of seminars today, as it turned on its head the way bank practitioners calculated the outstanding amount to be repaid by borrowers who had defaulted on their BBA contracts.
Some banks had calculated the amount up to the full period of the facility, even though the borrowers may have defaulted only a few years into the financing. to be fair, though, banks usually have a defaulter rebate, which is at their sole discretion.
Similarly, legal and Shariah experts will be looking at the impact of the latest judgement by Justic Abdul Wahab, which will be scrutinised by the Court of Appeal as an appeal is pending.
"The effect of this judgement is that customers are obliged to pay only the principle that had been extended to them.
"Since the court holds this contract null and void, Section 66 of the Contract Act will apply," said a lawyer.
Section 66 of the act states that "when an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under the agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it."
In Malaysia, Islamic banking institutions refer to Islamic banks licensed under Section 3(1) of Islamic Banking Act 1983 (IBA) and commercial banks, merchant banks, finance companies and discount houses licensed under Section 6(4) of Banking and Financial Institutions Act 1989 (BAFIA) that participate in the Islamic banking scheme.

Workshops on impact of BBA judgement

The local Islamic finance industry has started the process to understand the impact and repercussion of the judgements on Al-Bai' Bithaman Ajil (BBA) by High Court judge Datuk Justice Abdul Wahab Patail, with at least two seminars already in the pipeline. Zaid Ibrahim & Co, Malaysia's largest law firm, is organising a one-day seminar on Oct 14 while The Islamic Banking and Finance Institute Malaysia (IBFIM) is conducting another on Oct 22.
In July, Zaid Ibrahim led by its chairman Datuk Dr Nik Norzrul Thani announced that it was the first Asian law firm to have received approval from the Dubai Financial Services Authority (DIFC) to provide legal services to local, regional and international clients in and from the Dubai International Financial Centre (DIFC), a world-class global financial hub.
In a release, IBFIM noted that the Islamic finance industry has again been triggered with another controversial ruling by our High court on the legality of a well known facility of BBA.
"In this latest case, it was ruled that the sale element in the BBA is not a bona fide sale but is merely a financing facility.
"Hence, it is in conflict with the Islamic Banking Act 1984. This has significant impact on the players in the country as well as Malaysia’s image as the leader in Islamic finance," it said.
In this state of uncertainty, it said IBFIM is takign the initiative to organise a workshop to discuss the impact of the ruling.
The workshop will be facilitated by Mohamed Ismail Mohamed Shariff, who recently joined local legal firm Skrine and Shariah scholar Dr Aznan Hassan.
(By Habhajan Singh, THE MALAYSIAN RESERVE, Oct 13, 2008)

Sunday, October 5, 2008

Lawyer Ismail joins Skrine

By Habhajan Singh
Top-notch Islamic finance legal brain, Mohamed Ismail Shariff, has joined local legal firm Skrine to establish an Islamic finance practice at the 45-year-old firm. Ismail, one of the legal pioneer's on the local Islamic finance front, joins as a partner at Skrine. At the moment, the company does not have any significant presence in the sphere of Islamic finance.
"To be able to compete with other international firms, and with Malaysia becoming an Islamic banking hub, there is a need for size and quality of services," Mohamed Ismail told The Malaysian Reserve recently. That must be backed with a big set up, where other necessary services are available. This is to meet the present trend," he said.
The move to Skrine means that his company Mohamed Ismail & Co has ceased to exist as a firm as of Oct 1. On April 24, another major local legal firm, Azmi & Associates, announced its merger with 12-year-old legal firm Illiayas, headed by Mohamad Illiayas Seyed Ibrahim. Azmi & Associates and Illiayas had entered into a merger agreement to create a "larger Malaysian law firm with expanded practice areas and partnership base", it said in a statement then.
Meanwhile, in a letter to fellow lawyers, Mohamed Ismail said with the combined strength and expertise of both the firms, comprising 89 lawyers, Skrine will be in a better position to provide a wider range of legal professional services of international standards.
"A notable addition to Skrine’s considerable and highly-regarded expertise will be an enhanced range of Islamic banking and finance, and takaful services," said Mohamed Ismail, who began practicing law in 1970. He added that Skrine has a varied and extensive practice, and his role would be to enhance the firm's Islamic finance practice.
Among others, the legal firm has practices in the areas of banking and finance, capital markets, corporate and commercial, intellectual property and tax.
According to its website, Islamic finance is listed as one of the services under the company's banking and finance practice, which also includes acquisition finance, asset finance and leasing, corporate recovery and insolvency, and retail banking.
In a note on its website, Skrine says it has advised on many international public and private transactions, usually dealing with complicated and layered financing based on local law (including tax and regulatory matters) and cross-border issues. Skrine was founded in 1963 as Skrine & Co by John Skrine, Stanley Peddie, Peter Mooney, William Donald Bewsher and Chin Yoong Chong.
(The Malaysian Reserve, Oct 6, 2008, p32)

M'sian scholars at HSBC global meet

Two Malaysian Shariah scholars took part in HSBC Amanah's third bi-annual meeting of its Global Shariah Advisory Board in Makkah recently. Dr Mohammed Daud Bakar and Dr Mohammad Akram Laldin, two familiar names in the Malaysian Islamic finance scene, sit on the HSBC Amanah's global board chaired by renowned Pakistani retired Supreme Court judge Sheikh Muhammad Taqi Usmani.
The meeting earlier this month was part of the international bank's continuous efforts to engage both Islamic scholars and bankers in a constructive dialogue about pressing issues and the challenges facing Islamic finance, HSBC Amanah said in a statement. HSBC Amanah is a global Islamic banking division of the HSBC Group. In Malaysia, it has set-up a wholly-owned subsidiary HSBC Amanah Malaysia Bhd when it received Bank Negara Malaysia's (BNM) approval to run an Islamic bank.