REUTERS: UK government extends mortgage aid scheme to Islamic finance

Britain's government sought to bolster London's position as a centre for Islamic finance on Tuesday by extending its 'Help to Buy' mortgage scheme to loans that comply with Islamic law. Help to Buy was launched last year and offers banks insurance against the risk of lending to home-buyers who cannot afford large mortgage deposits, reports Reuters (London, 11 Feb 2014).

Britain's finance ministry said property finance plans that circumvent Islam's bar on interest payments would now be eligible in the same way as standard mortgages.

"The Help to Buy extension builds on the government's commitment to support the UK Islamic finance market ... and retain London's position as the premier western Islamic financial centre," the report quoted a finance ministry statement.

THE REPORT GOES ON:

Islamic finance is worth around 11 billion pounds a year to Britain, the government added.

Later this year Britain aims to become the first Western country to issue a bond that complies with Islamic law, known as a sukuk, in a further attempt to cement London's place as the main Western centre for Islamic finance.

However, the sum of money that it intends to raise - around 200 million pounds - is small and in the past the government's debt issuance agency has had doubts about whether Islamic finance offers value for money and said the bond is likely to be a one-off.

The Treasury said Help to Buy Islamic mortgages would be provided by the Islamic Bank of Britain, which is owned by Qatar's second-largest bank Masraf Al Rayan MARK.QA.

Under the mortgages, the property is owned by the bank and home-buyers purchase it in stages, paying the bank rent on the rest of the property.

STATEMENT FROM UK TREASURY:

The government’s Help to Buy mortgage guarantee scheme can now also be used by providers of Home Purchase Plans, the Financial Secretary to the Treasury, Sajid Javid, announced today (11 February 2014). Home Purchase Plans (HPPs) are a Sharia law compliant alternative to mortgages and are often known as ‘Islamic Mortgages’.

The Help to Buy scheme has already helped thousands get on or move up the housing ladder, and the government remains committed to making the aspiration of home ownership a reality for as many households as possible.

In line with this, the government has been looking at how to open up access to the Help to Buy mortgage guarantee scheme, so that providers of HPPscan also benefit. From today the rules have been amended to enable banks that sell HPPs to purchase a government guarantee for them. Additionally, the Islamic Bank of Britain have stated their intention of participating to offer Home Purchase Plans under the scheme.

This will be particularly supportive to some Muslim homebuyers who have been unwilling to use a traditional Help to Buy mortgage because of their religious beliefs. However, the inclusion of HPPs in the Help to Buy schemeintroduces more choice for all consumers and perspective homebuyers.

MORE HERE.

UK Treasury appoints Islamic finance advisors

The Treasury has appointed external advisors to assist on Islamic financeA bank, HSBC, and a law firm, Linklaters LLP, have been hired to help development a government Sukuk, or Islamic bond. 

HSBC will provide expert financial advice on structuring the Sukuk to ensure that it conforms with principles of Islamic finance, said the Treasury today. Linklaters will provide commercial legal advice in relation to the capital markets, tax, regulatory and real estate implications of issuing a government Sukuk for the first time. 

The appointment is related to the David Cameron’s announcement at the World Islamic Economic Forum in October 2013 that the Treasury was working on the practicalities of issuing a bond-like Sukuk worth around £200 million. It followed a competition launched in December 2013. In line with the government’s Transparency Agenda the Treasury will publish the contracts.

- Raymond Doherty, 31 January 2014

Britain Looks Forward To Partner With Malaysia In Islamic Finance

The British government is looking forward to partner with Malaysia in Islamic finance due to the country's success in the sector.
British Minister of Trade, Investments and Small Business, Lord Mervyn Davies, said as the world's top financial centre, London was keen to join hands with Kuala Lumpur as the two governments could generate more ideas and schemes together, reports Bernama (Nov 3, 2009).
"Hong Kong and Shangai Bank Corporation (HSBC), a globally famous bank, has moved its Islamic finance headquarters from the Middle East to Kuala Lumpur. This shows the confidence that the economy has in the Malaysian market," Davis said.
He said this at a press meet after his one-day official visit to Malaysia Tuesday. Also present was the British High Commissioner Boyd McCleary.
Davis said Malaysia has been included as one of the top 15 high growth markets as not only big companies are interested in Malaysia but also the United Kingdom's small and medium enterprises (SMEs).
"As the trade minister, I always encourage all our 4.8 million SMEs to invest and move further in countries with emerging markets like Malaysia," he said.
Davis also said that the halal industry in Malaysia has a great future in the UK as there is a demand for the industry there.
"All these efforts will be supported by liberalisation of the service sectors carried out by the government recently, which will encourage other foreign investors, especially financial companies, to extend their services in Malaysia," he said.
"This liberalisation will be also exciting as it will indirectly increase more foreign direct investments."
Total exports of goods and services from the UK to Malaysia was 1.64 billion pounds last year while total exports from Malaysia to the UK was 2.04 billion pounds.
Davis said the UK has good representation in all the emerging sectors in Malaysia, including education, Islamic finance, petroleum and retail.
He advised all sectors contributing to the economy to heed Prime Minister Datuk Seri Najib Tun Razak's suggestion to invest in parts of the economy which have huge potential to recover from the current economic downturn.
"This plan is very similar to what we have been doing in the UK for the past two years," he said. - Bernama

UK Tories would maintain Islamic finance focus: REUTERS

The UK Conservative Party would foster the development of Islamic finance as much as the Labour government, if it comes to power after next year's general election, an Islamic finance expert linked to the Party said.
Mohammed Amin, partner and head of the UK Islamic Finance practice at PricewaterhouseCoopers (PwC), said at a conference on Wednesday: 'All the ways (in which) Labour has supported Islamic finance would be every bit as valuable under David Cameron (Conservative Party leader) as prime minister, reports Reuters (London: Sept 17, 2009).
Speaking at an Islamic finance conference in London as the vice-chairman of the Conservative Muslim Forum, an affiliate of Cameron's party working to encourage support from the Muslim community, he said: "The next conservative government would be very supportive of Islamic finance."
In April the budget 2009 changed the tax regime to facilitate Islamic-debt issuance and encourage the growth of London as an Islamic finance hub. Rules were changed to remove fiscal penalties to UK companies willing to issue sukuks, or Islamic bonds, effectively ending a regime which would have double-taxed the transactions needed to set up a sukuk, the report said.
The government however shelved its plans to launch a sovereign sukuk last November, citing the troubled market conditions in the wake of the Lehman Brothers collapse, it added.
The report added Amin said the Conservative party had been quiet about the Islamic finance field because there was 'no political mileage' in highlighting the achievements of the Labour government.

The steady rise of Islamic finance: BBC

One of the world's leading experts on Islamic finance, Sheikh Hussain Hassan, argues the whole crisis in Western banking could have been avoided if these basic sharia principles had been followed.
"$600 trillion were wasted on options, futures and derivatives, all gambling. Sharia prohibited these kind of risks 14 centuries back," he said in an article posted on the BBC website.
The article noted that London has become one of the biggest centres for Islamic finance in the world, with five Islamic banks, and many others in the high street offering Islamic financial products, or "windows" as they are known, adding that the growth of Islamic finance has been an unexpected outcome of the attacks on the World Trade Center of 11 September 2001.
Farmida Bi, a partner at London-based law firm Norton Rose, told the report that London has attracted this kind of investment because the British government wooed Islamic money in the wake of 9/11, at the expense of the US.
"It was really September 11th that made being a Muslim a political statement and not just a matter of personal faith," she said.
"And with the Patriot Act, which made investments in the US difficult for many Islamic investors, there was a significant increase in Islamic investors choosing to invest in Islamic institutions and Islamic products."

Islamic finance must resolve inner tensions: FT

Proponents of the US$800 billion (RM2.87 trillion) industry argue that the prohibition on dealing in interest has saved Islamic institutions, preventing them from investing in all the dubious structures that have brought down high-flying international institutions, argues a recent article in the Financial Times.
A small idea is developing into a big hope in the Middle East. It is that the answer to the global financial crisis lies in Islamic finance, it said.
The article, entitled "Islamic finance must resolve inner tensions", goes on to say one cheerleader for Islamic finance is Humayon Dar, chief executive officer of BMB Islamic, a subsidiary of The BMB Group, the global alternative asset management company.
He told the UK-based newspaper that he was starting to worry about his job at the end of last year because of the changing economic climate, adding "But I’m pleasantly surprised. The inquiries we’ve been receiving are numerous."
However, the article noted that many of the Gulf’s Islamic banks have not been immune to the financial crisis — the liquidity squeeze in the region has put pressure on these banks just as much as their conventional counterparts, adding that the volume of sukuk, or Islamic bonds, has dramatically declined, though predictions abound that it will take off again later this year.
"But it is true that Islamic banks have been relatively protected because they had no exposure to securitised debt-based assets.
"This fortunate condition, however, may be due to the immaturity of the industry. The financial wizards who flocked to Islamic banks in recent years had not yet engineered the synthetic structures that would pass muster with sharia (Islamic law) scholars, whose job is to sign off on the probity of products," the article argues.

BRITAIN: Islamic finance firms in Britain sitting pretty

Neill Gibson, a partner in Trowers & Hamlins who works on many Islamic finance matters, told The Times in a recent article that Islamic finance would not have touched the subprime markets "but it won’t have been protected from other badly hit sectors, such as real estate".
The article entitled "Crossing over to Islamic banking: Shariah-compliant finance is prospering in Britain", quoted a lawyer dabbling in Islamic finance as saying that Shariah can permit certain futures and options structures, such as the "salaam" (sale contract with a deferred delivery) and "arboun" (sale contract with a non refundable deposit), it prohibits convoluted derivative products.
"An asset has to be visible. If you can’t see it, it’s unlikely to be Shariah-compliant," Hamid Yunis, the head of the law firm Taylor Wessing’s Islamic finance practice, said in the report. The article began by saying that as the credit crunch has mutated inexorably into a recession, with bankers having eclipsed politicians, lawyers and even journalists as public enemy number one, the growing number of Islamic finance institutions in Britain might just be sitting pretty.
It noted that UK now has five fully Shariah-compliant banks and another 17 financial institutions have set up special branches or firms.
They include the Qatar Islamic Bank (QIB), with its London-based European Finance House in Berkeley Square, and the Islamic Bank of Britain, which has headquarters in Birmingham. The report also quoted an Islamic bank marketeer as to why Shariah banking would have survived the onslaught of the credit crisis. "Our core business will always be Muslims but the number of non-Muslims are really picking up.
"We’ve had massive interest — and that’s down to a number of reasons, all of which have kept us insulated from the credit crunch," said Steve Amos who heads marketing at Islamic Bank of Britain. He alludes to the nuances of Islamic banking — specifically that Islamic finance has to be Shariah, or Islamic law, compliant.

UK and Malaysia working side-by-side

(UKTI Press release)
More doors to opportunities in Islamic finance between the UK and Malaysia will open with a Memorandum of Understanding (MoU) signed on Wednesday, 25 February by UK Trade & Investment (UKTI) and Bank Negara Malaysia.
Signed by UKTI Chief Executive Officer Sir Andrew Cahn and Governor Zeti Akhtar Aziz, the agreement maps out how the two organisations will work together to make Islamic finance a global success by:
Encouraging the exchange of Islamic finance staff, experts and students;
Encouraging joint-education programmes on Islamic finance with reciprocal academic, professional and vocational qualifications;
Supporting Islamic finance policy exchanges between advisers, officials and legislators to learn from experiences; and
Promoting mutual recognition of standards around Islamic finance transactions, such as Shariah interpretations and accounting, legal and regulatory treatments.
Globally, Islamic finance is estimated at $250 billion with an expected growth between 10 and 15 per cent per annum over the next few years.
UKTI Chief Executive Officer Sir Andrew Cahn said:
"As conventional liquidity becomes difficult to come by, companies are looking for alternative financial options, helping Islamic finance grow in the mainstream international finance market.
"Despite its origins overseas, Islamic finance has found a natural home in the UK and working in partnership with Malaysia helps cement the global positions of both countries as centres of excellence in Islamic finance."
Enjoying close historic, educational and commercial ties, Malaysia is the UK's second-largest South East Asia export market, while the UK is one of its largest investors.
Bank Negara Malaysia Governor Dr Zeti Akhtar Aziz said:
"The MoU signifies the establishment of a collaborative partnership between the two countries in the area of Islamic finance and provides the potential to strengthen the inter-linkages amongst key financial centres in Islamic finance in the international financial system."
A working group of representatives will help drive the MoU forward.

BNM & UK body to join hands on Islamic finance

Bank Negara Malaysia (BNM) yesterday signed a Memorandum of Understanding (MoU) with the UK Trade and Investment (UKTI) to establish a collaborative framework to promote mutual co-operation in Islamic finance.
The MoU was signed in London by BNM governor Tan Sri Dr Zeti Akhtar Aziz and UKTI CEO Sir Andrew Cahn, the central bank said in a statement issued in Kuala Lumpur on Feb 25.
This MoU will pave the way for Malaysia and the UK to strengthen co-operation in the development of talent and expertise, business linkages and infrastructure support in Islamic finance. This strategic initiative will facilitate the exchange of resources in the development of human capital and promote the mutual recognition of common standards in Islamic finance transactions.
These initiatives in the context of the current global development of Islamic finance would contribute to elevating the understanding and appreciation of Islamic finance.
The signing of this MoU reflects the commitment to further develop the Islamic finance industry in the United Kingdom and Malaysia, Bank Negara said.
"The MoU signifies the establishment of a collaborative partnership between the two countries in the area of Islamic finance and provides the potential to strengthen the inter-linkages amongst key financial centres in Islamic finance in the international financial system." said Dr Zeti Akhtar Aziz.
Sir Andrew Cahn highlighted that "as conventional liquidity becomes difficult to come by, companies are looking for alternative financial options, thus helping Islamic finance become part of the mainstream international finance market.
"Despite its origins overseas, Islamic finance has found a natural home in the UK and working in partnership with Malaysia helps cement our position as the leading western centre for Islamic finance," he said. — Bernama

Malaysia, London can bridge Islamic financial markets

Malaysia and London can pave the way towards bridging Islamic financial markets between the East and the West, according to Bank Negara Malaysia's governor Tan Sri Dr Zeti Akhtar Aziz (picture).
She said the global financial crisis had highlighted several structural weaknesses and imbalances in the international financial system.
"Whilst Islamic finance is not insulated from the effects of the current environment, the Shariah principles and values that underlies Islamic finance provides an important underlying foundation," Zeti said. "This has been further reinforced by the strengthening of the financial infrastructure, the regulatory regime, the supervisory and legal framework, and the crisis management capabilities," she said at the two day Euromoney 8th Annual Islamic Finance Summit on "Islamic Finance and Global Financial Stability" which began in London on Feb 23. The text of her speech was released in Kuala Lumpur on Tuesday.
"As we weather the current environment and prepare for the next wave of the growth cycle, it is also timely to explore the potential synergy that can be optimised between London, an international financial centre, and Malaysia, an international Islamic financial hub," Zeti said. "And in doing so, capitalise on the respective comparative advantage, thereby strengthening the linkages between Islamic financial markets, in particular, between the East and West," she said.
Zeti said with total global Islamic financial assets now estimated at US$700 billion in 2007, the Islamic financial industry was offering a wide range of complex and sophisticated Islamic financial products and services. Of significance, she said, was its greater integration into the international financial system.
As it becomes part of the financial globalisation process, Islamic finance has however become increasingly exposed to the systematic implications of external developments, Zeti said.
"Two issues are of interest. Firstly, as Islamic finance expands, its potential for sustaining financial stability and secondly, how robust is the industry to external shocks. In this regard, there are several areas of potential collaboration," she said.
In the area of liquidity management, Malaysia has an established and vibrant Islamic money market, the central bank governor said. She said the range of Islamic money market instruments could be a viable platform towards the development of a bilateral currency market.
With Malaysia's Islamic infrastructure and London's global reach, a mutual enriching international currency Islamic money market could potentially be developed in which other financial centres could participate and leverage on the enhanced interconnectivity, Zeti said.
In the immediate term, it could accord advantages to Islamic financial institutions in the United Kingdom and Malaysia to manage their liquidity management requirements, she said.
In the area of sukuk, Malaysia has the largest sukuk market while London has one of the most established exchanges. Thus, an area for potential cooperation could be in the area of the cross-listing of sukuk, according to Zeti. — Bernama

UK's Shariah banking still lacks awareness, skills and standardisation

By Habhajan Singh
The Islamic finance fraternity in the United Kingdom, which has been experiencing growth in the last five years, has to deal with areas of standardisation, awareness and skills to take the industry forward, according to a recent document from the UK Treasury.
The document also noted that the government would provide "support and encouragement where appropriate".
According to a December 2008 Treasury report entitled "The Development of Islamic Finance in the UK: The Government's Perspective", the role of the government in achieving this progress has been important, particularly through the removal of tax and regulatory barriers.
"The Treasury and the Financial Services Authority will continue to work towards creating a level tax and regulatory playing field between conventional and Islamic finance.
"Furthermore, the government will continue to keep the feasibility of issuing sovereign wholesale and retail Islamic finance products under review," the report added.
UK is home to a number of Islamic banks, including the European Islamic Investment Bank, Islamic Bank of Britain and Gatehouse Bank.
Being an international financial hub London is also seeing Islamic finance related events, like the 8th Annual Islamic Finance Summit which begins tomorrow in the city. The two-day seminar will look at at the possibility of providing European corporate institutions with Islamic liquidity and whether Islamic liquidity for European corporate institutions as the possible "next big driver" is merely wishful thinking.
In its document, the UK Treasury noted that "it is clear that much of the future work in developing the sector and removing barriers for growth in areas such as standardisation, awareness and skills, is necessary to take the industry forward, with the government providing support and encouragement where appropriate".
The document, containing a foreword from economic secretary to the Treasury Ian Pearson, also highlighted several areas that the government has identified for further progress.
These include collaboration between industry and international standard setting bodies to create a set of robust and accessible term-sheets for the main Islamic products. Another area is the collaboration among industry and community groups to raise awareness and knowledge about Islamic finance at the grass roots level.
The third area has been identified as collaboration between industry and trade bodies to highlight the UK's strength as a provider of education, training and skills in Islamic finance.
"Many of the remaining barriers will be addressed as the sector grows and develops. However, where there is a need for further intervention, the government stands ready to help," the document said.
The report also noted that the UK is now the leading centre for Islamic finance outside of the Gulf Cooperative Council and Malaysia.
"London and Birmingham now host the only stand-alone Islamic financial institutions in the EU. "UK consumers can now access a wide range of Shariah compliant retail financial products and services, which are regulated to the same standard as conventional financial products, conferring the same degree of consumer protection," it said.
On its regulatory approach, the document repeated what it had stated earlier that the government "will not champion Islamic finance over conventional finance, but will instead strive to create a level playing field between Islamic and conventional finance".

(This story appeared in The Malaysian Reserve on Feb 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)

Islamic finance accelerates into motor policies

Motor insurance in line with the principles of Islamic finance is now being introduced in the United Kingdom and may be popular with motorists beyond the Muslim belt alone, according to a UK newspaper.
"First it was Islamic current accounts, then mortgages and investment funds, and now we have a motor insurance product that conforms to Islamic law, or Shariah.
"This move will be welcomed by many of the two million British Muslims looking to buy insurance cover aligned with their faith.
But it could also prove popular for non-Muslims who find the notion of an ethical or co-operative insurance product appealing," The Independent reported.
Unlike conventional insurance, where risk is transferred from the policyholder to the insurance company, halal (permissable) insurance, or takaful ("guaranteeing each other"), requires all participants to share risk equally, the newspaper reported. Instead of premiums, participants pay contributions which, as with ordinary insurance, are calculated on the presumed risk of the individual and how likely they are to claim. These contributions are then pooled in a takaful fund, which is invested in strictly halal activities.
There is also a Shariah Supervisory Committee, made up of Shariah scholars, to oversee all activities and to ensure that the whole process is consistent with Islamic principles, it noted.
Interestingly, according to the paper, once the fund has been used to pay for any valid claims, any surplus money is redistributed to participants at the end of the year in the form of discounted premiums, which come in addition to any no-claims bonuses.
"What is unique is the ethical nature of what we do," says Bradley Brandon-Cross, the chief executive of Salaam Halal Insurance. "It's a transparent process and the opportunity to get something back is attractive to customers, both Muslims and non-Muslims alike."

(This story appeared in The Malaysian Reserve on Feb 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)

ACCA: ‘Need to ensure level playing field for Shariah banking’

By Habhajan Singh
While it is not possible for United Kingdom (UK) regulation to distinguish Islamic finance from other forms of banking on a non-secular basis, there is a need to ensure a level playing field as far as possible. This was one of the pointers highlighted by Association of Chartered Certified Accountants (ACCA) president Richard Aitken-Davies during a recent breakfast meeting he hosted in London with some players from the Islamic finance sector.
He also noted that Islamic banks are not a panacea as they are increasingly beginning to feel the effects of the slowdown, due to the interconnection with the global financial system.
The discussion also touched on the role Islamic finance could play in helping in the current credit crisis. It revolved round a recent ACCA paper — "Islamic Finance: An Ethical Alternative to Conventional Finance?" — which explores the basic tenets of Islamic finance, the role of the UK in leading its development and whether it is a serious alternative to conventional finance.
"Once seen as a marginal industry by some, Islamic finance is now recognised as a vital and thriving market. "It has been widely acclaimed as the fastest growing sector within the world of finance and positions itself as an alternative model," Aitken-Davies wrote on his blog.
"Some suggest much of the current problems might have been avoided in an Islamic system (for example, because short selling and derivatives are generally prohibited).
"Advocates of this view point to the fact that funds adhering to Islamic (Shariah) investment principles have so far avoided the worst effects of the credit crisis," he added.
In November 2007, UK's Financial Services Authority (FSA), UK's single financial regulator, produced a paper entitled "Islamic Finance in the UK: Regulation and Challenges", setting out FSA's role in the development of the UK as the major European financial centre for Islamic financial products and services.
In the paper, it noted that UK's tax and legislative framework is becoming favourably inclined to Islamic financing, establishing a level playing field for a variety of Islamic products such as mortgages, bonds and insurance.
It also said it believes that these could lead to the availability of new retail products, the expansion of wealth and asset management services and the development of sukuk and other wholesale markets.
"Although we cannot promote Islamic finance (or any other particular kind of finance), we can give a clear regulatory framework which is flexible enough to adapt to changes in the market.
"We are keen to see the industry expand, although we recognise this will bring new regulatory challenges," the paper noted.
Since ACCA student, and members live in countries with a thriving Islamic finance market in the Middle East, Malaysia and Pakistan, he said it was keen to play its part in increasing the understanding and development of this sector. During the discussion, he also noted the the need to raise awareness of the principles of Islamic finance, with particular emphasis on the embedded principles of ethics and social responsibility.
"Further development of Islamic finance will require a wider range of products to stimulate competition and provide the best service to the public," he said.
(The Malaysian Reserve, Dec 15, 2008, p32, by Habhajan Singh. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays)

More Islamic finance jobs (July/2)

Head of Operations (Islamic) - Qatar
A major new Islamic investment bank in the Gulf due to start trading
in the coming months is looking for an experienced hand who will
establish its operations department, from scratch.

Amanah Manager - UK
This is a more junior position. The employer is a global Islamic
banking division of the one of the largest banks in the world with 10
years experience. This is a sales role and they are looking for
someone who has an understanding or passion for Islamic Finance.
Fantastic opportunity for a personal banker or a junior private
relationship manager, says the adv.