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    Islamic banking escapes global financial crisis


    KUALA LUMPUR, October 20, 2008 -- Islamic banking has largely escaped the fallout from the global financial crisis, thanks to rules that forbid the sort of risky business that is felling mainstream institutions.

    But experts say that because of its heavy reliance on property investments and private equity, the booming 1.0 trillion dollar global industry could be hit if the turmoil worsens and real assets start to crumble.

    "In the current financial turmoil, it is interesting to note that Islamic financing may have prevented a majority of the mess created by the conventional banking and financial institutions," Kuwait Finance House said in a report.

    "The outlook for Islamic financing is bright and will likely take the lead in terms of providing funding for major projects as the conventional banking system reevaluates its business model."

    The rules of Islamic banking and finance - which incorporate principles of sharia or Islamic law - read like a how-to guide on avoiding the kind of disaster that is currently gripping world markets.

    Islamic law prohibits the payment and collection of interest, which is seen as a form of gambling, so highly complex instruments such as derivatives and other creative accounting practices are banned.

    Transactions must be backed by real assets - not shady repackaged subprime mortgages - and because risk is shared between the bank and the depositor there is an incentive for the institutions to ensure the deal is sound.

    Investors have a right to know how their funds are being used, and the sector is overseen by dedicated supervisory boards as well as the usual national regulatory authorities.

    "Islamic banking has, thus far, remained positive, despite the current challenging global financial environment," said Zeti Akhtar Aziz, the central bank governor of Malaysia, which is Southeast Asia's leader in Islamic banking.

    Zeti said this month that because of the slowing global economy, plans for Islamic "sukuk" bonds had been postponed or scrapped by companies including Kuwait's Abyaar Real Estate Development Co. and Malaysia's Perisai Petroleum.

    And Jennifer Chang, a partner at Pricewaterhouse Coopers in the Malaysian capital Kuala Lumpur, said that given the extent of the global crisis, Islamic banks may suffer damage despite their strong position.

    "Islamic banks, especially in the Middle East, got heavily into private equity and real estate investments, and a lot of loans may be backed by properties. So if the property market goes down, there will be an impact," she said.

    "If a borrower is not able to pay then the bank will foreclose and the question is -- can you sell the property in the market and at what value? These are issues which all banks can face."

    There have been calls for the conventional banking industry to take a leaf out of the book of Islamic finance, which also shuns investments in gaming, alcohol and pornography in favour of ethical investments.

    Influential Sunni cleric Sheikh Yusuf al-Qaradawi earlier this month called on Muslims to take advantage of the turmoil to build an economic system compatible with Islamic principles.

    "The collapse of the capitalist system based on usury and paper and not on goods traded on the market is proof that it is in crisis and shows that Islamic economic philosophy is holding up," said the Egyptian-born, Qatar-based cleric.

    In recent years the sector has broken out of its niche and been embraced by mainstream banks. As well as basic bank deposits and investment accounts, it has expanded into areas including equity funds, bonds and Islamic hedge funds.

    Abhishek Kumar, a senior research analyst at Financial Insights, a company under market research and analysis firm International Data Corp (IDC), said recent events may further boost the sector.

    "More and more institutions will be interested in providing Islamic services to diversify their risk portfolio," he said, while warning that in the current financial storm there were no absolutely safe harbours.

    "We're not really sure what the real extent of the impact is, and whether we've passed the worst of it or not, But the extent is not going to be as bad as in the mainstream sector," he said.

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    Akram Belkaïd:


    November 7, 2008 -- The suggestion that Wall Street should adopt the rules of Islamic finance might surprise, or even irritate, some people. But there is one very simple reason why the idea is under serious consideration around the world: the fact that this form of finance, now worth more than $400bn, prohibits interest charges which may make it more resistant to the damage caused by subprime mortgages and speculation on the derivatives markets.

    During Pope Benedict XVI’s visit to France in September, an unexpected editorial by Vincent Beaufils, in the French weekly Challenges, tackled the issue head on. The magazine’s editor pointed out that at a time when the world was undergoing “a financial crisis that has swept aside every sign of growth, we would be better reading the words of the Qur’an than those of the pontiff.” He continued: “If the bankers who are so desperate to profit from equity capital had shown even the slightest respect for sharia principles, we wouldn’t be in this mess.” Beaufils ended by praising bankers from the Gulf “who refuse to compromise a sacred principle: money must not produce money” - a principle translatable, in modern financial terms, as: “Any credit must be matched by clearly identified assets.”

    The editorial has spread across the internet in various languages, often accompanied by the observation that Islamic banking remains subject to safeguards that international finance abandoned in the name of deregulation. Several Arab television stations, including Al-Jazeera, devoted special programmes to the theme, in which they speculated about the possibility of a flow of savings from non-Muslim countries to Islamic financial institutions. But the Central Bank of Bahrain, the world centre of Islamic finance, remained cautious: “The reason the region’s banks have avoided the subprime crisis is because they lack the technical and human resources to invest in products of this type.”

    Nevertheless, one French banker working in Dubai expected Islamic finance to take advantage of the crisis and expand in the West: “In countries with significant Muslim communities, the current crisis will give Islamic banks a marketing advantage... They are already promoting the fact that their businesses are sharia-compliant; now they will begin to emphasise how they avoided the deregulation of the financial system.”

    Not that the sector is immune to accidents. During the 1990s, the spectacular collapse of Islamic banks in Egypt halted their development in Muslim countries. And one Tunisian banker, who views the establishment of such banks in his country with extreme suspicion, recalled that the International Monetary Fund (IMF) had sounded the alarm on several occasions, calling upon them to be more transparent and to observe standard international accounting and prudential practices.

    Other experts are concerned about the increasing sophistication of the investments offered by Islamic banks. In order to get round the prohibition on interest, these products are often tied to tangible assets like property or raw materials – volatile sectors, targeted by speculators, which could undermine the funds that depend upon them.

    But such reservations are unlikely to halt the rise of Islamic finance. Crisis or no crisis, more than 10 major conferences on the topic are planned in Europe and North Africa over the next few months.

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    DUBAI, February 6, 2009 -- More than half the building projects in the United Arab Emirates, together worth 582 billion dollars or 45 per cent of total value, have been put on hold amid the global financial crisis, a study said on Thursday.

    The number of projects suspended is 52.8 percent of the total but the ones which are ongoing have a greater combined value of 698 billion dollars, according to figures published by the Dubai-based Proleads market research company.

    The study put the total value of construction orders in the oil-rich state at 1.28 trillion dollars.

    Proleads cast doubt over the completion timetable of real estate developments scheduled to be ready in early 2009.

    "While numerous real estate projects are scheduled for completion in early 2009, the rate at which projects are being completed has slowed down," the market search group said.

    Yet more projects may be deferred in 2009 in the real estate sector, which represented in mid-January 84 percent of the total value of construction orders, but suspensions will be fewer among infrastructure schemes, it said.

    The study said the projects which are continuing indicate that the UAE economy is still doing better than other economies hit by the global financial crisis.

    "To put it into perspective, the 698 billion dollars of continuing work we are reporting is almost equivalent to the latest stimulus package proposed for the United States," said Emil Rademeyer, director of Proleads Global.

    "The UAE may no longer be the land of milk and honey but it is still in a far better position than most," he said.

    Proleads said that a frenzied real estate sector in the emirate of Dubai led to five-years of unrelenting growth in the UAE construction industry, but the global financial crisis has cast its shadow.

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    Vendredi 6 Février 2009 -- Des projets de construction totalisant 582 milliards de dollars ont été gelés aux Emirats arabes unis en raison de la crise financière mondiale, selon une étude publiée jeudi à Dubaï. Des grands projets, dont le coût total est estimé à 698 milliards de dollars, sont en revanche en cours de réalisation dans ce riche pays pétrolier, selon cette étude élaborée par le centre de recherche Proleads basé à Dubaï.

    Le secteur immobilier a connu un boom sans précédent ces dernières années aux Emirats arabes unis, un pays affecté par la crise financière mondiale qui a conduit à un manque de liquidités et à un durcissement des conditions d'octroi des prêts bancaires.

    Un responsable de la Chambre de commerce d'Abou Dhabi, capitale des Emirats arabes unis, avait averti en décembre que jusqu'à 45% des employés du secteur du bâtiment pourraient perdre leur emploi en 2009 en raison de cette crise. L'émirat d'Abou Dhabi a annoncé mercredi qu'il allait injecter plus de 4 milliards de dollars (3,1 milliards d'euros) dans le système bancaire pour faire face aux effets de la crise mondiale.

    L'Etat des Emirats, membre de l'Opep, a été frappé par la chute des cours du brut et la récession mondiale, mais ses dirigeants ont affirmé que l'économie de ce pays était en mesure de surmonter la crise.

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    Samedi 12 Septembre 2009 -- Si les banques islamiques ont été épargnées et avaient continué à enregistrer des bénéfices, même au plus fort de la crise financière mondiale, c’est parce qu’elles sont des «banques éthiques». Tel a été, en substance, le résumé de l’exposé de l’expert international Lachemi Siagh sur le thème «L’impact de la crise financière sur les banques islamiques». Un événement organisé mercredi soir au Sofitel d’Alger, à l’initiative de la chambre algéro-allemande du commerce et d’industrie (AHK). Rappelant les causes et les manifestations de la crise dont notamment la récession mondiale, les faillites et les pertes de millions d’emplois, les nationalisations de banques par des pays considérés comme les «champions du libéralisme» tels la Grande-Bretagne ou les Etats-Unis, M. Siagh a relevé que la finance islamique a été épargnée. «À peine si elle a été affectée par le ralentissement de l’activité économique», a-t-il toutefois tempéré, expliquant que «les causes sous-jacentes à la crise n’ont pas eu d’effets sur la finance islamique». Pourquoi ? «Parce que le paradigme des banques islamiques est différent de celui des banques conventionnelles», a-t-il dit en exposant ces différences entre les deux modèles. D’abord, «l’intérêt est le moteur de l’activité bancaire classique et le fondement de l’intermédiation bancaire. Or, les opérations bancaires islamiques ne doivent en aucun cas, de façon directe ou indirecte, comporter une rémunération fixée au préalable et assimilable à l’intérêt ou «riba», le Coran interdisant formellement les revenus provenant de l’usure ou «riba», note le président de la revue Strategica finance. Ensuite, les banques classiques usent d’une «spéculation éhontée et proposent des produits financiers exotiques très complexes et risqués pour l’investisseur». Par contre, souligne encore Lachemi Siagh, «la doctrine économique islamique rejette toute forme de spéculation ou gharar», expliquant que celui-ci est, selon la charia, «la transaction qui comprend un élément d’incertitude relatif soit à l’objet, soit au prix, soit au délai dans lequel il s’exécute». Le conférencier a également évoqué le filtrage exercé par l’investisseur islamique qui refuse de mettre son argent dans toutes les activités prohibées par l’islam. Il en est ainsi de l’alcool, de l’industrie porcine, des jeux de hasard, des services financiers conventionnels comme les banques et les assurances, des produits spéculatifs et leurs dérivés, de l’industrie de l’armement, et de la pornographie», énumère M. Siagh. L’expert en finance a également décortiqué les points relatifs au ratio d’endettement ou à celui des liquidités qui ne doivent, pour chacun des deux, «jamais être supérieurs à 33%». En plus des différences dans les critères d’octroi des bonus et rémunérations et dans les mécanismes de régulation entre les deux systèmes bancaires, le conférencier a mis en évidence la différence dans leur système de gouvernance. Pour M. Siagh, «les dérives de l’économie néolibérale et financière nécessitent de rechercher d’autres voies pour la conduite des affaires», et la finance islamique peut, selon lui, constituer une alternative.

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    ALGER, Jeudi 12 Novembre 2009 -- Un forum sur la finance islamique en Algérie s'est tenu mardi à Alger en présence des professionnels des secteurs bancaire et financier. Les différents intervenants ont relevé, lors de cette rencontre, que la finance islamique en Algérie est encore à un "stade embryonnaire" puisque sa part dans l’ensemble du système financier national stagne autour de 1% malgré son introduction depuis 1991 dans le paysage bancaire national. Selon les explications données par le PDG du bureau de conseil financier "Strategica Finances", Hachemi Siagh, la loi sur la monnaie et le crédit autorise, certes, les opérations d’investissement et de commerce conformes aux préceptes de la loi islamique (charia) mais ne les a pas clairement définies en tant que catégorie spécifique de financement.

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