PART 1: ISLAMIC INVESTMENT BANKING: GLOBAL TRENDS
1 Innovation, globalisation and diversification: the key to success for Islamic investment banking
Sohail Jaffer Introduction
The strengths and resilience of the Islamic banking sector Sukuk – a challenge to overcome for the sector
The future is bright
Compelling long-term prospects
2 Growth and development of Islamic capital markets – the Malaysian experience Zarinah Anwar
Introduction
Origins in meeting community needs Orderly growth
The critical role of the Shariah Advisory Council Current Islamic capital market landscape in Malaysia Pioneering the sukuk market
Broadening the range of listed Shariah-compliant products Building the base for Islamic fund management
Islamic structured products as a hedging instrument
Strong regulatory and facilitative tax frameworks are critical success factors Human capital development
Conclusion
3 Overview of Shariah-compliant investment banking: global challenges and opportunities post-global credit crunch
Saleh Jameel Malaikah Introduction
The impact of the credit crunch and beyond Modernising the Shariah governance process Islamic investment banking – innovate or stagnate Private equity the mainstay of Islamic investments The power of ‘bricks and mortar’
The wealth management revolution beckons
Product development and corporate governance need of the time for Islamic banking Takaful – the untapped financial services giant
Opportunities for GCC banks to expand beyond the regional frontiers The Sukuk market and beyond
Conclusion
4 Strategic choices for Islamic banks in service provision for home and overseas markets Rodney Wilson
Introduction
Extending the range of Islamic financial services The capacity of Islamic banks
Strategic options for Islamic banks Vertical or horizontal expansion Al Rajhi Bank in Saudi Arabia Al Rajhi Bank in Malaysia
Dubai Islamic Bank Qatar Islamic Bank (QIB) Conclusion
5 London as the international centre for Islamic finance Gillian Walmsley
Introduction
A continued commitment to development Recent developments
Islamic finance at the London Stock Exchange Sukuk
Shariah-compliant exchange traded funds A centre of excellence and specialist expertise Looking to the future
6 Opportunities and challenges faced by Islamic banks in the UK Dr Aly Khorshid
Global market for Islamic financial services Shariah-compliant financial services Shariah advisory board members Roles of Shariah scholars
Government strategy for development of Islamic finance in the UK Impact on investment decisions
Risk management and Islamic banking
Islamic finance offers several answers to risk management in banks Sukuk and current UK legislation
Potential for Sukuk in the secondary market
Characteristics of secondary market Sukuk and the conventional debt market Limited number of instruments within the Sukuk market
The path to liquidity in the secondary market Treasury management of Islamic banking
Understanding of Shariah law, creates challenge for standardisation Future challenges
Growth and business development What more must be done?
Government intervention has to protect the taxpayer
7 M&A opportunities available in the MENA region and cross-border expansion of Islamic financial institutions (post global crisis)
Alexander von Pock Introduction
M&A: drivers and risks A look at the past Effects of the crisis Way forward
8 The outlook for Shari’ah-compliant investments including alternatives post global crisis Henry Chin
Defining Shari’ah-compliant investment
Overview of different financial instruments and structures Demand for Islamic finance
Sources of capital
Capital mobility and allocation The challenges of Islamic finance
The outlook for Shari’ah-compliant alternative investments PART 2: ISLAMIC CAPITAL MARKETS
9 The Malaysian Sukuk market Zainal Hasfi Hashim
Rapid growth of the global sukuk market Impressive growth of Malaysian sukuk industry
Key growth drivers underpinning strong sukuk development Malaysia’s leading edge as a global sukuk hub
Facilitative rules for issuance process
Well-defined Shariah governance framework Competitive pricing
Innovative structures and human capital development Incentives for investment activities
Comprehensive infrastructure 10 Innovation in Sukuk structures Moinuddin Malim
Historical overview Basic structures and issues Structuring Sukuk
Rating and listing of Sukuk
The approach to structuring Sukuks Emerging market leader
Sukuk defaults Conclusion Appendix A Appendix B
11 The growth and development of Islamic capital markets following the global crisis Farmida Bi
Introduction
The growth of sukuk before the global financial crisis AAOIFI statement
Global financial crisis
Primary and secondary sukuk markets Sukuk defaults
Lack of transparency and untested restructuring Signs of recovery
Other positive signs The future
12 Islamic capital markets: the case for a more intelligent positioning in an evolving global industry
Ayman Khaleq Executive summary
Capital markets considerations applicable to Islamic capital markets products Legal form of investment vehicles
Regulation of Islamic products and investor suitability requirements Exchange suitability
Nature and location of the assets
Enforcement and bankruptcy considerations Tax
Conclusion
13 Swaps – profit rate swap and cross currency swap Kareem Hussaini and Wanda Regina
The structure of global swap markets Profit rate swap
Cross currency swap
Summary of cash flow movement
An analysis of some pros and cons of the structures Some challenges
Credit risk and swaps Conclusion
14 Shariah-compliant financial intermediation: a natural fit for investment banking Zamir Iqbal
Introduction
Financial intermediation in Islamic financial system Shariah-compliant intermediation and investment banking Challenges for Shariah-compliant investment banking 15 Islamic liquidity management
Majid Dawood
The essence of liquidity Definition
Introduction
Current options and current concerns New and needed developments The future
Conclusion
PART 3: WEALTH MANAGEMENT 16 Post-crisis Islamic investment Gul Khan
Introduction
An opportunity for Islamic finance Equity funds
Other investments Sukuk
Conclusion
17 Buy side Shariah products Omar Saleem Asghar
18 Recent buy side innovations in wealth management Naveed Ahmad
Introduction
Markets and investor segments Product selection
Public equities Conclusion
19 Innovations in Shariah-compliant mutual funds Rejina Rahim
Introduction
Innovation is not a strange concept in Islam Shariah assets breakdown
Malaysia Saudi Arabia
Customer profile surprises in Malaysia
Is Islamic asset management coming into the mainstream? Can Shariah-compliant mutual funds be a viable investment tool?
Issues plaguing Islamic asset management Is the party over for Islamic finance? Conclusion
20 Attractiveness of Luxembourg for Shariah-compliant investment funds and Sukuk Pierre Weimerskirch
An attractive segment
Increasing competition among countries and financial centres
How attractive is Luxembourg as a gateway for Sukuk and Islamic funds? Looking to the future
21 Irish domiciled Shariah-compliant investment funds Brian Higgins and Emmet Quish
Introduction
Ireland as a fund domicile
Key features of an Irish domiciled Shariah-compliant fund Irish fund legal structures
UCITS funds and compatibility with Shariah Latest developments in UCITS product – UCITS IV Non-UCITS Shariah-compliant investment funds Conclusion
22 Investor services to the Shariah-compliant mutual funds industry Richard Street
A breadth of funds Shariah funds structure Prohibited businesses
Prohibited instruments and activities Accounting-based screening
Maintaining a list of Shariah-compliant companies Dealing with a change in status
Income purification
Fund administration and custody Support for international development
23 Real estate Islamic funds; market analysis, opportunities and structuring techniques Anass Patel
Introduction
Real estate market overview and post-crisis trends Are Islamic real estate funds the panacea in the long run?
Structuring active real estate funds and sharia-compliant investments Islamic REITs in a non-listed environment
24 Challenges and opportunities for the growth of Takaful Tommy Trask
PART 4: NEW TRENDS AND DEVELOPMENTS IN THE INTERNATIONAL ARENA 25 The GCC sovereign wealth funds and voluntary governance
Dr Zeinab Karake-Shalhoub Introduction
GCC SWFs
Portfolios of GCC SWFs
SWFs and the Santiago Principles Conclusion
26 The role of sovereign wealth funds in promoting Islamic investment banking Alberto Brugnoni
27 Improving the core under the Shariah overlay Dr Amin Rajan
Before the credit crunch: 2–2007 After the credit crunch: 2007–2010 Concluding remarks
28 The role of international centres promoting Islamic Finance like DIFC, Bahrain Financial Harbour, MIFC, London, Paris, Luxemburg and Dublin
Ken Owens
International centres – a little bit of background
International centres enabling the growth of Islamic finance Human capital
International tax issue for Islamic finance Regulating Shariah, audit and compliance Malaysian Islamic Financial Centre Dubai International Financial Centre Bahrain Financial Harbour
London – United Kingdom Paris – France
Luxembourg Conclusion
29 Islamic finance in international financial centres Nathalie Schoon
Islamic finance in international centres The role of international financial centres Global developments
The role of regional financial centres
Regional versus international, is one better than the other?
30 The convergence of Islamic and sustainable finance: the revival of common sense Natacha Guerdat
Introduction Sustainable finance Islamic finance
More than ethical screening Supporting change
Impact investing
Microfinance, convergence by objectives Conclusion
31 The role of the UK as an international centre for Islamic banking and finance Mohammed Amin
Introduction Political stability
The English legal system The UK tax system Travel and the time zone
Professional resources and the network effect
Supportive UK government policy for Islamic finance A successful approach to adapting the UK tax system for Islamic finance
Equality of regulatory treatment and an open licensing approach Competition from other financial centres
Conclusion
32 Potential for Islamic investment banking in France Valéry Foussé
A completely new international situation What drives the French situation?
What will have impact on a long term basis?
Where Islamic finance investment banks will potentially have a role Where the competition is important and players are financially strong France tries to preserve its competitiveness and attractiveness
A political move ahead to enhance France’s financial market and open it to Islamic finance A strong mathematical school
French banks do have strong expertise in Islamic finance but … New entrants are welcomed but should be fathered
A vast potential of development for potential new entrants
33 Islamic banking in Turkey: the Istanbul Financial Centre plans further expansion Paul Wouters
Preparing for a new phase
34 Technology trends in Islamic investment banking: towards best of breed solutions Bill Willison
PART 5: SHARIAH, REGULATORY AND SUPERVISORY FRAMEWORK 35 Islamic investment banking and European regulation
Tim Plews
The current position The scope of this chapter Global financial turmoil
Islamic finance and the global financial turmoil Islamic investment banking and the turmoil
EU regulatory policy-makers and Islamic investment banking A growing profile within Europe
The EU’s regulatory structure
A ‘do-nothing’ approach towards EU regulation? The exceptional position of London and the UK The rest of Europe is not standing still
Islam’s political dynamic
Islamic investment banking: articulating its ethical proposition Who should provide an education on Islamic finance?
What these institutions can do
The key points for communication to the European commission Islamic finance lacks a global regulator – does that matter? So what should happen next?
36 The role of Shari’ah boards and the evolution of underlying Shari’ah principles Mohd Daud Bakar
Introduction
Shari’ah board: is it a Shari’ah advisory or Shari’ah supervisory board? Who is a Shari’ah board member?
What are the roles and duties of a Shari’ah board?
An overview of the evolution of some underlying principles in Islamic finance Conclusion
37 Rethinking the strategic significance of Shari’a supervision boards Abdel-Maoula Chaar
Introduction
Shari’a boards’ interlocks effect on the Islamic financial field The case study of the Lebanese Islamic banks
The institutionalisation effect of Shari’a boards Conclusion
38 The role of IIFM in the global expansion of Islamic capital and money market Ijlal A. Alvi
Islamic capital and money market IIFM’s role
IIFM master agreements for treasury placement (MATP) IIFM/ISDA Tahawwut master agreement (TMA)
Liquidity management in Islamic financial institutions (IFIs) Exploring I’aadat Al Shira’a (repurchase) potential
IIFM Wakala master agreement Sukuk