(19) Statement on Shariah Compliancy of Albaraka Bank

Note: Daarul Iftaa Camperdown, the organisation that issued the recent fatwa against Albaraka and Oasis, is said to certify Islamic Finance, a division of Wesbank, which in turn is a division of First National Bank- one of the four major conventional banks operating in Southern Africa.

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Statement on Shariah Compliancy of Albaraka Bank Limited

Respected Client,

The Muslim Community in South Africa is constantly faced with the challenge of ensuring that their dealings comply with Shariah. With the Interest Based Banking system having gripped nations all over the world, providing an acceptable alternative to the Riba based banking system has become a burning issue of the time.

Albaraka Bank Limited’s mission is to reflect Islamic Economics Principles in all its operations and products and is therefore dedicated to providing this alternative and fulfilling the need of providing a Banking solution consistent with the principles of Shariah.

The Bank strives to achieve this by providing financial products that conform to the principles of Shariah. Furthermore, any queries received from clients or staff members and the public, on products, procedures or even general issues pertaining to Shariah Compliance are tabled at monthly Internal Shariah Committee meetings. The Bank has an Independent Shariah Supervisory Board which meets on a regular basis to resolve issues tabled at the Internal Shariah Committee.


Together with the guidance of the Shariah Board, the Bank uses the Islamic Banking Standards set by AAOIFI - The Accounting and Auditing Organisation for Islamic Financial Institutions, as a basis in its operations. The Bank has chosen to adopt these standards in order to ensure consistency and compatibility of its applications with the International Islamic financing arena.

AAOIFI (The Accounting and Auditing Organization for Islamic Financial Institutions) was established in Algiers on 1 Safar 1410AH corresponding to 27 March 1991 and is based Bahrain.

One of the primary objectives of AAOIFI is to prepare, promulgate and interpret Shariah standards for Islamic Financial Institutions in order to achieve harmonization in the application of Islamic Financial concepts among the Shariah supervisory Boards of Islamic Financial Institutions and to avoid contradiction or inconsistency between the Fatwas issues by different Islamic Scholars around the world. The Shariah Standards are prepared by a group of highly qualified Ulama selected from all over the world. The Shariah Board of AAOIFI is currently chaired by Mufti Taqi Usmani.

Over the years, AAOIFI has taken significant steps to encourage the application and enforcement of its standards throughout the world. The standards issued by AAOIFI are used as guidelines by many government regulators in jurisdictions such as Bahrain, Sudan, Jordan, Malaysia, Qatar, Saudi Arabia, Dubai and Lebanon. Most recently, Syria has signed an agreement to mandate and adopt AAOIFI's standards.

AAOIFI has received acceptance from Islamic Financial Institutions internationally. Membership of AAOIFI continues to expand and now stands at 115 members from 27 countries. This steady progress is a reflection of the confidence placed on AAOIFI internationally as the leading representative of the industry.

Whilst the Bank primarily adopts the rulings of the AAOIFI Standards and Albaraka’s Independent Shariah Supervisory Board in its procedures and products, we recognize the leadership role that the Ulama play in the community. In this context, any inputs and suggestions received are treated with utmost priority and importance.

We pray that Allah give us the ability to work in unity to strengthen the Ummah in general and specifically the Islamic Economic System.

We welcome any suggestions or advice that may be helpful to us in ensuring adherence to Shariah and thereby attainment of our ultimate objective, to please our Creator. We will always continue to play a leading role in a transparent and proactive manner in our effort to strengthen the Islamic Economic System.

(18) Fatwa against Albaraka & Oasis

>>> "Darul Iftaa" <10260081@yebo.co.za> 2007/02/02 02:28 PM >>>

Question:

1. Could you please advise if the returns from a savings account or general investment account in Albaraka Bank are halaal or not?

2. Also, are similar investments in the Crescent Oasis fund halaal?

3. if not, is there ANY known organization where one can invest his savings for halaal returns (besides property which may not be affordable)?

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Muhtaram, Assalaamu `alaykum waRahmatullahi Wabarakatoh
In the name of Allah, Most Gracious, Most Merciful

1. We do not regard the returns from Albaraka Bank to be Halaal. In the past we have tried, with much frustration, to communicate with them but they have shown clear reluctance in being transparent as far as Shariah Compliance is concerned. We have been through some of their contracts and workings, and found them to be seriously flawed.
AlBaraka does not have any local Aalim on its so called Shariah Supervisory Board. If there is any local Aalim who approves of their products, we would like to know his name in order to engage with him on the issues.
In the light of this, it is our duty to caution the Muslim public from investing with AlBaraka Bank.

2. Similarly, the returns from Oasis Crescent Fund are not Halaal. We had met with them, but they were unwilling to divulge details of their investment portfolios. When we expressed our disapproval of their products on our website, they threatened to take us to court. What is particularly disturbing is that this company is owned and run by Muslims, but some of their products are without a shadow of doubts clearly haraam. When they themselves are engaged in haraam, what trust can one have that their so called "halaal" products are in fact acceptable in Shariah?

3. Unfortunately, we receive this type of query very often, but have no solution on hand. Many people are looking for purely Halaal investment portfolios. Since we are not in the business field, the solution would lie with businessmen who have good entrepreneurial skills. They should come up with such products. We would be most glad to contribute in as far as the Shariah Compliance is concerned.

I assure you that there is a huge market just waiting to flood funds into an investment scheme that is thoroughly vetted and approved by the Ulama. We therefore would like to invite all businessmen to apply their minds in this direction, and come up with a viable investment scheme run strictly according to the Shariah.

Those interested should feel free to contact us.
And Allah Ta'ala knows best.
Was salaam
E. Vawda, for Daarul Iftaa

Checked and approved: Mufti Ebrahim Desai Saheb.
Fatwa Dated: 1st Feb. 2007 ____
Visit us at: http://www.alinaam.org.za http://www.askimam.org

(17) U.S Dow Jones & Citigroup to Launch First Islamic Bond Index

New York - Dow Jones Indexes and Citigroup Corporate and Investment Banking, both leading global index providers, today announced that they intend to launch the Dow Jones Citigroup Sukuk Index, the first index that seeks to measure the performance of global bonds complying with Islamic investment guidelines.

The index, which is intended to launch April 2, was created primarily for use as the benchmark for investors seeking exposure to Shari'ah-compliant fixed-income investments. In addition, the index may serve to increase secondary market trading in this growing asset class and facilitate cross-market relative value trading among different asset classes.

The Dow Jones Citigroup Sukuk Index will include investment-grade, U.S. dollar-denominated Islamic bonds - also known as Sukuk - issued in the global market. At launch, the Index initially will track seven issues: Islamic Development Bank, Solidarity Trust Services Ltd, BMA International Sukuk, Qatar Global Sukuk, Malaysia Global Sukuk, Sarawak Sukuk and Dubai Global Sukuk.

To be included in the Index, an Islamic bond must comply with both Shari'ah law and the Bahrain-based Auditing & Accounting Organization of Islamic Financial Institutions (AAOIFI) standards for tradable Sukuk. Once a bond meets these criteria, Dow Jones Indexes and Citigroup will apply market-based criteria such as minimum maturity of one year, minimum issue size of US$250 million, and an explicit or implicit rating of at least BBB-/Baa3 by leading rating agencies.

"Sukuk, or Islamic fixed-income securities, have emerged over recent years as an increasingly important asset class. It can be expected that we will see the issue of a significant number of corporate, quasi-sovereign and sovereign Sukuk in the future, along with the development of a liquid and efficient Islamic capital market," said Michael A. Petronella, president, Dow Jones Indexes/Ventures. "The co-operation with Citigroup to calculate and market the Dow Jones Citigroup Sukuk Index combines experience in the Islamic bond market with expertise in Islamic finance and indexing."

Mohsin Nathani, chief executive officer, Citi Islamic Bank, said: "We are delighted to offer our global index and Sukuk capabilities to the Islamic Banking industry in partnership with Dow Jones Indexes. The launch of the Index is in line with our strategy to offer Islamic issuers and investors world-class and innovative products that contribute to expanding the frontiers of Islamic capital markets."

The Dow Jones Citigroup Sukuk Index follows the same consistent, quantitative methodology as the Dow Jones Islamic Market Indexes, which are monitored to ensure their continued compliance with Shari`ah Law. Dow Jones Indexes launched the first Islamic indexes - the Dow Jones Islamic Market Index family - in 1999. Today, the Dow Jones Islamic Market Indexes are used by asset managers in 16 countries for a variety of financial products that screen out activities that are incompatible with Islamic investment guidelines. Excluded from the indexes are stocks of companies in these lines of business: alcohol, tobacco, pork-related products, financial services, defense/weapons, and entertainment. Also excluded are companies that fail any of three financial ratios.

Citigroup has been a leader in the Islamic finance business for more than 20 years and has successfully arranged Islamic transactions for issuers in Europe, Asia, LATAM, Africa and the Middle East. Citigroup's Islamics operation began in 1981 in London, and in 1996 Citigroup was the first international institution to set up a separately capitalized Islamic Bank, Citi Islamic Investment Bank (CIIB). CIIB's core business has been the origination, structuring and distribution of Islamic banking transactions in structured trade finance, leasing, project financing, advisory services and Islamic securities.

Members of the Dow Jones Shari'ah Supervisory Board are: Sheikh Nizam Yaquby, Bahrain; Sheikh Dr. Mohd Daud Baker, Malaysia; Sheikh Justice Muhammad Taqi Usmani, Pakistan; Sheikh Dr. Mohamed A. Elgari, Saudi Arabia; Sheikh Abdul Sattar Abu Ghuddah, Syria; and Sheikh Yusuf Talal DeLorenzo, U.S.

End of day index values of the Dow Jones Citigroup Sukuk Index will be available on www.djindexes.com, via The Yield Book® fixed income analytical system and via major data vendor services upon the launch of the Index

(16) To boycott, or not to boycott?

At home this weekend, I saw a Jamiat KZN notice on the Musjid board calling for Muslims to continue the boycott on the Sunday Times. Odd I thought, must be an old notice. So I asked the Imaam. He said that he had just received a sms from Jamiat KZN asking for the boycott to continue. But Jamait Gauteng had already called off the boycott in last weeks Sunday Times! And this week they placed the ad again?!
KZN is asking Muslims not to boycott and not to advertise in the Sunday Times and Gauteng Jamiat itself advertises in the paper and calls on Muslims to stop the boycott!

Thought back to the Jumah sermon and recalled the Molvi saying how wonderful it was to see the entire Muslim world uniting for the first time in decades. So what’s going on? A person witnessing this is probably highly confused. Gauteng, where perhaps the majority of the advertisers are based, have been told to continue advertising, and KZN, where perhaps majority of the readership is based, have been asked to continue the boycott..

Do organisations of scholars need to have the same opinions? Do groups of Muslims always have to be in total agreement? I don’t think so. And I think that is the beauty of Islam. Muslims all agree on the fundamentals and on other issues agree to disagree. Look back into history- you always had those who would literally interpret and act upon the injunctions and then you had others who looked at the essence of it and tried to understand what was to be achieved. The familiar example of the Sabaha RA who prayed before reaching a certain place and those who said that they would reach first and then pray. The Prophet SAW said that they were both right.

But isn’t that a bit confusing for those of us who are not comfortable with our understanding of Islam? The only solution then would be for us to study and understand our Islam to the best of our ability. We need to be able to have our own points of reference so that we can be confident and sincere about our personal choices in these situations.

Then only would I be able to look at both arguments put forward from Gauteng and KZN and make up my own mind whether or not to buy or advertise in the paper. And similarly, when an institution says that women should not properly participate in a protest, those who disagree will do so in accordance with proper Islamic decorum. And also those who disagree with an institution certifying ‘Islamic Banking’ products, will put forward their opposing argument in the appropriate manner.

Then only I suppose would this ensure that our new found unity remains. As long as we don’t take our disagreements to the limits of ugly hate speech, characteristic of a certain Mufti’s newsletter, we should be able to ensure that steady progress is made. After all, those sinister enemies of Islam that do exist want us to fight among ourselves. And if we are not smart about our emotional reactions and rehearsed rhetoric, we would blindly walk right into their traps. As has often happened before…

And each one has a goal toward which he turns; so vie with one another in good works. Wheresoever you may be, Allah will bring you all together. Lo! Allah is Able to do all things. (HQ 2:148)

(15) Islamic banking Islamic? (Part 2)

Islamic banking Islamic? (Part 2)


Some of our scholars have yet to recognize the monster for what it is. They think of the banking system as a necessary part of economic activity. They do not connect the deaths of millions of children in Africa every year with the burden of debt repayments to the banks (the United Nations Development Programme's annual Human Development Reports 1997 - 1999 do show this connection). We need a payment transmission system, a safekeeping service, and investment advisory services. To all these things, yes. To money creation for the sake of profit, no.

Islamic finance is not a product to be offered to a niche market. It is a system. It must be promoted and implemented as a system. Where the monetary system is concerned, I am beginning to feel that this is something that cannot be achieved by the private sector alone, Islamic or otherwise. A lead is required from the society at large since we must redefine the meaning of the words 'legal tender'. We must somehow overturn the monetary system as it is. And that will require us to defeat the monster that faces us.

Which politician will be brave enough to challenge the wealthy bankers and their friends in the leveraged corporate boardroom? The prize awaiting a successful challenge will be huge. Such a nation will be a light for the world to follow. Imagine no more debt. Imagine all those bankers being released from their unproductive industry (the largest by value on the London Stock exchange) to do something useful instead. Imagine a world free of dominance by a few huge firms, huge and dominant because they have been leveraged with the bankers created money. Imagine what we once had before all of this. A world of small businesses, a world of variety, of individual responsibilities and co-operating communities.

Failure to defeat the monster means a never ending necessity for growth. A world awash in the dust of riba, ruled by the 'Money Power', paying perpetual interest on an unrepayable debt.

Oh, I know they'll say I'm being extreme; it's just that these other fellows have all been saying it too:

"The Bank hath benefit of interest on all moneys which it creates out of nothing". Statement of William Paterson, first Director of the Bank of England, upon receiving the Charter of the Bank in 1694: quoted in Tragedy and Hope, Carroll Quigley, MacMillan New York (1966)

And I sincerely believe with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale. Thomas Jefferson in a letter to John Taylor 28 May 1816, Writings (1984) New York: Literary Classics of the United States

The distress and alarm which pervaded and agitated the whole country when the Bank of the United States waged war upon the people in order to compel them to submit to its demands cannot yet be forgotten. The ruthless and unsparing temper with which whole cities and communities were oppressed, individuals impoverished and ruined, and a scene of cheerful prosperity suddenly changed into one of gloom and despondency ought to be indelibly impressed on the memory of the people of the United States. If such was its power in time of peace, what would it have been in a season of war, with an enemy at your doors? No nation but the free men of the United States could have come out victorious from such a contest; yet, if you had not conquered, the government would have passed from the hands of the many to the few, and this organized money power, from its secret conclave, would have dictated the choice of your highest officials and compelled you to make peace or war, as best suited their own wishes. President Andrew Jackson, Address to the American people, 4 March 1837, recorded in Richardson's Messages, volume 4, p. 1532

The government should create issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of the consumers. The privilege of creating and issuing money is not only the supreme prerogative of government, but it is the government's greatest creative opportunity. By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest, discounts and exchanges ... money will cease to be the master and become the servant of humanity. Democracy will rise superior to the money power. President Abraham Lincoln, Senate Document 23 1865

I am afraid that the ordinary citizen will not like to be told that the banks or the Bank of England can create and destroy money. Post-war Banking Policy, p. 93 (1928) William Heinemann, by Reginald McKenna, Chancellor of the Exchequer of Great Britain, later Chairman of Midland Bank

In the abstract it is absurd and monstrous for society to pay the commercial banking system interest for multiplying several fold the quantity of the medium of exchange when a) a public agency could do it all at negligible cost, b) there is no sense in having it done at all, since the effect is merely to raise the price level, and c) important evils result, notably the frightful instability of the whole economic system. Saturday Review of Literature, p. 732 (1927), Frank Knight

By allowing private mints to spring up, Parliament has fundamentally and perhaps irretrievably betrayed democracy. Before the War it was customary even in the works of apparently respectable economists to find absolutely dishonest hair-splitting distinctions between the invisible money so created and paper notes. The latter were really money and the former was not! In fact the reader can always tell in such standard works on the subject when he is approaching the fishy part of the business. The essential fact, the creation of new money, becomes obscured in a cloud of anticipatory justification and special pleading. The Role of Money (1933), Frederick Soddy, Nobel Laureate in Chemistry

Despite the accusations of neo-imperialism levelled at the IMF and the World Bank, in the same way that a country's domestic banking system is carried out with apparently scrupulous honesty, the financial conduct of the IMF and World Bank appears above reproach. If a nation borrows, it must repay. Naturally! What other conclusion can there be? The true injustice of the IMF and World Bank only become apparent when the fraudulent nature of these 'loans' is understood, and how they relate to the debt-based banking system ... It is an injustice amounting to international slavery and extortion; it is an aggressive injustice, involving the subjugation of whole nations and their sovereign peoples, operated on a scale that exceeds the total of all the more obvious efforts at dominance by individual nations indulging in warfare over the centuries. The Grip of Death (1998), Michael Rowbotham


Exerpt of article: http://globalwebpost.com/farooqm/study_res
/i_econ_fin/diwany_ibanking.htm



[Courtesy: http://www.irfi.org/articles/articles_301_350
/is_islamic_banking_islamic.htm

About the author: Tarek El Diwany is a writer and consultant in Islamic banking and finance. Between 1996 and 1998 he headed the Islamic Finance department at Prebon Yamane in London, having previously established an OTC bond derivatives dealing operation for the same company. He is the author of The Problem With Interest (1997) and founder of http://www.islamic-finance.com (1997). He holds a BA Hons in Accounting & Finance from the University of Lancaster in the UK (1985) and is a founding partner of Zest Advisory LLP.]

(14) Islamic banking Islamic? (Part 1)

The contractum trinius was a legal trick used by European merchants in the Middle Ages to allow borrowing at usury, something that the Church fiercely opposed. It was a combination of three separate contracts, each of which was deemed permissible by the Church, but which together yielded a fixed rate of return from the outset.

For example, Person A might invest £100 in Person B for one year. A would then sell back to B the right to any profit over and above say £30, for a fee of £15 to be paid by B. Finally, A would insure himself against any loss of wealth by means of a third contract agreed with B at a cost to A of £5. The result of these three simultaneously agreed contracts was an interest payment of £10 on a loan of £100 made by A to B.

I had read about the contractum trinius some months before first encountering the full documentation behind an Islamic banking murabahah contract. It was the kind of contract that Person A might use in order to finance the purchase of good X from Person B. The bank would intermediate in the transaction by asking A to promise to buy good X from the bank in the event that the bank bought good X from B. With the promise made, the bank knows that if it buys good X from B it can then sell it on to A immediately. The bank would agree that A could pay for good X three months after the bank had delivered it. In return, A would agree to pay the bank a few percent more for good X than the bank had paid to B. The net effect is a fixed rate of financial return for the bank, contractually enforceable from the moment that the bank buys good X from B. Money now for more money later, with good X in between.

The above set of legal devices is nothing other than a trick to circumvent riba, a modern day Islamic contractum trinius. The fact that the text of these contracts is so difficult to come by is one shameful fact of Islamic banking. If so clean, why so secretive? The following is an excerpt from a murabahah contract that was used frequently by two major institutions during the 1990's. The 'Beneficiary' is the client that needs finance, and earlier clauses require that the Beneficiary acts as the agent of the Bank in taking delivery of the goods.

Excerpt from a Murabahah contract

Promise to Purchase the Goods

1 The Beneficiary undertakes to purchase the Goods from the Bank immediately after it has taken delivery thereof on behalf of the Bank on the terms specified in this Agreement.

2 The contract of sale of the goods to the Beneficiary shall be concluded by an exchange of telexes or telefax messages as soon as the Beneficiary has taken delivery of the Goods on behalf of the Bank.

3 If, for any reason whatsoever, the Beneficiary shall refuse or fail to take delivery of the Goods or any part thereof or shall refuse or fail to conclude the Sale Contract after taking delivery of the Goods, then the Bank shall have the right to take delivery, or cause delivery to be taken, of the Goods and shall have the right to sell, or to cause the sale of, the Goods (but without obligation on its part to do so) in a manner determined by it in its sole discretion and shall have the right to take whatever steps it deems necessary (including demand from the Guarantor to pay) to recover the difference between the price realized upon sale and the price paid by the Bank plus any other expenses incurred by it in relation to the Goods and/or any damage caused to the Bank as a result of the breach of undertaking by the Beneficiary to take delivery of the Goods or to conclude the contract of sale of the goods. "

We see here that there is even a guarantor used to ensure that the bank does not lose money on the deal in the event that the Beneficiary defaults. So much for profit-sharing. Yet the words 'profit-sharing' are to be heard constantly at all of the conferences. Some of the scholars, if pressed, will talk about moving towards more satisfactory products such as mudaraba. But then everyone goes home and works on another murabahah contract. We are told that Muslims must work within the existing banking system and change it from the inside. But we have been trying this for over forty years and nothing has changed. We are still fixing financial rates of return in advance using the Islamic triple contract.

One head of Islamic Trade Finance admitted to me over lunch not long ago that there is no practical difference between the murabahah business that he does now and the conventional letter of credit business that he used to do in his previous job. Just the labels are different. Then there's the Islamic banking department that uses interest-bearing financial instruments for the purpose of closing some of its deals. When deals are done the funds often go to lubricate the trading operations of large corporations such as BMW and General Motors. Meanwhile, in many countries, small and medium sized Muslim-owned businesses are offered no Islamic finance facilities at all. When they do finally encounter a financing proposal from an Islamic bank, many of these businessmen quickly become cynical because the financing cost is fixed at the outset of the financing agreement.

These are all signs that something has gone badly wrong in this industry. But I'm not saying that it is all the fault of the people on the inside. The Western academic establishment is at least partly responsible for the way that the Islamic financiers are thinking. For example, because Brealey and Myers have written a standard text on corporate finance, they are probably as big a force in Islamic finance as Judge Taqi Usmani. It is awfully hard to escape from the value judgements that the overwhelming mass of usury-based finance books contain. That's why an educated Muslim in Islamic finance can ask his client a shocking question such as 'what cost of finance are you looking for?' without thinking twice. He's been taught by Brealey and Myers that fixed-rate finance plays a part in any 'good' financing structure and so off he goes in search of a way to do fixed-rate finance Islamically. The possibility that fixed-rate finance may be completely incompatible with Islam in the first place may not even occur.

But there are two other reasons that prevent Islamic banks from giving up on the doubtful fixed rate products and adopting profit and loss sharing instead. The first is that the clients often prefer to take finance on a fixed rate basis. The second, more overwhelming problem, is the nature of the very business process underlying commercial banking itself.

To explain the first reason, let me tell you about a discussion I had with the Chairman of a major construction company in Asia. His company specialized in building toll roads. It had borrowed heavily at fixed interest in the middle of an economic boom. I told the Chairman that we could develop a toll revenue-sharing financing package. We would part-finance the toll road and share the toll receipts. No toll receipts, nothing for us to share. This would be good for his company because if no one used the road, there would be no financing cost. With the interest based alternative, whether the toll road was full or empty, there would still be a financing cost.

But the Chairman felt that 7% interest was a good deal and so our suggestion was not adopted. Probably this was because he knew that the toll road was going to provide profits of 30%, and there's no point paying out 30% in profit share when you can pay out 7% in interest instead, is there?

Well, the economy turned down, fewer motorists than predicted used the toll roads, but the interest still had to be paid. And so the company had to be rescued. The Financial Times commented a few days later that the rescue was required because 'interest costs exceeded toll revenues'. I kept that article because it summarized with a real life example everything that true profit-sharing would have avoided. The moral of the story is that the chairman wants to fix his financing cost because he believes his business is going to be profitable and he wants to keep most of the profit to himself. He's practicing financial leverage like all those un-Islamic textbooks tell him to.

The unfortunate fact is that even if the Chairman had given the go ahead for profit-sharing, no Islamic bank would have offered it to him. This brings me on to the second of the two reasons for the general failure of Islamic banking to provide profit-sharing finance.

Several years ago, a teacher of mine was invited to Kuwait to provide a consulting service of sorts to the executive committee of a large Islamic financial institution. On an early fact-finding tour he encountered the institution's senior Shariah scholar, an elderly man who was partly deaf, paralyzed on one side, and who had little experience of modern banking and finance. The local bankers portrayed this man as a venerated Shariah scholar, but my teacher immediately recognised him as a rubber stamper - shamefully empowered by his employers when he should have been enjoying a quiet retirement. To understand how this situation came to pass, we need only delve into the recent past. During the late 1970s and early 1980s, a small number of international Islamic banking and finance organisations came to prominence. Understandably, they were characterized by a narrow product range and in some cases a lack of credibility. For some of these companies, commercial survival came in t he form of occasional equity injections from a kindly patron and the incentive to improve business efficiency was therefore reduced. Yet it was argued that faults should be tolerated and the financial lifelines maintained in order to shield the new-born industry from a world of harsh competition. The conventional banking system could not be changed overnight, and the road of transition had to be travelled patiently.

As it turns out, patience has been of little use on this particular journey for the simple reason that we have taken the wrong road to begin with. We have arrived at a financial wonderland in which there exists an Islamic equivalent to almost all the major products of the interest-based sector, with quantitative and qualitative features that are frequently indistinguishable from them. Some have explained this situation by arguing that Islamic banking and finance can only function properly within the context of economic and social policies that are themselves Islamic. They propose that governments in the Islamic world should encourage such institutions as Waqf (endowment), mutual associations, and Zakat (the wealth levy), or at least remove the encouragements that presently exist for proscribed activities (the tax deductibility of interest for example). In my view, the most urgent of these tasks is that the Muslim world reforms its monetary system. An Islamic economy cannot be built upon un-Islamic money, and to know why this is so requires a brief digression into monetary history.

Exerpt of article:

[Courtesy:
About the author: Tarek El Diwany is a writer and consultant in Islamic banking and finance. Between 1996 and 1998 he headed the Islamic Finance department at Prebon Yamane in London, having previously established an OTC bond derivatives dealing operation for the same company. He is the author of The Problem With Interest (1997) and founder of http://www.islamic-finance.com (1997). He holds a BA Hons in Accounting & Finance from the University of Lancaster in the UK (1985) and is a founding partner of Zest Advisory LLP.]

(13) Shariah banking products set to rise!

By Sarah Butcher
10 Nov 2005

2006 could be a good year for anyone interested in working with Sharia - or Islamic law - compliant banking products on both sides of the Atlantic.

Recruiters in London and New York say investment banks are showing an increasing interest in the fast growing Islamic banking market. "It's definitely a growing area," says Aiden Kennedy, a partner at Armstrong International in London. "All the bulge bracket banks are looking at moving into it right now."

"Islamic banking is still very much in its infancy," confirms Deborah Rivera, president and founder of search firm The Succession Group in New York. "We're expecting growth in the near future."

Much of the interest surrounds products applying derivatives technology to Islamic- approved contracts which avoid the payment or receipt of interest, forbidden under Islamic law. "There are a lot of fairly vanilla Sharia-compliant products," says Kennedy. "But a number of banks are creating more sophisticated products for the Sharia market in the Gulf States, and for institutions in Europe which are looking to invest in the Middle East."

Deutsche Bank, HSBC, Citigroup, and BNP Paribas have an established Islamic banking presence. In March this year, for example, Deutsche Bank claimed to pioneer the first Sharia-compliant foreign exchange option, allowing Islamic investors to hedge foreign currency risk.

However, anyone expecting a flood of Sharia-compliant hiring is likely to be disappointed. Teams tend to be quite small. A spokesperson for Deutsche Bank in London says staff working on Islamic transactions are drawn from other areas of the bank and don't form a dedicated sharia-compliant division. "We work in a matrix organisation and call upon expertise as required," says a banker working in the Sharia-compliant area of another global organisation.

Kennedy says candidates moving into Islamic banking roles typically have a high degree of sophistication with derivatives products: "There are some very talented people in this space, working at the leading edge of product development. It's a small community, and there is a premium to be earned for working there."

Many of those working on Sharia-related products are Muslim, although this is not mandatory. "We have a few dozen nationalities and every religion from Jews to Christians, Muslims and Hindus in our group," says the head of the Sharia-compliant division of an international bank in New York.

Nevertheless, investment banks' growing interest in Islamic banking is likely to appeal particularly to Muslims as a means of combining their religion and career. That said, one banker of Muslim origin says banks make it difficult to observe religious customs: "In Ramadan you can't take a 10 minute break to eat after sunset, and taking two minutes to pray somewhere in the office is unthinkable. Most people are afraid to say they are Muslim."
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My Comments:
Here’s another reason for Muslim professionals to have an in-depth and complete Islamic knowledge of their field- I believe that if Muslims working in the field, fully understand what Islam aims to achieve, we can gradually work towards an economic environment that is truly based on Islamic principles, without having to leave our jobs or take drastic steps...

(12) Absa boosts new Islamic investment offering!

Source: Mail & Guardian
Date published: 10 November 2005
Summary: Absa claims that they are the first major bank in SA to offer investment products specifically designed to comply with Islamic Shariah law. With the launch by Absa Private Bank of Absa's Islamic Investment Account and Islamic Offshore Investment Account, Absa has chosen to focus on ensuring the highest degree of Shariah compliance and maintaining the quality of the investment product and clients.

Absa says it is the first major bank in South Africa to offer investment products specifically designed to comply with Islamic Shariah law.

It said the achievement helps it to realise its strategic intent to provide banking and investment products to meet the needs of its diverse client base.

Islamic banking products are not new to the South African market, but until now equity investment products were not available from any of the major banks.

With the launch by Absa Private Bank of Absa's Islamic Investment Account and Islamic Offshore Investment Account, Absa has chosen to focus on ensuring the highest degree of Shariah compliance and maintaining the quality of the investment product and client service.

"These are not only the first products in Absa's Islamic Wealth Series, but also the first in a series of lifestyle-tailored offerings by Absa Private Bank. We are committed to managing, preserving and growing the wealth of all our clients, taking into account their financial needs as well as their lifestyle needs," says Zarina Bassa, Absa executive director responsible for private banking.

"This entails consideration of the unique cultural and religious dimensions that influence the management of the wealth of the individual, the family and the business," adds Bassa.

Hassen Sheik Ebrahim, general manager of Private Wealth Solutions at Absa Private Bank, adds that the launch is in line with Absa's mission to be the leading financial-services group serving all of its stakeholders.

"This means respecting the values, customs, beliefs and integrity of all our clients. The Muslim community should have the right to select Shariah-compliant wealth-management products at the institution of their choice without compromising on quality. By selecting Absa, clients have the added benefit of dealing with a large, established bank."
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My comment:

What are the thoughts of other Muslim professionals that work in the finance and economics field?

How can we ensure that, given the current developments in the field, the system that Islam ultimately aims to achieve can eventually be realised?

Is it even necessary for other Muslim professionals to be concerned?

Will we ever be held accountable for how we used or even refuse to use the knowledge that Allah has allowed us to obtain in His cause?

Looking forward to your response,
Wasalaam
BILAL RANDEREE

(11) Travelling the wrong road patiently!

TAREK EL DIWANY, a writer on Islamic banking and monetary history, addresses some fundamental conflicts of interest.
Source: Banker Middle East www.bankerme.com

Several years ago, a teacher of mine was invited to Kuwait to provide a consulting service of sorts to the executive committee of a large Islamic financial institution. On an early fact-finding tour he encountered the institution's senior Shariah scholar, an elderly man who was partly deaf, paralysed on one side, and who had little experience of modern banking and finance. The local bankers portrayed this man as a venerated Shariah scholar, but my teacher immediately recognised him as a rubber stamper - shamefully empowered by his employers when he should have been enjoying a quiet retirement.
To understand how this situation came to pass, we need only delve into the recent past. During the late 1970s and early 1980s, a small number of international Islamic banking and finance organisations came to prominence. Understandably, they were characterised by a narrow product range and in some cases a lack of credibility. For some of these companies, commercial survival came in the form of occasional equity injections from a kindly patron and the incentive to improve business efficiency was therefore reduced. Yet it was argued that faults should be tolerated and the financial lifelines maintained in order to shield the new-born industry from a world of harsh competition. The conventional banking system could not be changed overnight, and the road of transition had to be travelled patiently.
As it turns out, patience has been of little use on this particular journey for the simple reason that we have taken the wrong road to begin with. We have arrived at a financial wonderland in which there exists an Islamic equivalent to almost all the major products of the interest-based sector, with quantitative and qualitative features that are frequently indistinguishable from them. Some have explained this situation by arguing that Islamic banking and finance can only function properly within the context of economic and social policies that are themselves Islamic. They propose that governments in the Islamic world should encourage such institutions as Waqf (endowment), mutual associations, and Zakat (the wealth levy), or at least remove the encouragements that presently exist for proscribed activities (the tax deductibility of interest for example). In my view, the most urgent of these tasks is that the Muslim world reforms its monetary system. An Islamic economy cannot be built upon un-Islamic money, and to know why this is so requires a brief digression into monetary history.

The roots of the problem
The European goldsmith bankers of the seventeenth century are widely seen as the forefathers of modern banking. These men took deposits of gold coins from customers and issued paper receipts in return. Each receipt promised repayment of the underlying gold upon presentation at the bank, and the goldsmith would often charge a fee for his service of safe-keeping. In due course, the public began to trust paper receipts to the extent that they would use them in payment for goods and services among one another. The goldsmiths' paper receipts had, for all practical purposes, become "money". This development was the key to the goldsmiths' future wealth. They gradually turned to society not as safe-keepers of coins but as lenders of money, and when borrowers came to take their loans they would be given not gold coins but newly printed paper. The goldsmith had obtained the ability to manufacture money out of nothing, and charge society interest for the privilege of borrowing it. Loans would be secured against property or other assets of the borrower; collateral that could be seized and liquidated if the borrower fell into trouble. The financing of poorer members of society therefore became the exception from the earliest days of banking practice.
The reason for the lack of profit-sharing in commercial banking emerges when we imagine an economy in which the banking system creates all of the money supply. Here, if a total of 400 units of paper money have been advanced to borrowers on a profit sharing basis, the maximum that all borrowers will be able to repay is 400. No opportunity exists under these arrangements for the banking system as a whole to make a profit. By charging 10% interest on the other hand, the banks may stipulate that 440 is to be repaid in one year's time, thus making the system commercially viable. Such a stipulation leads directly to what is probably the most disturbing feature of the modern monetary system. If the repayment amount at the end of year one is 440, but there is still only 400 of money in existence, where will the extra 40 come from? The answer is that it has to be created, either under the authority of the state, or by the banking system. Given that most of the modern money supply is created by the banking system, it becomes immediately obvious why repayment of yesterday's debt tends to leave society in even deeper debt today. If the commercial banks create sufficient money to repay yesterday's debt we enjoy a healthy or inflationary economy. If they don't, recession or deflation will eventually arise. The former scenario is adopted as a policy target by almost all modern governments, but leads inevitably to an increase in both debt and money supply in the long term.
At a time when education, health and housing services are suffering financial stress in many countries of the world, an almost embarrassing bias in resource allocation towards the banking sector is encouraged by the interest-based monetary system. In August of 2002, Fortune magazine ranked the top 500 global corporations of 2001 by revenue. Taking one example, 33 of those companies were in the UK, and among them were six banking organisations. These UK banks made $20.62 billion in profit during the year. All of the other UK corporations on the list, when added together, made a loss of $0.97 billion. 37 companies on the Fortune 500 were head-quartered in France. Here, the five banks made $7.99 billion profit, and the remaining 32 corporations when added together made a loss of $2.41 billion.

"The society that witnesses the change to interest-free money will recognise the new system as a pillar of true freedom"

To the letter of the law
Today, Islamic commercial banks indulge in money creation just as much as conventional commercial banks. This single sin is sufficient on its own to conclude that Islamic banking isn't Islamic but, as the earlier example demonstrates, it is a sin that requires interest-based lending in order to make it profitable. Though Islamic bankers may not realise it, the business model of interest-based banking is forced upon them and it is putting true profit sharing beyond their reach.
The crop of 'Islamic' mortgages that are now appearing in the UK are a clear manifestation of the fixed rate mentality that now predominates in Islamic banking. In not one of those mortgages does the bank contract to take capital risk. Even in the so-called Ijara mortgage, in which the bank is held to own the property and rent it to the client, arrangements have been put in place to pass capital risk to the lessee. Thus, if the client is unable to keep up with rental payments and the property is repossessed by the bank, the bank has recourse to the client if it realises a capital loss when selling the property on the open market.
One Shariah argument used to justify this recourse is that the client has promised to buy the property from the bank at the end of the lease period, and must therefore bear all of the capital risk should he place the bank at a monetary disadvantage by failing to fulfil that promise. This implies that a promise to purchase (given by the client to the bank) can be used to produce the same commercial risks as an actual purchase. No one should underestimate the implication of this legal position. The doors that it opens in a world of sophisticated arbitrageurs will almost certainly lead to the synthesis of many transactions that are presently prohibited by consensus of the Islamic scholars.
The splitting of conventional interest-bearing products into components that can be replaced with 'Islamic' counterparts is an essential skill which the Islamic bankers have perfected in their search for fixed rate returns. At best the combination of such components into one transaction weakens the integrity of the contractual principles involved, and at worst represents a blatant technique for bypassing the Islamic prohibition of usury. For example, while it is unanimously accepted that the giving of gifts, the making of promises and the advancing of interest-free loans are all acceptable in Islam, the combination of these three contracts into one transaction easily produces an interest-bearing loan. Here, Person B promises to give a gift of 10 to Person A if Person A makes an interest-free loan of 100 to Person B.
In their effort to gain approval for such techniques, unscrupulous Islamic bankers may succumb to the temptation of asking questions that elicit the 'correct' answers from their Shariah scholars. Thus the modern scholar must shift some of his focus away from the detailed level of contractual principle and look to the wider impact of what the banker is trying to achieve.
If asked whether it is permitted to pull a string, the scholar must find out whether the string is attached to a gun before giving his judgement. Such efforts require a high degree of both Shariah and technical knowledge. There is a big difference between defining interest (a Shariah matter) and discovering whether or not a particular Islamic banking contract allows the bank to practice interest (a technical issue).
We should not expect Shariah scholars to fulfil both of these roles.


Replacing artifice with value
In time, an entirely new methodology will be adopted in Islamic banking; one based upon a surplus of money, not upon the artificial shortage that is maintained by the modern commercial banking system. Debt will no longer be the pre-requisite to every major act of spending or investment. The time value of money will no longer dominate our view of how to manage the earth's resources, for the money with which we measure value will no longer bear interest as a condition of its creation. I believe that this change will occur either by force or reason, as the world grows weary of perpetual indebtedness. The society that witnesses the change to interest-free money will recognise the new system as a pillar of true freedom. It will enjoy the release into productive employment of human and physical resources that are presently engaged in the value-subtractive processes of the modern financial economy.
There will of course be much resistance to such a change, and the lobby that presently benefits from the interest-based monetary system will spend heavily in order to protect its future. The payment of money by banking organisations to Shariah scholars must be scrutinised for precisely this reason. If a bank asks 100 scholars whether its latest product is Halal, and 98 of them say "no", should we be suspicious if the bank gives a consulting contract to the two who said "yes"? Would some of the 98 become a little more flexible next time round, if they saw the other two earning large incomes from their work?
These are not the questions of a cynic. They are the questions of one who has read a little history and knows the simplest facts of human nature. A scholar should not have his integrity questioned simply for being in a minority, of course, for his views may be honestly held. What matters is that by promoting those scholars who approve of the products it wants to launch, an Islamic bank is in the fortunate position of being able to choose the rules of the game for itself while telling everybody else that it doesn't make up those rules.
In this battle between truth and falsehood, central banks and supranational institutions cannot lead the necessary reforms because they have always been creatures of the system itself. Over many decades they have proven themselves unwilling to delve into the essential issues of money creation, despite the volumes of research that they undertake on every other nuance of monetary policy. The real tragedy is that the Islamic banking movement, which could have exposed the fraud of modern money creation, has become a laughable effort to Islamise that fraud. The Prophet Muhammad, PBUH, said that "Even though usury be much it leads in the end to utter poverty". Our Creator does not want His creation to forget that. But we are slipping, slowly, into a world that thinks it knows better.

(10) $60 oil a bonanza for private bankers, Islamic sector included!

SPECIAL REPORT
THE INTERNATIONAL HERALD TRIBUNE,
26 October 2005

Private bankers are giddy with excitement to the degree that private bankers ever are as they vie for the business of the newly rich and the newly richer resulting from $60 oil. "We're seeing a growth situation in the Middle East that's a once-in-a-lifetime opportunity," said Mark Morgan, chief officer of Citigroup Global Wealth Management for the Middle East, based in Dubai. Morgan compares the current wealth accumulation in the Gulf region to the epic fortunes created by the industrial revolution in Britain and America a century ago. "This is when the dynasties of the next 50 and 100 years are being created," he said by telephone.

Oil wealth has long sought out the services of private bankers in discreet financial centers like Geneva, Luxembourg, and London. Now, the private bankers are coming to their customers.

Despite rules that effectively bar them from participating in the region's booming stock and real estate markets, banks including Citibank, ABN AMRO, and Barclays have recently founded or expanded their private banking offerings across the Gulf region. Dubai is experiencing the greatest influx, while the established banking center in Bahrain, and rapidly internationalizing centers in Qatar and Kuwait, are also eagerly courting banks.

Although still in its infancy, the Islamic banking sector, governed by Shariah law, has also gained from the wealth explosion.

Wealth accumulation has taken on a new intensity worldwide, wealth management reports say. But oil has pushed the Gulf region to the forefront of private banking growth. ABN AMRO has reported 50 percent revenue growth for the last three years from its private banking Gulf division, and profit growth has been even higher, said Gilles Rollet, ABN AMRO's chief executive for private banking in the Middle East.

According to the latest world wealth report by Merrill Lynch and Capgemini, millionaires in the Gulf region controlled $1 trillion in 2004, up by nearly 30 percent from 2003.

Morgan, of Citigroup, who set up the bank's first private banking office in the region only 18 months ago, is now planning its fourth office there, in Kuwait, after opening in Dubai, Abu Dhabi and Bahrain. Fortis, Julius Baer, and Standard Chartered are all also actively expanding in the region, while LGT Bank, the private bank of the ruling family of Liechtenstein, plans to open an office in Bahrain by the end of this year.

"We've found that wealthy people the world over look the world over," Morgan said. "The best opportunities are now on their doorsteps."

The wealth pool is also spilling over into the bank accounts of a growing number of foreigners living in the region. Ashburton, a South-African-owned offshore financial management company based in the British island tax haven of Jersey, plans to open an office in Dubai early next year to serve expatriates living there, its managing director, Trevor Falle, said.

"The Middle East has always been a happy hunting ground from an offshore point of view," Falle said. His research indicates that it is becoming even happier; tens of thousands of British and South African citizens have flocked to the region to take often high- paying jobs.

The region's stock and real estate markets have absorbed and created much of the wealth. Gulf stock market indices have been among the world's best performers this year, while real estate price gains have made more established markets like London seem tame.

Recent market action has underscored the region's remarkable financial liquidity. In May, a $135 million initial offering of Aabar Petroleum Investments on the Abu Dhabi stock exchange was oversubscribed more than 800 times.

In this exuberant climate, wealth managers are trying to reminding investors of the importance of diversification. A return of "6 to 10 percent doesn't exactly get them excited," Rollet, of ABN AMRO, said. Some of the bank's most popular offerings include high yield fixed-income investments in Pakistan and India, as well as private equity funds with investments in China and Japan. Citigroup has found success with venture capital funds concentrated in China, India, and Eastern Europe.

As Dubai's financial center has grown, banks have moved into smaller regional hubs. A loosening of restrictions for foreign banks in Kuwait has prompted HSBC and BNP Paribas to plan to expand there, in addition to Citigroup. Qatar inaugurated a financial center in May and is now accepting license applications. The first bank to receive a license there was Ansbacher, a British wealth management group that became a wholly owned subsidiary of Qatar National Bank last year.

Meanwhile, the region's original banking capital, Bahrain, is increasingly focusing on Islamic banking. Bahrain has 28 registered Islamic financial institutions, a number that is expected to grow quickly, said Andrew Jeffreys, editor in chief for emerging markets reports published by Oxford Business Group, a consultancy firm. Investors complying with Shariah law outlined in the Koran avoid interest-bearing investments, and companies involved in banned activities, including gambling, and alcohol. To help serve this market, estimated to be growing by about 15 percent annually, Dow Jones is expanding the number of its Islamic indices around the world from the current 44. The company added conventional indices in Kuwait and Bahrain this year, with an eye to building experience in the region in preparation for launching Islamic indices, said Lars Hamich, the managing director of STOXX, the unit that handles Dow Jones's index business in Asia, Europe and the Middle East. Tracking Shariah-compliant investments is not only interesting for Islamic investors, Hamich said, since those investments have often outperformed competing investments in recent years.

"The branding, the name, is sometimes a challenge," Hamich said. But compliance with Shariah debt requirements has helped Islamic- style investors to avoid financial land mines, like Enron and Global Crossing.

Bankers say the trends that are attracting them to the Gulf will continue for the foreseeable future. The Institute of International Finance recently predicted that the countries that make up the Gulf Cooperation Council Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Bahrain, and Oman will earn more than $300 billion in revenues in 2006, or about three times the average for the previous decade.

Even for Rollet, of ABN AMRO, living in Dubai, the continuing flow of money and the rise of the stock markets still amazes. "It continues to surprise me every morning when I turn on the radio in the car," he said.

(9) How the West Came To Run Islamic Banks

Giants like Citigroup dominate the sector, through Islamic subsidiaries and hired Sharia scholars.
By Owen Matthews

Newsweek
Oct. 31, 2005 issue –

You're a pious Muslim with a few million in oil dollars to invest. So would the perfect Islamic bank for you be Citigroup, perhaps? HSBC?

Actually, yes. Giant Western banks—or, rather, their Islamic subsidiaries—are leading the market for financing that complies with Qur'anic laws forbidding lending money for profit, or sponsoring un-Islamic activities such as gambling or smoking. Citigroup's Bahrain-based Citi Islamic subsidiary was first into the market in 1996, and now leads the pack with deposits of more than $6 billion. Citi and at least 10 other Western majors dwarf the biggest locally owned rival, Al Baraka of Bahrain, worth a little more than half a billion.

Westerners are drawn in by oil money. The Middle East is enjoying its fastest growth in a generation. According to Islamic Banking and Finance magazine, there are $265 billion in deposits that comply with Sharia, the law that governs the behavior of Muslims, finances included. That's up 17 percent in the past year, and by almost 10 times in the past decade, according to the U.A.E.'s Sharjah Islamic Bank. Since 1996 Dow Jones has offered indexes of stocks vetted by Sharia scholars. Now there are more than 40 Islamic indexes, and last year Islamic stocks on average outperformed the market by 5 percent.

How did Western banks come to dominate a market predicated on Islamic purity? A generation ago, an Islamic bank was just a simple investment house that, instead of paying interest on deposits, created dividends by buying and renting out property. "Islam forbids making money on money," says Alun Williams, marketing director of the new Islamic Bank of Britain. "But it does allow you to rent, and to trade." Now Western banks are using that template to pioneer Islamic credit cards, Islamic mortgages and Islamic bonds (known as sukuks) that during the past year have financed everything from a $1 billion upgrade of Dubai airport to Pakistani government debt. As growth picks up in the Middle East, more and more Muslim-run corporations find they need sophisticated services, from bond issues to derivatives, that so far only Western banks provide.

The Western banks gain Islamic credibility by hiring top-drawer Sharia scholars to sit on their boards. "The caliber of your scholars is the basis on which these [financial products] are marketed," says Majid Dawood, a London-based consultant on Sharia compliance. Because there are just a handful of financially literate Islamic scholars in the market, most sit on the boards of many institutions and can, says Dawood, command salaries of as much as $88,500 per year per bank. Sheik Mohammed Taqi Usmani, a former Sharia judge on the Supreme Court of Pakistan, sits on the board of Citi Islamic, HSBC, Al Baraka and eight others, and is chairman of the Dow Jones Islamic indexes' Sharia panel.

But the trend toward investing in Islamic funds really took off after 9/11, when many Muslims began bringing their money home from America. Since then, international banks like Societe Generale, BNP Paribas, Deutsche Bank and Standard Chartered have all entered the Islamic banking business. Accounting and consulting firms like Ernst Young are now offering Islamic financial services. The recently opened Islamic Bank of Britain, owned by leading Islamic banks and other institutions from the Middle East, plans to create a retail-banking chain for "average income" Muslim Britons, says Williams.

Customers in Muslim nations are driven to Western banks in part by distrust of their own banks. Prominent failures, such as the 2001 collapse of Turkey's Ilhas Finance dented depositors' faith. In Turkey, the Islamic world's largest economy, the fledgling Islamic-banking sector is lobbying the state to guarantee deposits of up to $36,000, which could in time make Turkey a major player. In Malaysia, where more than 11 percent of deposits are now Sharia-compliant, local houses like Bank Muamalat are working to gain on the multinationals. "Local Islamic banks lack sophistication," says Humayun Dar, an Islamic economist. "Customers are still more comfortable with an international name." Even if the rules are strictly local.