Islamic Economic

Performance of Islamic Mutual Funds

2007-05-30T23:07:00.000-07:00

Good Islamic investments primarily come in the form of offshore mutual funds. Unfortunately, good ones are few and far between. Many are improperly managed by untrained and unsupervised individuals. I won’t buy many of them for any of my clients. Who should? In the age of post-Enron, post-Worldcom, we don’t need to buy offshore investment assets that don’t meet the most stringent test for professionalism, transparency & ultimately for what I call “truthfulness.”

Read next...

New Horizons for Islamic Securities: Emerging Trends in Sukuk Offerings

2007-05-30T22:29:00.000-07:00

This Article seeks to demystify sukuk by providing an analysis of the nature and application of sukuk structuring techniques, with an emphasis on legal considerations, in the rapidly changing world of Islamic finance.2 It also attempts to explore emerging trends in the rapidly evolving marketplace for sukuk investments. In particular, this Article will evaluate both the underlying legal principles involved in innovative sukuk structures and the use of assets in non- Islamic jurisdictions to back securitizations represented by sukuk certificates. After providing a general explanation of the fundamentals of sukuk as an Islamic investment vehicle and an overview of the growing importance of sukuk in the marketplace, this Article will turn to a discussion of the primary legal challenges of utilizing assets to back sukuk offerings in non-Islamic jurisdictions. In addition, this Article will provide an analysis of key conflicts of law considerations posed by the exportation of sukuk products outside their traditional markets. The first ever sukuk offering involving US assets will be examined as a case study to provide additional insight into how asset-backed sukuk deals in non-Islamic jurisdictions must be carefully structured.

Read next...

The Taxation of Islamic Finance in Major Western Countries

2007-05-30T22:24:00.000-07:00

For several decades, Islamic finance has been growing rapidly in the Muslim world, particularly in the Middle East and Malaysia. In view of the importance of the major western financial centres such as London, New York, Frankfurt and Tokyo, Islamic banks headquartered in Islamic countries find that they need to have operations in these western financial centres. More recently, as the Muslim populations of western countries have increased, they have a desire to access Islamic financial services themselves.

Read next...

Managing Financial Risk of Sukuk Structures

2007-05-30T22:07:00.000-07:00

The objective of this research is to review the evolution of Sukuk markets, describe the Sukuk structures and analyze the various risks underlying the Islamic sovereign and corporate Sukuk structures. The paper compares the risk underlying 5 traditional fixed income instruments and those underlying the Sukuk structures. Interest rate swaps and other derivative instruments are utilized to manage the risk of the traditional fixed income instruments. These instruments are not available to Islamic asset managers. The paper therefore, aims to analyze the securitized structures of Sukuk and suggest Shari’ah compatible frameworks which can replicate the functions of interest rate swaps and derivatives in managing the risks of Sukuk.

Read next...

Sharia Marketing

2007-05-25T00:11:00.000-07:00

The marketing world is progressing from rational market towards an emotional market and even to the extend of spiritual market. In rational marke, customers buy products and services with rational thoughts (such as function and price), while in an emotional market, customers use their emotional thoughts (such as personal taste, prestige, self image). A customer in spiritual market starts to consider values (such as right or wrong, halal or haram). Perhaps this trend is what drives the rapid development of the sharia (Islamic based business) market.

Read next...

Principles of Shari'ah Governing Islamic Investment Funds

2007-05-25T00:06:00.000-07:00

The term ‘Islamic Investment Fund’ here means a joint pool wherein the investors contribute their surplus money for the purpose of its investment to earn halal profits in strict conformity with the precepts of Islamic Shari’ah. The subscribers of the Fund may receive a document certifying their subscription and entitling them to the pro-rata profits actually earned by the Fund.

Read next...

The Economics of Islamic Finance and Securitization

2007-05-25T00:02:00.000-07:00

Islamic lending transactions are governed by the precepts of the shariah, which bans interest and stipulates that income must be derived as return from entrepreneurial investment. Since Islamic finance is predicated on asset backing and specific credit participation in identified business risk, structuring shariah-compliant securitization seems straightforward. This paper explains the fundamental legal principles of Islamic finance, which includes the presentation of a valuation model that helps distil the essential economic characteristics of shariah-compliant synthetication of conventional finance. In addition to a brief review of the current state of market development, the examination of pertinent legal and economic implications of shariah compliance on the configuration of securitization transactions informs a discussion of the most salient benefits and drawbacks of Islamic securitization.

Read next...

A Basic Guide to Contemporary Islamic Banking and Finance

2007-05-24T23:58:00.001-07:00

I would like to preempt two opposing reactions that many readers may have once they recognize that “Islamic finance” is in many ways very similar to (and at times identical with) conventional finance. Some may feel that this similarity is an attempt to dilute the Islamic teachings to simplify our lives, while others may feel that the Islamic Legal distinctions between Islamic and regular finance are artificial means of creating an industry where none is needed. I will be among the first to admit that the terms “Islamic banking” or “Islamic finance” can be quite misleading given the many similarities between Islamic and conventional financial contracts. To explain my point of view about this issue, let me use a good analogy: the issue of “Islamic marriage”.

Read next...

Risk Management : Islamic Banking and Its Potential Impact

2007-05-24T23:53:00.001-07:00

This is a little different from other case studies being presented at this conference. Since the representatives of the Shariah Bureau of Bank Indonesia responsible for the supervision and development of Islamic finance will focus on the experience and progress of Islamic banking in Indonesia, I will focus on some questions about the impacts of that banking, particularly in rural areas, and aspects that the Bank Indonesia representatives will not focus on.

Read next...