Islamic Investment Banking Euromoney Book Sample

Islamic Investment Banking:
Emerging Trends, Developments and Opportunities
Islamic Investment Banking:

Emerging Trends, Developments and Opportunities
Edited by
Sohail Jaffer
E U R O M O N E Y
B O O K S
Published by Euromoney Institutional Investor PLC Nestor House, Playhouse Yard London EC4V 5EX United Kingdom Tel: +44 (0)20 7779 8999 or USA 11 800 437 9997 Fax: +44 (0)20 7779 8300 www.euromoneybooks.com E-mail: hotline@euromoneyplc.com Copyright 2010 Euromoney Institutional Investor PLC and the individual contributors
ISBN 978 1 84374 660 7
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Contents
Lord Mayors foreword Christian Sautters foreword Yves Merschs foreword Editors notes and acknowledgements About the editor About the contributors
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Part I: 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 Growth and development of Islamic capital market 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 3 3 4 5 7 11 11 11 12 13 14 15 15 17 18 18 19 20
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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 What more can international financial centres in the region like Dubai International Financial Centre (DIFC), Bahrain, Qatar and King Abdullah Financial District in Riyadh do to promote Islamic banking and finance? Conclusion 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 Overseas expansion strategy of KFH Dubai Islamic Bank Qatar Islamic Bank (QIB) Conclusion London as an 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
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A centre of excellence and specialist expertise Looking to the future 6 Opportunities and challenges faced by Islamic banks in the UK 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 M&A opportunities in MENA and cross-border expansion of Islamic financial institutions in the wake of the global crisis Alexander von Pock Introduction M&A: drivers and risks A look at the past Effects of the crisis Way forward The outlook for Shariah-compliant investments including alternatives post global crisis Henry Chin Defining Shariah-compliant investment Overview of different financial instruments and structures Demand for Islamic finance Sources of capital Market potential for Shariah-compliant investments
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Capital mobility and allocation The challenges of Islamic finance The outlook for Shariah-compliant alternative investments
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Part II: 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 Malaysias 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 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 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 93 93 93 95 97 97 98 99 101 101 102 104 104 108 109 115 118 120 122 123 126 131 135 135 135 136 136 137 137 139 139
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Other positive signs The future 12 Islamic capital markets: the case for a more intelligent positioning in an evolving global industry Ayman H. Abdel 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 Sharia compliance certificates (Fatawa) Nature and location of the assets Enforcement and bankruptcy considerations Tax Conclusion 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 An analysis of some pros and cons of the structures Some challenges Credit risk and swaps Conclusion 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 Islamic liquidity management Majid Dawood The essence of liquidity Definition Introduction Current options and current concerns New and needed developments The future Conclusion
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Part III: Wealth management 16 Islamic investment post-financial crisis: opportunities and challenges Gul Khan Introduction An opportunity for Islamic finance Equity funds Other investments Sukuk Conclusion Buy side Shariah products Omar Saleem Asghar Recent buy side innovations in wealth management Naveed Ahmad Introduction Markets and investor segments Product selection Public equities Conclusion 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 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 187 187 187 188 190 194 196 198 206 206 206 208 213 217 219 219 220 221 223 223 226 227 228 229 233 233 235 235 237 237 243
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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 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 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 Concluding remarks regarding the competitive landscape of Grand Paris Challenges and opportunities for the growth of Takaful Tommy Trask
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Part IV: New trends and developments in the international arena 25 The GCC sovereign wealth funds and voluntary governance Zeinab Karake-Shalhoub Introduction GCC SWFs 301 301 302
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Portfolios of GCC SWFs SWFs and the Santiago Principles Conclusion 26 The role of sovereign wealth funds in promoting Islamic investment banking Alberto Brugnoni Improving the core under the Shariah overlay Amin Rajan Before the credit crunch: 20002007 After the credit crunch: 20072010 Concluding remarks International centres promoting Islamic finance 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 Malaysia International Islamic Financial Centre Dubai International Financial Centre Bahrain Financial Harbour London United Kingdom Paris France Luxembourg International Financial Services Centre (IFSC) Dublin, Ireland Conclusion Islamic finance in international financial centres Natalie Schoon The role of international financial centres Global developments The role of regional financial centres Regional versus international, is one better than the other? 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
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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 Potential for Islamic investment banking in France Valry Fouss 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 Frances 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 Islamic banking in Turkey: the Istanbul Financial Centre plans further expansion Paul Wouters Technology trends in Islamic investment banking towards best of breed solutions Bill Willison
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Introduction Technology investment drivers Current technology Future trends Conclusion Part V: 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 EUs 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 Islams 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? The role of Shariah boards and the evolution of underlying Shariah principles Mohd Daud Bakar Introduction Shariah board: is it a Shariah advisory or Shariah supervisory board? Who is a Shariah board member? What are the roles and duties of a Shariah board? An overview of the evolution of some underlying principles in Islamic finance Conclusion
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Rethinking the strategic significance of Sharia supervision boards 416 Abdel-Maoula Chaar Introduction 416
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Sharia boards interlocks effect on the Islamic financial field The case study of the Lebanese Islamic banks The institutionalisation effect of Sharia 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 IIFMs profile and its contribution to ICMM IIFM master agreements for treasury placement (MATP) IIFM/ISDA Tahawwut master agreement (TMA) Liquidity management in Islamic financial institutions (IFIs) Exploring Iaadat Al Shiraa (repurchase) potential Wakala master agreement Sukuk Promotion of ICMM Conclusion
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Lord Mayors foreword
The past quarter century has seen a series of immense changes in the world of finance and supporting professional services accompanied, as we are only too aware at the moment, by crises and market failures, but also by the creation of major opportunities. The balance of the global economy has changed radically and is still changing. These changes have been accompanied by changes in financial techniques and products. The evolution of Islamic finance and the scope for participation in it are a major part of these developments. London, as a global financial centre, looks inwards to the evolving European single market, westward across the Atlantic and eastward towards the Middle East, Africa, South Asia and the markets of the Pacific Rim. In all these areas, there is scope for the development and application of Shariah-compliant finance. So Londons evolving position as a centre for Islamic finance makes economic and business sense. It is a practical response to new opportunities. But there is a wider element to it. The British Government, with the support of the Bank of England and the Financial Services Authority, has made changes in the fiscal and regulatory system to give Islamic finance the same status as conventional Western financial techniques. There are several policy drivers the first is to widen access to financial products and to the broader economy for Britains growing and increasingly prosperous Muslim population. It makes ethical as well as practical sense for Muslims to buy property, to save, to access retail banking and to obtain cover against risk in ways consistent with their faith. There is nothing divisive or discriminatory in the availability of an Islamic mortgage, a Shariah-compliant savings product, or motor cover through a Takaful provider. It is entirely open to a non-Muslim to open an account with a bank offering entirely Islamic products and an increasing number have done so. Equally, Muslim individuals who for entirely practical and pragmatic reasons participate in the conventional system can continue doing so in the same way, of course, as do the governments, central banks and sovereign wealth funds of Muslim countries. I continue to emphasise, as did my predecessors, that Islamic finance here in the London market is not something strange, exotic and arcane it is a natural and welcome addition to the range of products and services that UK-based companies, regardless of nationality of ownership and as participants in the Citys brand, offer to individuals, households and companies here, and to the wider process of global trade and development. This is illustrated by the list of firms and organisations involved. Certainly it includes exclusively Islamic banks, some with major shareholders from the Middle East, but alongside them are the majority of British retail banks and some building societies and major insurers. Advising them and providing the legal and accounting framework are a number of UKbased international law and accountancy firms with active and growing Islamic finance teams.
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Lord Mayors foreword
Neither is the element of intellectual depth and development neglected. Several business schools, including the Citys own Cass Business School, offer specialist post-graduate MBAs, and the Chartered Institute for Securities and Investment has a growing programme of qualifications and training, delivered in the UK and in other markets. Beside them, a number of institutes and professional groups study the principles of Islamic finance, the market for it and the scope for its development. We should not forget, of course, the need for the close study of risks and of crisis-handling. Although Shariah-compliant banks and other institutions look to have fared better than Western ones during the current crisis, nobody should pretend that risks, and maybe unresolved problems, are not out there in the Islamic finance market as they are elsewhere. The sheer scope of this book, however, illustrates the second driver for UK policy the immense worldwide opportunity for the spread and development of Shariah-compliant products and techniques. As economic weight shifts eastwards, so ways need to be developed to mobilise capital in a way consistent with the ethical approach of its owners. The global economy needs investment in financing trade, in developing infrastructure, in providing capital for new and growing businesses. An increasing proportion of this investment is likely to flow from Muslim countries and, as I have stated above, Shariah-compliant products are needed to channel that flow. I recommend this book to a wide range of readers to those involved in the market and those contemplating it, to those raising capital and those likely to need it, to business academics and to their students. Whilst its scope is international, I am delighted that it gives due coverage to Londons position as the major Islamic finance centre outside the Muslim world a position I and those with whom I work am determined to uphold. Alderman Nick Anstee The Right Honourable The Lord Mayor of London The Mansion House, London EC4 December 2009
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Christian Sautters foreword
Financing needs of Western countries have increased due to the financial crisis. France is not immune to this necessity, and access to Islamic finance is one part of the solution which has to be brought to the debate in the context of the mobilisation of essential resources in the financing of our economy. As outlined by Elyes Jouini and Olivier Pastre in their November 2008 report, Islamic finance represents a 100 billion market potential for the Paris business place. The government seized this opportunity, and sukuk issuance is now possible in France. As the assistant to the Mayor of Paris in charge of employment, economic development and international incentives, I am naturally interested in any type of financing. I therefore wish to underline here the strengths which Paris offers to foreign investors and in particular to the Islamic finance operators.
1 An important potential market for all Islamic banking activities

Paris and its district, but more generally France, offers an important captive market for retail Islamic banks: indeed the Muslim community counts for 9% of the French population six million people. In order to serve this population, partnership opportunities are broad, in particular with the mutualist banks. The market is also ready to welcome financing and investment from Islamic banks thanks to the presence of many major corporations. Indeed, Paris is the second business place for the 500 largest global companies, behind Tokyo but in front of London and New York. Moreover, the French private sector has developed privileged ties with the Muslim worlds private players, particularly in North Africa. Large French infrastructure companies, seeking stable resources in order to finance their long term projects, already have recourse to Islamic financing.
2 Paris in the middle of the euro area

Very early, London took a position on the Sharia-compliant products but Islamic financial institutions based there would do well to also consider a continental European base in the euro zone, offering a stability which allows protection against currency exchange risk.
3 A varied economic network

Paris has managed to keep an important sectoral diversity which makes the le-de-France market the premier economic and scientific area of Europe today. The seven international competitive clusters set up in le-de-France (ICT, software, health, aeronautics, eco-activities, finance and transport), give the area a prestigious position for the future and highlight an
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Christian Sautters foreword
economic dynamism. Innovative SMEs are emerging due to this expanding ecosystem and are looking for capital in order to develop. Islamic financial institutions on the other hand are seeking to invest their surplus capital: another important market potential.
4 Real estate: a changing territory

To foster new entrants to its territory, Paris is forging ahead in developing its commercial property. Two million square metres of additional office space will be provided by 2020, thus giving Paris a total of 18 million square metres. Organisations which comply with Islamic finance principles are potential options in financing this real estate development. Investment funds from Muslim countries are most welcome and sought after. Gulf countries investors already have a strong presence in the Paris real estate market. According to the professionals I regularly meet during trade fairs, real estate Paris market events, which stood the crisis quite well, still have substantial growth potential and profitability rates are among the highest in Europe. In the hotel industry in particular, Paris intends to promote the creation of 7000 additional rooms by 2020. This plan falls under the 35,000 additional rooms regional prospect for lede-France. Foreign candidates for these reliable and profitable investments in this key international tourist city are numerous.
5 A skilled workforce
Parisian schools and universities educate well-respected mathematicians and financial engineers who are valued worldwide. Therefore Islamic banks will find a skilled workforce readily available in Paris. Added to that, I would mention the new Islamic finance Masters degree created at Dauphine, one of the most prestigious Parisian universities, well known for the excellence of its finance training. As you can see, there are numerous reasons for Islamic finance to settle sustainably in Paris. I invite you to read Islamic Investment Banking, which I am sure will convince you of the opportunities offered by Islamic finance. Christian Sautter Adjoint au Maire de Paris Paris March 2010
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Yves Merschs foreword
While the global economy slowly recovers from the recent unprecedented crisis, it is necessary to revisit our economic and financial paradigms and to shift them away from excessive risk taking and towards ethical practices that emphasise on socially responsible investment. In this context, the principles underlying Islamic investment are interesting: it promotes fair entrepreneurship and aligns finance with the real economy. The Islamic prohibition on leverage activities and, generally, its principles of justice and participation, reduce perceived risk and stabilise the global financial system.1 Islamic finance spreads across the worldwide economy. It transcends the Muslim population and extends into new geographic areas and new customer classes that present a significant untapped economic growth potential. However, the thirty-year growth of Islamic finance presents certain challenges, notably its lack of product diversification and its over-reliance on real estate as asset class, and we should all study how to sustain that growth. On the one hand, Islamic investment institutions need to meet the demand for Islamic products and services as diversified and as comparable as those offered by conventional counterparts. On the other hand, the authorities need to regulate Islamic financial institutions fairly and efficiently to ensure equivalence in prudential supervision. The various topics of this book are of the utmost interest. They contribute greatly to our knowledge of Islamic financial practice and show its shortcomings. From its creation in 1998, the Banque centrale du Luxembourg has helped spread knowledge about Islamic finance. In 2005, the Banque centrale du Luxembourg was the host of the first Islamic Financial Services Forum organised in Europe by the Islamic Financial Services Board. Furthermore, as at January 1 2010, the Banque centrale du Luxembourg is the first European central bank to be admitted as associate member of the Islamic Financial Services Board. Through this membership, the Banque centrale du Luxembourg intends to contribute to adapting standards in order to allow Islamic financial institutions to trade on equal terms and to remove hurdles in managing Shariah-compliant liquidity. Providing reliable and extensive Shariah expertise, this new opus is most welcome. It will help the whole financial industry rise to the challenge and it may also shape Islamic investment innovation, harmonise and optimise market practices, and help consolidate the regulation for this growing industry. Yves Mersch President of the Banque centrale du Luxembourg March 2010
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Chris Morris et al. Has the crisis shown the strengths or the weaknesses of Islamic finance? IFM Global Market Monitor, October 21 2009.
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Editors notes and acknowledgements
As good as it feels to see secular countries embrace the concept of Islamic finance in general and Islamic investment banking in particular, it is undeniably in the Middle East and SouthEast Asia we see the bulk of Shariah-compliant financial activity. Islamic investment banking can be traced back to the 1950s when the first credit unions were established in Pakistan and Egypt. Today, Gulf Cooperation Council countries such as the United Arab Emirates, Bahrain and Qatar have become regional Islamic finance hubs in their own right. Malaysia, the Islamic finance international hub in South-East Asia, remains the main issuer of Sukuk, with over $5 billion so far in 2009, which includes the remarkable international Petronas global issuance for $1.5 billion. Since the inception of Sukuk in Malaysia, both corporates and the government have issued over 673 bonds worth $26 billion. The UAE, spearheaded by the Dubai International Financial Centre (DIFC), comes close second with a grand total of 35 Sukuk worth over $22 billion. In the Middle East, Qatar and Dubai have paved the way for the creation of international hubs, both increasingly attracting companies to operate from their financial centres. However, despite the fact Islamic financial Institutions are more aware of the necessity to diversify their asset portfolio to attract a growing number of investors, it will not be until Sukuk can be issued in all currency denominations, especially in Euros, that the market will truly flourish and expand globally. Within Europe, London is well positioned to become the international hub for Islamic capital markets, with 18 Sukuk (Islamic bonds) worth $10 billion listed on the Stock Exchange, followed closely by the Luxembourg Financial Place (14 Sukuk worth $5.5 billion). The Square Mile also counts five fully Shariah-compliant banks as well as one Takaful company and as far as asset management is concerned, seven Islamic exchange traded funds (ETFs) have been launched so far. In a survey conducted by BDO, 13% of the 173 experts contacted thought that London was likely to be the leading international centre for Islamic finance issuance and 16% for Islamic finance investing. Competing for the European gateway to Islamic finance position, Paris is close behind London and the French government has just passed a law enabling the issuance of Sukuk. The financial crisis, which has impacted conventional and Islamic markets, has brought on the imperative necessity for governments and corporations to protect and, if possible, grow their capital, even in adverse conditions. In the Middle East and SouthEast Asia, many conventional banks have understood the huge potential of Islamic investment banking. Calyon, BNP Paribas, Deutsche Bank, Citigroup and HSBC all provide advice and capital-raising solutions which are Shariah-compliant, such as syndicated financing, trade, commodity and structured finance as well as capital market solutions. Citigroup for example has recently opened an advisory unit in the Middle East, servicing corporations in the UAE, Bahrain and Kuwait. The rationale behind this new entity was to service the global capital flows being redirected to the Middle East region. Global Securities House in the UK is another
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example of expansion into Islamic investment banking when it merged with Gatehouse Bank into one entity. The advisory and asset management arm of the business was united with the Capital Markets expertise of the bank in order to reduce costs but also to offer Islamic products from a single platform. One of its focuses today is to bring the Islamic mandates to the UK and European corporates, believing that Islamic finance will expand both in terms of geographic footprint but also of product diversification.1 In October 2009, Gatehouse Bank announced it joined Paris Europlace, which promotes the French capital as an Islamic finance centre. This move propels the UK-based bank in the rank of experts but also demonstrates the firm intention from the French to welcome Shariah-compliant finance within its territory and become the leading European hub. Indeed, the government has shown its determination by making some changes to the tax regime as well as proposing a law change in parliament to facilitate Sukuk issuance. Another way for corporations to raise capital and survive a challenging environment is through mergers and acquisitions (M&A). According to a survey by Norton Rose conducted amongst 1,000 senior executives, half the companies in the Middle East and North Africa plan at least one M&A deal this year. In times of crisis, corporations only keep the parts of their business that meet long-term objectives and sell those that do not. The primary aim of consolidation is to pool resources to enable firms to survive the downturn, but for those bigger corporations who do not have a cash flow problem, M&A activities will be golden opportunities to buy companies in difficulty at a lower price. The changing economic landscape has also increased the need for innovative risk management tools, such as Islamic derivative instruments. According to an article written by Clifford Chance in Euromoneys Islamic Finance Review 20092010, a growing number of Shariah scholars take the view that as Islamic finance is getting more sophisticated, investors should be able to enter into hedging arrangements. For a long time, those were not considered Shariahcompliant as they fell under the category of speculation or uncertainty. Interest rate swaps, Murabaha-based products as well as Waad-structured products (for example, currency swaps or FX options) all form part of the Islamic financial landscape and according to the law firm, it is only the beginning for innovative Islamic financial risk management products. On top of risk management, solid corporate governance practices are also needed if Islamic investment banking stands a chance to flourish. Currently, there is a concerted effort by the industry, including financial institutions, corporations and regulatory bodies, to introduce homogeneous regulations and best practices in order to provide consistent Islamic financial services throughout the globe. Recently the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) has expressed the willingness to stand as the industry watchdog in order to ensure all products launched are Shariah-compliant. But what the industry truly needs is a global common trade association made up of major financial institutions and corporates, which would provide the industry with the cement it badly needs and with the accreditation it is due. Initiative strongly supported by Shariah scholars as well as institutions such as the International Islamic Financial Markets (IIFM) in Bahrain or the Islamic Financial Services Board (IFSB) in Malaysia. I hope you will find this guide to Islamic investment banking and its obvious potential a valuable source of information. Sections will cover various subjects, including the latest developments in the Islamic investment banking arena, in the two main Islamic financial hubs (Middle East and Malaysia), but also in the international arena. You will also find sections on
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capital markets, wealth management, international developments and regulations. I hope those will provide you with some insight into the challenges faced by the industry today as well as the opportunities Islamic investment banking offers worldwide. The content of this book is organised in five distinct parts: I: II: III: IV: V: Islamic investment banking: global trends Islamic capital markets Wealth management New trends and developments in the international arena Shariah, regulatory and supervisory framework
In order to provide the most complete information, we have invited leading practitioners to contribute their knowledge and experience. I hope you will find their contribution a useful source of guidance and information on Shariah-compliant investment banking. I would like to thank the individual authors for their important contributions, time, encouragement and support. I am very grateful they chose to share their significant knowledge and impressive expertise in their chosen field. I am also indebted to Alderman Nick Anstee, Lord Mayor of London, Mr Christian Sautter, Deputy Mayor of Paris and Mr Yves Mersch, Governor of the Banque Centrale du Luxembourg for sharing their perspectives on how London, Paris and Luxembourg respectively are well positioned to grow the Islamic banking business in Europe. Special thanks to managing editor, Sanjeevi Perera and her team for their excellent assistance in reviewing and realising this unique publication. I am also very grateful to Nesrine Jaffer for her invaluable research, review, assistance and contribution to enhancing the overall quality of this new publication. Sohail Jaffer Partner FWU Group, Luxembourg
BDO Islamic finance, challenges and opportunities.
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About the editor
Sohail Jaffer is a partner and the head of international business development for white label bancassurance and investment services within FWU Group, an independent financial services group headquartered in Munich. The groups main activities include asset management, bancassurance and individual pension plans. For FWU Group, Mr Jaffer has successfully concluded several important bancassurance distribution deals with major banks in MENA and the Far East. From June 1998 until June 1999, Mr Jaffer was senior vice president within the International Mutual Funds Group of Scudder, Stevens and Clark Ltd, based in London where he was responsible for international product development in Europe and Japan. From January 1989 until May 1998, he was vice president at Citibank (London), where he worked within the Financial Institutions Group as head of structured products including alternative investments until 1996. He later joined Citibanks Alternative Investment Strategies (AIS) Group where he was a regional director and his responsibilities included international business development and asset gathering from institutional investors in Europe and the Middle East region. He was also a member of Citibanks Hedge Funds Policy and Strategy Committee involved in hedge fund manager selection and due diligence. Mr Jaffer was an audit partner with the Price Waterhouse practice in Africa from July 1984 until September 1988. He is a UK qualified certified accountant (FCCA). He is currently regional advisory council member (EMEA) of the Alternative Investment Management Association (AIMA), was a council member of AIMA for the period 2001 to September 2008 and past chairman for the period 1997 to 2000. He is also a member of ALFIs Asset Management Advisory Committee and of their Hedge Fund Committee. ALFI is the Association of the Luxembourg Funds Industry. He is also an active member of the Islamic Finance Working Group of Luxembourg for Finance, commissioned by the Luxembourg Finance Minister and designed to promote Shariah-compliant finance in the Grand Duchy. Mr Jaffer has written extensively on alternative investments and has edited several Euromoney publications on hedge funds, wealth management, Islamic banking, asset management and insurance as well as two editions of the CPI publication on investing in the GCC Markets. World Finance has voted him Best Business Leader in Europe in its Islamic Finance Awards 2009.
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About the contributors
Ijlal Alvi Ijlal Alvi is an experienced professional with over twenty years experience in the financial services industry with strong credentials; specifically in the areas of foreign exchange, money market, fixed income securities and asset and liability management. He has extensive hands-on experience in setting up new treasury functions, strategic planning, policy making and banks restructuring/formation as well as mutual and special purpose fund and financial institutions. Prior to moving to the Gulf, he had spent 10 years at senior positions in the areas of treasury and capital markets with international and regional financial institutions. Since 1997, he has served at senior positions with a number of Middle East based financial institutions. Mr Alvi is the chief executive of IIFM since mid 2005 where he has been instrumental in initiating standardisation of documentation, products and processes in Islamic money and capital market. Mr Alvi has been involved on several working committees at international level such as the Islamic Financial Services Industrys 10 year Framework, Islamic Money Market Task Force and Islamic Financial Sector Development Working Group. He currently manages a number of IIFMs global working groups focused towards developing a unified approach in documentation and products covering liquidity management, hedging and other Islamic capital and money market related issues. Last year he had overseen the launch of Islamic Financial Services Industrys first documentation standardisation in the form of Master Agreements for Treasury Placement. Mr Alvi has presented a number of papers in Islamic finance and Islamic capital and money market at several forums, seminars and workshops worldwide. Moreover, he is a regular contributor in the printed media where his contribution is particularly focused on standardisation in the Islamic financial services industry. Mohammed Amin Mohammed Amin, MA FCA AMCT CTA (Fellow) is a member of the HM Treasury Islamic Finance Experts Group, established by the Economic Secretary to the treasury to advise the government on Islamic finance strategy. He also chairs the Business and Economics Committee of the Muslim Council of Britain. Until recently Amin was a partner in PricewaterhouseCoopers LLP and led PwCs Islamic finance practice in the UK. He has presented on Islamic finance in cities as far afield as Kazan, Jakarta, Melbourne, New York and Sao Paulo. Zarinah Anwar Zarinah Anwar is the chairman of the Securities Commission (SC), Malaysia a post she assumed on 1 April 2006. She had served as deputy chief executive of the SC and has been a member of the commission since 1 December 2001. Zarinah is vice chairman of the emerging markets committee of the International Organizations of Securities Commissions (IOSCO).
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She was chairman of the ASEAN Capital Markets Forum, a grouping of chairmen of ASEAN securities regulators, from 20062008. Zarinah currently chairs the Malaysian Venture Capital Development Council (MVCDC) and the Capital Market Development Fund (CMDF), and is a member of the Labuan Offshore Financial Services Authority (LOFSA), the Malaysia International Islamic Financial Center (MIFC), the Financial Reporting Foundation (FRF) and the Board of Directors of the Institute Integrity Malaysia (IIM) and the Asian Institute of Finance Malaysia (AIF). Zarinah started her career in the government legal and judicial service where she served in the courts as well as the attorney-generals chambers. Zarinah subsequently spent 22 years with Shell and was deputy chairman of Shell Malaysia prior to joining the SC. Omar Asghar Omar Asghar heads wealth management for Mashreq, Dubai. He is responsible for shaping the customer experience and driving the banks high-end businesses. These include HNWcentric Mashreq Gold services for conventional and Islamic customer segments, investments and insurance business, retail deposits, payments and transactional product management. In addition, Omar drives CRM, customer loyalty programmes, business analytics and segmentation strategy for the bank. Omar graduated from the University of Rochester, New York and possesses a very strong and diverse financial services, people and business management skill set. Prior to joining Mashreq in 2006, Omar worked with Citibank in their New York and Dubai offices looking after a variety of high impact responsibilities including retail product management, remote distribution and marketing. Prior to that, Omar worked with ABN Amro Bank in Pakistan, where he started his banking career as a wealth management RM and progressed to branches and sales management before transitioning to run the alternate delivery channels for the franchise. Omar is married and based out of Dubai. His interests anchor around magical realism in literature, art and digital media. Dr Mohd Daud Bakar Dr Mohd Daud Bakar is the president/CEO of International Institute of Islamic Finance (IIIF) Inc. (BVI), Amanie Business Solutions Sdn. Bhd (Kuala Lumpur) and Amanie Islamic Finance Consultancy and Education LLC ( DIFC, Dubai). Prior to this, he was the deputy vicechancellor at the International Islamic University Malaysia. He received his first degree in Shariah from University of Kuwait in 1988 and obtained his PhD from University of St. Andrews, United Kingdom in 1993. In 2002, he completed his external Bachelor of Jurisprudence at University of Malaya, Malaysia. He has published a number of articles in various academic journals and books and presented many papers in various conferences both local and abroad. Dr Mohd Daud is the authority in Islamic legal theory and Islamic finance in Malaysia. He is currently the chairman of the Central Shariah Advisory Council of the Central Bank of Malaysia and a member of Shariah Advisory Council of Securities Commission of Malaysia. He is also a member of Shariah board of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) (Bahrain), International Islamic Financial Market (IIFM) (Bahrain), Dow Jones Islamic Market Index (New York), Oasis Asset Management (Cape Town, South Africa), Unicorn Investment Bank (Bahrain), Financial Guidance (USA), BNP Paribas (Bahrain), Morgan Stanley (Dubai), Jadwa-Russell
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Islamic Fund (Kingdom of Saudi Arabia), Bank of London and Middle East (London), Noor Islamic Bank (Dubai), Islamic Bank of Asia (Singapore) and in other financial institutions both local and abroad. Apart from that, Dr Mohd Daud is also actively advising in capital market product structuring such as Sukuks both local and abroad. Farmida Bi Farmida Bi is a partner at the law firm Norton Rose LLP. Farmida is a recognised expert in the Islamic capital markets field and has advised on many of the most innovative sukuk issues, such as the $3.5 billion musharaka sukuk issued by DP World to fund its acquisition of P&O and the first ever Sharia-compliant RMBS issue by Tamweel. Farmida advised the UK Government on its proposed sukuk issue in the form of Sharia-compliant treasury bills and is currently acting for the delegate on the $650 million Golden Belt sukuk issue which is in default. Farmida is the only female named as a leading individual for Islamic finance in the legal industry guide, Chambers UK 2009, which ranks solicitors and barristers in over 60 specialist areas of law. Alberto G. Brugnoni Alberto G Brugnoni is a former director with Merrill Lynch Bank and is an independent Islamic finance adviser. His unique professional background combines Islamic, conventional and ethical finance. In the mid 1980s, Alberto pioneered some of the first murabaha transactions and participatory investment schemes (mudharaba) ever done in the West. In 1997, he released Pilot Project Genoardo, a seminal study for the establishment of a Mediterranean development bank based on Shariah-compliant principles He now runs ASSAIF (www.assaif.org) a financial engineering think-tank that structures and develops Shariah-compliant products and instruments with a particular focus on structured products, Takaful, home financing and microfinance. ASSAIF is also at the forefront of finance research in some key areas, such as the nature of money, the monetary system and accountancy and strives to join Shariah-compliant contractual structures with the aims and goals advocated by Islamic finance. ASSAIF offers professional consultancy and training in legal, fiscal, administrative, financial engineering and marketing areas and works with governments, central banks, public and private institutions, local and regional authorities, professional practices and investors. Alberto regularly chairs the major events on Islamic finance around the world and gives presentations in Italian, French, English and Arabic. Abdel Maoula Chaar Abdel Maoula Chaar is the head of research and development at the Lebanese Ecole Superiure des Affaires. He leads the development of Islamic financial programmes and activities, among which the Executive Master of Islamic Financial Management (XIFM) elaborated in cooperation with the Rotterdam School of Management. Mr Chaar holds a Masters degree in Strategic Marketing and Communication from ESCP Europe and a Masters degree in Research in Strategic Management from the University of Paris XII. He is currently finishing his PhD thesis on the influence the Sharia mindset has on the elaboration of the strategies of Islamic banks and on the dynamics of the institutionalisation of the Islamic financial field. Mr Chaar is a professor of Islamic finance. He is an editor and qualified trainer of the international
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Islamic Financial Qualification (IFQ). He has written a number of articles and participated in numerous books on Islamic financial management issues. Henry Chin Henry Chin, PhD is global alternative investments strategist, vice president at RREEF Alternative Investments, the global alternative investment business of Deutsche Banks Asset Management division. In this role, Henry is responsible for developing and co-ordinating RREEF Alternative Investments global coverage of real estate, and infrastructure capital markets. Prior to joining RREEF Alternative Investments in August 2005, Henry worked as a researcher at DTZ Research in London to develop real estate research for Asia-Pacific real estate capital markets. Henry has seven years research experience of Asia Pacific and Global real estate markets. He holds a BA in Land Economic and Administration from National Taipei University (Taiwan); an MSc in Real Estate from the University of Reading (UK) and a PhD in Real Estate Investment from Oxford Brookes University (UK). He has presented and published a number of papers at various leading international real estate conferences and academic journals. Henry is a guest lecturer at Oxford Brookes University and National Taipei University; a member of the Society of Property Researchers (SPR), Investment Property Forum (IPF), Urban Land Institute (ULI) and UKSIP. He holds an Investment Management Certificate (IMC) in the UK. Majid Dawood Majid Dawood is an experienced financial services professional. He is the CEO and has been a key individual in the establishment of Yasaar Limited, the first Shariah compliance services company which assists financial institutions structure cost-effective Shariah-compliant financing structures around the globe. Prior to setting up Yasaar, Majid held the position of country representative for Credit Lyonnais Securities (Asia) Ltd as well as capital markets consultant to Credit Lyonnais and Jardine Fleming. Majid is a well known speaker on Islamic finance and Shariah, having presented on these topics globally as well as having authored numerous articles for industry journals and chapters for books. In 2004, Majid was presented the Deloitte & Touche award for the most innovative Islamic finance product for the Caravan 1 Sukuk. Under his leadership and guidance in December 2007 Yasaar was voted the Best Islamic Finance Advisory Firm by the readers of Islamic Business and Finance magazine and in January 2009 won the same award for the second year running. Also in 2009 he set up the publication capability by establishing Yasaar Media. Yasaar Human Capital, the Islamic finance executive search and recruitment division was launched in Q3 in 2009. Majid holds a BA (Economics) from the University of Massachusetts. Valry Fouss Valry Fouss, MS ESCP Europe, expert-comptable and commissaire aux comptes, is a partner of KPMG France. He has twenty years experience of serving French and international banks acting in the retail banking, private banking, asset-backed financing or investment banking sectors, and a strong international experience of auditing in the financial services and real estate sectors, including two years in KPMGs London-based financial services group investment banking department (19982000). He is the French correspondent of the Islamic finance international group within KPMG.
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Natacha Guerdat Natacha Guerdat is a partner of Conser Invest, an independent advisory firm dedicated to sustainable and responsible investment solutions. Conser provides tailor-made solutions to institutional and private clients wishing to combine financial performance and sustainable development principles. Natacha has 10 years experience in sustainable finance. She joined Conser Invest in 2008 from the private bank Lombard Odier Darier Hentsch & Cie where she worked as portfolio manager dedicated to sustainable investing. Prior to this role she worked in the buy-side equity research department as a financial analyst and contributed to the development of the responsible investment unit. She was also responsible for the coverage of the alternative energy industry. As such she created and managed a dynamic alternative energy basket and a mutual fund investing in alternative energy, water and waste treatment. Natacha is co-founder of Sustainable Finance Geneva, a non-profit association which aims to promote responsibility and sustainability in finance. She holds a master degree in international relations from the Graduate Institute of International and Development Studies in Geneva (IHEID). Zainal Hasfi Hashim Zainal Hasfi Hashim is the manager in the Islamic banking and Takaful department, Bank Negara Malaysia (Central Bank of Malaysia). He started his career in central banking in 1990 and has worked in the bank regulation department before being seconded to the Labuan Offshore Financial Services Authority (LOFSA) as assistant manager in charge of offshore banking operations. He has on several occasions been invited as a resource person and speaker for the Central Banking Course, the Financial Sector Talent Enrichment Programme (FSTEP), Islamic Finance Regulator Programme and a moderator for the examination of Part I and Part II courses of the Chartered Islamic Finance Professional Programme (CIFP). He holds a Bachelors Degree in Business Administration from Ohio University, USA; a Bachelor of Science (Honours) Degree in Politics and International Relations from the University of London and Masters degrees from the University of Malaya and the International Islamic University Malaysia. Zainal Hasfi obtained his PhD from the University of Manchester, United Kingdom. Brian Higgins Brian Higgins is a partner in the financial services department of Dillon Eustace which is one of Irelands leading law firms. He advises international financial institutions and asset managers on carrying on business in Ireland. In particular, he advises on the structuring, establishment and operation of all types of investment funds (including UCITS, non-UCITS and Shariah-compliant funds) and asset management firms. Brian is a co-author of the Irish Institute of Bankers manual for its diploma in financial services and regularly contributes articles in relation to investment funds to international publications. Brian is recommended in European Legal Experts 2009 in the area of investment funds. Kareem Hussaini Kareem Hussaini, Vice President of The Islamic Bank of Asia, is a banker with more than twelve years experience. At The Islamic Bank of Asia (IB Asia), Kareem Hussaini is leading
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the efforts on the development of Treasury and Wealth Management products. He is also responsible for developing the business in the Middle East and Far East for the Shariahcompliant products offered by IB Asia. Having earned the right to use the Chartered Financial Analyst designation, Kareem is currently a member of the CFA Institute, USA, and a Chartered Accountant from the Institute of Chartered Accountants of India. He graduated from Sydenham College of Commerce and Economics, India. Zamir Iqbal Zamir Iqbal works as lead investment officer with the quantitative strategies, risk and analytics department in the Treasury of the World Bank in Washington, D.C. He earned his PhD in international finance from the George Washington University, USA where he also serves as adjunct faculty of international finance. He has published several articles on Islamic finance in reputed journals and has presented papers at international forums. He has extensive experience with capital markets, structured products, risk management, financial sector development, and financial modelling. His research interests include Islamic finance, financial engineering, structured finance and international banking. He is co-author of Introduction to Islamic Finance: Theory and Practice (2007), Risk Analysis for Islamic Banks (2007), and New Issues in Islamic Finance and Economics: Progress and Challenges (2008), Globalization of Islamic Finance (2009) and Stability of Islamic Finance (2010). Zeinab Karake-Shalhoub Zeinab Karake-Shalhoub is director of research at the Dubai International Financial Centre (DIFC), in the UAE. Before joining DIFC, she was a professor at the American University in Sharjah. Zeinab served as the associate dean of the School of Business and Management, the director of marketing, management and MIS, and the chair of MIS. Before coming to AUS, Zeinab was a professor of business at Catholic University in Washington, DC (19892001). She also served on the faculty of business at George Washington University for four years (19861989). Zeinab has a BBA and MA from Catholic University of America (Washington, DC, 1982) and a PhD from the George Washington University (Washington, DC, 1987). Zeinab completed three summers of professional, post-doctoral programs at MIT in Boston, Massachusetts. She is a visiting scholar at INSEAD (2006). Zeinab is the author of more than 50 published articles, monographs, and reviews. She is also the author of six published books Technology and Developing Economies (1990); Information Technology and Managerial Control (1992); Organizational Downsizing, Discrimination, and Corporate Social Responsibility (1999); Trust and Loyalty in Electronic Commerce: An Agency Theory Perspective (2002); The Diffusion of Electronic Commerce in Developing Economies: A Resource-Based Approach (2007).This book is already in its sixth print and has been translated to Arabic; and Cyber Security in Developing and Emerging Economies (2010). Zeinab is also the regional editor of Management Decision Journal. Zeinab is twice recipient of the prestigious Emerald/MCB University Press International Excellence Research Award for her groundbreaking research (1995, 2002). She also received the AUS Excellence in Teaching and Service Award in 2001. Zeinab was elected and served as the founding president of the AUS Faculty Senate (2000 2001). In 2003, Zeinab received the Best Researcher Award from the American University of Sharjah; and more recently she was nominated and received the prestigious 2007 Emirates
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Business Women Award for innovation. In addition to her work as a researcher, college administrator, professor, writer and editor, Zeinab has developed and delivered a number of seminars and training programmes for mid-and-high level American and international managers, both in the United States and abroad. She delivered keynote speeches at a number of conferences and serves as a consultant and resource specialist for a number of national and international companies and institutions. Ayman H. Abdel Khaleq Ayman H. Abdel Khaleq is a partner at Vinson & Elkins based in Dubai. His practice focuses on advising clients on structured finance and debt capital markets transactions with a particular emphasis on the structuring and documentation of Islamic finance and investment products (including Sukuk offerings backed by pools of global assets). In addition, he advises clients on the structuring and formation of innovative Sharia-compliant real estate, infrastructure and private equity funds and investments. Ayman has been involved in a number of privatisation and deregulation transactions across a number of Middle East countries such as Bahrain, Saudi Arabia, Qatar, and Jordan, and has been advising foreign investors on doing business in the Middle East for over thirteen years. Some of the key sectors in which Ayman practices include infrastructure, telecommunications, media and technology, energy (including renewable energy) and real estate. Ayman is qualified in New York State and Jordan and is fluent in Arabic and English. He holds LLM (honours) from the George Washington University and an LLB (highest honours) from the University of Jordan Faculty of Law. He has published a number of articles on Islamic finance topics and on doing business in the Middle East, and has spoken at a number of international conferences and seminars dealing with the said topics. Gul Khan Gul Khan is the global head of wealth management at HSBC Amanah, the Islamic banking business of the HSBC Group. He is responsible for growing HSBC Groups Islamic premium banking and wealth management business. Prior to this role, he was the regional head of premier, home finance and insurance, for HSBC Middle East. Gul joined HSBC over 11 years ago and during his time as an international manager for the bank has held a variety of management positions in geographies as varied as North America, Asia-Pacific, Europe and the Middle East. His roles have encompassed retail banking, wealth management, islamic banking and corporate banking, and he has also held strategic positions at the HSBC Group head office, in the UK. Dr Aly Khorshid Dr Aly Khorshid is a recognised scholar in Islamic finance and expert on Shariah-compliant finance, within the Islamic law and contracts. He is CEO of Islamic finance with Elite Horizon economic consultancy, his role includes; structuring, endorsing and advising on Shariahcompliant products with particular experience in capital and stock market products, consultant to central bank on regulating and establishing Islamic banking system, conducting comprehensive due-diligences for potential investment opportunities. He has been a Shariah board member since 1997 with bank Al-Baraka UK. He is now serving as a Shariah board member in several Islamic institutions. Dr Khorshid has a PhD on Islamic studies and economics, a
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Masters degree in management, University of Leeds (UK), and has studied Fiqh and Shariah at Al-Azhar University (Egypt). His publications include, Islamic Insurance: A modern Approach to Islamic Banking, and the Euromoney Encyclopaedia of Islamic Finance. He also has many articles published on Islamic finance. Dr Khorshid is a trustee member of Academy UK, member of the institute of management consultancy (UK), and visiting lecturer in ElAzhar University, Egypt and SOAS University of London on Islamic finance. He is a regular speaker on Islamic finance issues at conferences and TV. He can be contacted by email: alykhorshid@mac.com or by phone: 00447944411777. Dr Saleh Jameel Malaikah Dr Saleh Malaikah is currently the chairman of Rusd Investment Bank, Malaysia and is the chairman of a group of financial entities in several countries. In addition, he is a member of the boards of the National Industrialization Co. (NIC), Saudi Tabreed Co. (STC), and Nabaa Development & Investment Co. (NDIC). Since 1990, he has been assistant professor at King Fahd University for Petroleum & Minerals (KFUPM). In 1992 he was the chief executive officer (CEO) of Al-Tawfeek Investment Bank which became a model of Islamic investment banking. Between 1995 and 2000 he was CEO of Albaraka Investment & Development Company, the financial services sector (FSS) of Dallah al-Baraka Group (DBG), acting as holding company for DBG holdings in financial institutions. He oversaw the groups investments in around 45 companies in 30 countries, with total assets above $5 billion. In 1995 he started his own business in hotel management and UMRA services in Makkah Al-Mukkarramah and in 2003, left AlBaraka to fully oversee his own business. Dr Malaikah was a founding member on the Board of Trustees of the Accounting & Auditing Organization for Islamic Financial Institutions. He is currently a member of the Audit Committee of Bank Al-Jazira. He is also a member of the National Investment Committee of the Association of Saudi Chambers of Commerce, and is head of the Executive Investment Committee for the Society of the Gifted, which is headed by the Custodian of the Two Holy Mosques, King Abdullah bin Abdul-Aziz Aal Saud. Dr Malaikah is a well-known speaker in finance, insurance, banking, investment and Islamic economics. It is worth noting that in his various capacities, Dr Malaikah has been instrumental in developing Islamic finance practices in the Saudi economy. His leadership in the field was recognised by his peers. Thus, he was named in 1997 the Dealmaker of the Year of the Islamic Banking & Finance Forum, and the next year he was awarded the Lifetime Achievement Award of the Islamic Banking & Finance Symposium (LARIBA). He was also recognized as the Islamic Banker of the Year 2000 by ISNA/IBTF (Islamic Society of North America and Islamic Business and Trade Forum). In 2007 he received the Takaful Leader of the Year award during the Second World Takaful Conference. Dr Malaikah obtained his PhD, specialising in finance and investment, after graduating with BSc (Eng) and MBA. Moinuddin Malim Moinuddin Malim brings with him a vast experience of Islamic banking stretching over 19 years. Today, Moin is the chief executive officer of Mashreq Al-Islami (MAI), previously known as Badr Al-Islami, which is the Islamic initiative for the entire Mashreq group represented through the Islamic finance company as well as Islamic Banking of Mashreq PJSC. As the head of the Islamic initiative, Moin has successfully transitioned the business model of
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MAI all across the bank through retail, institutional and wholesale banking channels. Originally, Moin joined Badr as head of corporate and investment banking where he was responsible for establishing the wholesale banking channels and successfully led this initiative. In a short span of three years, Moin has led Badr to become the market leader in real estate trust account management. Badrs presence is recognised and respected in large corporate entities from all across UAE and the rest of GCC for bilateral, club, syndication and Sukuk advisory deals. The wholesale banking group has been profitable from the very first day and has started to contribute 10% of the Mashreq groups net profit in less than two years of operations. MEED has ranked Badr at number 26 amongst the top 50 Islamic Banks in GCC, and number 9 in UAE (3% market share in UAE) by assets whereas non of its UAE based peer group namely Siraj (FGB), Meethaq (ADCB), Al Wifaq (UNB), Bayt Al Mal (RAK Bank), Marooj (NBAD), Aseel, and Mawarid who were all licenced at the same time in December 2006, made it to the list. Prior to MAI, Moin established the asset management and capital markets unit in Dubai Islamic Bank (DIB) and left the bank as managing director for the two units in 2006. Under him, the bank lead arranged a number of the Sukuks starting from the inaugural, first ever $1 billion Sukuk Al Ijara for the Department of Civil Aviation, Government of Dubai. During his stay a total of $9 billion Sukuks were led arranged by the bank including Nakheel, DP World, DCA, Emirates and DMCC. He was at the forefront of bringing first ever international Musharaka Sukuk and other ground breaking structures. Under Moin, DIB established its credentials as Best Global Sukuk House (Euromoney), Best Sukuk House (Banker Middle East), led the Euromoney Lead Tables in 2004 and 2005 and other regional awards. He created a full spectrum of Shari-compliant investment products for retail, wholesale and private banking channels from capital protected funds, to real estate, shipping, aviation, power, local and regional and international stock funds. Moin joined DIB from the International Investor (TII) where he was a senior partner leading the investment banking activities for the group in UAE and later in Qatar. In TII, he led a number of private placement project and public offerings of equity during his stay between 1999 and 2003. Before TII, he headed the international finance division at Al-Tawfeek Company for Investment Funds (Dallah Al Baraka Group), where he was responsible for extending Islamic financing facilities to global cliental and had a large portfolio of financing assets. He picked up his enthusiasm for Islamic banking from this pioneer group during 1992 until 1999. Prior to devoting his career in Islamic banking, Moin worked at the University of Toledo as research assistant in the department of finance for almost two years from 1990 to 1992 as well as with a private consultancy firm specialising in financial advice to banks. Moin holds Master of Business Administration in Finance & International Business and Bachelor of Business Administration from University of Toledo (USA) and Bachelor of Science from University of Karachi (Pakistan). Ken Owens Ken Owens is an audit partner in the Asset Management Group in PricewaterhouseCoopers, Ireland and has extensive knowledge and 16 years experience in advising and auditing asset management clients including mutual funds, hedge funds and private equity funds adminis-
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tered in Ireland. Ken also works with asset managers and administrators based in Ireland. He provides a range of services to his clients including fund and corporate audit services, and regulatory advisory services. Over the years Ken has assisted clients in structuring new funds and advised on various accounting, tax and operational matters. Ken has been involved with the Irish Funds Industry Association (IFIA) for a number of years and is a member of the IFIAs governing council. Ken has lectured on auditing and accounting issues to the asset management industry in Ireland on behalf of the IFIA and the Institute of Chartered Accountants in Ireland. Ken is a fellow of the Institute of Chartered Accountants in Ireland and sits on the Institutes audit and assurance committee. Ken is also a member of the Investment Funds Listing Committee of the Irish Stock Exchange. Anass Patel Anass Patel is the director of investment and strategy of DTZ Asset Management. He is responsible for developing new fund ideas, innovative vehicles and strategic relationships with top-tier fund managers. He is in charge of key account management and development such as GE Asset Management (on behalf of GE Pension Trust at the European level), Dubai Islamic Bank for the Al Islamic Pan-European property fund compliant with the sharia rules, and the Hexagone fund, a co-developed French property fund with Aviva Investors. With more than 10 years of experience in finance and real estate, he previously worked at GE Capital from 1999 to 2006, as investment and then risk specialist in Europe and the US. He also worked at HRO as head of the research activity. Anass has a post-graduate degree from Ecole Centrale Paris and graduated from ESC Lille business school. He is a CCIM member from the US (Certified Commercial Investment Manager). Anass is also the founder-president of AIDIMM, a not-forprofit organisation that promotes Islamic finance towards the general public from France and French speaking countries. Tim Plews Tim Plews is a partner in Clifford Chance LLP and co-head of its financial services practice in London. Mr Plews advises many of the worlds leading financial institutions on the implications of financial services law and regulation. He advised Islamic Bank of Britain plc on its establishment in the UK and the grant of its banking licence by the Financial Services Authority: the first Sharia-compliant bank to be established in either Europe or North America after 9/11. Mr Plews has more recently advised European Islamic Investment Bank on its establishment in the UK. Mr Plews is also engaged on a number of assignments in the Middle East that are connected with the further development and institutionalisation of Islamic finance. He is a member of the UK Treasurys working party considering the UK regulatory approach to Islamic finance and a member of the International Monetary Funds experts group on cross-border bank resolution. Mr Plews advised the Dubai International Finance Centre on the establishment of its legal and regulatory framework. He has also advised the Dubai International Financial Exchange. Mr Plews is also advising the Qatar Financial Centre Authority and also advising organisations interested in the QFC. He joined Clifford Chance in 1985, having read law at Cambridge University. He is a member of the advisory board of Complinet,
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the editorial board of Cambridge University Press Practitioners Guides to Law and Practice and a guest lecturer on international regulation in the Centre for Financial Services at New York University Law School. Dr Alexander von Pock Dr Alexander von Pock is a principal at A.T. Kearney, based in the firms Dubai office. He has more than 10 years of experience in strategy consulting with a focus on financial services. His clients include leading financial institutions both conventional and Islamic in Europe and the Middle East, where he has worked on diverse management issues, including overall business strategy, M&A, product and pricing strategies, market entry strategy, growth strategy, post-merger-integration, reorganisation and operations improvement. He also regularly writes on banking and Islamic finance issues, and is a frequent speaker at banking and Islamic finance conferences. Dr von Pock is a graduate both in economics and in Near and Middle Eastern studies from the University of Bonn. He has received a doctorate in economics from the University of Bochum with a thesis on Strategic Management in Islamic Finance. Nor Rejina Abdul Rahim Nor Rejina Abdul Rahim is Nomura Asset Management Malaysias managing director. She is Nomura Asset Managements first woman and non-Japanese national to head their overseas branch. Rejina who is a qualified barrister at law, started off her career as a legal officer with a Malaysian stock broking house before joining a regional fund management outfit in 1998 where she was involved in various roles from compliance, legal, risk management, product development to marketing and client services. Rejina has actively contributed towards the development of both the unit trust and asset management industry in Malaysia through close work with the industrys associations and the Securities Commission of Malaysia. Rejina holds a fund managers representative licence. She is also the secretary for the Malaysian Association of Asset Managers (MAAM) and has spoken at a considerable number of Islamic finance conferences globally. Amin Rajan Amin Rajan is the CEO of CREATEResearch, a UK based think-tank that specialises in the future trends in global fund management. It works with prominent partners to publish much acclaimed annual reports on prospective challenges and potential responses in the industry. The reports always attract a long series of feature articles in the Financial Times, Global Investor, Financial News and IPE. He also writes for these papers regularly. Amin also offers strategic advisory and coaching services to CEOs and CIOs in fund management as they grapple with unfolding industry dynamics. He has developed special expertise in the emerging business models and their successful implementation. Since 2001, he has undertaken specialist advisory assignments for clients as diverse as Aviva Investors, Allianz Global Investors, Axa Investment Managers, BlackRock, Citigroup Asset Management, Credit Suisse Asset Management, Deutsche Asset Management, Invesco, M&G, Martin Currie Investment Management Morgan Stanley Asset Management, Principal Global Investors, T. Rowe Price, and UBS Asset Management. Amin has presented the results of his work at over 100 major events in the USA, Europe and Asia Pacific in the last five years. His expertise covers, amongst
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others, leadership and new business models in financial services. He is the author of 17 best selling research reports. Details are available from amin.rajan@create-research.co.uk. Amin has published numerous books and articles on leadership, business cultures, socio-economic forecasting, globalisation and new technologies. He is a visiting professor at the Centre for Leadership Studies at Exeter University and a Fellow at Oxford Universitys Said Business School. Wanda Regina Wanda Regina is an analyst in the product development team at the Islamic Bank of Asia (IB Asia), focusing on the development of Shariah-compliant treasury and wealth management products. She has been involved in the development of products offered by IB Asia such as Shariah-compliant profit rate swap, foreign exchange forward, and structured products. Wanda graduated from the Business School of the National University of Singapore. Dr Natalie Schoon Dr Natalie Schoon, CFA joined the Bank of London and the Middle East plc (BLME) in April 2007 as head of product research. Prior to this Natalie was at Barclays Capital where she worked as a senior consultant on the Basel II programme. Natalie has worked in international financial organisations such as ABN Amro and Gulf International Bank. She began her career in Islamic finance whilst working in Bahrain, Kuwait and Dubai during the 1990s. Natalie holds a PhD in financial analysis (thesis subject: Residual Income Models and the Valuation of Conventional and Islamic Banks) and is an accredited trainer for the Islamic Finance Qualification. Richard Street Richard Street is director, head of securities and fund services Middle East, global transaction services, Citi. Based in Dubai, Richard leads the development of Citis securities and fund services capabilities in the Middle East and the client relationships for the product range. Prior to this Richard was the co-head of securities and fund services sales for global transaction services in Europe, the Middle East and Africa, with specific responsibility for the UK, Ireland and the Channel Islands, the Nordic region, Central and Eastern Europe, Middle East and Africa. Tommy Trask Tommy Trask is head of industry research and ratings advisory at Alpen Capital (ME) Limited. Alpen Capital offers M&A, debt and equity advisory services to clients in the Middle East and South Asia from its offices in the UAE, Qatar, Oman and India. It was awarded Best Investment Bank, by Banker Middle East Industry Awards in 2009. Tommy has worked for over 13 years in the investment banking industry in London, New York, Frankfurt and Dubai. While working for Dresdner Kleinwort as director (debt capital markets) and for Standard & Poors as associate director and global industry coordinator (industrial ratings), Tommy managed many successful credit rating projects in Europe, the US, Latin America, the CIS and the Middle East. In 2002 Tommy was awarded Standard & Poors Gold Award for Customer Service.
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Gillian Walmsley Gillian Walmsley is head of fixed income products at the London Stock Exchange and covers the groups London markets for fixed income and Islamic finance in addition to ETFs and securitised derivatives. Before joining the Exchange in 2008, Gillian was part of the interest rate product development team at Liffe, the derivatives arm of NYSE Euronext, where she worked on the design and launch of various short-term interest rate, bond index and government bond futures and options contracts and on the structuring of exchange credit derivatives. Previously, she was part of the equity derivatives team and worked on the launch of stock futures, the development of the UK equity options market and the introduction of flexible equity and index contracts. Gillian began her career in the City on the Liffe trading floor as an exchange official overseeing open-outcry trading activity in the fixed income option pits. Gillian holds the Securities & Investment Institutes Islamic Finance Qualification. Pierre Weimerskirch Pierre Weimerskirch is a partner in the business advisory services practice at Ernst & Young Luxembourg. Pierre leads the firms advisory services to private equity and real estate funds and is a member of the EMEIA Real Estate Advisory leadership team. He also leads Ernst & Young Luxembourgs Middle East/Islamic finance initiative. He has a doctorate in finance. Pierre has 20 years experience in financial services. Pierre started working with UBS Bank as an asset manager in the institutional asset management department. Afterwards he joined the financial services advisory practice of Arthur D. Little in Germany. In 1999 Pierre joined the business risk services practice of Andersen in Luxembourg which combined with Ernst & Young in 2002. He has a deep experience, providing a wide range of advisory services to primarily European and global investment management, wealth management and real estate businesses and respective service providers. He has been involved over the last five years in various projects in the Middle East where he helped clients with the set up of operations and the launch of investment structures. Pierre is also lecturer at the University of Luxembourg and the author and co-author of numerous articles and books in the area of investment and wealth management. Bill Willison Bill Willison is an associate consultant with Braxxon, a management and systems consultancy serving the financial markets, with expertise in both conventional and Islamic investment banking. He has worked in IT and banking for all of his career, having started with IBM UK in the London Banking Branch, before moving to Logica and subsequently joining JP Morgan where he became a senior vice president responsible for international technology. He specialises in information systems strategy, process improvement and programme management, and became involved in Islamic finance in 2007, as programme manager for the set up of Gatehouse Bank, including system selection, process design and implementation. Professor Rodney Wilson Professor Rodney Wilson is director of the Islamic finance programme in Durham University. He currently chairs the academic c ommittee of the Institute of Islamic Banking and Insurance in London and is acting as consultant to the Islamic Financial Services Board with respect to
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its Shariah governance guidelines. His previous consultancy experience included work for the Islamic Development Bank in Jeddah and the Ministry of Economy and Planning in Riyadh. He has written numerous books on Islamic finance for leading international publishers including Edinburgh and Columbia University Presses and Brill and has recently published articles on Islam and capitalism, sukuk securities and Shariah-compliant private equity finance. From January until June 2009 he was a visiting professor at the Qatar Foundations Faculty of Islamic Studies in Doha, and he has returned there in 2010. He has recently completed a paper for the Kuwait programme of the London School of Economics on Islamic finance in the GCC and an article for Islamic Finance News in Kuala Lumpur on Islamic finance in Qatar. Professor Wilson teaches masters level courses on Islamic economics and finance and supervises PhD students working on Islamic finance. He has acted as course director for Euromoney Legal Training in London, Bahrain, Kuwait, Riyadh, Abu Dhabi, Shanghai and Singapore, and taken courses for the Kuwait Investment Authority, the Commercial Bank of Kuwait, the Arab Banking Corporation, Citibank, HSBC, the Monetary Authority of Singapore and SJ Berwin, the international law firm and private equity specialist. Further details and research interests for Professor Wilson can be found on www.dur.ac.uk. Paul Wouters Paul Wouters went from being a Belgian lawyer specialising in international financial regulations and corporate consulting to being resident in Istanbul-Turkey for many years, where he is now a consultant to Bener Law Office. Focusing on Islamic finance and contract law, he has introductions from the GCC over Turkey to South-East Asia. Paul is amongst other things a member of the Advisory Board of Islamic Finance News and consults, lectures and writes on ethical and legal aspects with respect to the Islamic finance sector. At present he is based in South-East Asia and can be contacted at pwouters.law@gmail.com.
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Islamic Investment Banking Euromoney Book Sample

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Islamic Investment Banking:

Emerging Trends, Developments and Opportunities

Islamic Investment Banking:

ISBN 978 1 84374 660 7

Typeset by Phoenix Photosetting, Chatham, Kent Printed by TJ International, Padstow, Cornwall

xvi xviii xx xxi xxiv xxv

387 388 391 394 395

Lord Mayors foreword

Lord Mayors foreword

Christian Sautters foreword

1 An important potential market for all Islamic banking activities

2 Paris in the middle of the euro area

3 A varied economic network

Christian Sautters foreword

4 Real estate: a changing territory

Yves Merschs foreword

Editors notes and acknowledgements

Editors notes and acknowledgements

Editors notes and acknowledgements

BDO Islamic finance, challenges and opportunities.

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