Islamic Finance

This article examines the Islamic Investment industry through a historical perspective, offering a critical analysis of trends and an insightful analysis of the road ahead. The Islamic Investment market has historically been over-weighted toward trade finance transactions and real estate. Mutual Funds (often described as Asset Management) have become increasingly common with the advent of the Dow Jones Islamic Indices. Yet even Mutual Funds are an extremely limited option for the wealthy Islamic client.

In addition to the equity market, the Islamic private debt securities (PDS), or bond market, is an integral part of the Islamic capital market. Thus in December of 1998 the Bank Negara Malaysia (BNM) issued the Guidelines on Participation in the Islamic Banking Scheme (IBS). Several Malaysian discount houses, notably ASDB, have begun to participate in the new scheme.

The Zam Zam Tower Project in Makkah, Saudi Arabia is a landmark construction and financial development project that seeks to capitalize on its proximity to the Haramain (Holy Mosque), serving as an example to other

In late 2003 Jaiz International Plc raised N3bn through an IPO to fund Nigeria's first Islamic bank, surpassing the minimum capital requirement of N2bn set by the Central Bank of Nigeria (CBN). Of the 120 million Nigerians, half is

Malaysia's new prime minister Datuk Seri Abdullah Ahmad Badawi ('Paklah') has taken steps to advance and more rapidly liberalize Malaysia's Islamic banking sector. Prime Minister Badawi plans to use Malaysia's chairmanship of the Organization of Islamic Conference (OIC) states to further promote cooperation and arbitrate disputes between its member states. Tan Sri Nor Mohammed Yakcop, appointed Second Finance Minster by the Prime Minister, has pushed for the use of the Islamic gold

Despite including a limited range of economic sectors, the shari`a-compliant Dow Jones Islamic Market Indexes (DJIM) performed comparably to its counterparts in 2003. Greater research is necessary to increase growth within the Islamic investing community, and support for these studies should be sought out from major Western financial groups that have a stake in the

As Islamic financial institutions tend to avoid taking large risks, most have avoided investments in the reconstruction of Iraq. The Islamic Development Bank (IDB) is contributing US$500m to the Iraq Reconstruction Program, which is to be taken as more of a symbolic gesture than a firm commitment. Iraq is heavily indebted to the IDB as a result of failing to pay subscription dues and financing fees. Member states have pressed the IDB to contribute more finds to Iraqi reconstruction.

The increasing number of Islamic financial institutions is encouraging, yet most of the licenses are being issued in Bahrain to relatively small institutions in the real estate sector. Bahrain may need to reform its financial authorization categories, particularly with regards to institutions licensed as Offshore Banking Units (OBU). As a model for banking in the region, Bahrain should further proliferate high quality institutions that serve the interests of the greater gulf region. The IDB member countries must further liberalize their markets.

The Common Terms Agreement (CTA) has been widely used to facilitate arrangements between borrowers and multiple financiers through integration. A new approach utilizing the Facilities Co-ordination Agreement (FCA) may be more effective for negotiating shari`a-compliant arrangements, particularly with regards to pro rata utilization of the facilities, repayments, and sharing provisions.

The murabaha market has been suffering from low return rates, averaging 0.9%.