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Archive for April 2009

Islamic Banking System Must Become Strong Financial Model, Says Don

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Points of Essence:

  • Islamic finance should find its own niche model by not emulating the conventional banking concept. This will gain the trust which has apparently been shattered by the conventional financial system meltdown. The time has come for the Islamic financial system to dictate  the international financial landscape. But it must  unleash its full potential to win the confidence of the financial community. Bernama has the report.

KUALA LUMPUR, April 10 (Bernama) — The Islamic banking system must emerge as a strong financial model that need not rely on conventional banking, says University of New Orleans director Prof Dr M. Kabir Hassan.

He said many of the Islamic banks in the world did not understand thoroughly the Islamic banking concept.

“To make it a financial system supported by all communities, the authorities or bank managements must find the sources and new alternatives.
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Written by Suapi Shaffaii

April 12, 2009 at 1:42 am

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Three-Tier Banking Needed To Strengthen Islamic Banking

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Points of Essence:

  • Islamic banking is urged to operate on a three tier system. First tier is to mirror the operation of conventional bank as a deposit taking institution. The second tier is to leverage on the Mudharabah mode company where banks will act as  fund providers. The third tier will be to act as a partner in Musyarakah type of transactions. The appropriate regulations will be modeled to accommodate the three tiers rather than one regulation fits all as of the conventional system. Bernama has the report.

KUALA LUMPUR, April 6 (Bernama) — A three-tier banking system is needed in Islamic banking to further strengthen the industry, an economist suggested.
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Written by Suapi Shaffaii

April 7, 2009 at 9:17 pm

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Malaysian court rules divisive Islamic contract valid

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Points of Essence:

  • The Malaysian court of appeal has finally delivered a verdict which is in favor of Bai Bithaman Ajil. The controversy surrounding this Islamic home product in the global Islamic banking arena is well known which is further exacerbated by lower court rulings holding the product  contractual document invalid. However, the latest ruling by the second highest court in the court upholding the validity of the product’s contract will be at least for now set a clear direction for Islamic finance in the country.  Reuters has the report.

KUALA LUMPUR, April 1 (Reuters) – A Malaysian court has ruled that a popular but controversial Islamic finance contract is valid, a move expected to boost sharia banks in Southeast Asia’s most developed Islamic financial market.

The bai bithaman ajil or deferred payment sale contract is the mainstay of Malaysia’s Islamic finance industry and is commonly used in home loans. But some religious scholars, especially in the Gulf, say it is an interest-based loan cloaked in Islamic dress.

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Written by Suapi Shaffaii

April 5, 2009 at 1:38 am

No frills airline AirAsia turn to Islamic finance for aircraft financing

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Points of Essence:

  • Unperturbed by the prevailing credit crunch, Air Asia, the largest Asia’s low cost airline continues with its expansion plans. It found support in the Islamic finance as it sought US$336mil (RM1.21bil) in the form of syariah-compliant French Single Investor Ijarah facility to fund the purchase of 8 new aircraft. The Ijarah facility features RHB Islamic Bank Bhd and Bank Rakyat as two of the arrangers. The French based BNP Paribas and Natixis Transport Finance are the lead arrangers. The first of its kind deal, the Islamic French-Malaysian transaction marks the venture of Malaysian financial institutions in the business of aircraft financing which may further stimulate the promotion of Malaysia as the hub of Islamic financing. The Star has the story.

By CECILIA KOK

JUST when it seems almost impossible for airlines to obtain financing to buy aircraft these days, given the prevailing credit crunch, AirAsia Bhd has once again defied market trend.

The budget airline has announced some major financing deals that it has secured for the 2009 and 2010 deliveries of its aircraft order since late last year. These include the US$336mil (RM1.21bil) syariah-compliant French Single Investor Ijarah facility, whose lead arrangers are BNP Paribas and Natixis Transport Finance, for the purchase of up to eight new aircraft; and a deal with Barclays Capital – the investment banking division of UK-based Barclays plc – to finance the purchase of 15 new planes worth US$700mil (RM2.5bil) for delivery up to early next year.

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Written by Suapi Shaffaii

April 4, 2009 at 1:22 pm

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Fitch cuts Kuwait’s KFH, warns it may act again

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Points of Essence:

  • The giant of the Middle East is cooled down by a downgrade from Fitch.  Attributed by its heavy exposures to the Kuwaiti troubled investment companies as well as the political standoff in the state owned banking conglomerate had its impact on the future growth of the bank. Fitch is watching this development with great concern and thus warn for yet another rating cut. Reuters has the story.

KUWAIT, April 1 (Reuters) – Fitch Ratings has cut Kuwait Finance House (KFH), the country’s biggest Islamic lender, due to exposure to the Gulf Arab state’s troubled investment firms, it said on Wednesday.

The move is the latest cut by agencies for Kuwaiti lenders, mainly due to risks in having given loans to the troubled sector of investment firms, of which several have said they need fresh funds or have to sell assets to weather a financial crisis.

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Written by Suapi Shaffaii

April 4, 2009 at 1:24 am

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