Koran-friendly mortgages now in Hamilton

By Sharon Boase
The Hamilton Spectator
(Mar 13, 2007)

A Hamilton credit union is the first financial outfit in Steeltown to join a global banking trend that’s slowly making its way to Canada.

McMaster Savings and Credit Union (MSCU) has begun offering Shariah-friendly mortgages, financial arrangements that comply with the prohibition under Islamic law on the payment or collection of interest.

Working in partnership with UM Financial, a Muslim financial services company based in Scarborough, MSCU has ventured into the world of trade partnerships that generate profit rather than interest.

“We’re a credit union, we need to serve the community we’re in and we identified this as a community that wasn’t being served,” said Paul Mauthe, CEO of MSCU.

Islamic Banking and Finance

Words from the Sharjah Islamic Bank

The Wealth Issue: Make money, not war

By Gillian Tett

Published: September 22 2006 12:43 | Last updated: September 22 2006 12:43

The man about to arrive in a restaurant next to the Bank of England in the City of London is coming to talk about religion. Not the Christian creed that has shaped the City of London over the centuries, but the religion that currently begets unease in many westerners – Islam. More specifically, why, at a time when parts of the Muslim world appear to be at war with the west, some of the world’s biggest investment banks are pouring resources into “Islamic finance”.

He has been described as one of Deutsche Bank’s leading figures in its quest to win Islamic business. His colleagues say he is a genius at creating schemes that enable rich Muslims to use their money in accordance with their beliefs. When he arrives, not only does he not look like a Muslim; he doesn’t even look like a hotshot banker. With a sober shirt and understated manner, he looks more akin to an accountant. (In fact, he is a qualified actuary.) Wearily, he introduces himself as Geert Bossuyt – and rubs tired eyes. He has come off a flight from Dubai, where Deutsche Bank is building up a business on the back of the Middle Eastern oil boom.

Memorandum on the Issues, Opportunities, and Challenges Facing Portfolio Managers in the Coming Decade

By: Khaled Sultan
Date: April 28, 2006

Introduction

Today’s investment environment is a challenging one for all of its participants. Things have come a long way since the turn of the past century, and a deeper analysis of the investment industry is required to understand how it will change in the future. The following memorandum aims to discuss the various issues, opportunities and challenges facing portfolio managers of large balanced mutual funds over the next decade. We will begin with a brief description of portfolio management and some historical background on the industry. We will then continue the discussion around the underlying issues. Some of the issues we will put forward are arguably as old as the profession itself, including the fiduciary duty a manager has to her clients. Other issues, on the other hand are expected to gain some light in the upcoming decade, especially issues such as ethical and environmentally friendly investing. We will also address some of the upcoming challenges in this business including the various management and research fees charged to clients by their fund managers, and the degree of transparency of those fees, or lack thereof. Our discourse will also highlight the future investment environment which is expected to continue to be constrained by growing regulation, and compliance burdens. The memorandum will aim to be comprehensive, however much of the discourse will be focused on the major issues expected to gain prominence over the upcoming years.

Retaining ethics when investing

Islamic financing focuses more on how the money is invested rather than how much profit there is

Saturday, February 10, 2007NANCY HAUGHT

Ethical investing caters to potential investors who want their money to earn a fair return and accomplish something good at the same time. Islamic investing goes a step further.

In the seventh century, the Prophet Muhammad, a businessman himself, saw the harmful effects of usury, the charging of excessive interest. For hundreds of years, religious leaders and philosophers had warned against the practice: It allowed the rich to profit unfairly from the needs of the poor.

“The Prophet Muhammad forbade interest on money loans,” says Samuel L. Hayes, an professor emeritus at Harvard Business School and co-author of “Islamic Law and Finance: Religion, Risk and Return.” “But he did believe you had a right to earn a return on a house that you owned or a load of dates that you had delivered but hadn’t been paid for.”

Islamic Banking and Finance HSBC Amanah

Some HSBC marketing…

S&P Launches Shariah Indices

By David Oakley

Published: December 18 2006 21:29 | Last updated: December 18 2006 21:29

The growing power of Islam in the financial world will be underlined on Monday with the launch of three benchmark indices designed to track the health of companies that comply with the laws of the Koran.

The three new indices will be called the S&P 500 Shariah Index, the S&P Europe 350 Index and the S&P Japan 500 Index, the index services arm of Standard & Poor’s, the ratings agency, said on Monday.

They will be based on the well-established western versions from which they take their names but strip out the companies that do not comply with Islamic law, and are not shariah-compliant.

Alka Banerjee, vice-president of S&P Index Services, said: “Potential growth in shariah-related investing around the world is enormous, but has been held back by a lack of globally accepted benchmarks and other tailored investment tools.

“The new S&P shariah indices will provide Islamic investors, and the institutions that serve them, with a rigorous and consistent set of international benchmarks to help them gauge the state of the market in this growing area.”

Cultural Competence a Must in Islamic Investing

Cultural Competence a Must in Islamic Investing
Compiled by the DiversityInc staff
© 2006 DiversityInc.com®
July 19, 2006

If you thought managing mutual funds was difficult, try managing funds for Islamic investors. All Islamic investments are subject to two conditions. Islamic scholar Mufti Muhammad Taqi Usmani says: Instead of a fixed return tied up with face value, they must carry a pro-rated profit actually earned by the fund. Neither the principle nor the profit rate is guaranteed.

Also, the amounts pooled together must be invested in ventures that align with Shariah, Islam’s code of principles. The investment channels, as well as the terms reached with fund managers, must conform to the Islamic principles.

What does this mean? Fund managers cannot invest in financial firms that earn interest, such as banks and brokerages, tobacco or alcohol companies, or any adult-entertainment business such as gambling or pornography. Companies steeped in debt are avoided, but so are those with too much cash on hand, according to an article in The Wall Street Journal (WSJ).

Nicholas Kaiser, president of Bellingham, Wash.–based Saturna Capital Corp, manages two Islamic mutual funds. Saturna’s $200-million Amana Trust Growth consistently is among the highest-performing stock funds tracked by investment-research firm Morningstar. The 12-year-old fund has returned 18.1 percent and 7.6 percent on the past three and five years, respectively, according to the WSJ. To date, the fund holds just under 70 stocks, of which nearly 25 percent are non-U.S. companies. Kaiser also manages Amana’s Income Fund, which invests only in dividend-paying common stocks under the expectation it will have more stable stock prices. Both Amana’s Growth and Income Funds are supervised by an Islamic Advisory Board to ensure accordance with Shariah principles.

The inherent restrictions have both limited and assisted his fund management. While it cuts some potential high-performers from the get-go, it also avoids possible troublemakers. For example, Kaiser dropped Enron Corp. before its volatile lawsuit banished it from the stock market because its excessive debt violated Islamic investing principles. He also sold America Online stock when the Internet giant announced plans to merge with Time Warner in January 2000. The acquisition, completed a year later, involved roughly $182 billion in stock and debt.

Investing in stock market: the Shariah way

Islamic economists and financial experts agree that if certain conditions are met, it is lawful to invest in the stock market. Any earnings that result from such investments will be halal. The logic behind this argument is that when one purchases shares in a company he actually becomes a shareholder and thus becomes a partner in the business. Thus, this arrangement is akin to the Islamic concept of musharakah. However, there are a host of conditions that must be satisfied before one is allowed to invest in stocks. To start with, one must be sure that the business of the corporation/company offering the stock must be halal. Over and above this, shariah scholars have developed certain financial parameters for stocks selection. These are mainly related to the capital structure of the company. The purpose of these criteria is to determine the level of involvement of riba (interest) and gharar (uncertainty) in the overall business of the company.

One should keep in mind that these criteria are the results of modern fiqh scholarship (ijtihad) and therefore, should be seen to represent the current state of thinking on the issue. In that way, they represent the maximum tolerance levels and not the last word on the subject. In short, if a Muslim investor is contemplating investment in the stock market, he must not only be careful about the profitability but also about the compliance of shariah. These can be done by looking at the nature of business, percentage of income from interest and the financial soundness of the company. While there are a number of tools available to help understand the financial soundness of a company there are not many that can guide an investor in determining the shariah compliance of a stock. Following screening patterns may be helpful in determining the shariah compliance of stocks.

Investing the Islamic way

Meghdoot Sharon in New Delhi | May 24, 2005 12:10 IST

For a devout Muslim making investments that attract the element of interest is considered ‘haram’ — something not permitted under the tenets of Islam, and this is perhaps the one major reason why not many Muslims invest in stocks or in insurance, or for that matter, even seek housing finance.

But things are changing. Ahmedabad based Parsoli Corporation Ltd, which has been involved in providing tailor-made financial products to Muslims, now offers an option where Muslims can invest in Shariah-compliant stocks, or avail of a housing finance scheme where there will be no element of interest or even help them cover themselves under an insurance cover – takaful — that is within the accepted norms of Islam.

Talha Sareshwala, chief financial officer, Parsoli, said, “It is a huge, an enormously huge, market that needs to be tapped. Whether it is insurance, or stock trading or availing housing finance, Muslims have lagged behind. We intend to change that now with our Islamic Wealth Management System.”

He added that the main aim of Parsoli is to create a new market segment of independent financial advisors. “For example, in the UK, IFAs are the link between the people and the product and IFAs are highly regulated in the UK. That is what we intend to replicate in India.”

It is generally accepted by Muslim jurists that the operation of conventional insurance involves the elements of uncertainty in the contract of insurance, gambling as the consequence of the presence of uncertainty and interest in the investment activities of conventional insurance companies, which violate rules of the Shariah.

Financial vs. Strategic Buyers

Financial vs. Strategic Buyers

My First Post

Ok…this is my first post, and am quite excited…I actually should be studying finance, but oh well…

My name is Khaled Sultan, an IT professional currently doing my MBA. I have a degree in Electrical Engineering, and another in Computer Science. I am a techi (a.k.a. geek at heart). I started my MBA a year ago (part time) and have two more years to go.

Well…better get back to studying…will post later.