Internationalization Of Islamic Fund

INTERNATIONALIZATION OF ISLAMIC FUND

PRESENTED BY

JATIN SIRSIKAR - 53

WHAT IS ISLAMIC FINANCING?  Islamic banking system can be defined as

a faith based system of financial management, which derives its principles from the Islamic Shari’a

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 It promotes profit‐sharing in the conduct of

banking business as well as prohibiting paying or receiving interest on any transaction

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  Based on equity‐based system not on

the debt‐based system   This system allows IFIs to adjust the

value of their assets and liabilities according to any changes in the fair market value of the investment   Prohibition of predetermined interest

rate on loans forces IFIs to monitor the borrowers at a reasonable cost and get the exact information

GLOBAL ISLAMIC ECONOMY

Characteristics of Islamic communities And The Rise of IFI’s   High level of poverty, debt and high population growth   Defense budgets and the government subsidies to utilities   Low availability of employment in the private sector

Growth of IFI’s  Arabian Gulf countries - similarity in

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religion, culture, language and arid geography GCC countries - hold 20% of the world’s crude oil production and have a GDP per capita of more than US$8,000 Malaysia and South‐East Asia Southeast Asian region Citibank, ABN Amro, HSBC, BNP Paribas, and Bank of America - banks to open their own Islamic windows IFIs are unique in producing Islamic bonds (Sukuk) - in global market

Factors behind the Growth of IFIs  The economical growth of GCC

countries - oil discovery and the establishment of the (OPEC), which provided the foundation for IFIs  Saudi Arabia promoted the spirit of Islam - Islamic universities, institutes, and Islamic centers  Dallah AlBaraka Group, 1969 and Dar Al‐Maal Al Islami Organization, 1981 was founded  The IFIs were the best agent to manage Arab’s investments – specially

CHALLENGES BEFORE IFIs INTERNATIONALIZATION Challenges inside Challenges outside the Islamic the Islamic  the regulators’ limited

 cultural barrier in non‐

influence over IFIs Muslim countries activities  different  the limited role of IFIs characteristics and in money and capital their religious markets results in foundation of IFIs limited contributions  marginal recognition to the country’s macro economic by the central banks limited capital of IFIs  shortage of qualified manpower and compared management inside  IFIs

FRAMEWORK OF SOLUTIONS Support from primary and secondary markets

aging subscription operations, attracting individual and inst

dary market creates a demand for marginal jobs and support se

 Transparency in their financial reporting

  Standardize their rules of reporting

  Creating new innovations of investments -

enhance the inter‐bank transactions such as overnight funds

  Central banks need to review as degree of

risk is less

  OIC countries should follow Bahrain’s model

- strong legal system & licensing

For External Level  Improved customer service – thru

effective dialogue & complement each other civilizations

  IFIs should have an open mind to the

international market - matching between Shari’a requirements and Western norms

  Need to arrange for more conferences,

seminars and other channels of communications to shorten this gap

CONCLUSIONS  IFIs are existed in Muslims countries as

well as some European and American countries

  Establish effective communication with

their counterparts

  Training program for their employees   Help the investors to measure the

advantages of dealings with IFIs

THANK YOU