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Monday Nov 25, 2024
Thursday, 5 September 2013 00:00 - - {{hitsCtrl.values.hits}}
Q: In terms of Sukuks, there has been a dialogue going on about it for the past five years and nothing really has happened. Where do see the market going?
Marikar: Islamic banking has been biased towards funding and asset based products. Infrastructure projects are more or less with Islamic banking in general. As far as Sri Lankan is concerned, at the moment some of the banks have practiced this but not for infrastructure projects. With Sukuks we are working closely with more stakeholders but it will take more time to pull this off. In general products, I see few new banks coming up with such. Few products used in the Middle East and Pakistan are now introduced here.
Focusing on infrastructure, our project has not been large enough at times to attract foreign investment or there may have been some legal restrictions. Sometime the customers do not accept the type of solutions given to them. So we need to have a balanced solution for the customer, Sharia requirements, and for the legal and regulatory framework.
Q: There is this perception by the Government that if the funding has to be asset backed, having sovereign, why is an asset used as security? How can we overcome the mindset of the regulators?
Ahmed: I notice that there are two misconceptions here. The first is that everyone talks about asset backed and asset based. But what is an asset? To give an example, there was a recent benchmark transaction done for Emirates Airlines. For that the assets used for the transaction were the seats. The perception of Islamic finance has moved. We should not always be stuck with what is an asset. There are various structures implemented by the Islamic finance industry across the globe. UAE being the pioneer, they are still pioneering new structures. When you want to attract capital to Sri Lanka, either from the Gulf for Asia, the capital is not considering if it is Islamic or non-Islamic; the capital is looking for return. The first thing we have to focus as Islamic banking practitioners is the offering in return to capital. The commercial feasibility is what is required. These are what should be focused on.
Q: How far has the infrastructure in Islamic finance developed?
Hannan: Any investor will look for a service provider for comfort and that is not available in Sri Lanka. As per regulations you have to provide the prices and publish it since these funds have parameters. As a service provider, we are someone who takes charge of the fund. So we have to act as strong trustee.
Q: Give us some insight on the Mudarabah in Pakistan?
Ibrahim: In Pakistan this was introduced in 1988 and was started with corporate entities. For Mudarabha, new laws were brought in and if any company wanted to start a Sharia business, the Government will give the benefit of taxes. In Pakistan this was a structure in the industry. It is similar to fund management. The custodian of Mudarabah is the regulator.
Q: Is this model available only in Pakistan?
Ibrahim: It is used in Malaysia and South Africa.
Q: With regard to Islamic Fund, am I right in saying that there is nothing coming into the sector? Are there activities taking place in that arena?
Ahmed: From experience I can say that in the gulf, apart from KSA, there are no developed equity trust fund markets. Even in UAE you can count the number of funds although it is a big market. In Islamic Finance we only see two major players, Malaysia and the KSA. The second element of this is offshore funds. A lot of Western fund management companies have structured Sharia compliance funds established in remote entities, but they focus and investment area have been in western economies. We have not seen funds from the Islamic finance space from emerging markets.
