Islamic Retail Banking and Finance : Global Challenges and Opportunities

International experts discuss strategies for Islamic retail banking and finance. Introduction:With conventional banks in the west opening Islamic windows to service their Islamic customers, the establishment of the first discrete Islamic retail bank in Europe, and the conversion of entire banking functions to Islamic alternatives, Islamic retail products are increasingly moving to the mainstream. Offerings of Islamic mortgages, savings, insurance and retail investment products are part of a global expansion of the financial industry which are increasingly competitive with conventional financial products.

Islamic Retail Banking and Finance is the first book of its kind bringing together the leading banks, lawyers, accountants and retail product providers who have been involved in the rapid expansion of the Islamic retail industry throughout the globe.

Our contributors provide the reader with discussions of :

the market for Islamic retail products
the products available, how they differ from conventional alternatives, and their basis in Islamic law
the development of mortgage and home finance schemes, takaful, savings plans, auto finance products and equity investment products
how banks, insurance providers and asset managers can manage consumer education, what are the cultural and ethical constraints
the experience of training Islamic bankers
how to manage liquidity and credit issues
what are the regulatory constraints and challenges faced by Islamic retail product providers, and the experience of those who have successfully launched their products
the experience of those involved in conversion of Islamic retail banking functions
legal and taxation issues
the views from regulatory authorities themselves
If you are involved in the launch of Islamic retail products, work in an Islamic bank, or are a finance professional interested in how Islamic products are structured you must read this book.

With contributions from institutions and individuals including Clifford Chance, Deutsche Bank, Ernst and Young, Failaka, Financial Services Authority, FWU Group, London Special Risks, Meezan Bank, Shape, Sharjah Islamic Bank, State Bank of Pakistan, Vinson and Elkins, Volaw Trust, Shaykh Yusuf deLorenzo and Prof. Rodney Wilson.

Table of Contents :

Author biographies
The editor
The contributors

Part I An introduction to Islamic retail banking and finance

1 Editor’s introduction
Sohail Jaffer, Managing Director, FWU Group, Luxembourg
2 The Shari’a scholar’s view of Islamic consumer finance and retail products
Yusuf Talal DeLorenzo, Shari’a Supervisor and Director, Yasaar Limited United States
Introduction
Origins of modern retail Islamic finance
Retail markets
Shari’a-compliant products and services
Conclusion
3 The growth of Islamic banking and product development among
Islamic retail banks
Professor Rodney Wilson, University of Durham, Institute for Middle Eastern and Islamic Studies,
United Kingdom
Introduction
Jordan Islamic Bank
Dubai Islamic Bank
Bank Islam Malaysia
Islamic Bank of Britain
Lessons from Islamic retail banking experience

Part II Islamic retail banking: Growth opportunities and
market developments

4 Establishing Islamic banks in the West:
The case of the Islamic Bank of Britain
Tim Plews, Joint Managing Partner, London Finance and Capital Markets Practices,
Clifford Chance LLP, United Kingdom
Introduction
Islamic financial institutions in the United Kingdom
The FSA’s approach to new proposals
Making an Islamic bank proposition to the FSA
Five key factors for a successful licence application
What does IBB offer Muslim believers?
Product puzzles
The role of the Shari’a committee of scholars
Taxation of Shari’a-compliant financial products
Developments elsewhere?
5 Converting a conventional retail bank to Islamic banking
Nathif Adam, Head of Investment and International Banking, Sharjah Islamic Bank, UAE
Introduction
UAE institutions ring in a new era
Conversions in Saudi Arabia: A springboard for growth
Varying approaches to conversions
Planning the conversion
The conversion process
Conclusion
6 Survival of the fittest: The future of Shari’a-compliant retail banking
in the GCC
Sameer Abdi, Senior Manager, Islamic Financial Services Group, Ernst & Young, Bahrain
Introduction
Market realities drive the retail banking industry
Is retail expansion sustainable in the long run?
How can regional retail banks sustain future growth and performance?
Competitive pressures in Islamic retail banking
The way forward for retail Islamic banks
7 Global challenges for Islamic retail banking: Developments in Pakistan
Zafar Ali Khan, Vice President and Head of Marketing,
Liability Products and Housing Finance, Meezan Bank Limited, Pakistan
Introduction
Historical overview of Islamic banking
Islamic retail finance in Pakistan
Conclusion

Part III The development of Islamic finance products

8 Structuring Islamic mortgage and home finance products
Abdulkader Thomas, CEO, SHAPETM Financial Corporation, United States, with
Waheed Qaiser, Assistant General Manager, Islamic Bank of Britain, United Kingdom;
Bader Al-Bahar, Deputy General Manager, Al Dar Finance, Kuwait; and
Professor Sudin Haron, Universiti Utara Malaysia, Malaysia
Introduction
The history of Islamic home finance
Capital adequacy concerns
Home financing developments among Muslim majority populations
Home financing instruments, and the concerns of Islamic scholars
Successful minority experimentation in the United States
Methods and structures for home financing
Securitising home finance
Who leads the market?
Future challenges
9 Home finance schemes in the UAE: A case study
Sohail Zubairi, Vice President and Head of Shari’a Structuring, Documentation and
Product Development, Dubai Islamic Bank, Dubai
Introduction
Background
Birth of an idea
Issues remaining to be resolved
Shari’a parameters for home financing
Conclusion
10 Islamic investment opportunities in the OIC:
Alternative investments to reverse capital flight
Rushdi Siddiqui, Head of Business Development, Dubai Bank, Dubai
Introduction
Islamic alternative asset classes
Reversing Shari’a-compliant capital flight?
Conclusion
11 Recent developments in Islamic auto finance products
Ibrahim A. Mardam-Bey, Executive Vice President, BSEC, Bemo Securitisation SAL, Beirut
Introduction
Market profile
Recent market drivers
Islamic auto finance products
Islamic versus conventional auto finance
Market evolution

Part IV Islamic wealth management products

12 Wealth building blocks: The growth of takaful savings,
Islamic life insurance and bancassurance
Omar Fisher, Deputy General Manager, Takaful Business Development,
Unicorn Investment Bank, Bahrain
Introduction
Highlights of Islamic life insurance
Insurance in the Arab world
Realignment of Islamic banking and life insurance to promote savings
Customising products and delivery of advice
Conclusion
13 Takaful: Islamic insurance in Malaysia
Zainal Abidin Mohd. Kassim, FIA, ASA, Principal and Actuary,
Mercer Zainal Consulting Sdn. Bhd., Kuala Lumpur, Malaysia
Introduction
Islamic religious law (Shari’a)
Investments and interest
Commercial contracts
Underwriting risk
Takaful in Malaysia
Issues arising in implementing takaful in Malaysia
The future of takaful
14 Takaful: Models and markets in the United Kingdom and Europe
Bilal Aquil, Solicitor, Clyde & Co., Middle East Regional Office, Dubai
Introduction
Overview of takaful
The established takaful market
The UK and European insurance market
Legal and regulatory issues
Financial services regulation
Practical challenges
Conclusion
15 Islamic wealth management: Innovative product designs
Sohail Jaffer, Managing Director, FWU Group, Luxembourg
Introduction
Strategic product partner selection
Product innovation
Global opportunities
16 Islamic EquityBuilder CertificatesTM:
Islamic innovation in quantitative modelling
Markus E. Barth, CFA, Global Equity Quantitative Strategist & Investment Products Group,
Deutsche Bank AG, United Kingdom
Introduction
Determining the criteria
Analysing the benchmarks
Determining the stock selection model
Performance assessment: Testing the model
Creating the wrapper and securing approvals
Summary
17 Trends and performance monitoring of Islamic equity funds
Tariq Al-Rifai, Director, Failaka International, United States
Introduction
Diversification and growth
Understanding the market
Monitoring funds
Current market trends

Part V Legal and regulatory issues
18 Expanding the scope of retail investment products: Key legal issues,
conflict of laws considerations and success stories
Ayman H. Abdel-Khaleq, Associate, Vinson & Elkins LLP, Dubai
Introduction
Legal considerations affecting the structuring of Shari’a-compliant
retail investment products
Examples of Shari’a-compliant retail investment products
Conclusion
19 Trusts and Shari’a law
Trevor Norman, Director, Volaw Trust and Corporate Services Limited, Jersey
Introduction
What is a trust?
The main components of a trust
Practical uses of trusts
Shari’a compliance
The main types of trust
Trusts and companies
The duties and powers of trustees
Influencing the actions of the trustee
Conclusion
20 The view from the regulators in the United Kingdom
Toby Fiennes, Manager, Wholesale Banks, Financial Services Authority, United Kingdom
Introduction
The FSA’s approach to regulation
Authorisation of the Islamic Bank of Britain
Conclusion
21 The view from the regulators in Pakistan
Pervez Said, Director/Adviser to the Governor, State Bank of Pakistan, Pakistan
Introduction
Past issues
Key stakeholder needs analysis
The strategy
Supporting systems for the Islamic banking model
Outstanding issues
Market response and current status
Appendices
Training Islamic bankers: Back to basics on Islamic finance
for the uninitiated
Atif Raza Khan, Program Director, Islamic Banking,
Bank Training & Development Limited, United Kingdom
Introduction
General principles
Applying general principles
Conclusion
Basel II – Capital adequacy for Islamic retail products
Bilal Aquil, Solicitor, Clyde & Co., Middle East Regional Office, Dubai
International regulation

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