Company shares as sukuk asset?(0)
Reuters recently reported that “Malaysia’s central bank has rejected Bimb’s proposal to secure the sukuk with shares of the company, which will need to identify an alternative asset for the exercise… Bimb last month proposed a 10-year Islamic bond, or sukuk, of 1.5 billion ringgit ($456.66 million) as part of a plan to acquire the 49 per cent stake it does not own in Bank Islam held by the Dubai Group and Tabung Haji.”
Sukuk has been issued where the underlying asset has been toll road revenue, aircraft leases, offshore oil drilling leases, mobile phone airtime, etc. Furthermore, a variety of sukuk includes convertible sukuk (to compliant company shares), exchangeable sukuk (another compliant company controlled by the sukuk-issuing company), perpetual sukuk (capital ratio), etc.
The regulator has to walk the fine line between encouraging Islamic capital market development with supporting compliant instruments and prudence, especially after Credit Crisis I (US subprime) and Credit Crisis II (eurozone sovereign debt).
It must be recalled that the derivatives market reached the size of $700 trillion, whilst the world economy was at $60 trillion. Hence, regulators conscious of maintaining the connection between offering instrument (abuse) and underlying (local) economy in an inter-connected capital markets.
Shares are asset?
According to Wikipedia, “a shareholder or stockholder is an individual or company that legally owns one or more shares of stock in a joint stock company… Shareholders are granted special privileges depending on the class of stock… and the right to a company’s assets during a liquidation of the company. However, shareholder’s rights to a company’s assets are subordinate to the rights of the company’s creditors.”
Thus, does the issue become “shareholders’ rights subordinated to creditors” for company shares secured to issue Sukuk?
Bank Negara prudence
The Malaysian central bank, Bank Negara Malaysia, was correct, on prudence, in rejecting Bimb’s proposal to secure sukuk issuance with the bank’s shares. As the Reuters story was lacking details, the rejection may be due to some of the following reasons:
1. Shares of an Islamic bank are generally illiquid (and smaller free float) compared to conventional counterpart publicly-listed bank, hence, an illiquid “holding” to an already illiquid instrument (attested by minimal secondary market trading volume for non-Murabaha sukuk)
2. What happens if the bank is acquired, taken private, stock-splits, issuance of additional shares, market sell-off, earnings declining due to non-performing loans and corresponding provisioning, or if it goes bankrupt? If the company goes bankrupt, the common stock holders would have the “residual assets of the company after discharge of all senior claims such as secured and unsecured debt”.
3. Now, assuming it was approved, what if the Shariah-compliant company, not Shariah-based like an Islamic bank, Takaful operator, Islamic Reit, violates one of the financial ratios (of the securities commission) at the review, and must removed from an Islamic index, what happens to the sukuk? Does it convert into a conventional bond, as the company is no longer Shariah-compliant? Will the “Islamic” holders of the paper need to sell immediately to continue being Islamic? Would clever lawyers be able to build in fail-safe mechanisms, but, will it make the sukuk, one, difficult to price/understand and, two, require a “fail-safe” premium?
4. Assuming it was approved, the 49 per cent would be in a trust, with corresponding responsibilities, would there be a conflict between sukuk holder and non-sukuk stock holders at AGMs, voting for directors, etc? Would the sukuk holders have some extra fiduciary duty, care and loyalty to the company?
Martin Whitman stated, “it can safely be stated that there does not exist any publicly-traded company where management works exclusively in the best interests of Opmi [Outside Passive Minority Investor] stockholders. Instead, there are both ‘communities of interest’ and ‘conflicts of interest’ between stockholders [principal] and management [agent]. This conflict is referred to as the principal/agent problem. It would be naive to think that any management would forego management compensation, and management entrenchment, just because some of these management privileges might be perceived as giving rise to a conflict of interest with Opmis.”
Islamic finance, as it matures and evolves and becomes cross border, will encounter both diminishing tailwinds and increasing headwinds. To address the headwinds, prudence may demand erring on side of caution to protect and preserve confidence and trust in this niche market, hence, with the regulators saying, “no, not yet as more research required”.
“A ship in harbour is safe — but that is not what ships are for.” — John A. Shedd.
The writer is co-founder and MD of Azka Capital, a private equity advisory firm focused on halal industry initiatives, and an advisor to Thomson Reuters on Islamic finance and the halal industry. Views expressed are his own.
Muslim consumerism is linked to real economy sectors(0)
By Rushdi Siddiqui
Dubai actually has most of the attributes of an Islamic economy. For example, an activity log for a person in Dubai may entail:
He lives in a residence that is Islamically mortgaged by, say, Tamweel, and it is ‘insured’ by Takaful Re Limited. The profit rate payment is off Thomson Reuter’s six-month Islamic Interbank Benchmark Rate (IIBR). He has peace of mind as his biggest ‘asset’ is Shariah-compliant.
Uniting Islamic finance and halal at conferences(0)
By Rushdi Siddiqui, co-founder and MD of Azka Capital
Conferences provide an insight on the road ahead for industries, products, innovations, and services. The speakers are assumed to know more than most on the other side of the podium.
One of the interesting developments in the Islamic finance conferencing arena has been the introduction of topical issues from the $2.1 trillion halal industry. Is it because there is no ‘new new’ in Islamic finance or the realisation that Islamic finance needs to build bridges to new areas linked to the real economy or both?
Common Bond — Islamic
finance and clean energy(0)
By Rushdi Siddiqui, co-founder and managing director of Azka Capital
There are a number of common denominators between Islamic (and ethical) finance and clean (green) energy. The colour green is closely linked to Islam, yet, very little ‘green’ (environment considerations) in Islamic finance (for real estate/project financing).
The demand for both Islamic finance (IF) and clean energy (CE) was a by-product of visionaries seeking alternatives for interest based finance and fossil fuel, respectively. The pioneers were often categorised as ‘ahead of their time’, a commonly understood code phrase for ‘won’t work or be accepted.’
Yet, propelling pioneers of both industries was the recognisation there would be negative consequences if the world continued to follow status quo, greenhouse gases resulting global warming and debt and derivative fuelled financial crisis. Thus, a viable option was needed that would eventually ‘scale size’ and become ‘conventionally competitive.’
As in any embryonic industry, like IF and CE, there are growing pains associated with inefficiency, availability, pricing, reliability, tax, etc., and, only through low or sunset subsidies and passage of time, would it become mainstream acceptance.
In assuming nearly four decades have passed since the birth of IF and CE, these two sectors have more in common and need to work together.
Ethics: Harm and Haram
Ethics is in the eye of the beholder, hence, one man’s ethics may be another’s sin. Notwithstanding, ethics can be viewed, at minimal, ‘do no harm’ and in the case of Islamic finance, ‘do no haram.’
Clean energy may be defined as ‘… sustainable provision of energy that meets the needs of the present without compromising the ability of future generations to meet their needs … sustainable energy include renewable energy sources, such as hydroelectricity, solar energy, wind energy, wave power, geothermal energy, artificial photosynthesis, and tidal power …’ Source: Wikipedia.
Islamic finance ‘… banking activity that is consistent with the principles of Shariah … Sharia prohibits … investing in businesses that provide goods or services considered contrary to Islamic principles is also haraam (‘sinful and prohibited’). Source: Wikipedia.
Thus, the overlap between IF and CE may be summed up as PPPA: Principals (secular conduct/behaviour and spirituality), Preservation (stewards of the Earth), Protection (of good), and Avoidance (of bad).
All inventions and innovations attempt to address a gap, as the end goal is a knowledgeable customer that furthers the cause by purchasing and/or participating. To convince the customer of conscience requires primarily values alignment and, secondarily, acceptable levels of price penalty premium. But, for how long?
Query: Is there an acceptable premium on values?
For IF, the customer is willing to pay little bit more for financing home and car or insurance premium (Takaful), and willing to accept slightly inferior returns on their investment, as long as there are regulator and scholar sign-off. Thus, an acceptable level cost of being a Muslim (CoBM) in the short term, i.e., a sunset subsidy from the client to the compliant institution/offering.
In jurisdiction where taxes are part of the economic system, like the UK, Islamic finance had to lobby to level playing field. For example, as Islamic financing often requires ‘two transactions,’ hence, removal of double stamp duty for Islamic mortgages in UK was necessary to make it tax efficient. In such cases, there is often a ‘push back’ from conventional finance about ‘special treatment’ for IF.
For CE, subsidies, including tax credits, are the necessary spark to encourage its use and position as an asset class to make it ‘conventional competitive’ to fossil fuel and invite private sector money, respectively. However, once the subsidies are removed within the gestation period or earlier to, say, budget concerns or effective lobbying, it becomes less attractive asset class (for mutual or private equity funds) or use.
Greenhouse gases have resulted in global warming, and the financial crisis I and II presented a systemic risk to the global capital/financial markets. Clean energy is looking to diversify into growth stories of emerging markets, like Abu Dhabi’s Masdar City, and Islamic finance is looking to the west to showcase a blueprint linking financing to the real economy (asset backed).
Islamic finance and clean energy can work symbiotically, however, requires low level of subsidy and a leveled playing field. There are two types of returns: (1) financial returns and (2) societal (or social) returns, the key is finding right balance.
Innovation and invention in modern Muslim world(0)
By Rushdi Siddiqui,
The Islamic Development Bank, held their 24th Annual Symposium in beautiful Dushanbe, Tajikistan, invited me to chair a session on ‘Innovating for Economic Development in IDB Member Countries’.
At first glance, the words ‘invention’ and ‘innovation’ are not typically associated with the Muslim world.
The word ‘imitation’ (or reverse engineering) often is linked to the third world, Muslim majority countries. Yes, there is some element of innovation involved in reverse engineering, from pharmaceuticals to electronics, but it’s not something to be proud about to entice, say, foreign direct investment. The bigger question is, how much longer should the Muslim world continue to flatter via imitation, i.e., a ‘Xerox’ society.
Innovation and invention have been traditionally linked to Islam/Arab/Muslims since the birth of the religion, but something happened along the way. We have become a society of buyers over builders, consumers over savers, exporters of capital and importers returns, hence, an unsustainable situation.
The first revelation to the Prophet Muhammad (peace be upon him) was about reading:
Translation: In the name of Allah, the Most Beneficent, the Most Merciful.
Read: In the name of your Lord Who created.
Created man from a clot of blood
Read: And your Lord is the Most generous
Who taught [man the use of] the pen
and taught man that which he did not know
Reading implies searching and seeking information to the far corners of the world, from Arabia to China and beyond, that yields knowledge, which eventually becomes wisdom. A wisdom that gets applied for betterment of man (individually), society (collectively) and the stewardship for future generations.
Thus, our predecessors have contributed to sciences, humanities, culture, arts, mathematics (algebra, logarithm, system of numbers), etc., and acknowledged by the likes of Prof Carole Hillenbrand’s book, ‘What the East taught the West.’
Furthermore, there is a ‘mobile’ museum, 1001 Inventions: The Enduring Legacy of Muslim Civilisation, .. ‘…1001 Inventions uncovers a thousand years of scientific and cultural achievements from Muslim Civilisation from the 7th century onwards, and how those contributions helped create the foundations of our modern world.’ It has been showcased in the GCC: Abu Dhabi, Doha, and Dhahran.
There are number of theories, from conspiracy to self destruction, on what happened along the way for the Muslim world, as a whole, to become a ‘knowledge deficient society.’ We only have to look at the small number of patents filed form the Muslim world to the US Patent/Trademark Office, countries aspiring to become knowledge based economies in their 2020/2030 vision planning, countries establishing entities, like Malaysia’s Talent Corporation, to bring back the emigrated human capital, and so on.
There is neither an exact formula for innovation nor a firm timetable with milestones. Instead, innovation is about establishing a fluid enabling infrastructure, with accountable benchmarks, customised to the local situation. Some of the elements of enabling include:
Initially government leads but removes itself from being a market participant to avoid crowding out affect, hence, a sunset privatisation of innovation
Availability and accessibility of risk capital PLUS mentoring, Muslim majority countries are about collateral based finance, including Islamic banking. Therefore, funds alone will not result in success, but MUST include mentoring to include, say, opening doors to suppliers/customers, legal documentation, etc.
Culture and cluster that is focused addressing national/regional needs, hence, one size fits all becomes a ‘white elephant’ project.
Education both university oriented (reverse linkage) and harnesses power of street smarts via inclusion to offer market demand, not just based, solutions.
The IDB has the credibility and financial muscle to possibly fast track innovation in selected Muslim countries like the UAE, Malaysia, Turkey, Saudi Arabia, etc., however, it must take a stakeholder approach.
It must understand that the constraints of a country and work within those challenges to offer a market based solution as innovation is not only about economic development, but, as important, economic diversification.
The benchmarks must be reasonable and measurable with two important milestones: employment generation and raising the gross national income (GNI).
Thus, as a first step, IDB should create an Innovation Council (IC) for several selected member country as pilot programmes. The members of the IC may include financiers, regulators, businessmen, academics, etc., to give 360 degree review of the landscape and a pathway forward towards leading instead of following.
The writer is co-founder and MD of Azka Capital, private equity advisory firm focused on halal industry initiatives, and he is an advisor to Thomson Reuters on Islamic finance and Halal industry. Views expressed by the author are his own
Rushdi Siddiqui: Is the Islamic finance industry ready for social media?(0)
By Rushdi Siddiqui, co-founder and managing director of Azka Capital
Social marketing eliminates the middlemen, providing brands the unique opportunity to have a direct relationship with their customers. — Bryan Weiner.
Today, it seems Islamic finance is still stuck at a hard-copy of stage communication (faxes) when the financial world has moved on to Facebook, Twitter, blogging, etc.
Many Islamic financial institutions have Web sites, but how often is it updated beyond awards won? How many Islamic banks, takaful operators, Shariah consulting firms, industry bodies, etc, are on Facebook? Yet, the youth — its future clients — in many Muslim countries with Islamic finance are on Facebook.
What about the cross-sell of Islamic finance to non-Muslims as an ethical alternative? These potential customers are an important cluster of social media and they are continuously looking for offerings aligned with their values.
Several Islamic financial institutions have Twitter accounts, unsure how many of their (retail) clients are on Twitter. Do these institutions believe SMS, Internet and mobile banking is the “social media” connection to their clients?
Maybe the culture of social media is lacking in, say, the GCC. But we saw how effectively social media was utilised during the Arab Spring.
Is there a fear of technology among Islamic financial institutions? The fear of hackers stealing from customer accounts and identity theft? They have heard about horror stories on hacking from US- and EU-based banks with allegedly better (read, more expensive) firewalls.
Is there fear that social media connectivity will raise the level of transparency to conventional benchmarks standards and with accountability to follow? Put differently, will social media result in enhanced governance? It is not a bad thing in this post-credit crisis environment where companies are rewarded via a stable stock price and rave reviews for transparency and governance.
Is there fear that “bad news” concerning Islamic financial institutions will spread like wildfire if (deeply) connected to social media? It will spread anyway as news organisation coverage is supplemented by bloggers and tweeters in real time.
Is it a lack of resource issue in having, say, a “chief social media officer”? It would appear that Islamic financial institutions have not looked at public relations and outreach as an investment in their brand, but, rather, a cost of doing business.
Brand-building goes towards commitment to not only clients and staff, but long-term growth of the institution, including eventual cross-border expansion and future clients. Furthermore, during challenging market cycles, the message to the community, whose attention has become shorter, is the confidence inspiring “business as usual”.
The Thomson Reuters Islamic Finance Gateway, or IFG, may just provide a guidance for Islamic financial institutions on understanding about the benefits of social media connectivity. It comes down to market intelligence, and the market place is the best source of “knowledge that powers” market movements. The community connectivity function of the IFG comes down to insights by industry experts making sense of the information overload, communicating about important sign posts on the road ahead and allowing community to interface with experts on a secure platform.
At the behest of colleagues, I joined LinkedIn about a year ago to connect with like-minded colleagues globally to share ideas and articles. Outside of unsolicited endorsement of people I have connected with, but, not worked with, it has been a pleasant experience, especially reading leadership articles.
Furthermore, I started tweeting a few months ago, initially on Islamic finance and the halal industry, but have expanded to issues related to Muslims, Islam, Muslim countries, etc. It has been a fulfilling experience and I should have joined much earlier. Why?
1. Tweeting forces one to convey their message in 140 characters, becomes very important in today’s world of short-attention span and information overload. Islamic financial institutions should be able to convey thought leadership within these constraints.
2. Twitter brings news in real time from multiple eyes, hence, it’s a multiple “op-ed” of the market place on the subject matter. The raw news provides more colour than polished sound-bites.
3. Twitter has allowed me to follow the likes of global leaders like His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, and his comments in real time. He first tweeted about Dubai being a hub for an Islamic economy a few months ago.
Shaikh Mohammed’s tweets, at the time of writing this, on the performance of UAE government standards should encourage Islamic financial institutions to engage and embrace the social media to not only connect, but also to report developments.
Rushdi Siddiqui is co-founder and managing director of Azka Capital, a private equity advisory firm focused on halal industry initiatives, and an advisor to Thomson Reuters on Islamic finance and the halal industry.
Rushdi Siddiqui: Forming your own opinion(0)
By Rushdi Siddiqu, Global Head of Islamic Finance at Thomson Reuters
APRIL 1 — “I never considered a difference of opinion in politics, in religion, in philosophy, as cause for withdrawing from a friend.” — Thomas Jefferson
“Life is not a spectator sport. If you’re going to spend your whole life in the grandstand just watching what goes on, in my opinion you’re wasting your life.” — Jackie Robinson
Everyone has an opinion; however, some people are shy to share. An interactive article, much like a survey, requiring readers’ opinions may actually encourage wider audience participation. For many of us, constructive comments about an online article actually provide more insights than the article itself.
Why is that when China, North Korea, Russia, Venezuela (under the late Hugo Chavez) made/make provocative comments about the US, the reaction from the Tea Party loyalists and Fox talk show hosts are not immediate and proportional, if at all, when compared to comments from stateless extremists like Al Qaeda?
Is it because, in the mind of the loyalists, these sovereignties are not trying to expand religion, and they can actually do economic and/or military harm to the US? What about election year politics?
Many of the Muslim countries are trying to diversify their economies from natural resources, commodities, conventional banking, basic manufacturing, typically 4-5 economic sector bias, to a knowledge based economy as part of 2020 and 2030 vision plans.
The knowledge pursuit implies linkage of educational budgets for clusters, technology parks, equity financing (venture capital and crowd funding), legal protections, mentoring, etc. One way of looking at the output would be the number of patents registered with the US Trade & Patent Office. Does Malaysia have the most patents from the OIC?
Why do selected Muslim countries with excessive surplus continue to purchase trophy assets in the US and western Europe, at times at top of the market, and not invest more of the money in the “national mission” of establishing and enabling an educational infrastructure for future generations?
I recently had an eye-opening conversation with the former Prime Minister Tun Abdullah Ahmad Badawi, where he articulated that education starts in the mother’s womb with appropriate nutrition, food and spiritual guidance! The Muslim world needs this type of thinking to close the “knowledge” approach gap with the developed world.
Why has the OIC, as a whole, not captured the imagination of emerging market investors like BRICS? Is it because, out of the 57 OIC states, 22 are least developed but only three are G-20, there is corruption, capital flight, brain drain, and a host of most of the world’s intra-country conflicts, etc? Thus, requiring a sub-OIC, like SAMI +3, Saudi Arabia, Ankara, Malaysia, Indonesia, Pakistan, Nigeria, and Egypt? Who will promote such a clustering?
Why is it when celebrities like Mike Tyson or the late Michael Jackson allegedly “revert” to Islam, it spreads like wildfire on Muslim websites (with excitement)? Why is it when the UK wanted to issue a sovereign Sukuk (roughly and badly translated as an Islamic bond), the Islamic finance world spoke of it as a “badge of arrival” for the niche market? Do Muslims have an identity crisis and still mentally and/or are psychologically colonised by Western/conventional offerings?
Faith, finance, food and fashion
Islamic finance isn’t just about finance, but linked to faith, food, fashion, etc., hence, when will it or, rather, how will it step up and be the financial “lubricant” to these satellite-linked activities? Islamic finance needs to serve the economy, and not be positioned as the economy!
Should Ogilvy Noor, an Islamic branding consultancy, examine the merits of rebranding Islamic finance to Participation Finance, especially if the cross-sell to non-Islamic customers and countries is one of the KPI growth stories? Furthermore, how best to “educate” the anti-syariah movement, which attempts to link, without evidence, Islamic finance to terrorism financing?
Why Islamic finance, biased towards real estate financing, does not finance a real economy-linked movement like the halal food industry, as they are both mentioned in the same chapter of the Quran? The irony of the situation is a Muslim can consume the end product of certified halal food companies, like Malaysia-based Prima, but may not be able invest in the stock as it violates one of the financial ratios (too much conventional debt)!
Is the blame game spread to both halal (need to tell a better story of halal as an asset class) and Islamic finance (halal, asset backed, is ripe for Sukuk offering)?
Is food manufacturing considered a “sexy” or exciting industry compared to mega developments and information super corridors, etc.? Do people get excited about a food park or cows or chickens? Yet, everyone knows how important food security is to a country; hence, the disconnect.
Why is ethnic cuisine a great ambassador for a country? For example, in US, we have Italian, Chinese, Lebanese and Mexican food, Turkish delights, Pakistani biryani, Indian curry, Polish sausages, etc.
What Malaysian food/meal would be a good ambassador to the US? Would satay be a perfect food ambassador as the signature dish of Malaysia Airlines? How many Malaysian fast-food franchises exist in the US/UK?
Why is healthy food, vitamins, etc, expensive in Malaysia? This is one area, along with health club membership, the government should sunset subsidise until people feel the difference and understand the implications of health.
Why do Muslim countries not encourage local sport development by way of budgets, facilities and international coaches? Some of the countries offer “citizenship” for non-nationals to represent the country, and, even then a victory appears to be hollow.
For example, assume 25 per cent of the 1.8 billion Muslims are under 15 years old, there are Michael Jordans, Lebron Jameses, Tiger Woodses, David Beckhams, etc, in the Muslim world, and they would be wonderful ambassadors and role models for the country and its youth.
Who has a greater contribution to society, one who does not wear the “veil” and provides much charitable contributions, including the kindness of a smile, or the taker of charity, who passes judgment?
The highlight of the Proud to Be Human moment for 2012 had to be the recovery of Malala Yousufzai, the brave young Pakistani girl shot by the Taliban for promoting girls’ education. Her actions should earn a Nobel Peace Prize for the courage of a “special ops soldier”.
The Nobel committee needs to send a strong signal about girls’ education by awarding her the 2013 Nobel Peace Prize for Courage and Contribution to Girls’ Education in Emerging Markets.
“Too often we… enjoy the comfort of opinion without the discomfort of thought.” — John F. Kennedy
So, what is your thoughtful opinion?
* This is the personal opinion of the columnist.
Missing voice in Islamic finance industry: media(0)
As part of the on-going dialogue with Muslim entrepreneurs linked to Islamic finance and Halal industry, today’s interview is about media coverage of Islamic finance.
Meet Syaiful Naim bin Othman, founder/CEO of www.amilin.tv, and you see a man on a mission on connecting the masses to Islamic finance.
What was your motivation and objective to start this venture?
Media, much like food and clothing, is an important part of our everyday life. Through various mediums, radio, television, newspaper or the Internet, we are e-connected with a broad market place coming together based on common shared values.
The global financial media has made economics, finance, banking, capital markets as part of our daily lives, whether we ‘turn it on’ whilst eating breakfast or working out in the gym.
The world is now looking for growth markets and growth stories, and Islamic finance, OIC economy and Halal industry present compelling opportunities. However, the present approach to creating awareness, educating, addressing mis-perceptions and lifting the veil of mystery associated with this niche markets needs to be revisited.
Our mission is to provide the fastest and most comprehensive Islamic finance headlines and news of major events set to shape our business day ahead. For me, we need to put our house in order and the solution is Amilin TV. An online web TV, Amilin TV focuses on Islamic financial news, the OIC economy and the Halal industry.
We are the prime mover of Islamic finance news TV and we have the largest Islamic finance video repository on the Internet. To date, our hits for the Web TV include viewership from over 70 countries.
Do you think the media understands the importance of Islamic finance?
No, the story about Islamic finance is just not getting out, including majority of Muslims. Some think that Islamic finance is related to terrorist financial activity. Few think its just about prohibition against pork and interest. Others believe it’s just semantics combined with ‘smoke and mirrors.’
The industry has failed to educate and promote the ‘beauty’ of Islamic finance to the masses. Here, the media plays an important role, much like in conventional finance, in addressing information gaps, vacuums and dis-information.
From my point of view, we need to educate the media first. But, at Islamic finance events, media is ‘just’ a sponsor and not involved as panelists or even panel sessions on media.
The passive approach does not contribute to the dialogue, it’s a gatekeeper to its readers and viewers, hence, needs to be heard.
To attract more online subscribers what is the most important for Amilin TV?
We will launch our Islamic finance business talk show this year. It will be looked upon as a turning point for the Islamic finance industry to move to the next level.
It will provide the fastest and most comprehensive Islamic finance headlines and news of major events set to shape our business day ahead. Featuring analysis and breaking news on the Islamic financial market, our talk show will also broadcast global equity market reports presented in considerable banter between hosts and their guests.
Our target subscribers are affluent financial professionals from both the conventional and Islamic banking sectors.
What are your challenges and plans going forward?
When we first started a few years ago, we had many challenges for an on-line broadcasting entity. The financial industry is covered by the usual suspects, Thomson Reuters and Bloomberg, however, we have managed to find our target niche market. We have been recognised by the industry as the only online Islamic Finance news TV. If you Google Islamic finance TV, Amilin TV ranks number one and if you search for Islamic finance news, Amilin TV ranks number two. We are also a media partner and official web TV for international Islamic finance and Halal events happening in among others, Kuala Lumpur, Russia, Dubai, Doha, and Jakarta.
Our vision is to become the mainstream financial media. Currently we have our broadcast studio in Kuala Lumpur and plan to set up our next studio in Dubai soon.
His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, has announced his vision and initiative for an ‘Islamic economy’. Any country aiming to become the global hub in Islamic economy needs this kind of business media as a marketing arm to promote and propagate their Islamic finance agenda to the world.
The writer is the Global Head of Islamic Finance and OIC Countries for Thomson Reuters. Views expressed are his own and do not reflect the newpaper’s policy
Chance for Halal Industry to raise the bar(0)
By Rushdi Siddiqui & Tina Jamaluddin
A change agent must tell the truth to a benevolent dictator, religious hardliner, and compassionately connect with youth and have nots.
Breaking News: “Nestle removes beef pasta meals after finding horsemeat. Nestle, the world’s biggest food company, has removed beef pasta meals from shelves in Italy and Spain after tests revealed traces of horse DNA.” — BBC News on Feb 19, 2013.
The Chinese new year of the Snake, seems to have become the year of Horse (meat). The year, 2013, did not start on a positive note for meat loving consumers in Europe with the mid-January announcement about Irish food inspectors finding horsemeat in some beef burgers heading for the UK supermarket chains.
This was followed almost immediately by announcement from the UK, Sweden and France that up to 100% horsemeat was found in several brands of frozen food.
In tracing the origins of the abattoirs responsible for contaminating the supply chain, it leads investigators across France to Cyprus to Netherlands to Romania and Luxembourg. The concern was the contamination seemed not to be accidental, but, rather the work of criminal conspiracy.
The world’s largest food manufacturer, Nestle, with a large imprint in the halal market, admitted that two of their beef products produced out of their factory in Italy and Spain contained more than 1% horse DNA. Furthermore, the possible source of contaminant was a supplier in Germany, a sub-contractor owned by JBS, the world’s largest meat processing company.
How does this affect consumer confidence in accepting the authenticity and integrity of the attached label?
Now, the entire supply chain, from the proverbial “farm to fork” is somewhat compromised, possibly not from a food safety perspective, but from an ethical and business standpoint. Nestle and JBS are listed No 1 and No 6, respectively, on the list of world’s largest food companies (by sales), and for all their food safety systems and standards, they still find themselves embroiled in this unfolding scandal.
The food retailers across Europe, with PR machinery in place, have firmly distanced themselves from the actions of their guilty suppliers, and have been adamant that they were as shocked as their customers by the discovery. Furthermore, the EU health ministers were quick to point out that while mislabeling is ethically questionable, the horsemeat contamination is not a food safety or public health issue, even though the equine drug Phenylbutazone, or bute, used on horses is not allowed to enter the food chain as it could pose a health risk in humans.
This leads back to the bigger question: how confident are we, as food consumers that we have not been exposed? Where does the “buck of responsibility stop?” The fingers are pointing to those making the larger profit margins, major food retailers have to bear some of the responsibility. Furthermore, it would appear they are constantly squeezing the supply manufacturers to produce cheap products while improving their own bottom line.
While eating horsemeat may be considered taboo or even unethical or unsavory in some parts of the world, Muslims are not prohibited from eating horse and camel if the animal is slaughtered in accordance with strict Islamic practices. However, the worry for Muslim consumers, who readily eat non-certified halal meat products with the justification that “as long as it’s not pork”, is that during the same testing process, food inspectors have also discovered minute traces of pork DNA in some beef frozen foods.
For example, Waitrose’s brand of British meatballs showed they contained some pork. Even some Halal meat pies produced in the UK were found to have traces of porcine DNA. The word distressing is an understatement for Muslims relying on truth in labeling by the name brand companies!
The potential fallout could be massive and will shift the mindset of Muslim consumers worldwide who already face challenges of finding halal food products on supermarket shelves. While the contamination of pork DNA in meat products might not be deliberate, traces of pork DNA may be the result of ultra sensitive DNA testing, which can detect traces at minute levels and will be evident in factories that also produce pork-based products or get their raw materials from abattoirs that slaughter pigs.
The implications of such a scenario are crap shoot “roll the dice” (willing to chance it) versus capital equipment expenditure. Thus, going forward, this means that non-halal manufacturers, who produce halal products, will either have to have dedicated factories for halal products or they might consider dropping the product altogether.
Today, not one halal company controls the entire supply food chain. It is well-known and accepted that supply chains are long, challenging and complicated. Thus, given the scare of cross contamination and food safety issues, it is imperative that halal institutions and food manufacturers take up the challenge and convey to the public at large that their supply chains encompass the essence of halal.
There are two very important halal lessons to be learned from Islamic finance on (1) what not to do and (2) what to do during external financial shocks.
In both niche markets, Islamic finance as a subset of social-ethical movement (a subset set of conventional finance) and halal food as a subset of the “food industry” (although halal includes pharmaceuticals, cosmetics, logistics, etc), a “call to action” plan explaining the merits and value proposition is urgently required to address the external turbulence.
For the halal industry, the horsemeat fiasco is about the “trust and confidence” of the food supply chain being compromised. It is here that the halal industry can show the transparency and accountability of the food supply chain from “farm to fork.”
The halal industry has the opportunity to raise the transparency bar for not only itself, but, more importantly, for its conventional brethren.
Rushdi Siddiqui is global head, Islamic finance and OIC countries, Thomson Reuters and Tina Jamaluddin is ex-head of business and product development of PrimaBaguz Sdh Bhd.
Looking for halal alpha in Dubai(0)
By Rushdi Siddiqui, Global Head of Islamic Finance, Thomson Reuters
It is one of the legs of an Islamic economy for Dubai, as recently mentioned by His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai. It is a $640-billion (Dh2.35 trillion) niche market with greater reach and traction than Islamic finance for Muslims. It is also a consumer non-cyclical, linked to the real economy and asset-backed. Furthermore, companies such as Nestlé, Unilever, Cargill, Kraft and other Fortune 500 companies produce goods for this niche market.
We’re talking about the halal industry: from food and pharmaceuticals to cosmetics, logistics and more — $2.1 trillion in total, with the food sector comprising about a third.
According to a consultant study, “Consumer spending on food in the GCC is expected to reach $106 billion in the next five years … [and] Saudi Arabia and the UAE together account for around 75 per cent of the region’s total food retail market”.
Halal was in the Arab Spring countries long before Islamic finance, and they are now just talking about building enabling environment for sukuk. Here, an agriculture sukuk would have a more direct impact than general purpose sukuk.
Halal presence is a better indicator of Muslim purchasing power than the traction of Islamic finance in Western countries. “Halal has gone mainstream,” says Darhim Hashim, CEO of the International Halal Integrity Alliance. “There are now aisles — no longer shelves — in supermarkets such as Asda and Tesco, dedicated to halal products.”
Halal needs to move from the present conversation of certification and ingredients to an asset class. Thomson Reuters and Idealratings launched the world’s first halal food index, the Socially Acceptable Market Investments Halal Food Index, at the World Halal Forum in 2011. At the launch, there were 240 companies from 15 Muslim countries, including seven from the UAE, thus facilitating inward investing and intra-Organisation of Islamic Cooperation (OIC) investing.
Two points need to be addressed. Firstly, Muslims do not control the halal food supply chain (the OIC, overall, are net importers), especially at the important midstream, manufacturing and processing stages. Secondly, the present approach to food security by way of agriculture, food and land bank funds has yet to meet expectations.
There is a third way, beyond domestic growth and importing, that is less about securing food supply and more about controlling it. However, to control it, one has to know the farm to fork to finance supply chain, as well as traceability, leakages and the like.
Shaikh Mohammad’s announcement has reached the far corners of the food and finance world, and Dubai has the vision, will and means to address food security and build a global brand in the food industry, much like Emirates is for air transportation.
— The writer is Global Head, Islamic Finance & OIC Countries, Thomson Reuters
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