Islamic Finance Awards To Award KPMG For The 4th Year Running

Euromoney’s Islamic Finance Awards has acknowledged KPMG’s role in promoting and aiding the development of the Islamic finance industry through its network of international member firms for the fourth year running.

There are many KPMG member firms which are active in the Islamic finance arena in countries such as the UK,  France, Canada, South Africa, Qatar and India. In the UK, KPMG is currently working on three Shariah- compliant real estate funds.One has launched and is buying its first property while the other two are in the developmental stages of fund launch. KPMG also continues to act as auditor to the first standalone takaful company in Western  Europe.

KPMG’s French practice is still advising on the establishment of what are expected to be France’s first  standalone Islamic retail and commercial banks and the Canadian practice is advising a company hoping to be the country’s first Islamic bank. The South African practice was included as part of the national treasury  task team for recommending enabling legislation for Islamic finance by way of a new insertion in the Income  Tax Act. KPMG in Qatar was commissioned to assess the feasibility of setting up a takaful company as well.Samer Hijazi, director in KPMG’s financial services practice made some comments on the award.

“This award demonstrates our continued commitment to the Islamic finance industry, particularly during the  recent challenging global market conditions. We are very proud of our achievements in this space and will  continue to work closely with our clients to help the industry step up to the next level with regard to  governance, asset management and product offering,” he said.

Islamic finance Industry 'Crucial Growth Engine'

Islamic finance has significantly surpassed its niche industry status to become an established component of  the financial system.

The fact that over recent years Islamic financial institutions have grown at a faster pace than their conventional peers confirms the increasing demand for Sharia-compliant financial products and services.

With the unprecedented growth of major economies in the Middle East, the region is increasingly becoming a  more competitive and sophisticated market and the key players are targeting a greater share of the exciting  growth potential for Islamic finance, according to David McLean, chief executive of Mega Events, organiser  of 1st Annual Middle East Islamic Finance & Investment Conference (MEIFIC 2011).

The event will be held on April 12th and 13th at Dusit Thani Dubai and will set the stage for key players in the  region to successfully adapt to new market realities in the Middle East.

"The exclusive opening keynote session at MEIFIC 2011 will examine the current state of and the future n prospects for Islamic finance in the region and the next wave of growth opportunities for Middle East players," he said.

"The session will also share critical insights on how the leading market players are re-tuning their  businesses to succeed in the Middle East Islamic finance market."

Key players in the Middle East Islamic finance and investments industry will be gathering at MEIFIC 2011 to  explore the growth potential that the Islamic finance and investment market in the Middle East offers.

The conference will feature groundbreaking debates as the region taps into the next growth phase in the  post-crisis landscape.

Islamic finance stays strong despite downturn

Islamic finance, which requires financial products from mortgages to savings accounts to be structured to comply with Sharia law under the Quran, is attracting sustained interest from non-Muslims as well. And it's no surprise when you consider that, according to the International Monetary Fund, between 2007 and 2009 Islamic banks' assets grew an average of twice as fast as conventional banks' assets in major Muslim markets.

The Gulf region is a natural destination for sharia-compliant cash from all over the world: according to consultancy Deloitte & Touche, around 80% of Islamic financial institutions globally are based in the GCC. What's more, 60% of assets held by Islamic financial institutions globally are concentrated in the GCC.

"The potential for Islamic finance in the Gulf is extremely encouraging," says Dr Mohamad Nedal Alchaar, secretary general of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), the international standard-setting organisation for Islamic finance.
"This largely reflects the improving economic conditions in the region, and we believe that the supply and demand for credit in the Gulf will increase in the coming years."

Supply of credit is likely to expand

According to Dr Alchaar, supply of credit is likely to expand as liquidity rises. Meanwhile, demand for credit will grow in tandem with increased economic activity, including major investments in infrastructure across the region, as well as renewed efforts towards economic diversification.

"Islamic finance mechanisms generally require real economic activities as underlying transactions," Dr Alchaar notes. "So this rise in economic activity should create a perfect environment for Islamic finance."

Dr Alchaar points to takaful, or Islamic insurance, and trade financing as two areas with particular potential in the Gulf. Takaful is co-operative, whereby customers put money into a communal fund and take out what they need in the event of a claim. Insurance companies charge a fee for managing the operation, and any money left over at the end of the year is paid back to customers.

According to Ernst & Young's World Takaful Report 2010, global takaful contributions soared 28% in 2008 to reach $5.3bn - and Saudi Arabia accounted for more than half of those contributions, totalling US$2.9bn. The takaful industry in the region's biggest economy is expected to grow faster than non-oil GDP for the foreseeable future, while other Gulf countries including the UAE have been tipped as significant potential growth markets.

According to Datamonitor the UAE's insurance market value for 2009 amounted to $5.1bn, which is expected to rise to $11.61bn by 2014, a 128% increase since 2009. And the UAE Minister of Economy, Sultan Bin Saeed Al Mansouri, said in November that insurance premiums in the Emirates in 2010 were expected to hit $6bn.

"Life insurance penetration on a country-by-country basis is generally linked to two things: tax incentives for saving, and mortgage-linked life insurance," says Raj Madha, banking analyst at Rasmala Investment Bank.

"Obviously in this region we don't have tax, so that link to the tax-efficient savings concept, doesn't really exist. And the second driver, the link to the property market, exists and has suffered hugely.