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Islamic finance

I am a regular writer and presenter on Islamic finance. Some of my works are listed below.

A late 2012 snapshot of the UK Islamic finance industry

My contribution to the Islamic Finance News global "2013 Guide". In my view UK Islamic finance has struggled since the global financial crisis. The UK Islamic banks were unprofitable in 2011. Figures for 2012 were awaited when I wrote. One key challenge is that the UK retail Islamic finance market is small. If conditions improve, 2013 may see new entrants to the industry.

Report on the cross-border taxation of Islamic finance in the MENA region

I am the principal author of this report published by the Qatar Financial Centre Authority and the International Tax and Investment Center. It looks at the taxation of four common Islamic finance structures: commodity murabaha, sukuk, salaam and istisna in eight MENA region countries: Egypt, Jordan, Kuwait, Libya, Oman, Qatar, Saudi Arabia, Turkey and also in the Qatar Financial Centre. The report recommends how these countries should adapt their tax systems to facilitate Islamic finance.

How can Islamic finance enter western markets?

My response to this generic question is that each country market is distinct, and thinking about western markets as a whole will lead to bad strategic decisions. Each Islamic financial institution needs to decide what markets it can enter profitably and focus on its core strengths.

Some questions about the International Islamic Liquidity Management Corporation (IILM)

The IILM was set up by several central banks from Muslim majority countries. Its aim is to issue high quality Shariah compliant instruments suitable for Islamic banks to hold for their treasury operations. To date, it has not yet issued any such instruments. I pose some questions that must be answered before such instruments are issued.

The evolution of sukuk from asset-backed to asset-based structures

People use terms such as "asset backed" and "asset based" with sukuk without being clear what they mean. After defining the terms, I point out that investors in asset based sukuk have much less protection in the event of default by the sponsor. The credit ratings agencies have been saying the same thing for many years, but few people paid attention until the financial crisis hit some of the Gulf states.

Islamic Financial Institutions and the Implications of Accounting under IFRS

Islamic finance practitioners often question whether IFRS or AAOIFI accounting standards should be used. In practice, local law rarely allows a choice. While IFRS accounting often deviates from the transaction's legal form, so does AAOIFI accounting at times. IFRS accounting can make it harder to assess whether the company's transactions are Shariah compliant.

The impact on Islamic banking of Indonesia's new rules on bank ownership

Many countries have restrictions on foreigners owning banks. These are normally a bad idea. Indonesia's new rules are quite flexible, and therefore should not do any serious harm.

A tale of two banks: a comparison of the published accounts of Islamic Bank of Britain and of Bank of London and the Middle East

I gave a lecture based upon comparing the accounts of this Islamic retail bank and this Islamic investment bank. The accounts show the differing commercial pressures these banks face.

What businesses should Islamic banks finance?

The magazine Islamic Finance News asked: "Should the Islamic finance industry be responsible for funding the global Halal sector? And if so, how should this be facilitated?" This question appears to assume that Islamic banks exist to fulfil a social purpose. In my view, they do not; their sole purpose is to make a profit for their shareholders.

Does Islamic finance need you?

Many young UK Muslims obtain Islamic finance qualifications and want a career in Islamic finance. However the supply of UK Islamic finance jobs is very limited. Moreover, the Islamic finance industry needs specialist skills, which in most cases can only be acquired within conventional finance.

Non-Malaysian companies issuing ringgit sukuk

Like many developing countries, Malaysia has exchange controls. Whether foreign companies should be allowed to issue ringgit denominated sukuk in Malaysia is purely a foreign exchange management question, not an Islamic finance question.

Islamic banks' treasury management challenges

Islamic banks face far more challenges than conventional banks. In particular, the main contracts used by Islamic banks for treasury liquidity management are sometimes frowned upon by Shariah scholars. Also there is a shortage of liquidity management instruments apart from the Shariah compliant inter-bank market.

How industry standardisation in Islamic finance could help promote cross-border transactions

Islamic finance is far less standardised than conventional finance, with little standard documentation. This increases transaction costs. The industry also needs more Shariah standards and would benefit from greater willingness to publish fatwas.

Islamic financial institutions and the shortage of investible products

A short explanation of why Islamic financial institutions are often more liquid than their conventional counterparts, and how they should address this.

Written interview on the UK retail Islamic banking scene

In response to questions from the magazine Islamic Finance News, I explain why the industry has grown so little and the competitive pressures it faces.

When do cross-border Islamic finance payments suffer withholding tax?

As tax law varies from country to country, there is no general answer to this question. However this article, first published in Islamic Finance News, explains how to think about the issues.

The Royal Bank of Scotland disaster: its lessons for Islamic finance

The Financial Services Authority has published a 452 page report "The failure of the Royal Bank of Scotland." Islamic banks are exposed to many of the risks that brought down RBS.

The choice of applicable law for Islamic finance

Students of Islamic finance often wonder why so much of it takes place under English law. An interview with Global Islamic Finance Magazine allowed me to give a brief explanation.

Accounting and tax implications of sale and leaseback

This article first published in Islamic Finance News looks at the accounting under IFRS and AAOIFI accounting standards. It also briefly considers the tax issues that can arise.

Presentation on “Taxation of Islamic finance transactions” at ITIC MENA Tax Forum, Istanbul

The slides and addtional text explain why Islamic finance transactions often suffer a higher tax burden than equivalent conventional transactions. The coverage is not specific to any one country.

Accounting for sukuk under IFRS and AAOIFI accounting standards

My chapter from a new book which uses a hypothetical example to show how the two sets of accounting standards can give very different accounting results for the same transaction.

Liquidity management at UK Islamic banks

Islamic banks face greater liquidity management challenges than conventional banks. I cover the reasons and also review the liquidity management practices of the five UK Islamic banks.

A simple introduction to Islamic mortgages

There is much misunderstanding about Islamic mortgages. Accordingly, I have explained how they work in simple terms with diagrams and illustrative numbers.

Leaked US ambassador's report on UK Islamic finance scene.

The diplomatic cable released by WikiLeaks is a fair status summary with occasional errors, and quotes many people including myself.

What is AAOIFI’s Proper Accounting Standards Role?

A review of GCC Islamic banks shows that AAOIFI's accounting standards are only followed in Bahrain and Qatar. I conclude that AAOIFI should cease issuing its own accounting standards and instead collaborate with the IASB.

The tax treatment of Islamic finance in Western countries and Muslim majority countries

This is my chapter of the book "Euromoney Encyclopedia of Islamic Finance" edited by Aly Korshid and published by Euromoney Books. My goal in writing it was to explain the different approaches to the taxation of Islamic finance taken by the UK and some Muslim majority countries.

The role of the UK as an international centre for Islamic banking and finance

This is my chapter of the book "Islamic Investment Banking: Emerging Trends, Developments and Opportunities" edited by Sohail Jaffer and published by Euromoney Books. My goal was to explain the factors that have made the UK the leading centre for international Islamic finance outside Muslim majority countries.

Islamic financial products and their challenge to taxation systems

This is my chapter of the book "The Chancellor Guide to the Legal and Shari'a Aspects of Islamic Finance" edited by Humayon Dar. It explains why the UK would tax Islamic finance transactions more heavily than conventional finance, and discusses how UK law has been revised with the goal of parity of tax treatment.

The UK Islamic banking scene

This short article looks at the figures on the five UK Islamic banks as at 31 December 2009. Only one of them is a retail bank, and I explain why retail Islamic banking has not taken off in the UK.

A review of "Islamic Commercial Law: An Analysis of Futures and Options" by Mohammed Hashim Kamali

This is my favourite book on Islamic finance, and the one I always recommend to people new to the subject who want to understand the religious background.

Why has retail Islamic banking not taken off in the UK?

I read a newspaper article which posed this question, and decided to set out my own thoughts.

How conventional insurance and takaful differ numerically

Many people who are new to Islamic finance often ask about the difference between takaful and conventional insurance. I have tried to explain this with the simplest possible example; two people who each have a house that is at risk from fire.

British Government Policy on Islamic Finance

I was asked to contribute an article on Islamic finance for the brochure being prepared by the Muslim Council of Britain's delegation to the World Islamic Economic Forum. As the audience at the WIEF would mostly come from Muslim majority countries, I decided to explain how the UK has been able to promote Islamic finance while maintaining a policy of religious neutrality.

The United Kingdom’s approach to the regulation of Islamic finance

The UK is globally recognised as the leading Western country for Islamic finance.  However from time to time proponents of Islamic finance ask me why the UK does not allow Islamic banks to offer “true” profit and loss sharing investment accounts. This item is a long answer to that short question.

Would Islamic finance have prevented the global financial crisis?

I gave a presentation on this subject to the Institute of Islamic Banking and Insurance in July 2009, and then wrote an article based on the presentation.

Are Islamic banks Islamic enough?

In one form or another, this question often crops up at conferences on Islamic finance. In my view, the answer depends upon the personal religious views of each Muslim, and I have therefore not sought to address it in any of my published writings on Islamic finance. However, the receipt by the Muslim Council of Britain of an open letter required me to address it when composing the response.

Video presentation on "Would Islamic finance have prevented the global financial crisis?"

On 6 July 2009, I gave a presentation on this subject in Australia. The video can be downloaded free from iTunes.

Islamic finance in Australia

I visited Australia in July 2009. Australia is an important regional financial centre, and I believe it has significant competitive advantages if it chooses to compete regionally in international Islamic finance.

Should Financial Reporting for Islamic Finance be different?-video

This short video of 2 minutes and 17 seconds addresses the question of whether we need accounting standards for Islamic finance which are distinct from the accounting standards applicable to conventional finance. The short answer is no. The video is not very "bubbly"; apart from the subject being accounting, the other reason is that I was speaking without any notes or advance preparation, so I was literally making it up as I went along! It can be watched on the website of the Institute of Islamic Banking and Insurance.

Taxation of Islamic finance - video

The CFA Institute is a body engaged in financial training. I recorded for them a 25 minute video comprising a slide presentation with me talking on "Taxation of Islamic finance."