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ISLAMIC BANKING AND FINANCE

ASSIGNMENT # 1
INSTRUCTOR : MR. AZEEM PIRANI

MOHAMMAD HASSAN
0811120
BBA 8A

............................................................... 3 Article # 1 : Azerbaijan develops Islamic financing ........................................................ 4 Original Articles: ............................................................................................................................................................................................................................................................................................. 5 Article # 2 ............................................................ 6 ............. 3 Article # 2 : Challenges to growth of Islamic banking ......................................................................................................................................................................... 5 Article # 1 .............................Mohammad Hassan 0811120 2 Islamic Banking and Finance Assignment # 1 Contents Summary of articles: .............................

html Published : 25 January 2010 Summary: Azerbaijan. Many countries interest in Islamic finance is associated with various factors. By developing Islamic financial infrastructure. Islamic finance is one of the fastest growing segments of the global financial services industry worldwide2. Ansar Leasing. The International Bank of Azerbaijan will begin its work in March.NationalGeographic. and in Azerbaijan. officially the Republic of Azerbaijan is the largest country in the Caucasus region of Eurasia.trend. the CIA World Fact Book CIA.ca/open/islamicfinance/ . It is located at the crossroads of Western Asia and Eastern Europe1. Azerbaijan’s Islamic finance market is in its introductory stage. analysts believe that interest in Islamic finance as a source of investment is very high.utoronto. Although not many of us have heard of this country. Conversely. and plans to present six various Islamic banking products to the market.com.uk.com.gov. is one of the major operators in Islamic finance in the country. although major growth is expected in little time. and this is just the first phase of their plan. The Islamic Corporation for the Development of the Private Sector (ICD) is also working towards creating the first Islamic insurance company in Azerbaijan.rotman. 2 http://ep. Azerbaijan has the potential to play a significant role in boosting cooperation in Islamic banking with Persian Gulf and Central Asian countries.az/capital/analytical/1984137. and Encyclopedia Britannica also place Georgia in Asia.bbc. Currently. Azerbaijan may indeed attract massive investments and financing from the Islamic capital market. analysts believe that the country may become a regional Islamic financing center in the near future. and Worldatlas.Mohammad Hassan 0811120 3 Islamic Banking and Finance Assignment # 1 Summary of articles: Article # 1 : Azerbaijan develops Islamic financing Webpage Link : http://en. Merriam-Webster's Collegiate Dictionary. 1 Azerbaijan may be considered to be in Asia and/or Europe. numerous sources place Azerbaijan in Europe such as the BBCNEWS.co. The UN classification of world regions places Azerbaijan in Western Asia. and the company’s success has attracted many more banks and companies to enter the Islamic finance market.

and professional characteristics. However. contributing to a whopping volume of transactions at USD 1. variation regarding Shariah. On the professional side. but also among scholars. In reality.086 trillion. At times. some of these fatwas contradict from bank to bank. This is because economic globalization does not allow for such a separation between Islamic banks and traditional banks. one of the most basic fundamentals of Islamic banking is based on the profit-and-loss sharing principle. This article identifies two major challenges.com/business/opinion/challenges-to-growth-of-islamic-banking1.971299 Published : 26 January 2012 Summary: More than 310 Islamic financial institutions currently operate in over 75 countries. thus creating hurdles in the progress of the sector. the interest rate in Islamic banks mirrors interest rates in traditional banks. . however. Islamic banking is part of the global banking system and will remain so due to the integration of the economies of Islamic countries with the global economy. despite the global interest and new trends.Mohammad Hassan 0811120 4 Islamic Banking and Finance Assignment # 1 Article # 2 : Challenges to growth of Islamic banking Webpage Link : http://gulfnews. Some financial instruments adopted by some Islamic banks are prohibited or regarded as undesirable in other banks. but it also requires finding a solution to the currently existing Shariah and professionalism-related problems. This reflects conflicts of interest and competition among not just banks. which can seriously hinder the global compatibility of this sector. The efforts of Islamic banking to go global are crucial for growth. Regarding shariah. in that it fluctuates in accordance with the interest rate of the London Interbank Offered Rate (or any Offered rate prevailing in a country). Islamic banking still faces many challenges. there is a wide variation of ‘fatwas’ within each bank.

Mohammad Hassan 0811120 5 Islamic Banking and Finance Assignment # 1 Original Articles: Article # 1 Azerbaijan develops Islamic financing 25 January 2012. At the same time. not only from Arab countries. the foremost of which is the desire to attract liquid resources from the Middle East and Southeast Asia and a certain demand for financial products in accordance with Sharia law by local Muslims. and supply and demand. which plans to introduce these tools with the financial support of the Islamic Corporation. Also. Alternative financial tools can be provided for Azerbaijani investors in this way. Ansar Leasing. Islamic financing is one of the fastest growing segments of the global financial services industry worldwide. Islamic financial tools can become the channel through which their assets can be involved in the economy. During this period. In the near future. European and Central Asian countries are considered experts in Islamic financing. Takaful. has successfully operated in Azerbaijan for three years. particularly in the UK. Today. the company has formed a portfolio worth $15 million and the company plans to draw about $6-$7 million from its founder to expand operations. Therefore. Azerbaijani banks' interest in Islamic products is growing gradually. By developing Islamic financial infrastructure. Evidently. the number of practicing Muslims who cannot and do not want to use traditional financial services is growing in Azerbaijan. interest in Islamic finance as a source of investment is high in our country. which is popular in Europe. Azerbaijan actively introduces Islamic financing. the successful development of Islamic finance on the domestic market will depend on the further improvement of legislation. Jan. The amount of money that enters the market through this channel is very small in Azerbaijan. 25 / Trend / Leyla Abdullayeva. Azerbaijan may indeed attract investments and financing from the Islamic capital market. regulatory prudential norms. The independent authority of the International Bank of Azerbaijan (IBA) on Islamic banking will start its work in March. since many issues related to Islamic financing have not been yet addressed. Some Azerbaijani private banks are also starting to expand the range of Islamic financing tools. is actively introducing deposit products. organized on Islamic principles and established by the ICD. which include Wadia yad Daman. One such bank is TuranBank. it may become a subject of debate. Most of Takaful's customers are non-Muslims in countries where the Islamic insurance market is the most developed in the world. Trend Analytic Center Expert Azerbaijan may soon become a regional Islamic financing center and play a significant role in boosting cooperation in Islamic banking with Persian Gulf and Central Asian countries. Many countries' interest in Islamic finance is associated with different factors. Another bank. . introducing Ijarah (leasing) and Murabaha. 17:50 (GMT+04:00) Azerbaijan. which plans to present six Islamic banking products to the market during the first phase. Baku. Nikoil. The Islamic Corporation for the Development of the Private Sector (ICD) is also in talks to create the first Islamic insurance company in Azerbaijan.

The seminar also highlighted global interest in Islamic banking. will boost this trend. The recent announcement that the world's largest Islamic bank. the volume of transactions touched $1. the interest rate in Islamic banks mirrors interest . More than 310 Islamic financial institutions currently operate in more than 75 countries. thus creating hurdles in the progress of the sector. More than 310 Islamic financial institutions currently operate in more than 75 countries.98 trillion) in 2011     Mohammad Al Asoomi. Some of these fatwas contradict each other. would be headquartered in Bahrain. although one of the most basic fundamentals of Islamic banking is based on the profit-and-loss sharing principle. Special to Gulf News Published: 00:00 January 26. Islamic banking still faces many challenges. But despite the global interest and new trends. Even China is entering the market. Many of these challenges have complicated Sharia and professional characteristics.Mohammad Hassan 0811120 6 Islamic Banking and Finance Assignment # 1 Article # 2 Challenges to growth of Islamic banking Although Islamic banking has grown rapidly over the last three decades. This point was made at a seminar organised last week by the Emirates Centre for Strategic Studies and Research in Abu Dhabi in cooperation with the Paris Institute of Geo-Political Studies. Although Islamic banking has grown rapidly over the last three decades.98 trillion) in 2011. Some financial instruments adopted by some Islamic banks are prohibited or treated as undesirable in other lenders. 2012  Image Credit: Gulf News Archive A branch of Dubai Islamic Bank. accounting for only one per cent of the world's total. which may hinder their adoption and the mission of the banking business in general. the volume of transactions touched $1. and among scholars on the other. and in the GCC the sector continues to flourish.086 trillion (Dh3. recently approving a licence to set up the first Islamic bank in the country. with a capital of $100 billion. there is a wide variation in fatwas in each Islamic bank. Wide variation Regarding Sharia.086 trillion (Dh3. On the professional side. This disparity reflects conflicts of interest and competition among Islamic banks on the one hand. motivated by the growing economic importance of Islamic countries and the increasing number of Muslims in places such as Europe.

Islamic banking is part of the global banking system and will remain so due to the integration of the economies of Islamic countries with the global economy. especially given that there are complicated financial instruments and derivatives that are difficult to deal with in terms of Sharia only. particularly if they want to achieve the stature of French banks. Let us not forget that one reason for this is that Islamic finance prohibits overestimating assets without sound financial foundations. and financial derivatives — two major causes of the crisis.Mohammad Hassan 0811120 7 Islamic Banking and Finance Assignment # 1 rates in traditional banks. Even though fatwa departments in Islamic banks are currently considering a substitute for this interest rate mechanism. it would be possible for Islamic banking to constitute an important part of the world banking system. despite the fact that the effects on Islamic banks were less serious than those suffered by traditional banks. There are also major stock exchanges for commodities. This is because economic globalisation does not allow for such a separation between Islamic banks and traditional banks. for example. The impact of the global financial crisis on Islamic banking stand as evidence of strong association between Islamic banking and global banking. thus putting big burdens on financial institutions because of the size and speed of transactions. Dealing with global fin-ancial markets is different from dealing with local and regional markets. gold and oil that deal with billions of dollars daily. This is the average interest rate that leading banks in London charge when lending to other banks. in reality. in that it moves up and down in accordance with the interest rate of the London Interbank Offered Rate (Libor) on the London Stock Exchange. But if these issues can be resolved. but it also requires finding a solution to the currently existing Sharia and professionalism-related problems. . The efforts of Islamic banking to go global are important.