Islamic industry body consolidation?

Posted by Indian Muslim Observer | 17 August 2013 | Posted in , , ,

By Rushdi Siddiqui

Hussein Al Qemzi, CEO of Noor Islamic Bank and Noor Investment group, recently made extremely important comments concerning the need for a definitive industry body to promote and regulate Islamic finance.

He said: “... it is a real concern that there is no authoritative global body to regulate and promote Islamic finance… Disagreement and different interpretations, over what is Shariah-compliant and what is not, continue to make it difficult to establish the necessary regulations for the industry to develop globally accepted products… Some people argue that standardisation is an unrealistic goal, given the fragmented nature of Islamic finance. I do not agree. There is a need for balanced, globally accepted, regulation that does not impede growth, or allow for abuse.”

Outside box thinking

Sometimes solutions require (way) outside the box thinking. For example, what if we take a chapter form the merger and acquisition arena and apply to Islamic finance industry bodies, hence, to achieve the ‘definitive, authoritative industry’ body requires consolidation.

The industry bodies include Accounting and Auditing Organisation of Islamic Financial Institutions (AAOIFI), International Islamic Rating Agency (IIRA), International Islamic Financial Market (IIFM), and General Council for Islamic Banks & Financial Institutions (Cibafi).

Consolidation makes sense when and where there are cost savings synergies. It makes sense when there is an overlap of founding shareholders, when same scholars sit on boards of various bodies, when there are resource constraints resulting in operational challenges and hiring qualified human asset, and so on.

Finally, consolidation may make sense when the need of the hour is an industry body that sees the bigger picture and where it fits in as an important stakeholder in Islamic finance versus the present “silo” approach.

Founding stakeholders

If we look at the sampling of the founding shareholders of the above-mentioned industry bodies, there is an overlap with heavy weights of Islamic finance including Islamic Development Bank, Al Rajhi, Albaraka, and Kuwait Finance House.

The vision for Islamic finance at conception time these alphabet organisations were launched — 1991 (AAOIFI) to 2005 (IIRA) — to now has changed dramatically. The times have moved on and the bodies need to also stay relevant.

The IIFM website, meanwhile, states its mission as: “... the global standardisation body for the Islamic Capital & Money Market segment of the IFSI. Its primary focus lies in the standardisation of Islamic financial products, documentation and related processes.”

But, the question is wouldn’t it make more sense and be more efficient for IIFM to work under the umbrella of an industry-setting body that produces standards requiring standardisation?

Cibafi chairman in its message on its website states that Cibafi was established for two major roles — support and protect the industry. Support the industry through awareness and training, holding conferences, seminars and forums and providing the necessary information. Protect the industry so as to avoid, as much as possible, the obstacles and deviations in the course of the Islamic finance industry.

Wouldn’t it make more sense to bring Cibafi under the umbrella of an industry body that produces standards that are followed by training, seminars, and work-shops on them?

Finally, the most prominent Islamic finance industry body is the Bahrain-based AAOIFI.

Its website states: “AAOIFI is an Islamic international autonomous non-for-profit corporate body that prepares accounting, auditing, governance, ethics and Shariah standards for Islamic financial institutions and the industry. Professional qualification programmes (notably CIPA, the Shariah adviser and auditor “CSAA”, and the corporate compliance programme) are presented now by AAOIFI in its efforts to enhance the industry’s human resources base and governance structures.”

AAOIFI is best positioned to be the umbrella Islamic finance industry body in the Gulf Cooperation Council as its standards become standardised documents (IIFM) with process review (IIRA), and are promoted and protected with the understanding (Cibafi).

One window shopping

For example, consolidation results in one Islamic finance conference event with all the four bodies under one roof, and taking place in various Islamic finance hubs to educate, make aware and demystify.

The combination then results in a four-by-four Olympic relay race, where the baton is internally coordinated from each of the bodies.

Looking ahead, after AAOIFI “acquires and integrates”, there needs to be discussions for a merger of equals with Malaysia-based Islamic Financial Services Board (IFSB), with a “one stop shop” for standards and prudential regulations.

The chairmen of these industry bodies need to put aside their egos for a bigger cause — to promote and protect Islamic finance under one industry body.

[Rushdi Siddiqui is co-founder and MD of Azka Capital, private equity advisory firm focused on halal industry initiatives. He is also an advisor to Thomson Reuters on Islamic finance and halal industry.]

(Courtesy: Khaleej Times)

United halal-Islamic finance sector to build USD4trn empire

Posted by Indian Muslim Observer | 10 August 2013 | Posted in , , ,

Rushdi Siddiqui's passion for Islamic finance radiates through his columns, his conference speeches and his relentless pursuit to take the industry to its next level.

Having worked for two of the world's most well-known financial media giants Thomson Reuters and Dow Jones as their chief Islamic finance go-to guy, Rushdi Siddiqui has earned the stripes and experience to forge his own path.

As early as 1998, he introduced the concept of Islamic indices at Dow Jones, and has since pushed the idea of Islamic investing at the governmental level and with many stock exchanges across the Muslim world.

As global head of Islamic Finance and Organization of Islamic Countries at Thomson Reuters , he led the team that established the world's first Islamic equity index, first sukuk index, first Islamic sustainability index, first halal food index, and first Islamic interbank benchmark rate (IIBR).

He also participated in the world's first Islamic Exchange Traded Fund (ETF) in Turkey and France, Malaysia and the US, led the index provider to be the first to have licensed Islamic assets under management of USD 7 billion, and led the team to establish the world's first comprehensive pre-trade, multi-asset Islamic finance platform.

But there is much more work to be done, and Siddiqui has ventured out on his own to launch Azka Capital.

As co-founder and managing director of the private equity advisory firm, he is focused on halal industry initiatives with Islamic financing, which he believes are industries that have much in common, but hardly communicate with each other.

He remains an advisor to Thomson Reuters on Islamic finance, the halal industry and OIC countries.

In an interview with alifarabia.com, Siddiqui outlines his hopes and frustrations for the industry he has helped to nurture.

Q. What was your primary motive to start your own PE advisory firm, Azka Capital, and what are your key areas of focus?

A. In travelling to over 35 Muslim and non-Muslim countries over the span of last 15 years, one sees many challenges on financial inclusion, youth unemployment, access to capital, and so on, i.e., the Arab Spring moment in waiting. The challenges are really disguised opportunities in waiting, so it's really about being able to see it, grab it, and run with it.

I wanted to do something global and impactful with like-minded people for Muslims, but it had to be something 'compliant.' Once in the Islamic finance space for a period a time, like 15 years, the default thinking is 'compliance,' hence, employment in the conventional space was neither an option nor welcomed in that space.

I've worked for great companies like Dow Jones and Thomson Reuters and have learned so much, so it was time to put it all together and possibly start the process of building the next 'Dow or Thomson' with the right people - as chemistry is key to success.
I've always been interested in private equity, but there are not many pure-play compliant PE firms with the dedicated focus for the triple bottom line: returns to investors, society and man on the street. Furthermore, the area of focus had to be about building and growing something linked to the real economy and less financial engineering play.

What's interesting about the Islamic private equity space is the financial ratios we started in with Dow Jones Islamic Market Index (DJIM) in 1999 are used here, hence, come full circle!

In 2011, working with Idealratings, I led a team to launch the world's first Halal Food index, Socially Acceptable Market Investments (SAMI), with the former prime minister of Malaysia, Tun Abduallah Badawi, a people's prime minister! We expanded the conversation about halal, a USD 2.3 trillion industry, into an asset class from just about ingredients, certification, etc.

Halal is not just about meats/foods, but also about pharmaceuticals, cosmetics, logistics, etc., all linked to the real economy, yet very unstructured and fragmented. Combine it with food security, [it becomes] a national security issue in, say, GCC, this is what I will (Insha'allah) return to with my colleagues.

Q. Who is your target market?

A. It comes down to creating risk-adjusted portfolio value for, say, GCC investors who have traditionally invested in real estate, oil/gas, and healthcare. The halal sector is: (1) easy to explain (one has to eat); (2) it's a consumer non-cyclical, hence, its bandwidth of volatility is less than real estate; (3) it's about intra-OIC and inward OIC investing (mandate of the Islamic Development Bank); (4) it's about making consumer investors of halal products into stock investors (eventually), and (5) it's about creating a Muslim 'Fortune 50' company inorganically.

Thus, strategic investors include family offices, high-net-worth individuals, sovereign wealth funds, food companies, Western investors looking for the next BRICS story in the emerging markets, etc.

Q. How different is it to venture out on your own, compared to working with one of the most recognized media companies in the world?

A. There are many lessons learned from Dow Jones and Thomson Reuters , and probably the most important ones are about leadership/vision, motivating, budgeting, brand building/protecting, business development, etc.

Obviously, managing costs is paramount to survival, I have seen first-hand [over the years] 'Islamic start-ups' that have burned their investor money on large salaries, first- class travel, five-star hotel, client entertainment, etc. You must manage investor money as if it's your own, and have to think three times before spending.

Q. Do you think the industry is living up to its potential? What more would you like to see for the industry to flourish?

A. The simple answer is 'no, not yet.' The industry captains have been dropping the 1.8 billion Muslims, but how many are bankable? How many has Islamic finance touched? Today, it seems Islamic finance is only about the bankable. But, the Islamic bank has a fiduciary duty to maximize shareholder value, and does zakat and purification address their CSR [corporate social responsibility] obligations beyond the deposit taking community?

Furthermore, the industry is relying too much on the debt capital market and structured products (less now) for providing solutions and addressing growth. For example, look at the business model or Islamic leverage used by ArCapita, Gulf Finance House, Gulf Investment House, Investment Dar, etc., where are these companies now?

Where is (Islamic) venture capital? Micro-finance? SME financing? These areas (small companies) employ the largest amount of people, contribute the largest percentage of GDP, and are the foundation of knowledge-based economies yet access to risk capital is minimal. For example, I'm involved in an Islamic crowd funding initiative in Egypt called www.shekra.com, and it's a good beginning. Where is the Islamic development bank on crowd funding?

Sukuk and syndicated Murabaha loans are not entrepreneurial capital, the pre-requisite for knowledge-based economy, hence, the equity part of the Islamic capital market is the developmental need of the hour. For example, how has sukuk directly benefitted the man on the street, I have yet to see/hear conversation [about] agricultural sukuk for farmers in, say, the post-Arab Spring North African countries.

The first order of business for the IDB and countries that are true Islamic finance hubs, like Malaysia, is to establish an industry body for the Islamic equity capital market as there is minimal coverage from AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) and IFSB (Islamic Finance Services Board).

This would actually establish the foundation for Shariah-based investing, hence, a blue print for the compliant financing side.

Q. You have discussed halal as a key area of focus in many of your columns and work, do you think that is a way for the Islamic finance industry to enter the mainstream, as in business to consumer segment?

A. Yes, period. Prohibition against interest and encouragement of lawful or 'halal' food are mentioned in the same chapter of the Holy Koran, yet, these two' inter-related industries,' amounting to about USD 4 trillion, do not speak to each other.

Halal is about the real economy, much like real estate, hence, it is the heart of Islamic banking: collateral based financing as there are hard assets (factories, warehouses, etc), consumable products (repeat business), and customers (demographics or Muslims). Furthermore, Muslims do not control the halal food supply chain, hence, integrity risks are slowly cropping up in Europe, where pork DNA found in halal food.

Thus, Islamic finance can reduce concentration risk associated with real estate by expanding into a less volatile real economy linked sector: halal.

Q. Do you think Islamic finance has managed to capitalize on the conventional financial sector's weaknesses in the aftermath of the global financial crisis?

A. At one level, the answer is no, as Islamic finance institutions are not cropping up in Europe or US since 2008. However, no new initiatives will be launched during damage control period.

The question that comes to mind is: What is the message the industry needs to convey to Western jurisdictions about Islamic finance?

1. It's beyond prohibition against interest and pork;
2. Its focus should not be about USD 1.3 trillion or USD 1.6 trillion or 15-20% growth per annum or sukuk issuance reached more the USD 100 billion in 2012;
3. It's not about religion (though accountability to a higher authority), but business and financing based upon transparent rules;
4. It's about collateral-based financing within manageable levels of debt;
5. It's about investment returns linked to asset-backed financing with resorting to derivatives to [generate] returns
6. It's about another level of (Shariah) compliance, where the product offering is as advertised/promoted, i.e. no hidden surprises.

The credit crisis, l and ll, flushed an important point: investors had more risk than they thought as the credit rating agencies and regulators were not seeing or refused to see the telltale signs of a bubble about to burst, producing global systemic risk to the financial system.

Q. Dubai has unveiled plans to become a Islamic hub? Bahrain and Malaysia tried to do the same, but both have had mixed results. Do you think Dubai can succeed and what does it need to do to ensure success?

A. Sheikh Mohammad's announcement about positioning Dubai as an Islamic economy, led by Islamic finance and halal, is now taken very seriously because his grand vision and sheer will (plus some leverage) made Dubai a global brand in a short period of time.

For Dubai to become an Islamic hub for, say, sukuk, it needs to establish an enabling infrastructure with the appropriate stakeholders to offer a 'Euro-bond' platform of the 1960s/70s. So, it's not just about benchmark-size sukuk, contract modalities, league tables, etc., but a platform for issuers to bring compliant paper into market efficiently and expeditiously to take advantage of credit pricing.

For the halal industry, Dubai should not attempt to focus on research, academic papers, ingredients, stunning debate, and even certification as these issues are being raised in Malaysia, Brunei, and elsewhere. There is minimal value added in repeating and recycling on Dubai brand, instead focus should be on: Halal as an asset class to address food (cum national) security. The food, agriculture and land bank funds that have been launched have yet to meet expectations for a number of reasons, from political sensitivities to not understanding food supply chain and entry wedge with appropriate investment vehicle.

[Also,] building a global 'go-to' information platform on USD 2.3 trillion halal industry, much like what we did at Thomson Reuters with the Islamic Finance Gateway (IFG). Today, as the world is hyper-connected and quality information starved, access to credible and continuously updated information is key to surviving (including against fraud in halal sector) and eventually thriving. This actually builds the foundation for a transaction portal, B2B2C2G, for halal, much like Alibaba.com.

Today, Dubai does not house an industry body for Islamic finance, as AAOIFI, IIFM, IIRA and CIBAFI are in Bahrain and IFSB is in Malaysia. The time is ripe and right for Dubai to house the world's first industry body for the USD 2.3 trillion halal industry and modeled after Islamic finance bodies but with the Dubai flair! This is something we, at Azka, have started to map out.

I believe enough time has been spent on thinking about Islamic economy (in the ivory tower by academics), it's now time to bring it to the ground level and execute by stakeholders of practitioners.

Q. There is still skepticism about IF even in Islamic countries. What can the industry do to change it?

A. Islamic finance must address the 'what's the difference (to conventional finance)' question. For example, many Muslims do not understand why there has to be sale/purchase of, say, copper to buy a house/car in a compliant-manner. Thus, if they don't understand it, they will not participate.

Second, Islamic finance needs to have the courage to deploy the mountain of liquidity we hear about towards risk capital in selected Muslim countries. Thus, as a trial balloon it will 'win over' the hearts and minds and lead conventional finance.

Finally, Islamic finance must fit in, but, more importantly, stand out as a value-added proposition to challenges of Muslims and those with aligned values. It's not just about compliant-financing for financing sake, but development finance, holistic consumer approach, CSR (beyond zakat), etc.

Q. Which area (sub-sector or country) of Islamic finance do you think is most promising?

A. The most promising area is the most undeveloped area: Islamic equity capital market (iECM). Today, Islamic finance is heavily debt bias, led by the sukuk poster child, and as one can be conventionally over-leveraged, one can be Islamically over-leveraged. There is no 'divine put,' hence, defaults and bankruptcies exist in Islamic finance.

The development of the iECM will bring balance to today's Shariah-complaint (debt bias) Islamic finance. It will move the industry towards Shariah-based finance, and financial inclusion of the under-banked and non-bankable. It's the equity capital markets that develop countries and diversify economies, and raise the standard of living.

For example, look at the assets under management (AUM) to bank deposit ratio or stock market capitalization to GDP ratio, and one will see G20 non-Muslim countries having higher ratios (for both) than Muslim countries. Thus, Islamic finance, at one level, captures the depositor money play, but it does not get circulated beyond real estate.

(Courtesy: AlifArabia.com)

It’s Ramadan: Do not disturb the faster?

Posted by Indian Muslim Observer | 27 July 2013 | Posted in , , ,

By Rushdi Siddiqui

“Don’t let this Ramadan be just a holiday of rituals. Don’t finish reading the Quran without it transforming you. Don’t feed your body at Suhoor, but starve your heart of Qiyam.

“Don’t reduce this downpour of mercy to just a month of sweets and lavish Ifthars. Seek him, you will find. Take a sincere step towards change, transformation, redemption.

“If you do, you will find Him in front of you. Find Him this month. He’s been there all along. Closer than your jugular vein. Look and you will find. Walk and you will arrive.”—Y. Mogahed.

There are many tell-tale signs Ramadan is approaching; from Ramadan sales, Ramadan tents (Ifthar), Ramadan deferment of consumer payment (on say, mortgage) and so on. But one sign stands out for me, it has to do with a “code of conduct” for non-Muslims residing in a Muslim country.

The code for non-Muslims includes abstaining from eating or displays of affection in public, playing loud music, etc. during the fasting hours. Is this cultural (Muslims), religious (Islam) or a combination?

This “do not disturb” sign seems to work even though it leaves a “strange” taste (of entitlement) in one’s mouth (no pun intended).

Muslims in West

I, like tens of millions of Muslims, live in a non-Muslim secular country, the USA, and, during Ramadan, the dynamics are different in a Western country. There is no additional “code of conduct”, beyond obeying the laws of the land.

For example, in the US, the media, usually local stations, will show a programme/documentary about fasting and interview local Muslims/Imams about the holy month, what it means, and the rituals associated with it.

It will be rare for the same media to suggest a code of conduct for their non-Muslim viewers towards Muslims during Ramadan, as the backlash would be immense. Furthermore, we, Muslims in the West, would not raise the issue of expected behaviour from our non-Muslim friends/colleagues, unless they ask, and, even then with hesitation.

White House, work & commute

The US President, Barack Hussain Obama, like his predecessors generally issues a Ramadan greeting message, and there is an Ifthar with (selected) invited members of the community (usually donors) at the White House. The President also sends similar messages of congratulations, hope, and peace during Christmas, Easter, Jewish holidays, etc.

Our employer may acknowledge Ramadan, and may even accommodate work hours, allow for leaving early (for breaking fast) but offsetting by arriving early.

But, at work, colleagues will still eat food, including ham sandwiches, at their desks, the smell from the microwave in the pantry will still waft through nearby, the usual wise cracks and colourful language will still be used, etc. In other words, it is business as usual. Is this offending our sensibilities? No, not all!

(It’s not a respect or disrespect issue towards the Muslims or any other faiths, as many of these people are God-fearing Sunday church goers. Thus, as a whole, religion is an individual matter in the US. But, as a country, reference to God is inscribed into the dollar bill with the following motto, “In God, We Trust.”)

The commute to work, as many of us take the train and subways, means interacting with many non-Muslims.

(The television advertisement, in Malaysia, for train passengers shows proper etiquette during Ramadan. Query:Why not the rest of the year?)

The non-Muslim commuters will carry out their business as usual, hence, there will be some “rude” people using colourful language, people eating on the run (includes drinking beer), music playing, and so on. Again, does this offend our sensibilities? No, of course not.

Thus, such an environment tests a Muslim’s willpower and forces us to focus on both the “Deen” (spirituality) and “Donia” (secular) during the fasting month. It’s about addressing a test and overcoming an inner struggle, which strengthens our resolve.

This has played itself out for decades for Muslims residing in the West, and, it is now actually easier as Muslim “holidays” have been officially recognised due to the increasing numbers (votes) and donations.

Stronger Muslims?

Does this mean Muslims residing in the West are “stronger or more resilient” in their faith or less prone to distraction than Muslims living in a Muslim country with the “do not disturb” environment backed by possible official admonishment or fines for a violator?

It has more do with managing expectations in the place we grow up and where we reside. It may also be a psychological issue, where some Muslims in a Muslim majority country feel a sense of entitlement, hence, non-Muslims must “shadow fast” by also abstaining from certain behaviour in public.

(I’ve walked the malls, including the restaurants and food courts, be it KLCC or Pavilion or Mid-Valley, during fasting hours, and the non-Muslims are going about their business and intentions as they would any other month.)

I have been coming to Malaysia for 15 years, and this year I was fortunate enough to start fasting in this beautiful Muslim country. The embrace and ambience is different from New York, as the spirit of Ramadan is everywhere and, for me, the fast is easier and more spiritual in Malaysia, especially with the hospitality of a colleague’s home and family.

Thus, non-Muslims eating, drinking, etc., in front of me are not a distraction to my fast. In fact, it’s a great opportunity to discuss Islam to eradicate myths they have. It’s an opportunity to show peace and tolerance of Islam.

I would hope the Malaysian Tourism Minister, working with the re-vamped Malaysia Airlines, will embark on a campaign for Ramadan 2014, as part of faith-based or family tourism, in Malaysia for Muslims living in the US. It will be in the summer holidays in the US.

Code of conduct

A proposed code of conduct during Ramadan may include:

1. The price of food goes up during Ramadan so the government has to remind or take stern action against those who violate the law, especially if the establishments are Muslim owned.

2. There are many announcements made in Islamic finance during Ramadan for obvious reasons. For example, some Islamic banks offering Islamic mortgages offer the opportunity to defer payment during the fasting month and add it to the end of the mortgage period. Is this smoke and mirrors or easing the financial burden during Ramadan? Why not, as part of CSR, write off Ramadan months and ask the government for a tax break?

3. The hotels that offer Ifthar, while welcomed, should tier price the Ifthar, much like air-travel with coach, business class and first class. Thus, those families that cannot afford RM120 per person, may be able to afford, say, RM20 per person.

4. Many of us who are fortunate enough to have Ifthar at hotels, see first-hand how much food is wasted by the paying customer, including ourselves. The hunger pang, cotton dry mouth fasting person loads up his/her dish at the buffet as if it’s his/her last meal, but cannot finish the meal as the stomach has shrunk. There should be a financial penalty for such waste; maybe weigh the unfinished food and charge a few ringgit per ounce and give all proceeds to charities fighting hunger.

5. There should be a healthy Ifthar campaign, hence the government should encourage, at subsidized prices, co-operating and enlightened hotels/restaurants. It could possibly start a habit of eating healthy, which could slowly solve the problem with obesity related health issues in Malaysia.


During the holy month of Ramadan, Muslims observe the third pillar of Islam, fasting, and non-Muslims should not be compelled to “shadow fast.”

Ramadan Kareem Malaysia.

(Courtesy: TheMalayMailOnline.com)

Ramadan inspired dates index

Posted by Indian Muslim Observer | 23 July 2013 | Posted in , , , , ,

By Rushdi Siddiqui

I have been fortunate enough to be involved in many interesting conversations over the years from the potentially practical (Islamic stock exchange, Islamic Libor, convergence between Islamic finance and halal industry), to potentially flawed (Islamic inflation, Islamic unemployment, consumer price index, Islamic car, Islamic washing machine), and the potentially feasible (Islamic currency, dinar).

Big Mac index

Today, I would like to speak about the theory of purchasing power, but present it as something relatively simple and relevant that not only attempts to capture the purchasing power of (Muslim country) consumers, but also with something that is closely linked to historical Arabia and referenced in the Holy Quran.

A purchasing power theory index has been around since 1986, and it’s linked to one of the most recognised global brands around the world. McDonald’s, the golden arches company, has made the ‘Big Mac’ into a trademarked asset class, much like ‘Xerox’ equated to photo-copying. Its signature product, Big Mac, is known worldwide and is often used as a symbol of American capitalism.

Why doesn’t the Muslim world, consisting of 57 countries and nearly 25 per cent of the world’s population, have something comparable? Are brands like Mecca Cola fit for purpose or is it pushing religion and confining to only Muslims?

In 1986, The Economist published the oversimplified burgernomics, as a tongue-in-cheek example of Big Mac PPP. It examines the purchasing power parity between nations, using the cost of a Big Mac as a benchmark. Obviously, this is the language utilised by a layman and not an economist, but it conveys the essence of the index intent.

Put differently, the Big Mac index is about the amount of time that an average worker in a given country needs to earn to purchase a Big Mac. But, the Big Mac may not be applicable to many Muslims, be it costs, halal certification, taste, or availability.


The million dollar question has two parts: 1. Does the Muslim world need to develop a halal Big Mac equivalent index? 2. If so, what type of ‘food’ could command the same brand recall as the Big Mac amongst Muslims?

Yes, there is a desire to have a comparable (food) index that relates ‘more’ to the Muslims due to its availability, acceptability, historical and religious significance. More importantly, it neither requires detailed explanation nor justification of the chosen ‘food’.

In going through the process of selecting the right food for the proposed index, obviously, it is worth looking at the various options considered to rival the Big Mac.

A Rojak or oxtail soup index lacks the universality, as such cuisine may not be available or in demand outside of Malaysia, Singapore and Indonesia. Biryani is probably a better bet than Rojak or oxtail at a global level, but should it be chicken, lamb, beef, or prawns based?

Honourable mention needs to be made for Bukhara rice, shawarmas, baklava, curry, bread and lentils as index barometers, but somehow they do not quite encapsulate the notion of halal Kebabnomics.

Dates index

Hence, the closest Big Mac match for Muslims could be the date. Obviously, there will be disagreements on comparing dates (natural food) to processed food (Big Mac) and the relevance of dates outside of the holy month of Ramadan.

Dates are mentioned in the Holy Quran as most beneficial for health, encouraged to be consumed at Iftar (breaking of fast) during Ramadan, used as an ingredient in a variety of foods, and are subject of economic scientific discussions, as its health components strike discourses at conferences and festivals.

It is in the holy month of Ramadan that the sale of dates reaches its peak as Muslims worldwide abide by the Sunnah of Prophet Muhammad (peace be upon him) to break fast with dates or water — as he said, this is undoubtedly the best thing for the health of our bodies. The variants of date products include pickled dates, date ice cream, date cola, etc, modelled into different delicacies. The utilisation of dates today has grown by leaps and bounds as it was once a upon a time used as a provision to nourish prophets and messengers in their long missions and nomadic lifestyle.

The proposed dates index may be stated as: how much time is required for a person to work to purchase five kilogrammes of Madinah dates. In knowing fellow Muslims, there may be differences of opinion of the appropriate dates, but we need to have an indicator, which we can call our own.

The dates index is more relevant than a Big Mac as it rhymes with all Muslims regardless of their race/ethnicity, geographical and/or cultural differences.

[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.]

(Courtesy: Khaleej Times)

Islamic banks sponsor the Internet (access)

Posted by Indian Muslim Observer | 12 June 2013 | Posted in , , ,

By Rushdi Siddiqui

What is the most valuable commodity in the world? Gold? Oil? Dollar? Diamonds? No, none of the above.

All respectable jurisdictions have laws against 
its misuse.

One of the leading futurists said: “Power is no longer money in the hands of few, but information in the hands of many.”

We now live in a hyper-connected world, hence, the question becomes: is access to the internet, 
a vast universe of information (overload), a right or privilege?

To communicate, is a right or privilege?

To connect with people, is it a right or privilege?

In the last column, I raised and discussed the need for Islamic finance to connect with the social media, from Twitter to Linkedin to FaceBook, as their potential customers, Muslim youth and those with aligned value system, are ‘residing and working’ there.

Today, I would like to raise the issue of another avenue for Islamic financial institution sponsorship dollars/dirhams and internet access.


Islamic financial institutions, from banks, takaful operators, asset management firms, management/Shariah consultant firms and so on, have been sponsoring events in Dubai (IIFF), Malaysia (KLIFF), Bahrain (MEGA), London (Euromoney), etc., for decades.

During the pre-credit crisis time period, it seemed there was one/two Islamic finance events per week globally, for building brand awareness, product launches, etc. Islamic institutions were flush with cash for their marketing budgets, and conference organisers were happy to oblige to put on a ‘show.’ But, one by-product of the ‘over-conferenced’ environment was a push back to organisers as quality became sub-par and networking was with familiar faces.

[Some of the sponsors won awards at the sponsored Islamic finance conference, but that is topic for another day].

In hindsight, it’s difficult to gage the effectiveness of the sponsorship moneys on metrics for brand/product goodwill translating into actual customers. In an Islamic overbanked market, some would say destructive competition, like Dubai or Malaysia, it’s difficult to state unequivocally the marketing/PR spent resulted in more customers and increased margins in the medium term.

In the post credit-crisis environment, the pendulum has swung to the other end of the spectrum, hence, fewer Islamic finance conferences, but more educational/community based seminars from the likes of the Islamic finance team at Thomson Reuters.

Naming rights

Islamic banks have begun to think outside the box and comfort zone to (1) create brand awareness to new/another set of customers (2) who pay less attention to the traditional channels of [retail] reach. This is a major break-through for the Murabaha centric banks.

One of the areas where the marketing seems to have expanded is possible the outgrowth of the Ramadan Tents sponsorship during the fasting month in Dubai. For example, Noor Islamic was the first Islamic bank to have its name on a Dubai metro station.

Hotel Internet access

It’s well accepted Dubai is tourism, trade and commerce hub of the Middle East. It’s well accepted the Dubai hosts the largest number of conferences on finance, technology, construction/realty, food, fashion/arts, etc., in the Middle East. It’s well accepted Dubai has the largest number of hotels, from one to seven stars, in the Middle East. It’s well accepted the Dubai International Airport/Terminal Three is the busiest, destination or connection, in the Middle East.

Now, with millions of people visiting Dubai, for business or leisure, one of the biggest complaints is not breakfast should be included in the hotel room rates (it should), but the cost of accessing the Internet, especially when paying top dollar per night.

The challenge (‘costly’ Internet access) presents a wonderful opportunity for Islamic banks, Takaful operators, and even Dubai Financial Market, an Islamic stock exchange, to sponsorship Internet access at [the better] hotels. The goodwill will be directed not towards the hotel (directly), but by sponsoring Islamic financial institution.

The hotel guests become potential clients, partners, and provide business development opportunities, or may even provide valuable feedback.

Furthermore, they become a brand ambassador for the bank, via word of mouth ‘endorsement,’ as every-time access Internet in room, have to (endure) the commercial about the bank. For example, on Emirates airlines, one views the commercials, luxury brand, hotel, or financial institutions, before being able to watch a movie on ICE.

For the hotel, it may result in repeat customers and referrals to colleagues and families without incurring marketing costs.


Islamic financial institutions need to think outside the box on not only marketing, but also expanding their customer base.

‘Traditional thinking is all about “what is”

Future thinking will also need to be about what can be.’
— Edward De Bono

Internet access is a right and Islamic banks should lead the charge.

[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.]

(Courtesy: Khaleej Times)

Common Bond — Islamic finance and clean energy

Posted by Indian Muslim Observer | 07 June 2013 | Posted in , , , ,

By Rushdi Siddiqui

‘I don’t have a set of tenets, but I live an ethical life. I practice a humility that presupposes there’s a power greater than myself. And I always believe, don’t inflict harm where it’s not necessaary.’ -- Michael J. Fox

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.

[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.]

(Courtesy: Khaleej Times)

Innovation and invention in modern Muslim world

Posted by Indian Muslim Observer | 02 June 2013 | Posted in , , , , , ,

By Rushdi Siddiqui

"Innovation distinguishes between a leader and a follower" -- Steve Jobs

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.
Quran: 96:1

Created man from a clot of blood
Quran: 96:2

Read: And your Lord is the Most generous
Quran: 96:3

Who taught [man the use of] the pen
Quran: 96:4

and taught man that which he did not know
Quran: 96:5

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.

Innovation formula?

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.

First step

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.

[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.]

(Courtesy: Khaleej Times)

Is the Islamic finance industry ready for social media?

Posted by Indian Muslim Observer | | Posted in , , , , ,

By Rushdi Siddiqui

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.

LinkedIn, Twitter

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.]

(Courtesy: Khaleej Times)

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