CAIRO - Luring Islamic funds into the British island, Bermuda has introduced a set of new laws to launch shari`ah-compliant platform amid efforts to become the first western center for the growing global industry, The Royal Gazette reported on Thursday, January 19.
We are looking at the Shari'ah side of Bermuda's legislation to become the first Western centre for Islamic finance, said Peter Hughes, director of Apex Fund Services group.
Hoping to become a western hub for Islamic finance, executives from the Island have been actively reviewing existing laws to launch a Shari'ah-compliant platform for investors.
These efforts began last November when Hughes, along with Business Bermuda CEO Cheryl Packwood, led a group at the 18th World Islamic Banking Conference in Bahrain.
The delegation tried to show the Island was open for businesses and clients from Asia and the Middle East, being capable of handling Shari`ah-compliant financial structures.
We are looking to launch a Shari'ah platform that will allow us to have Shari`ah vehicles and products that would enable us to become the first one of its kind, Hughes said.
We have made a real push into this niche area, he added.
Islamic banks have proved a success because of rules that forbid investing in collateralized debt obligations and other toxic assets that cause financial crises.
Islam forbids Muslims from usury, receiving or paying interest on loans.
Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.
Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.
The new shari`ah complaint rules succeeded in luring new clients from Islamic finance hubs in Asia and Middle East.
We now have strong links in Bahrain and there is a commonality of wanting to create a niche jurisdiction for Shari`ah compliancy, that is closer to the US timezone, Packwood, Business Bermuda CEO, said.
We are also focusing on Kuala Lumpur in Malaysia, as it has an enormous sukuk market.
The process for getting this off the ground may be slow but we have the Bermuda Monetary Authority and the Bermuda Stock Exchange behind us.
The Islamic banking system is being practiced in 50 countries worldwide, making it one of the fastest growing sectors in the global financial industry.
Starting almost three decades ago, the Islamic banking industry has made substantial growth and attracted the attention of investors and bankers across the world.
A long list of international institutions, including Citigroup, HSBC and Deutsche Bank, are going into the Islamic banking business.
Currently, there are nearly 300 Islamic banks and financial institutions worldwide whose assets are predicted to grow to $1 trillion by 2013.