Irish Minister welcomes Islamic
Finance to Ireland
Dr. Mozammel Haque
Dublin, Ireland: Islamic finance is welcome to Ireland, said the Irish Minister for Social Protection, Ms. Joan Burton, TD at the International Conference on Co-existence, Islamic Finance & Investment, organised by the Irish Business Executives Forum (IBEF), Dr. Sheikh Shaheed Satardien, President of the Muslim Council of Ireland (MCI) and International Islamic Forum for Dialogue (IIFD, held on 5-6 June, 2012, at Dunboyne Castle Hotel, Dublin, Ireland.
Irish Minister Ms. Joan Burton
Minister for Social Protection of the Republic of Ireland, Ms. Joan Burton, TD, said, “The government has laid the foundation in terms of succession law and regulations to provide for the legitimacy for the Islamic finance to be recognised in the context of the work being done in Ireland per se.”
She also mentioned, “We do have a lot of work to do to develop and to evolve in this country, particularly the countries on the periphery which have difficulties to overcome the difficulties.
“We have had a number of significance programme in relation to regulations of finance and regulation of Central Bank in relation to legislate to financial organisations and the organisations for banks and others who provide financial services,” the Minister Ms Burton mentioned.
Minister Ms Burton is hopeful that the additional regulations should be in future considerable additional assurance to tackle disasters and she also mentioned about “regulations which make provisions for Islamic Financial arrangements.”
Mr. Tom Woods
In 2011, Mr. Taoiseach, the Irish Prime Minister spoke of Government’s view of Islamic Finance as an area where there is significant potential for growth in Ireland, mentioned Mr. Tom Woods, Financial Services, Tax, KPMG Partner, Dublin, Ireland, in his presentation and added, “While the Funds industry in particular has been successful in developing and promoting Ireland as an attractive location for Islamic Funds there remains an opportunity for further growth and diversification particularly within the banking and securitisation markets. Islamic Finance is one of the major growth areas in international finance and the Government has indicated its commitment to playing its role to support the development of this sector in Ireland.”
Speaking about the Islamic Finance developments in Ireland, Mr. Woods mentioned, in 2008, Financial Regulator established a team specialising in Sharia compliant funds in order to expedite approval process. In 2009, Woods mentioned, Irish Tax Authorities issued briefing confirming that Sharia compliant funds, Ijarah transactions and Takaful arrangements were to be taxed on the same basis as that applicable to the comparable conventional financial products.
In 2010, Woods mentioned Irish Tax Legislation was amended to tax Islamic Banking Products and Sukuk issuances on the same basis as their conventional equivalents. This includes Murabaha, Diminishing Musharaka and Wakala arrangements.. Broadly, the return under such arrangements is treated for tax purposes in the same way as interest is. A person elects into the tax regime.
Mr.Woods also said, dedicated team was established to expedite a sharia compliant fund applications; sharia compliant funds and leasing operations established in Ireland. He also mentioned, increasing interest in using Ireland as onshore location for Sukuk issuances; increasing interest in investing in aviation assets and renewable energy projects.
Referring to opportunities, Mr. Woods said, % tax rate for qualifying funds; withholding tax exemptions on lease rentals, interests and dividends; 12.5% corporation tax rate – secure (lowest amongst OECD member countries).
Dr. Sheikh Shaheed Satardien
Earlier, in his inaugural speech, Dr. Satardien, President of the Muslim Council of Ireland and the Executive Chairman of the Irish Business Executives Forum (IBEF) said, “The founder of Islam had huge experience of commerce prior to his revelations from God. The Holy Qur’an states that interest must not charged in lending money. That is the most fundamental aspect of Islamic Finance. From an Islamic point of view an increase in capital without any services provided or risk incurred is forbidden.”
Speaking about how big is Islamic Finance, Dr. Satardien mentioned, “According to Standard & Poor’s Rating Service Islamic finance assets reached at least $400 billion during 2009 with a potential market of $4 trillion. According to Forbes in 2008, there are at least $500 billion in assets being managed according to Islamic principles and that the market is growing at more than 10% per year. Although it may be much smaller than the non-Islamic financial industry, these figures are very significant. Many of the biggest Islamic banks are in Iran, with Bank Melli having assets of over $45 billion. Saudi Arabia, Kuwait, Malaysia and the United Arab Emirates are also big movers in the Islamic finance world.”
In his speech, Dr. Satardien raised a number of questions. “Is it possible to pursue economic growth and still protect our natural and physical environments? How should governments try to raise the finance needed to pay for health and education services and income support programmes? What is the proper role for government in the economy? Would we be better off with much lower taxes but also poorer social services than we presently enjoy?”
Dr. Satardien mentioned, “The current practices in this market, in banking, in investing etc, are not sustainable. They are not sustainable for many reasons, including moral ones, but the sheer boiling anger of the global taxpayer when the full impact of the theft of the State coffers becomes apparent, will be the final sustainable nail in its coffin.”
Naturally, the question is what sort of money market practices can replace the current model? Dr. Satardien said, “Islamic investments, to be fully compliant with our religion, must not be interest based, but must rely on profits for services rendered, for risk-sharing, for profit sharing itself. Islamic Finance should be Islamic in its true sense and not only compliant with certain aspects of Islam. If we do window-dressing with it and not make it Islamic in its essence it will inevitably, like conventional finance, also fail.”
Frank Kaufmann made a comparison between Islamic banking and Western system of Banking. He said, “The dominant factor that differentiates sharia law from our own Western laws (aside from obvious religiosity) is that of usury. While Christians and Jews did away with this belief long ago, the Qur’an “forbids the charging of interest in exchange for a loan, or ‘riba’” (2). The reason for this, according to the Qur’an, is “because it harms the humane aims of Islam towards mercy, solidarity and cooperation” (3). This is a founding principle that has shaped Islamic banking.
Mr. Kaufmann continued, “Islamic banking itself has the essential belief that money should be used productively and investment activities should be dealt with in partnerships so that risks and rewards are shared by creditor and debtor alike. Also, according to sharia, excess capital (i.e. profits) ought to be put back into the community in the form of zakat (alms). But for all intents and purposes it includes stocks, real estate investments, insurances, and currency swaps that are sharia-compliant (called sukuks). There are limits, though; “sharia law prohibits investing in certain industries or products, including alcohol, tobacco, pork, and pornography” (4). Another popular instrument is the murabaha, "essentially cost-plus financing which involves the sale and repurchase of a commodity to fund a loan” (5).”
Professor Dr. Hamid Ahmad Al-Refaie
Professor Dr. Hamid Ahmad Al-Refaie, President of International Islamic Forum for Dialogue (IIFD) presented a paper on Safe Economy. He spoke about i) The Zakat system; the philosophy of the Zakat system. He said, Zakat is not just alms or benefaction from rich people, it is not just official taxes. Zakat is the divine right which should be pay yearly to the needy from the net income of rich people. Zakat is Islamic philosophy for encouraging of circulating and alternation of money among people in the societies.
Dr. Refaie said, strong economy based on a strong production; and strong consumption. So any defect in this equation certainly will destroy the economy in any country. The crisis which is facing the world societies today is because of the big defect between number consumers and producers. There are only a few producers in front of a big number of powerless consumers; because they do not have purchasing power. Certainly such case is destroyer economic situation.
“Big numbers of incapable consumers surely lead to stagnancy in producing; the thing which will lead to more of joblessness and to more complication in the world economic crisis,” said Dr. Refaie and added, “What is the solution..? Islam legislated the Zakat System to resolve such crisis. Zakat is human economic system aims to give chance to the jobless and needy to start their life as producers and active persons in their societies. But how..?”
He maintained, “By offering money to the jobless and needy to enable them to become producers in the societies and to become positive consumers. Such this doing makes money go into process of circulation among the needy and wealthy in the societies. Such a process of the money's circulation in society certainly will end the case of economic stagnancy and refresh the economic development.”
Dr. Joseph Coughlan
Dr. Joseph Coughlan, Head of School of Accounting & Finance, College of Business Dublin Institute of Technology, gave an Irish perspective of Islamic Finance. He mentioned about Importance of the Islamic Finance market internationally and nationally and Widespread take-up of the instruments because of their specific characteristics
At the same time, he mentioned a lack of knowledge in Ireland and internationally on the key principles. He mentioned what he is doing through the Dublin Institute of Technology. He mentioned the programme of the DIT: teaching Islamic Culture and Organisation; Islamic Economics; Fundamentals of Islamic Finance; Islamic Financial Economics; Risk Management in Islamic Finance; European & Irish Perspectives and Accounting for Islamic Finance Instruments.
He also mentioned about the Award granted by the DIT, such as i) Continuing Professional Development (CPD) Postgraduate Diploma in Financial Services (Islamic Finance); At Level 9 (Masters level) on the National Qualifications Framework and Opportunity to convert to full postgraduate diploma/MSc in time.
Dr. Mozammel Haque
Dr. Mozammel Haque talked about some basic things such as the concept of Islamic Finance, its fundamental principles and its growth world wide and the UK experience. While tracing the growth of Islamic finance in Europe, Dr. Haque mentioned the historical developments of Islamic Finance in the United Kingdom and pointed out some of the milestones of the development of Islamic Finance in the UK:
Dr. Haque also mentioned the role education & training institutions are playing in imparting Islamic Finance and awarding University degrees in Islamic Finance. In this connection, he mentioned, Markfield Institute of Higher Education, Islamic Foundation, Leicester; Cas Business School, City University, London; Bangor Business School, Bangor University, Wales; Henley Business School, Reading University, England and SGIA and DBS, Durham University, England.
Dr. Haque also mentioned the Organizations offering qualifications & training in Islamic Finance; such as Associations of International Accountants (AIA); Chartered Institute of Management and Accountants (CIMA); Securities and Investment Institute (SII) (Islamic Finance Qualification); Institute of Islamic Banking and Insurance (IIBI).
Dr. Haque also mentioned about the Muslim Organizations which are engaged in Islamic Finance, such as The Islamic Foundations, Leicester; Muslim Council of Britain (MCB) and The Islamic Finance Council.
There are two Chairs in Islamic Finance in the United Kingdom, Sharjah Chair in Islamic Law and Finance, Durham University and there would be Chair in Aston University , Birmingham.
Mr. Jamal Harwood in his presentation advocated for the gold standard: which is the future for a stable global currency and he mentioned the Islamic solutions to the present economic crisis. He said, businesses invest based on equity finance that encourages risk sharing and rewards profits; taxation is designated and defined so the government cannot increase and create new taxes. There are no income tax so work is incentivised and disposal income is higher boosting spending. There are no expenditure taxes which lowers prices and increases affordability.” This is the Islamic Economic Solutions-2.
According to Mr. Harwood, the Islamic Economic Solutions -3 are: Taxes are on wealth so the poor don’t pay. There is active redistribution of income via paying Zakat (wealth tax) so the poor and needy are lifted out of poverty. There is active and fast circulation of money through the prohibition of hoarding gold and silver, no interest and a wealth tax of 2.5% which encourages equity finance. The state is prohibited from fixing prices of goods and services or wages allowing prices and wages to fall as well as rise and thereby stimulating the economy even when overall demand is low. There are restrictions on derivatives trading and other harmful business activities.”
Abdul Kader talked about European stock markets vis-à-vis Islamic stock markets. In the light of the recent financial crisis, he said, relatively, the Islamic stock markets were less impacted by the crisis; and that presents an opportunity for those markets to attract international investments that are concerned with international portfolio diversification.
“However, this also presents a challenge for the Islamic stock markets to improve their investment climate through effective financial regulation and prudential actions according to Islamic perspectives in order to attract more Muslims investors or more Islamic international funds,” said Alaoui.