Banking in the time of Ramadan: reconciling contemplation with profit-making

how-to-offer-sadaqah“The month of fasting has come, the emperor’s banner has arrived, withhold your hand from food, the spirit’s table has arrived. The soul has escaped from separation and bound nature’s hands; the heart of error is defeated, the army of faith has won.” — Rumi

The UK prime minster, David Cameron, in his Ramadan message states: “Ramadan is about charity, contemplation and community.”

In the context of Islamic economy contemplation, here are three thoughts for consideration during the holy month of Ramadan.

Global Zakat fund

It is well-known, understood and accepted that Zakat, third pillar of Islam, extremely important during Ramadan, and mentioned in 82 places in the Holy Quran, and has eight classes of recipients: The masakeen — the destitute; fuqaraa — the needy or poor; amil’ Zakah — the alms collectors; Fi sabi ‘Lillah — in the path of God; gharimun — people burdened with debt; Ibn as’Sabil — the wayfarers; riqab — people in bondage or slavery; Mu’Allaf — those who have inclined towards Islam.

But, can Zakat also play a meaningful ‘role in Muslim socio-economic development?’

In 2009, the World Zakat Fund (WZF) was established by a London-based Shariah consulting/structuring, BMB Islamic, with the objective of ‘collecting and distributing Zakat in an organised manner making use of modern management techniques.’  It was backed by the Malaysian government to alleviate poverty.

The CEO of BMB stated: “…35 per cent of the fund raised would be used for immediate consumption, emergency and relief and would be partly managed and disbursed by international Zakat organisation. The remaining 65 per cent would be managed by BMB Islamic. The target size of the fund for the first year is $750 million, which is expected to grow to $10 billion in 10 years. “The distinguishing feature of WZF is that it manages Zakat, for the first time, in a sustainable way ensuring growth and continuity.’ — Source: Arabnews.

Needless to say, the Zakat fund did not take off, may be ahead of its time, but, now, the time may be ripe and right to revisit a professionally run Global Zakat fund that benefits the eight intended recipients by way of returns.


The convergence conversation has traditionally been about building bridges, i.e., standardisation, between the leading regions for Islamic finance: GCC (led by Dubai, UAE) and SE Asia (led by Malaysia). While generalisations about Malaysia being too liberal or GCC being too strict are less frequently aired, because of cooperation, cross fertilisation of scholars, etc., it’s still important work in progress.

Now, the convergence conversation needs revisiting, as the need of the hour is (Islamic finance) expansion to include the $1.6 trillion halal (or Muslim lifestyle) real economy six sectors. Islamic finance needs to expand beyond murabah and real estate (to reduce concentration risk), and halal industry needs to position itself as an asset class and Islamic financing opportunity for end-to-end halal offering.  By way of an example to show-case the convergence opportunity, a company (asset backed) in agro-food halal sector will probably have conventionally financed balance sheet, hence, opportunity to refinance with sukuk?  Is takaful used to insure their facilities and equipment? If selling overseas, Islamic trade finance utilised? If looking to grow organically, is Islamic working capital available or to grow inorganically, acquisition with Islamic structure and capital? If company is looking to develop, say, alternative to porcine based gelatin, is venture capital involved?

Thus, the combinations of the $1.3 trillion Islamic finance with the $1.6 trillion halal is Brics opportunity: growth story, growth markets with growth demographics. If both niche sectors continue to take a silo approach, the status quo will prevail: how many are willing to live in a ‘silo?’

Profile IPO from GCC

Question: What could generate media and investor frenzy for dedicated Islamic financial institution on par to the public listing of social-media giant Facebook or the pending listing of e-commerce giant Alibaba?

The Islamic Development Bank (IDB) was founded in 1973, by the finance ministers of the Organisation of Islamic Cooperation (OIC), and opened its doors for business in 1975. The bank shareholders are the 56 member states of OIC, it has received the highest credit rating, AAA, from the agencies, and is observer at the United Nations General Assembly.

The IDB recently held a working session organised by Board of Governors and they raised ‘the concerns and priorities of the next stage of IDB ‘s strategic role and affirmed that the role of the bank in the coming years is to face the enormous challenges faced by the IDB member countries.’

Now, imagine the buzz that would be generated if talks started to circulate about the public listing of the Jeddah based 40 year old Islamic Development Bank (IDB)! Where to list? What would be the size? Would it be hugely oversubscribed like the UK sovereign sukuk?

The writer is a global leader and head of Islamic Economy and senior partner at Dinarstandard. Views expressed by him are his own and do not reflect the newspaper’s policy.

Source: Al Bawaba

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