1. An Emerging Islamic Financial Landscape In North America
Alfatih Aryasantana GP (G )
Kamal Hassan (G )
Muhamad Kholid (G )
Rehan Saeed (G )

2. Outline Islamic Financing Landscape in: Genesis: How it all began
Malaysia
North America
Genesis: How it all began
Identifying the Markets in NA
Islamic Financing Products
Challenges
Conclusion

3. A national agenda backed up by the government
Islamic Financing in Malaysia
A national agenda backed up by the government
Islamic Financing in North America
Grassroots started by the Muslims of North America

4. Adequate institutions and Market Infrastructure
“One of the basic functions that determine the robustness of an Islamic banking system is …”
Adequate institutions and
Market Infrastructure

5. Malaysia Islamic Financial Landscape
North America Islamic Financial Landscape
Islamic
Financial
System
Regulatory framework: BNM
Legal Set-up: Islamic Bank Act & BAFIA
Islamic
Financial
Market
Surplus
Sector
Deficit
Sector
Central Shari'ah Board
Takaful
Direct
Financial
Market
Islamic
Money
Market
Indirect
Financial
Market
Commercial
Banks
Unit
Trusts
Islamic
Capital
Market
Islamic
Bond
Market
Finance
Companies
Islamic
Equity
Market
Merchant
Banks
Payment systems
Financial disclosure:GP8

6. North America Islamic Financial Landscape
Conventional
Financial
System
Islamic
Financial
System
Regulatory framework: Federal Reserve
Legal Set-up: National Bank Act of 1864
Islamic
Financial
Market
Conventional
Financial
Market
Surplus
Sector
Deficit
Sector
Takaful
Direct
Financial
Market
Islamic
Money
Market
Indirect
Financial
Market
Commercial
Banks
Unit
Trusts
Conventional
Capital
Market
Islamic
Capital
Market
Islamic
Bond
Market
Finance
Companies
Islamic
Equity
Market
Merchant
Banks

7. “…genesis of the present Islamic financial structure began with the institutional building in 1983.”
Islamic Unit Trust Arab-Malaysian Unit Trust
Syarikat Takaful Malaysia
Islamic Banking Act
Time Line 1983 – present day
The First Islamic
Financial Institution in Malaysia
Tabung Haji
1969
1969
Tabung Haji
1983
1984
1993
1994
1999
Bank Islam Bhd
Islamic Inter-bank Money Market
KL Shariah Index
University Bank/University Islamic Financial Corp in 2005
SAMAD
Group (OH)
HSBC
[NY only]
United Bank
of Kuwait (NY)
Dow Jones
Islamic Fund (NY)
Amana
Mutual Funds (WA)
UM Financial
Canada
Time Line 1981 – present day
Islamic Financial
Institution Development
Islamic Cooperative
Housing Canada
1981
1981
Islamic Cooperative Housing Canada
1986
1987
1994
1996
1998
1999
2000
2002
2003
2004
2005
Takaful USA (NJ)
Azzad
Funds (VA)
Devon Bank
(Chicago)
Shariah Capital (NY) (Hedge Fund)
LARIBA (CA)
Dow Jones
Islamic Index (NY)
MSI
(TX)
Guidance Financial Group (VA)
Bank
Whittier (CA)
Salam Financial (Canada)

8. Islamic Financial Products Offered
Name of Institution
Location
Type of Institution
Islamic Financial Products Offered
LARIBA
USA
Finance House
Home, auto, and business financing
Guidance Financial Group
Home Financing
SAMAD Group
Services – Home Financing
MSI
Home, auto, and equipment
Islamic Co-operative Housing Corp
Canada
Home financing
Ansar Co-operative Housing
Qurtuba Islamic Housing Coop
Salaam Financial
UM Financial
Home financing,
Takaful Canada
Islamic Insurance
Insurance
First Takaful USA*
Islamic insurance
United Bank of Kuwait*
Conventional Bank w/ Islamic window
University Bank
Fully fledge Islamic Bank
Interest-free deposit accounts, home financing
HSBC
Home financing, interest-free checking accounts, credit/debit card
Devon Bank
Home and business financing
Bank of Whittier
Interest-Free Personal and Business Checking Account, Riba-Free VISA ATM/Debit Card,
Saturna Captial (Amana Mutual Funds)
Islamic Mutual Fund
Halal investment, Education saving account, retirement plans, saving for hajj
Azzad Asset Management
Islamic Ethical Fund
Hala Investment
Shariah Capital
Islamic hedge fund
Halal Investment
Dow Jones Fund
Islamic mutual fund
Dow Jones Islamic Index
Shariah Index
Investment screening

9. IDENTIFYING THE MARKET

10. Experts identify three distinct levels of observance in the Muslim community.
Most observant Muslims who don’t use conventional financing.
the core market for Islamic financing arrangement
Muslim who currently use conventional financing, but might switch to Islamic financing if available.
consist of N. American born children of immigrants
Least observant Muslims, who currently use conventional financing, would continue even if religious compliant alternative were available.

11. Mosque affiliation does not necessarily imply a demand for Islamic finance, financial institutions assume that mosque attendees would form the basis of their Islamic market and have concentrated their outreach efforts on this population.
In 2001, there were 1,368 mosques in the U.S. The states with the greatest number by rank were;
1. California – LARIBA
2. New York – HSBC only offers Islamic financing in New York..
3. Michigan – University Islamic Financial
4. Pennsylvania – Guidance Financial Group
5. Texas – MSI (Muslim Savings & Investment)
6. Ohio - Samad Group
In Canada, it largest population of Muslims and mosque can be found in Toronto;
Co-operative Housing Society of Toronto, UM Financial, An- Nur Cooperative Corp. headquarters are located.

12. WHAT WERE THE NEEDS TO THE MUSLIMS IN NORTH AMERICA?
Muslims needs in the West have primarily been the willingness to become homeowners.

13. HOW IS CAPITAL MOBILISED BY IFIs IN NORTH AMERICA?

14. UM Financial Model: Capital Mobilization

15. CHOICE OF ISLAMIC FINANCING PRODUCTS IN NORTH AMERICA

16. Early Stages: Murabahah Ijarah
Due to “similarities” in structure with conventional financing
Murabahah is close to loan contract
Ijarah close to leasing contract

17. MURABAHA 1. Consumer selects house and applies to financier.
2. Financier approves consumer and house.
3. Financier pays seller and obtain title
4. Financier sells on deferred basis to customer
Financier transfers title.
Consumer makes monthly payments and
Grants mortgage and signs note.

18. Murabaha Illustration
Customer/ Owner
Islamic Bank
House Developer
(3) Payment using Bank’s own funds
(4) Sell the Goods/Assets at marked-up price
(5) Settlement on deferred term
(2) Islamic Bank purchase aforesaid assets
(1) Customers Identify the Assets and Request bank to finance the house.

19. IJARA wa IQTINA
Ijara wa iqtina: The words mean ‘leasing and acquisition’ and it is variably called ijara muntahia bitamlik, ‘leasing ending in ownership’ or lease to own. The United Bank of
Kuwait and LaRiba as well as others have applied this concept. It has a history of informal application as well as program application dating to the 1920’s.

20. Ijara Illustration
1. Client identifies and approaches Vendor or supplier of the asset that he/
she needs, collects all relevant information;
2. Client approaches Bank for ijara of the asset and promises to take the
asset on lease from the Bank upon purchase;
3. Bank makes payment of price to Vendor;
4. Vendor transfers ownership of asset to Bank;
5. Bank leases the asset, transfers possession and right of specified use to
Client;
6. Client pays ijara rentals over future (known) time period(s).
7. Asset reverts back to Bank.

21. Musharaka / Declining Balance Partnership
1. Consumer selects house and applies to financier.
2. Financier approves consumer and house.
Financier and Consumer jointly buys house and obtain title in common tenancy
4. Consumer leases house from common tenancy for monthly rent
5. Upon buyout, title is solely in consumer’s name

22. The Challenges faced for further development
Extensive regulatory environment
Organizations offering Islamic finance both product and service conformance from state and federal regulations as well as the Shariah
Restrictions on the range of permissible investments that commercial banks may hold
Costs of offering products that have little precedent
Disapproval to offer profit-loss sharing deposits
Capitalization of Funds
Market Infrastructure

23. Conclusion
Islamic investment and financial products remain unmet in North America
To increase the availability of Islamic financial services, local Islamic financial institutions must:
Access the capital markets
Leverage capital by securitizing assets
Ally with investment and brokerage firms in the US and Canada
The legal and regulatory framework in North America is not completely opposed to Islamic financing

24. THANK YOU
Wassalam