1. Welcome to class of Islamic Banking in Emerging Markets Dr
Welcome to class of Islamic Banking in Emerging Markets Dr. Satyendra Singh Professor, Marketing and International Business University of Winnipeg Canada

4. Why Study This Topic?
↑ Market size  ↑ demand for the product  2nd largest religion  ~2 billion  cannot ignore this market segment
Source: worldometers.info

5. Islamic Banking –The Concept
Concept  principles  no deception and no riba (interest)
It is not new  7th Century
Money is a medium of exchange
Interest can lead to injustice/exploitation in society  Zulm
No real 'lending' as all 'lenders' obtain interests
To earn $ for banks, they must obtain an equity / ownership
Requires banks to participate, share risk  profit varies
Profit share is distributed instead of interest earned
Leads to more ethical society (Unlike West  you must pay interest)
This concept encourages better resource management

6. Terms Shari’ah  Islamic law Riba  Interest Hiba  profit
Ta'widh  Compensation
Ujrah  Payment in exchange for services, benefits and privileges offered to the customers

7. Islamic Modes of Finances
Rental-based
Ijara  Lease
Trade-based
Murabaha  buy ↓, sell ↑
Partnership-based
Musharaka  Partnership  time,$  share profit
Risk is shared b/w 2 person  loss or profit is shared
Mudharabah  Partnership one $, other effort
If profit, it is shared with the customer; bank takes its fee
If loss, customer loses; bank does not take its fee

8. Ijara Mortgages – Lease to Own Very Popular
Find a house to purchase and agree a sale price
Bank will then purchase the property outright
You then enter into 2 agreements with the bank
Pay back the purchase price  fixed monthly instalments  over 25 years
Pay agreed $ as rent each month  bank’s profit
Rent is set annually, ↓ yearly in % of payment
When fully paid  ownership is transferred to you
Borrow  up to 90% of the purchase price
Legitimate under Sharia law

9. Murabaha Mortgages – Bank Resells House to You
Find a house and agree a purchase price with the seller
You then agree the loan required with your bank
Typically, you will need to deposit 20% now
Bank will then buy the house and immediately resell it to you for a higher price
You pay back the bank the resale price in fixed instalments  until you own the house  < 15 years
The difference between the original purchase price and the higher price at which the house is resold to you provides the bank with a profit  Sharia compliant

10. Slightly more expensive than interest mortgages
The Mortgages
Slightly more expensive than interest mortgages
Banks have to pay slightly ↑ rates for halal (permitted) funding
Few Islamic mortgages providers, so competition is not as intense as for interest mortgages
Arrangements are complex and banks take ↑ risk
Ijara  bank owns house for 25 yrs before transferring ownership to you
Sharia Advisory Board  consists of experts on Sharia

11. Islamic Credit Cards
Ujrah Concept  Payment in exchange for services, benefits and privileges offered to the cardholders
Mudharabah  Partnership  bank $, customer benefit
Minimum age  21, With parents  18
Yearly Facility Charges  RM 2400/7200/48000
Payable Facility Charges  varies monthly; 0 if full payment paid on or < due date
Ta'widh (compensation)  1% of outstanding RM

12. Banks with Islamic Portfolios
England
HSBC, Lloyds TSB
Malaysia, Cambodia, Singapore
CIMB
Canada
Royal Bank of Canada!?

13. Surya University
Jakarta, INDONESIA
2015