Summit Notebook

Fatwa shopping? Not for Barclays

The limited number of Sharia scholars has meant the same group of men are on various advisory boards which has led to criticism that people can go “fatwa shopping” and that scholars are in it for the money.

Not so, says Harris Irfan, head of Islamic products at Barclays Capital.

“We’re not out fatwa shopping,” he said at the Reuters Islamic Banking and Finance Summit. “We want to work with the scholar who’s willing to say ‘no’ (to non-Sharia products)”

A study last year by Funds at Work, a consultant for the fund industry, looked at scholars’ engagement by financial firms in the Gulf Arab region. It found the top 10 scholars hold about 46 percent of all available positions in the region.

Internationally, excluding the Gulf, the top 10 scholars – out of 70 active outside the region — hold 58 percent of board positions.

Scholars can earn up to $150,000 per project and it can take four to six months for a Sharia-compliant project to be developed. For the scholar, that can mean between four to six weeks of work on a project.

It may look cushy but often these same scholars will work for nothing to help develop standards for the industry.

Skeletons in the closet, sprawling ownership stymie Gulf bank consolidation

Anyone waiting for Gulf banks to consolidate — a long talked about prospect — can forget about it for now.

With debt markets shut, leaving only pricey equity financing, budding suitors are standing frozen, unable to make a commitment.

But the lack of reasonable financing for mergers is not the only obstacle, according to Frederick Stonehouse, head of strategic mergers and acquisitions at Bahrain’s Unicorn Investment Bank .

Valuing the assets of privately-owned banks, the best candidates for consolidation, is no easy task.

“Many of the banks which I feel should be looking for consolidation are unlisted, so how do you value those?” he says.

 And then there is the old, familiar issue of transparency — as in, the lack of it in the region. 

“You think everything may have come out of the woodwork but maybe it hasn’t. You could be going into an institution and paying quite a price for it and then finding that the problems are a lot deeper than you imagined,” he says.

from Global Investing:

The best of both worlds?

Combined Shariah and ethical/SRI products could be the way forwards for Islamic finance investing, according to Dr Humayon Dar, CEO at BMB Islamic, the Shariah consultancy at BMG Group.

Speaking at the Reuters Islamic Finance Summit today, Dar highlighted the development of an upcoming F&C fund that will meet both ethical and Shariah investing criteria, and can be sold to both Muslims and non-Muslims. "I see this as the way forward in markets such as Malaysia, where a significant proportion of the population is non-Muslim," he said, adding that once such products have established a track record, it should appeal to a broader audience, and encourage other launches.

Marrying the Western and Islamic traditions of investing could help Shariah surmount a number of hurdles that have so far limited its appeal. A recent Oliver Wyman survey found that only half of the 1.4 billion Muslims worldwide would opt for Islamic finance if given a competitive alternative to conventional products. Dar said he had conducted his own survey which found that no more than 25 percent of UK Muslims was interested in Islamic banking and finance. "The vast majority prefer competitive quotes from non-Shariah providers," he said - this is particularly the case in the mortgage sector.

In other countries he said the problem is twofold. Where Arabic is not the dominant language, the severity of the prohibition on earning interest on financial products is not recognised by the majority of Muslims. In other countries it is a question of poverty: "This technicality is not relevant to their thinking," he said.

Despite this, he was optimistic about the prospects for growth in the next decade: "By 2020, Islamic financial products will account for 40 percent of the total in the top six Islamic finance markets," he said. These markets include Saudi Arabia, Malaysia, Bahrain and Kuwait.

In the short term he also predicted a bumper year for sukuk - the Islamic equivalent of a bond. The last six months of 2009 should see an increase in sukuk activity, and in 2010 he predicted increases in activity of up to 200 percent.

"This is an asset class that could grow very quickly as the fall in oil prices has consequences for governmental budgets - it's likely that we will see some sovereign issuance," he said.

AUDIO – The costs of war

Wars have numerous costs and most of those are unimaginable for most of us not in the middle of one.

But, aside from the tragic cost of death or injury, wars also cost a lot of money to finance and President-elect Barack Obama will be facing some of those costs (as well as a whole mess of other stuff) when he takes office in January.

As the United States grapples with a severely struggling economy, a number of federal bailouts and questions about our overall financial shape, Obama will also have to decide rather quickly how he will prosecute the wars in Iraq and Afghanistan and the staffing of the military.

On Monday, Loren Thompson of the Lexington Institute and Richard Aboulafia of the Teal Group spoke at the Reuters Aerospace and Defense Summit about the kinds of challenges Obama will face and just how much this is all going to cost.

Thompson (who you hear speaking first in the audio clip) and Aboulafia have been at our summits before and are always highly engaging and well-informed guests. But this year, maybe more than we’ve ever seen, the two warned that the problems facing the country and the defense sector were as serious as they have seen.

Staffing the military is an expensive proposition and it’s getting more so, the two concurred. And a government with a lot on its plate might be forced to take a second look at staffing committments. They think Obama will.

The Aero and Defense Summit is the final one of the year. In 2008, Reuters has had 33 summits around the globe and have as many or more planned for 2009. Our previous gathering, Reuters Investment Outlook Summit, provided clients with an excellent look at how to manage through what will certainly be a challenging 2009.

AUDIO – Teddy Roosevelt had it right

The world is a more dangerous place because of the global economic meltdown, according to Northrop Grumman Chief Executive Ronald Sugar, whose company provides specialized aircraft, radar and other electronics to meet that threat.

Sugar was the kick-off speaker at the annual Reuters Aerospace and Defense Summit on Monday in Washington, D.C.

Sugar acknowledged that hunger and thirst could not be solved with his company’s products but  argued that diplomats dealing with the world’s woes would be more likely to be successful if diplomats followed President Teddy Roosevelt’s famous dictum.

“You only talk if you have a big stick,” he said.

The Aero and Defense Summit is the final one of the year. In 2008, Reuters has had 33 summits around the globe and have as many or more planned for 2009. Our previous gathering, Reuters Investment Outlook Summit, provided clients with an excellent look at how to manage through what will certainly be a challenging 2009.

– Additional reporting by Diane Bartz in Washington

It’s never easy keeping to times

The Reuters Middle East Investment Summit kicks off on Monday 3 November. With the world facing its worst economic downturn since the 1930s, the summit is set to provide a view from the world’s largest oil producing nation. Events organisation is never easy and in such turbulent times, the region is proving just as difficult. Five speaker cancellations just 12 hours before the summit highlighted just how diifficult keeping appointments is in the region. Emergency board meetings, sudden trips overseas or in one case “yes we confirm in the morning” to “we are not sure by lunch time” to “no, no the chairman has other engagements by the evening.” Anybody doing business in the region is acutely aware that appointments are never rigid, but when the world needs stability and not chaos it might be time to keep to those appointments to reassure the investment community. As one public relations executive noted “As they say in these parts In Sha’ Allah (God Willing) next time.”

Audio – Kuwait Finance House sees silver lining in downturn

 Lim Boh Soon, chief executive officer of Kuwait Finance House in Singapore said at the Reuters Wealth Management Summit that he sees the period of downturn in the global economy lasting 18-24 months.

However, he thinks the market sell-off over the past two weeks has thrown up good value and said the Middle Eastern bank will look to raise up to $600 million for three Asia-focused funds next year.  Kuwait Finance House is the Gulf third-largest lender.

What do you make of Lim’s assessment on the global economy? Do you think it is a good idea to start buying into the market?

Click here and hear to listen on Lim’s assessment of the global economy.

A philosophical look at the habits of the super-rich

The credit crisis may be hitting the man on the street hard, but spending by the “other half” on the latest super yacht or Damien Hirst work of art looks set to carry on relatively unaffected.

Super-wealthy individuals in commodity-rich areas such as Russia and the Middle East are reaping the benefits of a five-year boom in oil and other commodity prices.

Even though oil and commodity prices are now coming off sharply, the boom is still feeding through into their spending power, provided they haven’t done anything too risky with their cash in the meantime.

And it’s happening just when everyone else is cutting back on non-essentials.

“It’s like philosophy,” explains ING’s Deputy CEO of Private Banking Bernard Coucke.

“Philosophy always comes after a century of economic prosperity, never before. Spending always comes after prosperity, never before.”