UKIFC features in The Global Business Magazine
The UKIFC features prominently in the most recent edition of The Global Business Magazine following a successful Global Ethical Finance Forum 2017 in Edinburgh.
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The 2nd Global Ethical Finance Forum a huge success!
Day One: Reflecting on the aftermath of the global financial crisis and highlighting the need of establishing a sustainable financial system, Keith Brown MSP, Cabinet Secretary for the Economy, Jobs & Fair Work, Scottish Government, said, “In the ten years following the global financial crisis there has been something of a re-alignment in attitudes among bankers and investment managers and among customers and shareholders. [...] Interest in establishing an alternative, sustainable, responsible and ethical financial system continues to grow as does interest in developing a more long-term and responsible form of economic development.”
Credit: Ian Jacobs
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Speaking on behalf of the UKIFC and explaining how Scotland poses as a fitting backdrop to host the narrative due to its strong heritage in ethical finance, Omar Shaikh, Advisory Board Member said, “Globally the city is a leading financial hub and within this, Edinburgh is a key location for asset management and banking. With Scotland’s proud heritage in prudent finance through the mutual life companies, origins of the savings bank movement, I believe that Scotland presents a natural place to convene and host this international dialogue which is pertinent now more than ever.”
Stressing on the massive opportunity that lies for mainstreaming ethical finance, Lord Sheikh, The Baron Sheikh of Cornhill and Patron of the UKIFC, said, “A fundamental part of the UK’s economic success strength stems from bilateral trade. This will be more important than ever before as we embark on a new era for our country post-Brexit. In particular, I believe that we must now seek greater economic and trade ties with our friends from across the globe and forge new trading agreements. In this context, the APPG believes that Islamic and ethical finance can offer a gateway to building new relationships and accessing new markets.”
Day Two: In an exemplary keynote address and what was possibly a fitting case study, Jameel Ahmad, Deputy Governor, SBP, took the audience on Pakistan’s journey to embracing financial inclusion, wherein he spoke about responsible finance and its pre-requisites and cited some informative statistics highlighting Pakistan’s global recognition in embracing financial inclusion. He further expanded on State Bank of Pakistan’s impressive strategic approach towards responsible finance, in particular strengthening the framework for microfinance consumer protection and the national financial literacy programme being rolled out. He also took into account the obstacles that may pose a hindrance in achieving the goal of effective financial inclusion.
In a powerful and fitting closing keynote address, Nigel Kershaw, Chair, The Big Issue, said, “There is a lot of talk about ethical finance and in particular ESG and social impact because it’s talked about primarily by people involved in the financial sector. I believe the democratisation of capital is extremely central to what we do. Quite often, the discussion is top-down supply and product-led and for me, it often misses one of the most important social outcomes that is quite often forgotten – that’s the opportunity for ordinary people to invest and save in creating a better place to live for themselves, their families and the community around them. It’s not about mainstreaming ethical finance, it’s all about bringing the mainstream to us.”
Following the welcome and keynote addresses was the Plenary Session on the interplay between ethics, faith and finance which witnessed leading experts deliberate on how ethics should redeem its integral role within finance, beyond being just a convenient addendum.
Click on the links below to see press releases from the forum.
UKIFC and Church of Scotland convene 3rd Shared Values Workshop at Dalmahoy Hotel and Country Club
The Islamic Finance Council UK (UKIFC) and Church of Scotland co-hosted a private event at the Dalmahoy Hotel and Country Club on 12th September 2017.
The round table was the third in a series of three workshops that forms part of a joint venture between Islamic finance and the Church of Scotland (see BBC). The round table picked up on discussions from earlier round tables held in Edinburgh and the House of Lords in London, delivering a draft Shared Values Framework.
The framework was authored and presented by Shaykh Ruzwan Mohamed, one of the UK's leading Islamic theologians to an audience of seniorrepresentatives from the faith traditions and financial services sector including the Church of England, Church of Scotland and the Quakers, international scholars and academics, and senior figures from CMS, Wintons, DDCAP, Al Rayan Bank, RBS, HSBC and RJ Fleming.
HH Sanusi II, Emir of Kano (and former Governor of Central Bank of Nigeria), who has supported the initiative since inception and attended earlier round tables sent his apologies, commended the UKIFC and Church of Scotland in reaching this impasse and reiterated his support in a video message.
The presentation by Shaykh Ruzwan Mohamed was well received and appreciated by the audience who broadly agreed with its content. Contributions from Sir David Walker (former Chairman of Barclays Bank and Morgan Stanley) and other participants were taken on board and will form part of the considerations in moving on to the research and development stage of the joint venture to deliver a practical solution.
A selection of pictures from the event can be seen below:
Shari'ah Governance – what can the UK add to the debate?
Shari'ah authenticity is fast becoming a hot topic as the fall-out from the Dana Gas case, to be heard later this year (2017), continues to emerge. The issuer company is refusing to repay holders of its sukuk having received legal advice indicating that the bond, which they themselves issued, is no longer Shariah-compliant in the UAE therefore rendering it unlawful. Creditors counter that regardless of any recent changes in Islamic finance interpretations the sukuk was compliant at the time it was issued and should therefore be honoured. Maintaining the integrity of Shariah compliance is the core function of Shariah governance and the outcome of this case could considerably impact confidence in the authenticity of both the sukuk market and the Islamic finance industry as a whole.
With consumer and regulatory demands increasingly focusing on trust, transparency and accountability, corporate governance has become a critical challenge for all financial institutions. In particular, this trend has shone a light on Islamic financial institutions, where in-house boards of Islamic scholars self-regulate the institution’s Shariah compliance, raising questions around whether the current model of governance is fit for purpose. This theme was debated in London last October at the Islamic Finance Council UK (UKIFC) / International Shari’ah Research Academy for Islamic Finance (ISRA) Thematic Workshop which brought together local and international experts from Malaysia, GCC, Pakistan and elsewhere to explore issues relating to Shariah governance, regulation and business ethics.
The Bank of England (BoE) shared its current views on Islamic finance and the challenges in regulating the Shariah governance process as a secular regulator. With no UK legal requirement for Islamic financial institutions to have their own Shariah board the BoE’s policy approach is to seek to create a level playing field for Islamic finance vis-à-vis conventional finance. The focus of the Financial Conduct Authority is therefore on product disclosures (i.e. ensuring that statements relating to Shariah compliance are accurate), leaving it to the consumer to determine if they are comfortable with the interpretation of Shariah presented.
At the Workshop the UKIFC and ISRA launched a pioneering report exploring the potential role for External Shariah Audit in providing an additional independent check on the work of Shariah scholars.
The report seeks to strengthen Shariah assurance by calling for external Shariah audit to be made mandatory in Islamic financial institutions across the globe. The report was compiled on the basis of 30 in-depth interviews, including input from Central Banks in Bahrain, Malaysia, Oman and Pakistan along with AAOIFI and IFSB and financial institutions and audit firms.
The report’s findings indicated that while stakeholder feedback was broadly in favour of moving to a mandatory requirement for external audit, significant challenges remained in relation to the availability and experience of potential auditors and in defining their scope of work. The question of the public disclosure of external audit reports also remains a thorny issue.
An audience poll conducted at the event yielded the following results:
- 56% thought that the current model of Shariah Governance is NOT sufficient
- 76% felt that external Shariah audit WILL strengthen Shariah Governance
- The main barriers to the growth of Islamic finance in the UK were considered to be lack of knowledge and inadequate financial resources.
The integrity of Shariah will remain at the core of Islamic finance as without this it will lose its fundamental differentiator. Thus, ensuring robust Shariah governance frameworks are established that evolve with the growth of the industry and assist all stakeholders – including scholars – remains paramount. This will require a combined and co-ordinated global effort and the City, as a leading global financial centre, remains committed to playing its part in continuously improving governance frameworks. Pioneering initiatives led by the UKIFC, such as the world’s first CPD programme for Shariah scholars on conventional finance (since adopted by regulators around the world) and the seminal work on external Shariah audit mentioned above, have emanated from London, reflecting not only its ability to add value and provide thought leadership but also its commitment to work together with global partners in developing the Islamic finance industry.
Graham Burnside
Advisory Board Member
Islamic Finance Council UK (UKIFC)
UKIFC Board Members speak at the International Takaful Summit in London
Our Advisory Board Members, Ajmal Bhatty and Omar Shaikh were invited to speak at the International Takaful Summit in London on 11th-12th July 2017.
Ajmal Bhatty is a thought-leader in takaful and has been a practitioner and promoter for over 30 years. Ajmal is a Director at Tokio Marine Middle East, and is setting up a foundation to serve the takaful industry in steering it towards growth and stability and in developing ethical and sustainable micro-financial solutions for the markets of Africa and South Asia. Ajmal shared key insights into his work.
Omar spoke on Shari'ah Governance and Audit. Omar shared key findings from our External Shari'ah Audit Report (download a copy here) and fascinating insights from countries that had implemented Shari'ah Audits through their Central Banks. Omar said that the evolution of Shari'ah Governance was imperative as the [Islamic finance] industry evolved and used Morocco as a case study to demonstrate how emerging markets are supervising Shari'ah matters.
The 11th International Takaful Summit was a platform to discuss how the global Islamic insurance sector can capitalise on the experience of London’s insurance market in order to drive growth.
The flagship two-day programme addressed the challenges specific to takaful companies such as low penetration rates, distribution channels, suitable investment vehicles and the lack of qualified practitioners and operational issues that are affecting global business such as cyber security, digital disruption, data analytics and the use of robotics. The programme also covered challenges and opportunities specific to Africa, Asia and GCC takaful markets with a suggested road map for the way forward.
"Faith in finance" is the theme for the lastest Edinburgh Ethical Finance Round Table
The 13th Edinburgh Ethical Finance Round Table took place in the offices of Maclay Murray & Spens LLP at Quartermile on 15th June 2017. The topic for the meeting was faith-based finance and the faith perspective on ethical investment.
The first presentation was given by Catherine Alexander, chair of the trustees of the Church of Scotland Investors Trust. The Trust was established by the Church in the 1980’s to provide it and its congregations with cost effective investment management of their funds. The total funds under management currently amount to around £400m and day to day management is delegated to three investment management firms. Catherine indicated that the Trust has always operated on the basis of avoiding certain categories of investment, their current policy being to exclude any company with a higher than 15% involvement in armaments, alcohol, gambling, tobacco or tar sands. Certain of these exclusions were not without their questions – for example the Church of Scotland itself is willing to accept heritage lottery funding for projects. Increasingly the Trust is seeking ways of encouraging ethical behaviour by those they invest in and consider that they have an important role as lobbyists in this direction within the corporate sector.
Saquib Ismail, Senior Sales Manager with Al Rayan Bank gave the second presentation. He opened by giving a brief history of the Bank, which was founded in 2004 (as Islamic Bank of Britain) and opened its first branch in Scotland last year (see Scotsman article). It currently has around 50,000 customers and has grown rapidly in recent years. In keeping with Sharia requirements all of its products are asset-based and all returns provided to depositors constitute profit and not interest, although for the most part this distinction is invisible to the Bank’s customers. Interestingly, the list of assets and activities which the Bank excluded is very similar to that mentioned by Catherine, although in the Bank’s case the exclusions are absolute rather than matters of choice and policy. A recent notable development is that around 80% of the Bank’s deposit customers are now non-Muslims, although Muslims naturally remain a substantial majority of those taking “Islamic mortgages”.
The presenters then took a number of questions from the floor, one point which emerged being that any set of ethical investments principles needs to be kept under regular review, to take account of changing perceptions and understanding. There was general agreement that most recent research had tended to indicate that returns from ethical investments generally fully matched those of conventional investment strategies. David Cousland, of Fair Finance Agency, cited the work of Oikocredit in the developing world, including one notable project which had been running across the Muslim and Christian communities in Egypt for around 40 years.
The final part of the meeting saw a report on a “global first” for Scotland, namely the ongoing project between the Church of Scotland and the Islamic Finance Council UK to attempt to produce a financial product which would help to tackle financial exclusion, based on the shared values of the two faith communities (see BBC article). Doctor Richard Frazer and Martin Johnstone, Convener and Secretary of the Church and Society Council, spoke for the Church of Scotland and Omar Shaikh for the UKIFC. The aim will be to produce in the fairly near future a document setting out the conclusions reached on the applicable shared values, as emerging from the series of inter-faith workshops which had taken place, and there would then be a phase of “R & D” seeking to build out the detail of a financial product. It was emphasised that the ultimate product would be open to the whole of society, not only those of the faiths involved. The relevance of Scotland’s long history of ethical finance was noted and Doctor Frazer also made the point that part of the process would involve taking views from the “grass roots” communities which the product would be intended to assist. In response to a question from the floor Mr Shaikh confirmed that it was the intention of involving other faith groups also in the process as matters moved forward.
Financial Inclusion Expert Joins UKIFC Team
The UKIFC is delighted to announce the appointment of Ms Modupe Ladipo as a Senior Advisor. Ms Ladipo specializes in financial inclusion and has over 25 years’ experience in financial services working across complex environments in Africa, Asia-Pacific, Europe and the US.
Based in Nigeria, Ms Ladipo will strengthen the UKIFC's Government Advisory capability, particularly in Africa where financial inclusion is a key policy driver.
A pioneer of non-interest (Islamic) finance in Nigeria Ms Ladipo is the former CEO and current Chair of Enhancing Financial Innovation & Access (EFInA); a leading NGO backed by UK Government's DFID and the Bill & Melinda Gates Foundation.
UKIFC Advisory Board Member Mr Omar Shaikh said: "We worked closely with Modupe and her team during our time in Nigeria and were impressed by her passion, professionalism and the technical expertise she demonstrated in making the Nigerian financial system work better, especially for the poor. As a recognised leader in financial inclusion across Africa and with strong knowledge of both conventional and Islamic finance, we look forward to working with Modupe to expand our work in emerging markets and using non-interest/Islamic finance to address financial inclusion."
Commenting on her appointment Ms Ladipo said: "I joined the UKIFC as a Senior Advisor to provide thought leadership on how Islamic and Ethical Finance can contribute to the global financial inclusion agenda. I look forward to provide technical support for the development of innovative Islamic and Ethical Finance products aimed at low income earners across multiple jurisdictions."
To find out more about the UKIFC's work in Government Advisory and Ethical Finance please click here.
Graham Burnside attends Responsible Finance and Investment Summit in Zurich
Our Advisory Board Member, Graham Burnside was invited to speak at the RFI Summit in Zurich on 3rd & 4th May 2017, on financial inclusion and accessibility, and efficiency through FinTech. During the session, Graham also discussed whether by opening finance to Muslims, impact investing can have a broader social impact.
Graham is an expert in banking and finance law, specialising in particular in structured finance and capital markets. He is considered the Scotland's leading expert, having structured and documented the first (and so far only) Islamic mortgage products operating under Scots law and the first fully Sharia-compliant commercial real estate financing in Scotland.
The Responsible Finance & Investment Summit (RFI Summit) is an initiative of the RFI Foundation and Swiss Arab Network to build awareness of shared values that can bring socially responsible investing (SRI), environmental, social and governance (ESG) and Islamic finance together to increase their positive impact.
During the Responsible Finance & Investment Summit key stakeholders within responsible finance were brought together to build connections for new growth opportunities and more measurable impact. The RFI Summit played a vital role in connecting representatives from across the responsible finance industry to build on the growing cooperation between SRI, ESG and Islamic finance.
Scotland leading the ethical finance debate
With a proud and respected heritage in the financial sector, such as the pioneering development of savings banks and mutual life companies, and a growing reputation for driving forward today’s ethical finance debate, Scotland is on the cusp of becoming a key player in the global market.
Scotland’s contribution to the ethical finance movement has been recognised internationally and, according to experts in the sector such as the Islamic Finance Council UK (IFC), the country has a unique opportunity to become a leader in this rapidly developing field.
This is the backdrop to the Ethical Finance Round Table (EFRT) taking place in Edinburgh today in which Bola Gibson, of TSB Banking Group, will discuss the Group’s approach to building a trusted mainstream bank, as well as a discussion on the prospects for developing a “kite-mark” for ethical financial products led by Julian Parrott of Ethical Futures.
The IFC launched the EFRT series in 2010 as Scotland’s only systematic platform bringing together the various strands in the broad ethical finance arena. It has attracted speakers from across the world and has now become one of the UK’s leading ethical finance discussion platforms.
Martina Macpherson, Managing Partner of London based SI Partners – oekom research UK, who presented at the last EFRT in October said: “Since the 1980s, ethical and sustainable investment has grown into a complex industry. Green and ethical retail funds in the UK now have more than £13.5 billion invested, up from £6.5 billion just a decade ago. In addition, a range of studies have shown that ethical investment funds can beat their benchmarks and even outperform many of their non–ethical counterparts.”
Around 35 bodies will be represented at this today’s event including Church of Scotland, Heriot Watt University, mlm Solutions, Scottish Government, ScotWest Credit Union, Social Investment Scotland, Standard Life Investments and The Charity Bank.
Speaking ahead of the meeting, IFC Advisory Board member Omar Shaikh commented on the progress the EFRT has made. He said:
“The roundtables have become a great success. The depth and variety of the insights has been truly impressive and the willingness to learn from each other’s experience has highlighted real synergies. The ongoing banking failures have made many in society keen to see a more responsible form of finance. The roundtable debates are playing a key role towards defining terms such as ethical and responsible.”
A direct output of the EFRT series has been the establishment of a Government-backed steering group tasked with assessing the feasibility of establishing a Scottish Ethical Finance Hub (SEFH), a concept which emerged at previous meetings and gained strong support from participants. The SEFH’s role would be to facilitate commercial investment, R&D and thought leadership as required for developing and testing ethics-based models of banking and finance, and enhance international engagement.
Ms Macpherson commented: “an ethical finance hub that leads the way in knowledge exchange, innovation and best practice will build bridges between industry, academia, religious groups and politics. It will confirm Scotland’s role in ethical and sustainable investment decision-making, within the UK, Europe and beyond, for years to come.”
Complementing the EFRT, this year will see Dubai based Middle East Global Advisors (MEGA) host the inaugural Global Ethical Finance Forum (GEFF) in Edinburgh in early September, bringing together key stakeholders from the Gulf, Asia and Europe to explore the global convergence of standards in the ethical sector.
The decision to select Scotland as the host country for the first GEFF was driven in large part by Scotland’s very strong heritage in ethical finance. Ehsan Abbas, Chairman of MEGA, lauded Scotland’s “immeasurable contribution to the creation of financial institutions and early professional bodies specializing in ethical finance.”
Graham Burnside, IFC Advisory Board Member, strongly believes that ethics and business can go hand-in-hand: “The demand for increased social responsibility and ethical behaviour is quickly becoming a major transformative force within the global financial services industry. We are particularly excited about the progress the EFRT series has made and see the SEFH as a genuine opportunity for Scotland to demonstrate true innovation on a global scale. Securing the GEFF event is a major coup for Scotland and we look forward to welcoming high profile speakers and attendees from across the world.”
ENDS
NOTES TO EDITORS:
The Islamic Finance Council UK (IFC) is a specialist advisory and development body established to promote and enhance the global Islamic and ethical finance industry. The IFC focuses on government policy advisory, ethical finance, shariah governance and executive training. To find out more visit us at alasdairc15.sg-host.com
To find out more about GEFF2015 visit http://ukifc.com/growing-the-global-ethical-finance-industry-through-collaboration-and-convergence/
For more information or to arrange interview then please contact Chris Tait, IFC, on 07931 103573, or 0207 193 6329 or chris@ukifc.com