2010: A Big Year for Islamic Finance ‘Firsts’ in Canada
For much of 2010, I have remained a silent observer in the evolving landscape of Islamic Finance in Canada. There is little doubt the movement has gained significant momentum this year, both in terms of infrastructure-building as well as financial engineering.
Despite the termination of the frontierAlt Oasis Canada Fund in April (one of only two managed Shariah-compliant equity mutual funds in Canada), Islamic Finance continues to attract interest from financial institutions who are not only looking to diversify their product offerings and tap into new customers, but also to shape the direction of the conversation.
In March, a number of firms attended the inaugural conference of the Usury-Free Association of North America (UFANA), an organization committed to promoting Islamic Finance.
UFANA 2010 focused on the growth and potential of this alternative financing industry, and the conference drew in senior representatives from four of the big five Canadian banks as well as representatives from the Ontario Ministry of Finance and the Federal Ministry of Finance. This was followed by the G20 Islamic Finance Summit in June, which focused on Islamic financial instruments used in North America and the reasons underlying the resilience of Islamic banks during the global economic crisis.
Additionally, representatives from several major financial services institutions, including BMO, Scotiabank and RBC Financial, are participating in an Islamic Finance working group of the Toronto Financial Services Alliance, which is trying to position Toronto as a North American hub for Islamic Finance, among its other goals. In May of this year, the working group published the first report on its findings related to the challenges and opportunities facing the industry in Canada.
In terms of products, UM Financial officially launched the iFreedom Plus MasterCard® this March. Canada's first Shariah-approved MasterCard is a personalized, prepaid card that allows users to load money for future in-store and online purchases, essentially avoiding debt and interest charges. As such, it is the first payment card in Canada to be approved as permissible by a panel of three Muslim religious scholars affiliated with UFANA.
On the education side of the things, Toronto-based Centennial College launched a certification course on Islamic Finance this fall. The UK-based Chartered Institute for Securities & Investment (CISI) accredited the college as its first Canadian training provider, delivering the Institute's Islamic Finance Qualification (IFQ) - the first international benchmark in the area of Islamic Finance. The first session of the course was filled to capacity with financial services industry employees.
Small steps, big strides.
As the global appetite for high-quality paper continues to grow, Canada's top AAA ratings from Standard & Poor’s and Moody’s Investors Service is attracting the attention of foreign investors. UM Financial is working with a bank in the Middle East, HSBC and several Canadian provinces to help issue Islamic bonds (sukuk).
HSBC Bank may offer $500 million in Shariah-compliant bonds and three government-related borrowers from a Canadian province may issue $1.5 billion of sukuk, according to Omar Kalair, CEO of UM Financial. Lastly, a "handful" of Canadian companies may sell $980 million of Islamic debt by 2013 as estimated by Daud Vicary Abdullah, global Islamic Finance leader at Deloitte Corporate Advisory Services in Kuala Lumpur.
Note: For more information on Islamic Finance, see Manal Siddiqui's earlier blog posts on SocialFinance.ca.
Photo Credit: http://www.flickr.com/photos/itzafineday/2639957145/