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Shariah Finance

Sovereign Wealth Funds

What is a Sovereign Wealth Fund?



New York Times
December 3, 2007
By Steven R. Weisman

Before 2007, few had heard of sovereign wealth funds. But as announcement followed announcement of major purchases by the funds, they began to stir increasing debate, and some concern, in financial and political capitals.

The term applies to government-owned funds set up by the world’s leading exporters, especially China and the major oil producers, that are being deployed more assertively for investment in banks, private companies, equity funds, real property and other assets. Some call it “cross-border investment” of the kind that has happened for decades. But others call it “cross-border nationalization” because of the power that governments might have in countries where they invest.

Until now China, Japan and other exporting superpowers, along with the big oil exporters in the Persian Gulf, were content to keep most of their trillions of dollars in reserves in safe investments like bank deposits and United States Treasury debt. That is no longer the case. Increasingly they are channeling investments into the private sectors of other countries to get a higher return. With their huge asset base, government investors can afford to diversify and pursue riskier opportunities.

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Och-Ziff to Sell 9.9 pct Stake to Dubai Fund

$30B American Och-Ziff hedge fund sells a 9.9% stake for $1.25B to a Sovereign Wealth holding company called Dubai Holdings. Most, and possibly all Dubai "corporations" funded by UAE Sovereign Wealth are requiring Shariah Compliance or payment of a tax as a non-shariah entity.

        

Reuters
October 29, 2007
Boston, MA

U.S. hedge fund Och-Ziff Capital Management Group said on Monday it is selling a 9.9 percent stake to a Dubai fund for up to $1.26 billion, marking another investment in the financial sector by wealthy Middle East state-owned funds.

Och-Ziff, which also plans to raise about $1.1 billion in an initial public offering, said it has signed an agreement with Dubai International Capital LLC and its unit, DIC Sahir Ltd, to sell 38.14 million Class A shares to DIC Sahir.

That will work out to 9.9 percent of outstanding Class A shares of the firm on the closing date of the public offering, Och-Ziff said in a regulatory filing.

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Islamic Finance: UK Law Overview

This academic article describes Islamic Finance...without making any connection to Iran, Jihad, women's rights, or the goal of Shariah to replace secular law with Shariah Law.



Practical Law Company
May 2007

Introduction

Islamic finance is a small but rapidly growing part of the world finance industry (for more information on the growth of Islamic finance, see Article, Islamic finance: unveiling the mysteries, PLC Magazine, May 2007 (www.practicallaw.com/0-359-2952)).

Despite the growth of Islamic finance market, the industry faces a number of challenges, including the fact that there are very few appropriately qualified Sharia (www.practicallaw.com/7-203-8719) scholars and that there is no global consensus on Sharia. This lack of consensus, combined with a high level of innovation and low transaction volumes mean that documents for the Islamic finance market (and the sukuk (www.practicallaw.com/5-203-8720) market in particular) tend to be tailor-made for individual transactions, leading to higher transaction costs than those for conventional finance alternatives.

While there have been recent attempts to standardise documentation for Islamic transactions, especially in the highly flexible sukuk market, progress has been slow and the industry is still some way off achieving the same level of LMA standardisation as is seen in the conventional syndicated loan market (see The future below).

In a further twist, over the course of 2007-2008 the credit crunch has unexpectedly thrown the spotlight onto Islamic finance as an alternative source of funding as the increasingly tight and restricted Western credit markets struggle to deal with the demands for financing of major power and infrastructure projects. The liquidity of Islamic finance houses and private Middle Eastern investors has therefore given extra impetus to a financing tool already on the rise and made it impossible for investors to ignore as a serious alternative to conventional techniques.

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Shariah-Compliant Financial Products




Accountancy
March 15, 2007
By Muhammad Ashraf

Shariah compliant finance is an important part of life for the faithful. Currently, Shariah-compliant financial products are available to both Muslims and non-Muslims around the globe. Hence, all consumers should have the opportunity to take up these products without facing undue regulatory barriers. Consequently, regulatory framework, including taxation, of Shariah compliant products should apply equally regardless of the faith of provider or consumer.

State bank of Pakistan is currently regulating the Islamic banking Mechanism through various regulatory instruments of law which includes circulars, etc, hence, alignment of other laws is required for a good framework for the correct interpretation of Shariah compliant products which ought to be based on the principle of concordare leges legibus est optims interpretandi modus – to make laws agree with laws is the best mode of interpreting them. Moreover, the law should be so amended to include the nature of contract instead of the types of contract because of the fact that contractus regit actum – contract governs the act.

This article is an endeavor to suggest a principle based framework for Shariah compliant financial products and will try to encompass various aspects of the nature of existing Shariah compliant financial products. This includes effect of laws relating to property including motor vehicle, transfer of property, registration of property, stamp duty, hence, will not only be restricted to Income Tax Ordinance, 2001 and Sales Tax Act, 1990. The suggestion in this article is based on the concept that leaving the issue unresolved would amount to maihemium est inter criminia majora minimum, et inter minora maximum – mayhem [chaos] is the least of great crimes and the greatest among small.

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Saudi Charity Begins...Nowhere




International Analyst Network
July 7, 2006
By Dr. Rachel Ehrenfeld

Upon hearing Warren Buffett’s announcement on June 25, 2006, of giving $37 billion to charitable foundations, mostly to the Bill & Melinda Gates Foundation, the director of the Council of American-Islamic Relations (CAIR), Nihad Awad, declared that Muslim organizations “are lagging behind,” only because of intimidation by the West. The Muslims, he said, are in “the cycle of fear,” [of] “being accused of funding suspicious organizations that fall under the scrutiny of anti-terrorism investigations.” One wonders why they are funding “suspicious organizations” in the first place.

Instead of blaming America and the West, as CAIR constantly does, it could initiate the establishment of a new Muslim foundation with a similar mission to that of the Bill & Melinda Gates Foundation. This new Muslim foundation could supply immunization, HIV and anti-malarial medication, and medical means to reduce cervical cancer incidence and deaths in poor Muslim countries, feed millions of refugees from Muslim atrocities in Darfur, and generally “bring innovations in health” to Third World Muslim countries. Indeed, Awad himself pointed out that, “We in the Muslim world are lagging behind when we should be pioneers as per our Islamic beliefs.”

To be sure, there is no shortage in oil billionaires in Saudi Arabia and the Gulf states. According to Forbes Magazine 2006 list of the World’s Richest People, Saudi and Gulf billionaires are worth at least $134 billion. Muslim billionaires in Egypt, Turkey and Lebanon are worth additional $29.4 billion. This is not taking into account Muslim billionaires and millionaires in Asia and elsewhere. Moreover, the oil boom in the Middle East generated at least 300,000, new wealthy millionaires in the region.

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