Second Conference on Islamic Banking Held in Toronto

by Faisal Kutty

The Regal Constellation Hotel in Toronto was the venue for the Second Conference on Islamic Banking and Finance which took place June 2 and 3. More than 65 people, including representatives from government, private banking and investment institutions and Islamic organizations participated in the conference, co-chaired by Conservative politician Don Blenkarn, former chairman of the Special Committee on Banks and Banking, and chairman of the House of Commons Finance Committee, and Liberal member of Parliament Derek Lee. The conference was co-sponsored by the Islamic Co-operative Housing Corporation Inc., the Arab Bankers Association of North America, the Canadian Bankers Association, the Ontario International Corporation, the Center for Middle East Studies of Harvard University, the Islamic Society of North America and Zafar & Associates.

Islamic banks are growing at a phenomenal rate. According to Imtiaz Ali, a banker from Trinidad and Tobago, who spoke about the relevance of Islamic banking to Canada, there are more than 100 Islamic banks around the world, accounting for more than $100 billion in deposits. Many Islamic banks are headquartered in Geneva, and even some conventional banks have set up Islamic banking units. Imtiaz Ali said that both "Islamic banks and the Canadian government have the same goal of maximizing economic well-being." However, Islamic banks pursue maximization of profits within an ethical framework.

The two distinguishing features of Islamic finance are the prohibition of interest, and the prohibition of investment in businesses dealing in alcohol, gambling, pornography and other socially destructive and Islamically objectionable products and services. Under the Islamic scheme, investors cannot receive a guaranteed return (interest). However, they can invest in profit-sharing ventures (which involve a business risk) and lease deals without interest. Islamic financial instruments include Murabaha (mark-up financing), Ijara (leasing), Ijara wa Iqtina (lease-purchase financing), Mudaraba (trust finance), and Musharaka (equity participation).

Isabel Bassett, assistant to the Ontario minister of finance, delivered the luncheon address on the last day of the seminar. She told the gathering that "the debate on Islamic banking is no longer restricted to the Islamic world or just Muslim nations, but is broadening to include non-Muslim countries and their governments who are in charge of regulating financial matters.

"The debate is very much relevant to many Canadian Muslims who want to live their lives according to Islamic principles. Many want to observe the injunctions of the Qur'an against usury. As it says in the holy book, 'God has permitted trade and forbidden usury.' And in the next line, 'God will deprive usury of all blessings.'

Islamic banks pursue profits within an ethical framework.

"Therefore, the issue of Islamic banking and finance is of great interest to the millions of Muslims who have migrated in the last 25 years to the West, where they are living as economically successful minorities in Europe, the United States and here in Canada....

"Islamic banking and finance is gaining importance not only in Muslim countries in Southeast Asia and the Middle East, it is also creating some interest in banking circles in the Western world and in markets such as South Africa...

"Because Islamic banking goes beyond the pure financing activities of conventional banks, entrance into the Canadian banking marketplace is not without regulatory obstacles...Increasingly, Western financial institutions will have to find innovative ways to tap the potential for growth in the Islamic banking market."

Though it has not been possible to set up an Islamic bank, there have been successes since Islamic finance facilities were introduced into North America in the mid-1980s. In fact, Bassett, also a member of the provincial parliament, noted that Muslims "while operating within the Canadian economic system, have found innovative ways to observe the Islamic laws of interest-free banking by doing business in other ways." These include a number of housing co-operatives and other investment vehicles adhering to Islamic law.

The Toronto and Region Islamic Congregation (TARIC) also is working on setting up a Muslim credit union. According to Haroon Salamat, president of TARIC, the initial business plan was submitted and the Ontario Ministry of Finance has requested a "long-term five-year business plan." He told the Washington Report that one of the concerns was that due to the Islamic nature of the credit union it would not be in a position to lend money in exchange for a fixed return. Therefore, in order to meet regulatory requirements, the credit union "would have to keep substantial funds in cash, thereby lowering the profitability." He stated that they are looking into this.

Most participants felt the conference achieved its dual objectives of updating participants on the latest developments in this rapidly expanding sector and improving their understanding of this banking phenomenon. Omar Fischer of the Khidr Corporation of New Jersey asserted in his concluding remarks that "Muslims like to talk a lot, but do very little." In response, Abdullah Idris Ali, a member of the event's organizing committee, called on the participants to continue their efforts in a concerted manner. He urged the attendees to take action and form an ad hoc committee to continue the work and follow up on developments in the field within Canada. As a result, an Ad Hoc Committee for Islamic Financial Institutions in Canada was formed.

For further information, contact Ad Hoc Committee for Islamic Financial Institutions, Box 1464 Station B, Mississauga, Ontario, L4Y 4G2, fsl. 905 270-3919.

Lebanese Prime Minister's Visit to Canada a Trade Success

A five-day official visit to Canada by Prime Minister Rafik Hariri of Lebanon has paved the way for increased trade and investment between the two countries. The high point of the visit, between April 10 and April 14, was the signing of the bilateral Foreign Investment Promotion and Protection Agreement (FIPA). The FIPA guarantees that Canadian investors in Lebanon will receive the same protection as Lebanese investors and vice versa.

Canada's Minister of International Trade said that the agreement "represents Canada's strong commitment to further expand our commercial ties with Lebanon, and reflects Canada's support for Lebanon's reconstruction efforts by fostering increased bilateral investment."

The visit, Hariri's first to Canada, also resulted in the signing of a number of other agreements as well as the launch of the DFAIT Navigator to Trade in Lebanon Web site. According to the trade magazine CanadExport, the Web site is intended to assist Canadian companies interested in doing business with Lebanon.

The Lebanese market has been growing about 7 percent annually since 1992. The growth is attributable to the massive rebuilding effort in the wake of the civil war. The reconstruction is expected to generate between U.S. $26 billion and U.S. $40 billion in trade. Canadian exports to Lebanon have grown from $8 million to $67.2 million, but both countries see a greater role for Canada. The Department of Foreign Affairs and International Trade is encouraging Canadian companies to take advantage of growth opportunities in the electrical energy, telecommunications, agriculture, health, construction, transport and the environmental sectors.

For further information on trade opportunities for Canadian companies in Lebanon, contact Ian Shaw, Middle East Division, Department of Foreign Affairs and International Trade, tel. (613) 944-2070, fax (613) 944-7975.

Mississauga Council Blocks Community Project

A number of religious groups have joined the Muslim community in its bid to have the city of Mississauga approve its re-zoning application for a mosque project in the city. The Canadian Islamic Trust Foundation (CITF) seeks to have some property re-zoned to allow a place of religious assembly and related ancillary uses to cater to the more than 25,000 Muslims who call Mississauga home.

The council scheduled a June 23 meeting on the property. In addition, the CITF also took the issue to the Ontario municipal board, which set a July 14 hearing on the matter.

The 6.7-acre property was purchased by the CITF in March 1996. The project calls for renovating and expanding the existing 58,000-square foot industrial building on the premises to house a place of worship, community center and school to cater to the 250,000-strong and growing Muslim community in the greater Toronto area.

This ambitious "Mississauga Mosque Project" has faced opposition from the beginning. Local councillor Pat Mullin, Mayor Hazel McCallion and some local residents openly oppose the project, citing traffic congestion. Dr. Mohammed Ashraf, secretary of the CITF, citing a traffic impact study commissioned by the CITF in response to the traffic concern, says the independent study "did not identify any traffic problems at the Southdown Road and QEW intersection as a result of our project."

The city proposed a number of alternative sites for the project, but these were rejected by the project committee for reasons ranging from concerns for the safety of children attending the school, lack of accessibility, significant cost differences and being located outside Mississauga. Pervez Nasim, a director of the CITF, dismisses the traffic concern but adds that his group "is willing to listen to and address genuine concerns, if any, of local residents."

It is not only Muslims who see these concerns being raised simply to oppose the project. Bernie Farber, national director of the Canadian Jewish Congress, told the Toronto Star: "When religious communities want to build synagogues, mosques or whatever, there always seems to be some kind of impediment placed in the way." Other religious groups, including representatives of Christian and Sikh communities, also have expressed their support. In a recent letter addressed to the mayor, Reverend David C. Freeman of the Ancaster Alliance Church called on the Mississauga council to approve the application.

CBC Ombudsman Apologizes for Statements About Khalid Duran

The Canadian Broadcasting Corporation (CBC) has apologized to Khalid Duran and Steven Emerson, the producer of "Jihad in America." The ombudsman, Mario Cardinal, had questioned Duran's credibility in a nine-page report released Jan. 10, 1997. The report resulted from a complaint filed by members of the Muslim community in Montreal against a radio program which had used the "expertise" of Khalid Duran to portray the Islamic Circle of North America (ICNA) as part of a "fundamentalist Islamic network."

The apology was offered after the CBC was contacted by attorneys for Duran and Emerson. The letter of apology, dated May 21, 1997, stated that some of the ombudsman's findings were unfounded (see story in the April/May 1997 issue of the Washington Report). In particular, the ombudsman wrote: "The claim that Mr. Duran had been dismissed from Temple University in Philadelphia for professional misconduct was unfounded." He continued, "There was also no truth to the statement that Mr. Duran had been ousted from the Oriental Studies Institute in Hamburg after having been found guilty of defamatory comments in 1993."

Outlook

The IMF hopes for a modest recovery in Palestinian exports and private investment this year. Real GDP is projected to rise 5 or 6 percent this year and unemployment should fall to 31 percent or so, still very high. The PA will restrain its current budget even after hiring 3,000 new policemen and 3,700 new teachers and health personnel.

All this is modest of course, and as the IMF report stresses again and again, even such modest gains depend on the touchy Israeli-Palestinian political climate. More border closures or some kind of long-lasting disruption in public order in Gaza or the West Bank could send Palestine's fragile economy spinning downward again.

*Recent Economic Developments, Prospects, and Progress in Institution Building in the West Bank and Gaza Strip, IMF, Washington, DC, 1997.