London : Monday, June 19, 2006

SPEECH DELIVERED BY H.E. DR. AHMAD MOHAMED ALI, PRESIDENT, IDB GROUP
AT THE ISLAMIC FINANCE AND TRADE CONFERENCE 2006,
ORGANIZED BY THE MUSLIM COUNCIL OF BRITAIN, LONDON
13-14 JUNE, 2006.

Bismillahir Rahmanir Rahim

RT. HON. GORDON BROWN MP Chancellor of the Exchequer,
Honorable Sir Iqbal Sacranie, outgoing Secretary General,
Muslim Council of Britain,
Dr. Mohd Abdul Bari, newly elected Secretary General,
Muslim Council of Britain,
H.E. Sheikh Ibrahim bin Khalifa Al- Khalifa, Chairman, AAOIFI,
Excellencies,
Distinguished Delegates,
Ladies & Gentlemen,

It is an honor and privilege for me to address this august gathering of highly distinguished scholars, policy makers and practitioners on a subject of far-reaching importance for all our nations and communities. Throughout human history, trade has not only been the means of exchanging goods and services, but has also been a vehicle for fruitful dialogue between trading nations and communities and expansion of the frontiers of civilization. Fair trade relations strengthen mutual respect and inter-dependence between societies and promote understanding, harmony and peace among people and nations. Trade, on fair terms, also helps nations to stand on their own feet and contribute to the overall development of the world.

Financing, on the other hand, facilitates production and trade, and the two together lead to an increase in the volume of economic activities and the welfare of the people. Trade has a special significance for Islamic finance, as it is around trade that the basic principles of Islamic Financial Services Industry (IFSI) have evolved. Hence, the Muslim Council of Britain deserves the appreciation of IDB for selecting this subject as the theme of the Conference. Let me join other distinguished speakers in wishing this Conference great success.

I am confident that the Conference will open new opportunities for investments compatible with Islamic law in the United Kingdom and explore avenues for mutually beneficial trading relationships between the member countries of the Organization of Islamic Conference (OIC) and the UK.

Distinguished Delegates
Similar to conventional finance, London is fast emerging as the major international centre for Islamic finance. It is in this context that the IDB has noted with great interest the initiative taken by Her Majesty’s Government in authorizing the Financial Services Authority (FSA) in September, 2004 to establish the Islamic Bank of Britain as the first full-fledged Islamic bank in the West. Similarly, the removal of the double Stamp Duty on Islamic mortgages by the Right Honorable Chancellor of the Exchequer, Gordon Brown, in the Finance Act 2004 is considered by IDB as the most positive step in the field of tax neutrality for Islamic finance in the European Union. Indeed, the initiatives taken by the UK Government could serve as the model for other countries, not only in the West, but also for some OIC countries, for providing a level playing field for Islamic finance.

Distinguished Delegates
I am sure that most of you are aware about the objectives and the functions of the Islamic Development Bank. Although a major part of equity capital of the Bank has been contributed largely by relatively well-endowed countries among its 56 member states, the basic foundation of the institution is built on the principle of solidarity. The membership of the Bank includes a large number of the world's least-developed countries where the relatively richer developing member countries are assisting and supporting the lesser endowed members to make IDB as the living embodiment of the real South-South cooperation with AAA rating from Standard & Poors. Similarly, the IDB is actively engaged in providing developmental assistance to its member countries in the CIS republics which are also members of the European Bank for Reconstruction and Development.

The IDB has adopted, poverty alleviation, promotion of trade, and development of the Islamic Financial Services Industry (IFSI) as its three strategic objectives. The long-term vision of the Bank focuses on comprehensive human resource development of its member countries. In support of its vision and the strategic objectives, the Board of Governors of IDB, in its 31st Annual Meeting held the week before in the State of Kuwait, have doubled its authorized capital to a total amount of 30 billion Islamic Dinars equivalent to approximately 45 billion US dollars and the subscribed capital to 22.5 billion US dollars and approved 2 billion US dollars to be paid in cash from the callable capital of the Bank. The Governors also announced the establishment of a Poverty Alleviation Fund. Saudi Arabia has announced its contribution of 1 billion US dollars to this Fund. Yet another significant event was the signing of the Articles of Agreement for the establishment of the International Islamic Trade Finance Corporation (ITFC) by 43 member countries, with an authorized capital of 3 billion US dollars, adding a fifth institution in the IDB Group,

Excellencies
As all of you are aware, acceptance and confidence of the public in the financial services industry plays a vital role in their decision to demand and access the financial services. The Islamic Financial Services Industry plays an important role by including in the financial services the needs of a wide spectrum of the society. In providing its services, it offers innovative variants in the menu of alternative products available in the traditional financial markets. This widens the potential significance of the industry to cater, not only to the requirements of Muslims, but also the needs of the traditional markets. Islamic finance, therefore, contributes to greater competitiveness and public welfare and enhances the quality of financial services to the society.

Distinguished Delegates
Islamic financial institutions, wherever they exist, fall under the purview of central banks or other regulatory authorities that supervise conventional banks. In addition, Islamic banks are also supervised by their respective Shariah Boards. This makes Islamic banking a well-regulated and closely supervised business.

For promoting free and fair trade, Islamic finance can be successful only if it is fully integrated with the international financial architecture. The Islamic Financial Services Board (IFSB) based in Kuala Lumpur, Malaysia, has already prepared best practice standards, for risk management, capital adequacy and corporate governance. Similarly, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) based in Bahrain has adapted international standards for Islamic financial institutions to enhance disclosure and transparency.

In this era of globalization, I feel it is imperative that Islamic finance must work hand-in-hand with the supervisory and regulatory agencies in the West to ensure financial stability and sustain investors' confidence. The IDB, in close coordination with a number of leading central banks of its member countries, the IFSB and the AAOIFI, is playing a crucial role in strengthening the architecture and infrastructure of the Islamic Financial Services Industry.

The orderly development of this industry in the local jurisdictions and its integration with the international financial markets underlines the need for a continuous dialogue between the various stakeholders. For this purpose, the Islamic Development Bank has recently launched an Annual Forum for Islamic Financial Sector Development to be held in conjunction with the Annual Meetings of its Board of Governors. The IDB would welcome the UK Financial Services Authority as well as the business community to participate in such mutually beneficial dialogue processes. Moreover, research centres, universities, financial institutions and regulators in the West can lend a helping hand in building the Islamic Financial Services Industry on sound and systematic foundations. This is needed not only to allow the traditional financial industry to interface with the Islamic financial industry, but also to enable the Islamic Financial Services Industry to help a very large part of world population to bring their financial and monetary transactions within the fold of the formal financial markets.

Distinguished Delegates
In conclusion, I would like to commend once again the efforts of the UK Government in building an inclusive financial services industry in which the Muslim community can also participate gainfully with the mainstream of economic activities without infringing the basic tenets of their faith.
Not only this Conference will serve to further strengthen such efforts, but we, at the Islamic Development Bank, will remain committed and engaged to work with all of you for the development of the OIC member countries in particular and global development at large.

Thank you all indeed.
Wassalaamu alaikum warahmatullahi wabarakatuh.

Chancellor of the Exchequer Announces UK to Become Gateway for Islamic Trade And Finance

London : Thursday, June 15, 2006

Chancellor of the Exchequer of the UK Govt., Rt Hon Gordon Brown announced the intention of the UK Government to make the United Kingdom a gateway for Islamic trade and finance and thus cultivate the ground for stronger trading links between UK and the Muslim World.

This endeavor, the Chancellor pointed out, would not just help the UK economy but also help to narrow the divisions between the West and the Muslim World. While stating that countries can become closer through trade and economic cooperation, the Chancellor recognized the Islamic Development Bank as the leading multilateral development financing institution helping to alleviate poverty, and increase trade among nations. Calling for global fight against poverty, he quoted liberally from the Hadith and explained the need for poverty alleviation, imparting better education etc.

Addressing the two-day conference in London this week organized by the Muslim Council of Britain, H.E. Dr Ahmad Mohamed Ali said that trade could be an instrument for fruitful dialogue and partnership between nations in addition to helping the developing countries to stand on their own feet. The President expressed the hope that the conference would open new opportunities for improving trade relations between the UK and the OIC countries especially in the wake of the fact that London is emerging as the fastest centre for Islamic banking.

Mr. Callum Mcarthy, Chairman of the Financial Services Authority of the UK Government announced that the government would soon unveil a framework to bring Islamically compliant "home purchase" plans within its sphere of regulation and also address the status of the Islamic bonds known as sukuks.

The statement of the Secretary General of OIC was read by Sheikh Ibrahim bin Khalifa al Khalifa, Chairman of AAOIFI, Bahrain. Several leading Islamic scholars and experts in Islamic financing including Sheikh Mufti Taqi Osmani, reputed Shariah scholar and retired Justice of the Shariah Court of Pakistan spoke and presented papers at the two day conference. Sir Iqbal Sacranie, past Secretary General of the MCB gave an overview of the Conference. Dr Mohamed Abdul Bari, new Secretary General of the MCB thanked the participants.