Newsletter english version (2nd edition)

PRINCIPLES
& PRACTICES
OF ISLAMIC
FINANCE
5 exclusive interviews of professionals
working in the Islamic Finance Industry
Worldwide Islamic Finance News
Executive Master’s News
2 special reports on «Waqf» and «Islamic
Life-Insurance»
Various articles on Islamic Finance
NEWSLETTER
ISSUE N°2
NOVEMBER 2014

ISLAMIC FINANCE NEWS ·············································· p.3
EXECUTIVE MASTER’S NEWS ········································· p.7
WAQF ········································································· p.13
ISLAMIC LIFE-INSURANCE ··········································· p. 22
ARTICLES AND INTERVIEWS ON ISLAMIC FINANCE ······ p. 26
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SUM-MARY
ISSUE N°2
NOVEMBER 2014
EDITORIAL
by Arnaud Raynouard - Law Professor
(Vice-President of University Paris-Dauphine)
Ethical and solidarity-based finance seems promised to a good future in France.
Encouraging the idea of a control, even a limitation, of speculation and risk, it
meets the approval of the public opinion and is put forward in the political
speeches. The economic crisis will have imposed on the actors of the finance
to rethink the economy, bringing to the foreground alternative and innovative
solutions which rest on principles such as responsibility and solidarity.
The French regulatory and legal framework is favorable to such a development
as advances regarding solidarity-based financing and crowdfunding prove.
Therefore, the evolution of the legal framework of crowdfunding was the object
of a public consultation on the basis of a text presented by Fleur Pellerin, when
she was vice-minister in SME, innovation and digital economy. Islamic finance,
which aims to be complementar to the conventional finance is not outdone.
It is making its path in France as products and offers which comply with the
principles of Islamic financing are more and more numerous. It has to be noted
that these principles are not specifically «Islamic» but join an ethics known by
the French tradition, even though it is not practised. The sharing of the risks
and the profits, the prohibition of interest, the will to create a solidarity-based
and responsible economy are not the monopoly of the Islamic finance! These
ideas allow the concrete development of concepts of sustainable development
within finance.
This new edition of the Newsletter of the students of the University Paris-Dau-phine
will be the opportunity to make an inventory of the of the advances(o-verhangs)
of this alternative finance in France and abroad. Two parts were
dedicated to the «waqf» and to the « Islamic life insurance » to familiarize the
readers with solutions of Islamic financing.

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ISLAMIC
FINANCE
NEWS
EUROPE
France : Vitis Life has launched a high-end life insurance contract (Amane Exclusive Life) that provides French citizens with a Sha-ria-
Compliant multi-support investment instrument. The said contract takes the form of a « Wakala » (Agency contract) in which the
Insurer (Wakil) is mandated by the underwriters to invest their contributions (premiums) in Sharia-compliant investment accounts.
The contract gives policyholders several investment vehicle options and was certified by the CIFIE (The European Independant Com-mitee
of Islamic Finance) on October 2013. This Sharia Compliant life insurance is expected to have a significant contribution in the
medium to long term on the growth of Islamic Finance in France.
United Kingdom
The 9th edition of the World Islamic Economy Forum (WIEF)
was held in October 2013 in London. For the first time since its
establishment, the event took place in a non muslim country with
an unprecedented record of participants that reached 27 000. This
event was the perfect opportunity for the British Prime minis-ter
David Cameron to re-emphasize his commitment to the vision
of making London one of the top global Islamic Financial cen-ters.
To achieve this objective, the British government issued debt
in the form of Sukuk with a value of £200 million. In addition,
a Global Islamic Financial Market Index will list and follow the
companies with Sharia-Compliant activities and financial criteria.
Luxemburg
The first Retail Islamic bank in the Euro-zone is very close to
settling in Luxemburg. The equity comes from three sharehol-ders
among which a Saudi Islamic bank and a prominent member
of Abu-Dhabi Royal family. The establishement will go through
three stages : the authorization of the French Financial Sector
Supervisory Comittee (Comité Consultatif du secteur Financier)
is expected by the end of 2014. In year 1, Eurisbank will pur-sue
a classical logic of Luxembourg private banking and attrac-tion
of High Net Worth Individuals (HNWI) by leveraging the
shareholders’ networks. In year 2, the bank should start a corpo-rate
banking activity before making the leap in the retail banking
world. In year 3, the bank will focus on the French market and on
attracting a maximum number of customers.

4
Islamic student loans are coming soon in England
Academic fees being very important in the UK, the British go-vernment
has put in place a student loan system in order to help
the students pay for these costs. Until 2012, these loans were set
up without interest. But since 2012, the system has changed and
a rate of 3% is required for students. This new system excludes
Muslim students from the new loan system managed by the Briti-sh
government since the introduction of interest rates is contrary
to Islamic law that prohibits usury.
Following this, a study was conducted by the Government to
confirm whether or not the change of system affected access of
young Muslims at the university. The study confirmed that 93% of
the 20,000 players who say they have consulted industry and seen
a decline in enrolment due to the change of the system, as well
as a «clear demand» for sharia-compliant alternatives. From this
observation, the government decided to remedy this by creating a
system of alternative sharia-compliant student loan. The aim is to
boost enrolment of Muslim students at the university. A new fund
is in creation with the collaboration of many experts in Islamic
finance, this fund will attract grants or interest-free loans used
to finance Muslim students’ loans. No timetable has been set up
regarding its implementation.
WEST AFRICA
The monetary policy committee of the BECEAO, that was held
on the 5th of March 2014 in the headquarters of the Dakar ins-titution,
approved the eligibility, at the refinancing counters of
BECEAO, of government debt (Sukuk).
This is a regulatory framework set out by the Central Bank to exa-mine
the admissibility of Sukuk and the possibility of their inte-gration
in the portfolio at a time when governments are getting
more eager to this mode of financing.
According to the Central Bank : « A convention was signed with
the Islamic Development Bank to allow the increase of Sharia
Compliant financing instruments in the region ». Thus, Senegal
will be able to realize the first expected Sukuk issuance with no
obstacle, given the current government works seriously on the
project before 2017, the year of the next presidential elections.
The first Sukuk issuance project in Senegal was initiated by the
« Wade » government and was aborted after the 2012 presidential
elections.
SOUTH AFRICA
The South African minister of Finance announced the issuance
of Government Sukuk in 2014. According to the Global Islamic
Finance report, the use of Islamic bonds has reached a value of
$144 billion in 2012, which shows how fast Sukuk are spreading.
The exact dates of the issuance are still unknown because such
an announcement would have a direct impact and distortions on
credit costs and the volatility in financial markets.
Kenya
The British Bank « Standard Chartered » opened its subsidiary
dedicated to Islamic Finance « Saadiq ». Kenya, where the muslim
population makes up 15% of the population (or 40 million inha-bitants),
has just adopted a new specific legal framework for Is-lamic
Finance which represents 2% of the country’s total banking
activity. The British bank is already active in Kenya with a network
of 28 branches and intends to seize the opportunity to offer Isla-mic
banking services. The bank’s objective is to expand its range
of products and services across the entire African continent after
testing them in Kenya as the Retail banking manager Mr. Wassim
Saifi pointed out « Our experience in Kenya and an eventual suc-cess
in this market will surely determine our future strategy for
Islamic Finance in the rest of Africa ».
Senegal
For the very first time in Dakar, a certificate delivered by the in-ternational
university of Rabat, Optima, Sherbrooke academy and
the Dakar campus, was launched. This certificate targets banking
and insurance professionals, chief financial officers, regulators
and lawyers and plans to give them a course of 2 months on the
principles of Islamic Finance along with the Sharia precepts on
which the Islamic contracts and products are based.
AFRICA
Morocco : The legislation project for credit institutions which devotes a significant part to Islamic banks, called « participatory banks »
was adopted in January 2014. This project specifies the status of « participatory banks », the products, supervisory bodies and sets out a
guarantee fund for customer protection. The high council of Oulemas will be responsible for validating the compliance of participatory
products to the Sharia which has been qualified in the legislation as « Ara ». Thanks to this amendment to the country’s banking act,
the number of participatory banks should start growing considerably starting the second semester of 2014.
A vital energy project for the Moroccan state funded by an Islamic way :
The expertise of the international law firm Clifford Chance has served to the financing of the energy project near the port of Safi in
Morocco. An international team of lawyers from Clifford Chance has advised GDF Suez, Nareva and Mitsui sponsors on a funding of
18 years of an independent power project with a capacity of 1,386 MW (gross) effect, requiring a funding of $ 2.6 billion near the port
of Safi. Funding was partially provided by a structure including an Islamic part provided by the Islamic Development Bank (IDB). An
innovative structure that combines an «arrangement of istisna with wakala arrangement” has been developed and implemented. The
Islamic part represents the first phase of a cross-border Islamic financing in Morocco, and the first international Islamic finance project
structured in this way.
Tunisia : Zitouna Bank was awarded the prize of Good Administration at the World Islamic Economy summit last November in Dubai.
The award highlights the bank’s efforts and initiatives in enhancing the economic environment and promoting Islamic Finance.

ASIE
India : In January 2014, the prime minister of the Republic of India, Manmohan Singh, inaugurated the « National Waqf Development
Corporation ». The purpose of this initiative is to improve the efficency in « awqaf » management by enhacing transparency.
Henceforth, there is an explicit recognition by the Indian Government of its will to support the development of « Awqaf ». This step
could be the pre-requisite of the development of the Islamic finance sector in India where Sharia Compliant banking activities are still
not allowed.
Malaysia
Creation of a Futures contract for refined,
bleached and deodorized palm oil.
The refinement margins, that are directly
linked to storage and warehousing costs
as well as to factors relating to raw mate-rials
and sales prices, have become highly
volatile. Malaysia is looking to expand its
range of financial products to cover even
the international hedging activities of ex-porters
and importers of refined palm oil.
The International Islamic Liquidity Ma-nagement
(IILM), an institution head-quartered
in Malaysia, issued the equiva-lent
of $400 million short-term Sukuk in
February 2014. This issuance was rated
A-1 by Standard & Poor’s and was not the
only short-term issuance in 2014, a simi-lar
issuance of 3-month paper with a value
$860 million was made a month earlier
and whose purpose was to offset the shor-tage
of financial instruments with high
liquidity that Islamic banks can purchase
for their short-term management of finan-cing
needs.
Bahreïn
Kuwait Finance House received the award « Institution Exellence » on the 20th anniversary of the World Islamic Banking conference
held in Bahrain last December 2013. Kuwait Finance House was selected for the excellent international advisory performance and qua-lity
exhibited in important mergers and acquisitions deals and the efficiency of leadership in conducting strategic management activities.
United States
The race to Islamic financing and unused funds has become apparent in the United States and some investment bankers have started
capitalizing on the opportunity as we can see with the recent securitization deal of Continental rail: a transportation company from the
East Coast. The trend of increasing Sharia compliant deals in non-muslim countries is not specific to the U.S and attempts at developing
the Islamic finance industry have been made in various other states such as the U.K and South Africa.
Continental Rail, an American business that runs freight trains along the East Coast has recently been subject to a thorough exami-nation
by the famous law scholar Yusuf De Lorenzo. The idea is to package the leases of the acquired rail cars into a security by Ame-rican
investment bankers from Taylor Delongh looking to attract new sources of funding from the Islamic financial system. «It’s a new
territory for all of us,» said John H. Marino Jr., chief executive of Continental Rail. «There is a gap between all the money coming in
to Islamic banks and the deployment of that money into real economic assets,» said Sayd Farook, the global head of Islamic finance at
Thomson Reuters.
U.S. Banks will most probably be adopting a “Wait and See” strategy before attempting to reproduce Goldman
& Sachs Sukuk issue
The three year period it took Goldman & Sachs to sell its debut Sukuk didn’t help the perceptions around Islamic Finance in the U.S
where the industry is still at best at the infancy stage and surrounded by misconceptions and lack of awareness. George Thomas Conboy
estimates that there are great chances Goldman & Sachs will be the sole player in the American Islamic Finance market in the near term.
A study conducted by the Washington based Pew Research Center and published in July showed that Islam is the most negatively per-ceived
religion in the U.S. followed by Atheism. Unlike Hong Kong or the U.K, the U.S hasn’t made any regulatory changes to enhance
the framework and address specific legal and tax issues such as the stamp duties that may be incurred when buying and selling the un-derlined
assets (Profits and capital gains incur taxes while interest is tax deductible).
5
Middle-East
Dubai : In 2020, Dubai will host the World Exhibition. In addition to infrastructure developments, the exhibition should have a signi-ficant
positive effect on Dubai’s financial market.
The government should fund exposure through a mix of Sukuk, bank loans and money raised from the sale of assets and profits gene-rated
by companies. Borrowing needs will be expected to mobilize the growth of the banking sector and generate important commis-sions
on transactions conducted with Investment banks.

The World Bank is working on what could be a $500 million Sukuk issue for immunisation purposes
Michael Bennett, head of derivatives and structured finance at the World Bank’s treasury department declared that the world bank will
be assuming the mantle of treasurer and helping the International Finance Facility for Immunization (IFFI) raise up to $ 500 million for
one of its programs that had been previously funded through instruments such as Kangaroo Bonds in Australia but never with Sukuk.
This initiative is not in any way an ad hoc operation as the World Bank has been considering increasing its use of Sukuk and using them
in a variety of ways that would be fully compatible with the foundations of Islamic Finance such as Green Sukuk for renewable energy
financing. It is expected that the multilateral institution will be coming up with a partial guarantee instrument for Sukuk to strengthen
investor’s confidence towards countries that have been struggling with attracting financing. The only Sukuk Sovereign insurance product
so far in the market is the one developed and offered by the Islamic Development Bank.
6
Creation of the Islamic Finance Development indicator
The Official launch of the Islamic Finance Development indicator
(IFDI) took place at the world summit of Islamic Economics on
November 25th and 26th 2013. IFDI is the result of collaboration
between the Islamic Corporation for the development of the Pri-vate
sector, a subsidiary of the Islamic Development Bank, and
Thomson Reuters, the Global leader in economic Information.
The IFDI developed by Reuters-Zawya is based on the analysis of
5 different indicators, when taken together, give an assessment of
the scale and depth of the Islamic Finance Industry by country.
These 5 indicators are : quantitative developments, knowledge,
governance, corporate governance, education (awareness).
World’s top 15
Malaysia, Bahrain and the United Arab Emirates come at the top
of our list for the top contender countries in the field of Islamic
Finance. This position is due to the development across all sectors
through Sharia-Compliant funds.
Oman, a new entrant in the industry, was ranked fourth thanks
to the quality of Know-How and education as shown by the exa-mined
indicators and that are as we know essential pillars in any
governmental strategy.
We also find the six countries of the GCC in the top-15 which
reflects the extent and importance of Islamic finance in the Gulf
region.
Brunei appears in the seventh position despite the low score in
Quantitative developments thanks to a good score in all other
aspects and a successful development of the Islamic finance do-mestic
sector.
Singapore is the only country with a population that is not predo-minantly
Muslim that we find in the Top-15 due to an outstanding
performance in governance, takaful, sukuk and investment funds.

Executive
Master’s News
4th promotion Graduation ceremony
7
The Graduation ceremony of the 4th promotion of the Executive
Master took place at Dauphine University on December 15th
2013 with the presence of the ambassador of Bahrain in France,
the president of the university and numerous students and family
members. The class delegate gave a speech to thank all those in
charge of the program for their commitment and devotion to the
success of the degree and the well-being of the students. The am-bassador
of Bahrain highlighted the involvement of the univer-sity
in promoting Islamic Finance through the executive master
initiative. The university’s president expressed the pride he feels
when he sees the development and evolution of the degree year
after year. During the ceremony, a presentation was made by a
CNRS researcher on “Waqf ”, which is an important tool in the de-velopment
of Islamic Finance. The Ceremony ended by a cocktail
offered to all guests.
Graduation at Université Paris Dauphine on the 5th of december 2013.

OECD launches new initiative to boost private
infrastructure investment in the Middle East
and North Africa (MENA) region
9 december 2013, Paris : Representatives from OECD and Middle East and North Africa (MENA) governments and leaders from key
international organisations launched a new initiative to attract private investment to infrastructure projects in the region, the ME-NA-
OECD Working Group on Investment Security in the Mediterranean (ISMED).
Imtiyaz in the World Islamic Economy Forum
8
“MENA countries urgently need more and better infrastructure
such as roads and seaports to ship our products to the world and
renewable energy plants to power industry and households,” said
Mohamed Louafa, Moroccan Minister Delegate to the Head of
Government in charge of General Affairs and Governance, at the
conference on Fostering Infrastructure Investment in the MENA
Region: Mitigating Risk in Uncertain Times.
The conference was organised in cooperation with the Inter-Mi-nisterial
Delegation for the Mediterranean, France, and IPEMED,
an Euro-Mediterranean think tank.
Demand for infrastructure is growing in MENA due to demo-graphic
pressures, rapid urbanisation and increasing expectations
for improved public services and employment opportunities.
However, the mounting infrastructure needs of the region cannot
be met solely by public resources given the challenging fiscal cir-cumstances
of many governments. Leveraging private capital and
knowledge in delivering public infrastructure has also become
increasingly challenging.
“The OECD has a long history of engagement with MENA and
is pleased to continue working with countries from the region to
The 9th Edition of the WIE forum took place for the first time in
an European capital London from the 29th to the 31st of Octo-ber
2013. Kader Merbouh, the director of the Executive Master
attended the event along with two of the students, Souad Bouskra
and Halima Youssouf, to promote the master on an international
level and look for new partnerships and sponsors.
A partnership aiming essentially at promoting Islamic Finance
was concluded with the association: “Bee Just”. The first joint
event organized by Dauphine and Bee Just will took place on the
4th May in Dubai.
strengthen their infrastructure frameworks and build innovative
public-private partnerships,” said OECD Deputy Secretary-Gene-ral
Rintaro Tamaki.
The MENA-OECD ISMED Working Group will bring together
experts from international financial institutions, development
agencies, the financial services sector, and MENA policymakers to
deliver recommendations on how governments can mitigate risks
for private infrastructure investment. The group will focus on is-sues
ranging from arbitration and public-private partnerships, to
Islamic financial instruments and cost- and risk-sharing instru-ments.

Imtiyaz at the Swisslife Conference in Marseille
Swisslife invited investors and brokers in Marseille on February 10th 2013 for a conference on Islamic Finance. Kader Merbouh, the
director of the Executive Master attended the conference at the KEDGE Business School in Marseille with the student Maxime Laurent.
The sales director of Swiss Life France, Vincent Liégeon, announced that the insurance company will launch in 2014: “a securities ac-count
that will make the investment in Sharia Compliant UCIT possible”. Last year, the company launched the first Sharia Compliant life
insurance contract in France. These Halal savings and investment products “SALAAM Epargne & Placement” are certified by the CIFIE
and are subject to a special tax treatment. Isn’t the Insurance company concerned about its brand image and the risk related to losing a
part of its clients after having launched Sharia Compliant products? Mr. Liégeon brought an honest answer affirming: “If our existing
clients stop their relationship with us for the sole reason that we are offering Islamic products, they are racist clients that we don’t want
anything to do with”.
Imtiyaz and the study trip to the Gulf
9
Every year, the Executive Master plans a study trip to a destina-tion
where the Islamic Finance industry plays an important part
and where the students are able to meet and interact with the
most influential people of the industry.
This year, for the second time, the fifth class “Imtiyaz” traveled to
the Gulf from April 26th to May 11th, 2014 with the support and
assistance of personalities such as the ambassador of Bahrain in
France Mr. Naser Al Belooshi, the ambassador of UAE in France
Mr. Mohamed Meer Abdallah Al Raeesi and institutions such as
Paris Europlace, Chaabi Bank in Paris and the Bahrain Institute
of Banking and Finance (BIBF). This trip was the opportunity
for the 20 participating students to promote the degree and create
long lasting relationships with the professionals of the sector and
look for job opportunities in the Gulf.
Three countries were included in the trip : The kingdom of
Bahrain, UAE (Dubai and Abu-Dhabi) and the Kingdom of Qatar.
These countries represent the largest and most important finan-cial
markets in the Arab world and play an essential role in the
development of Islamic Finance around the world.
Master’s students traveling to the Gulf.

Imtiyaz at the Charity soccer tournament of Elite 5 Event
10
The Executive Master students participated at the event “Charity
Football Tournament” organized by Elite 5 soccer whose manager
and founder, Larbi El Bahraoui, is a student in Imtiyaz Class. This
tournament took place on Saturday May 10th 2014 at the Doha
Sports Complex in Qatar and was the opportunity to gather 16
teams trained and constituted by institutions of the Middle East, 8
international players and « Robert Pires » as special guest.
Master’s studients participating to the soccer tournament organised by the Elite 5 Event in Doha, Qatar.
Annual Conference of the Executive master
Principles and practices of Islamic Finance
(May 17th 2014)
Despite the impulsion shown by public authorities back in
2008 and 2009, Islamic Finance in France is still embryonic and
discreet. According to the first report on the state of the industry
released by Thomson Reuters on November 25th 2013 in Dubai,
Islamic finance continues to grow in an aggressive way with a
considerable market in France, Europe and let’s not forget the
emerging markets. However, European markets and particularly
those near our borders, namely Luxembourg and London, are
racing to position themselves in the industry and thus sending
extremely strong signals to the Middle-East. Efforts are conti-nuing
in France with new entrants and a growing interest of the
existing actors for this type of Finance.
Since its launch back in 2009, the executive master Principles
and Practices of Islamic finance of Paris Dauphine University has
become a major player in the French Islamic Finance industry.
The Executive master has undertaken, as every year, the initiative
of bringing together all major players of the industry in France
to interact and exchange on the trends, challenges, developments
and more importantly review the main developments in France
as well as future prospects.
The conference “Islamic Finance: what future in France?” revol-ved
around three roundtables (life insurance, Real Estate and
Banking) and was followed by a briefing on the Executive master
Principles and Practices of Islamic Finance.
Alain Pithon (General Secretary of Europlace)
Amine el Alami (Chaabi Bank, France)
Jean Philippe Besse (Parisian Advisory)
Lilian Le Fahler (Executive Manager Treasury & Capital Markets
KFH, Bahreïn)
Marc Mariani et Eva Leygonie, (Baker &Mc Kenzie)
Nicolas Limbourg (VitisLife)
Ouassim Bendiab (Andalus Advisory)
Valentine Baudouin (Associate, KramerLevin)
Vincent Liégeon (Directeur Commercial, SwissLife France)

Nordine Sadki
Interview of the Alumni
Nordine Sadki is a fresh graduate of the Executive master (Averroes Class). He began his high education in “L’Ecole Internationale
des Sciences du Traitement de l’Information” where he got his engineering degree in quantitative finance. He pursued his education at
the university of Pierre & Marie Curie where he completed the prestigious master of probabilities. After having worked in trading and
asset management for prestigious conventional banks such as HSBC, Société Générale, Nordine Sadki is now a structurer at Abu Dhabi
Islamic Bank (ADIB). He shares his perception, vision and opinions as a practitioner for the positions he has filled.
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After your education, why choose Islamic Finance ?
I have always had a passion for market finance in general and its
quantitative and mathematical aspects given that I come from an
engineering school. During my studies at the engineering school,
the executive master in Paris Dauphine was being launched. At
the time Islamic Finance was just kicking off in France and was
just at its very beginnings, I took an interest in the field by reading
the interviews of Anouar Hassoune who became one of my pro-fessors
later on. I wanted to take part to this general excitement
and started to see myself in the Islamic finance world in which I
would exploit my knowledge and experience of the conventional
sector. Unveiling the secrets of the Islamic Finance world inte-rested
me for its ethical and social justice principles that are rarely
present in the conventional world.
As a practitioner, do you believe Islamic Finance keeps its
promises ?
As a practitioner, I always do my best to make Islamic Finance
deliver its promises and I strongly believe that other actors of the
industry try to do the same by focusing on ethical and social jus-tice
principles that I mentioned earlier. Due to its young age, the
Islamic finance industry hasn’t reached yet the necessary maturity
to deliver its promises and keep them, I believe it’s only a matter
of time. I always try to bring together theoretical principles and
Islamic finance values to the practice. Let’s not forget that there is
a balance to find since Islamic Finance is used for economic pur-poses
and economic gain but beware of the drifts.
Was the reality disappointing compared to what you were
taught in school ?
I can’t say I was disappointed. First, it is very important to say that
to be a good practitioner, one needs to understand the theory. The
theories that are taught in school help me understand the reality
of the field on a daily basis. There are theoretical aspects that will
remain only in books like contracts that are never implemented in
the real world for their complexity.
Don’t you think that Islamic Finance faces limitations
with the strict framework within which it has been defined
or to the contrary, do you believe it’s rather a strength that
can help it expand significantly ?
I think that Islamic Finance is evolving in an unique framework
that needs to be dynamic and in constant evolution. An isolated
Islamic Finance can’t and won’t bring the necessary strength for
this sector to grow and expand.
Why is this sector so attractive to the UAE and the Gulf in
general : Fashion trend or true belief ?
Other than the fact that the population in the region is largely
Muslim, Islamic banks have been successful in competing with
conventional banks. In terms of prices and service, they’re equal,
sometimes even better. From an economic standpoint, Islamic
banks are comparable to conventional banks and clearly competi-tive.
In a country where religious beliefs are essential, the concepts
of Islam conveyed by the banks appeal to the clients. Riba and
Sharia compliance are fundamental notions to the average citizen
of the UAE.
The Murabaha which is the most used product in the in-dustry
is often criticized as being a Riba in disguise. Where
do you stand on this debate ?
I believe that a Murabaha used and executed in the rules and spirit
of the Murabaha isn’t a Riba disguised. Then again, we need to
make sure of the respect and good execution of the different steps
Nordine Sadki

12
of a Murabaha contract. The Sharia Boards who are the guaran-tors
of the Murabaha need to make sure that no abuse is com-mitted.
This contract is often criticized because it is sadly often
badly executed and understood by the banks. This tends to distort
the contract.
Are conventional banks still attractive to the Gulf ?
Clearly yes but Islamic banks are true competitors and contenders
in this market, it is no longer a conventional banks’ monopoly.
Do you think that one day Islamic banks will totally re-place
Conventional banks ?
No. Today, Islamic banks cannot fully operate without the help
and cooperation of conventional banks. The global economic sys-tem
is anchored and highly linked to the conventional world. To
say that Islamic banks will one day replace conventional banks
is economically impossible since the world economy is based on
debt.
In addition, Islamic banks are still too weak in terms of propor-tion
to imagine an economy purely based on Islamic banks that
need to conclude transactions with International banks to sur-vive.
What is missing today and what do Islamic banks lack to
enforce and strengthen their presence and increase their
market shares ?
Several parameters have to be taken into account to answer this
question but I will mention only two that I deem to be the most
important :
First, Islamic Finance today lacks a well-defined legal framework
and an unified governance within Islamic banks. Islamic Finance
should have a “regulatory framework” : a concept of rules and
laws unique to the sector. A need of standardization is necessary
to make sure all banks will be subject to the same set of rules.
Standards and legal framework are pre-requisites to market de-velopment.
Institutions such as IIFM, work together and closely
with Islamic banks who have a market expertise and knowledge
to come up with standards such as ISDA/IIFM Tahawwut Master
Agreement and unify the documentation that will be used across
different banks.
There is also a need for more evolved products for risk manage-ment
that cannot be designed without research and development
efforts. R&D sections in Islamic banks are not as developed as
Conventional banks’. There is a gap between market actors like
myself who know the real world and have frictions with it on a
daily basis and sharia scholars who most often have a theoretical
vision. This gap needs to be reduced and the two worlds need to
join their efforts together to improve research at the level of Isla-mic
Banks.

REPORT
ON WAQF Wajdi Lahmar - Yasmine Abdouch
Randi De Guilhem - Boubacar Faye
dividuals and defined as being « The contracts concluded between
individuals and society in an effort to promote the general well-being
». The waqf belongs to this latter category and has played a
central role in social, economic, scientific and cultural develop-ment
throughout history.
The famous universities of Al-Azhar in Cairo, Ez-Zitouna in Tu-nisia,
Al Qaraouiyune in Fes-Morocco and the Merton college in
Oxford have all been funded through Waqf.
Section 1 : Genesis and Evolution of Waqf
it from a sale or an inheritance in order
to give out the proceeds generated by its
use (rents) to a charitable purpose. Some
lawyers state that the Waqf is immobilized
in the hands of God.
Legal : From a legal standpoint, setting up
a Waqf « is removing the property from the
domain of private property and preventing
13
What is a waqf ?
By Wajdi LAHMAR
According to a report released by the PNUD in 2009, around
40% of the population in Arab countries live below poverty line.
The search for new ways of socio-economic empowerement of
Muslim societies brings us to the question : what solidarity and
mutual aid mechanism would help reduce social disparities wit-hin
these communities ?
The study of Islamic Finance contracts reveals a distinction
between three categories : Sales contracts تاضواعملا , Equity fun-ding
and charitable instruments based on the volunteering of in-
Linguistic : Literally, the word Waqf
(plural : Awqaf) is derived from Waqafa
which means to stop or to stop mobilizing.
The individual who constitutes a waqf is
called « Waqif » and the object of the Waqf
is denominated the « Mawqouf »
Terminology : In Islamic law, the Waqf is
the act of locking a property and secure
it from falling in it again while intending
its usufruct to a specific charity or public
good. The English language has opted for
the word « endowments » or « bequest »
to denominate the Waqf, while the North
Africans have chosen the word « Habous »
and the Turcs « Vaqf ».
The purposes behind Waqf
The purpose behind its institution is to find sources of stable and permanent funding to support religious, educational, nutritional, eco-nomic,
health and safety needs of the community. The waqf also aims at consolidating solidarity values between different social classes
in order to gain the blessing of God and ultimately a place in paradise (Jannah).
The first Waqf in Islam
The first Waqf in Islam was the mosquee of Quba in Medina that was built by the Prophet after the Hegire. Six months later, the Prophet’s
Mosque (Al Masjid An-Nabawi) was built thanks to a Waqf constituted by the Prophet himself once again.
Major phases in the history of Waqf
Non-muslims and the Waqf
The undeniable proof of the existence of Waqf prior to Islam is the place to which all Muslims turn to for their daily prayers : Al Ka’baa
that was built by Ibrahim in accordance with divine orders. Similar practices were observed in some non muslim communities, but
despite the numerous similarities, the Islamic Waqf has sufficient unique and original features to qualify as a sui generis institution.
Major phases of the development of Waqf in Islam
The Waqf has been through ups and downs along the phases of its evolution. We have identified four important phases :

First phase : Birth and development
Since the time of the Prophet and his Caliphs, each Waqf was
administered by its founder. However, the increasing number of
Awqaf and the death of the founders created problems that au-thorities
had to solve. Thus, under the reign of the Umayyads, an
independant Diwan was created specifically for the registration
of Awqaf. The Diwan was the first form of organization and cen-tralization
of Awqaf.
Second phase : Colonization & Decline
The pious foundations in colonies were completely abandoned
and left to fall into ruin during colonization. The settlers deli-berately
opted for a direct intervention in Awqaf to reduce their
positive role in supporting national resistance movements. Even
after their departure, the settlers left behind them corrupt go-vernments
and leaders.
Section 2 : Awqaf and the sources of Fiqh
Le Coran :
Even if the Quran repeatedly required muslims to give away alms, there is no direct indication or mention of the Waqf and so it cannot
be considered to be as mandatory as prayer or fasting. However, the sunna brings an interesting addition to the matter.
The hadiths :
The Prophet ensures that good deeds continue to exist after death, but the practice of the Waqf as we know it today, was born after the
Prophet answered Omar’s Question : « I have a land in Khaybar and I have never had a property this valuable, what should I do with
it ? » the Prophet replied « if you want, you can immobilize the property and give away its produce as alms ». Following this recommen-dation,
Abou Talha donated a garden, Othman a well, Khalid Ibn Al Walid his shields and weapons and some companions went to the
extent of giving their own homes. Regulation by lawyers hasn’t been developed by lawyers until the second Hegire century.
14
The main foundation of Fiqh Awqaf
Characteristics of waqf :
The waqf is characterized by three main elements, it needs to be :
irrevocable, perpetual and inalienable.
- Irrevocability : Neither the Waqif nor his heirs can revoke a
Waqf.
- Perpetuity : Ensures the benefits will pass from a generation to
the next.
- Inalienability: The ownership of the immobilized asset is consi-dered
returned to God and may not be sold, borrowed against,
offered or inherited.
Waqf Pillars (Arkan al waqf) :
- The donor (Waqif ou habis)
- The text or contract (sîghah) of which the terms may either be
explicit or implicit
- The object (mawqûf)
- The recipient or beneficiary (mawqûf ’alayhi)
Any Muslim institution having these four characteristics must
be considered a Waqf. However, a waqf may be contested when
Third phase : State Interventionism
At the end of the colonial era, the state has replaced civil society
in overseeing a large number of public services. This intense re-gulation
was the root cause behind the contraction in the social
development role of Waqf. This latter was limited to the custody
of mosques, religious and cultural activities.
Fourth Phase : A new Hope…
This phase began in the 80’s with the launch of new policies ai-ming
at rehabilitating and promoting civil society and the role it
plays. The « Magic » Waqf solution was brought to the table once
again and several conferences and round tables were organized to
draw attention to this mechanism.
the intent of the founder is questionable, an example would be
the case in which the founder is looking to deprive women from
their shares in an inheritence.
Basic Foundations :
The Fiqh of waqf is built around three main pillars that provide
legal protection for the inherited assets, namely :
- Respect to the condition of Waqif and his will that may not, no
matter the circumstance, be modified or broken.
- Jurisdiction of magistrates (the qadis) on waqf, given the fact
that the legal authority has always been the one to be considered
as the most independent and the most capable when it comes to
preventing injustice and violation of legitimate interests..
- The waqf is a legal person: From the moment a Waqf is made, it
becomes an independant entity of the Waqif.
In addition to Fiqh books, AAOIFI dedicated norm n° 33 to the
Waqf.

New forms of Waqf have emerged along the years and the classification can be based on several criteria :
Classification according to civil law :
- Awqaf Mazboutah (properties directly administered by the ministry of Awqaf).
- Awqaf Mulhaka (administered by special Mutawalis designated by the founders)
Classification by purpose :
Depending on the purpose sought by the founder, a Waqf is either khayri or ahliou or a combination of both.
Classification by Object of Waqf :
- Real Estate, property and agricultural land Waqf
- Movable Objects Waqf
- Cash Waqf
- Waqf in terms of time : doctors, engineers, teachers and professors may devote their time to a charitable cause.
It’s a modern Fiqh innovation to widen the spectrum of mutual aid and the Waqf recepients.
15
Section 3 : Types of Awqaf
Multiplication and diversification in the areas of Waqf
The Awqaf in the service of religion and worship
Construction and maintenance of mosques and specific Awqaf
pilgrimage (hajj).
Science and Education Waqf
Permitted the funding of scientific work of the epic names of the
Golden-Age, as Ibn Sina (Avicenne, 980 – 1037) and Ibn Rochd
(Averroès, 1126 – 1198).
Waqf and Social causes
The Waqf was designed to fight poverty, provide housing, food
and care for the elderly. The Waqf also took charge of diverse
areas ranging from health to construction and equipment of
hospitals and clinics, water and sanitation. There was even Awqaf
for weddings that still exist today in Egypt.
The examination of the genesis and historical foundations of
Waqf reveals the importance of documentary work around
this institution. Fiqh has played an important role in the im-plementation
of Waqf within Muslim societies, the work of
many lawyers helped establish the beginnings of a simplified
legal framework, making this practice accessible to people and
anchoring its customs in Arabo-Muslim civilizations.

16
Waqf :
legal
aspects
By Yasmine Abdouch
The classical theory on the unity of patri-mony,
developed by Strasbourg professors
Charles Aubry and Charles Rau back in
the nineteenth century has definitely evol-ved
in the XXIth century with the intro-duction
of mechanisms for allocation of
assets such as the EIRL or the « Fiducie »
in France.
The Anglo-Saxon system has known, since
the XIVth century, the trust system, which
allows a founder to give to a third party
(through allocation of assets) the res-ponsibility
of managing the patrimony on
behalf of one or more beneficiaries. Just
like those mentioned legal systems, Isla-mic
law provides a similar institution to
the Anglo-Saxon Trust.
Indeed, The Waqf is a legal mechanism for
allocation of assets, irrevocable and ina-lienable
and managed by a person or an
entity to the benefit of a charity or specific
beneficiaries in accordance and respect to
the will of the grantor.
Although this institution is not governed
by French Law, it is necessary to examine
under what forms and mechanisms such a
system can be considered.
The Formation of a Waqf
The establishment of a Waqf is a tripartite transaction whereby the founder (1) transfers his assets to a manager who, in fulfillment of this
purpose (2), will be in charge of administering the benefit of specific and determined beneficiaries (3).
The founder of the Waqf
The allocation of assets in Waqf is an act of provision that assumes
the founder has full legal capacity, that is to say he must be an
adult, not under guardianship and able to manage financial mat-ters.
This criterion joins the distinction of legal acts by category
that defines French law and allows us to identify the individuals
legally able to enter into a particular act with significant legal
consequences.
The object of Waqf
The purpose/object is of particular importance as it will deter-mine
the legal status of the Waqf institution. Indeed, it is com-monly
accepted that a Waqf can be formed only with the existence
of a charitable purpose or if it is made for the benefit of family
members.
The allocated assets in Waqf need to respect the prescriptions
of Islamic law as well as the prescriptions of the legal system in
which they exist. Thus, these assets that are placed in Waqf cannot
be excluded from trade by law, their use needs to be authorized
and must be eligible for the formation of a valid contract. Mo-reover,
only material assets existing at the time of the formation
of the Waqf that the owner holds or is entitled to their usage or
control, may be assigned to a Waqf.
In a second phase, the properties that are the object of Waqf need
to be allocated in an irrevocable manner and in a way their aliena-tion,
mortgage, donation or inheritance is no longer possible. This
state is justified by the etymological definition of Waqf that means
« Blocking », « Immobilizing ». However, different schools of ju-risprudence
have different views when it comes to the perpetuity
of the immobilization. While the Malikis consider that the pro-perty
may be allocated only for a specified period, the Hanbalis’
on the other hand, believe that assets are allocated on a perpetual
basis.
This difference raises the problem of the legal nature of the allo-cation
of patrimony. Does this allocation represent a donation,
a transfer of property or simply a dismemberment of ownership
through which the grantor keeps the Abusus and the beneficia-ries
hold the Fructus.
Finally, the majority of schools exclude consumer goods from
the Waqf except for movable assets that are deteriorated through
use. Conversely, according to the Hanafi, only property and
immovable assets can be a Waqf subject to three exceptions :
- Personal property attached to real property such as animals and
agricultural tools belonging to a rural area,
- Movable property designated by some Hadiths as horses and
weapons for Jihad (Opinion of Abu Yusuf),
- Personal property that is assigned to the Waqf such as shovels
and pickaxes for cemeteries…

17
The Beneficiaries
The beneficiaries of a Waqf can be both individuals or legal per-sons
managing a public service. Then, a distinction needs to be
made between two types of Awqaf : Charitable Waqf dedicated to
mutual aid purposes and the family Waqf to the benefit of close re-latives
and the descendants. Nevertheless, the founder of the Waqf
has the ability to select multiple categories of beneficiaries. We can
then imagine that a certain share of the income from Waqf will
benefit a certain community (the poor for instance) and the rest
will go to the family. Nonetheless, the designation of beneficiaries
must meet certain criteria impacting the validity of Waqf :
- Recipients must exist at the time of the formation of Waqf and they
must be identified or identifiable. Except for the Maliki school which
states that reinvesting the income until birth is possible, the majority
of schools consider the appointment of an unborn child prohibited,
- Recipients must be able and allowed to acquire property
- The objective of the Waqf needs to be lawful.
The Characteristics of the Waqf
The act of foundation
The Foundation act of Waqf is a legal act which is divided into
different decisions that do not necessarily have the same defi-nition
when taken separately : an irrevocable commitment to
transfer ownership, transferred assets clearly representing an en-dowment,
a task to be accomplished for a non lucrative purpo-se.
A Waqf is based on a statement provided by the founder and
although the law does not require it and stipulates that merely a
verbal statement is admitted, the common usage requires that it’d
be in writing to ensure the legal security of the institution. It is
only appropriate that such an act expresses the sole intent of the
founder to allocate the assets in Waqf.
As for the validity of this legal act, most Islamic jurisprudence
schools consider that certain provisions would render the act null
and void since suspensive conditions make the realization of the
Waqf foundation dependent on the occurrence of a future event.
Islamic law expressly prohibits uncertainty in transactions with
the only unanimous exception to this principle being the forma-tion
of a testamentary Waqf that starts taking effect on the death
of the founder.
Contrary to the Maliki doctrine’s view, other provisions such as
determining a limited duration for the Waqf, the option for the
founder to freely revoke or sell the committed property would be
prohibited because they go against the principle of sustaining the
institution.
A Waqf can be qualified as such only if it meets certain specifications and operates through procedures prescribed by Islamic Law.
The irrevocability of waqf
The nature of the statement of formation
raises certain legal problems.
Is the statement contractual in nature
and therefore requires the consent of the
beneficiaries and their acceptance or is it
simply an unilateral act emanating from a
will ? The issue is of such importance that
it determines the time the irrevocability
of the Waqf enters into effect, different
schools have adopted differing views on
the matter.
Similarly, the nature of the transfer of pro-perty
remains unresolved as schools differ
on the determination of the owner of the
property once a Waqf is established.
A thesis supports that the Waqf reflects
the same characteristics as a donation and
therefore it is at the time when the effec-tive
transfer of assets is realized that the
possession by the beneficiaries is conside-red
effective and the Waqf irrevocable.
Others consider that once the statement
of formation is made, the property of
the assets is transferred to God but such
a conception would be very difficult to
transpose in the French Legal system.
The perpetuity of Waqf
The perpetuity principle of the Waqf as-sets
assumes maintenance of those assets
through the income they will be genera-ting
or by the beneficiaries who will be
entitled to use them.
In case of damage or willful destruction,
the administrator or the beneficiaries may
claim compensation that will go to the
Waqf and be used for the restoration or
replacement of the assets.
However, a divergence emerges when the
destruction is not voluntary and is the re-sult
of normal use.
Waqf Administration
A Waqf is administered by one or more
persons designated by the founder. Given
the perpetual nature of Waqf, the founder
may decide that the person appointed to
administer the Waqf during his lifetime
and specify the terms and modalities of
the appointment of his successor(s). The
administrator shall accept appointment
and must have full capacity. According
to most schools, except the Hanafi, the
administrator must be trustworthy, have
the necessary skills, be Muslim and of
male sex. As we can see, the appointment
is made on a very intuitu personae basis.
The administration of the Waqf consists in
a maintenance and repair duty of the allo-cated
assets and the distribution of income
generated by the asset to the designated
beneficiaries. The administrator has the
right to be paid for his work.
The disappearence of waqf
The Waqf heavily relies on the principle
of perpetuity, however, different schools
have identified situations in which the
Waqf can end :
- In Case the asset is lost or disappears
- When the founder commits apostasy to
Islam
- When the Waqf operates in a manner
contrary to its essence
- For the Malekites, in the case of death of
the recipients or when the Waqf expires
(as provided by the founder) as men-tioned
earlier.

The Integration of Waqf in The French Legal system
The thorough study of Waqf allows us to highlight the religious dimension that is extremely present and represents an essential part of the
process from establishment to extinction. In addition, the different schools of Islamic jurisprudence are not unanimous and diverge on
key points such as the element of perpetuity and the nature of the assets. Given these data and the principle of secularism and non-dis-crimination
of the French system, it is difficult to imagine that such an institution can fully and easily integrate the French legal system.
In contrast, the Waqf could be similar in its general principles to the « foundation » established by the law of july 23rd 1987. This law
states that « a foundation is the act by which one or more natural or legal persons shall allocate irrevocable assets, rights or resources to
carry out a task of general interest and with a non-profit purpose ». Thus, as for the Waqf, any asset assigned or given to the benefit of a
foundation is irrevocable and perpetual in nature.
18
Nevertheless, the foundation has legal capacity only as of the date
of entry into force of the decree of the council of state granting
recognition of public utility.
The public utility foundation must include in its supervisory
board a representative of the state administration. The institution
is then formed and managed by a binding state supervision which
results in submission of the acts to state supervision.
Although the Waqf is similar to the foundation as provided by
French Law, its formation under this form is legally too binding
and complicated. Moreover, due to the lack of a proper legal defi-nition,
the recognition of public utility for the foundation is sub-ject
to the discretion of the administrative authorities.
Thus, according to the jurisprudence of the state council, the ob-ject
of a foundation cannot be too general, too imprecise, vague
or narrow. It may not contravene the republican values of secula-rism
and neutrality, as well as being distinct from the interests of
its members. Therefore, could a Waqf of which the deed excludes
beneficiaries on the basis of their religion be considered under
French law as a public utility foundation ?

Waqf & food
security in the
Middle East
By Boubacar FAYE
19
The Middle-East may face problems of
food security, the region currently lacks
the means to produce an adequate food
supply because of water scarcity, lack of
arable land, inadequate investments in
agriculture, poor inventory management
and distribution networks under-opti-mized.
According to the World Bank, the Middle
East used to import 50% of its food needs
back in 2008. With food prices hitting the
roof and an increased volatility in interna-tional
markets, the domestic agriculture is
of strategic importance in all food produ-cing
countries in the region. Non-produ-cing
countries such as states of the Gulf
Cooperation Council (GGC) have pur-sued
a research strategy to look for new
and innovative ways to secure lands in
other countries to produce part of their
food needs.
The Muslim population in the Middle
Eastern countries is estimated today at
321 million people. Projections for 2030
say the figure would grow to as much as
439 million, a 36.5% jump in a timeframe
of 20 years that would have a significant
impact on food security that is very easy
to foresee.
The acquisition of rights for using lands
abroad by Arab countries from the
Middle-East was not without controversy.
These transactions can create important
political and legal risks arising out from
the inhospitable treatment they receive
both inside and outside the host country.
They have been pointed out as forms of
land grabbing comparable to the 19th
century colonization. The terms of these
acquisitions and their details are often
unknown to the public. This opacity feeds
suspicion on the fact that these transac-tions
are opportunistic theft of scarce re-sources.
The Waqf is a sort of trust through which
assets are allocated and maintained for a
specified period or in perpetuity for spe-cified
recipients and for one or several
goals (security or social well-being, cha-rity,
public utility infrastructure…), it has
the potential to respond to and overcome
the issues of food security. The objective
is to combine multilateralism with food
security objectives and to do so, the waqf
as a structure can be considered but it will
have to be adapted to suit the participants.
These need to agree on the scope of the objectives, the composition of the assets to be included in the Waqf…
More importantly, the structure of the proposed Waqf requires freedom of action vis-à-vis the direct administration, freedom of manage-ment
vis-à-vis any general Awqaf authority in order to promote effective management and reduce the political and legal risks associated
with host governments. The considered Waqf structure consists of appointing a Nazir (Waqf Nazir) or (Waqf Nuzur, group, entity) to
administer the Waqf and maximize the assets of the Waqf to be compared to benchmarks of international assets, of the same class, and
also follow standards of governance. This approach offers more guarantees for the designation of the holder(s) of the required experience
to administer the Waqf in an effective and profitable manner without any undue (government) interference.
Thus, the objectives of reducing the political risk would be achieved paving the way for the pursuit of the food security objectives effectively
and in an innovative way.
The religious origins of the Waqf and its historical treatment make
it a safe vehicle for the investment in assets, particularly in the
context of multi-party agricultural investment with a significant
involvement from government entities who conclude alliances
instead of pursuing their objectives separately. Compared to other
forms (corporations, partnerships…), the waqf is less likely to
meet a political or other interference that may thwart its original
purpose or decrease its value through abuse or mismanagement.
Middle-Eastern countries, institutions and private parties are
able to serve the needs of food security and with an expertise in
Islamic finance and a developed practice of the Waqf. The Waqf
structure is a well established and proven structure that deserves
the attention of political and economic institutions.

ISLAMIC
Finance & waqf :
perpetuating a societal strategy
By Randi Deguilhem - CNRS
20
A powerful tool that finances in a sus-tainable
and recurring way a personal
investment strategy in favor of beneficia-ries
selected in advance by the founder or
foundress (no difference by sex is made
as to the establishment of the Waqf), the
Waqf foundation (often called Habous in
North and Subsaharian Africa) is very well
known and widely used at all socio-econo-mic
levels everywhere in the Islamic world
since the beginnings of Islam (Carballeira
Debasa 2002 ; Cizakça 2000, 2011 ; De-guilhem
1995, 2008 ; Henia 1999 ; Saidou-ni
2007).
The Waqf is also a strategic mobilization
tool by men and women belonging to
other religious communities (Christian,
jews…) in the Middle-East and in Eastern
Europe, which formerly belonged to the
Ottoman empire (de Rapper 2009).
Insofar, the Waqf has no direct coranic
references-in the use and in the fiqh, it
is often associated with sadaqa jâriyya :
namely a charitable or societal recurring
gift-however, many hadiths mention it like
the one in which ‘Umar ibn al-Khattâb
seeks the advice of the prophet on the best
way to make the income from his garden
at Khaybar available to the Muslim com-munity,
the answer of the prophet was that
Umar created a Habous.
Thus, the fact that the waqf has links
with hadiths but is not mentioned in the
Coran gives it the opportunity to evolve
and adapt freely according to the needs
of different individuals and groups (trade
groups, neighbor groups…) in society
which results in a diversity of the struc-tures
that have developed and appeared
in response to specific needs in different
parts of the Islamic world.
To give a clear definition of the concept : although the waqf is becoming a complex tool as it is developing and adapting to the evolutions
in society, its infrastructure, which is a self-sufficient system, it can be summarized as follows : to set up a « traditional » Waqf, an indivi-dual
(free, debt-free and pubescent) allocates a specific part of the revenues generated by the assets (buildings, agricultural land, a sum of
money) that fully belongs to him/her (milk) to beneficiaries he/she appoints.
The beneficiaries, either family members or any other person (waqf dhurrî/ahlî), institutions such as places of worship, education, health-care,
etc. (waqf khayrî) or a combination of both (waqf mushtarak), receive their share of generated revenues (in cash or in kind) on a
regular basis by the manager (mutawallî ou nâzir) of the Waqf also appointed by the founder.
As for the bare property (buildings, agricultural land, cash), it
belongs fully and exclusively to the Waqf and grows in the vast
majority of cases, through a lease overseen by the manager of the
Waqf.
According to Fiqh Jurisprudence, the asset committed to a Waqf
cannot be sold, mortgaged, bequeathed or otherwise modified
(the manager may however exchange the property against ano-ther
by an istibdâl contract but in reality, the documents from
the Ottoman era is living proof that removes any doubt on the
fact that those assets met and were conform to all market laws. In
other words, despite the prohibition of fiqh to remove them from
the category of « Waqf », the status of assets under Waqf used to
change hands quite often (for example : Sroor 2010).
As a matter of fact, archival research in the Middle East and other
centers around the world shows great adaptability of the Waqf
that has met, across the centuries, the different situations in lands
of Islam and the evolving needs of the individuals living there.
We notice therefore a large variety in Waqf linked to a historical
periodization that we think differs from a region to another.
In summary : 1- The period from the first centuries of Islam to
colonial times-during which novelties occur, as for the use of cash
as Waqf property that generates income for foundations starting
the medieval times in Egypt and especially during the Ottoman
period in the Balkans ; 2- The colonial era that has witnessed great
dismemberments of Waqf systems in colonies ; 3- Independence
era with states formerly colonized where dismemberments per-sist
or the system evolves towards direct management by the state
(This process had already started in the Ottoman era, Deguilhem
2003) and 4- a resurgence and a redefinition of Awqaf for the last
fifteen to twenty years and a positioning as to Islamic finance that
is spreading and developing fast not only in Islamic regions but
also in Europe and America (Cizakça 1998).

These questions are at the heart of current economic issues and
several institutions and international bodies were created in the
last fifteen years to study the waqf in all its aspects.
To illustrate, let’s mention three of these bodies headquartered
abroad starting with the « Kuwait Awqaf Public Foundation »
(KAPF) created in 2000 in Kuwait as a research organization, dis-semination
of studies on the Waqf through its biannual review,
Awqaf, and its activities aiming to support international meetings
and programs on Waqf.
The second organization we will mention is the International
Center for education in Islamic Finance (ICEIF) Kuala Lampur,
Malaysia, which performs academic studies on the Waqf and as
the KAPF, organizes training courses in the current management
of Waqf. Last but not least, the Institute for Islamic World Studies
(IIWS) of the Zayed university Abu-Dhabi/Dubai that mobilizes
social and human sciences for the study of Islamic civilizations,
including islamic finance and Waqf.
Finally, in France as well as in other places in Europe, the Islamic Relief uses, since the 1990s, the tool of waqf, in the order of seven cate-gories
of waqf. This authority is not a research body like the authorities quoted above but an association of action with the civil society
which intervenes by means of waqf. As for the academic research, let us quote the GDRI program of the CNRS (NATIONAL CENTER FOR
SCIENTIFIC RESEARCH) which, with the partnership of nine authorities located in France as well as abroad, has the objective to study
the socioeconomic and political history of the waqf since its origins in our days.
In the end, for the individual, to create a waqf or to participate in a waqf foundation established beforehand by others would mean : «
leave one’s footprint in the society while alive and after one’s death «.
21
Finally, let’s not forget that this long Waqf history differs from a
region to another but develops in a tripartite global framework
defined by religious jurisprudence (fiqh) sunni and shia’ (that
evolves according to madhahib but also the local history), political
civil law and the relationships to the use of customary law (‘urf).
We are talking then about a powerful instrument of society, a de-cision-
making body at the level of the individual from the founder
who has a very modest patrimony (in history, most waqf were only
small holdings) to the founders with an extremely large estate.
A power of founder regarding his/her decisions on the investment
of its assets in Waqf (the founder of the Waqf has the right to spe-cify
in its founding statement/charter, ways to grow the Waqf as-sets
through certain leases…the founder can also prohibit others,
for instance, the prohibition of exchange of property istibdâl to
avoid the dispersion of estate) as well as the choice of beneficiaries
of the foundation (strategy of supporting financially for example a
mosque or a religious school in a given place) but also in relation
to the Waqf manager (ultimately, it’s the mutawallî or the nâzir
who make decisions on the management of any matter relating to
the Waqf).
BIBLIOGRAPHY :
CARBALLEIRA DEBASA Ana Maria, 2002, Legados pios y
fundaciones familiares en al-Andalus (siglos IV/X-VI/XII),
Madrid, Consejo Superior de Investigaciones Cientificas
CIZAKCA Murat, 1998 (nov.), « Awqaf in History and its
Implications for Modern Islamic Economies », Islamic Economic
Studies, v. 6/1, pp. 43-70, 2000, A History of Philanthropic
Foundations. The Islamic World from the Seventh Century to
the Present, Istanbul, Bogazici University Press, 2011, Islamic
Capitalism and Finance : Origins, Evolution and the Future,
Cheltenham (Royaume-Uni), Edward Elgar Publishers de
RAPPER Gilles, 2009, « Vakëf : lieux partagé du religieux en
Albanie », in Dionigi Albera et Maria Couroucli (éd.), Religions
traversées. Lieux saints partagés entre chrétiens, musulmans et
juifs en Méditerranée, Arles, Actes Sud, pp. 53-83
DEGUILHEM Randi (dir.), 1995, Le waqf dans l’espace
islamique. Outil de pouvoir socio-politique, Damas,
Institut Français d’Etudes Arabes de Damas (IFEAD), 2003
(mai), « Sur la nature de waqf. Les fondations pieuses en
Syrie contemporaine : une rupture dans la tradition », Awqaf,
Fondation Publique des Awqafs de Koweït, v., 4, pp. 5-43 , 2008,
« The Waqf in the City », in Salma K. Jayyusi (dir. with Renata
Holod, Attilio Petruccioli and André Raymond), The City in the
Islamic World, Leyde, Brill, pp. 923-950
HENIA Abdelhamid, 1999, Propriété et stratégies sociales à
Tunis (XVIe-XIXe siècles), Tunis, Presses de l’Université Tunis I
SAIDOUNI Nacereddine, 2007, Le waqf en Algérie à l’époque
ottomane XI-XIIIe siècle de Hégire / XVIIe-XIXe siècles. Recueil
de recherches sur le waqf, Koweït, Fondation Publique des Awqaf
de Koweït
SALIBA Sabine, 2004, « Waqf et gérance familiale au Mont
Liban à travers l’historie du couvent maronite de Mar Challita
Mouqbès (XVIIe–XIXe siècles) », in Randi Deguilhem et
Abdelhamid Hénia (dir.), Fondations pieuses (waqf) en
Méditerranée : enjeux de société, enjeux de pouvoir, Fondation
Publique des Awqaf du Koweït (KAPF), Koweït, pp. 99-129
SROOR Musa, 2010, Fondations pieuses en mouvement. De
la transformation du statut de propriété des biens waqfs à
Jérusalem (1858-1917), Beyrouth-Damas, Institut Français du
Proche-Orient (IFPO)
TOUKABRI Hmida, 2011, Satisfaire le ciel et la terre : les
fondations pieuses dans le Judaïsme et dans l’Islam au Moyen
Âge, Paris, Honoré Champion
Presentation of the author :
Randi Deguilhem, Director of Research at the
CNRS(NATIONAL CENTER FOR SCIENTIFIC RESEARCH),
is a member of TELEMME-MMSH, Aix-en-Provence.
Responsible for the GDRI « Waqf « ( 2012-16 ) to which belong
nine European international partners and of the Islamic world,
she manages since 2010 the doctoral seminary to IISMM-EHESS
Paris which analyzes the waqf as social phenomenon.
Randi Deguilhem randi.deguilhem@gmail.com deguilhem@
mmsh.univ-aix.fr

LIFE
INSURANCE
Islamic vs. Conventional life insurance :
what differences, what similarities ?
By Fatima ABDUL KASIM
A commonly used wealth management tool, the life insurance contract is the favorite savings and placement product of French people.
The launch in France of the life insurance contracts Salaam by Swisslife and Amane Exclusive life by VitisLife shows the interest of
European actors for Islamic insurance.
This foreshadows an interesting development of this market.
22
Life-Insurance : An important tool for wealth management
Life Insurance is an envelope that allows individuals to invest their
money and manage it in the most flexible way while enjoying a
very attractive taxation regime. Life Insurance (Savings type) is
often confused with the Insurance upon death (the welfare/pre-vention
type). However, they are very different in nature and do
neither concern the same needs nor aim for the same objectives.
On the one hand, the idea behind death insurance is not to save
but rather to guarantee a capital consisting of regular premium
payments that will be distributed to the selected beneficiaries
when the insured person dies. On the other hand, Life Insurance
products are mainly savings and investment instruments that al-low
to build-up a capital and through investment to take advan-tage
of tax benefits. For instance, they can help ensure additional
income to compensate for the future loss of earnings as for the
case of retirement.
There are mainly two types of contracts: in euros and in units of
account. The contract in euros (First category) guarantees capital
with a low yield while the unit of account contract provides a hi-gher
return for a higher level of risk.
Contracts in euros
The managing institution is required to repay a sum equal to the
net premiums as well as capitalized net gains at maturity. Finan-cial
income generated by the investments will increase savings
and become, subsequently, interest bearing.
These contracts may be invested only in funds called « Euros »
that meet the criteria of capital guarantee and compensation.
Contracts in units of account
Unlike Contracts in euros, these contracts have as a reference an
unit of account instead of the Euro. The capital invested evolves
according to the value of the unit of account which may be a Euro
denominated fund or units or shares of mutual funds, unit trusts,
REIT’s, OPCI’s
The insurer guarantees the number of units of account which re-sults
in the transfer of the risk to the client who bares it entirely
on his own.
The Benefits of Life Insurance
There are various benefits that motivate French people to invest
their money in life insurance contracts.
Firstly, life insurance allows individuals to secure their savings
and investments: the euro life insurance contract offers a certain
level of investment security and protection. Therefore, French in-vestors,
that are seeking guarantee before performance, are more
drawn to the capital guarantee of the funds denominated in Euros.
Secondly, life insurance has a very interesting tax regime: the life
insurance policy can benefit from tax advantages because it offers
tax exemptions on income after a period of 8 years; and tax reliefs
on inheritance rights. lam dans le cadre ses investissements de le
faire, tout en profitant des avantages juridiques et fiscaux qu’offre
ce produit.
In case of redemption before eight years, except for some exemp-tion
cases (dismissal, disability or early retirement), the benefits
are subject to Income tax. If it is more interesting, the beneficia-ry
would avoid the progressive tax by opting for withholding tax
rates up to:
- 35 % when the duration of the contract is less than 4 years;
- 15 % when the duration is equal or greater than 4 years;
- 7.5 % when the duration is greater than or equal to 8 years after
a deduction of 4,600 euros for single people and 9,200 for couples.
Capital gains are also subject to social contributions at the rate of
a total of 15.50 %.
Moreover, Life insurance contracts fall within the scope of the
French wealth tax. Therefore, their value at the 1st of January
should be declared and subject to wealth tax when the insured is
a French tax resident.

23
Concerning inheritance taxes, the amount of acquired or reco-gnized
products at the date of the insured’s death are subject to
social security contributions at the rate of 15.50%.
Furthermore, the selected beneficiary of the Life Insurance
contract would be taxed, depending on the insured’s age at the
payments date, as follows :
Payments made until the 70th anniversary of the insured :
-20 % for the portion lower or equal to 902,838 euros after a tax
allowance up to 152,500 euros if applicable;
- 25 % for the portion greater to 902,838 euros.
Payments made after the 70th anniversary of the insured :
Inheritance taxes are paid by the designated beneficiary according
to the degree of kinship between the beneficiary and the insured.
Finally, conventional life insurance is valued for its flexibility.
Indeed, the investor may arbitrate and decide to reconcile secu-rity
and performance, choose to focus on security by investing
exclusively in the Euro fund (capital guarantee) or rely exclusively
on performance by investing in the units of account (shares and
bonds). While the return on Euro contracts is limited to 3%, it is
possible to reach 7-8% return on the units of account at a higher
level of risk.
The specificities of Sharia-Compliant Life Insurance
Several life insurance contracts that comply with Islamic ethics
are marketed in France, including « Salam Epargne et Placement »
by Swisslife which is affordable to all and « Amâne Exclusive Life »
by Vitis Life which targets a wealthier clientele. These Islamic life
insurance contracts provide the same legal and tax advantages as
the conventional contracts. However, differences in several as-pects
exist.
Financial filters/screening
First, respecting islamic ethics means that life insurance contracts
cannot pay interest on investments. The contracts to promote are
the ones in units of account and not the ones denominated in eu-ros.
As a matter of fact, the manager of the Euro funds is required
to repay at maturity an amount equal to the net premiums to
which we add capital gains. Thus, these contracts generate inte-rest
and include safe supports and as a result cannot be considered
for Islamic finance. To receive a return, subscribers must invest
the money in one or more « units of account » (SICAV or mutual
funds). Risk taking is then greater for investors, the yield on Ha-lal
life insurance is much higher than the conventionals’ one and
could reach 7% over the long term.
In addition, a check is made at the level of the funds in which the
money is invested to make sure they don’t contact any debt to in-crease
their performance and don’t use any technique prohibited
by Islamic finance, such as derivatives. Finally, the companies in
which the funds invest need to produce industrial earnings and
not financial earnings.
The Extra Financial screening
The extra financial screening ensures that funds do not invest in
areas prohibited by Islamic finance such as the gambling industry,
pornography, alcohol or weaponry.
The Beneficiary clause
Regarding this clause that allows the transfer of assets, the owner
is free to designate the beneficiaries of his choice. However, the
owner needs to make sure that the clause respects the religious
constraints in terms of equality between the heirs and all sorts of
other restrictions.
Compliance controls by a religious authority
Compliance with Islamic principles of the Islamic life insurance is
subject to a control by a sharia board that gives its approval after
auditing the contracts and funds.
To conclude, we can say that Islamic life insurance is nothing but a
contractual adaptation of the conventional life insurance. It allows
investors wishing to respect the ethical principles derived from Is-lam
to do so while enjoying the tax benefits of this product.
Characteristics of the « Salam-Pax » : Ethical Fund of Funds
Valentine Beaudouin, Member of the SICAV’s management board
Could you describe your SICAV’s
activities to us ?
It’s a Luxembourg SICAV governed by the
UCITS IV directive that aims at creating
the safety and liquidity conditions for pri-vate
investors in the funds. The UCITS IV
Directive determines and gives a clear de-finition
of the criteria for the composition
of assets, liquidity, and establishes univer-sal
rules for the structuring, management
and administration of funds, including the
protection of investor’s assets.
The SICAV « Salam Pax » Ethical fund of
funds is a multi-compartment SICAV but
we still have only a single compartment :
Ethical fund of funds whose strategy is to
invest in other Islamic funds. The funds
that are eligible for Islamic Finance and
UCITS IV standards are highly correlated
to equity strategies and so the composi-tion
of the fund of funds is mainly made
of equity with some Sukuk funds, among
which we find Templeton fund..
What made you opt for the fund of
funds strategy ?
The purpose behind the choice of fund
of funds is to diversify and have a global
exposure to different management strate-gies.
Do you encounter any constraints ?
One constraint is that the final investors
use the Euro currency for their savings
and investments. There are many funds

that are not Euro or dollar denominated and so require hedging in compliance with Islamic Finance. We have around 30% dollar expo-sure
VitisLife - Amâne Exclusive Life : Interview of Bastien Perrine
Responsable (VitisLife)
24
As you already know, Islamic Finance has existed for many
years now, what are to you the elements that made Vitis
Life launch an Islamic life insurance contract ? why the
sudden infatuation ?
Vitis Life operates in the French market since 2007 and in order
to differentiate ourselves from our competitors located in France
and in Luxembourg, we had to find a solution that our compe-titors
have not yet looked at and this is where it hit us and we
thought that Islamic Finance is a very interesting topic and holds
enormous potential due to its ethical component.
Was the product at its launch presented as an ethical pro-duct
or as Sharia-Compliant ? Did you choose to sell it as
an Islamic product or did you choose a different positio-ning
?
The product was presented as one that respects Islamic Finance
principles, but above all, we have worked with our marketing and
communication team to make the product more attractive espe-cially
since we are on the French market.
In my opinion, we should not be ashamed to speak of an Islamic
product since it is not really the product that has an ethical virtue
but it is Islamic Finance that does. An Islamic Finance professio-nal
once told me : « Finance should be at the service of the eco-nomy
and not the other way around » and this is the idea we want
to carry out.
Why France ?
We made an arbitration to decide on which territory we would
launch our product, let’s take the example of Belgium for the sake
of illustration, this country was not selected because the number
of the Muslim population is not that important even if we already
market products over there. Spain was not selected for regulatory
constraints since a death guarantee is required in a Life-Insurance
contract which is prohibited by Islamic Finance.
This is why France as a choice came naturally, we already have a
good knowledge of this market that has the largest Muslim po-pulation
in Europe and we already market a conventional invest-ment
management product so it was easier for us to start from
this existing product and clone it in some sort.
What is your target and the potential for collection in
france ?
Our target is rather wealthy individuals, for instance, the average
premium last year was €400 000. We kept the same logic as for our
conventional business.
Is there a difference between a conventional contract and
yours ?
Our contract is a management contract, the operation behind is
simple, we create an envelope in which the manager gets plugged
to accomplish his mandate. For the time being, our contract is an
OPCVM free management contract that has no differences with a
conventional contract.
Could you describe your distribution model ?
The historical partners of Vitis Life are independent managers and
we continually develop our relationship with them, we also em-phasize
on institutional clients : private banks, asset management
companies with whom we have I believe crossing over interests
and to be able to continue promoting our offer and live in an open
architecture, institutions would potentially need Sharia-Com-pliant
life insurance to shelter their management mandate.
Do you wish to diversify your Sharia-Compliant product
offerings ?
For now, we keep on doing what we do best, that is management
products for wealthy clients. Evolution and diversification might
come in capitalization for individuals and legal persons.
and is managed using sharia compliant instruments.
What are your prospects for future development ?
We are planning to launch two additional compartments. The second compartment will be created very soon and will aim to invest in
Sukuk, as for the third compartment, it will be a compartment in direct action, rather than through equity funds. The objective would
be to invest in European stocks that have an appropriate/acceptable capital structure that would make them eligible given the criteria
specified by Islamic finance.
As for the fund, the first objective is to become a multi-compartment SICAV that allows investors to pick their strategy and allows us to
attract different investor profiles.

Launch of NoorAssur.com, independent platform for islamic savings
solutions - exclusive interview of founder Sonia Mariji
Aware of the growth of the Islamic finance market, and of islamic life insurance in particular, Sonia Mariji, strong of a robust expe-rience
of more than 10 years in the finance - brokerage, creates NoorAssur.com, first web platform of intermediation specialized in halal
Could you describe NoorAssur.com?
NoorAssur.com is an independent platform of orientation which is going to allow the people
interested by products of halal savings and investment to be redirected towards a qualified
broker near their place of residence, and it is possible through a system of geo-localization.
The people will have to fill up a questionnaire on the website for that purpose. This way,
NoorAssur.com allows the Internet users-prospects to reach the offers of halal savings and
investment in France.
Besides, Noorassur.com offers to partner brokers to enter in contact with new targeted pros-pects
who reside in their zone of activity. Our specificity being that this getting in touch will
be free. We plan to organize training sessions to familiarize the brokers with the products
which we reference on NoorAssur.com. The idea is to bring an additional training to pro-fessional
25
brokers.
savings solutions.
Why have you decided to launch Noorassur.com ?
Since I distribute the product Salaam, I visited a number of islamic fairs such as the Annual Meeting of the western Muslims ( RAMO)
of Nantes, the cultural days organized in Lyon, to meet potential Muslim customers. I noticed that there was a very high demand from
them, and a cruel lack of information. The objective of NoorAssur.com is to answer this need, by informing about products, by commu-nicating
with the future prospects but also with the professionals of the insurance industry, who are not yet formed in these products.
These products exist, there is a high demand, but channels of information, communication and connection between the supply and
demand were clearly missing ; the objective of Noorassur.com is to create this bridge to connect all the actors.
What are your future axes of development ?
We would like to list every halal insurance products that exist and that will come to the market in our database. For the moment, we are
on the life insurance, but if insurance products such as takaful had to appear, we shall also add them.

CROWDFUNDING &
islamic Finance
By Maxime Dossa, Consultant, Crowdfunding
The Crowdfunding is a technique used to finance projects using internet technologies to collect the necessary funds to the realization
of projects initially referenced on a computer platform. Crowdfunding platforms bring together carriers of projects and investors. Pro-jects
with a social purpose can also take advantage of this technique and seek financing in the form of grants. Crowdfunding has an
Anglo-Saxon Origin and it has attracted public interest last year in Europe in general and France in particular as a result of the global
financial crisis. In the face of the financing difficulties in the French economy and especially for the Small and medium size businesses, this
technique has witnessed a keen interest from internet users who have quickly realized that they could finance all sorts of projects thanks
to disintermediation techniques.
The FinPart association is one of the actors who were active in a lobbying campaign to overcome the regulating authorities’ reluctance.
The evolution of the legal framework of crowdfunding has been the subject of a public consultation on the basis of a text submitted by
Fleur Pellerin, minister in charge of the digital economy. However, prior to this evolution, many platforms had to operate in an uncer-tain
26
environment, others had to close for regulatory reasons.
Note that the different modes of financing using crowdfunding platforms are :
- Donation with nothing in return- Donation against donation
- Free loan
- Paid Loan
- Capital Investment
Since February 14th 2014, the minister in charge of the digital economy Fleur Pellerin gave the confirmation for the adoption of a law
regulating crowdfunding.
The end of banking monopoly
With crowdfunding, it’s the end of the monopoly of banks on in-terest
loans because every individual will now have the option to
lend at interest up to €1000 per project.
This is a clear step forward compared to the previous text sub-mitted
to consultation where the cap was €250 per person. Let’s
not forget that every project will be able to raise up to €1 million.
Loan’s platforms
Now with the new law regulating crowdfunding, the status of in-termediary
in crowdfunding will be required, thus, making the
remuneration of the loan possible.
Platforms for capital funding
The second status created by the law is the status of Crowdfun-ding
advisor (Conseiller en investissement participatif). This way,
individuals will be able to invest in the form of equity in compa-nies
via the platforms. The remuneration of the investor will be
made in the form of dividends. let’s note that the new law exempts
crowdfunding platforms from making a savings’ public offering.
The activities won’t and can’t be considered as saving’s public
offerings and the platforms won’t be bound by the obligation to
produce a prospectus as is the case for companies providing in-vestment
services and banking establishments.
What role for Islamic Finance ?
Crowdfunding platforms can mobilize donations (zakat/charity)
to the parties responsible for this « tax » to finance solidarity ac-tions
in France and the whole wide world. As for the free loan, it
is well known that the priinciples of Islamic Finance (Qard Has-san)
allow it. The solidarity lender would make available a capital
that would go in financing a company that needs to use the funds
with respect to the ethical principles unique to Islamic finance.
The revenues generated by the company can be invested in other
projects. Some lenders can impose a remuneration : once again,
thanks to the Mudaraba, the lender can perceive a remuneration
out of the performance realized by the entrepreneur who becomes
a paid manager, a payment for growing the lender’s savings.
For an investor profile, he can make a contribution in a company’s
equity (Mousharaka) by agreeing to take the risk of sharing pro-fits
and losses generated by the investment. These mechanisms are
now possible from a technical stand point and legally compatible
with the recently adopted legislation on crowd funding. Even for
Takaful insurance products, crowdfunding mechanisms can be

used to create pools of insured people who would gather their savings in a solidarity fund and thus cover losses of the insured with
respect to Islamic finance principles.
Through the tools mentioned above, we understand that it is possible thanks to crowdfunding to participate in financing the companies
eligible for Islamic Finance investments. Thus daring to break the banking monopoly, the public authorities provide incentives for inno-vation
exclusive Interview : M. Kacem Ibn Abdeljalil, Directeur Adjoint Marke-ting
& Communication at Chaabi Bank Paris
Interview by Mlle Zineb OUALADI & M. Karim KARA, 25 March 2014
27
and stimulate the growth of SME’s in France.
England wishes to make London one
of the world’s Islamic finance most
important destinations, do you think
that France will pursue the same ob-jective
?
To this day, not one French bank has ex-hibited
the will to explore this market ex-cept
for Chaabi Bank. No banking license
was issued to new foreign entrants (Isla-mic
institutions). The legal framework is
rather more favorable to a joint-venture
with an Islamic bank and even trying to
encourage French banks to open an Isla-mic
window.
The City remains today the leading euro-pean
place for this activity.
Nearly three years have passed since
the launch of the Chaabi Harmonis
line, what is the feedback Chaabi
Bank can give from this experience ?
In 2011, Chaabi chose to market a depo-sit
account consistent with the principles
and precepts of Islamic Finance. In 2012,
the bank has expanded its product line by
offering its customers a murabaha finan-cing.
All of this was in accordance with
August 2010 fiscal instructions.
These products have enabled Chaabi Bank
to diversify its clientele that was mainly
made of artisans and middle managers but
has become more diverse lately, we can
find young clients with an average age of
36 years from higher social categories (Se-nior
Executives, doctors, lawyers, business
people…) and having a sizable personal
contribution-about 36% of the investment
program, which is very rare in conven-tional
finance. We can say that these cus-tomers
with high savings capacity had re-frained
from investing as they did not find
products matching their ethics.
The bank finances old and new properties
for primary residence or rental investment
(purchase for rental) and finances the pur-chase
of land to build.
Mr. Ibn Abdejalil has confirmed that the
bank does not plan for now to launch
other forms of Islamic financing, given
that the tax smoothing that would make
the decreasing Musharaka possible hasn’t
taken place yet. For Ijara, a mode of fi-nancing
that resembles leasing, the bank
would have to resort to outsourcing of the
acquired properties’ management which
would obviously engender additional
costs.
In addition, Chaabi Bank is considering
expanding its product range with the
launch of new Balance sheet savings pro-duct
« Savings account » for which the fea-sibility
studies are still undergoing.
Why was there not consumer com-munication
around these products in
France ?
The introduction of Islamic Finance in
France by Chaabi Bank was made without
advertising and without any voluntary
public communication. Given the size of
its network, Chaabi Bank chose a gradual
increase in capacity and costs, relying
only on « Word of mouth », the associa-tive
fabric and the regular participation
in conferences on the topic of Islamic Fi-nance.
Then, the first entry channel of the
bank was the call center for customer re-lationships.
What are your projects on the euro-pean
territory for the future ?
M. Ibn Abdeljalil Kacem has confirmed
that Chaabi is preparing for 2014 the
launch of certain Harmonis products in
Belgium. The offer will include first « De-posit
account and savings account ». The
project was recently presented to the Na-tional
Bank of Belgium.
Thereafter, for more sophisticated pro-ducts
including real estate financing,
Chaabi Bank will wait for the Belgian au-thorities
to establish some fiscal reforms
so that the products are cost competitive
compared to the ones proposed by the
conventional industry.
As for other European subsidiaries, Ger-many
and Holland will follow.

The shariah
compliant
investment
By Erragraguy Elias
INTRODUCTION
The fund manager manages on behalf of investors who hold shares or stocks depending on the legal form of the investment vehicle. Al-though
the principle of investment is entirely consistent with the Islamic ethics, the issue of Sharia Compliance is central to the constraints
that Fund managers face. These managers need to ensure not only the legal compliance of the contracts between the fund and the investors
but also the compliance of the securities selected by the portfolio manager. As explained by Khatkhatay et Nisar (Khatkhatay et Nisar,
2007, p. 221), a stock certificate holder who is considered to be similar to a shareholder is legally responsible for the compliance of the
business activities to the Sharia’.
However, the authors explain that as a minority shareholder, he has no or little influence on the conduct of business. Thus, the changing
nature of the business activity requires regular monitoring from the investor to ensure the company’s activities comply with the Sharia.
Portfolios of equity funds are highly diversified and clients find themselves committed to a large number of companies which are them-selves
often involved in several activities. As a result, small investors’ reach remains limited and they can not fully ensure the companies’
28
Islamic funds apply a set of filters that
reduce the investment universe for their
portfolios, similar to the screening ap-proach
used in Socially Responsible In-vestment
(SRI) funds. The SRI filters are
strictly extra-financial, Islamic investment
on the other hand imposes extra finan-cial
or qualitative factors and financial
or quantitative factors. In addition to the
filtering process, the management of Isla-mic
assets requires the establishment of a
« purification » process to extract revenues
from activities deemed unlawful/prohi-bited.
Qualitative filters
The qualitative criterion consists of the
Sharia Compliance of the activities of the
company targeted for investment. Sharia
categorizes certain business activities as
unlawful or haram, it prohibits any invest-ment
in companies whose primary acti-vity
is considered haram.
In addition to the sectors clearly illegal
under the Sharia, other sectors whose
main activity is sharia compliant may be
excluded due to a significant exposure
to illicit activities. This is the case of the
hospitality industry, food distribution and
airlines.
Nonetheless, cases where companies with
lawful primary activities are engaged in
illicit secondary activities exist. It is the
case for publicly traded big firms and
conglomerates that own a significant
number of subsidiaries and other com-panies
operating in various sectors. The
most conservative Islamic jurists prohi-bit
investment in such companies, they
consider them to be non-compliant to
the sharia’ from the moment they derive
a proportion of their revenues, no matter
how marginal, from an illicit activity. Ne-vertheless,
the majority of jurists tolerate
that a marginal part of revenues comes
from a Haram activity, invoking the prin-ciple
of utility. They explain that a strict
exclusion would reduce dramatically the
eligibility and significantly increase the
risk exposure of Islamic funds. The tole-rance
level should not, however exceed the
limits set by Sharia boards of each fund or
index.
Quantitative filters
When the company passes the qualitative
filters, she goes through a quantitative
screening that targets the financial struc-ture
of the company. The quantitative fil-
activities compliance.
The criteria of sharia compliance of the Islamic funds

Newsletter english version (2nd edition)

Newsletter english version (2nd edition)

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