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Islamic finance

With more than 1.5 billion Muslims in the world today and Muslims increasingly seeking financial services that conform to their religious beliefs, the global Islamic finance market is poised for exponential growth. Our long-standing presence across much of the Muslim world makes us ideally placed to play a prominent role in this expanding market.

The Islamic finance market is one we know and understand well. In 2003, we established a dedicated Islamic banking unit with global headquarters in Dubai to order to respond to the needs of our customers and clients. The brand, Standard Chartered Saadiq (Saadiq meaning ‘truthful’ in Arabic), was launched in 2007 to represent our Islamic Banking business. The brand represents our commitment to provide economically viable solutions that are based on Islamic values and meet Shariah requirements.

Concept of Islamic banking

Shariah, or Islamic law, applies to all aspects of a Muslim’s life, including their finances. Shariah law prohibits charging and earning interest on lending or receiving money, because interest (the Arabic word for which is ‘riba’) is prohibited. In short, money cannot be made out of money. However, Shariah law permits wealth to be generated through trade and investing in assets.

A comparison of conventional and Islamic banking is given below:

Conventional banking Islamic banking
Based on interest Based on trade or rent
Deals in money or paper Deals in tangible assets
Based on fixed returns on both sides of the balance sheet Based on profit-sharing on the deposit side, and based on return from economic activity on asset side

Developing Shariah-compliant Islamic products

Standard Chartered Saadiq employs an international team of professionals with Islamic financial expertise, who develop Shariah-approved financial solutions for our customers and clients. We have an international Shariah board comprising three of the world’s most renowned Shariah scholars – Dr Abdul Sattar Abu Ghuddah, Sheikh Nizam Yaquby and Dr Mohammed Ali Elgari. We also have a separate Shariah board in Malaysia to meet local regulatory requirements. Furthermore, we have an in-house Shariah Department to facilitate product development and support our origination teams.

Saadiq Wholesale Banking

Standard Chartered Saadiq has a dedicated central Islamic origination and structuring team based in Dubai, which works globally with our relationship and product teams, leveraging our knowledge to deliver Shariah-compliant structured solutions.

These transactions are spread across various industries, markets and asset classes and cover financing alternatives in the areas of:

  • Transaction Banking
  • Capital Markets
  • Syndicated Finance
  • Project and Export Finance
  • Structured Trade Finance
  • Hedging Solutions

Standard Chartered Saadiq uses its strong presence across local markets in Asia and the Middle East, along with our origination and distribution capabilities across products and geographies, to ensure that our clients achieve the best distribution coverage.

In 2010, Standard Chartered Saadiq introduced a full suite of Shariah-compliant commodity hedging solutions ranging from basic to structured solutions, including swaps and options. Applications include tools for commodity risk management (hedging against price volatility) as well as strategies for investment purposes tailored to meet clients’ specific requirements across a comprehensive spectrum of commodities such as sugar, rice, wheat and crude oil.

Islamic finance: Case study

Providing Shariah-compliant solutions in the UAE

Using our unique capabilities in Islamic banking, we worked with a UAE client – a conglomerate group of companies managing established multinational brands – to provide a liquidity management solution. The solution was our first ever Shariah-compliant notional pooling facility whereby individual account balances are brought together on a purely notional basis for the purposes of financial management.

Notional pooling benefits our client by maximising the yield on the daily cash of the various companies in the client’s conglomerate, while maintaining the integrity of the individual account position. This helps to reduce our client’s financing costs considerably.

We are one of the few banks in the UAE market to offer this enhanced notional pooling product – a hybrid of our Shariah-compliant overdraft and deposit products. Developing the product was a complex process; it involved re-engineering our client’s cash management systems, and a redesign of our own internal systems.

Afaq Khan, CEO of Standard Chartered Saadiq, says: “As our clients develop a need for more sophisticated Shariah-compliant products, we are able to take the lead in offering these facilities.”

Saadiq Consumer Banking Standard Chartered Saadiq offers comprehensive Islamic consumer banking products in the following customer segments:

  • Personal Banking
  • Private Banking
  • Premium Banking
  • Small and Medium-sized Enterprise Banking

Currently, in addition to our conventional consumer banking branches, Standard Chartered Saadiq has dedicated Islamic branches that offer comprehensive Islamic consumer banking products in:

  • Bangladesh
  • Bahrain
  • Indonesia (through our affiliate Permata Bank)
  • Malaysia
  • Pakistan
  • UAE

Islamic Finance Industry

Regulatory frameworks for Islamic Banking are only just being developed. As an industry leader, we are actively participating to help create an appropriate framework for Islamic Finance through dialogue with regulatory organisations, such as:

Standard Chartered Saadiq’s industry recognition

Standard Chartered Saadiq has won more than 66 industry awards in the last four years. In 2010, Standard Chartered Saadiq was honoured to be voted ‘Best Islamic Investment Bank’ by Global Finance.

Standard Chartered has arranged in excess of USD34 billion in Islamic financing for clients since 2005. We have been involved in a number of landmark transactions, including debut sukuk issuances for the Government of Indonesia and the Government of Dubai in 2009.

Annual Report and Accounts 2010