Canada well positioned to become Islamic banking hub: report

TORONTO - Islamic banking is being touted as the next big thing for Canada's financial services sector, but experts say it's up to the new federal government to demonstrate that it welcomes Shariah-compliant investments.

See Full Article

"It's absolutely fundamental that the Canadian government signal that, in fact, it is open to Islamic finance," says Walid Hejazi, an associate professor at the University of Toronto's Rotman School of Management.

They could do so either by issuing sukuk - Islamic bonds - or by making a public statement, Hejazi says, noting that the previous government was on record as saying it welcomed such investments.

"If there is a risk that a change in government is going to change its view on that kind of investment, that spooks investors," he said. "So the government must be clear to say . . . 'We're open to Islamic finance, we welcome it,"'

Islamic finance - which bans interest payments and investments in gambling, pornography, weapons, alcohol, tobacco and pork - is a fast-growing niche in the financial services industry.

A study released earlier this month by the Toronto Financial Services Alliance and Thomson Reuters says Canada has a number of advantages - including a growing Muslim population, a stable banking system and a favourable regulatory environment - that make it well positioned to become a North American hub for Islamic banking.

"Islamic finance is one of the fastest growing kinds of finance in the world," said Janet Ecker, president and CEO of the TFSA.

"There are opportunities here which should be explored. Toronto is an international financial centre. ... This is another way to keep our reputation and our capabilities growing."

Hejazi says the Islamic ban on interest doesn't mean consumers borrow money for free - it just requires loans to be structured more like partnerships between financial institutions and borrowers.

"The whole idea or the concept is to avoid people becoming buried in debt because, back in the days of the Prophet, ... when people weren't able to pay their debt they were enslaved or exploited," he said.

In the case of commercial loans, that means both the bank and the borrower must have a vested interest in the success of the underlying business.

"If the underlying business does well, they share in the profit," Hejazi says. "If it does poorly, they share in the losses. That's the fundamental difference; this idea of shared risks, and nobody can have a guaranteed return."

The report commissioned by TFSA says there are a number of opportunities for Islamic banking to expand in Canada. Some Muslim Canadians desire Shariah-compliant solutions to their personal finance needs, including mortgages, insurance and investment opportunities.

The Canadian government could also issue sukuk, or Islamic bonds, which are structured in such a way that they generate returns without the use of interest payments, to help fund its planned infrastructure spending, according to the report.

"The new federal government has an opportunity to demonstrate Canada's openness to foreign investment from markets in the Middle East and Southeast Asia by encouraging investments either in a conventional or an Islamic-compliant manner," said Jeffrey Graham, partner and the head of the financial services regulatory group at Borden Ladner Gervais LLP.

"Other governments who have been seeking to do the same thing have issued sovereign sukuks, or Islamic bonds, to help promote their financial sectors."

However, a spokesman for the Department of Finance appeared to throw cold water that idea, saying in an email that "there continues to be very strong demand for regular 'plain vanilla' Government of Canada securities."

Meanwhile, one of the obstacles to the growth of Islamic finance in Canada is the lack of what Hejazi calls "human capital."

"We need to have people across the country that understand Islamic finance, which we don't have," said Hejazi, who teaches a course on Islamic finance, now in its fifth year, at Rotman. Last year the course was full, with 40 students on the waiting list.

"I get so many emails from people downtown, from the banks, the accounting firms, consulting firms, saying 'Could I sit in on your class?"' says Hejazi. "There's a lot of interest. People really want to learn more."



Advertisements

Latest Economic News

  • Liberals ask President Trump to approve Keystone XL pipeline

    Economic CTV News
    Canada’s natural resources minister says that he hopes the new U.S. administration will allow the Keystone XL pipeline quashed by Barack Obama to proceed, noting that all Canadian regulatory approvals are in place. Jim Carr spoke to CTV’s Power Play from Washington, D.C. Source
  • Apple depicts Qualcomm as a shady monopolist in US$1B lawsuit

    Economic CTV News
    SAN FRANCISCO -- Apple is suing mobile chip maker Qualcomm for $1 billion in a patent fight pitting the iPhone maker against one of its major suppliers. The 100-page complaint filed Friday in a San Diego federal court depicts Qualcomm as a greedy monopolist abusing its power in a key segment of the mobile chip market to extort royalties for iPhone innovations that have nothing to do with Qualcomm's technology. Source
  • Trump's 'America first' tone worries head of Canadian oil and gas industry group

    Economic CTV News
    Trump takes charge: Sworn in as 45th president of the U.S.A. Source
  • Obama administration urges Canada to reverse Super Bowl ad decision

    Economic CTV News
    OTTAWA - In one of its final communications with Canada, the outgoing Obama administration is engaging in pigskin politics: asking the Trudeau government to overturn a regulation affecting ads during the Super Bowl. The U.S. Source
  • Oil and stock prices higher as Donald Trump sworn in

    Economic CBC News
    Stock markets responded to the first day of the Trump Administration in a largely positive way, with the Dow Jones, the Nasdaq and the S&P 500 all higher on the day of his swearing in. The Dow Jones Industrial Average was up by nearly 100 points to 19,829 just minutes before the new president formally acceded to the position. Source
  • Stocks higher as Donald Trump lays out glimpse of future economic policies

    Economic CBC News
    Stock markets responded to the first day of the Trump Administration in a largely positive way, with the Dow Jones, the Nasdaq and the S&P 500 all higher on the day of his swearing in. The Dow Jones Industrial Average was up by nearly 100 points to 19,829 just minutes before the new president formally acceded to the position. Source
  • Stocks close higher as Donald Trump lays out glimpse of future economic policies

    Economic CBC News
    Stock markets responded to the first day of the Trump Administration in a largely positive way, with the Dow Jones, the Nasdaq and the S&P 500 all higher on the day of his swearing in. The Dow Jones Industrial Average was up by nearly 100 points to 19,829 just minutes before the new president formally acceded to the position. Source
  • Navdeep Bains defends open borders for global trade in Davos speech

    Economic CBC News
    Automakers on both sides of the border fear the potential negative effects of a Donald Trump presidency, Canada's economic development minister said Thursday as he met with international business and political leaders in Switzerland. Navdeep Bains said he's been having nervous conversations with concerned automakers, both at the recent auto show in Detroit and during his current visit to the World Economic Forum in Davos. Source
  • Will Trump end globalization? The doubt haunts Davos' elite

    Economic CTV News
    DAVOS, Switzerland -- It's been impossible to escape the shadow of Donald Trump at this year's gathering of the business elites at the World Economic Forum in Davos, Switzerland. Uncertainty over what Trump will do once he takes office Friday and whether his presidency will mark the end of globalization dominated discussions all week at this event, which more than any has become synonymous with international business. Source
  • Sears, N.B. partner for a 2nd new business centre expected to create 360 jobs

    Economic CTV News
    TORONTO -- The New Brunswick government and Sears Canada Inc. announced their second partnership this week to open a business centre in the province with the help of millions of dollars of government funding. The provincial government is providing Sears (TSX:SCC) with about $5.2 million of funding to open its second new business centre in the province. Source