tag:blogger.com,1999:blog-363212772024-03-20T14:08:54.907-01:00Islamic Finance and Banking by Riyazi Farookislamic finance and banking
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Riyazi Farook
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islamic finance educationRiyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.comBlogger130125tag:blogger.com,1999:blog-36321277.post-7961636359647158282012-11-20T21:08:00.003-01:002012-11-20T21:11:52.177-01:00<h2 style="text-align: center;">
<span style="font-size: x-large;">Brand preference in Islamic banking</span></h2>
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<span style="font-size: x-small;">Copyright ©</span> <span style="font-size: x-small;">Emerald Group Publishing Limited</span></div>
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<strong><u></u></strong> </div>
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<strong><u>The Authors</u></strong></div>
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<strong>Khaliq Ahmad</strong>, KENMS, IIUM, Kuala Lumpur, Malaysia</div>
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<strong>Ghulam Ali Rustam,</strong> Management Centre, IIUM, Kuala Lumpur, Malaysia</div>
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<strong>Michael M. Dent</strong>, Universiti Malaya, Kuala Lumpur, Malaysia</div>
<h3 style="text-align: justify;">
Abstract</h3>
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<b>Purpose</b> – University students have a clear need for bank accounts as they have fees, expenses and cash needs. The usefulness of a current account is therefore pre-evident and Islamic banks need to focus on their brand image and the services they offer. Indeed, understanding bank selection from Muslim customer's perspective can provide useful information to banks' senior management to help them allocate resources and design products that promise to attract and better satisfy customers. Literature collected so far suggests a strong Islamic brand reputation as well as better financial and banking services are the main factors which influence the selection of a brand. The purpose of this paper is to test this within a positivistic empirical framework and amongst the younger generation in Malaysia.<br />
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<b>Design/methodology/approach</b> – The sample was based on 300 students at the International Islamic University of Malaysia. The study utilised five selection criteria based on previous research, personal experience and interview with bank officials and university students. The study also provides some insight into the younger generation's awareness of Islamic banking and the processes involved in the selection of their preferred brand.<br />
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<b>Findings</b> – It would seem that whilst the importance of religion is a major driver in the choice of Islamic banking the fundamental differences between Islamic and conventional banking are poorly understood. What is important is brand, ease of use and the quality of the customer interaction.<br />
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<b>Originality/value</b> – The paper investigates the factors which determine a customer's choice of a particular bank and provides insights into cementing relationships with existing customers as well as how to gain new ones.</div>
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<h4 style="text-align: justify;">
1 Introduction</h4>
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Previous literature suggests that factors such as banks' strong Islamic reputation as well as better financial and banking services are to be among the leading factors in the selection of the respective Islamic bank. Although the idea of the Islamic banking system is still in its infancy, it has nevertheless attracted a great deal of attention of many local and foreign investors. Being a nascent idea, Islamic banking has a potential for attracting new customers and consequently, enhancing a bank's future market share. This needs to be tested. The aim of this study, therefore, is to examine the bank selection criteria being employed by students in Malaysia. Henceforth, the choice of younger customer would reflect the future potential market for Islamic banking marketing services whose average age would be between 19 and 25 years.</div>
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Customers and financial institutions both seek mutual relationships (<a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb10" title="b10.">Cronin, 1997</a>). Hence, exploring relationship information through survey studies is relevant especially to the banks' management that need to formulate the appropriate brand and marketing strategies necessary to attract new customers and also retain existing ones (<a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb16" title="b16.">Kaynak and Kucukemiroglu, 1992</a>). This is generally applicable to all types of banks including Islamic banking institutions. Lately, Islamic banking and finance has emerged as one of the most important trends in the expansion of the financial sector. With the development of viable Islamic alternatives to conventional banking and finance, Muslims and to a certain extent non-Muslims are seeking <em>Shari'ah</em> based solutions to their financial needs.</div>
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According to <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb14" title="b14.">Kapur (2008)</a>, the world's largest Islamic banks have outpaced conventional banks with an annual asset growth of 26.7 per cent. The Islamic institutions reported growth of nearly $350 billion in assets beating the 19.3 per cent growth rate of the mainstream banks. This growth rate is well above the previous estimates of 15-20 per cent.</div>
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The remarkable growth of an industry still in the infancy stage of branding carries a significant message to the world that Islamic banking has indeed proven a worthwhile alternative to that of conventional finance. A greater understanding of the social, economic and cultural background which underlies this growth necessitates further study and research, in which this paper may make a small contribution.</div>
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Islamic banking and finance rest on certain principles and ethos that govern not only the interest-free mechanism but also several other prohibitions and unethical practices discouraged by the <em>Shari'ah</em>. These include such practices as uncertainty (<em>gharar</em>), cheating (<em>ghish</em>) and gambling (<em>qimar</em>).</div>
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As a result, Islamic banks of national financial systems not only in Muslim dominated countries like Malaysia but also countries with Muslim minorities such as Singapore, the UK and Kenya. Even more interesting is that many non-Muslims have also come to realise certain desirable aspects of Islamic banking (<a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb12" title="b12.">El Qorchi, 2005</a>).</div>
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The benefits of this study obtain from the understanding of how to cement relationships with existing customers as well as how to gain new ones. This study attempts to investigate the factors which determine a customer's choice of a particular bank as a provider of their financial services needs.</div>
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The research seeks to address the following questions:</div>
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<em>RQ1.</em> What are the main factors that motivate customers to deal with either an Islamic bank or a conventional bank or both, and to what extent are customers satisfied with their brand choice?</div>
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<em>RQ2.</em> What can banks do to attract new customers whilst retaining the old?</div>
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<em>RQ3.</em> What influences the customers in the present environment in their choice of brand?</div>
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<em>RQ4.</em> What differences does an Islamic bank product carry and how does this influence customers choice of bank?</div>
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The significance and importance of this study can be viewed in two dimensions: the theoretical contribution and the practical implications. Theoretically, the study fills a gap in the literature which is the exploration of the bank selection criteria for potential young customers – in this case, undergraduate students in Malaysia. The findings of this study also add a further dimension which is that of a non-Western study where the current literature has been primarily based.</div>
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On the practical side, this study can help marketeers in banks to identify the major factors that determine bank selection decisions among young and future decision customers. Such information should assist Islamic banks in devising the appropriate marketing strategies for reaching and attracting young customers. Islamic institutions can also use the findings of this study to develop their competitive advantage around those salient selection attributes and to address their relative strengths and weaknesses in what is a very competitive industry. Finally, the information provided in the study can be utilised by Islamic banks to achieve a better understanding of their customers' selection process and to develop programmes to better develop specific market segments.</div>
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<em>1.1 Research objectives</em></h4>
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The study of how customers select their bank has been an important issue in the field of banking services marketing. Although the existing literature provides a number of different studies on bank selection decisions, there has been little research on Islamic banking decisions of students in the Asia Pacific region, particularly Malaysia. Two unpublished Master's degree dissertations (<a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb3" title="b3.">Awang, 1997</a>; <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb4" title="b4.">Bakri, 2006</a>) conducted studies of selection criteria in Malaysia and Indonesia, respectively. Neither, however, focussed on young customers. Thus, the aim of this paper is to redress this gap in the literature by exploring the decision criteria of university students (who are likely to move onto careers as professionals employees) in their brand choice of Islamic banking services.</div>
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The sub-objectives are as follows:</div>
<ol type="1">
<li><div style="text-align: justify;">
to determine the demographic profile of Islamic bank customers in IIUM;</div>
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<li><div style="text-align: justify;">
to study the brand awareness and usage of various Islamic bank product/services among Islamic bank customers in the university;</div>
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to identify any demographic relationships with the usage of different products and services offered by Islamic banks; and</div>
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to measure the level of customer satisfaction with various basic brand attributes.</div>
</li>
</ol>
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The abundance of relevant literature such as <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb2" title="b2.">Anderson <em>et al.</em> (1976)</a>, <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb17" title="b17.">Laroche <em>et al.</em> (1986)</a>, <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb5" title="b5.">Balachander <em>et al.</em> (2000)</a>, <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb24" title="b24.">Tan and Chua (1986)</a>, <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb7" title="b7.">Boyd <em>et al.</em> (1994)</a>, <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb9" title="b9.">Crane and Clarke (1988)</a>, <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb11" title="b11.">Denton and Chan (1991)</a>, <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb1" title="b1.">AlMossawi (2001)</a>, <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb18" title="b18.">Lymperopoulos and Chaniotakis (2006)</a>, <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb6" title="b6.">Blankson <em>et al.</em> (2007)</a>, <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb20" title="b20.">Martenson (1985)</a>, <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb19" title="b19.">Mannan (1984)</a>, <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb27" title="b27.">Yousef (1996)</a>, <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb8" title="b8.">Cohen <em>et al.</em> (2006)</a> and <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb15" title="b15.">Kaynak <em>et al.</em> (1991)</a> demonstrate the effort that has gone into investigating brand selection criteria for banking services customers. In this paper, we particularly focus on five factors, convenience of location, financial benefit, technology/physical facilities and brand itself.</div>
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<em>1.2 Methodology</em></h4>
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The sample for this study was selected from a population of over 15,000 undergraduate students at the International Islamic University of Malaysia at their main campus in Gombak. The majority of these are young – aged 19-25. The sample size of 300 represents about 2 per cent of the student population. Students were selected as respondents because they are young and future potential bank customers. In order to construct a representative sample, students were selected from all six <em>kulliyahs</em> (faculties), namely Engineering, Law, Economics and Management Sciences, Islamic Revealed Knowledge and Human Sciences, Information and Communications Technology, Architecture and Environmental Design and the Institute of Education in variable proportions. Using a convenience selection criteria, students were selected from each <em>kulliyah</em> in a 50:50 male:female split.</div>
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<em>1.2.1 Data collection</em></h4>
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The required data were collected by means of a specially designed questionnaire. The questionnaires were passed to and received from students through the help of other students and by face-to-face interaction with a researcher. In total, 214 of the 300 questionnaires were returned comprising a 71 per cent return rate. The questionnaire consisted of two sections. The first section elicited demographic information. The second asked respondents to rate the relative importance of eight factors on their selection of an Islamic bank using a five-point Likert importance ranking scale ranging from “very important” to “not important at all”. The factors were adapted from the relevant literature, particularly the work of <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb1" title="b1.">AlMossawi (2001)</a>, personal experience and interviews conducted with the branch manager of Bank Muamalat Malaysia Bhd in the IIUM main campus. A pilot test confirmed that students were familiar with the chosen factors. Respondents were not asked for their names and were assured of the confidentiality of their responses.</div>
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<em>1.2.2 Data analysis</em></h4>
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The data collected were analysed using SPSS (version 13) and mean ranking technique. Factor analysis was then used to identify the five evaluative criteria using eigenvalues greater than one rule.</div>
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2 Findings and results</h4>
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<em>2.1 Respondent profiles</em></h4>
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Of the 300 distributed questionnaires, 214 were received back with an almost identical split between male and female respondents (<a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#id4320020106001.png" title="Table I.">Table I</a>).</div>
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The respondents were all customers of banks within the university and mostly between 19 and 24 years of age. Most of the students were Malaysian (56 per cent) and 44 per cent from other countries as illustrated in <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#id4320020106002.png" title="Table II.">Table II</a>.</div>
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<em>2.2 Convenience and location</em></h4>
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As <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#id4320020106003.png" title="Table III.">Table III</a> illustrates, most of the respondents stated that they agreed with the factors measuring convenience. The means for these factors were between 3.82 and 3.22. We can say that all of these items are important dimensions in the selection of a bank. The most important factor was the banks opening hours with a mean of 3.82 followed by the availability of automated teller machines (ATMs) with a mean of 3.76. The location of the main branch was slightly more important than the location of the local branch. Parking was also important (many Malaysian students owning cars) with available parking also scoring well above 3. Hence, it would seem that convenience and accessibility is very important, this accords with the findings of <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb2" title="b2.">Anderson <em>et al.</em> (1976)</a>. The availability of ATMs also came out very strongly with all three factors relating to this service ranking high, this was true for both male and female respondents. This seems to indicate that in their bank selection the new generation puts greater emphasis on the factors which give them quick and convenient access to bank services rather than factors relating to the hospitality or condition of the bank's premises.</div>
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<em>2.3 Charges for transactions</em></h4>
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As might be expected the factors relating to cost were all rated highly with means ranging from 3.05 to 3.57. The highest ranked item was “low service charge” with a mean of 3.57, other factors were ease of obtaining a loan (3.32), attractive exchange rate (3.29), no charge for credit cards (3.23) and finally attractive prizes (3.05) suggesting that students in Malaysia (and indeed probably most countries) are enticed with freebies (<a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#id4320020106004.png" title="Table IV.">Table IV</a>).</div>
<h4 style="text-align: justify;">
<em>2.4 Technology and physical facilities</em></h4>
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In <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#id4320020106005.png" title="Table V.">Table V</a>, it is possible to see that most respondents strongly agreed on the importance of smart employees and the general appearance of the bank. The means ranged from 3.63 to 3.84. The most important was neatly dressed employees followed by pleasant bank atmosphere (3.79). The 24-hour availability of ATMs can out at 3.77 and ATMs in several locations at 3.67. It is perhaps surprising that smartly dressed employees seem to rate higher than ATM factors. Perhaps, there is more trust in a bank with smartly dressed employees!</div>
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<em>2.5 Brand choice</em></h4>
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<a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#id4320020106006.png" title="Table VI.">Table VI</a> is key in that it identifies the major factors relating to brand choice. As might be expected, the recommendations of friends and relatives ranks highly as does the (convenience factor?) of the university using the same bank. Confidence and friendliness of bank personnel also show means of above 3.9 which suggest (particularly in the early stages of the interaction) that the human dimension is important – be that approachability or trustworthiness/reliability as evidenced by their confidence. By far, the most important factor, however, was that of the bank's reputation – or brand. It is probable that with less financial acumen and experience students in their early twenties are more likely to select a bank with a good and well-known brand name (<a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb13" title="b13.">Flavian <em>et al.</em>, 2005</a>).</div>
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From <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#id4320020106007.png" title="Tables VII and VIII.">Tables VII and VIII</a>, it is possible to see that there is a strong drive to choose an Islamic bank – but also a need for greater knowledge on what Islamic products the banks offer.</div>
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Somewhat surprisingly, a number of students would opt for a non-Islamic bank on campus which suggests that whilst they are hungry for more knowledge of Islamic finance and that Islamic orientation of the bank is an important driver of choice if a convenient alternative was available they may still select it.</div>
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3 Summary</h4>
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This study indicates that knowledge of young customers about Islamic products is limited and that they are unaware of the various services available to them. The brand of the bank serves an indicator of its trustworthiness so it seems that this and convenience factors are the major drivers of choice. There is a strong drive to select an Islamic bank – but it seems probable that convenience factors may over-ride this particularly if the selection of bank is made hurriedly. If indeed students become more interested in the Islamic products offered as they grow older banks can provide more information – but it would seem that the brand itself is of paramount importance in the first instance.</div>
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The study proved that the dimensions identified are indeed important in the bank selection process. In addition from the analysis, an overall mean was calculated to ascertain the major factors which were as follows:</div>
<ul>
<li><div style="text-align: justify;">
customer interaction (mean 3.78);</div>
</li>
<li><div style="text-align: justify;">
brand and recommendations (3.76);</div>
</li>
<li><div style="text-align: justify;">
technology and physical facilities (3.74);</div>
</li>
<li><div style="text-align: justify;">
convenience (3.55); and</div>
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<li><div style="text-align: justify;">
financial benefits (3.31).</div>
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</ul>
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Finally, this study examined one type of young customer, namely university students, whilst important, other segments of young customer who may have different selection criteria should not be ignored. Similarly, the study was carried out in Malaysia, other southeast Asian countries may reveal very different results.</div>
<h4 style="text-align: justify;">
4 Conclusions and recommendations</h4>
<div style="text-align: justify;">
As seen from the above, although the underlying concepts of Islamic banking system are not so similar to that of non-Islamic banking system, Islamic banking institutions face strong competition from both Islamic and conventional banks. As regards, convenience (aka ease of use – see <a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb23" title="b23.">Ndubisi and Guriting (2006)</a>) this seems to drive customer satisfaction and ultimate brand selection in the first instance. Factors such as ATMs and their locations, parking space provided, the attractive location of the bank and its' opening hours all serve to reduce stress (<a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb5" title="b5.">Balachander <em>et al.</em>, 2000</a>). Owing to IT savvy characters of younger generation, an attention therefore on technology (which the young and well educated are far more amenable to) such as on-line banking can be expected to pay dividends (<a href="http://www.emeraldinsight.com/journals.htm?issn=1759-0833&volume=2&issue=1&articleid=1915652&show=html#idb25" title="b25.">Poon, 2008</a>).</div>
<div style="text-align: justify;">
Furthermore, speed, lack of time and the impatience of young customers make the factor of convenience a very significant one in their brand selection process. The first source of competing brand is expected to come from the conventional commercial banks, while the secondary level of competition will be posed by the presence of other Islamic commercial banks. Hence, the branding strategy of the Islamic banks must be concerned with its ability to gaining a competitive advantage and establishing a strong brand image.</div>
<a href="http://www.blogger.com/null" id="id4320020106001.png" name="id4320020106001.png"></a><br />
<div style="text-align: justify;">
<img alt="ImageTable IGender of respondents" src="http://www.emeraldinsight.com/content_images/fig/4320020106001.png" width="600" /><br />
<em><strong>Table I</strong>Gender of respondents</em></div>
<a href="http://www.blogger.com/null" id="id4320020106002.png" name="id4320020106002.png"></a><br />
<div style="text-align: justify;">
<img alt="ImageTable IINationality of respondents" src="http://www.emeraldinsight.com/content_images/fig/4320020106002.png" width="600" /><br />
<em><strong>Table II</strong>Nationality of respondents</em></div>
<a href="http://www.blogger.com/null" id="id4320020106003.png" name="id4320020106003.png"></a><br />
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<img alt="ImageTable IIIConvenience factors" src="http://www.emeraldinsight.com/content_images/fig/4320020106003.png" width="600" /><br />
<em><strong>Table III</strong>Convenience factors</em></div>
<a href="http://www.blogger.com/null" id="id4320020106004.png" name="id4320020106004.png"></a><br />
<div style="text-align: justify;">
<img alt="ImageTable IVThe importance of low service charges" src="http://www.emeraldinsight.com/content_images/fig/4320020106004.png" width="600" /><br />
<em><strong>Table IV</strong>The importance of low service charges</em></div>
<a href="http://www.blogger.com/null" id="id4320020106005.png" name="id4320020106005.png"></a><br />
<div style="text-align: justify;">
<img alt="ImageTable VTechnology and physical factors" src="http://www.emeraldinsight.com/content_images/fig/4320020106005.png" width="600" /><br />
<em><strong>Table V</strong>Technology and physical factors</em></div>
<a href="http://www.blogger.com/null" id="id4320020106006.png" name="id4320020106006.png"></a><br />
<div style="text-align: justify;">
<img alt="ImageTable VIBrand choice" src="http://www.emeraldinsight.com/content_images/fig/4320020106006.png" width="600" /><br />
<em><strong>Table VI</strong>Brand choice</em></div>
<a href="http://www.blogger.com/null" id="id4320020106007.png" name="id4320020106007.png"></a><br />
<div style="text-align: justify;">
<img alt="ImageTable VIIThe importance of Islam" src="http://www.emeraldinsight.com/content_images/fig/4320020106007.png" width="600" /><br />
<em><strong>Table VII</strong>The importance of Islam</em></div>
<a href="http://www.blogger.com/null" id="id4320020106008.png" name="id4320020106008.png"></a><br />
<div style="text-align: justify;">
<img alt="ImageTable VIIIThe importance of choice" src="http://www.emeraldinsight.com/content_images/fig/4320020106008.png" width="600" /><br />
<em><strong>Table VIII</strong>The importance of choice</em></div>
<h3 style="text-align: justify;">
Notes</h3>
<ol>
<li><div style="text-align: justify;">
Some parts of this paper's findings are presented in international conference elsewhere.</div>
</li>
</ol>
<div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com55tag:blogger.com,1999:blog-36321277.post-84866754765221270672011-12-28T13:25:00.003-01:002011-12-28T13:40:00.878-01:00<div align="center"><span style="color: rgb(0, 0, 0);font-size:180%;" ><strong>Marketing Islamic Finance Products in Pakistan: Trends and Analysis</strong></span></div><div dir="ltr" align="justify"><span style="color: rgb(102, 102, 102);"><span style="font-size:85%;"><em><strong></strong></em></span></span> </div><div dir="ltr" align="justify"><span style="color: rgb(102, 102, 102);"><span style="font-size:85%;"><em><strong>by Salman Ahmed Shaikh</strong></em><br /></span></span></div><span style="color: rgb(102, 102, 102);"><span style="font-size:85%;"></span></span><span style="color: rgb(102, 102, 102);"></span><div dir="ltr" id="img200lft" align="justify"><span style="color: rgb(0, 0, 0);"></span> </div><div dir="ltr" align="justify"><span style="color: rgb(0, 0, 0);">There are 5 fully-fledged Islamic banks operating in Pakistan and 15 conventional banks with Islamic banking branches. The share of the industry in the banking system has risen to over 7 percent from just 0.5 percent in 2002, according to Reuters. </span></div><div dir="ltr" align="justify"><span style="color: rgb(0, 0, 0);"> </span></div><p dir="ltr" align="justify"><span style="color: rgb(0, 0, 0);"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1owuh2HcNl2hM1nElW_0bMAgkfwd7A1Zz419CeKEDEwkqdJn53AlUxW4H0-YRNfCfeWQjM86fJhaOYH0BTPfHBHZNWTymJm0MVikdl6ulFSW2TjtG4hHn5MX7ad0XWk8WdEcuyA/s1600/pakistan.jpg"><img style="margin: 0px 10px 10px 0px; width: 227px; height: 154px; float: left; cursor: pointer;" id="BLOGGER_PHOTO_ID_5691188159085544402" border="0" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1owuh2HcNl2hM1nElW_0bMAgkfwd7A1Zz419CeKEDEwkqdJn53AlUxW4H0-YRNfCfeWQjM86fJhaOYH0BTPfHBHZNWTymJm0MVikdl6ulFSW2TjtG4hHn5MX7ad0XWk8WdEcuyA/s400/pakistan.jpg" /></a>Citing the challenges for the industry, people usually opine that the industry needs to create awareness about itself, its products and the concepts underpinning their development.<br /><br />One listed Islamic bank in Pakistan showed Rs 47 million on the expenditures side in 2010 which was more than the Rs 41 million in profits it reported for the same year. Of note is that it is the first time the bank had reported profits and, as odd as this ratio might appear, it nevertheless tells us that a good sum of money was spent on advertising. Another listed Pakistani Islamic bank had also spent Rs 43 million on publicity in 2010.<br /><br />Creative advertising is also finding its way into these marketing campaigns as evidenced by the few examples of original marketing slogans used by some Islamic banks, which names will not be revealed.</span></p><p dir="ltr" align="justify"><strong><u><span style="color: rgb(0, 0, 0);">Sample slogans </span></u></strong></p><div dir="ltr" align="justify"><span style="color: rgb(0, 0, 0);"> </span></div><p dir="ltr" align="center"><strong><span style="color: rgb(0, 0, 0);">"Finally, a car that lets you fly. Finance your dream car."</span></strong></p><p dir="ltr" align="center"><strong><span style="color: rgb(0, 0, 0);">"Live in your dream home."</span></strong></p><p dir="ltr" align="center"><strong><span style="color: rgb(0, 0, 0);">"Drive your dream car."</span></strong></p><div dir="ltr" align="justify"><span style="color: rgb(0, 0, 0);"> </span></div><p dir="ltr" align="center"><strong><span style="color: rgb(0, 0, 0);">"Shariat Mein Barkat. (It means blessing is only in Islamic law)"</span></strong></p><p dir="ltr" align="justify"><span style="color: rgb(0, 0, 0);">Sadly, though these slogans have contributed their share in promoting consumerism in Pakistani society they failed to hail Islamic virtues of Shukr (thankfulness), Sabr (patience), Tawakkul (steadfastness), Infaaq (payment to charity), refraining from Israaf (extravagance), hubb-e-maal (love of wealth) and hubb-e-dunya (love of materialism).<br /><br />The prevalent practice of marketing efforts includes billboard advertising, TV commercials, print media and additionally running paid content in the form of discussion programs on TV. But, in the name of creating awareness, serious discussions and arguments usually lie missing in the paid discussion programs run on TV.<br /><br />The proponents of Islamic banking repeatedly try to give some logical answers to support the case of Islamic banking and argue that the end result of many activities could be similar, but their interpretation for Halal and Haram could still be different. These logical arguments are analyzed briefly.<br /><br />A McDonalds burger in the West may taste the same as in the East, but one may be permissible i.e. Halal and one may be prohibited i.e. Haram if the animal from which the meat was prepared was not slaughtered in the prescribed Shari'ah manner. The forbidden burger is not prohibited on the basis of taste, but rather due to the manner of slaughtering. But regardless of the argument, the way the burger is advertised fails to remind the consumer of the fact that it is God Almighty who has given man permission to take the life of an animal for food consumption. </span></p><div dir="ltr" align="justify"><span style="color: rgb(0, 0, 0);"> </span></div><p dir="ltr" align="justify"><span style="color: rgb(0, 0, 0);"> Similarly, pre-marital and post-marital sex may prompt similar physical and emotional responses, but in Islam, the former is prohibited while the latter is permissible. Here again, the reason for prohibiting pre-marital sex is not biological or utility related, but rather social i.e. Islam treasures the family system and wants to protect its sanctity at all cost, else, from a social point of view, humans would be no different than animals.<br /><br />If one does not wish to invest money for profit purposes, but has some surplus funds, Islam has encouraged spending on charity over lending for interest and it is supported through many verses. "They ask thee how much they are to spend; Say: "What is beyond your needs." Thus doth Allah make clear to you His Signs: In order that ye may consider." (Al-Baqarah: 219).</span></p><div dir="ltr" align="justify"><span style="color: rgb(0, 0, 0);"> </span></div><p dir="ltr" align="justify"><span style="color: rgb(0, 0, 0);"> "In their wealth, there is a known right for those who ask for it and those who have need for it." (Al-Muarij: 24-25).<br /><br />Instead of those Islamic institutions who are working in conformity with Islamic rules and principles trying to create awareness about these virtues, emphasis has been on creating wealth. By not using the Islamic virtues mentioned above, Islamic banks have essentially failed to create brand affinity among the masses on the basis of what Islam promulgates as core to its followers beliefs. This is not to deny the efforts and achievements of Islamic banks, but rather meant to point out the shortcomings which need to be looked at and addressed right away.</span></p><div dir="ltr" align="justify"><span style="color: rgb(0, 0, 0);"> </span></div><div dir="ltr" align="justify"><table border="0" cellspacing="0" cellpadding="10" align="center"><tbody><tr><td style="color: rgb(204, 204, 204);" bg=""><p><span style="color: rgb(0, 0, 0);"><strong>BOX: Islamic Credit Cards: A Necessity or Luxury </strong><br /><strong>By Salman Ahmed Shaikh</strong> </span></p><span style="color: rgb(0, 0, 0);"> </span><p><span style="color: rgb(0, 0, 0);"> Islam never encourages one to become indebted unless it is absolutely necessary. Many a -hadith show the viewpoint of Islam on debt creation, especially when it is beyond ones capacity to repay, and points to what extent it should be avoided and used to meet ones necessary requirements. </span></p><span style="color: rgb(0, 0, 0);"> </span><p><span style="color: rgb(0, 0, 0);">Prophet Muhammad (pbuh) said:<br /> <br />-O Allah! I seek refuge with Thee from sin and debt. [Sahih Muslim]<br /><br />The Prophet Muhammad (pbuh) said:<br /><br />-After the grave sins which Allah has prohibited, the greatest sin is that a man dies while he has debt due from him and does not leave anything to pay it off, and meets Him with it.<br /><br />The following supplication is related to the Prophet Muhammad (pbuh) for salvage from debt:<br /><br /> -O Allah! I seek refuge in You from all worry and grief. I seek refuge in You from incapacity and slackness. I seek refuge in You from cowardice and niggardliness, and I seek refuge in You from being overcome by debt and being subjected to men.<br /><br />But, the currently practiced and widely used Islamic finance contracts are more based on debt financing than equity financing.<br /><br />Some financial institutions in Islamic countries have developed Islamic Credit Cards for consumer financing. Problems arise due to the fact that credit cards could be used for impulsive buying or even the fulfillment of ones needs while not involving a tangible asset. Even when a transaction may involve a tangible asset, it is hard to fulfill all the necessary requirements of Murabaha in quick time.<br /><br />One way to deal with this is to use the credit card not as a mode of financing but simply offer it as a convenience product that carries a transaction fee.<br /><br />But, charges must be realistic, i.e not excessive. It must also be noted that a credit card might still be provided to the customer (else it will be same as a debit card), but no additional amount is to be charged over the credit amount. The charges so taken from the customer must be transaction-based and not time specific. In the current practice, they are time specific. Monthly charges have to be paid irrespective of whether one uses the card or not. This is not recommendable.</span></p><span style="color: rgb(0, 0, 0);"> As a matter of fact, banks aim at making a profit out of the business of providing finance, even for consumption purposes. This is not recommendable looking at the various principles and philosophy of Islamic faith. Islamic Economics and its basis, principles and objectives will be increasingly compromised if such products are launched.<br /> </span></td></tr></tbody></table></div><p dir="ltr" align="justify"><br /><strong><em><span style="color: rgb(51, 51, 51);font-size:85%;" >About the Author</span></em></strong></p><p dir="ltr" align="justify"><em><span style="color: rgb(51, 51, 51);font-size:85%;" > Salman Ahmed Shaikh is a researcher in Islamic Economics. He is author of "Proposal for a New Economic Framework Based on Islamic Principles". He has also written 20 papers and more than four dozen articles on Islamic Economics. He can be contacted at </span><a href="mailto:salmanahmed_hyd@hotmail.com"><span style="color: rgb(51, 51, 51);font-size:85%;" >salmanahmed_hyd@hotmail.com</span></a><span style="color: rgb(51, 51, 51);font-size:85%;" >. Courtesy provided by Halal Tamweel. </span></em></p><div dir="ltr" align="justify"><span style="color: rgb(0, 0, 0);"> </span></div><div align="justify"><span style="color: rgb(0, 0, 0);"> </span></div><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com28tag:blogger.com,1999:blog-36321277.post-3252401608669200782011-08-02T06:02:00.007-01:002011-08-02T06:21:33.219-01:00<div style="text-align: center;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:78%;"><b style=""><span style=";font-size:15pt;" ><span style="font-family:Calibri;"><span style="font-family:verdana;font-size:100%;">Brand Loyalty and Relationship Marketing in Islamic Banking System</span></span></span></b></span><br /></div><div> </div><div><span><span style="font-family:Calibri;font-size:130%;"><strong style="color: rgb(153, 153, 153); font-style: italic;"><br /><span style="color: rgb(102, 102, 102);">By. </span></strong><span style="font-size:85%;"><span style="font-family:Arial;"><span style="color: rgb(102, 102, 102); font-style: italic;" class="f"><strong>MWO Maznah Wan Omar</strong></span> </span></span></span></span></div> <p><span style="font-family:Times New Roman;font-size:100%;"> </span><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14pt; mso-bidi-font-size:11.0pt;" ><span style="font-family:Calibri;">Abstract</span></span></b></p><p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">Islamic banks' ability to withstand the global downturn has fuelled an </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">expansion of Islamic finance around the world. Islamic banks have learned that customer loyalty and brand loyalty must be earned. Brand loyalty and relationship marketing among banking consumers particularly in the islamic banking system in Malaysia has captured great interest among the Malaysian public as a whole (i.e. relationship between employees and customers). Relationship marketing is not more than just getting the customers but it is also how to maintain the existing customers as much as possible. There are important dimensions that supported the strength of relationship marketing that can lead to brand loyalty. In relation, brand loyalty refers to the favorable attitude towards a brand in addition to purchasing it repeatedly by the customer. The customer tends to be loyal since there is relationship marketing between them and the organization. This study will show the influence of relationship marketing through Bank Islam emp</span></span><span style="font-size:100%;"><span style="font-family:Calibri;">loyees in Malaysia on Brand Loyalty. The data for this study will be acquired from 3 Bank Islam business premises in Pulau Pinang, Kedah, and Perlis which represent the northern states of Peninsular Malaysia. Various data-analytic tools will be used to analyze the data such as test of differences, reliability analysis, factor analysis, and multiple regression analysis. The study tries to determine how relationship marketing which is measured through three dimensions, that is Customer trust on Bank Islam staff, Bank Islam Staff commitment during the service delivery, and the communication skills among Bank Islam Staff can have an influence on Brand Loyalty among Bank Islam customers.</span></span></p><span style="font-family:Times New Roman;font-size:100%;"> </span><br /><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14pt; mso-bidi-font-size:11.0pt;" ><span style="font-family:Calibri;">1.<span style="mso-spacerun: yes;"> </span>INTRODUCTION </span></span></b><p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">In recent years there has been growing interest in relationship marketing (i.e. relationship between employees and customers) since there has been a cha</span></span><span style="font-size:100%;"><span style="font-family:Calibri;">nge in terms of </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">marketing philosophy which is marketing orientation. One of the most important areas in marketing orientation includes relationship marketing. Relationship marketing is not more than just getting the customers but it is also how to maintain the existing customers as much as possible. </span></span></p><p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">There are important dimensions that supported the strength of relationship marketing that can lead to brand loyalty. In relation, Brand loyalty refers to the favorable attitude towards a brand in addition to purchasing it repeatedly by the customer. The customer tends to be loyal since there is relationship marketing between them and the organization. This study will show the influence of relationship marketing through Bank Islam employees in Malaysia on Brand Loyalty. The data for this study will be acquired from 3 Bank Islam business premises in Pulau Pinang, Kedah, and Perlis which represent the northern states of Peninsula Malaysia. </span></span></p><p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">Various data-analytic tools will be used to analyze the data such as test of differences, reliability analysis, factor analysis, and multiple regression analysis. The study try to determine whether relationship marketing which is measured through three dimensions, that is Customer trust on Bank </span></span></p><p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">Islam staffs, Bank Islam Staff commitment during the ser</span></span><span style="font-size:100%;"><span style="font-family:Calibri;">vice delivery, and the communication skills among Bank Islam Staff do have an influence on Brand Loyalty among Bank Islam customers. Finally the study also attempts to determine if Customer Overall satisfaction would have a mediating effect on the relationship between relationship marketing and Brand Loyalty in the case of Bank Islam.</span></span></p><span style="font-family:Times New Roman;font-size:100%;"> </span><br /><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14pt; mso-bidi-font-size:11.0pt;" ><span style="font-family:Calibri;">2. LITERATURE REVIEW</span></span></b><p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">Brand management is an area of increasing importance to marketers today, particularly as organizations attempts to communicate the ever complex and intangible messages as part of brand management strategies (Davis, 2000; Goodchild & Callow, 2001). One of the many interesting questions facing today's brand managers concerns how to develop a better understanding of the appropriate relationship between constructs such as relationship marketing and brand loyalty, particularly in relation to the myriad of known antecedents to brand loyalty in the marketing literature (Taylor et al., 2004). In this study we assess the relative importance of many of the known antecedents to brand loyalty, including overall customer satisfaction.</span></span></p><p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">By having a strong brand, companies not only could facilitate the differentiation of their offer from the competitors. With branding, financial companies are able to c</span></span><span style="font-size:100%;"><span style="font-family:Calibri;">reate customer confidence and loyalty in their performance, exert greater control over promotion and distribution of the brand, as well as commanding a premium price over the competitors; all while impacting the valuation of the business </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">(Holverson & Revaz, 2006; Pass et al., 1995).</span></span></p><p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">The added value that a brand name gives to a product is now commonly referred to as "brand equity"</span></span></p><p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">(Aaker, 1991). Brand name adds value to each of these interested parties which include the investors, manufacturers, and the retailers. Brand equity and brand loyalty provides a strong platform for introducing new products and insulates the brand against competitive attacks. From the perspective of the trade, brand loyalty contributes to the overall image of the retail outlet. It builds store traffic, ensures consistent volume, and reduces risk in allocating shelf space (Cobb-Walgren et al., 1995). However, if the brand has no meaning to the consumer, automatically there wouldn't be of any value to the investors, the manufacturer, and the retailer unless there is value to consumer (Farquhar, 1989; Crimmins, 1992).</span></span></p><p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">Over the past 15 years, a major shift has occurred in the wa</span></span><span style="font-size:100%;"><span style="font-family:Calibri;">ys that industrial companies deal with their customers and suppliers (Christopher et al., 1991; Ellram, 1995). This change has come about as companies have recognized that sustainable competitive advantage in the global economy increasingly requires companies to become trusted participants in various networks or sets of strategic alliances (Morgan & Hunt, 1994). Relationship marketing which is powered by the employees of an organization has emerged over the years as an exciting area of marketing that focuses on building long-term relationships among employees who is a proxy to their employer and customers that frequent to their business premises. As Gronroos (1993) observed: establishing a relationship, for example between an employee and a customer, can be divided into two parts: to attract the customer and to build the relationship with that customer so that the economic goals of the organization are achieved through that relationship.</span></span></p><span style="font-family:Times New Roman;font-size:100%;"> </span><div><div style="text-align: justify;"><b style=""><span style="font-size: 14pt;font-size:11.0pt;" ><span style="font-family:Calibri;">THE RESEARCH MODEL</span></span></b><br /></div><b style=""><span style="font-size: 14pt;font-size:11.0pt;" ><span style="font-family:Calibri;"><br /></span></span></b><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj4TMgly8Urh9PVs05QuHgazo2f23zCIPLHHlwZsXbl6HDYmxs0PkhrSKudfnz-_W6Kwgp7Phz7r2S2BJds_Xe-EnzC0oES2bYhb1otK5Hok-TH_nF5efxMCvAlFWGkDZJGTsNLtQ/s1600/Riyazi+Farook.jpg"><img style="float: left; margin: 0pt 10px 10px 0pt; cursor: pointer; width: 466px; height: 233px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj4TMgly8Urh9PVs05QuHgazo2f23zCIPLHHlwZsXbl6HDYmxs0PkhrSKudfnz-_W6Kwgp7Phz7r2S2BJds_Xe-EnzC0oES2bYhb1otK5Hok-TH_nF5efxMCvAlFWGkDZJGTsNLtQ/s400/Riyazi+Farook.jpg" alt="" id="BLOGGER_PHOTO_ID_5636152078387706754" border="0" /></a><br /></div><p><span style="font-family:Times New Roman;font-size:100%;"> </span><b style=""><span style="font-size: 12pt;font-size:11.0pt;" ><span style="font-family:Calibri;"><br /></span></span></b></p><p><b style=""><span style="font-size: 12pt;font-size:11.0pt;" ><span style="font-family:Calibri;"><br /></span></span></b></p><p><b style=""><span style="font-size: 12pt;font-size:11.0pt;" ><span style="font-family:Calibri;"><br /></span></span></b></p><p><b style=""><span style="font-size: 12pt;font-size:11.0pt;" ><span style="font-family:Calibri;"><br /></span></span></b></p><p><b style=""><span style="font-size: 12pt;font-size:11.0pt;" ><span style="font-family:Calibri;"><br /></span></span></b></p><p><b style=""><span style="font-size: 12pt;font-size:11.0pt;" ><span style="font-family:Calibri;"><br /></span></span></b></p><p style="text-align: justify;"><b style=""><span style="font-size: 12pt;font-size:11.0pt;" ><span style="font-family:Calibri;"><br /></span></span></b></p><p style="text-align: justify;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 12pt; mso-bidi-font-size:11.0pt;" ><span style="font-family:Calibri;">3.1<span style="mso-spacerun: yes;"> </span>The Objectives of This Study<span style="mso-spacerun: yes;"> </span></span></span></b></p><div style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-family:Calibri;"><span style="font-size:100%;">a.<span style="mso-spacerun: yes;"> </span>To determine whether Relationship marketing between Bank Islam staff and their customers will have any influence on Brand loyalty. </span></span><br /><span style="font-family:Calibri;"><span style="font-size:100%;">b.<span style="mso-spacerun: yes;"> </span>To determine whether Relationship marketing within Bank Islam will have any influence on customer's overall satisfaction. </span></span></div><p style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"><span style="font-family:Calibri;"><span style="font-size:100%;">c.<span style="mso-spacerun: yes;"> </span>To determine whether customer Overall satisfaction with Bank Islam employee will have any influence on Brand loyalty. </span></span></p><p style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"><span style="font-family:Calibri;"><span style="font-size:100%;">d.<span style="mso-spacerun: yes;"> </span>To determine whether customer Overall satisfaction on Bank Islam employee mediates the relationship between Relationship marketing and Brand loyalty. </span></span></p><span style="font-family:Times New Roman;font-size:100%;"> </span><br /><b style="mso-bidi-font-weight: normal;"><span style="font-size: 12pt; mso-bidi-font-size:11.0pt;" ><span style="font-family:Calibri;">3.2<span style="mso-spacerun: yes;"> </span>Hypotheses </span></span></b><p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">Hypothesis 1: There is positive relationship between relationship marketing and brand loyalty.<span style="mso-spacerun: yes;"> </span></span></span></p><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">1a: There is positive relationship between trust and brand loyalty. </span></span><br /><span style="font-size:100%;"><span style="font-family:Calibri;">1b: There is positive relationship between commitment and brand loyalty. </span></span><div style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"><span style="font-size:100%;"><span style="font-family:Calibri;">1c: There is positive relationship between communication and brand loyalty.</span></span></div><div style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"> </div><p style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"><span style="font-size:100%;"><span style="font-family:Calibri;">Hypothesis 2: There is a positive relationship between relationship marketing and overall satisfaction. </span></span></p><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">H2a: There is a positive relationship between trust and overall satisfaction.</span></span><br /><span style="font-size:100%;"><span style="font-family:Calibri;">H2b: There is a positive relationship between commitment and overall satisfaction. </span></span><br /><span style="font-size:100%;"><span style="font-family:Calibri;">H2c: There is a positive relationship between communication and overall satisfaction. </span></span><br /><div style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"><span style="font-size:100%;"><span style="font-family:Calibri;">Hypothesis 3: there is a positive relationship between overall satisfaction appeal and brand loyalty. </span></span></div><div style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"> </div><p style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"> <span style="font-size:100%;"><span style="font-family:Calibri;">Hypothesis 4: Overall satisfaction mediates the relationship between relationship marketing and brand loyalty. </span></span></p><span style="font-family:Times New Roman;font-size:100%;"> </span><br /><b style="mso-bidi-font-weight: normal;"><span style="font-size: 12pt; mso-bidi-font-size:11.0pt;" ><span style="font-family:Calibri;">3.3<span style="mso-spacerun: yes;"> </span>Research Questions </span></span></b><br /><p style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"> <span style="font-size:100%;"><span style="font-family:Calibri;">From the previous discussion, we infer specific research questions for this study, they are:</span></span></p><p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">Does customers trust towards the Bank Islam employee during their interaction influences </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">Bank Islam Brand Loyalty?</span></span></p><p style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"><span style="font-size:100%;"><span style="font-family:Calibri;">b) Does Bank Islam employee's commitment towards their customers during employee/customers </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">interaction influence Bank Islam Brand Loyalty?</span></span></p><p style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"><span style="font-size:100%;"><span style="font-family:Calibri;">c) Does Bank Islam employee's communications skills delivered during employee/customers </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">interaction influences Bank Islam Brand Loyalty?</span></span></p><p style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"><span style="font-size:100%;"><span style="font-family:Calibri;">d) Does customer's overall satisfaction towards Bank Islam employee influences Bank Islam </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">Brand loyalty?</span></span></p><p style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"><span style="font-size:100%;"><span style="font-family:Calibri;">e) Does customer's overall satisfaction mediates the relationship between Bank Islam relationship </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">marketing and Bank Islam Brand loyalty?</span></span></p><p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span></p><p style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14pt; mso-bidi-font-size:11.0pt;" ><span style="font-family:Calibri;">4. METHODOLOGY</span></span></b></p><div style="text-align: justify;"> </div><p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">The area of study for this research is limited to three Bank Islam business premises located in Pulau </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">Pinang, Kedah, and Perlis. All the three states are located in the Northern States of Peninsular Malaysia.</span></span></p><div style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"><span style="font-size:100%;"><span style="font-family:Calibri;">A structured questionnaire will be distributed by four research assistance at the entrance/exit of the </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">Bank Islam business premises that was selected for this study. Questionnaire will be collected right after </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">respondents completed the survey. Thus a non-response as well as early and late response analysis is not </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">required for this study. </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">The unit of analysis for this study is individual customers who patronize the Bank Islam business </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">premises.<br /><br /></span></span></div><div style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"> </div><div style="text-align: justify;"> </div><p style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"><b style="mso-bidi-font-weight: normal;"><span style="font-family:Calibri;"><span style="font-size: 13pt; mso-bidi-font-size:11.0pt;" >4.1 Description of Methodology</span></span></b></p><div style="text-align: justify;"> </div><div style="text-align: justify;"><div style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">To have a representative finding, the sampling technique used must be objective. This is an important effort adopted by most researchers in order to furnish a finding pertinent to the general. To choose the sample for this study, probability random sampling was used. A probability sample is necessary if the sample is to be representative of the population (Reeves, 1992). Therefore, a two-stage sampling technique is employed in this study.</span></span><br /></div><span style="font-size:100%;"><span style="font-family:Calibri;"><br /></span></span></div><div> </div><div><div style="text-align: justify;"><span style="font-size:100%;"><span style="font-family:Calibri;">The unit of analysis for this study is individual customers who patronize the Bank Islam business premises. Studying primary consumer groups permits a more valid and reliable clarification to the model research in this study. A total number of 500 samples will be collected from 3 different locations (Bank Islam business premises) in the state of Pulau Pinang, Kedah, and Perlis. In determining the sample size for this study, sample size selected was based on 3 considerations. One of the considerations is the criteria set according to Roscoe's rule of thumb (Sekaran, 2003) i.e. a sample that is larger than 30 and less than 500 are appropriate for most research, and the size must be several times larger (10 times or more) for multiple regression analysis to be conducted.</span></span><br /></div><span style="font-size:100%;"><span style="font-family:Calibri;"><br /></span></span></div><div> </div><div><div style="text-align: justify;"><span style="font-size:100%;"><span style="font-family:Calibri;">For this study, a survey method is employed. Surveys are a better source of primary data collection in marketing and social sciences in contrast to observation and experiments (Baker, 2001). According to </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">Robson (2002), surveys are use in accord with a cross-sectional design, that is, the collection of information from any given sample of the population only once. The data are collected using a set of questionnaires or structured interviews with the objective of generalizing from a sample to a population to determine attitudes and opinions and to help understand and predict behavior (Baker, 2001; Mokhlis, </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">2006). Questionnaires will be distributed personally to customers who exit Bank Islam business premises and have had an interaction with any Bank Islam employees.</span></span><br /></div><span style="font-size:100%;"><span style="font-family:Calibri;"><br /></span></span></div><div> </div><div><b style="mso-bidi-font-weight: normal;"><span style="font-size: 13pt; mso-bidi-font-size:11.0pt;" ><span style="font-family:Calibri;">4.2 Population and Sample Size</span></span></b></div> <p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">Since the mailing list of Bank Islam customers/clients is not made available, a 2-stage systematic sampling technique will be employed.</span></span></p><div><span style="font-family:Times New Roman;font-size:100%;"> </span></div><div><b style="mso-bidi-font-weight: normal;"><span style="font-size: 13pt; mso-bidi-font-size:11.0pt;" ><span style="font-family:Calibri;">4.3<span style="mso-spacerun: yes;"> </span>Sampling Design<span style="mso-spacerun: yes;"> </span></span></span></b></div><p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-family:Calibri;"><span style="font-size:100%;">A two-stage sampling technique is employed in this study. During the 1</span><span style="font-size:85%;"><sup>st</sup></span><span style="font-size:100%;"> stage = A random sampling technique is used to select the Bank Islam business premises. List of Bank Islam business premises will be retrieved from Bank Islam listing. 2</span><span style="font-size:85%;"><sup>nd</sup></span><span style="font-size:100%;"> stage = systematic sampling. A skip interval of 2 will be utilized in the selection of Bank Islam clients as our respondent (Arithmetic progression will be utilized). </span></span></p><div><span style="font-family:Times New Roman;font-size:100%;"> </span></div><div><b style="mso-bidi-font-weight: normal;"><span style="font-size: 13pt; mso-bidi-font-size:11.0pt;" ><span style="font-family:Calibri;">4.4<span style="mso-spacerun: yes;"> </span>Sample </span></span></b></div><p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">A sample of 480 will be collected (16 items (independent variable) X 10 = 160 samples X 3 locations = 480 samples). To accommodate for non-responses, an additional of 20 samples will be collected. </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">Therefore a total of 500 samples will be collected altogether for this study. </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">Sample selected was based on 3 considerations:- </span></span></p><div><span style="font-family:Times New Roman;font-size:100%;"> </span></div><span style="font-size:100%;"><span style="font-family:Calibri;">a)<span style="mso-spacerun: yes;"> </span>The first consideration, Sample size selected was based on the criteria set according to Roscoe's Rule of Thumb (cited in Sekaran, 2003).<span style="mso-spacerun: yes;"> </span></span></span><p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-family:Calibri;"><span style="font-size:100%;"><span style="mso-spacerun: yes;"> </span>30< sample < 500. The size must be several times larger (10 times or more) for multiple regression analysis to be conducted. </span></span></p><div style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"><span style="font-family:Calibri;"><span style="font-size:100%;">Therefore, 16 items (questionnaire)<span style="mso-spacerun: yes;"> </span>X 10 = 160 samples x 3 independent hoteliers – 480 samples. </span></span></div><div style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"><span style="font-family:Calibri;font-size:100%;"></span> </div><p style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"> <span style="font-family:Calibri;"><span style="font-size:100%;">b)<span style="mso-spacerun: yes;"> </span>Second considerations, Cohen & Cohen (1977); Sawyer & Ball (1981), believes that very large sample sizes usually allow even small effects to be statistically significant. It is especially important with highly powered research designs to measure and report effect sizes in addition to statistical significance. </span></span></p><p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">Sawyer and Ball (1981) estimated that a proportion of 13% of the explained variance to effect size values, as a medium effect size for regression analysis. According to Sawyer and Ball (1981), the medium effect of 13% is sufficient for testing an existing model. </span></span></p><p style="margin: 0in 0in 0pt; line-height: normal;" class="MsoNormal"><span style="font-family:Calibri;"><span style="font-size:100%;">f² = <span style="mso-spacerun: yes;"> </span>R²<span style="mso-spacerun: yes;"> </span>=<span style="mso-spacerun: yes;"> </span>0.13<span style="mso-spacerun: yes;"> </span>=<span style="mso-spacerun: yes;"> </span>0.1494 </span></span></p><p style="margin: 0in 0in 0pt; line-height: normal;" class="MsoNormal"><span style="font-family:Calibri;"><span style="font-size:100%;">1-<span style="mso-spacerun: yes;"> </span>R²<span style="mso-spacerun: yes;"> </span>1 – 0.13 </span></span></p> <p style="margin: 0in 0in 0pt; line-height: normal;" class="MsoNormal"><span style="font-family:Calibri;"><span style="font-size:100%;"><span style="mso-spacerun: yes;"> </span>ŋ* = L+K+1 </span></span></p><p style="margin: 0in 0in 0pt; line-height: normal;" class="MsoNormal"><span style="font-family:Calibri;"><span style="font-size:100%;"><span style="mso-spacerun: yes;"> </span>f² </span></span></p><p style="margin: 0in 0in 0pt; line-height: normal;" class="MsoNormal"><span style="font-family:Calibri;"><span style="font-size:100%;"><span style="mso-spacerun: yes;"> </span>= 13.62 + 3 + 1 </span></span></p><p style="margin: 0in 0in 0pt; line-height: normal;" class="MsoNormal"><span style="font-family:Calibri;"><span style="font-size:100%;"><span style="mso-spacerun: yes;"> </span>0.1494 </span></span></p><p style="margin: 0in 0in 0pt; line-height: normal;" class="MsoNormal"><span style="font-family:Calibri;"><span style="font-size:100%;"><span style="mso-spacerun: yes;"> </span>= 117 samples. </span></span></p><p style="margin: 0in 0in 0pt; line-height: normal;" class="MsoNormal"><span style="font-family:Calibri;"><span style="font-size:100%;">Therefore, 117 samples x 3 locations<span style="mso-spacerun: yes;"> </span>= 351 samples (to be collected) </span></span></p><div style="margin: 0in 0in 0pt; line-height: normal;" class="MsoNormal"><span style="font-size:100%;"><span style="font-family:Calibri;">Thus, 500 samples will be collected to accommodate for non-responses. </span></span></div> <div style="margin: 0in 0in 0pt; line-height: normal;" class="MsoNormal"><span style="font-family:Calibri;font-size:100%;"></span> </div><p style="margin: 0in 0in 0pt; line-height: normal;" class="MsoNormal"><span style="font-family:Calibri;"><span style="font-size:100%;">c)<span style="mso-spacerun: yes;"> </span>The third considerations, Issue's on response rate were covered. Response rate in Malaysia is between 15% - 30% base on the previous research/study/theses. </span></span></p><div style="margin: 0in 0in 0pt; line-height: normal;" class="MsoNormal"><span style="font-size:100%;"><span style="font-family:Calibri;">Therefore, the samples that will be collected are 500 samples,<span style="mso-spacerun: yes;"> </span></span></span><span style="font-family:Calibri;"><span style="font-size:100%;">(The sample size was increased to 23%, to accommodate the non-response rate).<br /><br /></span></span></div><div style="margin: 0in 0in 0pt; line-height: normal;" class="MsoNormal"><span style="font-family:Calibri;font-size:100%;"></span> </div><p style="margin: 0in 0in 0pt; line-height: normal;" class="MsoNormal"> <b style="mso-bidi-font-weight: normal;"><span style="font-size: 13pt; mso-bidi-font-size:11.0pt;" ><span style="font-family:Calibri;"><span style="mso-spacerun: yes;"> </span>4.5<span style="mso-spacerun: yes;"> </span>Questionnaire Design</span></span></b></p> <p style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">Questionnaire consists of 3 Sections. Section A =Relationship marketing (Caceres & Paparoidamis, </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">2007). Section B = Overall customer satisfaction ( Bloemer & Ruyter, 1998). Section C = Brand loyalty (Aaker, 1996). An interval scale data (use for independent variable, mediating variable, and dependent variable) and a nominal scale data (demographic data) will be collected from the questionnaire distributed to the hotel guest. A Likert Scale of 1 to 5 will be used to frame answers in the questionnaire. </span></span></p><p style="margin: 0in 0in 0pt; line-height: normal;" class="MsoNormal"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 13pt; mso-bidi-font-size:11.0pt;" ><span style="font-family:Calibri;">4.6<span style="mso-spacerun: yes;"> </span>Translation Procedure</span></span></b></p><div><div style="text-align: justify;"><span style="font-family:Times New Roman;font-size:100%;"> </span><span style="font-size:100%;"><span style="font-family:Calibri;">A back-to-back translation procedure will be utilized. The original instrument in English was literally translated into Bahasa Malaysia and back to English by a bi-lingual lecturer from Universiti Teknologi </span></span><span style="font-size:100%;"><span style="font-family:Calibri;">MARA Kampus Kedah. The instrument will be pre-tested for reliability and language accuracy.</span></span><br /></div><span style="font-size:100%;"><span style="font-family:Calibri;"><br /></span></span></div><div><span style="font-family:Calibri;font-size:100%;"></span> </div><div><span style="font-family:Calibri;font-size:100%;"></span> </div><div style="margin: 0in 0in 0pt; line-height: normal;" class="MsoNormal"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14pt; mso-bidi-font-size:11.0pt;" ><span style="font-family:Calibri;">5.<span style="mso-spacerun: yes;"> </span>CONCLUSION<br /></span></span></b></div><div style="margin: 0in 0in 0pt; line-height: normal;" class="MsoNormal"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14pt; mso-bidi-font-size:11.0pt;" ><span style="font-family:Calibri;"></span></span></b> </div> <div style="margin: 0in 0in 0pt; line-height: normal;" class="MsoNormal"><span style="font-size:100%;"><span style="font-family:Calibri;"><br /></span></span><div style="margin: 0in 0in 0pt; line-height: normal; text-align: justify;" class="MsoNormal"><span style="font-size:100%;"><span style="font-family:Calibri;">To ensure success, it is recommended that Bank Islam follows the suggested model above to ensure that they significantly improved their overall brand management particularly building up Brand loyalty among their customers, without losing a large part of their uniqueness, independence and management control. The essence of Bank Islam management is to be able to relate relationship marketing through their employee, customer overall satisfaction, and Brand loyalty as part of their property management. To do so it requires the management of Bank Islam to spend time, effort and commitment, as well as to put in some financial resources, blended with management experience and knowledge of market plus courage to take risks. This venture is achievable and can be used as a strategy to speed up corporate growth and success of Bank Islam. The value of this study lies in the fact that it places the role of brand management firmly in Bank Islam. The employees of Bank Islam play a key role in enhancing good relationship with Bank Islam customers and exert considerable influence on the structure and culture of a company.</span></span></div></div><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com54tag:blogger.com,1999:blog-36321277.post-37909038765710115422010-10-19T04:35:00.009-01:002010-12-04T06:50:38.128-01:00<div align="justify"><span style="COLOR: rgb(0,0,0)"><strong><span style="font-size:180%;">Sukuk and Islamic Investment</span></strong><br /><strong><span style="font-family:times new roman;">By Rose Anderson</span></strong></span><span style="font-family:arial;font-size:85%;"><br /></span><br /><span style="COLOR: rgb(0,0,0)">Islamic finance govern by Shari’ah law , as per Shari’ah law interest is strictly restricted in Islam.Free debt help is allowable without taking any interest, or these can be treat as to help anyone, without taking any interest from the lender. As interest is against the Islamic law bond market not develop in the Islamic world. Most of the Petroleum exporting countries are investing there surplus amount in the US free debt help bonds and they not taken interest on investment. Sukuk is invested to protect the religious value and also to increase the Muslim investment market.Malaysia is the largest issuer of the sukuk bonds ,sukuk is not only famous in islamic market but also some European and American countries issued sukuk bonds to get the islamic investment of rich middle east countries.Sukuk is also consider as a portfolio investment to diversify the investment.<br /><br />A major challenges facing Islamic financial products like sukuk bonds are the lack of liquidity.According to S&P, there are more sukuk listed in Dubai than any other else, but the secondary market is virtually non-existent. Further, the bulk of sukuk are over-the-counter instruments,with listed sukuk accounting of only 20-255 of outstanding sukuk is issued worldwide; that is, $10-15 bn so far, says the rating agency. Zeti contends that creation of persistent supply of Islamic papers and instruments that would upgrade the secondary trading of instruments and greater depth of the market is the hour. According to her, another factor that could help futher expand the market for Islamic finance products would be to bring in greater diversity in the market for Islamic financial institutions and portfolio manager to manage their funds effectively. Pricing issues also pose significants challenges to the unhindered growth of the market. There is the need for developing a relevant benchmark for efficient and credible pricing. For example , if sukuk is issued based on the Ijarah principle, and if it uses the property as its underlying assets then actual rate of rental may be explored to be used to determine the rate of return on the instrument. However, it may then fluctuate depending upon the demands and supply for that property. Shari’ah experts, who have a full understanding of the mechanics of sukuk, should play an important role in ensuring its proper pricing as well as governance, she suggests.<br /><br />Taking Islamic finance products global is another challenges as it requires harmonization of standards and practices between those of regional Islamic finance and international standards. Zeti suggests that full support has to be accorded to the international standard setting organizations such as Islamic Financial Service Board (IFSB) and to the Accounting and Auditing Organization for Islamic Financial Institution (AAOIFI) to formulate appropriate standards that would strengthen the Islamic Financial system.The Malaysia based IFSB has already formulated the prudential treatment for sukuk investment by the Islamic Financial Institution s as specified in the Capital adequacy standards and has also undertaken a set of initiatives to strengthen the framework and practices in the Islamic money market.<br /><br />Also, lack of rating is another major issue. Given the complex legal structure, it adds to the cost and complexity of rating. Further rated instruments are almost non-existent in the Middle East.<br />However, global rating agencies such as S&P, however, feel that there is a way out. “the provisions of Islamic debt instruments may add level of complexity to rating analysis long stading methodologies and rating scales are sufficiently broad so far to incorporate the varied features of Islamic debt financing,”It said in recent report. Islamic finance largely centers on assets-backed approaches and sometimes involves a degree of risk-sharing more commonly born by equity investors.In practice,however,as illustrate d in the sukuk that Standard & Poor’s has rated, binding guarantees and other contractual obligations can place transactions firmly in the debt category.</span></div><div align="justify"></div><div align="justify"></div><br /><span style="font-family:arial;"><em>R. Anderson is a financial writer .She is the Community Member of "Debt Community" and has been contributing her suggestions to the Community . She has also made notable contributions through various articles written on different subjects related to debt industry.</em></span><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com17tag:blogger.com,1999:blog-36321277.post-66259247488047742942010-10-17T08:31:00.000-01:002010-10-19T05:42:15.349-01:00<span style="font-weight: bold; color: rgb(0, 0, 0);font-size:180%;" >Coming of age</span><br /><span style="font-weight: bold; color: rgb(0, 0, 0);font-size:130%;" >Past challenges, future opportunities</span><br /><span style="font-family: times new roman; color: rgb(0, 0, 0); font-style: italic;">By Dr. John Lee and Anita Menon (KPMG Malaysia)</span><br /><span style="color: rgb(0, 0, 0);"><br /></span><div style="text-align: justify;"><span style="color: rgb(0, 0, 0);"><span style="font-size:100%;"><span style="font-family: arial;">Last year may go down in history as the watershed year for the financial services industry. However, as </span></span></span><span style="font-size:100%;"><strong style="color: rgb(0, 0, 0); font-family: arial;">Dr. John Lee</strong></span><span style="color: rgb(0, 0, 0); font-family: arial;font-size:100%;" > and </span><span style="font-size:100%;"><strong style="color: rgb(0, 0, 0); font-family: arial;">Anita Menon</strong></span><span style="color: rgb(0, 0, 0); font-family: arial;font-size:100%;" > explain, while Islamic finance was not entirely unscathed by the vagaries of the economy and the contagion effect of the conventional finance sector, the industry still recorded compounded annual growth rates of 28 percent from 2006 to 2009. Islamic banks also recorded an increase in assets by 28.6 percent in 2009 to US$822 billion.</span><span style="font-size:100%;"><sup style="color: rgb(0, 0, 0); font-family: arial;">1</sup></span></div><div style="color: rgb(0, 0, 0); font-family: arial; text-align: justify;"> </div><p style="color: rgb(0, 0, 0); font-family: arial; text-align: justify;"><span style="font-size:100%;">This in itself is interesting, as a couple of years ago at the height of the previous growth cycle for Islamic finance, many felt that the true test of the resilience of the system would be when there was a shock to the system, and when the liquidity in the Middle East dried up. However, skeptics would also claim that this was due to Islamic institutions general investment prohibitions which meant that they were less exposed to subprime assets.</span></p><div style="color: rgb(0, 0, 0); font-family: arial; text-align: justify;"> </div><p style="color: rgb(0, 0, 0); font-family: arial; text-align: justify;"><span style="font-size:100%;">2009 also saw the entrance of a number of new players which indicate that interest in this burgeoning sector is as yet, unabated. As at end 2009, there were 1,124 Islamic financial institutions globally.<sup>2</sup> While issuance of sukuk<sup>3 </sup>dropped in 2009 on the back of tightening liquidity and concern on possible defaults, the demand for quality sukuks continued to be there and issuance increased by 40 percent for the first 10 months of the year, as compared to the corresponding period in 2008.<sup>4</sup> Saudi Arabia led the issuance followed closely by Malaysia; with one of the largest issuances by Malaysia’s national oil and gas company Petronas totaling US$1.5 billion.</span></p><div style="text-align: justify;"> </div><table style="width: 605px; height: 199px; text-align: left; margin-left: 0px; margin-right: 0px;" border="0" cellpadding="1" cellspacing="1"> <tbody> <tr> <td colspan="2" height="10"><strong><span style="color: rgb(0, 38, 100);">Figure 1 - Total Sukuk Issuance by Country in 2009</span></strong></td><td style="vertical-align: top;"><br /></td><td style="vertical-align: top;"><br /></td></tr> <tr> <td align="left" height="155" valign="top"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiHBSL9aKhdEvk7pSnzv-gQ9824HuMwqvRnx9W-xTpd-c58kxkrsnszpodr9GKINpoJrs_DZOf3uk-v-Zeju5CazIX5u5y8OxxT2YffNm2RMIPefEqTiKwQA0pwOgWqVHSAPAfSgw/s1600/Pie.jpg"><img style="float: left; margin: 0pt 10px 10px 0pt; cursor: pointer; width: 400px; height: 198px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiHBSL9aKhdEvk7pSnzv-gQ9824HuMwqvRnx9W-xTpd-c58kxkrsnszpodr9GKINpoJrs_DZOf3uk-v-Zeju5CazIX5u5y8OxxT2YffNm2RMIPefEqTiKwQA0pwOgWqVHSAPAfSgw/s400/Pie.jpg" alt="" id="BLOGGER_PHOTO_ID_5529641580603354130" border="0" /></a></td><td align="left" height="155" valign="top"><br /></td><td style="vertical-align: top;"><br /></td><td style="vertical-align: top;"><br /></td></tr> <tr> <td colspan="2" height="10"> <p>Source: S&P’s Europe, Middle East, and Africa Markets Outlook 2010, January 2010.</p></td><td style="vertical-align: top;"><br /></td><td style="vertical-align: top;"><br /></td></tr></tbody></table><div style="text-align: justify;"> </div><p style="text-align: justify; color: rgb(0, 0, 0);"><strong>Outlook for the rest of this </strong><strong>year and into 2011</strong></p><div style="text-align: justify; color: rgb(0, 0, 0);"> </div><p style="text-align: justify; color: rgb(0, 0, 0); font-family: arial;"><span style="font-size:100%;">The outlook for the remainder of 2010 remains positive with some analysts saying<sup>5</sup> that Saudi Arabia is expected to continue to lead issuance, although investors are expected to be somewhat spooked by the recent Dubai World crisis, sukuk defaults and the problems seen to be encountered by some of the institutions in the Middle-East. Dar-Al Arkan, Saudi Arabia’s largest property developer by market value, successfully issued a sukuk in February this year raising US$450 million and analysts believe that the number of issuances for the rest of 2010 is likely to grow to pre-crisis levels.</span></p><div style="text-align: justify; color: rgb(0, 0, 0); font-family: arial;"> </div><p style="text-align: justify; color: rgb(0, 0, 0); font-family: arial;"><span style="font-size:100%;">KPMG in Malaysia’s analysis indicates that the Islamic finance market is steadily growing both deeper and wider, with the emergence of new Islamic finance markets such as the Maldives, Korea, Kenya, Nigeria and also stronger interest from EU countries like France and Italy. Korea for instance, is currently working on amendments to its legislation that may see the first Korean sukuk being issued as early as 2010 or 2011. In Malaysia, the interest continues to grow and, among the recent liberalization measures is the issuance of two new Islamic banking licenses to foreign players; with a paid-up capital of at least US$1 billion, along with two family Takaful licenses towards the middle of this year. Malaysia continues to be a leading market outside the Middle East with assets of almost 11 percent of the global market and with Islamic assets making up almost 19 percent of the banking and finance market in Malaysia. However, the UK is emerging as a key market holding close to 2.5 percent of global assets.<sup>6</sup></span></p><div style="text-align: justify; color: rgb(0, 0, 0); font-family: arial;"> </div><p style="text-align: justify; color: rgb(0, 0, 0); font-family: arial;"><span style="font-size:100%;">Within the Asia-Pacific region, relative newcomers such as Singapore and Hong Kong have expressed their desire to also become centers, while the most populous Muslim nation – seen by many as the next big growth zone – Indonesia has still a long way to go if estimates of asset size are anything to go by. Bank Indonesia, the central bank of Indonesia, has indicated that shariah assets are projected at US$7.6 billion as at end 2009, which places the nation’s Islamic finance assets at 2-3 percent of the total banking assets.<sup>7</sup> This is attributed to the nascent infrastructure and regulatory system for Islamic finance. While there is a new law which was set to be effective in April 2010 that would remove the double-taxation on some Islamic banking transactions, there are still issues around this area that hold back the otherwise huge untapped potential in this country.</span></p><div style="text-align: justify;"> </div><table style="width: 680px; height: 82px; text-align: left; margin-left: 0px; margin-right: 0px;" border="0" cellpadding="1" cellspacing="1"> <tbody> <tr> <td colspan="2" height="10"><strong><span style="color: rgb(0, 38, 100);">Figure 2 - Total Banking A</span></strong><strong><span style="color: rgb(0, 38, 100);">ssets & Islamic Banks by Country in 2009</span></strong></td></tr> <tr> <td align="left" valign="top"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgxdyddmwfqDEdWWLSO-8wcv4feo56s-CQ0AHz6hKv7kEPq35N3bgkrCUo6Y0fkKFu0dKNwTV7wZkPhl9eJbnhCHYDcjoL-kb8WqcxfiNVHJsU-NxyEmyS9zCqcuM6kxZ9UbTPTcQ/s1600/Bar-vertical.jpg"><img style="float: left; margin: 0pt 10px 10px 0pt; cursor: pointer; width: 400px; height: 253px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgxdyddmwfqDEdWWLSO-8wcv4feo56s-CQ0AHz6hKv7kEPq35N3bgkrCUo6Y0fkKFu0dKNwTV7wZkPhl9eJbnhCHYDcjoL-kb8WqcxfiNVHJsU-NxyEmyS9zCqcuM6kxZ9UbTPTcQ/s400/Bar-vertical.jpg" alt="" id="BLOGGER_PHOTO_ID_5529641993285404802" border="0" /></a></td></tr> <tr> <td colspan="2" height="10"> <p>Source: The Banker, The Pew Forum, Bank Negara Malaysia, FSA, Central Bank of Bahrain, November 2009.</p></td></tr></tbody></table><div style="text-align: justify;"> </div><p style="text-align: justify; color: rgb(0, 0, 0);">The global Muslim population is continuing to grow faster than the non-Muslim market; recent estimates place the Muslim population at 1.57 billion, 23 percent of the global population.<sup>8</sup> There is also a large Muslim population in the Asia-Pacific region - China for instance has more Muslims than Syria; while Russia has more Muslims than Jordan and Libya combined. This translates to immense opportunities for shariah compliant finance in as yet untested markets. The potential for Islamic finance continues to be enormous. The only impediment to its growth may be that the conventional regulatory structure is currently unable to support the introduction of Islamic products.</p><div style="text-align: justify; color: rgb(0, 0, 0);"> </div><p style="text-align: justify; color: rgb(0, 0, 0);">Through the adoption of a progressive face as opposed to an overtly religious tone, in countries such as Malaysia, the Islamic finance industry has continued to make inroads in the non-Muslim market. This may also be the approach adopted in countries such as India and certain African countries with large Muslim populations, but, where the projection of an Islamic face would be anathema to the political regime.</p><div style="text-align: justify; color: rgb(0, 0, 0);"> </div><p style="text-align: justify; color: rgb(0, 0, 0);">Islamic finance is also gaining acceptance where it is seen as an ethical alternative to the conventional system, bridging the gap between socialism and capitalism. According to the Vatican’s official newspaper Osservatore Romano in its March 2009 issue, “The ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service.” Ethical investors also are drawn to the principles that underlie Islamic financial transactions. Therefore growth is expected to come from this segment of consumers as well who are not necessarily attracted by its faith-based appeal, but more from its socially responsible outlook.</p><div style="text-align: justify; color: rgb(0, 0, 0);"> </div><p style="text-align: justify; color: rgb(0, 0, 0);"><strong>The future of Islamic finance</strong></p><div style="text-align: justify; color: rgb(0, 0, 0);"> </div><p style="text-align: justify; color: rgb(0, 0, 0);">The ongoing debate on whether products are shariah compliant or shariah based and the lack of standardization, continues to be an issue. Additionally, other major hurdles that remain or have become more apparent with the recent financial meltdown include:</p><div style="text-align: justify; color: rgb(0, 0, 0);"> </div><ul style="margin-top: 0px; margin-bottom: 10px; text-align: justify; color: rgb(0, 0, 0);"><li>the need for robust risk management practices that would be able to drive product innovation and development;</li><li>the need for a legal and regulatory framework for dispute resolution, especially on cross-border transactions;</li><li>the ongoing requirement for trained practitioners in this field that have a strong understanding of shariah requirements, but are also in tune with market and consumer demands.</li></ul><div style="text-align: justify; color: rgb(0, 0, 0);"> </div><p style="text-align: justify; color: rgb(0, 0, 0);">Notwithstanding that, many Islamic institutions are expected to undergo a transformation in their approach and strategy, and more importantly in their business models as well. This will enable them to encompass more of the ideals of shariah principles and to move away from the predominance of debt-based structures as in the past. When Islamic finance was first introduced into the market, the approach was to adopt products that were familiar to the generation of consumers and clients brought up on conventional financial products. Therefore, Islamic financial products were shariah compliant mirrors of their conventional equivalents. Furthermore, the initial target market was retail customers who are generally risk-averse and therefore, fixed rate products were more appealing to this segment of the market.</p><div style="text-align: justify; color: rgb(0, 0, 0);"> </div><p style="text-align: justify; color: rgb(0, 0, 0);">Increasingly however, a radical shift from the current norms will be required and this would fuel the anticipated growth in Islamic finance. The pursuit of social objectives would gain emphasis alongside the pursuit of commercial objectives; since Islamic finance is meant to be the antithesis of the previous conventional financing norms – where excessive risk-taking led to the ultimate downfall of many players. The financial crisis has heightened the interest in Islamic finance and it’s future; the concepts of risk-sharing should be ingrained further through the development of more profit and risk sharing mudaraba and musyaraka products. This would require a shift in banking business models as well. Increased product sophistication and market awareness-building would also need to go hand-in-hand with the advancement of the financial and legal infrastructure.</p><div style="text-align: justify; color: rgb(0, 0, 0);"> </div><p style="text-align: justify; color: rgb(0, 0, 0);">Over the next 18 months Islamic finance institutions are expected to come of age</p><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com3tag:blogger.com,1999:blog-36321277.post-68721518459637007632010-05-06T05:36:00.005-01:002010-05-06T09:46:50.740-01:00<span style="color: rgb(0, 0, 0);font-size:180%;" ><span style="font-weight: bold;">ISLAMIC FINANCE 2010</span></span><br /><span style="color: rgb(0, 0, 0);">by IFSL RESEARCH</span><br /><br /><div style="text-align: justify; color: rgb(0, 0, 0);"><span style="font-weight: bold;">OVERVIEW</span><br /><br />The global market for Islamic financial services, as measured by shariacompliant assets, is estimated by IFSL to have reached $951bn at end-2008,25% up from $758bn in 2007 and three quarters up on the 2006 total(Chart 1). However, 2009 may have seen a pause following strong growth ofprevious years. Commercial banks account for the bulk of the assets withinvestment banks, sukuk issues, funds and takaful making up the balance.<br /><br />Key centres are concentrated in Malaysia and the Middle East including Iran,SaudiArabia, Malaysia, Kuwait, UAE and Bahrain (Chart 2). Islamic financeis also developing in Asian countries such as Bangladesh, Pakistan andIndonesia, as well as North African countries such as Sudan and Egypt. TheUK, in 8th place, is the leadingWestern country and Europe’s premier centrewith $19bn of reported assets, largely based on HSBC Amanah. Assets inother Western countries are currently small but a number of countries,particularly France, are looking to develop a presence in Islamic finance.<br /><br />While the Islamic finance industry initially has been less affected by thefinancial crisis and global economic downturn, there are ongoing challenges,particularly for the sukuk market and for some Islamic banks. The sukukmarket fell back in 2008, but despite recovery in issuance to $20bn during2009, is being tested by its ability to deal with several defaults. A $10bn loanby Abu Dhabi staved off the threat of a potential default by Dubai World onits repayment on the Nakheel $4bn sukuk in December 2009. Quality issuersof sukuk continue to attract demand from investors.<br /><br />Islamic banks have not been immune to the effects of the financial crisis anddownturn: some have suffered a higher rate of non-performing loans thanconventional banks, mainly due to their exposure to falling real estatemarkets. Revenue and profitability has suffered in both 2008 and 2009 andliquidity is a significant restraint for some banks.<br /><br />Islamic banks have not been immune to the effects of the financial crisis anddownturn: some have suffered a higher rate of non-performing loans thanconventional banks, mainly due to their exposure to falling real estatemarkets. Revenue and profitability has suffered in both 2008 and 2009 andliquidity is a significant restraint for some banks.<br /><br />- 22 banks including five that are fully sharia compliant, more than in anyotherWestern country. Two Islamic banks were granted licences in 2008.<br />- 20 Sukuk issues raising $11bn listed on London Stock Exchange,exceeded only by Dubai Nasdaq.<br />- Seven sharia compliant exchange-traded funds (ETFs).<br />- 20 law firms supplying services in Islamic finance.-<br />- Advisory services provided by Big Four professional service firms.<br />-Institutions offering educational and training products in Islamic finance.<br />- Off-exchange trading in commodity-based agreements linked to LMEcontracts.<br /><br />GLOBALMARKET FOR ISLAMIC FINANCE<br /><br />As mentioned in the overview, IFSL estimates that the global market forIslamic financial services, as measured by sharia compliant assets, isestimated to have reached $951bn at end-2008, 25% up from $758bn in 2007(Chart 1). Assets have grown from about $150bn in the mid-1990s. Islamiccommercial banks accounted for 74% of the assets, investment banks 10%,sukuk issues also 10%, funds 5% and takaful 1%.<br /><br />Assets that can be allocated to individual countries from The Banker’ssurvey of 500 organisations reveal that the leading countries for shariacompliant assets are Iran with $293bn, Saudi Arabia $128bn and Malaysia$87bn (Table 1). These are followed by other Gulf states including UAE,Kuwait, Bahrain and Qatar. The UK, in 8th place, is the leading Westerncountry with $19bn of reported assets, largely based on HSBC Amanah.Countries with most of the 302 firms reporting to The Banker’s surveyinclude Malaysia with 37, Bahrain 34 and Kuwait 30. Iran, Sudan, SaudiArabia and Indonesia each have between 20 and 23 firms supplying Islamicfinance (Table 1).<br /><br />Broadening geographical customer base for Islamic services The market iscurrently most developed in Malaysia, Iran and the majority of countries thatform the Gulf Co-operation Council (GCC). However, Islamic finance ismoving beyond its historic boundaries in these countries into new territories.Markets where Islamic finance is developing include:<br /><br />- Other countries in the Middle East and North Africa such as Turkey,Sudan, Egypt, Jordan and Syria.<br />- Other Asian countries such as Indonesia, which has the largestindigenous Muslim population in the world, as well as Hong Kong,Singapore, Bangladesh, Pakistan and China.<br />- Western countries in Europe and North America. Countries such as theUS, France, Germany and the UK each have indigenous Muslimpopulations of between one and five million, although Russia has muchthe largest in Europe with 30m. The customer base in Western countriesis not necessarily restricted to Moslems: other customers may beattracted by the ethical and environmental basis of Islamic finance.<br /><br />Following the lead set by the UK, otherWestern countries, such as Japan andFrance, are looking to make the appropriate regulatory and legal reforms thatwould facilitate provision of Islamic financial products. London is seeking toconsolidate its position as the gateway to Islamic finance in Western Europe.Providers in London are likely to focus on services that complement thoseavailable in other centres. Government strategy for the development ofIslamic finance in the UK is set out on page 7.<br /><br /><span style="font-size:100%;"><span style="font-weight: bold;">Sharia compliant financial services</span></span><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgzbYO7jIB42De6frxmcGwtMkWT4cMBN8Pq8G0tlVZ8yVflpYhtDzoiy5RB8-GQqtYAbXYWZZzEO85rHic4DiD_ii8ejHGjRyqjeNINTJTeK35DrCkjwzWNRupun0HfERavlqNy3w/s1600/uk.jpg"><img style="float: right; margin: 0pt 0pt 10px 10px; cursor: pointer; width: 270px; height: 400px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgzbYO7jIB42De6frxmcGwtMkWT4cMBN8Pq8G0tlVZ8yVflpYhtDzoiy5RB8-GQqtYAbXYWZZzEO85rHic4DiD_ii8ejHGjRyqjeNINTJTeK35DrCkjwzWNRupun0HfERavlqNy3w/s400/uk.jpg" alt="" id="BLOGGER_PHOTO_ID_5468103686238127746" border="0" /></a><br />Banking and sukuk - the issue of Islamic notes - represent the forms ofIslamic finance that are most well established, although takaful (insurance)and funds are also evolving. Products that may be the subject of innovationinclude private equity and private wealth management.<br /><br />Banking Islamic banks have been perceived favourably since the onset of thefinancial crisis in 2008 as they have been less exposed to losses frominvestment in toxic assets. However, they have not been immune from theeffects of the crisis and the subsequent economic downturn. Some Islamicbanks have suffered a higher rate of non-performing loans than conventionalbanks, mainly due to their exposure to falling real estate markets. Revenueand profitability has suffered in both 2008 and 2009 and liquidity is asignificant restraint for some banks.<br /><br />In its World Islamic Banking Competitiveness Report 2009/10 McKinsey &Company recommended that many Islamic banks need to take action in anumber of core areas in order to:<br /><br />- Enhance and diversify their business mix, by tapping into new businesslines such as personal finance asset management and various areas ofinvestment banking.<br />- Upgrade risk management in order to address credit and liquidityconstraints. This would also include avoiding excessive exposure to realestate.<br />- Reduce operational costs and improve service quality to maintaincompetitiveness.<br />- Explore growth opportunities in the international markets, especiallywhere any excess capital can be better deployed in underdevelopedmarkets.<br /><br />Islamic banks compete not only with each other but also with all other banksoffering conventional finance, particularly those that have establishedIslamic ‘windows’. In the Banker’s survey, balance sheet assets of shariacompliant banks rose 29% from $622bn in 2007 to $800bn in 2008, of which$701bn were in commercial banks and $99bn in investment banks.<br /><br />In the UK, five fully sharia compliant banks have been established putting itin the lead in Western Europe (Table 2). The Islamic Bank of Britain (IBB)became the first stand-alone retail Islamic bank in the country in 2004 andwas followed between 2006 and 2008 by The European Islamic InvestmentBank (EIIB), The Bank of London and The Middle East (BLME), EuropeanFinance House and Gatehouse Bank. IBB is the only bank with a high streetpresence having eight branches and around 50,000 customers. EIIB providesinvestment banking services including trade finance, private equity and assetmanagement. BLME offers Sharia compliant investment, corporate andprivate banking to businesses and high net worth individuals globally.European Finance House offers a range of investment products and servicesto clients that include companies and wealthy investors. Gatehouse Bank is awholesale investment bank operating in capital markets,institutional wealth management, Treasury business andadvisory services.<br /><br />In addition to the five sharia compliant banks, there are anestimated 17 conventional banks that have set up windows inthe UK to provide Islamic financial services (Table 2). HSBCAmanah is the only conventional bank with an Islamicwindow to report to the Banker’s survey: its assets of $16.5bnaccount for 85% of the UK’s identified assets, with a further6% from BLME and 4% from the HSBC parent bank.<br /><br />The 22 Islamic banks in the UK substantially exceeds that in anyother western country or offshore centre (Table 4). The UK market forIslamic mortgages has grown to about £500m, some 0.3% of the total UKmortgage market.<br /><br />Sukuk are issues of Islamic notes that represent an alternative toconventional bonds. Issuance of sukuk increased rapidly from $1bn a yearin 2002 to $34bn in 2007 (Chart 3). In common with the broad-basedslowdown in global capital market activity, sukuk issuance fell awayduring 2008 to $15bn, as a result of a decline in asset valuation, a lack ofliquidity and a lack of market confidence. The ruling from the Accountingand Auditing Organisation for Islamic Financial Institutions (AAOFI) thatquestioned the sharia compliance of some sukuk structures also acted as abreak on issuance in 2008.<br /><br />Sukuk issuance rose from the low point of Q4 2008 to reach $6bn in eachof Q3 & Q4 2009, resulting in an annual total of $20bn, up by 30% on 2008.Most issuers in 2009 have been government or quasi governmentorganisations. Uncertainty has arisen from the financing problems at DubaiWorld, resolved for the time being by a $10bn loan fromAbu Dhabi. This hasbrought concerns about settlement of sukuk defaults into focus with keyissues set out in the side panel. In the meantime, quality issuers of sukuk arecontinuing to attract demand from both Islamic and non-traditional investors.<br /><br />Malaysia is the main country in the global market, but Indonesia andSingapore have come into the market more strongly in 2009. According toIslamic Financial Information Service (IFIS), the main factors hinderingrevival of the sukuk market in the GCC are troubled Kuwaiti investmentcompanies, the real estate market in the UAE and the availability of credit inSaudi Arabia.. There was one sukuk listing in Nasdaq Dubai and two on theLondon Stock Exchange in 2009. This has brought the Dubai total atend-2009 to 21 listings totalling $18bn and to 20 listings in London worth$11bn.<br /><br />Long term prospects for sukuk are positive, with three factors having a rolein fostering growth in demand when market conditions improve:<br /><br />- There is a commitment to a substantial programme of infrastructureinvestment in the GCC totalling up to $1,000bn over the next ten years,some of which will be financed through Sukuk.<br />- Recent years have shown that there is an appetite and demand forinvestment in Sukuk that goes well beyond Islamic investors amongstthose investors that wish to gain exposure to diverse but high qualityassets.<br />- Governments and regulators in a variety of countries have recognised theimportant role that Sukuk can play in capital markets and have beengiving priority to developing their countries as Sukuk centres. Inaddition to Dubai and the UK, these include Bahrain, Hong Kong,Malaysia, Japan, Pakistan, Singapore and South Korea.<br /><br />Islamic funds The market for Islamic funds has been expanding steadily.Eurekahedge estimates that the total number of sharia compliant fundsreached 680 funds by end-2008 having risen more than threefold from around200 in 2003. Ernst & Young estimates that the total value of these funds has grown from $20bn in 2003 to $44bn in 2008 (Chart 4). Equity funds accountfor the largest segment: 40% of funds, with fixed income 16% and real estate& private equity 13% (Chart 5). Cash, commodities and other funds make upthe balance. Over half of funds, 58%, are invested in a portfolio covering theMiddle East and Africa. A further 20% are in a global portfolio, 15% in Asia,6% in America and the residual 1% elsewhere.<br /><br />The bulk of Islamic funds are small scale with two thirds being less than$100m and many of these having attracted only $10m to $15m. The domicileof funds is heavily concentrated with nearly two thirds of the total number offunds being in five jurisdictions: Malaysia 23%. Saudi Arabia 19%, Kuwait9%, Luxembourg 7% and Bahrain 6%. Cayman, Ireland and Indonesia eachaccount for a further 3-4% each, but the remaining 25% is divided between afurther 23 countries, including 1% in the UK.<br /><br />Eurekahedge estimates that the average return on Islamic equity funds was22% in 2009, recovering from an average drop of 28% in 2008. This wasclose to the return on the global equity index, up 25% in 2009 following a fallof 37% in 2008. The largest Islamic equity funds, according to Failaka, arethe US-based Amana Funds, which it estimates account for 95% of Islamicfunds in the US totalling $2.3bn in 2009.<br /><br />There has been a substantial decline globally in the number of new fundlaunches since the 2007 peak. In the UK new offerings in 2009 haveincluded:<br /><br />- BLME launching a sharia compliant money market fund, the first of itstype to be launched in Europe.- Qatar Islamic Bank<br />- European Finance House launching its GlobalSukuk Plus Fund.G<br />- atehouse Bank and DDCAP announced the launch of a fund in early2010 to invest capital in structured trade finance transactions. DDCAP isa wholesale Islamic market intermediary company.<br /><br />This followed a more active year in 2008 when four exchange traded funds(ETFs) were listed on the London Stock Exchange. Other offerings in 2008included a fund of equity funds, the first of its type globally by SEI; the firstsharia compliant retail capital-protected equity fund in the UK by Alburaq;and the launch by FTSE Group of the FTSE Bursa Malaysia Hijrah ShariaIndex, in association with Bursa Malaysia.<br /><br /><span style="font-weight: bold;">Takaful</span>, similar to mutual insurance, is a risk sharing entity that allows forthe transparent sharing of risk by pooling individual contributions for thebenefit of all subscribers. The global market remains at an early stage ofdevelopment and is estimated at $8.3bn in 2008, up from $6.6bn in 2007(Chart 6). Iran, where takaful is the compulsory form of insurance, is thelargest market, with assets totalling $2.6bn (Table 1). It is followed byMalaysia, with premiums of $2.1bn, UAE $1.0bn and Saudi Arabia $0.8bn.Together, these four countries account for over three quarters of the globalmarket. Smaller markets for takaful with annual premiums of over $100mhave developed in Kuwait, Bahrain, Qatar, Sudan and Indonesia. Penetrationof takaful is nevertheless low in these and other countries with Islamicmajorities. Takaful represents a strong growth opportunity, particularly withregard to life insurance, as sharia compliant products are developed.<br /><br />The takaful market in the UK remains at an early stage of development.Principle Insurance, authorised by the FSA in 2008, was the first shariacompliant independent takaful company in the UK, but it stopped taking newbusiness in 2009. The remaining takaful available in the UK is restricted toHSBC Amanah’s home insurance offering. Prudential was given approval in2006 to launch a takaful business in Malaysia in partnership with BankNegara Malaysia.<br /><br />Other financial products The range of products generated by Islamic financehas broadened steadily. In the UK in 2007 Merrill Lynch structured the firstsharia compliant credit default swap for a UK power company involvingGCC investors. In 2008, Barclays Capital and Sharia Capital Inc. of the USlaunched the first Islamic fund of hedge funds. Sharia compliant publicprivate partnerships (PPP) are also under consideration.<br /><br />The UK has a successful record as a trading centre for Islamic products ascommodity-based LME contracts are traded off exchange. This has been akey mechanism for Islamic financial institutions to manage their assets andliabilities. In 2008 ETF Securities launched a sharia compliant precious metalexchange trade commodity platform, based on platinum, palladiumsilver, gold and a basket of other metals.<br /><br /><span style="font-weight: bold;">Law firms</span> The UK is a major global provider of the s<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEheg5JwZXScv3TBDdQFOcJae8wevtjPWc0d7ffzfXAn5XlxXV611iO3lxT7TSkpW2bTFZJguNfHjUb-X8ddGWQ34aLMeNMANitiqOZbQrPIVbn65JSM38jwWQ0SoFSDVVRoxtnfHQ/s1600/law.jpg"><img style="float: right; margin: 0pt 0pt 10px 10px; cursor: pointer; width: 275px; height: 366px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEheg5JwZXScv3TBDdQFOcJae8wevtjPWc0d7ffzfXAn5XlxXV611iO3lxT7TSkpW2bTFZJguNfHjUb-X8ddGWQ34aLMeNMANitiqOZbQrPIVbn65JSM38jwWQ0SoFSDVVRoxtnfHQ/s400/law.jpg" alt="" id="BLOGGER_PHOTO_ID_5468104188528085474" border="0" /></a>pecialist legalexpertise required for Islamic finance, with 20 major law firms providinglegal services in Islamic finance (Table 5).<br /><br /><span style="font-weight: bold;">Professional service firms</span> The Big Four professional services firms -PricewaterhouseCoopers, KPMG, Ernst & Young and Deloitte - have eachestablished an Islamic finance team in London providing specialist servicesincluding advice on tax, listings, transactions, regulatory compliance,management, operations and IT systems.<br /><br /><span style="font-weight: bold;">Education and training</span> There is a growing demand for skills as Islamicfinance expands and UK institutions are at the forefront of providingqualifications for the global industry.<br /><br />Courses in Islamic finance are offered by the Chartered Institute forSecurities and Investment (CISI), Chartered Institute of ManagementAccountants, Association of International Accountants, Cass BusinessSchool and the Institute of Islamic Banking and Insurance. These courseshave been key to the development of Islamic finance qualifications in theUK. One new development in January 2010 has been the launch by AstonBusiness School of an Islamic Finance and Business Centre.<br /><br />In a separate initiative, the Islamic Finance Council UK has developed apioneering ‘Scholar Professional Development Programme’ in conjunctionwith the CISI. The objective of the course is to teach conventional finance toShariah scholars worldwide. Partners for this programme include the CentralBank of Bahrain and the International Shariah ResearchAcademy for IslamicFinance (ISRA) that is backed by Malaysia’s Central Bank.<br /><br />Beyond Islamic finance, the UK education offering that majors in Islamspans the full range of qualifications starting from 16 year-old school levelthrough vocational and career-based qualifications as well as undergraduateand postgraduate degrees.<br /><span style="font-weight: bold;">GOVERNMENT STRATEGY FOR DEVELOPMENT OF ISLAMIC FINANCE IN THE UK</span><br /><br />London has been providing Islamic financial services for 30 years, althoughit is only in recent years that this service has begun to receive greater profile.An important feature of the development of London and the UK as the keyWestern centre for Islamic finance has been supportive government policiesintended to broaden the market for Islamic products for both shariacompliant institutions and firms with ‘Islamic windows’ (see side panel).<br /><br />A key aspect of supportive government policy has been the establishmentsince 2003 of an enabling fiscal and regulatory framework in the UK forIslamic finance. There have been a number of initiatives which are intendedto form part of a continuing process:<br /><br />The removal in 2003 of double tax on Islamic mortgages and theextension of tax relief on Islamic mortgages to companies, as well asindividuals.- Reform of arrangements for issues of bonds so that returns and incomepayments can be treated ‘as if’ interest. This makes London a moreattractive location for issuing and trading Sukuk.- Initiatives by the Financial Service Authority to ensure that regulatorytreatment of Islamic finance is consistent with its statutory objectivesand principles.<br /><br />Following a review into the case for issuing sharia compliant governmentbonds, the UK Government announced in November 2008 that this would notoffer value for money at the present time. The situation has since been keptunder review by the Government. Investors would welcome a UKGovernment sukuk as it would provide more liquidity in the secondarymarket and act as a benchmark for UK companies that might considerissuing sukuk.<br /><br />During 2009 the UK Government has been following through on otherinitiatives designed to support the UK as a centre for global finance and toensure conventional and alternative finance are treated on the same basis.Specifically, it has been undertaking a consultation on the legislativeframework for those alternative finance investment bonds (AFIBs) or sukukthat are structured to have similar economic characteristics to conventionaldebt instruments. Following this consultation, the Government announced on21 January 2010 that it intends to introduce measures to provide ‘clarity onthe regulatory treatment of corporate sukuk, reducing the legal costs for thesetypes of investments and removing unnecessary obstacles to their issuance’.<br /><img src="file:///C:/Users/Riyazi/AppData/Local/Temp/moz-screenshot.png" alt="" /><br /><span style="font-weight: bold;">BARRIERS TO DEVELOPMENT OF ISLAMIC FINANCE</span><br /><br />The global development of Islamic finance requires that further progress ismade in addressing a number of barriers. These may be broadly groupedwithin the following headings including: taxation and regulation;standardisation; awareness; and skills. More details on these barriers aredetailed in the The December 2008 UK Government paper on ‘Thedevelopment of Islamic finance in the UK: the Government’s perspective’.<br /><br /><br /></div><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com14tag:blogger.com,1999:blog-36321277.post-80895576441940642772010-02-16T14:43:00.003-01:002010-02-16T15:32:21.504-01:00<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjll1tmudNARcCENXOm0MBbtRgbd9kr6U1TbVqoi-ukeFm6j3mFrn2IA0xGbG_8bOgg75t9ZR_4uf6E29GMe9PXj2w1CCyKF6lEvr8r_edrDv_8E0_H8U_3k3DEiCRFKAy6dX4BGA/s1600-h/Riyazi+Farook.jpg"><img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 239px; height: 183px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjll1tmudNARcCENXOm0MBbtRgbd9kr6U1TbVqoi-ukeFm6j3mFrn2IA0xGbG_8bOgg75t9ZR_4uf6E29GMe9PXj2w1CCyKF6lEvr8r_edrDv_8E0_H8U_3k3DEiCRFKAy6dX4BGA/s200/Riyazi+Farook.jpg" alt="" id="BLOGGER_PHOTO_ID_5438879813817293826" border="0" /></a><br /><div align="justify"><div style="text-align: left;"><span style="color: rgb(0, 0, 0);font-size:180%;" ><strong>DERIVATIVES AND ISLAMIC FINANCE</strong></span><br /></div><br /><span style="color: rgb(51, 51, 51);"><strong><span style="font-family:arial;">Muhammad Ayub</span></strong><br /></span><span style=";font-family:verdana;font-size:85%;" ><span style="color: rgb(51, 51, 51);">(The writer is Senior Joint Director, Islamic Banking Department, State Bank of Pakistan Karachi.)</span><br /></span><br /><span style="color: rgb(0, 0, 0);font-family:verdana;font-size:85%;" >The conventional options, swaps and futures stem from debts and involve sale and purchase of debts/liabilities. As a group, products such as interest-rate swaps, stock options and futures, currency futures etc are called derivatives i.e. instruments derived from the expected future performance of the respective underlying assets. These are very complex and risky contracts having present market value of trillions of dollars over the world. According to an article published in the Economist, some $ 128 trillion of over the counter derivatives were outstanding in June 2002, a 28% increase over a year earlier. It has been observed, however, that global financial market is becoming increasingly fragile as more and more derivatives and ‘hedging’ instruments emerge.</span></div><div align="justify"><span style="color: rgb(0, 0, 0);font-family:verdana;font-size:85%;" ></span></div><div align="justify"><span style="color: rgb(0, 0, 0);font-family:verdana;font-size:85%;" ></span></div><div align="justify"><span style="color: rgb(0, 0, 0);font-family:verdana;font-size:85%;" >Just to introduce the terms to common readers, an option to buy a commodity is known as ‘call option’ while the option to sell a commodity is known as a ‘put option’. An option has a nominal size, this being the amount of underlying asset that the option holder may buy or sell at the strike price, the price at which the holder may buy or sell the underlying asset upon exercise of the option. If the price moves favorably, the option is exercised and the commodity is bought/sold at the agreed price. If the price moves unfavorably, the buyer of the option simply abandons it. Thus an option contract confers the right but not the obligation to enter into an underlying contract of exchange at or before a specified future date (the expiry date). The buyer of that option pays a price (the premium) to the seller (the writer) of the option.<br /><br />We can explain the options trading with help of an example. A call option purchase at a price of say Rs 5 on bond or stock ‘A’ provides a right to Mr. M to purchase the stock at price of Rs 50 three months from now. If as per his expectations the price of ‘A’ increases to Rs 60 on the maturity date, then the buyer of the call has a net gain of Rs 5 (on an investment of Rs 5). This is what the seller or the writer of the call would lose. But if the price of the stock falls below Rs 50 on the maturity date, say to Rs 40, the buyer would allow the option to expire without exercising it since he can buy from the market at a lower price. His loss would amount to Rs 5 or hundred percent with the call. This Rs 5 would be what the seller of the call would gain on zero investment. In the game, the buyer and seller have diametrically opposite expectations. The possibility of risk and returns are magnified, the gains of the buyer being equal to the losses of the seller and vice versa.<br /><br />The institutions dealing in derivates and hedge funds claim that diversity of hedging products protect their clients against market volatility and provide a larger spectrum of risk management to the benefit of the society. But, actually volatility is caused by their activities when they trade in derivatives as a part of rip-off factor and the clients are sold nothing for something – protection against a danger that never needed to exist in the first place. They may produce huge profits for financial institutions at the cost of others. But these profits are not necessarily indicative of productive efforts. Mr. Warren Buffet, Chairman Berkshire Hathaway says: Derivatives are financial weapons of mass destruction mainly due to opaque pricing and accounting policies in swaps, options and other complex products whose prices are not listed on exchanges; Credit derivatives and total return swaps that are agreements to guarantee counterparty against default or bankruptcy merit special concern.”<br /><br />The macro-economic arguments for their existence are also not convincing – they are for minimizing risks which do not need to exist as described earlier. The global foreign exchange market as at present is more or less an unproductive pursuit in that it exists because of an unnecessary monetary expansion. It would be better to structure the financial system such that it does not suffer from continuing volatility. What we are seeing in the Western world is the emergence of financial products that are a symptom of a system that has gone wrong. For a more efficient economy, we must promote systems in which people work in productive pursuits rather than unproductive ones. Change the system to relate it with real sector activities<br />and all those clever dealers who earn huge profits out of thin air could become doctors, industrialists, business people and teachers instead! As such, Islamic financiers who look at the products of this system as a paradigm seem to be at mistake.<br /><br />Study of the behaviour of the Derivatives market reveals that it has the potential to cause a serious breakdown in the financial system. The degrees of leverage that are afforded by option contracts can be so high that large unpredictable market moves in underlying prices may one day lead to the insolvency of a major financial institution. Liabilities cannot be perfectly hedged even if that is the intention, and some traders deliberately do not hedge their option portfolios because such action would limit the potential for high returns. The case of Long Term Capital Management in the United States, rescued by a Federal Reserve bail out in 1998, demonstrates the degree of risk that can be incurred. The question is whether the central bank or other authorities would be able to move quickly enough, or in large enough measure, to prevent failings.<br /><br />For example, Collateralized Debt Obligations (CDOs) are sophisticated type of derivatives and clever way of exploiting anomalies in credit ratings. A number of loans or debt securities payable by various companies are put into a pool, and new securities are issued which pay out according to the pool’s collective performance. The new securities are divided into three (or more) levels of risk. The lowest, equity tranche, takes the first loss if any companies in the pool default. If nough losses eat that up, the next, mezzanine level suffers. The most protected level, the senior tranche, should still be safe, unless the collective pool has severe losses. It takes only a couple of defaults in a pool of 100 companies to destroy the equity tranche. Downgrades of investment-grade corporate bonds in America were a record 22% in 2002, according to Moody’s and it recorded bond defaults of $ 160 billion worldwide. The equity and mezzanine tranches of many CDOs have suffered severe losses; some have been wiped out. Even senior tranches, usually rated AAA, have been downgraded because losses may yet reach them. Thus, the whole concept of CDOs as in vogue refers to absolute risk and exploitation.</span></div><div align="justify"><span style="color: rgb(0, 0, 0);font-family:verdana;font-size:85%;" ></span></div><div align="justify"><span style="color: rgb(0, 0, 0);font-family:verdana;font-size:85%;" >According to the concept of Option (khiyar) as we find in Shariah literature, the informationally disadvantaged party at the time of entering into the contract has the option to cancel the contract within a specified period. A person has also the right to undo his purchase if the seller specifically allows as part of the terms of the sale. All such forms of option are in the nature of rights embedded in a contract. In the term khiyar as used in Fiqh books we do not see any analogy that would lead us to acceptance of the structure of modern option contracts. These are independent financial contracts traded for a price that do not have any clear-cut parallel in the classical Islamic theory of contracts. Khiyar relates to a halal contract of exchange that has already taken place, whilst a modern option relates to an exchange that is yet to take place. In the case of khiyar, the exchange of one or both counter values is effected immediately while in the case of the modern option contract, future delivery applies to both the payment and the underlying asset. In addition, uncertainty as to the materialization of the exchange exists with the modern option contract but not in khiyar. A resolution of the Islamic Fiqh Academy of the OIC asserts, “Option contracts as currently applied in the world financial markets are a new type of contracts which do not come under any of Shariah denominated contracts. Since the subject of the contract is neither a sum of money nor a utility or a financial right which may be waived, the contract is not permissible in Shariah.<br /><br />Most of the derivatives incorporate gharar (absolute risk), gambling and interest and support speculative activities. Islamic legal rules, particularly the ban on Gharar and on the sale of debt for debt, do not allow transactions devoid of real/productive activities. Derivatives involving such financial contracts which themselves are prohibited in Shariah (Riba based bonds & forward foreign exchange where mutual exchange is not simultaneous, for example) are clearly un-acceptable according to the Shariah principles. In case the underlying assets are equities and commodities it would be seen whether or not Riba and Gharar are involved. Experts are of the view that even in case of acceptable forms of underlying assets, a key valuation element in arriving at the fair value of an option contract remains the rate of interest. The Black-Scholes formula proposes that since an option can be perfectly hedged through constant trading in the underlying asset, the option position should be riskless and hence earn the buyer the risk free rate of interest on the premium that was paid for it. (In reality, constant trading of the underlying asset to achieve the perfect hedge is unattainable, and so option prices behave in ways that are not entirely predicted by Black-Scholes.) For the unhedged option, the contract becomes one of pure uncertainty. Neither party knows whether the option would be exercised, as it is dependent upon the condition of the market at a future date.<br /><br />According to some writers ‘Arbun'can become a basis for developing some kinds of Shariah compliant options – contract by which one party buys the right to purchase from the other party specified goods for a specified price on a certain date. ‘Arbun’ is a void contract according to a Hadith and the three schools of Islamic law. Only Hanabalah uphold ‘Arbun’ with the condition imposed by some of them that time should be stipulated for the option. The OIC Fiqh Academy has also endorsed ‘Arbun’ but only if time limit is specified. Even if ‘Arbun’ is accepted as valid transaction, most of the derivatives current in the market would still be unacceptable from Shariah angle due to involvement to Gharar and Riba. A Call Option can be considered near to Bai al Arbun in the sense that the seller does not return the premium or advance payment to the buyer in case the latter does not exercise the purchase option and the buyer loses the option premium even if the option is exercised and the contract is confirmed. In case of Bai al-Arbun, however, the option premium is adjusted in sale price when the contract is confirmed. However, this subject of derivatives needs extensive research.<br /><br />Samuel L. Hayes, after detailed discussion on derivatives concludes, “There are no effective derivates of Islamic debt contracts which replicate conventional risk-hedging and leveraging contracts such as swaps, futures, and options. Similarly, in the equity security sector, there are no risk-hedging or leveraging contracts in Islamic finance truly comparable to available conventional derivatives….. With respect to commodities and other goods, the Salam contract is an imperfect Islamic substitute for a conventional forward contract. The related Istisna contract for goods being manufactured for a buyer provides another partial Islamic proxy for a forward contract. It is also possible to construct an Islamic contract which partially replicates a conventional futures contract, via back-to-back Salam contracts”.</span></div><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com6tag:blogger.com,1999:blog-36321277.post-88274689606427532682010-02-16T14:15:00.006-01:002010-02-16T15:35:22.148-01:00<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhmtWrJgPaKjTlHuPilfGQglVSsf-nn5uOjljnUQVFe4i5uZ4fu4u7WturlJiwasf5dHuKBEMpaAAeN8KIeAPTTCDrtK33g-I1IA9QsK9oZ0daz9uRO6hLsmZVmbNhDnmdUy7xO5w/s1600-h/Riyazi+Farook.jpg"><img style="margin: 0px 0px 10px 10px; width: 200px; float: right; height: 143px;" id="BLOGGER_PHOTO_ID_5438861663646876530" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhmtWrJgPaKjTlHuPilfGQglVSsf-nn5uOjljnUQVFe4i5uZ4fu4u7WturlJiwasf5dHuKBEMpaAAeN8KIeAPTTCDrtK33g-I1IA9QsK9oZ0daz9uRO6hLsmZVmbNhDnmdUy7xO5w/s200/Riyazi+Farook.jpg" border="0" /></a> <div align="justify"><span style="color: rgb(0, 0, 0);"></span></div><div align="center"><span style="color: rgb(0, 0, 0);font-family:verdana;font-size:180%;" ><strong>Derivatives in Islamic Finance</strong></span></div><div align="justify"><span style="color: rgb(0, 0, 0);"></span></div><div align="justify"><span style="color: rgb(0, 0, 0);"><br /><span style=";font-family:arial;font-size:100%;" >During the late 1980's an opportunity came my way to become an option dealer in the London capital market. At that time I was not a practising Muslim and, given that the pay in this line of work could be enormous, I accepted without a second thought. As the years went by, it occurred to me that the size of my pay packet bore little relation to the benefit enjoyed by society as a result of my work. Others had misgivings of their own. Accountants complained of the hidden risks that banks were taking 'off balance sheet' and, from time to time, government ministers would make a scapegoat of the derivatives market when other excuses were not forthcoming. Regulators scrambled to recruit staff who could understand what the traders were doing but offerred low rates of pay and, therefore, sufferred from a persistent lack of qualified staff.<br /><br />As the derivatives booty trickled down in ever greater quantities, the financial establishment began to seek a wider economic justification for the existence of this market. The business schools, progenitors of modern option valuation techniques, were only too happy to help. The increasing diversity of hedging products provided a more complete spectrum of risk management tools and was therefore of benefit to society, they told us. But we in the market saw a different story unfolding. XYZ bank would lure the poorly paid treasury manager at the Kingdom of Somewhere-Or-Other into a complex swap deal that only a PhD in Nuclear Physics could properly value. So the bank would book a multi-million dollar profit the very day the deal was closed and the Kingdom's officers would never know any better. Derivatives departments began to swarm around corporate clients like bees around a honey pot.<br /><br />Of course the scam couldn't last forever. By the early 1990's, Bankers Trust traders were caught discussing the size of the "rip-off factor" on a Procter and Gamble derivatives deal. We know this because the episode was taped and made public on behalf of the company. It was one of many large derivatives losses accrued by clients that had acted on the eager encouragement of their bankers. Soon Orange County and Metallgesellschaft would fall into the same trap at a cost of hundreds of millions of dollars more.<br /><br />"We can protect you against market volatility" the investment bankers tell their clients. But the market volatility is caused by the activities of those very same investment bankers, and so the clients are sold nothing for something. Protection against a danger that never needed to exist in the first place. Sadly, the world learned little from the derivatives explosion. By the time the internet boom collapsed, a new generation of clients was learning about the motivations that really drive bankers and advisors. The clients tend to be offerred the products that provide financial institutions with the highest profit margin.<br /><br />What if every country had pure gold coins as its currency? Then what would be the point of the foreign exchange market? What would be the point of exchanging one ounce of American gold for one ounce of Japanese gold? Who would need currency derivatives? Who would need to pay commission on foreign currency transactions? We see very quickly where this idea leads. An end to a trillion-dollar-a-day market that produces huge profits for the financial establishment. But of course profit is not necessarily indicative of productive effort. Theft is a good example of this principle. If we want to achieve a more efficient economy, we must promote systems in which people work in productive pursuits rather than unproductive ones. The foreign exchange market is an unproductive pursuit in that it exists because of an unnecessary monetary convention. Change the convention, in other words adopt a different monetary standard, and all those clever dealers can become doctors and teachers instead!<br /><br />But back to options. Modern option contracts have a variety of features in common that can be summarised as follows. An option is a right not an obligation to enter into an underlying contract of exchange at or before a specified future date (the expiry date). The buyer of that option pays a price (the premium) to the seller (the writer) of the option. The option may give its holder the right to buy a specified asset (the underlying) from the option writer, gold for example, such being a call option on gold. Or the option may give its holder the right to sell the underlying asset to the option writer. This would be a put option. Every option has a strike price, this being the price at which the holder may buy or sell the underlying upon exercise of the option. And every option has a nominal size, this being the amount of underlying that the option holder may buy or sell at the strike price. A 15 December 2001 European call on gold at $400 per ounce in 100 ounces gives its holder the right to buy 100 ounces of gold from the option writer at $400 per ounce on the 15 December 2001, if the holder so wishes.<br /><br />If we exclude those financial contracts which are of themselves haram (bonds and forward foreign exchange for example), then we are left with a set of underlyings such as equities and commodities upon which a derivative contract may be based.<br /><br />Curiously, even where acceptable forms of underlying such as these are concerned, a key valuation element in arriving at the fair value of an option contract remains the rate of interest. The Black Scholes formula proposes that since an option can be perfectly hedged through constant trading in the underlying, the option position should be riskless and hence earn the buyer the riskless rate of interest on the premium that was paid for it. (In reality, constant trading of the underlying asset to achieve the perfect hedge is unattainable, and so option prices behave in ways that are not entirely predicted by Black-Scholes.) For the unhedged option, the contract becomes one of pure uncertainty. Neither party knows whether the option will be exercised, as it is dependent upon the condition of the market at a future date.<br /><br />The first problem with the standard option contract from a Shari`ah perspective is that a contract of exchange in which both payment and underlying are deferred is widely held to be prohibited. The second problem is the uncertainty that exists with regard to whether or not the option will be exercised. Thirdly, if the option contract is judged to be halal, the question then arises as to whether that option can itself be sold to a third party, as is the case in the market for warrants for example. Fourthly, by buying a put option and selling a call option, a trader can replicate a short position in an underlying asset. Where these options are cash settled, the trader can be seen to achieve the same cash-flows as a short seller of that underlying. Shari`ah scholars have agreed that selling what one does not own is a prohibited commerical activity, and the possibility that such an activitiy can be synthesised through the use of options must therefore call into question their validity under Shari`ah. There is a fifth problem that pertains to more complex option contracts where the strike price itself varies according to an agreed formula. Such is the case with a serial option. For example, a one month 'at-the-money' serial call with daily resets gives the holder a series of one day call options whose strike price is the price of the underlying asset at the previous day's close of trading. As this price is unknown in advance, the strike price itself cannot be known. This represents further gharar.<br /><br />Under Bay al-Urban, a deposit is paid on an item that a prospective buyer may purchase at a later time. Should the buyer not complete the purchase, the deposit is lost. This contract has been used as a justification for Islamic options by some writers who argue that the deposit can be seen as the premium paid by the buyer of a call option. The problem is that the scholars do not widely allow bay al-Urban. According to Ibn Rushd in Bidayat al-Mujtahid:<br />Within this topic is the sale of the urban (sale with earnest money). The majority of jurists of different regions hold that it is not permitted, but it is related from a group of the Tabi'un that they permitted it, among them are Mujahid, Ibn Sirin, Nafi ibn al-Harth and Zayd ibn Aslam. The form it takes is that a person puchases a thing and delivers to the seller part of the price on the condition that if the sale is executed between them this earnest money will form part of the price of the goods, if it is not executed the buyer will forgo it. The majority inclined toward its prohibition, as it is from the category of gharar, mukhatara and the devouring of wealth of others without compensation. Zayd used to say, "The messenger of Allah (God's peace and blessings be upon him) permitted it". The Ahl al-Hadith said that this is not known from the messenger of Allah (God's peace and blessings be upon him).<br /><br />Under Khiyar, which is allowed by the jurists, the buyer of an item has the right to undo his purchase if the seller specifically allows as part of the terms of the sale. This is in other words an option to cancel a previously agreed sale. All buyers have a right to cancel a sale following purchase but before leaving the presence of the seller (khiyar al-majlis). This right is different to that expressly given by the seller to the buyer under sale with an option (bay al-khiyar), where the buyer may leave the presence of the seller for a specified period of time before returning to cancel the sale and take back the money that was paid.<br /><br /></span></span><span style="color: rgb(0, 0, 0);"><span style="font-family:arial;"><span style="font-size:85%;"><strong>Ibn Rushd in Bidayat al-Mujtahid comments:<br /></strong>Permissibility of option is upheld by the majority, except for al-Thawri and Ibn Shubrama, as well as a group of the Zahirities. The reliance of the majority is on the tradition of Hibban ibn Munqidh, which contains the words "and you have an option for three days", and also what has been related of the tradition of Ibn Umar: "The parties to sale have an option as long as they have not parted, except in sale with an option". The reliance of those who prohibit it is (on the argument) that it constitutes gharar and that the basis of sale is that it is binding, unless definitive evidence is produced for the permissibility of sale with an option from the Qur'an or authentic sunna or ijma. They also said that the tradition of Hibban is either not authentic or it is specific to the case of a person who complained to the Prophet (God's peace and blessings be upon him) that he was deceived in sales. They said that the tradition of Ibn Umar and the words in it, "except sale with an option", have been interpreted through another version of this tradition in which the words "that he says to his counterpart: 'Choose'," have been recorded.<br /><br />In khiyar it is difficult to see any analogy that would lead us to the acceptance of the modern option contract as described above. Khiyar relates to a halal contract of exchange that has already taken place, whilst a modern option relates to an exchange that is yet to take place. In the case of khiyar, the exchange of one or both countervalues is effected immediately. In the case of the modern option contract, future delivery applies to both the payment and the underlying asset. In addition, uncertainty as to the materialisation of the exchange exists with the modern option contract but not in khiyar.<br /><br />Disagreements among traditional scholars in the matter of khiyar arise in minor details, such as the length of time for which the buyer has the option to return the goods, or who is liable for any damage to the goods whilst the buyer is in posession of them during the option period. These scholars do not seem to have disagreed upon those fundamental principles which distinguish khiyar from the modern option contract.<br /><br />It is my view, having been involved in derivatives dealing, that the potential exists in this market to cause a serious breakdown in the financial system. The degrees of leverage that are afforded by option contracts can be so high that large unpredictable market moves in underlying prices may one day lead to the insolvency of a major financial institution. Liabilities cannot be perfectly hedged even where that is the intention, and some traders deliberately do not hedge their option portfolios because such action would limit the potential for high returns. The case of Long Term Capital Management in the United States, rescued by a Federal Reserve bail out in 1998, demonstrates the degree of risk that can be incurred. The question is whether the central bank or other authorities will be able to move quickly enough, or in large enough measure, to prevent future failings.<br /><br />When looked at from the Islamic perspective, as with so many other Islamic financial products, it seems that theory needs to be stretched in order to justify an Islamic option contract. The macro-economic arguments for their existence are of dubious merit, based as they are on minimising risks which do not need to exist in the first place. Better to structure the economic system such that it does not suffer from continuing volatility. If there was no such thing as interest, there would be no such thing as interest rate options. The same with foreign currency. What we are seeing in the Western world is the emergence of financial products that are a symptom of a system that has gone wrong. Islamic financiers who look at the products of this system as a paradigm are making a big mistake. </span><br /></span></span></div><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com2tag:blogger.com,1999:blog-36321277.post-63311131247004781732009-12-09T13:09:00.003-01:002009-12-09T13:26:06.133-01:00<p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal; font-weight: bold;"><span style="letter-spacing: 1pt;font-size:180%;" >Islamic finance in Sri Lanka needs good corporate governance, regulatory and legislative measures</span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="line-height: 115%;font-size:85%;" >By<b style=""><span style=""> </span><span style="letter-spacing: 2.3pt;">Riyazi Farook</span></b></span></p><p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="line-height: 115%;font-size:9;" ><b style=""><span style="letter-spacing: 2.3pt;"></span></b></span>The Islamic finance is certainly the fastest growing industry in the world, worth over US$ 1 trillion to date- a 28% increase from last year, which clearly demonstrates the industry’s potential despite the global financial crisis and the consequent economy downturn. Interestingly, industry is already catering to as much as 15% non-Muslim customer base throughout the world.</p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">The Sri Lankan financial sector remained comparatively insulated from the global financial crisis, despite the fact, similar to the island’s conventional finance sector Islamic finance has also witnessed the insolvency before even the industry kicked off.</p><p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">Institutions offering Islamic financial services in Sri Lanka cannot undermine the corporate governance practice, which should be on top of its strategic agenda to credibly protect particularly depositors' and shareholders' resources in the investment pools. Regulatory measures should also ensure Islamic financial service ventures are not just merely attracted to quick profit from the emerging industry but to aim at what global Islamic finance industry being achieved over the last three decades. </p> <p class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><b style=""><span style="line-height: 115%; text-transform: uppercase; letter-spacing: 1pt;font-size:9;" >Industry Overview</span></b></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="">In March 2005, CBSL issued an ordinance to include provisions for Islamic finance in which Sri Lanka became one of the few countries to have specific legislation for Shari’ah-compliant financial operations. The amendment also provided flexibility for conventional financial institutions to establish windows to offer Islamic banking and finance products and services.</span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="">According to Islamic Finance News Malaysia Islamic banking sector in Sri Lanka is estimated around US$900 million. Sri Lanka has number Islamic financial services providers including market leader Amana Investments Limited, Muslim Commercial Bank (MCB), People’s Leasing Company - Islamic Financial Services Unit, First Global Group, and ABC Investments (Baraka Islamic Financial Services). </span>Amana Takaful Limited (ATL), the only takaful provider in the country, was introduced in 2002 and ATL was listed on the Colombo Stock Exchange (CSE) in late 2006. Amana Securities Limited (ASL), a subsidiary of Amana Investments Limited, is a trading member of the CSE and is one of just 20 stock<span style="">-</span>broking companies licensed to operate on the CSE.<span style=""></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style=""></span>The country’s largest bank, Bank of Ceylon, was planning to launch an Islamic banking unit in early 2008, but the bank decided to delay due to the global financial crisis.</p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="">In a remarkable development, Amana Investments Limited was recently issued a Letter of Provisional Approval by CBSL. Presently AIL is in the process of fulfilling certain condition listed in the Letter of provisional Approval such as raising of a minimum capital of Rs. 2.5 billion to establish island’s first ever full-fledged Islamic licensed commercial bank named Amana Bank Limited under Section 5 of the banking Act No. 30 of 1988 to carry out Islamic banking business in Sri Lanka aiming to deliver retail, business, and<span style=""> </span>private banking facilities including wealth management, infrastructure financing, bonds, corporate treasury placement and many other financial products and services in the country to attract Shari’ah compliant investment funds from the Middle East and the Far East.</span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="">The ‘DJIM Amana Sri Lanka Index' launched in collaboration with Dow Jones Indexes, USA, The DJIM Amana Sri Lanka Index is the only Islamic Index in Sri Lanka, provides access to investors who seeks investment opportunities in Sri Lanka stocks that comply with Shari’ah requirements.</span></p><p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="">Country’s first ever planned Sukuk issuance attempt to raise approximately Rs. 500 million (US$ 4.5mn) by the Islamic Financial Services Unit, window of the People Leasing Company Co. LTD. - a fully owned subsidiary of People’s Bank (100% State-owned bank) was postponed primarily due to procedural delays and with regard to regulatory authorities, and consequences of the global financial meltdown. However, the company sources said that it is now rescheduling to launch the Sukuk once the investors sentiment and market condition become more favourable.</span></p> <p class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><b style=""><span style="line-height: 115%; text-transform: uppercase; letter-spacing: 1pt;font-size:9;" >Corporate Governance PRACTICE</span></b></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="color:black;">The Corporate Governance, including risk management staged to rigorous debate as corporate scandals and failures around the world shook the financial industry, and indeed Islamic finance industry is not immune to scrutiny. Sri Lanka has also been experiencing increased scams and failures in conventional including Islamic financial industry for last few years, which resulted CBSL to issue a voluntary code of corporate governance practice to financial institutions but, corporate governance code yet to be made mandatory for financial institutions to prevent such scandals and failures in future.</span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="color:black;">Generally, corporate governance in Islamic finance institutions is quite similar to a combination of both Combined Code and Sarbanes-Oxley, because the corporate governance of an Islamic financial institutions distinguish in many forms to that of its conventional counterparts, most importantly Islamic finance institutions need to ensure that they comply with the Shariah (Islamic law) meaning that unlike secular governance practices Shariah would first examine at the transactional structure to find whether the process involves any activities or elements that contradict the profits generation. Also Islamic financial institutions must invite customers to contribute an active role in the governance process.</span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="color:black;">For instance, the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) Financial Accounting standards 11 provides clear principles and guidelines for Islamic financial institutions to disclose the share of the actual profits and of the funds from the returns they receive and emphasise the their disclosure in the financial statements and annual reports. The CBSL, as frontline regulator should regulate corporate governance practice by improving the levels of disclosure, compelling transparency, reporting standards, risk management and accountability to protect investors and maintain the integrity of this emerging financial industry competitive.</span></p><p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="color:black;">In the absence of sufficient legal and regulatory framework the emerging market unable to remain and perform competitive in the financial industry. <span style=""> </span>A good example, in the UK or USA Islamic finance services industry subject to higher standards of corporate governance requirements and making them attractive for investment. To improve viability of the island’s Islamic finance and get greater benefit from this fastest growing industry, Corporate Governance should be enforced at the core of the Islamic financial institutions in Sri Lanka.</span></p><p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="color:black;"><br /></span></p> <p class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><b style=""><span style="line-height: 115%; letter-spacing: 1pt;font-size:9;" >REGULATORY AND LEGISLATIVE ISSUES</span></b></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="">The country’s Islamic finance institutions and experts will continue advising the CBSL on the development of new laws and regulations to facilitate the Islamic finance industry. Particularly, Amana Investments Limited has not only established itself as the pioneer of Sri Lanka’s Islamic financial services industry, but in the forefront lobbying the CBSL for relevant changes in the Islamic finance legal framework.</span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="">The Islamic finance directive issued by the CBSL supervision department defines Islamic banking and two of its fundamental elements clearly in the legislation. Receiving money for the investment in a commercial venture agreed based on the profit and loss sharing principles including Mudaraba and Musharaka contracts. Second, a contract based on buy and sale transaction agreement based on deferred payment option such as Murabaha.</span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="">Islamic Finance Focus Group (IFFG) was recently set up by Islamic finance industry experts and interest groups, including KPMG Sri Lanka. The main objective of IFFG is to advise and lobby the Sri Lankan government, relevant regulatory bodies and parties to allow Islamic finance to compete on a level playing field with conventional financial institutions. IFFG continues to play a pivotal role in the development of new tax legislation and regulations in Sri Lanka to facilitate Islamic finance. In order to achieve this development there are few areas of anomalies in the Sri Lanka’s tax system that required to be addressed carefully for urgent reform and restructure to accommodate all forms of Islamic finance transaction in Sri Lanka.</span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="">Some Shari’ah compliant transactions are more affected by the Value Added Tax (VAT) than conventional finance, but this area of legislation is difficult to modify, as it quite similar to the EU tax system. However, it is significant to note that the Sri Lankan tax regime is not as complicated and extensive as the EU, UK or US tax system.</span></p><p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="">IFFG also working closely with CBSL and regulatory bodies to enable new legislation to be drafted to allow Islamic financial institutions to offer comprehensive range of Shari’ah compliant products without occurring the adverse direct tax consequences. <span style="color:black;">Sri Lankan government should aim these measures to promote the island as a leading centre for Islamic finance in the South Asian region.</span></span></p> <p class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><b style=""><span style="line-height: 115%; text-transform: uppercase; letter-spacing: 1pt;font-size:9;" >Growth Potential</span></b></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="">The stable foundations for the future development of Islamic finance in Sri Lanka have yet to be laid firmly. Although future growth cannot be precisely forecasted due to lack of research on the island's Islamic financial market, there is a clear scope for expansion.</span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="">With mega post-war development projects in the pipeline such as infrastructure and economy development, the majority in the road sector would that have a positive impact on the construction industry, sovereign sukuk (Bond) issuance will potentially attract widespread international and local investors’ interest. Islamic finance institutions and experts realise the importance of encourage the Sri Lankan government to issue sovereign sukuk as an alternative to government bonds in the future.</span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style=""></span><span style="color:black;">On the aspect of development and challenges of Sri Lanka’s Islamic finance industry, Managing Director of the island’s market leader Amana Investments Limited, Faizal Salieh added, “Having completed twelve years of strong presence in country’s financial industry, we are continuously lobbying for regulatory and fiscal legislation to ensure innovation and growth; we are happy that CBSL has introduced promising changes in regulatory framework to support Islamic banking and Insurance Board of Sri Lanka has also licensed Takaful operators. Islamic finance has been supported by the tax authority applying substantial reform so far, but now we need progressive tax neutrality for Islamic financial products. At this stage Islamic finance industry imposing tremendous challenges for market players to ensure good corporate governance, risk management, transparency and Shariah compliance practices.”</span><span style=""><br /></span></p><p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="">The Sri Lankan government has allowed enough avenues in the fiscal and regulatory policy framework to facilitate Islamic finance since 2005. Furthermore, positive support and a favourable financial regulatory environment are encouraging for Islamic financial institutions to set up operations and for local and international investors to participate in taking the country’s Islamic finance industry to new growth.</span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;" align="center"><b style=""><span style="">Riyazi Farook </span></b><span style="">can be contacted for further enquiries at<b style=""> riyazif@islamicfinanceandbanking.com</b></span></p><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com10tag:blogger.com,1999:blog-36321277.post-55455808048268252072009-09-27T12:27:00.002-01:002009-09-27T12:35:42.039-01:00<div style="text-align: justify;"><span style="font-family: lucida grande; font-weight: bold;font-size:180%;" >The Legal Aspects of Marketing for Islamic Banking Services</span><br /><br /><span style="font-weight: bold;">INTRODUCTION</span><br /><br />In this paper I would deal with basically the two aspects which I consider play a major role, other things being equal, in the decision of a customer opting for or deciding to take up a particular banking product, or availing himself of a particular banking service, over another in relation to Islamic banking services. These are:<br /><br />1. The forum in which any disputes arising in the transaction will be decided; and<br />2. The law that will be applied in deciding the dispute.<br />Accordingly, a clear understanding of these matters is essential in marketing Islamic banking services.<br /><br /><span style="font-weight: bold;">ISLAMIC BANKS AND FINANCIAL INSTITUTIONS </span><br /><br />In the strict sense of the word there is o¬nly o¬ne Islamic bank in Malaysia, Bank Islam Malaysia Berhad, it being the o¬nly bank to date licensed under the Islamic Banking Act, 1983 ("The Islamic Banking Act"). However under the amendments made to the Banking and Financial Institutions Act, 1989 ("BAFIA") (Which came into force o¬n 1 August 1996) all conventional banks and financial institutions. Mohamed Ismail Shariff 1 April 1997, The legal aspects of marketing for Islamic banking services. <br /><br />Can carry o¬n Islamic banking business and Islamic financial business. This is brought about by the amendment to Section 124 of the BAFIA which reads as follows:<br /><br />"124. (1) Except as provided in section 33, nothing in this Act or the Islamic Banking Act 1983 shall prohibit or restrict any licensed institution from carrying o¬n Islamic banking business or Islamic financial business, in addition to its' existing licensed business, provided that the licensed institution shall consult the Bank before it carries o¬n Islamic banking business or any Islamic financial business.<br /><br />(2) For the avoidance of doubt, it is declared that a licensed institution shall, in respect of the Islamic banking business or Islamic financial business carried o¬n by it, be subject to the provisions of this Act.<br /><br />(3) Any licensed institution carrying o¬n Islamic banking business or Islamic financial business, in addition to its existing licensed business may, from time to time seek the advice of the Syariah Advisory Council established under,subsection (7), o¬n the operations of its business in order to ensure that it does not involve any element which is not approved by the Religion of Islam.<br /><br />(4) Any licensed institution carrying o¬n Islamic banking business or Islamic financial business shall comply with any written directions relating to the Islamic banking business or any other Islamic financial business, carried o¬n by such licenced institution, issued from time to time by the Bank, in consultation with the Syariah Advisory Council.<br /><br />(5) Any licensed institution carrying o¬n Islamic banking business or Islamic financial business shall be deemed to be not an Islamic bank.<br /><br />(6) This Act shall not apply to an Islamic bank.<br /><br />(7) For the purposes of this section -<br /><br />(a) There shall be established a Syariah Advisory Council which shall consist of such members, and shall have such functions, powers and duties as may be specified by the Bank to advise the Bank o¬n the Syariah relating to Islamic banking business or Islamic financial business;<br />(b) "Islamic banking business" has the meaning assigned thereto under the Islamic Banking Act 1983 1; and<br />(c) "Islamic financial business" means any financial business, the aims and operations of which, do not involve any element which is not approved by the Religion of Islam."<br />So it is clear that both categories of banks, Islamic and conventional, can do Islamic banking business. And in a broad sense they are both subject to the same law (with some variations) in so far as their Islamic banking business is concerned.<br /><br /><span style="font-weight: bold;">WHICH COURT HAS JURISDCTION OVER ISLAMIC BANKING LAW MATTERS - THE CIVIL COURTS OR THE SYARIAH COURTS? </span><br /><br />This question arises because of certain amendments made to the Constitution of Malaysia with regard to the jurisdiction of the High Court. The provision of the Constitution referred to is Article 121. Prior to the amendment it read as follows:<br /><br />"121. (1) Subject to Clause (2) the judicial power of the Federation shall be vested in two High Courts of co-ordinate jurisdiction and status, namely<br /><br />(a) o¬ne in the States of Malaya, which shall be known as the High Court in Malaya and shall have its principal registry in Kuala Lumpur; and<br />(b) o¬ne in the States of Sabah and Sarawak, which shall be known as the High Court in Borneo and shall have its principal registry at such place in the States of Sabah and Sarawak as the Yang di-Pertuan Agong may determine;<br />and in such inferior courts as may be provided by federal law.<br /><br />(2) The following jurisdiction shall be vested in a court which shall be known as the Supreme Court and shall have its principal registry in Kuala Lumpur, that is to say<br />(a) Exclusive jurisdiction to determine appeals from decisions of a High Court or a judge thereof (except decisions of a High Court given by a registrar or other officer of the court and appealable under federal law to a judge of the Court);<br /><br />(b) Such original or consultative jurisdiction as is specified in Articles 128 and 130; and<br /><br />(c) Such other jurisdiction as may be conferred by or under federal law."<br />Clauses (3) and (4) are not relevant to the present discussion.<br />The amended Article reads as follows:<br />"121. (1) There shall be two High Courts of co-ordinate jurisdiction and status namely -<br />(a) o¬ne in the states of Malaya, which shall be known as the High Court in Malaya and shall have its principal registry in Kuala Lumpur;<br /><br />(b) o¬ne in the States of Sabah and Sarawak which shall be known as the High Court in Borneo and shall have its principal registry at such place in the States of Sabah and Sarawak as the Yang diPertuan Agung may determine;<br /><br />and such inferior courts as may be provided for by federal law; and the High Courts and inferior courts shall have such jurisdiction and powers as may be conferred by or under federal law.<br />(1A) The courts referred to in clause (1) shall have no jurisdiction in respect of any matter within the jurisdiction of the Syariah Courts.<br /><br />(2) There shall be a court which shall be known as the Supreme Court and shall have its principal registry in Kuala Lumpur and the Supreme Court shall have the following jurisdiction, that is to say -<br /><br />(a) Exclusive jurisdiction to determine appeals from decisions of a High Court or a judge thereof (except decisions of a High Court given by a registrar or other officer of the court and appealable to a judge of the court);<br /><br />(b) Such original or consultative jurisdiction as is specified in articles 128 and 130; and<br />(c)Such other jurisdiction as may be conferred by or under federal law."<br /><br />Relying o¬n this amendment (particularly Clause (1A)) it has been argued that the Civil Courts no longer have jurisdiction to hear cases where Islamic law is applicable, such jurisdiction now being vested in the Syariah Courts. Previously the Syariah Courts and the Civil Courts exercised concurrent jurisdiction o¬n certain matters involving Islamic law.2 With the inclusion of Clause (1A) in Article 121 it was thought that the jurisdiction of the Civil Courts o¬n matters involving Islamic law had been taken away.<br /><br />In at least o¬ne case involving a banking transaction based o¬n Islamic principles in which the writer was Counsel the High Court has ruled that Clause (1A) has not take away its jurisdiction and that it did have jurisdiction to hear the case.3 It is the writer's view, with respect, that this decision is correct for reasons which need not be discussed in detail here.<br /><br />In brief, Syariah Courts o¬nly have jurisdiction in respect of matters that fall within the State List in the Federal Constitution.4 The Civil Courts have jurisdiction in respect of matters which fall within the Federal List. The Ninth Schedule of the Federal Constitution contains the Federal List and the State List which set out the respective areas where the Federal Parliament or the State Legislature may make laws. Banking as well as the incorporation and regulation of corporations fall within the Federal List. Banks are companies incorporated under the Companies Act, 1965. Accordingly they fall within the jurisdiction of the Civil Courts.<br />Besides, the State List, which provides for the establishment of Syariah Courts, states that they (the Syariah Courts) "shall have The legal aspects of marketing jurisdiction o¬nly over persons professing the religion of Islam..."5 Banks being a creature of statute can have no religion.<br />For these reasons it is clear that the Syariah Courts cannot assume jurisdiction over banks and other companies or in respect of any other matter that falls within the Federal List.<br />There is no written judgment o¬n this issue and it is hoped that should the matter be ever raised again there would be an authoritative pronouncement from the Courts o¬n the subject.<br /><br /><span style="font-weight: bold;">WHAT LAW APPLIES TO ISLAMIC BANKING TRANSACTIONS </span><br /><br />The Islamic Banking Act is an unique piece of legislation. It provides for the setting up and licensing of "Islamic banks". It is unique in the sense that probably for the first time an Act of Parliament has been enacted to deal specifically with Islamic banking. The writer is not aware of similar legislation in any other jurisdiction following the common law system.<br />Up to the present o¬nly o¬ne bank, Bank Islam, has been licensed under the Islamic Banking Act.<br />The Islamic Banking Act stipulates that a bank licensed under it Act shall carry o¬n "Islamic banking business".<br /><br />Section 2 defines "Islamic Bank" as "any company which carries o¬n Islamic banking business and holds a valid licence..." and "Islamic banking business" as "banking business whose aims and operations do not involve any element which is not approved by the Religion of Islam". It is to be noted that "banking business" itself is not defined.<br /><br />The definition of Islamic banking business appears at first flush to be simple; but in reality it is not so. What is the meaning, for example, of the expression "any element which is not approved by the Religion of Islam"? There are four madzhabs in the sunni branch of Islam (as opposed to the Shi'a branch). And opinions even among the four schools do vary o¬n many aspects of the law and no o¬ne can say that o¬ne opinion is correct and the others are not. It is more a question of choice. In the event of differences in opinion o¬n the law applicable in respect of any particular matter, there is no direction in the Act as to the law of which madhab is to be applied. Seen from this point of view the wording may seem to be too general. It might be thought that greater certainty would have been achieved if the definition had been more precise, such as providing that in the event of a difference the law to be applied is the law in accordance with, say, the Shafi'e madzhab.<br /><br />On the other hand, however, the broad definition does have some positive aspects. The writer considers the definition to be a liberal o¬ne. That would facilitate, for instance, the reception and application of the law from any of the four schools or even from the Shi'a branch to suit the circumstances, thus making the resulting proposition of the law more widely acceptable.<br />The Islamic Banking Act by not defining banking business has either left it to be: implied by the Courts that the meaning of the term is to be the same as that applied in conventional banking or intended that term to acquire a meaning by custom and usage over the years. The civil courts would have to rule o¬n that issue when the occasion arises; but for now it is an open question.<br /><br /><span style="font-weight: bold;">THE APPLICATION OF ISLAMIC LAW WITHIN A COMMON LAW SYSTEM </span><br /><br />It must be remembered that the Islamic Banking Act and Islamic law generally are to be applied and implemented within the existing common law system and the regime of all other existing laws. This includes not o¬nly the laws but also the courts system and court procedure. Needless to say, that system and those laws and procedure were not drafted or designed with Islamic law in mind or to facilitate the application of Islamic law.<br /><br />A moment's reflection will bring into focus the enormity of the problem. To a legal practitioner this is a legal nightmare. What this means is that any document that is to be used1 in an Islamic banking transaction has to comply with BOTH (1) Islamic law (or in the words of the Act it must "not involve any element which is not approved by the Religion of Islam") AND (2) also with all other applicable laws, eg Contracts Act, 1950, Bills of Exchange Act,1949,just to name two. To take a simple illustration: a contract made in a banking transaction by an Islamic bank or as an Islamic transaction must be valid under Islamic law AND also under the civil law, for it to be enforceable in the civil courts. For example, a contract may be valid under Islamic law yet it could fail in the civil courts for want of consideration and thus be unenforceable. The reverse situation can quite as well happen.<br /><br />Thus any document or instrument to be used in Islamic banking has to:<br />(1) Be in accord with Islamic law;<br />(2) Be in accord with the existing civil laws; and<br />(3) Be structured in such a way (eg, as to form) as to be enforceable in the civil courts.<br />This problem was realised at the outset when banking documents were first drafted for use by Bank Islam and a great deal of caution was exercised to ensure their compliance with the above-stated requirements.6 Over the years these documents have been modified and improved upon.<br />The validity of some of these documents were challenged in the courts but, happily, none of those challenges have been successful.7<br /><br />One provision of particular significance is Section 3(5)(b) of the Islamic Banking Act which provides that the Central Bank (ie Bank Negara Malaysia) shall not recommend the grant of a licence, and the Minister shall not grant a licence, unless he is satisfied:<br /><br />(b) that there is, in the articles of association of the bank concerned, provision for the establishment of a Syar'iah advisory body to advise the bank o¬n the operations of its banking business in order to ensure that they do not involve any element which is not approved by the Religion of Islam".<br /><br />This is an important provision. However, its real purport has not been tested in the courts as yet.8 The setting up of a Syar'iah advisory body is a statutory requirement and its f-unction is "to ensure that [the operations of the bank] do not involve any element which is not approved by the Religion of Islam". What is the ambit of this subsection? To take an example, if a particular document used in banking transactions by a bank licensed under the Islamic Banking Act has been approved by its Syar'iah advisory body, can it then be challenged in court as being contrary to Syar' iah? Can the court find such a document to be not in accordance with the Syar'iah? If it does so, what is the effect of it o¬n the decision of the Syar'iah advisory body?<br /><br />Put another way, are decisisons of the Syar'iah advisory body open to review by the courts? This is by no means an easy question to answer. And it is not easy either to venture an opinion o¬n the issue since any opinion has to be relative to particular factual situations. In the writer's view the issue should be cleared up by legislation rather than by lengthy and costly litigation in the courts.<br /><br />The establishment of the Syariah Advisory Council under BAFIA raises another problem. It is this: it will be recalled that o¬ne of the requirements of an Islamic Bank is to have an in-house Syariah advisory body "to advise the bank o¬n the operations of its banking business". What would be the position if the advice of these two bodies (both of which are established under statute) o¬n the same issue differ?<br /><br />Such conflict of opinion is not unforeseeable. And it should be avoided before it arises. There must be some machinery set up to ensure that both advisory bodies consult each other and agree o¬n the advice to be rendered o¬n any issue of Islamic law. It would be even better if the twc bodies are merged into o¬ne so that there would be no opportunity for such conflicting advice to be rendered at all.<br /><br />It must be recognised, however, that the documents now in general use by Bank Islam (and adopted and used by other' banks and financial institutions) cannot meet all the banking or commercial requirements. As the application and use of Islamic law in commercial transactions become more pervasive the necessity for new types of documents will be felt (as they have been) and these must be devised (as has beer, done). Great ingenuity and far-sightedness will be needed in the creation of such documents. But the task is enormous and urgent and should not be done piecemeal. It must be adressed and necessary action taken o¬n a collective or central basis rather than by individual banks or financial institutions as seems to be the practice now.<br /><br /><span style="font-weight: bold;">CONCLUSION</span><br /><br />In Malaysia Islamic banking is o¬n par with conventional banking:<br /><br />1. Islamic banking is regulated by the Islamic Banking Act (under which Islamic law is to be applied to banking transactions) but all other laws applicable to banking matters generally also apply to Islamic banking. Thus a customer who does Islamic banking enjoys double protection; and<br />2. Any legal disputes involving Islamic banking matters are brought before the civil courts.<br />Thus the writer sees no major legal impediment for the growth of Islamic banking in Malaysia, though certain amendments to existing laws need to be made to make them more suited to Islamic law principles. The real challenge facing Islamic bankers is to bring home the message to Muslims and, more importantly, to non-Muslims:<br />1.That Islamic banking is open and available to everyone, Muslim and non-Muslim,<br />2. That it is relevant to present times and can meet the demands of modern-day business; and<br />3. That it is a true and in many respects a better alternative to conventional banking.<br /><br /></div><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com4tag:blogger.com,1999:blog-36321277.post-26730949644999695572009-07-01T21:58:00.005-01:002009-07-01T22:04:57.855-01:00<p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><u><span lang="EN-US" style="font-size:16;color:#000000;"><span style="font-size:180%;">Islamic Finance to Reduce Fiscal Deficit in India</span> </span></u></b></p><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span lang="EN-US"><span style="font-size:100%;color:#000000;">Syed Zahid Ahmad</span></span></p><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="font-size:100%;"><span style="color:#000000;"><span lang="EN-US">(aicmeu</span><span lang="EN-US" style="font-family:Arial;">@</span><span lang="EN-US"><a href="http://yahoo.com/">yahoo.com</a>) </span></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="font-size:100%;"><span style="color:#000000;"><span lang="EN-US"><br />At a time when economic recovery needs more stimuli by the Government of India (GoI), there is also an urgent need to safeguard the economy from the debt trap because the GDP growth rate fell to 6.7% in 2008-09 against 9% in 2007-08; the </span><span style="mso-bidi-: HI;font-family:Minion-Regular;" lang="EN-US" >debt servicing reached to 58.83% of the total expenditure for the year 2008-09</span><span lang="EN-US">. It means maximum receipts are now spent for debt servicing which</span><span style="mso-bidi-: HI;font-family:Minion-Regular;" lang="EN-US" > accounted to 15.87% of the Gross Domestic Product (GDP), while the debt receipts were 9.78% of the GDP in 2008-09. Even t</span><span lang="EN-US">he</span><span style="mso-bidi-: HI;font-family:Minion-Regular;" lang="EN-US" > interest payments were 21.39% of the total expenditures by GoI and 5.77% of the GDP in 2008-09. Notably the revenue deficit in 2008-09 is already 30% due to high debt serving ratio to total revenue expenditure. </span></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-: HI;font-family:Minion-Regular;" lang="EN-US" ><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="font-size:100%;"><span style="color:#000000;"><span style="mso-bidi-: HI;font-family:Minion-Regular;" lang="EN-US" >In an attempt to find the actual reasons behind high fiscal deficit, it is observed that the increased debt receipts by GoI to finance revenue expenditures (especially high debt servicing); increased subsidies on food, fuel and fertilizer; and rural development through schemes like NREGS, farmer's loan waiving scheme and </span><span lang="EN-US" style="font-family:Arial;">Sarva Shiksha Abhiyan</span><span style="mso-bidi-: HI;font-family:Minion-Regular;" lang="EN-US" > are the three most important factor of high fiscal deficit. Since there is need of more stimuli to counter recession in the economy, it is expected that the plan expenditures may further increase whereas due to recession, the revenue receipts may decline. This decrease in revenue receipts and increase in plan expenditure may increase the fiscal deficit to an unwanted level high. Working upon different options to reduce the fiscal deficit, it is found that Islamic finance can reduce the fiscal deficit even though if revenue receipts declines and plan expenditures increases. </span></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-: HI;font-family:Minion-Regular;" lang="EN-US" ><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-: HI;font-family:Minion-Regular;" lang="EN-US" ><span style="font-size:100%;color:#000000;">Islamic financial products has a great role to play in reducing the fiscal deficit in emerging economies by replacing the debt based investments for infrastructure with funds mobilized through equity based Government Securities for infrastructure projects. Let's see how Islamic finance may help us reduce our present fiscal deficit. </span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span lang="EN-US"><span style="font-size:100%;color:#000000;">Revised Estimates as presented in Interim Budget for 2009-10</span></span></b></p><div align="center"><table style="BORDER-BOTTOM: medium none; BORDER-LEFT: medium none; MARGIN: auto auto auto 4.75pt; WIDTH: 421.55pt; BORDER-COLLAPSE: collapse; BACKGROUND: #99ccff; BORDER-TOP: medium none; BORDER-RIGHT: medium none; mso-border-alt: solid white .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-border-insideh: .5pt solid white; mso-border-insidev: .5pt solid white" class="MsoNormalTable" border="1" cellspacing="0" cellpadding="0" width="562"><tbody><tr style="HEIGHT: 26.25pt; mso-yfti-irow: 0; mso-yfti-firstrow: yes"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; HEIGHT: 26.25pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" valign="top" width="449" ><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >Income Expenditure Estimates for Union Budget</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; HEIGHT: 26.25pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" valign="top" width="113" ><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >2008-09 R. E.</span></b></p><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >(in Rs. Crores)</span></b></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 1"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">1.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Gross Tax Revenue</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >627,949</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 2"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">2.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Net Tax Revenue</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >465,970</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 3"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">3.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Total Non-Tax Revenue</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >96,203</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 4"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><b><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">4.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span></b><b><span style="mso-bidi-language: HI" lang="EN-US">Total Revenue Receipts</span></b></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >562,173</span></b></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 5"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">5.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Non-debt Receipts</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >12,265</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 6"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><b><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">6.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span></b><b><span style="mso-bidi-language: HI" lang="EN-US">Debt Receipts to finance Fiscal Deficit</span></b></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >326,515</span></b></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 7"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="color:#000000;"><span style="mso-spacerun: yes"></span>Market Loans</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US"><span style="color:#000000;"><span style="mso-spacerun: yes"></span>261,972 </span></span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 8"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" valign="top" width="449" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="color:#000000;"><span style="mso-spacerun: yes"></span>Market loan as % of total debt receipt</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="113" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >80.23%</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 9"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" valign="bottom" width="449" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="color:#000000;"><span style="mso-spacerun: yes"></span>Debt receipts as % of total receipts</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="113" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >36.24%</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 10"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" valign="bottom" width="449" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="color:#000000;"><span style="mso-spacerun: yes"></span>Debt receipts as % of total capital receipts</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="113" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >96.38%</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 11"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">7.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Total Capital Receipts</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >338,780</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 12"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><b><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">8.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span></b><b><span style="mso-bidi-language: HI" lang="EN-US">Total Receipts</span></b></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >900,953</span></b></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 13"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">9.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Total Revenue Non-Plan Expenditure</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >561,790</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 14"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">10.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Total Capital Non-Plan Expenditure</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >56,206</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 15"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">11.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Total Non-Plan Expenditure</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >617,996</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 16"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">12.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Total-Revenue Plan Expenditure</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >241,656</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 17"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">13.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Total Capital Plan Expenditure</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >41,301</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 18"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">14.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Total – Plan Expenditure</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >282,957</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 19"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b style="mso-bidi-font-weight: normal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="color:#000000;"><span style="mso-spacerun: yes"></span>Total Revenue Expenditures</span></span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b style="mso-bidi-font-weight: normal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >803,446</span></b></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 20"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b style="mso-bidi-font-weight: normal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="color:#000000;"><span style="mso-spacerun: yes"></span>Total Capital Expenditures</span></span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b style="mso-bidi-font-weight: normal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >97,507</span></b></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 21"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">15.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Total Budget Support for Central Plan</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >204,128</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 22"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">16.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Total Central Assistance for State & UT Plans</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >78,829</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 23"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><b><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">17.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span></b><b><span style="mso-bidi-language: HI" lang="EN-US">Total Expenditure*</span></b></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >900,953</span></b></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 24"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" valign="top" width="449" ><p style="MARGIN: 0cm 0cm 0pt 36pt" class="MsoNormal"><b><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >DEBT SERVICING</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="113" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" ></span></b></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 25"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">18.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Repayment of debt**</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >337,316</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 26"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">19.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Total Interest Payments</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >192,694</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 27"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">20.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Total debt servicing (18+19)</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >530,010</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 28"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">21.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Interest Payments as Percentage to Revenue Receipts</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >34.30%</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 29"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">22.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Total Debt servicing as Percentage to Revenue Receipts</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >94.28%</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 30"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">23.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Non Debt receipt as % of total receipts</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >1.36%</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 31"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">24.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Debt receipts as % of total receipts</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >36.24%</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 32"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" valign="bottom" width="449" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="color:#000000;"><span style="mso-spacerun: yes"></span>Interest payment on debts as % of total Expenditure</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="113" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >21.39%</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 33"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" valign="bottom" width="449" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="color:#000000;"><span style="mso-spacerun: yes"></span>Debt Servicing as % of total Expenditure</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="113" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >58.83%</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 34"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">25.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Interest Payments as Percentage to Total Receipts</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >21.39%</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 35"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">26.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Repayment of Debts as Percentage to Total Receipts</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >37.44%</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 36"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">27.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Repayment of Debt as % to GDP</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >10.10%</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 37"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">28.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Interest payment as % to GDP</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >5.77%</span></p></td></tr><tr style="HEIGHT: 13.5pt; mso-yfti-irow: 38; mso-yfti-lastrow: yes"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 337pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="449"><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l2 level1 lfo1" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;" lang="EN-US" ><span style="mso-list: Ignore">29.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-language: HI" lang="EN-US">Total Debt Servicing as % to GDP </span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 84.55pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #ddeeff; HEIGHT: 13.5pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="113"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >15.87%</span></p></td></tr></tbody></table></div><p style="TEXT-ALIGN: justify; TEXT-INDENT: -12.15pt; MARGIN: 0cm 0cm 0pt 10.8pt" class="MsoNormal"><span style="mso-bidi-language: HI;font-size:8;color:#000000;" lang="EN-US" >* Excludes expenditure matched by receipts (Details in Annex-2 to Expenditure Budget, Volume-1, 2009-2010)</span></p><p style="TEXT-ALIGN: justify; TEXT-INDENT: -12.15pt; MARGIN: 0cm 0cm 0pt 10.8pt" class="MsoNormal"><span style="mso-bidi-language: HI;font-size:8;color:#000000;" lang="EN-US" >** Excludes discharge of 91 days, 182 days & 14 days intermediate Treasury bills, discharge of Ways & Means Advances including overdraft, income and expenditure of National Small Savings Fund (NSSF), investments of NSSF, Reserve Funds and Deposits not bearing interest and suspense transactions. Discharge under MSS met from the sequestered cash balances is not included.</span></p><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="color:#000000;"><b><span style="mso-bidi-language: HI;font-size:10;" lang="EN-US" >Data source</span></b><span style="mso-bidi-language: HI;font-size:10;" lang="EN-US" >: <a href="http://indiabudget.nic.in/">http://indiabudget.nic.in/</a> </span></span></p><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-: HI;font-family:Minion-Regular;" lang="EN-US" ><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-: HI;font-family:Minion-Regular;" lang="EN-US" ><span style="font-size:100%;color:#000000;">Notably the total revenue expenditure is 142.92% of total revenue receipts reflecting 30.03% revenue deficits. Major cause of this high revenue deficit is high debt service ratio to total revenue expenditures. For a developing economy like India, in the proposed plan we project increasing capital expenditures, but in revised estimates of 2008-09 budget, the revenue expenditure is 89% and capital expenditure is just 11% of total expenditure; all due to high debt servicing ratio (66%) to total revenue expenditure. Notably the interest payment alone is 24% of total revenue expenditures. So, with capital expenditure being as low as just 11% of total expenditure and debt serving being as high as 59% of total expenditure, how can we go planning for foster inclusive growth? </span></span></p><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-: HI;font-family:Minion-Regular;" lang="EN-US" ><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><u><span style="mso-bidi-: HI;font-family:Minion-Regular;" lang="EN-US" ><span style="font-size:100%;color:#000000;">Debt Finances crossed the Planned Estimates:</span></span></u></b></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="font-size:100%;"><span style="color:#000000;"><span style="mso-bidi-: HI;font-family:Minion-Regular;" lang="EN-US" >The debt based finances for investments under 11<sup>th</sup> five year plan document was proposed to be 48.42% of total receipts for 2008-09, whereas the revised budget estimates reveals that the debt receipts were </span><span style="mso-bidi-language: HI;font-family:'Verdana','sans-serif';" lang="EN-US" >96.38% </span><span style="mso-bidi-: HI;font-family:Minion-Regular;" lang="EN-US" >of total capital receipts in 2008-09. This reflects our inability to mobilize targeted amount of non debt receipts, causing high fiscal deficit due to interest payments over borrowed debt receipts.</span></span></span></p><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-: HI;font-family:GillSans-Bold;" lang="EN-US" ><span style="font-size:100%;color:#000000;">Source-wise Projected Investment for 11<sup>th</sup> Plan</span></span></b></p><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;color:#000000;" lang="EN-US" >(Rs crore at 2006–07 prices)</span></p><div align="center"><table style="BORDER-BOTTOM: medium none; BORDER-LEFT: medium none; MARGIN: auto auto auto 5.4pt; WIDTH: 462.05pt; BORDER-COLLAPSE: collapse; BACKGROUND: #99ccff; BORDER-TOP: medium none; BORDER-RIGHT: medium none; mso-border-alt: solid white .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-border-insideh: .5pt solid white; mso-border-insidev: .5pt solid white" class="MsoNormalTable" border="1" cellspacing="0" cellpadding="0" width="616"><tbody><tr style="HEIGHT: 25.35pt; mso-yfti-irow: 0; mso-yfti-firstrow: yes"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 107.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #75baff; HEIGHT: 25.35pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt" width="144"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >Sources</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #75baff; HEIGHT: 25.35pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;color:#000000;" lang="EN-US" >2007–08</span></b><b><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.9pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #75baff; HEIGHT: 25.35pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >2008–09</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #75baff; HEIGHT: 25.35pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >2009–10</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #75baff; HEIGHT: 25.35pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >2010–11</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #75baff; HEIGHT: 25.35pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >2011–12</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 61.35pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #75baff; HEIGHT: 25.35pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt" width="82"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >Total 11<sup>th</sup> </span></b></p><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;color:#000000;" lang="EN-US" >Plan</span></b><b><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></b></p></td></tr><tr style="HEIGHT: 14.15pt; mso-yfti-irow: 1"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 107.8pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="144" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><span style="mso-bidi-: HI;font-family:Minion-Semibold;font-size:11;color:#000000;" lang="EN-US" >1. Centre</span></b><b><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="80" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >112,608</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 53.9pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >128,305</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="80" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >148,545</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="80" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >172,123</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="80" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >204,041</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 61.35pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="82" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >765,622</span></b></p></td></tr><tr style="HEIGHT: 14.15pt; mso-yfti-irow: 2"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 107.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="144"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;color:#000000;" lang="EN-US" >Central Budget</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >29,416</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.9pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >33,517</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >38,804</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >44,963</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >53,301</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 61.35pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="82"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >200,000</span></p></td></tr><tr style="HEIGHT: 14.15pt; mso-yfti-irow: 3"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 107.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="144"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;color:#000000;" lang="EN-US" >Internal Generation (IEBR)</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >24,958</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.9pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >28,437</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >32,922</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >38,148</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >45,222</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 61.35pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="82"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >169,687</span></p></td></tr><tr style="HEIGHT: 14.15pt; mso-yfti-irow: 4"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 107.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="144"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;color:#000000;" lang="EN-US" >Borrowings (IEBR)</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >58,234</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.9pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >66,352</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >76,819</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >89,012</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >105,518</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 61.35pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="82"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >395,936</span></p></td></tr><tr style="HEIGHT: 14.15pt; mso-yfti-irow: 5"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 107.8pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="144" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><span style="mso-bidi-: HI;font-family:Minion-Semibold;font-size:11;color:#000000;" lang="EN-US" >2. States</span></b><b><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="80" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >79,499</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 53.9pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >99,022</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="80" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >124,998</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="80" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >160,232</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="80" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >207,186</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 61.35pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="82" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >670,937</span></b></p></td></tr><tr style="HEIGHT: 14.15pt; mso-yfti-irow: 6"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 107.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="144"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;color:#000000;" lang="EN-US" >States Budgets</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >52,689</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.9pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >65,628</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >82,844</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >106,195</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >137,315</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 61.35pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="82"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >444,671</span></p></td></tr><tr style="HEIGHT: 14.15pt; mso-yfti-irow: 7"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 107.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="144"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;color:#000000;" lang="EN-US" >Internal Generation (IEBR)</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >8,043</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.9pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >10,018</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >12,646</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >16,211</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >20,961</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 61.35pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="82"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >67,880</span></p></td></tr><tr style="HEIGHT: 14.15pt; mso-yfti-irow: 8"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 107.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="144"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;color:#000000;" lang="EN-US" >Borrowings (IEBR)</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >18,767</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.9pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >23,376</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >29,508</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >37,826</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >48,910</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 61.35pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="82"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >158,386</span></p></td></tr><tr style="HEIGHT: 14.15pt; mso-yfti-irow: 9"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 107.8pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="144" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><span style="mso-bidi-: HI;font-family:Minion-Semibold;font-size:11;color:#000000;" lang="EN-US" >3. Private</span></b><b><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="80" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >78,166</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 53.9pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >94,252</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="80" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >115,724</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="80" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >146,762</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="80" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >184,687</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 61.35pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="82" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >619,591</span></b></p></td></tr><tr style="HEIGHT: 14.15pt; mso-yfti-irow: 10"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 107.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="144"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;color:#000000;" lang="EN-US" >Internal Accruals/Equity</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >23,450</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.9pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >28,726</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >34,717</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >44,029</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >55,406</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 61.35pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="82"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >185,877</span></p></td></tr><tr style="HEIGHT: 14.15pt; mso-yfti-irow: 11"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 107.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="144"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;color:#000000;" lang="EN-US" >Borrowings</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >54,716</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.9pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >65,976</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >81,006</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >102,733</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >129,281</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 61.35pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="82"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >433,713</span></p></td></tr><tr style="HEIGHT: 14.15pt; mso-yfti-irow: 12"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 107.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="144"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >Borrowings as % to private</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >70.00%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.9pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >70.00%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >70.00%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >70.00%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >70.00%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 61.35pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="82"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >70.00%</span></p></td></tr><tr style="HEIGHT: 14.15pt; mso-yfti-irow: 13"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 107.8pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="144" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><span style="mso-bidi-: HI;font-family:Minion-Semibold;font-size:11;color:#000000;" lang="EN-US" >4. Total Projected Investment</span></b><b><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="80" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >270,273</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 53.9pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >321,579</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="80" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >389,266</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="80" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >479,117</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="80" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >595,913</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 61.35pt; PADDING-RIGHT: 5.4pt; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="82" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >2,056,150</span></b></p></td></tr><tr style="HEIGHT: 14.15pt; mso-yfti-irow: 14"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 107.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="144"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;color:#000000;" lang="EN-US" >Non-Debt</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >138,555</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.9pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >165,875</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >201,933</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >249,546</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >312,205</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 61.35pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="82"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >1,068,114</span></p></td></tr><tr style="HEIGHT: 14.15pt; mso-yfti-irow: 15"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 107.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="144"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;color:#000000;" lang="EN-US" >Debt</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >131,718</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.9pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >155,704</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >188,333</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >229,571</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >283,709</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 61.35pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="82"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >988,035</span></p></td></tr><tr style="HEIGHT: 14.15pt; mso-yfti-irow: 16"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 107.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="144"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >Non Debt as % of Total</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >51.26%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.9pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >51.58%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >51.88%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >52.08%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >52.39%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 61.35pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="82"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >51.95%</span></p></td></tr><tr style="HEIGHT: 14.15pt; mso-yfti-irow: 17; mso-yfti-lastrow: yes"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 107.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="144"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >Debt as % of Total</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >48.74%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.9pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >48.42%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >48.38%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >47.92%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="80"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >47.61%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 61.35pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.15pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="82"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >48.05%</span></p></td></tr></tbody></table></div><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="color:#000000;"><b style="mso-bidi-font-weight: normal"><i><span style="mso-bidi-: HI;font-family:Minion-Italic;font-size:10;" lang="EN-US" >Data Source</span></i></b><i><span style="mso-bidi-: HI;font-family:Minion-Italic;font-size:10;" lang="EN-US" >: </span></i><span lang="EN-US" style="font-size:10;"><a href="http://planningcommission.nic.in/">http://planningcommission.nic.in/</a></span><span style="FONT-FAMILY: Minion-Regular; mso-bidi-: HIfont-family:Minion-Regular;font-size:9;" lang="EN-US" ></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;">According to 11<sup>th</sup> plan documents, projected investments in 2008-09 should be of Rs. 321,579 crores while total plan capital expenditure in revised budget observed as just Rs. 41,301 crores. So the plan capital expenditure is just 12.84% of targeted investment in 2008-09. This shows our inefficiency to make budget development pro to ensure foster and inclusive growth. So, it is better that GoI reduce debt borrowings which ultimately increases revenue deficits; and shift the focus on infrastructure investments to stimulate the economy at a time when GDP growth rates and employment growth rates are falling. </span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><u><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;">Actual Debt Receipts is 210% to the planned Estimates:</span></span></u></b></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="font-size:100%;"><span style="color:#000000;"><span style="mso-bidi-language: HI" lang="EN-US">Since the revised estimates on debt receipts (Rs. 326,515 Crores) is already 210% of estimated requirements of debts (Rs. 1,55,704 Crores) by year 2008-09 as projected in 11<sup>th</sup> five year plan documents, the GoI should seriously think about this increased debt receipts. The funds </span><span style="mso-bidi-: HI;font-family:Minion-Regular;" lang="EN-US" >utilized for debt servicing (Rs. </span><span style="mso-bidi-language: HI" lang="EN-US">530,010 Crores) </span><span style="mso-bidi-: HI;font-family:Minion-Regular;" lang="EN-US" >is already 162% of </span><span style="mso-bidi-language: HI" lang="EN-US">debt receipts to finance fiscal deficit (Rs. 3.26.515 Crores), the GoI should revisit its budgeting. How good is it to increase the debt receipts at a time when Indian industries are looking for more affordable credits from banks to meet the challenges after the global meltdown? </span></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-: HI;font-family:Minion-Regular;" lang="EN-US" ><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-: HI;font-family:GillSans-Bold;" lang="EN-US" ><span style="font-size:100%;color:#000000;">Likely Sources of Debt as projected by the Planning Commission</span></span></b></p><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;color:#000000;" lang="EN-US" >(Rs crore at 2006–07 prices)</span></p><div align="center"><table style="BORDER-BOTTOM: medium none; BORDER-LEFT: medium none; MARGIN: auto auto auto 15.15pt; WIDTH: 467.45pt; BORDER-COLLAPSE: collapse; BACKGROUND: #cde6ff; BORDER-TOP: medium none; BORDER-RIGHT: medium none; mso-border-alt: solid white .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-border-insideh: .5pt solid white; mso-border-insidev: .5pt solid white" class="MsoNormalTable" border="1" cellspacing="0" cellpadding="0" width="623"><tbody><tr style="HEIGHT: 35.95pt; mso-yfti-irow: 0; mso-yfti-firstrow: yes"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 149.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 35.95pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt" width="200"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >Likely Sources of Debts</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 35.95pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >2007–08</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 35.95pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >2008–09</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 35.95pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >2009–10</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 49.2pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 35.95pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt" width="66"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >2010–11</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 35.95pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >2011–12</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 51.5pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 35.95pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt" width="69"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >Total Eleventh</span></b></p><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >Plan</span></b></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 1"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 149.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="200" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >1 Domestic Bank Credit</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >49,848</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >63,207</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >80,147</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 49.2pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="66" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >101,626</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >128,862</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 51.5pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="69" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >423,691</span></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 2"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 149.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="200"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;font-size:10;" lang="EN-US" ><span style="color:#000000;"><span style="mso-spacerun: yes"></span>As % of likely total debt resources</span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="bottom" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-family:Minion-Regular;font-size:9;color:#000000;" lang="EN-US" >48.69%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="bottom" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-family:Minion-Regular;font-size:9;color:#000000;" lang="EN-US" >49.99%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="bottom" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-family:Minion-Regular;font-size:9;color:#000000;" lang="EN-US" >51.09%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 49.2pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="bottom" width="66"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-family:Minion-Regular;font-size:9;color:#000000;" lang="EN-US" >52.00%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="bottom" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-family:Minion-Regular;font-size:9;color:#000000;" lang="EN-US" >52.72%</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 51.5pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="bottom" width="69"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-family:Minion-Regular;font-size:9;color:#000000;" lang="EN-US" >51.32%</span></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 3"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 149.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="200" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >2 Non-Bank Finance Companies</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >23,852</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >31,485</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >41,560</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 49.2pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="66" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >54,859</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >72,415</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 51.5pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="69" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >224,171</span></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 4"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 149.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="200" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >3 Pension/Insurance Companies</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >9,077</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >9,984</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >10,983</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 49.2pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="66" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >12,081</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >13,289</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 51.5pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="69" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >55,414</span></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 5"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 149.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="200" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >4 External Commercial Borrowing (ECB)</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >19,593</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >21,768</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >24,184</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 49.2pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="66" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >26,868</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >29,851</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 51.5pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="69" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >122,263</span></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 6"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 149.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="200" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;font-size:10;" lang="EN-US" ><span style="color:#000000;">5 <b>Likely Total Debt Resources</b></span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >102,370</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >126,444</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >156,874</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 49.2pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="66" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >195,435</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >244,416</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 51.5pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="69" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >825,539</span></b></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 7"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 149.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="200" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >6 Estimated Requirement of Debt </span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >131,718</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >155,704</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >187,333</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 49.2pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="66" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >229,571</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >283,709</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 51.5pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="69" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >988,035</span></b></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 8"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 149.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="200" ><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >US$ Billion</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >32.93</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >38.93</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >46.83</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 49.2pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="66" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >57.39</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >70.93</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 51.5pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="69" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >247.01</span></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 9"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 149.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="200" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >7 Gap between Estimated Requirement and Likely Debt Resources (6–5)</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >29,348</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >29,260</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >30,460</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 49.2pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="66" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >34,136</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >39,292</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 51.5pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="69" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >162,496</span></b></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 10; mso-yfti-lastrow: yes"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 149.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="200" ><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >US$ Billion</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >7.34</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >7.31</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >7.61</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 49.2pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="66" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >8.53</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 54.25pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="72" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >9.82</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 51.5pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="69" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >40.62</span></p></td></tr></tbody></table></div><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="color:#000000;"><b><i><span style="mso-bidi-: HI;font-family:Minion-Italic;font-size:10;" lang="EN-US" >Data Source</span></i></b><i><span style="FONT-FAMILY: 'Minion-Italic','serif'; mso-bidi-: HIfont-family:Minion-Italic;font-size:9;" lang="EN-US" >: </span></i><span lang="EN-US" style="font-size:10;"><a href="http://planningcommission.nic.in/">http://planningcommission.nic.in/</a></span><span style="FONT-FAMILY: Minion-Regular; mso-bidi-: HIfont-family:Minion-Regular;font-size:9;" lang="EN-US" ></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;">In year 2008-09 the deficit budget cost an amount of Rs. 192,694 crores to GoI which was paid as interest over the debt receipts borrowed to finance the deficit budget. This may be called as loss to GoI because had there been equity based receipts against debt receipts, GoI would have saved this amount. </span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><u><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;">Financing Fiscal Deficit through subsidized bank loans is not good</span></span></u></b></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="font-size:100%;"><span style="color:#000000;"><span style="mso-bidi-language: HI" lang="EN-US">In the 11<sup>th</sup> five year plan document it was projected that by year 2008-09, to meet the proposed investment needs around 50% debt receipts worth Rs. 63,207 crores would be mobilized as domestic banks credit. However the figures of revised budget estimates for 2008-09 states that market loans (amounting Rs.</span><span lang="EN-US"> 261,972 Crores) </span><span style="mso-bidi-language: HI" lang="EN-US">are over 80% of total debt receipt by the GoI. The increased flow of subsidized bank loans to GoI for financing fiscal deficit is in fact creating problems for economic growth of the economy because it is creating hurdles for banks to increase the supply of cheaper credit to the private sector at a time when they needs it to minimize their output cost and combat recession. <span style="mso-spacerun: yes"></span>It is observed that beside fall in international demands, the availability of equity finance or cheaper credit sources have affected the business confidence. The equity financial sources are drying up after reversal of capital flows from stock markets due to global meltdown. External Commercial Borrowings (ECBs) and Export Credits have also declined.<span style="mso-spacerun: yes"> </span>This all had affected the growth rate for industries. </span></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span lang="EN-US"><span style="font-size:100%;color:#000000;">Industry wise GDP growth trend during recent years</span></span></b></p><table style="BORDER-BOTTOM: medium none; BORDER-LEFT: medium none; MARGIN: auto auto auto 4.9pt; BORDER-COLLAPSE: collapse; BORDER-TOP: medium none; BORDER-RIGHT: medium none; mso-border-alt: solid white .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-border-insideh: .5pt solid white; mso-border-insidev: .5pt solid white; mso-table-layout-alt: fixed" class="MsoNormalTable" border="1" cellspacing="0" cellpadding="0" width="615"><tbody><tr style="HEIGHT: 1cm; mso-yfti-irow: 0; mso-yfti-firstrow: yes"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 1cm; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt" rowspan="2" width="221"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >Industry</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 73.05pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 1cm; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt" rowspan="2" width="97"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >2006-07</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.2pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 1cm; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt" rowspan="2" width="79"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >2007-08</span></b></p><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >(QE)</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 1cm; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt" rowspan="2" width="72"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >2008-09</span></b></p><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >(RE)</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 109.05pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 1cm; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt" width="145" colspan="2"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >Percentage change over previous year</span></b></p></td></tr><tr style="HEIGHT: 15.55pt; mso-yfti-irow: 1"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.85pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >2007-08</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 55.15pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="74"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >2008-09</span></b></p></td></tr><tr style="HEIGHT: 15.55pt; mso-yfti-irow: 2"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="221"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >1. Agriculture, forestry & fishing</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 73.05pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="97"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >531,315</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.2pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="79"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >557,122</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >566,045</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.85pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >4.9</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 55.15pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="74"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >1.6</span></p></td></tr><tr style="HEIGHT: 15.55pt; mso-yfti-irow: 3"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="221"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >2. Mining & quarrying</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 73.05pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="97"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >60,038</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.2pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="79"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >61,999</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >64,244</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.85pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >3.3</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 55.15pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="74"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >3.6</span></p></td></tr><tr style="HEIGHT: 15.55pt; mso-yfti-irow: 4"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="221"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >3. Manufacturing</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 73.05pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="97"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >440,193</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.2pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="79"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >476,303</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >487,739</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.85pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >8.2</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 55.15pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="74"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >2.4</span></p></td></tr><tr style="HEIGHT: 15.55pt; mso-yfti-irow: 5"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="221"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >4. Electricity, gas & water supply</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 73.05pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="97"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >60,544</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.2pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="79"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >63,730</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >65,899</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.85pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >5.3</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 55.15pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="74"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >3.4</span></p></td></tr><tr style="HEIGHT: 15.55pt; mso-yfti-irow: 6"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="221"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >5. Construction</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 73.05pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="97"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >205,543</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.2pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="79"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >226,325</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >242,577</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.85pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >10.1</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 55.15pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="74"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >7.2</span></p></td></tr><tr style="HEIGHT: 15.55pt; mso-yfti-irow: 7"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="221"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >6. Trade, hotels, transport and communication</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 73.05pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="97"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >778,896</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.2pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="79"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >875,398</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >954,589</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.85pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >12.4</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 55.15pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="74"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >9.0</span></p></td></tr><tr style="HEIGHT: 15.55pt; mso-yfti-irow: 8"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="221"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >7. Financing, insurance, real estate & business services</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 73.05pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="97"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >409,472</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.2pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="79"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >457,584</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >493,356</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.85pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >11.7</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 55.15pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 15.55pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="74"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >7.8</span></p></td></tr><tr style="HEIGHT: 14.75pt; mso-yfti-irow: 9"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="221"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >8. Community, social & personal services</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 73.05pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="97"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >385,118</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.2pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="79"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >411,256</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >464,926</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.85pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >6.8</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 55.15pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d5eaff; HEIGHT: 14.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="74"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >13.1</span></p></td></tr><tr style="HEIGHT: 16.3pt; mso-yfti-irow: 10; mso-yfti-lastrow: yes"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 16.3pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="221"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >9. GDP at factor cost</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 73.05pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 16.3pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="97"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >2,871,120</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 59.2pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 16.3pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="79"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >3,129,717</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.8pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 16.3pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >3,339,375</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 53.85pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 16.3pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="72"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >9.0</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 55.15pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 16.3pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="74"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:10;color:#000000;" lang="EN-US" >6.7</span></b></p></td></tr></tbody></table><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US" style="font-size:10;color:#000000;">Source: - CSO press release dated 29<sup>th</sup> May 2009.</span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;color:#000000;">Besides evaluating fall in annual growth rate of Gross Domestic Product (GDP) from 9.0% in 2007-08 to 6.7% in 2008-09, it would also be important to analyze the growth trend for different industries during last year. The Manufacturing industry employing majority of non agricultural workers observed deepest fall where annual growth rate fell to 2.4% in 2008-09 compared to 8.2% in 2007-08. Similarly the annual growth rate of agriculture, forestry and fishing fell to 1.6% in 2008-09 against 4.9% an year ago. </span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;color:#000000;">However the increase in annual growth rate for Community, Social and personal services has remarkably increased to 13.1% in 2008-09 as compared to 6.8% in 2007-08 reflecting the impact of increased expenditures by the Government by financing schemes like NREGS.<span style="mso-spacerun: yes"> </span>But it would be important to notice that such expenses have not only increased the fiscal deficit beyond estimated budget for 2009-10, only 9% Indian workforce engaged in Community, Social, and Personal services expected to be benefited through it. </span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;">Thus the excess flow of subsidized bank credits to GoI for financing deficit budget is ultimately restraining the economic growth. </span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><u><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;">Fearing for even higher fiscal deficit? </span></span></u></b></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;">To reduce the fiscal deficit, it is simple to either cut the expenses or increase the revenues. But under present conditions, it is not possible either to increase the revenue receipts or to cut the expenditures because any increase in taxation will be disastrous at a time when recession has hit the business community and are already demanding for more stimuli to recover. When there is mounting pressure to increase the stimuli, the expenditure is suppose to increase further. Moreover the political promises (to provide subsidized foods and increase flagship programme expenses) by the new Parliamentarians before the election would also increase the plan expenditures. It all increases the possibility of any further increase in the current fiscal deficit. </span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><u><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;">What the Government should do now?</span></span></u></b></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt; BACKGROUND: white" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;">Considering the constraints to increase the revenue receipts and cut the plan expenditures to control fiscal deficit, the GoI needs to innovate new products for public finance. As almost 60% of total expenditures are made for debt servicing, GoI needs to substitute the debt receipts with equity funds. Since SEBI failed to protect the stock markets and NBFCs dealing in MFs and VCs are not in a position to mobilize huge long term investment funds, GoI needs to innovate Sovereign equities to mobilize adequate amount of non debt receipts for consolidation of public finance. </span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt; BACKGROUND: white" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt; BACKGROUND: white" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;">Considering the available options of capital sources in international market, there are chances to get Islamic funds instead of mere equity funds from the Muslim countries. The equity funds are somehow different from Islamic Funds in the manner that when equity funds are mixed with debt funds, it doesn't remain Islamic Funds. </span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt; BACKGROUND: white" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><u><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;">Islamic Bond (Sukuk) for public finance in India:</span></span></u></b></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;color:#000000;">Islamic economist Dr. Shariq Nisar in his paper '<i><span style="mso-bidi-font-weight: bold">Islamic Bonds (Sukuk): Its Introduction and Application</span></i><span style="mso-bidi-font-weight: bold">'</span> writes that the recent innovations in Islamic finance have changed the dynamics of the Islamic finance industry. Specially in the area of bonds and securities the use of Sukuk or Islamic securities have become increasingly popular in the last few years, both as a means of raising government finance through sovereign issues, and as a way of companies obtaining funding through the offer of corporate Sukuk. Beginning modestly in 2000 with total 3 Sukuk worth $336 millions the total number of Sukuk by the end of 2007 has reached to 244 with over US$ 75 billion funds under management. Dr. Shariq summarizes the growth of Sukuk in following table. </span></span></p><div align="center"><table style="BORDER-BOTTOM: medium none; BORDER-LEFT: medium none; WIDTH: 328.95pt; BORDER-COLLAPSE: collapse; BACKGROUND: #99ccff; BORDER-TOP: medium none; BORDER-RIGHT: medium none; mso-border-alt: solid white .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-border-insideh: .5pt solid white; mso-border-insidev: .5pt solid white; mso-yfti-tbllook: 1184" class="MsoNormalTable" border="1" cellspacing="0" cellpadding="0" width="439"><tbody><tr style="HEIGHT: 15.35pt; mso-yfti-irow: 0; mso-yfti-firstrow: yes"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 40.6pt; PADDING-RIGHT: 5.4pt; HEIGHT: 15.35pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" valign="top" width="54" ><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><span lang="EN-US" style="color:#000000;">Year</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 166.6pt; PADDING-RIGHT: 5.4pt; HEIGHT: 15.35pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" valign="top" width="222" ><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span lang="EN-US" style="color:#000000;">Sukuk Size (USD million)</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 121.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 15.35pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" valign="top" width="162" ><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span lang="EN-US" style="font-family:Arial;color:#000000;">Number of Sukuk</span></b></p></td></tr><tr style="HEIGHT: 15.35pt; mso-yfti-irow: 1"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 40.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="54"><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US" style="color:#000000;">1990</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="222"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="color:#000000;">30.00</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 121.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="162"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="font-family:Arial;color:#000000;">1</span></p></td></tr><tr style="HEIGHT: 15.35pt; mso-yfti-irow: 2"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 40.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="54"><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US" style="color:#000000;">2000</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="222"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="font-family:Arial;color:#000000;">336.30</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 121.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="162"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="font-family:Arial;color:#000000;">3</span></p></td></tr><tr style="HEIGHT: 15.35pt; mso-yfti-irow: 3"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 40.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="54"><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US" style="color:#000000;">2001</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="222"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="font-family:Arial;color:#000000;">780.00</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 121.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="162"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="font-family:Arial;color:#000000;">4</span></p></td></tr><tr style="HEIGHT: 15.35pt; mso-yfti-irow: 4"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 40.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="54"><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US" style="color:#000000;">2002</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="222"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="font-family:Arial;color:#000000;">985.83</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 121.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="162"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="font-family:Arial;color:#000000;">9</span></p></td></tr><tr style="HEIGHT: 15.35pt; mso-yfti-irow: 5"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 40.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="54"><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US" style="color:#000000;">2003</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="222"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="font-family:Arial;color:#000000;">5717.06</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 121.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="162"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="font-family:Arial;color:#000000;">36</span></p></td></tr><tr style="HEIGHT: 15.35pt; mso-yfti-irow: 6"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 40.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="54"><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US" style="color:#000000;">2004</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="222"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="font-family:Arial;color:#000000;">7209.53</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 121.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="162"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="font-family:Arial;color:#000000;">67</span></p></td></tr><tr style="HEIGHT: 15.35pt; mso-yfti-irow: 7"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 40.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="54"><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US" style="color:#000000;">2005</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="222"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="font-family:Arial;color:#000000;">12033.76</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 121.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="162"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="font-family:Arial;color:#000000;">89</span></p></td></tr><tr style="HEIGHT: 15.35pt; mso-yfti-irow: 8"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 40.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="54"><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US" style="color:#000000;">2006</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="222"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="font-family:Arial;color:#000000;">48114.82</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 121.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="162"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="font-family:Arial;color:#000000;">225</span></p></td></tr><tr style="HEIGHT: 15.35pt; mso-yfti-irow: 9"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 40.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="54"><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US" style="color:#000000;">2007</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="222"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="font-family:Arial;color:#000000;">75538.70</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 121.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="162"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="font-family:Arial;color:#000000;">244</span></p></td></tr><tr style="HEIGHT: 15.35pt; mso-yfti-irow: 10"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 40.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="54"><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US" style="color:#000000;">2008</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 166.6pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="222"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="font-family:Arial;color:#000000;">32242.16</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 121.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #d9ecff; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" valign="top" width="162"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><span lang="EN-US" style="font-family:Arial;color:#000000;">156</span></p></td></tr><tr style="HEIGHT: 15.35pt; mso-yfti-irow: 11; mso-yfti-lastrow: yes"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 40.6pt; PADDING-RIGHT: 5.4pt; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" valign="top" width="54" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><span lang="EN-US" style="color:#000000;">Total</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 166.6pt; PADDING-RIGHT: 5.4pt; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" valign="top" width="222" ><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span lang="EN-US" style="font-family:Arial;color:#000000;">182988.16</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 121.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 15.35pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" valign="top" width="162" ><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span lang="EN-US" style="color:#000000;">834</span></b></p></td></tr></tbody></table></div><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;">Recent studies about Sukuk at </span><a href="http://online.wsj.com/"><span style="font-size:100%;color:#000000;">http://online.wsj.com/</span></a><span style="font-size:100%;color:#000000;"> indicates that although by recently </span></span><span style="font-size:100%;"><span style="color:#000000;"><span style="mso-ansi-language: EN; mso-bidi-language: HI" lang="EN">the Sukuk market has managed to come back modestly, but only for higher corporate issuers. IFIS data show that so far this year, more than $7.6 billion of Sukuk have been issued. Almost all this year's fund-raisers have been governments or government-related, the overwhelming majority from Southeast Asian countries such as Indonesia. The Middle Eastern market that drove the pre-2007 boom has also sprung into life this month with a $500 million issue for the government of Bahrain, which was boosted to $750 million because of strong demand. </span><span style="mso-bidi-language: HI" lang="EN-US">Thus there is no harm if GoI study the feasibility of innovating Islamic products to consolidate public finance in India.<span style="mso-spacerun: yes"> </span></span></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt; BACKGROUND: white" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt; BACKGROUND: white" class="MsoNormal"><b><u><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;">Scope of Islamic Bond in India:</span></span></u></b></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt; BACKGROUND: white" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;">Since India houses second largest Muslim population of the world, it is expected that at least 20% Indian Muslims who are economically better off and desperately looking for real Islamic investments would grab it with enthusiasm. Unfortunately so far India has yet to launch any real Islamic bond or Mutual fund because somehow all the so called ethical mutual fund have been mixing equity funds with debts. </span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt; BACKGROUND: white" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt; BACKGROUND: white" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;"><span style="color:#000000;">Moreover unofficial sources indicates that considering the higher growth rate of India, some larger Islamic banks and financial institutions like Islamic Development Bank, Dubai Islamic Bank and others desire to invest in Indian infrastructure but do not find suitable opportunities.<span style="mso-spacerun: yes"> </span>So, we find the scope to study the prospects of Islamic Bond (Sukuk) from GoI to finance infrastructures.<span style="mso-spacerun: yes"> </span><span style="mso-spacerun: yes"></span></span></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-: HI;font-family:GillSans-Bold;" lang="EN-US" ><span style="font-size:100%;color:#000000;">Sector-wise Projected Investment for the Eleventh Plan</span></span></b></p><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt; mso-layout-grid-align: none" class="MsoNormal" align="right"><span style="mso-bidi-: HI;font-family:Minion-Regular;" lang="EN-US" ><span style="font-size:100%;color:#000000;">(Rs crore at 2006–07 prices)</span></span></p><div align="center"><table style="BORDER-BOTTOM: medium none; BORDER-LEFT: medium none; WIDTH: 320.25pt; BORDER-COLLAPSE: collapse; BACKGROUND: #d9ecff; BORDER-TOP: medium none; BORDER-RIGHT: medium none; mso-border-alt: solid white .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-border-insideh: .5pt solid white; mso-border-insidev: .5pt solid white" class="MsoNormalTable" border="1" cellspacing="0" cellpadding="0" width="427"><tbody><tr style="HEIGHT: 1pt; mso-yfti-irow: 0; mso-yfti-firstrow: yes; mso-row-margin-right: .75pt"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 180.35pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 1pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt" rowspan="2" width="240"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;color:#000000;" lang="EN-US" >Sectors</span></b><b><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 139.15pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 1pt; BORDER-TOP: white 1pt solid; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt" width="186" colspan="2"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >Projected investment for 11<sup>th</sup> five year Plan</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; BORDER-RIGHT: #ece9d8; mso-cell-special: placeholder; BACKGROUND-: #ece9d8color:transparent;" width="1" ><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="color:#000000;"></span></p></td></tr><tr style="HEIGHT: 1pt; mso-yfti-irow: 1"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 70.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 1pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="94"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >Rs. crore</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 69.15pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 1pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="92" colspan="2"><p style="TEXT-ALIGN: center; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="center"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >Shares (%)</span></b></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 2"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 180.35pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="240" ><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l3 level1 lfo3" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;font-size:11;" lang="EN-US" ><span style="mso-list: Ignore">1.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;" lang="EN-US" >Electricity (incl. NCE)</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 70.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="94" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >666,525</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 69.15pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="92" colspan="2" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 15.95pt 0pt 0cm" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >32.42</span></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 3"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 180.35pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="240" ><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l3 level1 lfo3" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;font-size:11;" lang="EN-US" ><span style="mso-list: Ignore">2.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;" lang="EN-US" >Roads and Bridges</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 70.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="94" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >314,152</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 69.15pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="92" colspan="2" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 15.95pt 0pt 0cm" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >15.28</span></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 4"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 180.35pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="240" ><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l3 level1 lfo3" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;font-size:11;" lang="EN-US" ><span style="mso-list: Ignore">3.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;" lang="EN-US" >Telecommunication</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 70.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="94" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >258,439</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 69.15pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="92" colspan="2" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 15.95pt 0pt 0cm" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >12.57</span></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 5"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 180.35pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="240" ><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l3 level1 lfo3" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;font-size:11;" lang="EN-US" ><span style="mso-list: Ignore">4.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;" lang="EN-US" >Railways (incl. MRTS)</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 70.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="94" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >261,808</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 69.15pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="92" colspan="2" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 15.95pt 0pt 0cm" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >12.73</span></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 6"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 180.35pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="240" ><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l3 level1 lfo3" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;font-size:11;" lang="EN-US" ><span style="mso-list: Ignore">5.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;" lang="EN-US" >Irrigation (incl. Watershed)</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 70.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="94" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >253,301</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 69.15pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="92" colspan="2" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 15.95pt 0pt 0cm" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >12.32</span></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 7"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 180.35pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="240" ><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l3 level1 lfo3" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;font-size:11;" lang="EN-US" ><span style="mso-list: Ignore">6.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;" lang="EN-US" >Water Supply and Sanitation</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 70.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="94" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >143,730</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 69.15pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="92" colspan="2" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 15.95pt 0pt 0cm" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >6.99</span></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 8"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 180.35pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="240" ><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l3 level1 lfo3" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;font-size:11;" lang="EN-US" ><span style="mso-list: Ignore">7.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;" lang="EN-US" >Ports</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 70.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="94" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >87,995</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 69.15pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="92" colspan="2" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 15.95pt 0pt 0cm" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >4.28</span></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 9"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 180.35pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="240" ><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l3 level1 lfo3" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;font-size:11;" lang="EN-US" ><span style="mso-list: Ignore">8.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;" lang="EN-US" >Airports</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 70.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="94" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >30,968</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 69.15pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="92" colspan="2" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 15.95pt 0pt 0cm" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >1.51</span></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 10"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 180.35pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="240" ><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l3 level1 lfo3" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;font-size:11;" lang="EN-US" ><span style="mso-list: Ignore">9.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;" lang="EN-US" >Storage</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 70.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="94" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >22,378</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 69.15pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="92" colspan="2" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 15.95pt 0pt 0cm" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >1.09</span></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 11"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; WIDTH: 180.35pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="240" ><p style="TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l3 level1 lfo3" class="MsoNormal"><span style="color:#000000;"><span style="mso-fareast-font-family: Arial; mso-bidi-: HIfont-family:Arial;font-size:11;" lang="EN-US" ><span style="mso-list: Ignore">10.<span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span style="mso-bidi-: HI;font-family:Minion-Regular;font-size:11;" lang="EN-US" >Gas</span><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 70.75pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="94" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >16,855</span></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; WIDTH: 69.15pt; PADDING-RIGHT: 5.4pt; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt; BACKGROUND-: 5.4ptcolor:transparent;" width="92" colspan="2" ><p style="TEXT-ALIGN: right; MARGIN: 0cm 15.95pt 0pt 0cm" class="MsoNormal" align="right"><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >0.82</span></p></td></tr><tr style="HEIGHT: 12.75pt; mso-yfti-irow: 12; mso-yfti-lastrow: yes"><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: white 1pt solid; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 180.35pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="240"><p style="MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><span style="mso-bidi-: HI;font-family:Minion-Semibold;font-size:11;color:#000000;" lang="EN-US" >Total (Rs crore)</span></b><b><span style="mso-bidi-language: HI;font-size:11;" lang="EN-US" ></span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 70.75pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="94"><p style="TEXT-ALIGN: right; MARGIN: 0cm 0cm 0pt" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >2,056,150</span></b></p></td><td style="BORDER-BOTTOM: white 1pt solid; BORDER-LEFT: #ece9d8; PADDING-BOTTOM: 0cm; PADDING-LEFT: 5.4pt; WIDTH: 69.15pt; PADDING-RIGHT: 5.4pt; BACKGROUND: #99ccff; HEIGHT: 12.75pt; BORDER-TOP: #ece9d8; BORDER-RIGHT: white 1pt solid; PADDING-TOP: 0cm; mso-border-alt: solid white .5pt; mso-border-left-alt: solid white .5pt; mso-border-top-alt: solid white .5pt" width="92" colspan="2"><p style="TEXT-ALIGN: right; MARGIN: 0cm 15.95pt 0pt 0cm" class="MsoNormal" align="right"><b><span style="mso-bidi-language: HI;font-size:11;color:#000000;" lang="EN-US" >100</span></b></p></td></tr><tr height="0"><td style="BORDER-BOTTOM: #ece9d8; BORDER-LEFT: #ece9d8; BORDER-RIGHT: #ece9d8; BACKGROUND-: #ece9d8color:transparent;" width="240" ><span style="color:#000000;"></span></td><td style="BORDER-BOTTOM: #ece9d8; BORDER-LEFT: #ece9d8; BORDER-RIGHT: #ece9d8; BACKGROUND-: #ece9d8color:transparent;" width="94" ><span style="color:#000000;"></span></td><td style="BORDER-BOTTOM: #ece9d8; BORDER-LEFT: #ece9d8; BORDER-RIGHT: #ece9d8; BACKGROUND-: #ece9d8color:transparent;" width="91" ><span style="color:#000000;"></span></td><td style="BORDER-BOTTOM: #ece9d8; BORDER-LEFT: #ece9d8; BORDER-RIGHT: #ece9d8; BACKGROUND-: #ece9d8color:transparent;" width="1" ><span style="color:#000000;"></span></td></tr></tbody></table></div><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="color:#000000;"><b><i><span style="mso-bidi-: HI;font-family:Minion-Italic;font-size:10;" lang="EN-US" >Data Source</span></i></b><i><span style="mso-bidi-: HI;font-family:Minion-Italic;font-size:10;" lang="EN-US" >: </span></i><span lang="EN-US" style="font-size:10;"><a href="http://planningcommission.nic.in/">http://planningcommission.nic.in/</a></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="MARGIN: 0cm 0cm 0pt; BACKGROUND: #d9ecff" class="MsoNormal"><b style="mso-bidi-font-weight: normal"><u><span lang="EN-US" style="font-family:Arial;"><span style="font-size:100%;color:#000000;">Fiscal deficits can be reduced by the Sukuk funds:</span></span></u></b></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt; BACKGROUND: #d9ecff" class="MsoNormal"><span lang="EN-US" style="font-family:Arial;"><span style="font-size:100%;color:#000000;">Since returns to Sukuk holders comes from the actual returns from the project there is no chance of any interest burden on the economy. In case there is any loss in the specified project that will also be duly shared by the Sukuk holders. Thus Sukuk finance negates any possibility of interest burden on the economy and removes the chances of fiscal deficit due to interest payments on borrowed debts to finance infrastructural needs of the economy. </span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt; BACKGROUND: #d9ecff" class="MsoNormal"><span lang="EN-US" style="font-family:Arial;"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt; BACKGROUND: #d9ecff" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;"><span style="color:#000000;">We have higher revenue expenditures due to higher debt servicing ratio total expenditure. The problem is also that capital expenditure is much behind the target and growth rate can't be foster if we lack infrastructure. Thus while we need to stimulate the economy, it is better to introduce Sukuk by Indian Government as it would not only help building infrastructure, increase capital expenses and stimulate the economy, but also reduce the revenue deficits, debt servicing ratio and also revenue deficits. <span style="mso-spacerun: yes"></span></span></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt; BACKGROUND: #d9ecff" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt; BACKGROUND: #d9ecff" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;color:#000000;">Financing the deficit through more of subsidized bank loans is creating problems for the banks to reduce lending rates for private sector; as a result the private sector are getting lower amount of credits at higher costs. Besides the recent global recession, this hardening credit supply is adversely affecting the growth rate of agriculture and manufacturing industry by witnessing negative growth rates in during last 6 months.<span style="mso-spacerun: yes"> </span>Thus deficit finance is not helping majority of Indian workforce as agriculture and manufacturing collectively provide livelihood to around 63% workers. So, to ensure foster and inclusive growth by way of providing sufficient and affordable credits to private sector, the increased flow of subsidized bank loans to GoI should be reduced otherwise private sector will continue to suffer and we may not be able to attain desirable growth rate even by increasing the fiscal deficits to stimulate the economy. </span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt; BACKGROUND: #d9ecff" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt; BACKGROUND: #d9ecff" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;color:#000000;">Since Sukuk is bounded with religious faith, the economic rationality is secondary aspect in decision making by the investors. The top priorities for Sukuk holders are to ensure that – </span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt; BACKGROUND: #d9ecff" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; BACKGROUND: #d9ecff; tab-stops: list 18.0pt; mso-list: l8 level1 lfo12" class="MsoNormal"><span style="color:#000000;"><span lang="EN-US" style="font-family:Arial;"><span style="mso-list: Ignore"><span style="font-size:100%;">1.</span><span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span lang="EN-US"><span style="font-size:100%;">The returns are Halal (legal according to Islamic ethics) and investments will be used for building potential infrastructures for national development, thus the investments and returns may draw tax incentives as well which may stand as compensation against lower rate of returns.<span style="mso-spacerun: yes"> </span></span></span></span></p><p style="TEXT-ALIGN: justify; TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; BACKGROUND: #d9ecff; tab-stops: list 18.0pt; mso-list: l8 level1 lfo12" class="MsoNormal"><span style="color:#000000;"><span lang="EN-US" style="font-family:Arial;"><span style="mso-list: Ignore"><span style="font-size:100%;">2.</span><span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span lang="EN-US"><span style="font-size:100%;">The investments are meant for legal share (proportionate ownership) in the infrastructure. </span></span></span></p><p style="TEXT-ALIGN: justify; TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; BACKGROUND: #d9ecff; tab-stops: list 18.0pt; mso-list: l8 level1 lfo12" class="MsoNormal"><span style="color:#000000;"><span lang="EN-US" style="font-family:Arial;"><span style="mso-list: Ignore"><span style="font-size:100%;">3.</span><span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span lang="EN-US"><span style="font-size:100%;">There would not be any fraud or cheating by the fund managers and the investments would not be spent for promoting unethical and unlawful activities (as prohibited by Islamic ethics).<span style="mso-spacerun: yes"> </span></span></span></span></p><p style="TEXT-ALIGN: justify; TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; BACKGROUND: #d9ecff; tab-stops: list 18.0pt; mso-list: l8 level1 lfo12" class="MsoNormal"><span style="color:#000000;"><span lang="EN-US" style="font-family:Arial;"><span style="mso-list: Ignore"><span style="font-size:100%;">4.</span><span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span lang="EN-US"><span style="font-size:100%;">The investments will be in safe hands to carefully develop the assets and not manipulate it. </span></span></span></p><p style="TEXT-ALIGN: justify; TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; BACKGROUND: #d9ecff; tab-stops: list 18.0pt; mso-list: l8 level1 lfo12" class="MsoNormal"><span style="color:#000000;"><span lang="EN-US" style="font-family:Arial;"><span style="mso-list: Ignore"><span style="font-size:100%;">5.</span><span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span lang="EN-US"><span style="font-size:100%;">Even if the rate of returns are low as compared to market returns on other investments, the advantage of earning Halal income, tax incentives on investments upon national infrastructure would be some compensatory advantages to the Sukuk holders. </span></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt; BACKGROUND: #d9ecff" class="MsoNormal"><span lang="EN-US" style="font-family:Arial;"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt; BACKGROUND: #d9ecff" class="MsoNormal"><span style="font-size:100%;"><span style="mso-bidi-language: HI;color:#000000;" lang="EN-US" >Since all sorts of returns on Sukuk are free from interest and does not exceed to the actual asset value, whatever is paid as returns to Sukuk holders is to pay from the actual earnings from the asset created by that particular investment. There is no need to borrow any debt to pay Sukuk returns or repay the whole Shukuk funds because all the Shukuk holders collectively own the asset. They will thus proportionately gain or loose according to appreciation or decline in the value of that particular asset.</span><span lang="EN-US" style="font-family:Arial;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><u><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;">Indian Institute of Islamic Infrastructure Funds (IIIIF):</span></span></u></b></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="font-size:100%;"><span style="color:#000000;"><span style="mso-bidi-language: HI" lang="EN-US">It is desirable that the GoI set an autonomous financial corporation as 'Indian Institute of Islamic Infrastructure Funds' (IIIIF) to grab the national and international market of Shariah Funds and mobilize adequate funds for the infrastructural investments in India. </span><span lang="EN-US">If </span><span style="mso-bidi-language: HI" lang="EN-US">IIIIF</span><span lang="EN-US"> succeeds soliciting cooperation with leading Islamic investment and development banks around the world, hopefully we may not need debt based receipts for deficit finance especially to meet the infrastructural requirements in India</span><span style="mso-bidi-language: HI" lang="EN-US">. </span><span lang="EN-US">The services of such banks may be solicited through GoI securities with assured lease rent after completion of particular infrastructure projects. Once India manages to mobilize project based Islamic Infrastructure funds, with such funds specific borrowed debts may be repaid to reduce the debt burdens. </span></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span style="mso-bidi-language: HI" lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;color:#000000;">Based on the projection by the Planning Commission of India, the estimated requirements of infrastructure investment is Rs. 20,56,150 crores. Considering the commercial aspects of different sectors, it is expected that IIIIF may help us arrange 93% of the total requirements amounting Rs. 19,12,420 crores for 11<sup>th</sup> five year plan's infrastructural needs. Only the investment need of water supply and sanitation amounting Rs. 1,43,730 may not be sellable otherwise infrastructure projects of all other sectors seems sellable through equity based Government securities by IIIIF upon which any specific amount as % of investment could be assured as returns in terms of lease rents after completion of the projects. IIIIF along with RBI and Ministry of Finance may design such equity based Government Securities (Sukuk). Further such securities may be traded in open market as RBI has recently framed policy for stripping and reconstitution of Government securities to enhance the trading scope of securities. However for Sukuk, there could be assured lease rent or dividend as rate of returns instead of interest. </span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><b><u><span lang="EN-US"><span style="font-size:100%;color:#000000;">Conclusion:</span></span></u></b></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;color:#000000;">Islamic Finance in terms of Sukuk may help India raise required infrastructure investment funds for the Government and the corporate sector. It may solve the most threatening challenge of our economy by providing equity funds for infrastructure against Government Securities enabling GoI reduce its fiscal deficit after repaying borrowed debts for capital expenditures through equity funds; and also by arranging equities for the corporate sector. Wish the proposed IIIIF may reduce the fiscal deficit allowing India attain foster and inclusive growth as it carries following promising features – </span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l4 level1 lfo8" class="MsoNormal"><span style="color:#000000;"><span lang="EN-US" style="font-family:Arial;"><span style="mso-list: Ignore"><span style="font-size:100%;">1.</span><span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span lang="EN-US"><span style="font-size:100%;">Reduce the fiscal deficit of India even if our revenue receipts declines and we need to increase the plan capital expenditures to stimulate the economy.</span></span></span></p><p style="TEXT-ALIGN: justify; TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l4 level1 lfo8" class="MsoNormal"><span style="color:#000000;"><span lang="EN-US" style="font-family:Arial;"><span style="mso-list: Ignore"><span style="font-size:100%;">2.</span><span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span lang="EN-US"><span style="font-size:100%;">Help India save amount up to 6% of our GDP we pay as interest over debt receipts. </span></span></span></p><p style="TEXT-ALIGN: justify; TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l4 level1 lfo8" class="MsoNormal"><span style="color:#000000;"><span lang="EN-US" style="font-family:Arial;"><span style="mso-list: Ignore"><span style="font-size:100%;">3.</span><span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span lang="EN-US"><span style="font-size:100%;">Enable GoI to repay debt receipts borrowed for financing the infrastructure investments. </span></span></span></p><p style="TEXT-ALIGN: justify; TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l4 level1 lfo8" class="MsoNormal"><span style="color:#000000;"><span lang="EN-US" style="font-family:Arial;"><span style="mso-list: Ignore"><span style="font-size:100%;">4.</span><span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span lang="EN-US"><span style="font-size:100%;">Provide desirable equity fund for the corporate sector at a time when external financial resources are dried up and the cost of domestic bank credits are not affordable. </span></span></span></p><p style="TEXT-ALIGN: justify; TEXT-INDENT: -18pt; MARGIN: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; mso-list: l4 level1 lfo8" class="MsoNormal"><span style="color:#000000;"><span lang="EN-US" style="font-family:Arial;"><span style="mso-list: Ignore"><span style="font-size:100%;">5.</span><span style="FONT: 7pt 'Times New Roman'"> </span></span></span><span lang="EN-US"><span style="font-size:100%;">Once GoI succeeds arranging sufficient infrastructure funds through Sukuk and repays debts borrowed for capital expenditures, it would reduce the load of public finance on domestic banks thus enable them to reduce the cost on credits specified under PSA or for private sector enterprises. </span></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;color:#000000;"></span></span></p><p style="TEXT-ALIGN: justify; MARGIN: 0cm 0cm 0pt" class="MsoNormal"><span lang="EN-US"><span style="font-size:100%;"><span style="color:#000000;">There could be many more significances of IIIIF if we resolve it without any prejudice for the sake of national interest.<span style="mso-spacerun: yes"> </span><span style="mso-spacerun: yes"></span></span></span></span></p><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com2tag:blogger.com,1999:blog-36321277.post-42565903793384541672009-06-16T21:26:00.014-01:002009-06-18T14:44:48.472-01:00<div align="justify"><table style="color: rgb(255, 255, 255);" align="center" cellpadding="0" cellspacing="0" width="600"><tbody><tr><td class="home" width="840"><p align="center"><span class="Title" style="color: rgb(0, 0, 0);font-size:180%;" ><strong><strong class="Title style45">Integrating Technology into Islamic Finance</strong></strong></span><strong><span class="style13"></span></strong></p></td></tr><tr><td class="home" width="740"><p align="justify"><span style="color: rgb(0, 0, 0);"></span></p><br /></td></tr><tr><td class="home" valign="top" width="740"><p align="justify"><span style="color: rgb(0, 0, 0);"><strong>The progression of Islamic finance has been extensive and of colossal impact. With its growth rate beyond expectations and confidence levels at an all-time high, the industry is doing well out of the current economic turmoil. However, does its technological capabilities meet the requirements of up-to-the-minute customers? RAHAYU MUSA KAMAL spoke to technology experts on what needs to be done to ensure smooth growth.<br /><br /></strong><img src="http://www.islamicfinanceasia.com/images/3-tech1.jpg" align="left" height="106" hspace="5" width="80" />With the ever-changing technological advancements in tandem with today's fast-paced and on-the-go lifestyle, it seems like every aspect of our lives now revolves around state-of-the-art creations that have made daily affairs easier to execute than before. </span></p><p align="justify"><span style="color: rgb(0, 0, 0);">Consumers are more open to the latest innovations, hence to live up to their expectations and to cater to demand, fledgling industries like Islamic finance have no choice but to be equipped with modern yet suitable capabilities for growth.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">There has long been a misconception about adopting technology into Islamic finance. The impression given is that it operates similar to its conventional partner. However, this has proven to be somewhat inaccurate as espousing the technology similar to that used by conventional banks can't be done.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">First of all, being an Islamic bank, a set of Shariah principles must be followed. According to Jamil Hassan of Oracle Financial Services Software, Islamic banks have to adhere to a set of Shariah principles that regulate them to organize their products (liabilities and assets) in an entirely different way from conventional banking. </span></p><p align="justify"><span style="color: rgb(0, 0, 0);">The principal consultant of Islamic banking gave an example that in Islamic banking, imposition of interest is prohibited on all financings and most contracts between Islamic banks and their borrowers are conducted under the framework of trading (i.e. buy and sell). </span></p><p align="justify"><span style="color: rgb(0, 0, 0);">As for the depositors, the deposits placed in the banks fall under the concept of Mudarabah, where all profits accrued (and losses incurred), after deducting the banks' fees, are passed back to the depositors.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">"In this context, the underlying technology for a bank's core banking system has to be re-engineered to fully address the requirements of Shariah in an integrated way. It should be capable of handling financing contracts and have a robust profit distribution engine. </span></p><p align="justify"><span style="color: rgb(0, 0, 0);">These attributes are mandatory for Islamic banks that want to be successful and are able to compete head on with their rivals, whether Islamic or conventional banks," Jamil said.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">He added that the core banking system must be flexible enough so that new products and services can be supported and released within a short time; and can be updated on a regular basis by its vendor so that all best practices and new developments elsewhere are made available to the Islamic banks.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">For David Hii, a few issues need to be addressed when it comes to technology and the Islamic finance industry. "The business measure of Islamic finance is changing very quickly. </span></p><p align="justify"><span style="color: rgb(0, 0, 0);">"As a result, there are different requirements and ways of doing business, and that is happening a lot faster than expected. </span></p><p align="justify"><span style="color: rgb(0, 0, 0);">"Islamic banks are constantly seeking ways to partner and also leverage on the existing banks they are a part of because several Islamic banks are part of a big group, so this is called technical integration," said the chief technology officer of Microlink Solutions.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">He said Islamic bankers have this perception that technology can help their business but contended technology can't solve everything as what is more important is the ability to offer good service along with the technological advancements. Hii pointed out that without good consultants, Islamic banking providers would not be able to maximize the benefits of technology as well.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">"Over the last five years, there have been changes in how we can build our software; this is where it can help the Islamic banking world. It's important to build what you need and continue to grow from there. </span></p><p align="justify"><span style="color: rgb(0, 0, 0);">It will involve compromise from both parties; the bankers will have to understand that there are limitations," said Hii, adding that this will require vast consulting experience between the software provider and the bankers.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">He said bankers must understand that one cannot change the game plan later on in the project without making compromises, and that communication is important.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">Outsourcing the most viable option<br />For Islamic banking, it is imperative that the software used be suitable for all its transactions and customers. Jamil explained that currently, Islamic banks are typically small (usually fewer than 50 branches, with an asset size of US$5 billion or less) and do not have extensive IT budgets and expertise to manage their technology platform to meet the future competitive landscape. </span></p><p align="justify"><span style="color: rgb(0, 0, 0);">In addition, as these banks are regulated by the same regulators as the conventional banks, similar processes and controls are being imposed, resulting in higher operational costs for Islamic banks.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">"Given the above, Islamic banks should choose technology platforms that can be leveraged for the longest possible timeframe (between five and seven years, at least), supported by strong and reputable organizations with a deep understanding of and strong commitment to Islamic banking," he said, adding that strong and reputable technology solution providers will ensure that their technology platforms are constantly updated with the latest functionalities, regulations and technologies required for the smooth operation of these banks.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">"The most viable way for Islamic banks is to outsource the task of upgrading technology to their technology solution providers. It is thus imperative that Islamic banks spend considerable time selecting the right technology providers that they want to partner with. </span></p><p align="justify"><span style="color: rgb(0, 0, 0);">"Choosing the right technology partner will allow Islamic banks to move rapidly and stay ahead of the competition while a wrong choice can set a bank back by months or even years. </span></p><p align="justify"><span style="color: rgb(0, 0, 0);">Hence, a strategic long-term partnership with the technology vendor that can support growth is an important consideration," Jamil said.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">Hii, on the other hand, explained the importance of knowing the services banks are providing so that it will be easier for the software engineers and the end result will be of high quality. "Both parties should know what is required and what needs to be done. </span></p><p align="justify"><span style="color: rgb(0, 0, 0);">It is only natural so that it will be a win-win situation for both. There will be a lot of integration that is required. Technology allows banks to integrate in a different environment, to expand the business," said Hii.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">On the different types of solution providers available now and how Islamic financial institutions select the product that suits them best, Jamil, an expert in this field, explained that at the functional level, most solutions from global technology providers have the required functionalities to support the existing operations of a bank. He said these solutions, however, differ in the following areas:<br />At the same time, technology is also undergoing rapid changes, with applications such as Java, Web 2.0 and Service Oriented Architecture being among the latest trends.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">A committed player in Islamic finance will have to ensure that it continues to enhance its solution offerings by incorporating functionalities that are in demand while maintaining a practical approach in upgrading its underlying technology so as to align itself with the latest IT trends.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">"A bank should choose a solution from a solution provider that can demonstrate the above three important criteria. A solution that exhibits these three behaviors will ensure that a bank is able to use its system for as long as possible, thus maximizing its agility to compete in the marketplace and yet, maintain operational costs to the minimum," explained Jamil.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">Compatibility factor<br />Meanwhile, Hii lamented the lack of expertise on the Islamic banking solution providers' side.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">"There are now a lot of different tools to cut short the learning cycle as many mediums can be used to communicate between the service provider and the clients. Normally, for an average software engineer, it will take three to six months to really master the skills of creating software for Islamic finance, but since there are so many tools now, more and more can be done," said Hii, adding that in many instances, the service provider need not learn everything about its clients as long as it knows the right questions to ask and gathers correct information.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">With Islamic finance being a young industry, issues like being on a par with its conventional counterpart, which has existed for years, and tried and tested mostly everything related to information technology, problems are bound to crop up. For Jamil, the most important criteria are the compatibility between the culture and aspirations of the bank and that of the solution provider. </span></p><p align="justify"><span style="color: rgb(0, 0, 0);">Many failures in software implementation occur during the implementation phase as a result of people-related issues, such as the wrong personnel being deployed for the project, lack of dedication by various team members and a lack of direction by top management.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">He stressed that a solution provider that has shown resiliency in managing all its previous projects, especially in a similar environment faced by the bank, is likely to be able to handle all issues expeditiously without upsetting too many parties within the project teams.</span></p><p align="justify"><span style="color: rgb(0, 0, 0);">"Selection of a solution provider is a strategic decision, hence objectivity and professionalism must be maintained throughout the decision process. As the partnership is to last a minimum of five years (with little option for 'breakup'), a solution provider must be one that understands the bank's culture, is respectful of the various forces within the bank and is flexible yet fully committed to assist the bank in its journey — all these are imperative if a bank intends to take full advantage of the system that it procures from the vendor," Jamil concluded.</span></p></td></tr></tbody></table></div><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com0tag:blogger.com,1999:blog-36321277.post-17956906366833548772009-05-28T08:14:00.000-01:002009-05-28T08:15:50.850-01:00<div align="justify"><span style="color:#000000;"><span style="font-size:180%;"><span id="ctl00_ContentPlaceHolder1_FaNews1_FormView1_headlineLabel">Islamic Banks - Their strategies and ratings </span><br /><img border="0" src="http://mail.google.com/mail/images/1pix.gif" width="1" height="5" /></span><span style="FONT-WEIGHT: bold;font-family:Arial;font-size:11;" ><span id="ctl00_ContentPlaceHolder1_FaNews1_FormView1_stndfrstLabel">This special comment is based on a speech delivered by <i>Christine Kuo </i>, a Moody's VP/Senior Analyst, at the 6th IFSB Summit on 7 May 2009 in Singapore. </span></span></span></div><p align="justify"></p><div align="justify"><table border="0" cellspacing="0" cellpadding="0" width="158" align="left"><tbody><tr><td><span style="color:#000000;"><img style="BORDER-RIGHT-WIDTH: 0px; WIDTH: 150px; BORDER-TOP-WIDTH: 0px; BORDER-BOTTOM-WIDTH: 0px; HEIGHT: 180px; BORDER-LEFT-WIDTH: 0px" id="ctl00_ContentPlaceHolder1_FaNews1_FormView1_Image2" border="0" alt="S&P, Sukuk, Al Rajhi Bank, Dubai Islamic Bank, DIB, al Rajhi, Qardh Hasan, Rab al Maa, oman, KFH, Pakistan, Pakistan, Bahrain, Malaysia, Turkey, Abu Dhabi Islamic Bank, adib, M&A, Egypt, National Bank for Development, tamweel, amlak, RHB Bank, RHB, JV, joint venture, " src="http://www.cpifinancial.net/v2/images/news/im10336AM247.jpg" /></span></td><td><span style="color:#000000;"><img border="0" src="http://mail.google.com/mail/images/1pix.gif" width="8" height="1" /></span></td></tr><tr><td><table border="0" cellspacing="0" cellpadding="5" width="100%" style="color:#eeeeee;"><tbody><tr><td><span style="font-family:Arial;font-size:11;"><span id="ctl00_ContentPlaceHolder1_FaNews1_FormView1_imgS1capLabel" style="color:#000000;"></span></span></td></tr></tbody></table></td><td><span style="color:#000000;"><img border="0" src="http://mail.google.com/mail/images/1pix.gif" width="1" height="1" /></span></td></tr></tbody></table></div><span id="ctl00_ContentPlaceHolder1_FaNews1_FormView1_bodyLabel"><p align="justify"><span style="color:#000000;">Professionals in the Islamic banking sector are often asked whether the current strategies adopted by Islamic financial institutions will prove effective at competing at the global level in the long run. Since a strategy is a plan of action designed to achieve certain goals, its effectiveness can be assessed only in relation to these well-defined goals.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">From the rating perspective, an effective strategy is one that allows a particular Islamic bank to grow its business while delivering a stable and good financial performance, thereby making it stand out against credit ratings of other global banks.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">While Islamic banks in different countries operate under different environments and are at different stages of development (and therefore require different strategies), we can still find a set of common characteristics among their various strategies that benefit their long-term ratings.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">To address this topic and related issues, this report is organised into the following five sections:</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">(1) summary of those characteristics in strategies that benefit ratings;</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">(2) specific strategies adopted by various Islamic banks;</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">(3) rating implications of these strategies;</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">(4) selective rating issues concerning Islamic banks; and</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">(5) how relevant stakeholders could affect strategies and ratings of Islamic banks.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><b><span style="color:#000000;">Characteristics in strategies that benefit ratings</span></b></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Moody's assigns ratings to banks globally, irrespective of their form or nature, and that includes Islamic banks. In assigning ratings to banks, Moody's first evaluates a bank's intrinsic safety and soundness thereby arriving at a Bank Financial Strength Rating (BFSR), and then factors in potential support from the relevant providers to derive the bank's ratings for deposits and debt. This analytical framework is common to all types of banks, so the ratings of Islamic banks are comparable to those of conventional banks globally.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">It is worth noting that an Islamic Financial Institution (IFI) is an institution that limits the scope of its business to comply with a set of ethical and moral guidelines derived from the teachings of Islam. It should be noted that there is nothing that stops a 'conventional' bank from operating the same ethically-driven model. It would still be Shari'ah compliant despite not being 'branded' as such. IFIs focus on a subset of global finance consistent with Shari'ah, thus the skills and experience applied to rating broader and more universal institutions is equally applicable and valuable in the Islamic context.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">In accessing a bank's financial strength, Moody's considers factors such as franchise value, risk positioning, regulatory environment, operating environment and financial fundamentals. Of these factors, regulatory and operating environments are outside of a bank's control, but bank strategies can definitely affect the other factors in the long term.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><b><span style="color:#000000;">Strategies that improve franchise value</span></b></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Franchise value is about the solidity of a bank's market standing in a given geographical market or business niche. A solid and defensible franchise is a key element underpinning a bank's ability to generate and sustain recurring earnings, to create economic value and, thus, to preserve or improve risk protection in its chosen markets.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">The Islamic brand is economically valuable; in many instances Muslim depositors will happily pay a small premium for conducting their finances in what they perceive to be an ethical way. With a large addressable population and relative immaturity there is still scope for solid long-term growth.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Moody's believes strategies leading to sustainable entrenched market position, improved geographical and earnings diversification, and increased earnings stability can enhance a bank's long-term franchise value.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Size is important because diversification is harder to achieve when an institution is small. It should be noted, however, that a bank dominant in smaller but more favourable markets may have a higher franchise value (which could translate into greater earnings stability) than a bigger bank with a highly price-sensitive customer base in a competitive market.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">It follows that it is better for Islamic banks to have a strategy that helps achieve a stronger position in a few selective markets than one which results in marginal positions in many competitive markets.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><b><span style="color:#000000;">Strategies that improve risk positioning</span></b></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">A bank's risk positioning is a fundamental qualitative factor in Moody's credit analysis; the current credit woes apparent in the global market once again highlight its importance. In this regard, we view positively strategies that improve corporate governance, controls and risk management, financial reporting transparency, credit risk concentration and liquidity management. Strategies that set a conservative market risk appetite are also considered favourably.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Improving risk positioning is particularly relevant. Although Islamic banks are able to pass through a negative shock on the assets side to the investment depositors, displaced commercial risk is at stake.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Islamic banks have a number of buffers to manage displaced commercial risks. These are profit equalisation reserves which contribute to smooth earnings across the cycle; investment risk reserves which absorb negative shocks on asset values; Mudarib fees which can always be decreased in a discretionary manner to avoid penalising the depositing Rab al Maal; and shareholders who can always provide Qardh Hasan to profit-sharing depositors. In a stress situation, those IFIs sufficiently equipped with such mitigating instruments would be considered more resilient to downturns.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Nonetheless, to date few, if any, Islamic banks have passed on losses to their depositors. If the buffers mentioned above are inadequate, the IFIs could experience funding pressure as deposits are moved to other financial institutions.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Additionally, Islamic banks tend to have greater concentration in assets and liabilities compared with conventional banks. They also face challenges in managing liquidity and risk due to the limited range of instruments available.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Moreover, Islamic products are less commoditised and require more tailoring and oversight, and this leads to substantial overheads and operation risk.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><b><span style="color:#000000;">Strategies that improve financial fundamentals</span></b></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">We break down our analysis of a bank's financial fundamentals into five sub-factors, namely profitability, liquidity, capital adequacy, efficiency and asset quality. Some financial metrics necessarily reflect a bank's franchise value and risk positioning, but a prudent financial policy also plays an important role in shaping these numbers.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">For instance, a bank with a strategy to maintain a conservative financial policy is likely to keep its capital and liquidity ratios higher then most of its peers. The result is a stronger balance sheet and which can better withstand adverse economic cycles. For Islamic banks with significant exposures to equities and properties, conservative financial leverage is particularly important in view of the volatility in the values of these investments.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Most of the strategies of Islamic banks try to achieve profitable asset growth. The differences in their strategies mainly reflect the state of development of Islamic banking and their positions in their respective home markets, their aspirations for the medium and long term, and the resources they have.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><b><span style="color:#000000;">Organic growth in home market</span></b></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">This is the main strategy adopted by almost all Islamic banks across different countries since decent growth potential still exists at home. While organic growth does not allow for quantum leaps in assets and earnings, this strategy is of lower risk.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><b><span style="color:#000000;">Market with low penetration: strategic focus is on increasing awareness</span></b></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">For markets where Islamic banking has low penetration, such as Indonesia, North Africa, Turkey, Jordan and (probably) the Sultanate of Oman (where Shari'ah-compliant finance is expected to pick up), there is plenty of room for growth and the level of competition is relatively low. Moreover, Islamic banks in these markets are mostly still small in size. Therefore, they are not keen on acquisitions or venturing overseas. Instead, they focus on growing customers and businesses at home. Their major competitors are conventional banks in the same markets and their strategies involve conversion of conventional banking assets into Shari'ah-compliant assets. Increasing awareness of Islamic banking services is essential at this stage.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><b><span style="color:#000000;">More mature market: strategic focus is on providing competitive products and services</span></b></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">In the more mature markets, such as Malaysia, Sudan and most countries within the Gulf Cooperation Council (GCC), low-hanging fruit have already been picked. Therefore, Islamic banks need to set their strategies to compete not only with the conventional banks but also with their Islamic banking peers. The target is to increase the wallet share of existing customers, to attract Muslim customers who still bank with conventional banks, and to attract non-Muslim customers if the markets have significant non-Muslim populations. Being able to offer competitive products and services is the critical factor to success.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">A few larger Islamic banks have been expanding outside of their home markets to tap other Muslim populations as there is a natural brand affinity. Kuwait Finance House (KFH) is one such example. It has established subsidiaries and associate companies in the Gulf and wider Middle East and North Africa region (MENA), as well as in Asia. Its subsidiaries in Bahrain, Malaysia and Turkey are key to the group's regional expansion strategy.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Its foreign expansion is expected to continue, especially in North Africa (including Morocco), the Gulf region (including Saudi Arabia) and Muslim Asia.Other examples are Al Rajhi Bank and Dubai Islamic Bank. The former ventured into Malaysia in 2006, while the latter launched its operation in Pakistan in the same year. Finally, most Islamic banks established in the UK have majority or strategic bank shareholders headquartered in the Gulf region.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><b><span style="color:#000000;">Mergers and acquisitions</span></b></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">This option is adopted by only a very small number of Islamic banks as the potential for organic growth is still great. However, as business and the number of Islamic banks grow, the markets will become more mature and competitive. At that time, Islamic banks operating in fragmented markets would likely pursue M&A strategies for asset and earnings growth.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">For example, there are 17 Islamic banks in Malaysia, a mid-size economy with GDP of approximately $200 billion. Islamic banking assets account for less than 20 per cent of total banking system assets. Since the largest Islamic bank (Maybank Islamic Berhad) accounted for only about 2.2 per cent of these assets, this implies that all Islamic banks are small and the market is fragmented. The market is currently growing and profitable, but competition is rising which will drive down margins gradually. This development could lead to market consolidation over the medium term.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">In some cases, depending on conditions and regulations, Islamic banks with entrenched positions in their home markets may also consider using M&As to establish their presence overseas. For example, Dubai Islamic Bank has acquired a majority stake in the Bank of Khartoum, the largest bank in Sudan, whereas Abu Dhabi Islamic Bank has acquired Egypt's National Bank for Development with a view to converting it into a fully fledged Shari'ah-compliant bank within two years.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Under current market conditions, M&A activity may be driven by necessity rather than by choice. In the UAE for instance, there are two troubled Islamic mortgage lenders or "home finance companies" facing difficulties due to liquidity issues, and are effectively in the process of being nationalised (although their status is still unclear as the Federal government has yet to announce its final decision on the matter). The two companies together -- Tamweel PJSC (Tamweel) and Amlak Finance PJSC (Amlak) -- have about 60 per cent of the market, but have shown themselves to be just as vulnerable as any other wholesale-funded conventional counterparts.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Per se, a merger would not solve the issue; however, it would give birth to one large systemically important institution that would be easier to regulate, control, fund and strengthen from the perspective of its public-sector shareholder.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><b><span style="color:#000000;">Strategic partnerships and joint-ventures</span></b></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">This strategy is popular among Islamic banks which want to build presences overseas. It is also used by banks seeking technical expertise in markets and/or products from other institutions. To facilitate the formation of partnerships and joint ventures, the Islamic banking businesses of conventional banks often need to be incorporated.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">For example, Abu Dhabi Commercial Bank of the UAE and RHB Bank of Malaysia have entered into a strategic alliance. While both also operate conventional banking businesses, two reasons given for the partnership involve the ability to leverage each other's strengths in Islamic banking, while they also share the goal of developing a global Islamic banking platform.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><b><span style="color:#000000;">Reacting to a crisis scenario</span></b></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">As is often the case in the field of Islamic banking, larger banks and smaller contenders tend to react differently in a situation of stress, which the overall market has been experiencing for several months. While larger Islamic financial institutions, like Saudi Arabia's Al Rajhi Bank or Kuwait's KFH, prefer to protect asset liquidity, capitalisation and their reputation at the expense of growth and profitability, smaller banks –- when they can afford to adopt such an opportunistic view -- are keen to quickly gain market share.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Such a strategy is apparent in the competitive UAE market. At a time when market liquidity has been scarce, most banking players tend to refrain from lending, leaving room for those competitors with ample asset liquidity to use their own balance sheets to capture extra shares of the lending market. For instance, Dubai Bank, one of the UAE's smaller Islamic banks, pursued such tactics: prior to the crisis, the bank managed to accumulate sizeable asset liquidity on its balance sheet, which it extensively used across 2008, resulting in a doubling of its size despite the worsening global credit woes.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Funding was less of a constraint for IFIs, because of market perception that these players will be more resilient than conventional peers amid global credit turmoil. The market acknowledged that Islamic banks could not carry on their balance sheets any toxic assets (in the form of highly-leveraged structured instruments or global investment banks' shares) simply because these are considered "haram" and therefore not eligible for investment as per Shari'ah Boards' fatwas.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">In practice, a phenomenon of customers switching savings from conventional banks (perceived as riskier), to Islamic banks (perceived as less directly and indirectly exposed to 'subprime') has been recorded across a number of countries, especially in the UAE, Kuwait and Bahrain.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><b><span style="color:#000000;">Rating implications of these strategies</span></b></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">The rating implications of different business strategies need to be considered in relation to individual institutions and the likely impact on their business and financial profiles.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Organic growth in home market</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;"> Good for long-term ratings, as long as not too aggressive</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">This strategy is usually good for long-term ratings since the expansion of market positions could improve franchise value. To the extent that growth is a result of tapping new customers, the strategy would also serve to reduce concentration risk and increase earnings diversification. Moreover, organic growth in home markets involves tapping business in a familiar operating environment. And since strategy is implemented by the existing management team, it has lower execution risk.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">But overly aggressive growth could still harm bank credit profiles. An institution's risk management system and infrastructure often cannot keep pace with strong business growth. This may be indicated by the experiences of Tamweel and Amlak which became exposed to construction risk by funding under-construction properties. As a result, asset quality problems could surface later. Worse still, if growth is supported by debt-like hybrid capital instruments, any capital buffer utilised to support potential loss from the risk assets will thin</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;"> Example: <b>Al Rajhi Bank</b></span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">In September 2006, Moody's upgraded Al Rajhi Bank's financial strength rating to C- from D+. The rating action was to recognise the bank's strengthened franchise, improved financial fundamentals and strong capital base. Organic growth outside of home market</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;"> Potential higher diversification benefits, but with higher short-term risk</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">The small size and/or a maturing nature of home markets often drive financial institutions to seek long-term and sustainable growth abroad. Such an expansion strategy is inevitable and, in the long term, beneficial. However, growing the business in less familiar markets, and sometimes in more volatile and often constrained environments, brings near-term challenges.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Until Islamic banks have seasoned their overseas operations and demonstrated that they are able to deliver stable earnings, increased risk profiles may outweigh any benefits. However, once seasoned, the income and risk diversifications benefits would be more evident since assets in overseas markets generally have a lower risk and earnings correlation than have risk assets in the same market. The less correlated and better diversified the new markets, the higher the diversification benefits.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;"> Example: <b>KFH</b></span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">KFH's international operations are growing in importance, and have started to confer visible diversification benefits to the group as well as brand credibility overseas. The performance of foreign subsidiaries has improved over the past few years. This development has somewhat altered its culture in a positive way, forcing it to more efficiently allocate resources across the organisation and experience more intense competition.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><b><span style="color:#000000;">Mergers and acquisitions</span></b></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;"> High execution and integration risk, and financial leverage often rise</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">M&As of material sizes always trigger rating reviews. While the reviews do not always lead to rating actions, when the latter do take place they are often negative for acquirers. The possible results include changing an institution's rating outlook to negative, placing ratings under review for possible downgrade, or simply rating downgrades.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Negative rating actions are more common, and mainly reflect the many risks involved in such a strategy, including execution risk, integration risk, regulation risk and financing risk. With M&As involving targets outside of home markets, the risk is still higher.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Until now, Moody's has not taken any negative rating actions on any Islamic banks as a result of their M&A initiatives, mainly because the acquirers have been able to absorb the added risks without creating too much pressure on their own balance sheets. This has in turn been due to the relatively small sizes of the transactions.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><b><span style="color:#000000;">Strategic partnerships and joint ventures</span></b></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;"> Rating neutral in most cases</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Moody's recognises that strategic partnerships and joint ventures could be a lower risk strategy for tapping into less familiar business lines or markets. And this strategy sometimes results in an increase in capital, which is good from a rating perspective.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Nonetheless, it is not uncommon to hear of disagreements among partners in terms of the formulation and execution of business strategies. And since each partner emphasises its own primary businesses, and it takes time to form a consensus and resolve any potential conflicts of interest, slow action or inaction could prevent the realisation of full possible benefits.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Moreover, not many strategic partnerships or JVs have brought big enough benefits to transform the business and financial profiles of its investors.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><b><span style="color:#000000;">Selective rating issues concerning Islamic banks</span></b></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">While the underlying operations and economics of Islamic banks are substantially similar to those of conventional banks, we see some risk issues that could affect the ratings of Islamic banks.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">The limited scope of eligible asset creates asset concentration risk. Non-deposit liabilities could have concentration risk as well due to the relatively small number of Islamic financial institutions available to participate in the inter-bank market. There is also only a small range of Shari'ah-compliant instruments available for managing or transferring risks.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">For example, Al Rajhi Bank is highly exposed to the sovereign, primarily through murabaha placements with the government and balances with the Saudi Arabian Monetary Agency. This is in line with other Saudi Arabian banks. If we were to add to this situation the bank's top 19 group exposures and come up with an estimate of its top 20 exposures relative to Tier 1, then the amount could be quite sizeable. This is a common feature for rated Saudi banks and which significantly constrains their BFSRs.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">In the case of KFH, the institution has some industry concentration in the property sector, with direct and indirect real estate exposures in Kuwait and internationally (exposure to the US real estate market appears negligible). In its loan portfolio alone, real estate and construction represented 12 per cent of exposures, whereas direct investments in properties accounted for 2.8 per cent of total assets at end-2007. At the same time, like most other GCC banks, single-borrower concentration is rather high.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">KFH is also more exposed to market risk since direct investments are a key component of its business model and it has a marked preference for equities (in addition to Sukuk and property).</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Focus on tangibles had led to increased property-related financings at IFIs, affected by relatively undiversified nature of the economies. As the real estate markets are highly volatile in the GCC, the concentration risk is magnified.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><b><span style="color:#000000;">Challenges in liquidity management</span></b></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Liquidity management is structurally more challenging at Islamic banks because there is still a significant shortage of liquid instruments, despite the efforts of the various central banks to provide a variety in which Islamic banks can place their surplus cash. In fact, Tamweel and Amlak would have gone insolvent if not for the government with liquidity being the issue.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Moreover, displaced commercial risk is always possible should an Islamic financial institution's assets yield returns for profit-sharing investment account (PSIA) holders that are lower than expected, or worse still, show negative rates of profits. While PSIAs are supposed to absorb losses -- other than those triggered by misconduct or negligence -- it remains to be seen how such account holders would react to losses on their accounts.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Historically, Islamic banks in the GCC have kept very large proportions of core liquidity on their balance sheets in the form of short-term international Murabaha and central bank deposits, at the expense of extra revenue. This approach has proved to be a wise choice in a region prone to numerous cycles and recurring shocks, and given that their investment portfolios tend to be more illiquid as stress situations worsen.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><b><span style="color:#000000;">How the relevant stakeholders could affect the strategies and ratings of Islamic banks</span></b></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Of the various stakeholders in Islamic banks, it is the regulators, shareholders, company management and employees, and customers which have key roles in shaping an Islamic bank's business strategy and performance and so affect its intrinsic financial strength. Additionally, regulators could influence an Islamic bank's deposit and debt ratings according to their capacity and willingness to provide systemic support in time of stress.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Regulators can affect a bank's strategy and ratings through their influence on the regulatory environment and systemic support. A more favourable regulatory environment could contribute to better BFSRs, while systemic support could further lift deposit and issue ratings as the joint-default probability is lower.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">A bank regulator's principal objectives are usually focused on protecting depositors and promoting a healthy banking system. As such, the interests of a bank regulator are often aligned with the interests of depositors, bond holders and other creditors.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Through a combination of effective regulations, active supervision, and aggressive and prompt enforcement, a strong regulatory environment can promote sound banking practices and limit excessive risk taking. As a result, a bank's financial strength is often improved.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">The level of systemic support is a result of the capacity and willingness of the national government to support troubled banks. Moody's firstly determines whether the countries in which the Islamic banks are domiciled are high, medium or low support countries. We then apply the appropriate level of support based on the importance of the respective bank to the system.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Tamweel and Amlak are examples of systemic support prevalent in jurisdictions where IFIs have been growing (i.e., the GCC).</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><b><span style="color:#000000;">Shareholders</span></b></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Balance of growth and returns</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">The presence of active shareholders often pressures financial institutions to report higher returns on equity (RoE). To the extent that this is achieved by improving franchise and other business fundamentals, which lead to better financial metrics, the bank's long-term ratings will benefit.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">However, if a higher RoE is achieved mainly by a more aggressive use of financial leverage, e.g., to make sizeable acquisitions financed by debt and other lower-quality capital instruments, or to conduct a large number of share buybacks, the bank's ratings would be pressured.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Many equity investors have under-estimated the risk of financial leverage in the past. However, we are now seeing that change in light of the prevailing global crisis.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><b><span style="color:#000000;">Management and employees</span></b></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Financial institutions, including Islamic banks, need to solve the most fundamental incentive problems so that strategies that involve excessive risk taking or a focus on short-term gains are discouraged. Staff tend to act based on how they are evaluated and compensated. Ill-devised performance metrics and compensation systems inevitably lead to a weak corporate culture and problems that undermine an institution's long-term prospects.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Client characteristics matters</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Client characteristics could affect bank business profiles and financial results. For example, some Islamic mortgage originators in the UK note that the prepayment rate is higher, and the delinquency rate lower, than for conventional customers of similar income. Another example is that the customers in the GCC countries are willing to accept low or no returns on their deposits.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">We note that the difference between Muslim and non-Muslim customers, in terms of credit quality and cost of deposits, is not significant across all markets. The point is that customer behaviour does have implications onbank performance; therefore, a selection of target clienteles could affect bank financial strength when distinctions do exist among different classes of customers.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">To sum up, it is impossible to lay out one best strategy for all institutions, but Moody's believes those strategies that improve franchise value, risk positioning and financial fundamentals will benefit an Islamic bank's financial strength rating, which is comparable on a global basis.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Various strategies can be adopted by Islamic banks to achieve profitable growth and enhance their competitiveness, but the resulting immediate and long-term risks and benefits differ. It is worthwhile to point out that while asset growth is important, appropriate systems and infrastructure to address risk issues need to be in place to support sustainable growth. Therefore, strategic focus needs to be timed, with risk management being implemented first followed by growth.</span></p><p align="justify"><span style="color:#000000;"></span><p align="justify"><span style="color:#000000;">Finally, regulators, shareholders, management and employees, and customers all have roles in shaping an organisation's strategy and could influence ratings. When it comes to global comparisons, Moody's believes it is more important for Islamic banks to build strong franchises in selective markets and businesses, and to maintain sound financial profiles as opposed to big balance sheets</span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span 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align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p><p align="justify"><span style="color:#000000;"></span></p></span><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com4tag:blogger.com,1999:blog-36321277.post-26155610023638612462009-05-06T14:51:00.009-01:002009-07-20T13:29:17.315-01:00<h1 align="center"><u><span style="font-size:100%;color:#000000;">Malaysia takes the lead</span></u></h1><p class="articleInfo" align="justify"><strong><span style="color:#666666;">By Geraldine Lambe </span><span style="color:#000000;"><span style="font-size:85%;">Source: </span><span style="font-size:85%;"><a href="http://www.thebanker.com/">http://www.thebanker.com/</a></span></span></strong></p><div class="photo_first" align="justify"><span style="color:#000000;"><img alt="Badlisyah Abdul Ghani, chief executive of CIMB Islamic" src="http://www.thebanker.com/images/6522.photo.2.jpg" width="126" height="126" /> </span></div><p class="photo_first" align="justify"><span style="color:#000000;">Badlisyah Abdul Ghani, chief executive of CIMB Islamic </span></p><h2 align="justify"><span style="font-size:100%;color:#000000;">Having already introduced many tax and business incentives, Malaysia is consolidating its position as an up-and-coming hub for Islamic finance. Its policies reflect the belief that developing the sector is crucial to the country's future success. Writer Geraldine Lambe</span></h2><h2 align="justify"><span style="font-size:100%;color:#000000;"></span></h2><p align="justify"><span style="color:#000000;">At the opening dinner of the Malaysian central bank's 50th anniversary conference in Kuala Lumpur in February, Malaysian prime minister Datuk Seri Abdullah Ahmad Badawi told the audience of visiting central bankers and economists that the development of Islamic finance will be critical to the country's future success.</span></p><p align="justify"><span style="color:#000000;">The prime minister stressed the importance of Islamic finance as an alternative channel for intermediation and its competitiveness in terms of products and services. He was also keen to point out that Malaysia intends to leverage its experience in the sector as it continues to build the country as a regional – or even global – hub.</span></p><p align="justify"><span style="color:#000000;">Malaysia has already gone a long way towards laying the foundations for its Islamic finance ambitions by way of tax incentives and business-friendly policies. In 2000, the government set out a 10-year masterplan that put together the strategic directions for the country's banking and capital markets. In late 2006, the Malaysian International Islamic Financial Centre (MIFC) was set up to co-ordinate the various efforts by government and regulatory bodies.</span></p><p align="justify"></p><p align="justify"></p><li><a href="http://www.thebanker.com/news/fullstory.php/aid/6522/Malaysia_takes_the_lead_.html">Click here for entire article</a></li><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com3tag:blogger.com,1999:blog-36321277.post-69339669762305926532009-04-17T19:08:00.022-01:002009-04-17T20:58:29.649-01:00Exchanges and Islamic Finance<p align="left" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><span style="font-size:78%;color:#000000;">By Michael Saleh Gassner, Michael Gassner Consultancy Ltd</span></p><p align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><span style="font-size:78%;color:#000000;">The peninsula region where the prophet Muhammad spent his life, was well experienced in international trade. Commodities were sourced from as far away as China with partnerships being founded to execute such long distance trade. In Islam trade is encouraged, but exchanging money for money in a different amount is categorised as impermissible. This prohibition still influences the Islamic understanding of modern day banking interest as a grievous sin.</span></p><p align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><span style="font-size:78%;color:#000000;"></span></p><p align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><span style="font-size:78%;color:#000000;">The Quran sura Al Baqara, verse 275, states that our creator allowed trade but prohibited <i>Riba</i>, which is typically translated as interest. While trade transactions allow for deferred payment and rent is permissible, the understanding of <i>Riba</i> is close to the differentiation between banking interest based on loans and economic interest charged for real capital. The latter could at least be structured in an Islamically acceptable way, though many scholars emphasise profit and loss sharing partnerships as a preferable financing alternative. A substantial cultural difference is apparent in the understanding of trade; in Europe, the gods for trade and thieves were the same: Mercury for the Romans, Hermes for the Greeks. In Islam, trade is recommended for Muslims, while lending money against money is a sin.</span></p><p align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><span style="font-size:78%;color:#000000;"></span></p><p align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><span style="font-size:78%;color:#000000;">Where were goods exchanged in the Islamic history? We can still see the model today, in the old bazaars or suqs of Istanbul, Damascus, Cairo or Tunis and many other Middle Eastern cities. The spice bazaar contains all retailers of spices; household goods are in another area; clothes sellers congregate in yet another area. This clustering of traders is a typical and common phenomenon of market regulation throughout Islamic history – very much like modern day exchanges, they bring supply and demand to a single point in order to increase competition and achieve a proper equilibrium price. The understanding of this issue was remarkably advanced among Islamic jurists.</span></p><p align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><span style="font-size:78%;color:#000000;"></span></p><p align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><span style="font-size:78%;color:#000000;">What else does Islamic finance focus on? Basically it condemns a number of industry sectors as unethical; to name but a few: alcohol, pork-related products, conventional banking and insurance, gambling, certain entertainment, pornography, and in general everything harmful to individuals or society. Above all mankind is understood to be the custodian of the creator, and hence individuals should be careful in their usage of the wealth given to them. This principle leads to considerations familiar to the Socially Responsible Investment movement and to the concept of sustainability.</span></p><p align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><span style="font-size:78%;color:#000000;"></span></p><p align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><span style="font-size:78%;color:#000000;">Wealth also results in an obligation towards the poor, called <i>Zakat</i>. This obligatory social tax is one of the five pillars of Islam that each Muslim must uphold. At the same time <i>Zakat</i> leads to mobilisation of idle savings in investments, as non-invested money would decrease by 2.5% annually if there were no returns to cover this tax. This stimulation to avoid hoarding of resources and instead mobilise them in investment or consumption helps to avoid one of the causes of recessions, which is hoarding money fearing an economic downturn.</span></p><p align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><span style="font-size:78%;color:#000000;"></span></p><p align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><span style="font-size:78%;color:#000000;">While trade is encouraged, gambling (<i>Maysir</i>) and excessive uncertainty in contracts (<i>Gharar</i>) are both prohibited. Additionally, forward contracts are considered impermissible on the basis of the rule 'do not sell what you do not own'. This prohibition has important implications for modern day exchange markets, especially regarding the use of derivatives by practising Muslims. In the remainder of this article we will review the issues involved regarding stock markets, commodity markets, and bond markets and derivative markets. </span></p><h2 align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><span style="font-size:78%;color:#000000;">Stock markets </span></h2><p align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><span style="font-size:78%;color:#000000;">Although many will assume that stock markets in the Muslim world have to follow Islamic rules, this is in fact not the case. Only Sudan (above USD100m annual turnover) and Iran (very low turnover, ca. USD4.9m in 2006) have stock markets defined as Islamic-only by state law. Other markets do not assess whether or not the stocks listed comply with the requirements of Islamic law; only modern commercial law is applied, partly influenced by both Islamic and Western concepts. In addition to the two stock markets mentioned only one other has opted to operate under Islamic rules supervised by an external independent Sharia Supervisory Board: the Dubai Financial Market, which is the stock exchange for the local shares of Dubai. (The newly established Dubai International Financial Exchange (DIFX) is a different entity and operates conventionally.) An Islamic exchange monitors its listed companies against the activities and debt criteria set by the Sharia Board. Those companies which do not comply with the rules can not be listed and traded. It may be expected that other exchanges will turn Islamic over the next couple of years, following the example of the Dubai Financial Market. </span></p><h3 align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><span style="font-size:78%;color:#000000;">2006 turnover at selected exchanges</span></h3><div align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><table cellspacing="0" cellpadding="2" summary="2006 turnover at selected exchanges" border="1"><tbody><tr><th><span style="font-size:78%;color:#000000;">Exchange </span></th><th><span style="font-size:78%;color:#000000;">Volume (shares) </span></th><th><span style="font-size:78%;color:#000000;">Value (USD) </span></th></tr><tr><td><span style="font-size:78%;color:#000000;">Sudan (Islamic) </span></td><td><span style="font-size:78%;color:#000000;">7.6bn </span></td><td><span style="font-size:78%;color:#000000;">1.0bn </span></td></tr><tr><td><span style="font-size:78%;color:#000000;">Iran (Islamic) </span></td><td><span style="font-size:78%;color:#000000;">10.9bn </span></td><td><span style="font-size:78%;color:#000000;">4.8bn </span></td></tr><tr><td><span style="font-size:78%;color:#000000;">Dubai Financial Market (Islamic) </span></td><td><span style="font-size:78%;color:#000000;">39.6bn </span></td><td><span style="font-size:78%;color:#000000;">67.4bn </span></td></tr><tr><td><span style="font-size:78%;color:#000000;">Saudi Arabia (Conventional) </span></td><td><span style="font-size:78%;color:#000000;">54.4bn </span></td><td><span style="font-size:78%;color:#000000;">1,403.7bn </span></td></tr><tr><td><span style="font-size:78%;color:#000000;">NYSE (Conventional) </span></td><td><span style="font-size:78%;color:#000000;">588.1bn </span></td><td><span style="font-size:78%;color:#000000;">21,789.5bn </span></td></tr></tbody></table></div><p align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><span style="font-size:78%;color:#000000;"></span></p><p align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><span style="font-size:78%;color:#000000;">What are the rules applied to identify a stock as Sharia-compliant or not? There are different opinions and ongoing debate. But the best known and most widely accepted rules are defined by the Sharia Supervisory Board of Dow Jones Islamic Market Indexes and laid out in their rulebook: </span></p><p class="articlequote" align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><span style="color:#000000;"><span style="font-size:78%;"><b>Industry Type:</b> Excluded are companies that represent the following lines of business: alcohol, tobacco, pork-related products, financial services, defence/weapons and entertainment. </span></span></p><p class="articlequote" align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><span style="color:#000000;"><span style="font-size:78%;"><b>Financial Ratios:</b> Excluded are companies whose: </span></span></p><div align="justify" style="font-family:tahoma, new york, times, serif;font-size:12pt;color:#0000ff;"><ul><li><span style="font-size:78%;color:#000000;">Total debt divided by trailing 12-month average market capitalisation is 33% or more. </span><li><span style="font-size:78%;color:#000000;">Cash plus interest-bearing securities divided by trailing 12-month average market capitalisation is 33% or more. </span><li><span style="font-size:78%;color:#000000;">Accounts receivables divided by 12-month average market capitalisation is 33% or more.</span><span style="font-size:85%;color:#000000;"> </span></li></ul></div><p align="justify"><span style="font-size:85%;color:#000000;">The rules are designed to exclude forbidden activities for Muslims, minimising the impact of interest received and paid, and avoiding the trading of debt. Unintended impermissible income should be forwarded to a charity – a matter of pragmatic compromise. There is no requirement that the companies are managed by Muslims, or are situated in Muslim countries. Interestingly, initial empirical analysis suggests that there is no cost for following ethical rules in terms of returns. Higher performance has even been observed at some times and the future will tell us whether this is significant – Enron, as a famous example, was screened out because of increasing debt levels. However, underperformance of course can occur when a prohibited sector like finance is doing well. </span></p><p align="justify"><span style="font-size:85%;color:#000000;">As Western stock markets are much larger they also provide the majority of the market capitalisation of the leading Dow Jones Islamic Market Index, which nevertheless increasingly includes areas not covered by other providers such as Malaysia and Sri Lanka. For major Western markets, Dow Jones has some competition as an Islamic index provider from FTSE and, in 2006, from Standard & Poors. As a matter of fact, the majority of Islamic funds will still be invested in Western markets, as the size and trading volume of Muslim stock markets is not yet well advanced. A number qualify as emerging markets, some as frontier markets, and many are much too small to accommodate with any substantial funds. </span></p><p align="justify"><span style="font-size:85%;color:#000000;">An ongoing debate among Muslims about all exchanges is whether speculation on them is permissible or not. Speculation in the Western meaning can be of two kinds: investing, with the aim of being a partner with the company invested in; and gambling, buying the same company for price differentials. In the latter case there is fierce debate as to when speculating on price differentials constitutes gambling and when it does not. Obviously a grey zone exists. The legal contract for buying and selling shares is always to be upheld and enforceable, but what about the intention, the major criterion at the day of judgement – is it about gambling or investing? If price bubbles go high there is often not much doubt left about the intention; the person who sells his house to fund his speculation is no longer a reasonable investor but a gambler. </span></p><h2 align="justify"><span style="font-size:85%;color:#000000;">Derivatives </span></h2><p align="justify"><span style="font-size:85%;color:#000000;">A similar debate surrounds derivatives. Technically we have to differentiate two conventional derivative contracts: </span></p><ul><li><div align="justify"><span style="font-size:85%;color:#000000;">The forward purchase </span></div><li><div align="justify"><span style="font-size:85%;color:#000000;">The right to buy or sell </span></div></li></ul><p align="justify"><span style="font-size:85%;color:#000000;">The forward purchase is not considered to be permissible as it contravenes the general rule 'do not sell what you do not own', an established principle of Islamic jurisprudence. Therefore the normal contract for shorting shares is impermissible under Sharia rules. </span></p><p align="justify"><span style="font-size:85%;color:#000000;"></span></p><p align="justify"><span style="font-size:85%;color:#000000;">Nor can the right to buy or sell be the subject of a valid contract. A similar right evolves if one party gives a unilateral promise for another to buy or sell, but, there is no compensation for it. This restriction is hindering Islamic financial institutions from participating in the deeper derivate markets in the Western world, even for transactions which have a real business concern as their motivation. </span></p><p align="justify"><span style="font-size:85%;color:#000000;"></span></p><p align="justify"><span style="font-size:85%;color:#000000;">Nevertheless, contracts allowing the hedging of risk were known in Islamic law from the earliest times. <i>Salam</i> or <i>Salaf</i> is the name of one of these contracts, for a sale by description of a homogenous good. The delivery is postponed, but the price is paid today. It allows individuals to benefit from falling prices, for example by enabling a farmer to secure the future price of his harvest. A major condition is that delivery needs to be done even if the harvest is not as expected. The Hanbali school, prevalent in Saudi Arabia, allows an even more liberal stance, with <i>Arbun</i>, a downpayment with revocation option. While in a Salam contract full payment needs to be made today, <i>Arbun</i> allows the purchaser to pay only a part, the downpayment. If markets change the buyer can revoke the contract and leave the downpayment with the seller. With a high downpayment <i>Arbun</i> functions similarly to a <i>Salam</i> contract, while a small downpayment can be compared with either an American option, where execution can be done during the agreed-upon time, or with an European option, where execution could be done only at a given date. Among academics there is also a discussion as to whether master agreements (<i>Istijrar</i>) can be used to replicate barrier and Asian options. Last but not least, Deutsche Bank published an academic paper presenting their <i>Wa</i><i>'d</i> structure, two promises functioning like a forward contract at a price referenced to any index. More and more hedging tools are being discussed, but at a very early stage. The International Islamic Financial Market in Bahrain works together with ISDA to define template contracts for Islamic quasi-derivatives. </span></p><h2 align="justify"><span style="font-size:85%;color:#000000;">Forex markets </span></h2><p align="justify"><span style="font-size:85%;color:#000000;">Foreign exchange is restricted by Sharia by the rules of exchange of currencies (<i>Sarf</i>), requiring spot transactions. In addition, there is a widespread distrust regarding fiat/paper money among Muslims; some groups go as far as requesting a return to a gold standard. In early Islam six commodities were used as monies: gold, silver, wheat, barley, dates and salt – a multiple currency environment. </span></p><p align="justify"><span style="font-size:85%;color:#000000;"></span></p><p align="justify"><span style="font-size:85%;color:#000000;">In the Gulf Cooperation Council countries (Saudi Arabia, Qatar, Kuwait, Bahrain, UAE, Oman) there is an intense debate about creating a single currency, like the euro in Europe. All individual currencies are currently pegged to the US dollar. This is likely to persist, although the high US dollar surplus from oil and the rising import costs from Europe and Asia do not represent a proper exchange rate any longer; a devaluation of the US dollar is getting more likely. </span></p><p align="justify"><span style="font-size:85%;color:#000000;"></span></p><p align="justify"><span style="font-size:85%;color:#000000;">Forex hedging transactions for future dates are rather difficult to offer for an Islamic financial institution. A forward contract is not permissible. Likewise <i>Arbun</i> and <i>Salam</i> are not applicable. Hence, only a unilateral promise can form an instrument in some cases – but there is no compensation embedded in the first place. </span></p><h2 align="justify"><span style="font-size:85%;color:#000000;">Islamic bond markets </span></h2><p align="justify"><span style="font-size:85%;color:#000000;">Conventional bonds are based on interest-bearing loans and consequently prohibited in Islamic finance. An alternative instrument which came into prominence over the last five years is called by its Arabic name '<i>Sukuk</i><i>'</i>. A <i>Sukuk</i>, the plural of <i>Sakk</i> (the origin of the English word 'cheque'), is a certificate representing partial ownership in certain assets accepted by Sharia. A structure that has been popular for some time is based on a sale and leaseback with purchase undertaking. A company wishes to sell its headquarter and leases it back. A Special Purpose Vehicle collects the funds from the investors to buy the property. After the maturity date the purchase undertaking, a unilateral promise, is executed and the company buys the headquarter back at principal. During the rental period the cash flow consists of the rents paid to the landlord, in many cases benchmarked to LIBOR. </span></p><p align="justify"><span style="color:#000000;"><span style="font-size:85%;"><i>Sukuk</i> are being listed in Bahrain, at the Dubai International Financial Exchange, Kuala Lumpur, Ireland, London and Luxembourg. Both London and Luxembourg recently increased their efforts to attract these listings; the UK even gave an assurance that <i>Sukuk</i> can be used by UK corporates with the same tax treatment as conventional bonds. In April 2007, a UK finance minister announced that the government was considering borrowing money via bonds that were Sharia-compliant. </span></span></p><p align="justify"><span style="font-size:85%;color:#000000;"></span></p><p align="justify"><span style="font-size:85%;color:#000000;">Secondary market trading of <i>Sukuk</i> is increasing slowly and is still on a very low level. As bonds are mostly traded OTC and not on an exchange, some <i>Sukuk</i> desks have been set up; a major dealer is the Liquidity Management Centre in Bahrain. </span></p><h2 align="justify"><span style="font-size:85%;color:#000000;">Commodity markets </span></h2><p align="justify"><span style="font-size:85%;color:#000000;">Commodity markets are strongly used for a transaction called <i>Tawarruq</i>. This is the purchase of a commodity on credit and the sale to a third party at spot for a lower price – two sales contracts replicating exactly a conventional loan. Treasuries of Islamic financial institutions in particular rely on this method to manage their assets and liabilities. The approach is highly disliked among academics and practitioners but Islamic finance still lacks an elegant solution to meet this necessity. So some scholars see an advantage in upholding a legal form, even if the substance is no different from an interest-bearing transaction. The commodity bought and sold for this large transactions is typically platinum or aluminium, any commodity considered permissible and not money in Sharia. The London Metal Exchange is a traditional harbour for this business, Tokyo looked into it, Malaysia is using palm oil, and scholars are starting to push Islamic financial institutions to use local traders rather than international exchanges. </span></p><h2 align="justify"><span style="font-size:85%;color:#000000;">Vision </span></h2><p align="justify"><span style="font-size:85%;color:#000000;">Islamic finance and exchanges is a theme with many facets. And we will see an increasing relevance for the exchanges of the world as the market share of Islamic finance increases steadily in the core markets of the Gulf and beyond. For commodity trades, the relevance of local traders will increase; for investments a move towards China and India is ongoing, following the demand for oil; and at least some Islamic-only exchanges will be built to serve the pious Muslim's financial needs and contribute to the wider economic development of Muslim societies. </span></p><p align="justify"><br /><br /><a href="http://www.islamicfinanceandbanking.com/" target="_blank" rel="nofollow"><span style="font-size:85%;color:#000000;"><img alt="Click Here- Riyazi Farook" src="http://img218.imageshack.us/img218/1931/riyazi.png" border="0" /></span></a><span style="font-size:85%;color:#000000;"><br /></span></p><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com5tag:blogger.com,1999:blog-36321277.post-6028627905786442342009-03-31T10:42:00.007-01:002009-03-31T10:51:52.043-01:00<div align="justify" style="font-family:verdana, helvetica, sans-serif;font-size:8pt;color:#000000;"><h1 align="center"><span style="font-family:arial;font-size:100%;color:#000000;">Top 500 Islamic Financial Institutions</span></h1><div class="photo_first"><span style="color:#000000;"><img height="138" alt="" src="http://www.thebanker.com/images/6123.photo.2.jpg" width="100" /> </span></div><p class="photo_first"><span style="font-size:85%;color:#000000;">Joe Divanna, managing director, Maris Strategies</span></p><h2><p><span style="font-size:78%;color:#000000;">As the banking industry descends into ever-deeper gloom, the more ethical, risk-sharing approach offered by the Islamic finance industry is attracting an increasing amount of attention. The Banker's Top 500 Islamic Financial Institutions ranking lists the sector's key players.</span></p><p><span style="font-size:78%;"><span style="color:#000000;">By <i>Stephen Timewell</i> & <i>Joseph DiVanna</i></span></span></p></h2><p><span style="color:#000000;">During the past four decades Islamic financial institutions have evolved from mere concepts into fully fledged realities. And in recent years there has been a new dynamism as this fledgling financial industry has proved increasingly attractive, not only to the world's 1.6 billion Muslims but also to many others who are beginning to understand the unique aspects of Islamic finance.</span></p><p><span style="color:#000000;">While the credit crunch creates turmoil throughout the global banking industry, the impact of certain risks and risk management strategies have been highlighted. The effects of taking excessive risks have led to horrendous banking losses for many and have also emphasised the different philosophical approaches between Islamic and traditional or conventional Western finance.</span></p><p><span style="color:#000000;">This does not mean that Islamic institutions do not take risks, they certainly do. But with risk sharing being a fundamental tenet of Islamic finance, the credit crunch has highlighted core differences in financial philosophy, leading many to suggest that Islamic finance represents not only a flight to quality but also a more ethical approach to banking.</span></p><p><span style="color:#000000;">How to gauge the impact of this new style of banking, especially in this extraordinary financial period, is complex. But basic data is essential and a clear understanding of the Islamic financial spectrum is necessary to provide a reliable global overview of this growing industry.</span></p><p><span style="color:#000000;">This month <i>The Banker </i>publishes its second comprehensive analysis of the Islamic financial industry, incorporating 500 Islamic institutions, including banks, finance companies and insurance (takaful) companies from 47 countries. In order to provide a verifiable benchmark, <i>The Banker</i> has sought, with the help of Cambridge consultancy Maris Strategies, to establish the size of sharia-compliant assets across all institutions worldwide which provide Islamic financial services (see Methodology Box ).</span></p><p><span style="color:#000000;">This second Top 500 Islamic Financial Institutions (TIFI) listing demonstrates both the robust size and strong growth of sharia-compliant assets (SCAs). This 2008 report shows that the sharia-compliant assets of the Top 500 have grown by 27.6% since the report of November 2007 to reach $639.1bn, continuing the healthy expansion of Islamic institutions of recent years. The 2007 report showed 29.7% annual growth in SCAs, reaching $500.5bn.</span></p><p><span style="color:#000000;"></span></p><p><b><span style="color:#000000;">Critical growth</span></b></p><p><span style="color:#000000;">This second listing reflects not only critical growth in assets but also important improvement in the level of disclosure. While disclosure still has a long way to go across all types of Islamic financial institutions, the number of firms reporting sharia-compliant assets rose by 57 to 280 this year, from 221 in last year's report. But, no matter how welcome this increase may be, there are clearly still 334 institutions not reporting SCAs and a number of international banks with Islamic subsidiaries, such as Standard Chartered Saadiq, not willing to provide basic information. Nevertheless, while the listing stays at 500, the number of registered institutions continues to grow, reaching 614 this year, compared with 524 last year.</span></p><p><span style="color:#000000;">The key developments in Islamic finance over the past year have been the growth in new institutions, especially Islamic investment banks, in the Gulf and also in London. Institutions such as Noor Islamic Bank in Dubai and Al Hilal Bank in Abu Dhabi, both opening with large capital bases, are providing the new face of Islamic finance. But the influence of this new financial form is spreading well beyond the Middle East and Muslim countries. Not only are there new institutions, such as European Finance House and Gatehouse Bank, setting up in London but HSBC Amanah, the Islamic subsidiary of global giant HSBC, has jumped to 10th place in <i>The Banker</i>'s table, from 14th last year, after a significant 56.2% rise in SCAs.</span></p><p><span style="color:#000000;">The attraction of Islamic finance is growing in the non-Islamic as well as the Islamic world, and the global credit crunch has helped to stress its advantages in terms of lowering risk and creating alternative financing structures. Mohammed Amin, UK head of Islamic finance at PricewaterhouseCoopers, says: "I am aware of several UK companies, which would otherwise borrow conventionally, who are talking to Islamic banks regarding funding. The credit crunch has had much less impact on Islamic banks' ability to lend compared with conventional banks."</span></p><p><span style="color:#000000;"></span></p><p><b><span style="color:#000000;">Into the mainstream</span></b></p><p><span style="color:#000000;">Also, the interest in Islamic finance by the major global financial institutions has helped bring it into the mainstream. This can be easily seen in the Bloomberg league tables for Islamic finance (including both Islamic bonds and loans) where almost half of the leading 20 players are major international institutions. And while this year's Top 500 $639.1bn total in SCAs is miniscule compared with the $90,256bn amassed by<i> The Banker</i>'s Top 1000 World Banks, there are huge opportunities in this young market.</span></p><p><span style="color:#000000;">"The rise of Islamic banking may indeed be one of the most important developments in the global financial services business this decade," says Douglas Johnson, CEO of New York-based Calyx Financial. "Certainly these institutions help to integrate and expand worldwide economic development, which is never a zero-sum game." Part of these global developments could come in the form of sovereign sukuks (Islamic bonds) from countries such as the UK, which is studying their issue. It could also boost London's role as an Islamic financial centre. "Sovereign sterling sukuk, issued with short maturities of up to 12 months, will meet a real need that London Islamic banks and takaful have for managing liquidity, and my expectation is that the study will ­eventually reach a positive conclusion," says PwC's Mohammed Amin. "If so, the first issue may take place in 2009, after legislation to eliminate the stamp duty land tax cost that would presently arise on issuing sukuk based upon leases of UK land and buildings, which was consulted on over the summer."</span></p><p><span style="color:#000000;"></span></p><p><b><span style="color:#000000;">Close analysis</span></b></p><p><span style="color:#000000;">In analysing the $639.1bn Top 500 market, the six states of the Gulf Co-operation ­Council (GCC) – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates – provide the largest regional segment and also the largest growth in the 2008 report. Institutions from the GCC grew by a staggering 47.5% to reach $262.7bn. The non-GCC states of the Middle East and north Africa (MENA) region, which are dominated by Iran, also expanded significantly, rising by 40.4% to reach $248.3bn.</span></p><p><span style="color:#000000;">Together, the GCC and non-GCC MENA states account for an increasingly dominant share of the Islamic financial institutions market with 80% in the 2008 report compared to 70.9% in the 2007 report.</span></p><p><span style="color:#000000;">Asia, led by Malaysia, which grew by 32.3% to reach $67.1bn and the third biggest country with regards to Islamic finance, is the third largest region in the world again but its level of SCAs has declined significantly this year. This was due partially to restating of assets in Pakistan and Brunei. Asia's share of the market fell to 13.5% but analysts expect strong growth from Pakistan and Indonesia, which have relatively low SCA levels given their high Muslim populations.</span></p><p><span style="color:#000000;">The Australia/Europe/America grouping expanded by 60.6% to $35.1bn, 5.4% of the market, but growing through the UK's rapid expansion in Islamic finance partially via HSBC Amanah.</span></p><p><span style="color:#000000;">In country terms, Iran again has the largest level of sharia-compliant assets, at $235.3bn, more than double that of the next nearest country in the rankings, Saudi Arabia at $92bn. The Iranian banks and authorities claim their institutions are 100% Islamic, a view that is not generally shared in the industry. Saudi Arabia and Malaysia say their SCAs make up only 31.1% and 22.9% respectively of their total assets, hence their SCA figures are much smaller than those of Iran. The leading countries remain broadly the same as last year: Kuwait, UAE, Bahrain, Qatar and the UK are the next five in the listing.</span></p><p><span style="color:#000000;">Examining the Top 500 listing, unsurprisingly, the Iranian banks dominate the leading positions, accounting for 10 out of the leading 25 institutions, which are led again by Bank Melli Iran, with SCAs of $48.5bn. The big mover among the top players in the report is Kuwait Finance House, which increased its SCAs by a huge 70.3% to $37.2bn to move into second position. Saudi Arabia's Al Rajhi Bank moves up into third place with growth of 18.7% to $33.3bn.</span></p><p><span style="color:#000000;"></span></p><p><b><span style="color:#000000;">Geographical analysis</span></b></p><p><span style="color:#000000;">Of the leading 10 banks, six, led by Bank Melli, come from Iran; the others are Bank Saderat, Bank Mellat, Bank Tejarat, Bank Sepah and Bank Keshavarzi. Dubai Islamic Bank moved up to eighth from ninth place and the UK's HSBC Amanah moved from 14th to 10th.</span></p><p><span style="color:#000000;">Looking ahead, the growth in banking and finance in the MENA region, along with the absence of serious damage from the global credit crunch, provides some assurance that recent high growth rates of sharia-compliant assets approaching 30% will be maintained. But even with lower projected growth rates of 25%, which seems justified by the listing data, SCAs of about $800bn in 2009 and $1000bn in 2010 look likely. And this growth only reflects modest expansion in the industry – the upside could be considerably more.</span></p><p><span style="color:#000000;"></span></p><p><b><span style="color:#000000;">METHODOLOGY</span></b></p><p><span style="color:#000000;">Last year's Top 500 Islamic Financial Institutions' listing was a bold first step to set a benchmark for the world's Islamic financial industry. This year, the list has been re-examined and supplemented through various credible sources, including central banks, public and private agencies providing advisory services to the Islamic financial institutions. All the financial details of the listed institutions have been updated to the best of our knowledge.</span></p><p><span style="color:#000000;"><i>The Banker </i>regards sharia-compliant assets as the primary index in compiling the Top 500 listing. We are aware that not all challenges in developing a universal and comprehensive platform to demonstrate the industry's state will be overcome by applying sharia-compliant assets as the guiding principle. To some extent, it will undermine our understanding of the contribution made by non-bank financial institutions, such as investment banks and insurance companies in the market. However, we believe that this is the best available approach to illustrating the entirety of the market at this early stage. Efforts have been made to maintain consistency of financial details. Annualised foreign currency rates provided by the International Monetary Fund's international financial statistics are used when converting local currencies to US dollars. Going forward, our intent is to work with those involved in the Islamic financial market to provide a platform to improve our Top 500 listing.</span></p></div><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com4tag:blogger.com,1999:blog-36321277.post-41395166121612677342009-03-09T11:51:00.003-01:002009-03-09T12:06:35.320-01:00<div align="justify"><span style="color:#000000;"><span style="font-size:130%;"><strong>Global Financial Crisis Unthinkable Under Islamic Banking Principles.</strong></span><br /></span><span style="color:#000000;"><span style="font-family:arial;">By Riyazi Farook, MA (UK), DipM (UK), PgDip IBI (UK)<br /></span><br /><br />As the economy superpowers on the brink of recession, the global financial industry declines into ever-deeper crisis, the collapse in the sub-prime market begins to have an impact on banking around the world, now credit crunch creates turmoil throughout the global economy. Recent years we had heard of the term 'Credit Crunch', defined as "A severe shortage of money or credit", the slogan has now entered dictionaries. The consequences of taking higher risks have led to unprecedented banking collapse around the world and have also emphasised the core philosophical methods between Islamic and conventional or interest based finance. Islamic banking institutions do take risk. But the clear distinction is risk-sharing being a fundamental principle of Islamic banking, the more ethical and risk sharing method offered by the Islamic banking industry is emerging and attracting an increasing amount of demand.<br /><br />The global economic crisis sparked by the US subprime mortgage meltdown would not have occurred if Islamic principles were applied in international financial markets, an Islamic scholar said. International Centre for Education in Islamic Finance (INCEIF) said US subprime mortgage crisis would technically be unthinkable in the Islamic financial markets sector because it would be against Shari’ah (Islamic Law) principles to sell a debt against a debt. The rule is very simple and clear, you can’t sell unless you posses the asset in Islamic trade. But in the subprime mortgage crisis had seen trillions of dollars traded without backing of assets and not supposed to be traded on Islamic principles. If such transactions followed the Islamic finance model it would have easily prevented and stabilised the global economic crisis by the use of Islamic Finance and Banking principles.<br /><br /><strong>Global Islamic Finance and Banking Industry</strong><br /><br />According to Financial Times, over the past decade Islamic banking is estimate to have grown more than fivefold from around $150bn in 1990 to $900bn in 2008 and growing at a rate of 15% to 20% a year and are set to hit $2 trillion in 2010. Global Islamic banking assets worth, based on the latest figures released by the Financial Times in 2008 November, grew by 27.6% over the past year to reach over $800 billion from around 50 countries. Although this is a relatively small compared with the $90, 256bn in total assets amassed by the top 1000 conventional banks around the world.<br /><br />Analysing the $800bn global market, the six states of the Gulf Cooperation Council-GCC (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE) offer the largest portion of the total but the non-GCC Middle East and North Africa (MENA) states are not far behind. While the overall total grew by 27.6% to $800bn in the listing, the GCC institutions expanded the most by a staggering 47.5% to $262.7bn and the non-GCC MENA institutions grew by 40.4% to reach $248.3bn. Asia, led by Malaysia, Brunei, Pakistan, Bangladesh, Indonesia and Thailand, is the largest region in the world for Shari’ah-compliant assets, growing by 32.3% to 119.3bn. Australia, Europe and North America grown by 60.6% to account $35.1bn with sub-Saharan African institutions contributed $4.7bn in assets. Now Global banking giant such as America's Citigroup, Britain's HSBC and Germany's Deutsche Bank have also established Shari’ah-compliant banking units.<br /><br /><strong>The Financial Crisis: How it happened</strong><br /><br />US Federal Reserve increased the key interest rates from 1% to 5.35% following a two year time between 2004 and 2006, the US housing market starts to experience the worst, with prices decreasing and a rise in mortgages fail homeowners to make their payments. These default rates on high risk sub-prime loans to consumers with poor or no credit histories has risen to record levels. As colossal losses in US financial market led to a crunch on global credit markets and subsequent fall in international equity markets. The collapse in the sub-prime market begins to have an impact at banks around the world. Federal Reserve brought a warning that the US sub-prime crisis could cost up to $400bn. The Federal Reserve slashes the key interest rate to by 0.5% to 5.75% at which it lends banks, warning the financial crisis could be a risk to economic growth. Not only the US Federal Reserve, the Bank of Canada and the Bank of Japan also begin to intervene. It is the obvious sign that conventional banks are refusing to lend and do business with each other. To improve this situation the European Central Bank subsidised 108.7bn Euros into the financial market to try to improve liquidity. UK high risk mortgage providers set to pull out mortgages and increased the cost of borrowing for UK homeowners with poor credit histories.<br /><br />In August 2007 French bank BNP Paribas produced quick climb in the cost of credit, and made global financial recognize how serious the circumstances was, however, start off much earlier. Investment bank BNP Paribas announced investors they would not be able to obtain money out of two of its main funds because it cause difficulties in valuing the assets, owing to a "complete evaporation of liquidity" in the market. In October 2007 major failures start to appear in the world’s financial industry, Swiss banking giant UBS bank has announced losses $3.4bn from investments linked to sub-prime. Following, American banking giant Citigroup posted a sub-prime loss of $40bn. US investment bank Merrill Lynch revealed a $7.9bn disclosure to bad debt. A major bond insurer MBIA, announced a loss of $2.3bn. After failing to search for a potential buyer, Lehman Brothers becoming the first major US investment bank to collapse since beginning of the credit crisis. The US Federal Reserve pledge an $85bn rescue package the nation's largest insurance company AIG, to keep it away from liquidation.<br /><br />Former Federal Reserve chief Alan Greenspan described the current financial crisis as "probably a once in a century type of event" and cautioned that this financial calamity will lead to the closure of major firms. The US House of Representatives passes a $700bn (£394bn) government plan to rescue the US financial sector a part of $900bn (£600bn) economic stimulus package.<br /><br /><strong>Aftermath of Financial Crisis</strong><br /><br /><strong><em>Global:</em></strong><br /><br />The World Bank predicted that global economic growth will slow in 2009, as the financial crunch hits the wealthiest nations. Following this announcement global stock markets, including London's FTSE 100 index, experience their major collapses since 11 September 2001. International Monetary Fund (IMF) warns that world economy development could decline to its lowest point ever since World War II to just 0.5% this year. As the result of economy slowdown by the end of this year up to 51 million jobs will be lost worldwide that has creating a global unemployment crisis, International Labour Organisation (ILO) reported.<br /><br />Extreme market volatility caused a loss of 600m Euros to French savings bank Caisse d'Epargne during the financial market crisis. South Korea announced a $130bn financial rescue package to stabilise its financial markets. The Dutch government funded 20bn Euros ($26.8bn) to protect the financial sector from the credit crisis. Sweden's government also announced its financial rescue plan, with credit guarantees to banks and mortgage providers up to a level of 1.5 trillion kroner (£117.2bn; $205bn). The government also announced it will establish aside 15bn kroner as a bank stabilisation fund.<br /><br /><strong><em>United States of America</em></strong>:<br /><br />Mr Obama took over the White House with 11 million Americans unemployed, More than half a million Americans jobs slashed in last month, creating the worst year for US unemployment since the end of the Second World War and trillions of dollars of lost in stock market savings, Mr Obama pledged economy was his first and greatest priority. As Mr Obama already been proposed and presented $838 billion stimulus package to Congress has just been passed by the US senate and the infusion of $350 billion left over from the bail-out package agreed in October, 2008.<br /><br />The crisis had a significant domino effect on the US economy and, which in turn affected almost all stock markets worldwide. The interest rate has been cut hugely by the Federal Reserve from the 5.25% where it stood in September 2007.The US Federal Reserve has slashed its key interest rate from 1% to a range of between 0.00 - 0.25% as it battles the country's recession. Since 1954 it is the lowest the central bank's key rate - the target rate for banks to charge to lend to each other. Analysts said that the key interest rate is now virtually zero, however it's zero or 0.25% actually does not make a huge difference.<br /><br /><strong><em>United Kingdom</em></strong>:<br /><br />While pound at a 23-year low against the dollar the Bank of England has cut interest rates to a record low of 1% from 1.5% in February, the first time since the Bank of England was founded in 1694—the lowest level in its 315-year history. Ernst & Young, said that the Bank should not stop here rates will be cut again. UK government considered once interest rates brought to zero as an approach to help both fuel the economy and avoid deflation.<br /><br />According to figures released by the Office for National Statistics (ONS) that the UK is on the brink of a recession. The UK economy failed to grow at all for the first time since 1992 between July and September, as economic growth down by 0.5%. Housing market in the UK has fallen to its lowest point in 30 years in March this year led to one of the UK’s biggest nationalisation in which the UK government had to pump billions of pounds of taxpayers' money into three UK banks (Royal Bank of Scotland (RBS), Lloyds TSB and HBOS). Bank of England officially gave the figures in its latest bi-annual Financial Stability Report that globally financial institutions have already lost $2.8 trillion from the latest financial meltdown.<br /><br /><strong>Scam or failure?</strong><br /><br />During the financial crisis the The FBI has arrested 406 people, including well-respected Wall Street figure Bernard Madoff, a former chairman of Nasdaq has been charged with operating alleged $50bn (£30bn) "Ponzi scheme", world's biggest banks have become the victims of this biggest fraud in history stretched wider and deeper than anyone imagined. Housing developers and brokers also on alleged mortgage frauds worth $1bn linked to sub-prime mortgages.<br /><br />The financial model used by many investment banks including American investment bank Lehman Brothers and British retail banks HBOS has been questioned about the financial and model. Confidence and trust, two of the most invaluable principles, are at the lowest point following the bailout of Fannie Mae, Freddie Mac and AIG. The financial crisis perhaps the worst since 1929 when Bank of America took over the collapsed Lehman Brothers, Bear Stearns and Merrill Lynch.<br /><br />From Wall street & Canary Wharf in London, there has been growing accusations that state-backed banks paid and preparing pay out billions of pounds in bonuses to reward failure lavishly from taxpayers money Even if bankers are legally entitled to enjoy bonuses there is a moral responsibility on some of these bankers, will bring accusations that the taxpayer-funded bank is happy to reward failure lavishly.<br /><br /><strong>How could have prevented and unthinkable</strong><br /><br />Islamic or conventional, in today’s global volatiles condition all types are effected. However, while the global financial crisis losses of more than $400 billion from conventional banks worldwide, Islamic banks are virtually nil. Because the Islamic Finance and Banking have defining characteristics in the conventional finance world after the unprecedented crisis of the U.S. subprime mortgage market left financial institutions hundreds of billions of dollars of worthless credit instruments attached to home loans by complex structures.<br /><br />Islamic banking and finance generally presents very low risk profile than conventional western finance, this presents a very meaningful way for both consumers and institutional investors and suggests that investment with Islamic financial institutions will grow dramatically as investors switch to more secure products in this environment. As the risk profile of Islamic Banks is generally lower than conventional western banks, this opportunity offers a more solid option for both consumers and institutional investors, also proposes that Islamic Finance and Banking industry will create positive awareness and confidence among people to grow faster as they switch to more secure products in this environment. Unlike the western banks, who will continue to restrict their lending policies in light of the current economic crisis Islamic banks posses huge sum of capital to finance wealthy individuals and corporate.<br /><br />While the conventional financial system failing catastrophically, Islamic banking and finance system seems to take root, with 17% of Qatari and 15% of Malaysian banking assets and impressively, over 95% of finance and banking transactions in Saudi Arabia comply with Shari’ah (Islamic law). Global banks have written down more than $400 billion while none of Malaysia's Islamic banks have been written down from the resulting global credit crunch. The Wall Street Journal, highlighted points out that conventional financial system is facing ever-deeper crisis while Islamic banking playing a pivotal role in over $200bln worth of projects fascinating the Middle East and North Africa (MENA) region.<br /><br />According to Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) senior Islamic financial products should to be compliant with Islamic Shari’ah principle to avoid excessive gearing and speculation and the stricter rules imposed on lending by Islamic law prohibits the payment of interest and requires transactions to be linked to assets and require tight controls on debt levels - precisely what regulators of conventional finance are looking for the world over the current financial crisis.<br /><br />Greater transparency, this is one of the key unique selling points of Islamic Finance and Banking, as the industry seeks to capitalise on the market wracked with turmoil and many filled with gloom from failing of the conventional market. Liquidity risk is one of the key challenges for conventional finance industry which has been created by the ongoing financial crisis. Due to the fact that Shari’ah constraints the revenue generation from interest based sources, the conventional market is out of reach for Islamic financial institutions. Therefore, surplus liquidity cannot simply be capitalised to conventional financial institutions. However, it is permissible to exchange of funds between Islamic banks, by the use of Mudarabah and Musharakah instruments. Islamic Development Bank, Bahrain Monetary Agency and Bank Negara Malaysia few of the most respected entities in Islamic Finance and Banking industry playing key role in this area.<br /><br /><strong>What is Islamic Finance really?</strong><br /><br />Islamic banking is a comprehensive financial concept which rapidly grows globally. Islamic banking is different from conventional banking in many directions, where principles and core values of Islamic Banking are originated from religion is very important. Awareness of Islamic Banking is expanding very fast. Politics and history have a high influence in implementing the Islamic banking practice in the countries where the system operates its highest standard. Islamic Banking is an unfamiliar concept in the Western World. The core concept of Islamic Banking contains much more than its prohibition of usury (Impose a fee for transacting money - "interest" or "excessive interest"). Islamic Banking priority objective is that ethic and finance can be dedicated to serve the society. The main idea behind the banking system is to eliminate the widespread economy injustice in society.<br /><br />Prohibition of interest (Riba) is not only limited to Islam but it is also clearly forbidden in Judaism and Christianity. Main difference between Islamic and conventional banking is not that conventional banking allows interest bearing transaction and Islamic banking does not. But the core principles of Islamic banking and finance are;<br /><br />I. Prohibition of Riba (Interest or Usury) or 0.0% interest<br />II. Application of trade and commerce (Al Bay) in all transactions to ensure the profit & loss sharing<br />III. Avoid of Gharar and Maisir, particular types of uncertainty or contingency in contracts such as speculation, derivatives and short selling as well gambling and high risk<br />IV. Disengagement from financing alcohol, tobacco & drugs, weapons, porn, gambling, and environmentally harmful products.<br /><br />The origin of Islamic banking is from the religion Islam might cause reluctance and suspicion among Western world possibly this can be even worse as its concept is still unknown to world in general. In today’s world various approaches has been undergoing to gets closer the Islamic Banking to all consumers encourage to be dealt with.<br /></span><span style="color:#000000;"><strong><br />The Bailout</strong><br /><br />When financial crisis hit Asia ten yeas ago there was a flow of funds from the western financial institutions in Asia which helped in some way to overcome the crisis. However, interestingly this time the case is reverse, the funds flow from Middle East and Asia. The global financial crisis offered the $1 trillion worth Islamic Finance and Banking industry with an opportunity to expand its appeal beyond its Muslim consumers and investors and is also drawing the interest of companies outside the Middle East.<br /><br />A growing number of investors are adapting to Islamic financial instruments to get projects off the ground. Islamic Finance and Banking principles emphasised that gains are from ethical, shared investment rather than being interest-based. Ethical nature of the Islamic banking policies may appeal to consumers from various cultural backgrounds. Gulf Cooperation Council (GCC) is increasing financial providers of fully-fledge Islamic banks and finance units at conventional banks and introducing more instruments in the GCC market to investable wealth which is increasing by one of the highest rates in the world.<br /><br />Zurich based investment bank Credit Suisse believe investment in Islamic Finance and Banking products are not expose to interest rates since Islam prohibits charging interest and Sukuk or Islamic bonds, unaffected to the credit crisis in the international finance and banking industry. Islamic insurance (Takaful) works by policyholders paying into and claiming from a central pool - the system works on a "risk-sharing" model on contrast to the conventional insurance model. Credit Suisse advices that before Islamic Finance and Banking institutions provide traditional Islamic and non-Muslim investors asset allocation it needs more liquid instruments that can compete with orthodox investment vehicles.<br /><br />The popularity of Islamic Finance and Banking has set to a remarkable demand in the development of innovative and creative products. This significant development has particularly focused on the on the instrument of Sukuk, where number of diverse Sukuk products have been created. Islamic bonds, or Sukuk backed by the tangible assets. Islamic bonds, designed with unique structures and features, cannot fall into catastrophe such as subprime mortgage. Subprime mortgages are backed by dubiously rated collateralised debt packages which eventually caused unprecedented global credit crunch. Islamic Finance experts and scholars firmly believe that Sukuks or Islamic Bonds could provide answer to this current global credit crisis.<br /><br />The Gulf Finance House in Bahrain will invest in energy production projects to meet the greater demand for alternative energy needs by the launch of a Shari'ah compliant "Energy Bank". There are many investors and developers worldwide adopting the Islamic financial models to finance their projects. The most recent activity is Singapore based CapitaLand Limited, South East Asia´s largest property company, which planning to issue US$700 million worth of Islamic bond.<br /><br />The U.K. government is at the final stage of the process to issue government Sukuk, the first of its kind sovereign Sukuk to come out of the G8. The recent comments of the Archbishop of Canterbury have backed the growth of Islamic finance in London. In fact, the Sukuk (Islamic Bonds) is now appealing at corporate and government at internationally acceptable Islamic capital market instrument to raise finance. Similar to sovereigns such as the UK Treasury, the Japanese Ministry of Finance is also seriously studying the Sukuk structure to utilise as a debt management instrument in the wholesale sterling and yen markets. Outstanding issued Sukuks are value at US$97.3 billion globally, Sukuk market expecting to grow to US$200 billion dollars by 2010. London is already being successful with listing more than 15 Sukuk (Islamic Bonds) at London Stock Exchange (LSE) worth nearly £5 billion. LSE has also established the World's first secondary market for trading of Islamic bonds.<br /><br /><strong>Challenges Ahead</strong><br /><br />The financial crisis does not cause much of a danger to Islamic Finance and Banking industry; not because it is fundamentally insulated from the conventional financial industry but because oil prices. The industry's development has largely happened throughout a period in which oil prices, the basis of added liquidity, mostly in the Middle East that has fuelled the industry's growth. The stability of the Islamic financial industry will face its major challenge if oil prices continue to drop considerably.<br /><br />Islamic Finance and Banking industry has experienced faster growth since 2001 and the regulatory changes needed for the industry to continue growing. Leading Islamic Finance and Banking experts cautioned the industry was in danger because both banks and Shari’ah scholars were not developing solutions which are Shari’ah-compliant.<br /><br />Global financial meltdown has demonstrated that the Islamic Finance and Banking industry cannot remain totally immune to global financial market. However Islamic Finance and Banking industry evaded the toxic debt problems experienced by the conventional finance industry.<br /><br /></span><span style="font-family:arial;font-size:85%;color:#000000;">Riyazi Farook, holding a Masters Degree in Marketing Management from Middlesex University London and also a Postgraduate Diploma in Marketing from the Chartered Institute of Marketing (CIM), UK and Postgraduate Diploma in Islamic Banking and Insurance from the Institute of Islamic Banking & Insurance (IIBI), UK. He is a member of the CIM-UK and Associate Fellow of the IIBI-UK.<br />He can be reached via email at riyazif@yahoo.com or visit his website www.islamicfinanceandbanking.com</span></div><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com5tag:blogger.com,1999:blog-36321277.post-6816210701598651632009-02-18T08:46:00.019-01:002009-02-18T09:02:03.391-01:00<div align="justify"><strong><span style="color:#000000;"><span style="font-size:180%;"><span style="font-family:times new roman;">Surviving the credit crunch – Shari'ah-compliant retail investment opportunities </span><br /></span></span><em><span style="color:#000000;">01 January, 2009 Institute of Islamic Banking and Insurance UK Lectures<br /></span></em></strong><br /><span style="color:#000000;">Surviving the credit crunch – Shari'ah-compliant retail investment opportunities<br />Bashir Timol, director of 1st Ethical Ltd, a UK-based firm of Islamic investment and tax advisers, delivered the lecture on 16th October 2008. Timol has played a central part over the last seven years in developing a range of Shari'ah-compliant investments, tax planning products and Islamic wills for the domestic Muslim community. He has also liaised with Her Majesty's Revenue & Customs (HMRC), HM Treasury and the Financial Services Authority (FSA) over the development of Shari'ah-compliant regulation and legislation in the UK and has considerable experience of advanced tax mitigation strategies for UK-based owner-managed companies and professionals. The lecture was chaired by Mukhtar Karim, solicitor at Trowers & Hamlins, an international law firm.</span><br /><br /><span style="color:#000000;">The love affair with bricks and mortar has been especially pronounced within the UK Muslim community who have historically embraced property as a low-risk 'Shari'ah-compliant' alternative to conventional investments. The credit crunch and resulting property market price fall have dramatically underlined the need for investors to hold a diverse range of assets. Timol first discussed the key principles for Shari'ah compliance of investment transactions; all Islamic investment transactions must conform to certain guidelines to meet Shari'ah compliance. Like ethical or socially responsible investing, undesirable companies and industries are screened out on the basis of both qualitative criteria (nature of business) and quantitative criteria (level of receivables, debt and interest), and the investment supports only those products and businesses permissible from the Shari'ah viewpoint. Shari'ah-compliant investment transactions do not involve riba (interest). Instead, income is generated by investing the capital in the real economic activities and earning profit is legitimised by engaging in an economic activity and thereby contributing to the development of resources and the society.</span><br /><span style="color:#000000;"></span><br /><span style="color:#000000;">He mentioned that such transactions should not involve gharar (excessive uncertainty) or any kind of ambiguity in terms of the rights and responsibilities of the parties in the transaction. While uncertainty cannot be avoided altogether in any business transaction, Shari'ah scholars have derived a general principle that any contract must not be doubtful and uncertain as far as rights and obligations of the parties are concerned. Also, funds should not be channelled to economic activities involving maysir (gambling).</span><br /><span style="color:#000000;"></span><br /><span style="color:#000000;">Timol then listed the key businesses excluded from Shari'ah-compliant investments based on the above criteria. These include gambling outlets, the tobacco industry, the pornography industry, conventional interest-based banks and insurance companies, alcohol manufacturers and distributors, etc. Apart from business screening, financial screening criteria are also applied. Organisations whose principal activity is not the above, but derive more than five per cent of income from above activities or highly leveraged (having interest-bearing debt in excess of 33 per cent) are also excluded from Shari'ah-compliant investment transactions.</span><br /><span style="color:#000000;"></span><br /><span style="color:#000000;">Timol outlined the key guidelines from the FSA, the UK regulator for the financial sector, for investment advice; these include comprehensive understanding of clients' risk profile – risk is inextricably linked to reward but can also result in a loss. This criterion sits alongside all other Shari'ah requirements when structuring a balanced client portfolio. The issue of penalties and client's requirement to access funds is also considered in the decision-making process.</span><br /><span style="color:#000000;"></span><br /><span style="color:#000000;">He then classified the available Shari'ah-compliant investment opportunities in the UK into three categories: low risk, medium risk and high risk. Low risk investments include Islamic bank accounts. These are offered by the Islamic Bank of Britain (IBB), HSBC Amanah and Lloyds TSB; other low risk investments are Shari'ah-compliant property funds, though these have proved riskier in the recent financial turmoil. Ethical/Islamic unit trusts (such as offered by Friends Provident), agricultural land and leasing contracts were classified as medium risk, while Shari'ah-compliant UK equities, musharakah projects, musharakah and commodity funds were classified as high risk investments.</span><br /><span style="color:#000000;"></span><br /><span style="color:#000000;">He concluded the presentation by stating that Islam allows a wide investment remit as long as interest and unethical businesses are avoided; a portfolio must be diversified; accessibility of investments must also be available to investors.</span><br /><span style="color:#000000;"></span><br /><span style="color:#000000;">After the presentation, participants raised various questions about the musharakah funds on offer in UK, the performance of Shari'ah-compliant equity funds as compared to conventional ones, key providers of Islamic investment products in the UK and the criteria for setting the financial screening ratios for Shari'ah compliance.</span></div><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com1tag:blogger.com,1999:blog-36321277.post-81053837383327454972009-02-11T12:16:00.001-01:002009-02-11T12:21:10.889-01:00<div align="justify"><a class="contentpagetitle" style="FONT-SIZE: 180%; COLOR: #000000"><strong>Islamic Banking: Lessons from the credit crisis</strong></span></a><span style="color:#000000;"><span style="font-size:180%;"><br /></span><br />When it comes to the current economic environment, it can be said that we are all watching a “horror movie”. This is the ominous verdict delivered by the prestigious think tank, Ernst & Young Item Club.</span></div><div align="justify"><br /><span style="color:#000000;">All conventional indicators point in one direction: Euro Libor fixed rate touched 4.57 per cent (one month); sterling Libor reached 5.38 per cent; dollar Libor hit the level of 2.50 per cent - these are some of the highest levels seen in recent memory. Similar pattern is observed in the Swap market - with the difference in swap rates and government bonds being the highest in 6 months. TED spread, which captures the difference between 3-month Treasury bills and 3-month Libor rose to over 200bp. So what does all this mean? </span></div><div align="justify"><br /><span style="color:#000000;">It means two main things. Firstly, there is a significant concern about the conventional financial system and indeed the model used by many investment banks (Lehman Brothers) and retail banks (HBOS) has been questioned. Secondly, these indicators show that there is a large flight to quality, with gold prices surging and money managers facing mounting challenges of buying Treasury bills. </span></div><div align="justify"><br /><span style="color:#000000;">Confidence and trust, two of the most precious commodities, are at record low following the bailout of Fannie Mae, Freddie Mac and AIG. The collapse of Lehman Brothers, Bear Stearns and Merrill Lynch's takeover by Bank of America makes this crisis arguably the worst since 1929. This chaos has led many observers perplexed, with the BBC asking: </span><a class="style66" href="http://news.bbc.co.uk/1/hi/business/7621771.stm"><span style="color:#000000;">Where now for capitalism?</span></a></div><div align="justify"><br /><span style="color:#000000;">While the conventional financial system disintegrates, Islamic banking seems to be flourishing, accounting for 17% of Qatari and 15% of Malaysian banking assets and impressively, over 95% of banking activity in Saudi Arabia conforms to Islamic principles. The Wall Street Journal, points out that we are in the midst of an </span><a class="style66" href="http://s.wsj.net/article/SB121884306950645925.html"><span style="color:#000000;">“anti-credit crunch”</span></a><span style="color:#000000;"> with Islamic banking playing an important role in over $300bln worth of projects gripping the MENA region. </span></div><div align="justify"><br /><span style="color:#000000;">Given this level excitement around this fledgling, but promising industry – we must ask ourselves some tough questions. Can this level of growth be sustained? What are the main challenges facing the industry and what can we learn from the credit crisis?<br />The rise and rise of the property market. In Dubai, the property market and the fortunes of many Islamic banks are closely intertwined – and with a 79 percent increase in the property prices since 2007, many market watchers are feeling quite uneasy. More recently, this concern was compounded by a research note published by Morgan Stanley, predicting a 10 percent fall by 2010. </span></div><div align="justify"><br /><span style="color:#000000;">Alarmingly, Morgan Stanley’s worst case scenario envisages a fall to the same degree as Singapore property market crash in the 1990s, where prices collapsed by 80 percent in 18 months. Therefore, the risks associated with the real estate boom in Dubai and some of the other MENA regions are one of the primary concerns for stakeholders of Islamic banking. More broadly speaking, this concern can be tied to excess speculation, known as maysir.<br />Fatwa risk and product development. The race to join Islamic banking has led to a dramatic rise in the development of innovative and creative products. A significant amount of this development has taken place in the sukuk space, where more and more diverse sukuk products have been created.</span></div><div align="justify"><br /><span style="color:#000000;">This is a double edged sword: on the one hand, Islamic banking is a nascent industry; product development is absolute key to its survival. However, the risk lies in the over-use of conventional industry as a benchmark. This point can be expanded further – Islamic banking relies heavily on the concept of securitisation, where the focus is on greater transparency. This is a key selling point of Islamic banking, especially as the industry seeks to capitalise on the recent failing of the conventional market. There is a fatwa risk, however, associated in placing too much emphasis on product development and not enough on the Shari’ah principles. This point was illustrated recently when a top scholar at the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) claimed that 80 percent of sukuk structures are not Islamic.<br />Liquidity risk.</span></div><div align="justify"><br /><span style="color:#000000;">Ironically, the collapse of Bear Stearns had little to do with sub-prime mortgage meltdown, in which it was a major stakeholder. It collapsed as a result of plummeting market value for ultra-safe assets, such as the triple A-rated bonds by Freddie Mac and Fannie Mae.<br />Peloton, Carlyle Capital and many other hedge funds, which had absurd level of leverage, were forced to sell their ultra-safe assets, after banks became reluctant to roll over short term loans held by these hedge funds. </span></div><div align="justify"><br /><span style="color:#000000;">This was followed by a fall in the prices of the triple-A rated assets, even though there was little change in the probability of default for many of these bonds. Given the fall in prices of these “safe” assets and multiplied by the leverage, many hedge funds went bankrupt. Bear Stearns was a significant holder of these ultra-safe assets, which were used as collateral to fund its obligations to other banks. Following these price falls, other banks were simply not willing to accept the triple-A value of Bear’s collateral.</span></div><div align="justify"><br /><span style="color:#000000;">The latter point was confirmed by a Standard and Poor’s research note before the collapse of Bear Stearns, which reiterated that most of the sub-prime losses had been realised. Therefore, the final “knock-out” came from the lack of liquidity for these triple-A rated assets, rather than sub-prime losses.</span></div><div align="justify"><br /><span style="color:#000000;">From an Islamic banking perspective – liquidity risk is one of the key concerns, which has been given extra heat by recent events around the credit crisis. Of course, the money market is out of reach for Islamic banks, due to Shari’ah constraints. In addition, surplus liquidity cannot simply be given to conventional banks, since the interest revenue would be prohibited. Having said this, it is possible for exchange of funds between Islamic banks, by the use of Mudarabah and Musharakah instruments. The effectiveness of this depends on number and diversity of Islamic banks.</span></div><div align="justify"><br /><span style="color:#000000;">It is promising to see some of the most respected names in Islamic banking playing an important role in this area, such as the Islamic Development Bank, Bahrain Monetary Agency and Bank Negara Malaysia. Currently, the focus is on learning from some of the liquidity management schemes operating in Bahrain. In addition, Bank Negara Malaysia has introduced a PLS scheme for Islamic banks to obtain short-term funds. With the credit crisis in mind, efforts that are currently underway, need to be extended.</span></div><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com2tag:blogger.com,1999:blog-36321277.post-85549003370585142282008-09-17T13:16:00.001-01:002008-09-17T13:20:30.317-01:00<span style="color:#000000;"><span style="font-size:130%;"><strong>Ethical Investment Conference - Islam Expo 2008 (London)</strong><br /></span><br /><object height="344" width="425"><param name="movie" value="http://www.youtube.com/v/uOL41veMUnk&hl=en&fs=1"><param name="allowFullScreen" value="true"><embed src="http://www.youtube.com/v/uOL41veMUnk&hl=en&fs=1" type="application/x-shockwave-flash" allowfullscreen="true" width="425" height="344"></embed></object></span><br /><span style="color:#000000;"></span><br /><span style="color:#000000;">Ethical Investment in Britain Conference (Islam Expo 2008) The Ethical Investment in Britain conference will invite over 200 high-ranking delegates from leading investment and financial institutes, including senior Governmental figures as well as members of influential think tanks. </span><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com0tag:blogger.com,1999:blog-36321277.post-57352658356129944722008-09-17T12:18:00.000-01:002008-09-17T12:52:19.994-01:00<div align="justify"><span style="color:#000000;"><span style="font-family:arial;font-size:180%;"><strong>Why Islamic Banking for Indian Economy?</strong></span><br /><strong><em>Syed Zahid Ahmad</em></strong><br /><br />With suppressed desire by Indian Muslims to have Islamic Banking in India, and avoidance to cite taboo word ‘Islamic Banking’ by Raghuram Rajan Committee report on financial sector reforms, it has became more important that besides considering the religious, social, political and diplomatic dimensions, we must understand the economics of Islamic banking for Indian economy. Hope India will not miss the Islamic banking as its missed Globalization bus in the eighties and Asian Tigers including China superseded it. Recently Zee news, Financial Express and the Statesman dailies have projected high potentials for Islamic banking in India. Before it become a political agenda during coming elections, it is better to evaluate economics of Islamic Banking. After all the political parties need economic rationality to convince majority of voters that Islamic Banking is not being allowed to please Muslim voters but to genuinely boost faster and inclusive growth for Indian economy.<br /><br /><strong>Silver Lining for Islamic Banking in India:</strong><br />A few companies are already dealing big businesses in Shariah Investments funds. Many financial sector players eying upon trillion dollars Islamic investment funds. Eastwind launched Islamic Index; and Reliance Money and Religare have launched Shariah Complaint Portfolio Management Services. As a result Indian Stock market is observing some better trends in Shariah complaint stocks. With increased market of Shariah investments world wide, if China is going for Islamic banking to attract Islamic Investment Funds, why should India hesitate allowing Islamic banking with 150 millions Muslim who may help us pool around one trillion dollars Islamic investment funds from Gulf countries that too on equity base which may keep our national current account and fiscal deficit under control? The experience of Islamic banks of Malaysia and Britain may be interesting; as in Malaysia, the Chinese businessmen are the biggest customers of Islamic banking, in Britain also, Islamic banks are not for Muslims alone. Similarly Islamic Bank in India will not stand for Muslims alone but for all Indians.<br /><br /><strong>No visualization document for Islamic banking in India:</strong><br />So far Islamic banking has been considered as a religious matter for Indian Muslims and thus it was denied with a fear of financial segregation, a threat of parallel banking system along with a hidden fear for SCBs to loose Muslim depositors. There has never been any public committee analyzing the impact of Islamic banking in India because Muslims of India were never so evocative about features of Islamic banking in India; while the other community had no background to conceive this concept to required level for projecting its utility for Indian economy. Though the concept of Islamic banking is driven by ethics of Islam, it has more economic rationality compared to its religious vigour which needs some genuine study by professionals having basic knowledge of Islamic banking with expertise on Indian economy because Islamic banking carries more advantageous features to boost real sector economy compared to financial sector.<br /><br /><strong>Future leaders of Islamic banking in India:</strong><br />There might be a prejudice among top bankers that since Islamic banking originates from Islam, Muslims might take a lead in Islamic banking and their supremacy in banking sector may not be sure after Islamic banking. However the reality may be far different from the fiction. Indian Muslims are hardly capable to hold major shares of Islamic banking business in India as they lack required infrastructure, financial depth, banking creditability to attract the general depositors and investors under Islamic Banking. Islamic banking is not a children’s game. It requires even better professional expertise compared to conventional banking because it deals more with commercial projects than mere monetary credit and debit transactions. Indian Muslims may feel privileged in terms of Islamic ethics required for Islamic banking but they certainly lack professional efficiency to manage modern commercial banking on Islamic ethics. Our leading nationalized bank (SBI) is somehow reaching to that expertise which may be required to manage a complex banking project such as Islamic banking, but they have to hire services of experts on ‘Islamic Banking’. The RBI code of conduct to SCBs putting thrust on SMEs is reflecting the need of advanced commercial banking in India which would be focus under Islamic Banking. The performance by SBI has been best among nationalized banks to lend commercial credits. But still majority of unorganized sector workers who are non-bankable due to collateral problems are actually needing equity finance instead of debt finance. All the difference among nationalized bank’s operation and Islamic banking is the mechanism of credit and deposits. Under Islamic banking mechanism thrust would be on equity deposits and credits while interest charged would be replaced by profit margins on commercial credits and interest expended over deposits would be replaced by dividend on equity finance with deposits mobilized as equity deposits by banks. <br /><br />It is expected that with introduction of Islamic banking in India, the first choice of depositors and investors would be nationalized banks as despite contradiction of interest, Indian Muslims have a confidence in nationalized banks. To ensure security of deposits majority of Muslims depositors would prefer to join Islamic banking managed by nationalized banks. However it is expected that Foreign Investors looking to invest in India through Islamic banking, would prefer to have services of foreign banks. As far Indian Muslims are concerned, they have to make hard efforts to find their place in managing Islamic banking in India because they lack required financial depth; infrastructure and more importantly they have poor credibility among the depositors and investors due to some past failures of financial institutions.<br /><br /><strong>Islamic Banking for Inclusive Growth:</strong><br />Besides religious, social, political and diplomatic reforms, Islamic banking is more desired for Inclusive growth of India. It is interesting to evaluate probable impact of Islamic banking in different segments of Indian economy. Islamic Banking is the only mechanism which seems capable to tame the liquidity and inflation problems along with allowing inclusive growth. The increased percentage share in GDP by agriculture or manufacturing industry, or per capita income growth is just not indicative of true inclusive growth. For real inclusive growth, we have to ensure increase in income and employment status of workers in all segments. Empirical evidences reveals that though India has registered better growth rate in recent years, the number of poor living below poverty line has increased. Our household consumption which has declined in recent years is driven by household income; while corporate savings reflects income of corporate sector which has increased. In fact with better GDP growth rate in recent years, our corporate sector has snatched the fruits of growth, while majority of work force have failed to enjoy the fruits of development.<br /><br />Similarly the share of financial sector in GDP has increased in recent years. Since our SCBs extend debt finance, the credits extended by SCBs add interest as part of GDP cost which causes inflation. While under equity finance, credit cost being zero, the growth of credit share to GDP does not push cost of GDP, thus restricts inflation. Simultaneously the dividend shared by depositors on equity finance helps equitable distribution of income generated by financial sector. Thus instead of concentration of credit to corporate sector, the generated income is shared by household sector which increases level of consumption and pushes the economy on faster growth track. This basic difference between debt and equity credit needs attention of our financial sector regulators.<br /><br />Their financial background (in lack of collaterals) of farmers and poor workers associated to unorganized sector manufacturing and retail industries do not encourage SCBs to extend more debt finances. With schemes of loan waiving, the debt market is more dried for SCBs in agriculture sector. Even the SHGs, JLG schemes of Micro Finance are failed to add livelihood stocks for poor and vulnerable. This low tendency of economic reforms by financial sector for majority of Indian workers is creating imbalance in growth trend. India’s GDP is increasing with increase in number of poor living below poverty line. The fruits of growth are really not shared among Indian nationals, but among Indian sectors. This fact needs attention of policy makers and regulators to launch better financial instruments / banking mechanism to ensure worthiness of credit supply to the needy segment of our economy.<br /><br />Insight on Islamic banking reveals its potential to build infrastructure for our agriculture sector where workers are incapable to add infrastructure due to poor financial risk capacity, thus suffers a lot in productivity and economies of scale. Islamic banking could also help our unorganized sector manufacturing and retail industries avail equity finance to arrange capital required to compete with formal sector industries. These financial needs could not be fulfilled without Islamic banking because the financial vulnerability and low financial risks capacity of workers requires equity finance instead of debt finance which is neither provided by SCBs nor by MFIs because all credits by SCBs and MFIs are interest bearing.<br /><br />If Islamic Banking is allowed the inadequate labour capital ratio for informal sector workers associated with agriculture and manufacturing industries could be resolved through equity finance which might be a revolution is our agriculture and unorganized sector. With improved labour capital ratio, our poor and vulnerable workers associated with agriculture and unorganized sector might be able to compete with the formal sector workers with increased productivity. Thus Islamic Banking may financially empower over 90% Indian workers associated to agriculture and unorganized sector manufacturing and retail industries.<br /><br />Islamic banking may induce our political leaders to substitute grants and subsidies with equity finance schemes through specialized financial institutions because equity finance allows access to credit without debts of borrowers. Equity Finance helps achieve self-reliability, required for growth, which never comes through grant and subsidies but with successful utilization of equity finance. The stabilization funds for poor farmers / artisans may be utilized to experiment such finance. Islamic banking may not be a religion based banking business, but it could well resolve our real economic problems.<br /><br /><strong>Islamic Banking and Financial Inclusion:</strong><br />Though we do not have any survey to compare community wise financial exclusion in India, the study of data available through Sachar Committee report reflects Muslims are most disadvantaged community in financial sector, and banking is inversely related to concentration of Muslim Population. Muslims have over 80% Muslims financial exclusion due to interest based deposit and credit schemes available with formal financial institutions and SCBs. Due to restriction on Islamic banking mechanism in India, financial sector was one of the most unfavourable sectors for Indian Muslims. This reflects participation of Muslim workers in RBI and SCBs as well because with population share of 13.47%, Muslims have 0.78% and 2.2% share in employment with RBI and SCBs. Similarly the participation of Muslims with specialized financial institutions and corporations like SIDBI, NABARD and NMDFC is miserable. Hard to believe that Institutions like National Minority Development and Finance Corporation (NMDFC) have no Muslim employee. This has excluded Indian Muslims from formal financial and banking sector in India and to get rid of interest with meeting the banking and financial needs, wherever Muslims are concentrated; they find practice interest free banking through societies and NBFCs. With inception of Islamic banking it is expected that Muslims will join Islamic banks which will remove their financial exclusion.<br /><br />The Indian Muslims have a share of 7.4% in saving deposits while just get 4.7% of credit in terms of PSAs. If we consider this as a standard proportion in national aggregate deposits with and credits maintained by SCBs, Indian Muslims annually loose around Rs. 66,700 crores because Muslims have a credit deposit ratio of 47% against national average of 74%. It shows that Muslims of India loose around 27% of their deposits by not availing as credits. After Islamic banking this deficit may be removed to curb financial loss to Indian Muslims because with 31% Muslims living below poverty line and 40% Muslim workers as own account workers, the deficit of credit is like economic assassination of the community. Muslims avail just 4% and mere 0.48% credits from special financial institutions like NABARD and SIDBI respectively because there also the community has to indulge in interest which is strictly prohibited in Islam. <br /><br />The schemes launched by RBI, NABARD, SIDBI and Ministry of Finance for financial inclusion focus on providing access to credit and other financial products. As allowing access to Mutton shops for non vegetarians cannot yield inclusion of non vegetarians to mutton retails, interest based banking system will not help attaining target of financial inclusion for Indian Muslims, because interest is so strictly prohibited for Muslims that it is more acute than prohibition of muttons for vegetarians. The operation of Islamic banking will allow the Muslims to work with majority community in banking sector and it would definitely help us build civil society economy.<br /><br />Introduction of Islamic banking in India may please 150 millions Indian Muslims, the second largest community of India who are somehow uncomfortable with use of word Islamic terrorism. Moreover with introduction of Islamic banking, Indian government will certainly gain diplomatic advantages to make financial dealings with Muslim dominated nations especially to attract trillion dollars of equity finance from gulf countries. This is more important after Lehman fall because it reflects US crisis and need of alternative sources for FDI required for Indian Economy. After US, Gulf Market could only be targeted (through Islamic banking) because other countries like China are not exporting financial resources.<br /><br /><strong>Business of nationalized banks would be increased:</strong><br />So Indian Muslims are looking for Interest free banking to avail much needed credits for development which is possible through introduction of Islamic Banking in India. This may add at least approximately 60 millions Muslims to formal financial sector. Through this financial inclusion of Indian Muslims to formal sector Islamic Banks, it is expected that Indian nationalized banks may see additional savings worth 1,00,000 crores and credit worth over Rs. 2,00,000 crores which may help banks to gain higher rate of profits compared to their SLR. After successful operation of Islamic banks by our nationalized banks, private banks may also enter into dealing with Islamic banking<br /><br /></span><span style="color:#000000;"><strong>Stock Market Capitalization<br /></strong>Since Islamic banking focuses on equity deposits and finance, it is expected that Stock market will be the most preferred avenue for investments by future Islamic banks of India because currently it is our stock market which is attracting new investments under Shariah Finance schemes. With advanced art of technology for investment with liquidity and profitability, it is expected that majority of deposits with Islamic banks in India will be preferably canalised to stock market. It would be the safest and fasted mode of deploying equity funds. Thus Islamic Banks may add additional 6 million new D mat accounts with expected capital gain of Rs. 60,000 crores from domestic market and around 1 trillion US $ through Islamic Banks managed by foreign bankers in India.<br /><br /><strong>Formal Sector Economic Agents</strong><br />Under Islamic banking the formal sector economic agents like corporate firms listed with stock markets would be the first likely beneficiary of Islamic banking because their shares would be subscribed through investors at Islamic banks. All the companies listed in stock markets will have additional potential subscribers to genuinely subscribe their shares instead of mere trading stocks to gain for speculation.<br /><br /></span><span style="color:#000000;"><strong>Islamic Banking and Public Finance:<br /></strong>Islamic banking may further help us mobilize capitals on equity base to meet the investment needs for irrigation, dams, roads, electricity, and communication projects along with other infrastructure where public finance is insufficient and debt finance may be cause deficit to the government. With Islamic banking raising equity funds would be easier for banks. We must not forget that over 50% of our rain fed lands need irrigation which need equity finance to reduce the credit costs. The total investment in infrastructure, in 2006–07 was estimated to be around 5% of GDP. It has to be 9% of GDP by 2011-12, it means that we would require Rs. 2,07,291 crores in 2006-07 and Rs. 5,74,096 crores by 2011-12 to finance our infrastructure. The total investment amounts to Rs 20,56,150 crore for the 11th five year plan. Of which Rs. 14,36,559 crores is supposed to be met from Public Investment wile Rs. 6,19,591 from private investments. Islamic banking through promoting equity finance from national and international markets may reduce this burden effectively with keeping public finance well under control and probably we may need not to worry about fiscal deficit as well.<br /><br />Since Islamic banks may also have managerial control over commercial financing, government might use banking units as source to mobilize taxes as well which might reduce mobilization costs for public revenue and increase margins for governments.<br /><br /></span><span style="color:#000000;"><strong>Islamic Banking and Indian Economy:<br /></strong>Viewing the probable multi dimensional positive impacts of Islamic banking on Indian economy, there are many reasons to smile for Islamic banking in India. It is helping our financial sector maintaining stability while helping real economic sector attain inclusive growth. The public finance would be much benefited through Islamic banking by generating investment funds on equity basis. Thus Islamic banking should be considered as a core economic need of the economy instead of viewing it as a religious matter for Indian Muslims. By any projections, it is expected that Islamic banking may help us mobilize business up to 5% our GDP with making due corrections in financial and real markets. Therefore it should be considered as a genuine economic need of the nation instead of considering it as religious, social or political issue. Hope all patriot Indians will flag green signal to Islamic banking as it is opening the doors towards faster and more inclusive growth – An approach to 11th five year plan of India.<br /> </span></div><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com2tag:blogger.com,1999:blog-36321277.post-18747370435351517402008-08-13T18:14:00.001-01:002008-08-13T18:18:41.292-01:00<div style="font-family:times new roman, new york, times, serif;font-size:12pt;"><span style="font-family:times new roman;"></span><br /><div style="font-family:times new roman, new york, times, serif;font-size:12pt;"><div style="font-family:times new roman, new york, times, serif;font-size:12pt;"><div style="font-family:times new roman, new york, times, serif;font-size:12pt;"><div style="font-family:times new roman, new york, times, serif;font-size:12pt;"><div style="font-family:times new roman, new york, times, serif;font-size:12pt;"><div dir="ltr"><div style="color:#ffffff;"><h1 style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 900; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Arial, Helvetica, sans-serif;font-size:1.3em;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">The new UK tax law on sukuk<br /></span><div style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;"><img style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; FONT-SIZE: 70%; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normal; FONT-FAMILY: Verdana, Arial, Helvetica, sans-serif; BACKGROUND-COLOR: transparent" height="148" alt="Image for this story" src="http://www.newhorizon-islamicbanking.com/images/articles/uk.gif" width="120" border="0" /> </span></div><br /><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 700; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;"><em>Mohammed Amin MA FCA AMCT CTA (Fellow), tax partner at PricewaterhouseCoopers LLP and head of the firm's Islamic finance practice in the UK, explores the new UK tax law on sukuk. This article is based on the presentation given by the author at IIBI's monthly lecture in London, July 2007.</em><br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">Diagram 1 illustrates an ijara sukuk. The owner has a building and decides to raise money using that building. It sets up a special purpose vehicle (SPV) and sells the building to that SPV, and then rents it back. The SPV pays for that building by issuing sukuk. Those sukuk are not a debt owed by the SPV; instead they are a direct legal claim on a proportionate share of the building and of the rent it generates.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">Diagram 2 illustrates a mudarabah sukuk, based upon an actual example. XYZ trading company has a collection of business assets and wants to raise $500 million to use in its business. It sets up an SPV, here XYZ Sukuk Ltd, which raises $500 million to buy the assets. That $500 million comes from the investors as payment for sukuk certificates. Next the assets, which are now owned by XYZ Sukuk Ltd on trust for the investors, are contributed to a mudarabah whereby 99 per cent of the profits of the mudarabah will go to the trust for payments to investors subject to a maximum limit, in this case of six per cent, i.e. six per cent of $500 million = $30 million p.a. Again, the investors are not receiving interest but a share<br />of the business profits.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">Before this year's tax law, what happened if a sukuk was issued? The basic problem was that tax costs arose in the issuing SPV company. The SPV is receiving something that is clearly taxable income. However the payments that the SPV makes to the investors do not give rise to any tax relief. Those payments to the investors are not interest; they are simply paying on to the investor the fractional entitlement to the rent or the fractional entitlement to the income of the mudarabah. There is no reason why the SPV should get tax relief for those payments under basic UK tax law. So tax arises in the SPV.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">Even if the sukuk-issuing SPV tried to argue that this payment to the investors should really be treated like interest, it still wouldn't get tax relief. There is a very specific provision in our tax code, in the Income and Corporation Taxes Act (ICTA) 1988 section 209(2) (e) (iii). If you issue securities, in other words debt instruments, under which the interest payable on those securities is dependent upon the results of the company's business, then that interest doesn't get tax relief. Instead it is treated as a distribution, like a dividend. It is not a tax-deductible expense.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">We now have some new legislation in the Finance Act (FA) 2007. However, if you search FA 2007 for the word 'sukuk', you will not find it. The rules for sukuk introduced in 2007 follow the same overall approach as the 2005 rules for murabaha transactions or mudarabah transactions. HM Treasury simply created a definition, a new concept in UK tax law; something called an 'alternative finance investment bond' (AFIB). If the definition is met, certain tax consequences follow.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;"><span style="font-size:100%;"><strong style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 700; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; PADDING-BOTTOM: 0px; PADDING-TOP: 0px">The definition of an AFIB</span></strong><br /></span></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">The legislation requires one or more persons to pay money to a bond issuer. The bond issuer is going to acquire some assets which will generate income or gains.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">There has to be a fixed period of time when the arrangements will end. A sukuk that is perpetual won't qualify. As part of the legal agreements, the issuer has to undertake that at the end of the sukuk it will dispose of any bond assets that are left.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">The issuer will also make other payments to the investors, which are called additional payments. In diagram 1, the additional payments come from the rent and in diagram 2 from the business profits.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">The additional payment must not exceed a reasonable commercial return on a loan equal to the amount of the capital. One of the things that the UK Government was most concerned about was ensuring that it did not give a tax deduction for payments on sukuk instruments which had equity characteristics, i.e. which were equivalent to ordinary shares. The law does not stipulate what is a reasonable commercial return; that would depend upon the facts and circumstances.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">The bond issuer is going to manage the bond assets. In other words, the bond assets are not managed by the investors. Of course, the bond issuer can delegate management. In diagram 2, once the bond assets have been contributed to the mudarabah, XYZ Trading Company as the mudarib is going to manage that mudarabah.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">The sukuk, the bond, has to be transferable. This doesn't mean it has to be physically transferred. The sukuk could be issued and the same people may hold it for its entire five- or ten-year life, which is actually very common with sukuk. There is relatively little secondary trading in practice, but the critical thing is that they have to be transferable.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">The AFIB has to be listed on a recognised stock exchange. There is a provision in the Income Tax Act 2007 section 1005 which details what a recognised stock exchange is and there is a provision in the legislation to recognise a stock exchange purely for the purpose of the AFIB rules. As well as a long list of fully recognised stock exchanges, HM Revenue & Customs (HMRC) lists seven exchanges which are recognised only for the purposes of the AFIB rules. (See </span><a style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 700; FONT-SIZE: 70%; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normal; FONT-FAMILY: Verdana, Arial, Helvetica, sans-serif; BACKGROUND-COLOR: transparent" href="http://www.hmrc.gov.uk/fid/rse.htm" target="_blank" rel="nofollow"><span style="font-family:times new roman;font-size:100%;">www.hmrc.gov.uk/fid/rse.htm</span></a><span style="font-family:times new roman;font-size:100%;">)<br /></span><table style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" width="100%" border="0" ><span style="font-family:times new roman;font-size:100%;"></span><tbody style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;"><br /><span style="font-size:100%;"></span></span><tr style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;"><br /><span style="font-size:100%;"></span></span><td style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; FONT-WEIGHT: 400; PADDING-BOTTOM: 2px; COLOR: #000000; PADDING-TOP: 2px; FONT-STYLE: normalfont-family:Verdana;font-size:8.4pt;color:transparent;" width="100%" ><br /><div style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana;font-size:8.4pt;color:transparent;" ><span style="font-family:times new roman;font-size:100%;"><img style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; FONT-SIZE: 8.4pt; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normal; FONT-FAMILY: Verdana; BACKGROUND-COLOR: transparent" height="257" src="http://www.newhorizon-islamicbanking.com/images/articles/022-b1.jpg" width="470" border="0" /><br /></span><div style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 700; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana;font-size:86%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">Diagram 1 Ijara sukuk</span></div></div></td></tr></tbody></table><br /></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">If issuing a sukuk from the UK, it is important to make sure that it is listed on a fully recognised stock exchange within the Income Tax Act 2007 definition to avoid paying withholding tax. If a sukuk is listed on a fully recognised stock exchange, then the consequence of the 2007 rules is that it is treated for tax purposes as if it were a debt instrument and the exemption for listed eurobonds should apply. Interest on listed eurobonds can be paid without withholding tax.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">If a UK-based sukuk is created and listed on a stock exchange which is only recognised for the purpose of the AFIB rules and not recognised for any other purposes, then the eurobond exemption would not apply. The eurobond exemption looks specifically at stock exchange designations under Income Tax 2007, not at the extension for sukuk. Finally, there is an accounting test. If the issuer were to prepare accounts under International Financial Reporting Standards (IFRS), the sukuk would be treated as a financial liability.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">After all the strict definitions there are a few relaxations:<br /></span></p><ul style="PADDING-RIGHT: 0px; PADDING-LEFT: 20px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" type="circle" ><li style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" value="0" ><span style="font-family:times new roman;font-size:100%;">The issuing entity can acquire the bond assets either before or after the sukuk itself is issued. </span></li><br /><li style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" value="0" ><span style="font-family:times new roman;font-size:100%;">Bond assets can be any kind of property and can be secondary rights in property. For example, it could be that instead of owning a building the asset could be a lease over a building. </span></li><br /><li style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" value="0" ><span style="font-family:times new roman;font-size:100%;">A declaration of trust is permitted but not mandatory. </span></li><br /><li style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" value="0" ><span style="font-family:times new roman;font-size:100%;">Bond holders may be given the right to terminate early. </span></li><br /><li style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" value="0" ><span style="font-family:times new roman;font-size:100%;">The additional payment, the economic return to the bond holder, can be either fixed or variable. However, if the payments are not fixed then the test of whether they represent only an amount equivalent to a normal commercial return on the capital is made by looking at the maximum amount of the additional payments. To ensure that the additional payments cannot exceed a reasonable commercial return, it may be worth including a numerical cap in the documentation, as in diagram 2. </span></li><br /><li style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" value="0" ><span style="font-family:times new roman;font-size:100%;">Finally, the redemption payment can be satisfied by the issue or transfer of shares. This caters for convertible or exchangeable sukuk, corresponding to convertible or exchangeable bonds. </span></li></ul><br /><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;"><span style="font-size:100%;"><strong style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 700; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; PADDING-BOTTOM: 0px; PADDING-TOP: 0px">Tax consequences of qualifying as an AFIB</span></strong><br /></span></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">From the issuing company's perspective, the AFIB is treated as a loan relationship. In other words, it is treated as if it were debt and all the tax rules for corporate debt apply to the AFIB. The Government is not saying that this is a debt instrument or that the issuer is paying interest, it is merely saying that it is going to apply the same tax law that would have applied if there had been a debt instrument.<br /></span><table style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" width="100%" border="0" ><span style="font-family:times new roman;font-size:100%;"></span><tbody style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;"></span><tr style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;"></span><td style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; FONT-WEIGHT: 400; PADDING-BOTTOM: 2px; COLOR: #000000; PADDING-TOP: 2px; FONT-STYLE: normalfont-family:Verdana;font-size:8.4pt;color:transparent;" width="100%" ><br /><div style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana;font-size:8.4pt;color:transparent;" ><span style="font-family:times new roman;font-size:100%;"><img style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; FONT-SIZE: 8.4pt; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normal; FONT-FAMILY: Verdana; BACKGROUND-COLOR: transparent" height="442" src="http://www.newhorizon-islamicbanking.com/images/articles/022-c.jpg" width="470" border="0" /><br /></span><div style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 700; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana;font-size:86%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">Diagram 1 Mudarabah sukuk</span></div></div></td></tr></tbody></table><br /></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">The additional payments are treated as if they were interest for tax purposes. This potentially makes them tax-deductible, and there is an express override of section 209 (2) (e) (iii). The issuer is taxed as if it beneficially owned the assets, which means that it is entitled to any capital allowances (tax depreciation) the assets qualify for.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">To a limited extent the issuer is treated as a financial institution. The existing tax law for Islamic finance in FA 2005 and FA 2006 applies only if one party to the transaction is a financial institution, broadly speaking a bank, a building society, a wholly owned subsidiary of a bank or building society, or an overseas recognised deposit taker. The issuer of an alternative finance investment bond is treated as a financial institution but only for two specific categories of asset. These are purchase and resale assets, in other words assets which are used in a murabaha transaction, and diminishing shared ownership assets.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">The reason for these two choices is that when drafting this legislation HM Treasury primarily saw sukuk as an equivalent to conventional securitisation. Conventional banks lend conventional mortgages and often securitise them. Islamic banks typically provide mortgages by purchase and resale of property or proportional ownership of property. Accordingly, the AFIB rules enable Islamic banks to securitise their Islamic mortgages.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;"><span style="font-size:100%;"><strong style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 700; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; PADDING-BOTTOM: 0px; PADDING-TOP: 0px">Taxation of buyers and sellers of AFIBs</span></strong><br /></span></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">Buyers and sellers of sukuk are legally buying and selling a fractional ownership interest in assets. Before FA 2007, this gave rise to many technical questions. Was the purchase and sale of the assets subject to stamp duty; was it subject to capital gains tax or income tax; and was it subject to VAT or stamp duty land tax? If a sukuk paid rental income, was that rental income taxed in the UK if you were non-resident? Most of these questions are actually unresolved because sukuk were quite unfamiliar in a UK tax context.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">The situation now is that for both corporate and individual investors, sukuk are treated exactly as equivalent conventional debt would be treated for tax purposes, both for the taxation of income payments and for the taxation of gains or losses from buying and selling sukuk.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;"><span style="font-size:100%;"><span style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; PADDING-BOTTOM: 0px; PADDING-TOP: 0px"><strong style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 700; FONT-SIZE: 70%; PADDING-BOTTOM: 0px; COLOR: #800000; PADDING-TOP: 0px; FONT-STYLE: normal; FONT-FAMILY: Verdana, Arial, Helvetica, sans-serif; BACKGROUND-COLOR: transparent">Areas where further change is needed</strong></span><br /></span></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">In diagram 1, the first thing the owner does is to sell the buildings to the SPV. That sale is a taxable sale. If the building has gone up in value, the company will pay tax on the gain. If the company had issued a conventional eurobond it would not have sold the building or transferred the building anywhere and therefore it would not have paid tax.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">There needs to be some mechanism designed to stop tax arising on the gain when the building is sold, perhaps by deferring it as long as the building eventually reverts to the entity which sold it to the SPV.<br /></span></p><p style="PADDING-RIGHT: 0px; PADDING-LEFT: 0px; FONT-WEIGHT: 400; PADDING-BOTTOM: 0px; COLOR: #000000; PADDING-TOP: 0px; FONT-STYLE: normalfont-family:Verdana, Arial, Helvetica, sans-serif;font-size:70%;color:transparent;" ><span style="font-family:times new roman;font-size:100%;">Similarly, that sale of the building will give rise to stamp duty land tax. Again, that is an extra cost which does not arise if a conventional debt instrument is issued. The sale may also give rise to value added tax consequences. These are areas where the law needs to go further to put sukuk issuers into an equivalent position to conventional bond issuers. </span></p></h1></div></div></div></div></div></div></div></div><span style="font-family:times new roman;"></span><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com0tag:blogger.com,1999:blog-36321277.post-42579727639067527372008-07-17T21:12:00.005-01:002008-07-17T21:54:32.624-01:00<div align="left"><span style="font-family:verdana;font-size:130%;color:#000000;"><strong>Islamic Finance in the UK: Regulation and Challenges (Financial Services Authority-FSA)</strong></span></div><div align="left"><strong><span style="font-family:Verdana;font-size:130%;"></span></strong> </div><div align="justify"><strong><em><span style="color:#666666;">Michael Ainley, Ali Mashayekhi, Robert Hicks, Arshadur Rahman, & Ali Ravalia</span></em></strong></div><div align="justify"><span style="color:#000000;"><strong><em><span style="color:#666666;">November 2007</span></em></strong><br /><br /><br /><strong>1. Introduction</strong></span></div><div align="justify"><br /><span style="color:#000000;">In recent years, Islamic finance has grown rapidly across the world, conservatively estimated at 10-15% a year.1 Given the UK’s position as one of the leading international financial centres, it is no surprise that part of this growth has taken place in London which is now seen as an emerging global ‘hub’ for Islamic finance. At the same time, the government has wanted to give the UK’s relatively large Muslim community (around 3% of the population) access to financial services consistent with their religious beliefs. The Bank of England and the Financial Services Authority (FSA) have been closely involved in these developments, and this paper gives a regulatory perspective. It covers four main areas:<br />– why the UK is now emerging as a global ‘hub’ for Islamic finance;<br />– the important role which the FSA has played in this;<br />– the risk and challenges which Islamic firms in the UK face in the retail and wholesale markets; and,<br />– the outlook for future growth of Islamic finance in the UK.<br />The paper draws on work across the FSA, coordinated by a small team. The views expressed are those of the authors and not necessarily those of the FSA; and they are no way intended to set policy or be guidance for market participants. Rather, the paper is designed to highlight important questions and contribute to the current debate inthis area.<br /><br /><strong>2. The Islamic economic model</strong><br /><br />The beliefs of Islam encompass all aspects of a Muslim’s life, determining the articles of their faith and the relationships between man and God, and between human beings. They also determine their moral and behavioral code, as well as giving the framework for their daily activities. Islamic law or Sharia – as revealed in and derived from the<br />Qur’an and Sunnah (the sayings and practices of the Prophet Muhammad) – governs all economic and social activities and undertakings of Muslims. The Islamic economic model has been developed over time, based on the rulings of Sharia on commercial and financial transactions. The Islamic financial framework, as seen today, stems from the principles developed within this model, some of which are outlined below:<br />• The Islamic economic model emphasises fairness. This is reflected in the requirement that everyone involved in a transaction makes informed decisions and is not misled or cheated. On a macro-economic level, the Islamic model aims at social justice and the economic prosperity of the whole community; for example, specific Sharia rulings seek to reduce concentration of wealth in a few hands, which may be detrimental to society.<br />• Islam encourages and promotes the right of individuals to pursue personal economic wellbeing, but makes a clear distinction between what commercial activities are allowed and what are forbidden. For example, transactions involving alcohol, pork related products, armaments, gambling and other socially<br />detrimental activities.<br />• One key Sharia ruling on economic activities of Muslims is the strict and explicit prohibition of Riba, most usually described as usury or interest. Sharia scholars consider exchanging interest payments within the conventional banking system as a type of Riba. Modern Islamic banking has developed mechanisms to allow interest income to be replaced with cash flows from productive sources, such as returns from wealth generating investment activities and operations. These include profits from trading in (real) assets and cash flows from the transfer of usufruct (the right to use an asset), for example, rental income.<br />• The Islamic economic model is based on a risk and profit-sharing (and loss-bearing) philosophy. So, in this respect, Islamic transactions are similar to, if not the same as, equity-based transactions in rewarding performance. However, Sharia requirements go further to ensure that in distributing profits more emphasis is placed on reward for effort rather than reward for merely owning capital.<br />• The Islamic Law of Contracts plays a pivotal role within the Islamic financial system. Islamic commercial jurisprudence consists of principles and rules that must be observed for transactions to be acceptable in Islam; and the Islamic Law of Contracts is at the heart of this. One important principle is contractual certainty. Under this body of law, uncertainties or ambiguities that can lead to disputes may render a contract void under Sharia.<br /><br />While some of these principles and rules are based on clear and explicit rulings ofSharia, others are derived from Sharia scholars’ interpretations and understanding of the law, known as Fiqh, as set out in the Qur’an. These interpretations can and do differ between Sharia scholars. Certain contractual terms deemed to be valid under Sharia by the scholars of one school of Fiqh may not be acceptable to scholars from another school. This has had significant implications for the development of Islamic finance, which we discuss later in this paper.<br /><br /><strong>3. The development of Islamic finance in the UK</strong></span></div><div align="justify"><br /><span style="color:#000000;">Most of the growth of Islamic finance in the UK has taken place in the last five years, but the existence of Sharia-compliant transactions in the London financial markets goes back to the 1980s. Commodity Murabaha* type transactions through the London Metal Exchange were used, in significant volumes, to give liquidity to Middle Eastern institutions and other investors that fostered the development of a wholesale market in the UK. This did not, however, cater for retail Muslim consumers, as the products<br />developed at the time were aimed exclusively at wholesale and high-net-worth investors. These products were relatively uncomplicated in structure and fell outside the scope of the regulators.<br /><br />Retail Islamic products first appeared in the UK in 1990s but only on a very limited scale. A few banks from the Middle East and South East Asia began to offer simple products such as home finance. However, these compared unfavourably with their conventional equivalents in several respects, including their generally uncompetitive pricing. Most of these products did not fall within the regulatory framework, so consumers did not have the same protection as other consumers, for example, the availability of the Financial Ombudsman Service and the possibility of redress from the Financial Services Compensation Scheme. The growth of the retail market remained slow throughout the 1990s and early 2000s.<br /><br />Much has changed since then. Both on the wholesale and the retail side, the quality of products has improved; a wider range of products has become available; and more players have entered the market. Today, London is seen by many firms, including Islamic as well as non-Islamic, as an increasingly important global centre for Islamic finance. Some of the reasons are outlined below.<br /><br />Reasons for growth<br />There are, perhaps, six main reasons:<br />1. Global expansion of Islamic finance<br />The first experience of Islamic banking in modern times seems to have been in the Middle East in the 1960s.6 It is, therefore, a relatively young industry and nobody really knows the exact size today. But from a small base, the market size is now estimated to be about £250bn globally.7 There are also around 300 financial institutions around the world offering Islamic products.8 Not surprisingly, the growth<br />of the industry in the Middle East and South East Asia has influenced the UK market.<br />Initially, products created in the traditional markets were brought into the UK by some of the key industry players, but now products developed in London are being marketed in other countries, for example in the Middle East.<br /><br />2. Markets and skills base<br />London is well placed to take advantage of these trends. It has a tradition going back to the seventeenth century, if not before, of being willing to innovate and respond flexibly to new ideas. London has deep and liquid markets and the exchanges are among the most frequently used venues for listing and trading financial instruments globally. The London Metal Exchange has already been mentioned. The UK financial<br />services industry has a proven record of developing and delivering new products and a large pool of legal, accounting and financial engineering skills on which to draw. Several of these firms have now established or expanded offices in other Islamic centres. English law is already the preferred legal jurisdiction for many Islamic finance transactions.<br /><br />3. Islamic windows<br />Several major international institutions such as Citi, Deutsche, and HSBC have had a presence in the Middle East and South East Asia for several years. As a result, they have developed considerable knowledge and experience of local markets, including Islamic ones. To accommodate the new and growing demand for Islamic products, they have established business lines known as ‘Islamic windows’, some of which are based in the UK and others in the Middle East and South East Asia. These windows have contributed significantly to the development of Islamic finance because of the institutions’ global<br />experience in product development and their access to far greater resources than those available to local institutions in the Middle East and South East Asia.<br /><br />4. Excess liquidity in the Middle East<br />The sharp rise in oil prices since 2003 has resulted in huge liquidity surpluses and a surge in demand for Islamic as well as conventional assets in the countries of the Gulf region. The capacity of the local financial markets has not, however, been able to develop at the same speed. As a result, demand for assets has considerably outpaced supply and Middle Eastern investors have been looking, in large numbers, for suitable alternatives. This demand was quickly identified by Islamic and conventional institutions that now provide a channel through which assets within other markets are sold to these investors, often by way of Sharia- compliant transactions. This has been particularly notable in the UK. A recent example is the acquisition of Aston Martin by two Kuwaiti financial institutions, using Sharia-compliant financing.<br /><br />5. Public policy and taxation<br />Since the early 2000s the government, for reasons of wider public policy, has introduced a series of tax and legislative changes specifically designed to remove obstacles to the development of Islamic finance. The first significant change came in the Finance Act 2003 which introduced relief to prevent multiple payment of Stamp Duty Land Tax on Islamic mortgages (see below).13 The Finance Acts 2005 and 2006 contained further measures aimed at putting other Islamic products on the same tax footing as their conventional counterparts. Most recently, the Finance Act 2007 clarified the tax framework further, in the case of Sukuk. This is very much work in progress.<br /><br />6. Single financial regulator<br />Another contributory factor is institutional. The establishment of the FSA in 1997 combined 11 different regulators into a single body under a single piece of legislation. This has done much to resolve several of complications and conflicting views stemming from the previous regulatory regime where functions were divided. In particular, the FSA is able to look across the system as a whole, to assess Islamic financial institutions and products.<br /><br />Regulatory developments<br />As banking regulators, the Bank of England and, from 1998, the FSA have been open to the development of Islamic finance in the UK for some time. The first important signal was given in a speech by Lord Edward George, then Governor of the Bank of England, in September 1995 at a conference organised by the Islamic Foundation. In this, he recognised the ‘growing importance of Islamic banking in the Muslim world and its emergence on the international stage’ as well as the need to put Islamic banking in the context of London’s tradition of ‘competitive innovation’. In pointing out that the supervisory issues raised were similar in many respects to those of conventional banks, he also noted there were a number of potentially difficult questions to resolve, such as liquidity and risk management. But the problems, he said, should prove ‘more tractable’, the more they were understood by Western supervisors.<br /><br />These sentiments were first translated into practice in 2001 when a high-level working group, chaired by Lord George with representatives from the City, government, the Muslim community and the FSA, was established to examine the barriers to Islamic finance in the UK. One of the main ones identified was the fact that Islamic mortgages attracted double stamp duty, both on the purchase of the property by the bank and on the transfer of the property by the bank to the customer at the end of the mortgage term. As noted above, any change here was clearly a matter of public policy; and government legislation in 2003 to remove this anomaly was welcomed by both the Bank of England and the FSA.<br /><br />This open approach was taken forward by Sir Howard Davies, when he was Chairman of the FSA. For example, in a speech to a conference on Islamic Banking and Finance in Bahrain in September 2003, he told his audience that he had ‘no objection in principle to the idea of an Islamic bank in the UK’.14 He went further in saying that, provided Islamic banks met the FSA’s regulatory requirements, the UK had ‘a clear economic interest in trying to ensure that the conditions for a flourishing Islamic market are in place in London’. A soundly financed and prudently managed Islamic institution would, he argued, be ‘good for Muslim consumers, good for innovation and diversity in our markets and good for London as an international financial centre’.<br /><br />These high-level contacts with the Muslim community have since been reinforced by working level contact with Islamic institutions. The FSA now has good and growing links with the industry, other regulators and Islamic working groups in international organisations. It is also a participant in the recently established HM Treasury Islamic Finance Experts Group.15 These and other links have laid the foundation on which the FSA has been able to consider the authorisation of wholly Islamic firms.<br /><br /><strong>4. The FSA’s approach to authorisation</strong></span></div><div align="justify"><br /><span style="color:#000000;">To date, the FSA has authorised three wholly Islamic banks, initiated by Middle Eastern investors and institutions. The Islamic Bank of Britain began operations as an authorised firm in 2004 and by June 2007 had a balance sheet of around £140m.16 On the same date, the European Islamic Investment Bank, which was authorised in 2006, had a balance sheet of £302m.17 The Bank of London and the Middle East was authorised in July 2007, with a start up capital of £175m.18 The first of these is retail and the last two wholesale. Other applications are in the pipeline. The FSA has also authorised one Islamic hedge fund manager and is considering an application from the first wholly Islamic Takaful* provider.<br /><br />This section examines the authorisation process and how it is applied to wholly Islamic finance firms. It is, however, worth noting that the operations conducted by conventional banks for retail and wholesale clients through their Islamic windows do not require separate authorisation. These activities are covered under their existing authorisations and permissions from the FSA. Separate authorisation, however, would be required if such banks were to establish subsidiaries or separate legal entities to carry out this business.<br /><br /><strong><em>The Financial Services and Markets Act 2000</em></strong> </span></div><div align="justify"><br /><span style="color:#000000;">Anyone seeking to conduct a regulated activity in the UK is required to apply to the FSA for permission under Part IV of the Financial Services and Markets Act 2000 (FSMA).21 FSMA deals with the regulation of financial services in the UK and is the legislation under which bodies corporate, partnerships, individuals and unincorporated associations are permitted by the FSA to carry on those financial activities which are subject to regulation.<br /><br />Under Section 19 of FSMA, any person who carries on a regulated activity in the UK must be authorised by the FSA or exempt.** A breach of section 19 may be a criminal offence.<br /><br /><strong><em>Regulated activities</em></strong></span></div><div align="justify"><br /><span style="color:#000000;">The activities that are subject to regulation are specified in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO).22 Examples include accepting deposits, effecting or carrying out contracts of insurance and advising on investments.<br /><br />Before the FSA was established as the single financial regulator in the UK, several separate regulators oversaw different financial markets. The Bank of England, for example, was responsible for supervising banks under the Banking Act 1987 and the Securities and Investment Board was responsible, under the 1986 Financial Services Act, for investment regulation which was carried out by several self-regulatory organisations. However, under FSMA, and subject to any specific restrictions*, firms now seek a scope of permission from the FSA to be authorised for the full range of regulated activities they wish to undertake.<br /><br />Most of the Islamic applications the FSA has received so far have been to establish Islamic banks. Banking itself is not a defined regulated activity; rather, the generally understood meaning is an entity which undertakes the regulated activity of ‘accepting deposits’ (and is not a credit union, building society, friendly society or insurance company). As defined by the RAO, this covers money received by way of deposit lent to others or any other activity of the person accepting the deposit which is financed, wholly or to any material extent, out of the capital of or interest on money received by way of deposit. This activity warrants classification as a credit institution under the EU Banking Consolidation Directive and firms undertaking it are subject to the appropriate capital requirements.23 A firm claiming to be a bank will therefore be expected to seek this activity within the scope of its permission.<br /><br /></span><span style="color:#000000;"><strong>Non-discriminatory regime<br /></strong>All financial institutions authorised by the FSA and operating in the UK, or seeking to do so, are subject to the same standards. This is true regardless of their country of origin, the sectors in which they wish to specialise, or their religious principles. This approach is fully consistent with FSMA’s six Principles of Good Regulation, in particular, facilitating innovation and avoiding unnecessary barriers to entry or expansion within the financial markets.<br /><br />There is, therefore, a ‘level playing field’ in dealing with applications from conventional and Islamic firms. The FSA is happy to see Islamic finance develop in the UK, but it would not be appropriate, nor would it be legally possible, to vary its standards for one particular type of institution. This was clearly articulated by Sir Howard Davies in his speech in Bahrain in September 2003. The FSA’s approach can be summed up as ‘no obstacles, but no special favours’.<br /><br /><strong>Authorisation requirements</strong><br />All firms seeking authorisation are required to provide a credible business plan and meet, and continue to meet, five basic requirements known as the ‘Threshold Conditions’. These are set out in FSMA and described in further detail in the FSA Handbook.26 In summary, the five conditions are that:<br />• The firm must have the right legal status for the activities it wishes to undertake. This recognises, for example, that European directives place certain limits on the legal form that a firm accepting deposits or effecting and carrying out contracts of insurance may take.<br />• For a firm incorporated in the UK, its head office and ‘mind and management’ must also be in the UK.<br />• If the person or firm has ‘close links’ with another person or firm, these are not likely to prevent the effective supervision of the firm.<br />• The firm has adequate resources, both financial and non-financial, for the activities which it seeks to carry on.<br />• The firm is ‘fit and proper’. This takes into account its connection with other persons, including employees and shareholders, the nature of the activities it wishes to undertake and the need to conduct its affairs in a sound and prudent manner. These conditions can readily be applied to any type of firm, although the exact requirements may need to be shaped to fit differing sectors. For example, the requirement for adequate resources, which includes capital, would be different for a bank and an insurance company. However, the capital requirements for an Islamic and a conventional bank would be applied on the same basis. Another example would relate to the requirement that a business must have reasonable systems and controls to manage the type of business it wishes to undertake. In this case, the threshold conditions are flexible enough to be as readily applied to an Islamic firm as to a conventional provider, whatever sector the firm is operating in.<br /><br /><strong>Applying FSMA</strong><br />In applying FSMA to Islamic firms, there are several areas where more work or clarification is needed. So far, however, they have not presented any obstacles that could not be overcome. This owes much to the collaboration between the FSA and the applicants to develop pragmatic solutions.<br /><br />The FSA has identified three main areas of potential difficulty which are common to Islamic applications. These are: the regulatory definition of products; the role of Sharia scholars; and financial promotions.<br /><br /><strong>Regulatory definition of products</strong></span></div><div align="justify"><br /><span style="color:#000000;">The definition of products offered by Islamic firms is a key factor that firms and the FSA need to consider as part of the authorisation process. As explained earlier, the structure of Islamic products is based on a set of contracts acceptable under Sharia. So, while their economic effect is similar to or the same as conventional products, their underlying structure may be significantly different. This means the definition of these products under the Regulated Activities Order may not be the same as the conventional equivalent.<br /><br />This has two important implications for applicants. First, firms need to be sure they apply for the correct scope of permission for the regulated activities they wish to undertake. This, in turn, highlights the need for firms to assess whether the structure of Islamic products can be accommodated within the Regulated Activities Order. Second, the regulatory definition is relevant in determining the framework in which products can be sold, for example in the application or otherwise of conduct of business rules. If a product falls outside the FSA’s regulatory framework, there may be restrictions on who the product can be sold to. For these reasons, new applicants are encouraged to engage at an early stage with the FSA and their legal advisers about the regulatory definition of the products they intend to offer.<br /><br /><strong>The role of Sharia scholars</strong><br />The FSA also has to consider the role of the Sharia Supervisory Board (SSB). The industry defines the key objective of SSB scholars as ensuring Sharia compliance in all an entity’s products and transactions. In practice, Sharia scholars examine a new product or transaction and, if satisfied it is Sharia compliant, issue an approval. The FSA is, however, a secular and not a religious regulator. It would not be appropriate, even if it were possible, for the FSA to judge between different interpretations of Sharia law. However, the FSA does need to know, from a financial and operational perspective, exactly what the role of the SSB is in each authorised firm. It needs, in particular, to know whether and if so how the SSB affects the running of the firm. The FSA has to be clear as to whether the Sharia scholars have an executive role or one that<br />is simply advisory.<br /><br />This matters for two reasons. First, in the UK, any person acting as a Director of anauthorised firm must be registered under the FSA Approved Persons rules. To assess the suitability of a person, the FSA has a standard known as the ‘Fit and Proper test for Approved Persons’.27 One of the factors looked at is ‘competence and capability’. So, for an individual to become a Director of an authorised firm, we would expect them to have relevant experience. If, therefore, Sharia scholars are seen to have a directorship role, it is possible that some of them may not meet the competency and capability requirements. Second, and assuming that Sharia scholars are Directors, their role is more likely to resemble that of an Executive Director than a Non Executive Director as it might involve active participation in the firm’s business. In such cases, it would be very difficult to justify multiple memberships of SSBs of different firms because of significant conflicts of interests. This would put further constraints on an industry already facing a shortage of Sharia scholars with suitable skills.<br /><br />The key point from the FSA’s perspective is that firms can successfully show that the role and responsibilities of their SSB are advisory and it does not interfere in the management of the firm. The firms already authorised have been able to show this. The factors that the FSA typically looks at with regards to SSBs include the governance structure, reporting lines, fee structure and the terms and conditions of the SSB’s contracts.<br /><br />On a related point, we understand from the industry that complex products, having gone through a long process of development, are sometimes rejected by the SSB for non-compliance with Sharia. To some extent, this is seen to be a result of the lack of Sharia knowledge internally in the firm. One solution put forward by some practitioners is greater involvement by Sharia scholars in the product development process. While this may prove beneficial, it could lead to a more executive role as outlined above. A good industry practice, now developing, is that firms are starting to recruit more staff with an understanding of Sharia law. This could help to identify a product’s potential non-compliance with Sharia at a much earlier stage.<br /><br /><strong>Financial promotions</strong><br />The third issue, financial promotions, is more relevant on the retail side. Reflecting its statutory objective to protect consumers, the FSA’s requirement is that all advertising should be ‘clear, fair and not misleading’.28 This has been important in the context of Islamic finance as the products are still new and their structure differs from more conventional products. This, together with the fact that by necessity those who will wish to use them may be relatively inexperienced in financial services, reinforces the need for the promotion of Islamic financial products to include the risks as well as the benefits. The example below shows how these issues have been dealt with in practice.<br /><br /><strong>Authorisation of the Islamic Bank of Britain</strong><br />In August 2004, the FSA authorised the Islamic Bank of Britain (IBB), the first wholly Islamic retail bank in a country where most of the population is non-Muslim. Inevitably, the process raised new questions and it took some 18-24 months to complete. The FSA was then able to carry over the lessons to later applications.<br /><br />The main issue that arose concerned the definition of a ‘deposit’. In the United Kingdom, a deposit is defined as a ‘sum of money paid on terms under which it will be repaid either on demand or in circumstances agreed by parties’.29 The point is important because deposit-takers are regulated and the customer is assured of full repayment as long as the bank remains solvent. A savings account originally proposed by IBB as a ‘deposit’ was a profit-and-loss sharing account, or Mudharaba*, where Sharia law requires the customer to accept the risk of loss of original capital. This was not consistent with the FSA’s interpretation of the legal definition of a ‘deposit’ which requires capital certainty.<br /><br />After extensive discussions, the solution IBB adopted was to say that, legally, its epositors are entitled to full repayment, thus ensuring compliance with FSA requirements. However, customers had the right to turn down deposit protection after the event on religious grounds, and choose instead to be repaid under the Sharia-compliant risk sharing and loss bearing formula. The solution for IBB may, however, not necessarily be appropriate in other contexts. The FSA is prepared to review each case on its merits and will try to reach solutions that are acceptable to all those involved.<br /><br />Another area which was new to the FSA was the role of the Sharia Board, which we have already discussed above. Financial promotions are particularly important as the IBB was, and is, marketing its products directly to retail consumers. The FSA and the IBB looked at how the risks associated with its products were to be presented to customers. This has presented no problems so far. The FSA is currently taking a similar approach to the first Takaful firm which has recently applied for authorisation.<br /><br />The IBB now offers a range of retail and business banking services. It has established eight branches in cities with large Muslim populations, around the country. According to recent figures, the bank had over 50,000 accounts and some 42,000 customers.<br /><br /><strong>5. Risks and challenges</strong></span></div><strong></strong><div align="justify"><br /><span style="color:#000000;">The FSA expects all authorised firms to identify, monitor and mitigate the risks they face. Islamic firms are no exception. Although there are many risks which are common to Islamic and conventional firms, the FSA’s experience shows there are several risks which are specific to Islamic firms. This section looks at some of these risks. The list is not exhaustive and not all of the risks apply to all Islamic firms. There are differences too in the risk management practices of wholly Islamic firms and conventional firms operating Islamic windows, some of which we also discuss here.<br /><br /><strong>Risks specific to Islamic finance</strong><br />1. Sharia ‘arbitrage’<br />There is a diversity of opinion as to whether particular practices or products are Sharia compliant. This means that some products and services may be approved as being Shariacompliant by some Sharia scholars but not by others. On a global level, the approval of Islamic firms’ products and services may also depend on the jurisdiction they are to be offered in. This can add another layer of complication for regulators.<br /><br />The FSA is in no position to assess the suitability of the scholars consulted by Islamic firms. It does, however, want to see the basis on which an Islamic firm claims to be Sharia -compliant is communicated appropriately to the consumer. More generally, it supports moves to develop common Sharia standards by organisations such as the Islamic Financial Services Board (IFSB) and the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI).31 The IFSB, for example, has recently called for a dialogue within the industry to adapt current insurance regulations to meet the specifics of Islamic finance.32 Greater standardisation could reduce the potential for Sharia ‘arbitrage’ as well as making it easier for bankers and investors to understand the market.<br /><br />2. Sharia compliance throughout the product life cycle<br />For Islamic finance providers, gaining approval from the SSB on Sharia compliance of a product before its launch is vital. Equally important for firms is recognising that Sharia compliance is a continuous process that means their products and services are adequately monitored. Unlike conventional finance, this has implications for an Islamic firm’s prudential requirements as well as conduct of business: some products, if they breach Sharia compliance rules, can adversely affect a firm’s solvency by converting an asset into a liability on the balance sheet. Effective monitoring of Sharia compliance by an Islamic firm may involve reinforcing more remote SSB oversight through the Internal Sharia Audit process and by developing more knowledge and expertise within the firm.<br /><br />3. Issues for Sharia scholars<br />Several of the potential issues for Sharia scholars were outlined in Section 4. It is worth highlighting two more. The shortage of appropriately-qualified Sharia scholars in the Islamic financial industry means it is common for individual scholars to hold positions on the SSBs of a number of Islamic firms. This raises concerns over the ability of SSBs to provide enough rigorous challenge and oversight of firms’ products and services. Another issue is where the SSB of a firm is responsible for the yearly Sharia audit as well as approving products for Sharia compliance. As with conventional firms, the FSA would like to see these conflicts recognised and carefully managed.<br /><br />4. Human resources<br />It is widely acknowledged that there is a global shortage of experienced professionals in the Islamic finance sector. There is clearly scope for more education and training in the UK and some positive steps are now being taken. These include university degrees and professional training courses.<br /><br />As explained earlier, the shortage of resources also extends to Sharia scholars who have relevant banking experience. To address this, some firms have placed less-experienced scholars alongside experienced ones on their SSB, thus helping to develop more knowledgeable scholars.<br /><br />5. Contract and documentation risk<br />In contracts for Islamic transactions, the enforceability of terms and conditions depends on the governing law. In the case of a dispute, it is unlikely that a UK court will give a verdict based on Sharia law. The precedent here is the case of Shamil Bank of Bahrain EC v Beximco Pharmaceuticals Ltd et al, in 2004, when the Court of Appeal ruled that it was not possible for the case to be considered based on principles of Sharia law.33 There were two main reasons. First, there is no provision for the choice or application of a non-national system of law, such as Sharia. Second, because the application of Sharia principles was a matter of debate, even in Muslim countries.<br /><br />To mitigate this risk, contracts have to be written very carefully to minimise potential disputes and state the governing law. This is well understood by the industry. At present, most Islamic contracts are governed by English law, and a few under New York law. There are also advantages in standardisation of documentation and a number of initiatives are under way in this field (see Section 8).<br /><br />6. Risk of contagion<br />In the UK, the risk of contagion to the wider economy and financial markets through a failure of an Islamic financial institution is limited as the market is currently relatively small. In countries where Islamic institutions have a larger share of the market the impact would be wider.<br /><br />The industry is still very young and it is still building its reputation and credibility.Additionally, in some countries, Islamic finance and its various business models (which have so far tended to be conservative) have not yet been tested in a severe economic or market downturn. Given these factors, a significant failure now in the Islamic market might have a damaging impact on the future development of this sector.<br /><br />Risk management framework<br />This section outlines some of the financial risk management tools and practices used by Islamic finance providers, together with the challenges they face. It also looks at differences in risk management between wholly Islamic firms and Islamic windows of conventional firms.<br /><br />Sharia scholars of a wholly Islamic firm require all transactions within the firm to be in compliance with Sharia, including risk management. Many of the commonly used tools (for example, certain types of derivatives which are used for hedging against currency, interest rates and other risks), are not acceptable to almost all Sharia scholars. In the past, this has made risk management more difficult for wholly Islamic firms as Sharia compliant substitutes have been slow to develop. However, new products and techniques are gradually emerging – for example, Sharia-compliant, derivative-like products for managing foreign exchange and interest rate risk.<br /><br />Liquidity management has also been a challenge because of the lack, or limited availability, of Sharia-compliant instruments. Two of the instruments widely used by conventional banks, namely inter-bank deposits and government and corporate bonds or notes, are interest bearing, so are viewed as non-Sharia compliant by scholars. Again, Islamic firms are having to develop other methods. In the UK, as elsewhere, Commodity Murabaha transactions, which have a long history, are being structured so as to have almost exactly the same effect in terms of liquidity as the inter-bank deposits of conventional banks. Other products have been developed but their use is very limited. Some methods such as Tawarruq* are controversial and no consensus has been reached on whether they are Sharia compliant. Islamic securities markets are still relatively small in volume and quite illiquid. Nevertheless, volumes are now expanding and markets are beginning to develop around the world.<br /><br />For banks with ‘Islamic windows’, the industry practice is that the risks arising fromIslamic business and products are often pooled with risks from conventional business. Conventional tools are used to manage risks, at business unit or group level, but with certain limitations. For example, a firm that runs both Islamic and conventional mortgage books may have to keep the books separate at the start; but it may still pool Financial Services Authority the risks from the two books together and use a conventional tool to manage them. This practice has been accepted by the scholars of these firms.<br /><br />In short, the constraints in risk management for Islamic firms are due mainly to lack of availability of suitable products and the relatively small size of the markets. However, if Islamic finance continues to develop as it has done over the past five years or so, many of these constraints should reduce as more institutions enter the market and new tools evolve.<br /><br /><strong>Basel 2 and risk management</strong> </span></div><div align="justify"><span style="color:#000000;"></span></div><div align="justify"><span style="color:#000000;">The new Basel 2 capital risk framework has been recently introduced in the UK, in the form of the EU Capital Requirements Directive.34 Basel 2 is a revision of the existing Basel accord, which aims to make the framework more risk sensitive and representative of modern banks’ risk management practices. The broad framework consists of three pillars. Pillar 1 sets out the minimum capital requirements firms will be required to meet for credit, market and operational risk. Under Pillar 2, firms and regulators have to decide whether a firm should hold additional capital against risks not covered in Pillar 1, and must take action accordingly. Examples of Pillar 2 risks include concentration, liquidity and reputational risk. The aim of Pillar 3 is to improve market discipline by requiring firms to publish certain details of their risks, capital and risk management.<br /><br />If, in practice, certain risks affected Islamic institutions more than conventional firms, the FSA would expect these to be identified and quantified under Pillar 2. Where this is not possible or capital is not an appropriate mitigating tool, then other ways of managing these risks would need to be identified. Similar to conventional firms, these will include sound corporate governance and appropriate systems and controls. The FSA is in the process of putting this approach into practice across the firms it regulates but this is still work in progress. The FSA’s approach to both Islamic and conventional financial institutions will develop over time.<br /><br /><strong>6. Islamic finance in retail markets</strong><br /><br />After a slow start in the 1990s and early 2000s, the retail market has witnessed growth and some significant milestones in the last five years. Even so, establishing the market has not been as fast as some commentators predicted. Although reliable estimates of the overall size of the Islamic retail market are hard to come by, volumes appear to be relatively small. The size of the Islamic mortgage market in the UK, for example, is estimated at only £500m compared with the stock of mortgage lending of over £1.1 trillion in the UK as a whole and nearly 12 million borrowers.35 As far as we are aware, there are around nine or ten regulated financial institutions, including major high street banks, active in the Islamic retail markets.<br /><br />There are perhaps two main reasons for this modest growth. First, that demand may originally have been overestimated. Research by some commentators shows that financial decisions in the Muslim community, as in the population as a whole, are influenced by a variety of factors.36 Similarly, the Muslim community is not a uniform group in terms of relative affluence. In the past, there have been tax and regulatory hurdles and it is too early to judge whether recent reforms will result in an increased market share for Islamic products.<br /><br /><strong>Islamic mortgages</strong><br /><br />In the UK, Islamic mortgages have been structured under two different Sharia-compliant contracts, namely, Murabaha and Ijara*. Under the Murabaha method, the provider buys the property and sells it on immediately to the consumer for the original purchase price plus an agreed profit margin. The consumer pays this higher price in deferred payments in line with a fixed payment schedule. This method of financing falls within the definition of a regulated mortgage contract and has been regulated by the FSA alongside conventional mortgages since October 2004. It has rarely been used in the UK. In an Ijara contract, the finance provider buys the property and becomes the legal owner. The customer agrees to buy the property from the provider at a defined price at the end of a set period, and signs a lease agreement to occupy the property. During this period, the customer makes regular payments to the provider, consisting partly of the rental payment and partly a payment towards buying the property. At the end of the term, the legal ownership of the property is transferred to the customer. In the case of Diminishing Musharaka, the transfer of the ownership is gradual, as the payments made by the customer gradually buys the provider’s equity in the property. Until recently, this type of home financing was not regulated by the FSA.<br /><br /></span><span style="color:#000000;"><strong>Regulation<br /></strong><br />Under the Finance Act 2007, the government brought Ijara-based contracts within the FSA’s regulatory framework. For regulatory purposes, these contracts are called Home Purchase Plans (HPPs). The reasons for doing so included the need for a level playing field, as customers for HPPs did not enjoy the same levels of protection as customers for conventional mortgages. This meant HPP customers were potentially vulnerable to misselling and unfair treatment, with no means of redress.<br /><br />The regulatory requirements that were introduced took account of the relatively small size of the market and the FSA’s commitment to a more principles-based approach. It was recognised that imposing an expensive regime could have led some firms to cease offering the products altogether and to other distortions in the market. The FSA’s requirements were generally kept at a high level and proportionate to the expected benefits for consumers. There is now a single sourcebook for the conduct of business for ‘Mortgages and Home Finance’.37 To date, the FSA has received a few applications to offer HPPs by existing providers and more than 50 by intermediaries to enter this market.<br /><br /><strong>Prudential requirements</strong><br /><br />Under Basel 1, Murabaha-based home finance products were considered to have the same risk as conventional mortgages, risk weighted at 50%. Ijara-based products, however, were risk weighted at 100%, making them slightly more expensive for providers than conventional mortgages. Under the EU Capital Requirements Directive, the risk weights of all three products are the same in the UK, set at 35%, under the standardised approach.<br /><br /><strong>Takaful</strong></span></div><div align="justify"><br /><span style="color:#000000;">Takaful operations are mutual in nature and similar to conventional mutual insurers. Takaful firms and products are structured in a manner to address the specific concerns of Sharia scholars with conventional insurance products, namely uncertainty (gharar), gambling (maisir), interest (riba) and investment strategy. To deal with these concerns, Takaful products have three distinctive features – greater transparency in providing a clear distinction between the Takaful fund, which consists of contributions from policyholders akin to premiums, and the Takaful operator who manages the fund; an element of profit sharing; and limitations on acceptable investments.<br /><br />Specific models for Takaful will vary, but Takaful operations often have a two-tier structure consisting of one or more funds belonging to policy holders, above which sits a limited company with share capital which is responsible for overall governance, underwriting of risks, and investment management. Like conventional insurers, Takaful companies can generate a return based on their underwriting activity and their investment activity. The remuneration is either based on fixed fee or performance, but is commonly a combination of both, with underwriting subject to a fixed fee and investment management performance related. At times when the Takaful operator’s activities generate a loss and the funds are in deficit, this can be made up by an interestfree loan provided by the limited company, to be repaid once the funds are in surplus<br />again.<br /><br />As yet, Takaful activity in the UK remains very limited, with only one provider active and a second having applied for authorisation. A Lloyd’s syndicate was established to underwrite risks in a Sharia-compliant manner in 2006 with backing from a Takaful provider based in the Gulf, but this was wound down within a few months before it accepted any business.<br /><br />From a regulatory perspective, the FSA would treat a Takaful provider as it would any other insurance provider, assuming there was enough similarity in function and form. Given the parallels drawn between Takaful providers and conventional insurers, particularly mutual insurers, ratings agencies are also assessing them using the same method.<br /><br /><strong>Treating Customers Fairly (TCF)</strong> </span></div><div align="justify"><br /><span style="color:#000000;">Principle 6 of the FSA’s Principles of Good Regulation states that ‘a firm must pay due regard to the interests of its customers and treat them fairly’.40 The FSA’s TCF programme, which includes financial promotions, is designed to put this into practice.41 The outcomes the FSA wants to achieve include giving consumers clear information, suitable advice and an acceptable level of service. In addition, the FSA would wish to see products and services in the retail market targeted to meet the needs of identified consumer groups.<br /><br />Many of these requirements fit naturally with the principles and requirements of Sharia law, such as the requirement for Islamic financial institutions to disclose faults and avoid misrepresentations. However, owing to the sometimes complex or uncommon nature of Islamic financial products, these institutions should ensure consumer understanding is adequate. This will become more important as the industry develops and new products are introduced. These requirements and the additional layer of Sharia compliance can give firms a good basis for embedding TCF across their business.<br /><br /><strong>Financial capability </strong></span></div><div align="justify"><br /><span style="color:#000000;">Education to familiarise Muslims and other consumers with new products and new forms of finance will be critical. In this context the FSA has devoted considerable resources to launching and implementing a ‘National Strategy for Financial Capability’ across the whole population.42 The strategy brings together the financial services industry, consumer and voluntary organisations, government and media to find ways to improve the UK’s financial capability. As part of this strategy, the FSA gives clear, impartial information to help consumers make informed financial decisions. This is done through helplines, a ‘Moneymadeclear’ website and a range of printed guides.<br /><br />With respect to Islamic finance, the FSA cannot and does not give guidance on Sharia principles, nor on whether particular products are Sharia compliant. The FSA does, however, provide explanation of products and the associated risks. The factsheet on HPPs issued in March 2007 is a good example, setting out the key messages for consumers, giving a step-by-step guide to each product and the associated risks and benefits.44 We have also tried to ensure the factsheet gets to the right audience and some 5,000 copies have already been distributed. In this way, the FSA can provide a platform to raise public awareness but it will clearly rely on support from other institutions and organisations, private and official, which are involved in this sector.<br /><br /><strong>7. Islamic finance in wholesale markets</strong></span></div><div align="justify"><br /><span style="color:#000000;">In the last few years, the number of firms offering Sharia-compliant products and services has increased significantly. This has been particularly the case in London, as many international banks have situated their Islamic banking and advisory activities here. London’s strength in financial engineering and product design has meant that many Islamic products and solutions are now structured in London and marketed in the Middle East as well as to Western markets. The wholesale Islamic finance activities offered by the 25 or so firms active in London, including the two wholly Islamic banks, range from traditional banking activities and project and trade financing to structured products, asset management and private banking. The number of firms involved is growing.<br /><br /><strong>Market developments </strong></span></div><strong><div align="justify"><br /></strong><span style="color:#000000;">The greatest growth has been in Sukuk markets. The volume of outstanding issues is estimated to be $70bn globally, a considerable portion of which is listed in Bahrain and Dubai.45 London has, however, started to follow suit. It recently took a positive step towards becoming a global centre for Islamic finance and a centre of choice for listing Sukuk by establishing the world’s first secondary market for Sukuk. According to the Financial Times, trade volumes in London ‘rose from a trickle in December 2006 to about $2bn in January 2007’. The first Sukuk was listed on the London Stock Exchange in July 2006. A few more have been listed since then with the listing by ‘Aldar Properties’ the largest to date.<br /><br />The industry is also very supportive of the idea of the UK government issuing a sovereign Sukuk (see Section 8). Their hope is that a sovereign Sukuk will provide a benchmark for pricing, enhance liquidity in the markets and boost London’s ability to attract further Sukuk structuring activity.<br /><br /><strong>Sukuk structures</strong></span></div><div align="justify"><br /><span style="color:#000000;">In the light of Sharia law’s prohibition on interest payments, conventional bonds and debt instruments are forbidden in Islam. So Sukuk are structured to generate the same economic effects as conventional bonds, but in a Sharia-compliant manner. This is achieved through using assets and various contractual techniques acceptable under Sharia.<br /><br />Initially, these instruments were viewed by the industry as ‘asset-backed’ debt instruments. Structuring Sukuk is in many aspects similar to securitisation, one common characteristic being that the payouts are based on the performance of the underlying assets. However, some practitioners think Sukuk are ‘asset-based’ rather than ‘assetbacked’. In their view, there are two key differences between Sukuk structures and securitisation. First, for Sukuk there is no de-linkage of the assets from the originator (in other words, there is no ‘true sale’ of the assets by the originator to the Special Purpose Vehicle). Second, investors in Sukuk are exposed to issuer’s risk rather than the assets’ risk. The implication for the issuer is that cash flow segregation is only a book entry.<br /><br /><strong>Regulatory treatment of Sukuk</strong></span></div><div align="justify"><strong></strong><br /><span style="color:#000000;">The structures of Islamic products have created some challenges over their regulatory definitions in the UK and other centres around the world. Sukuk have been no exception to this. While similar in economic terms to conventional bonds, Sukuk may have significantly different underlying structures. The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) has identified at least 14 possible structures for Sukuk and more are being developed.47 It is therefore evident that it may not be possible to find one overarching regulatory definition for all types of Sukuk. These instruments need to be examined on a case-by-case basis.<br /><br />The issues are not straightforward. The FSA has conducted a review based on a ‘Mudaraba Sukuk’ and has identified two possible treatments of this instrument under FSMA. These are to treat it as an unregulated Collective Investment Scheme (CIS), and for the purpose of listing as a debt instrument.<br /><br />The term ‘Collective Investment Scheme’ is defined in Section 235 of FSMA, and describes a wide range of arrangements that provide for the collective investment of investor contributions. The definition says the arrangements must be such that the participants do not have day-to-day control over the management of the property and the arrangements must have one or both of the following characteristics:<br /><br />a) the contributions of the participants and the profits or income out of which the payments are to be made are pooled; and,<br />b) the property is managed as a whole by or on behalf of the operator of the scheme.<br /><br />This type of Sukuk appears to have both of these characteristics. If regarded as a CIS then there are two main consequences. First, the promotion of such schemes, being unregulated, would be subject to certain restrictions under FSMA. This means the product may not be freely marketable but may only be promoted according to the exemptions under FSMA and in the FSA Handbook. A second consequence would be that a person operating a CIS in or from the United Kingdom will need to be authorised under FSMA. This should not be a relevant issue as the Sukuk vehicle is found outside the United Kingdom, although the exact analysis will depend on the circumstances.<br /><br />A Sukuk will not, however, be categorised as a CIS under FSMA if the arrangements under which the rights of the participants are represented is a debt security within the definition set out in Article 77 of the Regulated Activities Order. The FSA’s consideration of the characteristics of this Mudaraba Sukuk suggests there may be an overlap between an instrument which is a CIS and an instrument which may fall within the broad categories of debt instruments as specified under the RAO.<br /><br />At this stage, it seems this kind of Sukuk would fit better under FSMA as an unregulated CIS. But the possibility of treating it as a contractual debt obligation of some kind cannot be ruled out. The FSA’s work on Mudaraba Sukuk and other types of Sukuk is continuing in consultation with industry practitioners.<br /><br /><strong>Treatment of Sukuk for listing purposes</strong><br />Any entity wishing to list an instrument, including Sukuk, on the London Stock Exchange is required to apply to the UK Listing Authority (UKLA), a division of the FSA. Listing procedures, prospectus and transparency regime and classification of instruments are based on the governing EU Directives and/or FSA listing rules. The classification of Sukuk as a CIS under FSMA does not conclusively determine how it should be classified for listing purposes. In this context, it has been and is possible for Sukuk to be classified as a debt security, subject to the information from the issuer being supplemented by including appropriate additional information as required. This appears to be better than, say, treating the Sukuk as an ‘asset-backed’ security since this would detract from the role of the originator as providing what could be said to amount to credit protection for the periodic dividend payments and repayment of principal. Nor would it seem appropriate for the Sukuk to be treated, for listing and prospectus purposes, as a collective investment undertaking as, for example, the purpose of the Sukuk may be to provide finance for a single project rather than an opportunity to participate in a range of investment situations. Treating the Sukuk as a debt security appears to provide the most appropriate fit with the Prospectus Regulation but, as said above, each structure will need to be considered separately.<br /><br /><strong>8. Outlook</strong><br />The foundations for the future development of Islamic finance in the UK have been<br />firmly laid. Although the likely growth cannot be predicted accurately, there is scope for<br />expansion, as set out below.<br /><br /><strong>Retail markets</strong><br />To date the industry has largely concentrated on providing mortgage and savingsproducts for retail consumers, and growth has been modest. The tax and regulatory developments already outlined could benefit the market and there are signs of firms expanding their product ranges through providing new saving and investment products. Interest-free student overdrafts have recently emerged and there seems to be demand for new products targeted at the personal finance and the small and medium-size enterprise (SME) markets. Elsewhere in the retail market, some regional stockbrokers are providing services to consumers at all levels of the wealth spectrum and some financial advisers are offering tailored advice to the Muslim community.<br /><br /><strong>Wholesale markets</strong><br />The Sukuk market in London is now well established. The volume of Sukuk trading is still small but this could change if the government goes ahead with a sovereign issue (see below). There are also indications that a few inter-dealer brokers in London may be trying to develop closer links with Islamic firms in the Gulf, possibly by establishing regional offices there.<br /><br /><strong>Takaful</strong><br />Takaful markets in other countries are considerably more mature than in the UK. These include the Gulf States and particularly Malaysia, which has been active in this area for several decades. The prospects for growth in the UK are unclear; but it is possible that as products are rolled out in these more established markets, there may be some transfer of activity to the UK. The growth of Takaful products in the UK could help to develop the Islamic mortgage market. As with conventional firms, Islamic finance firms would then be able to offer a combined package to prospective home buyers.<br /><br />One of the biggest obstacles for Takaful providers is the limited amount of Shariacompliant reinsurance capacity. Precise data is unavailable but, based on anecdotal evidence, Islamic reinsurance is able to provide only a fraction of the cover needed by the Takaful industry. As a result, Takaful providers sometimes have to obtain dispensation from their SSBs to take cover with conventional reinsurers. As already mentioned, the FSA is willing to consider further applications from firms in this sector on the same basis as conventional firms.<br /><br /><strong>Complex products</strong><br />Although derivative products are well established tools for managing risks in conventional financial markets, there has been considerable difficulty developing Shariacompliant products which mirror these instruments. These products are controversial and have not been readily accepted by scholars because of their speculative nature. A small number of products have been developed by various banks, for example, Citi have products for managing currency and interest rate risk and other firms such as Deutsche Bank have developed a technique for Islamic derivative products. Indicative of the widening interest in this area, the International Swap and Derivatives Association (ISDA) and the International Islamic Finance Market (IIFM) have signed a Memorandum of Understanding (MoU) to develop a master agreement for Shariacompliant derivative products. It is difficult to assess exactly what type of instruments<br />may result but the FSA is following this closely.<br /><br /><strong>Hedge funds</strong><br />Several hedge fund managers have Sharia-compliant funds within their portfolios. In January 2007, Amiri Capital was authorised as a stand alone Islamic hedge fund manager and more applications may be in prospect. The growth will to a great extent depend on whether the investors approve the methods proposed by fund managers.<br /><br />As with the UK managers of conventional hedge funds, managers of Islamic funds would also be regulated by the FSA. As now, the main regulatory focus would be on systems and controls, valuations, disclosure and conflicts of interest. So far as we know, there are currently no major regulatory issues with regard to Islamic hedge fund managers.<br /><br /><strong>EU passporting</strong><br />Under the relevant European Union directives, one avenue for financial institutions in the UK, including Islamic ones, to expand is to ‘passport’ their business activities into any one of the European Union member states (and vice versa). Concerted efforts have been made within the European Union to form a single market for financial services; and UK-authorised institutions may offer products throughout the European Union without the need to have separate authorisation in each member country. This means that Islamic institutions that ‘passport’ would have access to an estimated 15 million potential customers. The Bank of London and the Middle East is the first Islamic bank to have taken advantage of a cross-border services passport, which enables it to offer its products and services across all EU member states, without a physical presence in the host country.<br /><br /></span><span style="color:#000000;"><strong>Government initiatives<br /></strong>The government has recently taken important steps to promote the industry. In April 2007, the Treasury established an ‘Islamic Finance Expert Group’ representing a broad cross-section of opinion from the industry, the City, Muslim organisations and other bodies, including the FSA. The general objective is to advise the government on opportunities to help Islamic finance in the UK.<br /><br />More specifically, as confirmed in the Chancellor’s pre-Budget Report in October 2007, the group is overseeing an official study by the Treasury and the UK Debt Management Office on the possibility of the UK government issuing a sovereign Sukuk in the wholesale market. As to be expected, the study is examining the practical, legal and tax implications of doing so as well as structural issues such as the need for primary legislation. It has already generated a good deal of interest among market participants and the government will publish a consultative document later in 2007.<br /><br />At the same time, the government has asked National Savings and Investments (NS&I) to begin a detailed study on the feasibility of offering Islamic retail products. This study will cover similar ground to the one on Sukuk, namely looking at the costs and benefits, the range and structure of products that might be offered, and the likely demand. NS&I will publish their report by Autumn 2008.<br /><br /><strong>The longer term</strong><br />Looking further ahead, there is scope to expand the market for Islamic products and services to non-Muslims as well as Muslims. The market is not confined to a particular group of consumers and Islamic finance providers can position their products to appeal more to the much larger non-Muslim population. Their success in doing so will in part depend on the ability to demonstrate how the products are underpinned by generallyaccepted ethical principles. If Sharia-compliant products are no longer seen as ‘exotic’ or niche products, the industry could benefit from economies of scale which would help to sustain it over the longer-term.<br /><br /><strong>8. Conclusion</strong><br /><br />The potential for the future growth of Islamic finance, in the retail and wholesale markets, is clear and both the government and the City are actively promoting this objective. London’s emerging role as a hub for Islamic finance is underpinned by the factors outlined in this paper, in particular, a wide skills base, innovation and flexibility and historical links with the Middle East. These will remain strong. The government’s tax and legislative framework has established a level playing field for a variety of Islamic products such as mortgages, bonds and insurance. This could lead to the availability of new retail products, the expansion of wealth and asset management services and the development of Sukuk and other wholesale markets.<br /><br />The FSA has been, and is, willing to play its part in supporting these developments,within its regulatory powers under FSMA. Although we cannot promote Islamic finance (or any other particular kind of finance), we can give a clear regulatory framework which is flexible enough to adapt to changes in the market. We are keen to see the industry expand, although we recognise this will bring new regulatory challenges. If there is future growth in this market, it should benefit UK consumers and develop London further as an international financial centre.<br /><br />General Islamic finance terms and descriptions used in this paper are based on those used in the Islamic Finance Qualification (IFQ) developed by the UK Securities and Investment Institute (SII) and Lebanon’s Ecole Supérieure des Affaires (ESA).</span></div><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com2tag:blogger.com,1999:blog-36321277.post-34143569623348984752008-07-08T08:58:00.002-01:002008-07-08T09:08:20.326-01:00<span style="color:#000000;"><span style="font-size:130%;"><strong>Islamic Banking and Finance - Riyazi Farook</strong><br /></span><br /><object height="350" width="425"><param name="movie" value="http://www.youtube.com/v/aK_LKlKT5GM"><embed src="http://www.youtube.com/v/aK_LKlKT5GM" type="application/x-shockwave-flash" width="425" height="350"></embed></object></span><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com1tag:blogger.com,1999:blog-36321277.post-79361734273200173182008-07-05T20:46:00.003-01:002008-07-05T21:03:38.074-01:00<div align="justify"><strong><span style="font-size:180%;color:#000000;">Parallels Between Islamic and Ethical Banking</span></strong></div><div align="justify"><span style="font-size:85%;"><span style="color:#000000;"><strong>Professor Rodney Wilson</strong>, </span></span><strong><em><span style="font-size:85%;color:#000000;">Centre for Middle Eastern and Islamic Studies, University of Durham</span> </em></strong></div><div align="justify"></div><div align="justify"><br /><span style="color:#000000;">Islamic banks often describe themselves as being providers of ethical financial services, but they do not spell out explicitly what is meant by this or its significance. The word ethical is used as a label, and equated with Islamic, but there is no attempt to make the link between what is ethical and the specific methods of conducting financial transactions. This is unfortunate, as if Islamic banks are to build their customer bases, then they have to be convincing and persuade potential clients that there are worth switching to. For Islamic banks it not so much a matter of competing on price, but rather in stressing the unique quality of the services they provide. This means they have to be believable, and be able to engage the customer by appealing to his or her conscience.</span></div><div align="justify"><span style="color:#000000;"><br />Quite rightly the major concern of Islamic banks is that their financial practices should comply with the shariah law. Having a shariah advisor or committee of respected fiqh scholars who can endorse the bank’s activities is seen as crucial to ensure the institution’s reputation. In their publicity material however the emphasis by the banks is often on the standing of their shariah regulators rather than stressing the moral teaching that governs Islamic finance. There is little attempt to explain the ethical merits of how the bank conducts its business directly to the clients. Islamic banks can and do primarily attract clients because of their religious beliefs, and their desire to translate these into everyday financial dealings. Merely stating that a product is shariah compliant is insufficient however; Islamic banks need to be more closely engaged with their clients and make a convincing moral argument for their business methods.</span></div><div align="justify"><br /><span style="color:#000000;">As the requirements and aspirations of societies change there is a need to appeal to the intelligence as well as the beliefs of the client. Islamic banks must convince their customers of the advantages of their innovative financial products, and demonstrate that the products are both shariah compliant and at the same time related to new business circumstances. There is in other words an education role for Islamic banks and other providers of Islamic financial services. This should not undermine shariah advisors by bypassing them, but rather enhance their role as they can help underline the merits of Islamic finance to a wider but well informed and demanding customer base. In Islamic terms this is a matter of ijtihad or application of fundamental principles to changing circumstances. The shariah advisors or committee should, in other words, be involved in marketing as well as regulation, and play a more pro-active rather than reactive role.</span></div><div align="justify"></div><div align="justify"><span style="color:#000000;"></span></div><div align="justify"><strong><span style="color:#000000;">THE CO-OPERATIVE BANK’S ETHICAL POLICY</span></strong></div><div align="justify"><br /><span style="color:#000000;">There is undoubtedly much that Islamic banks can learn from conventional banks that designate themselves as being involved in ethical finance. Admittedly there are fundamental differences between ethical practices derived from religious teaching and those designed to appeal to popular secularist morality. Those involved in Islamic finance would regard their ethics as being enduring, as ultimately they are based on holy revelation, whereas ethics derived from social values are inevitably more transitory. With this important proviso it is nevertheless instructive to examine the experience of a leading western "ethical" bank.</span></div><div align="justify"><br /><span style="color:#000000;">As the Co-operative Bank is the sole, self-designated, ethical retail bank in the United Kingdom, it is instructive to look at its policy and dealings. Of particular relevance is its publicity on ethical financial practice and its engagement with ethically aware clients, who recognise, and get satisfaction from, their wider social responsibilities rather than simply personal material gain. The bank adopts a stakeholder approach which is of potential relevance for Islamic<br />banks, the aim being to identify and build on stakeholder synergies to secure benefits for the widest possible constituency.</span></div><div align="justify"><br /><span style="color:#000000;">The bank seeks to build on its name and history by defining what it sees as the underlying principles of co-operation. These include participation that the bank interprets in terms of welcoming the views and concerns of customers and in encouraging bank staff to take an active part in the life of their local communities. As the bank’s origins was in the industrial heart lands of northern England, where it was viewed as a bank for working class people, this stress on local solidarity and community identity seems natural. Its headquarters remains Manchester, where arguably financial institutions are in greater contact with the local community than in an international banking centre such as London.</span></div><div align="justify"><span style="color:#000000;"></span></div><div align="justify"><span style="color:#000000;">The bank seeks to develop close affinities with organisations that "promote fellowship between workers, customers, members and employers."1 The bank was historically, and still remains, the manager of most trade union finances and was an offshoot of the Co-operative Wholesale Society (CWS) which distributed goods to local consumer co-operatives throughout the north of England and Scotland. As the members of these local co-operative societies are their customers, this reference to customers and members in the mission statement on ethical policy is derived from past business traditions.</span></div><div align="justify"><br /><span style="color:#000000;">The Co-operative Bank aims to attract investment and make sufficient surplus funds to ensure that its future development can be adequately financed. Although it was restructured as a public law company, it is not quoted on the stock market, which means it is not primarily concerned with increasing shareholder value. Its sole shareholder is the CWS, a complex association of local consumer co-operatives whose origins date back to the Rochdale Equitable Partners Society. This was founded in 1844 by 28 working men who wanted to ensure good value in their food purchases. The bank was established as the loan and deposit department of the CWS in 1872, and was recognised by the Bank of England as an authorised bank in its own right in 1947. Checking accounts were introduced for purchases outside the co-operative organisations in 1975 when the bank joined the London Clearing House.</span></div><div align="justify"><br /><span style="color:#000000;">Because of the Co-operative Bank’s unique ownership structure it is not vulnerable to take-overs, as the CWS has no interest in divesting. Furthermore de-mutualisation is not an issue, as the Bank is already a company, not a mutual society. There are nevertheless disadvantages in not being a quoted company, notably the inability to raise equity capital from the market. The Bank has issued preference shares as a means of raising capital for expansion, which are at present held by 1,500 institutions.</span></div><div align="justify"><br /><span style="color:#000000;">There is much stress on group loyalty and identity in the Co-operative Bank’s mission statement. One purpose of staff education and training is to "encourage commitment and pride in each other and in the group".2 In some respects this group ethos could be compared to loyalty to the ummah, the whole Muslim community, although no Islamic bank mentions this in its mission statement. In the case of the Co-operative Bank under its support for freedom of association it stresses the importance of being non-partisan in all social, political, racial and religious matters, although the bank was traditionally associated with the Labour Party.</span></div><div align="justify"><br /><strong><span style="color:#000000;">WIDENING THE CO-OPERATIVE BANKS CLIENT BASE</span></strong></div><div align="justify"><br /><span style="color:#000000;">The ethical policy of the bank was first launched in 1992 in an effort to attract new, more affluent, customers outside the predominately working class clients that the bank traditionally served. The target group was the left of centre middle classes, who were perceived as having a social conscience and concern over issues championed by the more radical press such as ecology. At the same time, as the bank did not want to lose its existing clients, a large survey was carried out to find their reactions to the proposed ethical policy. Over 30,000 customers were approached, and of those who responded 84 percent felt it was a good idea for the bank to have an ethical policy and only 5 percent believed ethics had nothing to do with banking. Sixty percent of respondents agreed with the issues included in the ethical policy, the major reservation amongst clients being with respect to the bank’s proposal to no longer finance companies involved in tobacco production and distribution.</span></div><div align="justify"><span style="color:#000000;"></span></div><div align="justify"><span style="color:#000000;">The ethical policy involves five major areas of concern: human rights, armaments, trade and social involvement, environmental impact and animal welfare. The Bank pledges not to invest in or provide financial services to any organisation or regime violating human rights or involved in the manufacture of equipment used in violating human rights. On armaments the bank will not finance the manufacture of armaments sold to oppressive regimes, although the finance of armaments sold to democratic governments is permitted. To safeguard animal welfare the bank will not provide financial services to organisations involved in animal testing, exploitative factory farming, blood sports or the fur trade. These can be regarded as "negative" ethical criteria.</span></div><div align="justify"><br /><span style="color:#000000;">On the more positive side the bank supports companies which are involved in "fair" trade or are socially involved. This includes business customers and suppliers who take a pro-active stance on ethical purchases from Third World countries or organisations participating in the United Kingdom "social" economy such as charities. The environmental stance could also be interpreted positively, as it encourages business customers to be pro-active on the environmental impact of their own activities. There are also negative prohibitions specified including the avoidance of companies involved in the production of fossil fuels that cause acid rain, the manufacture of "unnatural" chemicals that result in ozone depletion and the unsustainable harvesting of timber which results in deforestation.</span></div><div align="justify"><br /><span style="color:#000000;">Critics could argue that these are concerns for the developed world that poor countries can ill afford. There is also the criticism that too many of the concerns are negatively expressed, and that the Bank lacks positive policies on issues such as renewable energy by wind, sea or river power or on organically produced foodstuffs and other similar matters. There is also the criticism that the Bank has been too involved in gimmicks such as its 99.99 PVC Greenpeace Affinity Card or its charity cards that involve the Bank making a donation of 1.25 pence for every £100 charged to the card. This demonstrates a minimal level of generosity, with the returns even worse in terms of value than air mile awards.</span></div><div align="justify"><br /><span style="color:#000000;">There is nevertheless a continuing high level of customer engagement by the bank, with clients voting on which four charities should be nominated to receive a donation each year. There have also been consultation exercises on the ethical policy following the initial 1991 survey, with major surveys carried out in 1994 and 1998. By 1994 the ethical policy had received greater support with over 80 percent of respondents approving of the Bank’s stance on every issue, an improvement of 20 percent over 1991.</span></div><div align="justify"><br /><span style="color:#000000;">Islamic banks can also learn from the way the Co-operative Bank disseminates its services, given that its branch network beyond the north of England is limited. In 1997 the Co-operative Bank signed an agreement with the Post Office to provide banking services, including deposit and withdrawal facilities throughout its 18,000 branches in the United Kingdom. This year there have been discussions between the government and the major retail banks about providing a "Peoples Bank" through automated services in every post office. However the Co-operative Bank’s scheme is already up and running, unlike the proposed scheme which is attempting to replace the payment of social security benefits and pensions in cash.</span></div><div align="justify"><span style="color:#000000;"></span></div><div align="justify"><span style="color:#000000;">The Co-operative Bank also has a telephone banking service and in 1999 launched its fully interactive banking service, Smile, on the Web. This has attracted over 200,000 clients, probably because it pays very competitive rates on savings deposits rather than because of its ethical stance. The bank also participates in the Link scheme, which means that clients have access to 29,000 cash dispensers throughout the United Kingdom.</span></div><div align="justify"><span style="color:#000000;"></span></div><div align="justify"><strong><span style="color:#000000;">THE DISSEMINATION OF ISLAMIC FINANCIAL IDEALS</span></strong></div><div align="justify"><br /><span style="color:#000000;">In their publicity material and on their Web sites Islamic banks generally provide much more limited information than the Co-operative Bank. The information is often not up to date, and Web sites are too often neglected after they are set up, even though they are potentially important for communicating information to present and future possible clients, especially as Islamic banks have often, at best, limited branch networks. The Web sites are often harder to locate using standard search engines, and designed in too graphic intensive a manner that means that rapid access is limited to those possessing computers with fast processors and abundant memory and with access to the latest telecommunications or fibre optic cable links.</span></div><div align="justify"><span style="color:#000000;"></span></div><div align="justify"><span style="color:#000000;">The Al Rajhi Banking and Investment Corporation has one of the best Web sites and some of the most well designed publicity material in the Islamic banking community. It provides details of the major principles on which Islamic banking is based, namely the avoidance of advancing money on the basis of a predetermined return in the future.3 The rationale for this is not adequately explained however, as murabahah earns a predetermined return, but is nevertheless regarded by most Islamic scholars as legitimate. The publicity material links the Shariah with "viable projects" and "reliable borrowers" but this is misleading, as though these are laudable objectives there are no sura or hadiths that mention these issues. The Bank stresses the values on which it conducts its business, and there is explicit mention that the Bank’s "journey is a search for righteous rewards via the right path", with references made to noble values, high principles and the trust of customers.</span></div><div align="justify"><br /><span style="color:#000000;">Although there have been surveys of Al Rajhi customers by independent researchers, the organisation itself has not carried out systematic consultation exercises with its clients in a similar manner to the Co-operative Bank. It refers to the hundreds of thousands of customers who have given it a mandate to carry out its business in line with Islamic principles, but the stress is on the validation from the Shariah board.5 The members of the board are listed, and their mandate is briefly explained. The Koranic verses dealing with riba are set out on the Al Rajhi Web site in Arabic and English,6 and although riba is correctly equated with both interest and usury, the link between the two is not discussed. An account of the views of the Shariah board on these matters would be instructive, as would more details of the merits of the Islamic financing instruments on offer.</span></div><div align="justify"><br /><span style="color:#000000;">The Director and General Manager of the Bank, Abdullah Suleiman Al Rajhi, was presented with the Islamic Banker of the Year award in 1998. It is largely through his efforts that the Bank has become the most profitable bank in Saudi Arabia and the second largest in the kingdom in terms of assets. Improvement is a continuous process however, and despite the Bank’s achievements there is much can be learnt from benchmarking good international ethical practice in the banking field.</span></div><div align="justify"><br /><span style="color:#000000;">The Al Baraka Investment and Development Company, as one of the leading international Islamic financing organisations, provides a clear statement of the philosophy and mission on which its operations are based. It states that its "principle philosophy is that capital should be harnessed in full conformity with Shariah principles, for purposes which are socially as well as economically viable, as it increases brotherhood and solidarity and reduces the reliance on debt finance."7 Through its involvement with 43 subsidiaries in 29 countries, Al Baraka has become increasingly aware of the problems that arise when there are varying fatwas applied by individual Shariah boards. It has therefore established a Unified Board for Shariah whose rulings apply to all institutions within the Dallah Al Baraka Group. This body liases with the Fiqh Academy in Jeddah, regarded by many Muslims as the most authoritative body of Shariah scholars in the Islamic world.</span></div><div align="justify"><span style="color:#000000;"></span></div><div align="justify"><span style="color:#000000;">While admirable for its brevity the statement of Al Baraka’s philosophy could arguably say more on the organisations values, and explain more fully the principles on which it operates. Both the short term and long term objectives are essentially about how the business aims to organise and manage its affairs, which could apply to any business, Islamic or secular. There is no elaboration on the principal philosophy, or explanation of how this translates into practice through the financing instruments and methods offered by the bank. Arguably too much is assumed, and no reference is made to engagement with bank clients or the wider community of potential customers in the markets in which the bank operates.</span></div><div align="justify"><br /><span style="color:#000000;">This also applies to the subsidiaries of Al Baraka that enjoy considerable autonomy. The London office simply refers to its mission as being to "invest capital and resources in an Islamic manner in order to achieve the best possible level of profit compatible with acceptable risk."8 The latter applies to any commercial financial institution, but the former deserves more explanation. One of the most successful affiliates of the Al Baraka Group, the Jordan Islamic Bank, has a similar low key approach when referring to its mission. It mentions that its operations are carried out in accordance with the shariah and refers to the "concept of economy based on a unique view of the role of money in society."9 Although it has 500,000 accounts, 1336 employees and 49 branches, it appears to consign itself to a niche role in Jordanian banking when it could do much more to persuade potential clients of the merits of its operations.</span></div><div align="justify"><span style="color:#000000;"></span></div><div align="justify"><span style="color:#000000;">The Shamil Bank, the renamed Faisal Islamic Bank of Bahrain, has a new Web page and publicity material to project its new image. It continues to be under the control of the Dar al Maal al Islami Trust, which owns 53 percent of its share capital. Although it does not say much about its priorities in ethical terms it stresses how all its operations are performed in strict adherence to the Shariah and it describes in some detail how its religious supervisory board operates.10 The management must seek prior approval from the board for new operations and activities. Once given the board monitors how they are being performed in practice. A designated member of the board undertakes field inspections of the bank’s operations and at least one member of the internal audit team is required to have a shariah background. This transparency over policy and procedures is to be welcomed, although as with other Islamic banks there could be more details given of the actual products on offer and how they are designed to comply with religious law. </span></div><div align="justify"><span style="color:#000000;"></span></div><div align="justify"><span style="color:#000000;">Other Islamic banks in the Gulf which have elements of best practice in their publicity and reporting include the Kuwait Finance House and ABC Islamic Bank of Bahrain. The Kuwait Finance House, which has built up a stake in the local deposit market of around 20 percent, stresses that it is an interest free financial institution that has competed successfully with its rivals which offer interest on their deposits.11 It provides summary details of its major financing facilities, murabahah, mudarabah, ijarah and istisna. The ABC Islamic Bank provides more detail on the products it offers that include not only mudarabah, ijarah and istisna, but also ijarah wa iktinan.12 This allows the client to purchase a leased good at a predetermined price. Other Islamic financing products offered by ABC include salam sale, qard hassan against deferred payment and sanadat al moqarada bonds that entitle the holder to a profit share rather than a fixed rate of interest. The different systems of transliteration used by for Islamic financing products can cause confusion however, and it would be desirable for all the banks in the Gulf to be consistent, as Arabic is the common language for all the institutions. Both the Kuwait Finance House and ABC Islamic Bank provide full details of who is on their shariah committees as well as a list of the senior managers.</span></div><div align="justify"><span style="color:#000000;"></span></div><div align="justify"><span style="color:#000000;">Bank Muamalat, the Islamic retail and business bank of Indonesia, has an admirably focused mission statement. It strives to "enhance the role of the Muslim people and entrepreneurs (in the nation’s economy) and maximise its economic value to shareholders while addressing its social responsibilities in line with Islamic teaching."13 This stress on social responsibility mirrors that of ethical institutions such as the Co-operative Bank. It also tries to "identify customers’ needs and offer a wide range of products and services, with emphasis in promoting the establishment, servicing and development of small and medium sized enterprises."14 The bank is therefore very clear about where its market lies, and whom it aims to serve.</span></div><div align="justify"><br /><span style="color:#000000;">The government ministers involved in Bank Muamalat’s establishment and leading founding members are listed in the interests of transparency, the latter including many well-known Indonesian Muslim entrepreneurs.15 The Association of Muslim Intellectuals also has an important input into the bank, and reference is made to B.J. Habibie who has played such an important role in the restoration of democracy in Indonesia and in trying to salvage the economy from the Asia crisis. Like the Co-operative Bank the Bank has particular respect for the interests of its staff whom it describes as professional and committed to Islamic teachings. It is committed to provide opportunities for the advancement of their ibadah and career.</span></div><div align="justify"><br /><strong><span style="color:#000000;">IMPROVEMENT IN COMMUNICATION, GOVERNANCE AND PARTICIPATION</span></strong></div><div align="justify"><br /><span style="color:#000000;">Although Islamic banks and western ethical institutions such as the Co-operative Bank have dissimilar values and aspirations and they are operating in different environments, there are numerous lessons that each can gain from the other’s experience. For Islamic banks it is perhaps appropriate to highlight five issues. </span></div><div align="justify"><br /><span style="color:#000000;"><strong>• Ethical banking principles and Shariah law</strong><br />The shariah law in the finance sphere is essentially concerned with economic justice. How each bank’s practices and products contributes to a more just financial system needs to be spelt out more clearly and fully. Although the Co-operative Bank’s prospectuses are far from adequate in<br />this regard, its statement of ethical policy is an approach that Islamic banks could usefully emulate. </span></div><div align="justify"><br /><span style="color:#000000;"><strong>• Fair trading practices and murabahah<br /></strong>Although Islamic banks continue to be heavily involved in trade finance through murabahah and other Islamic financing instruments, they seldom refer to fair trading practices. The fair trade agenda of ethical institutions like the Co-operative Bank involves helping organisations such as Tradecraft that promote higher prices for Third World producers. The Islamic Development does much to promote Third World trade, but many Islamic commercial banks in developing countries are in practice largely involved in the finance of imports from the advanced industrial countries rather than export finance. Murabahah essentially involves an alternative means of financing, but the ends also matter to the ethically concerned. </span></div><div align="justify"><br /><span style="color:#000000;"><strong>• Client endorsement from the Muslim community</strong><br />The Co-operative Bank undertakes regular customer consultation exercises on a highly organised basis to ascertain the views of its clients on ethical issues. Islamic banks tend to take the beliefs and values of their customers for granted, yet where clients are committed Muslims they have potentially much to contribute to the development and endorsement of new products and services, as well as to the overall aims and objectives of Islamic banks. </span></div><div align="justify"><br /><span style="color:#000000;"><strong>• Corporate governance issues and shariah advisors </strong><br />The Co-operative Bank could be more explicit about its obligations to the preference shareholders and the aims of its sole shareholder, the CWS, regarding the Bank. Likewise while many Islamic banks are admirably transparent about who their shariah advisors are and the role they perform, much less information is given about the aims and objectives of their major shareholders. </span></div><div align="justify"><br /><span style="color:#000000;"><strong>• Affinity debit cards as a vehicle for zakat</strong><br />Some critics view the Co-operative Bank’s affinity cards as a marketing gimmick which yields only modest returns for charity, but there is scope for Islamic banks running similar schemes, hopefully on a more generous basis. Zakat is a tax on wealth rather than spending, but affinity card revenue which the banks contribute to charity on behalf of individual card holders could be offset against personal zakat contributions. </span></div><div class="blogger-post-footer"><script language="JavaScript" src="http://tools.blogharbor.com/rss2js/rss2js.php?src=http%3A%2F%2Fislamicfinanceandbanking.blogspot.com%2F&num=0&date=yes&css=no"></script></div>Riyazi Farookhttp://www.blogger.com/profile/07356221208195678388noreply@blogger.com0