Islamic finance — which bans interest payments and investments in gambling, pornography, weapons, alcohol, tobacco and pork — is a fast-growing niche in the financial services industry.
"We need to have people across the country that understand Islamic finance, which we don't have."
A photo taken on Sept. 10, 2015 in Chelles, near Paris, shows an agency of the first Noorassur Islamic bank in France. (Joel Saget/AFP/Getty Images)In the case of commercial loans, that means both the bank and the borrower must have a vested interest in the success of the underlying business. "If the underlying business does well, they share in the profit," Hejazi says. "If it does poorly, they share in the losses. That's the fundamental difference; this idea of shared risks, and nobody can have a guaranteed return." The report commissioned by TFSA says there are a number of opportunities for Islamic banking to expand in Canada. Some Muslim Canadians desire Shariah-compliant solutions to their personal finance needs, including mortgages, insurance and investment opportunities. The Canadian government could also issue sukuk, or Islamic bonds, which are structured in such a way that they generate returns without the use of interest payments, to help fund its planned infrastructure spending, according to the report. "The new federal government has an opportunity to demonstrate Canada's openness to foreign investment from markets in the Middle East and Southeast Asia by encouraging investments either in a conventional or an Islamic-compliant manner," said Jeffrey Graham, partner and the head of the financial services regulatory group at Borden Ladner Gervais LLP. "Other governments who have been seeking to do the same thing have issued sovereign sukuks, or Islamic bonds, to help promote their financial sectors."
However, a spokesman for the Department of Finance appeared to throw cold water that idea, saying in an email that "there continues to be very strong demand for regular 'plain vanilla' Government of Canada securities." Meanwhile, one of the obstacles to the growth of Islamic finance in Canada is the lack of what Hejazi calls "human capital." "We need to have people across the country that understand Islamic finance, which we don't have," said Hejazi, who teaches a course on Islamic finance, now in its fifth year, at Rotman. Last year the course was full, with 40 students on the waiting list. "I get so many emails from people downtown, from the banks, the accounting firms, consulting firms, saying 'Could I sit in on your class?'" says Hejazi. "There's a lot of interest. People really want to learn more."
"So the government must be clear to say . . . 'We're open to Islamic finance, we welcome it.'"
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