For the first time in almost 4 years, I notice that my server on 1and1 is down and I am not able to login to the admin panel.
This might have happened in the past as well but what is weird today is the slow response time and the 500 errors even on their own control panels.
Monday, October 06, 2008
Saturday, September 06, 2008
Market Efficiency Literature Review
Market efficiency is one of the corner stone of modern Financial economics. This theory started with the largely unknown work of Louis Bachelier (A french mathematician). However, little attention has been allocated for this proposition until a US Economist, Samuleson, proposed it again in his dissertation in 1964. Though it has raised several controversies since its adoption. In 1965 Eugene Fama published his dissertation arguing for the random walk hypothesis. In Fama (1970) survey documents several studies that could not reject the significant power of this theory. Jensen (1978) also believes that "There is no other theory with as much economical background as the Efficient Market hypothesis". Some studies depicts the market as an intelligent agent with an invisible hand (similar to the concept of Adam Smith) that is able to correct the speculative movements in price processes as described in Poterba and Summers (1988).
As a result all shares on the market trade at their fair value. This price incorporates all known information and history price effects. No-arbitrage is realizable using public information.
Fama (70, 76) contributed a great deal to this literature by establishing an extremely important classification for this market efficiency:
Although the strong form efficiency imposes that no investor can beat the market even though a company might bring in an astonishing innovation. For example, if right now a company develops an AIDS treatment and know that it is 100% valid, an investor would not be able to realize an excess return knowing this information because the market should have already adjusted to it. However, the history has proven that some investors have consistently beaten the market such as Warren Buffer, George Sorros and Peter Lunch. In addition, Fama and French (87) argue that prices are negatively serially correlated and this could yield a possible 25-40% of predictability for price variations.
The literature argues for and against the theory from different point of views. Several classical papers document the presence of anomalies in the market pricing of shares. Other papers discuss the validity and the presence of information in the market movements.
Anomalies in return have been reported during the past fifteen years. Although, they should be called regularities as suggested by Berk (1995). These anomalies were documented in the following papers:
Benz (1981) This paper was one of the first that documents empirical irregularities with the market pricing. It describes two important aspects of the prices:
Puterba and Summers (1988) investigates the presence of a transitory price component in the price process. They notice that the presence of a negative serial correlation in the price process means that some previous erroneous market moves had been corrected or the negative serial correlation arises from variation in the risk factors over time. They aim in this paper at examining the hypothetical transient price component or the validity of mean reverting movement. In addition, they wanted to test whether the mean reverting movement are due to shifts in required return or resulting from changes in the interest rate.
Lakonishock and Smidt (1988) uses 90 years of daily return on DJIA to test for the existence of persistent seasonality patterns in the returns from 1898 until 1986. They find evidence of persistence anomalies of returns around the turn of the week, around the turn of the month, around the turn of the year and around holidays. The rate of return on Mondays was negative and the price increase around the turn of the month exceeds the total monthly price increase. The price increase from last trading day before Xmas to the end of the year is over 1.5%. However, there was no special pattern for end of the month if the month is not at the end of the year or end of quarter. Possibly these patterns are due to the inventory adjustment of different traders at the end of fiscal periods, timing of reporting by firms, seasonal patterns in cash flow to individual and institutional investors, tax-induced tradings, hedge funds last minute trading, and window dressing induced by periodic evaluation of portfolio managers.
Lo and Mackinglay (1988) tests the RW hypothesis for weekly stock return by comparing the variance estimators derived from data sampled at different frequencies. They find out that RW model is generally not consistent with the stochastic behavior of weekly return especially for smaller cap stocks. Unlike FF (87) and Poterba and Summer (88), they find out that portfolio returns exhibits positive serial correlation but the individual stocks show negative correlation. The rejection can not be completely explained by infrequent trading or time varying volatilities although they are largely due to the behavior of small stocks. In addition, they concluded that the price stationary mean reverting model discussed in Poterba and Summers (87) and FF (87) can not account for all the variations observed in the empirical survey of weekly returns.However, they assert that the rejection of the RW does not mean that market price are in-efficient but it should impose limits on the acceptable pricing models.
Karafiath (88 and 94) approached the issue from a different point of view and contributed some methodological innovations to the testing methods. In Karafiath 88 paper, he introduced the concept of using dummy variables in the even study procedure because it offers a convenient procedure to obtain cumulative prediction errors and related test statistics all in one step. In his 94 paper, Karafiath uses Monte Carlo simulations to investigate whether FGLS (Feasible Generalized Least Square), (Weighted Least Square) WLS, or (Consistent Estimator Least Square) CLS accounts better for heteroskedasticity and crosssesional correlation in return than (Ordinarily Least Square) OLS. The paper concludes that FGLS is well specified if the number of the time series observation is much larger than the number of securities but this model does not have greater power than the WLS (which is the FGLS with off-diagonal elements of the covariance matrix set to zero). The OLS is well specified in the MC simulation as well and the CLS have similar power to OLS. In summary, WLS, CLS, OLS are well specified under the simulation and WLS has better power than OLS or CLS. This extra power decreases as the number of securities increases.
Berk (1995) examines size related anomalies and suggests that the observation violating the RW hypothesis should be treated as regularities in an economy in which all asset returns satisfy any of the adopted asset pricing models (APM). In addition, the paper asserts that size of the firm can account for some of the return risk of a firm and is usually recognized as the most prominent contradiction to the AP paradigm. Schwert (83) notes that observed relation between the anomaly variables and return implies that these variables proxy for risk. Little success in explaining these regularities and their interaction with risk and return. The author assumes, for the sake of argument, that all companies have the same size (same expected value) and the end of period cash flow is the same. However, the risk of every firms CF is different and this means that the market value of each firm is different. Riskier firms have lower market value and should yield higher expected return on holding their assets. Consequently if the market value is used as a measure of risk, it will predict a component of return. As a conclusion, the author thinks that it is misleading to refer to the size relation with return as an anomaly. On the other hand, the author thinks that it would be an anomaly if a negative relation is not found between size and expected return and this is why size should be used in cross sectional regression to detect mis-specifications of the model.
Fama and French (1996) Based on previous conclusions in the literature, FF (93) developed an innovative model for risk-return relations using three factors that incoporate risks, size and growth (E(Ri) = b[E(Rm) - rf] + s* E[SMB] + h*E[HML]). This model could not prove its viability had not the size represent a major factor in risk and return prediction. FF (96) asserts that this model would not be able to predict return on all securities especially when there is a momemtum effects. However, the authors conclude that size, E/P, growth, CF/P, B/M, long term past return, and short term past return play all an important role in predicting future movement of prices. Hence, they are not anomalies and should be considered as essential factors even CAPM does not incorporate them. With this model, most of the anomalies disappear from the return process.
Barber and Lyon (1997) analyse the power and specification of test statistics in event studies designed to detect long term abnormal returns. They find out that test statistics based on abnormal returns calculated using a reference portfolio are mis-specified because of three main reasons:
This theory is based on the operational and allocational efficiency of capital markets that have the following properties:
- Agents are rational and seek the optimization of their expected utility
- All agents are price takers
- Assets are divisible and marketable.
- Market is frictionless without transaction costs and taxes
- Information is costless and arrives to all agents at the same rate and time
As a result all shares on the market trade at their fair value. This price incorporates all known information and history price effects. No-arbitrage is realizable using public information.
Fama (70, 76) contributed a great deal to this literature by establishing an extremely important classification for this market efficiency:
- Weak-Form Efficiency: No abnormal return can be realized based on previous price information and future price movement are totally random.
- Semi-Strong-Form Efficiency: No investor can earn excess return by trading on the publicly available information because the market adjust rapidly to the information and in an unbiased fashion.
- Strong Form Efficiency: Share price reflects all available information and no investor can earn excess return.
Although the strong form efficiency imposes that no investor can beat the market even though a company might bring in an astonishing innovation. For example, if right now a company develops an AIDS treatment and know that it is 100% valid, an investor would not be able to realize an excess return knowing this information because the market should have already adjusted to it. However, the history has proven that some investors have consistently beaten the market such as Warren Buffer, George Sorros and Peter Lunch. In addition, Fama and French (87) argue that prices are negatively serially correlated and this could yield a possible 25-40% of predictability for price variations.
The literature argues for and against the theory from different point of views. Several classical papers document the presence of anomalies in the market pricing of shares. Other papers discuss the validity and the presence of information in the market movements.
Anomalies in return have been reported during the past fifteen years. Although, they should be called regularities as suggested by Berk (1995). These anomalies were documented in the following papers:
* Puterba and Summers (1988)
* Lakonishock and Smidt (1988)
* Lo and MacKinglay (1988)
* Karafiath (1988, 1994)
* Berk (1995)
* Barker and Lyon (1997)
* Fama and French (1996)
Benz (1981) This paper was one of the first that documents empirical irregularities with the market pricing. It describes two important aspects of the prices:
- The logarithm of a stock price is an inverse predictor of its return
- When risk is controlled for by using an asset pricing model (CAPM for example) the marketvalue has explanatory power over the part of return that is nto explained by the model.
Puterba and Summers (1988) investigates the presence of a transitory price component in the price process. They notice that the presence of a negative serial correlation in the price process means that some previous erroneous market moves had been corrected or the negative serial correlation arises from variation in the risk factors over time. They aim in this paper at examining the hypothetical transient price component or the validity of mean reverting movement. In addition, they wanted to test whether the mean reverting movement are due to shifts in required return or resulting from changes in the interest rate.
They could not reject the random walk hypothesis using VR tests but they find significant transitory price component that is responsible for a major part of price variance over time. The standard deviation of US price variance is 15-25% and this accounts for more than 50% of monthly return variance. They found out also positive serial correlation for prices on the short run but negative serial correlation over the long run. They suggest that noise trading provides a plausible explanation for transitory price components.
Lakonishock and Smidt (1988) uses 90 years of daily return on DJIA to test for the existence of persistent seasonality patterns in the returns from 1898 until 1986. They find evidence of persistence anomalies of returns around the turn of the week, around the turn of the month, around the turn of the year and around holidays. The rate of return on Mondays was negative and the price increase around the turn of the month exceeds the total monthly price increase. The price increase from last trading day before Xmas to the end of the year is over 1.5%. However, there was no special pattern for end of the month if the month is not at the end of the year or end of quarter. Possibly these patterns are due to the inventory adjustment of different traders at the end of fiscal periods, timing of reporting by firms, seasonal patterns in cash flow to individual and institutional investors, tax-induced tradings, hedge funds last minute trading, and window dressing induced by periodic evaluation of portfolio managers.
Lo and Mackinglay (1988) tests the RW hypothesis for weekly stock return by comparing the variance estimators derived from data sampled at different frequencies. They find out that RW model is generally not consistent with the stochastic behavior of weekly return especially for smaller cap stocks. Unlike FF (87) and Poterba and Summer (88), they find out that portfolio returns exhibits positive serial correlation but the individual stocks show negative correlation. The rejection can not be completely explained by infrequent trading or time varying volatilities although they are largely due to the behavior of small stocks. In addition, they concluded that the price stationary mean reverting model discussed in Poterba and Summers (87) and FF (87) can not account for all the variations observed in the empirical survey of weekly returns.However, they assert that the rejection of the RW does not mean that market price are in-efficient but it should impose limits on the acceptable pricing models.
Karafiath (88 and 94) approached the issue from a different point of view and contributed some methodological innovations to the testing methods. In Karafiath 88 paper, he introduced the concept of using dummy variables in the even study procedure because it offers a convenient procedure to obtain cumulative prediction errors and related test statistics all in one step. In his 94 paper, Karafiath uses Monte Carlo simulations to investigate whether FGLS (Feasible Generalized Least Square), (Weighted Least Square) WLS, or (Consistent Estimator Least Square) CLS accounts better for heteroskedasticity and crosssesional correlation in return than (Ordinarily Least Square) OLS. The paper concludes that FGLS is well specified if the number of the time series observation is much larger than the number of securities but this model does not have greater power than the WLS (which is the FGLS with off-diagonal elements of the covariance matrix set to zero). The OLS is well specified in the MC simulation as well and the CLS have similar power to OLS. In summary, WLS, CLS, OLS are well specified under the simulation and WLS has better power than OLS or CLS. This extra power decreases as the number of securities increases.
Berk (1995) examines size related anomalies and suggests that the observation violating the RW hypothesis should be treated as regularities in an economy in which all asset returns satisfy any of the adopted asset pricing models (APM). In addition, the paper asserts that size of the firm can account for some of the return risk of a firm and is usually recognized as the most prominent contradiction to the AP paradigm. Schwert (83) notes that observed relation between the anomaly variables and return implies that these variables proxy for risk. Little success in explaining these regularities and their interaction with risk and return. The author assumes, for the sake of argument, that all companies have the same size (same expected value) and the end of period cash flow is the same. However, the risk of every firms CF is different and this means that the market value of each firm is different. Riskier firms have lower market value and should yield higher expected return on holding their assets. Consequently if the market value is used as a measure of risk, it will predict a component of return. As a conclusion, the author thinks that it is misleading to refer to the size relation with return as an anomaly. On the other hand, the author thinks that it would be an anomaly if a negative relation is not found between size and expected return and this is why size should be used in cross sectional regression to detect mis-specifications of the model.
Fama and French (1996) Based on previous conclusions in the literature, FF (93) developed an innovative model for risk-return relations using three factors that incoporate risks, size and growth (E(Ri) = b[E(Rm) - rf] + s* E[SMB] + h*E[HML]). This model could not prove its viability had not the size represent a major factor in risk and return prediction. FF (96) asserts that this model would not be able to predict return on all securities especially when there is a momemtum effects. However, the authors conclude that size, E/P, growth, CF/P, B/M, long term past return, and short term past return play all an important role in predicting future movement of prices. Hence, they are not anomalies and should be considered as essential factors even CAPM does not incorporate them. With this model, most of the anomalies disappear from the return process.
Barber and Lyon (1997) analyse the power and specification of test statistics in event studies designed to detect long term abnormal returns. They find out that test statistics based on abnormal returns calculated using a reference portfolio are mis-specified because of three main reasons:
- New listing bias: New companies are in and out of the index on a monthly basis and this might happen after the event
- Re-balancing bias: The compounded return of the reference portfolio is rebalanced every month but for individual companies in the tested sample are not
- Skewness bias: Long term abnormal return are right skewed.
The cumulative abnormal return is mostly affected by the new listing bias, and, therefore, the long run cumulative abnormal return is positively biased in general. On the other hand, the long run buy and hold abnormal return is affected by the re-balancing bias and the skewness bias which is a negative bias.
In order to correct for these misspecifications, the authors suggest matching the sample firms to control firms of similar size and book-market ratios and this method will get rid of all three type of biases.
Tuesday, September 02, 2008
Google Chrome: A new browser war
Official Google Blog: A fresh take on the browser
Finally google is stepping ahead with its browser war. They want to get directly into this market instead of supporting other IE's opponent.
Chrome will come with most of what in Firefox and Opera and would present a brand new JS engine. Lately, Firefox guys were talking about a new JS machine for Gecko as well. I am not sure how similar these two are.
Even of Google Chrome does not take up, it might be a good start for Google to get into this market and buy Firefox later on or empower this browser business unit to take over Firefox and re-brand it.
What will be Microsoft response to this? Faster RC for IE 8.0 that has several bugs with its engine especially the rendering of CSS. Is this push would force Microsoft to throw in another IE 6.0 into the market and make people's life harder as it was the case with Vista?
Let us see
However, there is one risky part in Chrome. It will create a separate process for every tab and every plugin. Immagine a heavy-browsing addict like me who opens 30+ tabs for everyreading?
This means at least 60 processes in one session. Can Vista handle that.
Finally google is stepping ahead with its browser war. They want to get directly into this market instead of supporting other IE's opponent.
Chrome will come with most of what in Firefox and Opera and would present a brand new JS engine. Lately, Firefox guys were talking about a new JS machine for Gecko as well. I am not sure how similar these two are.
Even of Google Chrome does not take up, it might be a good start for Google to get into this market and buy Firefox later on or empower this browser business unit to take over Firefox and re-brand it.
What will be Microsoft response to this? Faster RC for IE 8.0 that has several bugs with its engine especially the rendering of CSS. Is this push would force Microsoft to throw in another IE 6.0 into the market and make people's life harder as it was the case with Vista?
Let us see
However, there is one risky part in Chrome. It will create a separate process for every tab and every plugin. Immagine a heavy-browsing addict like me who opens 30+ tabs for everyreading?
This means at least 60 processes in one session. Can Vista handle that.
Sunday, August 31, 2008
الصكوك وتطبيقاتها المعاصرة
الصكوك وتطبيقاتها المعاصرة
إعداد
محمد تقي العثماني
رئيس المجلس الشرعي
بسم الله الرحمن الرحيم
تقديم
الحمد لله وكفى وسلام على عباده الذين اصطفى
أما بعد، فإن من مهام المجلس الشرعىّ، كما جاء فى نظام هيئة المحاسبة والمراجعة للمؤسسات المالية الإسلامية:
"تحقيق التطابق أوالتقارب فى التصورات والتطبيقات بين هيئات الرقابة الشرعية للمؤسسات المالية الإسلامية لتجنب التضارب أو عدم الانسجام بين الفتاوى والتطبيقات لتلك المؤسسات بمايؤدى إلى تفعيل دورهيئات الرقابة الشرعية الخاصة بالمؤسسات المالية الإسلامية والبنوك المركزية."
وبما أنه ظهرت فى زماننا صكوك استثمارية بمبالغ باهضة عمت المساهمة فيها فى كثير من البنوك الإسلامية، وقد أبدى جمع من العلماء ملاحظاتهم بالنسبة لموافقتهم للأحكام الشرعية، فإن المجلس الشرعيّ فى اجتماعه السابق بالمدينة المنورة قرر أن يبحث هذاالموضوع فى دورته القادمة فى مكة المكرمة، وفوّض إلىّ إعداد دراسة موجزة للمسائل التى تحتاج إلى البحث والنقاش بشأن هذه الصكوك. وإنى أعددت هذه الدراسة الموجزة المتواضعة لتكون ورقة عمل لمناقشة هذاالموضوع فى الاجتماع القادم إن شاء الله تعالى.
Ramadan 2008 in Montreal
The MCM moonsighting committee is pleased to announce that the first of Ramadan, 1429, is Monday, September 1st, 2008, according to the agreed upon Moonsighting Criteria, and abased on credible moonsightings in many places around the world.
The Muslim Council of Montreal would like to take this opportunity to wish you all a blessed Ramadan and may Allah grant you the success in this world and the hereafter. Fasting is an act of obedience and submission to Allah the Almighty. In addition, fasting promotes the spirit of unity and belonging within the Muslim Ummah, the spirit of human equality, the spirit of charity and sympathy, and it calls for Islamic Sociability.
Muslims in Montreal are urged to invite others, muslims and non muslims, to break the fast with them at sunset and to gather for Qur'anic study, prayer and visits. This provides a better chance for socialization in a brotherly and spiritual atmosphere. The Prophet (peace and blessings be upon him) indicated on more than one occasion that inviting a fasting person to break his fast (after sunset) is an act which is highly rewarded by Allah the Almighty.
Please do not forget our brothers and sisters in unfortunate areas around the world. They are suffering in Palestine, Iraq, etc.. and they might not find the joy of fasting as we do. May you please ask Allah the Almighty to alleviate their distress and shower them with his blessings.
Friday, July 25, 2008
Islamic financial services in Canada: Recent developments and long-term prospects
Stuart Carruthers (http://www.stikeman.com/cps/rde/xchg/se-en/hs.xsl/11424.htm)
As in many Western nations, the awareness and availability of Islamic financial services in Canada continue to grow, although still at a relatively modest rate. While some limited Shari'ah-compliant products are currently available, there has been limited activity to date, and no major financial institution yet offers a meaningful suite of Islamic financial products or services. However, given the burgeoning Islamic population in Canada, the growing potential for Islamic financial services in Canada is being carefully followed by Canadian financial institutions, regulators, government agencies, professional advisors and media outlets. For additional background on Islamic finance, please see Stikeman Elliott's Financial Services Updates of April 2007 and January 2008.
Much like in the United Kingdom, Canada's Muslim population has experienced significant recent growth - from an estimated 253,000 in 1991 to between 800,000 and 1,000,000 in 2006. By 2017, Muslim Canadians are expected to comprise from 3.7% to 4.9% of the Canadian population. Moreover, the Muslim population, which is younger and more educated than the overall population, is concentrated in Canada's largest cities. Consequently, there is expected to be increased demand for Islamic financial services in Canada in the coming years, potentially providing a tremendous opportunity for financial firms prepared to serve this growing community.
Overall, participation in the Islamic financial services sector is still rather peripheral and limited, and no major financial institution is currently offering a meaningful package of Islamic financial services. It is suspected that the current significant credit crunch and subprime mortgage exposures, although not as significant an issue in Canada as in the United States, are currently more pressing priorities for the larger Canadian financial institutions.
A number of applications have recently been made to OSFI, however, for newly-incorporated Canadian banks offering Islamic financial services. While some of the applications are understood to be quite far advanced, they appear to be on hold pending the response of a federal multi-agency task force established last year to consider issues related to Islamic finance in the Canadian financial services marketplace. Interestingly, earlier this year, the Canada Mortgage and Housing Corporation, a federal Canadian crown corporation, also turned its attention to the issue of Islamic finance in the Canadian marketplace, issuing a Request for Proposal for a research report on the subject. As previously widely reported, the request generated some controversy and resulting media coverage, with UM Financial and others supporting the exercise and at least one other Islamic group in Canada criticizing the exercise.
Future activity will likely include one or more of the major international financial institutions with Islamic windows offering retail home finance products in Canada, credit unions and mid-size banks offering home finance products in Canada, major existing Canadian banks breaking into the retail market, and, in the longer term, one or more newly-established Canadian Islamic banks.
As in many Western nations, the awareness and availability of Islamic financial services in Canada continue to grow, although still at a relatively modest rate. While some limited Shari'ah-compliant products are currently available, there has been limited activity to date, and no major financial institution yet offers a meaningful suite of Islamic financial products or services. However, given the burgeoning Islamic population in Canada, the growing potential for Islamic financial services in Canada is being carefully followed by Canadian financial institutions, regulators, government agencies, professional advisors and media outlets. For additional background on Islamic finance, please see Stikeman Elliott's Financial Services Updates of April 2007 and January 2008.
Much like in the United Kingdom, Canada's Muslim population has experienced significant recent growth - from an estimated 253,000 in 1991 to between 800,000 and 1,000,000 in 2006. By 2017, Muslim Canadians are expected to comprise from 3.7% to 4.9% of the Canadian population. Moreover, the Muslim population, which is younger and more educated than the overall population, is concentrated in Canada's largest cities. Consequently, there is expected to be increased demand for Islamic financial services in Canada in the coming years, potentially providing a tremendous opportunity for financial firms prepared to serve this growing community.
The Canadian financial and economic environment
A number of other factors may also support the growth of Islamic finance in Canada in the longer term. Canada continues to enjoy a relatively stable economic and political environment and has generally avoided the level of turmoil currently being experienced in the United States with respect to subprime lending and restricted credit availability issues. Further, a world-class regulator, the federal Office of the Superintendent of Financial Institutions (Canada) (OSFI), regulates the solvency of most of the larger financial institutions, including the large banks and life insurance groups, while also regulating the market conduct of the large banks. Canada also benefits from a strongly multicultural and tolerant society, a rapidly appreciating currency, robust regulatory and legal systems, a neutral and balanced foreign policy and favourable tax treaties with certain Gulf states.Activity to date
Despite significant recent media coverage of issues related to Islamic financial services in Canada, there has been limited meaningful activity to date. As previously widely reported, an Ontario-based Islamic mortgage provider, UM Financial, has been indicating for some time that it expects to launch a suite of products in collaboration with a major Canadian financial institution. No further announcements in this regard, however, have recently been made. One of the large banks offers Shari'ah-linked notes through its private banking division and in 2004 offered a similar retail investment product through its branches. The Co-operators mutual insurance group, meanwhile, offers certain limited Islamic insurance products, and Islamic mutual funds have also been sold across Canada. Many of the products, however, have been short-lived, including a group of funds, offered through a leading mutual fund group, which were discontinued in 2006 with only C$6.1 million in assets under management.Overall, participation in the Islamic financial services sector is still rather peripheral and limited, and no major financial institution is currently offering a meaningful package of Islamic financial services. It is suspected that the current significant credit crunch and subprime mortgage exposures, although not as significant an issue in Canada as in the United States, are currently more pressing priorities for the larger Canadian financial institutions.
A number of applications have recently been made to OSFI, however, for newly-incorporated Canadian banks offering Islamic financial services. While some of the applications are understood to be quite far advanced, they appear to be on hold pending the response of a federal multi-agency task force established last year to consider issues related to Islamic finance in the Canadian financial services marketplace. Interestingly, earlier this year, the Canada Mortgage and Housing Corporation, a federal Canadian crown corporation, also turned its attention to the issue of Islamic finance in the Canadian marketplace, issuing a Request for Proposal for a research report on the subject. As previously widely reported, the request generated some controversy and resulting media coverage, with UM Financial and others supporting the exercise and at least one other Islamic group in Canada criticizing the exercise.
Prospects for the future
Canada is still a number of steps behind the United Kingdom, where Islamic finance is in turn still growing slowly. Major developments in Canada are likely some time away, although, as noted above, the demographic prospects are excellent. The same structural issues are present in Canada as were identified in the U.K. by the Financial Services Authority's November 2007 discussion paper respecting developments in Islamic finance in that country. While there is significant interest from a wide variety of stakeholders, the eventual products will need to be extremely competitive in order to achieve wide distribution in the Canadian marketplace.Future activity will likely include one or more of the major international financial institutions with Islamic windows offering retail home finance products in Canada, credit unions and mid-size banks offering home finance products in Canada, major existing Canadian banks breaking into the retail market, and, in the longer term, one or more newly-established Canadian Islamic banks.
Subscribe to:
Posts (Atom)