Benson Sim United Nations Statistics Division

Transcript:Benson Sim United Nations Statistics Division:
Benson Sim United Nations Statistics Division Islamic finance in the national accounts 11th Meeting of the Advisory Expert Group on National Accounts 5-7 December 2017 New York, United States of America Outline of presentation Background What has been done Discussions at Beirut workshop Key conclusions of Beirut workshop Key recommendations of Beirut workshop Looking ahead Questions for the AEG 2 Background Islamic finance does not operate in the same way as conventional finance as it follows the Shari’ah Islamic law, principles and rules Shari’ah Islamic law does not permit Receipt and payment of “riba” (interest) Gharar (excessive uncertainty) Maysir (gambling) Short sales or financing activities that it considers harmful to society Instead, the parties must share the risks and rewards of a business transaction The transaction should have a real economic purpose without undue speculation, and not involve any exploitation of either party 3 Background 4 Example of difference Traditional Bank (Automobile Loan) Client (Monthly Installment P+ i & Has Title Deed) Bank (Lends 100% to Client) Asset Based approach Money on money interest approach as Bank does not buy an asset to resell Installment has an interest component Return on money is interest (on money) as no asset resale will happen This is clearly not an asset-backed approach to financing Automobile Loan Background Example of difference Murabaha (Automobile Financing) Cost-Plus approach: Terms are fixed from the outset of the agreement (in particular value of payment) In the event of early termination, no discount applied for early settlement Rebate on the deferred sale price permitted, but at the discretion of the financier Market Bank (Financier) Client (Borrower ???) Recorded at $11,000 Market 1. $10000 Cost Price (spot) 2. Assets (spot) 3. Assets (spot) 4. $11000 Sale Price (deferred payment sold at retail + $1000 agreed margin) 5. Assets (spot) 6. $10000 Cost Price (spot) Background Issues on the implementation of the 2008 SNA recommendations for Islamic finance were raised during several meetings in the Arab region organized by ESCWA The Advisory Expert Group (AEG) on National Accounts discussed this issue at its 10th meeting and Noted the differences in business arrangements between Islamic finance and conventional finance Recognized the system importance of Islamic finance for some economies and their relative rapid growth Agreed that further research on the statistical implications of Islamic finance in the national accounts is required and that practical guidance on the treatment of Islamic finance transactions