Lanka ORIX Leasing Company PLC (LOLC) was incorporated with the objective of bringing forth a new facet to the financial industry of Sri Lanka. With this objective in mind the company has focused its attention towards the area of Shari'ah Compliant Financing, with the aim of playing a more active role in developing this area of the country's financial services sector. LOLC under its wholly owned subsidiary Lanka ORIX Finance Company Ltd. (LOFC) has established a dedicated Islamic Business Unit branded LOLC Al-Falaah, in an effort to ensure that this area of financing is handled in a Shari'ah compliant manner, thereby guaranteeing consistency at all times with Shari'ah principles and concepts.
Lanka ORIX Finance Company Ltd. is the first Registered Finance Company to be granted approval to extend Shari'ah Compliant Financing. The Shari'ah Supervisory Board (SSB) of the company consists of a panel of respected, eminent Islamic scholars and practitioners of Islamic Finance with a local and international blend. The SSB provides advice and guidance on all aspects of Islamic financing and operations and constantly monitor the operations.
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| Mr. Shiraz Refai, Manager of the LOLC Al-Falaah |
The guiding principle of the Islamic Business Unit include the clear separation of in-flow and out-flow of funds, ensuring that no element of uncertainty exist in transactions, equality in all business relationships, Corporate Social Responsibility, cooperation, trust, honesty and openness is maintained at all times with regards to all transacting parties. The Sunday Times Supplements Desk spoke to Mr. Shiraz Refai, Manager of the LOLC Al-Falaah, The Islamic Business Unit of LOLC to find out more about the benefits of Islamic Financing with LOLC.
"We established the Islamic Business Unit with the intention of helping the Muslim community in our country, to move away from interest based financing as it is against the teachings of Islam. With our focus on better catering to the needs and requirements of the community, we have so far developed 4 main Shari'ah based product concepts under our portfolio, which includes a Shari'ah compliant deposit product - Mudharabah, and three lending products namely 'Ijarah' a substitute for leasing, 'Murabaha' for trade financing and 'Diminishing Musharakah' for property and project financing.
Our most recent to the Islamic product range is the unique and fully integrated 'Mudharabah Savings Account'. The salient features of this savings account includes an electronically updated passbook and can be accessed through any one of the company's branches. An ATM/Debit card which is linked up to the MAESTRO network too can be issued enabling access to the account through the Maestro network globally. Also we have provided increasing returns on a 'monthly basis' for our accountholders, which is a novel concept", says Mr. Refai.
According to Mr. Refai their portfolio has grown by 300% when compared to that of last year. This growth has been in the form of not only assets but deposit-based products as well. A growth of this magnitude is phenomenal in a competitive environment with many competitors mushrooming.
Although LOLC Al-Falaah, The Islamic Business Unit of LOLC functions under the LOFC, the unit's transactions are recorded separately ensuing that funds of the Islamic Business Unit are not comingled with the funds of the conventional business. When asked how a conventional business operation can enter into Islamic Financing Mr. Refai said that a business can always enter into this area provided that there is a clear separation mechanism in place which effectively and accurately separates the inflow and outflow of funds from its Islamic Financing activities and its normal business transactions. This separation process has been painstakingly done in order to ensure that they fully adhere to the Shari'ah concept.
In the future the unit is also considering moving into other areas of business such as pawning and micro financing. Currently all Islamic Financing facilities are available from anyone of the company's branches and service centres located island wide.
Islamic Financing is not restricted to the Muslim communities alone but is a mode of financing that is governed under the Shari'ah law. Therefore this mode of financing is open to all communities of the country who are interested in obtaining these types of facilities. The fundamentals of Islamic Financing include the sharing of profits and losses, between the investor and the entrepreneur, therefore providing a win-win situation for both parties. In addition to this another key feature of Islamic Financing is that it involves asset based lending, therefore ruling out the possibilities of uncertain investments. Currently LOLC Al-Falaah enjoys a healthy spread of Muslim as well as non-Muslim clients.
"Islamic Financing is growing in popularity throughout the world especially in South East Asia, the Middle East as well as in the European countries where laws have even been amended in order to facilitate the concept of Islamic Financing. In Sri Lanka too the Central Bank is also looking into this concept very positively. Although Islamic Financing has been practiced in our country for the past 10 years a majority of Sri Lankans are still new to this concept. However we have been quite successful in building awareness of Islamic Financing for the benefit of the general public through our door-to-door campaigns and public awareness programmes. This year too we will be conducting similar campaigns and programmes and will make all our products available to customers in all branches.
Also we will be introducing a few key dedicated branches which conduct 100% Islamic Financing in the regions as well. Last April we set up two such dedicated outlets in the Eastern province with a branch in 'Kattankudi' service centre in 'Ottamavdi'. We propose opening two more dedicated Islamic Financing branches in 'Kalmunai' and 'Akurana'", stated Mr. Refai.
With this wide range of Islamic products offered customers opting for these services enjoy the best of both worlds. These include the strengthening of their religious beliefs by complying with the Shari'ah standards whilst having the privilege of being backed by the LOLC group, which is one of the best blue-chip key players in the financial industry today. |
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