Business, Financial industry & Banking :: World finance

Tunisias islamic finance push has political echoes


* Ennahda says Islamic banking will boost economy* Bill covering Islamic banks may be ready in weeks* Tunisia plans to issue first sovereign sukuk next year* But secular critics say Ennahda using election ploy* Focus on Islamic finance could hurt conventional bankingBy Tarek AmaraTUNIS, Oct 10 After decades of secular rule, Tunisia's government aims to develop Islamic banking in the country, but some suspect the government's motives are more political than economic: it wants to win the support of voters. Governments across North Africa are promoting Islamic finance in the wake of last year's Arab Spring uprisings, which ousted regimes that neglected or discouraged the business for ideological reasons. The change of policy could bring economic benefits, giving the countries more access to a huge pool of Islamic investment funds from the Gulf. But as the controversy in Tunisia shows, there are political complications."Tunisia is looking to become a regional center for Islamic finance," Tunisian Prime Minister Hamadi Jbeli declared in June. Jbeli, a member of the moderate Islamist Ennahda movement which leads Tunisia's government after the overthrow of president Zine al-Abidine Ben Ali last year, said authorities would ensure that Islamic banks were able to compete on a level playing field with conventional banks. But some of Ennahda's political rivals accuse the movement of using the issue to attract fresh support and head off any challenge from hardline Islamists in parliamentary elections expected next year, regardless of economic considerations.

Ploughing scarce resources into Islamic banking could end up hurting the economy if it dilutes state support for conventional banks, and creates new Islamic lenders that increase competition while not being fully viable themselves, critics argue."The focus on talking about Islamic finance over the past few months is only political propaganda before the next election," said Adel Chaouch, an official in the Nida Touns, a secular party. "Talking about Islamic banks may increase divisions among Tunisians."ECONOMY Ennahda says Islamic finance, which obeys religious principles such as bans on the payment of interest and pure monetary speculation, will help the economy recover from the damage it suffered during Ben Ali's overthrow. Nearby countries have similar hopes. Egypt's Muslim Brotherhood wants to promote Islamic finance and Morocco, also led by a moderate Islamist party, says it plans to become a regional hub for the business.

Morocco's General Affairs and Governance Minister, Najib Boulif, told Reuters in March that the government was drafting a bill that would include regulations covering Islamic financial products. In Tunisia, there are currently only two Islamic banks because of the Ben Ali regime's coolness towards the industry.Their assets total 1.4 billion dinars ($893 million), or just 2.5 percent of the combined assets of all Tunisian banks, according to the central bank; in Gulf Arab countries, Islamic banks are estimated to hold about a quarter of banking assets.Committees set up by the finance ministry, religious affairs ministry and the central bank are now working on a law that would facilitate the creation of more Islamic banks.Nadia Kamha, director-general of the central bank, said the bill would be ready "within weeks" and that it would then be presented to the government for approval."Islamic finance can accomodate large groups of Tunisian people who have not been absorbed by traditional banks," said central bank governor Chadli Ayari.  Tunisia plans to issue its first sovereign Islamic bond early next year as it diversifies its sources of funding, Ayari told Reuters late last month. Access to another pool of capital would be welcome;  Tunisia expects to run a budget deficit of 5.9 percent of gross domestic product next year, when the government will need to raise an officially estimated 4-4.3 billion dinars.

POLITICS But sceptics argue the government's vision of an Islamic banking boom in Tunisia is fanciful. Fethi Jerbi, an economics professor at the University of Tunis, said it was unclear whether the economy could support more Islamic banks."The conditions for success in the Gulf countries are not available in Tunisia for Islamic banking products," because Tunisia is not as rich as Gulf economies and its financial system is not as well developed, he said. He also said authorities' focus on promoting Islamic banking risked neglecting conventional banks, which could have serious consequences for the banking sector and the economy. In a report last month, credit rating agency Standard & Poor's said Tunisia's banking sector faced "very high risk" in areas such as funding of the system. It added that although the government had been supportive of banks, it had limited capacity to provide emergency aid to the sector in the event of a major crisis. Noureddine Bhiri, Minister of Justice and an Ennahda leader, strongly denied that the Islamic banking drive was a political ploy."Turning to Islamic finance does not fall within political propaganda. The Tunisian revolutionary government does not need propaganda to attract voters," he told a seminar. Kamha said that while there was disagreement over whether conventional banks should be allowed to offer Islamic products, the central bank was inclining towards allowing this, by permitting the banks to operate "Islamic windows" which would segregate the money from conventional operations."This would increase the spread of Islamic finance in the country and make the banking sector more competitive."

Update 3 in campaign money race, romney wins october, obama leads overall


* This presidential campaign costliest ever* Romney, Republican Party amass cash as vote nears* Adelsons give $10 million more to pro-Romney Super PACBy Alina Selyukh and Alexander CohenWASHINGTON, Oct 25 Mitt Romney and his Republican allies raised more than President Barack Obama and the Democrats in the first 17 days of October as both presidential campaign efforts approached the $1 billion mark, with Obama in the lead, disclosures showed on Thursday. The tight 2012 presidential race has become the costliest in U.S. history thanks to massive spending on advertising and get-out-the-vote efforts by the campaigns and by outside groups that have no fundraising limits. After several months of lagging Obama in fundraising, Romney, the Republican National Committee and allied state parties overtook their Democratic rivals in October with $111.8 million raised from Oct. 1 to 17, his campaign said, a period that included two of the three televised presidential debates. Obama's campaign raised $90.5 million for itself and Democratic Party allies during that period, becoming the first in history to raise a total of more than $1 billion for an election effort together with his party. Romney and the RNC were close behind, taking in a total of $919.4 million throughout the 2012 campaign so far. Obama's campaign hedged on the $1 billion figure, saying the total was still short of that mark - at about $988 million - based on a tally of the cash raised since April 4, 2011, when Obama's team and the party officially became one campaign. Reuters totals are based on a more commonly used calculation method that includes campaign funds starting on April 1, 2011, and party efforts dating back to Jan. 1, 2011.

"As the Romney campaign and their super PAC allies continue to outspend us on the air, we're making every effort to expand our donor base heading into the final stretch," said Obama campaign spokesman Adam Fetcher. Romney's campaign said it had $169 million left in its own and the party's bank accounts at the end of Oct. 17 - a hefty sum for use in the last leg of campaigning before the Nov. 6 election and more than the $123.9 million available to Obama and the Democrats."There are less than two weeks left, but we still have much hard work to do to ensure that Mitt Romney and (running mate) Paul Ryan win in November and bring real change to Washington," said Spencer Zwick, Romney's national financial chairman. With the two men running neck and neck in polls, Thursday's money disclosures are the last glimpse into the campaigns' finances before Election Day."In an election this close, they're certainly going to try to put every dollar to use," said Anthony Corrado, campaign finance expert and government professor at Colby College in Maine. "They're building up cash because they want to have as much money as they can for the big final push."Obama voted early in Chicago on Thursday to encourage other Democrats to do so as both campaigns were in a hectic last-minute dash through the handful of crucial states seen as determining this year's winner.

WAR OF THE AIRWAVES In a record-breaking spending spree, both campaigns have devoted the bulk of their cash to blanketing the airwaves with advertising. In the first three weeks of October, the latest tally by the academic Wesleyan Media Project found that Republicans - Romney, his party and outside "Super PAC" groups - spent more than Democrats on ads, but Obama and his allies actually ran more ads. Only candidates themselves are promised the cheapest rates for ads, meaning parties and outside groups have to pay up. While Romney has held a cash-on-hand advantage over Obama in recent months, it is thanks to strong fundraising by the Republican Party. Obama's cam p aign on its own has dwarfed Romney's in the money stakes in recent months.

That has afforded special prominence to the deep-pocketed Republican "Super PACs," outside spending groups that can raise unlimited funds and buy ads on Romney's behalf as long as their work is formally uncoordinated with the campaign. The main pro-Romney Super PAC Restore Our Future on Thursday reported raising $20.1 million in the first 17 days of October. Of that, $10 million was a new infusion from billionaire Las Vegas casino mogul Sheldon Adelson and wife Miriam, financial disclosures showed on Thursday. Harold Simmons, who is a Dallas banker and another top donor, gave $1 million. The "super" political action committee had $24.2 million sitting in the bank as of Oct. 17, the filing showed. The pro-Obama Super PAC Priorities USA Action raised $12.7 million and had $10.1 million left in the bank on Oct. 17. The group received last-minute help from Silicon Valley start-ups, getting $1 million donations from LinkedIn co-founder Reid Garrett Hoffman, Zynga CEO Mark Pincus and Silicon Valley venture capitalist Vinod Khosla. Prominent billionaire financier George Soros also gave $1 million. Another strong outside money group on Romney's side is American Crossroads, a Super PAC that is part of the effort spearheaded by veteran Republican operative Karl Rove, a former top aide to George W. Bush. The group brought in $11.7 million in the first 2-1/2 weeks of October and had $6.4 million in cash on hand at the end. After months of staying on the campaign sidelines, natural gas advocate and billionaire CEO of BP Capital T. Boone Pickens gave his first $1 million to the group earlier this month. Other notable October contributions came from top Republican givers and the group's perennial donors Simmons, who gave $4 million, and Texas home builder Bob Perry, who gave $1 million.

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