Canada is widely considered to have the most effective and safest banking system in the world, according to the World Economic Forum. The Global Financial Magazine reports that six of the world’s top 10 safest banks are Canadian. The World Bank ranks Canada in the top five countries in terms of investor protection.
One of the most rapidly growing segments of the international financial services sector is Islamic finance. Recognizing this trend, and in competition with a number of other western financial centers, including London in England, Toronto is leading Canadian efforts to explore the prospects of attracting additional international financial activity, including Islamic finance.
Review of 2015
In the fall of 2014, as a follow-up to pronouncements earlier in the year, the then Canadian minister of foreign affairs, John Baird, led a Canadian delegation to Abu Dhabi to receive a report on the status and development of a Canada-UAE Business Council (Council). The report of the organizing committee of the Council identified a number of promising areas for future collaboration including Islamic finance. It was noted that Canada had expressed interest in making Toronto the North American center of Islamic finance. In addition, it was noted that the UAE had expressed interest in supporting Canada to better understand the regulatory requirements to allow for Islamic finance. Subsequently, there have been efforts to form a committee that can support the development of Islamic finance in Canada, as part of a larger effort to organize the Council.
The first steps to the formation of a robust consultative dialogue have been taken between the Toronto Financial Services Alliance (TFSA) and the International Islamic Financial Market (IIFM) organization based in Bahrain. The TFSA and members of the Toronto legal community are now being included in discussions with respect to consultation documentation being developed by IIFM.
In the early part of 2015, a delegation of senior business leaders from the Kingdom of Saudi Arabia visited Canada and held meetings with elected officials from all three levels of government in Canada – federal, provincial and municipal. In addition, the delegation hosted a major business forum in Canada in Toronto where representatives from various sectors of the Canadian economy were in attendance, including the financial sector. While the discussion was not focused on forms of finance, it was clear that investment in Canada, in either a conventional form or in an Islamically compliant manner, was being welcomed by the Canadian hosts. A new Canada-Saudi Business Council has been formed to take advantage of the positive energy and shared interests of the business and financial communities of both jurisdictions.
Subsequently, a very respected Saudi-based investment firm, Al Awwal Capital, has signaled its intention to establish a permanent presence in Toronto and has moved a senior executive to Canada to oversee the development of Islamic funds that would be offered to Canadian and Saudi investors. The initial focus of fund-related investing will be the real estate and health technology sectors. These are natural choices given the stability of the Canadian real estate sector and the world leadership that Canada has in a number of emerging areas of technology, including technology relevant to human health care.
In the last several months a couple of new players have entered the Canadian Islamic finance market in different ways. Canaccord Genuity Group, Canada’s largest independent investment dealer, has opened an office in the Dubai International Financial Center, with objectives that include helping Canadian issuers access the global Islamic capital markets. A new Canadian financial advisory firm, Avicenna Capital, has been formed in Toronto for the purpose of developing new Islamic financial products for Canadian corporate investors.
In October 2015, 35 Islamic bankers from Bahrain were in Toronto to participate in a leadership program being offered by the Ivey Business School of Western University. The bankers heard from a number of members of the financial community in Toronto, including Janet Ecker, the president and CEO of the TFSA and Professor Walid Hejazi, the head of the Islamic finance program at the Rotman Business School at the University of Toronto.
Finally, representatives of the TFSA will be attending the World Islamic Banking Conference in Bahrain in early December. During that time, a report will be released that is being prepared for the TFSA by Thomson Reuters on the prospects of Islamic finance in Canada. This report will be an important benchmark for Canada in its continuing efforts to raise its profile as a jurisdiction in which Islamic finance has a bright future.
Preview of 2016
There is a new majority federal government in Canada. The new Liberal government will have the support of Canadians interested in seeing Canada emerge as a more active jurisdiction for Islamic finance. While progress has been slow, there is reason to be very optimistic that Canada is poised to join the community of nations that have embraced Islamic finance as an important and permanent complement of the global financial system.