DUBAI, July 12 Japan's Bank of Tokyo-Mitsubishi UFJ (BTMU) said it had obtained permission from the Dubai Financial Services Authority to operate a so-called Islamic window, underlining growing Japanese interest in sharia-compliant banking. Islamic windows allow conventional banks to conduct Islamic finance by segregating assets from conventional interest-bearing funds. Industry sources said it was the first time that a bank from Japan was operating an Islamic window in the Middle East.
BTMU decided to take the step after Japan's Financial Services Agency changed its supervisory guidelines, the bank said in a statement seen on Sunday.
Japanese institutions have become increasingly interested in Islamic finance as a way to tap large pools of liquidity in southeast Asia and the Gulf.
Last September, BTMU became the first Japanese commercial bank to issue Islamic bonds; last month, a Malaysian affiliate of Toyota Motor said it planned to set up a funding scheme that would include Islamic debt. The Japan International Cooperation Agency has signed an agreement with the private sector arm of the Jeddah-based Islamic Development Bank to develop sharia-compliant transactions.
These days, when you apply for a mortgage, loan or other form of credit, the lending industry will automatically scrutinise your personal credit history. In practice, you hardly need to tell them anything as within a fraction of a second, the lenders computers will lock into your credit file held by any one of the big three credit agencies; Experian, Callcredit or Equifax And you'll be amazed what they know about your finances!
For many years now banks, building societies and other lenders have been providing information about your finances to the credit agencies. They know about every credit applications you've made, the occasions you've been late or missed paying a loan, mortgage or credit card, the balances on your loans and credit cards and whether you just pay off the minimum each month - even your credit limits! The agencies also accumulated lots of other information about you provided by public records, the voters' roll and the public register of court actions where all county court judgements are recorded. Their computers then statistically analyse all this information and assess your application. So in this context, the credit industry argues that the more information they have about you, the more accurately lenders can make lending decisions.
Yet within this mass of information, there is one notable omission. Despite representations to the government, information about student loans and their repayment history's, is not provided to the credit agencies. The data is refused because student loans are a debt to the taxpayer, not a commercial business.
Prior to September 1998, graduates repaid their student loans by mortgage style direct debits collected once the graduate started earning over Ј15,000. But more than 59,000 of graduates from before 1998 graduates are understood to be in payment arrears to the tune, on average, of around Ј2,750 per graduate.
After September 1998, the system of collecting student loans changed. These days, repayments are deducted directly from salaries by employers along with national insurance and income tax. This method is far more efficient and avoids the possibility of bad debts.
The credit industry argues that it needs the information on student loans as they can represent a significant strain on the graduates' finances – especially following the introduction of top-up fees which results in the average student loans being much larger. These loans are repaid at the rate of 9% of the graduates' income in excess of Ј15,000 and can represent a significant drain on their monthly income.
Therefore, to fully assess graduates' financial situation the credit industry argues that it needs student loan information. The Association Consumer Credit Counselling Service agrees. A spokes person said, “Knowing whether a young person has a student loan and whether it is being paid back, is useful.”
Yet despite the pressure to share its information, the Department for Education and Skills remains steadfast in its decision to refuse permission to the Student Loan Company to provide information to the commercial sector.
Even the Citizens Advice Bureau wants this decision changed arguing that lenders need information on student loans to help ensure that graduates avoid taking on so much debt that they can't maintain their repayments.
But for now at least, the situation remains. The credit industry cannot obtain any history about student loans.