HDC, IDB to set up halal investment fund

The Halal Industry Development Corporation (HDC) is in discussion with the Islamic Development Bank (IDB) to set up a halal investment fund.

Its focus will include to finance the development of agriculture businesses especially for IDB member countries.

An MoU was signed recently between the two parties to set the ball rolling, HDC chief executive officer Datuk Seri Jamil Bidin told Bernama in an interview.

“We can use the fund as a mechanism and propose it to the wealthy countries like in the Middle East and Brunei to inject funds and then, channel it to IDB member countries that have the ability to produce food supply,” he said.

Usually, the countries that have resources to produce food supply do not have enough financial capability to expand their production and reach export markets.

Richer Organisation of Islamic Conference (OIC) countries like in the Middle East, on the other hand, have the financial capability but do not have the resources like land and manpower to produce food.

For example, Jamil said, countries like Sudan and Pakistan have the ability to become halal meat producers but they do not have the financial capability to be global meat exporters.

HDC, IDB to set up halal investment fund


In Malaysia, meanwhile, there were over US$500 million of halal investment opportunities, of which agriculture businesses were among the lucrative businesses that can be tapped into.

Jamil said this was where OIC countries can leverage on each other’s capability and at the same time ensure enough halal food supply for the Muslim world without relying on traditional food producers.

He said the move would not only tackle the shortage of halal food supply globally but also a way to tackle rising food prices.

“International food prices increased steeply from mid-2010 to 2011, raising alarm bells across the developing world about a repetition of the food price crisis of 2007-2008,” he said, citing data from the United Nations He said with growth in the economy, rising disposable income as well as increase in halal awareness, trading in halal products especially meat and food products would also increase exponentially.

Non-Muslim Dutch consumers had also shown interest in halal food where the total demand is estimated to reach about US$3 billion annually, he said.

With the possibility of supply-side disruption, he said, there was a dire need for invesment in agricultural projects especially in under-developed and developing Muslim countries.

“We are coming out with a blueprint with the IDB on food security to find a solution. The fund will be one of the proposed solutions as well as other new cooperation between us,” he said.

Jamil said the blueprint was expected to be finalised within the next six months.

Apart from agriculture projects, he said, the fund would also address the missing gap in other underfunded investment opportunities which are neither small nor big enough — valued between US$1 million and US$10 million.

URL: http://www.theborneopost.com/2012/05/14/hdc-idb-to-set-up-halal-investment-fund/



Over the last ten years Islamic finance has grown quite impressively. With the growth in Islamic finance the need for shariah compliant financial products have also increased very much.

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However, Islamic capital markets in various Muslim countries are still quite underdeveloped. In these circumstances there have emerged a number of Indices developed by Dow Jones, FTSE and others to track shariah compliant stocks from the world over.

This paper using the shariah screening norms as adopted by the Dow Jones show that Indian capital market provides tremendous shariah compliant investment opportunities as compared to a number of Islamic countries.

Continue reading

Falalu Bello – Bible, Quran support non-interest banking

There is nothing controversial in non-interest banking otherwise known as Islamic banking because Christianity and Islam abhor usury or interest banking, former Managing Director of Unity Bank Plc, Alhaji Falalu Bello has said

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He said both Muslims and Christians can participate in the non-interest bank since the two holy books are against usury.

He added that the introduction of the banking system is not aimed at promoting any religion in Nigeria, but to provide a more conducive atmosphere for financial institutions to operate. “I don’t see anything controversial about Islamic banking.

The banking laws in Nigeria as far back as 1991, made it legal to have profit and loss banking in Nigeria, so whoever has a problem with it should have gone to court to challenge it when it was promulgated by the supreme military council,”

he said.   http://dailytrust.dailytrust.com/index.php?option=com_content&view=article&id=23014:falalu-bello-bible-quran-support-non-interest-banking-&catid=1:news&Itemid=2

Is Islamic banking relevant to Nigeria’s economic development

There is a palpable apprehension in the Nigeria following the announcement by the Governor of the Central Bank of Nigeria, Mallam Sanusi Lamido Sanusi, to establish Islamic banking in the country. Given an explicitly religious dimension to Islamic banking, and given also a priori consideration of the nation’s secular status, I did harbour great doubts whether the nation’s apex bank, as an agency of the Federal Government, has the moral right to attempt to complement the existing banking systems with a full-fledged faith-based bank.

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Of course, new times require new ideas. With high-profile collapses and bailouts by governments in developed world in the aftermath of the global banking crisis in 2008, almost all economic literate persons will concede that outworn economic dogmas of yesteryears have to be abandoned and new paradigm for financial markets stability embraced. Continue reading

Islamic banking: Features of accounting

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Afzalul Haq in the first of his three-part article

Islamic banking: Features of accounting

Now-a-days accountancy has become an important academic and professional discipline as the lingua franca or language of business. As such in the real life industrial scenario, accounting has become the vital part of the top management. Continue reading

Islamic Finance in Russia – Developments in 2010

It has been a year since the first conference on Islamic finance in December 2009. Over the year there have been quite a number of significant events taking place, all of which will influence the development of Islamic finance in Russia. Among these, the major milestones are the establishment of the Russian Association of Experts in Islamic Finance; the first Halal Expo Exhibition; publication of an authorized translation of the Accounting and Auditing Organization for Islamic Financial Institutions’ Standards of Islamic Finance Transactions; and the first Islamic finance deals on the Russian market.

Islamic Finance in Russia – Developments in 2010

Islamic Finance in Russia – Developments in 2010

As part of the wider growth process of specialists focusing on Islamic finance, the Association of Experts of Islamic Finance was established in early 2010. At present it has 76 members and 11 candidates from seven Russian regions. To become a member, candidates should demonstrate an adequate level of knowledge and obtain recommendations from two existing members of the association.

The first Halal Expo Exhibition took place in June 2010. This was a three-day event, which gathered more than 60 producers of halal goods and services from 10 countries. Companies demonstrated the advantages of their products to the several thousand visitors that attended. The event was supplemented with a seminar on Islamic finance that attracted the participation of representatives of one of the largest Islamic banks Al-Baraka and of the Malaysian Central Bank.

The first publication in Russian of the authorized Accounting and Auditing Organization for Islamic Financial Institutions, or Aaoifi, standards was one of the year’s important events. Assisted by Pepeliaev Group, the Russia Council of Mufties in association with the RAEIF translated and published such standards as “murabaha” (sale on credit), “sukuk” (securitization) and “takaful” (Islamic insurance).

The presentation of these published standards took place in Moscow in October 2010, with the participation of Aaoifi head Dr. Mohamad Nedal Alchaar.

One of the most important developments was investment by a Malaysian fund in facilities related to production and distribution of halal foodstuffs in Tatarstan.

Despite numerous complaints with respect to the tax and legal obstacles to implementing Islamic finance in Russia, it was possible to find adequate solutions for investment that were compliant with both Russian legislation and sharia principles. Russian lawyers, in cooperation with Malaysian colleagues, provided all the necessary support in respect of services required for this investment.

2010 saw issues of several sukuks in Europe, in particular in the field of aviation, i.e. the leasing of aircraft. Although transactions did not involve Russian companies, there are no major obstacles to conducting similar financing projects in Russia. We expect the first Russian sukuk to be issued in 2011, as the market is recovering and Russia appears to be attracting the interest of foreign investors, also from the Middle East and North Africa.

At present, the Russian legal and tax environment is able to accommodate most of the classical Islamic finance transactions, and there is growing number of experts who know the field, and so executing Islamic finance projects in Russia is rather more a matter of selecting the appropriate investment projects than issues relating to tax and legal support surrounding implementation. For the latter, there are appropriate solutions under existing laws.


Islamic finance – steady amid chaos


Reviewed by Robert E Looney

In 1936 in the depths of a world-wide economic depression, John Maynard Keynes described the decline of the world’s financial markets as a result of playing at a casino: “Short-term speculation with little regard to fundamentals.” A cursory examination of the current global financial crisis suggests little has changed since Keynes’ day – the conventional financial system, despite various patches and fixes over the years, is still prone to periods of extreme instability and abuse.

Unfortunately, the economics profession has provided little in the way of constructive input in re-designing a more stable financial architecture. Mainstream neo-classical equilibrium economic analysis has not systematically incorporated elements that would account for the conventional system’s instability, let alone provide a framework for predicting the occasional bouts of extreme instability.

Liberal-minded neo-Keynesians have done a bit better in identifying some important precursors of the crisis, in particular, the destabilizing role of huge private sector financial deficits in countries with large external deficits, such as the US. The Keynesian view certainly played a big part in the post-crisis response (fiscal stimulus) of many developed and emerging countries.

On the conservative side, monetarists certainly raised doubts about the Federal Reserve’s abnormally low interest rates and expansive monetary creation in the years preceding the crisis. Yet, at best, this line of analysis does not go very far beyond the warning of an impending bubble and likely bout of inflationary pressures.

No doubt a leading monetarist, Milton Friedman, if alive today, would reaffirm a firm belief in Say’s Law of the smooth functioning of unimpeded (free) markets. Those going down this road contend the current financial instability is wholly the fault of too much government. As Friedman often observed, “The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy”. Lax money and credit policy of US Federal Reserve under Alan Greenspan would be the focus of his ire today.

Monetarist offshoots such as the Rational Expectations School, while producing good explanations of the stagflation experience of the 1970s, have not been able to systematically incorporate irrational behavior into their models. The lemming or investor-herd mentalities observed in recent years remain well beyond their comprehension.

As Martin Wolf of the Financial Times has noted, of the Western interpretations of the global financial crisis, it appears those economists working in the Austrian tradition were more nearly right than anybody else. In particular, they have argued that: central bank inflation-targeting is inherently destabilizing; that fractional reserve banking creates unmanageable credit booms; and that the resulting pattern of investment, linked not to the marginal efficiency of capital but rather to financial returns, explains the subsequent financial crash.

The best non-Western explanation of the global financial crisis is presented in the book under review, The Stability of Islamic Finance: Creating a Resilient Financial Environment for a Secure Future by Hossein Askari, Zamir Iqbal, Noureddine Krichene and Abbas Mirakhor. However, this book is much more than just an alternative explanation of the current depressed state of the world economy – it is an elegant, sophisticated assessment of Islamic finance as a viable, realistic alternative to the current conventional system. Perhaps to the surprise of many, the author’s assessment finds a number of similarities between the core elements of Islamic finance and that of the Austrian School.

Certainly Islamic finance and banking institutions are thriving relative to conventional finance. The Banker’s 2009 survey of Islamic finance found the volume of sharia-compliant assets of the Top 500 grew by an extremely healthy 28.6%, rising to US$822 billion from $639 billion, in 2008 (forecasts are that this figure will top $1 trillion in 2010). At a time when asset growth in the Top 1,000 world banks slumped to 6.8% from 21.6% the previous year, Islamic institutions were able to maintain the 28% annual compound growth achieved in the past three years.

The industry also continued to expand, with 20 new entrants bringing the number of sharia-compliant institutions to 435, with a further 191 conventional banks having sharia windows. The Islamic banking geographies are stretching beyond the existing strongholds of Iran, Saudi Arabia, Bahrain, Malaysia and the UAE to Europe, South Africa, Kenya and Indonesia.

Advocates claim Islamic finance has been immune because sharia-compliant institutions are focused on the fundamentals, with simple products bearing robust mechanisms for risk mitigation. Market analysts have stressed the correlation between asset quality in Islamic institutions and their conservative approach to risk as an insulating factor. Many conventional bankers contend the success of Islamic finance in riding out the financial storm can be attributed to the fact it is underpinned by tangible assets such as real estate.

Askari et al incorporate all of these considerations into their demonstration of the advantages of the Islamic alternative, but they also go several steps further than most previous assessments. Prior examinations of Islamic finance have devoted most of their attention to its ethical side – prohibition of interest and the ban on lending for certain activities – gambling, alcohol production and so forth. As its title suggests, The Stability of Islamic Finance demonstrates, in addition to Islamic finance’s usual virtues, its relative stability with regard to the conventional system.

As the authors note (p 209), conventional banks fail to meet inherent stability conditions even in the presence of prudential regulations. First, credit losses from debt default to the depreciation of assets may create a large divergence in relation to the liabilities that remain fixed in nominal value. Second, bank credit has no fixed relation to real capital in the economy and bears no direct relation to the real rate of return. Unbaked credit expansion through the credit multiplier and further leveraging is a fundamental feature of conventional banks. Cash flow could fall short of expectations and force large income losses on banks, especially when the cost of funds is fixed through a predetermined interest rate.

Third, banks caught in a credit freeze, with a drying up of liquidity. may default on their payments. Fourth, banks are fully interconnected with each other through a complex debt structure; in particular, the assets of one bank instantaneously become liabilities of another, leading to fast credit multiplication. A credit crash causes a dramatic contagion and a domino effect that may impair even the soundest banks.

While their analysis is much too rich to detail here, suffice to say they demonstrate that an Islamic system overcomes many of these limitations. In particular, in an economy governed by the principles of Islamic finance, the rate of return on equities is determined by the marginal efficiency of capital and time preference, and is positive in a growing economy. This implies that Islamic banks are always profitable provided that real economic growth is positive. This establishes a basic difference between Islamic banking where profitability is fully secured by real economic growth and conventional banking where profitability is not driven primarily by the real sector.

A critical feature noted by the authors, and one consistent with the Austrian ideal for banking, is the fact that the Islamic system operates on a 100% reserve requirement. In this system, investment banking operates on a risk/profit sharing basis, with an overall rate of return that is positive and determined by the real economic growth rate.

Islamic banks do not create and destroy money; consequently, the money multiplier, defined by the savings rate in the economy, is much lower in the Islamic system than in the conventional system, providing a basis for strong financial stability, greater price stability and sustained economic growth.

In short, the requirements of Islamic finance – lower proportions of debt to equity, a condition that the lender share profits and losses with the borrower, and a focus on transactions based on tangible assets – mean that Islamic banks have not become entangled in the toxic-debt instruments that have laid waste to many of the conventional banking giants.

In sum, The Stability of Islamic Finance has many strengths. Perhaps the greatest one is the ability of the authors to bridge the gap between the conventional and increasingly sophisticated global financial system and that represented by Islamic finance. Previous attempts at contrasting the systems largely failed because authors were strong in one area but lacked the expertise to provide an in-depth critique of the other system. Professor Askari is an acknowledged world-class expert in both systems and combined with his three co-authors anchors an analytical team uniquely capable of integrating the workings of an Islamic system into the increasingly complex global context.

Still, there are many problems confronting a wider based adoption of Islamic financial systems. In addition to the usual West-Islamic differences over interest, ethical roles of business etc, a number of fundamental changes would have to take place in the way Western governments manage their economies. For one thing, the adoption of popular Keynesian stimuluses during recessions would be much more difficult than is currently the case. Central bank discretionary policy would have to be abandoned for strict rules on monetary expansion. Reserve requirements of 100% on banks would fundamentally alter the banking business – the list goes on.

Having shown its inherent advantages over the current system, hopefully the authors will collaborate on a follow-on book detailing how the Islamic financial system can transition outside of its current narrow confines to be a viable alternative to the conventional system.

The Stability of Islamic Finance: Creating a Resilient Financial Environment for a Secure Future by Hossein Askari, Zamir Iqbal, Noureddine Krichene and Abbas Mirakhor. John Wiley & Sons, Singapore (2010). ISBN: 978-0-470-82519-80. Price US$49.95, 256 pages.

Robert Looney is a professor of national security affairs, and associate chairman of instruction, Department of National Security Affairs, at the Naval Postgraduate School, California.


Why in India Islamic Finance is Nipped in the Bud

The recent stay order passed by the Kerala High court against the incorporation of an Islamic finance company needs to be critically reviewed and also the contents of the writ petition filed by Dr. Subramanian Swamy to understand why Islamic finance is generally nipped in the bud in India.

In this article I will be mainly analyzing the content of the writ petition and briefly cover the judgment of the Kerala High Court.

An excerpt from the petition of Dr. Subramanian Swamy

5) The Shariah is the canon law of Muslims. A financial services company set up with government participation which would follow the canon law of a particular religion, is clear instance of the state favoring a particular religion.

B) It is clear from Exhibit P1, P2 and P3 that the proposed Islamic financial company is to be set up strictly in accordance with the Shariah, the canon law of Muslims. Exhibit P3 implies the setting up of a Shariah Advisory Board. As it is stated in Exhibit P3 that the CEO of the proposed company is required to report to the Shariah Advisory Board, this makes it clear that the board will have some measure of supervision over the proposed Islamic Financial Services Company.

It needs to clearly emphasized that the company is being set up strictly in accordance with the Indian companies act as a non banking financial company and not in accordance with Shariah. No doubt in the articles of association the shareholders agree to conduct the business of the company in accordance with Shariah. The companies act provides freedom to the share holders to agree upon financial methodologies of the company provided they do not violate any existing regulation.

Therefore in this particular case if share holders have agreed to conduct their business in accordance with Shariah then the company has not violated any regulation and further this company is not the first company in India wherein the share holders have decided to conduct their business in accordance with Shariah.

Shariah Advisory Board would be an advisory body advising the CEO of the company on the Shariah compliance matters of the products and the services of the company. The CEO of the company reports to the Shariah Advisory Board on how the products and financial services are being implemented within the advised principles of the Shariah Advisory Board.

As the share holders of the company have agreed to conduct the business of the company in accordance with the principles of Shariah then it becomes pertinent that Shariah experts advice the company on the principles of Shariah. This being an internal matter of the company and being done within the parameters of the over all legal frame work should not raise any legal concern. The company is not a religious organization but a full fledged commercial financial entity which conducts its business based on certain principles.

The articles of association of the company does not mention that it would cater to any specific religious community but on the contrary it would as any other registered financial entity would not discriminate its clientele based on their religion.

An excerpt from the petition:

E) In M.P Goplakrishnan Nair v. State of Kerala, (2005) 11 SCC 45, the Hon’ble Supreme Court held that, ‘The state is not only prohibited to establish any religion of its own but is also prohibited to identify with or favoring any particular religion’. Hence Exhibit P1 is liable to be struck down on the ground of violation of Art .14 and 25.

Article 25, Freedom of conscience and free profession, practice and propagation of religion of the Indian constitution clarifies that, ‘Subject to public order, morality and health and to the other provisions, all persons are equally entitled to freedom of conscience and the right freely to profess, practice and propagate religion.

As Islam is a complete way of life, therefore there are also clear principles laid out in the religion on how the financial transactions should be conducted by Muslims. Therefore if the state creates an ambience wherein Muslims have an opportunity to profess and practice their Islamic financial principles that in-fact reiterates the fact that the state is upholding Article 25 of the Indian constitution.

If a state establishes a commercial legal entity and takes a minority stake in it and this entity internally has guidelines on its investment strategy based on Shariah, Islamic law, then it no way should mean that the state has established or embraced any specific religion and neither that it is identifying or favoring any particular religion.

The state by its action wants Article 25 to be exercised and create a vibrant economic environment which helps in building infrastructure and job opportunities in the state for people at large without being discriminatory to any particular religious community. It should be understood that the action of the state should not be construed in a parochial manner by any citizen.

In accordance with Article 14 of the Indian Constitution, Equality before law, which states that ‘the State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.’

The state of Kerala is on the contrary to the charge levied by the petitioner in his petition is upholding Article 14 of the Indian constitution by offering financial services through the company to the citizens at large without discriminating them on the basis of cast, creed and religion.

An excerpt from the petition:

F) The operation of the proposed company in a Shariah-compliant manner would mean that prohibitions of the Shariah will also be complied with. One of the basic principles of financial dealings under Shariah is the prohibition of riba or intetest. The prohibitions contained in the Shariah will also cover articles such as alcohol and pork which are considered haram (meaning prohibited in Arabic) for Muslims. The prohibitions contained in the Shariah may also extend to entertainment, including cinema and music

It is should be understood that no legislation in India mandates that a financial company should only structure financial products which are based on ‘interest’. There are innumerable financial products which are not based on interest, for e.g. equity funds. Not engaging in the business of alcohol and pork should again be not questionable as both have a clear track record of having negative impact on health.

Deaths because of consumption of alcohol and swine flu are clear indications to this. In case of entertainment the prohibition is more so towards obscenity and pornography which in fact is also not permissible under the existing legal structure. We humbly would like to emphasize that the financial policies of the company are indeed in the interest of the general public and not to the contrary as charged by the petitioner.

The law clearly allows the share holders of a financial company to make its decisions internally on how its financial products should be structured and offered to the customers there fore no one has any legal right to question how a legally registered financial company manages its internal policies.

It should be emphasized that the incorporation of the company has in no way violated Article 14, 15, 16, 19(1) g , 19 (6) and 25 of the Indian constitution. On the other hand it has strengthened the practice of Article 14 and 25.

The incorporation of the company also should not be interpreted as though it has favored any particular religion. By incorporating a legally registered financial company which has its own internal policies and which will offer its products and services without discriminating the religion of the recipients, it is clear that it does not violate any rule in the book.

The judgment of the Kerala High Court on the above writ petition should not be viewed in complete negative light as the judge has sought views on the incorporation of Islamic finance company from the Union of India, represented by the Secretary in the Department of Finance and Industry and by the Reserve Bank of India being represented by its governor. It would have been really helpful if the judgment would have been more comprehensive and would have realized the positives attached to Islamic finance.

We hope that this judgment will not derail the establishment of financial institutions in India which do not base their products and services based on ‘interest’. Banking which is asset based and not linked to interest should not be considered just as a religious urge of Muslims but it should be also be considered as another type of banking which may surely provide some solutions to the present ailments in the banking sector.


Sharia compliant investment: Is it the same as SRI?

Sharia compliant investment: Is it the same as SRI?

Sharia-compliant investment is the investment approach associated with Islam, Sharia being the set of rules (or  ‘path to headwater’) that governs the lives of Muslims.  It seems to be emerging as one of the key trends in the financial services sector, and indeed one of the few areas of substantial growth in these troubled times.  Some also suggest that the key tenets of Sharia are roughly equivalent to the SRI investment approach.

Within the last week alone there have been news stories about a new Sharia-compliant fund investing in water, the CFA Institute bringing a Sharia investment expert on board in response to market trends and the story of a Sharia-compliant deal gone bad, leaving no Sharia-compliant way out.  But what is Sharia-compliant investment? Why is it suddenly so fashionable? And is it a subset of social/ethical investment?

Sharia compliant investment is an evolving set of rules that are constantly under discussion, both in banks and amongst scholars of Islam.  However, there are a few principles that are universally upheld:

  • The payment or receipt of interest is prohibited; interest is considered to be exploitative because all risk is seen to be with the borrower not the lender. Wealth can therefore only be generated through legitimate trade and investment in assets.

Example 1: In an Islamic bank, the bank itself and its customers share any profit or loss on investment.  If you have a savings account in an Islamic bank you will not be earning interest but instead sharing the profit of the investments made on your behalf.  The risks of investments are also shared between bank and customer, but on agreed terms.

Example 2: If you want to buy a car but don’t have the cash, you apply to the bank which, if it approves, buys the car itself and then sells it to you for a marked-up price but in instalments… it looks like interest but it isn’t.

  • No financial involvement in alcohol, gambling, pornography, abortion, human cloning, defence, conventional banks or insurers is allowed. Investment in pork-related industries is also prohibited, as are most investments in the entertainment industries.

There are many more rules attached to Sharia which are observed in some institutions (and households) but not in others.  These are too numerous to go into now but there’s an excellent article in an old issue of the London Review of Books that discusses some of them.

So why is it in all the papers now?

The main reason is that financial institutions have realised that the world’s 1.3bn Muslims are under-served by current financial infrastructure.

To put it another way, the global Muslim population represents a huge and relatively untapped commercial opportunity-  in the form of both ‘everyday’ British Muslims who won’t use or would prefer not to use mainstream banking services, and also of representatives of oil-rich Muslim nations.

Another interesting an appealing point is that Sharia banks have emerged relatively unscathed from the recent tumult; the principles list above prohibited their involvement in the financial entanglements that brought down many other banks.

So how is it social investment? Firstly, the screening approach (excluding certain industries according to ethical criteria) is very similar to the traditional SRI approach.  Secondly, the preference for asset-backed deals and an aversion to high levels of debt means that deals seem to be subject to greater due diligence than they otherwise would be, and therefore avoid sub-prime situations.

Lastly, one really does get the sense that this is a ‘thinking investment’; that something other than greed and gambling holds considerable sway over the direction in which money is invested.

I wish that I could write as well as Jeremy Harding of the LRB, but I can’t so I will finish with a quote from him on the subject:

“[The Islamic approach is that ] Money… is an object of caution rather than superstition – and, in spite of its dangers, a useful tool for anyone who wants to build a respectable world, with God’s instructions pinned to the wall above the workbench.”

What do you think?
All the best



India is fertile ground for Islamic investments

Now, it’s India Inc’s turn to play a religious card but mercifully, for all the right reasons. The nation has emerged as a key ground for Islamic investments, under which speciality funds pump in money only into those activities or firms that are compliant with the principles and ethics of Islam.

With billions of dollars being deployed by devout investors only in those entities that are in conformity with Shariah laws, the opportunity is huge. Since about 12 per cent of India’s citizens are Muslims, Islamic finance is a domestic fund opportunity as well.

As many as 2,730 listed companies in India are Shariah compliant, says Talha Sareshwala, chief finance officer at Ahmedbad-based Parsoli Corporation Ltd, a BSE-listed non-banking finance company that specializes in channeling funds from domestic and non-resident Muslims into the Indian market.

According to industry sources, Islamic investments amounting to about $750 million have already been made in the country’s capital market and infrastructure sector over the past few months.

Shariah prohibits Muslims from receiving interest payments and from investing in companies involved in the production or sale of pork, alcohol, tobacco, pornography, gambling and non-Islamically structured finance. Islamic finance works on these principles and encourages Muslim community to invest their money as their religion allows.

Ashraf Mohamdey, chief executive officer, Idafa Investments Private Limited, Mumbai says, “Globally, Islamic finance (including Islamic banking, Islamic insurance and Islamic investments) is growing at the rate of 20 per cent per year. If given a chance to prove itself, Islamic finance will give similar growth numbers in India.”

“Almost 80 per cent of the companies are Shariah compliant as far as the business of the companies is concerned. The culture and ethos of the Indian community is such that except banks and financial institutions which are non compliant there are only a handful of non-compliant companies such as those involved in gaming and casinos or alcohol manufacturing,” Sareshwala said.

Sareshwala dismissed criticism that Islamic laws work against investment.

“Shariah is totally in favour of investment. Any investment, which is in line with Islamic principles, is not only allowed but also propagated in Islam,” he said. Islamic or Shariah Finance is not a new concept. It has been there for nearly two decades now and has caught in places including Britain, France, Indonesia, Malaysia and Middle East countries.

Apart from stock market, equity mutual funds may be a happening sector for Islamic Finance to flourish. Mohamdey says, “Equity mutual funds can play an important role to fill the void of Shariah compliant products here. An ethical fund like ‘Tata Select Equity Fund’ tries to fill that gap, in a limited way.

If Shariah-compliant funds are offered, following all the criteria of investments prescribed by Islam and Shariah boards certifying the products, it will give a lot of assurance to investors about the authenticity of claims made by any asset management company.”

Contact    www.wealthcity.in     for Shariah Compliant Investments[email protected]     –    +91 9566192266