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Wednesday, 2 July 2008

More entities offer Shariah-compliant investment options

Source ::: The Peninsula/ by Moiz Mannan
Islamic finance and Shariah-compliant investment options are gaining popularity and with the apparent rise in GCC income levels several Asian countries, including India, are developing avenues to cash in on this.
Last month, the Anil Dhirubhai Ambani Group company Reliance Money has joined hands with Parsoli Corporation to launch its first Islamic Sharia-compliant portfolio management schemes for investors in India and West Asia.
More recently, The Eastwind India Islamic Index comprising publicly listed companies, which are Shariah-compliant, was launched in New Delhi to attract Gulf-based investors to such Indian companies.
As per the understanding, Parsoli would work with Reliance Money to ensure compliance with Shariah for the relevant schemes being launched by Reliance Money. Parsoli would also market other financial products and services being introduced by Reliance Money from time to time.
According to media reports, the company will offer this PMS for as low as Rs500,000 and replicating the charges as applicable to other customers in the existing PMS portfolio.
The company also plans to market these schemes extensively in India and West Asian countries.
Currently RMoney offers PMS for as low as Rs500,000. The company does not charge any fee for returns up to eight percent, charges 10 percent fee for returns up to 20 percent and 20 percent fee for returns over 20 percent. Officials said this model would be replicated for the Shariah-compliant schemes as well.
Reliance Money has been expanding its presence in the GCC region. It has a presence in the UAE and Oman and plans to expand its distribution network into other West Asian and African countries which have significant non-resident Indian populations.
Islamic banking is gaining popularity all over the world including India. This can be judged by the forecast that investments worth $100bn will be made globally in this system by 2010.
These estimates were revealed by economists and experts of investment banking in a programme organized for the launch of the Eastwind India Islamic Index at the India Islamic Cultural Centre in New Delhi last week.
In India, so far, Reliance, UTI and State Bank of India have started practicing interest-free system of Islamic banking. This proves that this system is not only viable but also profitable. According to one estimate, more than 25 percent of non-Muslims in Malaysia have invested their money in Islamic banking.
The EW India Islamic Index excludes companies engaged in the alcohol products, conventional financial services like banking and insurance, gambling, hotels, pork-related products and all other businesses which the Shariah board considers unethical.
The EW India Islamic Index is a subset of EW All Share Index which has a market capitalization of Rs5.6 trillion, which is 99.5 percent of the total market capitalization of India.
The EW All Share Index consists of 1,425 companies from 10 sectors and 85 different industries. It will also be used for tracking investment potential in India.
Economy watchers say that the GCC countries, already over-stocked with North American and European assets, are increasingly looking to fast-growing Asia and to currencies which seem likely to appreciate.
It is the sheer rate of growth of Islamic finance and the possibility that its share of global finance will continue to increase rapidly which is pushing Tokyo, Singapore and Hong Kong and, of late, India to try to grab a piece of the action. At the very least they need to be able to offer Shariah-compliant products to rich GCC investors, and perhaps even sell the concept of sukuk to local, non-Muslim investors.
Promoters say that Sukuk financing provides profit sharing opportunities unavailable in debt finance. They note too that so far at least no Islamic finance institutions have been badly hurt by the global credit crisis because they do not engage in the leverage, hedging and derivatives trading which has proved so costly to western banks.
Sukuk products, they say, deserve some place in a portfolio and as secondary trading develops that will become more accepted. Likewise takaful – the Islamic version of insurance based on mutual principles and profit sharing and will become a more significant buyer of Shariah-compliant assets.
So, although, there is an ongoing debate in several Islamic nations over the exact definition and meaning of what constitutes “Shariah-compliant,” it seems that the Islamic philosophy is gaining good ground even as the conventional systems totter on the brink.
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