Words of Wisdom - the Editor

Peace.
Got busy with a new project. So couldn’t add more news. Although I came across a fine article by a brother on the history and future of Islamic Banking. I was surprised to know that Islamic banking had beginnings in 1975. Wow. That’s almost as early as my birth. And I guess if there are enough like minded people any idea is bound to grow. I too used to wonder if I can invest without plunging into interest based transactions.

UK I noticed is taking some fine initiatives to promote Shariah Finance. Also came across a western brother or atleast who calls Muslims his brothers and sisters but laughs cynically at the DOW Islamic index as 'bending backwards' to accommodate those guys who have four wives and cut of peoples hands. O well some people just don't get it, do they?

Sunday, May 4, 2008

Faith-based indices less hit in recent market meltdown

2 Apr, 2008, 0210 hrs IST,Shailesh Menon, TNN

MUMBAI: Blessings of Allah be on him who is mild and gentle in his business transactions... The trader who plies his trade cleanly will rise in the Hereafter" — says the Holy Koran.

The God above seems to have upheld the Prophet's word, as faith-based investors — more particularly Islamic investors who follow the ideals of Shariah investments — have not really burnt their fingers in the recent market meltdown. While broader indices have fallen in the range of 20-25%, Indian faith-based indices have only dipped 12-17% over the past three months.

Faith-based indices include stocks that strictly support an ideology. Though there are not many faith-based investment opportunities in India, investments in Shariah-compliant stocks are fast catching up. Shariah, the canonical law of Muslims, has strictures regarding finance and commercial activities permitted for believers.

Dow Jones Islamic Market India Index (DJIMII), S&P CNX 500 Shariah, S&P CNX Nifty Shariah and Parsoli Equity Index are the available benchmarks as far as Shariah-based equity investments are concerned.

Shariah-based equity investments, in severe terms, do not allow investors to invest in excessive debt companies (no investments in companies that have a debt-to-market cap exceeding than 33%), companies with high outstanding receivables (net receivables in excess of 45% of m-cap) and companies that do not have at least 25% of its capital in fixed assets.

Though this is a thick screen, about 85% of stocks on Nifty are Shariah-compliant, said experts. The current share of Indian Shariah compliant m-cap (at around 61%) is highest even when compared to the number in Islamic countries.

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