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.

Scholars Lay Down Rules On Sukuk

Move Aimed At Clearing Up Religious Doubt Over World's Fastest Growing Financial Instruments To Be Debated At International Islamic Finance Forum

Dubai, UAE - April 1, 2008:  New guidelines aimed at clearing up religious doubt over the booming Sukuk (Islamic bond) market – the world's fastest growing financial instruments – are to be debated at the premier international Islamic finance event in Dubai next month.

"The guidelines drawn up by a panel of Islamic scholars are vitally important to the Sukuk market which has grown to a total value of around $100 billion in under ten years," said Swati Taneja conference manager for the International Islamic Finance Forum. "In their guidelines, the scholars are making it clear that in future Sukuk must be clearly asset-backed rather than just asset-based."

The forum takes place at the Jumeirah Beach Hotel, Dubai, from 13-17 April 2008 under the patronage of HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai, who has supported the forum since it was launched in Dubai in March 2002.

Following concerns that many Sukuk may not be fully conforming to the teachings of Islam, the guidelines were drawn up by the board of 18 religious advisors to Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). The organisation's Secretary General Dr Mohamad Nedal Alchaar will give a keynote address on the harmonisation of Islamic finance practice at the forum.

NBK Plans to Open Islamic Private Bank in Switzerland, FT Says

March 31 (Bloomberg) -- National Bank of Kuwait SAK, one of the Middle East's largest lenders, is planning to open an Islamic private bank in Switzerland, the Financial Times reported, citing the bank's Chief Executive Ibrahim Dabdoub.

Dabdoub said the bank has applied for regulatory approval in partnership with an undisclosed Saudi financial institution, according to the newspaper.

National Bank would target wealthy individuals looking for bank products compliant with Islam, the FT said. Islamic finance is one of the fastest growing areas of banking in the Arab world, the newspaper reported.