After less than a year since the global rating agency, Standard & Poor's launched its BRIC Shariah index in May 2007, several Indian mutual fund houses are lining up Shariah-compliant funds in order to tap the growing investors' interest in Islamic finance.
Shariah-compliant mutual funds, also called Islamic funds, invest in equities or bonds of those companies which follow the tenets of Islam, which disapproves receiving interest payments and investing in companies involved in production or sale of pork, alcohol, tobacco, gambling and non-Islamically structured finance or life insurance. Though Islamic funds appear to be the same as ethical funds that follow Socially Responsible Investing (SRI), the rules governing the former are quite stricter and go beyond what SRI preaches.
Islamic finance which until recently was confined to only the GCC (Gulf Cooperation Council) countries and some select group of countries has for some time now gaining acceptance globally as a viable investment option.
This is supported by the fact that worldwide Sukuk has grown phenomenally. According to Morgan Stanley, a top US investment bank, Sukuks worth more than $90 bn worldwide were in issuance at the end of February 2008. In another report by the global rating agency, Moody's, the worldwide Sukuk issuance reached US$97.3 bn at the end of 2007. Moody's expects the market of Islamic bonds to hit $200 bn by 2010. There has also been significant growth in Islamic asset and wealth management following the development of diverse and innovative structures of Islamic investment funds, including Islamic hedge funds. |
