Ten things to know about Shariah- compliant equity investments SHAHEED BENAZIR BHUTTO UNIVERSITY, PAKISTAN
‛ Disclaimer ‛ This is not a religious presentation. The definitions related to religious terms are meant to give a clear understanding of the nature of restrictions in the context of Shariah-compliant equity investing. 2 SHAHEED BENAZIR BHUTTO UNIVERSITY PAKISTAN
What we need to know about Shariah-compliant equities? 3 ‛ The aim of today’s presentation is to shed light on 10 important things that we need to know about Shariah-compliant equity investments. ‛ What is a Shariah-compliant investment? ‛ An investment that is governed by Islamic Jurisprudence (Shariah law) and is in accordance with Shariah principles. ‛ The Shariah principles stems from four different sources. 1. (1) Quran (The religious book) 2. (2) Hadith (Sayings and actions of Prophet Muhammad PBUH) 3. (3) Ijma (The mutual consensus of Muslim Jurists) 4. (4) Qiyas (The process of analogical reasoning ) SHAHEED BENAZIR BHUTTO UNIVERSITY PAKISTAN
Why we should know Shariah-compliant investing ‛ Total population of Muslims 1.6 bn ‛ Over 300 global Islamic institutions are active around the world. ‛ Industry Growth rate in the last few years is 9.5% 4 In terms of Islamic funds More than 1100 Islamic mutual funds are available across the globe. More than 60bn AUM at the end of 2017 . Growth rate 5.5% Expected to reach 79bn in 2019 . 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 0 500 1000 1500 2000 2500 3000 3500 4000 AUM Shariah investments 3.4tln Shariah-compliant investing is more common than you think
Why we should know Shariah-compliant investing 5 ‛ Ernst & Young’s Islamic Funds & Investments Report ranks United States 4 th and Luxembourg 5 th a s a domicile for Shariah-compliant investment funds. ‛ Luxembourg stands at 3 rd Based on number of Islamic mutual funds AUM based on domicile Number of Islamic funds Source: ISRA and Zawya
1. Shariah-compliant investors priorities 6 The conventional investor’s top priority is efficient solution for risk and return trade-off. Do Shariah-compliant investors have the same investment priorities? In fact No.. The Shariah-compliant investors are more demanding. ‛ The Shariah-compliant investor’s priorities can be categorized into two groups ‛ (1) Primary objective . Adherence to faith and this must be done before any other portfolio solution. ‛ (2) Secondary objective. The profit maximization is then the secondary objective.
2. What are Shariah investment principles? 7 ‛ As the primary objective of Shariah-compliant investor is adherence to Shariah principles so let’s explore these principles ‛ ‛ Broadly speaking the Shariah investment principles are concerned with three aspects ‛ ‛ These two principles are concerned with the core operations of firms.
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- Summer '17
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