WORKING HOURS

9:00am to 06:30pm

CALL US

+91 11 29945946

MAIL US

info@icif.in

ThinkAdvisor : Banco do Brasil Sharia Fund Spurring Investor Interest

 

Banco do Brasil Sharia Fund Spurring Investor Interest

JULY 10, 2014

Brazil also exports halal sugar, grain and orange juice, among other things, to the six countries of the Gulf Cooperation Council (GCC)—Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman. And in 2013 the first sharia-compliant transaction to finance a sugar and ethanol producer was executed in Brazil’s Mato Grosso do Sul state. More asset-backed (and sharia-compliant) transactions have followed in Brazil’s agriculture sector.

With its large population and subsequent need for infrastructure projects—highlighted in the buildup to the World Cup, and a good fit for sharia—Brazil has further broadened its approach to winning Islamic investment money. But it is certainly not the first country to try to coax Islamic investors—even nonreligious ones—via compliance with Islamic rules. While the U.S. has lagged behind in this regard, financial centers from London to numerous countries in Africa, including Nigeria and Senegal, are eager to cash in on such a large and thriving market segment, with the U.K.’s Prime Minister David Cameron going so far as to declare that he wanted London to become a global center for Islamic finance.

After all, the Islamic finance sector in the last 30 years, according to the Global Islamic Financial Review, has grown to $1.6 trillion in assets. And according to Ernst & Young, over the past three years, the top 20 Islamic banks globally have seen growth of 16% per year. Not only that, but EY has predicted that lenders who observe sharia will more than double Islamic banking assets by 2018 to $3.4 trillion, with 70 million customers—an increase over 2013’s 38 million.

About those nonreligious investors: many who seek socially responsible investments, whether religious or not, see the rules of sharia as helping to provide such projects, particularly in the sukuk market, since sukuk—comparable to bonds—are understood to be used for such projects. Not only that, but sharia-compliant investments can provide an additional element of diversification. Sharia is also seen, rightly or wrongly, as providing an extra level of protection for investors, due to the strictness of its requirements.

Regarding the tough slog that sharia-compliant investing has often had in the U.S., Charles Sizemore, a portfolio manager for online investing marketplace Covestor, said, "This tends to be a politically charged issue, particularly in the 13 years that have passed since the 9/11 attacks by Al Queda, But it really doesn't need to be. It's a marketing gimmick to differentiate an investment product from the competition in the eyes of strictly observant Muslim investors. And this is nothing new in the West.”

 

Sizemore said, “London competes with Dubai as the center of ‘Islamic finance’ despite being a Western Christian country on the northwestern fringe of Europe. Britain has gone so far as to announce its intent to launch sharia-compliant ‘sukuk’ bonds. And if you want to go really far back in time, Jewish and Christian merchants in the Middle East and Asia often engaged in Islamic contracts during the days of the Caliphate, even between each other, because of their universal enforceability in Muslim lands.

Sizemore also pointed out an important difference between sharia-compliant and conventional investments: “[M]ore recently, emerging markets agree to ‘Western’ terms when raising capital because doing so reduces their borrowing costs, though this sometimes has unintended consequences. Consider the recent case of Argentina and its creditors duking it out in the U.S. court system rather than the Argentine court system. It may be distasteful to many Westerners, but if it lowers the cost of capital, it's hard to argue against it too vigorously.”


 
ThinkAdvisor

Banco do Brasil Sharia Fund Spurring Investor Interest

JULY 10, 2014

Brazil also exports halal sugar, grain and orange juice, among other things, to the six countries of the Gulf Cooperation Council (GCC)—Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman. And in 2013 the first sharia-compliant transaction to finance a sugar and ethanol producer was executed in Brazil’s Mato Grosso do Sul state. More asset-backed (and sharia-compliant) transactions have followed in Brazil’s agriculture sector.

With its large population and subsequent need for infrastructure projects—highlighted in the buildup to the World Cup, and a good fit for sharia—Brazil has further broadened its approach to winning Islamic investment money. But it is certainly not the first country to try to coax Islamic investors—even nonreligious ones—via compliance with Islamic rules. While the U.S. has lagged behind in this regard, financial centers from London to numerous countries in Africa, including Nigeria and Senegal, are eager to cash in on such a large and thriving market segment, with the U.K.’s Prime Minister David Cameron going so far as to declare that he wanted London to become a global center for Islamic finance.

After all, the Islamic finance sector in the last 30 years, according to the Global Islamic Financial Review, has grown to $1.6 trillion in assets. And according to Ernst & Young, over the past three years, the top 20 Islamic banks globally have seen growth of 16% per year. Not only that, but EY has predicted that lenders who observe sharia will more than double Islamic banking assets by 2018 to $3.4 trillion, with 70 million customers—an increase over 2013’s 38 million.

About those nonreligious investors: many who seek socially responsible investments, whether religious or not, see the rules of sharia as helping to provide such projects, particularly in the sukuk market, since sukuk—comparable to bonds—are understood to be used for such projects. Not only that, but sharia-compliant investments can provide an additional element of diversification. Sharia is also seen, rightly or wrongly, as providing an extra level of protection for investors, due to the strictness of its requirements.

Regarding the tough slog that sharia-compliant investing has often had in the U.S., Charles Sizemore, a portfolio manager for online investing marketplace Covestor, said, "This tends to be a politically charged issue, particularly in the 13 years that have passed since the 9/11 attacks by Al Queda, But it really doesn't need to be. It's a marketing gimmick to differentiate an investment product from the competition in the eyes of strictly observant Muslim investors. And this is nothing new in the West.”

 

Sizemore said, “London competes with Dubai as the center of ‘Islamic finance’ despite being a Western Christian country on the northwestern fringe of Europe. Britain has gone so far as to announce its intent to launch sharia-compliant ‘sukuk’ bonds. And if you want to go really far back in time, Jewish and Christian merchants in the Middle East and Asia often engaged in Islamic contracts during the days of the Caliphate, even between each other, because of their universal enforceability in Muslim lands.

Sizemore also pointed out an important difference between sharia-compliant and conventional investments: “[M]ore recently, emerging markets agree to ‘Western’ terms when raising capital because doing so reduces their borrowing costs, though this sometimes has unintended consequences. Consider the recent case of Argentina and its creditors duking it out in the U.S. court system rather than the Argentine court system. It may be distasteful to many Westerners, but if it lowers the cost of capital, it's hard to argue against it too vigorously.”

www.thinkadvisor.com/2014/07/10/banco-do-brasil-sharia-fund-spurring-investor-inte


 
Posted Date : 21 July 2014

News Updates

  • ISLAMIC FINANCE FOR FINANCIAL INCLUSION AND INFRASTRUCTURE DEVELOPMENT IN INDIA

    India is on track to overtake the UK to become the world’s fifth-largest economy in 2018, according to data and forecasts from the IMF. Soon it will trail only Germany and the ‘big three’ – the US, China and Japan. However, the Indian banking system is gasping for breath with...

    Read More
  • Islamic Development Bank seeks tie-ups for infrastructure investments

    Islamic Development Bank exploring joint opportunities with other multilateral development banks to invest in India’s infrastructure sector Tue, Jun 26 2018 Utpal Bhaskar Mumbai: Islamic Development Bank Group, one of the largest lenders to Muslim countries, is interested in exploring joint...

    Read More
  • BRINGING ISLAMIC BANKING TO INDIA

          Trying to bring Islamic banking to India   Though Muslims are a minority in India and are generally less affluent than Hindus, in sheer numbers they make India the second largest Muslim nation in the world. Cumulatively, their investment power is tremendous and rep...

    Read More
  • IMF ACCEPTS FINANCIAL ISLAM

      Criminal for our education sector to ignore it any longer Dr Mehboob Makhdoomi Srinagar | Posted : Jun 3 2018 The International Monetary Fund (IMF) has finally incorporated Islamic Finance into its financial sector assessments beginning January 1, 2019, calling Islamic Finance ...

    Read More
  • Islamic Finance Muslims in India develop mutual health insurance scheme as alternative to takaful

    Islamic finance pioneers and like-minded community leaders in India have come together to introduce an alternative product to formal takaful, which doesn’t exist in the country. A not-for-profit health assurance scheme, called Uplift Mutuals Biradaree, started in April this year at two of M...

    Read More
  • INT’L ZAKAT CONFERENCE KERALA CATERS HOPE FOR CREATIVE ZAKAT SYSTEM IN INDIA

    By HABEEB RAHMAN CP The International Zakat Conference, organised by Baithuzzakath Kerala, concludes in Cochin with the new hope for the effective zakat management in the country. More than 250 high-profile delegates from various parts of the country and other nations participated in the conference...

    Read More
  • ZAKAT THE SOURCE OF SOCIAL UPLIFTMENT AND ECONOMIC EMPOWERMENT

    Dr. Rahmatullah Abdul Ahad dwells upon how Zakat can be a source of social upliftment and economic empowerment. Poverty, which indicates the absence of material means, is rampant in all the states of India irrespective of caste and clan wise composition of the society. The consequence is sufferings...

    Read More