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Shariah finance | 17
Gaining Ground: India
Must Be Vigilant as Islamic
Finance Grows
by M. S. Shabbir, Managing Director of SenSage
Financial Services Pvt. Ltd., Hyderabad, India
I
ndia has finally woken up to the Learning from the Past Corporations and individuals engaged in
demands of the country’s largest ethnic Now, when the Indian government is slowly marketing and distribution of these products
group by giving a stamp of approval to opening the doors to Shariah finance, we hope should satisfy themselves completely before
the Benchmark Mutual Fund’s Shariah that the system does not err again. There are they offer them to the community. The fol-
BeES. This is the first exchange traded certain lessons we need to learn from our past lowing questions can help evaluate whether a
fund (ETF) in India benchmarked as well as from the experiences of seasoned product is Shariah compliant in true spirit.
against the S&P CNX Nifty Shariah Index. Shariah finance market players in other coun-
Similarly, Taurus Mutual Fund has launched tries. It is important for all of us to remember circle6 How is this scheme or product Shariah
the first open-ended diversified equity fund that:
namely, Taurus Ethical Fund benchmarked circle6 Protecting our wealth is one of the key circle6
compliant?
against S&P Shariah 500. An independent circle6
Who has structured it?
If it has been structured by muftis, are they
Shariah Advisory Board of TASIS will audit the circle6
objectives of Shariah.
Promoting Shariah-compliant business falls
fund’s investment books on an on-going basis under the category of “enjoining the right” circle6
adequately qualified and competent?
What is the nature of the scholars’ associa-
and issue a Shariah Compliance Certificate. (amr bil maroof). tion with the company offering the
Both the funds were launched in February. Now that the Securities and Exchange
One thing that is certain is that many more Board of India has opened the lid, it is likely circle6
Shariah-compliant scheme?
Who ensures that the product offered is in
players will now announce Shariah-compliant that many companies will emerge to capitalise accordance with the structure/ processes
schemes. In one way, this is good for those on this new “God-sent” opportunity, since
who have been struggling hard to bring this current market sentiment is very depressed. circle6
given by Shariah scholars?
kind of offering to the shelves. The 150-mil- Some will come with dubious products as they circle6
Is there any monitoring agency?
If yes, is the agency reputable, qualified and
lion-strong Muslim community can now invest aim to capture the market without considera- competent for such monitoring?
its savings in a conscience-driven manner and tion or respect for true Shariah compliance.
contribute en masse to the GDP. For one thing, the community must ensure Transparency is the key to Shariah
However, there are apprehensions about the that the job of a mufti is much more than that compliance. Norms given by Shariah scholars,
possible exploitation of Shariah sentiments. of a Shariah spokesperson. It is possible that the methodology adopted in deriving and
This happened in the past when Islamic the names of Shariah scholars who create the applying those norms and the results of the
finance was in a nascent stage in India. Many Shariah norms for Islamic products but may monitoring agency should all be in the public
fly-by-night companies came, exploited the not be involved in their monitoring on an domain for everyone to see.
concept and vanished. In the process, a stigma ongoing basis could be misused. What the Let us stand, be counted and not fall prey to
was left on the more serious and genuine play- community should ensure is that any scheme any deception in the name of Shariah. We
ers of that time. The biggest victim of this that claims Shariah compliance be regularly have a long way to go. At the same time, let us
financial lust was the man on the street who monitored by watchdogs that are competent pledge to give wholehearted support to
placed his absolute trust in and supported the and qualified. It should be the collective authentic Shariah-compliant products. We
system by bringing his life savings to the doors responsibility of the community to ensure need them more than anyone else.
of these institutions. Another victim was the proper adherence to Shariah and regular mon-
cause itself, which many of these institutions itoring of products and investment processes. M.S. Shabbir has more than three decades of expe-
had claimed to promote. Let us not take that right lightly. rience in personal advisory services
www.investmentinternational.com April 2009 Investment International
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