SA Islamic finance boom hits JSE

Islamic Finance has taken the world, and more recently South Africa by storm, as the majority of mainstream banking institutions now offering customers Shariah compliant banking products. However, there are still mixed opinions on whether these products and services are 100% Shariah compliant, as it were being administered by non-Muslim institutions.

The observation comes as the Johannesburg Stock Exchange (JSE) on Monday launched the FTSE/JSE Shariah Top 40 Index, comprising companies compliant with Islamic Shariah law. “This index gives Muslim investors access to the top performing listed companies in South Africa without compromising religious beliefs,” Ana Forssman, JSE’s GM of information products sales, said.

The index, launched jointly with FTSE Group, includes companies on the benchmark JSE Top40 Index compliant with Shariah, which bars Muslims from receiving or paying interest on loans or deposits. The JSE appointed Yasaar Research, an authority on Shariah law, to screen the companies to be included. This filtered out businesses involved in conventional finance, alcohol, pork- related and non-halaal food, entertainment, tobacco and weapons. In order to remain in the index, the companies will be reassessed quarterly by Yasaar.

According to Zaid Mohammed, who is the Director of the Islamic Finance Institute of South Africa (IFISA), financial institutions as well as investment companies were approaching the Finance Institute of South Africa, to request permission to begin listing products which Muslims would be comfortable purchasing.

“South Africa has become a global player when it comes to Shariah compliant products. Companies across the world have seen the underlying benefits involved in offering theses services. The Shariah has many economical and financial conditions that need to be met in order to be deemed ‘Halaal.’ Strict industry screenings are conducted to ensure that a company, who is listing Shariah compliant products, are not also funding non-Islamic products. This process includes a financial ratio investigation, where the company verifies that the prospective business is not investing in industries such as gambling, pork or liquor,” he explained.

Mohammed also added that some provision is made for companies looking to stock Islamic products even if they were not completely Halaal. “5% impermissible income is allowed for certain businesses, but a cleansing system is delegated to them. This means that companies are contracted to donate a certain percentage of money to charity…a review process is conducted quarterly to ensure that all the standards are upheld.”

Mohammed did warn however that many well known, commercial banking institutions operate their Islamic banking services or products under their own independent Shariah board. He urged prospective institutions to rather contact the IFISA directly, to find out whether these products met the minimum criteria in this regard to maintain whether these products met the criteria of the IFISA. VOC (Aisha Mouneimne) *Source: Voice of the Cape

MRN

Author: MRN Network

The aspiration of the Media Review Network is to dispel the myths and stereotypes about Islam and Muslims and to foster bridges of understanding among the diverse people of our country. The Media Review Network believes that Muslim perspectives on issues impacting on South Africans are a prerequisite to a better appreciation of Islam.