Monday, January 3, 2011, AM | 1 Comment
Bombay Stock Exchange (BSE) on Monday December 27, 2010 launched Shariah-50 Index which consists of companies that don’t deal in interest, alcohol, gambling, etc. This post is for those folks who strictly adhere to the Islamic Code of Sharia in all their personal finances. The rest of the world does not give a shit what kind of companies they invest in as long as folks get a nice return on their investment. However, it’s like anything else on the stock exchange and it is open to the general public.
The said Index has been developed with the cooperation and in partnership with the Taqwaa Advisory Shariah Investment Solutions (TASIS), a Mumbai-based Islamic finance firm whose board members include legal experts and Islamic scholars.
The Index has picked up a large chunk of scrips from infrastructure, capital goods, IT, telecommunications and pharmaceuticals from the BSE-500 bracket. So the companies were already listed on BSE individually but are turned into the Index of selected companies.
A scrip by the way is an I Owe You (IOU) as an informal document or as formal certificate agreed to by the issuer and the holder. US dollar is a scrip.
Stocks will be reviewed monthly for Shariah compliance, and non-compliant stocks will be removed. Additional companies will be added on a quarterly basis.
Who would benefit from Sharia-50 Index?
Indonesia, Pakistan, India, and Bangladesh have a combined population of more than 650 million Muslims. India has the third largest Muslim population of 138 million on the face of the earth. However, Muslims outside the Gulf States and Saudi Arabia are mostly not in a position to make investment on a large scale.
It’s good for those folks who so far have not taken part in investment in stocks in other exchanges. Some say the new index should attract investments worth around 25 billion dollars from the Gulf countries, Europe and the US.
- The index will make it easier for Muslims to know which companies adhere to Shariah law, encouraging them on a psychological level to invest.
- The index will increase awareness of financial investments amongst the masses and help enhance financial inclusion.
- Muslims, having been excluded in the past because of Islamic law, will now be able to invest guilt-free.
Islamic indexes already exist in other countries in the Middle East and Asia, including Indonesia and Pakistan, which have the two largest Muslim populations in the world.
In a Nutshell
The Index is expected to encourage members of India’s newly emerging Muslim middle class to invest, instead of saving money because of their conservative values.