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Shari’ah compliant financial product specialist

shariah-specialist

Shari’ah principles require the investments to be based on certain norms and filters related to the public need, fairness in business and ethical source of income; when investors act according to this, then it is called the Shari’ah investment or Ethical investment.

As a Shari’ah compliant mutual fund & financial product distributor, you can opt to service investors, who wish to invest in line with their faith.

What is Ethical investing?

An ethical investment fund is one that is structured in accordance to Islamic principles. The products undergo the following screenings and stay away from investing in such businesses:

Nature of Business:

Companies involved in the following businesses are completely avoided;


GAMBLING TOBACCO ALCOHOL FIREARMS
EXCESS DEBT ADULT ENTERTAINMENT IMPURE FOODSTOCK USURIOUS INSTITUTIONS

Financial Screening:

Investments are screened for the presence of interest, or Riba, as well as certain debt ratios.

Funds eligible under Shari’ah principles:

In India, the following funds are eligible for investing under the Shari’ah principles.

  Tata Ethical Fund

  Taurus Ethical Fund

  Nippon India Ethical ETF

Frequently Asked Questions


What is the methodology for choosing ethical investments?

In brief, any financial product/portfolio cannot hold shares of a company that;

  • Provides non-Islamic financial services and any other related interest services.
  • Manufactures/sells products or services not approved by the Ethical Board (i.e. liquor, tobacco, gambling, pornography, weaponry etc).
  • Has interest revenue exceeding a certain percentage of total revenue (usually 5%) - unless it is given to charity (Zakat).
  • Does not have a certain percentage of non-liquid assets.
  • Does not comply with certain debt ratios - Meaning, investing in companies with too much cash and/or liquid assets and excessive debt in their balance sheets is forbidden under Islamic principles. Shari’ah-compliant companies should have total conventional debt not exceeding 33.33% of their total assets or average market capitalisation over a 24- to 36-month period. In addition, their total amount of cash and value of interest-bearing financial instruments shouldn’t be more than 33.33% of total assets, while their sum of accounts receivables and cash should be less than 50% of total assets.