CBC News – February 27, 2012
The deadline for RRSP contributions is nearing, but there’s another important investment concern for Muslims — ensuring the products they rely on for their retirement income comply with Islamic principles.
With nearly a million Muslims in Canada, forming nearly three per cent of the country’s population, there has been an emphasis over the last decade in investment products that adhere to the strict dictates of Shariah law.
As a devout Muslim, Mohammad Khalid, a retired economist living in Oakville, Ont., says Muslims must be careful about their investments, such as securities and equities. Khalid, who manages his own portfolio, invests in sectors such as mining, forestry and technology, and is helping his older children save for their retirement. He says that unless Muslim investors are careful about where their money is going, they could end up in non-compliant products.
A testament to the growing interest in Shariah-compliant investing is Standard & Poor’s introduction of its Shariah stock index (S&P/TSX 60 Shariah Index) into the Canadian market in 2009. The index recategorizes equities on the S&P/TSX 60 and excludes all equities that do not comply with Islamic law, which is based on the Qur’an.
International investment services compliant with Islamic financial law are competing for a slice of the oil revenue in the Middle East. With the price of crude oil almost doubling in the last year, countries with large Muslim populations and connections – including Singapore, Hong Kong, London, Birmingham and Paris – are vying to act as key centres of expertise in the new boom. A spokesperson for the British Standard & Poor’s claims that, “By preparing the ground for Islamic finance, France can help financial innovation and benefit from the deep pockets of Middle Eastern investors as liquidity has dried up elsewhere in the global financial markets.”
Generally, more and more businesses have come forward to meet demand for Shariah-compliant services. Approximately two-thirds of the world-wide market for Islamic bonds (sukuks), an estimated $100 billion, is currently based in Malaysia, where the industry first took off. Outside of Asia and the Middle East, Britain in particular, is seen as the clear leader, worth about $6.5 billion.
UK high street bank Lloyds TSB has launched a Shariah-compliant nostro account that enables customers to transfer money around the world in line with Islamic principles prevents any funds being invested in industries – such as alcohol and gambling – that are prohibited under Islam. Lloyds TSB says the account, which is aimed at the UK’s two million Muslims and 100,000 Muslim firms, is the first of its kind to be offered by a mainstream western bank. Whilst many Muslim customers make and receive international payments through an estimated 250 Islamic banks worldwide, the process of transferring the money between banks has not been in line with Islamic principles, says the UK bank. “We’ve designed this account to help the growing number of Islamic banks across the world, which deal with our customers’ transactions,” says Diana Brightmore-Armour, CEO corporate banking and co-head corporate markets, Lloyds TSB. “We’re providing the missing link in the chain, so now any person or business receiving payments from abroad into their own Islamic account knows the money will be dealt with according to Islamic law, from start to finish.”