Shariah Compliant Investments

Course Overview:

Islamic Finance and Islamic Wealth Management are probably the closest the financial markets are ever likely to get to truly moral and ethical banking.

They remain a highly popular alternative to conventional products and are popular with both Muslims and Non-Muslims alike. Based on Islamic and Shariah principles they are mainly concerned with genuine profit and loss sharing with a real risk sharing ethic between banker and client.

Islamic wealth and fund management operates on the same principles as Islamic Banking and is equally popular. However, unlike conventional banking the product range is a lot narrower and although it continues to grow, the opportunities are more limited.

That said, to be a Shariah compliant investment requires compliance with a very strict code of ethics which tends to eliminate the speculative and highly geared opportunities. Accordingly, Islamic investments offer generally safer returns with steady growth and limited downside.

All three qualities make this an attractive proposition which is growing in popularity as an increasing number of offerings enter the market.

Learning Objective:

This course considers the merits of Shariah compliant investments, explains how and why they are compliant and how they can be used to build a portfolio for the morally and ethically driven investor.

Teaching Methodologies:

Classroom lectures and interactive practical workshop format intended to affirm the learning objectives.

Learning Pre-requisites:

None although a basic knowledge of conventional fund management would be helpful.

Course Content:

What is an Islamic Finance

• Definition – Fatwa
• Source of funds
• Use of funds
• Contractual relationships
• Profit & loss sharing

The Principles of Islamic finance

• The prohibition of Riba
• Real & notional interest
• Fixed & variable interest
• Interest as a return
• Methods of Islamic investment
• Trade credit & leasing
• Islamic deposits

Case Study/Exercise

Shariah compliant Investment Vehicles

• Wakala
• Mudaraba – Restricted
• Mudaraba – Unrestricted
• Musharaka

Case Study/Exercise

Islamic Asset & Fund Management

• Investors’ Objectives:
  • • Capital preservation.
  • • Maximise yields.
  • • Industry screens
  • • Balance sheet screens
  • • Haram investments
  • • Dealing with non-compliance
  • • The role of the sharia scholars
  • • Incorporation of Islamic doctrines.
  • • Link to Sharia precepts & ethics.
  • • Legitimate goods.
  • • Moral behaviour & social objectives.

Case Study/Exercise

Islamic Bond Market (Sukuk)

• What is a Sukuk
• How do they differ from Bonds or other conventional debt instruments
• What impact will recent defaults have on global market
• Two centres, GCC & Far East – differences in approach
• Specific differences

Course Conclusion

• Summary
• Revision

Open discussion