September 25th, 2007

 

Blurb: A Toronto company is launching a Sharia-friendly investment fund that targets Canada’s fast growing Muslim community

 

Sharia investing made easy

 

By Peter Diekmeyer • Bankrate.com

 

Like most religious rules, those of Islam can be pretty tough. Strict interpretations of Islamic law include provisions that govern everything from the type of food Muslims are allowed to eat, to the clothes they can wear. But one entrepreneur, Asif Khan, is on a mission to make the financial lives of Muslims a bit easier.

 

Last month the company Khan heads,-- frontierAlt Oasis Funds Management,-- introduced a Sharia friendly fund option that navigates some of Islamic law’s key provisions regarding financial dealings. “Islam is one of the world’s oldest and most respected religions. More than one billion people follow its teachings, including 750,000 Canadians, and those numbers are growing rapidly,” said Khan. “We want to help them by giving them choices about where they can invest their money while respecting the guidelines of Islamic teachings.”

 

Khan claims  that the new offering, -- frontierAlt Oasis Global Income Fund,-- will be first the first income fund in Canada that follows Islamic principals. At least 60 percent of the funds’ holdings will be invested in Sharia compliant companies. The balance will be invested in sukuk, which are fixed income securities that comply with Islamic law and investment principals. According to Khan, demand for these types of investments is so strong, that frontierAlt Oasis Funds Management, expects to accumulate close to $45 million in the new fund in its first year.

 

Complying with Sharia law

That said, investing according to strict Islamic principals is not easy. Muslims are generally not supposed to invest in businesses that generate significant portions of their revenues from alcohol or tobacco, financial services or weapons and defense products. That precludes many potentially lucrative investments.

 

However according to one noted scholar, it is Islam’s guidelines against usury which are the most problematic. "Investing in companies such as financial institutions that collect or pay interest is heavily frowned upon,” says Azeemuddin Subhani, a visiting lecturer in Islamic studies at the University of Waterloo. “That includes companies that operate with high ratios of liquid assets, debt or interest income.”

 

These provisions make even simple financial transactions such as taking out mortgages difficult for many Muslims, a trend that is intensifying in certain respects. “Liberal interpretations by some scholars say that modern banking, in which interest rates are kept fairly reasonable is OK,” says Subhani. “However in recent years, there has been increased vigilance among other Muslim segments. For them Sharia-compliant investing is very important.”

 

According to Subhani, Islam’s proscription against charging interest on money lent dates back to ancient times, and was a backlash against a then-common practice of lending at excessively high rates of interest. These taboos were also reflected in the teachings of both early Christianity and Judaism.

 

The ethical investing bandwagon

According to Khan, frontierAlt Oasis Funds Management’s introduction of a new Islamic friendly investment tool is in keeping with a global trend. “There are a number of well documented surveys regarding consumer interest in socially responsible investing,” says Khan. “Internationally there has been huge demand by pension funds for fixed income funds for Muslims. Recently, that demand has been increasing here in Canada too.”

 

Khan has always been a fast learner. His family, come from a long line of Indian Muslims who got off to a rough start when they came to Canada. His parents, both of whom had masters’ degree educations, were unable to find suitable employment. As a result, the family was forced to invest in a chicken restaurant, a business they knew next to nothing about. “We learnt the hard way,” says Khan with a chuckle. “All of us kids ended up working in the shop, but we came out of it with entrepreneurial mindsets.”

 

Khan developed his initial thoughts regarding Islamic investing on a stint that he did early in his career in Saudi Arabia. He made an initial stab at managing investments according to Sharia principals at a company that he worked at earlier in his career. But it was only after he was able to sign on the Oman National Investment Corp. as a key partner, that he was really able to start working toward his dream. Today, his ambitions are global in scope: frontierAlt Oasis Funds Management is partnered with another player in Dubai and is currently negotiating to set up a joint venture in India.

 

Despite all the hard work that Khan has put in, he has no plans to rest any time soon. He is currently in talks with several Canadian banks in order to broaden frontierAlt Oasis Global Income Fund’s distribution channel and is also planning to market Sharia compliant ETFs.

Of course even after the new offerings are fully introduced, Muslims will still have a host of religious rules to follow. The good news is that for some, investing their money in a Sharia-friendly way could get a lot simpler.


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For more information about the frontierAlt Oasis Global Income Fund, you can contact your broker or investment advisor or call toll-free at 1-866-745-5545. You can also get a simplified prospectus for the fund on the company’s Web-site at www.frontierAlt.com

 

Peter Diekmeyer (www.peterdiekmeyer.com) is a freelance business and economics writer.

 

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