Islamic Banking Dissertation
Islamic Banking Dissertation
Islamic Banking Dissertation
PROJECT REPORT
ON
Prof. D.P.Singh
SUBMITTED BY:
Altaf Ahmad
MBA-Finance/Marketing
2008-10
In a moment it is gone,
INTRODUCTION:
complete code of conduct for every day human life in all its spheres and
and Allah or describes the Almighty only with a transcendental reference but
man, and between man and society with moral, political and economic genesis.
as to exactly how he should carry on the events of his day. On the other hand,
capitalism has not been able to narrow down the gap between the “haves and
absence of a broad based sharing of fortunes and thus real happiness to a large
personal self-actualization, and thus retarded the process and rate of economic
production, distribution and supply by the whole of classless society, could not
get along with the human potential, dynamism and aspirations, and fell too short
to bring about economic satisfaction or progress, in individual and collective
promoting real economic well-being of the masses, Muslims all over the world
stared to re-discover the wisdom and balance of Islamic economic system. This
led to a renaissance, during the last few decades of economic thought and
conformity with the injunctions contained in the Holy Qur’an and sayings of the
Holy Prophet (Peace be upon him).The revival of Islamic Economic System has
now become a point of central attention in Islamic world, which covers about
one-sixth of the land surface of the global. The Muslim population by the year
2050 A.D. is expected to be over 2.6 billion or over 26% of the projected world
population of 10 billion. Thus one out of every four people by the middle of
Islam. Under the Islamic tenets, interest is prohibited in all forms and
Qur’an has clearly warned that those who do not forego interest which has
already accrued and do not desist from taking it any further, then they are at war
money). This definition of Riba is derived from the Quran and is unanimously
accepted by all the Islamic scholars. There are two types of Riba, identified to
date by these scholars namely Riba An-Nasiyah' and 'Riba Al Fadl'. 'Riba An-
which a lender receives over and above the principle (Ras ul Maal). 'Riba Al
from a sale of goods. The Islamic system order based on a set of principles
social justice.Plato and Aristotle had also opposed the concept of interest in the
era of before Christ. Interest was also prohibited in the preliminary teachings of
Jews and Christians, and is also prohibited in the First Testament of the Holy
Bible.Modern economists have also opposed the interest. The famous English
modern economics, has first time expressed his views on the point that unless
eradicated from the world, rather, he insisted that the world would not bear the
long-run idleness which is connected with the capitalism.Lord Keynes writes in
a book that the rate of interest will have to be diminished in order to eradicate
unemployment. Lord Keynes said that for a developed economy, interest rate
person and nations, and for this purpose the detailed study under the title “The
above-quoted book that “The Onus of interest badly affects capacity of capital
and the vulnerability adversely affects the constructively, which give rise to
unemployment. In the 20th century, Karl Marx, who introduced the surplus
theory in his book “Das Capta”, and Mao Zedung, and other socialist scholars
and economists had also dissented with interest termed as “Organ of fiscal
exploitation”.
BRIEF HISTORY
The current Muslim population of the world is 1.8bn and Muslims are about
13.4% of total population of India, approximately 152mn as per CIA. Given the
above mentioned statistics, it becomes imperative to introduce this form of
Banking in India as there exist wide disparity in terms of regions, religions,
languages etc. This disparity provides us with a Blue Ocean which can be
exploited to make a positive mark on the banking landscape of our country. It
would help to increase the size of the banking industry manifold and prove to be
a foundation for many more innovations to be introduced in future. The Sachar
Committee report highlighted that approximately 50% Muslims are financially
excluded. The long held issue of financial inclusion can be taken care of by
introducing Islamic Banking. Majority of Indian Muslims are so poor that they
are not targeted by the Commercial Banks and whose savings lie idle at home.
Muslims in India generally lack creditworthiness primarily because they form
part of “Ghettos” or negative areas, which were drawn back and are still in
vogue. It is here where the actual market potential of Islamic Baking lies. One
may argue that Indian Muslims are satisfactorily using the existing
Conventional Banking system. A one to one interview with Bank executives of
Personal banking division of many Banks revealed that a significant Muslim
population is:
The above steps are diligent efforts made by many Indian Muslims to make the
current conventional Banking ‘Shariah’ compliant in their own way. This is the
huge market which can be tapped by Islamic Banking.
The above figure shows as the markets grow, more niche products are sought
after, and therefore Islamic banking could become a new buzzword.
World over, the Monetary Authority of Singapore has made the development of
Islamic finance as one of its priorities and has accordingly aligned tax policies.
Malaysia has pioneered the art of Islamic Banking. There are currently 11 banks
operating on a full Islamic banking license in Malaysia and eight others that
offer Islamic banking products through a conventional bank window. Malaysian
banks dominated the top ten in The Asian Banker’s 2007 “Top 40 Islamic
Banks in Asia Pacific” report. Even China has opted for Islamic banking to pool
Islamic Investment Funds. This proves the potential of Islamic Banks and
definitely India needs to taste this as well. Islamic Investment business is
gaining considerable grounds and companies like McKinsey & Company Inc.
and Bearys Group have started doing big businesses through Shariah
Investments funds. ‘East wind’ launched Islamic Index; and ‘Reliance Money’
and ‘Religare’ have launched Shariah Complaint Portfolio Management
Services. As a result Indian Stock market is also observing some better trends in
Shariah complaint stocks. According to Sabry Ghouse, head of retail banking at
Al Rajhi in Malaysia,non-Muslim
customers now make up a sizeable proportion of the entire customer base. “We
opened a branch in Puchong, a suburb in Kuala Lumpur, to specifically target
the non-Muslim market,” he says. Angelo Vernados, author of Islamic Banking
and Finance in Southeast Asia: Its Development and Future, estimates that 75
percent of products sold by Maybank and OCBC Malaysia are to non-Muslims.
“It’s not just about Muslim investors,” he says
STRENGTHS
WEAKNESSES
• 13.4 % population of India are
Muslims • Lack of experts
OPPORTUNITIES THREATS
The rising Income Inequality in India is a cause of concern with World Income
Inequality Database (WIID) and the UN Human Development Reports stating it
to be 36.8, quite close to World Average and indicating it to have a rising trend.
This wide Income Inequality in its extreme voracious forms has lead to spread
of Terrorism. As Muslims who follow Shariah laws do not avail credits, and
remain isolated, Islamic Banking would help a lot in their upliftment. Seen in
this light, in the long run it could become a major tool to combat Terrorism.
With the introduction of Islamic Banking, Indian government will gain
diplomatic advantages to make financial dealings with Muslim dominated
nations especially to attract trillion dollars of equity finance from gulf countries.
The total investment in Infrastructure is expected to be Rs 20,56,150 crore for
the 11th five year plan. Of which Rs. 14,36,559 crores are supposed to be met
from Public Investment and Rs.6,19,591 from private investments. The GCC
countries interest in Venture Capitalism and real estate financing can help in
infrastructure development in India A rough estimate shows that introduction of
Islamic Banking and development of Islamic Funds would lead to adding of
approximately 6mn new DEMAT accounts, thereby giving a boost the Share
Market. In line with Dow Jones’ Islamic index, a similar index on BSE or NSE
will attract funds from those Muslims who want ‘financially rewarding Shariah
compliant investments’. The inadequate capital investment in unorganized
sector can receive a boast through equity finance of Islamic banking. This sector
normally lack collateral, hence are not eligible for debt financing. Islamic
banking is tailor made for this situation and thus can lead to the next revolution
in agriculture and unorganized sector. Last but not the least; it would bring a
feel good factor for Muslims whose sentiments are a lot hurt after the recent
Terrorist attacks
As per the SWOT Analysis of Islamic Banking done above, it is clear that it
faces many challenges in India. Banks will have to come out of Religious set up
and offer products of wider spectrum to a wider audience. It’s a challenge to
provide a solution that adheres to the basics of the Islamic finance concept and
at the same time remains flexible enough to meet the demands of the changing
environment. There is a need to advertise Islamic Banking so that it could be
used by Non- Muslims as well.
Porter’s Five Forces model analysis shows
• The staunch Muslim Customers may accept things in name of religion but the liberals
would go in for better returns. India’s Banking system offers wide range of products to
please customers and is highly competitive
Competitive rivalry
within
Industry:Moderate Threat of substitute
BARGAINING POWER OF
• Conventional banking products:Moderate
Suppliers: Low
format has wider options •Micro Finance is
• There is a lack of expert staff but to raise funds, deploy it another good option
Indian Muslims would definitely globally, and hence have
enter this industry cost advantage.
• Micro finance
institutions
Threat of new entrants: Low
• This is a highly niche product till it is customized for Non-Muslims, so there are few
new entrants
PRODUCTS TRENDS
A Shariah Supervisory Board will have to monitor the activities of the Islamic
Banks. The funds from Islamic Banking will have earmarked separately,
thereby allowing better transparency. As a working model, Islamic banks may
operate under any of the following two structures:
The two-tier approach offers a wider array of investment options with the intent
to attract customer whose main objective is growth and income options. It can
be preferred by specialized investment firms and wealth management
consultancies offering expertise and investment vehicles to mobilize surplus
funds.
CHAPTER 2
Islamic Banking and finance started in 1963 when Mit Ghambr Savings Bank
began offering interest free banking in Egypt. Starting from 1980s various
Islamic Banks and Islamic financial institutions have begun their operations in
different Islamic countries. While the countries of Iran and Pakistan have
implemented Islamic Banking in the whole banking sector, other countries have
permitted Islamic Banking institutions operate with the other traditional banks.
they want. Examination of the progress of these institutions in Iran and Pakistan
reveals that in Pakistan this process is a gradual one. On the other hand in Iran
Islamic ones was very rapid. The government of Iran has nationalized all the
banks during the period of 1979-1982 after the Islamic revolution. In August
1983, the Iranian government had passed the law for riba free banking and
asked all banks to convert their deposits and finish Islamisation of all their
operations within three years. After this period government has started to exert
control on the banks so that the banks provide interest free loans to public for
housing and for small-scale projects. The banks have also provided funds for
government projects. The six commercial banks and three specialized banks are
mainly engaged in short term projects and profit sharing agreements are only
small percentage of their activities. Since then Islamic Banks have steadily been
growing.There are thirty-one Islamic Financial Institutions and “interest-free
mode of financing” which are practical and more than 48 countries as well as
more than 300 Islamic Banks are working on these non-interest modes and
interest-free methods all over the globe. The international Islamic Financial
Institutions are providing a wide range of services in accordance with the basic
banks are distributed at the discretion of the bank managements.But the Islamic
between the two parties as per agreed ratio.Further, researchers divide Islamic
customers (b) high profit motivated customers (c) customers who are religiously
conventional banks.In the money market, the main objective is to meet short-
term liquidity requirements. The market facilitates banks with deficit in cash to
borrow from the banks having surplus money. Islamic money market conducts a
similar function of meeting the short-term liquidity needs. Instead of interest, it
investments. Low returns in Islamic money markets may badly affect the overall
profitability of Islamic Banks in the initial stages of their development. Even if,
Islamic money market offers returns higher than conventional market, the
Islamic Banks may still not enjoy an advantageous position. According to the
Institute of Islamic Banking and Insurance, there are more than 300 Islamic
Trinidad and Tobago, United Arab Emirates, United Kingdom, United States,
Yemen.
CHAPTER 3
contribute their surplus money for the purpose of its investment to earn halal
profits in strict conformity with the precepts of Islamic Shari’ah. The
and entitling them to the pro-rata profits actually accrued to the Fund. These
other name, but their validity in terms of Shari’ah, will always be subject to two
basic conditions:
Firstly, instead of a fixed return tied up with their face value, they must
carry a pro-rata profit actually earned by the Fund. Therefore, neither the
principal nor a rate of profit (tied up with the principal) can be guaranteed. The
subscribers must enter into the fund with a clear understanding that the return
on their subscription is tied up with the actual profit earned or loss suffered by
the Fund. If the Fund earns huge profits, the return on their subscription will
increase to that proportion; however, in the case the Fund suffers loss, they will
have to share it also, unless the loss is caused by the negligence or mis-
management, in which case the management, and not the Fund, will be liable to
compensate it.
acceptable to Shari’ah. It means that not only the channels of investment, but
also the terms agreed with them must conform to the Islamic principles.Keeping
these basic requisites in view, the Islamic Investment Funds may accommodate
a variety of modes of investment, which are discussed briefly in the following
paragraphs.
In an equity fund the amounts are invested in the shares of joint stock
companies. The profits are mainly achieved through the capital gains by
purchasing the shares and selling them when their prices are increased. Profits
Shari’ah, it is not allowed for an Islamic Fund to purchase, hold or sell its
shares, because it will entail the direct involvement of the share holder in that
unanimous on the point that if all the transactions of a company are in full
conformity with Shari’ah, which includes that the company neither borrows
money on interest nor keeps its surplus in an interest bearing account, its shares
can be purchased, held and sold without any hindrance from the Shari’ah side.
But evidently, such companies are very rare in the contemporary stock markets.
Almost all the companies quoted in the present stock market are in some way
the other hand, they keep their surplus money in an interest bearing account or
group of the Shari’ah experts is of the view that it is not allowed for a Muslim
to deal in the shares of such a company, even if its main business is halal. Their
agent for the other partners in the matters of the joint business. Therefore, the
it means that he has authorized the management to proceed with that un-Islamic
transaction, In this case, he will not only be responsible for giving his consent to
to himself, because the management of the company is working under his tacit
funds employed in the business are impure. Similarly, when the company
this view. They argue that a joint stock company is basically different from a
consensus of all the partners, and each one of them has a veto power with regard
to the policy of the business. Therefore, all the actions of a partnership are
stock company are taken by the majority. Being composed of a large number of
Therefore, each and every action taken by the company cannot be attributed to
objection is overruled by the majority, it will not be fair to conclude that he has
given his consent to that transaction in his individual capacity, especially when
is received; it does not render all the business of the company unlawful. Now, if
a person acquires the shares of such a company with clear intention that he will
oppose this incidental transaction also, and will not use that proportion of the
dividend for his own benefit, how can it be said that he has approved the
borrows money from financial institutions. These borrowings are mostly based
grave sinful act for which the borrower is responsible in the Hereafter; however,
this sinful act does not render the whole business of the borrower as haram or
rests with the person who willfully indulged in a transaction of interest, but this
Companies involved in some other business not approved by the Shari’ah, such
2. If the main business of the companies is halal, like automobiles, textiles etc,
but they deposit their surplus amounts in an interest-bearing account or borrow
money on interest, the share-holder must express his disapproval against such
dealings, preferably by raising his voice against such activities in the annual
the company, the proportion of such income in the dividend paid to the
shareholder must be given to charity, and must not be retained by him. For
4. The shares of a company are negotiable only if the company owns some
illiquid assets. If all the assets of a company are in liquid form, i.e. in the form
of money, they cannot be purchased or sold except on par value, because in this
case the share represents money only and the money cannot be traded in except
the negotiability of its shares? The contemporary scholars have different views
about this question. Some scholars are of the view that the ratio of illiquid assets
must be 51% at the least. They argue that if such assets are less than 50%, the
most of the assets are in liquid form, therefore, all its assets should be treated as
some other scholars have opined that even if the illiquid asset of a
company is 33%, its shares can be treated as negotiable.The third view is based
Firstly, the illiquid part of the mixture must not be in ignorable quantity. It
Secondly, the price of the mixture should be more than the price of the liquid
dollars, plus some fixed assets the price of the share must be more than 75
dollars. In this case, if the price of the share is fixed as 105, it will mean that 75
dollars are in exchange of 75 dollars owned by the share and the rest of the 30
dollars are in exchange of the fixed assets. Conversely, if the price of that share
the share are in this case against an amount which is less than 75. This kind of
exchange falls within the definition of ‘riba’ and is not allowed. Similarly, if the
price of the share, in the above example, is fixed as 75 dollars, it will not be
remaining amount will not be adequate for being the price of 75 dollars. For this
reason the transaction will not be valid. However, in practical terms, this is
where the price of a share goes lower than its liquid assets.Subject to these
Islamic Equity Fund can be established on this basis. The subscribers to the
Fund will be treated in Shari’ah as partners ‘inter se’. All the subscription
amounts will form a joint pool and will be invested in purchasing the shares of
different companies. The profits can accrue either through dividends distributed
shares. In the first case i.e. where the profits earned through dividends, a certain
different views about whether the ‘purification’ is necessary where the profits
are made through capital gains (i.e. by purchasing the shares at a lower price
and selling them at a higher price). Some scholars are of the view that even in
the case of capital gains the process of ‘purification’ is necessary, because the
market price of the share may reflect an element of interest included in the
assets of the company. The other view is that no purification is required if the
share is sold, even if its results in a capital gain. The reason is that no specific
amount of the price can be allocated for the Interest received by the company. It
is obvious that if all the above requirements of the ‘halal’ shares are observed,
the most of the assets of the company are ‘halal’, and a very small proportion of
its assets may have been created by the income of interest. This small
proportion is not only unknown, but also ignorable as compared to the bulk of
the assets of the company. Therefore, the price of the share, in fact, is against
the bulk of the assets, and not against such a small proportion. The whole price
of the share therefore, may be taken as the price of the ‘halal’ assets only.
Although this second view is not without force, yet the first view is
open-ended equity fund because if the purification is not carried out on the
appreciation and a person redeems his unit of the Fund at a time when no
price, even though the price of the unit may have increased due to the
appreciation in the process of the shares held by the fund. Conversely, when a
person redeems his unit after some dividends have been received in the fund
and the amount of purification has been deducted there-from, reducing the net
asset value per unit, he will get a lesser price as compared to the first person.On
the contrary, if purification is carried out both on dividends and on capital gains,
all the unit-holders will be treated at par with regard to the deduction of the
amounts of purification. Therefore, it is not only free from doubts but also more
equitable for all the unit-holders to carry out purification in the capital gains
also. This purification may be carried out on the basis of an average percentage
The management of the fund may be carried out in two alternative ways.
The managers of the Fund may act as ‘mudaribs’ for the subscribers. In this
case a certain percentage of the annual profit accrued to the Fund may be
management will get its share only if the fund has earned some profit. If there is
no profit in the fund, the management will deserve nothing, but the share of the
The second option for the management is to act as an agent for the
subscribers. In this case, the management may be given a pre-agreed fee for its
remuneration. According to the contemporary Shari’ah scholars, the fee can also
be based on a percentage of the net asset value of the fund. For example, it may
be agreed that the management will get 2% or 3% of the net value of the fund
methods before the launch of the fund. The practical way for this would be to
disclose in the prospectus of the fund on what basis the fees of the management
will be paid. It is generally presumed that whoever subscribes to the fund agrees
with the terms mentioned in the prospectus. Therefore, the manner of paying the
people aware about the Shari’ah complaint companies the Parsoli have made
enough efforts to bring an Islamic index known as PIE index to let people know
about the companies who actually do their business according to the Shari’ah
rules.
Another opportunity is mutual funds (Equity) which are based on 100% equity.
profits. And also there are many sartorial funds which invests only in a
particular sector like automobile, Oil & Gas, etc Here are some of the most
common types of the Shari’ah compliant funds and their basic investment
profile, which an investor must know before leaving his/her hard-earned money
at their disposal:
Equity Funds: As the name suggests, equity funds invest the money pooled in
from the investors into stocks. Equity MFs are further classified into sub-
categories depending upon the asset classes such as large-cap, mid-cap and
small-cap, sectors or themes. Equity funds carry a bigger risk profile than the
bond funds.
Sector Funds: Sector funds invest in the stocks of one particular sector and
these funds are generally conceptualized after some sector catches fancy of the
market or when there is any significant buzz for some major growth in a
particular sector. For example, the infrastructure sector is the current favourite
in the MF circle, while a few other sectors with exposure to the country’s
Index Funds: The index funds primarily invest in the constituent stocks of a
particular market index, such as Sensex and Nifty, and most often track the
movements of those indices. While during a bull run, index funds can give
impressive returns, the losses are also sharp during the bearish phases of the
market. However, the index funds are known to given good returns in the long
term, as their portfolio generally consist of stocks with proven track record.
CHAPTER 4
RESEARCH METHODOLOGY
4.1 Research Design
collecting and analysing data. But it is not necessary that a particular research
design is always the best. Experience with different research design will
generally provide the researcher with the capability to match a research problem
the target population and how easy or difficult to access it. The second factor
Broadly speaking we can classify research designs into the following three
categories:
Exploratory research
Descriptive research
Casual research.
Research objective
Sub objectives
Frequency of investment
Nature of Study
The nature of this study is exploratory one. This is generally used to clarify
thoughts and opinions about the research problem or the respondent population
or to provide insights on how to do more conclusive (casual) research. One
studies. The methods used in exploratory studies can range from the usual
selected cases.
Sources of Data
The obtained for the study is primary in nature as the data is collected from
Sample size
rather it convenient suiting the use. The sample size for the study is 200
respondents
Limitations
This being a convenience sample, the analysis may not be a true picture
respondents.
have an analysis plan in mind even before going to the field with a
the researcher. It is sometimes assumed that it can be done later or that all
possible analysis can be done anyway, so why bother to plan the analysis in
Not
The purpose of the question is to check out the age distribution of the
investors as well as non-investors and the results which we got that the tendency
of investing is 72.92%, 66.67%, 62.50% & 51.25% in the age group of 50-
above, 30-40, 40-50 & 20-30 respectively. Thus we conclude that age group of
50-above are highly investing while as other age groups are moderately
Qualificati ng
on
SSE 56 30 53.57 26 46.43
e & Above
investors and non-investors and the result shows that almost 83.33% is either
c) Occupation of investors
Table 4.3: Occupation of investors .
Frequenc Not
The response of this question shows that business is the main source of income
for the investors and the people in service and others are not fully.
d) Monthly income of investors
Not
Income y g e g e
0 – 10000 120 64 53.33 56 46.67
10000 – 20000 32 29 90.63 3 9.38
20000 – 30000 24 17 70.83 7 29.17
30000 & Above 24 13 54.17 11 45.83
investors’ i.e. most of the people who invest are in this income group although
among 32 people in this income range 29 were investing while in case of 4000-
10000 range among 120 people only 64 were investing and rest not investing.
Not
Savings y g e g e
0 – 4000 136 81 59.56 55 40.44
4000 – 8000 16 11 68.75 5 31.25
8000 – 12000 32 22 68.75 10 31.25
12000 &
8000 & 8000 – 12000 monthly invest their saving followed by 12000 & Above
Graph 6 of investors.
As our survey was in Kashmir and releated areas the %age of investors were
more than non investors but it may not be true for other areas and our survey
was mainly near brokerage houses so this was also one main reason for such a
result.
g) Amount invested from saved amount of 10000.
Here the result shows that 27% invest 2000-4000 from savings into stock
market while as 37% were unaware about their investment some people were so
risky that their reply was that invest almost 100% of their savings into equity
market.
h) Investment objective of investors.
investment 43 34.95
Capital Gain through short term
investment 45 36.6
Trading during a day(Intraday) 25 20.32
Others 10 8.13
Total 123
intraday traders as the response of some people was that they wholly depend on
products like ULIPS which in one way or other related with equity.thus we can
interpret from the results that muslim investors are risk takers.
Frequenc
asingle product i,e equity shares while as small %age of respondents were
goes to equity or Capital Market and to some extent in Mutual Funds, as both
decisions?
decisions
Return was the main criteria of the investment. In the survey we found that
54.3% were investing because of this reason while as 18.6 people take Shari’ah
into consideration before investing their saving 26% for tax benefits.
During our survey we found that 34% muslims investors expect to get 5-10%
return on their investment while as 21% people expect above 20% because of
high inflation and other attractive avenues and 14% expect 15-20% return.
We found that intraday trading was the main option of the investors so 46%
were daily investors and the weekly monthly and yearly %age was 29%,10.56%
0 - 20% 11 8.94
20 - 40% 52 42.3
40 - 60% 13 10.56
60 - 80% 22 17.88
80 - 100% 25 20.32
Total 123
42% people invest their savings into equity market as they are risk aware while
Table 4.16 : Why don’t you invest your savings to get some returns
When asked why they don’t invest most of the respondant reply was that are
not having so much income and knowledge about the products and because of
religion as islam prohibited interest but when they were asked that parsoli is
providing the avenues according to shariah they replied they are unaware about
this.
to Shari’ah Principles.
In the survey we found that majority of investor response was that they will
invest after investigation about the product and the company while
as18%believe that they would invest immediately after the launch of the
the opportunity?
The purpose of this question was to check out the responses of the
regarding to know about the product and the benefits and most of the
respondents about 80% of the population were willing to invest in these
Shari’ah principles?
100% of the population till now responded that there is a very less no. of
company can benefit itself by launching new products such as HUJJ Fund and
Islamic Banking and they will not only benefit the company but will help the
with this the customer base of its clients will also increase.
CHAPTER 5
FINDINGS:
We found that more than half portion of Muslim does not invest in any
financial product.
Products.
CNBC TV.
People who are satisfied are highly satisfied & the people who are not
financial products.
Most of Muslims are aware of Shari’ah principles and try to follow those
Live on the earth as you have to spend hundreds of years here & prepare
for thereafter as if you are going to die now. This shows that Muslims should
invest so that they can make their both worlds good. Feeding hungry, supporting
needy the virtuous deeds in Islam can only be executed only when one is having
sufficient corpus & investment is one of the main gateway for assimilation of
corpus. The following pares will determine the need & importance of Muslim
Every citizen should be able to take advantage of the boom in the Equity
markets of the country so that they are not left behind in the economic growth
that is being witnessed throughout the country. And it is going to last for years
to come. In order to remain in the main stream of the economy, Equity stock
markets (The Shari’ah way) provides the most cost effective investment
solution for the Muslims. Equity markets have proved that they are not only the
most effective, transparent, liquid and conducive to small and big size investors
as a means of investment, but history has also proved that it outperforms all
other asset classes where return on investments is the parameter considered.
based investments like the saving bank deposit, Bank FDR; Postal savings,
Debentures, Bonds etc are not permitted in Islam. Hence Muslims stand to lose
out and their capital gets depleted over a period of time. Therefore, stocks (The
Shari’ah way) are a far better option available to the Muslims. Investment in
disadvantages over equities. First, because of the unit size, it is not possible for
every individual to buy property since the cost involved is huge whereas, one
can invest inequity (the Shari’ah way) for an amount as low as Rs. One
thousand and there are no upper limits. Secondly, property is subject to a lot of
legal paper work and one has to go through a very cumbersome procedure to
acquire properties. However, it is very easy to buy and sell shares by being a
property which involves costly litigation. Equity shares have a big advantage
here since the stocks purchased get directly deposited in the investor's Demat
account where it is in the safe custody of the custodian and he can sell them
economics and return on investments, these precious metals can at best beat the
inflation and since they are globally traded with prices being affected by global
demand and supply, the price and value does not reflect the economic growth of
the nation. Hence, more often than not, it under performs the domestic economy
growth. And since the Indian economy is on a long term growth path, Muslims
precious metal is the warehousing because if they are not safely stored, then it
will always be susceptible to theft. Stocks are kept safely in the Demat account
held with the custodian.One more point that goes in the favour of equity stock
markets is the Capital gains tax advantage. There is no capital gains tax for long
term investors i.e. if the investment is held for more than one year. And for the
short term investments of less than a year, investors have to pay only ten
percent tax on its gains. Muslims must take advantage of this benefit and invest
in stocks that would help them create wealth in the long term the Shari’ah way.
and it is often said that it is 'Haram'. Islamic scholars over a period of time have
laid down certain parameters for investing like the Economic activities and
with them. In order to overcome this risk, one needs to take guidance from
Equity Research analysts(Shari’ah compliant) who can guide and advice them
on what to buy and most importantly when to buy and sell. If this part is
efficiently and judiciously taken care of, then there is no better option than
2007) 01-10.
March 1969.pp1-43.
WEBSITES:
www.parsoli.com
www.islamicequity.co.in
www.moneycontrol.com
www.financeinislam.com
www.iiibf.org
www.islamicnews.com
www.nseindia.com
ANNEXURE 1
Questionnaire:
Dear respondent
to mention that the information provided by you is only for academic purpose
Note Q.no 1-17 are for those who invest their savings, while as Q.no 16
Demographic information:
Name: ---------------------------------------------------
Age:
a) 20-30 b) 30-40 c) 40-50 d) 50 and above.
Educational qualification
Occupation
RELATED INFORMATION:
a) Yes b) no
2) Suppose you are saving Rs10000/month, how much amount would you like to
invest?
d) Others specify-------------
decision?
specify---------
9) What is the expected rate of return on your investment?
A) Daily
b) Weakly
C) Monthly
d) Yearly
a) 0-20%
b) 20-40%
c) 40-60%
d) 60-80%
e) 80-100%
the
opportunity------------------------------------------------------------------------
--------------------------------------------------------------------------------------
------------------------------------------------------------
13) Why don’t you invest your saving to get some returns?
a) lack of knowledge
b) Risk
c) Religious matter
a) Invest immediately
Shari’ah principles
specify--------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------