After a month of fasting, Muslims around the world celebrate Eid ul-Fitr. A joyous occasion indeed but it also comes as a reminder of the virtues of being a Muslim, where all aspects of one’s life are encompassed through religion.
Shariah investing is very much engrained in a Muslim’s way of life. It is not a sin to earn a living and to live comfortably but the process of earning the living is clearly stipulated in Shariah law. This includes a ban on interest, the prohibition of investing in activities that are deemed haram such as pork-related products, gambling, cinema and pornography as well as companies which are highly leveraged or have a high gearing ratio.
Wealth management has historically been dominated by men but increasingly in the 21st century, the sector is now appealing to women as well. The Boston Consulting Group (BCG) released a report last year estimating that women controlled 27% or US$20 trillion of the world’s assets under management in 2009. The bulk of this originates from the US, with Australia and New Zealand as well as Asia coming in second and third.
Another conventional firm based in the UAE – al-Bashayer Investments – also last year publicly announced its intention to launch Islamic products to address the needs of women in the region who preferred Shariah compliant investments.
Research firm Cerulli Associates in its third quarter Asia Pacific report also suggests that a hidden retail opportunity in the Shariah space in the Middle East lies with female investors. It said that interviews conducted with these women revealed that they were more risk averse than men, making the characteristics of Shariah investing – assets leveraged below 33%, transactions backed by real assets or the real economy, profit sharing and transparency – appealing to them.
In terms of investable assets, Cerulli discovered that these women generally had a penchant for real estate as they felt it was relatively safe and tangibly connected to the real economy.
Quoting Cerulli: “Considering women’s meticulousness in investing, as with many other matters, Cerulli thinks that a fund manager that can offer impartial guidance and appropriate products – delivered in the context of women’s needs for long-term security – can win this segment of the market.”
This is innovation and advancement in its true sense, and ought to be seriously considered by fund managers globally in order to tap a lucrative growth segment that was once not even considered a possibility.