India to launch first Islamic mutual fund

India to launch first Islamic mutual fund
www.channelnewsasia.com - 7/19/2004 3:00:00 PM GMT

Indian finance firm, Parsoli Corporation, will launch the country's first Islamic mutual fund, conforming to Islamic Sharia law which prohibits earnings from interest, a company official said.

Ahmedabad-headquartered Parsoli Corporation Limited will put its global mutual fund units on sale in the first week of August.

Parsoli head, Zaffar Sareshwala, said that since the September 11, 2001 attacks on the United States, Muslims living in South Asia and the Gulf region have been hesitant about putting their money in the U.S. and Britain.

"We will tap the Gulf money that is finding it difficult to make its way into the American capital markets due to stringent regulations and checks put in place after September 11," said Sareshwala.

"Big investments by Muslims, especially rich Arabs, were made in the United States, Britain and Western Europe, but now they are also uncomfortable about putting their money in these Western markets," he added.

"They don't want to touch the United States. Slowly, India is emerging as the best investment destination for them."

The Parsoli Global Islamic Fund also aims to meet the rising demands of Muslim investors who want investments based on Islamic law.

Sareshwala said that managers would monitor the fund closely to ensure they invested in firms which comply with religious law.

Under Islamic law, lenders are not allowed to earn interest and they have to share profit or loss borne by the creditors.

Islamic funds, which also avoid investments in alcohol, betting and tobacco, are worth about 250 billion dollars worldwide, according to estimates by a Bahrain-based Islamic financial house.

"By introducing a Sharia-compliant fund, we are providing an investment choice to the Muslims living in India, South Asia and the Gulf. Later we will launch insurance products and other Islamic financial instruments," said Sareshwala.

He also said that the global fund would invest in the scrip of 40 Indian firms, including tech giant Infosys Technologies and the country's largest pharmaceuticals company, Ranbaxy Laboratories which are Sharia-compliant.

"After a Sharia screening, companies involved in alcohol, gaming, interest earnings, casinos, leather and any other non-Islamic activities will be dropped from our investment list," said Sareshwala.

"Firms with a debt market capitalization ratio exceeding 33 percent or having net receivables of more than 45 percent of their net asset also automatically get dropped," he added.

From http://www.islamonline.com/cgi-bin/news_service/world_f...y.asp?service_id=867

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