Islamic finance could become a viable mainstream investment alternative for investors due to its ‘unique’ compliance with environmental, social and governance (ESG) sustainability effort, said industry executives.
Islamicfinanceguru.com co-founder Ibrahim Khan said greater exposure in the gold market and technology space with lower-debt requirements have made Islamic investment outperform in the last decade.
“Islamic investment has its rule with certain purposes in terms of values (halal eligibility) and investment rate.
“We have to define the products on its availability, options and its diverse applications,” he said during a panellist discussion at the Securities Commission eighth annual financial technology conference SCxSC here.
BIMB Investment Management Bhd (BIMB Investment) chief executive officer Najmuddin Mohd Lutfi said there is higher participation from non-Muslim investors even in the early 2000s due to ‘tolerable’ risk-return in Shariah-compliant investment.
“Investors also need to have additional funds before investing, and knowing their risk appetite and goals while taking a bit of risk,” he said.
“With technology and education, any investment can get an advisory, but it has to be a licensed provider.
For example, he said the machine learning on the ESG portion with artificial intelligence allow investors to manage risk in the portfolio and decide on the stock selection.
“Industry and the regulator would need to work together and promote innovation in Islamic finance space.
“We can see more proliferation of new products and services globally due to innovation mainly on digital technology such as equity crowdfunding (ECF) and peer-to-peer (P2P) financing platforms.
Wahed Invest chief investment officer Samim Abedi said Shariah-compliant finance is transparent, allowing investors to adhere to the rule of law, as revenue generated is not derived from non-Shariah activities.
“Nonetheless, Islamic finance products may not need to be sophisticated but relatively more uncomplicated to succeed.
“We see the conventional banks not cater to the Muslim population, but we see calibration in the Muslim world. So we want to create turnkey and available for all aspects of investors portfolio,” he said.
Najmuddin said Shariah-compliant investment could deliver between 8.0 per cent and 10 per cent return per annum in the next five years.
“We (BIMB Investment) have equity, sukuk, money market and alternatives with various asset classes to generate and match the risk-return for investors,” he said.
Additionally, he said investors can utilise waqf (endowment) to empower the community via social finance and make it more mainstream. – NST ONLINE
