Introduction to sharia-compliant investment
Assets in Islamic financial instruments have grown by an average of 15% per year over the past six years, and currently stands an estimated USD 950 billion. It is expected that the islamic finance will continue to grow at this rate for the next few years and that total assets in Islamic finance could reach USD 1.5 trillion by 2012.
Such a growth is supported not only by large muslim population in the world, but also non-islamic market who see the sharia-compliant products as alternative ethical products.
The demand for Islamic banking and Islamic products is increasing, especially in Turkey, and these products and services are being introduced by well known financial institution. As Patrigest, we offer shariah comliant investment funds that invest in a wide range of asset classes such as equities, commodities and real estate.
Islamic Finance Concept
The Islamic financial system is founded on the absolute prohibition of the payment or receipt of any predetermined, guaranteed rate of return. This closes the door to the concept of interest and precludes the use of debt-based instruments. The system encourages risk-sharing, promotes entrepreneurship, discourages speculative behavior, and emphasizes the sanctity of contracts.
An Islamic financial system can be expected to be stable owing to the elimination of debt-financing and enhanced allocation efficiency. A “two-windows” model for Islamic financial intermediaries has been suggested in which demand deposits are backed 100 percent by reserves, and investment deposits are accepted purely on an equity-sharing basis. Analytical models demonstrate that such a system will be stable since the term and structure of the liabilities and the assets are symmetrically matched through profit-sharing arrangements, no fixed interest cost accrues, and refinancing through debt is not possible.
Allocation efficiency occurs because investment alternatives are strictly selected based on their productivity and the expected rate of return. Finally, entrepreneurship is encouraged as entrepreneurs compete to become the agents for the suppliers of financial capital who, in turn, will closely scrutinize projects and management teams (source:Institute of Islamic Banking and Insurance).
Patrigest’s Alternative Investment Products
The most common forms of Sharia-compliant Investment products that PATRIGEST offers are commodity and equity products. Please find below current investment products that Patrigest offers to its clients.
Product 1(Commodity). Islamic Certificate linked to RBS Crescent VC Commodity Navigator Index
Brief Product Description: A 18 months TL denominated Islamic Certificate seeking 100% capital protection through a Sharia-compliant mechanism and linked to the performance of the Crescent Commodity Twister Strategy. The proposed strategy linked to the growth prospect of metals, agriculture and energy sectors.
Product 2(Equity). Islamic Certificate linked to Participation Index (Katilim Endeksi)
Brief Product Description (indicative): A 2 year TL denominated Islamic Certificate seeking 100% capital protection through a Sharia-compliant mechanism and linked to the performance of securities in the participation index.
Participation Index is a stock index formed of securities traded at Istanbul Stock Exchange National Market and conforming to Participation Banking principles. Securities are selected based on Index Rules set up according to Participation Banking principles. Accordingly, the index covers companies that are not active in the fields of interest-based financing, trade, services, intermediation (banking, insurance, financial leasing, factoring and other interest-based activities), alcoholic drinks, gambling, games of chance, pork and similar food, press, publication, advertisement, tourism, entertainment, tobacco products, weapons, futures gold, silver and currency trades.
Moreover, companies are required to achieve some financial rates in order to take part in the index. The rate of total interest loan rate of companies to market value shall not be lower than 30%; the rate of interest bearing cash and securities to market value shall not be lower than 30% and the rate of income from above mentioned fields to total income shall not be lower than 5%. Top 30 companies with the biggest public market value of such securities constitute the index companies. For more information on Katılım Endeksi you may look at website www.katilimendeksi.org.