Tapping the Islamic billions

While Shariah funds are hogging the limelight, there are a host of other financial products that can be offered to the community back home. For instance, global banks such as Standard Chartered have tailored conventional banking and financial products in Muslim-dominated countries like Pakistan, Bangladesh, the UAE, Malaysia and Indonesia to suit Shariah principles. "The interest element inherent in banking services such as loans and credit cards is not compliant with Shariah principles.

For financing transactions, they need to be structured as trade finance deals with the banks taking title to goods (the bank buys a product directly from the manufacturer and resells it to the customer at a higher price in pre-determined monthly instalments-the price differential covering the bank's charges.

So, instead of financing the customer, the bank sells him the product-which does not contravene Shariah principles)," points out Afaq Khan, CEO, Islamic Banking, Standard Chartered Bank. For credit cards, the bank charges a fixed monthly fee called Ujrah. In fact, while India is mulling over introduction of Islamic banking guidelines, countries such as Singapore and the UK have passed Islamic banking laws. Insurance is another sticky area.

While non-life insurance is Shariah compliant, term life insurance-which implies punting against death-goes against Islamic principles. Besides, what is of concern is where the premium is invested by the insurance company, which should be in Shariah-compliant stocks or companies.