Celebrating a growing market of Shari`ah-compliant funds, Canadian Muslims are resorting to products that comply with Islamic principles for their retirement income and investments.
"The way I actually look at Shari`ah-compliant products is mainly as a subset of ethical, or socially responsible investing [such as avoiding the adult entertainment industry or any company that may negatively impact the environment]," Mohammad Khalid, a retired economist living in Oakville, Ontario, told CBC News on Monday, February 27.
Khalid, a devout Muslim, said Muslims must be careful about their investments, such as securities and equities.
Managing his own portfolio, he invests in sectors such as mining, forestry and technology as well as helping his older children save for their retirement.
"The whole market is essentially available, excluding some of the major ones [such as insurance companies and banks]. ...There are so many different companies which will keep giving you dividends year after year," Khalid said.
Shari`ah-compliant funds in Canada are focused on mining, forestry and technology.
"We've assisted in getting the Shari`ah-compliant certification for a couple of the mutual funds that are in Canada right now," said Rehan Huda, a director with Amana Canada Holdings, a niche financial firm that sells Shari`ah-compliant investment funds.
"There’s one fund – a bullion fund – that’s a fairly large fund that has gold, silver, platinum stored here, and it’s a purely Shari`ah-compliant fund."Since we're heavily in resource and technology-weighted [funds] ... when those do well, the Shari`ah funds generally do well."
Islam forbids Muslims from usury, receiving or paying interest on loans.
Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.
Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.
Investors have a right to know how their funds are being used, and the sector is overseen by dedicated supervisory boards as well as the usual national regulatory authorities.
The Shari`ah-compliant system is now being practiced in 50 countries worldwide, making it one of the fastest growing sectors in the global financial industry.
With the growing Muslim population in Canada, the demand for Shari`ah-compliant investments was increasing.
"An inordinate amount of cash is found among Muslim investors that I know ... and they are waiting for Shari`ah-compliant products," Huda, from the director with Amana Canada Holdings, told CBC News.
"In the future, there’s going to be a lot more products because the population is increasing here."
Muslims make around 2.8 percent of Canada's 32.8 million population, and Islam is the number one non-Christian faith in the Roman Catholic country.
A recent report from the Washington-based Pew Forum on Religion & Public Life said that Muslims are expected to make up 6.6% of Canada’s total population in 2030.
A testament to the growing interest in Shariah-compliant investing is Standard & Poor’s introduction of its Shari`ah stock index (S&P/TSX 60 Shariah Index) into the Canadian market in 2009.
The index recategorizes equities on the S&P/TSX 60 and excludes all equities that do not comply with Islamic law, which is based on the Muslim holy book, the Qur'an.
Though many Canadians think the Shari`ah-compliant funds are not profitable, Khalid says there are many "wonderful companies" that can help investors reap big dividends, including technology companies.
"Absolutely nothing is holding them back," he said.
"If they don’t [invest], obviously they’re losing something big time. You can reduce your taxes big time."Starting almost three decades ago, the Islamic banking industry has made substantial growth and attracted the attention of investors and bankers across the world.
A long list of international institutions, including Citigroup, HSBC and Deutsche Bank, are going into the Islamic banking business.
Currently, there are nearly 300 Islamic banks and financial institutions worldwide whose assets are predicted to grow to $1 trillion by 2013.