Islamic Index Encourages Muslims

to Invest in Bombay Stock Exchange
Spreading the Wings of Islamic Finance in India's Emerging Market

The Bombay Stock Exchange has launched a new
stock index of companies that are compliant with the
Islamic legal code, encouraging Muslims to invest in
India's fast-growing stock market.

Islamic law imposes restrictions on investing in
companies that charge interest and those that sell
products such as alcohol, weapons or tobacco.

The index, called BSE TASIS Shariah 50, is composed
of the 50 largest and most liquid stocks that adhere
to Islamic law. The companies were chosen by the
Taqwaa Advisory and Shariah Investment Solutions
(TASIS), a Mumbai-based Islamic finance firm whose
board members include legal experts and Islamic
scholars.

Stocks will be reviewed monthly for Shariah
compliance, and non-compliant stocks will be
removed. Additional companies will be added on a
quarterly basis.

"It will create a market for Indian Muslims," Shariq
Nisar, the director of research and operations at
TASIS, said in a statement. "We can provide
opportunity to domestic investors so that they can
invest their money without falling foul of their ethical
and religious requirement.

"A lot of Muslim investors who could have invested
their money in stock market and benefited from it,
they were not having this opportunity earlier."

Islamic indexes already exist in other countries in the
Middle East and Asia, including Pakistan and
Indonesia, which have the two largest Muslim
populations in the world. (India is third, with more
than 150 million Muslims, or 13 percent of its
predominantly Hindu population).

The other countries' financial systems are not
necessarily sophisticated enough to support large
stock indexes.

India's development in the past decade, however,
allows it to support such a large index, which started
Monday. "The BSE has the largest number of listed
Shariah-compliant stocks in the world," Nisar said.
"All Muslim countries of the Middle East and Pakistan

put together do not have as many listed Shariah-
compliant stocks as are available on the BSE."

The index is expected to encourage members of
India's newly emerging Muslim middle class to invest,
instead of saving money because of their conservative
values.

Guilt-Free Investing

"These people were just keeping the money under
their pillows," Nisar said. "Many were investing either
in gold or in real estate."

The index will make it easier for Muslims to know
which companies adhere to Shariah law, encouraging
Muslims on a psychological level to invest.

The new index will increase awareness of "financial
investments amongst the masses and help enhance
financial inclusion," Madhu Kannan, the managing
director and chief executive of the BSE, said in a
statement.

Muslims, many of whom have been excluded from
India's financial sector in the past because of Islamic
law, will now be able to invest guilt-free.

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