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Wednesday November 16, 2011

Halal industry should work with Islamic finance


KUALA LUMPUR: Despite the halal industry’s rapid growth, it is missing out on opportunities to tap into Islamic finance, panel members said.

“There is a disconnect between the halal industry and Islamic financing, which is ironic since we’re working within the same religion, but are not talking to each other,” said Thomson Reuters head of Islamic finance (Asia) Rafiza Ghazali at a discussion on “Halal Economy” during the Islamic Financial Intelligence Summit.

She said in a study conducted by Reuters on 250 companies involved in halal production and with a combined market capitalisation of US$132bil, it found that only 50% of them passed the Aofi test, which meant that they are not syariah-complaint.

The Aofi test was a screening criteria used by Reuters to determine the syariah compliancy of stocks, she said.

“Why is it that they (companies in halal production) make sure their products can be consumed by Muslims, yet Muslims cannot invest in them?” Rafiza asked.

Fellow panelist, AmIslamic Funds Management Malaysia director Datin Maznah Mahbob, said: “There are so many opportunities for those companies to issue sukuk, short-term papers, and longer-term Islamic debt instruments of various tenures for fund managers to invest in.

“As a fund management firm, we invest in both sukuk and equities. If they structure their funding requirements in a syariah-compliant way, we can invest in them as they will be in my syariah-complaint universe.”

In a separate panel discussing the potential of Islamic funds, Aberdeen Islamic Asset Management CEO Abdul Jalil Rasheed cautioned against the popular belief that Islamic funds can outperform conventional funds at every turn.

“We don’t go out there saying it will outperform. I’ll be honest, we will guarantee a period of underperformance; that’s just how the market is. If you are outperforming consistently, you’re lying. Something’s wrong,” he said.

“No Islamic fund can claim they have a five to ten year track record. It will take some time to build critical mass and before we can tell clients that this fund can stand on its own merit against conventional funds.”

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