FBNQuest Managers Explore the Wins, Gaps and Capital Sweet Spots in Halal Investments

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Friday, July 16, 2021 / 11:00 AM / Bukola Akinyele-Yisau / Header Image Credit: WebTV

 

As the Halal industry evolves across the globe, with opportunities for deepening the non-interest financial market, FBNQuest experts recently explored the "The Wins, Gaps and Capital Sweet Spots" in the non-interest capital and money markets.

 

Ifeoluwa Dixon, Head, Fixed Income Solutions, FBNQuest Asset Management, and Aisha Wanka, Relationship Manager, FBNQuest Asset Management in a discussion on developments in the finance industry gave insights into the dynamics and the prospects for growth in the ethical traded securities market. 

 

Speaking on the concept of Halal and its relevance to the market and economies, Ifeoluwa described it as a shariah-compliant investment that is following Islamic Laws. She highlighted three guiding rules in Halal investment, they are;

  1. Riba- These are Investments that must not attract an Interest rate
  2. Haram- These are Assets that must not have pork involvement, pornography, military hardware, or any harmful products that affect the society
  3. Gharah-In this area, Islamic law is against the sale of goods one cannot predict i.e. Uncertainty. Once an individual is in alignment with the three key rules then he/she can invest.

 

On how Halal investments have impacted the economy, Dixon said it has been impressive as there have been key developments in sectors such as road infrastructure. Also in Q4,2020, the first Islamic finance REIT was launched contributing to the growth of the Nigerian housing sector, while the "Halal Compliance" was launched recently by another issuer.

 

She said, there have been efforts in the Islamic finance market from both the government, private sector, and individuals, to deepen financial inclusion as there is still a huge population of unbanked people in the country. This was mainly due to faith-based issues which have been reduced significantly by Islamic finance.  She added that this has supported the development of the Nigerian economy.

 

In her contribution, Aisha Wanka, FBNQuest Relationship Manager believed that there has been significant growth in the Halal industry, with the introduction of the Islamic mutual funds by FBNQuest, Stanbic, and United Capital. According to her, the growth had extended to the Sukuk market, citing the Osun State Sovereign Sukuk issued in 2013 and the 3 FGN Sukuk launched in 2017. She said these developments had contributed to the growth of the non-interest finance market.   



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You can send an email to the FBNQuest team via invest@fbnquest.com

Speaking on how FBNQuest Asset Management can help both Muslims and non-Muslims keep up with their investments, personal finance, and entrepreneurial journey. She said educating the investing public is very important for them to know that there is an aspect of the financial system that can cater to their needs. She also noted that the investment is not only for Muslims but for people who prefer to invest responsibly.


She added that workshops, seminars, webinars, and the Islamic Finance weekly programme are avenues for educating the public on the opportunities in the Islamic Finance market.

 

Looking at how critical Shariah compliance is in the investment guidelines for Halal, Aisha stressed its importance as a lot of people when investing don't get what aligns with their values directly or indirectly, but with the Shariah compliance, body products will be screened before issuance to ensure compliance with Islamic financial guidelines.

 

She said, "The client or customer is comfortable once that all values align with shariah principles and this makes it very critical".   

 

Providing a broader explanation on Halal investment types and how they operate, FBNQuest's Dixon explained that there are various Shariah-compliant contracts available for investments.  She said the trust financing that is a Mutual fund is Mudaraba, as it involves investors and the manager. The investors bring in their fund and the Manager is called Mudarib where he/she will manage the capital, the profit will be shared on the pre-determined ratio before embarking on the contract and the capital providers bear the loss. 

 

Giving further details she highlighted the following Shariah-compliant contracts;

  • Musharaka- This is about partnerships where people embark on business ventures and bring funds together, with opportunities for profit sharing and if there is a loss it will be shared following equity contributions and not predetermined rates.
  • Ijarah-This is another Islamic finance instrument based on a lease in Shariah compliance and the assets must not be involved in Riba, Haram, and Gharah.
  • Murabaha: This is a cost-plus margin where an individual will approach a financial institution to buy goods on credit and he/she will agree on the price and the margin.
  • Istina- This means the construction/manufacturing where one enters into a contract with another person constructing something in a specific way.
  • Salam-This covers future delivery on paying for  goods    

 

In the area of factoring standardization and certification as it concerns expenses incurred in Halal finance, Wanka said the scholars bring in standardized guidelines for each contract for the market to grow and reduce finance costs.

 

Speaking on the integration of risk management which enables the sustainability of Halal investment pools in a place like Nigeria, Ifeoluwa believed Halal is all about wearing a cap of a risk manager as the do's and don'ts are clear. Investment in Halal is governed by Islamic law and cannot be changed by any individual. The shariah advisory board council provides oversight on investing. The investments must be shariah-compliant and the biggest risk is to ensure that one is investing in an asset underlying shariah compliance,  to have the normal risk marketing, liquidity risk, and credit risk involved which the risk management framework will deal with accordingly. 

 

According to Wanka, the Shariah advisory council needs greater involvement in every aspect of the investments, because the risk is important in any type of investment or financial transaction.

 



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