Scandals Spark Tougher Screening of Western Investments
Stunned by the exposure of huge frauds, insider dealing and corporate greed, Islamic financial institutions are to discuss new and tougher screening techniques for future investment in the West.
Islamic financial institutions - with an estimated $230 billion under management, much of it in Western markets - have been shocked by the scandals which have toppled some of the biggest companies in the United States and tainted operations elsewhere in the world.
This issue will be debated openly at the International Islamic Finance Forum - a major gathering of Islamic bankers and financiers taking place in Geneva, Switzerland, later this month.
The seeds for the scandals at Enron, Xerox, WorldCom, Tyco and others were sown during the "anything goes" high-tech boom in which Islamic institutions invested heavily because they appeared not to conflict with Islamic morality and were "Shari'ah compliant." But they have since discovered, as US President George W. Bush recently pointed out: "A lot of money was made but too often standards were tossed out."
New York-based Director of the Dow Jones Islamic Market Indexes Rushdi Siddiqui, believes increased scrutiny of potential investments by Islamic financiers is inevitable. "In the light of continuing financial scandals in the West, which include formerly Shari'ah compliant companies like Enron and Worldcom, Islamic jurists and bankers will be defining and discussing the merits of an Islamic 'corporate governance' screen as part of the investment process," he said.
The Dow Jones Islamic Market Indexes track Shari`ah compliant stocks around the world for Islamic investors. Included is a broad Islamic Market Index with 1,600 plus companies with market capitalization of nine trillion dollars, from which about 29 Islamic indexes have been created covering all regions and almost all economic sectors.
Combined with increasing anecdotal evidence of a slowdown in investment in the West by Islamic institutions post September 11, the International Islamic Finance Forum is also slated to debate the regulatory environment affecting Islamic financial institutions since the attacks.
In the wake of September 11, less knowledgeable banking observers expected the pall cast by the search for the terrorist money trail to fall on the Islamic banking sector. That trail proved false, however, with most suspicion falling firmly on conventional finance sector. Nevertheless, some even went as far as predicting the sector could be quickly crippled by investors distancing themselves from all things Islamic. — (menareport.com)
© 2002 Mena Report (www.menareport.com)