A financial product is said to be syariah-compliant when it complies with Islamic law.
As the latter operates in accordance with the religious beliefs and cultural mores of Muslim societies, there are restrictions on how and where the funds can be invested.
For example, investments in alcohol, pork, pornography or the gambling industry, or in entities engaged in illicit, immoral or dubious trade, are forbidden.
Investments in entities involved in lending or borrowing, such as banks, are also prohibited.
What does it mean?
In recent years, syariah- compliant funds have grown significantly, making their way into investors' portfolios.
Islamic funds are suitable for both Muslim and non-Muslim investors who want to invest only in products that comply with Islamic investment principles.
Those who believe strongly in socially responsible investing will also find these funds attractive.
So you want to use the term? Just say...
'Syariah-compliant funds are relatively sheltered from the sub-prime mortgage crisis as they do not invest in most financial stocks.'
Lorna Tan
This article was first published in The Straits Times on December 07, 2008.
