In a recent report, Shariah funds: Opportunities and challenges in the Australian market, he states the size, strength and sophistication of the Australian market would appeal to Islamic investors – if only it was Shariah-compliant. Australia’s absence from the Shariah investment market suggests much work needs to be done before it can be considered a viable financial hub in the region, but Gary Johnson, global manager of financial services with Austrade, has flagged the government’s aim to support Islamic finance, stating that “Australia’s geographic position presents an important window to a rapidly growing and accessible Islamic market”. Interest has also surfaced among managers.
The Investment and Financial Services Association now runs a Shariah finance working group, which aims to promote awareness of the sector and help the Australian industry develop and market Shariah funds here and offshore, and the federal government hosted an Islamic finance delegation from Malaysia, led by Muhammad Ibrahim, assistant governor of Bank Negara Malaysia, in December 2009, in which Johnson stated that the Australian managers’ abilities in financial engineering should enable them to build competitive Shariah-compliant products. So far, two such funds have been launched in Australia. In September 2009, LM Investment Management launched a domestic unlisted property fund targeting investors in the Middle East and Malaysia. At the same time, the asset management arm of the Muslim Community Co-operative of Australia (MCCA), a mortgage originator, launched a Shariah-compliant mortgage fund. Unlike the LM offering, the MCCA fund targets the domestic retail market.
Such funds are guided by the tenets of Shariah, which define their structure, investment objectives and strategies, El Hassan writes. To comply with Shariah, funds must not invest in financial institutions or businesses that pay interest, or in businesses that involve speculation, such as gaming, or provide banned activities or products such as armaments, pork, alcohol, tobacco, prostitution and pornography. The investments must also be approved by a board of Shariah scholars. For this, LM consults an advisory board provided by an Islamic finance consulting business called Amanie Screening Solutions, which helps clients develop Shariah-compliant investment products and verify that their investments accord with the religious law. The board of scholars includes Amanie’s chief executive officer, Dr Mohd Daud Bakar, and Dr Mohamed Ali Elgari, Dr Muhammad Amin Ali Qattan and Dr Osama Al Dereai.