Magazine article Economic Review

Islamic Investment Funds in Pakistan Yet to Take-Off?

Magazine article Economic Review

Islamic Investment Funds in Pakistan Yet to Take-Off?

Article excerpt

The Islamic funds represent about 12% of the overall fund management industry in Pakistan. Introduction of Islamic funds has widened the industry's clientele by bringing a number of individuals in the investment bracket who were previously resistant to invest because of religious concerns. The first conventional investment fund was launched in Pakistan in 1962 while the first Islamic fund appeared 40 years later in 2002. Today the total assets under management of Islamic mutual funds in Pakistan are over Rs. 58 Billion. In Pakistan, all types of funds that are available in the conventional funds industry are also available on the Islamic side e.g. equity, money market, sovereign, corporate fixed income, index tracker, capital protected etc.

The KMI-30, the only Islamic index available in Pakistan which was launched in 2008, measures the performance of Sharjah compliant equity investments. The leading conventional index is KSE 100 Index. It is interesting to note that since its launch KMI-30 has consistently outperformed KSE 100.

The Dow Jones Islamic Market Pakistan Index (reviewed quarterly) measures the stock performance of companies traded in Pakistan that pass screens for compliance with Islamic principles. Calculation of the Dow Jones Islamic Market Pakistan Index began on October 27, 2006. The index is weighted by float-adjusted market capitalization which stood at PKR 330.3 Billion as of end of May, 2013.

According to official sources, the index had a price return of 44.69% during 2012.

According to news sources (May 2013), the Securities and Exchange Commission of Pakistan (SECP) has recently decided to establish a Shariah advisory board to guide Islamic Financial Institutions (IFIs) and Islamic Capital Markets in their transactions. The board would also be responsible for undertaking educational activities for understanding Shariah principles and introduction and implementation of new models and products based on international research. The nine members of board of the SECP will include prominent Ulema, a jurist, an accountant and representatives of the commission.

The Islamic funds industry is still going through its nascent stage. Awareness about Islamic investment funds will help in capital mobilization, considering the industry's huge growth potential. Information dissemination about the transparence of selection criteria can be an important step forward. Islamic funds industry is still evolving, developing and growing with new players entering the market.

In Pakistan, where Islamic Funds represent only 12% of the Funds Management Industry, there is still a long way for Islamic Industry to go.

New Entrant in the Market ABL AMC launches Islamic Stock Fund

ABL Islamic Stock Fund (ABL-ISF) is the newest addition to ABL Asset Management's product portfolio. ABL-ISF is the second Islamic mutual fund being launched from ABL's platform, after ABL Islamic Income Fund in 2010. The fund will be available through all branches of Allied Bank and ABL Asset Management from the second week of June.

The objective of ABL-ISF is to provide higher risk adjusted returns through capital gains and dividends by investing in a diversified portfolio of equity instruments, permissible under the Shariah principles. …

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