128 Islamic Finance in Practice
Future outlook
Finally, some light needs to be shed on the involvement and role of the
Shari’a scholars in managing a Shari’a-screened universe of stocks. Their
involvement is deeper than appears at first sight. They have played a key
role in classifying the multitude of business activity codes and specifying
areas of further investigation.
There is now a greater exchange of scholars between Malaysia and the
Gulf Cooperation Council countries, and so Shari’a standards are converging
rapidly. As an example, the Bursa Malaysia has recently launched a Bursa
Malaysia Hijrah Index in collaboration with FTSE. The screening criteria
are based on the FTSE methodology, rather than the Malaysian Securities
Commissions methodology, to enable global investors to use this as a
possible benchmark.
Shari’a scholars have also been amenable to argumentsfor incorporating
some sustainability criteria in the screening process. The exclusion of
tobacco and armaments are a case in point. It is quite possible to see Shari’a
scholars looking at more of the socially responsible investment criteria in
the very near future. The main driver for this development is expected to
come from investors who are increasingly becoming consciousof theseissues.
Just like the growth of the ethical investment movement in developed
markets, the rise in institutional investors representing public funds, will
drive this expected evolution in the Shari’a criteria. This, in turn, opens up
the area of affinity with ethical screening, and the possibility of having a
unified Shari’a/ethical screened universe in time. The target investor market
is expected to grow considerably as a result.