Foreword
Islamic finance−the creation and management of financial products and
instruments designed to operate in accordance with Shari’a principles−has
in recent years accelerated to become one of the fastest growing and dynamic
new areas in the finance industry. Today, the industry has developed into a
business estimated to be worth in excess of $500 billion, and is forecast by
some commentators to reach $1 trillion during 2008. Ongoing double digit
growth is expected to continue for the next 15-20 years.
The initial demand for Islamic finance products was “grass roots” driven;
it was initiated by a small group of business and retail investors who wanted
to invest financially in line with their beliefs. From these beginnings, an
entire industry has grown, which is today shaped on a worldwide stage by
government support, wide-ranging customer demand and competitive
drivers from within the financial services industry.
The landscape today is filled by an ever-growing range of providers. These
include local institutions in primary Islamic markets that are directly
competing with conventional service providers by using Shari’a compliance
as a major value proposition, as well asconventional financialinstitutions
that are expanding into the Islamic financial services arena, in order to
retain or increase their market share. Furthermore, a number of strong
centres or hubs for Islamic finance have emerged, underlining the global
nature of the growing industry, including Malaysia, Dubai, Singapore and
London.
Indexing is a key tool in the development offinancial markets; indices
offer retail and institutional investors alike a means of tracking and
analysing financial performance, and a basis from which to support the
development of new investable products. It is a natural evolution then, to
expect a wide-ranging and comprehensive set of internationally recognized
Islamic indices to be available to the new Islamic finance industry.
Internationally recognized Islamic indices offer transparencyandaccount-
ability, giving investors reassurance that stocks in which they are investing
are not only screened in line with financial market standards, for example
by size, liquidity, governance or free-float, but also have been screened by
recognized Islamic scholars tobe compliant with Shari’a law.
The emergence of comprehensive global Islamic indices isfurther evidence
of the advanced development of the Islamic investment industry. Major
index providers are competing with a range of Islamic index offerings, and
investors should take time to examine the methodologies behind each of
these, and the type of opportunities offered by each. The Financial Times
Stock Exchange (FTSE) Global Shari’a Equity Index Series is a comprehen-
