August 2001 — Islamic Funds — A Case for Dedicated Distribution Arm

On the 24th of August 2001, the Institute of Islamic Banking and Insurance hosted a lecture on Islamic Funds, A Case for Dedicated Distribution Arm. The lecture was chaired by Mr John Bauer. Marketing Dierector, SAMBA, UK.

The Institute invited Mr Suleiman Dualeh. CEO, Jersey ii-online Ltd, London, to deliver the talk.

Examining the sales record of Islamic investment products, Mr Dualeh started with an overview of the sector, and proceeded to study some of the less obvious symptoms of problems in the horizon, explored their causes, evaluated all available options to overcome these problems, and then suggested a solution.

The list of all known and widely marketed equity Funds now include some 104 Funds, managing total assets in excess of $5 Billion. While these figures may not look impressive in today’s standards, they nevertheless demonstrate a dramatic surge in the popularity of Islamic funds within a fairly short period. Considering that there were only 29 funds managing little over 800 million USD in 1996.

According to Mr Dualeh, the flourishing of the sector during 1990s can be attributed to the acceptance of the equity investment by the Sharia boards. As an Islamic asset manager during the late 1980’s and early1990s, he has been fortunate enough to participate in the intellectual debate that led to the lifting of the ban on equity investment by some of the Sharia boards. More importantly, the present consensus among the Sharia scholars on the stock screening criteria was unprecedented and proved helpful to the sector.

Other factors that helped the sector included the growing Islamic awareness among the Muslim youth, the prolonged bull market of the 1990s, and the creation of credible Islamic equity benchmarks by leading index providers such as Dow Jones and FT.

In the later part of his presentation, Mr Dualeh appeared to be more critical of the practices in the sector than we are used to hear from other speakers in the past. But having contributed significantly to the development of products during his 15 years professional career in the sector, he has earned not only the right but also the obligation to expose dangers that are lurking in the dark.

Talking about the problems and the pitfalls in the marketing front, Mr Dualeh took a closer look at the situation and revealed some of the important issues which, in his opinion must be approached with more caution.

The presentation, as usual was very well attended by the professional bankers of both categories that is by Islamic bankers and conventional bankers. The full text of the presentation will be published in the October 2001 issue of New Horizon.

Mr Suleiman Dualeh