Who has created the ?Al-Dar Islamic Fund'? Is it Pictet which is a Geneva based Private Bank which is in compliance with the Islamic culture? The answer to this buzzing mind boggling question is ?No'. As confirmed, the contained shares are not Islamic compliant and secondly the targeted profile (Islamic investor) has been misunderstood. With these two assumptions, a series of questions follow. Why? And what should have been done differently to fit into the culture of the Islamic investor? Firstly, we have tried to determine what were the cultural mistakes committed by Pictet. Secondly, we have determined the differences between the non-Islamic and the Islamic investor. Finally we arrived at the definition of a matrix that is to be used when creating an Islamic compliant financial instrument. The conclusion of this paper is that cultural differences are not only raised because of human direct interactions, but as a result of elaborated instruments or services rendered to each other. In a nuclear world where trade is widespread, proposing an Islamic cultural compliant fund should be made with more cultural analysis and not only in view of a pure financial approach or a basic Islamic image compliancy test. The focus should be on transitioning the local mindset to accept diversification and to think in terms of global development especially when rendering services for a multinational Private Bank. Therefore, Private Banks should use a different approach rather than actually putting themselves into risky situations that could turn out to be sensitive and controversial towards multicultural issues. This approach is unacceptable especially in a bank wherein, the financial approach should be computable in terms of reputation, money and loss.
[...] Islamic investor: Religion is part of the investment process, a dimension of it. Faith is a fundamental of decision. Diversity of financial products is available but not accessible to all. Not open to speculation and not used to manipulation. Therefore, a conventional investor profile as follows is not conceivable for an Islamic investor: Figure Investor profile Models Glossary : M. A. Mannan (1998) Glossary : Merrill Lynch website (2006) 9 Local diversity: Islamic compliance parameters We propose the following parameters to create local identification of compliance strengths by country: Parameter Percentage of Islamic religion in country Distance to first Islamic country Branches of Islamic religion Local cultural diversity to Islam Local Banking structure Local Institutional structure Local Economical Education Political and economical Islamic alliances Tolerance to non-Islamic cultures Rate 0 to 100% close to high little to various close to far Islamic to diversified Islamic to Laic low to high strong to distant none to high Those parameters are considered to be qualitative assessments of a country towards its Islamic compliance. [...]
[...] But our aim is to determine minimum relevant dimensions of Islamic compliancy when trying to set-up a rule of investment selection in a portfolio management strategy. The Matrix of the Islamic investor We have selected four different countries containing Islamic population (TR = Turkey, IR = Iran, FR = France and USA = United States of America), representative of cultural differences within origins and environment of Islamic investors. This would give us four profiles to which a Private Bank has to propose different ways to invest as per Islamic compliant finance. [...]
[...] Therefore, on a cultural point of view this fund is using Islamic framework as a filter to select Western shares, making the following assumptions: our filter would give Muslim investors confidence in accessing Western shares by insuring their compliance to Islamic rules; but we think that this basic filter is completely avoiding cultural and religious specificities within Islamic countries. The Al-Dar Islamic Fund is thus designated for high net worth non-Islamic investors looking for an exotic product (not by the content, but by the name) and educated Islamic investors used to non-Islamic culture, maybe not practicing full belief in Islam (mainly modern second generation or open-minded first generation If we consider the map in Annex on a purely commercial penetration point of view this fund would have no chance to reach a target in e. [...]
[...] The global non-Islamic basis is tolerated by the local Islamic diversity. Profile USA The tolerance to non-Islamic bias in the investments is more than possible. The non-Islamic country where all Islamic investments diversity could be proposed. The Pictet fund could be proposed in USA. Implication: management could propose a global investment portfolio with high tolerance to bias. The global non-Islamic basis is accepted by local Islamic diversity. The sensitivity to Islamic compliance appears to be a key to set-up a locally adapted portfolio Conclusions Cultural differences are not only raised because of human direct interactions, but also through financial services provided to each other. [...]
[...] The actual bearish trend of Qatari stock exchange on 14.11 .200615) is evidencing that non-Islamic investors are taking profit of the Islamic compliant companies by using speculation and manipulation; therefore a niche is emerging locally to satisfy those who will loose faith in the local stock exchange, through more Islamic compliant investments http://www.ameinfo.com/financial_markets/Qatar Figures and Table Figures Figure Islamic Sphere Figure Investor profile Models Table Table Matrix of Islamic investor results Bibliography Anne-Laure Dupont (2005), Atlas de l'Islam dans le monde: Lieux, pratiques et idéologie Autrement Daniel Kahneman (1998), Aspects of Investor Psychology Princeton University Dr. [...]
Online readingwith our online reader
Content validatedby our reading committee