The following industry and market analysis is primarily based on the most recent Islamic Financial Services Industry Stability Report (2014) provided by the Islamic Financial Services Board.
The total amount of assets in the Islamic financial industry was approximately $1.8 trillion by the end of 2013. The Islamic financial industry includes 4 major subcategories, Islamic banking, Sukuk (Islamic capital markets), Takaful (Islamic insurance) and Islamic Microfinance.
By far the largest subcategory is Islamic banking with an estimate of 80% of all assets. The remaining 20% split up to Sukuk $245.3 billion, Islamic funds $68.9 billion and Takaful $18.3 billion. The Islamic financial industry is still very small in comparison to the traditional industry, however it is one of the fastest growing sectors with an Compound Annual Growth Rate (CAGR) of 17,04% between the years of 2009 and 2013. The growth in the Islamic banking industry was, on average, 20% after the recovery of the global financial crisis in 2009. Most of the assets are concentrated in Islamic countries like Gulf Cooperation Council and Malaysia. Beside these major players, other countries in the Middle East or North Africa showed a rapid growth or entered the market.
Further growth, mentioned by Iqbal and Tsubota (2006), is also expected because of the increasing demand of Sharia compliant investments and financing due to the growth of “oiladollars” and the immigration of Muslim people all over the world.
The specialty of the regulatory framework for Islamic investments is that they all have to be Shariah confirm. The main principals for Islamic investments are (AlaSuwailem,'2006):
• It is not allowed to invest money only for the sole purpose of profit.
• The concept of interest (Riba) is not allowed
• It is only allowed to invest in companies, which are Shariah confirm (alcohol, weapons, pornography, gambling, etc. are prohibited by the Shariah)
• Gambling as itself is not allowed
• No high uncertainty/risk (Gharar) can be taken
• And the risk must always be shared between the lender and the borrower
One of the important differences between conventional finance and Islamic finance, as far as risk is concerned, is that in Islamic finance the risk must be split between borrower and lender and very high risk investments like short selling and high leverage is not allowed.
Inhaltsverzeichnis (Table of Contents)
- Industry and Market Analysis
- Literature Review
- Data Analyses
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This essay explores the performance of Islamic indices in comparison to conventional indices, focusing on the US market. It examines the theoretical foundations of Islamic finance, reviews existing literature on Islamic equity performance, and analyzes data from the Dow Jones Islamic US Index and the Dow Jones Industrial Index.
- Performance of Islamic indices in comparison to conventional indices.
- The theoretical principles and regulatory frameworks of Islamic finance.
- The impact of the global financial crisis on Islamic and conventional equity markets.
- The role of risk-adjusted return measures in evaluating investment performance.
- Customer demand for Shari'ah compliant investments.
Zusammenfassung der Kapitel (Chapter Summaries)
- Industry and Market Analysis: This chapter provides an overview of the Islamic financial industry, highlighting its growth, key subcategories, and regulatory framework. It discusses the principles of Shari'ah compliance and the unique risk management approach employed in Islamic finance.
- Literature Review: This chapter reviews existing research on the performance of Islamic equity, focusing on both Islamic mutual funds and indices. It examines studies that compare the performance of Islamic indices to conventional benchmarks, highlighting the contrasting findings and the need for further research.
- Data Analyses: This chapter presents the methodology and results of the empirical analysis comparing the performance of the Dow Jones Islamic US Index and the Dow Jones Industrial Index. It uses risk-adjusted return measures, such as the Treynor Index and Sharpe Ratio, to evaluate the performance of both indices during different market periods, including the global financial crisis.
Schlüsselwörter (Keywords)
Islamic finance, Shari'ah compliance, Islamic indices, conventional indices, risk-adjusted return, Treynor Index, Sharpe Ratio, global financial crisis, investment performance, customer demand.
- Citar trabajo
- Arthur Ritter (Autor), 2015, Islamic Investments. An Overview and Comparison of Islamic Indices, Múnich, GRIN Verlag, https://www.grin.com/document/299131
