Speaking at the India Shariah Finance Summit in the capital, Khan said the mutual fund industry is the best vehicle for popularising Shariah-compliant products. He pointed out that mutual funds are largely compliant with Islamic finance principles since they do not pay
The concept of charging or paying interest is prohibited under Islamic law. “We should start adopting the mutual fund route in a bigger way for Islamic banking. Shariah-compliant mutual fund schemes will help to channelise savings of the huge Islamic population in India,” Khan said.
Khan said Indian Muslims should have the option to invest in Shariah-compliant products. “Muslims have every right to seek an avenue for investment that complies with their religious faith,” he said.
Speaking on the occasion, Abizer Diwanji, executive director and head of financial services, KPMG, said the mutual fund sector could be opened up for Shariah-compliant products. “The present laws are amenable to mutual fund instruments that are compliant with Islamic finance. However, innovation in the industry is lacking and hence such products are not hitting the market,” he said.
Diwanji said bringing out Islamic finance products would be a step towards greater financial inclusion.
“Muslims are an underbanked community in India. Islamic finance could be a very big component for financial inclusion that the government is pushing for,” he said. Muslims account for around 13.4 per cent of the population or around 175 million people in absolute terms. Diwanji said the Reserve Bank of India could also consider offering specialised licences for Islamic banks, while doling out fresh bank licences as promised in the Union budget.
Sashi Krishnan, chief investment officer, Bajaj Allianz Life Insurance, which offers — Pure Stock Pension Fund –a Shariah-certified scheme, said Islamic financial products have seen growing acceptance in India over the past few years.
“The government is already working on a project to analyse the future of interest-free banking in India, while the mutual fund and insurance industry are also developing Shariah-compliant products,” he added.
Krishnan said the challenges to the popularity of Islamic finance in India are distributors who are not equipped to sell Shariah-compliant products, besides a lack of certifying agencies and standardisation of Shariah-based products.