Malaysia's highest office is throwing its weight behind Islamic venture capital and private equity.
At a recent symposium in Kuala Lumpur, PM Najib Razak [pictured] acknowledged that Islamic VC is still at an embryonic stage but that a greater awareness and understanding of Islamic finance itself could entice investors to risk their capital by investing in specific business opportunities.
Malaysia has been building its Islamic VC regulatory framework for some years now, releasing a 'Guidelines and Best Practices on Islamic Venture Capital' report in 2008. But growth is slow.
Jawad Ali, global deputy head for law firm King & Spalding's Islamic finance practice, told The Islamic Globe that the slow uptake is not entirely the fault of the venture capital industry, but a reflection of the general weariness of the global investment community battered by recent economic crises. He also pointed out that unlike passive investment in funds, Islamic VC and PE are more sophisticated ways of investing: "Money is important but you need more than money. There is some active involvement and taking the company and strategy to the next level."
It is this mix of finance and business nous, as well as entrepreneurship that Zaid Hamzah, innovation lawyer and author of an upcoming book on Islamic VC and PE, also calls for. He told this paper: "'On the ground education' instead of MBA programs on entrepreneurship can make the critical difference. The future of the [Islamic VC] industry will depend less on structuring or Shari'ah compliance but more on creating the eco-system that will produce quality deals to secure optimal returns on investment."
The chairman of Malaysia's Securities Commission, Zarinah Anwar recognizes it would take time to fuse the three areas necessary to grow Islamic VC - Shari'ah expertise, finance know-how and a deep working knowledge of industries and markets. Ali remains optimistic.
The potential for Islamic VC, he says, sits well with the whole ethos of Shari'ah compliant investments and all industries bar the decisively Haram ones are ripe for the picking.
© The Islamic Globe 2011
