01 February 2009
KUWAIT: Financial Relationship in Islamic banking and finance Islamic finance postulates the financial relationship between entrepreneurial investment and the moral prohibition of: Interest earnings or usury (Riba) and money lending. Haram (sinful activity), such as direct or indirect association with lines of business involve in alcohol, pork products, firearms, tobacco, and adult entertainment.
Speculation, betting and gambling (Maisir), including the speculative trade or exchange of money for debt without an underlying asset transfer. The trading of the same object between buyer and seller (bay' al Inah). Preventable uncertainty (gharar) such as financial derivative instruments, forwarding contracts, and future agreements.
The graph illustrates the percentage composition that Islamic and Sharia-compliant companies' market capitalization makes up of the total market capitalization of Kuwait Stock Exchange as of July 31,2008. It's evident that companies under the food sector have taken the lead with 100% of the respective KSE sector, followed by service, industrial and real estate with 89%, 87% and 66% respectively. Overall, the Islamic and Sharia-compliant companies make up 57% of the total Kuwait market capitalization.
The pie chart above depicts a more in-depth analysis of the market capitalization of Islamic and Sharia compliant sectors versus KSE Sectors. Therefore, when comparing the total market capitalization of Sharia-compliant companies in their respective sectors against the total market capitalization of the KSE it is clear that Islamic and sharia-compliant companies play a significant role in building up total market capitalization of the sectors. The top four sectors are services, banking, industry, and investment.
Kuwait Islamic funds
Some investment companies or banks are compliant with Islamic Sharia like the Investment Dar Company, Boubyan Bank, First Invest, Aayan Leasing, Al-Madina, and AlMadar, whereas the rest are conventional firms like Global, National Investment Company, Kuwait Investment Company and Kuwait Financial Centre (Markaz) are providing both conventional and Islamic financial services.
The increase in number of Islamic funds in Kuwait comes to fulfill the high demand on Islamic investment and finance.
The 36 sharia-compliant funds in Kuwait demonstrate the mixture between equity, money market, and real estate funds, with equity having the bigger portion of the number of funds. We can't determine which of the funds has the maximum management fee since KIC Fund and Markaz R Est Fund charges 10% from net profit, while Al-Dar Real Estate Fund charges 2% on an annual basis and the lowest by Boubyan Financial Fund charging 0.75% of the net asset value. Maximum subscription and redemption fee charged range between 2% and 0.5% whilst the lowest between 0.50% and 0.25% respectively. Similarly the average of the fees is 1.19% and 0.50% as compared to 0.13% charged as a custody fee, which is 0.20% on the upper side and 0.08% on the lowest.
From the funds information table we concluded that the majority of the Islamic mutual funds have monthly liquidity, and represent 50% of the total funds analyzed as Figure - 3 shows, whereas weekly liquid funds come second and representing 35% of total funds, the remaining 15% represents the bi-monthly and quarterly fund liquidity. The average redemption fee for the funds is 0.5%.
Management fees, by definition, are the fees paid out of the fund's assets to the fund managers for managing the fund's investment portfolio. The average management fee from the Funds fact sheet is 2.22%.
Subscription fee is a charge that is applied when subscribers enter the fund. For the funds, we found the subscription fees between 0.5% - 2.0% and the average subscription fee is 1.19%, whereas the redemption fees are between 0.5% and 1.0%, and the average redemption fee is 0.5%.
KUWAIT: Financial Relationship in Islamic banking and finance Islamic finance postulates the financial relationship between entrepreneurial investment and the moral prohibition of: Interest earnings or usury (Riba) and money lending. Haram (sinful activity), such as direct or indirect association with lines of business involve in alcohol, pork products, firearms, tobacco, and adult entertainment.
Speculation, betting and gambling (Maisir), including the speculative trade or exchange of money for debt without an underlying asset transfer. The trading of the same object between buyer and seller (bay' al Inah). Preventable uncertainty (gharar) such as financial derivative instruments, forwarding contracts, and future agreements.
The graph illustrates the percentage composition that Islamic and Sharia-compliant companies' market capitalization makes up of the total market capitalization of Kuwait Stock Exchange as of July 31,2008. It's evident that companies under the food sector have taken the lead with 100% of the respective KSE sector, followed by service, industrial and real estate with 89%, 87% and 66% respectively. Overall, the Islamic and Sharia-compliant companies make up 57% of the total Kuwait market capitalization.
The pie chart above depicts a more in-depth analysis of the market capitalization of Islamic and Sharia compliant sectors versus KSE Sectors. Therefore, when comparing the total market capitalization of Sharia-compliant companies in their respective sectors against the total market capitalization of the KSE it is clear that Islamic and sharia-compliant companies play a significant role in building up total market capitalization of the sectors. The top four sectors are services, banking, industry, and investment.
Kuwait Islamic funds
Some investment companies or banks are compliant with Islamic Sharia like the Investment Dar Company, Boubyan Bank, First Invest, Aayan Leasing, Al-Madina, and AlMadar, whereas the rest are conventional firms like Global, National Investment Company, Kuwait Investment Company and Kuwait Financial Centre (Markaz) are providing both conventional and Islamic financial services.
The increase in number of Islamic funds in Kuwait comes to fulfill the high demand on Islamic investment and finance.
The 36 sharia-compliant funds in Kuwait demonstrate the mixture between equity, money market, and real estate funds, with equity having the bigger portion of the number of funds. We can't determine which of the funds has the maximum management fee since KIC Fund and Markaz R Est Fund charges 10% from net profit, while Al-Dar Real Estate Fund charges 2% on an annual basis and the lowest by Boubyan Financial Fund charging 0.75% of the net asset value. Maximum subscription and redemption fee charged range between 2% and 0.5% whilst the lowest between 0.50% and 0.25% respectively. Similarly the average of the fees is 1.19% and 0.50% as compared to 0.13% charged as a custody fee, which is 0.20% on the upper side and 0.08% on the lowest.
From the funds information table we concluded that the majority of the Islamic mutual funds have monthly liquidity, and represent 50% of the total funds analyzed as Figure - 3 shows, whereas weekly liquid funds come second and representing 35% of total funds, the remaining 15% represents the bi-monthly and quarterly fund liquidity. The average redemption fee for the funds is 0.5%.
Management fees, by definition, are the fees paid out of the fund's assets to the fund managers for managing the fund's investment portfolio. The average management fee from the Funds fact sheet is 2.22%.
Subscription fee is a charge that is applied when subscribers enter the fund. For the funds, we found the subscription fees between 0.5% - 2.0% and the average subscription fee is 1.19%, whereas the redemption fees are between 0.5% and 1.0%, and the average redemption fee is 0.5%.
© Kuwait Times 2009
