S.F. Ho, Catherine,(2015), International comparison of Shari’ah compliance screening standards. , International Journal of Islamic and Middle Eastern Finance and Management, UNSPECIFIED
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Abstract
Purpose – This paper aims to review the Shari’ah investment screening methodologies of 34
prominent global Islamic finance users, including index providers, Shari’ah service providers, Islamic
banks, a regulator, an association body and fund managers.
Design/methodology/approach – A comparative analysis is performed to highlight the variances
of the Shari’ah-compliant methods and principles practiced by these renowned institutions with the
latest compiled data.
Findings – The two sets of business screens and financial screens are profiled separately to clearly
examine the similarities and differences between the different methodologies. Some of these
practitioners are more specific in their listing of Shari’ah-impermissible activities, while some are more
general in allowing more businesses to be included as permissible. The majority of these users practice
a two-tier method of screening: qualitative and quantitative. Under quantitative screen, the range of
allowable threshold ratios on non-permissible criteria differs slightly between them.
Research limitations/implications – With the wide divergence in screening methodologies applied
by practitioners, there is a general consensus in the acceptance of compliant assets from various countries
and practice. Standardization is, therefore, seen as a need not only to make understanding of Shari’ah
investments clear to investors but also to discourage misunderstandings between scholars and investors.
Practical implications – The suggestion, therefore, is to set globally acceptable universal Shari’ah
standard methodologies which are applicable by the world Islamic financial market. These standards which
are relevant and logical to global ethical investing would further stimulate investments in Islamic finance.
Social implications – With Shari’ah-compliant asset growing exponentially relative to the world’s
financial assets, it is alleged that greater harmonization of the global screening methods would prevent
misunderstanding and provide a clearer insight on Shari’ah investing, which could further accelerate
growth of the Islamic finance sector worldwide.
Originality/value – To provide a more transparent regulatory environment and build local and
regional regulatory framework through establishment of standards, there should be more consistency
with minimum barriers that prevent the industry from achieving its full potential. The paper also
contributes to existing literature by documenting and analyzing the qualitative and quantitative
screening procedures as practiced by a comprehensive set of global Islamic finance users. It is, therefore,
important to share this knowledge as an effort toward greater understanding and harmonization of the
practices at the global level to accelerate growth in the industry.
Keywords : | Shari’ah compliance, Business screen, Financial ratios, Quantitative screen, UNSPECIFIED |
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Journal or Publication Title: | International Journal of Islamic and Middle Eastern Finance and Management |
Volume: | 8 |
Number: | 2 |
Item Type: | Article |
Subjects: | Ekonomi Islam |
Depositing User: | Users 15 not found. |
Date Deposited: | 27 Dec 2019 07:10 |
Last Modified: | 27 Dec 2019 07:10 |
URI: | https://repofeb.undip.ac.id/id/eprint/1068 |