SP Funds is the largest family of Sharia-compliant ETFs (exchange traded funds) in North America. SP Funds is a joint venture between ShariaPortfolio, Inc. (USA based) and ShariaPortfolio Canada Inc. (Canada based). These companies have decades of experience with Sharia-compliant wealth management. See www.sp-wealth.com for more information.
Opinion of Islamic Banking or Takaful
Islamic banking is the ideal solution to avoid much of the market volatility and economic uncertainty that we are now regularly accustomed to. For example, under Islamic banking, the 2007 recession that occurred as a result of extreme interest-based debt would not have occurred. In fact, that recession made Islamic investing very popular in the United States. People buying Sharia-compliant funds are attracted to the inherent focus of investing in well capitalized companies with little to no debt. We believe these types of investments can better withstand uncertainty and volatility.
Takaful may do for insurance what Islamic investing has done for the stock market or Islamic finance has done for the mortgage industry. Islamic products may be great faith-based solutions, but their application goes well beyond religious requirements and can appeal to anyone looking for well-grounded solutions. ESG is a good example. Sharia-compliant funds (ie. SPUS) have very high ESG factors and can serve as tools for building portfolios for anyone looking for ESG solutions.
Basic guidelines of Islamic Banking
The obvious guideline for Islamic investing is to focus on industries that are socially responsible and conform to Muslim values. However, the requirement of investing in companies with little to no debt (as defined by Shura councils like AAOIFI that create these guidelines) is more challenging to adhere to. The effort is well worth it because a Sharia-compliant investment portfolio is one that contains companies with little to no debt and companies that don’t put individuals into debt.
How to ensure Shariah Compliance
In the case of SP Funds, we work with Standard & Poors (publisher of S&P 500 and other indexes) which utilizes Ratings Intelligence Partners to ensure all securities are Sharia-compliant. Sharia Portfolio portfolio managers in North America then review all constituents to ensure
compliance. The products are then audited by Raqaba, a leading Sharia audit and Islamic financial advisory practice. With these three layers of Sharia-compliance, we feel confident that our rigorous approach will result in products the public can feel completely confident about.
- Sharia-compliant investment products: Mutual funds and ETFs (exchange traded funds) are very important products for the Islamic economy. These products allow anyone, anywhere in the world, to participate in investments without the need to compromise on their personal values. ETFs make it even easier and cheaper for anyone to invest. SP Funds is proud to be at the forefront of this industry.
- Islamic financial advisory: Throughout North America, the demand for Sharia-compliant financial advisors has been strong. Firms like Shariah Portfolio started decades ago to meet this need and now the industry has grown to include both larger firms and scattered individual advisors who have stepped up to meet the needs of Muslim investors.
- Sharia-compliant mortgages: Muslims have often felt left out of the ability to own a home or finance a major business opportunity. Fortunately, many Sharia-compliant lending solutions have now presented themselves and are allowing people to take advantage of opportunities they may not have had before.
Concept of Money in Islamic Economics
Money is simply a medium of exchange with no intrinsic value in and of itself. That is why the concept of trying to make money from money (ie. taking or giving interest) is prohibited in Islamic banking. This means that anyone wanting to profit from an endeavor will have to participate as a partner rather than a lender. This leads to the idea of shared risks. Islamic economics encourages partnership rather than debt.
Future of Islamic Banking in the USA
Here in North America, we are witnessing the beginnings of a growing and robust Islamic banking industry. Many smaller companies have risen to meet the needs of Muslims in all areas including investments, loans, estate planning, etc. These companies are continuing to grow and become even more relevant over time. Larger financial firms are taking notice and looking for ways to create their own offerings. Muslims consumers are going to be the winners here as the industry continue to develop and mature with more and more offerings.