THE market for Shariah-compliant products for Muslims is wide, varied, and full of potential – and boy, do people know that. Wealth management company Farringdon Group Private Wealth Managers are tapping into the market by introducing Asia’s first Shariah-complaint “robo-advisor” to help customers online.
The Kuala Lumpur-based Farringdon Group plans to launch the online advisory system in December. The robo-advisor, called ‘Algebra’, will provide automated portfolio management advice based on algorithms without the help of people, reports Deal Street Asia.
Farringdon said the tool is available to investors globally “with a minimum investment of US$200 per month”. Clients can choose funds from the Islamic Master Select Portfolio, “a strategy with five risk-weighted baskets”, said the company in a statement today.
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CEO Stuart Yeomans was quoted saying: “‘Algebra’ beings together the sound investment principles of Shariah-compliant funds with the next generation of investment tools.”
In Islamic banking, a number of rules apply in order for a financial service to be considered Shariah-compliant. This means Muslims are prohibited from buying stocks that could possibly derive income from anything haram, such as gambling, alcohol, tobacco, pork products, adult entertainment, or military equipment. Some regular financial instruments, including debt-financing, derivatives, and interest, are also restricted.
Although Islamic banking still only represents a small fraction of the banking assets of Muslims, an Ernst & Young report shows that globally, the Islamic banking industry profit pool is expected to reach US$30.3 billion by 2020. The market for Shariah-compliant services is growing in demand, and in Southeast Asia, Malaysia has been the country most-involved in these efforts.
Other than a Shariah-compliant browser called Salam Browser, the world’s first Shariah-compliant airline, Rayani Airlines, was launched and shut down within months due to a breach of aviation regulations earlier this year.
Farringdon Group’s plan to tap into the demand for such services will probably last longer, given that the market opportunity for such a product as ‘Algebra’ is worth US$11.5 trillion.