Why islamic finance?

adminonDecember 17, 2022February 19, 2023Leave a Comment

The Islamic finance industry has grown rapidly in recent years. (Image: Shutterstock.com/kenary820)

Islamic finance is defined as a banking or financing activity that is in accordance with the Shariah, its interpretation and practical application through the development of Islamic economics. Felice Giuggioli provides insight into Sharia-compliant investing in Reyl Market Insight.

The Sharia-compliant investor seeks only an "acceptable" loan Profit. The reason Islam governs every aspect of a Muslim's life, even those aspects that a non-Muslim would consider outside the scope of the religion, lies in the word "Islam" itself, which literally means submission, submission to the will of Allah. Profit is acceptable only if its creation respects the rules of Sharia law, which are based on the protection and preservation of religion (faith), life, sanity, property and possessions (wealth).

This is the background that sheds light on the concept of Islamic finance, an approach based on the main prohibitions in Islam, which rests on four pillars: Riba (prohibition of interest), Gharar (prohibition of excessive insecurity), Maysir (prohibition of gambling) and Haram (prohibition of investment in prohibited activities such as gambling and commodities such as alcohol and pork etc.).

The Islamic finance industry

"The Islamic finance industry has grown rapidly in recent years, evolving from a niche market to an influential segment in the global financial landscape. The growth of the sector has been fueled by the growing Muslim population and increasing ethical credibility after the 2008 financial crisis", Says Felice Giuggioli, Solution Center – Senior Advisor at Reyl.

As he further explains. the Islamic finance industry recorded an average annual growth rate of 9.4% during 2014-2020, with peak growth rates of 14% and 15% in 2019 and. 2020. The overall size of the Islamic finance market can be easily estimated by looking at the components of the Islamic finance industry, he said:

1,595 Islamic financial institutions
1,008 Islamic finance education providers
1'235 Shariah scholars
844 Islamic finance events
47 regulations
2,878 Research work on Islamic finance
128 ESG/CSR USD bin disbursed
11'856 News on Islamic finance

The global market for Islamic finance remains largely concentrated in Iran, Saudi Arabia and Malaysia, which together accounted for 71.7% of total assets in 2020.

Islamic banking has increased its presence in many member countries of the International Monetary Fund (IMF) and has become systematically important in Asia and the Middle East. Compared to other Islamic products, Islamic banking accounts for 70% of the market share. Similarly, the expanding global sukuk market is supported by the worldwide networking of issuers and investors.

Islamic sustainable finance

"The Quranic concept of fealty over the earth, which emphasizes humanity's responsibility for the earth's resources and the preservation of prosperity, aligns well with the principles of sustainability, which advocate that companies have a positive impact on the environment, economy and society", says Giuggioli.

Sukuk in renewable energy and other environmentally friendly assets amounted to an issuance volume of 5.5 billion. USD in 2020 and to an additional 7 billion. USD by September 2021 – a boom in the near future, according to the expert.

In line with this growing trend, Reyl has been active in sustainable Shariah-compliant investing since 2020, arranging and structuring green Shariah-compliant investments, he said. "This also applies to the Premium Alziraea Fund (Prestige Group), launched in 2022, and the Asteria Planet Shariah Fund, a joint development of Reyl and Asteria, its impact investing subsidiary", Giuggioli says.

In 2018, Mexico's GDP was $1.2 trillion. (Image: Pixabay)

Given the tense situation between Mexico and the U.S., the emerging market faces significant challenges. MainFirst's Cornel Bruhin says investment opportunities in the energy and financial sectors can be found there, relatively independent of the U.S.

A new president, low growth in the first quarter of 2019 and tensions with the U.S. over immigration and trade: Mexico faces a number of challenges. Not least in view of the tense situation with the USA, many investors are currently rather negative about the markets in the Latin American country, says Cornel Bruhin, fund manager of the MainFirst Emerging Markets Corporate Bond Fund Balanced. However, he still sees interesting investment gems in Mexico – especially in the energy and financial sectors: "Oil and gas, electricity and finance are only slightly influenced by the US economy. Tourism as well as export business can even benefit from a weaker Mexican peso, as services and goods are mostly paid for in U.S. dollars, but their operating costs are in pesos", Bruhin points out. Thus, if you know the companies well, there may even be opportunities to expand positions.

In addition, the U.S. and Mexican governments have reached an agreement based on a deal negotiated over the past several months. Even if Trump threatens tariffs again, he said they are unlikely to be imposed. Because they would hit U.S. consumers significantly, and the U.S. auto industry would suffer especially, Bruhin said. In addition, Mexico is the third largest trading partner of the U.S. and tariffs would also jeopardize the new United States-Mexico-Canada Agreement (USMCA), he adds.

Heavyweight among emerging markets

Overall, he says, Mexico is increasingly becoming a heavyweight among emerging economies. Its gross domestic product was $1.2 trillion in 2018, putting the country in 15th place, just behind Australia at $1.4 trillion. Mexico is also one of the big players in the export business and has free trade agreements with 46 countries, more than any other country. It produces and exports the same amount of goods as the rest of Latin America combined, and: "Mexico's main exports are not raw materials, but manufactured goods such as cars, electrical appliances and computers.", Bruhin emphasizes.

In recent years, he said, many reforms by the previous president, Enrique Pena Nieto, helped reduce dependence on oil – it used to be ca. 40 percent and now only 20 percent of government revenues. The new President Andres Manuel Lopez Obrador, or "AMLO" for short called, wants to drive this development and plans to build two new refineries, renovate six existing ones and spend 4 billion. Provide U.S. dollars for new exploration. "These investments are urgently needed to restore margins and boost production", explains Bruhin. AMLO's goal, he said, is to increase production from the current 1.9 to 2.5 million barrels per day within two years.

Exploiting tensions

Investment opportunities in Mexico that are relatively independent of the USA can be found, for example, in the energy sector. The company Saavi Energia is the fourth largest independent energy producer in Mexico and has been active in the market for over 20 years. The majority are commercial and industrial customers, 92 percent of whom remain in Mexico. This makes cash flows quite stable and predictable. The yield on the recently issued bond is currently 6.3 percent.

The financial sector is also home to interesting, innovative financial companies such as AlphaCredit and Unifin Financiera, which give borrowers access to credit online and generate returns of over 10 percent. "As active managers and value investors, we keep seeing gems here and will analyze whether we can use the tensions as buying opportunities", says Bruhin.

If you want to open a securities account, you need to consider a few things. But even after opening, there are a few things to keep in mind if you don't want to make losses. One point that should not be underestimated is the monitoring of the securities portfolio.

Monitoring the securities portfolio is also called portfolio tracking. But why do more and more investors want to monitor their own securities portfolio? Why is the overall performance of the portfolio so important??

Learn how free portfolio performance monitoring works with Rentablo here.

Why monitoring portfolio performance with Rentablo is so important?

With Rentablo you can follow the development of your investment. Monitoring allows one to compare individual investments and create an overview for oneself. At the end of a monitoring period with Rentablo, you can assess whether a particular strategy has paid off.

Monitoring portfolio performance is particularly interesting for investors who regularly buy and sell shares. Rentablo can also be very interesting if one uses several depots. Finally, the number under the deposit does not really represent the return on investment.

Even dividends are not included in this figure. This leaves you ignorant and unable to accurately say whether or not the investment has paid off. But above all, this information can be very important if you want to trade stocks successfully.

If only low returns have ever been generated, Rentablo will alert you to this fact. Of course, tracking also shows actions that were successful. Now, before one starts monitoring portfolio performance with Rentablo, one needs one or more securities accounts.

A securities account can be used to buy stocks, ETFs and many other financial products.

Useful information about Berlin Rentablo Ltd

Rentablo is a portfolio performance monitoring software developed by Berlin-based Rentablo GmbH. Rentablo provides investors with a free, powerful online financial manager. The various tools help to make evaluations and analyses.

Those who use Rentablo can monitor their investment goals at any time and make adjustments if necessary. Rentablo is completed by integrated social features. In addition, peer group comparisons and exchanges with other investors provide that little bit extra.

The company offers all investors an attractive rate for the purchase of investment funds. In addition, the following services are included: Free software for portfolio management, free financial manager with asset overview, free budget book and countless cashback models. In addition, one can be individually advised, whereby this is done only against a small fee.

General data on the Rentablo software

Rentablo offers multiple functions. Those who choose this software can use portfolio tracking, a budget book and the cashback system. Keeping track of income and expenses at all times is what many people want to do.

With Rentablo's budget book this is easily possible. No matter which bank you are with, all accounts can be connected to Rentablo. But with Rentablo you not only have a good overview of your finances, with the software you can also easily save money.

Exactly how much you can save depends on the products, however. However, you can also calculate in advance whether the tool is worthwhile for you. The tracking tool is particularly popular with investors.

In addition to the tracking tool, there is also a tool that analyzes the portfolio and a tool that measures performance. The third tool can be used to manage the securities account. Keeping track of your finances anytime, anywhere with the management tool.

Whether as an app or a web application: Rentablo gives you all the important data. If you not only want to keep track of your finances, you can of course also enter your insurance policies into the tool. In addition to the free version there is also a paid version.

In the paid version, one can, for example, manage bank details. In addition, you benefit from stock fundamentals and personalized support.

Create automatic solutions with Rentablo

Many other solutions for monitoring portfolio performance run perfectly, but you always have to take care of the settings yourself. Better is an automatic solution. Rentablo offers such an automatic solution.

With Rentablo you can easily and quickly get the current situation about your portfolio. So one has the possibility to control one's asset accumulation, to reduce costs and to optimize returns. With Rentablo, all processes can be automated so that one no longer has to enter everything manually.

For those who do not always want to do the small tasks themselves, this is the perfect option. Through the quite well thought-out software Rentablo one can get away from the standardized excel sheet. In addition, one needs to have a good overview of one's total assets as well as overall performance.

The free version is perfectly sufficient to keep a good eye on one's own performance. In addition, Rentablo offers a good community in which one can exchange information and clarify questions.

The Islamic finance industry

Islamic sustainable finance

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