‘Asset rich, but cash poor’

“We are asset rich, but cash poor,” says Dr Shamsiah Abdul Karim, Deputy Director of Asset Development at the Islamic Religious Council of Singapore, while speaking at the World Islamic Economic Forum about the fate of Islamic mutual funds in the Muslim world and beyond.

Successful fund management practices, such as awaqf, pension funds and unit trusts across the globe have been pivotal in eradicating poverty and improving the wellbeing of populations across the Muslim world. Yet, for the Muslim world, there are a number of barriers standing in the way of turning these asset-rich funds and trusts into cash.

Islamic endowments (or awqaf) are finding their tradability hindered due to a number of different reasons, most notably: “There are high fees with equity funds, low transparency and a lack of performance. Often, we lose value from high fees,” says Thomas Polson, CEO and founder of US-based Falah Capital.

Speaking at the World Islamic Economic Forum (WIEF) – taking place in Madinat Jumeirah, Dubai, until October 30 – Polson explains the shortcomings of Islamic endowments: “When we think about Islamic mutual funds, they are not as positive as sukuks. Most Islamic funds are in closed markets, so if we don’t live in those markets, we cannot buy them.”

Endowments and pension funds worldwide are invested and draw huge amounts of capital from overseas. But, for Islamic endowments, country limitation is damaging. There are Islamic asset firms looking for profitability and, many agree with Polsen: “There is no reason why you can’t do this out of the US or Europe to benefit the industry as a whole.”

As sukuk bonds gather pace and start attracting foreign investors, WIEF delegates are calling for the same sort of globalization to apply to Islamic mutual funds. Global tradability opens doors to a number of different investors, such as takaful players in less developed markets that do not have access to Islamic mutual funds.

As Dr Karim passionately reiterates: “Awqaf is a vehicle for financing the Muslim community. We need to turn the assets we have into cash so the people can benefit from this. There is a lot of potential for Awqaf.”

“Awqaf is like a sleeping dragon that needs waking up,” adds Abdullah Al Fouzan, Founder and Chairman of The Investor and Security Co., who concludes a session that addresses the growing need to liquidate and globalize Islamic mutual funds.