Dow Jones Indexes, a leading global index provider launched its first Islamic index in 1999 and commemorating its 10th anniversary it hosted a round table discussion on the changing dynamics of global finance and its impact on economies in the Middle East, the growing importance of Islamic finance and the role it can play in stabilizing local economies.
Moderating the discussion, Mr. Jamie Farmer, senior director operations and exchange relations, Dow Jones Indexes, said “2009 marks the 10th anniversary of the launch of the Dow Jones Islamic Market Indexes. This is an important milestone for Dow Jones Indexes who pioneered the space of Islamic indexes and provided institutions with a tool to benchmark the performance of Shari’ah compliant portfolios. To commemorate what we believe has been a decade of successfully indexing Islamic equities, we today commence our worldwide anniversary events with a round table discussion in Dubai.”
Stating that Dow Jones Indexes was the first index provider who developed a method for screening equity indexes according to Shari’ah law, Mr. Sumeet Nihalani, senior director, Asia-Pacific and Middle East, Dow Jones Indexes, said “Dow Jones Islamic Market Indexes were created to serve as an indication or benchmark for institutional investors when deciding their portfolio or comparing the performance of their portfolios. Today, this index family is used as benchmark and basis for many investment products as they reflect investor sentiment.”
The Dow Jones Islamic Market World Index was launched in February 1999 as the first benchmark to measure the performance of a global universe of Shari’ah-compliant investable equities. Over the past decade, the Dow Jones Islamic Market Index series has expanded to more than 100 indexes for all major established and emerging financial markets, regions and sectors. Amongst these are Islamic indexes for the ASEAN, BRIC and GCC regions as well as for global and Malaysian blue-chips.
“Islamic indexing is an exciting yet challenging way of measuring markets and the Dow Jones Islamic Market (DJIM) Indexes play a leading role in further fostering and shaping the Islamic indexing world. Our superior and unique Islamic indexes are widely accepted by market participants around the globe. Dow Jones Islamic Market Indexes have not only been chosen to underlie the first-ever Islamic exchange-traded funds worldwide, but have also won a total of sixteen prestigious industry awards for Islamic index innovation and excellence in the past,” Mr. Nihalani added.
Dr. Nasser H. Saidi, chief economist, Dubai International Financial Centre Authority (DIFCA), said “The sub-prime crisis has led to the extensive collapse of the conventional banking and financial systems leading to a questioning of underlying market mechanisms, corporate governance, regulatory failure and the effectiveness of boards and risk management. Clearly the Basel II framework and self-regulation have failed. We need a new paradigm. Islamic finance, based on partnership, risk sharing and management, embodies the sound principles of corporate governance and ethics and enforces greater transparency and accountability. The global Islamic finance industry was around US$729 billion in 2007, an estimated $840 billion at the end of 2008 and is expected to grow to some $3.5 trillion in the next 5 years.”
“This is a defining moment for international capital markets and the reform of international financial architecture. Global markets remain in crisis despite concerted government and central bank intervention. The financial crisis has led to a globalised severe recession and a sharp reduction in commodity prices, including oil. Downward pressure on stock and real estate prices has continued and asset-backed lending especially mortgages is at a virtual standstill,” Mr. Saidi added.
“Islamic Finance has proved, to date, resilient to financial contagion and crisis. The timing is right for governments responding to crisis to develop and use Islamic finance instruments, primarily Sukuk, as an integral part of public finance, deficit financing and for financing public works and infrastructure. Governments and regulators should seize this historical opportunity to integrate Islamic Finance into the mainstream of banking of finance.”
Stating that Islamic finance is a more robust and reliable option especially with the economic crisis threatening to usher in widespread global recession, Mr. Ali Afshar, senior vice president, Head - Institutional & Investment Banking, Al Hilal Bank said “With the financial crisis further deepening and with its impact being felt in all developed, developing and transitional economies, the relative success and sustenance shown by the Islamic finance industry has been quite noteworthy. Conventional financial institutions and capital markets have been severely affected but the Islamic finance industry has relatively come through unscathed.”
Mr. Afshar further added “The basic principles of Islamic finance that necessitate transactions being backed by tangible assets, prevent it from investing in loans, options, derivatives and hedge funds, prohibit speculation, hence make Shari’ah compliant products less exposed to the potential risks resulting from over exposure and speculation as compared to conventional products.”
The strict industry and financial ratio screenings for Shari’ah compliance defined by the unique and sophisticated methodology of the Dow Jones Islamic Market Indexes have made the Dow Jones indexes the most widely used Islamic indexes by market participants across the globe as a benchmark to measure Shari’ah-compliant investable equities.
Besides launching the first Dow Jones Islamic Market World Index, Dow Jones Indexes were also the first movers in sukuk indexing and combining Islamic with sustainability criteria in the Dow Jones Islamic Market Sustainability Index. Dow Jones Indexes was the first index provider to license its indexes as the basis for the first ever Islamic exchange-traded fund worldwide.
