Islamic investments on the Romanian stock market

British company UMEX Securities, which offers trading services compliant with the Sharia (the Islamic law) intends to extend its team in our country, its representatives told us. The local office of UMEX Securities, which was opened two years ago and currently employs 12 people, conducts research, marketing and administrative (back-office) activities, as well as servicing the current client portfolio, according to the company. The goal of the firm's investment in Romania is to increase its exposure to the emerging markets, but local customers are not a specific target for the UMEX. "Our mission and aspiration are to obtain global recognition among Muslim households, Islamic companies, the international investor community and communities with ethical conscience", the company officials told us.

UMEX customers have not expressed interest in a specific sector of the Romanian stock market, as they are more concerned with the trading of corporate stocks that comply with the Sharia, according to the quoted source. The objectives of the local division are confidential, according to the company's representatives.

UMEX Capital Markets Group, which owns UMEX Securities, provides electronic platforms that offer market information and news concerning investments which are considered ethical, ecological and compliant with the Sharia, as well as individual trading solutions.

The company also ensures the "filtering" of the investment opportunities, in order to determine which ones comply with the principles of Islamic finance. There approximately 10,000 companies that comply with the conditions, according to UMEX. The analysis criteria are based on a Fatwa (interpretation) issued by the president of the Sharia Supervisory Board of the company, Sheikh Hussain Hamid Hassan, which comprises the lines of business and the financial criteria which must be met for a company to be compliant with the Muslim law.

The forbidden activities include the production, distribution and sale of products that contain alcohol or tobacco, pornographic material, products that contain pork meat or other types of meat that are not allowed, weapons, gambling, financial services that carry interest, as well as any other activity which is not allowed by the Sharia Supervisory Board.

Another service which the UMEX provides is that of "purification" of dividends, applicable in the case of companies that comply with the Sharia but which obtain part of their income from activities which do not comply with the Islamic teachings.

Islamic finance implies moral and behavioral norms derived from the Quran, the taxation of wealth and the restriction of charging interest on granted loans. Also, speculative transactions are not accepted.

The Islamic banking system is based on the sharing of risk between debtors and creditors. In the case of real estate transactions, instead of lending to a person to allow them to buy a property, the bank may acquire that property itself and sell it to them at a higher price, without penalizing them for missing their payments.

The value of the assets of Islamic banks has reached 1.55 trillion dollars, at the end of last year, according to Ernst&Young, which estimates that they will exceed 2 trillion dollars in 2015.

The investment managers in the Islamic finance system manage assets of over 1 trillion dollar. According to UMEX, there are currently 700 Islamic investment funds.