No speculation, no interest. The traditional stock exchange must be forgotten: investors enter directly into the capital of the companies they choose to bet on and share the profits as well as the losses. Those of Islamic finance are rigid precepts, but the credit crunch is perhaps even more so. For this reason, Italian companies could find in the resources of those who follow Sharia a "alternative funding channel“. This was stated by Paolo Balice, president of the Italian Association of Financial Analysts (AIAF), who on Friday organized a conference in Rome entitled "Foreign investments in Italy: the opportunities for Islamic investments".
According to Enrico Giustiniani, AIAF partner, "Sharia-compliant finance is a niche today, but its weight is becoming increasingly significant". Of course, there are difficulties. Islamic banks and funds must submit to two orders of controls: on the one hand, the laws of the countries where they decide to bring their money, on the other, God's Law, which imposes severe limitations. Not only speculation is prohibited (goodbye to bonds, shares and derivatives), but also operate in sectors considered sinful, such as weapons or alcohol. There are even authorities, the "Sharian Boards", which verify the compliance of contracts with these principles.
In choosing the subjects in which to invest, however, it is unthinkable to exclude all companies that have to do with interest rates a priori. Islamic investors therefore focus on companies that enjoy the more balanced debt ratios, as evidence of a lower speculative trend. “Sharia compliant” companies are therefore particularly solid and demonstrate a high capacity for resistance in times of crisis.
On the other hand, "the criteria imposed by Islamic law severely limit the range of companies with which observant investors can have relationships - Giustiniani underlines - to the point that most Italian companies are immediately ruled out for excessive debt".
According to an Aiaf study, of the 278 companies listed in Milan in October 2012, only 25 could be considered "Sharia compliant" (9%), while another 189 (68%) were excluded due to too much debt. Among the promoted titles, the most represented securities were those of companies a medium-small capitalization, mostly active in leading sectors of Made in Italy. Two examples above all: Landi Renzo and Tod's.
It remains to be seen whether Islamic investors are really interested in companies in our country. Apparently not, at least for the moment: “To date, the flows are oriented much more decisively on the domestic front, in particular towards the Malaysian market – explains Luca Filippa, managing director of the Ftse Group -. 'Sharia compliant' investments in the international theater are still under development”.
It would be possible to adopt measures to stimulate the influx of Islamic capital, but on this terrain cultural differences represent an obstacle. Particularly when it's in play the Italian taxman. Paola Jackets, head of the ABI tax office, recalls how “in some countries laws have been introduced that allow the creation of 'Sharia compliant' financial products. In Italy this does not happen, because Islamic bonds - which do not guarantee the repayment of the capital on maturity - are classified as atypical securities and are therefore penalized by the tax authorities. Our legal system has never implemented this kind of operation”.
