Dubai: Though Sharia-compliant investing has grown rapidly in the last five years, it has remained largely restricted to the wealthier sections of investors.
And if the market caters to this high net worth kind of clientele, there is a danger of it fizzling out in the next five years, said Alka Banerjee, vice-president, global equity, Standard & Poor's.
"At some point it will lose its appeal if it doesn't reach down to the retail level," she said on the sidelines of Islamic Funds World conference in Dubai. "We have to make it affordable for all the retail clients to make it really successful."
While there are various numbers quoted, from $500 billion to $750 billion in Sharia-compliant funds, it is still a relatively small market, though growing fast. And most of the products and services that are available are still limited and come with a high fee structure.
"To go to retail you have to have a lower fee structure and it hasn't happened yet. Infrastructure is not there for everybody to use and so it is still expensive," Banerjee said.
"Quite a lot of work has gone into providing new structures. But more inexpensive ways of doing this, such as developing systems or technology, will reduce fees. That is the key."
There is a demand for Islamic products and sukuk, plain equity funds and now more and more structured products are available.
"But," she said, "we don't have the full breadth of products and services that are available to the conventional investors. Unless you have the full range of products offered from insurance to mortgage to REITS to income funds and equities - in equities all the kinds of investing opportunities - and of course bonds that are still in their early stages, it will not grow fast enough. But we will probably get there eventually. We are in appositive frame of mind."
Also, various interpretations of the Sharia hinder faster expansion, she said.
"There are not many people who are well versed in finance and Islamic law. A lot of work has been done, but more needs to be done," said Banerjee.
“ Gulf News “