IslamicFinance.de

The growing popularity of Islamic finance has led to the constant development of new Shariah-compliant investment products. Most of those products have been developed and popularised in Malaysia. Islamic Exchange Traded Funds, or Islamic ETFs have become increasingly popular among both institutional and retail investors globally. They have low management costs, high liquidity, relative safety and solid appreciation potential as a mid- to long-term investment. The main difference from conventional ETFs is that Islamic ETFs track only benchmark indices that consist of Shariah-compliant stocks or assets. An Islamic ETF is managed strictly under Shariah principles and overseen by an appointed Shariah committee. This naturally increases costs and results in higher fees compared to conventional ETFs. To tap the huge potential, Islamic ETFs need to be made cost-effective and get incentivised by governments to attract both institutional and retail investors. In the Gulf Cooperation Council (GCC) countries ETF is relatively new. In the GCC more promotion is needed to bring Islamic ETFs out of their niche.