An Indian finance company plans to tap funds from Muslim investors for the first time. India is home to one of the largest Muslim populations in the world.
Indian finance company Parsoli Corporation is introducing the country's first Islamic mutual fund in August to meet demand from the country's 150 million Muslims who want to make investments based on Islamic religious laws.
Shariah law prohibits earnings from alcohol, gambling and interest. This makes certain businesses such as breweries, casinos, entertainment companies and banks taboo for observant Muslim investors.
Investment companies package portfolios of stocks into mutual funds, and the sell shares in the funds to private investors.
Islamic mutual funds filter out companies incompatible with Muslim religious law, allowing Muslims to invest in stocks with a clear conscience. Such funds already exist in Middle Eastern countries, the United States and Britain and they are marketed to wealthy Muslims in those countries.
Parsoli head, Zaffar Sareshwala, says the Indian fund will be different. It will tap a huge market of middle-class Muslims in South Asia who want to benefit from the growing Indian economy.
"The minimum entry level for most of these funds is not less than 25,000 to 50,000. So most of the lower middle-class or middle-class Muslims, it is out of reach for them," he said. "We have gone very retail where we can target the smallest of the small investor on the street."
The fund is drawing up a list of 40 companies that are compliant with Muslim laws, such as information technology and pharmaceutical companies.
Mr. Sareshwala says his company also plans to seek customers in the Middle East who are hesitant about making investments in the United States and Europe following the September 11 terror attacks in New York.
"Particularly the Middle Eastern population has become quite wary about United States," said Mr. Sareshwala. "They also have some fears, of course to a lesser extent than [the] United States, but also in the European Continent. After that, then India is the main destination."
Financial companies estimate that Islamic funds have attracted investments worth more than $200 billion worldwide.