Morgan Stanley Capital International (MSCI) Barra announced today that it will begin issuing a Shari'ah-compliant index. According to the methodology on their website, the 'sin' screens will be similar to the Dow Jones Islamic Market Index (DJIMI)excluding companies making more than 5 percent of their income from the following business activities:
• Pork-related products
• Financial services
• Weapons and defense-related products
• Adult Entertainment
The financial screens are calculated differently from the DJIMI:
• Total debt divided by total assets less than 33.33%
• Cash plus interest bearing securities divided by total assets less than 33.33%
• Accounts receivable divided by total assets less than 70%
• Total debt divided by trailing 12-month average market capitalization less than 33%
• Cash plus interest bearing securities divided by trailing 12-month average market capitalization less than 33%
• Accounts receivable divided by trailing 12-month average market capitalization less than 33%
One area where there is a significant difference is that the MSCI index adjusts the dividend payouts to 'purify' them by subtracting out a portion representing the share of interest income. The methodology is available on the MSCI Barra website.
Islamic finance commentary
Douglas Clark Johnson, the CEO of New York-based Calyx Financial compares Islamic finance to Eurobonds in their growth potential in the Asian Investor.
The Brunei Times has an opinion piece on the role of intention in Islamic banking to confront skeptics.
An opinion piece suggesting that introducing more Islamic finance in the U.K. will help to create a fairer society
Standard & Poor's (S&P) believes that Islamic finance has changed from being a niche product and is ready to expand significantly across regions and business products.