Our Syariah Compliance

Our Three (3) Shariah-compliant investments for consideration in investment:

The principles of Shariah investing that the Cooperative follow don’t prevent an investor from operating profitably. The end goal of Shariah-compliant investing is the same as any other investment, which is to seek capital gains for its investors.

1. The screening methodologies used by the board are as follows:

a. Business activity screening
The following business screenings have to be fulfilled to ensure that the Cooperative is Shariah- compliance:

Cumulative revenue from non-compliant activities and non-operating interest income should not exceed:

  • 5% of total income, applicable to the following business activities
    conventional banking;
  • conventional insurance;
  • gambling;
  • liquor and liquor-related activities;
  • pork and pork-related activities;
  • non-halal food and beverages;
  • Shariah non-compliant entertainment;
  • interest income from conventional accounts and instruments;
  • tobacco and tobacco-related activities; and other activities deemed non-compliant according to Shariah.

20% of total income, applicable to the following business activities

  • hotel and resort operations;
  • share trading;
  • stockbroking business;
  • rental received from Shariah non-compliant activities; and other activities deemed non-compliant according to Shariah.

b. Financial ratio screening

The following screens have to be fulfilled to ensure the Cooperative is Shariah-compliance:

  • Cash over Total Assets
  • Cash will only include cash placed in conventional accounts and instruments, whereas cash placed in Islamic accounts and instruments will be excluded from the calculation.

c. Debt over Total Assets

Debt will only include interest-bearing debt whereas Islamic debt/financing will be excluded from the calculation. Both ratios, which are intended to measure riba and riba-based elements within the Cooperative’s balance sheet, will be lower than 33%.

2. Islamic real estate investment trusts (REITs)

The Cooperative will look towards Shariah-compliant iREITs as a means of diversifying the portfolio into properties while still complying with the requirements of an Islamic fund. This will be a new investment opportunities in collective real estate investments through a Shariah-compliant capital market instrument. Popular property types within Shariah-compliant iREITs include industrial properties such as factories and warehouses, and healthcare properties such as hospitals and nursing homes. The Cooperative in order to conform with Shariah-compliant REITs will refrain from hospitality and entertainment-oriented properties such as hotels, serviced residences, alcoholic beverages dealers, karaoke lounges, wine cellars and gambling premises.

3. Islamic venture capital

A venture capital is a form of equity financing by the Cooperative in which the investor actively participates in the venture being financed. The objective is to add value to the recipient company during the financing period, so that the venture capitalist can sell his share later on with positive returns. From an Islamic point of view, venture capital is based on equity financing (sharikat’inan). Combining economic viability and Islamic preference, the following Shariah principles and concepts will apply to the Cooperative Islamic venture capital investments:
i. Musharakah
A partnership between two parties (or more) to finance a business venture whereby all parties contribute capital. If the venture is profitable, the profit will be distributed based on a pre-agreed ratio. In the event of a loss, the loss shall be shared on the basis of capital contribution.

ii. Mudharabah
A contract made between two parties to finance a business venture. The parties are a rabb al-mal (investor) who solely provides the capital and a mudharib (entrepreneur) who solely manages the project. If the venture is profitable, the profit will be distributed based on a pre-agreed ratio. In the event of a loss, it should be borne solely by the investor, to the extent of the capital contribution.

iii. Wakalah
A contract which gives the power and rights to another party to act on their behalf, based on the agreed terms and conditions. The activities of the venture companies will be Shariah-compliant and non-permitted Shariah activities include:-

  • financial services based on riba (interest);
  • gambling or gaming;
  • manufacture or sale of non-halal products;
  • non-permissible entertainment activities;
  • manufacture or sale of tobacco-based products;
  • stockbroking or share trading in Shariah non-compliant securities;

The Cooperative’s Shariah-compliant investment can be diversified and perform on par with conventional investment. These products are also flexible instruments which are open to investments across all investor classes, irrespective of their religious beliefs. The Shariah-compliant investment and financial products are expected to grow by leaps and bounds over the years, and to not miss out a piece of the pie, it pays to understand how they work.


*Investment in financial services, tobacco, breweries and cinemas are examples of non acceptable industries for investment according to Shariah ethical guidelines