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Shariah Screening of Stocks in Maldives.

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Shariah screening of stocks is essential for Muslim investors to understand whether they could invest in shares of a specific company or not within the ambit of Shariah. From a Shariah perspective, there are three kinds of companies operating in the world which is derived by looking at the types of activities they engage in. The first kind of companies are those companies whose main business activities conducted does not confirm with Shariah. For instance, if a company’s main activity is providing riba-based loans or conventional financing, then it will be prohibited for a Muslim to invest in such a company and receive dividends. This is because, buying a share of a company means that one will receive dividends from the profits made by the company and if the company engages in Shariah prohibited activities; the dividends received will be tainted with money made from Shariah non-compliant activities. The second kind of companies are those companies who engage in hundred percent Shariah compliant activities and one may ask whether in reality such companies exist in the world today or not. The typical example of such companies could be Islamic financial institutions that follow Shariah governance principles by implementing internal Shariah control mechanisms. One of the features that could be found in such a companies is having an internal Shariah Supervisory Board (SSB) or a Shariah Committee to ensure that the operations of the company is in compliance with Shariah. There is no Shariah issue in investing in such companies as their activities are in line with Shariah and in this case, by investing in shares of such a company, the dividends received would be Shariah compliant. The final kind of companies in this regard are the companies that engage in mixed activities whereby it is difficult to determine whether the majority of the activities they conduct is Shariah compliant (halal) or Shariah non-compliant (haram). Shariah screening of stocks is conducted for companies engaged in mixed activities to determine whether a Muslim can invest in shares of such companies. For the other two kinds of companies, Shariah screening is not required as even without conducting a screening, one is able to determine the Shariah compliant status of them.

What is Shariah Screening?

Shariah screening is conducted for companies engaged in mixed activities to determine the Shariah status of such companies using a process and benchmarks enacted by competent Shariah scholars using ijtihad. Generally, there are two stages involved in Shariah screening of stocks. The first stage is qualitative or business screening and the second stage is quantitative or financial screening of stocks. Apart from screening process, a purification process is also adopted by some of the Shariah screening bodies to purify the dividends received. The Shariah screening methodologies adopted in the world is not uniform as different Shariah screening authorities/bodies adopt different methodologies. Today in the world, Shariah screening is conducted by regulatory authorities in some countries like Malaysia and Maldives while in other parts of the world it is the companies such as FTSE and Dow Jones who engage in doing so. Islamic finance standard setting body, Accounting and Auditing Organization for Islamic Financial Institutions(AAOIFI) has also formulated a Shariah screening criteria for the purpose.

Shariah Screening Criteria of Capital Market Development Authority of Maldives

The screening of stocks in Maldives is found in the Regulation on Screening of Islamic Securities (2013/R-55) enacted under the Maldives Securities Act 2006 by Capital Market Development Authority (CMDA). This regulation sets out the shariah screening criteria used in Maldives by CMDA for the listed companies. In Maldives, it is the regulatory authority of the stock market who conducts the Shariah screening for listed companies who apply for the service. As such, it shall be noted that in Maldives, it is not all the companies listed in the Maldives stock exchange that will go through the shariah screening process. As per the regulation, the listed company shall apply to do the screening and a prescribed fee under the regulation shall be paid by the applying company. A company which is endorsed as selling shariah compliant equity will be screened semi-annually by CMDA and if the company does not pass the screening criteria at any time, the company will be classified as a ‘disqualified company’.

There are three stages involved in shariah screening of equity in Maldives. The first stage is the qualitative screening. The prohibited list of activities according to the said regulation are financial services based on riba (interest), gambling, manufacture or sale of non-halal products or related products and any other activities deemed non-permissible according to the Shariah principles.  As such, according to the said regulation, none of these activities shall be the core business or a substantial part of the business of the company. It is imperative to note that this is a mandatory requirement for the company to pass through the first stage of shariah screening. The second stage of screening is conducting quantitative screening of the company where it is checked using the financial information of the company received that the revenue generated from business which consists any of the activities listed in the prohibited list of activities , does not exceed 5% of the total revenue of the company; the total amount of interest bearing debts of the company does not exceed 33% of the total tangible assets; and the total amount of interest bearing receivables does not exceed 33% of the total assets.  The final stage of shariah screening is that, after the qualitative screening, if there is any tainted income of the company revealed, that tainted income portion shall be purified by giving to charity.

The only shariah compliant companies listed in Maldives Stock Exchange are Amana Takaful Maldives Plc and Maldives Islamic Bank Plc.

Conclusion

Shariah screening process is important to understand the Shariah compliant status of a company. Through this process the potential Muslim investors can decide whether they could invest in shares of a company and receive dividend which is halal.  For Muslims, it is imperative to know that the business activities they engage in are Shariah compliant or not as they need to be accountable for their actions not only in this world; but in hereafter as well. As such, Shariah screening of stocks is an important mechanism that needs to be understood by the existing shareholders and potential shareholders of the companies.

 

Dr. Aishath Muneeza is an Associate Professor at the International Center for Education in Islamic Finance. 

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Economy thrives, projects speed ahead despite challenges

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Before President Dr. Mohamed Muizzu assumed office, the economic condition of the Maldives was significantly deteriorating. Experts attribute the primary reason for the depreciation of the Maldivian currency to the excessive printing of money by the previous administration.

According to statistics from the Maldives Monetary Authority (MMA), more than USD 518.04 million was printed over the last three consecutive years, marking a historic high compared to USD 388.53 million printed over 40 years.

Additionally, upon assuming office, President Muizzu inherited a heavy debt burden. The total debt amounted to over USD 7.71 billion, with a significant portion owed to companies for upcoming parliamentary elections and previously initiated projects, totaling USD 584.88 million.

Despite these challenges, President Muizzu has been proactive in rejuvenating the Maldives’ economic status. Within three months of his tenure, USD 35 million has been deposited into the sovereign development fund. The President estimates that more than USD 100 million will be deposited into the fund by the end of the year.

discontinuation of printing money has been regarded as a pivotal step towards economic progression for the Maldives

President Muizzu’s commitment to revitalizing the Maldivian economy without resorting to the printing of money is indeed a significant pledge. By discontinuing the practice of printing money, the government aims to address economic challenges while ensuring fiscal responsibility and long-term sustainability.

The decision to immediately halt the printing of money upon assuming office underscores President Muizzu’s determination to prioritize sound monetary policy. This move reflects an acknowledgment of the risks associated with excessive money printing, including inflation and currency devaluation, and signals a commitment to addressing these challenges through prudent financial management.

Furthermore, President Muizzu’s plans to boost the country’s prosperity and income by reducing reliance on loans and settling debts owed to both foreign and domestic entities demonstrate a holistic approach to economic revitalization.

attracting a vast pool of investors

The efforts of the present administration to attract a wide range of investors reflect a strategic approach to addressing the significant development needs of the Maldives. By engaging in investment forums both domestically and abroad, the government has been successful in showcasing the diverse investment opportunities available in the country.

The decision to host investment forums in countries like China and the UAE demonstrates a proactive approach to international investment promotion. These forums serve as platforms for highlighting the potential for investment in key sectors such as infrastructure, tourism, and hospitality. By creating awareness about these opportunities, the government aims to attract investors who are interested in contributing to the development of critical projects, including the establishment of bridges, domestic airports, and resorts.

Over 500 projects underway

The continuation of 527 projects, including those that faced interruptions due to non-payment to companies during the government transition, underscores the commitment of President Muizzu’s administration to ensure continuity and progress in ongoing initiatives. Despite the challenges encountered, efforts have been made to address issues such as delayed payments and optimize project expenses to keep important projects on track.

It’s notable that the current year’s budget, initially approved by the prior administration, may not have fully aligned with President Muizzu’s priorities and rules for project implementation. This misalignment may have resulted in some projects not receiving adequate budget allocations or not being included in the budget at all. However, the administration has taken steps to optimize expenses and prioritize projects that align with President Muizzu’s vision for development

Initiatives to enhance economic growth and foster sustainable growth

The International Monetary Fund (IMF) has recognized President Muizzu’s initiatives as some of the strongest implementations seen among world leaders, emphasizing their potential for substantial progression. The IMF applauded the government’s decision not to overdraw the government’s account and expressed its readiness to provide any assistance needed. This endorsement from the IMF underscores the effectiveness of President Muizzu’s economic policies and strategies.

Additionally, the Maldives National Chamber of Commerce and Industries has voiced support for the government’s initiatives, recognizing them as favorable for the Maldivian future as a growing economy. Despite challenges such as a shortage of dollars for small businesses, the Chamber remains optimistic that the government’s decisive actions will lead to economic growth and stability in the value of the dollar.

The government has projected a 5.5 percent economic growth rate for this year, indicating confidence in the trajectory of the economy under President Muizzu’s leadership. Furthermore, President Muizzu revealed a significant reduction in the country’s primary debt balance, from USD 103.61 billion last year to USD 8.68 million in the current year. This reduction in debt, achieved within just four months, demonstrates the government’s commitment to fiscal responsibility and its ability to effectively manage the country’s finances.

Overall, these developments indicate that the government’s economic rejuvenation efforts have been successful, earning the confidence of global financial institutions in the Maldives’ future economic prospects.

Source(s): PsmNews

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Council to issue 14 plots in Hanimaadhoo for tourism development

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Haa Dhaalu atoll Hanimaadhoo island council has announced a 50-year lease on 14 plots from the island for tourism development purposes.

In the announcement put on gazette by the council, it has opened bid opportunity for interested bidders to lease the plots from Hanimaadhoo’s tourism zone.

The council has announced lease of 5,000 square feet plots for a 50-year lease period, for which interested proponents are required to register for the bids before 13:00hrs on April 30th, 2024.

For proponents wishing to mail the bid registration form, they can mail it to info@hanimaadhoo.gov.mv.

Proponents must furnish a bid registration, non-refundable, fee of MVR 1,000 for the 5,000 square feet plots. If proponents wish to acquire more than one plot, then they must pay MVR 1,000 per plot.

If the council annuls the announcement, it said the registration fees will be refunded to the proponents, and added the proponents will receive bid books upon registration.

Bid acceptance and opening are scheduled for April 30th, 2024 as well.

While the Hanimaadhoo International Airport is under an expansion project, the island has been putting efforts to increase its local tourism activities as well.

During his last month visit to Hanimaadhoo, President Dr. Mohamed Muizzu said the airport’s expansion will contribute towards increased tourism activity in the island.

He also said sustainable development cannot be achieved without individual development of key regions which include Hanimaadhoo as well.

Source(s): sun.mv

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Maldives signs with Chinese firm for Laamu Integrated Maritime Hub Project

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Agreements pertaining to the Laamu Integrated Maritime Hub Project have been signed with a Chinese company, aiming to accomplish the commitments made by President Dr. Mohamed Muizzu. The contract laying groundworks for this transformative endeavor was signed by the Chief Executive Officer (CEO) of Maldives Ports Limited (MPL) Mohamed Wajeeh and the General Manager of CAMC Engineering Li Wei Wei.

Outlined within the agreement are details of six subprojects:

  • Launching offshore bunkering services
  • Developing a cruise terminal
  • Establishing a super yacht marina
  • Developing Gaadhoo as an Eco-resort
  • Establishing a facility to store regionally produced food items
  • Building a transshipment port

Providing insight into the developmental project, CEO Wajeeh underscored MPL’s ongoing efforts to secure a relevant market. He envisioned attracting international shipping lines to the transshipment port, anticipating a significant economic boost from even a single shipping line. Discussions are also underway with cruise operators to initiate cruise terminal operations.

MPL disclosed proposals from two companies to assist in providing bunkering services. While Vitol Bunkering, currently involved in developing bunkering facilities in Haa Alif Atoll, is one of them, the second company expressing interest hails from Dubai.

The establishment of a commercial port and a harbor including logistics is a commitment outlined in the governments’ manifesto.

Source(s): PsmNews

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