November 10, 2006
First Islamic Bourse - Dubai & Marketing
An amusing bit of marketing from the out of favour Dubai Financial Market, as it declared it would be restructuring to comply with Islamic finance principals (which largely seem to revolve around the utter devotion to disguising interest as fees and other time linked cash flows).
As the article states:
Many investors in Dubai believe the conversion is primarily a marketing exercise. Islamic principals only exclude companies whose main business is pork, alcohol, arms, tobacco or interest, and state-owned DFM has never fallen into these categories. Furthermore, DFM will continue to list conventional banks after its conversion, with fees from banking stocks paid into a separate pool.The chief motive, analysts say, is that the main Dubai share index has fallen from a peak of 1,267 points a year ago to 379 points yesterday. They argue that bourse officials hope to offset the impact of this vicious bear market by tapping into the current Gulf Arab fad for investments with the "Islamic" tag.
Could not agree more.
However, the (superficially form-driven shallow) religiously (or values) motivated investor does seem to have a bottomless appetite for investments that allow himself to insufferably posture with respect to the rest of the world.
And of course there is always value in posturing. Else people would not own luxury goods.
Posted by The Lounsbury at November 10, 2006 05:38 PM
Filed Under: Biz - Private in MENA
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Come on, disguising interest as something else is really no different to converting income to capital (securitisation), asset valuation to p&l (marking-to-market)...it's all financing, no?
Posted by: Alex at November 12, 2006 12:50 PM
Securitisation is transparent and efficient (for financial actors). It is a means of transfering risk - and often in decomposing risk into sub-components for transfer to parties desiring exposure to said risk.
Disguising what are real interest charges as something else is precisely the inverse. It is certainly less efficient and harder for the payer to follow. the sole advantage may be to give access to financial products for people whose understanding of their religion would normally exclude themselves (as I don't believe there is a real de jure reason why non-usurious interest charges in a properly regulated environment should be actually banned by the religion - if one follows the clear intent and goals of the underlying religious text).
So, the answer is no, utterly different.
Posted by: The Lounsbury at November 12, 2006 02:16 PM
I'm intrigued by the details in Asharq al Awsat that 720bn shares are reserved for nationals or national entities. Buying shares in govt-controlled businesses seems to be the Dubai analogue of paying taxes...
Posted by: waterboy at November 13, 2006 03:08 PM