. .




  3. FIRST GRINDLAYS MODARABA                     

Investment in stocks of mainly manufacturing concerns may in some cases lead to profitability

Oct 22 - 28, 2001

Where to invest your money? A million dollar question indeed, particularly in the wake of the prevailing scenario. The 'question in question' also has a number of conflicting connotations that need to be addressed before anybody even tries to answer it. Candid answers to the following questions need to be acquired before attempting the impossible.

•Who is investing? The Government, banks and financial institutions, businessmen, salaried employees, pensioners, widows, housewives, golden handshake employees, etc.

•What kind of money are we talking about? Black or White money?

•For how long are we prepared to invest? Short or long term perspective.

•Where to invest? In banks or financial institutions, either private or public, real estate, currencies, gold, business, bonds, Government sponsored saving schemes, COI's, stock market, money market, treasury bills, individuals, insurance, Musharika certificates, TFC's and above all in the 'present' or 'future'.

•Under which system? Islamic or un-Islamic.

Answers to all the above questions need a couple of Ph.D. theses, which is certainly not the intention. In order to jump to some kind of a conclusion, we may have to limit our current exercise to those honest, hard working, middle or upper middle class salaried employees who are finding it difficult to invest their hard earned meager money that they have some how saved or received after their pension or had opted for or were forced to opt for the golden handshake scheme in avenues which are permissible under Sharia.

The people that are under discussion, in the strict term, are a rare commodity these days. Such people are rarely found in places of authority, but exceptions cannot be ruled out. These species are generally found in oddest of places particularly in departments unrelated to core activity. Their only weak point is their prime concern for the right and wrong of things, an unpardonable offence in our present day society. The irony is that most of the 'so called' successful people in our present day society are no doubt intelligent, hard working and highly educated lot but are naive enough to be totally ignorant of the reality of life after death, ultimate accountability and "Jaza o Saza". These days, we seem to be more concerned in investing in our 'present' rather than our 'future' or hereafter. In fact, we need to be more concerned about our 'future' than our 'present'. Because of our moral degradation, which seems to have crossed all permissible limits, we the Pakistanis in particular and Muslims in general have become a decadent society. We need to change our perception altogether to re-kindle our lost glory after which we would not be bothered with such questions. We should, in fact, invest in our 'future' that has the key to our success both in this world and hereafter. Investment in our 'present' cannot even be ruled out. Let us invest in our children's education, our home, our environment, our livelihood, etc.

The silent minority that we are talking about has little or nothing to save because of their honest disposition. Whatever little amount is available either from one's pension or belonging to the oft repeated cliche 'the golden handshakers' one would find it most difficult to opt for an investment opportunity that is safe, profitable and above all, Sharia compatible. Following are a number of such avenues which are either Sharia compatible or quasi compatible:

Musharika / Modaraba Certificates: Despite the fact that both Musharika and Modaraba Certificates are both Sharia compatible but the way these are being administered in Pakistan or elsewhere, under the prevailing financial system, are far from being Sharia compatible. The success of this 'so called' Islamic mode of investment certificates is evident from the fact that a number of people wish to invest their savings in investment avenues that are free from interest. The only question is the Sharia compatibility of the 'liability side' of the whole issue unless, of course, the funds of these institutions are invested in a Musharika, Modaraba, Ijara or other Islamic modes of financing, in the real sense of the term. A careful analysis of the operations of an Islamic financial institution needs to be looked into prior to making investment in similar investment certificates.

Modaraba Company: Investment in a Modaraba company, preferably involved in manufacturing, needs to be thoroughly looked into particularly in respect of the credibility and expertise of the Mudarib together with its business plans. The concept also needs to be studied in great detail as it holds great promise particularly for 'golden handshakers' who may find their funds channeled in both profitable and Sharia compatible investment avenues. The move can also stimulate the much-needed impetus for industrial growth.

Investment in Stocks: Investment in stocks of mainly manufacturing concerns may in some cases lead to profitability and Sharia compatibility subject to physical stock transaction, expertise, access to requisite information, etc. However, due to a general lack of direct relationship between the stocks and their fundamentals, the captioned avenue may not be a viable investment proposition for an ordinary person belonging to the given category of individuals.

Other forms of Investment: Other most common forms of present day investments like real estate, currencies, savings schemes, gold, bonds, etc. are not Sharia compatible, mainly due to the element of fixed return in some cases and lack of circulation of money in the other.

The panacea for all our socio-economic ills lies in the adoption of the Islamic Economic System ensuring socio-economic justice for all. Given the prevailing circumstances, the road leading to the cherished goal of every Islamic country of establishing the 'Islamic Economic Order', seems a far cry. An honest beginning can be made by at least improving "Good Governance" in various organizations by way of selecting credible and competent people at the helm of affairs and enforcing accountability at all levels. Such people are in a minority but may not be too difficult to find.

With improved 'Governance' and enforcement of accountability, hopefully in not too distant a future, the 'question in question ' may not be too diffcult to answer.