According to him, India is a more strategic option over countries like Malaysia and Pakistan because of the thriving stock markets . "It is estimated that Islamic finance business is worth $1 trillion and India can attract a sizable portion of it,'' said Nisar, who screened and launched the first list of Shariah-compliant stocks in India.
The funds that entered India last year include Gulf Finance House with about $10 million in the Indian Economic Zone project in Maharashtra, HSBC Amanah/KFH investing Rs $50 million in Kolkata-based SREI Infrastructure Finance and the Saudi Economic and Development Company Limited putting in $20 million in Bearys Group's Global Research Triangle.
These apart, Energy City of India secured $2,000 million from Gulf Finance House in October 2006. These are not inclusive of the funds that came through the foreign institutional investors' (FIIs) channel, he pointed out.
The rise in Islamic investments is also seeing domestic players intensifying their businesses. For instance, Bearys Group, which received the country's first Shariah-compliant realty fund, has established an Islamic finance company focused on foreign investments in real estate.
Similarly, Mumbai-based Taqwa Advisory and Shariah Investment Solutions is in discussions with a UAE-based Shariah advisory firm for bringing a suite of Islamic financing solutions. Ahmedabad-based Parsoli Corporation too is in talks with Delhi-based Taurus Mutual Fund for launching an Islamic mutual fund, he said.
According to Nisar, 60 per cent of the companies listed on the BSE and NSE are Shariah-compliant, with less than five per cent of the total income coming from interest. For screening the companies, all businesses related to conventional financial sector where profits came through riba-based (interest) operations are prohibited.
From the academia point of view, institutes like the Aligarh Muslim University, Indian Institute of Planning and Management (IIPM) and Institute of Chartered Financial Analyst of India (ICFAI) are looking to include finance courses.
"The West Asian countries are fearing that the investment they make in the US would freeze due to the slowdown. Currently, they are earning about four per cent in the US on their capital whereas the returns in India are three times more," said Ashraf Mohammedy, managing director of Mumbai-based Idafa Investments that offers wealth creation opportunities in line with Islamic Shariah.
Idafa is now spreading wings to Hyderabad, Chennai and Bangalore.
For Ashraf, the booming real estate sector is an automatic choice for putting in Islamic investment. "Islamic finance is a theme-based finance and is ethical. The religion tag ensures that money is not put into hotels, film production, media, sugar and tobacco companies and gambling," he said.
MY Khan, chairman of the Madhya Pradesh Stock Exchange, feels Islamic funds, like venture capital, can be used to promote small enterprises and can participate in infrastructure building like the special economic zones and real estate.
"Islamic banks have to accept deposits, borrowed funds and funds through bonds, which involve interest. But interest is forbidden under the Shariah Law," he said, adding that amendments to banking law were needed for the Islamic banks to become a reality in India.