Being syariah-compliant can help businesses generate long-term returns, a panel discussion heard yesterday. That is because compliance involves adopting socially responsible practices.
Mr Sani Hamid, director for wealth management and economy and market strategy at Financial Alliance, said after the event: "People tend to think syariah compliance is Muslim-centric and halal.
"They forget the point that such compliance actually incorporates a lot of socially responsible ethics."
These include not mistreating suppliers, employees and wholesalers and not polluting the environment.
Mr Rushdi Siddiqui, co-founder and chief executive of Zilzar Tech, an e-commerce company for halal products, noted that companies with such socially responsible practices typically have lower funding costs, and the returns after they are listed are typically greater.
Mr Rushdi moderated the panel discussion.
A report from Arabesque Asset Management presented similar findings. It reviewed 51 academic studies and found that 88 per cent showed a positive correlation between sustainable practices and operational performance.
When investors realise that compliance with Islamic law involves such practices, they might become more interested in putting money in such firms, noted Mr Rushdi.
He said on the sidelines of the discussion, which was part of the Islamic Banking and Investment: Asia/ Middle East Congress: "Malaysia and Dubai are leading places in the Muslim world in looking at such investments this way. This was not taking place before. We are at the beginning of the story."
Mr Sani added: "Gen Y and millennials are getting more sensitive to these things. They place more emphasis on whether the company is damaging the environment and (whether) it is a fair company."
Mr Mohamad Safri Shahul Hamid, senior managing director and deputy chief executive officer of CIMB Islamic, noted the size of Islamic banking assets is estimated at US$1.35 trillion (S$1.83 trillion) globally.
This represents approximately 1.3 per cent of total global banking assets, he said. Total Islamic banking assets grew at a compound annual rate of more than 40 per cent globally in the past decade, he said.
About 250 business leaders from about 80 international organisations attended the two-day congress here.