Former banker turned financial adviser, M S Shabbir works tirelessly to convince AMCs to launch Shariah compliant funds in India. He states that many AMCs, operating in India, have Shariah funds abroad. However, they are not keen on launching such funds here due a perceived lack of demand. Their concern comes partially from the lukewarm response to the earlier Shariah funds.
At present, there are three funds which comply with Shariah rules in India - Taurus Ethical Fund, Goldman Sachs CNX Nifty Shariah Index Exchange Traded Scheme and Tata Ethical Fund. As on June 2013, these funds collectively managed just Rs 125 crore. Shabbir claims that 25% of the AUM in Goldman’s Shariah ETF is held by his clients.
In 2006 when Shabbir returned to Hyderabad from Gulf, there was only one ‘Shariah friendly’ fund – Tata Select Equity Fund. This fund was targeted at Muslims and Jains. The fund avoided investing in banks, liquor manufacturing companies and other companies which are prohibited by Shariah rules. However, it did not adhere to all Shariah rules which prevented Muslims to invest in this fund. The fund was fully converted as Shariah compliant in September 2011 and renamed as Tata Ethical Fund.
Before floating SenSage Financial Services in 2006, Shabbir had worked in the NRI division of three banks in the Gulf. Many of his clients whom he served as a banker turned to him for advice on their investments. These clients were keen to invest in Shariah compliant funds in India but did not have many options. This prompted Shabbir to pitch for Shariah funds to AMCs.
To make his case stronger, he even organized an event on Islamic Finance which was attended by officials from banks, New York Stock Exchange, RBI, SEBI and AMCs. With limited sponsorship, Shabbir ended spending Rs 2.50 lakh from his own pocket. Rest of the cost was borne by his NRI friends. “One of the bankers, in fact, asked me if I had taken the police permission to organize this event,” says Shabbir. However, all’s well that ends well. The event was well received by 400-plus participants.
“Launching Shariah funds or ETFs do not require any tinkering with regulations unlike the banking sector. I met Raghuram Rajan and made a case for the introduction of Islamic banking in India. He showed great interest in the proposal,” says Shabbir.
Initially when he approached AMCs, they wanted a minimum AUM of at least 200 crore. He finally managed to convince two fund houses to launch Shariah Funds. Taurus and Benchmark (now Goldman Sachs) launched their Shariah Funds in 2009. “I met Rajan Mehta (co-founder of Benchmark Mutual Fund) and presented this idea and he responded positively. I had also shared this idea with Waqar Naqvi when he was with Birla Sun Life Mutual Fund. He launched the fund when he joined Taurus,” recalls Shabbir.
Shabbir suggests that many AMCs can look at restricting their non-performing schemes and relaunch them as Shariah funds. IFAs should also encourage their clients to invest in Shariah-based funds.
Shabbir says that even the non-Muslim community also supports Shariah Funds. Many of his non-Muslim clients have invested in Shariah compliant funds. “They don’t mind as long as the fund performs well,” reveals Shabbir.
Early Days
Starting his career at 18, Shabbir has worked for 22 years in India and the Middle East. After he quit banking to start on his own, Shabbir wanted to set up a national distribution firm by appointing sub-brokers which did not work out as planned. He also faced difficulty in hiring the right talent for his firm.
Now he caters to 300 clients, managing assets under advisory of Rs 30 crore. He is not too keen on expanding fast as he wants to ensure that clients have a high quality experience with him. Shabbir charges his clients depending on the assets under advisory. This contributes 50% of his revenue. All of his clients have come through referrals and he has not made a single cold call till date.
Besides mutual funds, Shabbir also provides stock broking services. His firm strictly adheres to the Shariah rules, which means he doesn’t allow day trading, speculation, or short selling. His firm also provides Money Gram remittance facility to NRI clients.
His daughter Lubna who has studied Chartered Islamic Finance Professional (CIFP) and is currently pursuing CFP helps him in the business. Shabbir has recently received SEBI Investment Adviser registration. “I’m the first to register with SEBI as Investment Adviser from Andhra Pradesh,” says Shabbir.