S&P Launches Shariah FI Indexes

January 21, 2014

S&P Dow Jones Indices launched a new range of Shariah-compliant indexes in the Middle East and North Africa (MENA) in early October.

The S&P MENA Bond & Sukuk Index has two subindexes, the S&P MENA Sukuk Index and the S&P MENA Bond Index. The S&P MENA Bond Index is non-Shariah compliant.

These indexes cover a universe of U.S.-dollar-denominated debentures that track the performance of bonds and Islamic fixed-income securities, which are known as “sukuk” in the MENA regions. The indexes are governed by an independent board of six Islamic scholars who helped design the original Dow Jones Islamic Market (DJIM) Indexes. They are based in Bahrain, Malaysia, Pakistan, Saudi Arabia, Syria and the U.S.

Shariah compliance entails limiting the use of derivatives and leverage, and avoiding companies that relate to food, alcohol, gambling and tobacco, among other guidelines. Indexes must be certified as sukuk by the Shariah Supervisory Board and comply with the Auditing and Accounting Organization of Islamic Financial Institutions standards for tradable sukuk.

 

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