Shariah compliant investments blooming in Brazil
Brazil, one of the most traditional business partners in the Islamic market, a leading Halal meat exporter with over two million tonnes per year and figuring as one of the most important Halal poultry exporters, has been targeted by several direct and indirect investments carried out by Shariah compliant funds.
Considering the always-growing interest of Islamic and non-Islamic investors in Shariah compliant assets, the IFSB foresees that Islamic assets will increase up to US$6.5 trillion by 2020.
Specifically in Brazil, there is growing availability of Shariah compliant financial products offered by major Brazilian banks, with direct investment in traditional economic sectors such as agribusiness and catt le-fatt ening, real estate and also including modern investment products such as renewable energy and tailor-made Shariah compliant assets.
Ritz-G5, an international real estate developer which originated from the amalgamation of Ritz Properties and a Brazilian construction company, G5 Construtora, developed one of the fi rst Brazilian independent investment products to be eligible for Shariah compliant funding. Majestic Village is a premium residential project, located in the city of Parnamirim in the state of Rio Grande do Norte, that was designed to att ract the domestic market, namely the steadily growing middle and upper-class population.
A couple of Brazilian banks are currently off ering in their investment portfolio Shariah compliant assets. Banco do Brasil, the largest bank in Latin América by assets, launched a Shariah compliant equity fund focusing on shares of Brazilian commodities and energy, mining, oil and gas companies that are traded on the Sao Paulo Stock Exchange (B3) in the Middle East and Asia.
Most of the direct investments being made by sovereign funds and other Shariah compliant funds focus on Brazilian commodities. In the states of Mato Grosso, Goias and Sao Paulo, some of Brazil’s main commodity producers, we have seen numerous examples of this kind of investment, ranging from catt lefatt ening to ethanol-producing.
In a way, this is the most Shariah compatible kind of investment. Because Shariah prohibits the collection of interest (Riba), in this kind of arrangement, producers and funders are in a partnership position, dividing profits or losses, instead of a conventional agricultural backing structure (that involves returning money to the investor with interest, aft er crop results).
Considering Brazil’s strong position as a leader in the exportation of commodities, we expect to see an exponential growth in Shariah funding of agribusiness, which is expected to lead to an increase in general Shariah compliant assets off ered in Brazil.
Este artigo foi publicado no Islamic Finance News, dia 19 de fevereiro de 2018.