Shariah Perspective

As a firm dedicated to Islamic finance, Codexa Capital endeavors to respect, understand, and implement the principles of Shariah in its client projects. Derived from the code of behavior for Muslim lives, Shariah guidelines for banking and investment serve as a professional, operational, and ethical discipline that has many intersections with civic regulation of financial services.

Corporate Qualifications

Codexa engagement with Shariah compliance takes place a several levels, in an effort to ensure responsiveness and accountability to our relationships worldwide:

• Shariah Advisors. We work with two renowned scholars, Dr. Daud Bakar of Malaysia and Sheikh Nizam Yaquby of Bahrain, in reviewing the structures and ongoing compliance of financial products we design.
• Client Coordination. We are prepared to work with the scholars of client organizations that have their own Shariah oversight boards. These relationships ensure our work adheres to internal standards while being responsive to regional or local market requirements.
• Staff Capabilities. We aim to build a cadre of professionals who are trained, either in the classroom or through less formal means, in the tenets of Islamic finance. We seek a diverse array of talent, accommodating views across the Islamic Crescent.

As our business evolves, we expect to formally submit to a Shariah audit at the corporate level. This initiative is distinct from the compliance of our investment products, which we have undertaken since inception.

Product-Design Framework

Codexa Capital’s product-design framework addresses six dimensions of Shariah compliance:

• Portfolio Construction. Does every investment conform to generally accepted Islamic investment standards? We also aim to ensure that all returns are wholesome and good, through ongoing portfolio monitoring and, as necessary, investment purification.
• Cash Management. Given restrictions on riba, are cash transactions executed properly and not associated with interest-bearing mechanisms? This concern includes review of any such activities conducted by investment sub-advisors.
• Outsourced Activities. Are all parties involved in product design, management, and administration informed about the principles and practices of Islamic finance? We routinely rely on external resources for quality and efficiency—asset managers, sales intermediaries, and professional service providers—and work closely with them to ensure the Islamic character of our joint work.
• Fees and Expenses. Are fees and expenses reasonable and customary, and disclosed appropriately in product documentation? Such costs should be clearly stated, wherever possible, to ensure clarity in intent and amount.
• Documentation. Are all legal, marketing, financial-reporting, and analytical-research materials accurate and transparent? All such work should appropriately reflect perspectives of issuers and investors regarding risk assessment and disclosure.
• Industry Best Practices. Do all aspects of product development reflect current thinking on Shariah structuring, supervision and oversight? We track new directives from industry associations such as the Accounting and Auditing Organization for Islamic Financial Institutions (www.aaoifi.com) and the Islamic Financial Services Board (www.ifsb.org). We also monitor developments at government supervisory entities such as Bank Negara and the Central Bank of Bahrain. Further, our management frequently attends industry events and educational programs to take an active role in professional colloquy.

This framework is designed to respond to Shariah principles on behalf of both issuers and investors. It is likewise intended to underpin the credibility and viability of our projects.