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April 1, 2001

Islamic Investing In the Modern World: The Muslim world is embracing its own unique style of inves

By Danielle Fugazy

The Muslim world is sprouting its own unique kind of online brokerages.

For the millions of Muslims who invest in the stock market, that means online trading with Sharia-sensitive characteristics.

That's because the stocks observant Muslims are allowed to buy must conform to Sharia, the Islamic law derived from legal scholars' interpretation of the Koran.

The list excludes companies connected with alcohol, tobacco and pornography because these are taboo for Muslims. Also banned are interest-based transactions.

One of the first Islamic trading sites was CSFBdirect's service, CSFBdirect-eUnion, launched last September. It offers financial products in the 14 countries with the biggest Muslim populations.

More recently, teamed up with to offer its customers The site allows Muslims to locate Islamic-favored stocks and to trade them through a single process. can screen some 6,000 stocks listed on Nasdaq, the American Stock Exchange, the London Stock Exchange and the New York Stock Exchange.

Another Islamic financial Web site,, has signed an agreement with Online Brokerage Solutions to launch online trading services. Like, will not permit non-Sharia approved transactions, a list that also includes options trading.

About 200 million Muslim consumers who live in North America, Europe and the Middle East, have been initially targeted by

Setting up was not easy, according to Bob Vosburgh, chief executive of Minneapolis, Minn.-based Online Brokerage Solutions. The most challenging part was "training customer service reps to get them up to speed on Sharia law."

But Vosburgh said the sweat was worthwhile. Market research suggested that the new venture could turn into his firm's "most profitable," he said. Financial projections were not available.

Larry Tabb, an analyst at TowerGroup, a securities industry consulting firm in Needham, Mass., isn't surprised at the growing number of Sharia-sensitive sites. "Muslims have very select needs and they are a large community," he said. "It makes sense to create special products targeted at them."

Tabb noted that firms create new products by assigning special characteristics to segments of the market. A college alumni credit card, for example, services a special niche market.

Targeting a segment can generate more business. Dr. Hasnita Dato Hashim,'s founder, said the site in September, without publicity, counted 16,000 unique users, or the number of individuals who reached the site. They accounted for about one million hits. In contrast, E*Trade's site gets about 3.27 million unique user visits per month, according to PC Data in Reston, Va. is expected to spend more heavily on advertising after it receives additional funding. It has so far raised $6 million, Hashim said.

An interesting challenge for Islamic sites is the cultural diversity of the Muslim world. Hashim said is working hard to tailor its services to each Muslim community.

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" has a ground presence in the Middle East so customers can meet with reps there. The site has different languages, such as English and Arabic, and we're going to add more," Hashim said.

Said Tabb at TowerGroup: "There are rules that apply across religious beliefs. U.S.-based Muslims, for example, will be more open to and understanding of U.S. companies. Middle Eastern Muslims will be more oriented towards companies [outside the U.S.]."

Although Islamic sites seem to be in the forefront, other groups are also the focus of targeted sites, Tabb noted. Charles Schwab & Co., for example, has launched a Chinese version of its brokerage.

Large brokerages are trying to understand what must be done to service the needs of special groups, Tabb said.

Danielle Fugazy is associate editor of WebFinance, a sister publication of Traders Magazine.