First Shariah compliant project set to take off in Kerala

Waqf land development scheme to receive investment from NRIs and Muslim investors

By Shafeeq Hudavi,,

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Kozhikode: After overcoming an array of uncertainties and legal combats and complexities, the first ever Islamic finance compliant project is all set to take off in Kerala. If things go as planned, the Waqf Land Development Scheme by the Cheraman Financial Services Limited (CFSL) will be soon materialized in Kannur in northern Kerala.

CFSL was launched in 2010 with the name Al Baraka Financial Service Corporation under the patronage of the State Industries Department and later the name was converted to CFSL in order to include the locality of Kerala. Cheraman is the name of a King from Kerala, who went to Mecca, met Prophet Mohammed (PBUH) and converted to Islam.

Mohammed Hanish, CFSL managing director
Mohammed Hanish

CFSL was formed by the Left Democratic Front (LDF) in a bid to utilize the financial potential of the expatriates and other Muslim investors for the comprehensive development. While having a talk with, Mohammed Hanish, CFSL managing director, said the primary work of the scheme has started in Kannur.

Kicking start a new model of investment a five storied shopping complex will be erected in Kannur. “Adequate land, owned by the State Waqf Board, for the scheme has been identified in Kannur town and fund mobilization is nearing completion,” he said.

“The funding by the company has been done mainly through BOT (build, operate and transfer) and joint ventures. Through the first BOT project, we are looking to develop a Waqf property,” he said.

After creating value on the property and sharing the rental income for 18 years, CFSL will give back the property to the Waqf Board.

As much as 11 % of the capital has come from Kerala State Industrial Development Corporation, undertaken by the State Industries Department while investments have been extended by CFSL promoters team, which include NRI businessmen P Mohammed Ali, C K Menon, M A Yusuf Ali, PNC Menon, Siddique Ahmed, E M Najeeb, P V Abdul Wahab, P A Ibrahim Haji and P K Ahmed along with two representatives of KSIDC, namely T Balakrishnan and VKC Mammadu Koya. Other companies like Cheraman Funds Management Limited, Cheraman Infrastructure Private Limited and Cheraman Fund are also part of the scheme.

Investment will be extended by CFSL in healthcare and leasing construction equipment, IT equipment, commercial vehicles and industrial machineries.

Besides, CFSL has decided to invest in the start-ups and other kind of development projects and looking to focus on companies operating in the internet and telecom space. Fund will be also mobilized to various initiatives like food processing, education, logistics and various technologies.

Meanwhile, CFSL has pinned hopes on the large investments from West Asia and South-East Asia. Dr Mohammed Palath, consulting lecturer in Al Jamia Al Islamiyya, Pattikkad in Malappuram of Kerala, said he assumed that Sharia compliant financing can attract the Muslim investors from Gulf countries.

Muslim businessmen are reluctant to invest in banks and other financial enterprises, which follow the Reserve Bank of India directions, as their religion doesn’t allow them any kind of interest. As per a Centre for Development Studies report, published in 2008, Muslims, who are the one fourth of the total population, constitute around 40 % share of total emigrants of the state. Muslims have 45 % share (Rs 18,998 crore) of total income of the state from foreign countries.

Mohammed added that projects based on Sharia principles can attract the Muslim businessmen in the state and “thus major infrastructure development can be brought about.”

Citing that expatriates will turn the major supporters of CFSL, Hanish said that there was enormous interest among Gulf-based NRIs in investing Kerala through this kind of investing.

While the Al Baraka Financial Services Limited, the first form of CFSL, was launched in 2010 there was offer to bring in Rs 10,000 crore from Oman alone through the initiative of Muscat based NRI businessman P Mohammed Ali.

Besides various banks, including Doha Bank in Qatar, had expressed to invest in the state through Islamic financing.

According to Mohammed, the RBI rules, which don’t allow functioning of Islamic banking in the country, still remain a concern. If RBI rules are amended in a bid to promote Islamic banking, huge investment will be drawn from Gulf countries.

Institutions and high net worth individuals from across the globe will invest in the country if such favourable move is taken by the government. Mohammed Hanish said such amendments will help at promoting such alternative ventures. “Officials and investors are unable to bring such changes. It is up to the government and the legislators to bring such an amendment to promote such ventures,” he said.

Though the state government was willing to launch a full-fledged Islamic Bank, but the attempt was stalled owing to the stiff opposition from various corners and a Kerala High Court verdict, which stayed Islamic banking citing such mode of interest free banking was not possible in the country due to RBI rules.