ISRA International Journal of Islamic Finance

Purging of impure income: a comparative study of the existing purging

methodologies
Wasiullah Shaik Mohammed, Mufti Abdul Kader Barkatulla, Mohammed Husain Khatkhatay, Zaffar
Abbas,
Article information:
To cite this document:
Wasiullah Shaik Mohammed, Mufti Abdul Kader Barkatulla, Mohammed Husain Khatkhatay,
Zaffar Abbas, (2017) "Purging of impure income: a comparative study of the existing purging
methodologies", ISRA International Journal of Islamic Finance, Vol. 9 Issue: 1, pp.62-80, https://
doi.org/10.1108/IJIF-07-2017-006
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IJIF
9,1 Purging of impure income: a
comparative study of the existing
purging methodologies
62 Wasiullah Shaik Mohammed
Taqwaa Advisory and Shariah Investment Solutions (TASIS) Pvt Ltd, Mumbai,
Received 1 March 2017 India, and BSA Crescent University, Chennai, India, and
Revised 18 March 2017
Accepted 20 March 2017
Mufti Abdul Kader Barkatulla, Mohammed Husain Khatkhatay and
Zaffar Abbas
Taqwaa Advisory and Shariah Investment Solutions (TASIS) Pvt Ltd,
Mumbai, India
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Abstract
Purpose – The purpose of this paper is to study the concept of purging and present a comparative study of
the existing purging methodologies prevailing in the market with a view to evolving a more effective method
of capturing the entire impure income to be purged.
Design/methodology/approach – To illustrate the present discussion, a case study of purging based on
numerical examples has been included. The argument has also been supported with empirical data related to
the universe of Sharīʿah-compliant stocks listed on Indian stock exchanges.
Findings – During the study, it was found that the existing purging methodologies of calculating
impure income to be purged have conceptual and practical shortcomings.
Research implications/limitations – The scope of the current research is limited to calculation of
impure income which accrues on account of Sharīʿah non-compliant investments directly or indirectly.
It does not try to quantify the benefit which may be imputed in the form of capital gains made in trading
of the investee company shares due to higher market value of the shares as a result of the impure income
earned by the investee company. The paper has focused on identifying and calculating the impure
income on account of interest. Impure income earned from specific Sharīʿah non-compliant products or
services has not been considered directly. The reason for this is that companies dealing in such products
or services are generally excluded at the business screening stage itself. In the case of those companies
which derive a relatively small proportion of their total income from such activities and pass the
business screening stage, the quantum of the impure income is not generally reported separately in
company accounts.
Practical implications/limitation – The result of adopting the proposed methodology will lead to
complete purging of impure income (to the extent that is possible under present Company Law and
stock exchange reporting regulations). Implementation of the proposed method requires a proper
understanding of the working of listed companies and either a sound mathematical background or
access to a software application to calculate the impure income to be purged.

© Wasiullah Shaik Mohammed, Mufti Abdul Kader Barkatulla, Mohammed Husain Khatkhatay and
Zaffar Abbas. Published in the ISRA International Journal of Islamic Finance. Published by Emerald
ISRA International Journal of
Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0)
Islamic Finance licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for
Vol. 9 No. 1, 2017
pp. 62-80 both commercial and non-commercial purposes), subject to full attribution to the original publication
Emerald Publishing Limited and authors. The full terms of this licence may be seen at http://creativecommons.org/licenses/by/4.0/
0128-1976
DOI 10.1108/IJIF-07-2017-006 legalcode
 Originality/value – The current paper is original and based on the authors’ personal understanding and Purging of
experience of providing Sharīʿah consultancy services related to Sharīʿah-compliant investments.
impure income
Keywords India, AAOIFI, Dow Jones, Indian capital market, Purging, Impure income,
Sharīʿah-compliant investment, TASIS
Paper type Research paper

63
Introduction
In the present business environment, it is very difficult to find fully Sharīʿah-compliant
companies for investment on the stock exchange. Due to this unavoidable market scenario,
Sharīʿah scholars have set a limitation on the percentage of impure income to be accrued in a
company’s account, below which the company (stock) is declared Sharīʿah-compliant
(AAOIFI, 2015). This relaxation implies that a Sharīʿah-compliant company, despite its
objective of making only pure income out of its business, may end up earning a proportion
of impure income. Thus, the investor seeking a fully Sharīʿah-compliant investment needs to
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purge this impure income accrued in the accounts of the company in which the investment is
made (AAOIFI, 2015).
The process of removing impure income from the total income realised from an
investment is known as purging (or purification). It is one of the important requirements to
make an investment fully Sharīʿah-compliant. Purging can be done either to remove only
interest income or to remove all types of impure income arising out of Sharīʿah non-
compliant investments or business sources (AAOIFI, 2015).
It is to be noted that the investor who invests in the shares of a company through the
stock market or by subscribing to a mutual fund would automatically become (morally)
responsible for the economic activities (and financial transactions) of the company to the
extent of his exposure (investment in the capital) to the activities of the company. Hence, the
investor needs to purge his share of the impure income that has accrued to the company’s
account to the extent of his investment in the shares of the company.
Purging is a concept which has emerged and evolved in the Islamic finance industry over
the past two to two-and-a-half decades. Therefore, the methods of purging or calculation of
impure income to be purged have not yet received sufficient scrutiny.
The objective of the current paper is to discuss the basic concepts of purging, present a
comparative study of the existing purging methodologies prevailing in the market, highlight
the issues pertaining to the existing purging methodologies and propose issues for experts
and researchers to research further.
To illustrate the present discussion, a case study of purging based on a numerical
example has been included in the last section of the paper. The argument has also been
supported with empirical data related to the universe of Sharīʿah-compliant stocks listed on
Indian stock exchanges. The reason for this is twofold:
(1) Primarily, it is to illustrate to capital market participants such as lay investors,
brokers, institutions and portfolio managers, the correct method of purging and the
factors to be taken into account in the process of actual application.
(2) Secondly, to debunk the claim often made that the right method of purging
requires detailed calculations and access to company data that present daunting
practical difficulties.

The usual dividend purification method of purging commonly adopted is definitely simple
and easy to apply. Unfortunately, it does not meet the objective (as discussed in the
 IJIF following paragraphs) for which purging needs to be done. It thus ends up only as a
9,1 cosmetic treatment to assuage one’s conscience while reducing the demand on one’s wallet.
In the present time, computing ability and access to the internet via mobiles, tablets,
computers and specialised data providers are readily available, which means the arguments
of inaccessibility of data and difficulty of calculation are no longer valid. This is especially
relevant when viewed in the context of needing to prevent one’s income from being tainted
64 by ribā (interest), which has been denounced in the strongest terms in the Qurʾān (2: 275-279)
and authentic hadīths

(see, Al-Bukhari, Volume 3, Book 34, hadīth

no. 382).

Impure income
After a brief introduction to the concept of purging, it is worthwhile to understand what
constitutes “impure income”, as the latter is the base on which the whole purging process relies.
In broad terms, impure income consists of interest income recognised (stated) as such in the
company’s accounts, income realised from Sharīʿah non-compliant financial investments and
income accrued on account of Sharīʿah non-compliant business sources (products and
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subsidiaries) (AAOIFI, 2015). These components of impure income are briefly described next.

Interest income
Generally, interest income is revenue accrued on account of bank and other deposits, loans
advanced and certificates of deposit held and directly reported (stated) as “interest income”
in financial statements of the company. This income needs to be removed to make an
investment in listed companies Sharīʿah-compliant.

Impure income from Sharīʿah non-compliant investments

The reporting conventions in India (and perhaps in many other countries) do not allow
companies to recognise the returns (income) arising from certain interest-based investments as
“interest” under the “interest income” category. For example, many money market instruments
such as debt-based mutual funds and preference shares provide returns to their investors
which arise either from interest or from trading of interest-based instruments. However, due to
the nature of the instruments, the return yielded to the investor is referred to as “dividend”
rather than as “interest” in company accounts (Income Tax Act, 1961, Chapter 1, Sec.2, 22a&b;
Interes Tax Act, 1974, 7 to 7b). In addition, companies may also trade in gilts, deep discount
bonds, debentures, units of debt and liquid mutual funds and even preference shares, and
report the income as “capital gains”. A similar practice arises in the case of insurance claims
from conventional insurance, which are generally clubbed with other income and not reported
separately as receipts of insurance in the financial reports of companies. As a result, we end up
with a situation of receipts or income on account of Sharīʿah non-compliant investments
entering the companies’ books without being reported (stated) as “interest income”.
Hence, such impure income components are likely to be overlooked during the process of
calculation of impure income to be purged. Therefore, to purge such impure income
disguised as dividend or capital gain or receipts, it is essential to first identify those interest-
based investments of the firm from which such “disguised” interest or interest-derived
income arises and then estimate[1] the quantum of such disguised interest income as a
proportion of such interest-based investments (Khatkhatay and Nisar, 2007).

Impure income from Sharīʿah non-compliant business sources

In a few cases where the primary business of the company is Sharīʿah-compliant, some
impure income accrues on account of a few minor business sources which are Sharīʿah
 non-compliant (such as from non-compliant products of the parent company or of a Purging of
subsidiary). In such cases, the impure income accrued on account of Sharīʿah non- impure income
compliant sources can be identified from product and investment schedules of the
company and its subsidiaries and can be purged in proportion to the contribution of
income from such offending products to the total income.
However, this can practically be done only in those cases where the information related to
such products and services is available in the public domain. Not all companies disclose
detailed information about income derived from their various products in their financial 65
reports or filings with the regulators.
As per the Sharīʿah, all the three categories of impure income, i.e. general interest, income
from interest-based investments and income from Sharīʿah non-compliant business sources,
should be considered for calculating the amount to be purged. However, the extent of
reporting detail may differ as well as the heads of account under which income from
different sources is consolidated for reporting. This may create minor differences in the
extent to which the total impure income can be correctly captured and purged. To allow for
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this lack of precision, the parameter (ratio) used to estimate the disguised interest income on
the basis of interest-based investments can be set at a relatively liberal level.

Various purging methodologies

After a brief discussion on the concept of “impure income”, this section discusses the
prominent purging methodologies prevailing in the market[2].
There are two prominent purging methodologies practised globally. One is the dividend-
based purging method, and the second is the purging method suggested by the Accounting
and Auditing Organisation for Islamic Financial Institutions (AAOIFI). In view of some
shortcomings in these existing methodologies, a third method, which is a modified version
of the AAOIFI purging method, has evolved and been applied by Taqwaa Advisory and
Shariah Investment Solutions Private Limited (TASIS) – a premier Sharīʿah advisory
services provider from India. The details of these three purging methodologies are provided
next.

Dividend-based purging method

Under this method, generally followed by the S&P, MCSI and FTSE Sharīʿah Indexes, the
purging of impure income is primarily linked to dividends. The purging amount is
calculated by multiplying the dividend received on the shares of the company held by the
investor (whether individuals, institutions or funds) by the ratio of impure income to the
total income of the company (S&P Dow Jones Indices, 2017).
The formula for the amount to be purged can be expressed as:

ð Dividend Paid per Share  Number of Shares HeldÞ

 ðInterest Income=Total IncomeÞ

Under this method, only the stated interest income can be purged, as this method takes into
account only the stated interest income and fails to take into account the “disguised” interest
income discussed above.
Moreover, under this method, the investor is liable to purge the impure income only if the
company pays a dividend. In the event a company does not pay dividend in a particular
year, the interest income of that year is not purged. Hence, there is no rationale for linking
the purging to receipt of a dividend.
 IJIF Furthermore, the recipient of the dividend may not even be the holder of the shares
9,1 during the period when the interest was earned. It is common knowledge that dividends for
any specific period are generally declared by companies not during that period itself but
after the concerned period has closed and the accounts for that period are prepared. Hence,
dividends are generally paid out three to six months after closing of the accounting year of
the company. At such point in time, it is very likely that the person holding the shares may
66 be someone who had not held the shares for even a single day of the period when the
violation (of earning interest) occurred.

The AAOIFI purging method based on share-holding

The second method is that of AAOIFI. Under this method, purging is primarily based on
interest earned per share by the company rather than (as in the previous method) on the
dividend received per share by the investor. According to this method, the purging amount
is calculated by dividing the total prohibited income by the total number of outstanding
shares of the company and then multiplying the resulting figure by the number of shares
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owned by the investor (AAOIFI, 2015).

The formula for the amount to be purged can be expressed as:

ð Interest Income=Total Outstanding SharesÞ  ð No: of Shares Held at Year-endÞ

Purging under this method is obligatory upon the investor only if the investor holds the
shares of the firm at the end of the accounting period. It is not applicable to those who may
have held them during the financial period but exited before the year-end (AAOIFI, 2015).
Again, under this method, only the stated interest income can be purged, as this method
takes into account only the stated interest income and fails to take into account the
“disguised” interest income discussed above.
Moreover, there appears to be a tenuous justification for laying the responsibility of
purging the interest for the entire year only and fully on the person who is found to be
holding the shares at the time of closing of the financial year. In fact, doing so constitutes an
injustice to the person holding the shares at the time of closing of the financial period of the
company unless he has indeed held the shares for the entire financial period.
The interest income is generally earned throughout the year. It should thus be the
proportionate responsibility of all those who held the shares during the year, to the extent of
the duration for which they held the shares for the respective periods. It should not be the
exclusive liability of the one who is found holding the shares at year’s end.
As per available information, the FTSE Russell Indexes have adopted the AAOIFI
purging methodology for their Islamic Indexes (FTSE Russell, 2016). Russell too considers
only the stated interest income and not the “disguised” interest income.

The Modified AAOIFI method

In addition to the above mentioned two methods, TASIS has developed and applied another
method which could be considered a modification of the AAOIFI method to make it more
just and comprehensive.
This method requires the purging of impure income earned per share of a company held
by an investor pro-rated over the period for which the shares were held in his portfolio by
that investor.
Hence, according to this method, purging of impure income is imperative for the investor
who had ownership of the shares when the impure income was earned by the company. He
needs to donate the pro-rata amount of interest income earned per share by the company for
 the relevant holding period, irrespective of whether the company or the investor made Purging of
profits, and whether the company declared dividends or not. impure income
The formula for the amount to be purged can be expressed as:
ðTotal Impure Income=Total Outstanding SharesÞ  ð No: of Shares HeldÞ
 No: of Days ½or Months the shares were held=Total No: of Days ½or Months
in the entire Accounting PeriodÞ 67
where:
Total Impure Income ¼ Interest Income þ k% of Interest-based Investments
where, “k” is the applicable ratio for estimating the “disguised” impure income from the
interest-based investments.
In case the investor needs to purge a portfolio of various shares he held, the above
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method needs to be applied for all stocks in his portfolio, taking into account the relevant
holding periods for the various stocks.

Case study of purging with numerical examples: the case for an individual
investor
For clarity of understanding the method of determining the quantum of impure income for
which the investor is responsible, a numerical example is explained below taking into
consideration the three different methods of purging income and considering different
scenarios. To avoid any confusion, the most general cases are considered.
Tables I and II below provide further details on the financial position of company PQR
Co. Ltd. and the investment by the investor in the company, respectively.

Particulars Unit 31.03.2012 31.03.2013 31.03.2014

Outstanding shares Million 100 100 100

Interest-based investments US$ million 10,000 12,000 15,000
Total income US$ million 500,000 550,000 600,000
Interest income (stated) US$ million 2,000 1,800 2,500
Income from interest-based investmentsa US$ million 800 960 1,200
(Disguised impure income) Table I.
Dividend@10% US$ million 3,600 Nil Nil Financial details of
The financial year for PQR Co. is April
PQR Co. Ltd. for the
to March
period of three years,
Note: aImpure income (disguised income) is assumed at 8% of interest-based investments as per TASIS i.e. 2011-2012, 2012-
Sharīʿah norms 2013 and 2013-2014

Date Transaction details No. of shares (million)

1 April 2011 Purchases/Opening balance 10 Table II.

30 June 2012 Sale 4 Details of investment
1 April 2013 Purchases 2.5 by investor in PQR
30 June 2014 Closing balance 8.5 Co. Ltd
 IJIF The purging amounts applicable to the investor using the three different methods discussed
9,1 above are as follows.

Purging calculation under the dividend method

Under the dividend method, the purging calculations for the three years are as described
below. The purging amount can be calculated using the appropriate formula given above:
68
ð Dividend paid per ShareÞ  ð No: of Shares HeldÞ  ð Interest Income=Total IncomeÞ

Purging amount for the period 2011-2012 = [3,600)/100]  10  [2,000/500,000] = US$1.44m.

As the company did not pay any dividend during 2012-2013 and 2013-2014, the purging
amount for those periods is nil. Table III summarises the purging amount for the three years
as per the dividend method.
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Purging calculation under the AAOIFI method

Under the AAOIFI method, the purging calculations for the three years are as described
below. The purging amount can be calculated using the formula given below:
ð Interest Income=Total Outstanding SharesÞ  ð No: of Shares Held at Year-endÞ
Purging amount for the period 2011-2012 = (2,000/100)  (10) = US$200m.
Purging amount for the period 2012-2013 = (1,800/100)  (6) = US$108m (as the
shareholding at the year-end was 10  4 = 6).
Purging amount for the period 2013-2014 = (2,500/100)  (8.5) = US$212.5m (as the
shareholding at the year-end 2013-2014 was 6 þ 2.5 = 8.5).
Table IV summarises the purging amount for the three years as per the AAOIFI method.

Purging calculation under the Modified AAOIFI method

Under the Modified AAOIFI method, the investor needs to purge the impure income for the
period he held the shares, irrespective of whether he still held the shares at the end of the
financial year or not and whether a dividend was paid or not. The formula for the purging
amount is:

Financial year Purging amount (US$ million)

Table III. 2011-2012 1.44
Purging amount for 2012-2013 0
the three years as per 2013-2014 0
dividend method Total 1.44

Financial year Purging amount (US$ million)

Table IV. 2011-2012 200
Purging amount for 2012-2013 108
the three years as per 2013-2014 212.5
AAOIFI method Total 520.5
 ðTotal Impure Income=Total Outstanding SharesÞ  ð No: of Shares HeldÞ Purging of
 ð No: of Days or Months the Shares Were Held=Total No: of Days or Months impure income
in the Entire Accounting PeriodÞ

where, k = 8 per cent (assumed)

Total Impure Income ¼ Interest Income þ 8% of Interest-based Investments 69
Purging amount for the period 2011-2012 = (2,000 þ 800)/100  (10  365)/365 = US$280m
(as 10 million shares were held for 365 days).
Purging amount for the period 2012-2013:
 For 4 million shares held for 91 days = (1,800 þ 960)/100  (4  91)/365 = US
$27.52m (as 4 million shares were held for 91 days).
 For 6 million shares held for 365 days = (1,800 þ 960)/100  (6  365)/365 = US
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$165.6m (as 6 million shares were held for 273 days).

Purging amount for the period 2012-2013 = 27.52 þ 165.6 = US$193.1m.
Purging amount for the period 2013-2014 = (2,500 þ 1,200)/100 x (8.5  365)/365 = US
$314.5m (as 8.5 million shares were held for 365 days) (Table V).
In the above case study, the investor owns at different points over the three years,
between 6 million and 10 million shares of the company’s total outstanding 100 million
shares, i.e. between 6 to 10 per cent of the company’s total shares.
From the purging amounts calculated according to the three methods (summarised in
Table VI above), the following conclusions can be drawn.
Dividend method. Under this method, in the first year (2011-2012), the investor is
required to purge an amount of US$1.44m, i.e. about 0.5 per cent of the actual interest
amount (US$280m as per the Modified AAOIFI method) that the investor is liable to purge.
In the second and third years (2012-2013 and 2013-2014), as the company did not pay a
dividend, purging is not applicable. Therefore, though in those two years, the company
earned US$1,800m and US$2,500m as interest, the investor is not required to purge any
amount. Hence, effectively he retains the impure income of US$193.1m and US$314.5m (as
per the Modified AAOIFI method), which he is actually liable to purge.

Financial year Purging amount (US$ million) Table V.

2011-2012 280.0 Purging amount for
2012-2013 193.1 the three years as per
2013-2014 314.5 the Modified AAOIFI
Total 787.6 method

Purging amount (US$ million)

Financial year Dividend method AAOIFI method Modified AAOIFI method

2011-2012 1.44 200.0 280.0 Table VI.

2012-2013 0 108.0 193.1 Purging amount for
2013-2014 0 212.5 314.5 three years as per the
Total 1.44 520.5 787.6 different methods
 IJIF This anomaly is due to the fact that purging in this method is linked to the dividend
9,1 payment and also because it does not consider the disguised impure income derived on
account of interest-based investments. Hence, a large amount of impure income is retained in
the company and with the investor.
AAOIFI method. Under the AAOIFI method, in the first year (2011-2012), the investor is
required to purge an interest amount of US$200m, i.e. around 71 per cent of the actual
70 interest amount (US$280m as per the Modified AAOIFI method) that the investor is liable to
purge on account of the 10 million shares, irrespective of whether the company declares a
dividend or not. However, in the second year (2012-2013) and the third year (2013-2014), the
shareholding pattern of the investor at the end of the financial years is reduced to 6 million
and 8.5 million shares, respectively; therefore, the investor is liable to purge the
corresponding proportionate amounts, which are US$108m, i.e. around 56 per cent of the
actual amount to be purged (US$193.1m as per the Modified AAOIFI method for 2012-2013)
and US$212.5m, i.e. around 67.5 per cent of the actual amount to be purged (US$314.5m as
per the Modified AAOIFI method for 2013-2014).
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In the second year, though the investor held 4 million shares until 30 June 2012, according
to the AAOIFI method, he did not incur any liability to purge the corresponding interest
amount in relation to these 4 million shares because they were not held till the end of the
financial period. Obviously, this liability amounting to about US$18m was transferred onto
some other investor who was holding those shares at the end of that financial year, i.e. as on
31 March 2013.
In addition, the variation in the amount to be purged is due to the fact that under the
AAOIFI method, the disguised impure income is not considered while calculating the total
impure income. Hence, the latter impure income continues to remain in the business. Thus,
the AAOIFI method has the potential to misallocate the purging liability among investors,
depending on whether the one holding the shares at year’s end has also held them
throughout the year.
Modified AAOIFI method. Unlike the above two methods, under the Modified AAOIFI
method, the disguised impure income derived from the interest-based investment is also
included as part of total impure income along with the interest income. Due to this effect, in
the first year (2011-2012), the investor is required to purge the entire impure income amount
of US$280m received by the company on the 10 million shares of the investor. The
additional US$80m is on account of the estimate of the disguised interest income provided
under the Modified AAOIFI method but not considered under the AAOIFI method.
In the second year (2012-2013), the 4 million shares are held with the investor up to 30
June 2012 (91 days) and 6 million shares are held for the entire year (365 days). Therefore, he
is liable to purge the total impure income, which is US$193.1m (US$27.5m on account of 4
million shares held for 91 days and US$165.6m on account of 6 million shares held for the
full year). In the third year (2013-2014), the investor needs to purge impure income of US
$314.5m, including US$102.0m on account of disguised interest income during the year.
Comparison. With the given example, in terms of total purging liability for three years,
the investor is responsible for only US$1.44m under the dividend method, which is far less
than the US$520.5m under the AAOIFI method and US$787.6m under the Modified AAOIFI
method. If the Modified AAOIFI method of purging is considered the more correct and
equitable one, then the investor is paying around 66 per cent under the AAOIFI method and
just a pittance (less than 1 per cent) under the dividend method of what he actually is liable
to pay (as per the Modified AAOIFI method).
It is to be noted that a part of the additional purging liability of the investor in the second
year in the above illustration on the basis of the Modified AAOIFI method is due to the
 specifics of the illustration. In case the details such as the period of holding of the shares Purging of
were to be different, the purging liability in the illustration could even have been greater in impure income
the case of the AAOIFI method than the Modified AAOIFI method. Say, for instance, if in
any year, the investor were to have bought shares towards the end of the year, under the
AAOIFI method, he would have had to shoulder the liability for purging on account of those
shares for the entire year. On the other hand, under the Modified AAOIFI method, his
liability would have been limited to the purging on account of only the few days for which 71
he had held the shares by the time the year ended.

Empirical study of applying dividend-based purging to Indian

Sharīʿah-compliant stocks
An objective approach to assessing the impact of the different methods of purging on the
extent of purging required would be to apply each of them separately to the latest updated
(as on 31 January 2017) universe of Sharīʿah-compliant stocks, as determined on the basis of
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the screening criteria followed by TASIS, the leading Indian Sharīʿah investment advisor.
According to the latest Sharīʿah list referred above, there were 1,077 Sharīʿah-compliant
companies listed on the main Indian stock exchanges. Of these, only 337 companies had
declared a dividend, and of these, 13 companies had not reported any interest income. Thus,
only 324 companies which had declared a dividend were liable for purging. On the other
hand, the number of companies which had reported interest income was 848. An additional
11 companies had reported interest-based investments, though they had no interest income.
Thus, compared to the companies required to purge under the Modified AAOIFI method,
only about 38.2 per cent of the companies were liable for purging under the dividend
method.
The total interest income for the entire universe of Sharīʿah-compliant companies was
Indian Rupee (INR) 151.83 trillion; the purging amount on the basis of the dividend method
was only INR 3,088.7 million, or an insignificant 2 per cent of the purging amount on the
basis of the Modified AAOIFI method. The above figures clearly indicate the ineffectiveness
of the dividend method in eliminating interest income earned by the Sharīʿah-compliant
companies from their earnings for Sharīʿah-conscious investors.

Case study of purging with numerical examples: purging of mutual fund

In the case of a financial instrument such as a unit of a Sharīʿah-compliant mutual fund or
pension fund, the overall interest purification ratio for the portfolio of the fund needs to be
calculated on the basis of the portfolio of stocks held under the respective instruments and
communicated by the mutual fund to individual holders or subscribers of the fund/scheme
as a ratio (i.e. the purging amount per unit of the security held per day). Calculation of the
purging amount for a financial instrument like units of a mutual fund/venture fund/
insurance fund is more tedious compared to that for a specific share or a portfolio of shares
held by an individual investor.
For clarity of understanding, the method of determining the impure income quantum for
a mutual fund for which the investor is responsible, according to the Modified AAOIFI
method evolved and applied by TASIS, is explained in the following paragraphs (TASIS,
2017). To avoid any confusion, the most general cases are considered.
Prior to moving on to the purging calculation directly, it is worthwhile to know the
various details related to the fund and the investors that are required for the purging
calculation:
 IJIF  Purging date: This is the date on which the purging for the fund and investor is
9,1 being done. In our present example, this period is September 2016.
 Purging period: This is the financial period for which the purging for the fund
and for the investor is being done. In our present example, this period is April
2014 to March 2015.
 Fund profile: Fund profile includes date of inception of the fund, the scrips/
72 stocks included, details of transactions and holdings (during the year), fund
investment value (average for the year), number of outstanding units (average
for the year) and net asset value (average for the year). This information can be
collected from the periodic reports regarding the portfolio of the fund.
 Financial details of investee companies: Financial details of scrips include total
impure income and outstanding shares of the respective companies for the
financial period 2014-2015 (applicable for this example).
 Investor’s investment details: Investor’s investment details include details of his
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transactions in units of the fund. This information can be collected from the
report of holdings of units issued to investors by fund managers.
It is to be noted that, in case of funds, purging is done for the fund first. This involves
determining the purging amount applicable due to investment by the fund in different scrips
held by the fund in its portfolio. For this, one has to obtain from the accounts of each
company, the total impure income earned by the company and the number of its total
outstanding shares. From these figures, the interest earned by the company (in terms of
rupees per share per day) is calculated. Applying this ratio to the number of share-days of
investment by the fund in the scrip, the amount to be purged by the fund on account of its
investment in the company can be calculated.
Then based on the total purging amount calculated on account of all the scrips in the
portfolio of the fund and the average number of units outstanding during the year, the
purging ratio for the fund (in terms of purging amount per unit per day) is calculated. This is
the purging ratio for the fund. From the investment history (transaction details) of the
investor with regard to the particular fund, one can calculate the total unit-days of his
investment in the fund. Applying the purging ratio of the fund to the unit-days of
investment in the fund, one can arrive at the purging amount for the particular investor on
account of his investment in that fund.
Let us assume that the Sharīʿah-compliant fund is launched on April 01, 2014. The fund
comprises five shares (A to E). The average number of units of the fund outstanding during
the period 2014-2015 is 100,000 and the average value of the fund is US$10m. The average
net asset value of the fund is US$100. The impure income for A, B, C, D and E is US$100,000,
90,000, 150,000, 70,000 and 80,000, respectively. The shares outstanding for each of the
scrips are 100,000. Tables VII and VIII provide details of the Sharīʿah-compliant fund and
the financial details of each stock included in the Sharīʿah-compliant fund for the financial
period 2014-2015.
The process of calculating the purging amount for a fund is as follows:
 Share-days for all the scrips/stocks in the fund: For this purpose, the monthly
shareholding pattern of the fund for all the shares during the year needs to be
collected. The details of transactions in the portfolios of mutual funds are
disclosed in the public domain. The exact holdings of the fund cannot be known.
Mutual funds do, however, publish the details of their share portfolios on a monthly
basis. From the opening and closing stock of each scrip in the portfolio for every
 month, one can calculate the average holding of each scrip in the portfolio during Purging of
each month of the year. Multiplying the average holding of shares of each scrip by impure income
the number of days in that month and cumulating the same over the year gives the
total share-days of investment in that scrip by the fund. Please refer to Table IX in
which the total number of share-days for scrip “A” is calculated and shown as
8,205,000. The total number of share-days for each scrip will be calculated in the
same way. As per Table X below, the share-days for scrips B, C, D and E are
7,217,500, 9,525,000, 6,997,500 and 7,312,500, respectively. 73
 Purging ratio: The purging (impure income) ratio for each of the scrips is
calculated separately by dividing the total impure income for that scrip by the
number of its shares outstanding, and the resulting figure is again divided by
365. Please refer to Tables VIII and XI.
 Purging amount for the fund: For this purpose, first the total purging amount
for each scrip is calculated by multiplying the total share-days for the scrip with
its respective purging ratio. Purging amount of all the scrips is added together
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Particulars Unit Value

Date of inception Date 01.04.2014

Number of scrips in the fund Number 05 Table VII.
Average number of outstanding units Number 100,000 Details of XYZ
Average value of fund US$ 10,000,000 Sharīʿah-compliant
Average NAV US$ 100 fund

Scrips/Stocks in fund Impure income (US$) Outstanding shares Impure income/share Table VIII.
Financial details of
A 100,000 100,000 1.0
B 90,000 100,000 0.9 stocks included in
C 150,000 100,000 1.5 XYZ Sharīʿah-
D 70,000 100,000 0.7 compliant fund for
E 80,000 100,000 0.8 the period 2014-2015

Holding during Average holding Share-days

Months Opening Closing the month period days for the month

Apr-14 0 25,000 12,500 30 375,000

May-14 25,000 25,000 25,000 31 775,000
Jun-14 25,000 10,000 17,500 30 525,000
Jul-14 10,000 15,000 12,500 31 387,500
Aug-14 15,000 35,000 25,000 31 775,000
Sep-14 35,000 20,000 27,500 30 825,000
Oct-14 20,000 15,000 17,500 31 542,500
Nov-14 15,000 20,000 17,500 30 525,000
Table IX.
Dec-14 20,000 35,000 27,500 31 852,500
Jan-15 35,000 35,000 35,000 31 1,085,000 Share-holding
Feb-15 35,000 25,000 30,000 28 840,000 pattern of a scrip in
Mar-15 25,000 20,000 22,500 31 697,500 XYZ Sharīʿah-
Total share-days 8,205,000 compliant fund
 IJIF to ascertain the total purging amount for the fund. As mentioned in Table XI
9,1 below, the purging amount for scrips A, B, C, D and E is assumed as US$22,479,
17,797, 39,144, 13,420 and 16,027, respectively. The total purging amount for the
fund thus comes to US$108,867.
 Purging amount per unit: For this purpose, the total purging amount of the fund
is divided by the average number of its units, which is calculated in US$ in the
74 current example. Please refer to Table XII below.
 Purging amount per unit per day: For this purpose, the purging amount per unit
is divided by 365. For the current example, the purging amount per unit per day
is US$0.0030. Please refer to Table XII below.

Purging for an investor investing in the mutual fund

After deriving the purging amount for the fund, let us move on to determine the purging
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amount for an investor (Table XIII).

The process of calculating the purging amount for an investor is as follows:
 Unit-days for the investor: For this purpose, the unit transaction details are
collected from the investor. The number of units purchased or sold is multiplied
by the period for which they were held (no. of days) to get the unit-days. Unit-
days for the total period are added to get the total unit-days. As presented in
Table XIV below, the number of units purchased/sold on 1 April, 1 July,

Scrips/Stocks Total share-days

Table X.
A 8,205,000
Share-days for all the B 7,217,500
scrips included in C 9,525,000
XYZ Sharīʿah- D 6,997,500
compliant fund E 7,312,500

Purging ratio Purging amount

Scrips/Stocks Total share-days (US$) (Total share-days  purging ratio)
Table XI.
A 8,205,000 0.0027 22,479
Purging amount for
B 7,217,500 0.0025 17,797
all the scrips C 9,525,000 0.0041 39,144
included in XYZ D 6,997,500 0.0019 13,420
Sharīʿah-compliant E 7,312,500 0.0022 16.027
fund Total interest income to be purged for the fund 108,867

Table XII.
Particulars Purging calculation Purging amount
Calculation of
purging amount for Purging amount per unit per year 108,867/100,000 = 1.09 1.09 (US$/Unit)
the fund Purging amount per unit per day 1.09/365 = 0.0030 0.0030 (US$ Unit/Day)
 1 October, 1 January and 31 March is, respectively, 100, 90, 75, 80 and 90. It Purging of
means 100 units were held for 365 days, 90 units were held for 274 days, 75 impure income
units were not held for 182 days, 80 units were held for 90 days and 90 units
were held for 0 days. Accordingly, the unit-days invested by the investor were
36,500, 24,660, 13,650, 7,200 and 0, i.e. a total of 54,710 unit-days.
 Purging amount for the investor: For this purpose, the total unit-days for the
investor are multiplied by the purging amount per unit per day. As per Table XIII 75
below, total unit-days for the investor are 54,710 and the purging amount per unit
per day is 0.0030. Hence, the purging amount for the investor comes to US$163.1.

Purging Amount for Investor ¼ ðTotal Unit Days of Investor

 Purging Amount per Unit per DayÞ
¼ 54; 710  0:0030 ¼ 163:1
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Major purging-related issues

Apart from the conceptual issues discussed above relating to purging, there are certain
practical issues pertaining to the abovementioned methodologies, some of which have also
been highlighted in the literature (Hashim and Habib, 2016), which we shall address in the
current section of the paper. However, the purging methodology discussed in the following
paragraph takes into account the impacts of both the conceptual as well as the practical
issues involved in purging.
Incidentally, there is also discussion in the literature on the issue of capital gains. The
view of the authors of this paper is that as far as Sharīʿah-compliant portfolios are
concerned, it is a non-issue and can be ignored. We turn in the next section to the real issues
identified below.
In the process of advising on the purging amount for investors and funds over the past
decade, we have identified a few major technical issues which complicate the process of
determining purging amounts for portfolios and need to be addressed. They deserve the

Date Units transaction (purchase/sale) No. of days holding Unit-days

Table XIII.
1 April 2014 100 365 36,500
Unit-holding pattern
1 July 2014 90 274 24,660
1 October 2014 (75) 182 (13,650) of investor in XYZ
1 January 2015 80 90 7,200 Sharīʿah-compliant
31 March 2015 90 0 0 fund as on 31 March
Total 54,710 2015

Particulars Units Value

Table XIV.
Avg. NAV US$ 100
Total Unit-Days of Investor Nos 54,710 Purging ratio
Avg. Investment of Investor per day US$ 14,990 calculation for
Purging Amount for Investor US$ 163.1 investor for the
Purging Ratio per US$ % 1.089 period 2014-2015
 IJIF attention of Sharīʿah scholars and, more so, that of practitioners who are involved in the
9,1 actual process of determining purging amounts. The issues are as follows:
 bonus;
 rights/warrants;
 splits; and
76  change in financial year.
It is evident that determination of the amount of interest to be purged – whether for an individual
portfolio or a mutual fund investment – requires calculating, separately for each scrip in the
portfolio, the ratio of interest to be purged in terms of rupees of interest earned during the year per
share per day. This implies the need to determine the divisor, i.e. the number of outstanding
shares. The problem arises when the quantity of issued shares of a company changes during the
course of the year. As a result, from a financial perspective, the weight or importance of a share
which existed prior to the change (increase in issued shares) undergoes a transformation in terms
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of its entitlement to proportional ownership of the company.

The number of issued shares increases as a result of bonuses. In the process of calculation of
interest income per share, all the figures used are those relating to the year-end.
The transactions which took place prior to the bonus date must be brought on par with
the transactions that occurred after the bonus date. To do so, the figures for the number of
shares transacted between the start of the financial year and the bonus date must be
suitably amended. This process can be termed as normalisation.
While accommodating the change and giving the right effect to it in the computing
process, one needs to be aware of the nature of the change. We consider below each type of
change that can potentially occur.

Bonus
In case of a bonus, the company issues additional shares to all the existing shareholders in a
specified ratio by capitalising some of its reserves. As a result, there is an increase in the
number of issued shares. Let us say a company issues A number of new shares for every B
number of existing shares held. As a result, subsequent to the bonus, the number of issued
shares of the company will be A þ B. As the existing shares were fewer in number earlier
and subsequent to the issue are part of a larger total number, their proportionate weight or
importance has reduced subsequent to the issue. Let us illustrate this point with an example
pertinent to our current discussion.
Assume that PQR Co. Ltd., whose year begins on 1st April, had 100 issued shares. On 1st
July, it issues an additional 50 bonus shares, i.e. in the ratio 1:2 (1 additional for every 2 held).
The company is earning US$30 as impure income every month. Hence, every shareholder of
the company was responsible for US$0.3 of impure income every month before the issue of
bonus. After the bonus issue, there are now 150 issued shares, which share the responsibility
for the impure income earning of US$30 per month from 1st July onwards. So, from 1st July
onwards, all 150 shares are each responsible for US$0.2 of impure income per month.
Obviously, the purging required for the same number of days of holding on account of a
share held during the prior period will not be the same as that for a share held for the same
number of days in the latter period.
As the portfolio may be actively buying and selling the shares of PQR Co. Ltd., one may
not be able to keep track separately of the number of issued shares of the company each time
shares of the company are bought or sold by the investor at different times. Instead, the
possible way is to normalise the number of shares bought or sold earlier, so that
 computation for both types of shares can be carried out in an undifferentiated manner on the Purging of
basis of the number of issued shares at the end of the year. impure income
Normalisation of shares can be done by increasing the number of shares bought or sold
prior to the bonus date in the ratio (A þ B)/B, (no. post-bonus/no. pre-bonus). This effect is
given in all transactions from the start of the financial year in which the bonus is declared
and extending up to the bonus date. By doing this, the extra effort of keeping track of the
two types of shares separately is avoided. This is illustrated below by calculating the
purging liability for a few transactions in the shares done pre- as well as post-bonus. 77
Let us assume that the transactions took place as depicted in Table XV.
The company is earning US$30 impure income per month. Hence, during the financial
year 1 April to 31 March, it has earned US$360.
Tables XVI and XVII illustrate the calculation of the purging amount based on the direct
method and normalisation method:
(1) direct method;
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(2) normalisation method;

(3) Total interest earned = 30  12 = 360;
(4) Total issued shares at year-end = 150;
(5) Purging amount per share = 360/150 = 2.4; and
(6) Purging amount per share per month =2.4/12 = 0.2.

Rights and warrants

Rights/warrants are issued by a company when it wants to offer an opportunity to some, or
all, of its existing shareholders to increase their holdings for a consideration (which is

Date No. of shares purchased No. of shares sold

Table XV.
1 April 2
1 May 2 Purchase and sale of
1 June 2 shares between April
1 August 4 and December of the
1 December 2 financial year

Purging
Month Purging calculation [monthly impure income  no. of shares  holding period] amount

April For 2 Shares held for 3 Months (a): 0.3  2 shares  interest of 3 months = 1.8 7.2
For 3 Shares held for 9 Months (b): 0.2  3 shares  9 months = 5.4
Total (a þ b) = 1.8 þ 5.4 = 7.2
May For 2 Shares held for 2 Months (a): 0.3  2 shares  interest of 2 months = 1.2 6.6
For 3 Shares held for 9 Months (a): 0.2  3 shares  9 months = 5.4
Total (a þ b) = 1.2 þ 5.4 = 6.6
June For 2 Shares Not held for 1 Month (a): 0.3  2 shares x interest of 1 month = 0.6 6.0
For 3 Shares Not held for 9 Months (a): 0.2  3 shares  9 months = 5.4
Total (a þ b) = 0.6 þ 5.4 = 6.0 Table XVI.
August For 4 Shares held for 8 Months (a): 0.2  4 shares  8 months = 6.4 6.4 Purging calculation
December For 2 Shares not held for 4 Months (a): 0.2  2 shares  4 months = 1.6 1.6 based on direct
Total purging amount 12.6 method
 IJIF generally at a discounted price compared to the ruling market price of the share). While we
9,1 are not concerned in purging calculations with the pricing aspect, as such offers are
generally taken up and lead to an increase in the issued number of shares, they have an
implication for calculation of the purging amount.
Though financially the implications of bonus and rights for shareholders are different, as
far as purging calculations are concerned, the treatment in the calculations is the same as
78 with a bonus, i.e. normalise all transactions relating to the scrip from the start of the related
financial year till the date of the rights issue using the rights ratio in a similar manner as
described above in the case of the bonus issue.

Split
Split refers to the situation where a share/s of a certain face value is/are split into shares of a
different face value. The result is again an increase in the number of issued shares, though in
this case there is no increase in the value of the share capital. Again, normalisation needs to
be done here by considering the relative figures. Generally, splits are expressed in terms of
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the face values pre- and post-split. In this case, the ratio used is the face value pre-split/face
value post-split.

Change in financial year

Generally, a change in financial year of a company leads to the company closing its books
either earlier or later than a full calendar year. Though not a frequent occurrence, it does
happen at times. In this case, calculation of the purging ratio (purging amount per share per
day) requires the purging amount to be divided by the number of days in the truncated or
extended period rather than by 365, as is normally done.

Conclusions
After a detailed discussion and comparative analysis of the three existing purging
methodologies, the following conclusions can be drawn:
 Under the dividend method, purging is restricted to the case where the company
distributes a dividend. If the company does not declare a dividend, or even if it
declares a dividend, but the investor had already sold his shares earlier, he is
not required to purge any amount though the interest was earned when he held
the shares. Hence, complete purging of impure income is not possible by using
this method – in fact, only a very minor part of the interest gets purged.
 Under the AAOIFI method, purging liability becomes the responsibility of the
investor only if he continues to hold the shares till the end of the accounting
period; otherwise, the entire liability of purging must be borne by someone else

Normalisation of shares
Months [No. of share  (A þ B)/B] Share months Purging amount

April 2  (2 þ 1)/2 = 3 3  12 = 36 36  0.2 = 7.2

Table XVII.
May 2  (2 þ 1)/2 = 3 3  11 = 33 33  0.2 = 6.6
Purging calculation June 2  (2 þ 1)/2 = 3 3  10 = 30 30  0.2 = 6.0
based on the August 4 4  8 = 32 32  0.2 = 6.4
normalisation December 2 2  4 = 8 8  0.2 = 1.6
method Total 63 12.6
 who was holding the shares at the end of the accounting period and may have Purging of
perhaps held them only for a fraction of the entire period over which the interest impure income
was received. Hence, mostly complete purging of impure income by the person
who is actually responsible for it is not possible by using this method either.
 On the other hand, the Modified AAOIFI method applies irrespective of whether
the company declares a dividend or not and whether he was holding the shares
when the company closed its accounting period or otherwise. The criterion is only 79
how much interest was earned by the company on account of his shares and during
the period he held the shares. That is the exact amount he is required to purge.
Taking an overall view of the existing methods of purging, it is clear that there is a
commitment, in principle, to purge the impure income under all the methods. Though there
are certain shortcomings in the calculation methodologies adopted under the dividend and
AAOIFI methods, it is hoped (particularly in the case of the dividend method – as the
effective quantum of purging under this method is negligible) that these shortcomings are
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not due to any wilful flouting of Sharīʿah requirements. Instead, they stem from an
inadequate comprehension of the practical application of Sharīʿah guidelines and
complexities of financial calculations.
The AAOIFI modified method of purification is logical and equitable. In fact, under this
method, the shortcomings of the other two methods are successfully addressed, making the
full purging of the impure income possible.
To our understanding, the Modified AAOIFI method is deemed a more correct, just and
comprehensive method of purging. It is hoped that researchers and practitioners may
consider this method for further study and experimental implementation.

Notes
1. AAOIFI Sharīʿah Standard No. 21, 3/4/4 (2015) recognises the need for an institution to exercise
additional effort and caution to identify such impure income, as it may not be directly reported in
the accounting statements of companies. Considering this provision, TASIS has decided to
recognise 8% of investment in preference shares and mutual funds as “impure income on account
of Sharīʿah-non-compliant investments” and includes the same in total impure income.
2. A brief Research Note by Barkatulla and Wasiullah (2016).

References
AAOIFI (2015), Sharīʿah Standards No. 21, 3/4/1-5, Accounting and Auditing Organisation for Islamic
Financial Institutions, Bahrain.
Barkatulla, M. and Wasiullah, S.M. (2016), “Methodology of purging interest income”, International
Journal of Islamic Finance, Vol. 8 No. 2, pp. 117-125.
FTSE Russell (2016), Russell Global Index Series: Construction and Methodology 2016, v 3.4, available
at: www.ftse.com/products/downloads/Russell-global-indexes.pdf?599
Hashim, A. and Habib, F. (2016), “Income purification methodology for Shariah-compliant stocks”,
Islamic Commercial Law Report-2017, ISRA & Thomson Reuters, Kuala Lumpur, pp. 66-69,
available at: http://ifikr.isra.my/documents/10180/a26d910a-3113-4b02-bd16-c21fac246c39
Income Tax Act (1961), Income Tax Department of India, Income Tax Act, available at: www.
incometaxindia.gov.in/pages/acts/income-tax-act.aspx
Income Tax Act (1974), Income Tax Department of India, Interest Tax Act, available at: www.
incometaxindia.in/Pages/ govacinterest-tax-act.aspx
 IJIF Khatkhatay, M.H. and Nisar, S. (2007), “Shariah compliant equity investments: an assessment of
current screening norms”, Islamic Economic Studies, Vol. 15 No. 1, pp. 47-76. Available at: www.
9,1 irti.org/English/Research/Documents/IES/085.pdf
S&P Dow Jones Indices (2017), S&P Shariah Indices Methodology, available at: www.spindices.com/
indices/equity/sp-500-shariah-index
TASIS (2017), Handbook on Investments in Shariah Tolerant Stocks, available at: http://tasis.in/userfiles/
files/Handbook%20on%20Investments%20in%20Shariah%20Tolerant%20Stocks.pdf
80

About the authors

Wasiullah Shaik Mohammed is Manager at Taqwaa Advisory and Shariah Investment Solutions Pvt
Ltd (TASIS), Mumbai. He is also pursuing a PhD in Management in the area of Islamic finance from
B S Abdur Rahman Crescent University, India. He has an MBA in finance from the prestigious
Osmania University, Hyderabad. He has worked as a financial analyst and as a financial research
analyst, structuring Sharīʿah-compliant financial contracts and products in real estate, microfinance,
manufacturing and retail business. His “Islamic Finance in India: Financial Regulations, Challenges
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and Possible Solutions” is among the few papers included in a recent specialist publication on
financial markets regulation as part of Advances in Finance, Accounting and Economics (AFAE)
Book Series in the USA. Wasiullah Shaik Mohammed is the corresponding author and can be
contacted at: [email protected]
Mufti Abdul Kader Barkatulla is a Sharīʿah Scholar on TASIS Sharīʿah Board. He is a prominent
Sharīʿah expert with a background in economics and finance as well as social, Muslim community
work. He was trained extensively in Islamic and modern education systems in India and the UK.
Mufti Barkatulla has contributed to British Muslim community as an imam, Sharīʿah judge,
developer of Islamic Law information databases and Sharīʿah advisor of Islamic banks and funds in
Europe and Asia. He has been commended by members of the British Parliament for his
contributions to the Islamic finance sector in the UK.
Mohammed Husain Khatkhatay is Director at TASIS Pvt Ltd, Mumbai. He holds a BTech from IIT
(Bombay) and an MBA. He has vast experience in Islamic finance. During his professional life of 40
years, he has been working in the areas of the capital market, Sharīʿah-compliant product
development, Islamic microfinance and Islamic finance regulation in India. He has played a key role
in structuring a Sharīʿah-compliant index, venture capital funds, a mutual fund and Sharīʿah-based
fund mobilisation models for real estate, leasing, finance, manufacturing, service companies and
other corporate clients. He has vast experience in Sharīʿah audit of policies, processes and operations
of the companies and firms operating in the Indian legal and regulatory environment. Khatkhatay
has been involved in tailoring the evolving Indian regulatory framework to create space for various
Islamic finance initiatives.
Zaffar Abbas is Director at TASIS Pvt Ltd, Mumbai. He is a commerce graduate with diversified
experience, including 30 years of hands-on experience in financial accounting, marketing and administration
in the field of Islamic finance and investment. He worked as a branch manager with Bait-un-Nasr Co-
operative Credit Society (a pioneer in the field of interest-free microbanking and finance in India). He also
worked as a branch manager with Barkat Investment Group (a pioneer in profit and loss sharing finance
and investments in India). He was instrumental in establishing and registering AASRA, the first Sharīʿah-
compliant multi-state co-operative credit society in India, and was its chief promoter. He actively
participated in promoting the financial activities of the Federation of Interest-free Organizations (India). He
played a key role as head of marketing of India’s first Sharīʿah-compliant mutual fund (TATA Ethical
Fund) launched by TATA, India’s leading industrial house.

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