The Philippines may be the bastion of Christianity in Asia, but Muslims represent a significant portion of the population and a growing economic force.

Elsewhere in the region, Muslims constitute a formidable investor base.

This is why in 2013, the Philippine Stock Exchange started a screening process for Shariah-compliant issuers. The creation of Shariah-compliant list at the PSE is expected to enhance the attractiveness of those in the list as investment options for investors in the Association of Southeast Asian Nations (Asean) and the global Islamic business community.

This is seen as first step for the Philippines to venture into the Islamic capital market and join the more than $1.5-trillion global asset class.
In the future, the PSE hopes to launch an Islamic sub-index, to better help fund managers who may want to launch mutual funds or exchange-traded funds (ETFs) based on Shariah compliance.

The Philippine bourse has teamed up with IdealRatings Inc. to screen companies for Shariah compliance in accordance to the globally accepted Accounting and Auditing of Islamic Financial Companies (AAOIFI) standards.

Shariah compliance screening excludes companies with businesses in conventional interest-based lending, financial institutions, pork, alcohol, intoxicants, tobacco, arms and weapons, gambling, casinos, derivatives, pornography, music/entertainment and human stem-cell research.

The process also includes the screening of the company’s financial ratios of cash and interest bearing investments not exceeding 30 percent, interest bearing debts not exceeding 30 percent and accounts receivables not exceeding 67 percent of market capitalization.

Because Islamic law prohibits charging of interest, banks can not be on this list and neither can big conglomerates with a big portion of income generated from their banking units.

The roster is thus a lot different from the main stock barometer PSE index. In fact, only a few of PSEi stocks are included in the latest Shariah listing at the PSE. Included are DMCI Holdings, Globe Telecom, Jollibee Foods Corp., Philippine Long Distance Telephone Co., Robinsons Land Corp., Semirara Mining & Power Co. and Universal Robina Corp.

The list is updated quarterly to ensure not just its appropriateness but also its relevance.

In the latest quarterly update of Shariah-compliant companies in PSE, 52 companies and 53 asset classes made it.