DOHA: Vodafone Qatar’s shares saw a huge jump after the company became fully Sharia’h compliant. The telecom operator’s shares jumped 18.99 percent on month-on-month in February 2015, after it announced it had switched its financial activity to Islamic transactions since early February.
Vodafone Qatar’s shares were down 9.42 percent at the end of January. On February 1, 2015 Vodafone Qatar announced it had switched all its financial activity to Islamic transaction. Its shares surged 18.99 percent at the end of the month compared to the previous month. Total value of the shares jumped to QR1.49bn from January’s QR270m. Total traded volume in February soared to 85 million shares from the previous month’s 17 million shares.
In the following eight trading after Vodafone Qatar announced its switch, its shares jumped 22 percent in the heaviest turnover for over a year, Reuters reported yesterday.
In February Vodafone Qatar announced it had successfully refinanced its conventional interest-bearing borrowings with a Sharia’h-compliant ‘wakala’ investment agreement in December 2014. The transition was completed in accordance with the current, effective laws that do not contradict Sharia’h rules.
Vodafone Qatar’s Sharia’h-compliance review included its investments, current debts, secured agreements and cash transactions; other agreements and contracts including rent, oversight bodies, service franchises and other commercial matters. Across the Gulf, companies that have traditionally used conventional finance are considering whether to “go Islamic”, by conforming to Sharia’h principles such as bans on interest payments and monetary speculation.
The number of major firms taking the plunge is still small — a handful in the past six months — but they underline the growing depth and cost-effectiveness of Islamic finance after several years of rapid growth in the industry.
Reuters report said companies can face a range of incentives and pressures to adopt Islamic finance. In some stock markets such as Qatar, Islamic investors with few options to choose from can reward Sharia’h-compliant firms by piling into their shares.
That appeared to happen with Vodafone Qatar. The company’s new policy included refinancing $330m worth of debt and the decision is a long-term commitment by the firm, chief financial officer Steve Walters told Reuters.
“The move is permanent. Vodafone Qatar intends to amend its bylaws to include its adherence to Sharia’h standards. This will affect all future commercial and financial activities.”
The Peninsula
