Pribumi, Bursa Malaysia collaborate to launch world's first zakat Index

KUALA LUMPUR: Bumiputera Malaysian Remissionary Association (Pribumi) and Bursa Malaysia have launched the Pribumi Bursa Malaysia Zakat Index (PBMZI).

PBMZI is designed to encourage recognition of publicly listed companies (PLC) that adopt Corporate Zakat practices. As the first customised index on Bursa Malaysia, it demonstrates the exchange’s dedication to promoting syariah-compliant products and services through innovative, data-driven market offerings.

Bursa Malaysia chairman Tan Sri Abdul Wahid Omar stated during the launch of PBMZI today that the index combines Islamic financial principles with environmental, social, and governance (ESG) and sustainable and responsible investment (SRI) elements.

“This aligns with Bursa Malaysia’s goal to encourage PLC to adopt Corporate Zakat within their ESG and SRI initiatives. As a global leader in Islamic finance, Malaysia’s capital market is well-positioned to champion this practice,” he said at the launch.

Abdul Wahid cited data from the Zakat Collection Centre of the Federal Territories Islamic Religious Council (PPZ-MAIWP) and Selangor Zakat Board of the Selangor Islamic Religious Council, which showed that corporate zakat contributions in 2023 amounted to RM165 million and RM176.4 million, respectively.

“These contributions significantly support socio-economic development, funding educational and human capital development programmes, and infrastructure projects, thereby fostering a more inclusive economy,” said Abdul Wahid.

The PBMZI tracks the top 200 companies on Bursa Malaysia’s Main Market that meet the criteria for profitability and Corporate Zakat contributions. The shortlisted companies undergo rigorous screening to ensure they are free from significant controversies before being included in the index.

Abdul Wahid said the strong potential of this index is supported by compelling back-test results.

“Based on historical five-year back-testing, the Zakat Index has consistently outperformed the FBM KLCI over one, three, six, and twelve months, as well as over three and five years, demonstrating the potential for superior returns when investing in ethically and socially responsible companies,” he said.

“Zakat contributions from the 27 PLC currently included in the Zakat Index totalled RM233 million in 2023, compared to RM197 million in 2022 and RM142 million in 2021. This represents a 64% growth in zakat contributions over the period, even during the challenging pandemic and post-pandemic times,” added Abdul Wahid.

Currently, the PBMZI comprises 27 components spanning various sectors, including financial services, consumer products, energy, healthcare, plantation, property, technology, telecommunications, transportation, and utilities.

Abdul Wahid said the PBMZI will be reviewed twice yearly, with assessments conducted in June and December.

“In December 2024, the Exchange hopes to have more PLCs included in this index, increasing the current number of 27 constituents. The Exchange believes that PBMZI will receive multiple positive responses from PLCs,” he said.

Pribumi president Izrul Zainal Abidin lauded Bursa Malaysia’s initiative for collaborating with capital market intermediaries such as Pribumi to custom-design the world’s first zakat index.

“This pioneering initiative shows both sides’ shared goal to innovate with Bursa by launching the PBMZI to meet client demand for socially responsible investments. Promoting Corporate Zakat in the capital market aligns with Islamic social finance and ethical investing,” he said.