Islamic finance and investment is alive and well in India according to the Bombay-based Barkat Baitun-Nas’r Group, which claims to be the pioneer of Islamic banking on the sub-continent.

And it is thriving and expanding as well. In fiscal year 1992-93, according to the Group’s results, it attracted 401.2 lakh rupees and declared a dividend of 16 per cent on investment. This compared with total deposits of 206 lakh rupees and a dividend of 20 per cent in the previous year.

In fact, comparing the results of the last five fiscal years, Barkat has averaged total deposits of 157.74 lakh rupees per year (starting from a low base of 16.5 lakh rupees in its first year - fiscal year 1988-19 to 401.2 lakh rupees in 1992-93), and a declared dividend of 18.05 per cent per year. These figures are those declared by the Group in corporate literature and New Horizon cannot verify them in terms of audited accounts, which it neither has access to, nor has studied.

The Barkat Investment Group (BIC) is headed by Mr. Mohammed Husain Khatkhatay and has a six-member Board of Directors including Mr. MS Salahuddin, Mr. Syed Zahid Au, Mr. Abdul Wahab Bhoira, Mr. Au Khwaja and Mr. Yusuf Mohammed Husain. BIC has eight branches and four authorised agents nationwide. Bait-un-Nas’r has another thirteen outlets nationally. The Group hopes to open new branches during 1994 in Malegaon/Nasik, Ratnagiri, Surat and Mumbra. Feasibility studies have also been carried out for future branches in Kerala and coastal Karnataka.

“We hope to touch a deposit target of 800 lakh rupees by 1993-1994”, stresses Barkat, whose corporate motto is the rather ambitious “Our Aim, Our Mission – An Interest-Free Economy”.

Barkat’s corporate language is similarly ambitious and exaggerated. It talks about ‘halal income and profit’, ‘good returns and ideological purity which puts Barkat deposits in a class of their own’, interest-averse banking’ and so on.

Barkat Bait-un-Nas’r Group started its Islamic finance operations in 1976 through the setting up of an Islamic co-operative credit society. In 1983 the Group launched two public-limited investment companies. Falah Investments Limited (FIL) and Ittefaq Investments Limited (IIL), which offered shares to small investors. Both companies invested investors’ funds in shares of major companies, on a Modaraba basis.

In 1988 the Group launched its profit- sharing Fixed Deposit Scheme through its newly-established Barkat Investment Corporation (BIC). The Scheme accepts deposits in multiples of Rs1,000 with a minimum of Rs10,000. It offers fixed deposit and savings schemes with varying conditions and criteria.

According to Barkat, the funds are invested in housing projects, land development, leasing and profit-and-loss (PLS) business all based on Islamic banking principles. One interesting factor is that “more than 70 per cent of Barkat’s funds are presently deployed in highly profitable construction and real estate development projects”. India’s real estate market might be a bull one at present, but investing such a high proportion of funds in one sector is very risky. Islamic financial institutions such as Kuwait Finance House (KFH), which in the 80’s suffered losses due to investment in the real estate market, can in hindsight teach Barkat a thing or two about the dangers of having such a heavy exposure in the market.

Nevertheless, Barkat is contributing to the growing housing demand in the country both in the middle class market through projects such as Al-Hamd Complex Bombay, Greenfields Enclave Umergaon in Gujrat, Golden Enclave Bangalore, and a Barkat apartment complex in Nalasopara, and through low cost projects as in Kausar Baug in Punjab.

Over the last year the Barkat Group has also expanded its activities to include stock market related investments through Barkat Stocks and Investments (BSI) Deposits Scheme; a Custodial/portfolio Management Service; a Secretarial Service for Share Investment, and Leasing through its Barkat Leasing & Financial Services Limited (BLFSL).

Barkat also claims to be expanding in international trading through exporting agricultural products such as Alfonso mangoes sourced in Chiplun and Khed fish processing; and in computer software development through its Barkat Computer Corporation (BCC) subsidiary which was set up in 1992.

There is very little information however about the Group’s capitalisation, reserve capital adequacy provisions, shareholders and regulatory aspects. Its marked material is an endless exercise in congratulatory claims and potential investment outlets and earnings from potential investors.