Analysis and discussion of issues that impact business

Companies continue to bend to meet market demands.

When Caribou Coffee went public last year, sharp-eyed investors noticed some unusual promises in its prospectus. Caribou, the nation’s second-largest coffeehouse chain, said it would never sell pork or porn. It wouldn’t charge or receive interest, either.

You might be surprised what some of those market forces are.

It appears a new market is emerging.

By following financial rules that are part of the Islamic code called Shariah, Caribou is among a small but growing list of Western businesses looking to make themselves as attractive as possible to Muslim investors. Some, like Caribou, are motivated by principle, while others see Muslim investors as an attractive new source of money.

Businesses are simply reacting to what they see as potential business.

“There’s a bunch of Islamic investors who are prohibited from a lot of regular investments, so a lot of money is sitting in cash not earning anything at all,” said Khalid Howladar, a vice president for Middle Eastern and Islamic Structured Finance with Moody’s Investors Service in London.

Personally, I was not aware of this growing market.

Dow Jones has created an Islamic investing index. A Texas company issued almost $166 million in Shariah-compliant bonds to finance natural gas operations in the Gulf of Mexico. And the German state of Saxony-Anhalt issued a floating-rate 100-million euro note — managed by Citigroup — that followed Shariah rules.

There are some specific considerations under Islamic law.

Islamic financial rules come from passages in the Quran that prohibit “riba” — making money from money. Generally, that means not paying or collecting interest, though some scholars say only abusively high interest rates are prohibited. Other prohibitions are more moral than financial, such as a ban on selling pork.

So, Western businesses are beginning to notice.

Middle Eastern investors flush with oil profits are looking for new places to invest, and American Muslims are looking to invest in a way that doesn’t conflict with their faith.

I imagine the more militant elements of Islam would consider any partnership with the West as an egregious compromise, but moderate elements of Islam may have something to say about that. Having something to lose is a great motivator.