Shari’ah Concepts for Investment Money
Mudarabah Fund
In the Mudarabah fund the sum may be invested in a particular enterprise activity on the foundation of profit and loss sharing.
Equity Fund
(Supply: Rules of Shariah Governing Islamic Investment Money by Mufti Taqi Usmani)
In an equity fund the quantities are invested in the shares of joint stock businesses. The revenue are derived generally via the money gains by purchasing the shares and offering them when their selling prices are improved. Income are also accomplished by the dividends distributed by the pertinent companies. If the major enterprise of a organization is not lawful in terms of Shari’ah, it is not permitted for an Islamic Fund to obtain, hold or market its shares, simply because it will entail the direct involvement of the shareholder in that prohibited company. Similarly the modern Shari’ah experts are practically unanimous on the position that if all the transactions of a company are in total conformity with Shari’ah, which consists of that the business neither borrows money on interest nor keeps its surplus in an curiosity bearing account, its shares can be acquired, held and sold devoid of any hindrance from the Shari’ah side. But evidently, this sort of organizations are really scarce in the contemporary stock markets. Almost all the businesses quoted in the existing stock market place or in some way involved in an activity which violates the injunctions of
Murabaha Fund
(Source: Concepts of Shariah Governing Islamic Investment Money by Mufti Taqi Usmani)
In a Murabaha fund the volume is companies whose operations are on basis of murabaha where transactions are undertaken on a expense-plus foundation. This variety of sale has been adopted by the contemporary Islamic banking institutions and economic establishments as a mode of financing. They buy the commodity for the advantage of their clients, and then offer it to them on the foundation of deferred payment at an agreed margin of revenue added to the cost. If a fund is designed to undertake this sort of sale, it really should be a closed-conclude fund and its models can not be negotiable in a secondary market. The purpose is that in the in the situation murabaha, as undertaken by the current fiscal institutions, the commodities are sold to the consumers instantly following their buy from the original supplier, while the value currently being on deferred payment basis will become a financial debt payable by the customer. Consequently, the portfolio of murabaha does not very own any tangible assets, instead it comprises of possibly money or the receivable debts, and both these items are not negotiable, as explained previously. If they are exchanged for cash, it must be at par value.
Ijarah Fund
(Resource: Rules of Shariah Governing Islamic Investment Money by Mufti Taqi Usmani)
The Ijarah Fund will include in companies dealing in the leasing of assets in accordance to Shari’ah principles. The ownership of these assets stays with the Fund and the rentals are charged from the end users. These rentals are the source of income for the fund which is distributed pro rated to the traders.
Combined Fund
(Rules of Shariah Governing Islamic Investment Money by Mufti Taqi Usmani)
Yet another form of Islamic Fund possibly of a nature where the subscription amounts are employed in distinct types of investments, like equities, leasing, commodities, etc. This may well be known as a Combined Islamic Fund. In this scenario if the tangible assets of the Fund are much more than 51% although the liquidity and debts are significantly less than 50% the models of the fund may well be negotiable. Nonetheless, if the proportion of liquidity and debts exceeds 50%, its models cannot be traded in in accordance to the majority of the modern scholars. In this scenario the Fund ought to be a closed-end Fund.
Published by Zia Ahmed
Investment Banker, Islamic Banker
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