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4 Things You Need to Know About Islamic Investments
September 21, 2017 Posted By MCB Funds

There’s a common misconception that Mutual Funds are not a Halal investment avenue. Well, this is certainly not true. Contrary to popular belief, most Mutual Funds in Pakistan have divisions which are regulated under Islamic Shariah Compliant policies.

Here’s what you need to know about Islamic investments:

1. All Islamic Investments are Regulated by Islamic Experts:

So who ensures that the investment is Halal? The most important part of Islamic Mutual Investments is that they are managed and supervised by renowned Islamic experts. For instance, the Shairah Advisory Board at MCB Funds comprises of:

  • Mufti Muhammad Taqi Usmani
  • Mufti Muhammad Zubair Usmani
  • Mufti Ejaz Ahmad Samadani

These experts take extreme care to ensure that all components of the investment transactions are carried as prescribed by Shariah. This means that the investor does not have to worry about their investment not being Halal.

2. Capital is Invested in Halal Equities and Securities:

Worried about fishy business with your capital? With Islamic Investment Funds you don’t need to worry at all. The investor’s capital in an Islamic Mutual Fund is invested in companies and organizations which are run under Shariah compliant policies. This rules out any concerns an investor might have related to their capital being used for unethical means.

3. Islamic Investments are Interest Free:

Whenever banking is involved, one of the first concerns of any customer is interest. Being prohibited strictly by Shariah, interest is a major concern for most people. Islamic Investment Funds make returns on capital in a way that the provider is willing to share in the risks of a productive enterprise. This means that capital in a way is lent and not invested, leading to interest being the return and not the profit. This means that the investment is devoid of interest.

4. Strict Criteria for Choosing Equities is Followed:

In order for the equity to be Shariah Compliant, it is necessary that the core business of the company should not violate any principle of Shariah. It is prohibited to acquire shares of companies which provide services on interest such as conventional banks, insurance companies, leasing companies. In addition to this companies involved in some other business not approved by the Shariah e.g. companies making or selling liquor, pork, haram  meat, or involved in gambling, etc. We at MCB Funds, in addition to the above, choose the companies based on the following five criteria:

  1. The Interest Bearing Debt to Total Assets ratio.
  2. The ratio of Non Compliant Investments to Total Assets.
  3. The ratio of Non Compliant Income to Total Revenue.
  4. The ratio of Illiquid Assets to Total Assets.
  5. Market Price per share should be at least equal to or greater than net liquid assets per share.

Islamic Investment Funds are the perfect option for someone who wishes to save and invest to meet their short and long term financial goals. Whether it be saving for your child’s future or to go on a family vacation, with Islamic Investment Funds, you can easily do so by remaining within Shariah regulated boundaries.