Friday, July 30, 2010

Shariah Compliance in Islamic UT

Read here: List of Islamic Fund from PM

"The outlook for Islamic UT industry in Malaysia remains positive" 
Dr-Aida-Othman(ZI Shariah Director)

What does Shariah compliance refer to in Islamic unit trusts?
Shariah compliance in a UT fund means that a great deal of focus is placed on eac of the company securities which the fund invests into. The emphasis is on the primary activities of a company with regard to the goods and services offered. These activities need to be identified to ascertain whether they are against Shariah principles. IF they are found to be contrary to Shariah principles, the particular company's securities are then excluded from the list of Shariah-compliant securities.

The companies will be classified as Shariah non-compliant securities if they are involved in one of the following core activities:
  • Financial services based on riba (interest)
  • Gambling and gaming
  • Manufacture or sale of non-halal products or related products
  • Conventional insurance
  • Entertainment activities that are non-permissible according to Shariah
  • Manufacture or sale of tobacco-based products or related products
  • Stockbroking or share trading in Shariah non-compliant securities 
  • Or Other activities deemed non-permissible according to Shariah

How often will each fund be reviewed to ensure it remains Shariah compliant?
Each fund is reviewed and monitored by the Shariah adviser technically on a constant basic. (monthly-to determine whether the securities they invest into still remain as Shariah compliant)

source: 'Feature' column taken from The Bulletin  July 2010

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