AN OUTLINE TO SHARIA FUNDS

Many people are afraid of investment in mutual funds as they think it unethical. Sharia compliant funds in India help you to invest your money in sharia compliant companies and also help you to refine your funds. Sharia funds in India are the funds of investment which meets the principles of sharia law and the principles of Islamic way of investment in India. These shariah investment in India are done following a variety of rules like investing only in sharia compliant companies, appointing a sharia board, carrying out sharia audit, refining the income from interest by charity works.
Mutual fund house and stock exchange ensure sharia compliance by employing Sharia advisory institutions. Sharia board will monitor and control the stocks regularly. Based on the sharia compliance statuses these stocks are regularly added and removed.
The concept of Sharia funds developed in the late 1960s. They expanded to popularity just recently. As the concept requires much effort for making the fund in compliance with law, the operations are carried out with good planning and structuring from the start to the end.
Investment of sharia funds are prohibited in companies which collect income from sales of alcohol, sales of tobacco, pork products, pornography, gambling, military equipments, weapons, dead animals not slaughtered according to the sharia rules, gold and silver etc.
Sharia fund in India are categorized into various types. The are :
Commodities
Commodities fund makes profit using halal commodities. The profit is made by buying and selling such commodities. They make use of two types of sharia approved contracts. They are Istisna and Bay-al-Salam. Istisna is a contract in which the buyer of an item funds the producers. Bay-al-Salam is also a forward contract in which buyer will pay the amount for buying raw material in advance.
Equity funds
Funds and companies are screened to check the sharia compliance .Equity fund have limited pool of companies to invest.
Murabha
They are similar to development funds were a fund will buy product and resell to third party. Here cost and margin are agreed in advance.
Ijara
This is responsible for management of asset. It receives a management fee.
