19TH SERIES OF SHARI’AH TRAINING SEMINAR
ZAMBOANGA PENINSULA
ISLAMIC JURISPRUDENCE:
INVESTMENT IN UNIT
TRUSTS/ MUTUAL
FUNDS
HATANG, ABDUBAKI FAIZAL, ISABEL
JAMSANI, DARWIZA JIKIRI, MARYAM
BY GROUP 1 ALLAMA, HAIDISHEENA H. MOHAMMAD AIN, RASHIADA
KAMLIAN, FARHA JUMAANI, SHAIRA
AMILANI, ZAIDA HATANG, MARY CRIS
What is a UNIT
TRUST/ MUTUAL
FUND?
Unit trust is a fund where money from many
different investors is pooled together and used
to invest in a portfolio of assets. These
investments are chosen and managed by a
professional fund manager, who aims to ensure
that the returns generated are in line with the
fund’s objectives. These investments are also
overseen by an independent trustee, who
ensures that the fund performs in accordance
with its stated aims.
Is it HALAL or HARAM?
The basic principle is that it is
permissible to invest in any company
if it does not deal with haram things
such as riba and so on. But if it does
deal with haram things such as riba,
then it is not permissible to invest in
it.
WHY IS IT HARAM?
With regard to the prohibition on investing and promoting
these companies, that is because of what that involves of co-
operating in sin and transgression, helping to spread haram
and causing people to fall into it. Allah, may He be exalted,
says (interpretation of the meaning):
“Help you one another in Al-Birr and At-Taqwa
(virtue, righteousness and piety); but do not help
one another in sin and transgression” [al-Maidah
5:2].
And most of the Unit Trust Companies are involved in Riba.
Allah's Messenger ( )ﷺcursed the one who
accepts usury, the one who gives it, the one who
records it and the two witnesses to it, saying, "They
are all the same." [Reported by Muslim].
What about MIXED
PORTFOLIOS?
It means they invest your money in mixed portfolios, some are HALAL,
some are HARAM.
The contemporary scholars differed concerning the ruling on
them, but the most correct view is that it is haram to , invest in
them or promote them.
So what to do?
SCREEN YOUR PORTFOLIOS
What if I neglect
screening it?
PURIFY IT
PURIFICATION
Even if one invests solely in halal assets, unintended or unavoidable encounters with haram elements
can occur. These haram elements could be due to the company's operations, liquidity provisions, or
simply the way the company manages its funds.
Whatever the source of these elements, they pose a serious challenge to maintaining the halal status
of your investment. Purification allows you to avoid benefiting from such activities directly.
Purification serves as a means to cleanse our wealth from any possible haram elements. Just as we
purify our wealth every year through zakat, purification allows us to cleanse earnings that may have
become mixed with haram.
The Prophet Muhammad (PBUH) warned about the importance of the source of our earnings
in a hadith reported in Sahih al-Bukhari (2083): Certainly a time will come when people will
not bother to know from where they earned the money, by lawful means or unlawful means.
This emphasizes the importance of ensuring our wealth does not contain any haram elements, even
if they are unintentionally acquired. Purification thus becomes a necessary step as it helps maintain
the purity and barakah of our wealth.
Dividend purification focuses solely on
cleansing any dividend income earned from
stocks/investments in proportion to any
non-compliant revenue reported by the
company.
Here are the steps:
determine the total percentage of non-
compliant income for the company. This can
be found by navigating to the compliance
report for a particular stock/investment. For
DIVIDEND example, let's assume Company A has 2%
non-compliant revenue as a result of
earning interest income.
PURIFICATION When you receive dividends from Company
A, calculate 2% of the total dividend amount.
Donate this 2% to charity
Conclusion
MAKE SURE TO INVEST ONLY IN UNIT TRUSTS OR MUTUAL FUNDS THAT ARE
SHARIAH-COMPLIANT BECAUSE WE WILL BE HELD ACCOUNTABLE IN THE
DAY OF JUDGEMENT.
Messenger of Allah ( )ﷺsaid, "Man's feet will not move on the Day of
Resurrection before he is asked about his life, how did he consume it,
his knowledge, what did he do with it, his wealth, how did he earn it
and how did he dispose of it, and about his body, how did he wear it
out."
[At-Tirmidhi, who classified it as Hadith Hasan Sahih].
Thank You
For Your Attention