Shariah-Compliant Funds
Contents
Demystifying Shariah-Compliant Funds: Investing in Accordance with Islamic Principles
Exploring the world of Shariah-compliant funds unveils a nuanced approach to investing that aligns with the principles of Islamic law. From their origins to their intricacies, Shariah-compliant funds offer investors a socially responsible avenue to grow their wealth.
Understanding Shariah-Compliant Funds
Shariah-compliant funds, a subset of socially responsible investing, adhere to the tenets of Shariah law, governing investment decisions based on Islamic principles. Despite their recent surge in popularity, these funds trace their roots back to the late 1960s. The growth of Shariah-compliant funds has been notable, with a 2011 report by PricewaterhouseCoopers (PwC) highlighting their rapid expansion in the early 2000s.
Exploring Requirements and Challenges
Managing Shariah-compliant funds comes with unique challenges, including stringent compliance requirements and the involvement of Shariah boards. These boards, comprised of Islamic scholars, ensure adherence to Shariah principles but can also introduce complexity and cost to fund management. Additionally, Shariah-compliant funds face limitations on investments, excluding industries such as alcohol, pork, and gambling.
Examples of Shariah-Compliant Investments
Various investment products and indexes cater to Shariah-compliant investing, offering investors a diverse range of options. For instance, Saturna Capital's Amana Growth Fund and S&P Dow Jones Indices' Shariah-compliant indexes provide avenues for investors to align their portfolios with Islamic principles while seeking financial growth.