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Various
Islamic financial institutions, especially in Islamic countries offer various
types of investment products that are free of Riba or interest. An Islamic
investment fund is usually one in which a number of people pool their money and
the money is in turn invested in an Islamic legal manner.
Investment funds have been defined by the Accounting and Auditing Organisation
of Islamic Financial Institutions (AAOIFI) as follows:
"Funds are investment vehicles, which are financially independent of the
institutions that establish them. Funds take the form of equal participating
shares/units, which represent the shareholders’/unitholders’ share of the
assets, and entitlement to profits or losses. The funds are managed on the basis
of either mudaraba or agency contract."
The
definition continues by setting out the Shari’a ruling that governs Islamic
investment funds:
"Investment funds are permissible by Shari’a. Because funds are a form of
collective investment that continue throughout their term, the rights and duties
of participants are defined and restricted by the common interest, since they
relate to third parties’ rights. Hence, in cases where the fund is managed on
the basis of agency the shareholders/unitholders waive their right to
management, redemption or liquidation except in accordance with the limitations
and conditions set out in the statutes and by-laws."
The Accounting
and Auditing Organization for Islamic Financial Institutions (AAOIFI) is an
Islamic international autonomous non-profit making corporate body that prepares
accounting, auditing, governance, ethics and Shari'a standards for Islamic
financial institutions. This organization was established in accordance with the
Agreement of Association which was signed by Islamic financial institutions in
Algiers.
AAOIFI was
registered in 1991 in the State of Bahrain. (aaoifi.com)
Some of the
modes for Islamic investment include the following:
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Equity Fund
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Investment in (Halal)
Shares
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Ijarah funds (leasing
funds)
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Commodity funds
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Etc.
Posted at HilalPlaza on January
27, 2006
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