Shariah-compliant MFs making a silent entry

MUMBAI: Shariah-based mutual fund (MF) schemes have made a quiet entry into the Indian investment arena. Benchmark AMC, a fund house that specialises in index-based investing, has recently closed subscriptions for a Shariah-based fund. A similar offering from Taurus Mutual Fund, Taurus Ethical Fund, is currently open for subscription.

Shariah is Islamic law derived from Quran and Hadis, the traditions of the Prophet, which governs all aspects of Muslim life. These principles advocate abstinence from investing in speculative businesses , as well as those that entail a high amount of debt, interest income and trading on current assets/liabilities.

They also prohibit investing in firms that produce or trade in alcohol, tobacco, pork and so on. ������ It is a good thing that finally we have Shariah-compliant investment options. Earlier, we used to recommend Tata Select Equity Fund,������ says Ashraf Mohammadi , MD, Idafa Investments, a firm that specialises in Islamic form of investments. Tata Select Equity Fund is not Shariah-based scheme, but its portfolio meets the prescriptions of the Islamic law.

The new schemes would also put an end to the misery of many Muslims, who have to constantly monitor their investment portfolios���especially schemes managed by MFs���to ensure that these comply with Shariah principles . Firms that specialise in the Islamic form of investments often advice people to give the interest or dividend income to charities, as it is prohibited to accept interest under Islamic law. They also keep an eye on companies in the portfolio to make sure they are compliant with the law.