By: Prof.Dr.Cdr(R) Aurangzeb Head of Department Business Administration Dadabhoy Institute of Higher Education (DIHE) Karachi

A joint pool in which INVESTORS contribute their surplus money for the purpose of its investment to earn “Halal” profit in strict conformity with the percepts ofIslamic Sharia

1. Equity Fund 2. Ijarah Fund 3. Commodity Fund 4. Murabahah Fund 5. Bai'-al-dain 6. Mixed Fund

 Amounts are invested in JOINT STOCK companies.  Profit through capital gains.  Profit through distribution of Dividends.

 Not involved in Manufacturing, Selling or offering “Liquors “,Pork, Haram meat, gambling, night clubs, pornography.  Business should “Halal” like automobile and Textile etc.

 Portion of income of company based on the interest should be given in charity.  Shares negotiable if assets are non-Liquid.

 Assets like Machinery, Equipments, Vehicles purchased and given to users on IJARA (Lease).  Ownership remains with funds and ‘‘Rentals’’ are charged from the users.  Pro-rated shares of Rentals are distributed to subscribers on the basis of “SUKUK” (Certificate).

 Can be sold and purchased in the secondary Market.  Only Halal use is permissible.  Management should act as agent of subscribers.

 Subscription amount used for purchasing commodities for re-sale.  Commodities must be owned by the seller at the time of sale.

 Forward sales are not allowed.  Commodities must be Halal.  Price of commodity must be fixed.

 A specific kind of sale where the commodities are sold on a cost-plus basis.  Commodities purchased for benefit of their clients, then sold the same on deferred payment at an agreed profit margin added to the cost.  The portfolio of Murabahah does not own any tangible assets but cash or receivable debts.

 Dain means "debt" and Bai' means ‘‘sale’’.  If a person has a debt receivable from a person and he wants to sell it at a discount, as normally happens in the bill of exchange, it is termed in Shariah as Bai'-al-dain.

 A kind of fund where the subscription amounts are used in different types of investments like equities, leasing, commodities etc.  In this case if the tangible assets of the Fund are more than 51% while the liquidity and debts are less than 50% the units of the fund may be negotiable.

 if the proportion of liquidity and debts exceeds 50%, its units cannot be traded as per contemporary scholars.  In this case the Fund must be a close ended Fund.

 Fund size is small.  Lack in strong legal and institutional framework.  Lack in supervisory framework.  Lack of knowledge and understanding of the Islamic Fund.

 Lack in research and development in the field of Islamic Finance and economics.  Lack in HR development and training to the banks staff on Islamic Banking system.

 Lack of guidance and information system.  Lack in Marketing of Islamic products /services and their introduction in international market.

 Lack of financial engineering.  Doubts about instruments used. Warren Edwardes

 Having staff qualified in the Islamic Finance would produce the best results.  Standard would be developed on the basis of efficient and effective management practices.  Transparency and reliability will be increased.

 Interest of investors and society at large will be enhanced.  Industry will be driven Ethically and morally.  Industry will be run effectively and efficiently.

 Future depends upon innovative instruments to enhance liquidity.  To develop secondary money and capital markets.  To Introduce Public Finance instruments  Having need of appropriate institutional arrangements, legal framework and taxation issues.

 Development of Human Resource.  Products and services are available for Non-Muslims also and they are using the same. Warren Edwardes

 We are Re-inventing the wheel of Islamic products and services.  We had developed strong base of Islamic Economics and finance but we have forgotten the lesson of research for the last 1000 years.

 Status of Pakistan’s population Upto 9 years of age……… 28% years…………...41% years…………….26% 6 1 and above………………….05% 100% Warren Edwardes

 New products/services are being developed and choice of the investors will be increasing.  Standardization and a better overall education system is required to sustain its strong upward growth.  This will bring stability and innovation.

1) Establishment of a ‘‘THINK TANK’’ for development of Islamic product/services with comparison of conventional modes. Proposed members are: State bank of Pakistan. Security & Exchange Commission of Pakistan (SECP) Stock exchanges. Warren Edwardes

Chamber of commerce. University/DAIs. Sharia advisory boards/committee of the banks and financial institution. Imam’s of all Mosques where Juma prayers/Eid prayers are offered. Any other relevant institutions and departments. Warren Edwardes

2) Awareness program for educated and uneducated people (58% literate) and (42% illiterate). 3) Training programs of the staff of Islamic banking and financial institutional. Warren Edwardes