Investor Service

Shariah compliance technique and criteria

Shariah Methodology

Our goal at IAMCL is to offer some Islamic mutual funds as investment solutions that comply to Shariah. In this regard, we follow the Shariah Advisory Board's recommendations about the guidelines. All companies under consideration for investment are subject to regular screening for Shariah compliance laws and the investments are restricted to asset types approved by the Shariah Advisory Board. Necessary declarations about the objective of this Funds disclosed in the prospectus.

Shariah screening criteria

The Islamic funds shall invest both in listed and non-listed securities and other instruments as per Rules and also follow all the investment restrictions specified in the rules. While investment in securities and other instruments the following criteria shall be observed as per Shariah guidance. While investing in securities the following criteria are to be observed:

Primary Selection of Companies

The basic business of the company should be in consistence with the Sharia Law. Although no universal consensus exists among contemporary Sharia scholars on the prohibition of companies, most Shariah Boards have advised against investment in companies involved in the activities of:

Conventional Banks, Insurance and Leasing Companies;
Alcohol
Pork related products
Tobacco
Weapons and Defense

Screening of Acceptable Companies

After removing companies with unacceptable primary business activities, the Fund may invest in the remaining companies if:

The total debt of the investee company is equal to or less than 33% of the trailing 12 months average market capitalization of the company.
The sum of cash or interest bearing securities of the investee companies is less than or equal to 33% of the trailing 12 months average market capitalization of the company.
The Accounts Receivable is less than or equal to 45% of the Total Assets of the company.

Other Sharia Compliant instruments

The Fund may also invest in other Sharia Compliant instruments as and when they are available for investment. Specifically:

In Participation Term Certificates, Modaraba Certificates, Musharika, Murabaha, Term Finance Certificates, and all other asset-backed securities;
In contracts, securities, or instruments of companies, organizations, and establishments issued on the principles of Bai' Mu'ajjal, Bai' Salam, Istisna'a, Mudaraba, Murabaha, and Musharika;
In the form of Riba-free cash deposits with Islamic Banks or financial institutions with the objective of maintaining sufficient liquidity to meet day-to-day requirements and to take advantage of suitable investment opportunities as they arise;
In other instruments that may be allowed by the rules and confirmed as Sharia-compliant by the Fund's Sharia Advisor from time to time.