Islamic Finance & Theory

(Page # 213-218)

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Group Members: Jawad Saeed Kamran Mirza Ahsan Ali Atta ur Rehman

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Islamic Investment Fund

Ijarah Fund Commodity Fund Murabahah Fund Bai-al-dain Mixed Fund

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IJARAH FUND
The subscription amount are used to purchase the assets for the purpose of leasing them out to their ultimate user. Ownership Fund Rentals User Rentals are the source of income for the fund which is distributed pro rata to the subscribers. Each subscriber is given the evidence of subscription in the form of certificates called sukuk. Sukuk are fully negotiable and can be traded in the secondary market.

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However, Before going into Ijarah Fund it should be keep in mind that contract of leasing should be in conformity with the principles of shariah. Some basic principles are:
1. 2. 3. 4.

Right of use Halal purpose Ownership responsiblities lies on lessor Rentals must be fixed and known

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COMMODITY FUND
The subscription amount are used in the purchasing of different commodities for the purpose of resale. The profit generated through resale is distributed pro rata among subscribers. To make this fund acceptable to shariah, it is necessary that all the rules of sales are fully followed. For example:

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Ownership 2.Forward sales 3.Halal 4.Physical/ Constructive possession 5.Selling Price

1.

MURABAHAH FUND

It is a specific kind of sale where commodity is sold on cost-plus basis Commodity in murabahah is sold on deffered basis at an agreed profit margin added to cost To execute this kind of sale, fund created is called close-end fund. Its unit cannot be traded in secondary market.

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Reasons:

Since commodity is sold immediately and price being on deferred payment basis, becomes a debt payable by client. So fund units do not represents any physical asset. It represents cash or receivable debt. And both cash and debt are not trade-able.

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Bai-al-dain

Sale of debt Bai-al-dain with discount is not allowed Shafiite school of thought Is debt of sale permissible if created through sale of commodity?

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MIXED FUND

When the subscription amounts are employed in different types of investment like equities, leasing and commodity, it may called a Mixed Islamic Fund. If tangible assets - 51% If proportion of liquid and debts exceed 50%, unit cannot be traded.
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THANK YOU

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