In the name of God, the compassionate the merciful
Islamic finance is often categorized amongst what we refer to as ethical finance because it deals with morality and justice. Islamic finance has nothing to do with anything starved of morality and justice. The messenger of Allah, may the peace and blessings of Allah be upon him says; “Religion is sincerity.” We said, “To whom?” He said, “To Allah and His Book, and His Messenger, and the leaders of the Muslims and their common folk.” (Narrated by Muslim, 95).
In general, fund management, also known as asset management or investment management, refers to the professional management of a portfolio of assets on behalf of investors. This can include a range of investment vehicles such as mutual funds, pension funds, hedge funds, and private equity funds.
The primary goal of fund management is to maximize returns for investors while managing risk and ensuring the safety of their investments. Fund managers typically have expertise in financial markets, investment strategies, and portfolio management techniques, and they make decisions on behalf of investors to achieve their investment objectives.
There is no difference between conventional fund management and Islamic fund management except that in Islamic fund management, shariah principles are strictly applied. The Sharia principles prohibit some elements imbedded in conventional funds management such as unethical and speculative activities, riba (interest),maysir (gambling), and gharar (uncertainty). The main objectives of funds management from an Islamic perspective include promoting social justice, ethical behaviour, and economic stability.
Islamic funds management follows a number of key principles, including:
Prohibition of interest (riba): Islamic funds cannot earn or pay interest, as it is considered exploitative and unjust. Instead, profits must be derived from legitimate business activities.
Investment in permissible (halal) assets: Islamic funds can only invest in assets that are deemed halal, or permissible, according to Sharia principles. This typically includes investments in sectors such as real estate, commodities, and Sharia-compliant stocks.
Risk-sharing: Islamic funds adhere to the principle of risk-sharing, where both the investor and the fund manager share in the risks and rewards of the investment. This promotes a more equitable distribution of wealth and encourages responsible investing.
Ethical investment: Islamic funds are required to invest in a socially responsible manner, avoiding industries such as alcohol, tobacco, gambling, and weapons. This aligns with the principles of Islamic finance, which emphasize ethical behaviour and social responsibility.
Transparency and fairness: Islamic funds must operate transparently and fairly, providing clear information to investors about how their funds are being managed and ensuring that all transactions are conducted ethically.
In a nutshell, funds management from an Islamic perspective is guided by the principles of Sharia and aims to promote ethical investing, social responsibility, and economic stability. By adhering to these principles, Islamic funds can provide investors with opportunities for financial growth while also contributing to the well-being of society as a whole. And Allah knows best! “Praise be to Allah, in Whose favour good deeds are accomplished” (ibn Majah 3803)
YAHAYA ILIASU MUSTAPHA
The writer is an Islamic Banking and Finance patron and advocate in Ghana and beyond.
Email: yahaya0246873726@gmail.com
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