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Analysis of Islamic Mutual Funds Operations in Pakistan


  • Shaikh, Salman


Islamic finance is a set of financial institutions representing a connected financial architecture that works based on prescribed Shari’ah principles. Growth in the industry has been stellar, but, certain principles, the strategic direction and the practices do not warrant celebration yet. This paper while noting the impressive performance of Islamic mutual funds in Pakistan, strives to a) discuss the theoretical problems in screening principles followed in investment policy, b) identifies the problematic and less ideal investment alternatives used in practice, and c) highlights the anomalies in income purification methodology. The paper argues that the vision of leading the establishment of an egalitarian and balanced financial system has taken a backseat and increasingly innovative financial engineering seems to have blurred the distinctive identity of Islamic financial system. The paper concludes with the recommendation that in the short term, Shariah regulators must comprehensively train themselves in prevalent financial reporting standards and understand their implications. In the medium to long term, centralized Shariah board and revised financial reporting standards must be structured taking into account special needs of auditing the fulfillment of Islamic principles in practice.

Suggested Citation

  • Shaikh, Salman, 2012. "Analysis of Islamic Mutual Funds Operations in Pakistan," MPRA Paper 42495, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:42495

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    References listed on IDEAS

    1. Mehreen Mahmud & Nawazish Mirza, 2011. "An Evaluation of Mutual Fund Performance in an Emerging Economy: The Case of Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(Special E), pages 301-316, September.
    2. Fikriyah Abdullah & Taufiq Hassan & Shamsher Mohamad, 2007. "Investigation of performance of Malaysian Islamic unit trust funds: Comparison with conventional unit trust funds," Managerial Finance, Emerald Group Publishing, vol. 33(2), pages 142-153, January.
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    More about this item


    Islamic Finance; Islamic Banking; Takaful; Murabaha; Ijarah; Mudarabah; Musharakah; Salam; Istisna;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G2 - Financial Economics - - Financial Institutions and Services
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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