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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.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42495.

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Date of creation: 01 Jul 2012
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Publication status: Published in Journal of Islamic Banking & Finance 3.29(2012): pp. 14-23
Handle: RePEc:pra:mprapa:42495
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  1. 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.
  2. 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.
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