An investment fund called the Mashreq Arab Tigers Fund has announced that it will convert to becoming a Shariah-compliant fund and change its name to the Mashreq-Al-Islami Arab Tigers Fund.
This isn’t particularly newsworthy, but the article linked below affords us a teaching moment.
That’s because the operators of the fund recognize ahead of time that, in the conversion process, a portion of the fund’s investment portfolio is likely to be invested in investments and activities that aren’t Shariah-compliant. The proceeds of such investments must be “purified.”
This is a little-known, but very common feature of Shariah-compliance that is absolutely screaming for regulation.
Under the process of purification, the proceeds are donated to an Islamic charity. And there’s the rub. As we have detailed over and over again on SFW for years, all too often, all too many Islamic charities have been implicated in funding Jihad.
In fact, this is so common that clearly some form of regulation needs to be imposed to oversee the activities of such charities to ensure that securities, particularly in America and the West, do not unintentionally (or intentionally) fund terrorism.
From the article:
It is proposed that the Fund may invest in companies that engage in activities of a marginal nature that do not comply with Shari’ah principles. The Shari’ah supervisory board has advised that any such amount becoming part of the Fund’s income is not permissible and hence the Fund should not benefit from it.
Further to same, it is proposed that the Investment Manager or its designated agent would segregate the non-compliant income from the dividend income received by the Fund using a dividend purification ratio. The non-compliant amount would be transferred to a non-compliant income account for donation to charity.