Some Sharia Mutual Fund Facts You Need To Know

Hi, Moduers!

In investing, we will face various investment instrument choices and, on top of that, the options of product type such as conventional or sharia investment products.

 

A mutual fund is an investment instrument that contains a pool of investors’ capital. The fund manager managed this pool of capital and allocated it to several assets such as stocks, bonds, and money market instruments. Both Conventional and Sharia Mutual Funds belong to that definition, but there are also differences between them. What are they? Let’s check it out!

  1. Supervised by OJK (Financial Services Authority)  and DPS (Sharia Supervisory Board)

Moduers, you know that to invest safely, you need to ensure that the mutual fund has been registered and supervised by the OJK. In Sharia Mutual Funds, mutual funds are not only supervised by the OJK but also by DPS.

The Sharia Supervisory Board is authorized to ensure mutual fund management is under sharia principles, such as excluding investing in cigarettes, alcoholic beverages, or conventional banks, and ensuring that Investor can only allocate investment funds to companies with a maximum debt total assets ratio of 45%. The Sharia Supervisory Board must report the results of sharia supervision at least every 6 (six) months to the Board of Directors and Commissioners of the Investment Manager, DSN-MUI (the National Sharia Board formed by the Indonesian Ulema Council), and regulators. The Sharia Supervisory Board will also recommend the distribution of the cleansing results to the Fund Manager.

 

  1. Managed by a Sharia Fund Manager or a Special Unit

Based on POJK No.61 of 2016, which regulates the formation of a Sharia Investment Manager, OJK obliges that Sharia Mutual Funds be managed by a Sharia Fund Manager or a particular unit called UPIS (Sharia Investment Management Unit). As of April 2021, there are 1 Sharia Fund Manager and 61 Fund Managers with UPIS, registered and supervised by OJK.

 

  1. There is a Cleansing Process for Sharia Mutual Funds’ Income

In Sharia Mutual Funds, all income must be under sharia principles. If there is a non-halal income in its management, which cannot be avoided, it must be cleansed. The cleansing process is to ensure that Sharia Mutual Funds have no income that does not comply with the sharia principles or things that can interfere with the halal status of the money earned during the investment process. Commonly, the funds from the cleansing process will be donated to charities.

One example of non-halal income is the interests earned on funds deposited in a Custodian Bank account, which is generally an account at a commercial bank. When investors put their money to invest in mutual funds, some of these funds are immediately withdrawn and transferred to the main account. Some are allowed to settle for some time so that the bank will provide interest. Even though the amount is small, the interest income must be recorded separately because it cannot be recognized as income and will subsequently be donated. This process is then called cleansing.

Another situation that causes funds to be cleansed is a corporate action, namely the issuance of debt. For example, if a company whose business units and financial ratios comply with sharia principles makes a loan to the bank. As a result of this action, the debt ratio changed to more than 45 percent, so the company was then excluded from DES (Sharia Securities List by OJK and IDX. After the new DES issuance, it turned out that the Fund Manager has not been able to sell all those shares within ten working days, and the price of the shares has increased. The gain from these price increases can not be recognized as a Sharia Mutual Fund income and must be listed separately for donation. However, if the sale of shares is carried out within ten working days, the increase in share price can be calculated into NAV (Net Asset Value)

 

  1. Additional Benefits and Social Impacts of Sharia Mutual Funds

The previous point covered the explanation about the cleansing process from non-halal income. The results of this income cleaning will not go directly to the owner of the capital but will be directed at charitable things in nature. The existence of this process shows that Sharia Mutual Funds are not only concerned with the maximum profit but also have a positive impact on society.

 

  1. Fund Managers May Only Invest in Securities Registered in DES

Fund Managers may only invest in Securities listed in DES (List of Sharia Securities) issued by OJK 2 (two) times.

 

SUMMARY

NO.COMPONENTSCONVENTIONAL MUTUAL FUNDSHARIA MUTUAL FUND
1.SupervisorFinancial Services Authority (OJK)Sharia Supervisory Board (DPS)
2.Fund managerConventional fund managerSharia Fund Manager or Sharia Investment Management Unit (UPIS)
3.Mutual fund income cleansing processNoneExists
4.Mutual fund profitNot donated, except philanthropic mutual fund products or otherwise stated.Non-halal profit (such as bank interest income) is donated on the recommendation of the Sharia Supervisory Board.
5.Invested companyAny company as long as it is still following OJK’s rules and regulations.A company listed on Sharia Securities List (DES)
6.RiskThere is a risk of loss if fund managers invest in many companies whose total debts are greater than assets.There are relatively fewer risks because it only invests in companies whose total debt is smaller than assets.

 

That’s all the facts about Sharia Mutual Funds that you should know, Moduers! You don’t want to miss the opportunity to invest and do charity simultaneously, do you? By investing in sharia mutual funds, you don’t only generate profit but also creating a field of reward for charities distributed. Are you interested in investing in sharia mutual funds, Moduers? Come on, visit www.moduit.id or download the Moduit application on the Play Store or App Store now!

 

Salam Moduit!

 

Share: