UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance

Amana Funds Essay By Promising Pakistani Islamic Finance Student


Students from all over the world like Faisal Naseem from Pakistan have something to contribute to the Islamic Finance industry.  He would like to share this essay with you on Amana Funds, which he submitted as an assignment for his MBA program at Iqra University in Pakistan.  The topic fits in with the theme of the the 8th Annual World Islamic Funds & Financial Markets Conference, which is taking place in the Kingdom of Bahrain this week.

I welcome contributions from promising students all over the world to submit Islamic Finance papers and You Tube Videos for consideration for publication on this website.  The student’s work will gain exposure to the Islamic Finance industry and become searchable on the World Wide Web and at the same time the student will be contributing to the advancement of the Islamic Finance industry as a whole.

Name: Faisal Naseem

University: Iqra University, Pakistan




Amana Funds


Nowadays, people are moving towards and showing keen interest in Islamic banking and finance. Muslims want to invest their income in the market based on Islamic principles, which prohibits interest-based transactions and financing. In 1984, Yaqub Mirza and Bassam Osman, two members of the North American Islamic Trust, introduced the concept of Amana Funds and mutual funds to the market for the first time.

Some mutual funds are off-limits to Muslims because they generally hold securities and contain an interest factor, which is forbidden under Shari’ah law. Only Amana Fund portfolios are managed in accordance with Islamic principles. Amana mutual funds are designed to provide more investment alternatives for Muslims.  Islamic principles require that the investor share in the profit and the loss and engage in transactions with no interest. Furthermore, investors must not involve themselves in businesses, which are prohibited by Islam, such as selling alcoholic beverages, casinos, pornography, gambling, and interest-based banks.

One of the reasons Muslims are motivated to save and invest in this manner is to make the financial preparations necessary for Hajj, a pilgrimage to Makah. This is one of the pillars of Islam. A person’s Hajj is not valid if it is performed on credit.

In the Islamic mode of financing, the funds must not purchase debentures, convectional bonds, insurance and other products, which contain or constitute interest-based transactions. For example, fixed- income investment confirms the Islamic principles known as sukuk and Islamic bonds, which strictly follow the guidelines of Scholars. There are three types of Amana funds.  The first Amana income fund was introduced in the market 1986. Amana Income’s 25-year run is rather rare in the U.S. mutual fund industry. Out of the roughly 7500 mutual funds currently in operation, only about 300 or 4% have been around as long as Amana Income. Research shows that the closure rate for U.S. mutual funds throughout the 1990s was around 36% rising to 56% in the 2000s.

After this mutual fund had such a positive impact in the market, the funds were diversified and in 1994, the Amana Growth fund was introduced. The main objective of this fund is long-term capital growth and compliance with Islamic Law. This growth fund invests in securities, which are not traded in the US. Investments in the securities of foreign issuers may involve additional risks beyond those normally associated with investments in the securities of U.S. issuers.

In 2009, Amana funds introduced a new fund called Amana Development World Fund. The purpose of this fund is to purchase stocks of different companies from countries with developing economies and markets. The Amana Development World Fund uses Islamic principles as a guideline for how investment decisions are made. The value of the Development World Fund shares increase or decrease in relation to the value of stocks in which they have invested increase or decrease.

UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance

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