Islamic Equity Funds: The Mode of Resource Mobilization and Placement

This study is on equity funds and addresses a central question that: can equity funds be operated on Islamic principles? This notion has been tackled in three dimensions: First: to be pursuant to Islamic rulings, equity funds must not transact in equities of companies which produce or trade in prohibited goods and services; Second: equity funds run on Islamic basis should remove and get rid of interest income generated through interest-based lending; Third: Islamic equity funds must not trade in stocks of companies which are of excessively high leverage ratios, i.e., companies whose assets are basically in the form of cash and debts._x000D_ _x000D_ Thus, it concludes that operating equity funds on Islamic basis require clearance of the Shariah-related matters in this regard. Other operational aspects such as relationship between investors and management, portfolio diversification and portfolio distribution with regard to industry and regions must also be investigated and scrutinized. _x000D_