Sharia Compliant Funds in Ireland

Author:Ms Jennifer Fox
Profession:Dillon Eustace

Originally Published In March 2008


The last number of years has witnessed an increased interest in

both Sharia Funds and in Islamic financial products worldwide.

Sharia Funds are funds which are deemed to be compliant with an

Islamic branch of law based on the teachings of the Koran

and Sunna.

According to the London-based Institution for Islamic Banking

and Insurance, there are now approximately 100 Sharia equity funds

managing US$ 5 billion in assets, a figure that is growing by 12

– 15% a year. On a broader scale, there is estimated to

be approximately US$250billion invested in Islamic products

worldwide, key markets for Sharia funds being the Middle East and

North Africa (MENA) region with growth also evident in more

traditional markets within the European Union.

This article sets out to explore the features of Sharia Funds in

the context of the Irish legal and regulatory environment given

recent Irish approvals for such funds.

The key features of a Sharia Fund are:

the appointment of a Sharia Board,

investment in Sharia compliant (Halal) products,


the purification of income.

These features are explained in detail below.

The appointment of a Sharia Board

Similar in structure to other Irish funds, Sharia Funds will be

set up as an investment company (or other legal vehicle) with a

board of directors and an investment manager or advisor who manages

the investments of the Fund and advises the board.

However, a distinguishing feature of Sharia Funds is the

requirement to appoint a Sharia Board which provides guidance to

the directors of the Fund and to the investment manager on matters

of Sharia law and in particular whether the proposed investments of

the fund are Sharia compliant.

The Sharia Board will consist of Sharia scholars, experts on

matters of Islamic law and practice and who are usually members or

advisers to Islamic banks. The Board will be heavily involved in

the early stages of drafting the fund documentation and will review

the constitutional documents and material agreements and will issue

a Fatwa which is a religious ruling issued after an

examination of fund rules and investments made by a Fund which in

effect certifies that the fund is "Sharia compliant". The

Fatwa is an important precondition in order for a Fund to

be marketed to prospective investors as Sharia observant.

The role of the Sharia Board is therefore twofold: (1) to

initially advise on the fund set-up and on the core documents; and

(2) to provide ongoing advice on the monitoring of the Sharia

element of the fund investments.


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