2nd Update on Public Asia Ittikal Fund (PAIF) Syariah Compliancy Issue

Another update of the Public Asia Ittikal Fund (PAIF) syariah compliancy issue.

The first entry about this issue is here. The second one is here.

I recently received a response from one of my readers. Here it is:

Would like to contribute here…..

If you have gone through the SC guidelines, the limitations are on income derived from permissible and non-permissible activities. The guidelines are tolerent on income derived indirectly from non-permissible activities.

where in ABC’s case, loan was taken to finance its operations. However not all of the debt taken are borrowings from the bank and the nature of the borrowings are not listed out fully. Some could be without the influence of interest (do update me on this if you could find the nature of borrowings).

Borrowings here are used to operate the business to derive profit.

Meanwhile the guidelines are focussing on direct activities like giving loans by charging interest as a business activity or directly involved in non-permissible activities as a core business activity to derive income/profit.

Therefore borrowings in ABC’s case are not core business activities but just means of funding to support the business. Eventhough to a certain extent interest is involved, this is still allowable.

According to shariah, interest (riba) is not allowed as most of the time profits the lender. Indirectly borrowers are not encouraged to take money from the lenders. However, having an objective view of the world today. What are ABC’s options, is there a Islamic Financing market to support ABC’s debt requirements in Australia?

ABC is doing a legitimate business and it brings goodness to the community at large (one of the Shariah requirement) and it has a good standing in the community (another requirement) – these two requirements fullfils the criteria of being a shariah compliant security. Taking a loan is non-avoidable here therefore looking at the situation, it is still within the permissible limits.

The limitations – 5, 10, 15, 20, 25% are on the profit deriving based activities of a firm.

Taking a debt is just a small indirect (among the many other activities done by ABC) and unavoidable part of the ABC’s activities

my humble views….open for comments.

Thank you

have a nice day.

Vaanan

Thanks a lot for your response Vaanan.

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Disclaimer: This article is not a specific nor general advice on managing or investing your money. This article does not constitute a recommendation nor does it take into account your investment objectives, financial situation nor particular needs.

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About nadlique

This blog is about the journey of a 28-year-old Malaysian towards financial freedom. This blog was started back when the blogger was 21 years old. However, his journey towards financial freedom had begun way before that. Materials such as investing, business, entrepreneurship, equities, and real estate are presented. The author also posts his thoughts and observations on life in general.

Comments

  1. Nadlique,

    I have actually posted your query to P. Mutual head office and regret to say, I am still waiting for their reply. I think it is better if you hear from the horse’s mouth directly.

    I have since sent them a “gentle” reminder..let’s see…

  2. Hi, i read your blog with great interest and surprise to find that there is young people like you who is so into the business of financial planning. I am only embarking in this area now.. well over 40. why not joining Public Mutual as an agent yourself? you will definitely enjoy this adventure besides giving yourself some discount when you invest. Cheers!

  3. @Jean

    Indeed Jean, it’s interesting to see what they’ll say.

    @vlin

    Welcome vlin!

    For now, I don’t really have any intentions to be an agent. Quite a big portion of my time at the moment is being consumed by being a trader. But who knows, in the future, I might be a UT agent! Hehe. Perhaps I could get Jean to be my mentor? 😉

  4. 🙂 my pleasure.

    What trading biz are you in?

  5. CFD and stock trading that is 🙂

  6. CFD…mmm..high risk.

  7. [This comment has been removed as requested by the comment poster]

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