The Law of Mutual Funds in Islam and Its Proposition

Investment is a way to reach income more easily because the investment is not required to go directly to the field.

The money you invest will work for you. The larger the companies in Indonesia, the more lucrative investments offered. One type of investment that is much favored by various groups is mutual funds.

Mutual fund management rules are derived from a group of investors to invest. This form of investment is usually available in the market by buying mutual fund units.

As Muslims, of course, everything we want to do must be in accordance with the Islamic sharia, including in terms of investment. Then, what is the law of mutual funds in Islam?

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Consider the following review.

“The agreement is permissible for Muslims except for agreements that forbid the lawful or justify haram. And the Muslim is obliged to fulfill the conditions that they put forward in the form of the syariat which forbids the living and justifies the forbidden.” (Narrated by Abu Dawud, Ibn Majah, and Turmudzi from Amr bin Auf)

Each type of investment certainly contains certain agreements that must be obeyed by the perpetrators. According to the hadith above, as long as the investment does not contain an agreement that forbids the lawful or justifies the forbidden, then Islamic sharia allows it.

The basic principle in the transaction and the conditions relating to it may be as long as it is not prohibited by sharia or contrary to sharia. (Al-Fiqhul Islami wa Adillatuhu, juz 4 shohifah 199)

In response to your doubts, the National Sharia Council of the Indonesian Scholarship Council has issued fatwa no. 20/DSN-MUI/IV/2001 which states that mutual funds are one type of investment that is permissible in Islam but in the form of Islamic mutual funds.

“A person gives his property to others to be used as trading capital with the provisions of the profits obtained divided between the two parties in accordance with the agreed conditions. Iraqi experts call it mudharabah, while the hijaz population calls it qiradh.” (AI-Mughni juz V p. 26)

In Islamic mutual funds, there are several contracts that apply to the perpetrators, including wakalah and mudharabah. Wakalah is the transfer of power from a party to another party for things that may be represented.

In terms of this mutual fund, the Wakalah contract is an agreement agreed upon by investors and investment managers who will manage mutual fund investment funds. Mutual fund investment managers can only manage investors’ funds in accordance with a mutual agreement.

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Whereas, mudharabah is the transfer of one’s property to others to be used in the business sector and the results will be shared by both parties with their respective portions in accordance with the mutual agreement.

يَا أَيُّهَا الَّذِينَ آمَنُوا لا تَأْكُلُوا الرِّبَا أَضْعَافًا مُضَاعَفَةً وَاتَّقُوا اللَّهَ لَعَلَّكُمْ تُفْلِحُونَ

“O ye who believe, do not eat Riba by multiplying and fearing Allah that you may have good fortune.” (QS. Ali Imraan: 130)

يا أيها الذين آمنوا لا تأكلوا أموالكم بينكم بالباطل إلا أن تكون تجارة عن تراض منكم ولا تقتلوا أنفسكم إن الله كان بكم رحيما

“O ye who believe, do not eat each other’s treasures in a vanity way, except by the way of commerce that applies with the likes of you. And do not kill yourself; in fact, Allah is the Most Merciful to you.” (QS. An-Nisa: 29)

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