Islamic collective investment scheme
An Islamic fund: investors pool money in units of equal value, managed under Shariah rules, sharing in the fund's profit or loss.
An Islamic collective investment scheme is a structured scheme in which investors pool capital in a fund by subscribing to units or shares of equal value, which represent ownership of the fund's undivided assets and a right to share in its profits or losses. IFSB-21 adds that the scheme is financially accountable separately from its sponsor and is established and managed in accordance with Shariah rules and principles. Sukuk are excluded from this definition.
Sources
This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.
Related terms
Shariah screeningChecking whether a company's business and finances meet Shariah criteria before it can be held in an Islamic fund or index.SukukCertificates of equal value representing undivided shares in the ownership of assets, usufruct, services or a project.Purification of incomeGiving away, usually to charity, income from a non-compliant source or a Shariah breach, so the institution does not benefit.