Wednesday, May 24, 2006

DIB's latest innovation: 'Islamic Capital Protected Fund'

Dubai Islamic Bank (DIB) has launched "Al Islami Capital Protected Note", an investment fund that will invest in the Sharia compliant equities in the US, European, and Japanese Stock Markets.

The fund has a 5-year maturity, and capital protection at maturity through Sharia compliant structure. For greater flexibility, investors can redeem their capital up to twice a month.

Capital protection on investments is generally, and almost unanimously, seen as alien to Islamic Investment ethics. In fiqhi terms, the ability to earn a profit on an investment (which inevitably has to be equity-backed in Islamic Finance) is solely due to exposure to market volatility, and subsequently, will be subject to the same. Therefore, this new Fund will raise some doubts in the minds of the informed reader.

Sadly, there is no detailed fatwa available on IDB's website. They have sufficed to state that the promised capitaal protection 'is a consequence of a complex technique employed by the Investment Manager and approved by the leading Islamic finance scholars.'

We are told, "Conformity with Sharia principles is ensured through issuance of fatwas from five of the world's top Sharia scholars, including Dr. Hussain Hamed Hassan, the Chairman of Dubai Islamic Bank's Fatwa & Sharia Supervisory Board."

I would definitely like to get hold of a script of their fatwa.

Meanwhile, the IDB has recently received a series of 'Best Islamic Bank' and 'New Product Innovation' awards nationally and internationally.

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