Wednesday Academic Dialogue (6)

Zakat of Investment Funds: A New Approach

Zakat of Investment Funds: A New Approach

Al-Emam Mohammad Bin Saud Islamic University, Riyadh, Saudi Arabia

Wednesday 28-09-2016 (27-12-1437H)

Abstract

According to the opinion of the majority of fiqh scholars, all owners of investment fund units must pay zakat of trade, regardless of important criteria that impact zakat of trade assets; such as: the trade intention of the investor and fund manager, the ratio of their portfolio turnover and the nature of the fund's assets and the extent to which they are zakatable. The paper discusses the validity of this opinion, given the fact that the fund portfolios do not differ from their portfolios counterparts managed by individuals, which have a settled and well-grounded zakat ruling. Building on the new zakat ruling, the paper propose practical solutions for calculating payable Zakat on all investment portfolios based on the above criteria. The paper conclude by highlighting the expected impacts of new ruling on investment decisions and the structure of the financial market.