ACADEMIC RESEARCH IN MODERN SCIENCE
International scientific-online conference
35
THE PRACTICE OF ESTABLISHING ISLAMIC INVESTMENT FUNDS
Makhmudov Shohrukhbek
MSc of the Academy of banking and finance of the Republic of Uzbekistan
(Master of Science) correspondence form of Education Master's degree in the
financial and securities market direction 24-05 group listener of the financial
and securities market direction 24-05 group listener
https://doi.org/10.5281/zenodo.15738760
Annotation:
Today, the role of the Islamic financial sector in the world
financial system is growing. Islamic investment funds, on the other hand, are one
of its most active and proselytizing sectors. These funds, unlike traditional
investment instruments, give up interest-based income and organize
commercial and financial activities on an honest basis.
Key words:
world financial system, Islamic finance, Islamic investment,
traditional investment, commercial, financial activities.
According to the Global Islamic Finance Report, total Islamic finance assets
in the world were US $ 3.25 trillion in 2023. From this, the contribution of
Islamic Investment Funds is more than $ 120 billion, and this figure has an
annual average growth rate of 6.9%.This scientific work analyzes the process of
Organization of Islamic Investment Funds, their structure, legal framework and
activities in practice.
Opportunities for the introduction of such institutions in Uzbekistan and
the existing obstacles in it will also be considered. Islamic investment funds are
an alternative financial instrument that serves to invest in modern financial
markets according to sharia principles. These funds aim to generate revenue
through honest sectors, giving up ribo (interest), maysir (gambling) and dirty
activities.The structure of the funds, the mechanism of functioning and the
directions of investment will be in constant control by the board of Sharia
Consultants, a guarantee of honesty and security for investors.
In practice, these funds, which are established under contracts such as
mudoraba and mushoraka, are working successfully, especially in countries such
as Malaysia, Saudi Arabia and the UAE.This thesis is aimed at analyzing the
compatibility of Islamic funds with Sharia, their economic efficiency and the
possibility of promising development. 2. The concept of Islamic investment
funds and their importance.Islamic investment funds are a financial institution
that funds investors in accordance with Sharia rules and directs them to certain
investment projects.
ACADEMIC RESEARCH IN MODERN SCIENCE
International scientific-online conference
36
These funds are prohibited in Sharia such as ribo (interest), maysir
(gambling), gharar (uncertainty), unclean products (e.g., alcohol, tobacco,
pornography, blood gun production, etc.k.) does not invest in related activities:
1. Sharia-compliant financial instrument: Islamic investment funds allow
honest and ethical investment for Muslim residents. The world Muslim
population as of 2024 is 1.9 billion people, which is about 24% of the total
population.
2. Ensuring economic stability: abandoning risky and uncertain activities in
traditional finance, Islamic funds serve sustainability by direct investment in the
Real economy.
3. Global financial market share: according to the Islamic Financial Services
Board (IFSB), the number of Islamic funds exceeded 1,500 in 2023, with the bulk
operating in Malaysia (28%), Saudi Arabia (22%) and Bahrain (12%).
4.Financial inclusion is possible: since a large part of the Muslim population
does not express confidence in the traditional banking system, Islamic funds are
becoming a means of financial inclusion for them. Legal and Sharia foundations
of Islamic investment funds. The activities of Islamic investment funds are based
on Islamic Sharia, specifically the fiqh ul-muamalot (exchange fiqhi) regulations.
The main emphasis in the organization of these funds is on staying free from
prohibited activities in Sharia and adhering to the principles of Justice.
Sharia fundamentals: Islamic investment activities rely on the following
Sharia foundations:Ribo (percentage) prohibition: percentage-based treatment
in the Quran and Hadith is strictly prohibited (Surah Bacara, verses 275-279).
Ban on Maysir (gambling) and ghararar (uncertainty): contracts related to
uncertainty and luck are prohibited. In funds, all investment operas should be
transparent and clear.
Investing in honest activities: the fund can only invest in the production and
distribution activities of honest products. Investing through Islamic financial
instruments such as Murobaha, mudoraba, mushoraka, rent.Legal
framework:international legal standards are also important in establishing
Islamic funds: the AAOIFI (Accounting and Auditing Organization for Islamic
Financial Institutions) sets international accounting and audit standards for
Islamic financial organizations. AAOIFI has developed over 100 standards for
Islamic investment funds since 2001.The IFSB (Islamic Financial Services Board)
is an international div that develops procedures and standards for Islamic
financial services. In 2023, IFSB controlled the activities of foundations in 25
member states. Legislation in Malaysia, the UAE, and Saudi Arabia is the passage
ACADEMIC RESEARCH IN MODERN SCIENCE
International scientific-online conference
37
of special laws relating to the establishment of Islamic funds in the states. For
example, in Malaysia, Islamic Capital Market Guidelines are valid from 2004.
As a result of the study, the following proposals and recommendations were
developed based on the importance of the value of net assets as an indicator
reflecting the attractiveness of investment funds:
1. The activity of investment funds in the world economy can be explained
by the fact that their attractiveness is widely used by modern forms of
innovation and elements of the digital economy. Therefore, in the world,
investment funds pay and indesli funds, whose categories are calculated in an
increase in the dynamics of the value of net assets, have a decent place;
2. In contrast to ordinary Joint-Stock Companies in the world experience,
investment funds can allocate part of the net profit to dividend payment or
increase the value of net assets by reinvesting in full, depending on the fund
policy;
3. In order for investment funds in Uzbekistan to be more attractive to the
investor, it is necessary to consider the prospects of increasing the value of their
net assets by the managing company. Since the "shake" of shares in the fund
portfolio, that is, the majority share of the portfolio of investment funds
operating in practice, is formed during the period of privatization of public
property, it is necessary to develop measures for the exchange of shares of the
non-dividend shareholder society for other Issuer Shares;
4. The calculation of strictly defined costs in investment funds with respect
to the value of net assets does not always work. Therefore, in the effective
management of the assets of the investment fund, the result achieved in order to
adapt the interests of the trustee to the laws of the market should depend on the
obtained effect as an incentive.
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