Shariah Investing

What is an Islamic Account?

The Islamic Account option of MIDF Invest provides our customer access to a holistically Shariah-compliant online investment service covering the aspects of maintenance of trust accounts, facilitation of forex transactions and access to shares that are Shariah-compliant. Each aspect has been reviewed, endorsed and approved by our Shariah Committee and conforms to the applicable rules, regulations and guidelines by the Securities Commission of Malaysia and Bank Negara Malaysia.

Trust Account:

Islamic trust accounts are created under your name to receive monies and make payments for your investments, whereas idle monies will be placed in Shariah-compliant deposits/ short-term Islamic instruments, hence there is no Riba’ element in the management of your trust account.

Forex Transaction:

The facilitation of forex transaction complies with the Bank Negara Malaysia’s Policy Document on Bai’ al Sarf (currency exchange) while the bank accounts use to facilitate the forex settlement is non-interest bearing, hence there is no Riba’ element during facilitation of forex transactions.

Investment Universe:

The Shariah-compliant shares are derived from a stringent and well-established equity Shariah screening methodology which has been endorsed by our Shariah Committee and complies with the relevant rules and guidelines set-out by the Securities Commission of Malaysia.  

MIDF Invest has partnered with IdealRatings Inc. for its Equity Screening Solution to perform the quarterly equity Shariah screening. The adopted screening methodology has been endorsed by MIDF Amanah Investment Bank Berhad’s Shariah Committee as well as been reviewed, tested and verified by ISRA International Consulting Sdn. Bhd.

Shariah Committee:

Being a licensed entity under the Bank Negara Malaysia and in accordance to the Islamic Financial Services Act 2013, MIDF Amanah Investment Bank Berhad has established its own Shariah Committee which undertakes the Shariah oversight role to govern all Islamic products and services offered by MIDF Amanah Investment Bank Berhad, including services offered via MIDF Invest, to ensure continuous compliance and conformations with the resolutions issued by the Shariah Advisory Council of Bank Negara Malaysia and that of Securities Commission of Malaysia.

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What do I do if the Shariah-compliant shares/instruments I bought have been reclassified as Shariah non-compliant?

We shall inform our customers via email and/or in-app message if any of the shares that the customers invested in has been reclassified as Shariah non-compliant. As per recommendation by the Securities Commission, if shares held by Customers cease to be Shariah compliant, the Customers are strongly advised to consider performing the following actions, depending on the current market value of their investment:

If the market value is greater than or equal to the investment cost of the stock:

1. Dispose the Shariah non-compliant stocks immediately.
2. Keep the dividends/capital gains received UP TO the Announcement Date.
3. Channel the dividends/capital gains received AFTER the Announcement Date to baitulmal and/or charitable bodies.
4. If the market value is less than investment cost of the stock:
5. Hold your investment in the Shariah non-compliant stocks.
6. Keep the dividends received during the holding period until the market value of the stock is greater than or equal to investment cost.  

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How do you determine the shares are Shariah compliant?

The Shariah-compliant shares are derived from a stringent and well-established equity Shariah screening methodology which has been endorsed by our Shariah Committee and complies with the relevant rules and guidelines set-out by the Securities Commission of Malaysia. All shares are reviewed based on two main criteria:

Qualitative criteria – selection of companies based on their type of business/industry classification; and

Quantitative criteria – employment of debt, interest and liquidity related ratios to identify non-permissible income from conventional financial activities.

MIDF Invest has partnered with IdealRatings Inc for its Equity Screening Solution to perform the quarterly Shariah screening and the adopted methodology has been endorsed by MIDF Amanah Investment Bank Berhad’s Shariah Committee as well as been reviewed, tested and verified by ISRA International Consulting Sdn. Bhd.

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How often do you review the Shariah compliant status of the shares?

Quarterly (March, June, September and December).

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Limit Order Cancellations on Shariah Non-Compliant Stocks (SNC) for Islamic Account Holders?

For Islamic Account Holders, failure to cancel limit orders on stocks reclassified as SNC (based on the latest quarterly email updates on Shariah Compliant Stock Reclassification) within the current quarter will result in the automatic cancellation of those SNC stocks on the first business day of the subsequent quarter. Clients will receive notification of such automatic cancellations in the email updates on Shariah Compliant Stock Reclassification, and no additional charges or fees will be imposed as a result of these cancellations.