Investment in Islamic Financial Instruments: Tabung Haji

Most of Th investments in Islamic financial instruments fall under the concept uqud al-muawadhat or debt-financing. Th also has some investment in the money market that fall under the concept uqud al-ishtirak such as the Al-Mudharabah Special Investment. Th investments in Islamic financial instruments are in the form of Islamic money market instruments, Islamic corporate notes & bonds and government investment certificates.

The Islamic money market investments are in accordance with the al-mudharaba principle. Instruments available for investment in this area include the general/special investment accounts, Islamic accepted bills and the al-murabaha commodity investments. Tabung Haji also invests in corporate bonds and notes through Bank Islam and other merchant banks to finance both short and medium term investment projects in accordance with the al–bai bithaman ajil and al–musharakah principles. Moreover, it also participates in the purchase of government’s Islamic treasury bills called Government Investment Certificates (gic) issued by Bank Negara Malaysia. These gics are in accordance with the al-qardul hassan principle. Besides contributing to th income, these types of investments also facilitate Th’s daily cash or liquidity requirements. These instruments are important as Th does not have access to the Islamic Interbank Money Market. As mentioned above, Th allows its depositors to withdraw 100% of their account balances. Hence, these instruments play an important part in enabling Th to arrange for the withdrawals. Figure 14, shows that Th allocated more of its fund to the short-term money market investment.

Figure 14: Investment in Islamic Financial Instruments

With the development of the Islamic Money Market, it is envisaged that new financial instruments will be developed to meet the Malaysian government’s aspiration of having an Islamic financial system that can operate side by side with the conventional financial system. As mentioned above, Th is working closely with the government via forums such as the Malaysian Economic Advisory Council.

Source: Towards Islamic Banking: Experience and Challenges, Institute of Policy Studies. Republished with permission.