TABLE OF CONTENTS

CHAPTER 1 - INTRODUCTION......................................................................................................2
1. BACKGROUND OF THE STUDY.............................................................................................2
1.2 CONTROL AND MANAGEMENT OF ISLAMIC MUTUAL FUNDS....................................7
1.3 SECURITY EXCHANGE COMMISSION OF PAKISTAN (SECP) SHARIAH ADVISORY
BOARD.................................................................................................................................................7
1.4 LITERATURE GAP......................................................................................................................8
1.5 PROBLEM STATEMENT..........................................................................................................10
1.6 RESEARCH OBJECTIVES........................................................................................................11
1.7 HYPOTHESIS..............................................................................................................................12
1.8 SIGNIFICANCE OF THE STUDY............................................................................................12
CHAPTER 2 - LITERATURE REVIEW.....................................................................................14
2. BACKGROUND OF THE STUDY.......................................................................................14
CHAPTER 3 - RESEARCH METHODOLOGY.....................................................................20
3. INTRODUCTION..................................................................................................................20
3.1 RESEARCH DESIGN..........................................................................................................20
3.2 SAMPLE...............................................................................................................................20
3.3 SAMPLE SIZE AND SELECTION PROCEDURE..........................................................21
3.4 MODEL OF THE STUDY...................................................................................................21
3.4.1 DEPENDENT VARIABLE...............................................................................................21
3.4.2 INDEPENDENT VARIABLES........................................................................................21
3.5 EXPLANATORY VARIABLES OF THE STUDY...........................................................22
3.5.1 INVESTORS’ CONFIDENCE.........................................................................................22
3.5.2 SHARIAH COMPLIANCE..............................................................................................22
3.5.3 RIBA FREE.......................................................................................................................22
3.5.4 HALAL BUSINESS...........................................................................................................23
3.5.5 MAINTAIN 70% OF DEBT RATIO...............................................................................23
3.6 CHI SQUARE TEST............................................................................................................24
3.7 DATA COLLECTION TOOLS..........................................................................................24
REFERENCES...........................................................................................................................30
 CHAPTER 1 - INTRODUCTION

1. BACKGROUND OF THE STUDY

From its inception the growth of mutual funds is very slow and it took really

long years to evolve the modern day mutual funds (Saini, Anjum and Saini,

2011). Mutual Funds emerged for the first time in Netherlands in the 18th

century and then got introduced to Switzerland, Scotland and then to United

States in the 19th century. Mutual fund is used as an investment tool to gather a

pool of investment from investors and the mutual fund companies to invest in

securities market to create wealth for the investors. A mutual fund is a

specialized financial institution in which investors invest in diverse portfolio of

investment securities, in return their investment units assigned to them. Each

unit of investment fund is the relative representation of securities that is bought

or Managed on behalf of investors (Najafi, Asgari and Bandari, 2013). A mutual

fund is an investment company that pools the money of various investors and

buys and manages a diversified portfolio of securities (Jones, 2012).

The aims of investors are towards portfolio diversifications, liquidity, lower

risks and abnormal return (Alwi, Ahmad and Hashim, 2017). The main motive

behind mutual fund investments is to deliver a form of diversified investment

solution. Over the years, the idea developed and people received more and more

choices of diversified investment portfolio through the mutual funds.

The investors at the beginning used to invest directly in the stock market and

many times they suffered from losses due to wrong guesstimate. But with the

inception of mutual fund, which were handled by the finance experts i.e. fund

managers, the risk of the fund invested become very low. The diversification of

risk in the investment of mutual funds plays an important role in the growth of

mutual funds. As time passed, many new mutual funds emerged consequently

new method and techniques of selling mutual funds were introduced. These

methods and techniques are being improved with the passage of time.

Today, there are 22 asset management companies (AMCs) operating in Pakistan,

offering 178 open-end mutual funds and three closed-end mutual funds. Assets

under management (AUM) of the mutual funds industry stood at PKR415

billion (US$4.05 billion) as of June 2015, up nearly 3% year-on-year. During

FY-15, 11 new funds under different categories were launched (Islamic Finance

news, 2016).

In this current period of globalization and emulation, the performance and

success of the industry is based on the determination of market performance of

its stock. As investors are interested to invest in the stock of those companies

from which they can earn maximum profit. During the early stages of mutual

funds, investors have a few investment opportunities for investing their money
in different investments channels, but as time pass many opportunities become

available to investors to invest their money. Mutual funds have observed a

remarkable growth in the last few years. This is due to, the joint efforts of the

and the fund managers who tried hard to educate and aware the investors about

the mutual fund tactics by using different methods and ways of promotions.

Islam is a religion that unites both spiritual and material aspects of life. It

regulates individual's relationship with God as well as relationships in social and

financial perspective. Thus, the Sharia covers the Muslim’s cultural, social and

behavioral identity. The prevalent acceptance of equity investments by Shari’ah

scholars in the early 1990s fortified the way to promote mutual funds that

operate in compliance with the ethical guidelines of the Islamic Law. As a

result, the Islamic mutual funds have been administered worldwide recognition

in its effectiveness as a financing facility, even in non- Muslim countries (World

Bank, 2017). The application of Sharia to investment choices and management

is not a new phenomenon. Earlier Muslims were able to establish an interest-free

financial system for mobilizing resources to finance productive activities and

consumer needs, which had worked effectively for centuries. Islamic mutual

funds aim to meet ethical and religious objectives without compromising the

traditional needs in terms of diversification, liquidity, and performance (Mansor,

2015).
In line with the rapid growth of the mutual fund industry, the Islamic mutual

funds also experienced substantial development. Over the last decade, the

Islamic financial industry has expanded itself beyond the limited domain of the

banking sector which has grown up to $2 trillion in assets worldwide (Ernst and

Young, 2014). Islamic mutual funds are different from conventional mutual

funds primarily due to the fact that assets in Islamic funds must be Shari'ah

compliant (Bacha and Mirakhor, 2013).

The contemporary increasing desire of Muslims to bring their modern economic

and financial activity to conform with their cherished religious values and

beliefs, has led to a growing interest in Islamic-approved Investment vehicles.

The number of Islamic mutual funds in the global market has increased from

470 to 943 between 2008 and 2014, signalling towards an increasing demand all

over the world for religion-based financing. The demand for Islamic mutual

funds is expected to grow further to $185.1 billion in the next 3 years and by the

end of 2019, the projected gap between demand and availability of Islamic

Mutual Funds could be as large as $108.4 billion.1 These figures suggest that

the Islamic finance industry has immense potential for expansion as global

demand for religion-based investing has steadily increased over the years

(Girard and Hassan, 2008). It is interesting to note that due to the enormous

growth of this sector even the conventional funds have started offering

customized financial products to cater the needs of Islamic investors. Although

the access to these products is not restricted and they are equally accessible by

both Muslims and non-Muslims, yet there is a widespread belief that the

characteristics and more importantly the performance of these Islamic funds is

different from that of conventional funds. (Naqvi, 2018).

Islamic mutual funds operate in a similar manner as a conventional fund except

that the Islamic mutual fund deploys only in Shariah-Compliant investments.

Shariah-compliant investments are characterized as following the Islamic

financial principles. These include prohibition of Riba (Interest), Gharar

(Uncertainty) and Qimar (Speculation). At the same time, Islamic principles

prescribe bearing of risks pertaining to ownership before the investors expect to

realize profit, as stipulated by following famous Hadith (Al-Kharaj bil Dhaman);

‫ ا ْبتَا َع ُغالَ ًما فَأَقَا َم ِع ْن َدهُ َما شَا َء هَّللا ُ أَنْ يُقِي َم ثُ َّم َو َج َد ِب ِه‬،ً‫هلل عنها أَنَّ َر ُجال‬1‫ رضى ا‬،َ‫شة‬
َ ِ‫عَنْ عَائ‬

. ‫ستَ َغ َّل ُغالَ ِمي‬ ُ ‫اص َمهُ إِلَى النَّبِ ِّي صلى هللا عليه وسلم فَ َر َّدهُ َعلَ ْي ِه فَقَا َل ال َّر ُج ُل يَا َر‬
ْ ‫سو َل هَّللا ِ قَ ِد ا‬ َ ‫َع ْيبًا فَ َخ‬

)۱( ‫ض َما ِن‬

َّ ‫اج بِال‬ ُ ‫"فَقَا َل َر‬
ُ ‫سو ُل هَّللا ِ صلى هللا عليه وسلم " ا ْل َخ َر‬

Hadrat Aisha (RA) narrated:

“A man bought a slave, and he remained with him as long as Allah wished him

to remain. He then found defect in him. He brought his dispute with him to the

1
(۱)‫ رقم الحدیث‬،‫ کتاب االجارة‬،‫ سنن أبي داود‬،)‫هـ‬۲۷۵ – ۲۰۲( ، ‫ سليمان بن األشعث بن إسحاق األزدي الس ِِّج ْستَانِ ُّي‬،‫أبو داود‬
۳۵۰۹
Prophet PBUH and he returned him to him. The man said: Messenger of Allah,

my slave earned some wages. The Messenger of Allah PBUH then said: Profit

follows responsibility”.

1.2 CONTROL AND MANAGEMENT OF ISLAMIC MUTUAL FUNDS

The Sharia also provides guidance regarding governance and management

structure of Islamic mutual funds. The Shariah Supervisory Board represents the

salient features that distinguish Islamic mutual funds from their conventional

counterparts. The Board assumes the responsibility for auditing the Sharia

compliance of a fund, including its components and management. It functions as

a customer advocate representing the religious interest of the investor

(DeLorenzo, 2000). The Board is typically made up of a team of prominent

Islamic legal scholars, well-disciplined in Sharia, particularly in areas of

transactions and business dealings. It should be independent and should act in an

advisory and supervisory role with the fund's management.

1.3 SECURITY EXCHANGE COMMISSION OF PAKISTAN (SECP)

SHARIAH ADVISORY BOARD

The Commission in its 24th meeting dated 26th May, 2015 approved a four-

member Shari’ah Advisory Board (SAB) of SECP to give its opinion on the

matters and issues of Islamic capital market. The SAB is entrusted to provide

Shari’ah opinion on the laws, rules, regulations, agreements, and documents

presented to it. The Shari’ah scholars also advise SECP on a range of issues
including the operation, auditing and reporting of Islamic mutual funds,

pensions and insurance operators etc. The guidance and advice of the Shari’ah

Board enhances the credibility of Islamic financial institutions and products

(SECP, 2017).

Although various Shariah screens have been followed to select the stock

portfolio in different term long the investment is determined with help of

Meezan Index criteria in case of Pakistan. The Meezan index criteria shows that,

the core business of the company should be Shariah compliant and should not

violate any principle of Shariah, the interest bearing debt to total assets should

be less than 37%, the companies having ratio less than 33% of non-compliant

investment to total assets, the non-compliant income to total revenue should also

be less than 5%, those assets that are not cash or cash equivalents to total assets

should be at least 25% and the market price per share should be greater than the

net liquid assets per share. If the companies, follow the above mentioned rules

than we can invest in the mutual funds of these companies otherwise not. And

these will be check by Shariah scholars appointed by AMC that the mutual

funds compliance to Islamic principles or not.

1.4 LITERATURE GAP

Numbers of studies have been conducted about perception, attitude, behaviour,

Shariah Compliancy and performance about mutual funds but more in case of

conventional mutual funds. Some researcher focused on perception of investors

towards mutual funds and some focused on attitude and behaviour in case of

international market. For example, Mane (2016) studies about the investors’

perceptions towards mutual fund in India and finds that most of the people are

hesitant while investing in mutual funds. Sharma and Agarwal (2015) study the

perception and attitude of investors towards mutual funds as an investment

option. They find that investors are not impressed from mutual fund. Shah and

Samira (2017) study on the awareness regarding shariah compliant mutual fund

in India and she finds that about 80% of the respondents never heard about the

shriah based mutual funds.

Hoepnerab and Rammalc (2011) study the Islamic mutual fund performance and

international investment style. They find that the results are consistent over time

and robust to time varying market exposures and capital market restrictions.

Mansoor (2011) studied the Islamic mutual fund performance and find the result

that both IMF and CMF portfolios perform better than the Kuala Lumpur

Composite Index (KLCI) return, proxy for the market portfolio. The returns

performance of IMFs is better than CMFs, with the result statistically

significant.

In Pakistan, Razzaq (2012) studies on the performance of Islamic mutual funds

and finds that the performances of Islamic mutual funds are very attractive. Qazi

(2014) studies on shariah compliance on Islamic mutual funds in Pakistan and

he finds that the investors are not much aware about the concept of Shariah
compliancy and even don’t know that Investment in Islamic mutual funds is safe

or not.

However, little work has been found on the level of knowledge in respect to the

Islamic mutual funds. This research is expected to enhance the literature on this

subject. Therefore, the literature gap is that we want to know about the level of

confidence of investors about Islamic mutual funds. That how much investor are

aware about the Islamic mutual funds, about its shariah compliancy and its risk

and also to know about the perceptions and attitudes of investors towards

Islamic mutual funds.

1.5 PROBLEM STATEMENT

From many decades Muslims are struggling and they are using skills and many

approaches to get success against this discrimination and unequal financial

system. For this purpose, many of this of the Muslim countries they launched

Islamic banking and Islamic Financial system but they can’t successful yet.

They are facing criticism from the jurists. So the Islamic analyst struggle to

develop and provide solid information about Islamic mutual funds to remove all

those confusions which the people perceive about Islamic mutual funds. The

Muslim scholars are trying to promote Islamic mutual funds and also to ensure

investors about the Shariah compliancy of Islamic mutual funds.

As we know that Islamic mutual funds investors are increasing day by day. So,

we will check the mutual funds investors’ satisfaction regarding Shariah

compliancy, investors’ interests. The financial institutions that are offering

Islamic mutual funds are fully compliant of Shariah rules and regulation or not

and also to know the behaviour and the level of awareness of investors regarding

Islamic mutual funds. For this purpose, we are going to conduct a research on

the level of confidence of investors about the Islamic mutual funds to know

about the interest and confidence level, perception, attitudes, Shriah compliancy

and the level of awareness.

1.6 RESEARCH OBJECTIVES

Based on the literature reviewed and discussion with a few experts in this

subject, the researcher will focus on the following objects.

 To examine investors opinion about investing in Islamic mutual funds.

 To examine investors opinion about Shariah Compliance of Islamic

mutual funds.

 To examine the preference of respondents for investing in certain mutual

funds.

 Research Questions and Hypothesis

 Research questions have been formed as under:

 What are the investor perceptions towards the operation of Islamic mutual

funds?
  Are Investors ensured that Islamic mutual funds are full Shariah

Compliant?

 What are the preferences of people for investing in certain mutual funds?

 What are the investors’ opinions regarding major Shariah deficiencies in

the operations of the Islamic mutual funds?

1.7 HYPOTHESIS

H1: There is no significant difference in awareness level among mutual funds

investors.

H2: There is no significant difference in Shariah compliancy of Islamic Mutual

funds among Mutual funds investors

H3: There is no significant difference in preferences for selecting Islamic mutual

funds by the investors.

1.8 SIGNIFICANCE OF THE STUDY

This study is important for investors and regulators because it gives them a

general idea that investors are satisfied or not. As we know that financial

institutions cannot persist without making good financial plans. Mutual funds

play an important role in the economy of any country. So the financial system

consists of many parts. The investors and firms use different types of financial

instruments and different types of mutual funds to maximize their wealth. As it

is obvious in Islam that interest is prohibited and many Muslims they don’t like
to invest in interest base financial instruments. So the Muslim scholars tried hard

to convey information about Islamic financial systems which is based on

Shariah rules and regulations. In this research we want to know about the

investors views that they are aware and having information about Islamic

Mutual funds or not. If they don’t know about Islamic mutual funds the Scholars

and Islamic financial experts should increase their effort to convey information

regarding Shariah compliancy of Islamic Mutual funds and to make the

investors satisfied that Islamic Mutual funds are fully Shariah Compliant.

The significance of the study is that by getting information about how much

investors are confident about investing in Islamic Mutual funds and to know

about that they have the knowledge about Islamic mutual funds or not. Also this

study provides useful information to both policy makers in the government and

for those who manage Islamic Mutual funds, The Asset management company

will take an idea that investors preferred Islamic mutual funds or not. Regarding

shariah compliancy Shariah advisors will also get the point how much people

know that it’s according to shariah and if the respondents are on negative side

they will review their methodology and try to find the ambiguity existing in

transactions.
 CHAPTER 2 - LITERATURE REVIEW

2. BACKGROUND OF THE STUDY

The study done on Investor awareness regarding shariah complaint mutual funds

in India. This study has been done by Shah and Samira (2017) in this study they

used chi square test and data they used is both primary and secondary data. The

study revealed that most of the respondents are unaware about shariah based

mutual fund.

Number of studies have investigated the investor’s perception about the mutual

funds. Mane in (2016) examines the investor’s perception about the mutual fund

in the city of Aurangabad India. She concludes that investors are not choosing or

feeling confident investing in mutual funds because they think it is risky. And

she also concludes the level of awareness is very low about mutual funds in the

city of Aurangabad India.

A study conducted on investors’ awareness and perception about mutual funds

by Sainj, Anjum and Saini in (2015) In this the authors are discussing that in the
mutual funds industry the word mutual funds become buzz words so they want

to know about the perception and awareness of the people about the mutual

funds. They have collected data from a sample of 200 investors. The result

shows that mostly the investors have positive approach towards investing in

mutual funds. In order to maintain their confidence in mutual funds they should

be provided with timely information relating to different trends in the mutual

fund industry.

Another research on perception of investors about mutual funds was conducted

by Sharma and Agarwal (2015). The study examined the perceptions on mutual

funds based on demographic factors and the result shows that female investors

are not interested investing in Mutual funds and also the study reveals the

perceptions of investors regarding private or public mutual funds. The investors’

perceptions regarding this depending on liquidity, flexibility, tax savings,

service quality and transparency etc.

Another study examined the status of awareness among mutual funds investors

and has been conducted by Prathap and Rajamohan in (2013). The study mostly

focuses on awareness and satisfaction of investors about mutual funds

investment. The result they got from this study is that the level of satisfaction

and awareness are is high and there having positive approach toward mutual

funds investment.
A study conducted by Imtiaz ul Haq on investor behaviour in the mutual fund

industry in (2013). The author in this paper discuss about investor fund-selection

ability explain the impressive growth of the U.K. mutual fund industry, the

behaviour of U.S. mutual fund investors vary across the business cycle and do

investors react to U.S. mutual fund name changes. The data he collected is UK

equity mutual funds only form period of 2000 to 2010 December. They used the

method Gruber’s (1996) smart money argument to the test by analysing the

allocation of new money amongst funds to search for fund-selection ability

amongst U.K. investors. Results imply that investors are chasers of past

performance and direct flows towards recent winners.

A study has been done on mutual fund investment choices criteria in Malaysia

by Jamaludin (2013). The studies investigate factors that are considered

important in selecting mutual funds. Here the study shows the selection criteria

of Muslims and non-Muslims. It is a survey based study and the result got form

this study is that Muslims are more eager to invest in Islamic mutual funds.

Other group of researcher study about investor attitude about the mutual funds.

Study done on investor attitude towards mutual funds as an investment options.

This study conducted by Singh (2012). In this paper the various demographic

factors about investors attitude towards mutual fund have been studied. The chi

square test has been used to analyse the data effectively and efficiently. The
author got result that still most of the investors are confused about mutual funds.

And they are unaware about the mutual funds.

A study done on Islamic mutual funds as faith based funds in a socially

responsible context by franco and miglietta (2007) In this study the author

underlying principles of socially responsible investing and Islamic Funds as

investment classes, and try to determine whether Islamic mutual funds, as faith-

based investments, can be included into the category of socially responsible

mutual funds, or if they exhibit distinguishing characteristics that indicate that

they would be more fittingly grouped in a separate investment family. They use

The Vector Autoregressive Model and conclude the result from both quantitative

as well as qualitative as that Islamic funds show different characteristics when

compare to SRI, both in terms of asset allocation and econometric profile.

The study on investors’ perception towards Islamic unit trust in Malaysia by

Halim, Ibrahim, and all others (2006). They used one-way frequency table, cross

tabulation and the ChiSquare Test of Independence. The study reveals that all

ethnic groups don’t have a lot of information regarding Shariah compliant

mutual funds.

Another study done on Islamic Equity funds the mode of resource and

mobilization and placement by Ahamd in (2001) and author focused on that

funds are based on shariah complaint or not and the relationship between
investors and management and he discussed the views about equity funds

according to shariah.

The study conducted to examine the attitude of investor towards mutual funds.

The study has done by Reliance Mutual Funds Company. The study reveals that

the small investors’ purchases behaviour does not have high level. The buying

intent of a mutual fund product by a small investor can be due to multiple

reasons depending upon customer’s risk return trade off. Thus the study

provokes the authority to take some positive measures for expanding the scope

of mutual funds investment.

In literature review we have concluded that most of the investors are unaware

about investing in mutual funds, even most of the people don’t have knowledge

about mutual funds. As my research will be on the level of awareness regarding

Islamic mutual funds, that investors know about the Islamic mutual funds or not

and also to know about investors’ perceptions regarding Shariah compliancy of

Islamic mutual funds.

THEORITICAL FRAMEWORK

Shariah
Compliancy

Riba Free Investors

Confidence
About Islamic
Mutual funds

Halal
Business

Maintain 70%
of Debt ratio

Alcohol or

other
 CHAPTER 3 - RESEARCH METHODOLOGY

3. INTRODUCTION

To carry out the research work different statistical tools will be used in order to derive certain

meaningful information and results. In case of primary data, Chi square tests will be applied

that and commonly used for testing relationships between categorical variables.  The null

hypothesis of the Chi-Square test is that no relationship exists on the categorical variables in

the population; they are independent. It is a powerful test for testing the significance of the

discrepancy between theory and experiment as given by Karl Pearson.

3.1 RESEARCH DESIGN

This research is based on quantitative approach and in order to find out the results a

questionnaire technique will be used by distributing them among the selected investors. The

entire process involved in research methodology is called research design. Research

configuration is an arrangement of concentrate made by an analyst before embraced his/her

examination work. In this research the researcher has contained engaging examination
configuration to research and concentrate on the given issue. The real objective of clear

research is to portray the event, phenomena and situations. Descriptions are being made on

the bases of logical perceptions are disclosed to be progressively exact and exact alternate

strategies.

3.2 SAMPLE

The present study will be based on primary data which will be collected from 300 investors

(respondents) using a structured questionnaire (Annexed). The research will be conduct in

various parts of the country where the respondents could be found accordingly. We shall use

convenient random sampling technique being non-probability where subjects are selected

because of their convenient accessibility and proximity to the researcher.

3.3 SAMPLE SIZE AND SELECTION PROCEDURE

The samples of 300 respondents from the mutual fund investors. The investors are selected

from Various mutual fund distributors, agents and from consultancy. The convenience

sampling method Is used for selecting sample investors in the study.

3.4 MODEL OF THE STUDY

The model of the research is prescribed as under:

We are using OLS model to show the relationship between dependent variable and

independent variables.

Investors’ confidence about Islamic Mutual Funds = ƒ (Opinion regarding Shariah

compliancy, Riba Free, Halal Business, Maintain70% of debt ratio, Alcohol or other ancillary

Activities).

3.4.1 DEPENDENT VARIABLE

 Investors’ confidence about Islamic Mutual Funds.

3.4.2 INDEPENDENT VARIABLES

 Opinion regarding Shariah compliancy,

 Riba Free,

 Halal Business,

 Maintain70% of debt ratio,

 Alcohol or other ancillary Activities

The main equation for the model is:

ICIMF = ƒ (β0 + β1OSC + β2 RF + B3HB + β4MDR + β6A + ε).

3.5 EXPLANATORY VARIABLES OF THE STUDY

3.5.1 INVESTORS’ CONFIDENCE

Psychology suggests that errors in assessing the reliability of information are likely to take a

consistent form: people with little information will tend to be too confident, relative to those

with more information. A study done by Bajracharya, Mathema (2017) shows that Investor

has low confidence towards mutual funds.

3.5.2 SHARIAH COMPLIANCE

In this variable the investors will be asked to give their opinion regarding Shariah compliancy

of Islamic Mutual funds. Accordingly, the Islamic mutual funds could be Shariah compliant

or not. If the opinion of investors become positive then it will show positive relation

otherwise, it will show negative relation. Jamaludin, Smith and Gerrans (2012).

The selection of Shariah-compliant companies takes place through a screening process based

on two qualitative and quantitative parameters. The qualitative criteria, in evaluating the

status of these companies, are to assure that they are not involved in the activities forbidden in
Islamic law. For example, investing in financial services based on Riba, Gharar, gambling etc.

Quantitative parameters are used to determine the level of mixed contribution toward halal

and non halal elements towards the revenue and profit of the company. (Sadeghi, 2008).

Shariah compliancy for Islamic banks requires Islamic banks compliant to maqsid-u- Shariah,

the manager should look after the ethical values and justice distributions. (Khaleequzzaman,

Mansoori, Rashid, 2016).

3.5.3 RIBA FREE

Riba in the Shari`ah, technically refers to the ‘premium’ that must be paid by the borrower to

the lender along with the principal amount as a condition for the loan or for an extension in its

maturity. (Ahmad & Hassan (2007) An Islamic mutual fund is similar to conventional mutual

fund in many ways, however Islamic mutual funds should shariah compliance and should be

Riba free, Gharar, and gambling. (Elfakhani, Hassan, Sidani, 2005).

In this variable the investors will be asked to provide your opinion and how much you are

confident about Islamic mutual funds that it is Riba free. If the answers are positive than we

will considered that Islamic mutual funds are Shariah Compliant and is not consist of Riba

and the if the answers are not positive so, it means that Islamic mutual funds is not Riba free.

3.5.4 HALAL BUSINESS

Investors want to invest their surplus money in business to earn profit. The business of the

company should be Halal and Shariah compliant. The two basic conditions for Halal business,

first the rate of profit and principle amount should not be guaranteed, second, the amount

collected invested in a business should be Shariah Compliant. (Usmani, 2007)

Shariah categorize certain commercial activities impressible which is Haram. But the business

activities which are permissible but in some operations they are indulge in Haram activities.

So some Ulama does not allow to invest in such kind of business, but some Ulama allow to
invest when the investors derive the small amount of income involve in that Haram activities.

( Khatkhatay & Nisar, 2007).

So in this variable we will have asked from the investors about the Islamic mutual funds

investment in Halal business or in a business that is not permissible in Islam. Are the

investors confident or not to invest in Islamic mutual funds?

3.5.5 MAINTAIN 70% OF DEBT RATIO

This variable is defined as the measure of company debt leverage and helps you indicate that

how much a company funds itself with debt. Debt to asset ratio is performed to measure how

much the company’s assets are financed by debt or how much the company’s debt affects its

asset management. (Husna, & Satria2019). The most important part of the Islamic fund is the

Shariah Screening, to check that funds would be invested is Shariah compliance or not it is

divided in to two parts one is to check the core business that should be Halal business and the

other is related to finance of the companies. The importance of Shariah screening is to

exclude the companies that are involving in unacceptable involving of debt, liquidity, interest

and impure income. (Ayedh, Shaharuddin & Kamaruddin 2019).

3.6 CHI SQUARE TEST

In case of primary data, Chi square tests will be applied that are commonly used for testing

relationships between categorical variables.  The null hypothesis of the Chi-Square test is that

no relationship exists on the categorical variables in the population; they are independent. It is

a powerful test for testing the significance of the discrepancy between theory and experiment

as given by Karl Pearson.

Karl Pearson’s Chi-Square is determined by:

2 ( Oi−Ei ) x 2
xc =∑
Ei
Where subscript “c” are the degrees of freedom. “O” is the observed value while E is

the expected value. The summation symbol denotes that it will have to perform a calculation

for every single data item in the data set.

3.7 DATA COLLECTION TOOLS

The data will be collected from population with the help of questionnaire. According to the

need of research convenience sampling is used for acquiring desired feedback from desired

respondent, the population have an equal chance of becoming a research contestant. It is

considered as most competent sampling technique. Due to time and resources constraints it is

not possible to study the entire population. Therefore, a random sampling technique will be

extracted from the population for collecting the required data. 300 questionnaires will be

distributed among participants. Convenient sampling technique will be used for selecting the

participant.

Three hypotheses were made in this study and hypothesis testing was done using Chi square

for association using IBM SPSS software. Both hypotheses were tested with 95% confidence

level i.e. at 5% significant level.

Friedman test has been applied to find out if there is significant relationship between the mean

rank and the problem Faced by the Mutual Fund Investors. Based on the Friedman test, it is

clear that all mean rank has significant relationship with the problem faced by Mutual Fund

Investors at 5% level of significance. Hence the hypothesis is rejected.

QUESTIONNAIRE

RESPONDANT PROFILE

Dear participants,

As a part of my research project, I need to collect responses. My research is

designed to study the phenomenon of brand hate. Please read each question

carefully and answer all the questions. The information you provide will remain

anonymous. Thank you for your cooperation.

Yours sincerely,

Name:

Contact:

Email:

Institute:
RESPONDENT PROFILE

I would like to ask a few questions about you.

 Name: ____________________ Profession: ________________

Contact No._______________ Email: ____________________

1. Please mention your gender?

a) Male b) Female
c) Other
2. Please mention your marital status?
a) Bachelor b) Engaged/married
c) Separated/Divorced d) Widowed
e) Don’t want to answer
3. Please mention your age category?
a) Less than 18 Years b) 18-27 Years
c) 28-40 Years d) 41-50 Years
e) Above 50 Years
4. Please mention your education level?
a) High School b) Certificate/Diploma
c) Undergraduate degree d) Post Graduate
e) PhD_______________ f) Any other (please specify) ___________
5. Please mention your approximately monthly family income?
a) Less than 15,000 PKR b) 15,000-30,000PKR
c) 30,001 to 50,000 PKR d) 50,001-100,000PKR
e) More than 100000PKR
6. Please mention your occupation?
a) Unemployed b) Student c) Private sector employee
d) Public-sector Employee e)Self Employed/own business f) Retired

QUESTIONNAIRE
S.No ITEMS SD D N A SA

SHARIAH COMPLIANCE
1. Do you think that Shariah Board

Advisors are efficient enough?

2. In your opinion Islamic Mutual Funds

are not Interest Free Investments

3 Do you consider Past Performance of

the Funds before investing into it?

RIBA FREE
4. Do you think Islamic Mutual Funds are

involved in Riba/Interest
5. Do you think Market Interest Rates has an

impact on Islamic Mutual Funds

6. Will you invest in Islamic Mutual

Funds, if Stock index & Government

Interest Rates decline?

7. Will you invest in Interest Free

investments
HALAL BUSINESSES
8. Do you think Islamic Mutual Funds are

not investing in Non-Islamic entities

9. Do you think Past Performances of a

funds has a positive impact on Islamic

Mutual Funds
10. Do you think Islamic Mutual Funds are

investing in Stock Markets

ALCOHOL, GAMBLING & OTHER ANCILLARY ACTIVITIES
11. Do you think Islamic Mutual Funds are

not invested in Alcohol, Gambling or

other illegal activities

12. Do you think people has a lack of

confidence in services being provided

 by Islamic Mutual Funds
13. Do you think that Islamic Mutual Funds

are following Shariah Advisory Board’s

obligations?
MAINTAINED A DEBT RATIO OF 70%
14. Do you think that Islamic Mutual Funds

are maintaining 30% funds in equity?

15. Do you think Islamic Mutual Funds are

considering Balanced Fund Plan?

16 Do you think Islamic Mutual Funds are

considering Income Fund Plan?

REFERENCES

1) Saini, S., Anjum, B., & Saini, R. (2011). Investors’ awareness and perception about

mutual funds. International Journal of Multidisciplinary Research, 1(1), 14-29.

2) Mane, P. (2016). A Study of Investors Perception towards Mutual Funds in the City of

Aurangabad. The SIJ Transactions on Industrial, Financial and Business Management,

4, 30-38.

3) Alwi, S., Ahmad, R., Hashim, I. Z. A., & Naim, N. M. (2017). Investigating the

Islamic and Conventional Mutual Fund Performance: Evidence from Malaysia Equity

Market. In International Conference on Management and Information Systems

September (Vol. 25, p. 26).

4) Singh, B. K. (2011). A study on investors' attitude towards mutual funds as an

investment option. Journal of Asian Business Strategy, 1(2), 8.

5) Elfakhani, S., Hassan, M. K., & Sidani, Y. (2005, December). Comparative

performance of Islamic versus secular mutual funds. In 12th Economic Research

Forum Conference in Cairo, Egypt(pp. 19-21).

6) Najafi, Z., Asgari, H., & Bandari, M. (2013). Identification of Mutual Funds Investing

in Tehran Stock Exchange. Journal of Management Research, 5(3), 185-199.

7) Sharma, P., & Agrawal, P. (2015). Investors’ perception and attitude towards Mutual

fund as an Investment option. Journal of Business Management & Social Sciences

Research, 4(2), 115-118.

8) Ibrahim, M., Halim, A., Rashid, M., Husni, A., Ali, R., & Abd Wahid, Z. (2006).

Investors' perception towards Islamic Unit Trust in Malaysia/Abdul Halim Mohamed

Ibrahim...[et al.]. Social and Management Research Journal, 3(2), 33-40.

9) Charles Parker Jones (2003) Mutual Funds: Your Money, Your Choice: Take Control

Now and Build Wealth Wisely

islamicfinancenews.com/sites/default/files/supplements/AlMeezan-Pakistan.pdf

10) Mehta, S., & Shah, C. H. A. R. M. I. (2012). Preference of investors for Indian mutual

funds and its performance evaluation. Pacific Business Review International, 5(3), 62-

76.

11) Capon, N., Fitzsimons, G. J., & Weingarten, R. (1994). Affluent investors and mutual

fund purchases. International Journal of Bank Marketing, 12(3), 17-25.

12) Bley, J., & Kuehn, K. (2004). Conventional versus Islamic finance: student knowledge

and perception in the United Arab Emirates. International journal of Islamic financial

services, 5(4), 17-30.

13) Saini, Y., Bick, G., & Abdulla, L. (2011). Consumer awareness and usage of Islamic

banking products in South Africa. South African Journal of Economic and

Management Sciences, 14(3), 298-313.

14) Kasim, Nawal, Mohamad Ibrahim, Shahul Hameed, and Maliah Sulaiman. "Shariah

auditing in Islamic financial institutions: exploring the gap between the" desirable"

and the" actual"." Global Economy & finance journal 2, no. 2 (2009): 127-137.

15) Ahmad, A. U. F., & Hassan, M. K. (2007). Riba and Islamic banking. Journal of

Islamic Economics, Banking and Finance, 3(1), 1-33.