Original Question: “Due to my lack of knowledge, I only discovered that my ILP isn’t shariah compliant for the past eight years. What should I do with the capital outlay and interests, respectively?”
If you were unaware of the non-shariah compliance of investment-linked policies, then there are three several ways to treat this investment:
You may try to ask your financial advisor whether you can switch the funds to a shariah-compliant fund, we list the funds below:
- FTSF Shariah Global Equity
- FTSF Global Sukuk
- AIA Global sharia funds → If you are with an AIA representative.
- NTUC Takaful fund
- HSBC Islamic Global Equity Index Fund
Do take note that you might incur some charges for switching funds.
If you cannot switch your funds to a shariah-compliant alternative, you may want to consider waiting for the fund to break even and collect the amount of capital you have contributed. This is based on the quranic verse, Surah Al-Baqarah, 279:
فَإِن لَّمْ تَفْعَلُوا۟ فَأْذَنُوا۟ بِحَرْبٍۢ مِّنَ ٱللَّهِ وَرَسُولِهِۦ ۖ وَإِن تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَٰلِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ ٢٧٩
If you do not, then beware of war with Allah and His Messenger! But if you repent, you may retain your principal—neither inflicting nor suffering harm.
Suppose you are uncomfortable with holding a non-shariah-compliant fund in your portfolio. In that case, you could consider cancelling the ILP and channelling the withdrawals to an ILP with a Shariah-compliant fund. There will be some penalties, and you will receive a fraction of the amount you invested.
In conclusion, it is great that there is a growing awareness among the community of the importance of aligning our finances with our beliefs, and hopefully, with that, more halal financial products will come in.
Wallahu A’lam.
