Islamic scholars and bodies ruling on ETFs and funds.
Who ruled·What they said·Where to read it
An ETF is only as clean as what it holds. The rules below set out what makes an ETF Islamic.
Last reviewed 26 September 2026.
Rulings and positions
Malaysia's securities regulator has written down what makes an ETF Islamic. Its 2022 guidelines start with the holdings: "An Islamic ETF's assets must only consist of assets that comply with Shariah."
The rest follows from that. Derivatives are allowed only to hedge risk, and they have to be Islamic ones. A conventional derivative is allowed only when no Islamic one is available or viable, and only with the fund's Shariah adviser signing off first. An ETF that follows an index has to follow a Shariah index made up of compliant securities.
The fund cannot lend out its holdings the conventional way. A Shariah adviser reviews its investments and reports on whether it has been run in line with Shariah.
SourcesSC Malaysia guidelines (PDF)
Foundations and principles
We found no International Islamic Fiqh Academy resolution on ETFs by name. An ETF is a basket of shares, so the Academy's ruling on shares in Resolution No. 63 reaches every company inside it. Shares in companies with lawful activities are permitted, and companies whose main purpose is haram are not.
A conventional ETF holds whatever its index holds, banks and insurers included. That is why the rules above require a Shariah index and compliant assets throughout.
ReadAl-Baqarah 2:275
What passes
- Every asset in the fund is Shariah-compliant.
- If it tracks an index, it is a Shariah index of compliant securities.
- Derivatives are used only to hedge, and holdings are not lent out conventionally.
- A Shariah adviser reviews its investments and reports on its compliance.
Further reading
References
- Securities Commission Malaysia (28 November 2022). Guidelines on Islamic Capital Market Products and Services, SC-GL/1-2022, Chapters 29 and 31. Source
ShariaQuant summarises what each body ruled, quotes the wording that matters, and links to every source so you can read the full ruling yourself. This is a record of their rulings, not a fatwa of our own.