SHARIAH ACCOUNT’S EQUAL DIVIDEND HIGHLIGHTS STRENGTH OF SHARIAH INVESTMENTS – ECONOMISTS

By Nur Athirah Mohd Shaharuddin

KUALA LUMPUR, March 1 (Bernama) -- The Employees Provident Fund’s (EPF) 6.30 per cent dividend payout for 2024 for the Shariah account, involving a total distribution of RM10.19 billion, is proof that Shariah-compliant investments have strong potential in generating returns, according to an economist.  

An economist at Universiti Sains dan Teknologi Malaysia, Prof. Dr Barjoyai Bardai, said this was an interesting scenario, as many people have long assumed that Shariah-compliant investments are more difficult to manage and, therefore, yield lower returns.  

“This year, the EPF has proven that Shariah-compliant investments have just as much potential in generating returns. This could serve as an indication to the global market that Shariah-based investments are equally attractive and may even achieve higher performance in the future.  

“This marks the beginning of a new era of investment opportunities,” he told Bernama.  

Earlier today, the EPF announced a higher dividend rate of 6.30 per cent for both Simpanan Konvensional and Simpanan Shariah for 2024, bringing the total payout to RM73.24 billion.

The performance was attributed to a recovery in global and domestic markets, resilient economic growth, and sound portfolio management.  

For the financial year ended Dec 31, 2024, the EPF recorded a total investment income of RM74.46 billion, an 11 per cent increase from RM66.99 billion in 2023.  

Boost to Investor Confidence in Shariah Funds  

Meanwhile, echoing this sentiment, Associate Professor Dr Muhammad Irwan Ariffin from the Department of Economics, Kulliyyah of Economics and Management Sciences, International Islamic University Malaysia (IIUM), opined that the equalisation of dividends would boost investor confidence in the EPF’s Shariah funds.  

Besides attracting more members to opt for Shariah-compliant savings, it would also encourage greater diversification into high-performing Shariah-compliant sectors such as technology, healthcare, and renewable energy. In response to the growing demand for Islamic finance products, the EPF could expand its Shariah-compliant asset base.  

“These equal dividends could be the first step towards bridging the gap between Islamic and conventional finance, reinforcing the idea that ethical investing can yield competitive returns,” he said.  

He also highlighted that this may encourage more institutional investors to consider Shariah-compliant investments, thereby fostering growth in Malaysia’s Islamic finance sector.  

He said Islamic finance products are shielded from excessive risk and speculative activities and have historically demonstrated resilience during financial crises.  

Their reliance on asset-backed investments, risk-sharing mechanisms, and the prohibition of interest (riba) helps mitigate volatility, making them more stable in uncertain economic conditions.  

“This stability may have contributed to stronger returns for the EPF’s Shariah-compliant portfolio, particularly amid global market uncertainties.

“As a result, the risk-mitigating nature of Islamic investments could be a key factor behind the equal dividend rates for the  EPF’s Shariah and conventional accounts in 2024,” he added.  

-- BERNAMA