For Muslims and faith-conscious investors seeking to grow their wealth while adhering to Islamic principles, Halal mutual funds offer a compelling solution. Recent market trends, including the unprecedented oversubscription of the Federal Government’s Sukuk bonds, demonstrate that Nigerian investors have a strong appetite for Shariah-compliant investment products.
Understanding Halal Mutual Funds
Halal mutual funds, also known as Shariah-compliant funds, are investment vehicles that operate according to Islamic law (Shariah). These funds represent a form of socially responsible investing that screens potential investments based on ethical guidelines important to Islamic followers. However, their appeal extends beyond the Muslim community. Many non-Islamic investors are drawn to these funds because of their ethical investment approach that excludes industries deemed harmful to society.
Core Principles of Shariah-Compliant Investing
At the heart of Halal mutual funds lie several fundamental principles that distinguish them from conventional investment products:
Prohibited Investments: Shariah-compliant funds strictly avoid investments in companies that are involved in alcohol production and distribution, pork products, gambling, pornography, weapons manufacturing and conventional interest-based financial services. This exclusionary screening ensures that your investment capital doesn’t support industries that contradict Islamic values or broader ethical standards.
Interest-Free Operations: Since Islam prohibits riba (interest), these funds cannot invest in conventional bonds or companies with excessive debt levels. Instead, they focus on equity investments and profit-sharing arrangements that align with Islamic financial principles.
Ethical Business Practices: Beyond industry exclusions, Shariah-compliant funds also evaluate whether companies engage in ethical business practices. This includes examining corporate governance, labour practices and environmental responsibility.
Purification Process: If a portfolio company does generate a small portion of income from prohibited activities, that income must be calculated and donated to charity to ‘purify’ the returns for investors. This ensures complete compliance with Islamic law.
How Halal Mutual Funds Operate
The operational structure of Shariah-compliant funds differs significantly from conventional mutual funds due to additional oversight requirements. Each fund must have a Shariah Advisory Board that is composed of Islamic scholars who possess expertise in both Islamic jurisprudence and modern finance. This board reviews all investment decisions, conducts annual audits and ensures ongoing compliance with Islamic principles.
The screening process typically involves multiple layers. First, companies are screened by industry to eliminate those in prohibited sectors. Next, financial ratios are examined to ensure debt levels and interest-bearing securities don’t exceed specified thresholds. Finally, the Shariah board conducts qualitative assessments to verify that business operations align with Islamic values.
Despite the exclusions, Halal mutual funds have access to diverse investment opportunities. Popular categories include technology, healthcare, real estate, consumer goods and industrial manufacturing, all sectors where companies can operate in alignment with Shariah principles.
Best Halal Mutual Funds in Nigeria
Nigeria’s Islamic finance sector is experiencing remarkable growth and reflects both the country’s large Muslim population and increasing awareness of ethical investing benefits. The explosive demand for the Federal Government’s Sukuk bonds, with recent issuances seeing oversubscription levels exceeding 700%, shows that Nigerian investors are actively seeking Shariah-compliant investment opportunities.
Industry experts note that the market remains underpenetrated despite this strong demand. This presents significant opportunities for growth as more asset managers develop Shariah-compliant products and as financial literacy around Islamic finance improves.
Based on market presence, assets under management and performance track records, here are the leading Shariah-compliant mutual funds available to Nigerian investors:
1. Lotus Capital Fixed Income Fund
Managed by Lotus Capital Limited and available on Cowrywise, this fund is the largest Shariah-compliant fund by assets under management in Nigeria. With a long-term track record and substantial scale, it offers investors exposure to fixed-income instruments that comply with Islamic principles while demonstrating consistent performance across multiple time horizons.
2. Lotus Halal Investment Fund
Also from Lotus Capital Limited, this fund provides a diversified approach to Shariah-compliant investing. With strong assets under management and a proven multi-year performance history, it represents one of the more established options in Nigeria’s Islamic finance landscape.
3. FBN Halal Fund
Managed by First Asset Management Limited, the FBN Halal Fund brings substantial scale and the backing of one of Nigeria’s leading financial institutions. The fund has demonstrated solid performance with significant assets under management, making it an attractive option for investors seeking established institutional expertise.
4. Stanbic IBTC Shariah Fixed Income Fund
This fund from Stanbic IBTC Asset Management Limited focuses on fixed-income securities that meet Shariah requirements. With considerable assets under management and a long operational history, it offers investors a conservative approach to Shariah-compliant investing.
5. United Capital Sukuk Fund
Managed by United Capital Asset Management Limited, this fund specializes in Sukuk (Islamic bonds), offering investors exposure to this growing asset class. With substantial assets under management, it capitalizes on the strong demand for Sukuk instruments in Nigeria.
6. Stanbic IBTC Imaan Fund
Another offering from Stanbic IBTC Asset Management, the Imaan Fund provides equity-focused Shariah-compliant investing. The fund has shown strong long-term performance and maintains significant assets under management, backed by one of Nigeria’s most respected asset managers.
7. ARM Halal Balanced Fund
Asset & Resource Management (ARM) offers this balanced fund that diversifies across different Shariah-compliant asset classes. ARM’s strong reputation in Nigeria’s asset management industry and their expertise in managing diverse portfolios make this a solid choice for investors seeking balanced exposure. Minimum investment is ₦10,000.
8. Norrenberger Islamic Fund
Managed by Norrenberger Asset Management Limited, this fund provides investors with access to Shariah-compliant investments through an experienced fund manager. The fund maintains substantial assets under management and offers professional management aligned with Islamic principles.
9. ARM Sharia Compliant Fixed Income Fund
ARM Investment Managers’ fixed-income focused fund offers conservative investors a Shariah-compliant option for fixed-income exposure. The fund benefits from ARM’s deep market knowledge and investment expertise.
10. FSDH Halal Fund
FSDH Asset Management Limited brings their investment management capabilities to the Shariah-compliant space with this fund. It has demonstrated solid performance and offers investors access to professionally managed Islamic investments.
11. Capitaltrust Halal Fixed Income Fund
Managed by Capital Trust Investments and Asset Management Limited, this fund focuses on fixed-income instruments that comply with Shariah principles, offering investors a conservative investment approach with demonstrated multi-year returns.
12. FSDH Halal Fund
This fund from FSDH Asset Management Limited provides investors with ethical investment options managed by an experienced team. The fund has shown consistent performance and maintains a respectable asset base.
13. Marble Halal Commodities Fund
Managed by Marble Capital Limited, this unique fund offers exposure to Shariah-compliant commodities investments, providing diversification beyond traditional equity and fixed-income options.
14. Marble Halal Fixed Income Fund
Also from Marble Capital Limited, this fixed-income focused fund provides conservative investors with Shariah-compliant options in the fixed-income space.
15. Cordros Halal Fixed Income Fund
Cordros Asset Management Limited offers this fixed-income fund for Shariah-conscious investors seeking conservative investment options with ethical compliance.
16. Lotus Waqf (Endowment) Fund
This specialized fund from Lotus Capital Limited caters to investors interested in endowment-style Shariah-compliant investing, offering a unique approach within the Islamic finance framework.
17. Emerging Africa Halal Fund
Managed by Emerging Africa Asset Management Limited, this fund provides investors with access to Shariah-compliant investments with a focus on African markets and opportunities.
18. EDC Nigeria Halal Fund
EDC Fund Management Limited offers this fund for investors seeking Shariah-compliant investment options managed by a specialized team focused on ethical investing principles. Minimum investment is ₦50,000.
19. Afrinvest Halal Fund
Launched in July 2025, Afrinvest Halal Fund is an open-ended unit trust scheme that offer 25 million units at ₦100 per unit at a public offer size of ₦2.5bn.
Conclusion
Halal mutual funds offer Nigerian investors an opportunity to grow their wealth while maintaining adherence to Islamic principles and broader ethical values. The remarkable growth in demand for Shariah-compliant investments, evidenced by recent Sukuk oversubscriptions and the expanding range of available products, suggests this market segment will continue its upward trajectory. Whether you’re a Muslim investor seeking to align your investments with your faith or an ethical investor looking for socially responsible options, Halal mutual funds provide a viable pathway to achieving your financial goals while investing in accordance with your values.
As with any investment decision, it’s advisable to consult with qualified financial advisors who understand both your personal circumstances and the nuances of Shariah-compliant investing. With proper research, realistic expectations, and a long-term perspective, Halal mutual funds can play a valuable role in building wealth and financial security for you and your family.
