Unlike conventional Mutual Funds which can manage any investments, there are specific requirements that must be met to be classified as a Sharia Mutual Fund. The stages involved in Sharia Mutual Fund transactions differ, and the impact on investors may also be slightly different from conventional Mutual Funds.

Sharia Mutual Funds are managed based on Sharia principles. Investment Managers will only manage Mutual Fund products through investments that are registered in the DSE (Sharia Compliant Securities List). This list contains companies that meet the following 3 criteria:

1. Business activities must not violate Sharia principles. Therefore, tobacco companies, businesses related to gambling, trading in prohibited goods, or involving bribery cannot be included in the DSE.
2. Total debt must be less than assets. A company whose shares are used for Mutual Fund investment must have total debt < 45% compared to the company's total assets.
3. Non-Sharia-compliant income must be less than assets. A company is only permitted to have non-Sharia-compliant income < 10% compared to business revenue.

Additionally, there is also a cleansing process in Sharia Mutual Funds. The cleansing process is the purification of non-Sharia-compliant income in Sharia Mutual Funds, such as income from bank interest. This typically occurs when funds remain deposited in the Custodian Bank for too long and generate bank interest. Income from the cleansing process is usually donated for charitable purposes.

In addition to being supervised by the Indonesia Financial Services Authority (OJK), every process in managing Sharia Mutual Funds must be supervised by the Sharia Supervisory Board (DSB). This Board comprises experts in capital markets and Islamic law. Their role is to ensure that every Sharia Mutual Fund management process complies with Sharia principles. The Sharia Supervisory Board is required to report the results of its Sharia supervision at least once every 6 months to the Management Board, Supervisory Board, DSN-MUI and Bank Indonesia.

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