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Kuala Lumpur. For 30 years, the government-run Amanah Saham unit trusts have been the most popular investment for Malay Muslims, with their consistently high yields and folksy advertisements encouraging kampung Malays to invest.

But a recent fatwa has had Muslims wondering if these seemingly wholesome investments have caused them to unknowingly break religious rules.

In May, the Fatwa Council in the country's most populous state, Selangor, ruled that the Amanah Saham unit trusts did not comply with the halal standard because they hold shares in banks which charge interest, a practice that Islamic purists consider forbidden.

The unit trusts - including Amanah Saham Nasional and Amanah Saham Bumiputera - are run by the country's biggest fund manager, state-owned Permodalan Nasional Berhad (PNB), which has some RM76 billion (S$31 billion ) under management.

In a way, the controversy stems from majority-Muslim Malaysia's decision more than a decade ago to be a global pioneer in Islamic banking. Spurred by their ambition to be the bankers to the Islamic world, Malaysian financial groups raced to create halal financial products, replacing the haram, or forbidden, concept of interest with terms such as profit-sharing.

As these new products - from car and home loans to bonds and credit cards - proliferated, it was perhaps inevitable that conventional banking started to appear less halal than its newer cousins.

With at least 20 percent of Malaysia's banking sector now being halal, people "are spoilt for choice," said Bank Islam chief economist Azrul Azwar.

In the case of the established Amanah Saham, those who object say it is because a portion of the funds is invested in the conventional banking operations of Maybank, Malaysia's top lender.

Last month, Siti Mariah Mahmud, a lawmaker from the opposition Parti Islam SeMalaysia, raised the issue in Parliament.

In a written reply, Religious Affairs Minister Jamil Khir Baharom said last week that the National Fatwa Council has concluded that investing in Amanah Saham is allowed and that its unit trusts are halal as the bulk of its investments is halal. He added that if the PNB dumps its assets in Maybank, there would be dire consequences for Muslim jobs in the banking industry.

Originally designed as a way to help poor Malays, the Amanah Saham funds are seen as a safe investment due to their high annual dividends averaging 10 per cent in periods of high growth and 6.5 percent now.

Most of the PNB's unit trusts are available only to Malays, although the government has also introduced several which are open to all Malaysians.

It is not the first time that Malaysia's religious clerics have issued conflicting edicts. Each state has its own syariah court as well as a mufti who issues fatwas. Fatwas issued in one state may not necessarily apply in another state and may not be legally binding unless they are gazetted into law.

A PNB spokesman declined to comment on whether there has been an unusual number of withdrawals recently from the Amanah Saham funds.

Housewife Rohaya Abdullah, 36, said she has heard that the Amanah Saham investments may not be 100 percent halal but continues to put her money in them.

"I am not sure about the whole halal-haram issue but I still invest for my savings," she said.

Others appear equally pragmatic.

"If the government says it is OK to invest in the unit trusts then I am fine with it,' said an insurance company employee, 34, who declined to be named. 'Otherwise, where else can I invest my money for good returns?"

Reprinted courtesy of Straits Times Indonesia. To subscribe to Straits Times Indonesia and/or the Jakarta Globe call 021 2553 5055.