First Islamic charity fund plans Q1 launch

* Eyes 10-15 pct returns a year

* CIO appointment due shortly

LONDON, Sept 29 (Reuters) - The first fund managing Islamic charitable donations plans to launch in the first quarter next year as it bids to raise $750 million from high net worth Muslims in its first 12 months, the fund’s Islamic advisor said.

The World Zakat Fund has $50 million in soft commitments so far, said Humayon Dar, chief executive of BMB Islamic, the fund’s sharia adviser. He predicts the fund could grow to as much as $10 billion over 10 years.

The fund -- established as part of an initiative by the Malaysian government -- is due to launch in the first quarter of 2010 and would start investing within a year of launch.

Muslims around the world who are able to save are expected to pay zakat, typically 2.5 percent of any savings accumulated over a year. The amount of zakat money distributed each year ranges between $20-30 billion, he said.

The payment of zakat can be a matter of personal choice, though in some countries the government extracts the payment from savings accounts on a pre-determined day. The funds tend to be used to help those in poverty, those in debt or refugees.

The concept behind the new fund divides Islamic scholars, some of whom argue zakat should be used for immediate relief, rather than being invested.

Islamic scholar Mohamad Akram Laldin, who serves on the HSBC Amanah Sharia advisory board, said the controversy will make it hard for the new fund to attract conservative Muslims.

“The priority is to give, not grow zakat,” he said. “It is a matter of principle,” he told Reuters.

To support the target of $10 billion, Dar points to an estimated 40,000 high net worth individuals in the Middle East, as well about 400 billionaires in the Middle East/North Africa region. BMB will manage the zakat assets through a unit based in Malaysia, of which Dar is CEO. It will shortly name a chief investment officer from a four-strong shortlist, Dar said.

Dar said 65 pct of funds raised would be invested, with a target to return 10 to 15 percent a year, while the balance would be used to fund charitable causes. Investments will include micro private-equity to finance entrepreneurs in sharia-compliant business, microfinance for small business in rural areas and sharia-compliant liquid investments, primarily equity.

It will also invest in social projects in the areas of health, clean water provision, education and housing. (Reporting by Cecilia Valente, Editing by Joel Dimmock and Rupert Winchester)