Investment refers to the process of buying assets with the aim of the assets increasing in value over time. As the value of the asset increases, the investor is provided with a return that takes the form of capital gains or income payments. Investment has historically always been associated with the growth of wealth and the pursuit of capital income. However, investments can also be a means to improving lives and the lives of those in your community.
Halal investment refers to the investment of money in accordance with Islamic finance principles. Shariah finance law is centered on the concepts of social justice, ethics, and using finances to help build communities.
What is a Shariah fund?
The concept of Shariah-compliant investing goes back for decades, yet the sector has only really taken off in the last five years. Muslims represent nearly a quarter of the world’s population and yet less than 1% of financial assets are Shariah-compliant. Islamic investment wealth management funds allow Islamic investors to invest in funds structured through Shariah-compliant contracts. The funds invest in shares or units of Shariah-compliant assets.
What are Shariah compliant index funds?
Shariah-compliant funds are investment funds governed by the requirements of Shariah law and the principles of the Islamic religion. Shariah-compliant funds are considered to be a type of socially responsible investing. Shariah-compliant funds filter out companies that support certain products and activities.
These include:
- Alcohol
- Gambling
- Tobacco
- Weapons
- Pork
- Adult entertainment
What are the benefits of Shariah investments?
As the Muslim economy continues to increase year on year, the Islamic finance industry is also growing to cater for the need for growing Halal investment options and products. Some of the main benefits of Halal investments for Muslims (and non-Muslims) include the following:
Social Responsibility – Taking a socially responsible approach to finances and investment not only means the investment is Sharia-compliant, but it can also lead to human rights protections, just distribution of wealth, and ethical investments that minimize environmental degradation.
Less Risk – Islamic finance principles mean that Halal investment products are less susceptible to huge market changes and fluctuations. Global crises do not impact Islamic finance as they do more traditional banking. As short-term speculation is discouraged in Islam, the exposure is much lower overall.
Growing wealth in a Halal way – This is the most critical benefit for Muslim investors. Not only does Halal investment mean that Muslims can engage and involve themselves with global markets, it also means that Muslims partake in disciplined investment that requires ethical due diligence.
Islamic finance promotes the concepts of ethical financial management and investment and reciprocal profits. The use of interest, risky investments, and unethical industry investment is discouraged. Halal investing is a growing financial niche, and it is available for Muslims and non-Muslims alike. Investing in products that are Shariah compliant is not difficult or impossible, it just requires some information gathering and due diligence.
References:
Labuan International Business and Financial Centre