Investing, buying, selling, and working in compliance with Sharia is on the rise as the Muslim population grows globally. It is important for investors to know what halal investing is and how it works in order to determine if the investment is in accordance with Islamic finance practices.
The most crucial aspect of Sharia law for Muslims is to ensure that all sources of income are Halal. The Quran places great emphasis on the necessity of ensuring income is halal (legitimate) in Islamic finance.
Halal and haram are traditionally the two terms that are most prominently associated with food in terms of halal and haram. It is important to note that the definition of halal and haram also applies to lifestyle choices, financial investments, and business transactions in addition to food.
This article will examine the concept of halal investment, its benefits and what are some halal investment ideas. Let’s get started.
What Is Halal Investing?
A halal investment is an investment that complies with the principles of Islamic law and is also known as a shariah-compliant investment.
A Halal investment can be described as a socially responsible investment in modern terms. Due to the Shariah doctrines, investors are required to protect and preserve five critical areas. These are religion, life, intellect, family, and property, to safeguard and preserve their investments.
Those who seek to generate income should not disregard halal investments. Islamic finance does not restrict or limit; rather, it promotes ethical practices that are mutually beneficial. Investing in halal investments promotes ethical and responsible investment practices. The right investments can still provide you with the opportunity to make money ethically.
Shariah law prohibits the following:
- Speculation or interest
- A product that contains alcohol, pork, or meat prepared without adhering to Islamic principles
- The gambling industry
- Developing and producing weapons of mass destruction
- The pornographic industry
- The cloning processes
You can also check out Muslim Pro app to find more about halal investment options and how Muslims deals in business activities that are shariah compliant.
Benefits Of Halal Investments
In addition to encouraging a disciplined investment process, halal investing encourages the monitoring of investments in depth. Among the benefits of halal investments for Muslim investors (and non-Muslim investors) are the following:
● Taking Responsibility For Society
When finances and investments are conducted in a socially responsible way, assets are used to benefit society. Consequently, human rights are enhanced, wealth is distributed fairly, and ethical investments are made that minimize the effects of environmental degradation.
● There Is Less Risk
The principles of Islamic finance make halal investment products less susceptible to massive market fluctuations and changes. In this way, riba is delinked from the economy, thereby reducing its vulnerability.
● Achieving Wealth In An Ethical Manner
For Muslim investors, this is one of the most significant benefits. Muslims who engage in Halal investment may engage and engage in opportunities that exist beyond the borders of their immediate home country.
Investors of all faiths are able to participate in halal investing because it is a growing financial niche. Sharia-compliant investment products need only be researched and executed with commitment; they are not difficult or impossible to invest in.
What Are Some Halal Investment Ideas?
The following are some halal investment options that Muslim investors can explore for investment.
1. Stocks
There are three types of shares that are traded on the open market: stocks, bonds, and shares. In basic terms, stocks are shares that are owned by companies that have made their shares publicly available. Stocks represent the earnings and assets of a company.
Owning a share of the company is the same as owning a portion of it. An increase in the company’s value will also boost stock prices at the same time. The value of owning stocks will also decrease if the market value of the company declines.
If Muslim investors purchase stocks, they should consider the modus operandi of the company to ensure that any income obtained is Sharia-compliant.
2. Property/Real Estate
Muslim investors consider it to be the most attractive type of investment. Generally speaking, this is a beneficial asset with a stable return of about 6-10% per year. It is also possible to benefit from hedging and renting activities and take advantage of income tax benefits.
A property investor should ensure that the property is not being utilized for interest-based loans or for commercial activities that are not Shariah-compliant. There is a limited amount of liquidity associated with this investment. It is therefore ideal to inspect the property before investing in it.
3. Sukuk
There is no interest paid on sukuks, so they are an alternative to traditional bonds. These securities are sometimes called Islamic bonds, and are typically based on the assets of the issuer. Considering that they belong to the ‘fixed income’ market, they are considered conservative investments.
Investors in halal funds can benefit from sukuks without breaking Sharia laws.
4. Owning A Business
Muslim investors are less likely to make use of this type of investment because it is a risky investment option. Despite this, the potential returns are very high due to the fact that the business can be operated directly by the owner. Businesses must ensure that their activities are not listed as non-compliant.
5. Gold
Gold is a traditional and safe investment option which is Sharia compliant in terms of its investment characteristics. As a result of its high value, its ease of obtaining and investing in, and the fact that no Islamic finance laws are violated, gold is often regarded as an excellent investment.
6. Cryptocurrency
Even though cryptocurrencies are volatile investments, they are not necessarily non-compliant with Shariah. Different opinions exist regarding the crypto world. Because there is speculation involved, some scholars will categorically declare it non-halal.
According to another group of scholars, this is permissible. You may find it best to seek the advice of a financial advisor who specializes in halal investing if you are interested in cryptocurrency or any other asset.
Final Thoughts
In Islamic finance, ethics are taken into account when managing finances and investing, as well as mutual profit sharing. Investing in risky or illegal industries is discouraged, as well as the use of interest and risky investments.
Investors can invest in halal shares for a variety of reasons, whether they are Muslims or not. Due diligence and gathering information are all you need to invest in Sharia compliant products.
We hope this article provides you with good knowledge regarding halal investment options.
