What is Shariah investing?

The prominence and popularity of sustainable finance and banking have been growing. But did you know that Islamic banking and Shariah investing share many common principles with sustainable financial choices as both are deeply rooted in the fundamental principle of avoiding harm?

Shariah investing is investing that complies with Shariah law, key laws in Islamic teachings that dictate what Muslims should or should not do. Shariah investing is sustainable at its core as it places a strong emphasis on the well-being of not only the environment, but also of individuals and society. This is done by ensuring that investments made under Shariah investing are ethical and socially responsible.

For instance, it is not permitted for Shariah investment to be conducted with companies which garner revenue from prohibited activities under Shariah law. These include alcohol, gambling, tobacco, and other products or services that are deemed harmful to society or the environment which are not in line with the values of Islam.

The prohibition of interest under Shariah law also means that companies which exceed prescribed limits on interest-bearing debt or cash are not permitted as a form of Shariah investment. This reduces risk for clients, as such dealings incur high levels of debt which could expose companies to volatile external factors.

 

Islamic banking is not just for Muslims

This sustainable and ethical form of investing is steadily attracting a growing number of interested investors beyond the Muslim community as there is an increasing awareness that Islamic finance and Shariah investing are open to anyone, not just Muslims. This is especially true in South-east Asia, home to one of the largest Islamic finance markets in the world.

There is also a wide array of benefits that Shariah investing offers that make it stand out from conventional investing. For instance, business dealings are fair, and transactions are transparent and clear. There is also no compounding of late payment charges or interest, and there are upfront profits for Islamic fixed-term deposits for commodities complying with Shariah Law.

With these clear advantages and a growing interest in sustainable banking practices and doing good via investments, it is no wonder many see Shariah investing as an attractive option. 

 

How to get started

Though Islamic banking may seem like an entirely new frontier, especially for non-Muslims, there are many user-friendly services and products that can help. 

One example is digital robo-advisors and stock platforms that specialise in Islamic finance and Shariah investing. Among these, a well-known platform is Wahed, which prides itself on making Shariah investing accessible and easy for beginners. 

As part of Maybank’s M25+ Plan to become a global leader in Islamic finance, the bank also offers an inclusive Shariah investing product called Maybank Asian Growth and Income – Islamic Fund.

The Asian stocks in this product are all carefully curated to ensure that they are Shariah-compliant, powered by Maybank’s own quantitative investing technology and pass through an effective Environmental, Social and Governance (ESG) screening. The ESG screener goes through every company and stock’s ESG performance, picking only those with the best scores to be part of the Islamic Fund. This ensures that customers invest only in the most sustainable, ethical and socially responsible stocks with this product. 

The Islamic Fund aims to bring all-rounded, effective and accessible services to all retail investors.  Visit the link here for a head start in your Shariah investing journey.