Guide to Halal Investment Opportunities in UK
Islamic finance is such an attractive form of financing for Muslims and non-Muslims alike. Because of its compliance with Sharia Law, it is also one of the most transparent and fair means of handling finance that is based on integrity and adherence to the Islamic code of conduct.
The main principle of Islamic finance is avoiding all haram or harmful/unrighteous activities in all finance transactions. This includes charging interest and other excessive profit-bearing activities. In addition to disallowing interest and profit generation, Islamic financial institutions must also ensure that gharar or ambiguity as well as maysair or gambling/speculation are minimised in contracts and transactions. Compliance to Sharia law also means you cannot invest in things that involve alcohol, pornography, gambling, and even haram food like pork.
Of all the prohibitions and compliance requirements of Islamic finance, its overarching principle remains to be the prohibition of any and all forms of interest. The model works on the unique basis of risk-sharing, where clients and banks share the risk of investments on the agreed terms and divide the profits between them. There are 5 major categories of Islamic finance, including:
- Ijara – This category of Islamic finance is a form of leasing agreement where the bank buys an item for you, the customer and then leases it back during a specific course of time.
- Ijara-wa-Iqtina – This is a similar agreement as Ijara, only that you, the customer, are allowed to buy the item when the contract ends.
- Mudaraba – mudaraba is a specialist investment where you share profits with the bank. While customers do risk losing money when the investment goes south, the bank on the other hand, will not charge handling fees unless the investment turns a profit.
- Murabaha – Murabaha is a unique form of credit, enabling you to make a purchase without taking out a loan that bears interest. The bank buys the item and sells it to you on a deferred basis.
- Musharaka – The fifth and last form of Islamic financing is musharaka, which is essentially, an investment partnership where profit-sharing terms are settled and agreed upon in advance and losses are attached to the invested amount.
Halal investment opportunities have been around since the 1960s, helping Muslim investors flourish in their investments. The key to managing your Halal investments and making sure that they all comply with Sharia law is to find financial advisors that offer expertise in personal, business, and non-profit Halal investments.
About the Author:
This article is written by Brian Adams, who is the director at Islamic Wealth Management. Islamic Wealth Management was established to provide Sharia-compliant financial planning service to Muslim individuals and business owners to maximise prosperity without comprising Islamic principles.