3 Common Principles of Halal Investment You Should Know

Muslims should put their money in an investment that is halal and permissible in Islam. In this short article, Musaffa attempts to highlight 3 common principles that make an investment halal.

Investment is an activity where someone tries to allocate his money to expect a benefit or return in the future. In other words, investment is possessing an asset or item to generate income from such support over some time.

In the capital market, the return from an investment is from capital or currency gains, dividends, interest, etc. Thus, the investors strive to obtain those returns by sacrificing their time, money, and effort. In addition, the capital market instruments for investment activity are a financial investment, equity market, mutual fund, bond, and derivative.

However, Islam forbids Muslims to invest in instruments that are against shariah principles. Therefore, the investment should be halal. It is because halal investment promotes the concept of social justice and ethics. There are specific criteria that make an investment halal. Here is the list of such standards.


The Common principles of Halal Investment 

1. The investment should not generate interest or riba.

Islam prohibits Muslims to involve in riba transactions. In general, riba is taking an additional amount or interest in a loan transaction. This activity is against shariah teaching. Islam obliges Muslims to select an investment that is not involved with interest or riba. Thus, it is suggested for Muslims to be wise in differentiating between halal and haram investment.

2. Muslim investors must avoid gharar

An investment in Islam should be free from gharar. Overall, gharar is a hesitation, trick, or action of harming others. Gharar may be in the form of a contract that contains fraud due to its uncertainty. In addition, gharar may be unclear trading. In other words, the contract of the transaction must be clear to create justice between parties.

3. The investment must be free from gambling or maysir

Muslim investors should avoid gambling in investment. Betting in any form of asset is prohibited. Gambling or maysir may be in the form of guessing or forecasting by requiring advance payment. Thus, Islam insists that the investment is not a tool of gambling or maysir.

The Benefit of Halal Investment.

  • It aligns with Shariah principles

Halal investment is based on Qur’an and Sunnah. This way, Muslim investors are convenient to perform an investment. It is because the products and instruments are free from haram elements. Moreover, the investment is done and utilized acceptably.

  • Interest free

The halal investment will always avoid interest. Moreover, the investment may generate profit from profit sharing. Hence, halal investment is an alternative for Muslims to avoid interest in their transactions.

  • Transparent 

Transparency means that every instrument in shariah compliance investment must be far away from gharar or unclear information of the investment. Furthermore, the halal investment must be far from gambling or maysir. Hence, by avoiding those things, there will be no party in a loss.

  • Free from prohibited elements 

Halal investment is also free from prohibited elements in Islam, such as selling pork, liquor, and fraud. That is to say that the involvement of these elements will lead Muslims into evil deeds and disadvantages. 

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