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Calculating Worldly Gains: Halal Investing

by Helmy Sa'at

Follow the money. Sniff out financial opportunities. Monitor the market trends which are constantly evolving. Manage your portfolio through diversification.

The above-mentioned are some of the often heard advice or tips for those who are keen to generate multiple streams of income through investing. One does not need to have millions of dollars to start, but one certainly could earn millions from a small amount of money with the right choices. At the same time, one could also lose so much money in a matter of seconds with the wrong moves.

Although capitalism levels the playing field by creating opportunities to build wealth and sustain accumulated affluence, what do you, as a consciously dutiful Muslim, need to know when it comes to manoeuvring the financial market? Let’s return to the fundamentals which need to align with Islamic principles.

Current Waves Of Conventional Investing

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Nowadays, anyone with a smartphone and a stable internet connectivity can download a deluge of investing apps, make snap decisions and fall into impulse trading.

In essence, the race to earn (extra) money is made easier and quicker with no restrictions on trades and business activities, which would not necessarily include ethical sources of revenue. Still, the guiding parameters is not to cross prevailing financial laws governed by financial regulatory bodies. As such, there are opportunities for greed and avarice to flourish when the financial system is open to rampant opportunism and abuse strictly dictated by an individual’s choices.

Injecting Halal Into Investing

There are strict criteria when it comes to ensuring participation in and perpetuation of halal (permissible) investing. The three fundamentals being riba (interest or usury), maysir (speculation or a gambling transaction) and gharar (uncertainty). Riba, which is additional money paid on the borrower’s part to the lender as compensation on top of the principal sum over a period of time, is categorically prohibited in Islam. It is essentially exploitative by contributing to widening the inequality gap.

يَـٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوا۟ لَا تَأْكُلُوا۟ ٱلرِّبَوٰٓا۟ أَضْعَـٰفًا مُّضَـٰعَفَةً ۖ وَٱتَّقُوا۟ ٱللَّهَ لَعَلَّكُمْ تُفْلِحُونَ

O you who believe, do not eat up the amounts acquired through Ribā (interest), doubled and multiplied. Fear Allah, so that you may be successful,

[Surah Ali ‘Imran 3:130]

Gharar is about uncertainty and ambiguity of contractual agreements that creates space for exploitation and manipulation of parties involved, leading to disputes. It is closely related to maysir as uncertainty could potentially snowball into extreme risk taking behaviour and gambling leading to either absolute gain or loss for one party alone.

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As evident, halal investing forbids participation in businesses that encapsulate elements of uncertainty and gambling. An example is the purchase of life insurance. Although we prioritised the well-being of our family in anticipation of unfortunate circumstances, life insurance remains problematic. Life insurance is set on the premise of uncertainty that would question Allah’s position in deciding our fate, the All-knowing when it comes to matters of life and death. With the said uncertainty that rests on the question of IF you were to pass away, then your loved ones would receive a payout based on the monthly premium you have paid over a period of time.

The alternative to this would be takaful whereby it abides by Islamic religious principles which still guarantees coverage, but derived from a pool of funds contributed by members.

Other examples of haram (forbidden) businesses include alcohol, tobacco, pork and pork products and pornography.

Interdependence Investments

There are a couple of issues worth investing time and energy which are adjacent to halal investing. Does halal investing necessarily translate into ethical investing?

Halal investing does not automatically relate to green investments which is just as important as stewards or viceregents of the planet:

إِنَّ رَبَّكُمُ ٱللَّهُ ٱلَّذِى خَلَقَ ٱلسَّمَـٰوَٰتِ وَٱلْأَرْضَ فِى سِتَّةِ أَيَّامٍ ثُمَّ ٱسْتَوَىٰ عَلَى ٱلْعَرْشِ يُغْشِى ٱلَّيْلَ ٱلنَّهَارَ يَطْلُبُهُۥ حَثِيثًا وَٱلشَّمْسَ وَٱلْقَمَرَ وَٱلنُّجُومَ مُسَخَّرَٰتٍۭ بِأَمْرِهِۦٓ ۗ أَلَا لَهُ ٱلْخَلْقُ وَٱلْأَمْرُ ۗ تَبَارَكَ ٱللَّهُ رَبُّ ٱلْعَـٰلَمِينَ

Surely, your Lord is Allah who created the heavens and the earth in six days, then He positioned himself on the Throne. He covers the day with the night that pursues it swiftly. (He created) the sun and the moon and the stars, subjugated to His command. Lo! To Him alone belong the creation and the command. Glorious is Allah, the Lord of all the worlds.

[Surah Al-A’raf 7:54]

Ponder the following: Halal investments overlapping with ethical investing that prioritises collective societal impacts, such as, the environmental effects of one’s choice of industry to invest in. It is not just about generating halal income. Both the process and impact matter just as much.

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Additionally, as part of the global community and in juggling halal-ness in life, deeper thought should be allocated whenever opportunities to work in the conventional insurance or banking industry surface. Are we being complicit by partaking in earning and consumption of haram money, when carving a career in such fields? What is the alternative in navigating conventional financial institutions in today’s economic landscape while still preserving your religious piety and without passing quick judgments? Share your thoughts and anything else you would like to know regarding the financial landscape in the comments section below.