Overview of Shariah Investing

Introduction

This tutorial provides a comprehensive overview of Shariah investing, highlighting its principles, benefits, and the available tools for investing in a Shariah-compliant manner. Understanding Shariah investing is crucial for those looking to align their financial activities with Islamic principles, particularly in regions like Malaysia where such frameworks are well-established.

Step 1: Understand the Principles of Shariah Investing

Shariah investing adheres to Islamic law, which prohibits certain activities. Familiarize yourself with the following key principles:

• Prohibited Activities: Investments that involve:
  • Riba (usury or interest)
  • Gharar (excessive uncertainty)
  • Maysir (gambling)
  • Investments in businesses related to alcohol, pork, and non-Islamic entertainment.

Step 2: Learn About Shariah Screening

Shariah screening is the process used to determine whether a company or investment adheres to Islamic principles. Key components include:

• Financial Ratios: Companies must meet specific financial criteria, such as:
  • Debt-to-equity ratio
  • Interest income limits
• Business Activity Review: Ensure the company's core business activities are not prohibited.

Step 3: Identify Shariah-Compliant Instruments on Bursa Malaysia

Bursa Malaysia provides a range of Shariah-compliant investment options. To spot them:

• Use the Shariah Compliance List: Access Bursa Malaysia’s official list of Shariah-compliant stocks.
• Look for Islamic Funds: Consider mutual funds and ETFs that focus on Shariah-compliant investments.

Step 4: Explore Islamic Participating Organisations

Know the entities involved in the Shariah investment landscape:

• Islamic Banks: Offer Shariah-compliant financial products.
• Investment Firms: Provide advisory services for Shariah-compliant investments.
• Regulatory Bodies: Ensure compliance with Shariah principles.

Step 5: Recognize the Benefits of End-to-End Shariah Investing

Investing in a Shariah-compliant manner offers several advantages:

• Ethical Investing: Aligns investments with personal beliefs and values.
• Financial Performance: Shariah-compliant stocks have shown consistent performance over the past two decades.
• Diverse Investment Options: Access to a variety of sectors and instruments that meet Shariah standards.

Conclusion

Shariah investing is a viable alternative for those seeking to invest ethically while adhering to Islamic principles. By understanding the key principles, screening processes, available instruments, and benefits, you can make informed investment decisions. As a next step, consider exploring Bursa Malaysia's resources or joining a webinar to deepen your knowledge of Shariah investing.