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Shariah compliant investment is a choice without a doubt


Pursuing wealth is not something forbidden in Islam. Thus, Muslims are encouraged to find income, taking good care of their property and expanding their assets.

With the wealth of one Muslim, it could help those in need, contribute to the growth of the religion and improve the economic position on Muslims as a whole.

Prophet Muhammad PBUH once said:

 ابتغوا في مالِ اليتيمِ، أو في مالِ اليتامى لا تُذهِبُها أو لا تَستَهْلِكُها الصدقةُُ

Meaning: “find the benefits (of trading) in wealth of the orphans so that it won’t disappear nor destroyed by sadaqah (zakat).”

Riwayat al- Baihaqi (10983)

This hadith suggested the wealth of orphans is used in businesses so that it increases. This proves that trading activities are things that are highly encouraged in Islam.

In the 5th Maqasid Shariah Islam also emphasizes the important aspects of stewarding wealth, and in that aspect too, it speaks of how wealth is generated such as through investments and others.  

However, in building its riches, a Muslim must obey the rules and orders that have been set by Shariah.



The meaning of Shariah compliant investment


Shariah compliant investment or also known as halal investment is an investment that is based on the principles of Islam and according to the shariah law. Shariah law is Islamic laws that has certain prohibition.

The investment must not have elements that involves riba, gharar (speculation), and maysir (gambling). Other than that, shariah compliant investments must be free from other elements that are banned such as cigarettes and alcohol

When you invest in shariah compliant investments, it means you are investing in assets that are free from things that are forbidden in Islam.



Who determines the investment is Shariah or not?


For your information, the authorities that are in charge of the investment industry in Malaysia is the Securities Commission (SC). This is where the SC, will regulate the stock exchange, clearing houses and depositories centers, registering the company’s prospectus other than recreational clubs that are not listed, approve the issuance of bonds etc.

The capital market in Malaysia is divided into two, which is conventional capital market and Islamic capital market. In 16th May 1996, Majlis Penasihat Shariah (MPS) has been established to be a main reference on questions related to Shariah for the Islamic capital market. MPS is under control of SC.

As you already know, the majority of Malaysians are Muslims. Therefore, the access to shariah compliant investment is very important to fulfill the needs of majority Muslim community. 



5 Types of Shariah compliant investments


Investment in a Takaful protection plan

In this takaful plan, you will gain two benefits in one plan. You will be given protection and increase of savings. When you participate in takaful, your contribution payment will be divided to three, which is:

  • Tabarru Fund
  • Wakalah fee or fi Takaful operator
  • Fund/ account related to syariah compliant investment of your choice

Not just that, takaful is also a form of investment for the afterlife (akhirat). Where the tabarru fund will be used to help other takaful participants who are afflicted by crisis. In fact, this charity (sadaqah) will keep going even after one’s passing.

You can read further about shariah compliant investment from Great Eastern Takaful, here:

A takaful contract is developed based on the concept of donation called tabarru`


Islamic trust fund

Islamic trust fund is also known as trust unit or fund unit

Trust fund is one investment instrument where the investor’s money will be collected into one fund. The fund will be invested by the fund manager.

Where will the fund be invested? What is the investment strategy? It all depends to the objective and intelligence of the fund manager.

Investors will gain profit in 2 forms which is through income distribution or increase of price.

Ways for you to identify whether the fund is shariah compliant or not is by its name. If the name of the fund has the word “Shariah”, “Islamic”, or “Sukuk”, it means the fund is Shariah compliant.


Exchange Traded Funds (ETFs)

ETF refers to Exchange Traded Fund.

Exchange Traded means it can be sold among each other (investors). And Funds which is rather self-explanatory, refers to a reserve.

The concepts of funds hold the same concept with of trust funds. Some funds are invested in stocks, bonds or commodities.

The differences between trust fund and ETF are the process on how the funds are managed. Investments in Trust funds are based on fund manager’s strategy. However, ETF are passively managed and tries to “mimic” the index.


Shariah compliant stocks

Buying stocks means we can buy half of the business ownership. For example, if you buy 100 unit of stocks from Nestle, this means you own one of the parts of ownership in Nestle.

You have the rights to vote in their annual meeting. You are also eligible to get half of the company’s profit through dividends.

If you want to start investing in stocks, you can open up a Central Depository System (CDS) account beforehand.  




Gold is an investment that is very close to the Muslim community in Malaysia. You can invest in gold traditionally by buying jewelry and gold bars. However, these days with the advance of technology, you can invest in gold at investment accounts through online whereby the gold is in digital form and the starting capital is lower. 

Shariah compliant gold investment


Real estate

Real estate investments are among the most popular investments for most investors. But as a Muslim, you need to make sure you do not invest using the debts from conventional banks that use riba.

Shariah compliant real estate investment


There is no reason not to choose Shariah compliant investments

In Malaysia, the task of screening shariah compliant investment instruments has been completed by MPS that consists of experts in the Islamic finance field and are very experienced in the industry.

With all the Shariah instruments available, there is no reason for you not to choose a shariah one. The most interesting part is, shariah compliant investments are universal and everyone can choose without discrimination.

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