Halal investing
What is halal investing?
A practical introduction to ownership, avoiding riba, business activity screens and using clear methods.
The short answer
Halal investing means choosing investments and contracts that fit Islamic principles. In practice, it usually avoids riba, forbidden business activities, excessive uncertainty and gambling. It uses clear rules to check each case.
Look beyond labels
Ask: what do I own, how is the return made, and what business is being financed? Shares mean ownership in a company; funds hold a mix of assets; savings and financing depend on the contract terms.
Halal investing is not the same as general ethical or ESG investing. There can be overlap, but a Shariah check also looks at financial structure, return source and governance.
Shariah-compliance considerations
The word 'halal' should come with evidence. Our platform uses AAOIFI Shari'ah Standard No. 21 as its default practical benchmark for shares: check the main business, then check the financial ratios and the date of the data used.
AAOIFI-style screening commonly looks for non-permissible income below 5% of total income, plus interest-bearing debt and interest-bearing cash or securities each at no more than 30% of market value. Do not assume an Islamic name, a tax wrapper or an ethical label is enough.
Look for a clear method, who reviews it, when it was last checked and how the provider handles a holding that later fails the screen.
What this means in practice
- 1Identify the product type first: savings, share, fund, sukuk or financing.
- 2Read the methodology and the product documents, not just marketing.
- 3Check the review date and what happens if a holding later fails the screen.
- 4Keep a copy of the source and version you relied on.