Islamic Based Investing

People use ideas from politics, religion and ideology when they invest their savings. I’m most familiar with liberal concepts of investment based on the environment, fair pay and health. Probably few of us understand the religious guidelines of Islam and how such folks invest when following Islamic tenets. As the number of Muslims grows it is a growing niche of the finance industry.

Islamic approved investment reduces an investor’s options. To be avoided are the industries of alcohol, tobacco, pork and immoral media like porn. Interest is seen as unjustly receiving money and doing nothing productive to earn it. To earn a return in lieu of interest, the return has to be a percentage of the profits earned when the money it put to use. Because banks do not do things in this way, they are off the approved list.

Also not approved are short selling and annuities. These are too close to gambling. In general, Muslim people do not separate the secular part of their lives from the religious as most Christians do.

From what I read, mutual funds which specialize in Islamic investment do poorly when the stock market booms but do well when it retreats. The approved firms tend to keep a lot of their assets in cash. Many of the approved firms are in Islamic countries.

There are an endless number of sites that discuss financial issues. I’m going to look for one which mixes in Islam to see how it advises the faithful.

 

 

10 Responses

    1. Kevin 6:48 This sounds like Dave Ramsey. What about financial leverage?

      Good question. Apparently there is a lot of borrowing which gives a kind of leverage. The borrowing needs to be presented as something different than interest. Interest was sin in the Old Testament.

      1. entech

        In Catholicism earning interest while you slept was considered a sin up until 1600 or so. It is difficult now to find what is sin, except dfr Matt, of course, where everything is sin especially if it begins with Jon ???

        1. entech 7:50 I did a search and a source said there are 19 verses in the Bible about interest. Only six are used against homosexuality. I think you could say interest was an obsession with whoever those men were who wrote the Bible. Among the places one can find interest discussed are Exodus, Leviticus, Deuteronomy, Psalm, Ezekiel, Proverbs and Matthew.

          My theory is the wealthy who wrote the Bible wanted those who were slaves, herders or tradesmen to make the wealthy wealthier. So they worked into their religious writing that hard work is the path to heaven. Earning interest was sitting around was OK for slave owners but not for slaves.

          1. entech

            I think it could go further than that Jon, the laws were not for the lawmakers, just as today the laws do not apply to the church leaders (at least that is what they think in many cases).

  1. Jinx II

    I remember from my Sociology classes, that Islam forbids earning interest from lended money is taking advantage of people, especially those down in their luck. I have found this to be true from my travels as well as interactions with Muslim friends and neighbors.

    When Muslims immigrated to North America and became larger communities, they needed to borrow money in order to build larger mosques….they found a way to justify doing so. The ban on profiting from the misfortunes of others still holds. I have found Muslims to be the first ones to generously extend a hand to non Muslim neighbors and strangers when hardship falls onto them. Physical labor, food, support, child care, elder care……they are there immediately.

  2. Jinx II

    Happy 4th of July!

    This is a bittersweet day for me. My beloved deceased Husband was born on this day and died 47 years later……been gone almost 17 years now.

    1. Jinx II A wonderful piece for the 4th of July!

      Delightful. Jefferson understood the destruction that religion can cause in societies. His lesson was that religions in societies need to hold back the passionate impulses. If that were taught by religions themselves we might get somewhere.

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