Halal investing 101: A refresher to remind yourself of the basics

We all need a reminder every now and then about how halal investing works. In a nutshell, halal investing touches on the following four issue areas:

  • Refraining from the giving and taking of riba
  • Avoiding speculation (gharar) and uncertainty (maysir)
  • Not transacting in the buying and selling of debt
  • Abstaining from investing in companies with unethical lines of business

Together, those four areas, derived from the Qur’an and Sunnah, are the primary rules of halal investing. Remember and use them to judge the soundness of your financial transactions. Often, that means referring your situation to a scholar with the appropriate training to determine the Islamic validity of contracts. The DIY (do it yourself) approaching to investing is full of problems, most of which I have seen firsthand. This brings us to the “who” of halal investing.

Just as you would go to a lawyer to get an important contract review, so too should you go to a specialist when it comes to your financial affairs. Even if you don’t have a personal scholar you lean on for such things, there are individuals out there who are accredited and able to share the fruits of their jurisprudence.

For many, that means using the agreed upon framework outlined by reputable scholars like those who make up the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). AAOIFI provides us with a rule book to follow to keep our earnings halal and to make money in a permissible way. You can learn more about the specific details of halal investing by referring to AAOIFI Standard Number 21. All the AAOIFI standards are available for free online at this link.

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