Investment Policies Under Shari’ah Principles

By Prof. Mohd Ma’Sum Billah, PhD

Abstract

The state of being wealthy is highly desired by people, regardless of religion, races or nationality. Islam, not being left behind, also encourages its followers to seek for wealth, but in doing so, it is compulsory to ensure that any activities concerning wealth creation must be aligned with Shari’ah principles and guidelines. Beginning from the purpose of wanting to be wealthy, to the way of obtaining and spending one’s wealth, these acts must comply with the teachings of Islam, as depicted in the Qur’an and Hadith of Prophet Muhammad S.A.W. For instance, Allah said: “But seek, with the (wealth) which god has bestowed on thee, the Home of the Hereafter, nor forget thy portion in this world” This verse indicates that wealth creation is permitted in Islam and it is a gift from Allah to those whom He wishes to award it to. Nevertheless, wealth should be spent in God’s cause, that is, for charity and good works. So, how do we create wealth, the Islamic way? There are many means of obtaining wealth, but the most prominent way is to engage in trade and commerce. Prophet Muhammad S.A.W. said: “Take to trade and commerce, because nine-tenths of the source of earnings is in trade and commerce.” Today, trade and commerce are becoming more and more complex, and they require knowledge and expertise in order to ensure the continuation of businesses over a long period of time. Hence, not everyone have the time, opportunity and needed skills to survive in the business world. Then, how are we to take advantage of the huge potential benefits that trade and commerce offer? One way is for Muslims to invest in businesses that offer future profits, while ensuring compliance with Shari’ah principles. This paper attempts to analyse the Islamic investment opportunities and some of the issues of investing in Shari’ah approved investments, as practised in Malaysia. Among other types of investments that we will be looking at are: equity and commodity investments, Ijarah, Musharakah and Mudharabah investments. Furthermore, we will also be discussing about Islamic investment criteria and its future.