Examples of Halal and Haram Investments according to Islam

IT People Blog – For those of you who are a Muslim who want to invest, of course it is important to know various examples of halal and haram investments. Currently, there are many investments that offer abundant benefits but the methods are not in accordance with the principles of sharia in Islam. On the other hand, there are some sharia-based investments that guarantee that all the profits you get are truly halal.

Even though it looks trivial, the purpose of investing is to make a profit, but you will definitely feel relieved when you know where your income or profits are coming from. Is it from a halal or haram process.

Therefore, on this occasion we will review in full the definition of investment in Islam, the law of investing in Islam, as well as examples of halal and haram investments. So we recommend that you read the following reviews to the end.

Understanding Investment in Islam

Halal and Haram investment according to Islam

Before discussing further about examples of halal and haram investments, it helps you understand the meaning of investment in Islam. This is so that you have guidelines before assessing an investment. Quoting from the popular site www.kompasiana.com, investment in Islamic perspective is not the same as investment that is applied in general.

In Islam itself, investment requires an investor and recipient of capital to implement a profit-sharing and loss-sharing system. This means that no party is harmed.

While on the edubuku.com site, it is explained that an investment can be said to be valid if it meets the following 3 criteria:

1. Investor (Actor)

The parties referred to here are capital managers and investors. These two people must be in a state of puberty, mumayyiz or be able to distinguish between good and bad and have a good understanding of price calculations, Al-‘Aqid (buyer and seller) must be independent and reasonable.

2.Akad (Agreement)

In entering into an investment agreement, both parties must be aware and not under coercion.

3. Transaction Object

Regarding the object of the transaction, it consists of three aspects, namely capital, business, and profit.

Capital must be a legal medium of exchange such as money, gold, or silver that has a clear exchange rate. Capital may not be in the form of goods unless it has been agreed by both parties to determine the exchange value of the goods.

The second aspect is business, namely efforts to invest in commerce. Capital managers may not cooperate in selling illicit goods such as liquor, pork, dog meat, carrion, and the like.

While the third aspect is profit, namely the absolute rights obtained by both parties. The distribution of investment profits itself has been established in Islam. First, it is clear that a certain percentage is known by both investors and capital managers. Second, the profits are shared in an even percentage. For example a quarter, a third, a half, and so on.

That’s a little explanation about the meaning of investment in Islam.

Examples of Halal and Profitable Investments

One of the things that can never be separated from halal investment is investments that are based on Islamic law or sharia principles. Currently, there are many investment companies that offer and apply sharia principles. The most characteristic feature to determine which investment company you are doing can truly be said to be based on sharia principles is the cleansing process in the investment.

Cleansing is a process where the profits from investments are filtered back by Islamic investment companies. This is so that the profits that will be given to investors are truly profits that are allowed in Islamic law. That way, you don’t need to be afraid anymore if there are elements of usury in these profits.

The examples of halal investments are as follows:

1. Sharia Mutual Funds

Mutual funds are companies that collect capital from customers or investors which later the capital will be included in other forms of investment such as stocks, bonds, and so on.

As a sharia-based investment, sharia mutual funds will provide transparency to investors so that you also know what your capital is used by the sharia mutual fund company. Not only that, all forms of capital management are used for things that smell halal.

If it turns out that during the business cycle there are things that are not halal, then there will be a cleansing process by the company. Usually, the proceeds from the cleansing process will be donated to charitable activities.

2. Profit Sharing Deposit

In the form of profit sharing deposits, you can save or invest a certain amount of money as capital with a certain nominal and can be taken within a certain period of time as well. For profit-sharing deposits, the withdrawal period is usually around 5 years to 10 years after the agreement takes place.

The principle used in profit-sharing deposit investment is the principle of mudharabah muthlaqoh where the bank manages the capital productively and certainly benefits customers. For the distribution of the results themselves, usually agreed in advance by the customer and the bank at the beginning of the agreement.

3. Land Investment

Talking about examples of halal and haram investments, buying and selling land is one form of halal investment that you can try to do. Who is not interested in this one investment activity?

Every year the price of land will tend to increase. In other words, this investment is quite profitable for those of you who want to earn a lot of halal income.

4. Invest in Gold Jewelry

In addition to land, gold investment is also a form of halal investment that is worth trying. Even though land or gold investment does not have sharia frills in it, these two forms of investment have been recognized by scholars as a form of investment that is lawful and far from usury and maysir.

This is because both land and gold have a tendency to increase in price over time.

Read also: Sins that hinder sustenance in Islam

Examples of Prohibited Investments in Islam

You already know the types of investments that are allowed in Islam. Now is the time to review examples of haram investments or investments that are prohibited in Islam.

As we know, most people think that all forms of investment are unlawful because they apply an interest system. For this reason, there is an investment based on sharia principles that answers these problems.

From the explanation above, a conclusion can actually be drawn as to what types of investments are forbidden in Islam. Here are 2 things that make investment illegal:

• Investments Implementing an Interest/Interest System

In the world of investment itself, interest is one of the things that cannot be separated in investment because of its nature that will provide benefits to the company. For this reason, make sure that the stock exchange used by a company uses mudharabah investments, namely profit sharing investments.

• Speculation Investment

Another example of illicit investment is a form of investment that relies on a system of speculation. This system seems to use a chancy system in order to get a lot of profit from investors. Examples of speculation in the investment process are short selling, margin trading, and options.

The following are examples of illicit investments:

1. Investment in Conventional Banks

Yes, everyone agrees that when you invest in conventional banks, the profits you get can be categorized as haram. This is because conventional banks do not have a cleansing system.

In addition, the interest-based profit system is also applied by conventional banks to earn profits. This can be included in the category of usury.

2. Invest to Buy and Sell Currencies

Buying and selling currencies is indeed a form of business activity that promises abundant profits if a trader or person buying and selling the currency wins the ‘bet’ in reading currency movements.

As we know that there are already a lot of people who are involved in buying and selling currencies online. In fact, when viewed from the process, buying and selling currency or trading can be categorized as an illegal investment.

Why? Because the system used is the maysir system or guessing about the rise and fall of the currency value of each country. In other words, this investment seems to teach traders to gamble.

Regarding the benefits themselves, not a few people who get abundant profits. On the other hand, many of them lost their investment money in large amounts because their predictions about currency fluctuations were wrong. (Profit is obtained from the loss of others)

Maybe that’s a few examples of halal and haram investments that you should know. If you look at the explanation above, it can be concluded that the halal or haram form of investment depends on the way the investment company generates income. If the methods are carried out using sharia principles, then the investment is halal and vice versa.

Hopefully the review of examples of halal and haram investments that we describe on this occasion can provide benefits for you.

Wallahualam,

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