Is Investing Haram?

Investing can be a lucrative way to make money in the long-term. And with more and more investment opportunities cropping up every day, it’s not unusual for Muslims to wonder if investing is permissible according to Islam.

So is investing haram — and are there any investments that are considered halal? Let’s explore the world of investment within the context of UK Islamic finance.

What is investing and why might it be considered haram?

In its simplest form, investing is the process of buying assets and selling them on for a higher price when they grow in value. For example, buying a home could be seen as an investment, as house prices have traditionally risen over time.

This type of investment isn’t normally considered haram. But other types of investment involve taking financial risks, generating interest, or buying assets from companies that sell haram goods. In these contexts, investing is usually considered haram.

Let’s take a look at some specific types of investment and whether they’re haram or halal.

Is investing in stocks and shares haram?

Investing in stocks and shares can be considered haram or halal depending on which stocks and shares you choose.

In general, you can buy or hold shares in companies that only deal in halal goods, and don’t offer interest on your investments.

However, if a company deals in haram goods (such as alcohol or gambling) it’s not usually permissible to buy shares.

Is investing in crypto haram?

Buying and selling cryptocurrencies like Bitcoin is usually considered haram. Crypto is still in its infancy, making it a high risk investment within a volatile market. Some scholars have compared crypto investments to gambling.

In addition, crypto isn’t regulated or accepted in the same way as traditional cash. In Islam, money should be based on physical assets, so crypto isn’t always regarded as a true currency.

That said, crypto is becoming more mainstream. Some countries have started to accept certain crypto coins as legal tender. So you’ll need to decide if you believe crypto to be a true currency, a digital asset, or neither, and whether it’s permissible in line with your faith and values.

Is investment banking haram?

Any type of investment banking that relies on riba is considered haram. In the UK, the banking system relies heavily on interest (riba), so investment banking may be considered haram by many Muslims.

However, more Sharia-compliant savings accounts are being opened by banks around the UK. These don’t generate riba, and many will pass their profits onto their savers. So if you’re looking for halal saving opportunities, consider opening an ethical savings account with one of these banks.

Which other types of investments are haram?

In general, the following investments are normally considered haram in Islam:

• Gilts and bonds issued by the government.
• Forex or FX trading (i.e. trading different currencies to make a profit).
• Speculative or high-risk investments.
• Investing in companies that deal in alcohol, gambling, tobacco, pornography, and other forbidden goods or services.

Which investments are halal?

Although there are some restrictions, Muslims still have plenty of opportunities to make halal investments in the UK. Here are five investments that are considered halal in most cases.

1. Sharia-compliant funds

Sharia-compliant funds are on the rise in the UK. This is one of the easiest ways to ensure your investments are halal, as all funds are certified as being compliant with Sharia law.

Use the faith-based filter on Fidelity’s investment finder tool to discover potential Sharia-compliant funds you could invest in.

2. Property and housing

Buying a house for your family is a financial investment, but it also helps you prepare for the future of your family.

In the UK, house prices have been rising steadily since the 2008 financial crisis. So many home buyers who look at property as a long-term investment get a positive financial return on their purchase. Find out about getting a Sharia-compliant mortgage to enable you to buy a home in the UK.

3. Halal businesses

It’s permissible to invest in companies that deal exclusively with halal products and practices.

Investing in ethical and halal businesses is a great way to do some social good, too. So do your research about the companies you’re thinking about investing in and find out which ones align with your values and beliefs.

4. Physical assets

Buying physical items that tend to increase in value over time is another way to make halal investments. This could include gold, art, collectibles, classic cars, or any other halal goods that have high trading value.

5. Sukuk

Sukuk is a type of Sharia-compliant bond. Unlike traditional bonds, which involve loaning money (and therefore incurring debts and generating interest), sukuk investments generate profit from their underlying assets. So you can safely invest in these bonds without compromising your beliefs.

Should you invest?

Any investment involves some level of risk, so it’s important to understand these uncertainties before you put your money on the line. You’re never guaranteed a return on any investment, even with less risky pursuits like buying a house or obtaining shares in an established business.

As well as considering whether your investment is permissible from a religious perspective, it’s also important to think about your financial position and risk tolerance level before making any investment decisions.

Invest in your community

Halal investments can help you build wealth in the long term. And at Bloom, it’s our mission to help new UK communities thrive financially.

Bloom is a money club app that helps you, your friends, and family build wealth. By creating a Bloom circle, you can contribute not just to your own wealth generation, but that of your family, too.

Find out how Bloom works to learn more about our money club app.