A Path to Impactful Wealth: 4 Reasons to Consider Shariah Investments

In recent years, there has been a noticeable surge in awareness regarding the Environmental, Social, and Governance (ESG) impacts of business and investment decisions. The World Economic Forum has projected that the global sustainable investment market will reach a staggering $53 trillion by 2025.

Interestingly, one lesser-known pioneer in the realm of responsible investing is Shariah investing, which has been shaping ethical investment practices for over 60 years.

“Before ESG became a prominent term in investing, Shariah investment products were already providing avenues for investors to attain both ethical returns and financial growth,” notes Farida Ahmed, Head of Customer Relations at Al Mabroor. “Shariah-compliant investing not only offers lucrative outcomes but also provides peace of mind.”

Here are some of the advantages associated with opting for Shariah-compliant investment products…

Invest in the real economy

Because Shariah investment products tend to be based on private equity and project-investment products, they usually involve investing in real-world businesses and generating returns from owning shares in successful business ventures. 

As opposed to complex, highly financialised investments that generate interest from stocks, bonds, currencies, and market indexes, a Shariah investment is based on a specific business that is easily understood. This might be a cattle farm, a rental property, a vehicle-finance business, or a construction company.

Impact investing

In line with the rise of corporate responsibility and ESG awareness, impact investing has gained prominence in the investment community. This approach looks to achieve positive business and social outcomes as a direct result of specific investments. Projects look to generate a social as well as a financial return. 

Shariah projects are a good example of impact investments.  

“Many of our projects have an uplifting social purpose, as well as achieving good returns,” says Ahmed. “Our property investments focus on medical care, as well as frail care facilities. Our agriculture projects help create jobs and provide food security in a highly food-insecure country, and our renewable-energy investments help the move towards carbon neutrality.” 

Generate positive returns 

The goal of Shariah investments is to help investors secure their future through innovative financial products. As such, these products need to generate returns to remain viable and to continue serving their social and financial purpose. Fortunately, the Shariah investment approach can generate extremely healthy returns. 

Ahmed says Al Mabroor can produce returns from its agricultural, property, and other projects that are consistently in the 9 – 15% range. “We can generate performance that is well beyond the inflation rate, and better than many traditional financial products,” says Ahmed.

Comply with the values of Islam

For Muslim investors, opting for Shariah investments ensures alignment with their religious principles. Shariah funds, a form of socially responsible investing, undergo certification by Islamic scholars and muftis within the local Muslim community, ensuring compliance with Quranic precepts.

These principles dictate that investments should not involve interest payments or proceeds from prohibited sources such as alcohol, pork, pornography, gambling, or military-related activities. Beyond religious certification, Shariah investment products also promote positive social and developmental impacts.

In essence, certified Shariah investment products offer returns that often surpass those of traditional banking products, while also fostering socially beneficial outcomes. Any conscientious investor, regardless of religious affiliation, should consider the Shariah-compliant option.