Islamic finance, also known as Shariah finance, is based on the principles of the Islamic faith and prohibits certain types of investments and business practices that are considered haram, or forbidden by Islamic law.
One of the most popular forms of Shariah-compliant investing is through investment funds, such as mutual funds and exchange-traded funds (ETFs), that are specifically designed to adhere to Shariah principles. The rise of Shariah-compliant investment funds can be attributed to a number of factors. One of the main reasons is the increasing awareness of the principles of Islamic finance among investors. Many Muslim investors are looking to align their investments with their religious beliefs and are turning to Shariah-compliant investment funds as a way to do so. Another factor contributing to the rise of Shariah-compliant investment funds is the increasing availability of these types of funds. In the past, Shariah-compliant investing was limited to a few mutual funds and ETFs that were specifically designed to adhere to the principles of Islamic finance. However, today there are a growing number of Shariah-compliant investment funds available, including Islamic bonds, real estate, and private equity, providing a more diverse range of investment options for Shariah-compliant investors. The global Muslim population is also contributing to the growth of Islamic finance and the rise of Shariah-compliant investment funds. According to a report by Thomson Reuters, the global Islamic finance industry is expected to reach $3.8 trillion by 2022. This growth is driven by the increasing number of Muslim investors looking to align their investments with their religious beliefs. In addition, Shariah-compliant investment funds are not only for Muslim investors, but also for anyone looking for an ethical and socially responsible investment options, as it prohibits activities that are deemed harmful for the society and environment. This appeal to a broader group of investors is another reason for the rise of Shariah-compliant investment funds. However, it's important for investors to thoroughly research and review potential investments to ensure they meet the requirements of Islamic finance. Not all investment funds labeled as "Islamic" or "Shariah-compliant" are the same, and it's crucial to understand the underlying investments and the screening process used by the fund before making a decision. Additionally, it is also important to consider the fund's performance and risk level, just like any other investment options. In conclusion, the rise of Shariah-compliant investment funds can be attributed to a number of factors, including the increasing awareness of the principles of Islamic finance among investors, the increasing availability of these types of funds, and the growing global Muslim population. These types of funds provide a valuable alternative for those looking for ethical and socially responsible investment options. As always, it's crucial to thoroughly research and review potential investments to ensure they meet the requirements of Islamic finance and to consider the fund's performance and risk level before making a decision. Do engage with a Shariah Investing Professional to get in the loop with what's available for you in the market.
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