Riba is one of the most frequently misunderstood terms in Islamic finance, but it is critical to the appropriate application of Islam in our financial lives. The Qur’an, Prophet Muhammad’s sunnah, and the consensus of the scholarly community all forbid riba.
What exactly do we mean when we say riba in Arabic? Although it is typically translated as “usury,” the actual definition of the term is “increase, addition, or growth.” Usury is often thought of as charging an extortionate rate of interest by English speakers. However, riba refers to any excess value in transactions that is prohibited under Islamic Shariah, or sacred law.
Riba al-nasee’ah is one of the most common types of riba acknowledged by practically all Muslim scholars. This is the only type of riba described in the Quran, and it is widely regarded as the most destructive and unethical of all. Simply expressed, riba al-nasee’ah refers to a rise in the value of a commodity as a result of the passage of time.
Interest-bearing bonds are included in this category. As a result, most bonds are considered unsuitable investments for Muslims. However, there are new options on the market that might help investors satisfy their needs.
Because of the Islamic prohibition on interest, many Muslims prefer to invest in stocks in the United States. Unfortunately, many of these do-it-yourself alternatives are overly simplistic and contradict our scholars’ meticulously defined criteria for halal investing.
Are bonds considered haram in Islam?
Sukuk investment certificates are comparable to bonds, but they aren’t dependent on debt, hence they’re halal. Interest payments on debt owed are viewed as usury, exploitative of the debtor, and are thus prohibited under Islamic principles (haram). As a result, conventional bonds and other debt products that earn interest revenue are prohibited under Islamic rules. Sukuk investments are halal since they aim to profit from the underlying assets’ investment income rather than interest and principal payments. Sukuk may look to be similar to bonds on the surface: They have maturities, can be evaluated by major credit rating agencies like S&P or Moody’s, and earn regular investment income payments, comparable to the coupon payments from traditional bonds. So, what distinguishes halal sukuk investments? They must meet the CORE Criteria listed below.
Are bond funds considered halal?
Halal investing entails making investments in firms that follow Islamic investing guidelines. Many traditional investment products are non-compliant. Profiting from debt, for example, is forbidden, thus observant Muslims cannot invest in bonds or GICs. Halal investing also prevents firms from profiting from certain activities, such as alcohol, cigarettes, gambling, pork, and weapons.
Is it possible to buy bonds in Islam?
Bonds fall under this category, and as a result, Muslim investors are prohibited from purchasing them. One of the reasons why Muslim investors in the financial markets favor stock investments over other types of investments is the prohibition of riba.
Is crypto kosher?
Indonesia’s quasi-governmental Ulama Council proclaimed a fatwa, or non-binding religious judgement, that cryptocurrency is haram, or forbidden under Islamic law, during a recent online discussion.
An Ulama is a Muslim scholar who is recognized for his or her expertise in Islam.
A transaction must meet certain standards under Islamic law, such as having a tangible form and a definite value.
“Cryptocurrency as a medium of exchange is prohibited because it has aspects of ambiguity, harm, and does not fit the Islamic requirement according to Shariah,” said KH Asrorun Niam Sholeh, the council’s head of religious decrees, during the conference.
Mr Sholeh stressed, however, that while cryptocurrencies as a currency are prohibited, they can be exchanged as commodities or digital assets if they meet certain criteria.
Use a shariah-compliant robo advisor or investing platform
Joining an Islamic robo-advisor or online investing platform is one of the simplest methods to invest in halal assets.
These platforms are regulated to guarantee that only shariah-compliant stocks and businesses are available to customers.
Wahed, a global Islamic investing robo-adviser with over 150,000 clients, is one such popular platform. You can choose an investing portfolio based on your risk appetite, fill your account, and watch your money grow using the Wahed app.
Is Forex considered halal or haram?
Forex trading can be both halal and haram, depending on the investor’s aim and behavior. Trading with an Islamic account and a good strategy is halal, however trading with a standard account and no system is deemed gambling and haram.
Is it permissible to invest in SIPs?
A Muslim is prohibited from investing in any types of funds under Islamic law. This is why Muslims are not permitted to invest in companies that overtly trade in Riba.