published 04/08/2022 - 3 Min Read

How to Find Sharia-Compliant Investment Instruments

Investing is a way for us to prepare our future financially or to build our financial freedom. Islam teaches us about the importance of preparing our finances for our future and our descendants. Prophet Muhammad ﷺ said to one of his companions, Sa’d ibn Abi Waqqas: 

“That you leave your inheritors wealthy is better than leaving them dependent, begging for what people have. Whatever you spend on them is charity for you, even the morsel you feed to your wife.” (Bukhari, Muslim)

In the Quran, Prophet Yusuf gave an example of the importance of saving while we have a surplus of resources to help us face the time when we are in need. 

[Joseph] said, “You will plant for seven years consecutively; and what you harvest leaves in its spikes, except a little from which you will eat. (Quran, Chapter 12, Verse 47). 

However, Allah tells us only to consume that which is halal or lawful. Then, how can we find investment instruments that are acceptable according to the sharia? The following are explanations by ALAMI Institute Director Wachid A. Muslimin, Ph.D (Candidate). 

“As mentioned in Surah Yusuf, when they had surplus, they had to save because there would also be famine in the future. What we save when we have surplus is what we can do during famines. Investments, therefore, are something very important in Islam,” said Wachid during a sharing session at the Muslim Life Fest that was held in late March 2022. 

Currently, there are various products and kinds of investment instruments. However, there are something that distinguishes these instruments: some use the conventional system, and some use the sharia system. Why are we as Muslims required to use sharia investment instruments?

This is because, as Wachid explained, what we own is basically a mandate from Allah. For this reason, we as God-conscious Muslims have the obligation to use it responsibly as we will have to answer Allah in the hereafter. 

“We will be held accountable for our wealth, including where we obtained it. All of the resources that have been mandated to, we will be held accountable by Allah,” added Wachid. 

Illustration. As Muslims, we believe that we will be held accountable for our wealth. (Pexels/Karolina Grabowska)

What distinguishes sharia investments from the conventional ones

Prophet Muhammad ﷺ has given examples of how to earn money in halal manners. In addition to that, we must also take into account the social and environmental impacts. 

“When investing, make sure the projects will have social impacts. What we do must have positive impacts on others,” said Wachid. 

This implies that sharia-compliant investments are not only halal but also positively impactful. Wachid further explained what to avoid according to the sharia when choosing investment instruments. 

“We must fulfill the contracts, and the contracts have to clearly state where the money will go to. It must not involve six things that are wrong: Riba (interest), Gharar (uncertainty), Maysir (speculation), Darar (harm), Zalim (oppression), and it must not sell things that are haram,” said Wachid.   

“Sharia-based investments also have social impacts. The results of these investments are not only for themselves, but also the eradication of poverty and assistance to the needy,” he continued. 

Tips on Choosing Sharia Investments 

Wachid further gave tips on what we should do before investing our money as Muslims so that our money will remain secure. For the first step, Wachid said, is to assess ourselves as investors. 

“There are long-term and short-term investments. The risks may vary. And it depends on your preference whether you would like to invest in high or low risk investments. An example of low-risk investments is term deposit and an example of high-risk investments is stock. There are also in-betweens like Sharia P2P Funding from ALAMI,” said Wachid. 

Sharia investments in Indonesia 

Are there sharia investment instruments in Indonesia? The answer to this is, of course, yes. As a country with the largest Muslim population in the world, Indonesia will not want to miss an opportunity to develop its sharia economic market potential. Moreover, the Indonesian government has planned Indonesia to be the hub for global halal economics. 

“It’s very well-developed. There are many sharia investment instruments in Indonesia, from sharia capital markets, sharia stocks, sharia mutual funds. Even banks have sharia timed-deposits,” added Wachid. 

However, said Wachid, one of the interesting sharia products in Indonesia is the sharia-based financial technology companies that offer an investment service through a digital platform. One of which is ALAMI Sharia which facilitates funders with beneficiaries. 

“This particular sharia investment instrument has garnered public attention, as seen from the total amount of funding that reached IDR 2 trillion with the total success rate of return (TKB90) of 100%,” explained Wachid. 

Based on the above explanation from ALAMI Institute Director Wachid A. Muslimin, Ph.D (candidate), Sharia P2P funding platform is a safe way to develop your wealth. 

Bayu Suryo Wiranto

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