What are Shariah Investments


Introduction

Islamic finance is an equitable mode of finance that derives its principles from the Shariah, the Islamic law. The most distinctive element of Islamic finance is the prohibition of interest, whether nominal or excessive, simple or compound, fixed or floating. Shariah Compliant financial transactions are based on the essential maxim of sharing risk and reward. The customer and the financier share the risk of any investment on agreed terms, and divide any profits between them. Islamic finance does not allow creating new financial risks in order to gain profit; it is about protecting society from trickery, fraud and social tensions. Shariah products also stress accountability, fairness and transparency.


Shariah Screening

Several filtering layers are implemented, namely an industry screen, financial screens and an additional screening for companies highlighted for inclusion. Industry screen – This is where all assets with a primary business involvement in the following areas are excluded from the investment universe, namely all types of conventional finance, alcohol, pork related products, tobacco and certain entertainment areas such as gambling, pornography, cinema and music. Financial screens – In addition to passing the industry screen, property investment projects must also meet a series of financial criteria to ascertain eligibility for inclusion into the investment portfolio.