WEALTH is entrusted to us by Allah as a means to attain a blessed life. Islam acknowledges the human need to acquire wealth, something which is regarded as noble in Islam. In fact, Islam encourages its followers to possess, produce and use wealth soundly and wisely.
Possession of wealth alone, without it being used and developed for the welfare of mankind, is contrary to what is demanded by Islam. Islam as a complete and ideal way of life has commanded that wealth is managed well and wisely.
Once it is found, wealth should be developed. Prophet Muhammad and the Caliphs of ‘Al Rashideen had invested in the form of developing charity assets such as camels, cattle and sheep. These livestock possess good potential for breeding and expansion.
It is forbidden in Islam for one to freeze his wealth without it being used for a good cause. The assets should be expanded so that the benefits can be enjoyed by many.
Investment is one method of producing and developing wealth. Hence, the type of investments which are accepted and legal in Islam are the ones that follow Islamic investment principles. In Islam, there are two popular syariah contracts related to investment: the Musyarakah and Mudharabah. In Muamalat or transactions, the rukun or principles of a contract cannot be ignored. If a transaction applying syariah contract does not possess the sufficient principles, the transaction is considered invalid.
The principles under the Mudharabah and Musyarakah concepts include the established and correct amount of money (capital) investment, investor, entrepreneur, permissible business according to Islam (halal), and the lawful contract of ijab and qabul (consent and agreement). Besides the required principles, the transaction must also meet certain conditions such as the agreed profit-sharing ratio and no guarantee on capital safe or fixed profit.
Profit guarantee contradicts the Islamic investment principles. Ulama or scholars of Islam have agreed that any profit guaranteed from an investment is considered haram or forbidden because it is a form of usury, not investment.
Islam does not allow an amount of profit guaranteed to investors from their investments because it contradicts with the norm of investment itself, which is subject to profit and loss. What is permissible and as practised by Islamic financial industry is that profit must be in the form of estimations and assumptions only, without promising a fixed amount of revenue.
This is in line with the Syariah Advisory Council’s decision that when any party sets a fixed and certain total profit for someone, then it will ruin the Mudharabah Aqad (agreement) of the investment.
The Securities Commission (SC), assisted by its own Syariah Advisory Council, has made a list of securities listed on Bursa Malaysia that comply with syariah. According to the SC Syariah Advisory Council, a company is not classified under syariah-compliant securities if its core business activities are not in line with the syariah laws, as in the following: (a) financial services based on usury (interest) (b) gambling and betting; (c) production or sale of unlawful goods or related products; (d) conventional insurance; (e) entertainment activities that are not in line with syariah; (f ) production or sale of tobacco-based goods or related products; (g) stock broking or trading of securities that are not syariah-compliant; and (h) other activities that are found not in accordance with syariah.
As for companies whose business activities are mixed — i.e. some parts are aligned with syariah and some are not, the Syariah Advisory Council considers two additional criteria: (a) public opinion of the company’s image must be good, and (b) the company’s core activities provide benefits and maslahah (good in general) to the Muslims and the country, while the elements not in accordance with syariah are very small and involve matters that are considered “umum balwa” (forbidden things which are difficult to avoid), “uruf” (normal practices) and the rights of non-Muslim community that is certified by Islam.
Hence, before making a decision to invest one should make appropriate consideration to ensure that the investment does not involve business activities which are forbidden by syara’. Do not be deceived by sweet promises offering large profits using various creative methods, including misleading names, on the pretext that it is an Islamic investment.