This archive report was first published on 16 May 2020.
Published on May 16, 2020, Islamic finance expert Ali Mohammed explores the essential criteria for making an investment Islamically acceptable in Episode 3 of the Islamic Finance Podcast Series.
The Islamic faith encourages financial investments and wealth growth, but only if they adhere to Shariah law. Investments must respect God's rights and serve both individual and public interests. They must also be backed by goods and services deemed Halal under Shariah law.
Investors must screen potential investments through two steps: industry screening and financial screening. Industry screening checks if the goods or services are Halal, while financial screening examines financial ratios, including a conventional debt-to-asset ratio below 30% and non-permissible income below 5%. Proper due diligence is also essential before investing.
Some investments are considered Haram, including conventional banking and insurance products, alcohol, and weapons. By understanding these criteria, investors can make informed decisions and ensure their investments align with Islamic principles.
Stay tuned for the next episode, where we'll delve into the structure and features of mortgage products in Islamic finance.
