Can preference for Halal stocks change the state of the Halal finance Industry?
The time that we live in, is dominated by a financial system that is ‘interest’ based. For an abiding Muslim, conducting a financial transaction which involves interest is forbidden. This makes the entire financial system unsuitable for Muslim participation.
Don’t despair, there is some positivity around with the emergence of Halal equities as an investment option for Muslims.
Halal equities, though a very basic investment option, can be a strong force in ushering a wider acceptance and availability of Halal finance. Investing in Shariah compliant equities is considered a basic investment option since it is accessible to all and does not have regulatory challenges unlike a Halal finance or banking product. With the advent of Shariah compliant halal stock advisory portals such as Islamicly, investing in an Islamic manner has indeed become quite simple. Just open a brokerage account, check which stocks are Shariah compliant in your access markets on such halal equity apps and invest in them through your stock broker.
Shariah compliant equity investment and the impact on Islamic Banking and Finance
Let us demonstrate this through Halal food.
Muslim food habits are often synonymous with halal food. It is seen that Muslims are very careful about consuming only Halal food. Amongst other factors, this has been the primary factor which led to wide spread availability of Halal food globally. Even in countries where the Muslim consumer isn’t a big proportion of the consumer base, halal food is available predominantly.
This preference for halal food has influenced the market to make more halal food available.
Similarly, as Islamic investments grow in listed companies, the company managements will naturally start taking cognisance of this new investor base. This will hopefully influence the company managements to make business and financial decisions which are acceptable to this investor class. Hence fuelling the demand for Halal finance. This, we believe, can fundamentally change the global demand for Islamic financial products and could act as the much needed catalyst in the growth of the Halal finance industry.
Muslim participation in Shariah compliant equities- present state
Our research finds that as many as 40% stocks globally are Shariah compliant. This means that about $35 Trillion of global market capitalisation is Shariah compliant. Unfortunately, Shariah equity investments are estimated to be just about $100 billion.
So, what do Muslims think about the equity markets?
1- One category assumes that trading in shares in general is HARAM
2- The second category thinks trading in shares is permitted freely or does not care whether it is Halal or not.
3- The third category thinks that trading in equities which are screened to be Shariah compliant is permissible.
As per the Shariah scholars, the third category is permissible i.e. Muslims can invest in the equity stock of such companies which are classified as Shariah compliant.
Shariah scholars globally have given guidelines for ascertaining which stocks are permissible for investment by Muslims. A detailed screening criteria for screening halal stocks is given here: Shariah Screening Criteria
You no longer need to be worried about the complexities of the screening criteria and the nuances of finding halal stocks. Just download the “Islamicly” app and discover the most accurate Shariah screened stocks of your choice. Islamicly gives you all the tools required to maintain a Shariah compliant stock portfolio, no matter in which country you are. It is backed by 20 years of institutional research and the most renowned Islamic finance Scholars who are considered pioneers of the modern Islamic finance industry. Islamicly is available on the app as well as on the desktop at www.islamicly.com
Here is the link to download Islamicly App
Do watch what one of the pioneering scholar of Islamic finance says about Islamicly here: