Shariah-compliant investing has evolved from a niche segment to a significant force in global financial markets, attracting both Muslim and non-Muslim investors drawn to its ethical foundations and robust risk management principles.
Core Principles
Islamic finance is built on several fundamental principles derived from Shariah law. The prohibition of riba (interest) requires that returns be generated through legitimate trade and asset-backed transactions rather than pure lending. The avoidance of gharar (excessive uncertainty) promotes transparency and clarity in contracts. The prohibition of maysir (speculation akin to gambling) encourages investment based on genuine economic activity.
Additionally, Shariah-compliant investments must avoid companies whose primary business involves activities considered haram (prohibited), such as alcohol, tobacco, conventional financial services, and gambling. Screening methodologies have been developed to assess companies based on both their business activities and financial ratios.
Growth and Opportunity
The global Islamic finance industry has grown substantially, with total assets estimated to exceed USD 4 trillion. Malaysia has established itself as a leading hub for Islamic finance, with a well-developed regulatory framework, a deep sukuk market, and a growing range of Shariah-compliant investment products.
The sukuk (Islamic bond) market continues to expand, offering investors access to fixed-income instruments that comply with Shariah principles. Shariah-compliant equity funds, real estate investment trusts, and alternative investments provide further diversification opportunities.
The Forte Perspective
At Forte Wealth Advisory, we provide guidance on Shariah-compliant wealth solutions designed to meet the needs of clients who seek investment approaches that adhere to Islamic finance principles while pursuing competitive returns. Our team includes specialists in Islamic finance who can guide clients through the available options and help construct portfolios that align with both their financial goals and their values.