By Irshad Mushtaq
Shariah, an Arabic term, represents the Islamic religious law governing daily life, particularly finance. It dictates that any form of interest, whether given or taken, is strictly prohibited. For instance, obtaining a car loan, business loan , home loan paying interest or earning through savings or fixed deposits is not permissible under Islamic law. Instead, Islamic finance models offer alternatives, such as consumers paying rent instead of traditional EMI.
Moreover, Shariah law restricts investments in businesses generating income from alcohol, pork products, gambling, or harmful goods. Conversely, sectors like FMCG, technology, and pharma, which do not intersect with interest-based banking or defense products, align with Shariah principles. This compliance has led to the creation of Shariah-compliant funds.
In India, options like the Tata Ethical Fund, Tarus, and Nippon ETF adhere to these laws. Notably, Quantum Ethical Funds offers a new fund offering at Rs 10 per unit. Historically, these Shariah funds have yielded higher returns compared to fixed deposits, insurance, or gold, making them a compelling choice for investors who are committed to their moral and religious values.
Investing in Shariah funds requires a mindset shift, emphasizing long-term growth, especially through systematic investment plans (SIPs). Such investments are seen as an optimal strategy for wealth creation and preservation.
Additionally, entities like AMFI, SEBI, fund managers, AMC, and the financial ministry play pivotal roles in ensuring the safety, security, and transparency of digital holdings in Shariah-compliant investments. This advisory and technological support bolsters investor confidence in aligning financial goals with ethical and religious beliefs.
- Learn from the insights of @Irshad Mushtaq, Writer, Investor, Entrepreneur & Founder of M I Securities! Connect for valuable financial advice at [email protected]
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