Over the years, Islamic finance a.ka. sharia investment has grown rapidly globally including in investment. Islamic investment is different from other conventional types of investment because for policies, managers and investors must comply with Islamic law.
The establishment of sharia investment policies, both for institutional and individual investors, begins with the Sharia Board. In Indonesia, there is a special institution for Islamic finance, namely the National Sharia Council.
Quoting from the dsnmui.or.id website, one of the objectives of the establishment of the National Sharia Council is to encourage the application of Islamic teachings in the economic and financial fields which are carried out in accordance with the guidance of Islamic law.
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Understanding Islamic Investment
Islamic asset management refers to the professional investment management of sharia-compliant securities. The Islamic investment business is based on Islamic finance principles. It aims to meet the financial needs of investors with integrity and in a way that is fair, trustworthy, honest and ensures a more equitable distribution of wealth.
Sharia investment is not only seen as a religiously guided investment but also as a form of ethical investment that promotes socially desirable real economic activities. One of the benefits of this investment approach is that it generates a competitive return on investment and encourages ethical business practices.
Sharia Investment Only for Halal Business
Similar to socially responsible investment, shariah compliant investment mandates social values & good governance. There should be no Riba in sharia investment and investment can only be done in a business permitted by sharia.
Sharia investment filters out businesses that are involved in various activities that are considered unethical, such as liquor, gambling, pornography, and other illicit things. In Islamic investment, profits and risks must be shared fairly. If you gain, you gain together, if you lose, you lose together.
In Islamic investment, investors and managers share the risk in choosing the right investment and its profitability, engaging in a partnership rather than a simple borrower-lender relationship.
Investors share risk with managers for example for production, distribution, and so on. So it can be concluded that investors and managers (or banks and depositors) both play an important role in the decision-making process. It turns a simple borrower-lender relationship into a prosperous partnership.
Tips for Choosing Sharia Investment
There are various types of Islamic investments such as Sharia Stock Investments, Sharia Mutual Fund Investments, Sharia Deposit Investments, Sharia Gold Investments, Sharia Bond Investments, and so on.
Each investment has different features and risk characteristics. Therefore, it’s a good idea to study the type of investment you want to choose. If necessary, you can make an investment plan. An investment plan can help you identify what type of investment is best for you.
If you are unsure about the type of Islamic investment you need, or which investment fund to choose, you may want to ask a financial advisor for advice.