For many years, ‘halal’ has been associated with refreshments and food stuff. However, with a rise in Islamic economy, halal finds its significance in other important sectors like fashion, cosmetics and even finance. Let’s try to understand the concept of halal investment, its key features and the process of investment.

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What is Halal Investment?

Halal investment, or technically referred to as shariah-compliant investment, comprises of investing in compliance with the standards of Islamic law. Requirements for shariah compliance are extensive and issue to ongoing discussion in religious and practitioner settings.

Although there are three main standard which are to be followed and taken care of :-

1. Transactions Must Not Comprise of Riba

Riba signifies taking interest from loans or deposits, even if the interest charged is not in huge sums of market rates. The overall notion is that charging interest is equivalent to usury and requires unfair exploitation of resources. For example, creditors with collateral and cash flow benefit from “unearned income”, while debtors require to spend more labour to produce profit from these loans, making the division of profit unjust between parties.

2. No Investment in ‘Haram’ Related Industries

Haram is the contrary of the word ‘halal’, and denotes to objects or practices which are unlawful in respect to Islamic law. Some instances of haram industries include military equipment, pork products, alcoholic beverages, gambling, and particular sectors of the entertainment industry such as erotica.

3. Investment Depending on Gharar and Maysir are Prohibited

Gharar connotes to extremely uncertain transactions or transactions which are opposite to the notion of certainty and transparency in business. Most derivative financial products, like futures, choices, and forwards are forbidden. Similarly, maysir refers to the obtaining wealth because of sheer luck, without any effort such as in gambling.

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The Halal Investing portfolio is an all-equity investment portfolio, so it is a greater risk portfolio. Because it doesn’t incorporate fixed income to mitigate risk, investors must maintain more of their assets in cash compared to investors who are in more conservative portfolios.

Shariah-Compliant Investing

Shariah-compliant funds are investment funds regulated by the needs of Shariah law and the standards of the Islam religion. Shariah-compliant funds are deemed to be a kind of ethical investing. The notion needs enormous endeavours to execute, as much consideration should be given to compliance with an extensive set of rules and requirements lead by the Shariah standards.

Process of Investment

Time is crucial factor when it comes to investment, meaning the earlier you begin, the further time you will get to increase your funds. There are several processes to investing which you can opt from, depending on your personal circumstance, however the essential factor is to initiate the process :-

1. Begin With Your Personal Portfolio

This is the most practical method for a person; however, it can be an intimidating job. With this choice, you can open a trading account with a discount broker or a firm that will enable you to purchase and sell stocks by yourself, paying the broker a low fee per trade.

The issue with this choice is that it is tough to identify whether a specific stock is Shariah compliant. The companies which establish compliance are subscription-based and never share this information of any case to people. As a single investor, you would require to analyse the prospectuses of Shariah-compliant mutual funds, each of which would offer you a listing of up to 300 stocks which are Shariah compliant. You would then have to categorise those stocks to invest in organisations of your choice.

2. Buy a Shariah-Compliant Mutual Fund

For individuals with time constraints or simply do not want to pick individual stocks to invest in themselves, a nice option would be to purchase shares in a Shariah-compliant mutual fund. Mutual funds are pool of stocks which an advisor has thoroughly investigated and packaged together in a fund. As an investor in a mutual fund, there is a negligible amount of work involved – you can simply buy into it and then just forget about it!

3. Operating With a Financial Advisor

This is the most extensive solution and would be ideal for individuals who seek investment guidance via several market conditions and life stages. A financial advisor will function with you to set brief and long-term objectives and will be able to offer investment choices further to stocks and mutual funds.

Labuan for Halal Investment

Labuan has been marketing itself effectively as a hub for Islamic finance and Islamic businesses because of its sturdy regulatory structure. The IBFC has referred to Labuan as the ‘world’s first omnibus legislation governing all Islamic businesses in an international financial centre’, that entails not only Islamic banks and financial service providers, but also takaful and retakaful businesses, waqf and other foundations, Islamic family offices, Islamic trusts and Islamic wealth management service providers. It also governs Islamic financial products formats and issues policies for Shariah advisory, sukuk issuances and Shariah-compliant captive structures.

Benefits of Labuan Investment Bank

No Time Limitation

With the Labuan bank account, the investors enjoy complete flexibility and liberty to access their accounts at any given time. Apart from this, another significant attribute is that you can handle the account with full security and not worrying about the political circumstances and achieve enhanced resource insurance.

Exemplary Financial Planning

The Labuan bank account offer potential choices to investors to seek for fresh and improved money related opportunities and advantages that are not possible in their resident country’s bank account. A money related opportunity is greatly beneficial in the event of a political or financial emergency and the businesses require an ideal location to safeguard their wealth to shield it against unnecessary losses or taxation measures.

Comprehensive Opportunities for Investors

As the Labuan bank account for offshore businesses does not fall under the government legislation, signifying that the investors can explore in a broader spectrum of areas that is only reasonable for the account holders in comparison to the account holders that are native and usually not offered such investment opportunities as those accounts are governed by the government laws.

From a foreign investor’s perspective, you will be relieved from maintaining extra duties to protect your wealth. When it comes to both security and privacy of your assets, understand that you can completely rely on Labuan banks. For detailed information on how to Open a Bank Account in Labuan, connect with QX Trust team of consultants at CONTACT US  or consultant@qx-trust.com for a complimentary session.