The Rise of Halal Investment: Reasons to Consider This Growing Trend
Image: A drilling rig in Dubai, UAE. (Source: AFP/TTXVN)
The global halal economy is expected to reach a market value of $7.7 trillion by 2025, more than double the $3.2 trillion in 2025 and significantly higher than the $5.7 trillion in 2021[^1^]. The Council of Islamic Financial Institutions and Islamic Banks released a report last year indicating that the global Islamic investment fund market has grown by 300% over the past decade, with nearly $200 billion in assets under management[^2^]. This growth can be attributed to a rise in halal investment.
Understanding Halal Investment
Halal, an Arabic term meaning “permissible,” refers to investments that are free from interest (riba), forbidden assets or goods (haram), ambiguous or uncertain transactions (gharar), and unethical business practices. It is an investment approach that aligns financial transactions with Islamic principles and values.
According to Omar Shaikh, the director of the UK Islamic Finance Council, halal investment involves managing money and finances in a manner consistent with one’s faith. Muslims believe that earning money through halal means is preferable to practices that are harmful to society and contradict religious ethics[^3^]. Umar Munshi, the co-founder of Islamic financial group Ethis, adds that halal investing ensures that a business’s activities do not have a negative impact on society or the environment. It aims to comply with Sharia law and avoid any negative consequences[^4^].
An example of a halal investment is Islamic corporate finance, which operates through profit-sharing models, Sharia-compliant insurance, and sukuk (Islamic financial certificates representing ownership rights)[^5^]. Unlike conventional bonds, sukuk investors have ownership stakes in the business and receive profits generated over time in lieu of interest payments. These payments ensure compliance with Sharia law.
Reasons for the Growing Popularity of Halal Investment
Image: Halal food booths at the International Halal Exhibition[^6^]
According to a report published by Goldman Sachs, by 2075, five of the world’s ten largest economies will have a Muslim population of over 850 million. These countries include India, Indonesia, Nigeria, Pakistan, and Egypt[^7^]. As the Muslim population grows, so does the demand for halal financial products. The Global Islamic Economy Report 2023, published by DinarStandard, reveals that approximately $25.9 billion was invested in Sharia-compliant assets in the 2022-23 financial year, marking a 128% increase from the previous year[^8^].
Siddiq Farid, co-founder of Dubai-based real estate investment platform SmartCrowd, attributes this growing interest in halal investment to a higher level of education and awareness among individuals. People are more cautious and seek investments with ethical principles, making halal investment an essential consideration. This trend is particularly evident among millennials, who have a stronger social consciousness and a better understanding of the impact of their money on the global economic landscape[^9^].
Additionally, the increasing number of halal investment opportunities and their improved accessibility also contribute to the surge in demand.
As the world embraces a more inclusive and ethical approach to finance, halal investment has gained momentum. With the potential for attractive returns and the alignment of investments with personal values, it is no wonder that halal investment is becoming an increasingly popular choice for individuals seeking financial growth while upholding their religious and ethical beliefs.
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