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Shariah Law Guide

 

Summary

Many Muslims follow Islamic Shariah law (other variations; Sharia, Shari’ah, Shar’ah) which shapes nearly all aspects of their lives, including the types of investments that are available to them.
Certain types of investments that are considered unfair or unethical under Shariah law are prohibited, restricting Muslims from investing in many forms of conventional investment vehicles. Hence, most Muslims invest in unique investment vehicles that comply with Islamic Shariah law.
These are not dissimilar to other ethical investment vehicles that have an extra set of rules layered on top of conventional common laws that influence the underlying investment decisions to suit a specific group of investors.
There has been increasing interest in Shariah compliant investment vehicles because of the build up of unmanaged wealth in the Muslim world, especially around the Gulf Cooperation Council (GCC) due their vast accumulation of wealth from the soaring price of oil and rapid development in regions such as Dubai.
As the majority of people in the GCC are Muslim and therefore follow Shariah law, a Shariah compliant investment vehicle is required to effectively tap into this great pool of unmanaged wealth. Moreover, Shariah compliant investment vehicles are even attracting non-Muslim investors who admire Islamic principles of risk sharing and those who agree with Islam’s views on ethical investments.
This article will cover the basic concepts behind Islamic Shariah law, the main investment vehicles and their impact on investors.
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