Everything you need to know about Sharia-compliant Islamic Superannuation

6 min read
15/02/21 8:40 AM

Money speaks, and when you invest in something you don’t believe in it can feel like you’re telling the world, “This is okay.” Invest in alignment with your beliefs when you choose Sharia-compliant Islamic superannuation.

Investing in Muslim superannuation funds that comply with Sharia law allows for ethical investing. You can skip potential investment options that include income from financial interest, alcohol, pork, immoral entertainment, violence, and more.

Instead, you will stick to more neutral businesses. You may have the opportunity to invest in positive, socially responsible companies. Not only will you have more peace of mind, but you will also help fund things you believe in that can make the world better.

What Is Sharia-Compliant Islamic Superannuation?

Sharia-compliant investing falls under “socially responsible investing.” This type of investment has become more popular in recent years as investors have better access to see where their funds are going.

Many have been disturbed to find that they are funding organizations and businesses that they disagree with. If you want to know more here is a glossary of Islamic finance terms.

What Is Excluded Under Sharia Law Compliant Investments?

The main idea of Sharia-compliant investing is ethical investing. It abandons the typical investment strategies that violate the edicts and morality of Islam. Some of the unsuitable investments that get left behind include:

Weapons Manufacture and Military Funding

This applies to weapons that can be used to cause mass destruction. By respecting the sacredness of life, Sharia-compliant investments avoid violence. They do not profit from investment in manufacturing weapons intended to kill large groups of people.

This especially applies to nuclear weapons, the aim of which is always violence against humans. Sharia-compliant investing will never fund nuclear weapons manufacture or related trade.

Military funding is also removed from Sharia-compliant investing. In the interest of protecting the sacredness of life, investors do not pay into funds that may support unjust military action.

Mind-Altering Substances and non-Shariah-compliant Food Sources

Sharia-compliant investments do not include any funds going to tobacco, illegal drugs, or alcohol. They also do not go to any meat—particularly pork—that does not follow proper slaughtering guidelines.

Investors can feel confident that their investments will go only to food sources that are compliant with halal practices.

Pornography & Adult Entertainment

Funds included in Islamic super funds do not contribute to any form of adult entertainment. They will not even support businesses that host or disseminate adult materials.

Unethical Scientific Practices

As science advances, Sharia law will also advance in its understanding of modern problems. Currently, this means that things like cloning are off the table for investment practices.

Gambling and Financial Speculation

Gambling is also out in these funds. No money goes to casinos, recreational betting, or lottery funding.

This extends to more professional forms of gambling as well, like speculation in the stock market. Insurance companies are avoided, too.

Sharia-compliant funds do not invest in financial institutions that make money with interest. More about this below.

Gharar and Stocks

Sharia investing does not embrace profiting off potential future events. Islam rejects uncertain or risky transactions called gharar.

Unfortunately, in the current global economic world, there are many practices that could be considered gharar. Short selling in the stock market—which is betting on what stocks you do not own are going to do—is considered gharar. It’s also a tactic many hedge funds use.

Business transactions with slippery contracts are gharar. Ones that focus too much on potential sales without concrete products yet are also considered gharar.

Rejecting gharar can very much narrow the field of investment options for investors who wish to stay in compliance with Sharia law.

Let’s Talk About Riba

Islam has long held that profiting off of someone else’s need for money is immoral. Riba is charging interest on a loan. In Sharia-compliant investing, no funds involved will profit from charging interest.

Why does Islam reject riba? In basic terms, it’s taking advantage of someone who is already asking for help. For society as a whole, this kind of practice can make an unfair playing field.

Loan practices that are compliant may include things like murabahah and ijara. These are when someone breaks down a payment plan or rents-to-own property from the bank. The bank profits by charging a little extra on the total price of a property, but they do not charge interest.

Those granting loans may also receive shares of an asset, but will not earn interest.

These types of loan activities can be practiced by funds in Islamic finance. They will still be in compliance with Sharia investing practices.

Given the set up of typical banking, the rejection of riba is one factor that really sets Sharia-compliant investing apart. A shocking 40% of typical super funds derive from riba. It does not have to be this way. You can have a say in where your funds go.

This is an attractive prospect for those investors wishing to avoid banks that use the interest to make money.

How Can I Be Certain the Investments Are Compliant?

In compliant investing—and any socially responsible investing set-up—the investment firm investigates each potential fund to see if they meet ethical standards for their investors.

These funds may be Australian or from other global organizations. The firm builds an investment portfolio based on those business models that comply with Sharia law.

These may include things like property, minerals, or business.

Australia Superannuation Funds

Australia’s superannuation funds continue to grow. Despite holding less than 1% of the world’s population, Australia’s super funds are some of the biggest in the world.

With close to $3 trillion at play, these funds show robust promise for investors. In fact, expectations for growth in these funds fall around 170% in the next decade.

Deciding to invest within the Australian market in a subset of Sharia-compliant funds is a smart financial move for the future. From these that meet the correct standards, the firm will put together promising portfolios to best meet the financial needs of their investors.

While this does narrow the field of potential investments, it is what Islamic finance investors were built to master. Their mission becomes balancing success with ethics in their pursuit of both good and financial stability.

Non-Muslims Want This, Too

The beauty of Sharia compliance is that it aligns with the good intentions of many people across a multitude of cultures. Funding gambling, tobacco, or violent organizations is objectionable to more than Muslims.

So Islamic super funds are gaining business from non-Muslims as well. The bigger they grow, the better for each investor involved. It is important for investors looking for halal investment options to let their friends and families know about this option.

Contribute From Your Paycheck

You don’t have to give up the convenience of typical investing when you swap to Islamic superannuation funds. Islamic super funds make it possible for Australian Muslims to invest ethically.

You can elect to have your employer pay directly into your Sharia-compliant account like any other retirement investment fund. Your investment organization can provide you the necessary paperwork.

Some funds may also have options to make sacrifices directly out of your paycheck as well, streamlining your overall financial situation. And if you change your job, this fund can go with you.

Crescent Wealth’s Islamic Super

At Crescent Wealth, it is our mission to provide excellent Islamic superannuation options to our customers, both Muslims and non-Muslims. With a focus on remaining Sharia-compliant and doing good with our investment funds, we choose the best performers across socially ethical investing out there.

You can feel confident that your retirement funds are halal and aligning with your convictions. We avoid investments in banks, insurance companies, and gambling. We do not invest in alcohol, tobacco, weapons manufacture, and nuclear weapons.

Instead, we direct funds toward things that build up our community’s economy. These include industries like healthcare, property and infrastructure, and natural resources. Also, they may include utilities, manufacturing, and innovative industries.

Our clients are able to build an ethically sound retirement fund. We can also direct funds into not-for-profit partners.

Most importantly, we allow our Muslim community to speak as one. We advocate for rejecting immoral investments. Our collective shifts away have a noticeable financial impact. Money talks and the financial world is listening to us.

Open a Fund Compliant with Sharia Law Today

If you would like to begin investing for retirement in a fund that supports the ethics of Islam and complies with Sharia law you can. Open a Crescent Wealth Islamic Super fund today.

In three minutes, you can get your account set up online. Bring your TFN and ID, fill out the form, and get started investing in a way that feels right to you.

Reach out to Crescent Wealth if you have any questions about getting started or how our investments are chosen.