Saving and investing is essential for a secure future. Since everyone wants to make their future secure, people turn to bank FDs to post office schemes and stock market. However, these remedies do not prove to be fit for everyone. For example, look at the Muslim community. Interest money is considered haram among Muslims. Along with this, many types of work-business including alcohol-cigarettes and pork are also forbidden in Islam. The religious beliefs of Islam come in the way in the case of investment-saving instruments prevalent in the market. In such a situation, the question arises that what should crores of people who believe in Islam do to secure their future? Today we are going to tell you this.
what is haram in islam
First of all, let us understand the religious compulsions of Islam. Islam forbids investing money in any such place, due to which people are harmed physically or emotionally. Similarly, activities that harm the environment and promote weapons are also forbidden in Islamic law. To put it simply, Islam forbids Muslims from investing money in businesses related to alcohol, tobacco, pork, weapons, gambling, porn, etc. Similarly, another obligation is regarding interest money. In Islamic beliefs, it is said that taking interest money means directly starting a war against God. For this reason, it is haram for Muslims to invest in any such place, which earns from interest.
Bank-post office is also not an option
Now let’s see the popular means of investment and savings. The most basic solution is to keep money in the bank or post office. Here the problem comes with the interest money. All schemes from bank FD to post office earn from interest only. In this way all these schemes become haram under Islamic laws. The stock market comes out as a great option, but here too the problems are not less. There is hardly any company which does not deal with interest money. The second problem is about his business. Let us understand this with just one example. A Muslim following Islamic laws can never buy shares of ITC, because the main business of ITC is manufacturing and selling cigarettes.
How Halal Funds Work
Overcoming these obstacles under Islamic laws, some companies have worked to provide investment and savings options to crores of Muslims. These companies have launched special funds, which manage the portfolio strictly following the Haram-Halal laws of Sharia. These funds never invest in companies whose business is haram according to Sharia. Since it is impossible to find a company that is exempt from interest, these funds are limited to only those companies whose share of interest earnings in their total earnings is not more than 3%. Another condition is that these funds invest money only in such companies, whose total debt is less than 25 percent of their total assets.
When did it start in India
The credit goes to S&P for introducing Shariah-compliant mutual funds in India. Such funds are called Shariah Compliant Mutual Funds, which are colloquially known as Halal Funds or Halal Mutual Funds. S&P launched two such funds in India in the year 2010. Both the initial Halal funds were S&P CNX 500 Shariah and S&P CNX Nifty Shariah. Now both these funds are closed.
Names of Halal funds available now
Talking about the current market, there are 3 options available for people looking for Halal earnings. The first name among these is Tata Ethical Fund. Similarly Taurus Ethical Fund and Nippon India ETF Sharia BeES are also available. Nippon India ETF Shariah BeES was earlier named Reliance ETF Shariah BeES. You will need a demat account to invest in it, as it is an ETF.
Halal Fund Returns
Problems and solutions have been talked about. Now the most important thing… return means earning. Is it not that in order to obey Islamic laws, one has to compromise on earning? So the answer is… no. These funds, which work according to Sharia laws, are no less in terms of giving returns. See the chart below to understand this:
| Option | Five year average annual return |
| bank fd | 7.18% |
| Sleep | 11% |
| Average of all three halal funds | 19.14% |
| Large Cap Fund Average | 7% |
| Average of Mid Cap Fund | 10.28% |
| Small Cap Fund Average | 14.74% |
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