Shariah-compliant investing adheres to several key prohibitions, including:
- Riba’ (interest) – Under Shariah law, money is considered a medium of exchange. However, earning or paying interest is considered against Islamic principles due to the prohibition of riba, which refers to usury or excessive interest.
- Gharar (uncertainty) – Gharar is typically observed within transactions that are unclear or ambiguous, such as options and futures. Islamic finance places a strong emphasis on transparency and clear contractual agreements to ensure compliance with Shariah principles and to avoid excessive uncertainty in financial transactions.
- Haram (impermissible) - Investments in businesses or industries that involve activities considered haram (forbidden) in Islam are prohibited. Examples include trade of alcoholic beverages, pork meat, and gambling.