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Investment Law according to Islam

Know the law on investment in Islam and types of products

Investment in Islam law is permitted if such type of investment is made in accordance with the principles of Islamic teachings. This includes Islamic stocks. The Islamic Investment Law has a certain vision depending on the type of investment one wants to make. One of the recommended investments for Muslims is gold investment.

In the review "Sharia Gold Investment in the Perspective of Islamic Law", which was compiled by Asriani, it was explained that investment in gold already has provisions and a legal basis. Precisely regulated in the fatwa of the National Sharia Council of the Indonesian Ulema Council No. 77/DSN-MUI/VI/2010 regarding cashless gold trading.

This gold investment comes in the form of a gold savings model. The principle is almost the same as other savings accounts, but interest is not applied as the system uses Shariah methods.

Besides gold, several types of investments are recommended. Indeed, the Islamic Investment Law still allows it as long as it is guided by Islamic teachings.

So what exactly is the investment law in Islam? See the following discussion.

What are the basics of investment law in Islam?

According to the Big Indonesian Dictionary (KBBI), the word "investment" means to invest money or capital with the aim of making a profit. Investing is a form of activity to generate income.

Investments can be made by all groups. But for those who are Muslim, of course they have to follow the rules according to Shariah or Islamic law.

It should be noted that in Islam there are 4 sources of Islamic law that are used. The sources of the law consist of Al-Quran, hadith, ijma and qiyas.

This source of law is the basis on which Muslims can do various things. Including discovering the legal basis for investing in Islam.

Quoting the scholarly journal Investment in Islamic Economic Perspective: Theoretical and Empirical Approaches, investment activities are part of muamalah fiqh. This means that investments can always be made unless there is an argument against it.

Several verses in the Quran have provided insight into how to invest, for example, such as Surah Al-Baqarah verse 261:

مَثَلُ الَّذِيْنَ يُنْفِقُوْنَ اَمْوَالَهُمْ فِيْ سَبِيْلِ اللّٰهِ كَمَثَلِ حَبَّةٍ اَنْۢبَتَتْ سَبْعَ سَنَابِلَ فِيْ كُلِّ سُنْۢبُلَةٍ مِّائَةُ حَبَّةٍ ۗ وَاللّٰهُ يُضٰعِفُ لِمَنْ يَّشَاۤءُ ۗوَاللّٰهُ وَاسِعٌ عَلِيْمٌ

Meaning: "The parable of a person who spends his wealth in the way of God is like a seed that grows seven stalks, on each stalk there are a hundred seeds. Allah multiplies for whom He wills, and Allah is All-Wide, All-Knowing."

According to the Interpretation of the Ministry of Religion (Kemenag), the above verse explains the multiplied reward for those who spend in the way of Allah. If there is someone who spends, then he will be rewarded with a good reward up to seven hundred times or more depending on the level of faith and sincerity of the spender.

Described in the book Investment in Islamic Financial Products (Yuliana: 2010), although it does not detail investment, this verse still conveys information about the importance of investment. In this case, it is explained how lucky people are who spend their wealth in the way of Allah. If seen from an economic point of view, it will clearly affect life in the world.

In fact, Islamic teachings have regulated the types of business (including investing) that can be done and those that are not allowed. As long as the investment is free of something that is considered illegitimate. As explained in the book Sharia Investments in Indonesia's Economic Development, investments made by a Muslim investor are required to avoid haram elements. Because something that is haram is something that is forbidden in Quran and hadith.

What is Shariah Investing?

The recommended investment for Muslims is Sharia based investment. Quoting NU Online, Shariah investing is an investment endeavor with the hope of obtaining profits in the future, with a model of profit sharing and division of labor in accordance with Shariah principles.

Sharia investment must be free from ribawi transactions, far from elements of gharar, ghabn, maisir and jahalah. Simply put, Islamic Investment Law is permissible if it is applied according to sharia principles.

Quoting also from NU Online, in sharia investment practice the term qiradh contract is often used which uses the partnership method (wasilah syirkah). If examined in more detail, the contract can be called a sharia investment contract if it fulfills several conditions. These conditions include :

  1. Have an agreement or contractual agreement that states when the cooperation of both parties ends.
  2. There is a contract object called charity or land to distribute work. This part is very important because if there is no land that can be distributed, then a product cannot be called an investment.
  3. The form of realization of the asset or product must be clearly measurable and agreed upon. An example is property investment.
  4. There is an agreed profit sharing ratio.
  5. There are two parts that work together to produce something. These two parties consist of the capital owner or rabbul mal and the executor of the contract (amil).
  6. The capital submitted by the capital owner must be fully surrendered to the mudharib (manager) to be managed and cultivated.

What are Sharia Investment Products?

Currently there are many sharia-compliant investment products. According to the sharia definition, investment is an investment activity that uses Islamic sharia principles and law.

Reporting from the official website of the Financial Services Authority (OJK), here are some sharia investment products that can be used by a Muslim to start investing :

1. Islamic Islamic Capital Market

The Capital Market is one of the sharia-based investment products in Indonesia. Even the legal basis has been regulated by Bapepam-LK as the capital market regulator in Indonesia, in several special regulations related to the Islamic capital market. For example, such as Regulation number II.K.1 concerning Criteria and Issuance of List of Sharia Securities, Regulation Number IX.A.13 concerning Issuance of Sharia Securities and Regulation Number IX .A.14 concerning contracts used in the issuance of Islamic Securities.

Overall, the Islamic capital market is almost the same as the conventional capital market. It's just that there are a number of special characteristics that distinguish it, the main thing is that in the Islamic capital market, the products and transaction mechanisms do not conflict with Islamic principles.

2. Sharia Mutual Funds

In general, there are several differences between Islamic mutual funds and conventional mutual funds. However, what is clear is that Islamic mutual funds apply rules according to Sharia principles.

Islamic mutual funds are a form of collective investment. Then it is managed by the investment manager by investing the managed funds in sharia securities in the form of sharia shares, sukuk or other sharia instruments.

3. Sukuk

Sukuk are Sharia titles in the form of certificates or proofs of ownership. According to Bapepam and LK Regulation Number IX.A.13, a sukuk is a certificate or proof of ownership which has the same value and represents an indeterminate part (integral or indivisible) of certain tangible assets, the value of the benefits of certain existing assets or existing tangible assets, there will be, services that already exist and that will be adam and so on.

Sukuk investment also has several types, here is the list :

  • Certificate of ownership of the leased property.
  • Certificate of Ownership of Benefits, which are divided into 4 (four) types.
  • Istishna certificate.
  • Mughara certificate.
  • Murabaha certificate.
  • Musaqa certificate.
  • Musyarakah certificate.
  • Muzara'a certificate.
  • Greeting certificate.

4. Other Sharia Investments

As explained earlier, the law on investment in Islam is permissible if this type of investment is made in accordance with the principles of Islamic teachings. Some types of sharia investments include investing in gold, real estate investment based on sharia, profit sharing deposits through a profit sharing system, etc.

In short, if the type of investment complies with the rules and principles of Sharia, then Muslims can be safe to invest in these investments.