The Halal Investing Guide

A halal investment is an investment in which it is permissible for Muslims to participate according to the Islamic ethico-legal system (Shari`ah)1. A halal investment fund is a one that is structured, managed, and operated so as to offer investors access to halal investments. A certified halal investment fund is one that has been reviewed, audited, and inspected by an independent panel of experts in Islamic ethics and law who have issued (and thereafter periodically re-issue) a formal certificate of compliance stating that the fund is in fact halal. It should be noted that in order for the fund to be found to be halal, the management must also comply with the principles of the Shari`ah in matters pertaining to the operations of the fund. At Wahed, we have a full time Ethical Review Board that reviews our systems, business practices, and investments in order to ensure the strict Shari`ah compliance of the platform.

Halal investing brings a sense of responsibility to bear on how investments generate returns by preserving a concern for ethics and values. Investments in domains that may cause harm to human beings or other elements of creation, for that matter, (i.e. the environment) are prohibited. This is where socially responsible investing (SRI) and halal investing overlap (we’ll be discussing similarities and differences towards the end of the article). We are proud to make this form of investing accessible at Wahed with low account minimums and seamless online account opening and funding.

This simple guide will provide you with some practical tips to identify halal investment options.

Or, if you’d like to watch our educational series on YouTube with Sheikh Dr. Yasir Qadhi, click here.

1) AAOIFI-Conformant Shari’ah Board

Standards matter. Each and every halal investment fund must have appointed a Shari’ah board whose membership conforms to the competency standards of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the leading standards issuing body for the halal financial services sector. There must be three members, at least two of whom are recognized Shari`ah experts with mufti-class. The Shari`ah Board’s role is to review, monitor, and advise on the structure, policies, and activities of the fund managers so as to insure that returns are permissible. A consistent, periodic, expert review aims to reduce the chances of generating returns from impermissible sources. Having a full time Shari’ah board is a necessity, which can not be satisfied by merely having a third party annual review.

2) Business and Financial Screening

There are two main screening levels for halal investments. A business screening by default refers to the review of a company’s business practices, products sold, and revenue sources. A company is prohibited from generating returns from the selling or producing of alcohol, pork products, weaponry, gambling, adult entertainment, or Riba (interest). The main business screening criteria are highlighted below:

  • Prohibition of interest (Riba)
  • Profit and loss sharing between the lender and the borrower
  • Prohibition of hazard or uncertainty (gharar), notably speculation
  • The lack of existence of an underlying asset, i.e. the obligation to back all investments with real assets
  • Prohibition of investments in forbidden assets (haraam)

To add on, there are certain limits imposed on a company’s debt levels to better control for excessive risk taking. The financial screen lays out three broad pre-defined financial ratios mentioned below.

  • Conventional debt/Total market capitalization < 30%
  • (Cash + Interest-bearing deposits)/Total market capitalization < 30%
  • (Total interest + income from non-compliant activities)/Revenue < 5%

Investments are considered halal only if a company’s financial ratios conform to those of AAOIFI set standards. Usually, if a company’s cumulative revenue from non-compliant activities and non-operating interest income exceeds 5%, it is required to purify its assets by giving that money to charity in order to maintain its halal status.

3) Operational Level Compliance

The company operating and managing the investment fund must also comply with Shari’ah regulations. The management company must refrain from taking on interest bearing debt and follow certain business practices.

4) Investment Policy

A fund must also establish an Islamic investment policy where the Shari’ah Board vets the investment products for Shari’ah compliance, and conducts ongoing due diligence on them. The policy will clearly outline the screening methods employed, the criteria used, and investment methodology implemented (selection process, absence of day trading, among other restrictions).

5) Purification Reports

Following up on point number one, a more transparent Shari’ah board will also provide the investors with a “purification report”. This will highlight any returns that may have been generated from impermissible sources, which are advised to be donated to charity to purify one’s income. Although this is not necessary, it helps the investors gain peace of mind by knowing the exact sources of their income. At Wahed, we provide our clients with an annual purification report to assure them that their returns are permissible, which further highlights our commitment to halal investing.

Final Tip – Socially Responsible and Halal Investing: Similarities and Differences

While many may think that halal investing is the same as SRI there are a few differences between the two concepts. SRI and halal investments both prohibit investments in certain industries such as alcohol, gambling and weaponry. The main difference is that halal investing prohibits the use of interest (Riba) and follows the aforementioned criteria on company leverage. SRI on the other hand focuses business ethics and practices such as community engagement and company diversity. The below Venn diagram will help you visualize the two concepts.

It is key to understand the criteria that defines halal investing to ensure that your returns inshaAllah will be halal. Unfortunately the “halal” stamp can be abused to attract business, so it is your duty as a Muslim or Muslimah to review the investment you’re getting into, and inshaAllah Allah will grant you barakah in your ventures.

1 These principles of the Shari`ah are derived from the Qur’an and authoritative life example (sunnah, literally ‘custom’) of the Prophet Muhammad (upon whom be peace).



  • abdurRaheem

    assalamu ‘alaykum wrwb

    what about ira and 401k plan offered by companies?

    • Wahed Support

      Wa Alaikum Assalam AbdurRaheem,

      Thank you for your interest! You would have to check the companies or instruments that these IRAs and 401(k) plans invest in. They may include bonds (which pay out interest) or companies operating in non-compliant industries such as conventional banking. The investment funds we invest in have been screened, reviewed and approved as halal by our Ethical Review Board. If you open an individual account, IRA, or rollover a 401(k) with Wahed, your money would be invested in approved and compliant funds.

      Feel free to reach out to us at [email protected]


  • Saheed

    Are cryptocurrency investments halaal?

    • Wahed Support

      Salam Saheed, thank you for your interest! We cannot give an answer to that question yet, but it is a topic that we will cover soon.

  • Aqeela majeef

    Is it for Canadian people too?

  • zia

    i am from pakistan, i ve few questions
    is it for pakistan as well?
    what i slimit of investment, minimum

    • Wahed Support

      Hello Zia, thanks for reaching out! We’re currently only on-boarding clients in the US but will be expanding internationally soon. Feel free to register at to stay informed!

  • Alvi Almas

    I am very much interested. I am an Indian. Can I join Wahed? How can I follow Wahed? What is the procedure to be part of Wahed?

  • Bamanga Raji

    Is your expansion drive covers West Africa and Nigeria inclusive? Do you partner with company’s that are into similar businesses ? Best regard.

    • Wahed Support

      Hello Bamanga, thank you for reaching out! We’ll send you more information shortly.

  • Ali

    Is buying a house on mortgage allowed?

  • Mulikat

    are there options for investing for non-US residents? I currently reside in the United Kingdom

    • admin

      Hello Mulikat,

      At the moment we are accepting US clients, we are unable to provide an exact date for our UK launch. InshaAllah we will be launching later in 2018.

      If you wish, you can go to and take our ‘Free Portfolio Recommendation’ in three minutes. This will show you how your portfolio would look like if you joined, and also enable us to inform you once we launch in the UK.

      Please let us know if you have any questions, we’re always happy to help!


  • Mustspha

    Right now I’m investing in 401k offred by my company Ecolab
    Can I rollover the 401k with you guys and how this is working ?

    • admin

      Salam Mustspha, thank you for your interest! it’s possible to rollover your 401k with us, we’ll email you more information on this shortly.

      Team Wahed

  • Saghir Adeel

    Asslam O Alakum WRT
    i am new to this investment, i want to understand how it work. let say if i invest $1000 and and how much halal profit i will be getting?

    • admin

      Hello Saghir, thank you for your interest!

      Your expected return depends on your risk profile and asset allocation. Users with a conservative profile are expected to earn less and be exposed to less risk than users with an aggressive profile, who will be exposed to more risk in exchange for a possibility of higher returns.

      You can view our portfolios’ historical performance at the end of the risk questionnaire. You can get started by clicking here.

      Please note that historical returns are not an indication or guarantee of future results.

  • T. Fiarz kamaldeen


    With strict screening policies and a sharia advisory comity , still how can there be “any returns that may have been generated from impermissible sources”

    Value your kind clarification.

    Jazakallah Kahira

    • Wahed Support

      Wa Alaikum Assalam, thank you for your question! Yes we do strict and thorough review prior to adding any security to the portfolio. However, in some cases, and since companies release financials quarterly or semi annually, we might find that some profits were generated from impermissible sources in newly released statements. In that case, we would like to advise our clients about this so that we’re as transparent as possible. If you have any questions please email us at [email protected]

  • Abdulazeez

    Am from Nigeria. Can I join you Halah Program?

    • admin

      Hi Abdulazeez,

      We will be accepting clients from Nigeria soon!

      Team Wahed

  • Aamir

    As salamu Alaikum
    I am from India and wanted to know if I can invest in your fund? Secondly is there any tax banefit for investing in this fund under section 80(c)?

    • admin

      Wa Alaykum AlSalam Amir,

      We will be accepting clients from India soon!

      Team Wahed

  • Mohammed Uddin

    What will be the exact contract between customer (me) and investment company (Wahed invt). Can we get details of the contract.
    Will the investment be done by Wahed exclusively in the Halal company OR Does it has to be on behalf of the customer?

    Just want to understand if the customer does not want to be part of the second contract between Wahed and Halal company whose share s will be purchased.

  • Ibrahim

    Salaam Wahed, please am in Ghana and I would like to know if I can be an investor of your company

    • admin

      Hello Ibrahim,

      You can definitely be an investor!

      To get started, please visit our website at http://www.wahedinvest.comand click on the ‘Free Portfolio Recommendation’. The report will show you how your potential portfolio would look like.

      Please let us know if you have any questions, we’re happy to help!


      Team Wahed

      • Muhammad muhiddin musa

        Please I’m from Nigeria and already registered with you guys the only thing that left is funding.please can I continue the process or you are not available in our country Nigerian.

        • Wahed Editors

          Hello Muhammad, thank you for reaching out! We’ll email you more information shortly.

  • RS

    Assalam alaikum,

    Is it possible for someone from India to invest in your portfolios?

    Thank you.

    • Wahed Editors

      Wa Alaikum Assalam, yes you can – we will email you more information shortly!

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