Ethical Investment Planning

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Ethical Investment Planning

Muslims are just as keen as anyone else to get good returns on their investments.  However Islam lays down limits and boundaries.  The ethical criteria for sharia compliant investments are twofold:

Industry Screen: Investment funds must not hold investments in the following sectors:

  • Conventional financial services (banking, insurance, etc.)
  • Alcohol & Tobacco
  • Pork related products
  • Weapons and Defence
  • Gambling
  • Entertainment (hotels, casinos, cinema, night clubs, pornography, prostitution, music)

Financial Screen: Investment funds will hold investments in companies that follow the following financial criteria:

  • Total debt/Total assets < 33%
  • Company’s cash & interest bearing securities / Total assets < 33%
  • Account receivable & cash / Total assets < 33%

Ethical and Muslim investors share very similar values and principals regarding investing.  The criteria required for sharia investments provide a consistent framework for including or excluding investments on an ethical basis.

There is now an excellent choice of sharia compliant funds available for Muslim and ethical minded investors.  However, sharia compliance does not necessarily equate to good investments.  Holborn applies the same due diligence, rigorous research and tools of analysis as we would use with a normal portfolio.   Getting the right balance on capital preservation, risk, future growth potential and accessibility are all of paramount importance.