Sharia

What is 'Sharia'

Sharia is an Islamic religious law that governs not only religious rituals, but aspects of day-to-day life in Islam. Sharia, literally translated, means "the way."

There is extreme variation in how Sharia is interpreted and implemented among and within Muslim societies today. This is especially prevalent for its financial laws.

Also known as "Shariah" or "Shari'a"

BREAKING DOWN 'Sharia'

Sharia-compliant finance is an area of modern finance that is growing among many banks and investment houses. This is due in part to investors eager to work with the Middle East as oil prices continue to increase. Western financial services firms are beginning to offer Shariah-compliant investment vehicles that neither pay interest, nor benefit from gambling.

In late 2007, a Sharia index was launched on the Tokyo Stock Exchange. This index includes companies that comply with Sharia law. The companies included in this index are screened on a daily basis, and exclude non Sharia-compliant companies such as casinos, and alcohol and tobacco companies.

In the West, Sharia-compliant investments are similar to socially responsible investments.

RELATED TERMS
  1. Takaful

    A type of Islamic insurance, where members contribute money into ...
  2. Riba

    A concept in Islamic banking that refers to charged interest. ...
  3. Islamic Banking

    A banking system that is based on the principles of Islamic law ...
  4. Sukuk

    An Islamic financial certificate, similar to a bond in Western ...
  5. Accounting and Auditing Organization ...

    A not-for-profit organization that was established to maintain ...
  6. Murabaha

    An Islamic financing structure, where an intermediary buys a ...
Related Articles
  1. Retirement

    Working With Islamic Finance

    There is no division between the spiritual and the secular in this type of socially responsible investing.
  2. ETFs & Mutual Funds

    A Guide To Faith-Based Investing

    If you've wondered how to invest in a way that reflects your religious belief, we've got the answers for you.
  3. Managing Wealth

    Go Green With Socially Responsible Investing

    Find out how morals and ethics can bring you a surprising return.
  4. Investing

    How The Islamic State (IS) Got Its Start

    Despite its relatively new emergence in radical Islamist terrorism, the Islamic State, or ISIS, has been around for nearly 12 years.
  5. Markets

    The 3 Most Dangerous Terrorist Organizations

    A brief look at the Islamic State, Al Qaeda and Boko Haram. What are they? What do they want? Where did they come from?
  6. Managing Wealth

    "Value" Investments: Social, Faith & Eco-Investing

    When it's time to invest, why not follow your heart along with your head? These four types of investments seek to do good while returning a profit.
  7. Managing Wealth

    The Evolution Of Sinful Investing

    Like beauty, whether something is sinful often depends whom you ask.
  8. ETFs & Mutual Funds

    When Socially Responsible Investing Hurts

    Socially responsible investing can make you feel good but it may not boost your returns.
  9. Managing Wealth

    Career Advice: Investment Banking Vs. Law

    Learn some of the most important differences between a career in investment banking and law, and figure out which career suits you better.
  10. Investing

    Who Funds ISIS?

    Faced with the high costs of running and defending a state, ISIS has been resourceful, resorting to just about any way of earning revenue.
RELATED FAQS
  1. What is an Islamic investment policy?

    Islamic investments are a unique form of socially responsible investments because Islam makes no division between the spiritual ... Read Answer >>
  2. Can I match a fund to my religion?

    Specialized mutual funds offer investments tailored for particular religions including Judeo-Christian faiths and Islam. ... Read Answer >>
  3. In what types of societies does limited government work best?

    See what a society needs to function with a limited government, and how social cooperation can be achieved through voluntary ... Read Answer >>
  4. What is a "socially responsible" mutual fund?

    As the name suggests, socially responsible mutual funds invest exclusively in socially responsible investments. Securities ... Read Answer >>
  5. Who is exempt from paying Social Security taxes?

    Learn about the groups of people who qualify for exemption from Social Security taxes, and explore the process of applying ... Read Answer >>
  6. Is a person registered for Financial Instruments Business eligible to conduct both ...

    Explore Japan's 2006 Financial Instruments and Exchange Law, and understand how the law affects investment services regulation. Read Answer >>
Trading Center