Sharia

AAA

DEFINITION of 'Sharia'

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. Murabaha

    An Islamic financing structure, where an intermediary buys a ...
  2. Sukuk

    An Islamic financial certificate, similar to a bond in Western ...
  3. Islamic Banking

    A banking system that is based on the principles of Islamic law ...
  4. Socially Responsible Investment ...

    An investment that is considered socially responsible because ...
  5. Usury

    The act of lending money at an interest rate that is considered ...
  6. Riba

    A concept in Islamic banking that refers to charged interest. ...
Related Articles
  1. Personal Finance

    Go Green With Socially Responsible Investing

    Find out how morals and ethics can bring you a surprising return.
  2. Retirement

    Working With Islamic Finance

    There is no division between the spiritual and the secular in this type of socially responsible investing.
  3. Term

    Understanding the Maintenance Margin

    A maintenance margin is the minimum amount of equity that must be kept in a margin account.
  4. Credit & Loans

    Co-signing a Loan? Make Sure You Know The Risks

    Contractually, co-signers are just as responsible for the loan as the person actually borrowing the money. Be careful not to put yourself at risk.
  5. Investing

    Trends In Copyright Litigation

    The Internet has resulted in an explosion in content. An increasing number of copyright trolls are monetizing such content through litigious practices.
  6. Taxes

    What's IRS Form 2848 Used For?

    It's a power of attorney tax form and here's what it can, and cannot, do.
  7. Investing

    Is Airbnb Safe? What You Need To Know

    Thinking of booking a room or listing your home on Airbnb? Get up to speed on safety features for both guests and hosts.
  8. Personal Finance

    Top 5 Ways to Retain Your Best Employees

    You need to think beyond salary to make the most talented people want to stay on for the long term.
  9. Taxes

    Gay Couples: Here Are Your New Rights

    The expansion of same-sex marriage means gay and lesbian partners can now enjoy basic spousal rights, regardless of where they live.
  10. Taxes

    Gay Marriage and Taxes: Everything You Should Know

    Same-sex couples now have a variety of tax strategies to consider.
RELATED FAQS
  1. Can a church issue a bond?

    The North American Securities Administrators Association (NASAA) has acknowledged that "church bonds" are allowed to be issued ... Read Full Answer >>
  2. 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 Full Answer >>
  3. What are the advantages and disadvantages of listing on the Nasdaq versus other stock ...

    The primary advantages for a company of listing on the Nasdaq exchange are lower listing fees and lower minimum requirements ... Read Full Answer >>
  4. Why is the Toraku Index important for analysts of the Tokyo Stock Exchange?

    The Toraku Index is a technical indicator for the Tokyo Stock Exchange that compares the number of advancing versus declining ... Read Full Answer >>
  5. What are the most common market indicators to follow the Japanese stock market and ...

    The two main indicators of the Japanese stock market are the Tokyo Price Index, or TOPIX, and the Nikkei 225 Stock Average, ... Read Full Answer >>
  6. What are the historical beginnings of the securities industry?

    The earliest beginning of securities trading goes back to 12th century France, with commodities brokers managing debts between ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  2. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  3. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  4. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  5. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  6. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!