The global Islamic halal economy is projected to reach a market value of $7.7 trillion by 2025, more than doubling from $3.2 trillion in 2015, and significantly surpassing the $5.7 trillion mark it reached in 2021. This growth is driven by rising demand for halal, or “sharia-compliant,” investments, according to industry experts.
A recent report by the General Council for Islamic Banks and Financial Institutions highlighted that the global Islamic funds market has grown by over 300% in the past decade, with nearly $200 billion now under management worldwide. These figures reflect the increasing appetite for ethical investments that align with Islamic principles.
What Is Halal Investment?
“Halal” means “permitted” in Arabic and, in the context of finance, stipulates that investments must avoid prohibited (haram) activities. This includes businesses related to alcohol, gambling, pork products, or military equipment, and transactions involving riba (interest). Investments must also avoid “gharar”—highly speculative or uncertain dealings.
According to Omar Shaikh, director of the Islamic Finance Council UK (UKIFC), halal investment is about managing money in line with Islamic faith, focusing on ethical, socially responsible practices. Umar Munshi, co-founder of Islamic finance group Ethis, adds that investments should go beyond sharia compliance to ensure they have a positive social and environmental impact.
How Does Halal Investment Work?
Halal investments often utilize innovative financial structures such as profit-sharing, sharia-compliant insurance, and sukuk (Islamic bonds). Unlike conventional bonds, sukuk gives investors ownership of a portion of a business and provides profit distributions instead of interest payments, making them compliant with Islamic law.
Over the past 15 years, the Islamic finance sector has grown substantially, with increased awareness and demand for halal investing leading to the development of new products and opportunities.
Why Is Halal Investment on the Rise?
A growing Muslim population is fueling demand for halal financial products. A report by Goldman Sachs estimates that by 2075, five of the world’s largest economies will have significant Muslim populations. The State of the Global Islamic Economy Report 2023 also showed a 128% year-on-year growth in sharia-compliant investments in 2022-23, totaling $25.9 billion.
Siddiq Farid, co-founder of SmartCrowd, noted that younger generations are driving this trend, as they are more socially aware and prefer ethical investment choices. Furthermore, the ongoing boycott of companies perceived as supporting Israel’s actions in Gaza has prompted increased demand for halal investments, particularly among millennials.
The Role of Technology in Halal Investing
Fintech (financial technology) has made halal investing more accessible, especially for younger investors. While Muslims constitute nearly a quarter of the global population, only a small fraction of financial assets are sharia-compliant. However, fintech innovations, including mobile apps and online platforms, have made investing easier and more transparent for Muslim investors.
The fintech industry itself is rapidly growing, with revenues expected to outpace traditional banking between 2023 and 2028. This shift, driven by younger, tech-savvy generations, is making halal investing more convenient and widespread.
With the rise of fintech and a growing global Muslim population, the demand for halal investments is set to increase, providing more opportunities for ethical and compliant investment options.
