- September 1, 2019: Vol. 31, Number 8

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An overview of the Islamic finance industry: Shariah-compliant investors can provide capital for investment in hard assets, such as real estate

by Thom Polson

Islamic finance has an enormous influence in our global economy and has been a large contributor to the many financial investments made worldwide. The Islamic world holds an immense pool of institutional capital that, under the right Shariah-compliant conditions, can enter Western markets. First developed in the late 1960s, Shariah-compliant funds have expanded and are today centralized in the emerging markets, buoyed by petrodollars and sophisticated investment managers. However, this money must be connected to tangible economic activity to produce profits, thereby compliant with Shariah law.

Many people may only associate the term “Shariah law” with issues of politics and religion. In fact, Shariah law is the compliance with Islamic principles that provides the rules and direction for how business should be conducted. In Islam, one cannot make money from money; rather, profits can only be generated through trade. For this reason, Shariah compliance prohibits earning int

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