Ways to invest my saved money in Germany in a halal way?

Question

I will be graduating soon from university with a masters degree in computer science. I will get a good salary when I start working and I will save about 1000 euros each month. However I'm looking for a way to invest my money, but in a halal way because I'm a Muslim. The halal way is simply that there shouldn't be a fixed interest rate for the investment. In the most simple form, a halal investment is like going to a merchant and giving him some money and tell him to use it to make business. If the business succeeds then I take profit relative to the investment I made. If the business loses, then I lose the money. So halal means I could lose or profit. Not in the banks where I'm always guaranteed to profit a fixed amount each month or year.

Can you please recommend halal ways to invest and grow my saved money?

Edit: I need to assert that my definition of halal investments here is very very basic. If you are a Muslim or have knowledge in Islamic finance, then I guess this question is targeted for you. Also if you know some Muslims who do halal investments, then probably you also are a target for this question :)

Answer 1

The UK has Islamic banks. I don't know whether Germany has the same or not (with a quick search I can find articles stating intentions to establish one, but not the results). Even if there's none in Germany, I assume that with some difficulty you could use banks elsewhere in the EU and even non-Euro-denominated.

I can't recommend a specific provider or product (never used them and probably wouldn't offer recommendations on this site anyway), but they advertise savings accounts. I've found one using a web search that offers an "expected profit rate" of 1.9% for a 12 month fix, which is roughly comparable with "typical" cash savings products in pounds sterling. Typical to me I mean, not to you ;-) Naturally you'd want to look into the risk as well.

Their definition of Halal might not precisely match yours, but I'm sure you can satisfy yourself by looking into the details. I've noticed for example a statement that the bank doesn't invest your money in tobacco or alcohol, which you don't give as a requirement but I'm going to guess wouldn't object to!

Answer 2

You can invest in a couple of Sharia-compliant ETFs which are available in Germany and issued by Deutsche Bank (and other financial institutions). For instance, have a look at these ETFs:

DB Sharia ETFs

In addition, Kuveyt Turk Bank aims to become Germany's first Islamic bank offering Sharia-compliant investments (Reuters).

Answer 3

What is not permitted in Islam is the practice of making unethical or immoral monetary loans that unfairly enrich the lender.

Originally, usury meant interest of any kind. A loan may be considered usurious because of excessive or abusive interest rates or other factors.

But In case of financial markets, people borrow money to make money and both parties benefits, and no one is taking advantage of the other.

I may be wrong in interpreting this way, God knows the best.

Answer 4

What is actually a halal investment? Your definition of halal investment is loose and subject to interpretation.

On one hand, nothing is fixed in the financial world. You might get a 10 Year Germany Bund with a fixed coupon rate of 1%, but the real rate of return of this investment is far from fixed. It depends on the market environment, the inflation, etc. (Also, you can trade this investment on the secondary market at any time.) Moreover, the country can default. For example, nothing is "fixed" if you hold the Argentina bonds. You might think a savings account in the bank is a fixed investment. But again, what about inflation? And if you talk with the account holders in Cyprus, you will understand there is no such thing that is "guaranteed to profit a fixed amount each month or year". So, from this point of view, everything is "halal", because nothing is fixed and the risk of losing the principal is always there.

On the other hand, if you assume that investing in a government bond and having a savings account is not halal by definition, you will end up with a situation that every investment is not halal. Suppose you invest in a company. What does the company do with your money? Sure, they will use some of your money to buy equipment, hire new people, and so on. But they will always save some money as cash reserves to meet the short-term and emergency funding needs. Those cash reserves are usually in the form of highly liquid investments, such as short-term bonds, money market funds, savings in a bank account, etc. Because those investments are not halal per definition, is your investment in the company still halal?

So in the end, you might just do whatever you want depending on your interpretation.