Halal Investing: Ethical Wealth Building in Germany

Explore Halal investing in Germany with this guide covering Shariah-compliant options such as profit-sharing, Sukuk, etc. and achieve ethical and sustainable wealth 🤑.

Key Takeaways

  • Halal investing aligns with Islamic law, focusing on ethical principles similar to ESG and socially responsible investing.
  • Riba, or interest, is prohibited in Islam; alternative investments ensure compliance with Islamic financial principles.
  • Sharia investing avoids interest, gambling, and unethical sectors, for responsible and sustainable wealth-building.
  • Profit-sharing accounts in Islamic banks offer Halal, interest-free savings, suitable for short-term financial goals.
  • Sukuk are Sharia-compliant bonds offering low-risk returns through profit-sharing from real economic activities.
  • Investing in precious metals like gold and silver provides a stable, Sharia-compliant strategy for wealth preservation.
  • Cryptocurrencies are risky and controversial for Halal investing; thorough research ensures Islamic compliance.
  • Halal ETFs and mutual funds offer safer, diversified investment strategies compared to picking individual stocks.
  • Real estate, using Halal mortgages, provides high returns without interest, making it a powerful investment option.
  • Halal investment options in Germany align with Islamic principles, promoting ethical and sustainable financial growth.

Introduction: What is Halal Investing?

Halal investing has witnessed a surge in popularity in recent years, transcending its origins in the Islamic community to attract investors from diverse backgrounds. However, navigating the landscape of Islamic finance, especially in Germany, can pose challenges. In this PerFinEx investing article, we aim to demystify Halal investing and unveil the top investment options available in Germany.

To begin, let’s clarify what Halal investing entails. Translating from Arabic to English, “Halal” signifies “permissible” according to Islamic law. Contrary to a common misconception, Halal investing isn’t exclusive to Muslims. It embodies an ethical principle akin to Socially Responsible Investing (SRI) or Environmental, Social, and Governance (ESG) investing. This approach shuns investments in industries like oil, gambling, alcohol, or tobacco, aligning with values of social responsibility and sustainability.

While these ethical investment principles may not always yield superior returns compared to conventional portfolios, the growing market share of sustainable investments underscores their significance. Join us as we delve into the realm of Halal investing, shedding light on its principles and unveiling lucrative opportunities for ethical wealth building in Germany.

What is Riba in Islam?

Riba, often translated as “interest”, is strictly forbidden under Islamic law and is one of the basic principles of Islamic finance. The concept of riba goes beyond just interest; it includes any guaranteed rate of interest on borrowed money, whether it is a fixed or variable rate, which is considered exploitative and unjust. This prohibition comes from the belief that money should not be used as a commodity to generate profits without engaging in productive economic activity. Instead, wealth should be created through trade, investment in tangible assets, and participation in entrepreneurial endeavors.

The prohibition of riba means that traditional savings accounts and interest-bearing investments are not allowed for Muslims. At first glance, this restriction may seem to limit investment opportunities, but Islamic finance offers a range of alternatives that are in line with halal principles. For example, Islamic banks offer profit-sharing accounts where the income is not from interest but from permissible business activities. These accounts operate on the principle of mudarabah, where the bank and the depositor share the profits realized from the bank’s investments.

By understanding and avoiding riba, Muslim investors can ensure that their financial activities are in line with their faith, promoting a fairer and more sustainable financial system. Through innovative financial products and services, Islamic finance demonstrates that it is possible to achieve financial success without violating ethical and religious principles.

Sharia Investing

Sharia investing answers the common question we hear often: are there good Halal investment options in Germany? Absolutely. While standard financial products may not align with Sharia principles, there are almost always Halal alternatives that function similarly. During an interview with our Tax Advisor Dirk, we discussed why it’s often more beneficial to invest within Germany rather than sending money abroad. Many of you would see better returns by keeping your investments local.

One key aspect of Halal investing is avoiding “Maysir,” or gambling. This principle is beneficial for all investors, Muslim or not. It emphasizes the importance of avoiding speculative investments like day trading or certain cryptocurrencies, which often promise quick riches but rarely deliver. Statistics show that 40% of people who engage in these risky investments quit after the first month, and 80% give up within two years. Only 7% make it past five years, and even then, their returns may still lag behind the market.

To invest successfully, you should focus on stable, Sharia-compliant options. This approach ensures your investments are ethical and sustainable, providing a more secure path to wealth. So, stop gambling and start investing Halal. Here’s how.

Profit Sharing Accounts

Profit-sharing accounts are a cornerstone of Halal investing. Offered by Islamic banks, these accounts do not pay interest. Instead, they share the profits generated from the bank’s Sharia-compliant investments. These accounts are ideal for short-term financial goals, such as emergency funds or saving for a vacation. They provide a safe and ethical way to grow your savings without violating Islamic principles. By participating in profit sharing, investors can ensure their earnings are derived from permissible activities.

We already discussed profit-sharing accounts as an excellent short-term investment option. Whether you need an emergency fund or are saving for a vacation, these accounts are suitable. Since they don’t pay an interest rate, they remain Halal. Islamic banks invest the money safely and ethically, ensuring compliance with Islamic principles. The profits shared with customers are derived from these investments, making them a permissible and effective way to grow your savings. This is just one of many workarounds available for those seeking Halal investment options. Next, we will explore other avenues such as real estate, which also adhere to Sharia principles.


Next up on the list is Sukuk. Contrary to standard bonds that pay an interest rate, Sukuk are Islamic bonds that don’t pay interest. Instead, they operate on a profit-sharing basis, ensuring compliance with Sharia principles. This makes them similar to profit-sharing accounts, providing a Halal workaround for bonds.

Sukuk involve investments with minimal speculation, making them one of the least risky and most compliant Halal investment options. They are tied to tangible assets or projects, ensuring that returns are generated from real economic activities. This not only adheres to Islamic guidelines but also supports ethical and sustainable investing practices. Adding Sukuk to your portfolio can provide a steady income while maintaining alignment with your values.

Precious Metals

Among the most Halal investments are precious metals like gold and silver, which are generally safe and unlikely to lose all value. Historically, they have provided surprisingly good returns over the years and decades. The key question is how to invest in precious metals effectively. One option is purchasing physical gold, which has favorable tax treatment compared to gold ETFs. Gold ETFs may seem convenient, but they are less advantageous from a tax perspective.

By investing in physical gold or Sharia-compliant funds, Muslim investors can ensure that their investments are secure, ethical, and in line with Islamic principles. This approach not only preserves wealth but also supports a diversified and stable investment portfolio.


From the investment with the least amount of risk to the investment with the highest amount of risk, cryptocurrencies stand out for their potential for both high returns and significant volatility. The allure of cryptocurrencies, such as Bitcoin and Ethereum, often lies in the hype of rapid wealth accumulation. Stories of investors becoming wealthy overnight contribute to this appeal. However, it’s crucial to approach crypto investments with caution, particularly within a Halal investment framework.

Cryptocurrencies can be a viable option if they constitute only a small portion of your portfolio—essentially, an amount you can afford to lose. Despite the excitement, the crypto market is highly speculative and lacks the regulatory safeguards present in traditional financial markets. Additionally, the involvement of some cryptocurrencies in Haram activities, such as gambling and money laundering, raises ethical concerns. This makes it challenging to ensure that your crypto investments are truly Halal.

Years of research indicate that while some cryptocurrencies might align with Halal principles, many do not. Therefore, if you are committed to Halal investing, it’s essential to conduct thorough due diligence. This includes understanding the regulatory landscape and ensuring that the cryptocurrencies you invest in adhere to Islamic ethical standards.

ETFs & Mutual Funds

When it comes to Halal investing, Halal ETFs (Exchange Traded Funds) and Halal mutual funds offer a multitude of options, aligning well with the principles of ethical investing similar to ESG (Environmental, Social, and Governance) and SRI (Socially Responsible Investing) frameworks. While it’s possible to invest in individual stocks, a study from Arizona State University highlighted that over the last 90 years, 96% of individual stocks underperformed compared to one-month treasury bills. This underperformance suggests that the risk-adjusted returns of many individual stocks are not worth the risk, making a compelling case for diversification.

ETFs and mutual funds provide this diversification by pooling investments across a wide range of stocks, reducing the overall risk. This approach is particularly beneficial for those who are not confident in their ability to pick the few stocks that might outperform the market. Instead, investing in the entire market through diversified funds ensures a more stable return over time.

For mid-term investments, a standard brokerage account is suitable for buying Halal ETFs or mutual funds. However, for long-term goals, such as retirement, holding these funds within a pension account is advantageous due to significant tax benefits. The right type of pension can yield tens of thousands of euros in tax savings annually, enhancing the growth potential of your investments. For more details on how to maximize these benefits, check out this comprehensive guide.

Real Estate Investment

Real estate stands as the pinnacle of investment opportunities, offering unparalleled advantages, especially when leveraging with a mortgage from a bank. This leverage can amplify returns, potentially leading to substantial profits. However, it’s crucial to recognize that real estate investment isn’t a guaranteed path to riches. Many individuals have faced financial ruin due to a lack of knowledge or poor investment decisions.

The key to successful real estate investment lies in selecting the right property tailored to your financial situation. While public listings may seem enticing, they often do not meet the criteria for optimal returns. For instance, one of our clients recently invested less than €29,000 of their own funds, covering closing costs and furnishings, while securing a 100% mortgage from the bank. This scenario showcases the potential for high returns, with an impressive return on equity exceeding 20% per year.

It’s important to note that this return on equity isn’t solely based on rental income or property appreciation. Rather, it’s derived from leveraging a small initial investment with a substantial mortgage. To explore similar investment opportunities tailored to your needs, consider scheduling a free meeting with us.

In terms of Sharia compliance, real estate investment operates under similar principles with slight variations. While traditional mortgages are not considered Halal, various Halal mortgage options are available. These options typically involve arrangements where the bank either leases the property to the investor or jointly purchases the property, gradually transferring ownership over time with each monthly payment.


In conclusion, we’ve explored a comprehensive range of Halal investment options available in Germany. While we’ve endeavored to provide accurate and insightful information, we acknowledge that our understanding may not fully align with the perspectives of Muslim investors (we are not Muslims). We’ve conducted extensive research to present these options, but we welcome any corrections or feedback from our audience.

Investing in accordance with Islamic principles offers a pathway to ethical wealth-building and financial security. From profit-sharing accounts to real estate investment and Sharia-compliant bonds, there are diverse opportunities for investors to grow their wealth while adhering to their religious beliefs.

As we strive to continue providing valuable insights into Halal investing and financial literacy, your engagement and feedback are invaluable. We look forward to sharing more informative articles with you in the future. Stay tuned for our upcoming content, and thank you for being a part of our community. If you need help with Halal investing in Germany, feel free to book a meeting with us.

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