Shariahcompliant

Shariahcompliant refers to activities, products, or institutions that adhere to Shariah, Islamic law derived from the Quran, Hadith, and other sources. The term is used most commonly in finance and investment but can apply to various commercial practices, consumer products, and organizational governance. Shariah compliance is defined by aligning with Islamic ethical and legal principles, while avoiding elements considered impermissible or haram.

Key principles include the prohibition of riba (usury or excessive interest), excessive gharar (uncertainty or ambiguity in contracts), and investments in haram activities such as alcohol, gambling, pork, and conventional weapons. Shariah-compliant outcomes also emphasize risk-sharing, asset-backed transactions, and social responsibility, aiming to promote fairness and ethical conduct.

In finance, Shariah compliance is typically ensured through a Shariah supervisory framework. Financial institutions may have a Shariah board or committee of scholars who review products, services, and investment portfolios. Standards and guidance are provided by bodies such as the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB). Institutions conduct screening to exclude haram industries and structure transactions using compliant contracts such as murabaha, ijara, musharaka, and mudaraba, among others. Investments are often screened or primed to be eligible for Shariah funds and sukuk instruments.

Governance processes include ongoing monitoring, periodic Shariah reviews, and the issuance of compliance certificates. Because Shariah interpretation can vary by region and school of thought, there can be differences in what is deemed compliant. Proponents argue that Shariah-compliant offerings provide ethical alternatives for investors, while critics note potential complexity and variability across markets.