Halal investing requires investment decisions to be made in accordance with Islamic principles. As a faith-based approach to investment management, investors often consider halal investing to be a category of ethical or socially responsible investing.
Islamic principles require that investors share in profit and loss, that they receive no interest (riba), and that they do not invest in a business that is prohibited by Islamic law, or sharia. Before investing in a company, it is necessary to evaluate its business activities and financial statements to determine where its primary revenues come from and how its balance sheet is managed. A company that meets certain criteria (mentioned below) would be halal, or permissible. If it does not meet the criteria, it would be haram, or not permitted.
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