Islamic Investment Behaviour

Abstract

In the past decade there has been strong growth in Islamic finance and banking across the globe. This has also been coupled with a movement towards the implementation of Islamic law amongst it adherents. This paper uses an experimental design to investigate the investment behaviours of a group of Muslims. Using Islamic law as guidance we argue that investment in shares is permissible in Islam pursuant to five conditions. Furthermore, we find that the Islam does influence investment behaviour, however the degree to which it does this is influenced by the degree of religiosity of the individual. In addition, we find evidence of ‘western style’ wealth maximisation amongst Muslim investors as well as a desire to consider sustainable investment principles in asset allocations. These findings have implications for investors, financial advisors, and policy makers.