“O you who have believed, fear Allah and give up what remains [due to you] of interest, if you should be believers. And if you do not, then be informed of a war [against you] from Allah and His Messenger.” Surah Al-Baqarah, 2:278-279
Dealing in interest is amongst the most serious injections in Islam with clear cut (qa’ti) texts directly in the Qur’an.
And for those who argued that trading is like interest Allah (SWT) explicitly corrects this misunderstanding with “Allah has permitted trading and forbidden interest” from Surah Al-Baqarah (Chapter 2, Verse 275)
These verses have driven Muslims to establish Sharia compliant investment funds.
Rather than depositing wealth in interest bearing bank accounts, Muslims have sought investment in Sharia complaint vehicles.
Sharia compliant investment funds are a basket of companies Islamically screened to ensure that they do not trade in industries and sectors considered haram or forbidden in Islam. Examples of companies excluded include those trading in alcohol, gambling, pork based food processing, pornograhpy, and weapons manufacturing. Some funds also screen for how much a company is leveraged in debt finance and therefore involved in interest bearing transactions.
In reality most businesses have some revenues or business transactions linked to the above forbidden activities so pragmatically some Islamic scholars have ruled that as long as 5% or less of a company’s dealings are associated with these activities then the company can be included in the investment fund for it to be considered Sharia compliant.
One of the most well known Shari’a compliant funds is HSBC’s Islamic Global Equity Index. This fund has $8 billion of equity assets which are widely used by Muslim investors and UK workplace pension schemes (such as those run by Aviva, Aegon, and Fidelity).
The HSBC Islamic fund has been found to have included Palantir, a so-called defence and intelligence manufacturer, openly and unashamedly providing weapons to Israel in its Genocide in Gaza.
In April 2025, Palantir’s chief executive Alex Karp responded to accusations that Palantir technology had enabled the killing of Palestinians in Gaza by saying “mostly terrorists, that’s true”.
Further analysis into HSBC’s Islamic fund has found other weapons manufacturers directly linked to the Gaza genocide including Rolls Royce, Honeywell, Analog Devices, which supplied critical weapons components to Elbit Systems, Israel’s largest weapons manufacturer.
Elbit System’s UK site was broken into and weapons were trashed by Palestine Action members in 2024. Palestine Action has been proscribed by the British government under terrorism laws despite principally committing little more than criminal damage.
Muslim professionals have invested in HSBC’s Sharia compliant investment funds either directly via halal savings platforms or indirectly via workplace pensions schemes are asking serious questions about how such weapons manufacturers, directly involved in the Gaza genocide, a cause close to ummah’s hearts here and globally, were missed from the screening of non-compliant companies? What other undesirable companies are in the $8bn portfolio and what are HSBC Shari’a compliant fund leaders managing the fund going to do about Palantir and other weapons suppliers?
The Islamic Perspective
There is a clear sentiment to live by all the teachings, laws and rules in Islam beyond prayer and fasting amongst a wide cross section of the ummah, particularly professionals in the West. This includes in economics and politics like abiding by the prohibitions on interest and standing up for justice for the Palestinians.
This Islamic demand in business and economics has been met by the supply of a variety of Sharia compliant products and services from halal mortgages to car finance, pensions and investments. These are commercial ventures with profit, growth and market share at their core. In some cases its essence, ethics and spirit of Islamic injections have been lost and Sharia compliance has become a box ticking exercise. Sharia compliant screening rules have been cut and pasted on to a growing stream of new products without due diligence and relevance to the new political and economic realities of the day.
Then there is the implementation of the screening rules which appears to have been seriously wanting. The HSBC fund appears to benchmark against the S&P Global Islamic funds, which is tech-stock heavy. Many Tech giants have some direct exposure to defence and weapons manufacture. Scrapping investment opportunities from the S&P fund or automated/AI screening, in a drive for growth and market share, may have led to HSBCs exposure. Additionally, today’s companies have global operations, beyond their country of registration, and invariably any operations that may involve controversial weapon’s tech may be on territories beyond the lens of official authorities.
All these issues mean applying Sharia compliant criteria developed by the likes of Shaik Taqi Usmani and others decades ago may not be fit for purpose.
We’ll only know through greater transparency and accountability, which means more than pasting the funds Sharia compliant certificate of its website.
A more fundamental problem
The partnership model established by the Prophet (saw) always involved capital with ‘body’ partners. There is delegation, representation and trust (Wakala) between the ones providing capital and those who manage the day to day running of the business. This ensures that the partnership, together as one entity, would never cooperate in sin.
In today’s corporate structures of joint stock companies there is a deliberate divorce between ownership and control. Share owners or partners can not involve themselves in the operation of the business according to the memorandum and articles of association. Therefore there is no effective representation or delegation.
The shares are offered to the public and brought and sold on the open market without the permission of the existing shareholders or partners. Shareholders may die or become incompetent yet the company continues.
The shareholders are partners in capital only and there is no personal or body element in it. Thus the joint stock company upon which these Sharia compliant structures are based do not conform to the partnership or company model established by the Prophet (saw).
Trading in halal products and services only is not enough to be Sharia compliant. Moreover changing the Sharia compliant criteria to align with today’s realities will also be insufficient as the world is changing so rapidly.
The only way to ensure permanent Islamic compliance is to adopt the company structures established by the Prophet (saw)’s sunnah.
