Beyond Muslim investors: How Islamic finance sharpens investment discipline

A QUESTION I hear most often is whether Islamic finance is relevant to investors who are not Muslim. My answer is yes.

This does not mean Islamic finance is trying to become something it is not. It remains firmly rooted in syariah principles.

Its wider relevance lies in the questions it asks of every investment: What is the capital financing? How much debt sits behind the business? Are returns supported by real economic activity? Does the investment encourage responsible ownership or reward excessive speculation?

These questions matter to families preserving wealth, entrepreneurs managing the proceeds of a business, and investors deciding how capital should be deployed over decades.

Global Islamic finance assets reached US$5.98 trillion in 2024, an increase of 21 per cent from the previous year, according to data in a report by the Islamic Corporation for the Development of the Private Sector and London Stock Exchange Group (LSEG), Islamic Finance Development Report 2025: 50 Years of Exponential Growth.

Scale alone does not establish investment merit, but it shows that Islamic finance is no longer peripheral to global markets.

Looking beyond exclusions

Islamic investing is often explained by what it excludes. Yet, exclusions are only one part of the framework.

Syariah-compliant investing considers both the financial characteristics of an investment and the nature of the underlying business. Certain sectors are excluded, while financial screens consider areas such as debt and interest-based income.

This brings greater discipline to how capital is allocated and returns are generated.

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Here, Islamic finance intersects with values-based and sustainable investing.

Both ask what capital supports. Their areas of overlap include ethical screening, responsible business conduct, transparency, stewardship and the avoidance of activities considered harmful to society.

The two frameworks are not interchangeable.

Syariah compliance is grounded in Islamic principles, while ESG methodologies differ across providers and markets.

A sustainable label does not establish syariah compliance, just as syariah compliance does not automatically demonstrate strong environmental or social performance.

Investors still need to understand what they own, how the structure works, how returns are generated and where the risks lie.

Discipline can influence resilience

Syariah-compliant equity investing typically applies sector and financial ratio screens.

These may limit exposure to companies carrying excessive leverage and encourage closer scrutiny of balance sheet quality and business activity.

Historical index data shows that selected syariah-compliant benchmarks have outperformed conventional counterparts over some periods, and underperformed over others.

Sector composition matters. Excluding conventional financial institutions, for example, may result in greater exposure to technology or other sectors.

The case is not that Islamic investing will always produce higher returns or avoid market losses. Its screening process asks investors to examine leverage, financial quality and economic substance more deliberately.

This may influence how a portfolio behaves across a market cycle, but it does not remove valuation, currency, liquidity or company-specific risk.

Resilience should be the result of sound portfolio construction, not a promise attached to a label.

A wider opportunity set

Sukuk is perhaps the most familiar part of Islamic capital markets. It is often compared with conventional bonds, although structures, investor rights and sources of return can differ.

For private wealth investors, sukuk can provide access to sovereigns, companies and projects across the Gulf, South-east Asia and other markets.

These regions are investing in infrastructure, digital development, energy transition and economic diversification. They may offer sources of income and growth that are under-represented in a traditional developed market portfolio.

Sustainable sukuk also illustrates the common ground between Islamic and sustainable finance.

The International Capital Market Association, the Islamic Development Bank and LSEG reported that more than US$42 billion of sustainable sukuk had been issued from 2017 to the first quarter of 2024, supporting eligible environmental and social objectives.

Diversification is not automatic. The benefit depends on the investor’s existing holdings, as well as the issuer, sector, geography, currency and underlying credit risk.

Sukuk investors must still consider liquidity, duration and the legal features of the structure.

Islamic investments are best viewed as a complementary part of the wider opportunity set for non-faith-based investors, not necessarily as a replacement for conventional allocations or a separate defensive category.

From wealth creation to stewardship

For affluent families, investment performance is only one part of the challenge.

They are also thinking about governance, succession and whether the next generation is ready for the responsibilities that accompany wealth.

Islamic wealth management takes a broad view of this journey, covering the creation, accumulation, preservation, purification and distribution of wealth. Its emphasis on responsible ownership, risk sharing and long-term stewardship can resonate with families from different backgrounds.

In our conversations with clients, the discussion is rarely about finding another product. It is more often about constructing a portfolio and investing for a purpose.

What should the wealth achieve? How should risk be managed? How can family members be prepared for ownership? How can capital be transferred without weakening the values or enterprise that created it?

We have developed Islamic wealth management as an advisory capability, rather than a collection of standalone products.

Our group Islamic wealth management wealth fee income doubled in the first half of 2026 compared with the same period in 2025, reflecting demand for an approach that brings investment decisions and long-term stewardship together.

The broader value of Islamic finance is not that it offers a guarantee of safety or superior returns.

Rather, the discipline that it brings to capital, risk and responsibility helps to improve portfolio resilience and nurture positive social impact.

It asks investors to look closely at what they own, how returns are generated, how much financial risk they are taking and what purpose their wealth is intended to serve.

Those are questions every long-term investor should be prepared to answer.

The writer is head of group Islamic wealth management, Maybank