Investing for Passive Income? Here Little Known Facts

You must have heard the term passive income, right? Even many Muslims now use this term to describe income that flows without having to work hard continuously. But, what exactly does passive income mean? Is this concept really in accordance with Islam?

So, what does it have to do with investment? Is investment a passive income? Or is it different?

Well, before we jump straight into the world of investment and passive income, it is very important to first understand these terms clearly. So that we do not just follow trends, but remain on the path that is halal and blessed according to the law of Allah ﷻ .

What is Passive Income?

Maybe you’ve heard the term passive income, and the image immediately goes like this: “Get money without having to work hard continuously, sometimes just sitting at home.” Sounds interesting, right? Who doesn’t want to have income that continues to flow even when lying down?

According to Wikipedia’s definition, passive income is “income earned repeatedly without having to be continuously actively involved after the initial effort is made” (Wikipedia, 2023). For example, you invest once, then the money “works” itself to generate profits, without you having to be directly involved every day.

But if we look at it from an Islamic perspective, this concept cannot be swallowed raw. In Islam, every income should ideally come from a legitimate and clear business. This means that getting profit without any role, effort, or risk at all—it is worth reviewing: is it really in accordance with sharia principles or is it actually off track?

Islam teaches that profit is proportional to the risk and contribution given. So, if someone says he gets money just by sitting still, without effort and without risk, we need to be alert. It could contain elements of usury, gharar (uncertainty), or practices that are not halal in the eyes of sharia.

The point is, not everything that is called passive income out there is automatically halal. We still have to be observant, so that the income we get is truly blessed and approved by Allah ﷻ .

Also read: How to Avoid FOMO in Investment

Business and Risk: Why Does It Matter?

When talking about income in Islam, these two things cannot be separated: effort and risk . Why? Because in Islam, something halal comes from clear work and contribution. There is no such thing as profit without movement, or getting results without responsibility.

Prophet Muhammad ﷺ said:

خير طعام يأكله الإنسان من عمل يده
“The best food a person eats is from the results of his own efforts.”
( HR. Bukhari )

This hadith clearly shows that Islam highly values effort. In fact, hard work is not just about earning money, but also a form of honor for a Muslim in maintaining the honor of himself and his family.

Well, in the world of muamalah (worldly affairs such as business, investment, buying and selling), risk also plays an important role. The scholars agree on the rule:

الغُنْمُ بالغُرْمِ
“The benefits go hand in hand with the risks.”

That is, if you want to get results, then be prepared to bear the risk. If you invest, of course there is a possibility of profit but there is also a chance of loss. As long as the risk is reasonable, clear, and agreed upon from the start, then that is what is recognized by sharia.

Therefore, income that suddenly comes without us knowing where it comes from, without contribution, without clarity, even without risk it is suspicious. It could be that there are prohibited elements such as usury, gharar (uncertainty), or maysir (excessive speculation) which are prohibited in the Qur’an.

So, when we talk about passive income, it is very important to evaluate:

●       Am I really taking part?

●       Was there any initial effort or at least supervision?

●       Are the benefits worth the risks involved?

Because in Islam, it is not only the results that are looked at, but also how to get them .

With the same relaxed, flowing style of chatting, but still sharp and sharia-compliant—here is the continuation of the article:

Also read: The Urgency of Studying Islamic Economic Thought

Is Investment Included in Passive Income?

Well, this is a question that often comes up: “So, is investment a passive income?” The answer is it could be yes, it could be no. It depends on the type and how to play it.

In general, investment is often referred to as a form of passive income. For example, you buy a property, then rent it out. Or you have business capital, and there is a profit sharing every month. It seems like you just sit back, but the money keeps flowing.

But in Islam, again we have to look behind the scenes :

●       What efforts are being made?

●       What risks are involved?

●       Is the contract and profit sharing clear?

For example, in a mudharabah or musyarakah contract, investors can gain profits from a business run by another party, but with the following conditions: clear capital, shared risk, and profit and loss divided according to agreement. This is halal and in accordance with sharia, because even though the capital owner is not directly involved in the business, he still has a contribution: bearing the risk and providing funds .

This means that investment can be a passive income, as long as the requirements are met. Don’t let the investment that is said to be “halal” actually provide a guarantee of fixed results every month without risk, this can actually be categorized as usury. Because in Islam, profit cannot be guaranteed without risk.

So, you can still get passive income from investing, as long as you know:

●       The money is invested in halal businesses

●       There are clear risks

●       There is clarity regarding the agreement and distribution of results

In essence, it is not a matter of sitting back and relaxing, but whether the method of obtaining it is in accordance with Islamic law or not.

Also read: Profit Sharing or Usury? Know the Difference from the Start 

Conclusion: To Make a Profit, Don’t Just Follow Trends

Passive income is indeed attractive, who doesn’t want to earn money while lying down? But in Islam, all profits must be balanced with effort and risk. There is no such thing as profit without any work at all.

Investment can be a passive income, as long as the method is halal. The contract must be clear, the business must be real, and free from usury. So, it is very important for us to understand the concept first before following suit.

Remember, Islam does not forbid profit. But Islam teaches us to seek profit that is blessed and fair . So that it is not only profit, but also peace of mind.

Also read: Sharia Compliant Investments for Beginners

Let’s Visit, Zeed and join for halal investment with Zeed.

Reference:

Wikipedia. (2023). Passive Income . Retrieved from https://en.wikipedia.org/wiki/Passive_income
Republika.id. (2023). Passive Income in Islamic Views. Retrieved from https://www.republika.id/posts/20432/passive-income-dalam-dengan-islam
Al-Bukhari, Muhammad bin Ismail. Sahih al-Bukhari. Accessed from https://www.hadits.id/hadits/bukhari
Ibn Qudamah. Al-Mughni , Juz 5.
Hadith: “Al-kharaj bi al-dhaman” (Narrated by Abu Dawud and Tirmidhi, graded hasan by Al-Albani).