Sadaqah and Investing: Building Wealth with Purpose

Sadaqah, voluntary charitable giving in Islam, is not in opposition to building wealth. A Muslim investor can grow their portfolio significantly while maintaining a consistent practice of charitable giving that purifies their wealth and earns ongoing reward.

The Blessing of Charitable Giving

Multiple hadith confirm that sadaqah does not decrease wealth but rather increases it through Allah's barakah. Many Muslim investors report experiencing this practically over long investment horizons. Treating sadaqah as a normal part of your financial plan is both spiritually and practically sound.

Percentage-Based Giving

Many Muslim investors commit to giving a fixed percentage of investment returns as sadaqah, above and beyond their obligatory zakat. Common commitments are 10-20% of annual portfolio gains. This scales naturally as wealth grows.

Purification of Questionable Income

If you hold stocks in companies where a small portion of revenue is from borderline activities, you should purify a proportional amount of dividends received. Calculate the percentage of non-compliant revenue and donate that fraction of your dividend income.

Waqf: Endowment Investing

A waqf is an Islamic endowment where assets are dedicated permanently to charitable purposes, with only the returns distributed for charitable use. Modern waqf structures allow investors to create lasting charitable impact while preserving capital.

Building a Sadaqah Practice

Consider automating your sadaqah giving through standing orders to trusted charities. Treat it as a non-negotiable expense in your financial plan, similar to zakat. The combination of obligatory zakat and voluntary sadaqah makes Islamic finance a system designed to circulate wealth throughout society.