Shariah Compliance in Gold Investment: Industry Perspectives on Hadith, Riba and Gharar in Malaysia’s I Finance Sector

Abstract

Gold investment remains a central instrument in contemporary Islamic finance due to its historical role as a store of value and its intrinsic characteristics, which align with Shariah principles prohibiting interest-based transactions and speculative financial products. In the Malaysian Islamic finance landscape, gold investment is further shaped by regulatory oversight and Shariah governance frameworks that seek to balance innovation with classical jurisprudential requirements. The rapid expansion of digital gold platforms has raised critical questions regarding Shariah compliance, as gold is classified as a ribawi item subject to riba al-faḍl and riba al-nasī’ah, as outlined in authentic hadiths within Al-Kutub al-Tisʿah. These concerns are particularly significant in Malaysia’s Islamic finance sector, where technological advancement has accelerated the use of non-physical gold transactions. Ensuring compliance requires careful examination of underlying Shariah contracts and operational frameworks. This study investigates Shariah issues in modern gold investment through industry players’ understanding of hadiths, their application of fiqh muamalat principles, the concept of qabḍ (possession), and the use of ijtihad in validating investment contracts. A qualitative methodology, combining in-depth interviews with ten informants including Shariah advisors, fiqh muamalat scholars, academics, and industry practitioners, and document analysis, was employed to capture insights into structuring Sharia-compliant gold products. Findings indicate that industry players primarily rely on secondary references and often lack understanding of the legal rationale (ʿillah), maqasid, and contextual background (sabab wurūd) of hadiths. Key challenges include ambiguous application of qabḍ, riba arising from delayed or unequal exchanges, and gharar linked to ownership uncertainty. A significant gap exists between hadith texts and industry guidelines, resulting in procedural rather than substantive compliance. The study recommends developing comprehensive hadith-based Shariah guidelines that integrate takhrij al-hadith, maqasid al-Syariah, and qawaʿid fiqhiyyah with operational practices. Strengthening hadith literacy and establishing specific Shariah standards for digital gold are essential for ensuring consistency, legal integrity, and genuine compliance within Malaysia’s Islamic financial market.