Is Stock Market Haraam?

[razia_jaan]

Can Someone Tell Me If Stock Market Is Haraam Or Halal?. A Friend Asked Me About It And I Didnt Have The Answer.

[al_islam]

I seen many different verdicts on it.

Im not sure what the majority consensus is.

Some say Its just about halal, Others say ot haram and some that its neither.

Please bring forward Fatwas or evidences of documents Inshallah I will too.

[fahid]

Response from Sunnipath (LINK)

In the name of Allah, Most Compassionate, Most Merciful,

To invest in the share of a particular company or to purchase shares a company’s from the stock market has been a matter of debate between the contemporary scholars.

Some contemporary scholars (who are very few) are of the opinion that it is not permissible to invest in shares. There basic argument is that, shares do not represent an ownership for the share-holder in the company’s assets, rather the share certificate is a document that signifies lending of some amount of cash to a particular company. The dividend which one receives will be considered interest (riba), thus unlawful.

The majority of the scholars, however, do not agree with this opinion. Scholars such as, Shaykh Ali al-Khafif, Dr. Wahba al-Zuhaili, Shaykh Taqi Usmani and others have declared investing in the shares of companies lawful (halal) subject to certain conditions.

They say that the share certificate actually signifies an ownership in a company for the share-holder. His ownership is in proportion of his investment in the company. This is the reason why if the company was to become bankrupt, the share-holder will not regain his investment in the state of cash, rather he will receive the company’s assets according to his proportionate ownership.

Therefore, it will be permissible to invest in the shares of companies, and the share certificate will not imply lending cash to the company.

If one intends to purchase shares from the stock market, it will be permissible with adherence to the following conditions:

1) The main business of the company must be lawful (halal). Therefore, to purchase shares of a company whose main business is unlawful, such as interest bearing banks, insurance companies, companies manufacturing and selling liquor, etc... would not be permitted.

If the main business of the company is Halal, such as a textile company or a telecommunication company, then it will be permissible to subscribe to its shares.

2) Many companies, despite their main business being Halal may be involved in interest dealings in one way or another. Due to this the following is necessary:

a) One should object to the interest dealings, preferably in the annual AGM. By doing so, the responsibility will be deemed fulfilled.

b) When the dividend is distributed, the proportion of the company’s income which was gained by interest dealings must be given in charity without the intention of receiving reward, as is the case with unlawful money in general. This amount (interest accumulation) may be known by means of the income statement.

3) The company whose shares one intends to purchase must have some illiquid assets in its possession. They must not all be in liquid form (i.e. cash, cheques, bonds, etc…). If all of the company’s assets are in liquid form, then the share cannot be sold or purchased except at face value.

The reason for this is that the share in this case represents money only, and money cannot be traded in except at par.

If the above three/four conditions are complied, then it will be permissible to trade in shares from the stock market.

As far as working as a stock broker is concerned, the work normally consists of buying and selling shares on behalf of a client. In the light of the above, it becomes clear that those shares in which it is permissible to trade, his work will also be permissible, and vice versa.

Therefore, it would be better not to work as a stock broker. However, if one is able to save oneself being involved in unlawful trading then it will be permissible.

And Allah knows best

Muhammad ibn Adam, UK

[al_islam]

Trading in Shares and Stocks

In the Name of Allah, Most Gracious, Most Merciful.

All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.
Dear questioner, we would like to thank you for the great confidence you place in us, and we implore Allah Almighty to help us serve His cause and render our work for His Sake.

Responding to the question, Dr. Monzer Kahf, Scholar in Islamic Economics & Financial Expert, states the following:

"Stocks/shares are basically of two kinds: common and preferred. If the preference in preferred shares in financial such as guaranteed minimum return, priority in payment at time of liquidation and the like, preferred stocks/shares are then prohibited because equal owners of the companies principal must be treated equally. They are forbidden to issue, buy, own and sell. If the preference is managerial they may be permissible.

Common stocks are not prohibited from this point of view. From another angle, stocks/shares may belong to companies that are fully compatible with the Shari'ah in establishment and all activities such as Islamic Banks, to companies whose main and major business is forbidden such as conventional banks or Las Vegas type entertainment companies, or to companies whose main/major business is permissible but their articles of incorporation allow them to undertake activities that are prohibited in the Shari'ah and their management actually do such activities, this category covers most companies on the stock exchanges such as Microsoft, Intel, Sony, General Motors, etc. because they are involved in at least one kind of impermissible transaction, i.e., Riba-based borrowing and/or lending.

Obviously, the Shari'ah ruling on issuing, buying, owning and selling the first category is permissible while prohibited on the second.

The third category is troublesome and needs certain details. It is prohibited for a Muslim to establish a company that indulged in prohibited activity and consequently, it is also prohibited to issue its stocks and offer them to the public for sale. The principle must be that it is also prohibited to buy and own such a stock because by doing so the owner becomes in fact a partner in the company whose management take up prohibited activities on behalf of all its owners as their deputed officers. In other words, the management acts as your agent, this means, you are doing this prohibited activity.

In this regard, two points are important. If one buys such stocks with the intention (that is coupled with ability) to convert such a company into all halal activities through having a majority in its board and general assembly, such a purchase is certainly permissible because it reduces the haram in the
world, although the process may take a few month or may be a year or two.

The second point (that may be more relevant to the questioner) is buying and owning such stocks as a small investor and a small minority holder to get benefit from expected capital gains and from dividends.

A small group of Muslim scholars argue that this category of stocks may be purchased and owned for investment within certain conditions that can be summarized in being sure that the prohibited activities do not make a high percentage of the total activity of the company. These include that the company does not have high rate of liability/asset, i.e., it does not live on loans, it does not earn a lot on interest it is not involved in activities that basically hurt the interests of Muslims such as producing and selling arms attackers of Muslim people.

Based on these conditions, Dow Jones in cooperation with a group of Muslim scholars have studied the registered stocks and make a list that is issued under the name of Islamic Market Dow Jones Index."

http://www.islamonline.net/servlet/S...=1119503543638

[Ali al-Hanafi]

Don't let Abuhajira know about this thread, all Hell'll break loose! lol!

[al_islam]

Don't let Abuhajira know about this thread, all Hell'll break loose! lol!

Ws,

If this is bad,

Then lets hope he doesnt find mine about the US stock economy....

[abuhajira]

haha lol...

Actually our Darul Iftaa has a well over 100 page recorded correspondence on shares and stocks... the correspondence is between the Ulama discussing the permissibility or impermissibility of it.. but you can tell from the flames on the cover of this booklet that Darul Iftaa rules it impermissible

InshAllah I will post the link for it..

Debate on Shares
Appendix A
Appendix B
Appendix C

[razia_jaan]

asalam alykum brother give me a yes or no answer, is it allowed or not?

haha lol...

Actually our Darul Iftaa has a well over 100 page recorded correspondence on shares and stocks... the correspondence is between the Ulama discussing the permissibility or impermissibility of it.. but you can tell from the flames on the cover of this booklet that Darul Iftaa rules it impermissible

InshAllah I will post the link for it..

Debate on Shares
Appendix A
Appendix B
Appendix C

[abuhajira]

Darul Iftaa - Camperdown's (Mufti Ebrahim Desai's) opinion is that it is not permissibile because of the issues with limited liabilities.

As for myself I still have a few issues I need to clarify with Mufti Vawda and Mufti Desai .. which doesnt mean I am some allama :P it simply mean for me to understand their view completely I need to clarify few issues.. I follow their opinion...

[umairel]

As contradictory opinions are found about it, what is current position of jamhoor ulema?
If not permissible, what is better alternative of it?