Ulamaa ID 04
Answer last updated on:
24th October 2012
Ulamaa ID 04
Al-jawab billahi at-taufeeq (the answer with Allah's guidance)
Trading in stocks is permissible in the Shari'ah subject to the following conditions:
1. The main business of the company is not violative of Shari‘ah. Therefore, it is not permissible to acquire the shares of the companies providing financial services on interest, like conventional banks, insurance companies, or the companies involved in some other business not approved by the Shari‘ah, such as companies manufacturing, selling or offering liquors, pork, Haram meat, or involved in gambling, night club activities, pornography etc.
2. If the main business of the companies is Halal, like automobiles, textile, etc. but they deposit their surplus amounts in an interest-bearing account or borrow money on interest, the share holder must express his disapproval against such dealings, preferably by raising his voice against such activities in the annual general meeting of the company.
3. If some income from interest-bearing accounts is included in the income of the company, the proportion of such income in the dividend paid to the share-holder must be given in charity, and must not be retained by him. For example, if 5% of the whole income of a company has come out of interest-bearing deposits, 5% of the dividend must be given in charity.
4. The shares of a company are negotiable only if the company owns some illiquid assets. If all the assets of a company are in liquid form, i.e. in the form of money they cannot be purchased or sold except at par value, because in this case the share represents money only and the money cannot be traded in except at par.
(An introduction to Islamic Finance, by Mufti Taqi Uthmani (DB))
And Only Allah Ta'ala Knows Best.