Is it permissible to invest in stock markets in Islam?
What is the opinion on having ‘cash-back’ credit cards?
Thank you.
Re: Finances
Any answers folks?
Re: Finances
I'm not an expert on this and I'm sure someone more knowledgeable will give you some answers.
In Islam, investing in a business is okay. Muslims are in fact encourage to engage in investment and partnerships to finance and run businesses. As far as I know, day-trading is not halal in Islam. Also fundamentally, you're engaging in speculation and you're not really investing. You're essentially gambling on a share to jump in value and looking to sell when it does. Almost all the time you will engage in credit transactions so that'd invalidate its permissibility. Investing and Speculation; there's a big difference between the two terms. So as far as my limited knowledge goes, trading shares in the stock market is not okay unless it is run on Islamic principles. I'd imagine those to be a minimum term for your investment to be locked in and utilized by the product/service you believe in and of course things like interest and the nature of the business itself (Halal/Haram).
Sorry, not sure on the cashback credit cards. I tend to stay away from credit cards. My debit will work just fine.
Re: Finances
as long as the company does not make haram products like drinking alcohol or such, yes investing in stock is halal.
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yes investing in stock is halal.
Aye, as long as the investor performs due diligence on the activities and nature of the business. And as I said, stay away from dealing in credit. Always sell what you possess.
Found a great answer, have a read.
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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."
You can also read:
Investing in the Stock Market
If you have any further questions, please don't hesitate to write back!
May Allah guide you to the straight path, and guide you to that which pleases Him, Amen.
Re: Finances
I'm not an expert on this and I'm sure someone more knowledgeable will give you some answers. In Islam, investing in a business is okay. Muslims are in fact encourage to engage in investment and partnerships to finance and run businesses. As far as I know, day-trading is not halal in Islam. Also fundamentally, you're engaging in speculation and you're not really investing. You're essentially gambling on a share to jump in value and looking to sell when it does. Almost all the time you will engage in credit transactions so that'd invalidate its permissibility. Investing and Speculation; there's a big difference between the two terms. So as far as my limited knowledge goes, trading shares in the stock market is not okay unless it is run on Islamic principles. I'd imagine those to be a minimum term for your investment to be locked in and utilized by the product/service you believe in and of course things like interest and the nature of the business itself (Halal/Haram).
Agreed.
Realistically speaking, it's pretty much haraam to invest in Western stock markets given the fact that nearly all companies are likely to have some level of gearing. Even Pakistani public limited companies are mostly financed by interest based debt. So technically investing in stock is quite halal, practically it is quite difficult because of all the conditions attached.
Re: Finances
Thanks a lot folks.
One clarification needed, if someone can help it will be much appreciated.
I do use a credit card but pay it off with my debit card every month so that zero interest accrues. The purpose is to build credit history which is important here.
In this case, is there anything wrong with cash back credit cards?
Say I spend 200 bucks and there is a 2% cash back policy, 4 bucks will go into my account. (of course as clarified, the 200 spent are always paid up by me on time without having to pay interest). Basically I guess you can call the 4 bucks free money that you get without working for it.
Halal?
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TLK you say it's halal. Can you give me a couple examples of what companies in the US would be considered halal for this investment?
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Again from my limited knowledge I have been told by friends and also read online that cash back credit cards are okay. As long as you don’t accrue any interest on yourself. The 2% or whatever the bank offers you is not interest, its a reward for being their customer. So that would be halal.
The Dow Jones has an Islamic Markets Index which is now called the Iman Fund. Its been there for a long time now and its basically for people looking to invest in Shariah compliant companies.
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what GDISA said.... furthermore..... if you want to make sure that you are investing in 'halaal' business....you can always check with islamic mutual funds etc....they have strict criteria on which they determine their investment portfolio......they continually assess the company and when it fails to meet the criteria they disinvest in that company.....
the criteria is usually based on halalness of the business being carried out, gearing level (interest based financing of the company) etc etc.....
usually islamic financial institutions offer market competitive returns to their investors...so if you chose an islamic fund....you wouldn't be suffering much monetarily....on the other hand you can be a little bit assured that it is 'somewhat' halaal....
Re: Finances
Thanks a lot GIDSA. That helped a lot!
Also, thank you Nomi and Rizla 