Mu' meneen Brothers and Sisters,

As Salaam Aleikum wa Rahmatullahi wa Barakatuh.  (May Allah's Peace, Mercy and Blessings be upon all of you)

One of our brothers/sisters has asked this question:

how far is it true that investing and trading in the stock market is forbidden in our coummunity? 

(There may be some grammatical and spelling errors in the above statement. The forum does not change anything from questions, comments and statements received from our readers for circulation in confidentiality.)

Answer:

Stock Market Halaal or Haraam?

In the name of Allah, We praise Him, seek His help and ask for His forgiveness. Whoever Allah guides none can misguide, and whoever He allows to fall astray, none can guide them aright. We bear witness that there is no one (no idol, no person, no grave, no prophet, no imam, no dai, nobody!) worthy of worship but Allah Alone, and we bear witness that Muhammad (saws) is His slave-servant and the seal of His Messengers.

According to the view of most scholars in Islam, there is nothing wrong in the investment of shares and the stock market.

But the scholars have given a few guidelines to follow, to make sure that that the income is halaal and in accordance with Shariah.

The principle of haraam/halaal in Islam is that, the haraam is listed, and everything which does not fall in this haraam category is deemed halaal. For example, Allah and His Messenger (saws) have termed intoxicated drinks as haraam. Now every other kind of drink, like Water, Juice, Coke, Milk, etc. and all its variations are deemed halaal, as long as they are not intoxicating.

The three main factors that make a stock haraam according to the scholars, is as follows:

The company should not deal in a product which is haraam in Islam. Eg. alchohol, prostitution, usury, pork, etc.

The company should not deal in a product which is used to harm a muslim country. Eg. Arms manufacturing in a pagan country, etc.

Only the pure buying, holding, and selling of stocks is termed halaal by the scholars. All types of other derivitive transactions like shorting the stock, buying calls, selling calls, buying puts, selling puts, straddles, or any other variations are not legal.

There are other small factors like the ratio of debt and percentage of ‘cleansing’ in the profits which the scholars have advised to be on the safer side when one meets with Allah on the Day of Judgement. But on the whole, the business of shares investment is halaal and should be treated like any other trading business, as long as the commodity being traded is not itself haraam.

Whatever written of Truth and benefit is only due to Allah’s Assistance and Guidance, and whatever of error is of me. Allah Alone Knows Best and He is the Only Source of Strength.

Your Brother in Islam,

Burhan