A - Buying stocks makes you a partner/owner in the company and in Shari'ah it is
forbidden for a Muslim to make decisions that involve Haram transactions, even if these
transactions are done, on his behalf, by his partners. This is the reason for the OIC Fiqh
Academy resolution that: In principle, it is forbidden to buy, own and sell stocks of
companies that do sometimes forbidden transactions although their main line of business
may be within permissible limits.
The exception a handful of Ulama took is essentially based of removing a substantial
Haraj (inconvenience) in relation to those Muslims, like you who deal in stocks and have
not much of other expertise to use their savings.
You see that we can sort stocks into three categories: 1) permissible, the example of
which is stocks of Islamic banks; 2) forbidden; where the main line of business is Haram,
such as conventional banks and alcohol, tobacco, and Pig producers and distributors; and
3) the majority of companies, where the main line of business is permissible, but the
management undertakes some transactions that are forbidden, such as Riba-based
contracts, sale of certain goods before they take possession of them, make parties for
guests and employees with alcohol and cigarettes offered, etc.
Those Ulama who attempt to remove the inconvenience came up with a few criteria to
test the permissibility. These criteria are:
1- Main line of business must be permissible;
2- Percentage of dependence of loans (leverage) must be not high, and they considered
one-third to be a limit for what is high (we have several use of the one-third in Fiqh as a
criteria of what is high: Last Will, Gharar, Jahalah, etc.) Leverage is measured as
percentage of loans to total assets;
3- Indulging in prohibited transaction must not be high. as an example they take Riba and
assumed that a company that has too much cash in banks and too much receivables to
mean that it has too many Riba-based use of their assets, considering one half is a limit
here, that is one half of their assets is a limit for total of cash and receivables;
4- Income from prohibited transactions, such as Riba, must be low, no more that 5% to
10%.
5- The main line of business must not be in an Area that is harmful to the Muslim
Ummah, such as American military industry that usually cooperate with Israel and other
aggressors against Muslims.
6- Once these criteria are applied, you still need to calculate, or at least make an educated
estimation of, the proportion of Haram in the income you get from a stock (this covers
both dividends and capital gain) and exclude that proportion from your own wealth or
property by giving it to charity or similar disbursements for the general welfare of the
Ummah, you may not use this part of income to make up a loss you otherwise incur or to
pay taxes the law requires you to pay, etc.
'Umar, may Allah be pleased with him, has a relevant statement: He who does not know
the Fiqh needed to play in our market must stay away from it. My dear Brother you need
to either acquire the technical know-how to apply these points or to hire someone to do it
for you or quit that market.
B - You cannot use an income you know it is Haram for you to compensate a loss of any
asset of yours, stocks or otherwise, because that Haram income is not yours. I belong to
whoever paid it to you and if you do not know the payer, or it is in contradiction with
rational behavior to return it to the payer (as is the case here because the payer is a Riba
player) , You have to exclude it from your own property by giving it to charity. Yes, you
still have to give that amount away.
Post time 13-12-2007 05:04 PM
(Mcm tak sabor pulak nak amik exam?)
