Fatwa #261715 April 2001United States of America
Criteria for investing in halal business/stock
Question
Alot of the stocks in DJ Islamic Market Index DJIM are technology stock like microsoft, oracle , and all these companies do business with companies involve in unacceptable primary business activities ( Alcohol , Pork related products , Conventional financial services (banking, insurance, Entertainment (hotels, casinos/gambling, cinema, pornography, music, etc.) i.e they all use software made by microsoft or oracle etc. Q-is it halal to do business with intstitutions involve in haram business? Q-if its halal is there any percentage of revenue / profit generated through these business activities Q-islamiq.com uses a "5 percent rule", (which is the maximum level of non-Shari'ah compliant activities or tainted income sources that are considered "tolerable") . is it halal to invest in a company with less than 5% profit generated from interest or other unacceptable activities Q-is day trading halal? Q-is there a minimum time period b/w buying and selling a stock Q - how to adjust inflation in islamic loan Q - if interest rate is less than inflation is halal to take loan from a bank Q -is it halal to work as contractor for a bank, or any intstitution involve in haram business i.e providing any service or product ( furniture, stationary, machinery, software, computers etc )as a contrator to a business involve in haram business
Answer
Respected Brother-in-Islam%0D%0A%0D%0AAssalaamu Alaykum Wa Rahmatullaahi Wa Barakaatuhu%0D%0A%0D%0AWe suggest you study the attached terms and condition of investing in a%0D%0Astock market by Mufti Taqi Usmani - Judge of the Appellate Division in the%0D%0ASupreme Court of Pakistan and Deputy Chairman of Islamic Fiqh Academy in%0D%0AJeddah.%0D%0A%0D%0Aand Allah Ta'ala Knows Best%0D%0A%0D%0AMufti Ebrahim Desai%0D%0AFATWA DEPT.%0D%0A%0D%0AA Muslim can acquire the shares of a joint stock company with the following%0D%0A%0Aconditions:%0D%0A%0D%0A1. The main business of the company must be Halaal (permissible) according%0D%0Ato Shari%E1h. So, a Muslim cannot invest in a company whose main business is%0D%0AHaraam, like the traditional banks, insurance companies, companies dealing%0D%0Ain wines, etc.%0D%0A2. If the main business is Halaal, but it is involved in borrowing money on%0D%0AInterest or placing its funds in an Interest bearing account a Muslim%0D%0Ashare-holder should raise his voice against this practice in the annual%0D%0Ageneral meeting of the company.%0D%0A3. When a Muslim share-holder receives a dividend he must ascertain that%0D%0Aproportion of the profit of the company which has accrued on its%0D%0Ainterest-bearing accounts. Then a similar proportion from his own dividend%0D%0Amust be given by him to a person or persons entitled to receive Zakaat.%0D%0A4. If all the assets of a company are in a liquid form and the company has%0D%0Anot yet acquired any fixed assets or any stock for trade, then the sale and%0D%0Apurchase of shares must be on their par value only.%0D%0AIf anyone of these conditions is contravened, the investment in a company is%0D%0Anot permissible in the Shari'ah.%0D%0A%0D%0ANB. The above ruling has been issued by Justice Mufti Muhammad Taqi Usmani%0D%0Aof the Shariat Appellate Bench - Supreme Court of Pakistan. He is also the%0D%0ADeputy Chairman of the Islamic Fiqh Academy - Jeddah.%0D%0A%0D%0A