Conditions for Trading in Stocks
|Q.) Is it permissible to buy and sell stocks?
A.) A Muslim can acquire the shares of a joint stock company with the following
1. The main business of the company must be Halaal (permissible) according to Shariah.
So, a Muslim cannot invest in a company whose main business is Haraam, like the
traditional banks, insurance companies, companies dealing in wines, etc.
2. If the main business is Halaal, but it is involved in borrowing money on Interest or
placing its funds in an Interest bearing account a Muslim share-holder should raise his
voice against this practice in the annual general meeting of the company.
3. When a Muslim share-holder receives a dividend he must ascertain that proportion of
the profit of the company which has accrued on its interest-bearing accounts. Then a
similar proportion from his own dividend must be given by him to a person or persons
entitled to receive Zakaat.
4. If all the assets of a company are in a liquid form and the company has not yet
acquired any fixed assets or any stock for trade, then the sale and purchase of shares
must be on their par value only.
If anyone of these conditions is contravened, the investment in a company is not
permissible in the Shari'ah.
NB. The above ruling has been issued by Justice Mufti Muhammad Taqi Usmani.