Investing in Banks and Stock Trading in the Islamic View ‎

The world is seeking an alternative form of the stock market for some time so that the interests of all relevant stakeholders can be secured. From the perceptions of straight Muslims, the existing form of the stock market limits a Muslim to make investments in the market caused by unsatisfying several requirements from the Islamic sharia. This article will discuss all the conditions the Islamic Shariah permits to start investing in the stock market.

Interested in Islam?

What you need to understand that all financial products, all the banking process is based on selling us money for money. That called Reba and what brought the economy to collapse was a result of this transaction. When these people started exchanging money for money in an unequal amount. For example, A person lent a sum of money to another person and ask him to pay it back together with an agreed additional sum of money within a fixed period. A race of interest was fixed for a specific period, and if the principal along with the interest was not paid within that period, the rate of interest was enhanced for the extended period. So on this enhanced or additional amount is Reba.

Why Reba (interest) is prohibited in Islam?

 Islam prohibited Reba interests duo for the following reasons:

Interest inculcates miserliness, selfishness, callousness, indifference, inhumanity, greed, and worship of wealth. It destroys the spirit of sympathy, mutual help, and cooperation, and that affects the feeling of brotherhood and unity among the community.

Interests cause many economic evils, for example, it leads to hoarding of money, adversely affecting its circulation among larger sections of society. It also causes the establishment of monopolies, cartels, and the concentration of wealth in a few hands. And so, the gap between the rich and the poor widens.

Is it mention in Quran or Hadith ?

Yes, the Quran and Hadith clearly prohibited interest.

In Allah says: “And whatever you give for interest to increase within the wealth of people will not increase with Allah. But what you give in Zakat, desiring the countenance of Allah – those are the Multipliers”. In chapter 4 verse 161 Allah says: ” And (for) their taking of usury while they had been forbidden from it, and their consuming of the people wealth unjustly. And we have prepared for the disbelievers among them a painful punishment”.

Prophet Mohammed (Peace be upon him) said “every loan that draws excess is Reba”

Muslims avoid interest or Reba. Allah (SWA) has considered Reba to be one of the most major sins, and the prophet called it a Kabeerah, a major sin, and it is the only sin. In the Quran Allah (SWA) has said “anybody, who deals with this it is as if he has engaged in a war against God himself.”

So, we have to avoid companies that are dealing blatantly in Reba.

Halal Investing:

There is much more legal ways that we can go into a lot more detail but for this article, realize that in order for an investment to be Halal, a number of basic conditions need to be met.

Since Islam’s main core is to save humans, it considered some rules that protect them. For instance, a Muslim can’t invest in anything that will help increase any kind of substance abuse or drugs. Or maybe even investing in companies that promote weapons of mass destruction. We as Muslims are ethical we are not allowed to invest in something that’s going to harm other people. Harm them physically, harm them emotionally. So we Muslims do not invest in any company that deals with harmful substances, or that deals with matters that are going to impact the environment in a very negative way. These are the things that we are cautious about.

Regarding shares and stock market investments, Muslims have categorized this under the classification of Awraq al-Naqdiyyah. This is often something, which is allowed, with certain conditions and it is also subjected to Zakah payment. Because it fulfills the Nisab and Hawl. “Shares is one of the equal parts into which the capital of an organization is divided, enabling the holder of the share to a percentage of the profits. Dealing in shares is acceptable within the Shari’ah.” (Fiqh al-Islam Wa Adillatuh, vol. 2, pg. 774)

“Money in Islam sorts a task to play. It shouldn’t be stored but used and circulate to allow people to make use of its benefits. That’s why the books of Fiqh say that the guardian of an orphan must be honestly invested. Such as the Zakah wouldn’t drain the wealth of the child.

Where can Muslims invest in?

You can buy shares in any company, which doesn’t pursue prohibited trade, it has to be ethical and permissible.

As an example, dealing with Islamic banks is the Muslim’s choice. As well as not to deal with alcohol companies because they’re producing something, which is Haram. To buy shares in chemical companies, which produce products damage people and thus the environment. But there is not even a small problem buying shares that deal with good companies. Likewise, investing in the stock exchange is okay, but by keeping the above considerations in mind.

Muslims can invest in shares in BT, in water, in gas, and in numerous things that can benefit people. And in things that aren’t directed towards humanity, which should be the general monitor for investments by the Muslim community.

“Holy is your Lord, the Lord of all honor and power. He is far above the (polytheistic) things they attribute (to Him). And peace be ever upon all the Messengers. And all type of perfect and true praise belongs to Allah, the Lord of the worlds.” (37:180-182)