Investment in Shari’ah-Compliant Securities

[The original posting can be found at: http://alnaqiy.com/home/article/investment-shariah-compliant/]

Question:

I think it is unfair if the stock of a company is classified as non-Shari’ah compliant just because the company takes loan from conventional bank. For me, as long as the activities of the company is halal, it’s should be Shari’ah compliant too. And why the salary of people who works at bank are classified as halal while he works at bank? For me, both cases are same.

Answer:

Muslims are strongly encouraged to only invest in Shari’ah-compliant securities which adhere to the fundamentals of Islamic law. If money is invested and spent in the right way, it can bring benefits not only to individual but also to the society as a whole.

In Malaysia, stocks of companies are classified as Shari’ah compliant if they have been approved by the Shari’ah Advisory Council (the Council) of the Securities Commission Malaysia (the Commission).

The Council is a responsible committee for advising the Commission on matters pertaining to the Islamic Capital Markets. The Council consists of prominent Shari’ah scholars, jurists and market practitioners. They are qualified individuals who can present Shari’ah opinions and have vast experience in banking, finance, economics, law and application of Shari’ah.

One of the activities that affect the status of a company is its loan from conventional bank. Islamic law does not permit loan with interest (riba) because there is an element of injustice in financing productive activities. Injustice to debtor, where he is obligated to pay interest even if business venture results in no profit or loss. Injustice to creditor in the event of substantial profits, where he receives a return disproportionate to amount of generated profits.

“O you who have believed, fear Allah and give up what remains [due to you] of interest, if you should be believers. And if you do not, then be informed of a war [against you] from Allah and His Messenger. But if you repent, you may have your principal – [thus] you do no wrong, nor are you wronged.” [Al Baqarah 2:278-279]

Jabir said that Allah’s Messenger (ﷺ) cursed the accepter of interest and its payer, and one who records it, and the two witnesses, and he said: They are all equal. [Muslim, 1598]

Thus, if borrowing is heavy on riba and the company is an active supporter of riba, will that be permissible?

With regards to the salary of the people working in conventional banks, at the moment we realise that it will take time to provide jobs for all of them in a halal industry and relevant with their qualifications. Thus all those who are working in the riba industry must take a stand that:

  1. he works to learn the complexity of the system and how it could be Islamised;
  2. he will exit once there is an opportunity and
  3. that he dislikes what he is doing as it is haram.

Allah knows best!

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