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Is share-trading on stock exchange allowed in Islam ?

Answered as per Hanafi Fiqh by Askimam.org

A Muslim can acquire the shares of a joint stock company with the following conditions:

1. The main business of the company must be Halaal (permissible) according to Shariáh. 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 of the Shariat Appellate Bench – Supreme Court of Pakistan. He is also the Deputy Chairman of the Islamic Fiqh Academy – Jeddah.

and Allah Ta’ala Knows Best

Mufti Ebrahim Desai

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This answer was collected from Askimam.org, which is operated under the supervision of Mufti Ebrahim Desai from South Africa.

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