Qur'an & Tafsir
Summary
The Qur'an permits trade conducted by mutual consent as the lawful way to acquire another's property, while separately and unconditionally prohibiting riba (usury/interest). Q1Q2
Key points
- Trade by mutual consent is the exception Allah carves out of the general ban on consuming others' wealth unjustly (Q4:29); Ibn Kathir explains this covers legitimate buying, selling and gifting. Q2
- Allah 'has permitted sale and prohibited riba,' rejecting the claim that the two are alike; Ibn Kathir notes one who desists after admonition is forgiven for the past. Q1
References
- Q1Al-Baqarah 2:275 · The Cow
- Q2An-Nisa 4:29 · The Women
Sunnah
Summary
The Prophet named consuming riba one of the seven sins that doom a person to Hell, underscoring why a company's riba-based dealings disqualify it as an object of investment. H7
Key points
- Consuming riba is grouped with shirk and killing an innocent soul among the seven 'destructive sins,' in a hadith graded Sahih. H7
References
- H7Sahih al Bukhari 2766 · Wills and Testaments (Wasaayaa)Authenticity
- Sahih — the whole collection is accepted as authentic (Sahih al-Bukhari)
Hanafi Fiqh
Summary
Hanafi fatwas hold that buying shares is permissible where the company's main business and dealings are lawful; any impermissible income mixed in must be purified by giving the proportionate amount to charity without seeking reward. One Hanafi mufti nonetheless counsels precautionary avoidance of the stock market altogether. F2F5F7
Key points
- If the main business of the invested company is halal, the profits are ruled halal, but any haram income found (directly or indirectly, e.g. from riba-based dealings or impermissible products) must be given away in charity without expecting reward. F5
- Citing Ibn Abidin's Radd al-Muhtar, a valid object of exchange (māl) must be something desired by people and of a permissible benefit (mutaqawwam); this underlies why shares tied to an impermissible 'good' (e.g. wine) cannot be a valid subject of sale. F7
- Mufti Ebrahim Salejee notes contradictory scholarly views on stock-exchange trading and advises precaution by avoiding it. F2
References
- F2Can I Invest in the Stock Market and Become a Broker? - IslamQA · islamqa.org
- F5Haraam or Halal: Trading Shares in the Stock Market? - IslamQA · islamqa.org
- F7Share Trading: Halal or Haram? - IslamQA · islamqa.org
Modern Fatwa Councils
Summary
The International Islamic Fiqh Academy (Resolution No. 63, 7th session, Jeddah, 1992) rules that forming or joining a joint-stock company with a lawful purpose and licit activity is permissible, but treats prohibition as the default even for an otherwise lawful company if it sometimes engages in prohibited dealings such as riba. M3
Key points
- There is no disagreement on prohibiting participation in companies whose main purpose is haram, such as riba-based transactions or forbidden products. M3
- The Academy's default judgement is prohibition for joint-stock companies that only occasionally engage in riba-based transactions, even where their main activity is lawful. M3
References
- M3Financial Markets (Shares, Options, Commodities, and Credit Cards) · IIFA · 1992-05-14
Hanafi ijtihadFrom the Hanafi fatwas cited
RulingBuying shares in a company whose core business and dealings are lawful is a valid (ṣaḥīḥ) trade and is mubāḥ (permissible); owning shares in a company whose core business is unlawful (e.g. riba-based finance, alcohol) is ḥarām, since the share is not then a valid subject of exchange. Where a lawful company carries incidental impermissible income, the investment remains valid but it becomes wājib (obligatory) on the shareholder to purge the tainted portion by giving it to charity without seeking reward.
Legal reason (ʿillah)Ibn Abidin's Radd al-Muhtar gives the reason that a valid tradable object (māl) must be something people desire and whose benefit is lawful (mutaqawwam); wealth generated from what has no lawful benefit fails this test. The IIFA's Resolution 63 gives its reason as avoiding participation in prohibited transactions such as riba-based dealings, even when they are only part of a company's activity. F7M3
- The Qur'an
Q2:29 gives a general (ʿāmm), definitive (qaṭʿī) permission for trade conducted by mutual consent, which covers buying and selling shares as a form of trade; Q2:275 definitively prohibits riba, an exception the verse itself makes to the general permission of sale. Q1Q2
- The Sunnah, graded by transmission
The mashhur hadith naming the consumption of riba among the seven sins that doom one to Hell reinforces, but does not add to, the Qur'an's own qaṭʿī prohibition of riba; it does not qualify the general permission of trade beyond what the Qur'an already excludes. H7
- Analogy (qiyas)
Shares are analogised to any tradable māl: valid where they represent ownership in a business dealing in lawful goods and lawful benefit (per Ibn Abidin's definition), invalid where the underlying business itself is not a valid subject of exchange (e.g. riba, alcohol). F7
- Juristic preference (istihsan)
Strict analogy might bar any company with mixed income, but the Hanafi fatwas depart from that toward permissibility with purification, recognising the practical difficulty of finding wholly 'clean' public companies and requiring the tainted portion be given to charity instead. F5
The Hanafi method — its sources in the order the school consults them — applied to the evidence above.
Conclusion
The sources treat buying shares as an ordinary form of trade, lawful in principle, but conditioned on what the company actually does: permissible where its core business and dealings are halal, impermissible where riba or another prohibited activity is central to it. Where a fundamentally lawful company carries incidental haram income, Hanafi fatwas require the investor to purify the tainted portion through charity rather than avoid the investment altogether, though one mufti counsels avoiding the stock market as a precaution and the IIFA sets a stricter default for companies with any riba-based dealings.
Comments
Loading…