Assalamualaikum Wa Rahmatullahi Wa Barakathu.
I would like to know ruling in Islam of invest in share / stock market ?
In the name of Allah, Most Compassionate, Most Merciful,
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
There are differences of opinion among senior and reputable Ulama regarding the permissibility of investing in stock market. Mufti Taqi Uthmani Sahib Hafizahullah has deemed investing in stocks permissible under the following conditions:[i]
1) The main business of the company is not in violation of Shariah. Therefore, it is not permissible to acquire the shares of the companies providing financial services on interest, like conventional banks, insurance companies, or the companies involved in some other business not approved by the Shariah, such as the companies manufacturing, selling or offering liquors, pork, haram meat, or involved in gambling, night club activities etc.
2) If the main business of the companies is halal, like automobiles, textile, etc. but they deposit their surplus amounts in an interest-bearing account or borrow money on interest, the shareholder must express his disapproval against such dealings, preferably by raising his voice against such activities in the annual general meeting of the company.
3) If some income from interest-bearing accounts is included in the income of the company, the proportion of such income should be given in charity and must not be retained by him. For example, if 4% of the whole income of a company is accrued from interest-bearing deposits, then 4% of the dividend should be given in charity.
4) The shares of a company can be purchased only if the company owns some non-liquid assets. If all the assets of a company are in liquid form, i.e. in the form of money, then that cannot be purchased or sold, except on par value, because in this case the share represents money only and the money cannot be traded in except at par value.
If one engages in trading, then it is necessary to ensure that the delivery of the stock has been made before selling it off to another buyer. He cannot sell without taking the possession of the share.[ii]
If the above requirements are met, you may invest in companies through stock market. It is a well known principle and practice among the Fuqahaa that when there are academic differences among the scholars on an issue, that creates a flexibility in the issue. Therefore, investing in a stock market will be permissible. Abstaining from investing in stock market will be acting on Taqwa.
And Allah Ta’āla Knows Best
Hammad Ibn Ismail Jogiat
Student - Darul Iftaa
Montréal, Québec, Canada
Checked and Approved by,
Mufti Ebrahim Desai.
[i] An Introduction To Islamic Finance – Maktaba Ma’ariful Quran Pg: 207
[ii] Note: Stocks that reflect in one’s trading account on the trade day after the purchase does not necessarily means possession. It takes 2-3 business days [approx.] for the delivery to take place. http://www.askimam.org/public/question_detail/41513