[Q 168] Islamic Clarification Regarding the Purchase of Shares

Question 

Some leading Islamic Finance scholars permit buying/selling shares, if certain conditions are met. Could you kindly explain in a little more detail why do you consider it to be impermissible? 

بسم الله الرحمن الرحيم

الجواب بعون الملك الوهاب اللهم هداية الحق والصواب

Answer 

Buying shares means that you are becoming a partial owner of the company and a partner in the business. Therefore, if the company is involved in unlawful activities, you will also be a part of it.

Currently, some Islamic finance scholars also allow the purchase of shares of a company whose income includes less than 5% of interest income and which takes interest-bearing loans upto certain limits. How can the purchase of shares of such a company be called an Islamic investment?

Then, the preference shareholder actually makes a usurious agreement, meaning that even if the company is going into loss, it still has to pay profit to  the equity shareholder who buys the share agrees to pay interest.

I have explained briefly. 

Answered by: Mufti Sajid Attari

Translated by: Usman Attari