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  • Contradiction In Trading Stocks

    Posted by Mohammad Omerzoi on December 9, 2024 at 2:39 pm

    Assalam Alikum.

    I hope this message finds you well. I would greatly appreciate a detailed response to my query regarding trading stocks. I often encounter contradictory fatwas about certain stocks being categorized as halal or haram. Currently, I base my decisions on the primary product or service of the company. For example, Intel produces chips, but it may have debts that incur interest or earn interest from funds held in banks or other entities.

    As far as I understand, no business in the United States operates entirely without debts or without earning interest. I am concerned that many opportunities have been deemed haram in the past, only to later be considered halal, leaving us at a loss.

    To clarify, I do not invest in stocks of companies whose main products are explicitly haram, such as those involved in gambling, betting, or alcohol production. However, I seek a clear answer backed by evidence from the Quran or Hadith, rather than assumptions or interpretations from scholars. While I respect scholars, I feel that some of their rulings have caused long-lasting confusion and challenges as well as holistically long-lasting losses and damages.

    Thank you for your time and understanding. I look forward to your guidance. Jazakallah Khairan

    Kind regards,

    Mohammad

    USA

    Dr. Irfan Shahzad replied 2 weeks, 4 days ago 2 Members · 5 Replies
  • 5 Replies
  • Contradiction In Trading Stocks

    Dr. Irfan Shahzad updated 2 weeks, 4 days ago 2 Members · 5 Replies
  • Dr. Irfan Shahzad

    Scholar December 11, 2024 at 2:59 am

    A business loan is essentially an investment by the bank rather than a traditional loan, meaning it generates profit instead of interest. Shareholders are not held accountable for the funds the company raises for its operations. If the product is halal, investing in the business is permissible.

  • Mohammad Omerzoi

    Member December 11, 2024 at 10:56 pm

    Thank you very much, Mr. Shahzad. However, what about the capital that companies like INTEL, TESLA, or QuantumScape keep in banks, which earns them interest in return? Even our salaries (in checking accounts) earn interest, which we donate at the end of each fiscal year. This is how corporations around the globe operate—either through interest-based debt or by earning interest on surplus funds in banks.

    While taking loans with interest isn’t explicitly mentioned as haram in the Qur’an, receiving interest is directly prohibited. Yet, our scholars often make decisions that can cause long-lasting losses/damages. For instance, Bitcoin was initially declared haram, even though it is purely digital currency and can function like debit or credit cards.

    When I check stocks for Shariah compliance, most turn out to be non-compliant for two reasons: either the companies have interest-based debt, or they earn interest from money kept in banks. Additionally, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) has set some standards that aren’t directly derived from the Quran or Hadith. For example, AAOIFI permits a company to be Shariah-compliant if 80% of its products are halal, even if 20% are haram. I find it hard to agree with such rules, as many scholars either lack expertise in the subject or may be influenced by political motives.

    I would greatly appreciate your thoughts on this matter, as well as any Quranic references you can provide.

    Once again Jazakallah Khairan

    Mohammad

    USA

  • Dr. Irfan Shahzad

    Scholar December 12, 2024 at 12:23 am

    First, it is important to understand what Riba is. Riba refers to charging additional money on the principal amount of a loan, which is prohibited. A business loan, despite being labeled as a ‘loan,’ is essentially an investment by the bank, whereas a personal loan is purely a loan in the traditional sense. Scholars who do not distinguish between a loan and a business loan argue that the profit generated from a business loan constitutes Riba and is therefore haram. On the other hand, those who view a business loan as an investment, rather than a loan, maintain that it is halal.

    In the case of a loan, the lender does not concern themselves with how the borrower uses the money; the borrower is free to utilize it as he wishes. However, in an investment, both parties enter into a contract, agree on terms, and specify the profit-sharing arrangements, making it an investment rather than a loan.

    Once it is established that a business loan is an investment, many related questions are resolved automatically.

  • Mohammad Omerzoi

    Member December 12, 2024 at 12:42 am

    Thanks Mr Shahzad. Thus it means RIBA can only be constituted in personal loan of consumable products. Even if let’s say Intel company has some returns from the surplus funds in the bank isn’t considered RIBA. In addition, not all bank may pay investment loans, but some banks pay loan to corporations supported by collateral or interest percentage. I need your opinion on this situation as well. Please accept my apologies for the prolonged discussion. Thanks and may Allah swt reward you.

    Mohammad

  • Dr. Irfan Shahzad

    Scholar December 12, 2024 at 12:51 am

    Like the word ‘business loan’, the word ‘interest’ is confusing. Not every interest is Riba. If interest is generated from a business loan, it is profit, and if it is further invested, it is halal. Now it is you can see the problem and can decide.

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