Message No : 19Sr.No : 577/725
Question By : sadaf

Assalamu Alaikum
Respected Mufti
I have a question about Investing in share trading or commodity trading; is it permissible in Islam?
Wassalam
Sadaf

 

Reply By : Asadullah Qasmi
Designation : Mufti, ODI, MMERC, 

In the name of Allah the most Gracious the most Merciful
The answer to your question is as follows:
It is allowed to buy and purchase shares under the conditions below:
(1) The company should not get involved in unlawful business, like it should be not interest-based bank, insurance company, wine company, etc.(2) All the assets and possessions of the company should not be in cash but it should have some frozen assets for example building, land and the company is in existence and these things are known surely. Otherwise, selling with difference will be interest. (3) If, after having become a member of the company, it is known that the company is involved in any sort of interest transactions, then one should raise objection against it in its meetings.(4) When the profit is divided, the part of the profit gained form the interest dealings should be given to the poor without an intention of reward.(5) The purpose of dealing in shares should be to achieve partnership in the business, it should not be to earn profit only by equalizing profit and loss wherein the shares are neither possessed nor the possession is meant, it is a form of gambling which is unlawful.
In order to make commodity trading acceptable to Shariah, it is necessary that all the rules governing the transactions of sale are fully complied with. For example: 1. The seller must own the commodity at the time of sale, because short sales in which a person sells a commodity before he owns it are not allowed in Shariah. 2. Forward sales are not allowed except in the case of Salam and Istisna (For their full details, see Islamic Fiqh Books). 3. The commodities must be halal. Therefore, it is not allowed to deal in wines, pork or other prohibited materials. 4. The seller must have physical or constructive possession over the commodity he wants to sell. (Constructive possession includes any act by which the risk of the commodity is passed on to the purchaser). 5. The price of the commodity must be fixed and known to the parties. Any price, which is uncertain or is tied up with an uncertain event, renders the sale invalid.
In view of the above and similar other conditions, it may easily be understood that the transactions prevalent in the contemporary commodity markets, especially in the futures commodity markets do not comply with these conditions. Therefore, an Islamic Commodity Trading cannot enter into such transactions. However, if there are genuine commodity transactions observing all the requirements of Shariah, including the above conditions, a commodity trading may be permissible.
Resolution of OIC about commodity Trading: Commodity trading may be either spot or future. Future commodity trading is not permissible on the ground that both payment of the price and delivery of the commodity are deferred. This is not permitted in the Shari`ah as the Prophet (peace and blessings be upon him) prohibited the sale of deferred (commodity) for a deferred (price). The OIC Islamic Fiqh Academy also ruled against such a transaction in its Seventh Annual Full Meeting 1412 A.H./1992 (resolution No.63/1/7).
It must be noted also that trading of currencies, gold, and silver is permissible by spot only, and if there is any time span between the contract and delivery of both or either price or purchased gold, silver or currencies, it enters under the domain of riba that is very strongly prohibited in the Shari'ah."Allah (Subhana Wa Ta'ala) Knows Best

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