Is Buying Stocks and Treasury Bills Allowed? Is Buying Stocks

31 August, 2018

Q As-salamu `alaykum. I would like to find out the ruling of the Shari`ah regarding buying stock, treasure bills (a short term obligation backed by the sovereignty of the government with maturity period of less than 1 year with guaranteed returns without any risk). Also, what could be the best source(s) of a Muslim multiplying his or her wealth in a non-Islamic country? In Ghana there are financial institutions where you can send your money with guaranteed returns without any risk and it's actually quite tempting as a worker where you can be accumulating additional wealth to aid in areas such as buying a house or a building, cars, sustainable family home, simply because the minimum wage in Ghana is nothing one can write home about and there are no jobs that pay more than enough to keep on head just above waters.

Answer

Wa `alaykum as-Salamu wa Rahmatullahi wa Barakatuh.

In the Name of Allah, Most Gracious, Most Merciful.

All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.

In this fatwa:

It is allowed to buy stocks of companies whose main line of business is permissible provided such companies fulfill the conditions mentioned below.

In his response to your question, Prof. Dr. Monzer Kahf, Professor of Islamic Finance and Economics at Qatar Faculty of Islamic Studies, states:

It is allowed to buy stocks of companies whose main line of business is permissible provided such companies fulfill the following three conditions, and you do the fourth thing:

1- The company does not use more than 30% of its assets in activities/transactions that are not permissible in the Shari`ah.

2- It does not depend on interest-loan for more than 30% of its assets.

3- Unlawful (haram) earnings do not make more than 5% of its revenues, and the 4^ththat you should do is:

4- You should calculate out of such investments the amount of profit that comes from (haram) and give it to Muslim charity.

Buying treasury bills is haram because these are pure debts on the treasury and any increment in a debt is prohibited by Allah in the Qur’an”, “Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, “Trade is [just] like interest.” But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah . But whoever returns to [dealing in interest or usury] – those are the companions of the Fire; they will abide eternally therein.” (Al-Baqarah 2:275)

This is exactly the riba prohibited by Allah Almighty as defined in this verse, “And if you do not, then be informed of a war [against you] from Allah and His Messenger. But if you repent, you may have your principal – [thus] you do no wrong, nor are you wronged.” (Al-Baqarah 2:279)

This means that any increment above principal must be avoided and repented from.

Allah Almighty knows best.

Editor’s note: This fatwa is from Ask the Scholar’s archive and was originally published at an earlier date.