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atifonly
PAKISTAN
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 Topic initiated on Tuesday, February 22, 2005 - 1:02 PM 
The Business of Stocks/Shares!!
Aslam o Alikum to all of you,
Hope everyone is fine wiht good health!! Well I have one question.
"Business of Stocks or Shares is allowed in Islam? If so How & Why? If not, explain Why? Please answer in the light of Quran & Hadis"
Thanks
Allah Hafiz! |
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perv1
UNITED KINGDOM
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Posted - Thursday, February 24, 2005 - 9:06 PM 
Stocks & Shares are in principle buying into a business and hence its prophets.
There is no restriction on legitimate business in Islam. |
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ibrahim
PAKISTAN
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Posted - Friday, February 25, 2005 - 5:43 AM
I hope The Following Q & A will be Sufficient:
Question: I would like to know the position of the stock exchange viz a viz the Islamic Shari‘ah. Please give a detailed answer.
Answer: The stock exchange is a market place where shares are bought and sold. By buying the shares of a company, you, in fact, share in the business. Therefore, if there is nothing against Islam in the nature of the business, there is nothing wrong in being the shareholder of that business and in getting dividends on those shares. Similarly, if you sell the shares at any point of time owing to some reason and get capital gains thereby, the transaction and the profit will not be wrong. However, when this trading moves beyond mere buying and selling, that is when the buyer and the seller do not remain a buyer and a seller, but become a ‘bear’ or a ‘bull,’ trouble begins.
Ideally, the market price of a share should be related to the performance of the company. But the speculators (euphemistically called investors) manipulate the prices by artificially stimulating the demand and the supply of shares. Forward contracts are made and further contracts are derived (financial derivatives) on that basis. The result is that the whole market activity is based on speculation rather than being based on entrepreneurship. The share price of a company doing perfectly well suddenly falls and that of a company in trouble suddenly rises. A person earns millions and loses millions in a day in this game. Obviously, such fluctuations have a negative impact on the economy, which is usually borne by the not-so-affluent sections of the society. One of the worst cases of such speculation was when on Oct. 19, 1987 – now known as the Black Monday – Wall Street crashed owing to the panic that had spread among the investors. Billions are lost in a day in such crashes. Since shares are sometimes bought and sold even before they have been actually bought and sold and, at times, are bought primarily on the basis of borrowed capital, stakes are high and the slightest fear may start a chain reaction, which can result in a major catastrophe. The reason for such timorousness is nothing except that the whole economic activity in these exchanges is based on speculation rather than on entrepreneurship. When such a large area of economic activity is based on speculation, the spirit of entrepreneurship suffers and moral corruption pervades the society.
Islam wants that the economic activity of its followers be based on entrepreneurship, hard work, creativity, moral principles and concern for others, whereas speculation is often detrimental to these values. The moral corruption that ensues from such activities as speculation far exceeds whatever material benefit they give. Therefore, it is closer to taqwa (fear of God) to avoid them. The pervading spirit in an Islamic society should be that of infaq (spending in the way of Allah). This spirit often dies in the absence of fear of God – and avarice and apathy become the deities.1
In an Islamic state, the government has the right to enact such laws as would eliminate the inherent risks of deception and loss by which either party can suffer in such activities as speculation on the stock exchange. However, until such laws are framed, it is up to the individual Muslim to decide when his trading becomes such speculation as would be detrimental to his taqwa. A good Muslim prefers to stick to nobler values even if they afford him less material benefit. Even in the absence of specific Divine injunctions or enacted laws, he should ask his own self whether his involvement in an activity is leading him away from God and inclining him towards the violation of moral values and ethics. His life should be marked by love of God, fear of His wrath, charity and concern for others. Losing these values for material benefit is a trade that a good Muslim never likes to make. But, as already said, that is a question which each Muslim must answer for himself. The rule here is sal nafsak (ask thy heart) – it will tell the truth.2 (Asif Iftikhar)
1. The following words of a famous economist bear witness to this reality:
For at least another hundred years, we must pretend to ourselves and to everyone that fair is foul and foul is fair, for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. (John Maynard Keynes, Essays in Persuasion, “The Future,” 1931).
2. It must also be remembered that in consideration of the way Allah Almighty revealed His laws through the Prophet (sws) and the way the Prophet (sws) implemented them, the State or an individual, in the desire to implement and follow Divine laws, should not hasten so much that an unnatural burden is put on one who is trying for his or her spiritual development. The approach of moving gradually towards the target is consistent with the spirit of Islam. The Shari‘ah is not difficult. It is not the purpose of the Shari‘ah to make life unnecessarily difficult for a person. Its purpose is to purify his or her soul. One should not try to make following the Shari‘ah unnecessarily difficult, especially in areas which it does not directly touch upon and in areas where there is a certainty or risk that not using the allowances given by the Shari‘ah or those that common sense points out will result in such burden as would result in greater evil than the one that is sought to be rooted out.
Link of This Topic:
http://www.monthly-renaissance.com/marq182y3.html |
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perv1
UNITED KINGDOM
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Posted - Friday, February 25, 2005 - 11:13 PM
Forgive me but I am not clear whether you think that buying & selling shares is allowed or not in Islam.
I am not a stockbroker, neither do I deal in shares. Therefore I do not know the minute details of share dealing just the principles
Ideally, the market price of a share should be related to the performance of the company. But the speculators (euphemistically called investors) manipulate the prices by artificially stimulating the demand and the supply of shares. Forward contracts are made and further contracts are derived (financial derivatives) on that basis. The result is that the whole market activity is based on speculation rather than being based on entrepreneurship.
Surely if you do not understand the details of particular business/company then you should not buy shares despite what the speculators say.
I thought business in general was based on speculation i.e. as a business person you buy particular goods and then hope to sell them at a profit. Hence you are speculating that you will be able to sell the goods and at agreater price than you have bought. |
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