Is buying shares halal?
A share is part-ownership of a real business, so what the business does is what you own. Shares are allowed when the main business is halal and interest-bearing debt, interest-bearing deposits and impure income stay within set limits, with the impure part of dividends given to charity. Shares in a bank, an insurer or any business haram at its core are not allowed, whatever the returns.
The guidance
I want to buy shares in a company. What kind of company is it?
- A halal business with little interest-bearing debt; I give away the impure partHalal · Equity · AAOIFI 21A share is part-ownership of a real business. It is allowed if the main business is halal and interest-bearing debt, interest-bearing deposits and impure income stay within set limits. Give the impure part of dividends to charity.AAOIFI’s limits: interest-bearing debt and interest-bearing deposits each under 30% of market value, and forbidden income under 5% of revenue.Other views: The OIC Fiqh Academy is stricter: it starts from prohibition for companies that sometimes deal in interest.
- A bank, insurer, alcohol or gambling company, or another business haram at its coreHaram · Riba · Haram businessA share makes you a part-owner of what the company does. Owning part of a business built on interest or other forbidden trade is not allowed, whatever the returns.
- A halal business, but its interest-bearing debt is above the limitsHaram · Riba · AAOIFI 21Once a company’s interest-bearing borrowing or deposits pass the limits, it no longer counts as a mainly halal investment. Wait until it is back within limits, or choose a screened alternative.
- I buy shares with money borrowed from my broker at interestHaram · Riba · Qur’an 2:275Buying on margin with an interest-bearing loan is riba, even if the shares themselves are halal.
People also ask
What are the AAOIFI screens for halal shares?
Interest-bearing debt under 30% of market value, interest-bearing deposits under 30% of market value, and forbidden income under 5% of revenue. Give away the impure part of dividends. The OIC Fiqh Academy is stricter and starts from prohibition for companies that sometimes deal in interest.
Is investing in Apple, Tesla or Amazon halal?
Each depends on its current debt and income screens, which change. Use a screening service or a Shariah-screened fund rather than assuming. The business itself is not haram in those cases; the ratios decide.
Is day trading shares halal?
Buying and selling shares you actually own, with your own money, is allowed subject to the screens. Margin, short selling and derivatives are not.
How do I purify dividends?
Work out the share of the company’s income that came from interest or other forbidden sources, usually published by screening services, and give that proportion of your dividend to charity without expecting reward.
Related questions
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This guidance follows the Hanafi school as applied today by Mufti Taqi Usmani and the AAOIFI standards. Notes mark where the Maliki, Shafi’i or Hanbali schools differ. The four schools on riba →