Financial Islam - Islamic Finance
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  • Home
  • News
  • The Islamic law
    • Socio-economic Justice
    • The ownership of wealth
    • Prohibition of Riba, Maysir and Gharar
    • Zakah
  • Islamic Economics
    • Shareholding in Islam
    • Loans and debts in the Sharia'h
    • The Islamic Development Bank
  • Islamic Finance
    • Financial intermediation
    • Islamic accounting
    • Financial statements analysis
    • Regulation and Supervision
      • Shari’ah Boards
      • Operations within the conventional system
    • Islamic Commercial contracts
      • Relationship with central banks
      • Valid transactions
      • Mudarabah
      • Musharakah
      • Diminishing Musharakah
      • Murabahah
      • Salam
      • Istisna'a
      • Ijarah
      • Wakalah
      • Other contracts
  • Islamic Banking Operations
    • Starting an Islamic Bank
    • Commercial transactions
    • Deposits
    • Islamic credit cards
    • Fee-based services
    • Letter of Credit
    • Bank Guarantee
    • Modes of financing and investment
      • Ijarah financing
      • Musharakah and Mudarabah certificates
      • Diminishing Musharakah
      • Replacing interest-based lending
    • Capital Market Operations
      • Islamic Unit Trusts
      • Islamic Fund Structures
      • Investment screening
      • Islamic Market Indexes
      • Islamic ETF
      • Venture Capital
      • Foreign exchange
  • Sukuk
    • Sukuk structures
    • Controversy
    • Indexation of financial obligations
    • Risks underlying Sukuk
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Shareholding in Islam

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It is permissible for a Muslim from the Shari’ah point of view to buy and sell ordinary shares and benefit from dividend of a company that it is not involved in the manufacture or sale of non-Islamic goods and which business is not based on interest or gambling. However, there are some objections among some Muslim scholars about the purchase of non-Muslim companies’ shares, on the ground that these companies borrow money on interest from conventional banks and other financial institutions, though most opinion tend to consider that in these cases interest is paid rather than received, and so the element of interest is not included in the companies’ profits. And even the amounts, that may be receivable from interest accounts, are generally very small in comparison with the total profits and therefore rather insignificant. In addition, buying and selling non-Muslim company shares is a crucial channel where Islamic financial institutions should be involved to strengthen their activities and diversify their offers. Dealing exclusively with Muslim companies or dealing with non-Muslim institutions on their own terms only necessitates Islamic banks to acquire an important maturity and a significant level of development.

Besides, it is very rare in the contemporary stock markets to find companies in full conformity with Shari’ah, in fact almost all the companies quoted in stock markets, even those which main business can be considered as Halal, either borrow money on interest, keep their surplus in an interest bearing account or purchase interest bearing bonds or securities. Some Muslim scholars consider that it is not allowed for a Muslim to deal in the shares of such a company, even if its main business is Halal because as a shareholder of that company he becomes a partner and thus an agent for the other partners in all aspects of the business. For that reason, the purchase of a share of a company can represent an authorization from the shareholder to the company to carry on non permissible transactions in its business. Moreover, when a company is financed on the basis of interest, its funds employed in the business are impure, and the impure interest received on its deposits and will be distributed to the shareholders through dividends.

However, a large number of contemporary Shari’ah experts does not consider a joint stock company as a simple partnership period. While all the policy decisions in partnership are taken by the consensus of all the partners, the policy decisions in a joint stock company are taken by the majority which overrule the opinion of an individual shareholder. Hence a shareholder cannot be responsible of each and every action taken by the company, especially if he unsuccessfully opposed to a particular action in an annual general meeting. Therefore, Muslims are allowed to buy shares of a company engaged in permissible business activities, but, which keeps its surplus money in an interest-bearing account, wherefrom a small incidental income of interest is received.


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  • Home
  • News
  • The Islamic law
    • Socio-economic Justice
    • The ownership of wealth
    • Prohibition of Riba, Maysir and Gharar
    • Zakah
  • Islamic Economics
    • Shareholding in Islam
    • Loans and debts in the Sharia'h
    • The Islamic Development Bank
  • Islamic Finance
    • Financial intermediation
    • Islamic accounting
    • Financial statements analysis
    • Regulation and Supervision
      • Shari’ah Boards
      • Operations within the conventional system
    • Islamic Commercial contracts
      • Relationship with central banks
      • Valid transactions
      • Mudarabah
      • Musharakah
      • Diminishing Musharakah
      • Murabahah
      • Salam
      • Istisna'a
      • Ijarah
      • Wakalah
      • Other contracts
  • Islamic Banking Operations
    • Starting an Islamic Bank
    • Commercial transactions
    • Deposits
    • Islamic credit cards
    • Fee-based services
    • Letter of Credit
    • Bank Guarantee
    • Modes of financing and investment
      • Ijarah financing
      • Musharakah and Mudarabah certificates
      • Diminishing Musharakah
      • Replacing interest-based lending
    • Capital Market Operations
      • Islamic Unit Trusts
      • Islamic Fund Structures
      • Investment screening
      • Islamic Market Indexes
      • Islamic ETF
      • Venture Capital
      • Foreign exchange
  • Sukuk
    • Sukuk structures
    • Controversy
    • Indexation of financial obligations
    • Risks underlying Sukuk
  • Takaful
    • Takaful Agreements
    • Takaful models
    • Areas of Takaful
    • General insurance
    • Life insurance
    • Reinsurance
    • Corporate Governance
  • Glossary
  • Contact