Shaykh Sulaymaan Ar-Ruhaylee was asked:
May Allah be good to you. We want an elaboration on the ruling of doing business with stocks/shares?
“The contemporary Scholars differed on stocks/shares: is it allowed to sell it and purchase it?
Some of the People of knowledge took the opinion that selling stocks/shares is haram. They said it does not have a reality and they are only papers which do not have a benefit for which they can be sold or purchase.
The majority of the contemporary jurists took the opinion, and this is the correct statement, that selling stocks/shares is permissible if the Legislated conditions are met because shares/stocks are an expression for a well-known portion of a well-known company that is present in the market. It is not an imagination. The company has principle wealth and it has work, and it has a value in the market in accordance to its strength and its profits. Following this, the conditions of buying/selling are fulfilled [in such transaction]. And this is correct.
However, it is obligatory that the stocks/shares which are sold and bought are permissible.
As for the companies which are impermissible, then it is not permissible to buy its stocks/shares nor sell them. Like usurious banks, for example. If you buy it, then you are a partner with the usurious bank and a partner in usury; refuge in Allah is sought. Likewise the commercial insurance companies.
Also the ambiguous stocks/shares in which the work of the company is halal except that the administration accepts haram financing. This financing is not present in its original structure/system. However, the administration takes a usurious loan. The stocks/shares in this company is a mixed and ambiguous. What is best is to leave it and avoid it. This is the conclusion in regards to that which is associated with stocks/shares”.
[Sharh Kitab at-Tawheed tape no. 30, question no. 4]
The Permanent Committee was asked:
Q: Please inform me whether it is permissible to buy stocks from a company in cash and sell them to another person for a higher price that is to be paid to me in installments over a period of a year, knowing that the buyer will sell the stocks after receiving them from me for a price that is less than that upon which we agreed.
A: There is no problem with buying or selling stocks as long as the companies that are dealt with do not use Riba (interest), and that they are ownership companies, such as architectural, agricultural or production companies. It is also permissible for the person who buys these stocks to sell them or deal in them without restrictions.
May Allah grant us success. May peace and blessings be upon our Prophet Muhammad, his family, and Companions.
They were also asked:
Q 2: Some Islamic companies or banks periodically announce that they are prepared to receive money from investors who want to share in projects that conform with Islamic Shari`ah (Islamic law). In most cases the average person is not able to ensure the Islamic validity of these investments and all he can do is read the Islamic companies’ publications and advertisements. Sometimes, the names of Islamic personalities are mentioned in these releases as participating members in the companies or as members of Fatwa committee that issue the lawful rulings on the companies’ investments. My question is: To what extent is a Muslim required to investigate the operations run by these companies before buying shares in them? If you are aware of any actual, current methods of investigation, please describe them. Attached is a press release issued by one of these companies, would you please tell me whether it is permissible to buy shares in them or not? May Allah reward you with the best.
A: If these companies are most likely safe and avoid going against Allah’s Purified Shar` (Law), there is no harm in buying shares in them. You should also do your best to know the truth before dealing with them as Allah (Glorified and Exalted be He) states: So keep your duty to Allâh and fear Him as much as you can May Allah grant us success. May peace and blessings of Allah be upon our Prophet Muhammad, his family and Companions!
However, the Scholars have warned against participating in the stock market due to the doubt that surrounds the companies that trade on it. The stock market is a mixed environment, with many companies working with riba (usury) or having partnership or trade with companies that work with it.
Shaikh Fawzan [may Allah preserve him] was asked:
May Allah be good to you eminent Shaikh, this questioner says: What is the ruling on taking up shares in general and with the bank specifically considering that he says that there are are thirteen companies and organizations that will put forth their stock in the coming month?
“I say: it is upon a Muslim not to join as a shareholder nor partnership until he knows its reality in detail. Until he knows its reality and what [the company] does. If it is safe from haram, from usury, from lying and cheating, ignorance, and Gharar (risk), then he enters into it. As for if he does not know it, then he avoids it due to the statement of the Prophet (ﷺ):
إنَّ الْحَلَالَ بَيِّنٌ، وَإِنَّ الْحَرَامَ بَيِّنٌ، وَبَيْنَهُمَا أُمُورٌ مُشْتَبِهَاتٌ لَا يَعْلَمُهُنَّ كَثِيرٌ مِنْ النَّاسِ، فَمَنْ اتَّقَى الشُّبُهَاتِ فَقْد اسْتَبْرَأَ لِدِينِهِ وَعِرْضِهِ، وَمَنْ وَقَعَ فِي الشُّبُهَاتِ وَقَعَ فِي الْحَرَامِ، كَالرَّاعِي يَرْعَى حَوْلَ الْحِمَى يُوشِكُ أَنْ يَرْتَعَ فِيهِ
[…] And between the two of them are doubtful matters about which many people do not know. Thus he who avoids doubtful matters clears himself in regard to his religion and his honor, but he who falls into doubtful matters [eventually] falls into that which is unlawful, like the shepherd who pastures around a sanctuary, all but grazing therein
[Bukhari and Muslim].
You should enter into something you knows is safe, halal, and lawful earnings. As for that which you know is haram, then you avoid it out of obligation. As for something that is doubtful to you, then you avoid it out of cautiousness and to protect your conscience. The Prophet (ﷺ) said:
دَعْ مَا يُرِيبُك إلَى مَا لَا يُرِيبُك
Leave that which makes you doubt for that which does not make you doubt
[Saheeh Tirmidhi no. 2518]
Shaikh Ibn ul-‘Uthaymeen rahimahullah was asked:
What is the Legislated ruling on the stock/shares of companies which are circulating on the market? Is it allowed to do business with them?
“I cannot answer this question because the companies present on the market differ in their dealing with usury. If you know that this company works with usury and distributes the profits of this usury with those who participate with them [investors/shareholders], then it is not allowed to partner with it. If you partnered with them, then afterwards you learn that it deals with usury, then you should go to the administration and cancel the partnership. If it is not possible, then you should remain in the company. When they give you the profit and it is revealed the source of that profit, then you take the halal amount of profit and get rid of the haram. If you do not know, then cautiousness is to get rid of half of the profit and keep the other half. This is because this what you are able to do and Allah says:
Fear Allah as much as you can
[Fatawa al-Islamiyyah (2/263-264) as cited in Al-Asham al-Mukhtalit pg. 119]
Shaikh al-Albani rahimahullah was also against buying the shares on stock market
[See: Silsilatul-Huda wan-Nur no. 427]
So it is advised to avoid trading in the stock market due to the doubt and prevalent use of usury.
And Allah Knows Best
Faisal Ibn Abdul Qaadir Ibn Hassan