Is Share Investing Halal or Haram?

Summary

This video script discusses the potential of halal stock investing for Muslims, highlighting the FTSE 100's 26% growth despite market volatility. It emphasizes the current economic climate, where governments are injecting funds into the economy, likely benefiting the stock market. The script outlines five key steps to identify halal stocks, including ensuring the business is not haram, the company has a low debt-to-asset ratio, and less than 5% of revenue comes from haram sources. It also suggests using robo-advisors, stock screening apps, or doing thorough research. The speaker offers resources, like a halal stock screening course, to help Muslims invest ethically.

Takeaways

• 📈 The FTSE 100 has increased by 26% over the last decade, suggesting potential for halal stock investing.
• 🌐 Governments are injecting vast sums into the economy, which could lead to growth in assets like stocks and property.
• 🚫 Many Muslims avoid stock investing due to misconceptions about it being similar to gambling or involving haram activities.
• ✅ The majority of scholars consider stock investing halal, provided certain criteria are met.
• 🤖 Using a robo-advisor or Islamic fund manager is one way to invest in halal stocks without doing the screening yourself.
• 📱 There are apps available for初步 screening of stocks for their halal compliance, though they may not be fully reliable yet.
• 🔍 Investors should conduct their own due diligence to ensure the stocks they choose meet halal standards.
• 🚫 The first step in halal stock screening is to ensure the company's business is not haram, such as alcohol, tobacco, or firearms.
• 💼 Ethical considerations are important, including checking for issues like slave labor or environmental harm.
• 💵 A company should not have an impermissible level of debt; a threshold of 33% debt to total assets is often used.
• 🔗 Companies should not derive more than 5% of their revenue from haram sources, such as the sale of alcohol or pork.
• 🏦 It's important to ensure the company has illiquid assets and is not just a shell company holding cash.

Q & A

How has the Footsie 100 performed over the last decade despite various market conditions?

Despite various market conditions, including the recent coronavirus pandemic, the Footsie 100 has still increased overall by 26% over the last decade.

Why is now considered a good time for Muslims to explore stock investing in a halal way?

Now is considered a good time for Muslims to explore halal stock investing because governments around the world are pumping hundreds of billions into the economy, which historically has led to increased investment in assets like stocks and property.

What are the common misconceptions about stock investing being Haram among Muslims?

Common misconceptions include the belief that stock investing is too similar to gambling, involves too many haram companies, and is associated with interest-bearing loans which are not permissible in Islam.

What does the majority of scholars say about the permissibility of stocks and shares in Islam?

The majority of scholars have said that stocks and shares are halal, but investors need to follow specific criteria to ensure they are only investing in halal stocks.

What are the three options Muslims have for investing in halal stocks without doing the screening themselves?

Muslims can invest through a robo-advisor, an Islamic fund manager, or use apps like Zara Islamically and other stock screening apps to find halal stocks.

What are the five steps to ensure a stock is halal according to the video?

The five steps are: 1) Ensuring the business is not haram, 2) Checking the company is ethical, 3) Ensuring the company has a tolerable level of debt (less than 33% debt to total assets ratio), 4) Making sure the company has no more than 5% of its revenues from haram sources, and 5) Ensuring the company has some illiquid assets.

What is the significance of the 33% debt to total assets ratio in halal investing?

The 33% debt to total assets ratio is significant because it represents a tolerable level of Haram debt that scholars have determined as permissible for a company to be considered halal for investment.

Why is it important to ensure a company has illiquid assets when considering halal investment?

It is important to ensure a company has illiquid assets to avoid investing in a shell company that only holds cash, as this would not be in line with Islamic principles which require money for money transactions to be equal.

What resources does Islamic Finance Gurus provide to help Muslims invest in halal stocks?

Islamic Finance Gurus provides resources such as a halal stock screening course, a halal stock list based on the Footsie 100, and an investment comparison engine to help Muslims invest in halal stocks.

How can Muslims ensure they are investing in halal stocks if they want to do the screening themselves?

Muslims can ensure they are investing in halal stocks by following the steps outlined in the halal stock screening course provided by Islamic Finance Gurus, which includes a checklist and practical steps for screening stocks.

Outlines

00:00

📈 Stock Investing in a Halal Way

This paragraph discusses the performance of the FTSE 100 over the last decade, highlighting a 26% increase despite challenging market conditions like the coronavirus pandemic. It emphasizes the importance of Muslims considering halal stock investing, especially with the current economic stimulus by governments worldwide, which is reminiscent of the financial crisis. The speaker suggests that the influx of funds into the economy could lead to a bull market, making it a prime time to invest in stocks and shares. The paragraph also addresses common misconceptions about stock investing being haram and introduces the criteria for identifying halal stocks, such as avoiding companies involved in haram activities, having a permissible level of debt, and ensuring the company's revenue is not majorly derived from haram sources.

05:00

🔍 Steps to Identify Halal Stocks

The second paragraph outlines the five steps to ensure a stock is halal for Muslim investors. The first step is to confirm the business is not involved in haram activities. The second step involves assessing the company's ethical standards, including labor practices and environmental impact. The third step is to check the company's debt level, with a general guideline of no more than 33% debt to total assets ratio being permissible. The fourth step is to ensure less than 5% of the company's revenue comes from haram sources, such as alcohol or pork sales. The final step is to verify the company has illiquid assets to avoid investing in a shell company. The paragraph also mentions resources available to help investors, such as robo-advisors, stock screening apps, and educational courses on halal stock screening.

Keywords

💡Footsie 100

The Footsie 100, also known as the FTSE 100 Index, is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. It is a key indicator of the overall performance of the UK stock market. In the video, the presenter mentions that despite various market conditions, including the coronavirus pandemic, the Footsie 100 has seen an overall increase of 26% over the last decade, highlighting the potential for investment growth.

💡Halal Investing

Halal investing refers to the practice of investing in a manner that is compliant with Islamic law (Sharia). This includes avoiding investments in companies that deal with prohibited goods or services (such as alcohol, pork, or gambling) or those that charge interest. The video discusses the importance of Muslims looking into halal stock investing as a way to participate in the stock market while adhering to their religious principles.

💡Financial Crisis

A financial crisis is a situation where the financial assets or institutions of a country or region are threatened, leading to a significant loss of confidence and economic disruption. The script mentions the financial crisis as a historical example where governments injected large sums of money into the economy, leading to an increase in the stock market and property values, which presents an opportunity for investors.

💡Robo Advisor

A robo advisor is an automated platform or digital algorithm-driven financial advisor that provides financial planning services with little to no human supervision. In the context of the video, robo advisors are mentioned as a potential solution for Muslims who want to invest in halal stocks, as these advisors can automatically screen and select stocks that meet Islamic investment criteria.

💡Stock Screening

Stock screening is the process of analyzing stocks based on specific criteria to determine their suitability for investment. The video emphasizes the importance of stock screening for Muslims to ensure that the companies they invest in are halal. This involves checking for compliance with Islamic financial principles, such as avoiding haram businesses and ensuring a permissible level of debt.

💡Debt to Assets Ratio

The debt to assets ratio is a financial metric that indicates the proportion of a company's assets that are financed through debt. In Islamic finance, a company is considered halal if its debt does not exceed a certain threshold, typically 33% of its total assets. The video explains that this ratio is used to determine whether a company's debt level is permissible for halal investing.

💡Haram

Haram, in Islamic law, refers to activities or things that are forbidden or prohibited. The video discusses the importance of avoiding haram businesses when investing, such as those involved in alcohol, tobacco, or adult entertainment. Ensuring that a company's business activities are not haram is a fundamental step in halal investing.

💡Ethical Company

An ethical company is one that operates with a strong commitment to ethical practices, including fair labor practices, environmental sustainability, and social responsibility. The video suggests that investors should consider a company's ethical practices in addition to its halal status, as part of a comprehensive approach to responsible investing.

💡Revenue from Haram Sources

This concept refers to the portion of a company's revenue that comes from activities or products that are considered haram under Islamic law. The video explains that a company can be considered halal even if it has some revenue from haram sources, as long as this does not exceed 5% of its total revenue. This threshold allows for some flexibility while still maintaining the principles of halal investing.

💡Illiquid Assets

Illiquid assets are assets that cannot be easily converted into cash without a significant loss in value. In the context of halal investing, the video advises investors to ensure that the companies they invest in have some illiquid assets, such as inventory or intellectual property, to avoid investing in a 'shell company' that merely holds cash.

Highlights

Despite market volatility, the FTSE 100 has seen a 26% increase over the last decade, suggesting potential for halal investing.

Government economic stimulus post-financial crisis often leads to growth in property and stock markets.

Current global economic policies involve massive injections of funds,预示着资产价值可能上升，尤其是股票和股份。

Many Muslims consider stock investing haram due to its perceived similarity to gambling and involvement with haram companies.

The majority of scholars have deemed stock and share investing halal, provided certain criteria are met.

There is no universally accepted halal stock screening method, leaving investors to rely on Islamic fund managers or apps for initial checks.

Investors should conduct their own research to ensure the stocks they invest in are halal.

The first step in halal stock screening is to ensure the company's business is not haram.

Investors should avoid companies involved in alcohol, tobacco, firearms, adult entertainment, or haram financing.

Secondly, ensure the company is ethical and does not engage in practices like slave labor or cause environmental harm.

Debt levels should be considered, with a maximum of 33% total debt to total assets ratio being permissible.

Companies should not derive more than 5% of their revenues from haram sources, such as the sale of alcohol or pork.

Investors should ensure the company has illiquid assets to avoid investing in a shell company.

Islamic finance gurus offer resources to simplify the process of halal stock screening.

Investors can use a halal stock screening course to learn how to screen stocks effectively.

Islamic finance gurus provide a pre-screened list of FTSE 100 companies to assist investors in making halal choices.

For those who prefer to invest directly in stocks, a halal stock screening course is available to guide the process.

Transcripts

over this last decade we have seen some

of the craziest market conditions heck

we're living through one right now with

coronavirus but in that time did you

know that the footsie 100 has still

increased overall by 26% that is a good

reason for Muslims to look further into

stock investing in a halal way the other

good reason for us to look into this

whole area right now is because there's

a real opportunity on the horizon

because look what happened in the

financial crisis the government they

slashed billions and billions into the

economy and where does all that money

end up it has to end up somewhere and

what happened at that time was it ended

up in property and the stock market and

we saw the biggest bull market in the

stock market for many many decades and

we saw house prices particularly in

London shoot up enormously and right now

what is happening in our economy around

us governments around the world are

pumping literally hundreds and hundreds

of billions into the economy once more

that money has to go somewhere and the

safest place for you to find yourself is

hold assets because assets will be the

things that start appreciating and so

stocks and shares are one key area where

that money will potentially end up in

this video I want to share with you how

you go about picking Halal stocks

because that is a relevant precursor to

you actually entering into the stocks

and shares market and buying stocks as a

Muslim

[Music]

a lot of Muslims think that stocks and

shares is Haram and they say that's

because it's too much like gambling

there's too many haram companies

involved there's too many

interest-bearing loans that are involved

in the whole economy how can we be

investing in something like that there

is actually some truth to all of those

arguments but ultimately the majority of

scholars have said that stocks and

shares is halal but you need to be

following a few set of very key criteria

to pinpoint only the halal stocks and

we're going to dive into that today

unlike meat there's no HMC of stock

screening so what are your options well

the first option is that you could

literally just give your money into a

robo advisor an islamic fund manager and

they'll do it for you the second

approach that you can use is use apps

like zara islamically and other stock

screening apps they're a great first

check in my experience but they're not

as well developed yet to be able to rely

on definitively and the third option is

something that you should always do is

do the check yourself to make sure that

you're really comfortable that they are

halal stocks and we're going to dive

into the five steps you need to take to

make sure a stock is halal step one is

the business haram right this is the

easiest one if you're going to invest in

something that's her arm that's not

allowed if you're confused about whether

a company is haram Mahalo ask them of

thee we've got a forum forum don't

Islamic finance guru calm or we've got

tomb of these on there and you can ask

them and they'll get back to you usually

within a day companies that deal in

alcohol Tobacco Firearms adult

entertainment Haram financing any of

those companies would be impermissible

and you can look and it really is an

obvious decision when it's something

like that the second step that you need

to take is to make sure the company is

actually an ethical company because it's

one thing being halal and selling I

don't know cardboard boxes but it's

another thing being an ethical company

that doesn't have you know slave labor

involved or it doesn't have any other

kind of environmental major kind of

calamities on its hand that sort of

thing just do your check on that usually

large indices have really strong

governance around them and that means

the companies on there typically won't

fall foul of that but do your own

homework the first step is make sure

that the company doesn't have an

impermissible level of debt now there

are some people in the Muslim community

who say that you should not invest in a

company that has any level of debt and

that is you know a fairly respectable

view and we've actually got a zero debt

halal stock list that we've created that

you can access on the website and I'll

share the link below but our view and

the view of the majority of scholars is

that as long as there is only a

tolerable level of Haram debt then that

should be permissible and the reasoning

behind that is because if you have a

situation where come where Muslims can

only invest in zero debt companies that

means that all Muslims will be investing

in a tiny tiny tiny basket of companies

and that means that their investments

are not going to be well managed they

don't really have access to a whole

range of investments it's going to

really limit Muslim investment and

Muslim growth and wealth the total level

of debt that is allowed by scholars such

as at a or I fee and others is 33% total

debt to total assets ratio so if you if

a company has more than that amount of

debt then they would not be permissible

but if they have less than then they

would be fine and the number is an HD

hard it's something that the scholars

have come up with by themselves based on

their understanding of the wider tax in

the wider context however some scholars

do point to a hadith where the Prophet

said Solara Salaam that fool off' is

kafeel a fool took a fear that 1/3 is a

lot and they say that that means that

you should have debt as a maximum at 33%

and they rely on on the hadith the

fourth step is to make sure that the

company that you're picking does it have

more than five percent of its revenues

coming from haram sources what that

means is that for example you've got a

company

such as Tesco that has sources of

revenue that are from Haram sources such

as the sale of alcohol or the sale of

pork you need to make sure that it

doesn't have more than 5% and where

there is any doubt and there may be

because you might not be able to find a

breakdown of that detail then you should

generally seek to avoid that and the

reason for why this 5% threshold is

allowed in the first place is because

every company pretty much will have some

money sat in the bank account or they'll

have some other kind of minor her arm

revenue coming in but if we use that

kind of strict criteria that no harm

revenue should be used then that would

rule out pretty much all companies

across the world and so that's why

scholars allow that and so--but the

fifth and final step is to make sure the

company you're investing in has some in

liquid assets what that means is you're

avoiding a situation where you're buying

a shell company that just holds cash

because then you're going to be buying

let's say a hundred pounds of cash that

there is in this company but you're

going to be buying it at say 95 pounds

or 105 pounds whatever that stock market

price is fluctuating that but that is

not allowed because in Islam money for

money needs to be perfectly equal and

you don't want to be doing that with a

stock market either so just check and

make sure the company has at least some

illiquid assets things like you know

cars inventory intellectual property

anything basically other than cash now I

appreciate that seems like a lot of

steps and some of them quite complicated

to pinpoint a halal investment so what

we've done at Islamic finance gurus

we've created a bunch of resources to

get you started as painlessly as

possible firstly you can just avoid the

pain of having to pick all these stocks

and shares yourself and put all your

money in with a fund manager or Robo

advisor who is going to put your money

into halal stocks and shares and we've

got an investment comparison engine that

lists all the options out that you can

compare between and go for whichever one

you fancy secondly we've actually

created a screen of the footsie 100

companies that lists out exactly which

one of those hundred or so companies is

halal so we've done the hard work for

you and you can just use that and crack

on do actually check

yourself as well if the company's halal

or not because obviously we've done an

initial screen where you should do a

detail screen when you're actually

coming to invest in a particular company

but you might say to me look Ibrahim I

actually really want to invest in stocks

and shares myself rather than have to

rely on anyone else that's fine you need

to be able to stop screen really well

and we used to as a young company we

used to screen stocks for people all the

time when they're sending those requests

to us but now I'll hamdullah is a larger

company we just get so many requests

that wasn't feasible so what we did was

we created a halal stop screening course

that allows you to get the practical

steps that are needed to actually do

this yourself so we've got a checklist

in there where you literally have to

just check off the boxes as you go

through the steps that we've outlined in

the videos that this is what you do you

go into a company's accounts this is the

step that you take this is the step that

you take and eventually you'll be able

to screen a stock in less than 10

minutes in less than five minutes even

once you get practice and if that is of

interest then just click the link below

and check it out please like this video

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this for you until next time assalamu

alaikum