Lawful Modes of Investment

[hello_0]

Salam Everyone

While this has been asked before, atleast partially, I still think the issue remains hazy.. So here goes (these are all related questions, I just put them all here so that we have a discussion framework)

1) Is stock investment allowed? (Not rampant trading where speculation rules, but sober investment in shares for the sake of dividends as a side income, with only occasional trading)

2) If investing in certain companies is not allowed (e.g. those partaking in alcohol/gambling/ etc) then does this automatically rule out Index Funds, since they can basically invest anywhere? (maybe they dont, I am not sure, but thats how I understand they work- by diversifying the investment to minimize risk)

3) What about bonds? Some say they are better because they don't have the speculative part; others say they are worse because they are interest-based

4) What about cryptocurrency? I feel its problematic since its highly speculative (one Musk tweet and it plummets :p)

Also, is there any book which details all of these issues and also recommends the best mode for investing Islamically? (Maybe on al-islam.org for example)

Thank you all

Edited May 30, 2021 by hello_0
typo

[Ashvazdanghe]

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Loan, Debt and al-Qarzu 'l-Hasan
Islam strongly recommends its followers to live within their own means, to manage their finances wisely, and not be extravagant in spending. Asking for a loan without necessity is reprehensible (makruh). lmam 'Ali ((عليه السلام)) said, “Beware of debt for it causes anxiety at nighttime and humiliation at daytime.”[^6] Of course, if there is a need, then the reprehensibility of asking for a loan is lifted.

If you give a loan without the condition of interest, then it is known as al-qarzu '1-hasan (a good loan; an interest­ free loan) and is considered a very good deed in Islam. Many ahadith say that the reward for giving charity is multiplied ten times whereas the reward for giving an interest free loan is multiplied eighteen times.[^7]

Giving such a loan is considered like giving a loan to Almighty Allah who is going to pay it back with compounded interest:

“Who will give a good loan to Allah so that He will multiply it for him manifold? Allah straitens and increases (the sustenance), and to Him you shall return.” (2:245)

 

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Islamic Banking
How then do banks operate under an Islamic economic system?
Ayatullah Khamana 'i, in answer to a question related to money earned in deposit accounts from banks (in a country governed by shari' a law like Iran), says:

“If the act of depositing the money in the ban k is like giving the loan to the bank and the bank gives extra money in that account-then it is riba and haram.
But if the deposit is not as loan but as an investment where the bank takes that money and invests on behalf of the customer according to one of the commercial laws of Islam [like mudaraba], and then the bank divides the profits between itself and the customer-in this case there would be no problem in the profit that the hank gives to the customer.”[^13]

 

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 Mutual Funds, the Stock Market and Bonds
In light of what we have said, investing in mutual funds and the stock market in which the returns are not guaranteed would be permissible.

Such investments, however, could become haram because of secondary reasons: like If one invests in a company that deals in a haram commodity, such as a brewery or casino. The best option for a Muslim investing in mutual funds would be the “ethical funds'” since such funds do not deal in alcohol, tobacco, gambling or environmentally harmful products.[^19]

https://www.shiavault.com/books/islamic-business-ethics/chapters/12-7-3-your-business-b-2-haram-business-and-trade/

https://www.sistani.org/english/qa/01227/

https://www.al-islam.org/a-code-of-practice-for-muslims-in-the-west-ayatullah-sistani/work-investment

 

[Ashvazdanghe]

Chapter fourteen » Sleeping Partnership (Muḍārabah)

Ruling 2228. A sleeping partnership is a contract between two people in which one of them, the ‘owner’ (mālik), provides capital to the other, whom we call the ‘worker’ (ʿāmil), so that he may trade with it and the profits be divided between them.

The validity of such a transaction (muʿāmalah) is conditional upon the following matters:....

https://www.sistani.org/english/book/48/2314/

 

[Ashvazdanghe]

Work & Investment » Questions and Answers

https://www.sistani.org/english/book/46/2053/

[Ashvazdanghe]

Muzara'h & Musaqa'h

Muzara'h (Farming) literally means cooperation in agriculture. The parties in this contract are the owner (farms) and the agent.Muzara'h is defined in the Civil Code as: A farm is a contract under which one of the parties gives land to the other party for a certain period of time to cultivate it and divide the yield

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Masaqat is derived from the word saqi (irrigation) and Masaqat means to irrigate with cooperation; In legal terms, it is a contract between the owner of the tree and the gardener, for fruitful trees, that the gardener irrigates and cares for the trees for a certain period of time, and the share of each party in the crop is determined jointly.

https://wikifeqh.ir/مزارعه

https://vakiltop.com/blog/مزارعه-و-مساقات/

 

[hello_0]

Thanks a lot @Ashvazdanghe!!

These resources are really helpful!

 

Wassalam