Is stock trading Halal Hanafi? Know the truth, then start trading.

Suhel Ahmad

Hanafi madhhab stock trading is not halal? In answer to this question, many say – yes. Many people say no.

The emotional conflict started with the share transaction of the partnership business. Many Hanafi scholars have already called many scholars and asked such questions.

Stock entrepreneurs turn to Hanafi thinkers to find answers to these questions. To find the answer, I had to take various problems.

Is stock trading Halal Hanafi

In Hanafi Hajhab stock trading is halal. It’s like some numerologists. They said in answer to this question – share trading in partnership business was there even in the Jahili era, and it is still there.

In their language, they explain that a partner can sell his share without the permission of other partners but subject to approval.

However, one can also sell to outsiders, but for the transaction to be valid, there are all the conditions that Muharaka and Mudaraba fulfil.

Details of stock trading in the light of Hanafi principles of finance

Below is an article on ‘Hasnafi Mazhar’s Principles of Life-Method.’ Which will help readers to get answers to their questions.

It is lawful or not lawful to be a partner in a business in which the capital is halal or most halal. It is permissible to enter into a partnership transaction where there is no illegal aspect to the marketing being legitimate.

If someone wants to sell his share, someone else can buy it. But buying and selling shares in an illegal business is illegal, and its profit is Haram.

A company or institution that deals in usury or gambling or most of its business is against usury, gambling, or Shariah; its share trading is illegal. Share certificates are receipts and certificates of any honest company.

For example – selling a share of Rs 1000 means selling that amount from the company’s assets, so if an honest company exists and all the principles of sale are available, then its sale of shares is valid.

But the purpose of the business of the institution or company is to issue shares so that after the achievement of the specified number,

Such transfer of shares is valid for becoming a partner in the company when the employee has not yet commenced business, But it is prohibited to sell the shares purchased before the commencement of work at a higher or lower price.

As some number of individuals wish to establish a company. They have calculated the cost of land, building machinery and all materials for the company, employee salary, and other company expenses – 3 crore rupees are required, and the estimated profit after working will be ten lakhs. The company’s concerned persons confirmed three crore shares of different prices based on the details.

It is mentioned that it is impossible to start work until the share price of three crore rupees is not recovered. Therefore, the sale of shares worth Rs. 3 crore is inevitable.

The result can start as soon as all the share transactions are completed and the sum of 3 crore rupees is reached.

Why is stock trading not halal in Hanafi schools?

Since the conventional banking system of the world is usurious, the share transactions of all banks under its supervision are illegal. There is some legitimate meaning, But most are illegal and usurious, and most halal and Haram are accepted.

In addition, those companies and institutions over which the World Bank has authority work under the law and advice, so it is not permissible to buy their shares.

Because his capital is illegitimate, their business is primarily not conducted according to the basic principles of Shari’ah.

Those institutions and companies that engage in fraud, dishonesty, usury, gambling, and illegal trading of their shares are invalid.

Likewise, companies that have no assets behind their shares but only capital. The shareholder only has receipts sold for $11 or $12 – pure interest, which is Haram.

That is why I have said that buying and selling shares of these companies and institutions is not legal.

The opinion of Hanafi scholars

Hanafi scholars said that stock trading is a precarious business regarding halal and Haram. So it is safe to avoid it.

Citing a quote from Ashraf Ali Thanvi (RA), Shaikhul Islam Maulana Muhammad Takvi Usmani called the stock trading business halal under certain conditions. namely-

  1. The company’s core business must be halal, such as medicine and instruction companies.
  2. To sell at more or less than the cost price, the company’s main asset should be money and other assets along with cash, like buildings, land, machines, etc.
  3. Although the main business is halal, if there are some usurious or haram transactions in the said company, they are few. Even then, he will protest against the usurious and haram transactions in the annual general meeting and ask for rectification.
  4. As much as the company’s income is from interest, it will be taken out and donated without the intention of reward.

Stock trading is halal if the above four conditions are correctly followed. However, there is widespread deception and fraud in the stock market.

And it isn’t easy to get the above conditions right. So it is safer to engage in any business alternative to stock trading, and so is our advice.

FAQs

Is stock trading permissible in Hanafi Islam?

Generally, Hanafi scholars allow stock trading if certain conditions are met.

What conditions must be met for stock trading to be legal?

The company’s business operations must comply with Islamic principles. Avoiding haram elements like usury, gambling, and immoral practices is crucial.

Can I invest in any stocks?

Investing in Shariah-compliant stocks, i.e., companies engaged in halal activities is advisable. It excludes businesses involved in alcohol, gambling, pork, or other prohibited industries.

Is margin trading allowed in Hanafi Islam?

Margin trading involving interest is not allowed. If you can trade without involving interest, it is halal, but caution is advised.

What about stocks with debt or interest-bearing assets?

Hanafi scholars generally discourage investing in companies with significant debt or that earn substantial income from interest.

Is day trading allowed?

Day trading will be halal if halal stocks are involved, and Islamic principles are followed. However, it is essential to avoid speculative and gambling behaviour.

How do I make sure my stock trading is halal?

Consult wise Islamic scholars. Thus, use screening tools to identify Shariah-compliant stocks. Therefore, stay informed about the business activities of the companies you invest in

Can I invest in mutual funds or ETFs?

It depends on the structure of the mutual fund or ETF. Ensure that they are Shariah-compliant and not involved in prohibited activities.

What if I unknowingly invest in a non-compliant stock?

If you discover that an investment is non-compliant, rectifying the situation by divesting from such stocks is advisable.

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