Saturday, August 1, 2009

Sharia Compliant Investment

Islam is "According to dictionary, the word Islam, from the tri literal root s-l-m, is derived from the Arabic verb Aslama, which means "to accept, surrender or submit. “ A Muslim (Arabic: مسلم ) an adherent of the religion of Islam. The feminine form of 'Muslim' is Muslimah (Arabic: مسلمة ). Literally, the word means "one who submits to God"."

Hence, it can be said that Islamic Finance is conducting financial and business matters according to the commandments of Allah(SWT) expressed or implied.


Muath quoted Zaineb Sefiani at BMB Islamic that It is permitted for Muslims to invest in companies whose share of income from Haraam activities is less than or equal to 5%.


The question before us is can we mix Halal with Haraam ? If yes, then what should be the ratio of Haram to Halal or ratio of Haram in a given total quantity or value and what are the conditions or circumstances under which this is allowed? Before we go further, it is pertinent to clearly define what is understood as Haram.

Haraam (Arabic: حرام‎) (often Haram) is an Arabic term meaning "forbidden". In Islam it is used to refer to anything that is prohibited by the faith. Itsantonym is halaal.

The religious term haraam can be applied to:

  • certain behaviours, such as adultery or abuse, abstention in the general elections (e.g. in Indonesia) and profane language.
  • certain objects and sacrelige.
  • certain foodstuffs or food ingredients, such as alcohol or pork.
  • and also to foods, objects and people that would normally be halaal but which were tarnished in some or other way, for example meat slaughtered in a non-permitted way or people with certain sexual preferences.

Haraam has, over the years, accumulated additional non-traditional uses to it. In Arabic-speaking countries, such as Lebanon, saying "haraam" can mean, "what a shame" or "what a pity" (this meaning has been adopted by Modern Hebrew slang as well). This can be used formally or between friends. Children are commonly told not to mistreat other children or animals because it is 'haraam'.

Haraam also applies to ill-gotten wealth obtained through sin. Examples include money earned through cheating, stealing, corruption, murder or any means that involves harm to another human being. It is prohibited in Islam for a true Muslim to profit from such Haraam actions. Any believer who benefits from or lives off wealth obtained through Haraam is not a Muslim.

The word also appears in Amharic, the national language of Ethiopia. It connotes the same idea of prohibition on religious grounds, however it is used by Christians in the Ethiopian Orthodox Tewahedo Church, including bans on pork (more out of Jewish dietary laws, not Islamic).

Haraam is best known to non-Arabs by means of the related word harem, referring to the forbidden area of the palace where the women were quartered.

The Hebrew cognate Herem referes to the highest ecclesiastical censure in the Jewish community.

The use of the term varies between Arabic-speaking communities and non-Arabic-speaking ones.

In Arabic-speaking countries, the term is used to describe anything permissible under Islamic law, in contrast to haraam, that which is forbidden. This includes human behavior, speech communication, clothing, conduct, manner and dietary laws.

In non-Arabic-speaking countries, the term is most commonly used in the narrower context of just Muslim dietary laws, especially where meat and poultry are concerned, though it can be used for the more general meaning, as well.

I am failed to come up with anything in Quran that suggests mixing of Halal with Haraam. All I get is following Hadith

"Narrated An Numan bin Bashir

I heard Allah's Apostle saying, 'Both legal and illegal things are evident but in between them there are doubtful (suspicious) things and most of the people have no knowledge about them. So whoever saves himself from these suspicious things saves his religion and his honor. And whoever indulges in these suspicious things is like a shepherd who grazes (his animals) near the Hima (private pasture) of someone else and at any moment he is liable to get in it. (O people!) Beware! Every king has a Hima and the Hima of Allah on the earth is His illegal (forbidden) things. Beware! There is a piece of flesh in the body if it becomes good (reformed) the whole body becomes good but if it gets spoilt the whole body gets spoilt and that is the heart." (Sahih Al-Bukhari 1:49)

According to The Lawful and Prohibited in Islam by Yusuf al-Qaradawi "Another Islamic principle is that if something is prohibited, anything which leads to it is likewise prohibited. By this means Islam intends to block all avenues leading to what is haram. For example, as Islam has prohibited sex outside marriage, it has also prohibited anything which leads to it or makes it attractive, such as seductive clothing, private meetings and casual mixing between men and women, the depiction of nudity, pornographic literature, obscene songs, and so on.

Accordingly, Muslim jurists have established the criterion that whatever is conducive to or leads toward the haram is itself haram. A similar principle is that the sin of the haram is not limited only to the person who engages in it but extends to others who have supported him in this, materially or morally; each is held accountable according to his share. For example, in the case of intoxicating drinks, the Prophet (peace be on him) cursed not only the one who drinks them but also the one who produces them, the one who serves them, the one to whom they are served, the one to whom the price of them is paid, etc. This point will be discussed again later. Again, in the matter of usury, the Prophet (peace be on him) cursed the one who pays it, the one to whom it is paid, the one who writes the contract, and the one who acts as a witness thereto. Accordingly, we derive the rule that anything which assists in the doing of what is haram is itself haram, and anyone who helps another person to do it shares in the sin of it."

"whenever any permissible action of the believer is accompanied by a good intention, his action becomes an act of worship. But the case of the haram is entirely different; it remains haram no matter how good the intention, how honorable the purpose, or how lofty the aim may be."

"While Islam has narrowed the range of what is prohibited, it is, at the same time, very strict in seeing that its prohibitions are observed. Accordingly, it has blocked the ways, apparent or hidden, leading to what is prohibited. Thus, what is conducive to the haram is itself haram, what assists in committing the haram is haram, any rationalization for engaging in the haram is haram, and so on, to the last of the principles which we have elucidated. At the same time, Islam is not oblivious to the exigencies of life, to their magnitude, nor to human weakness and capacity to face them. It permits the Muslim, under the compulsion of necessity to eat a prohibited food in quantities sufficient to remove the necessity and save himself from death. On the basis of these and similar verse of the Qur'an, Islamic jurists formulated an important principle, namely, that "necessity removes restrictions." However, it is to be noted that the individual experiencing the necessity is permitted to eat the haram food with the stipulation that he is "neither craving it nor transgressing." This is interpreted to mean that he should not desire to relish it nor transgress by eating more than the bare amount needed to satisfy his hunger. From this stipulation, jurists have derived another principle, that "The quantity permitted is determined by the (magnitude) of the necessity." Here the underlying idea is that, even though compelled by necessity, a person need not surrender to it or embrace it with eagerness; rather he must live with what is essentially halal and seek a way to return to it so that he may not become accustomed to the haram or begin enjoying it under the pretext of necessity."

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