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Question: I would like to know the
position of the stock exchange viz a viz the Islamic Shari‘ah. Please
give a detailed answer.
Answer: The stock exchange
is a market place where shares are bought and sold. By buying the shares
of a company, you, in fact, share in the business. Therefore, if there
is nothing against Islam in the nature of the business, there is nothing
wrong in being the shareholder of that business and in getting dividends
on those shares. Similarly, if you sell the shares at any point of time
owing to some reason and get capital gains thereby, the transaction and
the profit will not be wrong. However, when this trading moves beyond mere
buying and selling, that is when the buyer and the seller do not remain
a buyer and a seller, but become a ‘bear’ or a ‘bull,’ trouble begins.
Ideally, the market price of a share
should be related to the performance of the company. But the speculators
(euphemistically called investors) manipulate the prices by artificially
stimulating the demand and the supply of shares. Forward contracts are
made and further contracts are derived (financial derivatives) on that
basis. The result is that the whole market activity is based on speculation
rather than being based on entrepreneurship. The share price of a company
doing perfectly well suddenly falls and that of a company in trouble suddenly
rises. A person earns millions and loses millions in a day in this game.
Obviously, such fluctuations have a negative impact on the economy, which
is usually borne by the not-so-affluent sections of the society. One of
the worst cases of such speculation was when on Oct. 19, 1987 – now known
as the Black Monday – Wall Street crashed owing to the panic that had spread
among the investors. Billions are lost in a day in such crashes. Since
shares are sometimes bought and sold even before they have been actually
bought and sold and, at times, are bought primarily on the basis of borrowed
capital, stakes are high and the slightest fear may start a chain reaction,
which can result in a major catastrophe. The reason for such timorousness
is nothing except that the whole economic activity in these exchanges is
based on speculation rather than on entrepreneurship. When such a large
area of economic activity is based on speculation, the spirit of entrepreneurship
suffers and moral corruption pervades the society.
Islam wants that the economic activity
of its followers be based on entrepreneurship, hard work, creativity, moral
principles and concern for others, whereas speculation is often detrimental
to these values. The moral corruption that ensues from such activities
as speculation far exceeds whatever material benefit they give. Therefore,
it is closer to taqwa (fear of God) to avoid them. The pervading
spirit in an Islamic society should be that of infaq (spending in
the way of Allah). This spirit often dies in the absence of fear of God
– and avarice and apathy become the deities.1
In an Islamic state, the government
has the right to enact such laws as would eliminate the inherent risks
of deception and loss by which either party can suffer in such activities
as speculation on the stock exchange. However, until such laws are framed,
it is up to the individual Muslim to decide when his trading becomes such
speculation as would be detrimental to his taqwa. A good Muslim
prefers to stick to nobler values even if they afford him less material
benefit. Even in the absence of specific Divine injunctions or enacted
laws, he should ask his own self whether his involvement in an activity
is leading him away from God and inclining him towards the violation of
moral values and ethics. His life should be marked by love of God, fear
of His wrath, charity and concern for others. Losing these values for material
benefit is a trade that a good Muslim never likes to make. But, as already
said, that is a question which each Muslim must answer for himself. The
rule here is sal nafsak (ask thy heart) – it will tell the truth.2
(Asif Iftikhar)
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