Please Note: The views expressed in this blog are my personal views and understanding. These views do not represent Islam. Since, I am a Muslim, all the views expressed are seen through the lens of Islam as I see it. It may or may not coincide with Islamic teachings due to my personal shortcomings. This is a Muslim's blog, not a website teaching Islam. Everything good that is written is from Allah, every mistake below is from my own self.  TaqabbAllahu Minni wa minkum wa astaghfiruAllah, All comments are welcome.

Tuesday, April 8, 2008

Shariah comp-LIEnt investments- Exploiting the widespread ignorance

Do you remember when you were a kid your parents brought you a coin box to save any extra pocket money which was left with you? Savings is a good thing and its one of the part of planning for building a future. But, is savings the most primary thing or there is something more to it? Kids are initially reluctant to drop their coins into that coin box or 'piggy' bank as it is popularly known, which no longer comes only in the 'pig' shape but also seen in the form of fruits, cartoon figures and objects to attract the kids' interest. Soon, the parents succeed in training the kids in the habit of saving money by giving them examples of how they could benefit from it and luring them to save with an expectation of a bigger reward in the future.

When the kids grow up with such a habit of saving, they do not indulge in spending excessively. But, in Islam everything is done in moderation this applies also to savings. When the kids become adults, the savings concept has also grown up to become an 'investing' concept. The money in the coin box does not increase no matter how long a period we keep it in there. But, an investment made into a business has chances of growth over time ! So, the savings money is then transferred into business investments with careful planning. Some people have another way of earning which is the least risky i.e., earning regular interest on the deposited amount. Whereas in the former option the potential to earn is unlimited but it comes with a risk and investment has to be done with careful planning about the company and market conditions. In the second option the risk is minimized but the returns are not as high as investing in business directly. Gradually over time people master the skill of investing, sometimes suffer losses but nevertheless a careful planning yields good returns.

Now, this post is not to educate people about the basics of investing rather to ponder upon a topic which is of vital importance to the believers. Can we invest in any company? Although, I have personally come across some Muslims who have no objection in investing in any company but it is purely their personal opinions and not derived from the Shariah so its useless to argue over them. They are others who do believe that certain things are haram and hence we cannot invest in some companies, like those who produce haram things, process pork or sell alcohol et cetera. These people have a basis for their opinion from the Shariah derived from the Quran and Sunnah. Hence, with the spread of Islamic awareness after a period of ignorance and oppression we find many investment companies came up with the slogan 'Shariah Complaint Investments / Halal Investments, etc'. On one website I found the company claiming this - I quote verbatim 'We screen all the listed companies based on the Shariah guidelines and do not deal in the ones involved in Haraam businesses like production and sales of alcohol, tobacco, obscene entertainment, banking / finance companies and companies involved in operations that are detrimental for our environment and ecosystem'. And people are happy to invest their earnings into these companies thinking that they have finally found an 'Islamic Investment Company'.

But, please wait a minute. Is not involving in production and sales of alcohol, tobacco, obscene entertainment enough to make the company shariah complaint? Or have we neglected something more vital than alcohol and tobacco? As some of you might have guessed, the issue neglected is of Riba / Usury/ Interest. But, we aren't taking interest from the company, we are investing it and earning the profits, which is purely trade and trade is halal isn't it? But, wait a minute, is the company earning only from selling its products? One thing I learnt in Financial Management and Market Economics is that companies invest part of their surplus retained earnings into long term investments to generate capital, and what does this mean? In simple terms, they put this money in the banks and earn regular interest over a period of time thus earning from interest and this practice is almost everywhere in the Capitalist economic system. Hearing this, a lot of people stopped earning from such companies which practice this; but, there will always be those who will not be ready to sacrifice their dollar dreams just for a simple concept of Riba, and hence they will try to justify their investments and earning by changing names or terms, while in reality it still remains riba and they know it themselves. Lets see what is Riba, what does the Quran say about Riba and what did the Prophet (saws) had to say about it.

Quran Speaks:
O you who believe! Be mindful of God and give up what remains of al-riba if you are believers. If you do not do so, then receive a declaration of war from God and his Messenger. But if you repent, you shall have your capital sums (ru`us al-amwal). You do not deal unjustly and you are not dealt with unjustly (2:278-279)

Al-Baqarah 275. Those who eat Ribâ (usury) will not stand (on the Day of Resurrection) except like the standing of a person beaten by Shaitân (Satan) leading him to insanity. That is because they say: "Trading is only like Ribâ (usury)," whereas Allâh has permitted trading and forbidden Ribâ (usury). So whosoever receives an admonition from his Lord and stops eating Ribâ (usury) shall not be punished for the past; his case is for Allâh (to judge); but whoever returns [to Ribâ (usury)], such are the dwellers of the Fire - they will abide therein. 276. Allâh will destroy Ribâ (usury) and will give increase for Sadaqât (deeds of charity, alms, etc.) And Allâh likes not the disbelievers, sinners.

One of several Ahadith on Riba:
Hazrat Jabir r.a. has reported that the Messenger of Allah peace and blessings be upon him cursed the devourer of usury, its payer, its scribe and its two witnesses. He also said that they were equal (in sin).

Riba is one the most major sins in the sight of Allah and His Messenger. And Allah has already said that there will be some people who will say 'Riba is just like trading' and Allah mentioned the fate of such people in the Quran clearly.

It is unfortunate, that in spite of having 50+ countries calling itself 'Islamic', none of them have a Islamic economic system, or companies not dealing in Riba. Although, some claim that their companies have 'Islamic Banks' and 'Riba free' Investment, a closer look at these companies show that they are just using a different name while selling the same product, yes they are rarely some companies which are riba free but since they are unable to compete in the market of capitalists, they do not give as much returns and hence people are happy to invest in other companies giving higher returns under the label of 'shariah complaint'.

The investment firms claim that they invest in only those companies which do not involve in haram like alcohol, tobacco and pork but no one ever mentions about not investing in companies which directly earn from interest and this profit is passed on to us as dividends and makes us direct earners of riba, and claiming ignorance is not an excuse because no one invests without finding out about the company and ignorance about the company is not the reason but ignorance about the Shariah. The company releases an annual report every year and quarterly financial reports for its investors and in it they list all the earning and source of earnings, and if they do earn from long term investments and interest on savings, then we get a part of that haram money and since by investing in the company we are direct owners of a share, it is a direct earning of Riba on our part (It is NOT a wage\salary earned for services, rather a part of profits for being a part of owner (shareholder\investor). Unfortunately, today we do not have our system ruling in our own nations. But, to live according to Islam, Muslims have no choice but to implement the Islamic system of governance which includes economics and social laws, this is an obligation upon us and not an option. Only when we re-establish our own system in our lands and discard the kufr systems left over by the previous imperial British\French\Portuguese masters will we be able to prosper in the right sense and the blessings of Allah will be upon our earnings. We cannot ask a capitalist system to arrange for Islamic banking for us, because its like mixing oil and water. Even if we get an Islamic bank, it will only solve 5% of the problem, because 95% of the problem exists in the system of capitalism by which the whole nation is run.

"And whosoever does not rule by what Allah (swt) has revealed, such are the Kafirun (disbelievers)." [TMQ 5:44]

"And so rule between them by what Allah has revealed, and follow not their vain desires..." [TMQ 5:49] "The command (or the ruling) is for none but Allah." [TMQ 12:40]


There will always be people who will claim to be more 'progressive or logical' and they will claim that its impossible in todays world to invest without dealing in Riba and hence they should not be stopped or we won't progress. Well thats their statement and it should not be a justification of a sin. If there is no system conducive to our way of life, we should demand a system in our lands instead of flowing with the water as foam, we should stand up for our rights as a Muslim. In our own lands we are deprived of the fruits of Islam, and we succumb to the evil fruits of man made systems such as capitalism, communism , democracy and secularism which are inspired by nothing more than 'vain desires of man'. Progress comes from Allah, and that is the Aqeedah of a Muslim, investments are only a means to progress and when we invest by waging a war against Allah and His Prophet(saws) how can we expect Allah to put progress into such earnings? (O you who believe! Be mindful of God and give up what remains of al-riba if you are believers. If you do not do so, then receive a declaration of war from God and his Messenger....2:278-279).

Islam does not stop societies from progressing, rather it guides it to progress while maintaining a vital balance in the overall development of a society and nation and cares for the right of every creature in the jurisdiction of Islamic Shariah. The history of Islamic civilization is enough proof to the statement above. The world has seen a tremendous development in science and technology under the Islamic Khilafah, while Europe was in dark ages, Muslim scientists were pondering about sea routes, stars, world maps and medical sciences. The Islamic civilization was the one to hand over the torch of science and technology from the ancient to the modern age, itself being the vital link. Our system is not made by us rather in Islam, the system by Allah makes us !

By watering an apple tree and expecting it to bear mangoes on its branches, we are wasting our time, effort and resources and unintentionally making the unwanted tree stronger and stronger.



May Allah guide us all and give us the strength to carry forward the dawah of His deen to whole mankind so that everyone shares the fruits of prosperity, justice and equality like they were shared under Islamic Spain when even the Jews had their golden age under an Islamic System, and like under Umar (ra) when Africa became a richest continent with no one eligible to accept Zakah ! Ameen.

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