In this post we will take a look at the different categories of listed companies available and the predominant opinions regarding investing in them from a Shariah perspective. Companies can broadly be classified into 3 types which are Pure, Haram & Mixed.

Pure

These are companies in which the primary activity is permissible i.e. the company has been established for a permissible purpose e.g. a company selling furniture. Furthermore, the company is not involved in any impermissible dealings such as lending or borrowing on the basis of interest and all its dealing are Shariah compliant. The predominant opinion regarding the shares of these types of companies is that it is permissible to invest and to trade in them.

However, it should be noted that the availability of these types of companies is extremely limited as most listed companies throughout the globe are involved in some type of dealing which is contrary to Shariah principles. If someone only wanted to invest in the shares of these types of companies, there are quite a few which fall into this category listed in the Kingdom of Saudi Arabia.

Haram

These are the companies in which the primary activity is impermissible i.e. the company has been established for an impermissible purpose e.g. a conventional bank or a company involved in the production of alcohol. The ruling regarding the shares of these types of companies is that it is impermissible to invest and trade in them.

Mixed

These are companies in which the primary activity is permissible, however the company is involved in some impermissible dealings e.g. a company that produces paper but invests any excess cash it has into interest bearing deposits. The ruling on investing and trading in the shares of these types of companies is a point of difference of opinion among contemporary Shariah scholars. We will look at the various opinions regarding the shares of this category of companies as well the rules governing investing in them according to the Shariah scholars that allow it, in a future post insha Allah, as the majority of Shariah compliant shares offered to investors globally would fall under this category.

 

To read the next post (#2), please click the link below: 

https://rizqonomics.com/blog/investing-in-the-shares-of-listed-companies-2/