The following set of business activities are
considered prohibited in Islam, and thus investing
in these kind of businesses is not something a
Muslim should undertake.
| Food
and Beverage Related |
- Alcoholic
Beverages
Islam forbids a Muslim to manufacture, consume
or sell all intoxicating material, which include
all Alcoholic beverages (such as Wine, Beer,
...etc.)
- Pork
and Pork Products
- Tobacco
products
Even though many Muslims do consume Tobacco, its
harmful effects on one's own health (as well as
other passive smokers) is undisputed. Therefore,
many scholars are of the opinion that Tobacco
products are prohibited in Islam.
Gambling in all
its forms is prohibited.
This includes
Casinos, Internet Gambling Outfits,
betting, such as Horse and Dog racing,
...etc.
Lottery
schemes can also be considered as a form of
gambling, regardless if it is run by governments or
not.
| Pornography
and Adult oriented Material |
Whether in the
form of Video tapes, Magazines, Internet images, or
stripping clubs, all Adult oriented material is
prohibited, whether fo minors or adults alike.
| Interest
and Businesses based mainly on Interest |
Interest is
considered Usury (Riba) and therefore business that
have a significant portion of its income from
interest are considered prohibited. This includes Banks,
Credit Card, Financing, Mortagage,
...etc.
Due to the
prevalence of interest in today's world economy
(even in Muslim countries), it is fairly difficult
to find a business with 0% interest in its income.
Therefore,
some scholars have set a threshold for the
percentage that a business draws income from
interest. If a business has 25% or less of its total
income from interest (some said 33.3%), then it is
allowed to invest in that business, and get rid of
the interest based portion of the income, by giving
it away to the poor and needy or for public charity.
Many illegal or
unlawful activities are prohibited in Islam, either
explicitly of implicitly. These include:
- Prostitution
Extra marital sexual relationships are forbidden
in Islam. Therefore, it goes without saying that
profiting from such activities are also
prohibited.
- Drugs
Because of their intoxicating effect, drugs are
considered the same as alcohol (see above).
Moreover, because of the deeply addictive nature
of drugs, and their effect on ones health,
finances, family and society, they are
prohibited.
Some activities
may not be explicitly prohibited, and Muslims may
disagree on whether they are lawful or not.
- Commercial
Insurance
Many scholars have held that Insurance, in its
present for is prohibited, since you pay money
for something that may or may not happen. The
insurer takes this money, and in most cases gets
to keep it all, and (if too many claims occur)
may end up with a loss.
This imbalance is unfair, and have led to a
tendency to prohibit present-day insurance.
An alternative is Cooperative Insurance
where all participants co-own the pooled
premiums. The pool is invested, and any claims
from participants are settled. Any profit from
investment (less all claims) is distributed at
the end of the period (e.g. fiscal year). This
is a fairer method.
Until such a system is in place, there is no
viable alternative to commercial insurance, and
many scholars have allowed utilizing it as a
temporary measure.
- Day
Trading and Speculation
Day Traders and Day Trading Web Sites clearly
acknowledge that their business has nothing to
do with investing. All they do is watch the
market and buy and sell on short term price
fluctuation (normally within one day).
For this reason, this is closer to Gambling than
anything else, and is best avoided, not only for
religious reasons, but also because of the very
high risk it envolves.
- Margin
Trading
Margin trading is buying stocks with money
loaned from the broker. Interest is paid for
this loan, and therefore it is prohibited. It is
also very risky (and complicated), since you can
lose more than what you have borrowed, when you
are asked to cover up the loan (if the stock
price goes down).
- Options
and Futures
You are actually purchasing the right to
buy a stock at a future date for a fixed price
(regardless of the current price in the market).
If you exercise the option, you buy at the price
set in the past, otherwise, you do nothing and
the option expire (and you lose what you paid
for the option).
Certain scholars are of the opinion that Options
trading is prohibited.
In addition to religous aspect, Options
constitute a very high risk investment avenue,
and can cause the novice to lose a lot of money.
One possible exception is Employee Stock
Options, where the company gives the
employee certain number of stocks to be
purchased at a later date for a fixed price.
This is an incentive to employees to work hard
and make the company profitable so the stock
price goes up. If the option expires (or the
stock price is low) the employee pays nothing
(he does not exercise the option).
- Shorting
Shorting is borrowing stocks and selling them
when the stock is going down. Later, when the
stock is going up, it is sold at a higher value
and the borrowed stock given back to the lender.
What do you think about this?
Also check
the links below, they will help you screen companies
quickly and exclude those that engage in prohibited
activities:
Courtesy
of Muslim-Investor
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