Buying a share is not lending money: it is becoming a co-owner of a company, sharing its profits and its risks. This is why contemporary scholars do not reject the stock market wholesale: they look at what the company does and how one buys.
What the company does
A company whose main activity is forbidden is excluded: interest-based banking, alcohol, pork, gambling, immoral entertainment, tobacco, weapons according to the standards. The Quran forbids maysir", gambling (Al-Ma'ida 5:90), and wealth gained unjustly (An-Nisa 4:29).
The delicate question concerns "mixed" companies « mixtes » : a permissible activity (telecoms, cement, food processing), but interest-bearing bank debts or interest-earning investments. Almost all large companies fall into this category.
Two recognized positions
The International Islamic Fiqh Academy (Organisation of Islamic Cooperation) laid down the principle in 1992: creating or buying companies with a permissible activity is allowed, but taking part in a company that carries out interest-based transactions is forbidden, even if its main activity is permissible (resolution 63). In 1993, it requested further studies on these mixed companies, without revisiting this principle (resolution 77).
The AAOIFI, the accounting and auditing standards body for Islamic financial institutions, tolerates mixed companies under three quantified conditions (standard no. 21):
- interest-bearing debts: 30% at most of the market value;
- liquid assets and interest-bearing investments: 30% at most ;
- illicit income: 5% at most of total income.
The major Islamic stock indices (Dow Jones, FTSE, S&P) apply similar ratios, with a threshold of 33%.
These two positions coexist among scholars. Choose with your imam the one you follow.
Purification
If you hold shares in a mixed company that is tolerated, a small portion of your gains comes from an illicit source (often interest). It must be to give to charitable causes, without expecting any reward:
portion to purify = dividends received × share of the company's illicit revenue.
Example: 100,000 FCFA in dividends, from a company where 2% of revenue comes from interest: 2,000 FCFA to give.
The AAOIFI also reminds that the shareholder has a moral duty to oppose, at the general assembly, non-compliant transactions.
How to buy
The Islamic Fiqh Academy declares the following forbidden:
- buying shares on credit with interest from the broker (margin buying);
- selling shares one does not own (short selling);
- the options and futures contracts without physical delivery;
- the preferred shares that guarantee the capital or a profit.
Investing long term in a useful company, with your own money, is the safest approach. Reckless speculation, which resembles gambling, should be avoided.
And on the BRVM?
The Regional Securities Exchange (Bourse régionale des valeurs mobilières), in Abidjan, lists companies from the region. Before buying, look at their annual reports: activity, bank debts, financial products. Some Sharia-compliant mutual funds can do this screening for you; in the UMOA, they must have a compliance board. For an alternative to conventional bonds, see sukuk.
Nothing here is investment advice: the stock market carries a risk of loss. For the religious ruling, ask your imam; for investing, a licensed professional.