Wa `alaykum as-Salamu wa Rahmatullahi wa Barakatuh.
In the Name of Allah, Most Gracious, Most Merciful.
All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.
In this fatwa:
It is allowed to buy stocks of companies whose main line of business is permissible provided such companies fulfill the conditions mentioned below.
In his response to your question, Prof. Dr. Monzer Kahf, Professor of Islamic Finance and Economics at Qatar Faculty of Islamic Studies, states:
It is allowed to buy stocks of companies whose main line of business is permissible provided such companies fulfill the following three conditions, and you do the fourth thing:
1- The company does not use more than 30% of its assets in activities/transactions that are not permissible in the Shari`ah.
2- It does not depend on interest-loan for more than 30% of its assets.
3- Unlawful (haram) earnings do not make more than 5% of its revenues, and the 4th that you should do is:
Buying treasury bills is haram because these are pure debts on the treasury and any increment in a debt is prohibited by Allah in the Qur’an”, “Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, “Trade is [just] like interest.” But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah . But whoever returns to [dealing in interest or usury] – those are the companions of the Fire; they will abide eternally therein.” (Al-Baqarah 2:275)
This is exactly the riba prohibited by Allah Almighty as defined in this verse, “And if you do not, then be informed of a war [against you] from Allah and His Messenger. But if you repent, you may have your principal – [thus] you do no wrong, nor are you wronged.” (Al-Baqarah 2:279)
This means that any increment above principal must be avoided and repented from.
Allah Almighty knows best.
Editor’s note: This fatwa is from Ask the Scholar’s archive and was originally published at an earlier date.