Now obviously you know there is a technical and much more legal side and much more legal side that we can go into a lot more detail but for the purpose of this video realize that in order for an investment to be halal, a number of basic conditions need to be met First and foremost the company itself has to be something that is ethical something that is permissible.
A Muslim is not allowed to invest in anything that will increase immorality, that will increase any type of substance abuse, or alcohol or drugs or maybe even investing in companies that promote weapons of mass destruction. We as Muslims, we are ethical, we are not allowed to invest in something that’s going to harm other people. Harm them physically, harm them emotionally. So we Muslims do not invest in any company that deals with harmful substances or that deals with matters that are going to impact the environment in a very negative way. These are the things that we are very cautious about.
The second condition which is one of the most difficult ones to meet and that is the condition that we as Muslims, we avoid interest or riba. We know in the Quran that Allah (SWT) has considered riba or interest to be one of the most major sins and our Prophet (saw) called it a Kabeerah, a major sin and it is the only sin in the Quran that Allah (SWT) has said, ‘anybody who deals with this, it is as if he has engaged in war against God himself, Against Allah himself.’ So we have to avoid companies that are dealing blatantly in riba.
Now there are some technical aspects here that our modern scholars have derived. Because it is almost impossible to find a company that is 100% riba free. o given the dynamics that we find ourselves in, the Ulama that are specialised in Islamic finance, they have come together and they have formulated some reasonable conditions that small percentages are forgiven and overlooked Insha’Allah. And this is something that you will find in the legal and technical documents. And there are other conditions as well, of them is the asset to debt ratio that is found in companies, so there are a number of technical conditions that you will find in the books of fiqh and in the modern fatawa’s of Islamic finance.
And that is why it is so important that you find a company that has a shariah board that is looking into each and every business transaction, looking into each and every company and assessing whether these companies fit the criterion of Halal investing.