#907: On Treasury Bills & Stock Purchase

‘Thanks.

1) What is the position of Islam on investment made on treasury bills as operated by central bank of Nigeria.

2) What about position of Islam on buying and selling of shares as operated by Nigeria Stock Exchange?

ANSWER:

Alhamdulillāh, it appears like this Question is a follow up on our response to Treasury Bills (Refer to Q.899 on our Telegram Channel).

We have explained that Investing in Treasury Bills is Harām without a doubt
We had stated:

“…when you purchase bonds, you actually are lending your wealth for a fixed term at specific interest rates to be paid to you…”

It then doesn’t matter who the issuer is, whether the Central Bank of whosoever

This is Harām and a Muslim must distance himself from it
As for Stock Purchase,

Know firstly that Stock Exchange is more of a Market place where people trade financial securities, commodities, derivatives, and other financial instruments.
Stock exchanges allow investors to buy and sell shares and Bonds of a company among each other in a regulated manner

Now it is important to understand what a Stock is:
A Stock called a Capital Stock is a divided entity or share of ownership of a Company or Coporation

To boost investment and have access to more Capital and Resources, Companies sell Stocks to Investors which serve as Instruments to indicate ownership in the Company
Investors that have Shares (Stock) in a Company or Corporation are regarded as Stakeholders and have a say in the Day to day decisions and policies of the Company

Most companies pay dividends (Profits Shares) to their Stakeholders termly

While some other Companies simply sufficed by updating their Stakeholders with their Profit Accounts and invest them into other projects

Now, it is not likely that such Investors will always want to remain Stakeholders in that Company

Some Investors will like to sell their Stock to other Investors either because they need money for an urgent situation or because they lack any further confidence in such a Business
The Stock Exchange is a Market where Investors can buy and sell these Stocks at a Convenience

The same applies to Bonds
Bonds, as we have explained are Shares of Money loaned out to Companies or Government in return for Interest Rates
The essence of the Stock Exchange Market is for these Buying and Selling to happen between investors

So, Mr A who has a Stock from Corporation V may want to sell his Stock.

Mr B who speculates that
Corporation V will be highly profitable in the next few months may purchase that same Stock that Mr A is willing to sell

It is not a must to sell stock and bonds on the Stock Exchange Market

A person may decide to sell by advertising to those who are close to him or to whom he has access

But the Stock Market is a place where this is done at a regulated price and space
The forces of free market and government policies are of the main factors that affect stock prices and influence Investor decisions

That said, what is the Ruling of the Sharī’ah in partaking in these Markets?

It is permissible to Invest in stocks and own Shares in Companies Provided that that Company is known to trade in Halāl Transactions only

As for Purchase of Bonds, this is Harām since Bonds are Interest Based Transactions
And Allāh knows best.

Bārakallāhu Fīkum
Jazakumullāhu Khayran

📚 IslāmNode