Social. Political. Economic. Career| Seyed Ibrahim

Serious issues & ideas. Trusted Sources.

Knowledge of Finance and Fatwas

leave a comment »

Assalamu Alaikum,

Most of today’s financial services (Share market, Insurance, Credit Cards etc) are complex topics. Even those who read/watch news don’t thoroughly understand them. But, what we see are some Islamic Scholars (who don’t understand the complexities involved in Insurance, Stocks, and other financial products) issue Fatwaas / religious edicts approving or disapproving these.

Here is an example: I listened to one Jumua (Yes, Jumua Khutba) bayan on Share/Stock market. He says share market is like gambling because

1) People buy and sell shares within hours

2) Buyers don’t know the company’s financials (like earnings, profits) whose shares they buy

3) The foreign buyers & owners hike the share price thru brokers

4) Buyers don’t know the company’s activities. They may do haraam business

5) Buyers can’t ask questions to the management

The problem is he got some facts wrong, and looks at this market from a day trader’s perspective. I’m not interested in elaborate counter-points, and I’m not issuing any fatwa on Stock/share market. But some facts are:

1. Sharia-compliant indexes (like S&P CNX 500 Shariah Index in India, a lot in US) screen the haraam-businesses. Details at
https://seyedibrahim.wordpress.com/2009/02/19/shariah-compliant-mutual-funds

2. All public companies issue Quarterly financials, and yearly results are audited

3. Managers of large Mutual Funds DO meet the senior management periodically, and ask questions

4. Mutual funds and private wealth managers don’t buy and sell in months. Warren Buffet has not sold many for decades. Even if one buys and sells within hours – What is Haraam here? If you buy a pen/house/gold, does Islam prohibit you from selling it in hours?

5. Share holders have the right to ask questions and vote on the issues, during AGM (Annual General Meeting)

6. Rules against insider-trading have been toughened in many countries

Bottom-line: Fatwas like “Everything related to Share market is haraam” are misleading, when the person who says doesn’t even understand the Share market. Insurance is a bit more complex than stock market. So, I think we should try to understand the reasons behind every fatwa, and check if the reasons are valid. I know it is tough, but Insha Allah if we spend some time reading, and then talking to some Aalims, we can learn a lot.

A word of Caution: One can’t become an Islamic scholar by reading a couple of books, watching a few lectures, or browsing a few webpages. On the other hand, blindly accepting Fatwaas from Muftis / Scholars, who lack financial knowledge is not a good idea either.

Solution/Way out: Write down all the arguments (for and against a financial service) and also your/other’s comments and questions. Then, take it to a scholar. By doing this, you are educating the Scholar on the finance side, and you learn the Islamic rulings. And then, please spread the word. Enter a comment in this blog too.

Advertisements

Written by S Ibrahim

Mar 21, 2009 at 4:38 pm

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: