Halal Investing Frequently Asked Questions

Shariah ruling: Halal if the company, its core business, and its financial activities comply with Shariah principles.

A stock represents an ownership share in a company. Therefore, investing in companies with permissible business activities and Shariah-compliant financial practices is generally allowed. Companies whose primary business is prohibited, such as conventional interest-based banking, alcohol, or gambling, are not permissible investments.

Shariah ruling: The stock must pass both business-activity screening and Shariah financial screening.

A permissible business activity alone is not enough. Interest-bearing debt, non-compliant income, and other financial ratios must also be reviewed.

You can use Osooli to check the Shariah status of a stock:

www.osooli.ae

Shariah ruling: No.

A company may operate in a permissible industry while relying heavily on interest-bearing debt or earning non-compliant income.

Both the company’s business activity and its financial structure must be screened.

Shariah ruling: Investing in companies whose primary business is prohibited is haram.

Examples include:

• Conventional interest-based banks.
• Gambling and betting businesses.
• Alcohol companies.
• Pork-related businesses.
• Pornographic businesses.
• Certain conventional financial and entertainment activities that conflict with Shariah principles.

Shariah ruling: Shares of conventional interest-based banks are haram.

The core business of conventional banks is based on lending and borrowing with interest.

Islamic banks should be assessed separately to verify that their products and operations genuinely follow recognized Shariah standards.

Shariah ruling: Conventional insurance companies are generally not considered Shariah-compliant under contemporary Islamic investment standards.

Islamic takaful companies should be assessed separately to confirm that their structure and transactions comply with Shariah.

Shariah ruling: According to several contemporary Shariah standards, it may be permissible if the company’s primary activity is halal and its interest-bearing debt and non-compliant income remain within accepted screening limits.

However, some scholars take a stricter position and do not permit investment in mixed companies.

A mixed stock is a share in a company whose main business is permissible but which has some non-Shariah-compliant financial activities.

For example, a technology company may have a permissible core business but still maintain some interest-bearing debt or earn limited interest income.

Shariah ruling: The 5% threshold is used by some Shariah screening methodologies for non-compliant income. It does not mean that interest or prohibited income becomes permissible.

If non-compliant income exceeds the threshold used by the relevant screening methodology, the stock may become Shariah non-compliant.

Purification means removing the portion of investment income attributable to non-compliant sources within an otherwise Shariah-compliant company.

The investor should not retain that portion as personal profit.

You can determine the purification percentage or amount using the Osooli platform.

www.osooli.ae

The platform can help investors access Shariah screening information and purification data related to a stock.

Shariah ruling: No.

If the stock is Shariah-compliant, only the portion attributable to non-compliant income is purified, not the entire investment profit.

Shariah ruling: It depends on the Shariah methodology being followed.

Different Shariah standards may calculate purification differently, so investors should follow one clear methodology consistently.

Shariah ruling: Yes, if the stock itself is Shariah-compliant.

If the company earns a limited amount of non-compliant income, the relevant portion of the dividend should be purified.

Shariah ruling: Some ETFs are halal and others are not Shariah-compliant.

Investors should review the ETF’s holdings, underlying index, investment structure, use of derivatives, and Shariah screening methodology.

Shariah ruling: The name alone is not sufficient.

Investors should review the Shariah board, underlying index, screening methodology, purification process, and actual holdings of the fund.

Shariah ruling: The standard S&P 500 is not a Shariah-screened index.

It includes companies that may not comply with Islamic investment standards.

A distinction should be made between the regular S&P 500 and the S&P 500 Shariah index.

Shariah ruling: The standard Nasdaq index is not automatically Shariah-compliant.

The individual companies or the ETF tracking the index must be screened.

Shariah ruling: Each stock should be assessed based on its latest financial data.

A stock may be compliant at one point and later become non-compliant.

You can check stocks using Osooli:

www.osooli.ae

Yes.

A company’s debt, revenue sources, business activities, or financial structure can change, so Shariah compliance should be reviewed periodically.

The appropriate action depends on why the stock became non-compliant.

A company changing its core business is different from temporarily exceeding a financial screening ratio.

The investor should follow the divestment and purification rules of the Shariah methodology being used.

Shariah ruling: Conventional interest-bearing bonds are haram.

A conventional bond is essentially a loan in which the issuer repays the principal together with interest or an additional return tied to the debt.

Therefore, issuing, purchasing, and trading conventional interest-bearing bonds is prohibited.

Shariah ruling: Conventional government bonds that pay interest are haram.

The fact that the borrower is a government does not change the interest-based nature of the contract.

Shariah ruling: Haram.

The investor purchases the bond below its face value and later receives the higher face value at maturity. The difference represents an increase tied to a debt obligation.

One of the main Shariah-compliant alternatives is Sukuk.

Properly structured Sukuk represent ownership in an asset, usufruct, or investment project rather than merely an interest-bearing loan.

Shariah ruling: No.

The structure, contracts, ownership arrangements, and guarantees used in a Sukuk issuance must be reviewed to ensure genuine Shariah compliance.

Shariah ruling: Conventional margin trading based on an interest-bearing loan is haram.

If the broker lends money to the investor and charges interest on that loan, the transaction involves riba.

Shariah ruling: If leverage is based on an interest-bearing loan, it is haram.

The actual contractual structure must be reviewed rather than relying only on the product label.

Shariah ruling: Conventional short selling is haram.

In a standard short sale, the investor sells shares that they do not own.

Shariah ruling: Conventional options contracts traded in financial markets are not considered permissible under the rulings of major contemporary Islamic jurisprudential bodies.

Shariah ruling: Conventional futures contracts in their common market form are generally considered impermissible.

This is particularly the case when contractual obligations are deferred or transactions are settled through price differences without genuine ownership and delivery.

Shariah ruling: Conventional Contracts for Difference are not Shariah-compliant.

With a CFD, the investor does not own the underlying asset and instead speculates on the difference between opening and closing prices.

Shariah ruling: Currency exchange is permissible subject to Shariah conditions.

Possession must occur appropriately, and the transaction must not involve interest or prohibited deferment.

Many modern forex platforms, however, use leverage, CFDs, or other structures that require separate Shariah assessment.

Shariah ruling: Not necessarily.

Removing swap charges alone does not make a forex account halal.

Ownership, possession, lending structure, fees, and the nature of the traded product must also be reviewed.

Shariah ruling: Day trading can be permissible if the traded asset is halal, genuine ownership is established, and prohibited transactions are avoided.

The duration of the trade is not the main issue. The key factors are the asset, contract, ownership, and trading method.

Shariah ruling: Speculation is not automatically haram simply because the investor aims to profit from price movements.

If an investor buys a permissible stock, genuinely owns it, and later sells it at a higher price, the transaction is generally permissible unless prohibited elements are involved.

Shariah ruling: No.

A short holding period does not make a stock transaction haram by itself.

The ruling depends on the asset, contract, ownership, and trading method.

Shariah ruling: Yes, provided that the assets and investment method comply with Shariah principles.

Shariah ruling: Yes, provided that valid ownership and Shariah-compliant possession are established.

The product should not merely provide synthetic exposure to the price of gold without genuine ownership.

Shariah ruling: Permissible if genuine ownership and Shariah-compliant possession of the gold are established.

Shariah ruling: Some Gold ETFs may be halal while others are not Shariah-compliant.

The fund should hold actual gold, establish valid ownership and possession, and not merely rely on derivatives for price exposure.

Shariah ruling: Real estate investing is permissible in principle.

Buying, selling, and renting property is allowed when the use of the property, contractual structure, and financing comply with Shariah principles.

Shariah ruling: Some REITs are halal while others are not Shariah-compliant.

The properties, tenants, interest-bearing debt, non-compliant income, and financing structure should be screened.

Shariah ruling: There is no single ruling that applies to every cryptocurrency.

Each digital asset should be evaluated according to its nature, utility, trading structure, and the way returns are generated.

Shariah ruling: Bitcoin remains a matter of scholarly disagreement.

Some contemporary scholars permit it subject to certain conditions, while others prohibit it or remain cautious due to concerns about its nature, volatility, and uncertainty.

Shariah ruling: It depends on the contract and how the return is generated.

A reward generated through genuine participation in network validation is different from lending crypto assets in exchange for a guaranteed increase.

Shariah ruling: No.

Interest does not become permissible merely because the rate is small.

Shariah ruling: Donating interest to charity does not make intentionally entering an interest-based contract permissible.

Disposing of impermissible money that has already been received is different from deliberately entering into a riba-based contract to earn it.

Shariah ruling: It depends on the underlying contract.

If the investment is effectively a guaranteed loan that produces an increase in return because of time, it involves riba.

Some sale or lease-based Islamic contracts, however, may generate a predetermined return without constituting an interest-bearing loan.

Stock: Represents ownership in a company and can therefore be halal if the company meets Shariah requirements.

Conventional bond: Represents debt that normally pays interest and is therefore prohibited.

No.

Halal does not mean guaranteed profit.

A Shariah-compliant investment can increase or decrease in value.

Shariah ruling: No.

The size of the profit does not determine whether a transaction is halal or haram.

If the asset and transaction are permissible, a large profit does not make the investment prohibited.

Shariah ruling: No.

The mere possibility of profit or loss does not make an investment gambling.

Legitimate investing naturally involves commercial risk.

Shariah ruling: It is not haram merely because the investor did not perform extensive financial research.

However, the investor should at minimum confirm that the stock is Shariah-compliant.

There is no rule stating that halal investing must generate lower returns.

Shariah-compliant investments may outperform or underperform conventional investments during different market periods.

ESG والاستثمار الشرعي معياران مختلفان.

قد تكون شركة جيدة وفق ESG لكنها تتعامل بالربا أو تعمل في نشاط غير متوافق مع الشريعة.

Shariah ruling: No.

ESG investing and Shariah-compliant investing use different criteria.

A company may score well on environmental, social, and governance factors while still engaging in interest-based financing or prohibited business activities.

Yes.

A company’s financial data can change, which may affect its Shariah-compliance status.

You can monitor stock compliance using Osooli:

www.osooli.ae

Results may differ because platforms can use different:

• Shariah standards.
• Financial-ratio calculations.
• Financial data sources.
• Update dates.
• Shariah boards.
• Definitions of restricted business activities.

A specialized screening platform can be used instead of manually analyzing every company’s financial statements.

You can use Osooli to check stock Shariah compliance and access relevant purification information:

www.osooli.ae

Do not ask only:

Will its price increase?

Also ask:

Is the asset halal, and is the way I buy, finance, and trade it halal?

An asset itself may be permissible while the method used to trade or finance it may not be Shariah-compliant.